McRae Industries, Inc. Reports Earnings for the First Quarter of Fiscal 2014

 McRae Industries, Inc. Reports Earnings for the First Quarter of Fiscal 2014

PR Newswire

MOUNT GILEAD, N.C., Dec. 16, 2013

MOUNT GILEAD, N.C., Dec. 16, 2013 /PRNewswire/ --McRae Industries, Inc. (Pink
Sheets: MCRAA and MCRAB) reported consolidated net revenues for the first
quarter of fiscal 2014 of $31,653,000 as compared to $24,864,000 for the first
quarter of fiscal 2013. Net earnings for the first quarter of fiscal 2014
amounted to $3,045,000, or $1.33 per diluted Class A common share as compared
to net earnings of $1,943,000, or $0.87 per diluted Class A common share, for
the first quarter of fiscal 2013.

FIRST QUARTER FISCAL 2014 COMPARED TO FIRST QUARTER FISCAL 2013

Consolidated net revenues totaled $31.7 million for the first quarter of
fiscal 2014 as compared to $24.9 million for the first quarter of fiscal 2013.
Sales related to our western/lifestyle boot products for the first quarter of
fiscal 2014 totaled $22.3 million as compared to $18.5 million for the first
quarter of fiscal 2013. This 21% increase net revenues was primarily
attributable to continued strong demand for our men and women's branded
products. Revenues from our work boot products grew approximately 48%, from
$6.3 million for the first quarter of fiscal 2013 to $9.3 million for the
first quarter of fiscal 2014 as the production of military boots related to
our multiple contracts increased significantly. Revenues associated with our
smaller businesses were minimal. We are cautiously optimistic that the
improving economy, coupled with our multiple military boot contracts, will
have a positive impact on net revenues for the second quarter.

Consolidated gross profit for the first quarter of fiscal 2014 amounted to
approximately $10.3 million as compared to $7.9 million for the first quarter
of fiscal 2013. This increase in gross profit was attributable to both the
increase in net revenues and a slight uptick in overall profit margins. Gross
profit as a percentage of net revenues inched up from 31.7% for the first
quarter of fiscal 2013 to 32.4% for the first quarter of fiscal 2014,
primarily attributable to the positive impact that increased production levels
associated with the military boot business have on lowering per unit product
costs.

Consolidated selling, general and administrative ("SG&A") expenses totaled
approximately $5.5 million for the first quarter of fiscal 2014 as compared to
$4.8 million for the first quarter of fiscal 2013. This increase in SG&A
expenses resulted primarily from increased expenditures for sales related
compensation, travel expenses, professional service costs, product promotion
costs, and employee benefit costs, which were partially offset by reduced
health insurance charges. As a percentage of net revenues, SG&A expenses fell
from 19.3 % for the first quarter of fiscal 2013 to 17.4% for the first
quarter of fiscal 2014.

As a result of the above, the consolidated operating profit for the first
quarter of fiscal 2014 amounted to $4.8 million as compared to $3.1 million
for the first quarter of fiscal 2013.

Financial Condition and Liquidity

Our financial condition remained strong at November 2, 2013 as cash and cash
equivalents totaled $10.7 million as compared to $10.8 million at August 3,
2013. Our working capital increased from $43.1 million at August 3, 2013 to
$45.9 million at November 2, 2013.

We currently have two lines of credit with a bank totaling $6.75 million, all
of which was fully available at November 2, 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. Our $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 the remainder of fiscal 2014.

Net cash provided by operating activities for the first quarter of fiscal 2014
amounted to $321,000. Net earnings, as adjusted for depreciation, contributed
approximately $3.2 million of cash. Accounts and notes receivable used
approximately $3.9 million of cash as strong first quarter sales, primarily
attributable to the western and work boot business, outpaced customer
payments. Inventory levels in both of our boot businesses used approximately
$634,000 of cash as product demand remained strong. The timing of payments
for inventory purchases used approximately $349,000 of cash. The payment of
accrued sales commissions used approximately $381,000 of cash. The timing of
employee benefit and income tax payments provided approximately $2.2 million
of cash.

