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

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

PR Newswire

MOUNT GILEAD, N.C., June 6, 2014

MOUNT GILEAD, N.C., June 6, 2014 /PRNewswire/ --McRae Industries, Inc. (Pink
Sheets: MCRAA and MCRAB) reported consolidated net revenues from operations
for the third quarter of fiscal 2014 of $23,455,000 as compared to $22,585,000
for the third quarter of fiscal 2013. Net earnings for the third quarter of
fiscal 2014 amounted to $1,223,000 or $0.61 per diluted Class A common share
as compared to $1,333,000, or $0.62 per diluted Class A common share, for the
third quarter of fiscal 2013.

Consolidated net revenues from operations for the first nine months of fiscal
2014 totaled $81,711,000 as compared to $73,531,000 for the first nine months
of fiscal 2013. Net earnings for the first nine months of fiscal 2014 amounted
to $5,768,000 or $2.67 per diluted Class A common share, as compared to
$5,143,000, or $2.75 per diluted Class A common share, for the first nine
months of fiscal 2013.

THIRD QUARTER FISCAL 2014 COMPARED TO THIRD QUARTER FISCAL 2013

Consolidated net revenues for the third quarter of fiscal 2014 amounted to
$23.5 million as compared to $22.6 million for the third quarter of fiscal
2013. Net revenues related to our western/lifestyle boot products totaled
$13.3 million for the third quarter of fiscal 2014 as compared to $13.6
million for the third quarter of fiscal 2013. This slight reduction in net
revenues was primarily attributable to delayed receipt of inventory and
extreme weather issues early in the quarter. However, overall demand for these
products remained steady. Net revenues from our work boot products grew from
$9.0 million for the third quarter of fiscal 2013 to $10.0 million for the
third quarter of fiscal 2014. This increase in net revenues from our work boot
business resulted primarily from continued strong military boot requirements
for the U. S. Government and slightly higher demand for work boots as the
economy continues to improve.

Consolidated gross profit totaled approximately $6.3 million for both third
quarters of fiscal 2014 and fiscal 2013 as higher product import costs and
sales mix shifts had a dampening impact on gross profit margins, which fell
from 27.9% for the third quarter of fiscal 2013 to 27.1% for the third quarter
of fiscal 2014. Our work boot business gross profit margins increased slightly
as higher military boot production levels had a positive impact by lowering
per unit manufacturing costs.

Consolidated operating costs and expenses for the third quarter of fiscal 2014
totaled $4.3 million as compared to $4.2 million for the third quarter of
fiscal 2013. The increase in operating costs and expenses was primarily
attributable to higher expenditures or charges for sales related compensation,
sales and marketing expenditures, administrative compensation and professional
fees, which were partially offset by lower travel and employee benefit
charges.

As a result of the above, the consolidated operating earnings for the third
quarter of fiscal 2014 were approximately $2.0 million as compared to
approximately $2.1 million for the third quarter of fiscal 2013.

FIRST NINE MONTHS FISCAL 2014 COMPARED TO FIRST NINE MONTHS FISCAL 2013

Consolidated net revenues for the first nine months of fiscal 2014 amounted to
$81.7 million as compared to $73.5 million for the first nine months of fiscal
2013. This 11% increase in net revenues resulted from strong performances in
both of our product segments. Net revenues from our western/lifestyle products
segment grew from $49.7 million for the first nine months of fiscal 2013 to
$53.2 million for the first nine months of fiscal 2014 as market demand
remained strong. The work boot segment net revenues for the first nine months
of fiscal 2014 totaled $28.2 million, up from $23.7 million for the first nine
months of fiscal 2013 as military boot revenues for both our commercial and
government business grew nearly 38%.

Consolidated gross profit for the first nine months of fiscal 2014 totaled
$24.1 million as compared to $22.0 million for the first nine months of fiscal
2013. This 9.5% increase in consolidated gross profit resulted primarily from
the combined revenue growth in our western/lifestyle boot and work boot
segments. Gross profit as a percentage of net revenues for both boot segments
for the first nine months of fiscal 2014 totaled 29.4% as compared to 29.8%
for the first nine months of fiscal 2013. This slight decline in overall gross
margin percentage was primarily the result of product mix sales changes as the
lower margin military boot sales contributions increased nearly 5% over last
year.

Consolidated operating costs and expenses amounted to $14.7 million for the
first nine months of fiscal 2014 as compared to $13.7 million for the first
nine months of fiscal 2013. This increase in consolidated operating costs and
expenses was primarily attributable to increased expenditures or charges for
sales compensation related costs, marketing and advertising costs,
professional fees, and employee benefit charges, which were partially offset
by reduced outlays for group health insurance charges and travel costs.

As a result of the above, the consolidated operating profit for the first nine
months of fiscal 2014 totaled approximately $9.4 million as compared to
approximately $8.3 million for the first nine months of fiscal 2013.

FINANCIAL CONDITION AND LIQUIDITY

The Company's financial condition continues to be strong. Cash and cash
equivalents totaled $16.6 million at May 3, 2014 as compared to $10.8 million
at August 3, 2013. Our working capital totaled $48.1 million at May 3, 2014 as
compared to $43.1 million at August 3, 2013.

