McRae Industries, Inc. Reports Earnings For Fiscal 2018
MOUNT GILEAD, N.C., Nov. 26, 2018 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for fiscal 2018 of $73,892,000 as compared to $104,316,000 for fiscal 2017. Net earnings for fiscal 2018 totaled $2,190,000 as compared to $5,083,000 for fiscal 2017. Net earnings per diluted Class A common share were $0.91 for fiscal 2018 as compared to $2.11 for fiscal 2017.
CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2018 COMPARED TO FISCAL 2017
Consolidated net revenues for fiscal 2018 amounted to approximately $73.9 million as compared to $104.3 million for fiscal 2017. Our western/lifestyle boot segment, which includes western wear, ladies fashion, and children footwear products under the Dan Post, Laredo, Dingo, El Dorado, and John Deere brand names, experienced a decrease in revenue of 5.6% from $48.8 million in 2017 to $46.1 million in 2018. The sales decrease was primarily made up of Dan Post higher priced fashion boots, John Deere children boots, and Laredo men's boots. These sale decreases were partially offset by increases in our Laredo Cowboy Approved products and our El Dorado brand of premium men's boots. Net revenues for our work boot segment, which includes Dan Post, Laredo, John Deere, and McRae Industrial work boot products along with our military boots, decreased by 49.6% from $54.4 million in fiscal 2017 to $27.4 million in 2018. The military boot sales were the vast majority of this decrease as they went from $45.6 million in fiscal 2017 to $20.2 million in fiscal 2018. Fiscal 2018 proved to be a difficult year for our military business primarily because of the United States Government's over inventoried position on the hot weather Army boots and not awarding the temperate weather boot contract until four months after McRae had completed its obligation on the expiring contract.
Consolidated gross profit for fiscal 2018 totaled $18.7 million as compared to $25.6 million for fiscal 2017. Gross margins for the western/lifestyle segment increased from 34.2% for fiscal 2017 to 34.5% for fiscal 2018. Although gross margins on our military boots decreased from 12.1% in fiscal 2017 to -0.1% in fiscal 2018, gross margins in our work boot brands overall increased slightly from 34.7% in fiscal 2017 to 36.2% in fiscal 2018. The military boots decrease was due to manufacturing inefficiencies as a result of the lower volume of production.
Consolidated selling, general and administrative ("SG&A") expenses amounted to $16.4 million as compared to $17.8 million for fiscal 2017. This decrease resulted primarily from decreased advertising and employee related expenditures.
As a result of the above, consolidated operating profit totaled approximately $2.3 million for fiscal 2018 as compared to $7.8 million for fiscal 2017.
FINANCIAL CONDITION AND LIQUIDITY
At July 28, 2018, our financial condition and liquidity remained strong as cash and cash equivalents totaled $27.6 million as compared to $28.1 million at July 29, 2017. Our working capital totaled $55.4 million at July 28, 2018 as compared to $56.5 million at July 29, 2017.
We currently have two lines of credit totaling $6.75 million, both of which were fully available at July 28, 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. The $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.
Net cash provided by operating activities for fiscal 2018 amounted to approximately $4.1 million. Net earnings, as adjusted for depreciation, contributed approximately $3.4 million of cash, and a reduction in accounts receivable contributed approximately $1.7 million. The timing of payments for income taxes and lower accrued employee benefits used approximately $1.5 million of cash.
Net cash used in investing activities totaled approximately $3.2 million. The majority was used for capital expenditures and the purchase of securities. This was partially offset by proceeds from the sale of securities.
Net cash used to finance our dividend payments and the purchase of common stock totaled approximately $1.4 million.
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 fiscal 2019.
