McRAE INDUSTRIES, INC. REPORTS EARNINGS FOR THE FIRST QUARTER OF FISCAL 2022

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Dec 22, 2021, 16:30 ET

MOUNT GILEAD, N.C., Dec. 22, 2021 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the first quarter of fiscal 2022 of $27,588,000 as compared to $18,939,000 for the first quarter of fiscal 2021. Net earnings for the first quarter of fiscal 2021 amounted to $2,222,000, or $0.98 per diluted Class A common share as compared to $494,000, or $0.21 per diluted Class A common share, for the first quarter of fiscal 2021.

FIRST QUARTER FISCAL 2022 COMPARED TO FIRST QUARTER FISCAL 2021

Consolidated net revenues totaled $27.6 million for the first quarter of fiscal 2022 as compared to $18.9 million for the first quarter of fiscal 2021. Sales related to our western/lifestyle boot products for the first quarter of fiscal 2022 totaled $19.9 million as compared to $12.1 million for the first quarter of fiscal 2021. This 64% increase can be attributed to increases across all brands. Revenues from our work boot products increased approximately 3%, from $7.0 million for the first quarter of fiscal 2021 to $7.2 million for the first quarter of fiscal 2022. This is primarily a result of decreased military boot sales offset by an increase in our Dan Post and Laredo work boot sales.

Consolidated gross profit for the first quarter of fiscal 2022 amounted to approximately $8.0 million as compared to $5.0 million for the first quarter of fiscal 2021. Gross profit as a percentage of net revenues was up from 26.6% for the first quarter of fiscal 2021 to 28.9% for the first quarter of fiscal 2022. This is primarily attributable to our lower margin military boot sales making up a smaller percentage of total sales.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $5.1 million for the first quarter of fiscal 2022 as compared to $4.4 million for first quarter of fiscal 2021. This is primarily due to increased commissions, advertising, and healthcare costs.

As a result of the above, the consolidated operating profit for the first quarter of fiscal 2022 amounted to $2.8 million as compared to $0.7 million for the first quarter of fiscal 2021.

Financial Condition and Liquidity

Our financial condition remained strong at October 30, 2021 as cash and cash equivalents totaled $20.7 million as compared to $23.5 million at July 31, 2021. Our working capital increased from $58.0 million at July 31, 2021 to $60.2 million at October 30, 2021.

We currently have two lines of credit totaling $6.75 million, all of which were fully available at October 30, 2021. 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 2022. Our $5.0 million line of credit, which also expires in January 2022, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.

Net cash used in operating activities for the first quarter of fiscal 2022 amounted to $4.8 million. Net earnings, as adjusted for depreciation, contributed approximately $2.5 million of cash. Inventory used approximately $1.3 million of cash and accounts receivable used approximately $7.1 million of cash as first quarter sales outpaced customer payments.

Net cash provided by investing activities for the first quarter of fiscal 2022 totaled approximately $2.2 million, primarily due to the maturity of short-term investments.

Net cash used in financing activities for the first quarter of fiscal 2022 totaled $0.3 million, which was primarily used for dividend payments.

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 2022.

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 30, 2021	July 31, 2021
	October 30, 2021	July 31, 2021
ASSETS
Current assets:

Cash and cash equivalents	$20,665	$23,489

Equity investments	6,480	6,207

Debt securities	-	2,414

Accounts and notes receivable, net	23,507	16,382

Inventories, net	15,593	14,326

Prepaid expenses and other current assets	710	323

Total current assets	66,955	63,141

Property and equipment, net	5,217	5,363

Other assets:

Deposits	14	14

Notes receivable	1,025	1,017

Real estate held for investment	3,101	3,238

Amounts due from split-dollar life insurance	2,288	2,288

Trademarks	2,824	2,824

Total other assets	9,252	9,381

Total assets	$81,424	$77,885

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

	October 30, 2021	July 31, 2021
	October 30, 2021	July 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Accounts payable	$3,245	$2,714

Accrued employee benefits	1,112	660

Accrued payroll and payroll taxes	435	700

Income tax payable	1,058	236

Other	865	795

Total current liabilities	6,715	5,105

Deferred tax liabilities	534	534

Total liabilities	7,249	5,639

Shareholders' equity:
Common Stock:
Class A, $1 par value; authorized 5,000,000 shares issued and outstanding, 1,893,423 and 1,893,423 shares, respectively	1,893	1,893

Class B, $1 par value; authorized 2,500,000 shares; issued and outstanding, 366,737 and 366,737 shares, respectively	367	367

Retained earnings	71,915	69,986

Total shareholders' equity	74,175	72,246

Total liabilities and shareholders' equity	$81,424	$77,885

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)

	Three Months Ended
	October 30,	October 31,
	2021	2020

Net revenues	$27,588	$18,939

Cost of revenues	19,604	13,904

Gross profit	7,984	5,035

Selling, general and administrative expenses	5,136	4,357

Operating profit	2,848	678

Other income	208	50

Earnings before income taxes	3,056	728

Provision for income taxes	834	234

Net earnings	$2,222	$494




Earnings per common share:

Diluted earnings per share:
Class A	0.98	0.21
Class B	NA	NA

Weighted average number of common shares outstanding:
Class A	1,893,423	1,949,583
Class B	366,737	368,835
Total	2,260,160	2,318,418

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)

	Common Stock, $1 par value				Accumulated Other
	Class A		Class B		Comprehensive	Retained
	Shares	Amount	Shares	Amount	Income (Loss)	Earnings
Balance, August 1, 2020	1,957,142	$1,957	373,233	$373	$0	$69,487

Stock Buyback	(21,141)	(21)	(3,500)	(4)		(490)

Conversion of Class B	2,300	2	(2,300)	(2)		-
to Class A Stock

Cash Dividend ($0.13 per Class A common stock)						(253)

Cash Dividend ($0.13 per Class B common stock)						(48)

Net earnings						494
Balance, October 31, 2020	1,938,301	$1,938	367,433	$367	$0	$69,190


	Common Stock, $1 par value				Accumulated Other
	Class A		Class B		Comprehensive	Retained
	Shares	Amount	Shares	Amount	Income (Loss)	Earnings
Balance, July 31, 2021	1,893,423	$1,893	366,737	$367	$0	$69,986

Cash Dividend ($0.13 per Class A common stock)						(246)

Cash Dividend ($0.13 per Class B common stock)						(47)

Net earnings						2,222
Balance, October 30, 2021	1,893,423	$1,893	366,737	$367	$0	$71,915

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Three Months Ended
	October 30,	October 31,
	2021	2020

Net cash used in operating activities	(4,767)	(1,094)

Cash Flows from Investing Activities:

Proceeds from sale of assets	200	591

Purchase of land for investment	-	(160)

Capital expenditures	(117)	(98)

Purchase of securities	(246)	(5,118)

Proceeds from sale of securities	2,400	4,855

Net cash provided by investing activities	2,237	70

Cash Flows from Financing Activities:

Repurchase company stock	-	(515)

Dividends paid	(294)	(301)

Net cash used in financing activities	(294)	(816)

Net (Decrease) Increase in Cash and Cash equivalents	(2,824)	(1,840)

Cash and Cash Equivalents at Beginning of Year	23,489	20,959

Cash and Cash Equivalents at End of Period	$20,665	$19,119