MOUNT GILEAD, N.C., Nov. 26, 2018 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for fiscal 2018 of $73,892,000 as compared to $104,316,000 for fiscal 2017. Net earnings for fiscal 2018 totaled $2,190,000 as compared to $5,083,000 for fiscal 2017. Net earnings per diluted Class A common share were $0.91 for fiscal 2018 as compared to $2.11 for fiscal 2017.
CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2018 COMPARED TO FISCAL 2017
Consolidated net revenues for fiscal 2018 amounted to approximately $73.9 million as compared to $104.3 million for fiscal 2017. Our western/lifestyle boot segment, which includes western wear, ladies fashion, and children footwear products under the Dan Post, Laredo, Dingo, El Dorado, and John Deere brand names, experienced a decrease in revenue of 5.6% from $48.8 million in 2017 to $46.1 million in 2018. The sales decrease was primarily made up of Dan Post higher priced fashion boots, John Deere children boots, and Laredo men's boots. These sale decreases were partially offset by increases in our Laredo Cowboy Approved products and our El Dorado brand of premium men's boots. Net revenues for our work boot segment, which includes Dan Post, Laredo, John Deere, and McRae Industrial work boot products along with our military boots, decreased by 49.6% from $54.4 million in fiscal 2017 to $27.4 million in 2018. The military boot sales were the vast majority of this decrease as they went from $45.6 million in fiscal 2017 to $20.2 million in fiscal 2018. Fiscal 2018 proved to be a difficult year for our military business primarily because of the United States Government's over inventoried position on the hot weather Army boots and not awarding the temperate weather boot contract until four months after McRae had completed its obligation on the expiring contract.
Consolidated gross profit for fiscal 2018 totaled $18.7 million as compared to $25.6 million for fiscal 2017. Gross margins for the western/lifestyle segment increased from 34.2% for fiscal 2017 to 34.5% for fiscal 2018. Although gross margins on our military boots decreased from 12.1% in fiscal 2017 to -0.1% in fiscal 2018, gross margins in our work boot brands overall increased slightly from 34.7% in fiscal 2017 to 36.2% in fiscal 2018. The military boots decrease was due to manufacturing inefficiencies as a result of the lower volume of production.
Consolidated selling, general and administrative ("SG&A") expenses amounted to $16.4 million as compared to $17.8 million for fiscal 2017. This decrease resulted primarily from decreased advertising and employee related expenditures.
As a result of the above, consolidated operating profit totaled approximately $2.3 million for fiscal 2018 as compared to $7.8 million for fiscal 2017.
FINANCIAL CONDITION AND LIQUIDITY
At July 28, 2018, our financial condition and liquidity remained strong as cash and cash equivalents totaled $27.6 million as compared to $28.1 million at July 29, 2017. Our working capital totaled $55.4 million at July 28, 2018 as compared to $56.5 million at July 29, 2017.
We currently have two lines of credit totaling $6.75 million, both of which were fully available at July 28, 2018. 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 2019. The $5.0 million line of credit, which also expires in January 2019, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.
Net cash provided by operating activities for fiscal 2018 amounted to approximately $4.1 million. Net earnings, as adjusted for depreciation, contributed approximately $3.4 million of cash, and a reduction in accounts receivable contributed approximately $1.7 million. The timing of payments for income taxes and lower accrued employee benefits used approximately $1.5 million of cash.
Net cash used in investing activities totaled approximately $3.2 million. The majority was used for capital expenditures and the purchase of securities. This was partially offset by proceeds from the sale of securities.
Net cash used to finance our dividend payments and the purchase of common stock totaled approximately $1.4 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 2019.
