McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2019
MOUNT GILEAD, N.C., March 18, 2019 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the second quarter of fiscal 2019 of $20,738,000 as compared to $20,472,000 for the second quarter of fiscal 2018. Net earnings for the second quarter of fiscal 2019 amounted to $68,000, or $0.03 per diluted Class A common share as compared to $681,000, or $0.28 per diluted Class A common share, for the second quarter of fiscal 2018.
Consolidated net revenues for the first six months of fiscal 2019 totaled $41,339,000 as compared to $42,870,000 for the first six months of fiscal 2018. Net earnings for the first six months of fiscal 2019 amounted to $924,000, or $0.39 per diluted Class A common share, as compared to net earnings of $1,973,000, or $0.82 per diluted Class A common share, for the first six months of fiscal 2018.
SECOND QUARTER FISCAL 2019 COMPARED TO SECOND QUARTER FISCAL 2018
Consolidated net revenues totaled $20.7 million for the second quarter of fiscal 2019 as compared to $20.5 million for the second quarter of fiscal 2018. Sales related to our western/lifestyle boot products for the second quarter of fiscal 2019 totaled $12.2 million as compared to $13.1 million for the second quarter of fiscal 2018. This 7% decrease in net revenues is primarily a result of decreased sales in our premium children's boots, as well as a general softness in most sectors of our western/lifestyle boot products. Revenues from our work boot products increased approximately 16%, from $7.3 million for the second quarter of fiscal 2018 to $8.5 million for the second quarter of fiscal 2019. This was primarily a result of increased military boots sales.
Consolidated gross profit for the second quarter of fiscal 2019 amounted to approximately $4.6 million as compared to $5.0 million for the second quarter of fiscal 2018. Gross profit, as a percentage of net revenues, was down from 24.2% for the second quarter of fiscal 2018 to 22.1% for the second quarter of fiscal 2019. This is primarily due to higher sales of military boots.
Consolidated selling, general and administrative expenses totaled approximately $4.6 million for the second quarter of fiscal 2019 as compared to $4.4 million for the second quarter of fiscal 2018. This increase resulted primarily from increased employee related expenses.
As a result of the above, the consolidated operating profit for the second quarter of fiscal 2019 amounted to $0.03 million as compared to $0.5 million for the second quarter of fiscal 2018.
On January 15, 2019, we received an award from the Government for Marine hot weather boots at a maximum of $35,520,300 firm fixed price, indefinite delivery/indefinite quantity contract. This is a one year base contract with four one year option periods.
FIRST SIX MONTHS FISCAL 2019 COMPARED TO FIRST SIX MONTHS FISCAL 2018
Consolidated net revenues for the first six months of fiscal 2019 totaled $41.3 million as compared to $42.9 million for the first six months of fiscal 2018. Our western and lifestyle product sales totaled $24.6 million for the first six months of fiscal 2019 as compared to $26.4 million for the first six months of fiscal 2018, with the decrease primarily resulting from a decrease in sales for women's western boots and premium children's boots. Net revenues from our work boot business increased from $16.4 million for the first six months of fiscal 2018 to $16.7 million for the first six months of fiscal 2019. This increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our U. S. Government (the "Government") contracts.
Consolidated gross profit totaled $9.9 million for the first six months of fiscal 2019 as compared to $11.2 million for the first six months of fiscal 2018. Gross profit attributable to our western and lifestyle products totaled $8.2 million for the first six months of fiscal 2019, down from $9.3 million for the first six months of fiscal 2018. This decrease in gross profit is directly correlated with the decrease in sales. Our work boot products gross profit declined from $1.8 million for the first six months of fiscal 2018 to $1.6 million for the first six months of fiscal 2019.
Consolidated selling, general and administrative expenses totaled approximately $8.8 million for the first six months of fiscal 2019 as compared to $8.6 million for the first six months of fiscal 2018. This increase resulted primarily from increased expenditures for employee related expenses.
As a result of the above, the consolidated operating profit amounted to $1.1 million for the first six months of fiscal 2019 as compared to $2.6 million for the first six months of fiscal 2018.
