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McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2014

 McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six
                            Months Of Fiscal 2014

PR Newswire

MOUNT GILEAD, N.C., March 20, 2014

MOUNT GILEAD, N.C., March 20, 2014 /PRNewswire/ --McRae Industries, Inc.
(Pink Sheets MCRAA and MCRAB) reported consolidated net revenues for the
second quarter of fiscal 2014 of $26,604,000 as compared to $26,082,000 for
the second quarter of fiscal 2013. Net earnings for the second quarter of
fiscal 2014 amounted to $1,501,000 or $0.73 per diluted Class A common share
as compared to net earnings of $1,867,000, or $1.26 per diluted Class A common
share, for the second quarter of fiscal 2013.

Consolidated net revenues for the first six months of fiscal 2014 totaled
$58,257,000 as compared to $50,946,000 for the first six months of fiscal
2013. Net earnings for the first six months of fiscal 2014 amounted to
$4,546,000, or $2.06 per diluted Class A common share, as compared to net
earnings of $3,810,000, or $2.13 per diluted Class A common share, for the
first six months of fiscal 2013.

SECOND QUARTER FISCAL 2014 COMPARED TO SECOND QUARTER FISCAL 2013

Consolidated net revenues totaled $26.6 million for the second quarter of
fiscal 2014 as compared to $26.1 million for the second quarter of fiscal
2013. Revenues from our western and lifestyle footwear products totaled
approximately $17.5 million for both second quarters of fiscal 2014 and 2013
as heavy first quarter sales negatively impacted second quarter revenue growth
for this segment. Revenues related to our work boot products, which include
our licensed, private label, and military boot products, increased from $8.5
million for the second quarter of fiscal 2013 to $9.0 million for the second
quarter of fiscal 2014. This net revenue growth for the work boot segment was
primarily attributable to increased military boot sales related to our new
Israeli boot contract. Net revenues associated with our other work boot
products were down slightly, primarily the result of supplier and shipping
delays. We are cautiously optimistic that our western and life style business
activity will remain steady for the remainder of fiscal 2014. In addition, we
expect our work boot business to gain momentum as the economy and weather
improves and our military boot orders remain at their current production
levels.

Consolidated gross profit amounted to approximately $7.4 million for the
second quarter of fiscal 2014, down slightly from approximately $7.8 million
for the second quarter of fiscal 2013. The gross profit associated with our
western and lifestyle product sales totaled $5.9 million for the second
quarter of fiscal 2014, down from $6.3 million for the second quarter of
fiscal 2013. This decline in gross profit was the result of several operating
factors which included higher inbound freight charges, the implementation of a
customer shipping incentive program, a slight shift away from our premium
brand products and the impact of under-absorbed import costs. The gross profit
from our work boot product sales was approximately $1.4 million for the second
quarter of fiscal 2014 as compared to $1.5 million for fiscal 2013. Lower
sales from our branded work boot products offset the gross profit gain
associated with the increase in military boot net revenues.

Consolidated operating costs and expenses totaled approximately $4.8 million
for both second quarters of fiscal 2014 and fiscal 2013. Increased
consolidated operating costs and expenses for advertising and marketing
expenses and office related expenditures were offset by reduced sales
compensation costs, administrative salaries, and employee benefit charges.

As a result of the above, consolidated operating profit amounted to $2.6
million for the second quarter of fiscal 2014 as compared to $3.0 million for
the second quarter of fiscal 2013.

FIRST SIX MONTHS FISCAL 2014 COMPARED TO FIRST SIX MONTHS FISCAL 2013

Consolidated net revenues for the first six months of fiscal 2014 totaled
$58.3 million as compared to $50.9 million for the first six months of fiscal
2013. Our western and lifestyle product sales totaled $39.9 million for the
first six months of fiscal 2014 as compared to $36.1 million for the first six
months of fiscal 2013, as demand for these products remained strong. Net
revenues from our work boot business grew nearly 23%, up from $14.8 million
for the first six months of fiscal 2013 to $18.3 million for the first six
months of fiscal 2014. The increase in work boot products net revenues
resulted primarily from higher military boot shipments associated with our U.
S. Government and Israeli contracts.

Consolidated gross profit totaled $17.7 million for the first six months of
fiscal 2014 as compared to $15.7 million for the first six months of fiscal
2013. Gross profit attributable to our western and lifestyle products totaled
$14.4 million for the first six months of fiscal 2014 as compared to $13.1
million for the first six months of fiscal 2013. This increase in gross profit
resulted from the 10% increase in net revenues. Gross profit attributable to
our work boot products grew from $2.5 million for the first six months of
fiscal 2013 to $3.2 million for the first six months of fiscal 2014. This
increase in gross profit was primarily attributable to the improvement in net
revenues associated with our military boot products.

Consolidated operating costs and expenses amounted to $10.3 million for the
first six months of fiscal 2014 as compared to $9.6 million for the first six
months of fiscal 2013. This increase in operating costs and expenses resulted
primarily from higher outlays for sales compensation costs, office expenses,
advertising and marketing costs, computer services, depreciation expense,
donations, and employee benefit charges, which were partially offset by
reduced expenditures for administrative salaries and group health insurance
costs.

As a result of the above, the consolidated operating profit amounted to $7.4
million for the first six months of fiscal 2014 as compared to $6.1 million
for the first six months of fiscal 2013.

