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TMCNet:  McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2017

[March 15, 2017]

McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2017

MOUNT GILEAD, N.C., March 15, 2017 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets:  MCRAA and MCRAB) reported consolidated net revenues for the second quarter of fiscal 2017 of $28,113,000 as compared to $28,801,000 for the second quarter of fiscal 2016.  Net earnings for the second quarter of fiscal 2017 amounted to $1,633,000, or $0.68 per diluted Class A common share as compared to $1,399,000, or $0.58 per diluted Class A common share, for the second quarter of fiscal 2016.

Consolidated net revenues for the first six months of fiscal 2017 totaled $57,986,000 as compared to $60,531,000 for the first six months of fiscal 2016. Net earnings for the first six months of fiscal 2017 amounted to $3,160,000, or $1.31 per diluted Class A common share, as compared to net earnings of $3,394,000, or $1.40 per diluted Class A common share, for the first six months of fiscal 2016.

SECOND QUARTER FISCAL 2017 COMPARED TO SECOND QUARTER FISCAL 2016

Consolidated net revenues totaled $28.1 million for the second quarter of fiscal 2017 as compared to $28.8 million for the second quarter of fiscal 2016. Sales related to our western/lifestyle boot products for the second quarter of fiscal 2017 totaled $13.5 million as compared to $16.3 million for the second quarter of fiscal 2016. This 17% decrease in net revenues is primarily a result of decreased sales in our ladies fashion boots. As expected, the ladies western boots are declining to more historical levels and we continue to see softness in most sectors of our western/lifestyle boot products. Revenues from our work boot products grew approximately 13%, from $12.4 million for the second quarter of fiscal 2016 to $14.1 million for the second quarter of fiscal 2017 as the production of military boots related to our multiple government contracts continues to increase.   

Consolidated gross profit for the second quarter of fiscal 2017 amounted to approximately $7.4 million as compared to $7.3 million for the second quarter of fiscal 2016. Gross profit as a percentage of net revenues was up from 25.5% for the second quarter of fiscal 2016 to 26.3% for the second quarter of fiscal 2017. This is primarily due to labor efficiencies gained and decreased overhead in the manufacturing of our military boots.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $4.8 million for the second quarter of fiscal 2017 as compared to $5.1 million for the second quarter of fiscal 2016. This decrease in SG&A expenses resulted primarily from decreased expenditures for professional services, sales commissions, and heath insurance costs.

As a result of the above, the consolidated operating profit for the second quarter of fiscal 2017 amounted to $2.6 million as compared to $2.2 million for the second quarter of fiscal 2016.

FIRST SIX MONTHS FISCAL 2017 COMPARED TO FIRST SIX MONTHS FISCAL 2016

Consolidated net revenues for the first six months of fiscal 2017 totaled $58.0 million as compared to $60.5 million for the first six months of fiscal 2016. Our western and lifestyle product sales totaled $27.9 million for the first six months of fiscal 2017 as compared to $34.7 million for the first six months of fiscal 2016, with the decrease resulting from a softening in higher priced ladies fashion boots and most sectors of our western/lifestyle products. Net revenues from our work boot business grew from $25.7 million for the first six months of fiscal 2016 to $29.5 million for the first six months of fiscal 2017. This increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our U. S. Government contracts.

Consolidated gross profit totaled $14.8 million for the first six months of fiscal 2017 as compared to $16.0 million for the first six months of fiscal 2016. Gross profit attributable to our western and lifestyle products totaled $9.9 million for the first six months of fiscal 2017, down from $12.5 million for the first six months of fiscal 2016. This decrease in gross profit is directly correlated with the decrease in sales. Our work boot products gross profit grew from $3.4 million for the first six months of fiscal 2016 to $4.8 million for the first six months of fiscal 2017. This increase was driven by the higher military boot shipments mentioned above.

Consolidated selling, general and administrative ("SG&A") expenses totaled approximately $9.8 million for the first six months of fiscal 2017 as compared to $10.6 million for the first six months of fiscal 2016. This decrease in SG&A expenses resulted primarily from decreased expenditures for professional services and sales commissions.

As a result of the above, the consolidated operating profit amounted to $5.0 million for the first six months of fiscal 2017 as compared to $5.4 million for the first six months of fiscal 2016.

Financial Condition and Liquidity

Our financial condition remained strong at January 28, 2017 as cash and cash equivalents totaled $23.4 million as compared to $15.7 million at July 30, 2016. Our working capital increased from $50.5 million at July 30, 2016 to $53.2 million at January 28, 2017.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 28, 2017. 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 2018. Our $5.0 million line of credit, which also expires in January 2018, 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 2017.

