McRae Industries, Inc. Reports Earnings For The Second Quarter And First Six Months Of Fiscal 2019

MOUNT GILEAD, N.C., March 18, 2019 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets:  MCRAA and MCRAB) reported consolidated net revenues for the second quarter of fiscal 2019 of $20,738,000 as compared to $20,472,000 for the second quarter of fiscal 2018.  Net earnings for the second quarter of fiscal 2019 amounted to $68,000, or $0.03 per diluted Class A common share as compared to $681,000, or $0.28 per diluted Class A common share, for the second quarter of fiscal 2018.

Consolidated net revenues for the first six months of fiscal 2019 totaled $41,339,000 as compared to $42,870,000 for the first six months of fiscal 2018. Net earnings for the first six months of fiscal 2019 amounted to $924,000, or $0.39 per diluted Class A common share, as compared to net earnings of $1,973,000, or $0.82 per diluted Class A common share, for the first six months of fiscal 2018.

SECOND QUARTER FISCAL 2019 COMPARED TO SECOND QUARTER FISCAL 2018

Consolidated net revenues totaled $20.7 million for the second quarter of fiscal 2019 as compared to $20.5 million for the second quarter of fiscal 2018. Sales related to our western/lifestyle boot products for the second quarter of fiscal 2019 totaled $12.2 million as compared to $13.1 million for the second quarter of fiscal 2018. This 7% decrease in net revenues is primarily a result of decreased sales in our premium children's boots, as well as a general softness in most sectors of our western/lifestyle boot products. Revenues from our work boot products increased approximately 16%, from $7.3 million for the second quarter of fiscal 2018 to $8.5 million for the second quarter of fiscal 2019.  This was primarily a result of increased military boots sales.

Consolidated gross profit for the second quarter of fiscal 2019 amounted to approximately $4.6 million as compared to $5.0 million for the second quarter of fiscal 2018. Gross profit, as a percentage of net revenues, was down from 24.2% for the second quarter of fiscal 2018 to 22.1% for the second quarter of fiscal 2019. This is primarily due to higher sales of military boots.

Consolidated selling, general and administrative expenses totaled approximately $4.6 million for the second quarter of fiscal 2019 as compared to $4.4 million for the second quarter of fiscal 2018. This increase resulted primarily from increased employee related expenses.

As a result of the above, the consolidated operating profit for the second quarter of fiscal 2019 amounted to $0.03 million as compared to $0.5 million for the second quarter of fiscal 2018.

On January 15, 2019, we received an award from the Government for Marine hot weather boots at a maximum of $35,520,300 firm fixed price, indefinite delivery/indefinite quantity contract. This is a one year base contract with four one year option periods.

FIRST SIX MONTHS FISCAL 2019 COMPARED TO FIRST SIX MONTHS FISCAL 2018

Consolidated net revenues for the first six months of fiscal 2019 totaled $41.3 million as compared to $42.9 million for the first six months of fiscal 2018. Our western and lifestyle product sales totaled $24.6 million for the first six months of fiscal 2019 as compared to $26.4 million for the first six months of fiscal 2018, with the decrease primarily resulting from a decrease in sales for women's western boots and premium children's boots. Net revenues from our work boot business increased from $16.4 million for the first six months of fiscal 2018 to $16.7 million for the first six months of fiscal 2019. This increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our U. S. Government (the "Government") contracts.

Consolidated gross profit totaled $9.9 million for the first six months of fiscal 2019 as compared to $11.2 million for the first six months of fiscal 2018. Gross profit attributable to our western and lifestyle products totaled $8.2 million for the first six months of fiscal 2019, down from $9.3 million for the first six months of fiscal 2018. This decrease in gross profit is directly correlated with the decrease in sales. Our work boot products gross profit declined from $1.8 million for the first six months of fiscal 2018 to $1.6 million for the first six months of fiscal 2019.

Consolidated selling, general and administrative expenses totaled approximately $8.8 million for the first six months of fiscal 2019 as compared to $8.6 million for the first six months of fiscal 2018. This increase resulted primarily from increased expenditures for employee related expenses.

As a result of the above, the consolidated operating profit amounted to $1.1 million for the first six months of fiscal 2019 as compared to $2.6 million for the first six months of fiscal 2018.

Financial Condition and Liquidity

Our financial condition remained strong at January 26, 2019 as cash and cash equivalents totaled $21.2 million as compared to $27.6 million at July 28, 2018. Our working capital decreased from $55.4 million at July 28, 2018 to $55.0 million at January 26, 2019.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 26, 2019. 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 2020. Our $5.0 million line of credit, which also expires in January 2020, 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 2019.

For the first six months of fiscal 2019, operating activities provided approximately $2.9 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $1.5 million of cash. Decreased inventory levels in both of our boot businesses provided approximately $2.9 million of cash. Accounts receivable, accounts payable, employee benefit distributions, accrued payroll and payroll taxes, and income tax payments used approximately $1.6 million of cash.

Net cash used by investing activities totaled approximately $7.5 million, primarily for investing in securities. 

Net cash used in financing activities totaled $1.8 million, which was used primarily 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.

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SOURCE McRae Industries, Inc.