McRae Industries, Inc. Reports Earnings For Fiscal 2013

           McRae Industries, Inc. Reports Earnings For Fiscal 2013

PR Newswire

MOUNT GILEAD, N.C., Nov. 13, 2013

MOUNT GILEAD, N.C., Nov. 13, 2013 /PRNewswire/ --McRae Industries, Inc. (Pink
Sheets: MCRAA and MCRAB) reported consolidated net revenues for fiscal 2013
of $97,071,000 as compared to $75,684,000 for fiscal 2012. Net earnings for
fiscal 2013 totaled $7,498,000 as compared to $4,842,000 for fiscal 2012. Net
earnings per diluted Class A common share were $3.79 for fiscal 2013 as
compared to $2.27 for fiscal 2012.

CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2013 COMPARED TO FISCAL 2012

Consolidated net revenues for fiscal 2013 amounted to approximately $97.1
million as compared to $75.7 million for fiscal 2012. This 28% increase in
net revenues was primarily attributable to strong performance in both of our
boot product segments. Our western/lifestyle products business grew from $52.5
million for fiscal 2012 to $62.8 million for fiscal 2013 as demand for both
men and women's products continued to be heavy. Consolidated net revenues from
our work boot product sales increased from $23.0 million for fiscal 2012 to
$33.3 million for fiscal 2013 as nearly all of our product lines recorded
higher sales than the previous year. This 45% improvement in net revenues was
the result of two main factors. First, the rebound of the construction
industry in the U.S. had a positive impact on the demand for our traditional
work products. Secondly, and more significantly, at the end of fiscal 2012, we
received two new military boot contracts which have a base year and four
one-year options. In addition, we also received a two year contract with a
third year option to manufacture military boots for the nation of Israel. In
September 2013, we were the successful bidder on a U.S. Government contract to
manufacture boots for the Marines. This contract also has a one year base
period and four one-year options. Net revenues associated with our bar code
business were insignificant for fiscal 2013 and are expected to be minimal in
the future. For fiscal 2014, we are cautiously optimistic that the demand for
our western/lifestyle products will remain strong and that the improved
economy will have a positive impact on our non-military work boot business. We
expect our military boot contracts to provide a solid base for improved net
revenue performance for fiscal 2014.

Consolidated gross profit for fiscal 2013 totaled $29.5 million as compared to
$23.4 million for fiscal 2012. This 26% growth in gross profit resulted from
increased net revenues associated with both of our boot segments. Gross profit
as a percentage of net revenues fell from 30.9% for fiscal 2012 to 30.4% for
fiscal 2013. This decline in gross profit as a percentage of net revenues was
primarily the result of higher imported product costs, which was partially
offset by improved margins associated with the military boot business.
Imported product cost increases are expected to continue to apply pricing
pressure which will potentially have an impact on our margins for fiscal 2014.

Consolidated selling, general and administrative ("SG&A") expenses increased
nearly 15%, up from $15.7 million for fiscal 2012 to $18.0 million for fiscal
2013. This increase in SG&A expenses was the result of higher support costs
associated with the increase in net revenues. As a percentage of net revenues,
SG&A expenses for fiscal 2013 totaled 18.5% as compared to 20.7% for fiscal
2012. Increased expenditures for sales related compensation, travel expenses,
operating supplies, administrative compensation costs, health insurance
coverage, bad debt charges, professional fees, and employee benefit costs were
partially offset by reduced outlays for real estate rentals and advertising
programs.

As a result of the above, consolidated operating profit for fiscal 2013
totaled approximately $11.5 million as compared to $7.7 million for fiscal
2012.

FINANCIAL CONDITION AND LIQUIDITY

At August 3, 2013, our financial condition and liquidity remained strong as
cash and cash equivalents totaled $10.8 million as compared to $12.9 million
at July 28, 2012. Our working capital increased from $40.3 million at July
28, 2012 to $44.5 million at August 3, 2013.

We currently have two lines of credit with a bank totaling $6.75 million, all
of which were fully available at August 3, 2013. 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 2014. The $5.0
million line of credit, which also expires in January 2014, 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 fiscal 2014.

Net cash provided by operating activities for fiscal 2013 amounted to
approximately $1.7 million. Net earnings, as adjusted for depreciation,
contributed approximately $8.2 million of cash. The increase in accounts
receivable used approximately $3.6 million of cash as a result of the timing
of collection related to heavier than normal fourth quarter sales. Inventory
build–up for the fall selling season for our western/work boot unit and to
support our new military boot contracts used approximately $3.5 million of
cash. The timing of payment for accounts payable, accrued employee benefits,
accrued payroll and income tax payments provided approximately $1.7 million of
cash

Net cash used in investing activities totaled approximately $1.5 million. The
investment in held-to-maturity securities used approximately $1.0 million of
cash. Capital expenditures primarily for manufacturing and warehouse
equipment, expansion of the telephone system, and computer related
expenditures used approximately $900,000 of cash. Land sales provided
approximately $400,000 of cash.

Net cash used in financing activities totaled approximately $2.2 million.
Dividend payments totaled approximately $2.1 million and company stock
repurchases used approximately $161,000 of cash.