For the first six months of fiscal 2017, operating activities provided approximately $8.6 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $3.8 million of cash. Accounts and notes receivable, as adjusted for valuation allowances, used approximately $1.8 million of cash as a result of timing of payments related to the western and work boot business. Decreased inventory levels in both of our boot businesses provided approximately $8.4 million of cash. Accounts payable, employee benefit distributions, accrued payroll and payroll taxes, and income tax payments used approximately $1.8 million of cash.

Net cash used by investing activities totaled approximately $0.3 million, primarily for a building improvements and manufacturing equipment. 

Net cash used in financing activities totaled $0.6 million, which was used 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.



McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








January 28,
2017


July 30,
2016

ASSETS





Current assets:










Cash and cash equivalents


$23,406


$15,673






Short term securities


377


501






Accounts and notes receivable, net


14,496


12,708






Inventories, net


19,596


27,944






Income tax receivable


22


897






Prepaid expenses and other current assets


365


433






Total current assets


58,262


58,156






Property and equipment, net


7,804


8,147






Other assets:










Deposits


14


14






Long term securities


3,612


3,520






Real estate held for investment


3,627


3,602






Amounts due from split-dollar life insurance


2,288


2,288






Trademarks


2,824


2,824






Total other assets


12,365


12,248






Total assets


$78,431


$78,551


























McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








January 28,
2017


July 30,
2016


LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:










Accounts payable


$2,621


$4,696






Accrued employee benefits


777


1,090






Accrued payroll and payroll taxes


891


1,207






Other


739


698






Total current liabilities


5,028


7,691











Shareholders' equity:










Common Stock:





Class A, $1 par value; authorized 5,000,000 shares
   issued and outstanding, 2,031,188 and 2,030,658
   shares, respectively


2,031


2,031






Class B, $1 par value; authorized 2,500,000 shares;
   issued and outstanding, 387,099 and 387,628 shares,
   respectively


387


388






Unrealized losses on investments, net of tax


(47)


(59)






Retained earnings


71,032


68,500






Total shareholders' equity


73,403


70,860






Total liabilities and shareholders' equity


$78,431


$78,551






 

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)










Three Months Ended


Six Months Ended


January 28,


January 30,


January 28,


January 30,

2017

2016

2017

2016









Net revenues

$28,113


$28,801


$57,986


$60,531









Cost of revenues

20,727


21,456


43,231


44,528









Gross profit

7,386


7,345


14,755


16,003









Selling, general and administrative expenses

4,813


5,115


9,777


10,571









Operating profit

2,573


2,230


4,978


5,432









Other income

61


104


155


193









Earnings before income taxes

2,634


2,334


5,133


5,625









Provision for income taxes

1,001


935


1,973


2,231









Net earnings

$1,633


$1,399


$3,160


$3,394

























Earnings per common share:








     Diluted earnings per share1:








        Class A

0.68


0.58


1.31


1.40

        Class B

NA


NA


NA


NA









Weighted average number of common shares outstanding:








       Class A

2,030,710


2,039,822


2,030,684


2,039,584

       Class B

387,577


390,003


387,603


390,537

        Total

2,418,287


2,429,825


2,418,287


2,430,121


















 

1Diluted earnings per share is calculated using the if-converted method, which assumes that all Class B common shares are converted into Class A common shares.  Therefore, for Class A shares, distributed earnings with respect to Class A and all undistributed earnings are used to calculate diluted earnings per share.  For Class B shares, distributed earnings with respect to Class B and no undistributed earnings are used to calculate diluted earnings per share.  The current period calculation has been computed in accordance with the foregoing and the prior year calculation has been adjusted to correctly reflect this method.

 

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)








Six Months Ended



January 28,


January 30,



2017

2016






Net cash provided by operating activities


8,617


(652)






Cash Flows from Investing Activities:










Purchase of land for investment


(25)


(11)






Capital expenditures


(274)


(1,611)






Purchase of securities


43


(67)






Net cash used in investing activities


(256)


(1,689)






Cash Flows from Financing Activities:










Purchase of common stock


-


(29)






Dividends paid


(628)


(631)






Net cash used in financing activities


(628)


(660)






Net (Decrease) Increase in Cash and Cash equivalents


7,733


(3,001)






Cash and Cash Equivalents at Beginning of Year


15,673


15,437






Cash and Cash Equivalents at End of Year


$23,406


$12,436






 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mcrae-industries-inc-reports-earnings-for-the-second-quarter-and-first-six-months-of-fiscal-2017-300424197.html

SOURCE McRae Industries, Inc.


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