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McRae Industries, Inc. Reports Earnings For The Third Quarter And First Nine Months Of Fiscal 2015

Posted: June 18, 2015 12:20 am (UTC)

MOUNT GILEAD, N.C., June 17, 2015 /PRNewswire/ — McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues from operations for the third quarter of fiscal 2015 of $25,828,000 as compared to $23,455,000 for the third quarter of fiscal 2014. Net earnings for the third quarter of fiscal 2015 amounted to $1,209,000, or $0.61 per diluted Class A common share as compared to $1,223,000, or $0.61 per diluted Class A common share, for the third quarter of fiscal 2014.

Consolidated net revenues from operations for the first nine months of fiscal 2015 totaled $83,134,000 as compared to $81,711,000 for the first nine months of fiscal 2014. Net earnings for the first nine months of fiscal 2015 amounted to $5,013,000 or $2.39 per diluted Class A common share, as compared to $5,768,000, or $2.67 per diluted Class A common share, for the first nine months of fiscal 2014.

THIRD QUARTER FISCAL 2015 COMPARED TO THIRD QUARTER FISCAL 2014

Consolidated net revenues for the third quarter of fiscal 2015 amounted to $25.8 million as compared to $23.5 million for the third quarter of fiscal 2014. Net revenues related to our western/lifestyle boot products totaled $15.5 million for the third quarter of fiscal 2015, up from $13.3 million for the third quarter of fiscal 2014. This 16% improvement in net revenue was attributable to higher sales in all of our brands except for a slight sales reduction in our children’s line. Net revenues from our work boot products totaled $10.3 million as compared to $10.0 million for the third quarter of fiscal 2014 as military boot requirements for the U. S. Government remained strong and demand for our other work boot products remained steady.

Consolidated gross profit totaled approximately $6.4 million for the third quarter of fiscal 2015 as compared to $6.3 million for the third quarter of fiscal 2014. Gross profit margins for our western/lifestyle products remained steady at the 35% level. Our work boot business gross profit margins fell from 16.4 % for the third quarter of fiscal 2014 to 8.5% for the third quarter of fiscal 2015 primarily the result of higher per unit military boot manufacturing costs related to inefficiencies associated with a 25% increase in military boot production levels during the quarter. Our management team is focused on resolving the production issues as quickly as possible.

Consolidated operating costs and expenses for the third quarter of fiscal 2015 totaled $4.4 million as compared to $4.3 million for the third quarter of fiscal 2014. This slight increase in operating costs and expenses was primarily attributable to higher expenditures or charges for travel costs, sales and marketing expenditures, and administrative compensation, which were partially offset by lower sales compensation costs and bad debt charges.

As a result of the above, the consolidated operating earnings totaled $2.0 million for the third quarter of both fiscal 2015 and fiscal 2014.

FIRST NINE MONTHS FISCAL 2015 COMPARED TO FIRST NINE MONTHS FISCAL 2014

Consolidated net revenues for the first nine months of fiscal 2015 amounted to $83.1 million as compared to $81.7 million for the first nine months of fiscal 2014. Net revenues related to our western/lifestyle boot products for the first nine months of fiscal 2015 amounted to approximately $53.1 million as compared to $53.2 million for the same nine month period of fiscal 2014. The work boot segment net revenues for the first nine months of fiscal 2015 totaled $29.8 million, up from $28.3 million for the first nine months of fiscal 2014 as increased military boot revenues from both our commercial and government businesses helped to offset a 3.5% decline in our other work boot products.

Consolidated gross profit for the first nine months of fiscal 2015 totaled $22.5 million as compared to $24.1 million for the first nine months of fiscal 2014. Gross profit attributable to our western/lifestyle boot products amounted to approximately $18.6 million, down approximately $500,000 from the previous nine month period of fiscal 2014, primarily attributable to higher overall import costs. Gross profit from our work boot business for the first nine months of fiscal 2015 totaled $3.7 million as compared to $4.8 million for the first nine months of fiscal 2014. This 23% decline in gross profit resulted primarily from the higher third quarter military boot manufacturing costs and inefficiencies described above.

