McRae Industries, Inc. Reports Earnings For The First Quarter Of Fiscal 2018

MOUNT GILEAD, N.C., Dec. 27, 2017 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the first quarter of fiscal 2018 of $22,399,000 as compared to $29,872,000 for the first quarter of fiscal 2017. Net earnings for the first quarter of fiscal 2018 amounted to $1,292,000, or $0.54 per diluted Class A common share as compared to $1,527,000, or $0.63 per diluted Class A common share, for the first quarter of fiscal 2017.

FIRST QUARTER FISCAL 2018 COMPARED TO FIRST QUARTER FISCAL 2017

Consolidated net revenues totaled $22.4 million for the first quarter of fiscal 2018 as compared to $29.9 million for the first quarter of fiscal 2017. Sales related to our western/lifestyle boot products for the first quarter of fiscal 2018 totaled $13.3 million as compared to $14.5 million for the first quarter of fiscal 2017. This 8% decrease was primarily attributable to the decrease in sales for men's western boots and premium kid's boots. Revenues from our work boot products decreased approximately 41%, from $15.4 million for the first quarter of fiscal 2017 to $9.1 million for the first quarter of fiscal 2018. This is primarily a result of decreased military boot sales. We have been awarded a new contract with the United States Government for hot weather Army combat boots. This contract is for a base year and four option years. However, due to the government's over inventoried position on this product, the first delivery order was less than expected and the delivery time frame was extended. The contract for the temperate weather Army combat boots will not be awarded until January or February of 2018 and these contracts will also be for a base year and four option years. We are in the process of completing our obligations on the existing temperate weather Army combat boot contract. These developments are expected to negatively impact our military boot sales for fiscal 2018.

Consolidated gross profit for the first quarter of fiscal 2018 amounted to approximately $6.2 million as compared to $7.4 million for the first quarter of fiscal 2017. Gross profit as a percentage of net revenues was up from 24.7% for the first quarter of fiscal 2017 to 27.8% for the first quarter of fiscal 2018. This is attributable to the sales mix being more heavily weighted towards higher margin western and work boots.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $4.2 million for the first quarter of fiscal 2018 as compared to $5.0 million for the first quarter of fiscal 2017. This decrease in SG&A expenses resulted primarily from decreased expenditures for health insurance, computer and professional services, and salaries.

As a result of the above, the consolidated operating profit for the first quarter of fiscal 2018 amounted to $2.0 million as compared to $2.4 million for the first quarter of fiscal 2017.

Financial Condition and Liquidity

Our financial condition remained strong at October 28, 2017 as cash and cash equivalents totaled $29.2 million as compared to $28.1 million at July 29, 2017. Our working capital increased from $54.3 million at July 29, 2017 to $55.1 million at October 28, 2017.

We currently have two lines of credit totaling $6.75 million, all of which were fully available at October 28, 2017. One credit line totaling $1.75 million (which is restricted to one hundred percent of the outstanding receivables due from the Government) expires in January 2018. Our $5.0 million line of credit, which also expires in January 2018, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.

Net cash provided by operating activities for the first quarter of fiscal 2018 amounted to $2.0. Net earnings, as adjusted for depreciation, contributed approximately $1.6 million of cash. Accounts receivable used approximately $1.6 million of cash as first quarter sales outpaced customer payments. Both of our boot businesses provided approximately $1.0 million of cash as efforts to reduce inventory levels paid off. The timing of payments for employee related expenses and income taxes provided approximately $1.0 million of cash.

Net cash used by investing activities totaled approximately $500,000, primarily for manufacturing machinery and equipment.

Net cash used in financing activities totaled $311,000, which was used for dividend payments.

We believe that our current cash and cash equivalents, cash generated from operations, and available credit lines will be sufficient to meet our capital requirements for the remainder of fiscal 2018.

FORWARD-LOOKING STATEMENTS

This press release includes certain forward-looking statements. Important factors that could cause actual results or events to differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements include: the effect of competitive products and pricing, risks unique to selling goods to the Government (including variation in the Government's requirements for our products and the Government's ability to terminate its contracts with vendors), changes in fashion cycles and trends in the western boot business, loss of key customers, acquisitions, supply interruptions, additional financing requirements, our expectations about future Government orders for military boots, loss of key management personnel, our ability to successfully develop new products and services, and the effect of general economic conditions in our markets.

