MOUNT GILEAD, N.C., Nov. 15, 2016 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for fiscal 2016 of $108,758,000 as compared to $108,673,000 for fiscal 2015. Net earnings for fiscal 2016 totaled $4,692,000 as compared to $6,641,000 for fiscal 2015. Net earnings per diluted Class A common share were $2.36 for fiscal 2016 as compared to $3.17 for fiscal 2015.
CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2016 COMPARED TO FISCAL 2015
Consolidated net revenues for fiscal 2016 amounted to approximately $108.8 million as compared to $108.7 million for fiscal 2015. Sales for our western/lifestyle products decreased from $67.1 million for fiscal 2015 to $58.8 million for fiscal 2016 primarily as a result of softening in higher priced ladies fashion boots and premium kid's boots. Consolidated net revenues from our work boot products totaled $49.7 million for fiscal 2016 as compared to $41.3 million for fiscal 2015. This growth in work boot net revenues was the result of higher military boot production levels. As we continue to gain efficiencies, we expect to see even higher production levels in fiscal 2017. Net revenues associated with our other small businesses were insignificant for fiscal 2016 and we expect their contribution to be minimal in the future. We enter fiscal 2017 with cautious optimism as we face a retail business climate that continues to evolve as consumers' choices for products and delivery models continue to change.
Consolidated gross profit for fiscal 2016 totaled $26.9 million as compared to $29.3 million for fiscal 2015. Gross profit as a percentage of net revenues associated with our western/lifestyle boot segment amounted to 35.0%, down slightly from 35.7% for fiscal 2015 primarily due to changes in the product mix. Gross profit as a percentage of net revenues related to our work boot business fell from 12.5% for fiscal 2015 to 12.3% for fiscal 2016. This decline was primarily attributable to our military boot business making up a higher percentage of sales and carrying a considerably lower gross margin than other work boot products.
Consolidated selling, general and administrative ("SG&A") expenses amounted to $19.8 million as compared to $19.0 million for fiscal 2015. This increase in SG&A expenses was the result of higher health insurance costs. Our group health insurance costs increased over $1.6 million from fiscal 2015 to fiscal 2016. This was partially offset by a decrease in employee benefit expenses.
As a result of the above, consolidated operating profit totaled approximately $7.1 million for fiscal 2016 as compared to $10.3 million for fiscal 2015.
FINANCIAL CONDITION AND LIQUIDITY
At July 30, 2016, our financial condition and liquidity remained strong as cash and cash equivalents totaled $15.6 million as compared to $15.4 million at August 1, 2015. Our working capital totaled $52.8 million at July 30, 2016 as compared to $51.3 million at August 1, 2015.
We currently have two lines of credit totaling $6.75 million, all of which were fully available at July 30, 2015. 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 2017. The $5.0 million line of credit, which also expires in January 2017, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.
Net cash provided by operating activities for fiscal 2016 amounted to approximately $5.2 million. Net earnings, as adjusted for depreciation, contributed approximately $5.6 million of cash, along with deferred income taxes contributing approximately $1.0 million. Accounts receivable provided approximately $2.9 million of cash, as fourth quarter sales for our western/lifestyle segment decreased. Higher inventory levels in our military boot business, which were partially offset by lower inventory levels for our western/work boot business, used approximately $2.2 million of cash. The timing of payment for accounts payable and lower accrued employee benefits, accrued payroll, and income tax payments used approximately $2.4 million of cash.
Net cash used in investing activities totaled approximately $3.4 million. The majority was used for capital expenditures, primarily for our manufacturing facility and ERP system.
Net cash used to finance our dividend payments totaled approximately $1.3 million.
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 2017.
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.
