MOUNT GILEAD, N.C., Nov. 15, 2017 —  McRae Industries, Inc. (Pink Sheets:   MCRAA and MCRAB) reported consolidated net revenues for fiscal 2017 of $104,316,000 as compared to $108,758,000 for fiscal 2016.  Net earnings for fiscal 2017 totaled $5,083,000 as compared to $4,692,000 for fiscal 2016.  Net earnings per diluted Class A common share were $2.11 for fiscal 2017 as compared to $1.93 for fiscal 2016.  

CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2017 COMPARED TO FISCAL 2016

Consolidated net revenues for fiscal 2017 amounted to approximately $104.3 million as compared to $108.8 million for fiscal 2016.  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 17% from $58.8 million in 2016 to $48.8 million in 2017.  Women's fashion and premium children's boots had the largest sales decrease.  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, increased by 9.5% with sales increasing from $49.7 million in fiscal 2016 to $54.2 million in 2017.  The military boot sales increased by 15.2% from $39.6 million in 2016 to $45.6 million in 2017, while all other work boot brands decreased 12.8% from $10.1 million in fiscal 2016 to $8.6 million in fiscal 2017.  

Consolidated gross profit for fiscal 2017 totaled $25.6 million as compared to $26.9 million for fiscal 2016.  Gross margin for the western/lifestyle segment decreased from 35% in fiscal 2016 to 34.2% in fiscal 2017.  Gross margins on our work boot segment increased slightly from 12.3% in fiscal 2016 to 15.8% in fiscal 2017 because of manufacturing efficiencies, a higher volume of production, and better product mix in our military boots.

Consolidated selling, general and administrative (“SG&A”) expenses amounted to $17.8 million as compared to $19.8 million for fiscal 2016.  This was primarily driven by decreased commissions, salaries, advertising, and a company-wide effort to minimize expenditures.

As a result of the above, consolidated operating profit totaled approximately $7.8 million for fiscal 2017 as compared to $7.1 million for fiscal 2016.

FINANCIAL CONDITION AND LIQUIDITY

At July 29, 2017, our financial condition and liquidity remained strong as cash and cash equivalents totaled $28.1 million as compared to $15.7 million at July 30, 2016.  Our working capital totaled $56.5 million at July 29, 2017 as compared to $52.8 million at July 30, 2016.

We currently have two lines of credit totaling $6.75 million, both of which were fully available at July 29, 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.  The $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 fiscal 2017 amounted to approximately $14.8 million.  Net earnings, as adjusted for depreciation, contributed approximately $6.3 million of cash, and a reduction in income tax receivable contributed approximately $0.7 million.  Lower inventory levels throughout the business provided approximately $9.7 million of cash.  The timing of payments for accounts payable and lower accrued payroll used approximately $2.6 million of cash.  

Net cash used in investing activities totaled approximately $0.7 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 $1.8 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 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)

July 29,
2017

July 30,
2016

ASSETS

Current assets:

Cash and cash equivalents

$28,057

$15,673

Short term securities

505

501

Accounts and notes receivable, less allowances
of $1,625 and $1,975, respectively

12,331

12,708

Inventories, net

18,273

27,944

Income tax receivable

329

1,055

Prepaid expenses and other current assets

550

433

Deferred tax assets

1,674

2,130

Total current assets

61,719

60,444

Property and equipment, net

7,391

8,147

Other assets:

Deposits

14

14

Long term securities

3,804

3,520

Real estate held for investment

3,601

3,602

Amounts due from split-dollar life insurance

2,288

2,288

Trademarks

2,824

2,824

Total other assets

12,531

12,248

Total assets

$81,641

$80,839

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

July 29,
2017

July 30,
2016

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$2,510

$4,696

Accrued employee benefits

1,144

1,090

Accrued payroll and payroll taxes

809

1,207

Other

714

698

Total current liabilities

5,177

7,691

Deferred tax liabilities

2,263

2,288

Total liabilities

7,440

9,979

Shareholders' equity:

Common Stock:

Class A, $1 par value; authorized 5,000,000 shares

2,015

2,031

issued and outstanding, 2,030,658 and 2,039,335

shares, respectively

Class B, $1 par value; authorized 2,500,000

384

388

shares; issued and outstanding, 387,629 and

391,189 shares, respectively

Unrealized losses on investments, net of tax

(5)

(59)

Retained earnings

71,807

68,500

Total shareholders' equity

74,201

70,860

Total liabilities and shareholders' equity

$81,641

$80,839

   

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

For Years Ended

July 29,

July 30,

August 1,

2017

2016

2015

Net revenues

$104,316

$108,758

$108,673

Cost of revenues

78,739

81,837

79,347

Gross profit

25,577

26,921

29,326

Selling, general and administrative expenses

17,755

19,782

19,025

Operating profit 

7,822

7,139

10,301

Other income

357

366

324

Interest expense

(2)

Earnings before income taxes

8,179

7,505

10,623

Provision for income taxes

3,096

2,813

3,982

Net earnings 

$5,083

$4,692

$6,641

Earnings per common share:

Earnings per common share: 

     Diluted earnings per share:

        Class A

2.11

1.93

2.73

        Class B

NA

NA

NA

Weighted average number of common shares outstanding:

       Class A

2,024,470

2,035,906

2,038,645

       Class B

385,830

389,271

391,879

        Total

2,410,300

2,425,177

2,430,524

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

July 29,
2017

July 30,
2016

August 1,
2015

For Years Ended

Cash Flows from Operating Activities:

Net earnings 

$5,083

$4,692

$6,641

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation

1,211

907

785

Amortization of bond premiums

3

(Gain) loss on sale of assets

(2)

(6)

Loss on sale of securities

6

62

Deferred income taxes

398

951

(75)

Changes in operating assets and liabilities:

  Accounts receivable, net

377

2,928

(2,208)

  Inventories

9,671

(2,187)

(3,469)

  Prepaid expenses and other assets

(117)

99

21

  Accounts payable

(2,186)

(903)

1,821

  Accrued employee benefits

54

(537)

(171)

  Accrued payroll and payroll taxes

(398)

(18)

64

  Income tax receivable/payable

726

(933)

816

  Other

16

146

89

Net cash provided by operating activities

14,839

5,201

4,317

Cash Flows from Investing Activities:

Proceeds from sale of assets

13

15

Purchase of land for investment

(17)

(9)

Capital expenditures

(465)

(3,237)

(3,380)

Proceeds from sale of securities

833

484

75

Purchase of securities

(1,040)

(609)

(3,183)

Net cash used in investing activities

(659)

(3,364)

(6,497)

Cash Flows from Financing Activities:

Purchase of common stock

(545)

(342)

Dividends paid

(1,251)

(1,259)

(1,263)

Net cash used in financing activities

(1,796)

(1,601)

(1,263)

Net (Decrease) Increase in Cash and Cash equivalents

12,384

236

(3,443)

Cash and Cash Equivalents at Beginning of Year

15,673

15,437

18,880

Cash and Cash Equivalents at End of Year

$28,057

$15,673

$15,437

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SOURCE McRae Industries, Inc.

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http://www.mcraeindustries.com

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