                             McRae Industries, Inc. and Subsidiaries

                                   CONSOLIDATED BALANCE SHEETS

                                (In thousands, except share data)

                                           (Unaudited)


                                                  October 28, 

    2017    July 29, 

    2017
                                                  ------------------    ---------------


    ASSETS

    Current assets:


    Cash and cash
     equivalents                                                $29,200              $28,057


    Short term
     securities                                                     505                  505


    Accounts and notes
     receivable, net                                             13,914               12,331


    Inventories, net                                             17,399               18,273


    Income tax
     receivable                                                       0                  329


    Prepaid expenses and
     other current
     assets                                                         436                  550
                                                                    ---                  ---


    Total current assets                                         61,454               60,045
                                                                 ------               ------


    Property and
     equipment, net                                               7,566                7,391
                                                                  -----                -----


    Other assets:


    Deposits                                                         14                   14


    Long term securities                                          3,848                3,804


    Real estate held for
     investment                                                   3,603                3,601


    Amounts due from
     split-dollar life
     insurance                                                    2,288                2,288


    Trademarks                                                    2,824                2,824
                                                                  -----                -----


    Total other assets                                           12,577               12,531
                                                                 ------               ------


    Total assets                                                $81,597              $79,967
                                                                =======              =======




                           McRae Industries, Inc. and Subsidiaries

                                 CONSOLIDATED BALANCE SHEETS

                              (In thousands, except share data)

                                         (Unaudited)


                                                  October 28, 

    2017    July 29, 

    2017
                                                  ------------------    ---------------


    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY

    Current liabilities:


    Accounts payable                                             $2,522               $2,510


    Accrued employee
     benefits                                                     1,450                1,144


    Accrued payroll and
     payroll taxes                                                  614                  809


    Accrued income taxes                                          1,020                  589


    Other                                                           778                  714
                                                                    ---                  ---


    Total current
     liabilities                                                  6,384                5,766
                                                                  -----                -----



    Shareholders'
     equity:

    Common Stock:

    Class A, $1 par
     value; authorized
     5,000,000 shares                                             2,015                2,015
      issued and
       outstanding,
       2,014,842 and
       2,014,842
      shares, respectively


    Class B, $1 par
     value; authorized
     2,500,000 shares;                                              384                  384
      issued and
       outstanding,
       383,254 and 383,254
       shares,
      respectively


    Unrealized
     gains(losses) on
     investments, net of
     tax                                                             26                  (5)


    Retained earnings                                            72,788               71,807
                                                                 ------               ------


    Total shareholders'
     equity                                                      75,213               74,201
                                                                 ------               ------


    Total liabilities
     and shareholders'
     equity                                                     $81,597              $79,967
                                                                =======              =======

                                        McRae Industries, Inc. and Subsidiaries

                                         CONSOLIDATED STATEMENTS OF OPERATIONS

                                           (In thousands, except share data)

                                                      (Unaudited)


                                                            Three Months Ended

                                                               October 28,         October 29,

                            2017                                              2016
                            ----                                              ----


    Net revenues                                                           $22,399              $29,872


    Cost of revenues                                                        16,162               22,504
                                                                            ------               ------


    Gross profit                                                             6,237                7,368


    Selling, general and administrative
     expenses                                                                4,199                4,963
                                                                             -----                -----


    Operating profit                                                         2,038                2,405


    Other income                                                                77                   94
                                                                               ---                  ---


    Earnings before income taxes                                             2,115                2,499


    Provision for income taxes                                                 823                  972
                                                                               ---                  ---


    Net earnings                                                            $1,292               $1,527
                                                                            ======               ======





    Earnings per common share:


         Diluted earnings per share:

            Class A                                                           0.54                 0.63

            Class B                                                             NA                  NA


    Weighted average number of common
     shares outstanding:


           Class A                                                       2,014,842            2,030,658

           Class B                                                         383,254              387,629
                                                                           -------              -------

            Total                                                        2,398,096            2,418,287
                                                                         ---------            ---------

                                             McRae Industries, Inc. and Subsidiaries

                                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          (In thousands)

                                                           (Unaudited)


                                                                    Three Months Ended

                                                                        October 28,            October 29,

                                                                                     2017 2016
                                                                                     ---- ----


    Net cash provided by operating activities                                       1,954                   1,475
                                                                                    -----                   -----


    Cash Flows from Investing Activities:


    Purchase of land for investment                                                   (2)                   (21)


    Capital expenditures                                                            (485)                  (100)


    Purchase of securities                                                           (13)                   (85)
                                                                                      ---                     ---


    Net cash used in investing activities                                           (500)                  (206)
                                                                                     ----                    ----


    Cash Flows from Financing Activities:


    Dividends paid                                                                  (311)                  (314)
                                                                                     ----                    ----


    Net cash used in financing activities                                           (311)                  (314)
                                                                                     ----                    ----



    Net (Decrease) Increase in Cash and Cash
     equivalents                                                                    1,143                     955


    Cash and Cash Equivalents at Beginning of
     Year                                                                          28,057                  15,673
                                                                                   ------                  ------


    Cash and Cash Equivalents at End of Year                                      $29,200                 $16,628
                                                                                  =======                 =======

View original content:http://www.prnewswire.com/news-releases/mcrae-industries-inc-reports-earnings-for-the-first-quarter-of-fiscal-2018-300575618.html

SOURCE McRae Industries, Inc.