McRae Industries, Inc. Reports Earnings For The Third Quarter And First Nine Months Of Fiscal 2019
MOUNT GILEAD, N.C., June 14, 2019 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the third quarter of fiscal 2019 ending on April 27, 2019 of $18,606,000 as compared to $16,170,000 for the third quarter of fiscal 2018. Net earnings for the third quarter of fiscal 2019 amounted to $386,000, or $0.16 per diluted Class A common share as compared to $78,000, or $0.03 per diluted Class A common share, for the third quarter of fiscal 2018.
Consolidated net revenues for the first nine months of fiscal 2019 totaled $59,945,000 as compared to $59,041,000 for the first nine months of fiscal 2018. Net earnings for the first nine months of fiscal 2019 amounted to $1,310,000, or $0.55 per diluted Class A common share, as compared to net earnings of $2,051,000, or $0.85 per diluted Class A common share, for the first nine months of fiscal 2018.
THIRD QUARTER FISCAL 2019 COMPARED TO THIRD QUARTER FISCAL 2018
Consolidated net revenues totaled $18.6 million for the third quarter of fiscal 2019 as compared to $16.2 million for the third quarter of fiscal 2018. Sales related to our western/lifestyle boot products were $9.6 million for the third quarter of fiscal 2019 as compared to $10.1 million for the third quarter of fiscal 2018. This was primarily driven by a decline in our premium western boots sales. Revenues from our work boot products increased approximately 50%, from $5.9 million for the third quarter of fiscal 2018 to $8.8 million for the third quarter of fiscal 2019. This was primarily the result of increased military boot sales.
Consolidated gross profit for the third quarter of fiscal 2019 amounted to approximately $4.2 million as compared to $4.0 million for the third quarter of fiscal 2018. However, gross profit as a percentage of net revenues was down from 24.6% for the third quarter of fiscal 2018 to 22.5% for the third quarter of fiscal 2019. This drop was driven by a change in the sales mix of our western/lifestyle products, as well as an increase in freight cost. Additionally, margins were slightly impacted by management's decision not to renew our John Deere licensing agreement that expires in May 2019. Management plans to continue closing out our John Deere products over the next year.
Consolidated selling, general and administrative ("SG&A") expenses have slightly decreased from $3.9 million for the third quarter of fiscal 2018 to $3.8 million for the third quarter of fiscal 2019.
As a result of the above, the consolidated operating profit for the third quarter of fiscal 2019 amounted to $0.4 million as compared to $0.07 million for the third quarter of fiscal 2018.
FIRST NINE MONTHS FISCAL 2019 COMPARED TO FIRST NINE MONTHS FISCAL 2018
Consolidated net revenues for the first nine months of fiscal 2019 totaled $60 million as compared to $59 million for the first nine months of fiscal 2018. Our western and lifestyle product sales totaled $34.2 million for the first nine months of fiscal 2019 as compared to $36.5 million for the first nine months of fiscal 2018, with the decrease coming from declines in our premium western boots, as well as a general softness in most sectors of our western/lifestyle boot products. Net revenues from our work boot business increased from $22.2 million for the first nine months of fiscal 2018 to $25.5 million for the first nine months of fiscal 2019. This increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our government contracts.
Consolidated gross profit totaled $14.1 million for the first nine months of fiscal 2019 as compared to $15.2 million for the first nine months of fiscal 2018. Gross profit attributable to our western and lifestyle products totaled $11.0 million for the first nine months of fiscal 2019, down from $12.6 million for the first nine months of fiscal 2018. This decrease was primarily the result of lower sales volume, increased spending on air freight, and an increase in free freight for customers. Our work boot products gross profit increased from $2.4 million for the first nine months of fiscal 2018 to $2.8 million for the first nine months of fiscal 2019. This increase was driven by the higher military boot shipments mentioned above.
Consolidated selling, general and administrative ("SG&A") expenses remained relatively consistent at $12.6 million for the first nine months of fiscal 2019, as compared to $12.5 million for the first nine months of fiscal 2018.
As a result of the above, the consolidated operating profit amounted to $1.5 million for the first nine months of fiscal 2019 as compared to $2.7 million for the first nine months of fiscal 2018.