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)
July 28, July 29,
2018 2017
ASSETS
Current
assets:
Cash and cash
equivalents $27,605 $28,057
Short term
securities 2,211 505
Accounts and
notes
receivable,
less
allowances 10,665 12,331
of $1,221 and
$1,192,
respectively
Inventories,
net 18,427 18,273
Income tax
receivable 1,127 329
Prepaid
expenses and
other
current
assets 154 550
Deferred tax
assets 0 1,674
Total current
assets 60,189 61,719
Property and
equipment,
net 7,375 7,391
Other assets:
Deposits 14 14
Long term
securities 3,899 3,804
Real estate
held for
investment 3,775 3,601
Amounts due
from split-
dollar life
insurance 2,288 2,288
Trademarks 2,824 2,824
Total other
assets 12,800 12,531
Total assets $80,364 $81,641
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
July 28, July 29,
2018 2017
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,968 $2,510
Accrued employee
benefits 423 1,144
Accrued payroll and
payroll taxes 630 809
Other 733 714
Total current
liabilities 4,754 5,177
Deferred tax
liabilities 621 2,263
Total liabilities 5,375 7,440
Shareholders' equity:
Common Stock:
Class A, $1 par value;
authorized 5,000,000
shares
issued and outstanding,
2,019,974 and
2,014,842
shares, respectively 2,020 2,015
Class B, $1 par value;
authorized 2,500,000
shares; issued and
outstanding, 374,272
and
383,254 shares,
respectively 375 384
Unrealized losses on
investments, net of
tax (28) (5)
Retained earnings 72,622 71,807
Total shareholders'
equity 74,989 74,201
Total liabilities and
shareholders' equity $80,364 $81,641
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
For Years Ended July 28, July 29, July 30,
2018 2017 2016
Net revenues $73,892 $104,316 $108,758
Cost of revenues 55,182 78,739 81,837
Gross profit 18,710 25,577 26,921
Selling, general and
administrative expenses 16,431 17,755 19,782
Operating profit 2,279 7,822 7,139
Other income 443 357 366
Interest expense (1)
Earnings before income
taxes 2,721 8,179 7,505
Provision for income taxes 531 3,096 2,813
Net earnings $2,190 $5,083 $4,692
Earnings per common share:
Earnings per common share:
Diluted earnings per share:
Class A 0.91 2.11 1.93
Class B
NA
NA
NA
Weighted average number of common shares outstanding:
Class A 2,018,701 2,024,470 2,035,906
Class B 378,020 385,830 389,271
Total 2,396,721 2,410,300 2,425,177
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
July 28, July 29, July 30,
For Years Ended 2018 2017 2016
Cash Flows from Operating Activities:
Net earnings $2,190 $5,083 $4,692
Adjustments to reconcile net earnings to net cash
provided by
operating activities:
Depreciation 1,234 1,211 907
(Gain) loss on sale of assets - (2) (6)
(Gain) loss on sale of land (37) -
Loss on sale of securities 2 6 62
Deferred income taxes 32 398 951
Changes in operating assets and liabilities:
Accounts receivable, net 1,666 377 2,928
Inventories (154) 9,671 (2,187)
Prepaid expenses and other
assets 396 (117) 99
Accounts payable 458 (2,186) (903)
Accrued employee benefits (721) 54 (537)
Accrued payroll and payroll
taxes (179) (398) (18)
Income tax receivable/payable (798) 726 (933)
Other 20 16 146
Net cash provided by operating
activities 4,109 14,839 5,201
Cash Flows from Investing Activities:
Proceeds from sale of assets - 13 15
Proceeds from sale of land 46 -
Purchase of land for
investment (180) (17)
Capital expenditures (1,217) (465) (3,237)
Proceeds from sale of
securities 1,194 833 484
Purchase of securities (3,025) (1,040) (609)
Net cash used in investing
activities (3,182) (659) (3,364)
Cash Flows from Financing Activities:
Purchase of common stock (133) (545) (342)
Dividends paid (1,246) (1,251) (1,259)
Net cash used in financing
activities (1,379) (1,796) (1,601)
Net (Decrease) Increase in
Cash and Cash equivalents (452) 12,384 236
Cash and Cash Equivalents at
Beginning of Year 28,057 15,673 15,437
Cash and Cash Equivalents at
End of Year $27,605 $28,057 $15,673
View original content:http://www.prnewswire.com/news-releases/mcrae-industries-inc-reports-earnings-for-fiscal-2018-300755301.html
SOURCE McRae Industries, Inc.