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 28, | July 29, | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $27,605 | $28,057 | ||
Short term securities | 2,211 | 505 | ||
Accounts and notes receivable, less allowances | 10,665 | 12,331 | ||
Inventories, net | 18,427 | 18,273 | ||
Income tax receivable | 1,127 | 329 | ||
Prepaid expenses and other current assets | 154 | 550 | ||
Deferred tax assets | 0 | 1,674 | ||
Total current assets | 60,189 | 61,719 | ||
Property and equipment, net | 7,375 | 7,391 | ||
Other assets: | ||||
Deposits | 14 | 14 | ||
Long term securities | 3,899 | 3,804 | ||
Real estate held for investment | 3,775 | 3,601 | ||
Amounts due from split-dollar life insurance | 2,288 | 2,288 | ||
Trademarks | 2,824 | 2,824 | ||
Total other assets | 12,800 | 12,531 | ||
Total assets | $80,364 | $81,641 | ||
McRae Industries, Inc. and Subsidiaries | ||||
CONSOLIDATED BALANCE SHEETS | ||||
(In thousands, except share data) | ||||
July 28, | July 29, | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $2,968 | $2,510 | ||
Accrued employee benefits | 423 | 1,144 | ||
Accrued payroll and payroll taxes | 630 | 809 | ||
Other | 733 | 714 | ||
Total current liabilities | 4,754 | 5,177 | ||
Deferred tax liabilities | 621 | 2,263 | ||
Total liabilities | 5,375 | 7,440 | ||
Shareholders' equity: | ||||
Common Stock: | ||||
Class A, $1 par value; authorized 5,000,000 shares | ||||
issued and outstanding, 2,019,974 and 2,014,842 | ||||
shares, respectively | 2,020 | 2,015 | ||
Class B, $1 par value; authorized 2,500,000 | ||||
shares; issued and outstanding, 374,272 and | ||||
383,254 shares, respectively | 375 | 384 | ||
Unrealized losses on investments, net of tax | (28) | (5) | ||
Retained earnings | 72,622 | 71,807 | ||
Total shareholders' equity | 74,989 | 74,201 | ||
Total liabilities and shareholders' equity | $80,364 | $81,641 | ||
McRae Industries, Inc. and Subsidiaries | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(In thousands, except share data) | ||||||
For Years Ended | July 28, | July 29, | July 30, | |||
2018 | 2017 | 2016 | ||||
Net revenues | $73,892 | $104,316 | $108,758 | |||
Cost of revenues | 55,182 | 78,739 | 81,837 | |||
Gross profit | 18,710 | 25,577 | 26,921 | |||
Selling, general and administrative expenses | 16,431 | 17,755 | 19,782 | |||
Operating profit | 2,279 | 7,822 | 7,139 | |||
Other income | 443 | 357 | 366 | |||
Interest expense | (1) | - | - | |||
Earnings before income taxes | 2,721 | 8,179 | 7,505 | |||
Provision for income taxes | 531 | 3,096 | 2,813 | |||
Net earnings | $2,190 | $5,083 | $4,692 | |||
Earnings per common share: | ||||||
Earnings per common share: | ||||||
Diluted earnings per share: | ||||||
Class A | 0.91 | 2.11 | 1.93 | |||
Class B | NA | NA | NA | |||
Weighted average number of common shares outstanding: | ||||||
Class A | 2,018,701 | 2,024,470 | 2,035,906 | |||
Class B | 378,020 | 385,830 | 389,271 | |||
Total | 2,396,721 | 2,410,300 | 2,425,177 | |||
McRae Industries, Inc. and Subsidiaries | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(In thousands) | |||||
July 28, | July 29, | July 30, | |||
For Years Ended | 2018 | 2017 | 2016 | ||
Cash Flows from Operating Activities: | |||||
Net earnings | $2,190 | $5,083 | $4,692 | ||
Adjustments to reconcile net earnings to net cash provided by | |||||
Depreciation | 1,234 | 1,211 | 907 | ||
(Gain) loss on sale of assets | - | (2) | (6) | ||
(Gain) loss on sale of land | (37) | - | - | ||
Loss on sale of securities | 2 | 6 | 62 | ||
Deferred income taxes | 32 | 398 | 951 | ||
Changes in operating assets and liabilities: | |||||
Accounts receivable, net | 1,666 | 377 | 2,928 | ||
Inventories | (154) | 9,671 | (2,187) | ||
Prepaid expenses and other assets | 396 | (117) | 99 | ||
Accounts payable | 458 | (2,186) | (903) | ||
Accrued employee benefits | (721) | 54 | (537) | ||
Accrued payroll and payroll taxes | (179) | (398) | (18) | ||
Income tax receivable/payable | (798) | 726 | (933) | ||
Other | 20 | 16 | 146 | ||
Net cash provided by operating activities | 4,109 | 14,839 | 5,201 | ||
Cash Flows from Investing Activities: | |||||
Proceeds from sale of assets | - | 13 | 15 | ||
Proceeds from sale of land | 46 | - | - | ||
Purchase of land for investment | (180) | - | (17) | ||
Capital expenditures | (1,217) | (465) | (3,237) | ||
Proceeds from sale of securities | 1,194 | 833 | 484 | ||
Purchase of securities | (3,025) | (1,040) | (609) | ||
Net cash used in investing activities | (3,182) | (659) | (3,364) | ||
Cash Flows from Financing Activities: | |||||
Purchase of common stock | (133) | (545) | (342) | ||
Dividends paid | (1,246) | (1,251) | (1,259) | ||
Net cash used in financing activities | (1,379) | (1,796) | (1,601) | ||
Net (Decrease) Increase in Cash and Cash equivalents | (452) | 12,384 | 236 | ||
Cash and Cash Equivalents at Beginning of Year | 28,057 | 15,673 | 15,437 | ||
Cash and Cash Equivalents at End of Year | $27,605 | $28,057 | $15,673 | ||
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SOURCE McRae Industries, Inc.