Financial Condition and Liquidity
Our financial conditions remain strong at April 27, 2019 as cash and cash equivalents totaled $20.4 million as compared to $27.6 million at July 28, 2018. Our working capital decreased from $55.4 million at July 28, 2018 to $55.1 million at April 27, 2019.
We currently have two lines of credit totaling $6.75 million, all of which was fully available at April 27, 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 nine months of fiscal 2019, operating activities provided approximately $5.0 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $2.2 million of cash. A reduction in inventory and accounts receivables provided approximately $3.3 million of cash. Accounts payable and employee related expenses used approximately $0.7 million.
Net cash used by investing activities totaled approximately $10.0 million, which was used primarily for investing in securities.
Net cash used in financing activities totaled approximately $2.2 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)
April 27, July 28,
2019 2018
ASSETS
Current assets:
Cash and cash
equivalents $20,419 $27,605
Short term
securities 12,071 2,211
Accounts and notes
receivable, net 9,722 10,665
Inventories, net 16,095 18,427
Income tax
receivable 616 1,127
Prepaid expenses
and other current
assets 375 154
Total current
assets 59,298 60,189
Property and
equipment, net 6,729 7,375
Other assets:
Deposits 14 14
Long term
securities 3,968 3,899
Real estate held
for investment 3,782 3,775
Amounts due from
split-dollar
life insurance 2,288 2,288
Trademarks 2,824 2,824
Total other assets 12,876 12,800
Total assets $78,903 $80,364
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
April 27, July 28,
2019 2018
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,513 $2,968
Accrued employee benefits 142 423
Accrued payroll and payroll taxes 716 630
Other 799 733
Total current liabilities 4,170 4,754
Deferred tax liabilities 621 621
Total liabilities 4,791 5,375
Shareholders' equity:
Common Stock:
Class A, $1 par value; authorized
5,000,000 shares 2,018 2,020
issued and outstanding, 2,018,408 and
2,019,974
shares, respectively
Class B, $1 par value; authorized
2,500,000 shares; 374 375
issued and outstanding, 373,775 and
374,272 shares,
respectively
Unrealized losses on investments, net
of tax (33) (28)
Retained earnings 71,753 72,622
Total shareholders' equity 74,112 74,989
Total liabilities and shareholders'
equity $78,903 $80,364
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
April 27, April 28, April 27, April 28,
2019 2018 2019 2018
---
Net revenues $18,606 $16,170 $59,945 $59,041
Cost of revenues 14,425 12,198 45,871 43,871
Gross profit 4,181 3,972 14,074 15,170
Selling, general
and administrative
expenses 3,809 3,905 12,577 12,507
Operating profit 372 67 1,497 2,663
Other income 157 128 434 316
Earnings before
income taxes 529 195 1,931 2,979
Provision for
income taxes 143 117 621 928
Net earnings $386 $78 $1,310 $2,051
Earnings per common share:
Diluted earnings per share:
Class A 0.16 0.03 0.55 0.85
Class B
NA
NA
NA
NA
Weighted average number of common shares
outstanding:
Class A 2,019,442 2,021,648 2,019,604 2,018,292
Class B 374,104 374,798 374,180 379,254
Total 2,393,546 2,396,446 2,393,784 2,397,546
McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
April 27, April 28,
2019 2018
Net cash
provided by
operating
activities 5,047 7,408
Cash Flows
from
Investing
Activities:
Proceeds from
sale of
assets 152
Purchase of
land for
investment (25) (175)
Capital
expenditures (243) (712)
Proceeds from
securities 24 1,194
Purchase of
securities (9,959) (782)
Net cash used
in investing
activities (10,051) (475)
Cash Flows
from
Financing
Activities:
Purchase of
common stock (53) (133)
Dividends paid (2,128) (935)
Net cash used
in financing
activities (2,181) (1,068)
Net (Decrease)
Increase in
Cash and Cash
equivalents (7,185) 5,865
Cash and Cash
Equivalents
at Beginning
of Year 27,604 28,057
Cash and Cash
Equivalents
at End of
Year $20,419 $33,922
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SOURCE McRae Industries, Inc.
