McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2018
McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2018
MOUNT GILEAD, N.C., April 4, 2018 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the second quarter of fiscal 2018 of $20,472,000 as compared to $28,113,000 for the second quarter of fiscal 2017. Net earnings for the second quarter of fiscal 2018 amounted to $681,000, or $0.28 per diluted Class A common share as compared to $1,633,000, or $0.68 per diluted Class A common share, for the second quarter of fiscal 2017.
Consolidated net revenues for the first six months of fiscal 2018 totaled $42,870,000 as compared to $57,986,000 for the first six months of fiscal 2017. Net earnings for the first six months of fiscal 2018 amounted to $1,973,000, or $0.82 per diluted Class A common share, as compared to net earnings of $3,160,000, or $1.31 per diluted Class A common share, for the first six months of fiscal 2017.
SECOND QUARTER FISCAL 2018 COMPARED TO SECOND QUARTER FISCAL 2017
Consolidated net revenues totaled $20.5 million for the second quarter of fiscal 2018 as compared to $28.1 million for the second quarter of fiscal 2017. Sales related to our western/lifestyle boot products for the second quarter of fiscal 2018 totaled $12.5 million as compared to $13.2 million for the second quarter of fiscal 2017. This 5% decrease in net revenues is primarily a result of decreased sales in our premium kid's boots, as well as a general softness in most sectors of our western/lifestyle boot products. Revenues from our work boot products decreased approximately 48%, from $14.1 million for the second quarter of fiscal 2017 to $7.3 million for the second quarter of fiscal 2018. This was primarily a result of decreased military boots sales, as we experience a gap in our multiple government contracts. As mentioned in the first quarter, the delivery time frame for the new contract for hot weather Army combat boots was extended. While the first delivery on this contract is scheduled for May 2018, we have been shipping a small quantity ahead of schedule. On March 30, 2018, McRae Industries received an award from the Defense Logistics Agency Troop Support for a maximum $75,476,836 firm-fixed price, indefinite-delivery/indefinite-quantity contract for temperate weather combat boots. This is a one year base contract with four one year option periods. The first delivery is 120 days from the award date.
Consolidated gross profit for the second quarter of fiscal 2018 amounted to approximately $5.0 million as compared to $7.4 million for the second quarter of fiscal 2017. Gross profit as a percentage of net revenues was down from 35.6% for the second quarter of fiscal 2017 to 32.0% for the second quarter of fiscal 2018. This is primarily due to lower sales of military boots.
Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $4.4 million for the second quarter of fiscal 2018 as compared to $4.8 million for the second quarter of fiscal 2017. This decrease resulted primarily from decreased employee related expenses.
As a result of the above, the consolidated operating profit for the second quarter of fiscal 2018 amounted to $0.6 million as compared to $2.6 million for the second quarter of fiscal 2017.
FIRST SIX MONTHS FISCAL 2018 COMPARED TO FIRST SIX MONTHS FISCAL 2017
Consolidated net revenues for the first six months of fiscal 2018 totaled $42.9 million as compared to $58.0 million for the first six months of fiscal 2017. Our western and lifestyle product sales totaled $24.7 million for the first six months of fiscal 2018 as compared to $27.5 million for the first six months of fiscal 2017, with the decrease primarily resulting from a decrease in sales for women's western boots and premium kid's boots. Net revenues from our work boot business declined from $29.5 million for the first six months of fiscal 2017 to $16.4 million for the first six months of fiscal 2018. This decrease in work boot products net revenues resulted primarily from lower military boot shipments associated with our U. S. Government contracts.
Consolidated gross profit totaled $11.2 million for the first six months of fiscal 2018 as compared to $14.8 million for the first six months of fiscal 2017. Gross profit attributable to our western and lifestyle products totaled $8.7 million for the first six months of fiscal 2018, down from $9.7 million for the first six months of fiscal 2017. This decrease in gross profit is directly correlated with the decrease in sales. Our work boot products gross profit declined from $4.8 million for the first six months of fiscal 2017 to $1.8 million for the first six months of fiscal 2018. This decrease was driven by the overall decrease in military boot shipments.
Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $8.6 million for the first six months of fiscal 2018 as compared to $9.8 million for the first six months of fiscal 2017. This decrease resulted primarily from decreased expenditures for computer services, commissions, and employee related expenses.
As a result of the above, the consolidated operating profit amounted to $2.6 million for the first six months of fiscal 2018 as compared to $5.0 million for the first six months of fiscal 2017.