McRae Industries, Inc. and Subsidiaries | ||||
CONSOLIDATED BALANCE SHEETS | ||||
(In thousands, except share data) | ||||
July 30, | August 1, | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $15,673 | $15,437 | ||
Short term securities | 501 | 500 | ||
Accounts and notes receivable, less allowances | 12,708 | 15,636 | ||
Inventories, net | 27,944 | 25,757 | ||
Income tax receivable | 1,055 | 122 | ||
Prepaid expenses and other current assets | 433 | 532 | ||
Deferred tax assets | 2,130 | 2,270 | ||
Total current assets | 60,444 | 60,254 | ||
Property and equipment, net | 8,147 | 5,817 | ||
Other assets: | ||||
Deposits | 14 | 14 | ||
Long term securities | 3,520 | 3,553 | ||
Real estate held for investment | 3,602 | 3,594 | ||
Amounts due from split-dollar life insurance | 2,288 | 2,288 | ||
Trademarks | 2,824 | 2,824 | ||
Total other assets | 12,248 | 12,273 | ||
Total assets | $80,839 | $78,344 | ||
McRae Industries, Inc. and Subsidiaries | ||||
CONSOLIDATED BALANCE SHEETS | ||||
(In thousands, except share data) | ||||
July 30, | August 1, | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $4,696 | $5,599 | ||
Accrued employee benefits | 1,090 | 1,627 | ||
Accrued payroll and payroll taxes | 1,207 | 1,225 | ||
Other | 698 | 552 | ||
Total current liabilities | 7,691 | 9,003 | ||
Deferred tax liabilities | 2,288 | 1,513 | ||
Total liabilities | 9,979 | 10,516 | ||
Shareholders' equity: | ||||
Common Stock: | ||||
Class A, $1 par value; authorized 5,000,000 shares | 2,031 | 2,040 | ||
issued and outstanding, 2,030,658 and 2,039,335 | ||||
shares, respectively | ||||
Class B, $1 par value; authorized 2,500,000 | 388 | 391 | ||
shares; issued and outstanding, 387,629 and | ||||
391,189 shares, respectively | ||||
Unrealized losses on investments, net of tax | (59) | - | ||
Retained earnings | 68,500 | 65,397 | ||
Total shareholders' equity | 70,860 | 67,828 | ||
Total liabilities and shareholders' equity | $80,839 | $78,344 | ||
McRae Industries, Inc. and Subsidiaries | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(In thousands, except share data) | ||||||
For Years Ended | July 30, | August 1, | August 2, | |||
2016 | 2015 | 2014 | ||||
Net revenues | $108,758 | $108,673 | $103,629 | |||
Cost of revenues | 81,837 | 79,347 | 73,488 | |||
Gross profit | 26,921 | 29,326 | 30,141 | |||
Selling, general and administrative expenses | 19,782 | 19,025 | 18,660 | |||
Operating profit | 7,139 | 10,301 | 11,481 | |||
Other income | 366 | 324 | 311 | |||
Interest expense | - | (2) | (3) | |||
Earnings before income taxes | 7,505 | 10,623 | 11,789 | |||
Provision for income taxes | 2,813 | 3,982 | 4,241 | |||
Net earnings | $4,692 | $6,641 | $7,548 | |||
Earnings per common share: | ||||||
Earnings per common share: | ||||||
Basic earnings per share: | ||||||
Class A | $2.82 | $3.77 | $4.18 | |||
Class B | 0.52 | 0.52 | 0.48 | |||
Diluted earnings per share: | ||||||
Class A | 2.36 | 3.17 | 3.51 | |||
Class B | NA | NA | NA | |||
Weighted average number of common shares outstanding: | ||||||
Class A | 2,035,906 | 2,038,645 | 2,038,469 | |||
Class B | 389,271 | 391,879 | 392,055 | |||
Total | 2,425,177 | 2,430,524 | 2,430,524 | |||
McRae Industries, Inc. and Subsidiaries | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(In thousands) | ||||||
July 30, | August 1, | August 2, | ||||
For Years Ended | ||||||
Cash Flows from Operating Activities: | ||||||
Net earnings | $4,692 | $6,641 | $7,548 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
Depreciation | 907 | 785 | 748 | |||
Amortization of bond premiums | - | 3 | 10 | |||
(Gain) loss on sale of assets | (6) | - | (40) | |||
Loss on sale of securities | 62 | - | - | |||
Deferred income taxes | 951 | (75) | 87 | |||
Changes in operating assets and liabilities: | ||||||
Accounts receivable, net | 2,928 | (2,208) | 1,966 | |||
Inventories | (2,187) | (3,469) | 758 | |||
Prepaid expenses and other assets | 99 | 21 | (85) | |||
Accounts payable | (903) | 1,821 | (276) | |||
Accrued employee benefits | (537) | (171) | 91 | |||
Accrued payroll and payroll taxes | (18) | 64 | (48) | |||
Income tax receivable/payable | (933) | 816 | (1,012) | |||
Other | 146 | 89 | 64 | |||
Net cash provided by operating activities | 5,201 | 4,317 | 9,811 | |||
Cash Flows from Investing Activities: | ||||||
Proceeds from sale of assets | 15 | - | 87 | |||
Purchase of land for investment | (17) | (9) | (7) | |||
Capital expenditures | (3,237) | (3,380) | (650) | |||
Proceeds from sale of securities | 484 | 75 | - | |||
Purchase of securities | (609) | (3,183) | - | |||
Net cash used in investing activities | (3,364) | (6,497) | (570) | |||
Cash Flows from Financing Activities: | ||||||
Purchase of common stock | (342) | - | - | |||
Issuance of common stock | - | - | - | |||
Dividends paid | (1,259) | (1,263) | (1,165) | |||
Net cash used in financing activities | (1,601) | (1,263) | (1,165) | |||
Net (Decrease) Increase in Cash and Cash equivalents | 236 | (3,443) | 8,076 | |||
Cash and Cash Equivalents at Beginning of Year | 15,437 | 18,880 | 10,804 | |||
Cash and Cash Equivalents at End of Year | $15,673 | $15,437 | $18,880 | |||
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SOURCE McRae Industries, Inc.