Consolidated operating costs and expenses amounted to $14.4 million for the first nine months of fiscal 2015 as compared to $14.7 million for the first nine months of fiscal 2014. This decrease in consolidated operating costs and expenses was primarily attributable to reduced expenditures or charges for sales compensation related costs, group health insurance, bad debts and employee benefit charges, which were partially offset by higher outlays for professional fees, administrative wage payments and travel costs.

As a result of the above, the consolidated operating profit for the first nine months of fiscal 2015 totaled approximately $8.1 million as compared to approximately $9.4 million for the first nine months of fiscal 2014.

FINANCIAL CONDITION AND LIQUIDITY

The Company’s financial condition remained strong as cash and cash equivalents totaled $16.4 million at May 2, 2015 as compared to $18.9 million at August 2, 2014. Working capital remained healthy at $49.6 million at May 2, 2015, the same amount reported for August 2, 2014.

We currently maintain two lines of credit with a bank totaling $6.75 million, all of which was available at May 2, 2015. 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 2016.

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 2015.

Operating activities for the first nine months of fiscal 2015 provided approximately $3.6 million of cash. Net earnings as adjusted for depreciation, provided $5.6 million of cash. Our trade accounts receivable used approximately $1.4 million of cash primarily the result of seasonality dynamics associated with our western boot business. Increased inventory levels used approximately $480,000, primarily attributable to higher demand for military boots remained strong. Net employee benefit payments used approximately $511,000 of cash.

Investing activities used approximately $5.2 million of cash. Capital expenditures for manufacturing equipment, building additions and improvements and a new enterprise resource system with related equipment, used approximately $2.0 million of cash. Investments in marketable securities used approximately $3.2 million of cash.

Financing activities used approximately $947,000 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, our ability to address manufacturing inefficiencies, 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 2,                                     August 2,                                            2015                                                                                  2014                                                                                    ----      ASSETS      Current assets:       Cash      and      cash      equivalents                        $16,353                                  $18,880       Marketable      securities                             575                                       76       Accounts      and      notes      receivable,      net                                 14,847                                   13,428       Inventories,      net                                 22,767                                   22,288       Income      tax      receivable                           1,426                                    1,620       Prepaid      expenses      and      other      current      assets                                 406                                      553                                             ---                                      ---       Total      current      assets                              56,374                                   56,845                                          ------                                   ------        Property      and      equipment,      net                                  4,663                                    3,222                                           -----                                    -----       Other assets:          Deposits                             14                                       14       Marketable      securities-        long      term                                 3,545                                      872       Real      estate      held      for      investment                           3,594                                    3,585          Amount         due         from         split-         dollar         life         insurance                         2,288                                    2,288      Trademarks                            2,824                                    2,824       Total      other      assets                              12,265                                    9,583                                          ------                                    -----                   Total                 assets                  $73,302                                  $69,650                                         =======                                  ======= 

                                                                               McRae Industries, Inc. and Subsidiaries                                                                                 CONDENSED CONSOLIDATED BALANCE SHEETS                                                                            (In thousands, except share and per share data)                                                                                              (Unaudited)                                                                                                                                         May 2,                     August 2,                                                                                                                                                  2015                          2014                                                                                                                                                 ----                          ----      Liabilities and Shareholders' Equity       Current liabilities:             Accounts Payable                                                                                                                     $3,756                        $3,778            Accrued employee benefits                                                                                                             1,288                         1,798            Accrued payroll and payroll taxes                                                                                                     1,214                         1,161            Other                                                                                                                                   530                           463                                                                                                                                                  ---                           ---                 Total current liabilities                                                                                                        6,788                         7,200                                                                                                                            ___________                ___________       Shareholders' equity:            Common Stock:            Class A, $1 par; Authorized 5,000,000 shares; Issued                                                                                  2,039                         2,039             and outstanding  2,038,543 shares and 2,038,543, respectively            Class B, $1 par; Authorized 2,500,000 shares; Issued                                                                                    392                           392              and outstanding  391,981 shares and 391,981, respectively       Retained earnings                                                                                                                         64,083                        60,019                                                                                                                                               ------                        ------             Total shareholders' equity                                                                                                          66,514                        62,450                                                                                                                                               ------                        ------                 Total liabilities and shareholders' equity                                                                                     $73,302                       $69,650                                                                                                                                              =======                       ======= 