Financial Condition and Liquidity
Our financial condition remained strong at January 26, 2019 as cash and cash equivalents totaled $21.2 million as compared to $27.6 million at July 28, 2018. Our working capital decreased from $55.4 million at July 28, 2018 to $55.0 million at January 26, 2019.
We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 26, 2019. 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 2020. Our $5.0 million line of credit, which also expires in January 2020, 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 2019.
For the first six months of fiscal 2019, operating activities provided approximately $2.9 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $1.5 million of cash. Decreased inventory levels in both of our boot businesses provided approximately $2.9 million of cash. Accounts receivable, accounts payable, employee benefit distributions, accrued payroll and payroll taxes, and income tax payments used approximately $1.6 million of cash.
Net cash used by investing activities totaled approximately $7.5 million, primarily for investing in securities.
Net cash used in financing activities totaled $1.8 million, which was used primarily 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 26, July 28,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents $21,187 $27,605
Short term securities 9,531 2,211
Accounts and notes receivable, net 11,665 10,665
Inventories, net 15,479 18,427
Income tax receivable 760 1,127
Prepaid expenses and other current assets 438 154
Total current assets 59,060 60,189
Property and equipment, net 6,843 7,375
Other assets:
Deposits 14 14
Long term securities 3,854 3,899
Real estate held for investment 3,788 3,775
Amounts due from split-dollar life insurance 2,288 2,288
Trademarks 2,824 2,824
Deferred tax assets
Total other assets 12,768 12,800
Total assets $78,671 $80,364
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
January 26, July 28,
2019 2018
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,584 $2,968
Accrued employee benefits 141 423
Accrued payroll and payroll taxes 584 630
Other 767 733
Total current liabilities 4,076 4,754
Deferred tax liabilities 621 621
Total liabilities 4,697 5,375
Shareholders' equity:
Common Stock:
Class A, $1 par value; authorized 5,000,000 shares 2,019 2,020
issued and outstanding, 2,019,649 and 2,019,974
shares, respectively
Class B, $1 par value; authorized 2,500,000 shares; 375 375
issued and outstanding, 374,196 and 374,272 shares,
respectively
Unrealized gains(losses) on investments, net of tax (124) (28)
Retained earnings 71,704 72,622
Total shareholders' equity 73,974 74,989
Total liabilities and shareholders' equity $78,671 $80,364
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended Six Months Ended
January 26, January 27, January 26, January 27,
2019 2018 2019 2018
---
Net revenues $20,738 $20,472 $41,339 $42,870
Cost of revenues 16,154 15,511 31,446 31,673
Gross profit 4,584 4,961 9,893 11,197
Selling, general and administrative expenses 4,551 4,404 8,767 8,603
Operating profit 33 557 1,126 2,594
Other income 156 111 276 189
Earnings before income taxes 189 668 1,402 2,783
Provision for income taxes 121 (13) 478 810
Net earnings $68 $681 $924 $1,973
Earnings per common share:
Diluted earnings per share:
Class A 0.03 0.28 0.39 0.82
Class B
NA
NA
NA
NA
Weighted average number of common shares outstanding:
Class A 2,019,538 2,018,387 2,019,684 2,016,614
Class B 374,196 379,709 374,217 381,482
Total 2,393,734 2,398,096 2,393,901 2,398,096
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
January 26, January 27,
2019 2018
Net cash provided by operating activities 2,893 5,714
Cash Flows from Investing Activities:
Purchase of land for investment (23) (171)
Capital expenditures (82) (627)
Sale of securities 24
Purchase of securities (7,396) (58)
Net cash used in investing activities (7,477) (856)
Cash Flows from Financing Activities:
Repurchase of company stock (26)
Dividends paid (1,818) (622)
Net cash used in financing activities (1,844) (622)
Net (Decrease) Increase in Cash and Cash equivalents (6,428) 4,236
Cash and Cash Equivalents at Beginning of Year 27,604 28,057
Cash and Cash Equivalents at End of Year $21,176 $32,293
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SOURCE McRae Industries, Inc.
