McRae Industries, Inc. Reports Earnings For The First Quarter Of Fiscal 2016

16 Dec, 2015, 17:36 ET from McRae Industries, Inc.

MOUNT GILEAD, N.C., Dec. 16, 2015 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets:   MCRAA and MCRAB) reported consolidated net revenues for the first quarter of fiscal 2016 of $31,730,000 as compared to $29,239,000 for the first quarter of fiscal 2015.  Net earnings for the first quarter of fiscal 2016 amounted to $1,995,000, or $0.93 per diluted Class A common share as compared to $2,347,000, or $1.07 per diluted Class A common share, for the first quarter of fiscal 2015.  

FIRST QUARTER FISCAL 2016 COMPARED TO FIRST QUARTER FISCAL 2015

Consolidated net revenues totaled $31.7 million for the first quarter of fiscal 2016 as compared to $29.2 million for the first quarter of fiscal 2015. Sales related to our western/lifestyle boot products for the first quarter of fiscal 2016 totaled $18.4 million as compared to $19.4 million for the first quarter of fiscal 2015. This 5% decrease in net revenues was primarily attributable to the general slowdown in the apparel and footwear industries, which looks to be continuing into the second quarter.  Revenues from our work boot products grew approximately 35%, from $9.8 million for the first quarter of fiscal 2015 to $13.3 million for the first quarter of fiscal 2016 as the production of military boots related to our multiple government contracts continues to increase.   

Consolidated gross profit for the first quarter of fiscal 2016 amounted to approximately $8.7 million as compared to $8.9 million for the first quarter of fiscal 2015. This decrease in gross profit was attributable to the sales mix being more heavily weighted towards lower margin products. Gross profit as a percentage of net revenues was down from 30.3% for the first quarter of fiscal 2015 to 27.2% for the first quarter of fiscal 2016, primarily attributable to the decline in overall profit margins for our military boot products.  As we strive to improve labor inefficiencies due to a significant number of new employees compared to the same quarter last year, we expect to see improved margins.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $5.5 million for the first quarter of fiscal 2016 as compared to $5.1 million for the first quarter of fiscal 2015. This increase in SG&A expenses resulted primarily from increased expenditures for advertising, salaries and heath insurance costs. As a percentage of net revenues, SG&A expenses remained relatively constant at 17.2% for the first quarter of fiscal 2016 as compared to 17.3% for the first quarter of fiscal 2015.

As a result of the above, the consolidated operating profit for the first quarter of fiscal 2016 amounted to $3.2 million as compared to $3.8 million for the first quarter of fiscal 2015.

Financial Condition and Liquidity

Our financial condition remained strong at October 31, 2015 as cash and cash equivalents totaled $12.0 million as compared to $15.4 million at August 1, 2015. Our working capital increased from $49.7 million at August 1, 2015 to $50.8 million at October 31, 2015.

We currently have two lines of credit with a bank totaling $6.75 million, all of which was fully available at October 31, 2015. 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 2016. Our $5.0 million line of credit, which also expires in January 2016, 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 2016.

Net cash used by operating activities for the first quarter of fiscal 2016 amounted to $2,483,000. Net earnings, as adjusted for depreciation, contributed approximately $2.2 million of cash. Accounts and notes receivable used approximately $3.0 million of cash as first quarter sales outpaced customer payments. Inventory levels in both of our boot businesses used approximately $2.6 million of cash as product demand remained strong.  The timing of payments for accounts payable, employee benefits, and income taxes provided approximately $0.9 million of cash.

Net cash used by investing activities totaled approximately $589,000, primarily for a building addition and manufacturing equipment. 

Net cash used in financing activities totaled $338,000, which was mainly 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)








October 31,
2015


August 1,
2015


ASSETS





Current assets: 










Cash and cash equivalents


$12,027


$15,437






Short term securities


250


500






Accounts and notes receivable, net


18,681


15,636






Inventories, net


28,325


25,757






Income tax receivable


0


879






Prepaid expenses and other current assets


734


532






Total current assets


60,017


58,741






Property and equipment, net


6,453


5,817






Other assets:










Deposits


14


14






Long term securities


3,556


3,553






Real estate held for investment


3,594


3,594






Amounts due from split-dollar life insurance


2,288


2,288






Trademarks


2,824


2,824






 Total other assets


12,276


12,273






Total assets


$78,746


$76,831






 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








October 31,
2015


August 1,
2015


LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities: 










Accounts payable


$5,441


$5,599






Accrued employee benefits


2,140


1,627






Accrued payroll and payroll taxes


948


1,225






Accrued income tax


158


0






Other


575


552






Total current liabilities


9,262


9,003











Shareholders' equity:





Common Stock:





Class A, $1 par value; authorized 5,000,000 shares
   issued and outstanding, 2,039,822 and 2,039,335
   shares, respectively


2,040


2,040






Class B, $1 par value; authorized 2,500,000 shares;
   issued and outstanding, 390,003 and 391,189 shares,
   respectively


390


391






Retained earnings


67,054


65,397






Total shareholders' equity


69,484


67,828






Total liabilities and shareholders' equity


$78,746


$76,831






 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)








Three Months Ended



October 31,


November 1,

2015

2014






Net revenues


$31,730


$29,239






Cost of revenues


23,072


20,375






Gross profit


8,658


8,864






Selling, general and administrative expenses


5,456


5,058






Operating profit 


3,202


3,806






Other income


89


55






Earnings before income taxes


3,291


3,861






Provision for income taxes


1,296


1,514






Net earnings 


$1,995


$2,347





















Earnings per common share:










Earnings per common share: 





     Basic earnings per share:





        Class A


$1.11


$1.28

        Class B


0.13


0.13

     Diluted earnings per share:





        Class A


0.93


1.07

        Class B


NA


NA






Weighted average number of common shares outstanding:





       Class A


2,039,346


2,038,543

       Class B


391,071


391,981

        Total


2,430,417


2,430,524






 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)








Three Months Ended



October 31,


November 1,



2015

2014






Net cash provided by operating activities


(2,483)


(2,637)






Cash Flows from Investing Activities:










Purchase of land for investment


0


(2)






Capital expenditures


(589)


(123)






Net cash used in investing activities


(589)


(125)






Cash Flows from Financing Activities:










Purchase of common stock


(22)


0






Dividends paid


(316)


(316)






Net cash used in financing activities


(338)


(316)






Net (Decrease) Increase in Cash and Cash equivalents


(3,410)


(3,078)






Cash and Cash Equivalents at Beginning of Year


15,437


18,880






Cash and Cash Equivalents at End of Year 


$12,027


$15,802






 

 

SOURCE McRae Industries, Inc.



RELATED LINKS

http://www.mcraeindustries.com