FINANCIAL CONDITION AND LIQUIDITY

Our financial condition remained strong at February 1, 2014 as cash and cash
equivalents totaled approximately $12.6 million as compared to $10.8 million
at August 3, 2013. Our working capital amounted to $47.1 million at February
1, 2014 as compared to $43.1 million at August 3, 2013.

At February 1, 2014 we maintained two lines of credit with a bank totaling
$6.75 million, all of which was available at the end of the second quarter.
One credit line totaling $1.75 million (which is restricted to one hundred
percent of the outstanding receivables due from the U. S. Government) expires
in January 2015. Our $5.0 million line of credit, which also expires in
January 2015, 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.

For the first six months of fiscal 2014, operating activities provided
approximately $2.6 million of cash. Net earnings, as adjusted for
depreciation, provided $4.9 million of cash. Accounts and notes receivable, as
adjusted for valuation allowances, used approximately $709,000 of cash as a
result of timing of payments related to increased year to date sales. Reduced
inventory levels provided $342,000 of cash. The timing of payments for
inventory, employee benefit distributions, accrued payroll and payroll taxes,
and income tax payments used approximately $2.0 million of cash.

Investing activities for the first six months of fiscal 2014 used
approximately $346,000 of cash. Capital expenditures, primarily for
manufacturing equipment and computer related purchases used approximately
$345,000 of cash.

Dividend payments used approximately $534,000 of cash for the first six months
of fiscal 2014.

Reclassification

Certain amounts in the 2013 financial statements have been reclassified to
conform 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 the date made. Except as otherwise required by 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 expectation 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)
                                               February 1,  August 3,

                                               2014         2013
ASSETS
Current assets:
Cash and cash equivalents                      $12,554      $10,804
Accounts and notes receivable, net             16,103       15,394
Inventories, net                               22,704       23,046
Income tax receivable                          1,249        695
Prepaid expenses and other current assets      420          482
Total current assets                           53,030       50,421
Property and equipment, net                    3,304        3,319
Other assets:
Marketable securities- long term               953          958
Real estate held for investment                3,628        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                        $66,027      $63,436



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
                                                        February 1,  August 3,

                                                        2014         2013
Liabilities and Shareholders' Equity
Current liabilities:


 Accounts Payable                                   $ 3,328     $ 4,054
 Accrued employee benefits                          1,175        1,707
 Accrued payroll and payroll taxes                  965          1,209
 Other accrued liabilities                          481          399
 Total current liabilities                     5,949        7,369
Shareholders' equity:
 Common Stock:
 Class A, $1 par; Authorized 5,000,000 shares;
Issued
                                                        2,039        2,038
 and outstanding 2,038,543 shares and 2,037,605
shares, respectively
 Class B, $1 par; Authorized 2,500,000 shares;
Issued
                                                        392          393
 and outstanding 391,981 shares and 392,919
shares, respectively
 Retained earnings                                  57,647       53,636
 Total shareholders' equity                    60,078       56,067
 Total liabilities and shareholders' equity $66,027      $63,436



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
                            Three Months Ended        Six Months Ended
                            February 1,  January 26,  February 1,  January 26,

                            2014         2013         2014         2013
Net revenues                $ 26,604     $ 26,082     $ 58,257     $ 50,946
 Cost of revenues         19,187       18,304       40,539       35,258
 Gross profit       7,417        7,778        17,718       15,688
Less: Operating costs and
expenses:
 Selling, general and     4,845        4,779        10,315       9,569
administrative expenses
 Earnings from     2,572        2,999        7,403        6,119
operations
 Other income             76           56           153          94
 Interest expense         0            0            0            0
Earnings before income      2,648        3,055        7,556        6,213
taxes
Provision for income taxes  1,147        1,188        3,010        2,403
Net earnings                $  1,501    $  1,867    $  4,546    $ 3,810
Earnings per common share:
 Basic earnings per
share:
 Class A             $   0.87  $   1.51   $   2.45   $  2.56
 Class B             .13          .59          .22          .59
 Diluted earnings per
share:
 Class A             0.73         1.26         2.06         2.13
 Class B             N/A          N/A          N/A          N/A
Weighted average number of
common shares

 outstanding:
 Class A              2,038,543    2,034,052    2,038,395    2,032,507
 Class B              391,981      404,204      392,129      405,832
 Total          2,430,524    2,438,256    2,430,524    2,438,339



McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                     Six Months Ended
                                                     February 1,  January 26,

                                                     2014         2013
Net cash provided by operating activities            $   2,630  $   1,978
Cash flows from investing activities:
 Proceeds from sales of assets                   0            4
 Purchase of land for investment                 (1)          (54)
 Capital expenditures                            (345)        (439)
 Purchase of securities                          0            (1,045)
Net cash used in investing activities                (346)        (1,534)
Cash flows from financing activities:


 Purchase of company stock                       0            (14)
 Dividends paid                                  (534)        (1,620)
Net cash used in financing activities                (534)        (1,634)
Net increase (decrease) in cash and cash equivalents 1,750        (1,190)
Cash and cash equivalents at beginning of period     10,804       12,874
Cash and cash equivalents at end of period           $ 12,554    $ 11,684



SOURCE McRae Industries, Inc.

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