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. We caution readers not to place
undue reliance upon any such forward-looking statements, which speak only as
of the date made.



McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
                                                         August 3,  July 28,
                                                         2013       2012
ASSETS
Current assets:
 Cash and cash equivalents                              $  10,804 $  12,874
Accounts and notes receivable, less allowances of
$1,521                                                   15,394     11,782

 and $1,170, respectively
 Inventories, net                                       23,046     19,572
 Income tax receivable                                  0          209
 Prepaid expenses and other current assets              482        395
 Deferred tax assets                                    2,168      1,726
 Total current assets                               51,894     46,558
Property and equipment, net                              3,319      3,116
Other assets:
 Long term securities                                   958        0
 Real estate held for investment                        3,626      3,673
 Amount due from split-dollar life insurance            2,288      2,288
 Trademarks                                             2,824      2,824
 Total other assets                                9,696      8,785
 Total assets                                  $ 64,909  $ 58,459



McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
                                                           August 3, July 28,
                                                           2013      2012
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                         $  4,054 $  3,373
 Accrued employee benefits                                1,707     1,158
 Accrued payroll and payroll taxes                        1,209     1,003
 Income tax payable                                       74        0
 Other                                                    399       746
 Total current liabilities                           7,443     6,280
 Deferred tax liabilities                                 1,399     1,398
 Total liabilities                                   8,842     7,678
 Commitments and contingencies
Shareholders' equity:
 Common Stock:
 Class A, $1 par value; authorized 5,000,000 shares;
issued and
                                                           2,038     2,031
 outstanding, 2,037,605 and 2,030,880 shares,
respectively
 Class B, $1 par value; authorized 2,500,000 shares;
issued and
                                                           393       408
 outstanding, 392,919 and 408,376 shares,
respectively
 Retained earnings                                        53,636    48,342
 Total shareholders' equity                            56,067    50,781
 Total liabilities and shareholders' equity         $ 64,909 $ 58,459



McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)
For Years Ended                                  August 3, July 28,  July 30,
                                                 2013      2012      2011
Net revenues                                     $ 97,071 $ 75,684 $ 74,748
Cost of revenues                                 67,539    52,329    54,027
Gross profit                                     29,532    23,355    20,721
Selling, general and administrative expenses     18,005    15,671    14,626
Operating profit                                 11,527    7,684     6,095
Other income                                     204       249       202
Interest expense                                 (2)       (1)       (1)
Earnings (loss) before income taxes              11,729    7,932     6,296
Provision for income taxes                       4,231     3,090     2,467
Net earnings                                     $  7,498 $  4,842 $  3,829
Earnings per common share:
Earnings per common share:
 Basic earnings per share:
 Class A                                  $  4.54  $  2.73  $  2.22
 Class B                                  .77       0         0
 Diluted earnings per share:
 Class A                                  3.79      2.27      1.84
 Class B                                  NA        NA        NA
Weighted average number of common shares
outstanding:
 Class A                                   2,035,034 2,038,902 2,053,042
 Class B                                   399,878   414,853   423,697
 Total                                    2,434,912 2,453,755 2,476,739



McRae Industries, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For Years Ended                   August 3,      July 28,       July 30,
                                  2013           2012           2011
Cash Flows from Operating
Activities:
Net earnings (loss)               $    7,498  $    4,842  $    3,829
Adjustments to reconcile net
earnings (loss) to net cash

provided by (used in) operating
activities:
Depreciation                      686            640            629
Amortization of bond premiums     11             0              0
Loss on sale of assets            (282)          45             (83)
Deferred income taxes             (441)          26             161
Changes in operating assets and
liabilities:
 Accounts receivable, net        (3,612)        (801)          (510)
 Inventories                     (3,474)        (961)          (1,436)
 Prepaid expenses and other      (87)           (219)          (11)
current assets
 Accounts payable                681            618            (821)
 Accrued employee benefits       549            307            177
 Accrued payroll and payroll     206            (84)           (24)
taxes
 Income taxes                    283            68             267
 Other                           (347)          (9)            56
Net cash provided by operating    1,671          4,472          2,234
activities
Cash Flows from Investing
Activities:
Proceeds from sale of assets      390            8              126
Proceeds from maturing bond       75             0              0
Purchase of land for investment   (59)           (23)           (258)
Capital expenditures              (891)          (767)          (822)
Purchase of securities            (1,044)        0              0
Net cash used in investing        (1,529)        (782)          (954)
activities
Cash Flows from Financing
Activities:
Purchase of common stock          (161)          (356)          (215)
Issuance of common stock          5              0              0
Dividends paid                    (2,056)        (734)          (739)
Net cash provided by financing    (2,212)        (1,090)        (954)
activities
Net (Decrease) Increase in Cash   (2,070)        2,600          326
and Cash equivalents
Cash and Cash Equivalents at      12,874         10,274         9,948
Beginning of Year
Cash and Cash Equivalents at End  $   10,804  $   12,874  $    10,274
of Year

SOURCE McRae Industries, Inc.

Website: http://www.mcraeindustries.com
Contact: D. Gary McRae, (910) 439-6147
 
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