Net cash used by investing activities totaled approximately $188,000,
primarily for manufacturing equipment, computer equipment and software
upgrades.

Net cash used in financing activities totaled $219,000, which was used for
dividend payments.

RECLASSIFICATION

Certain amounts in the 2013 financial statements have been reclassified to the
2014 presentation.

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. Readers are cautioned not to
place undue reliance upon any such forward-looking statements, which speak
only as of the date made. Except as otherwise required by the federal
securities laws, we disclaim any obligation or undertaking to publicly release
any updates or revisions to any forward-looking statement contained herein (or
elsewhere) to reflect any change in our expectations or any change in events,
conditions or circumstances on which any such statement is based.

McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
                                               November 2,  August 3,

                                               2013         2013
Assets
Current assets:
Cash and cash equivalents                      $ 10,718     $ 10,804
Marketable securities                          0            0
Accounts and notes receivable, net             19,350       5,394
Inventories, net                               23,680       23,046
Income tax receivable                          0            695
Prepaid expenses and other current assets      271          482
Total current assets                           54,019       50,421
Property and equipment, net                    3,330        3,319
Other assets:
 Marketable securities- long term           955          958
Real estate held for investment                3,626        3,626
 Amount due from split-dollar life insurance 2,288        2,288
Trademarks                                     2,824        2,824
Total other assets                             9,693        9,696
 Total assets                        $ 67,042     $ 63,436



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
                                                     November 2,  August 3,

                                                     2013         2013
Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable                                $ 3,705      $ 4,054
 Accrued employee benefits                       2,498        1,707
 Accrued payroll and payroll taxes               828          1,209
 Accrued income tax                              666          0
 Other accrued liabilities                       453          399
 Total current liabilities                  8,150        7,369
Shareholders' equity:
 Common Stock:
 Class A, $1 par; Authorized 5,000,000 shares;
Issued

 and outstanding, 2,038,543 shares and        2,039        2,038
2,037,605 shares,

 respectively
 Class B, $1 par; Authorized 2,500,000 shares;
Issued

 and outstanding, 391,981 shares and 392,919  392          393
shares,

 respectively
 Retained earnings                               56,461       53,636
 Total shareholders' equity                 58,892       56,067
 Total liabilities and shareholders'   $67,042      $63,436
equity



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
                                                      Three Months Ended
                                                      November 2,  October 27,

                                                      2013         2012
Net revenues                                          $31,653      $24,864
 Cost of revenues                                   21,352       16,954
 Gross profit                                 10,301       7,910
Costs and expenses:
 Selling, general and administrative expenses       5,470        4,790
 Other expense (income), net                        (77)         (38)
 Interest expense                                   0            0
Total costs and expenses                              5,393        4,752
Earnings before income taxes                          4,908        3,158
Provision for income taxes                            1,863        1,215
Net earnings                                          $3,045       $1,943
Earnings per common share:
 Basic earnings per share:
 Class A                                       $1.58        $1.05
 Class B                                       .09          0
 Diluted earnings per share:
 Class A                                       1.33         .87
 Class B                                       NA           NA
Weighted average number of common shares outstanding:
 Class A                                        2,038,247    2,030,961
 Class B                                        392,277      407,460
 Total                                    2,430,524    2,438,421



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                    Three Months Ended
                                                    November 2,  October 27,

                                                    2013         2012
Net cash provided by (used in) operating activities $ 321        $ (2,412)
Cash flows from investing activities:
 Proceeds from sales of assets                  0            4
 Purchase of securities                         0            (1,045)
 Capital expenditures                           (188)        (142)
Net cash used in by investing activities            (188)        (1,183)
Cash flows from financing activities:
 Purchase of company stock                      0            (14)
 Dividends paid                                 (219)        (183)
Net cash used in financing activities               (219)        (197)
Net decrease in cash and cash equivalents           (86)         (3,792)
Cash and cash equivalents at beginning of period    10,804       12,874
Cash and cash equivalents at end of period          $ 10,718     $ 9,082



SOURCE McRae Industries, Inc.

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