Financial Condition and Liquidity
Our financial condition remained strong at January 27, 2018 as cash and cash equivalents totaled $32.3 million as compared to $28.1 million at July 29, 2017. Our working capital increased from $54.3 million at July 29, 2017 to $55.4 million at January 27, 2018.
We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 27, 2018. 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 2019. Our $5.0 million line of credit, which also expires in January 2019, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary. 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.
For the first six months of fiscal 2018, operating activities provided approximately $5.7 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $2.6 million of cash. Decreased inventory levels in both of our boot businesses provided approximately $5.0 million of cash. Accounts payable, employee benefit distributions, accrued payroll and payroll taxes, and income tax payments used approximately $1.9 million of cash.
Net cash used by investing activities totaled approximately $0.9 million, primarily for manufacturing machinery and equipment.
Net cash used in financing activities totaled $0.6 million, which was used for dividend payments.
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)
January 27, July 29,
2018 2017
---- ----
ASSETS
Current assets:
Cash and cash
equivalents $32,293 $28,057
Short term securities 506 505
Accounts and notes
receivable, net 12,505 12,331
Inventories, net 13,316 18,273
Income tax receivable 276 329
Prepaid expenses and
other current assets 300 550
--- ---
Total current assets 59,196 60,045
------ ------
Property and
equipment, net 7,391 7,391
----- -----
Other assets:
Deposits 14 14
Long term securities 3,908 3,804
Real estate held for
investment 3,772 3,601
Amounts due from
split-dollar life
insurance 2,288 2,288
Trademarks 2,824 2,824
----- -----
Total other assets 12,806 12,531
------ ------
Total assets $79,393 $79,967
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McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
January 27, July 29,
2018 2017
---- ----
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,170 $2,510
Accrued employee
benefits 354 1,144
Accrued payroll and
payroll taxes 538 809
Accrued income taxes 0 589
Other 734 714
--- ---
Total current
liabilities 3,796 5,766
----- -----
Shareholders' equity:
Common Stock:
Class A, $1 par value;
authorized 5,000,000
shares 2,023 2,015
issued and outstanding,
2,022,983 and 2,014,842
shares, respectively
Class B, $1 par value;
authorized 2,500,000
shares; 375 384
issued and outstanding,
375,113 and 383,254
shares,
respectively
Unrealized losses on
investments, net of tax 41 (5)
Retained earnings 73,158 71,807
------ ------
Total shareholders'
equity 75,597 74,201
------ ------
Total liabilities and
shareholders' equity $79,393 $79,967
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McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
January 27, January 28, January 27, January 28,
2018 2017 2018 2017
---- ---- ---- ----
Net revenues $20,472 $28,113 $42,870 $57,986
Cost of revenues 15,511 20,727 31,673 43,231
------ ------ ------ ------
Gross profit 4,961 7,386 11,197 14,755
Selling, general and
administrative
expenses 4,404 4,813 8,603 9,777
----- ----- ----- -----
Operating profit 557 2,573 2,594 4,978
Other income 111 61 189 155
--- --- --- ---
Earnings before
income taxes 668 2,634 2,783 5,133
Provision for income
taxes (13) 1,001 810 1,973
--- ----- --- -----
Net earnings $681 $1,633 $1,973 $3,160
==== ====== ====== ======
Earnings per common share:
Diluted earnings per share:
Class A 0.28 0.68 0.82 1.31
Class B NA NA NA NA
Weighted average number of common shares
outstanding:
Class A 2,018,387 2,030,710 2,016,614 2,030,684
Class B 379,709 387,577 381,482 387,603
------- ------- ------- -------
Total 2,398,096 2,418,287 2,398,096 2,418,287
--------- --------- --------- ---------
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
January 27, January 28,
2018 2017
---- ----
Net cash
provided by
operating
activities 5,714 8,617
----- -----
Cash Flows from
Investing
Activities:
Purchase of land
for investment (171) (25)
Capital
expenditures (627) (274)
Purchase of
securities (58) 43
--- ---
Net cash used in
investing
activities (856) (256)
---- ----
Cash Flows from
Financing
Activities:
Dividends paid (622) (628)
---- ----
Net cash used in
financing
activities (622) (628)
---- ----
Net (Decrease)
Increase in
Cash and Cash
equivalents 4,236 7,733
Cash and Cash
Equivalents at
Beginning of
Year 28,057 15,673
------ ------
Cash and Cash
Equivalents at
End of Year $32,293 $23,406
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CONTACT: D. Gary McRae, (910) 439-6147
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SOURCE McRae Industries, Inc.