                                                         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 2, 2015            May 3, 2014          May 2, 2015           May 3, 2014                                                                                 -----------            -----------          -----------           -----------       Net revenues                                                                            $25,828                 $23,455               $83,134               $81,711         Cost of revenues                                                                      19,455                  17,116                60,651                57,654                                                                                              ------                  ------                ------                ------               Gross profit                                                                     6,373                   6,339                22,483                24,057       Less: Operating costs and expenses:          Selling, general and administrative expenses                                           4,424                   4,338                14,386                14,654                                                                                               -----                   -----                ------                ------                 Earnings from operations                                                        1,949                   2,001                 8,097                 9,403          Other income                                                                              87                      70                   238                   223          Interest expense                                                                           0                     (3)                    0                   (3)                                                                                                 ---                     ---                   ---                   ---       Earnings before income taxes                                                              2,036                   2,068                 8,335                 9,623       Provision for income taxes                                                                  827                     845                 3,322                 3,855                                                                                                 ---                     ---                 -----                 -----       Net earnings                                                                             $1,209                  $1,223                $5,013                $5,768                                                                                              ======                  ======                ======                ======       Earnings per common share:           Basic earnings per share:              Class A                                                                            $.72                    $.73                 $2.84                 $3.18              Class B                                                                             .13                     .13                   .39                   .35           Diluted earnings per share:              Class A                                                                            $.61                    $.61                 $2.39                 $2.67              Class B                                                                             N/A                    N/A                  N/A                  N/A      Weighted average number of      Common shares outstanding:             Class A                                                                        2,038,543               2,038,543             2,038,543             2,038,444             Class B                                                                          391,981                 391,981               391,981               392,080                                                                                             -------                 -------               -------               -------                   Total                                                                    2,430,524               2,430,524             2,430,524             2,430,524                                                                                           ---------               ---------             ---------             --------- 

                                   McRae Industries, Inc. and Subsidiaries                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                 (In thousands)                                                  (Unaudited)                                            Nine Months Ended                                                May 2,                          May 3,                                                        2015                             2014                                                        ----                             ----       Net cash      provided by      operating      activities                                      $3,618                           $7,026                                                      ------                           ------       Cash flows from investing      activities:            Proceeds           from sales           of assets                                       0                               87            Purchase of           land for           investment                                    (9)                             (3)             Purchase of           securities                                (3,175)                               0            Capital           expenditures                              (2,014)                           (447)        Net cash      used in      investing      activities                                     (5,198)                           (363)                                                      ------                             ----       Cash flows from financing      activities:            Issuance of           company           stock                                           0                                0            Purchase of           company           stock                                           0                                0            Dividends           paid                                        (947)                           (849)                                                        ----                             ----       Net cash      used in      financing      activities                                       (947)                           (849)                                                        ----                             ----       Net increase      in cash and      cash      equivalents                                    (2,527)                           5,814       Cash and      cash      equivalents      at      beginning      of period                                       18,880                           10,804                                                      ------                           ------       Cash and      cash      equivalents      at end of      period                                         $16,353                          $16,618                                                     =======                          ======= 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mcrae-industries-inc-reports-earnings-for-the-third-quarter-and-first-nine-months-of-fiscal-2015-300100938.html

SOURCE McRae Industries, Inc.

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STOCK SYMBOL: – OTC-PINK:MCRAB
STOCK SYMBOL: – OTC-PINK:MCRAA
Company – McRae Industries, Inc.
Location: North Carolina (GeographyCode)
GEOTAG: North Carolina

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