We currently maintain two lines of credit with a bank totaling $6.75 million,
all of which was available at May 3, 2014. Our credit line totaling $1.75
million (which is restricted to one hundred percent of the outstanding
receivables due from the U. S. Government) and our $5.0 million line of credit
(which is secured by our western/work boot business accounts receivable and
inventory) expire in January 2015.

We believe that our current cash and cash equivalents, cash generated from
operations, and available lines of credit will be sufficient to meet our
capital requirements for the remainder of fiscal 2014.

Operating activities for the first nine months of fiscal 2014 provided
approximately $7.0 million of cash. Net earnings as adjusted for depreciation,
provided $6.3 million of cash. Our trade accounts receivable provided
approximately $1.6 million of cash as collection outpaced sales. The reduction
of inventory levels provided approximately $1.0 million of cash as third
quarter sales remained strong. The timing of inventory and accrued payroll
related payments used approximately $1.1 million of cash. Income tax payments
used approximately $800,000 of cash.

Investing activities used approximately $363,000 of cash. Capital
expenditures, primarily for manufacturing equipment, office equipment and air
handling equipment, used approximately $447,000 of cash. Proceeds from
investment land sales provided approximately $87,000 of cash.

Financing activities used approximately $849,000 of cash 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. 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 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)
                                               May 3,     August 3,
                                               2014
                                                          2013
ASSETS
Current assets:
Cash and cash equivalents                      $ 16,618   $ 10,804
Marketable securities                          0          0
Accounts and notes receivable, net             13,826     15,394
Inventories, net                               22,041     23,046
Income tax receivable                          1,575      695
Prepaid expenses and other current assets      354        482
Total current assets                           54,414     50,421
Property and equipment, net                    3,218      3,319
Other assets:                                            

 Deposits                                   14         0
Marketable securities- long term               950        958
Real estate held for investment                3,581      3,626
 Amount due from split-dollar life insurance 2,288      2,288
Trademarks                                     2,824      2,824
Total other assets                             9,657      9,696
 Total assets                        $ 67,289   $ 63,436





McRae Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)
                                                           May 3,    August 3,
                                                           2014
                                                                     2013
Liabilities and Shareholders' Equity
Current liabilities:


 Accounts Payable                                      $ 3,172  $ 4,054
 Accrued employee benefits                             1,475     1,707
 Accrued payroll and payroll taxes                     1,188     1,209
 Other                                                 469       399
 Total current liabilities
                                                           6,304     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,
respectively
 Class B, $1 par; Authorized 2,500,000 shares; Issued
                                                           392       393
 and outstanding 391,981 shares and 392,919,
respectively
Retained earnings                                          58,554    53,636
 Total shareholders' equity                           60,985    56,067
 Total liabilities and shareholders' equity       $67,289   $63,436





McRae Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)
                                           Three Months Ended    Nine Months Ended
                                           May 3,     April 27,  May 3,     April 27,
                                           2014       2013       2014       2013
Net revenues                               $23,455    $22,585    $81,711    $73,531
 Cost of revenues                        17,116     16,248     57,654     51,506
 Gross profit                      6,339      6,337      24,057     22,025
Less: Operating costs and expenses:
 Selling, general and administrative     4,338      4,195      14,654     13,764
expenses
 Earnings from operations         2,001      2,142      9,403      8,261
 Other income                            70         62         223        156
 Interest expense                        (3)        (2)        (3)        (2)
Earnings before income taxes               2,068      2,202      9,623      8,415
Provision for income taxes                 845        869        3,855      3,272
Net earnings                               $1,223     $  1,333  $ 5,768   $ 5,143
Earnings per common share:
 Basic earnings per share:
 Class A                            $.73       $ .74     $ 3.18     $ 3.30
 Class B                            .13        .09        .35        .68
 Diluted earnings per share:
 Class                              .61        $ .62     $ 2.67     $ 2.75
A
 Class B                            N/A        N/A        N/A        N/A
Weighted average number of
Common shares outstanding:
 Class A                             2,038,543  2,037,358  2,038,444  2,034,124
 Class B                             391,981    395,426    392,080    402,363
 Total                         2,430,524  2,432,784  2,430,524  2,436,487





McRae Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)
                                                 Nine Months Ended
                                                 May 3,    April 27,
                                                 2014      2013
Net cash provided by operating activities        $ 7,026   $ 5,059
Cash flows from investing activities:
 Proceeds from sales of assets               87        4
 Purchase of land for investment
                                                 (3)       (59)

 Purchase of securities                      0         (1,045)
 Capital expenditures                        (447)     (807)
Net cash used in investing activities            (363)     (1,907)
Cash flows from financing activities:
 Issuance of company stock                   0         6
 Purchase of company stock                   0         (162)
 Dividends paid                              (849)     (1,838)
Net cash used in financing activities            (849)     (1,994)
Net increase in cash and cash equivalents        5,814     1,158
Cash and cash equivalents at beginning of period 10,804    12,874
Cash and cash equivalents at end of period       $ 16,618  $ 14,032



SOURCE McRae Industries, Inc.

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