Mcrae INDUSTRIES, INC. REPORTS EARNINGS FOR THE SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2023


(MENAFN- PR Newswire) MOUNT GILEAD, N.C., March 17, 2023 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets:
MCRAA and MCRAB)
reported consolidated net revenues for the second quarter of fiscal 2023 of $30,769,000 as compared to $31,426,000 for the second quarter of fiscal 2022.
Net earnings for the second quarter of fiscal 2023 amounted to $1,729,000, or $0.76 per diluted Class A common share as compared to $2,536,000, or $1.12 per diluted Class A common share, for the second quarter of fiscal 2022.

Consolidated net revenues for the first six months of fiscal 2023 totaled $64,552,000 as compared to $59,014,000 for the first six months of fiscal 2022.
Net earnings for the first six months of fiscal 2023 amounted to $4,586,000, or $2.02 per diluted Class A common share, as compared to net earnings of $4,758,000, or $2.11 per diluted Class A common share, for the first six months of fiscal 2022.

SECOND QUARTER FISCAL 2023 COMPARED TO SECOND QUARTER FISCAL 2022

Consolidated net revenues totaled $30.8 million for the second quarter of fiscal 2023 as compared to $31.4 million for the second quarter of fiscal 2022.
Sales related to our western/lifestyle boot products for the second quarter of fiscal 2023 totaled $22.8 million as compared to $23.5 million for the second quarter of fiscal 2022.
This decrease in net revenues was spread across most of our product lines, as the demand for western boots was unprecedented in the prior year and many retailers were in an over inventoried position for the quarter.
Revenues from our work boot products increased from $7.0 million for the second quarter of fiscal 2022 to $8.2 million for the second quarter of fiscal 2023.
This was primarily a result of increased military boot sales.

Consolidated gross profit for the second quarter of fiscal 2023 amounted to approximately $8.0 million as compared to $9.2 million for the second quarter of fiscal 2022.
Gross profit, as a percentage of net revenues, was down from 29.1% for the second quarter of fiscal 2022 to 25.9% for the second quarter of fiscal 2023.
This is primarily because of decreased margins on military boot sales driven by increased labor cost and rising material cost associated with fixed price military boot contracts.
We continue to have difficult hiring and training qualified employees to work in our manufacturing facility.

Consolidated selling, general and administrative expenses totaled approximately $6.1 million for the second quarter of fiscal 2023 as compared to $5.7 million for the second quarter of fiscal 2022.
This increase resulted primarily from increased employee related expenses and product samples.

As a result of the above, the consolidated operating profit for the second quarter of fiscal 2023 amounted to $1.8 million as compared to $3.4 million for the second quarter of fiscal 2022.

FIRST SIX MONTHS FISCAL 2023 COMPARED TO FIRST SIX MONTHS FISCAL 2022

Consolidated net revenues for the first six months of fiscal 2023 totaled $64.6 million as compared to $59.0 million for the first six months of fiscal 2022.
Our western and lifestyle product sales totaled $49.5 million for the first six months of fiscal 2023 as compared to $43.4 million for the first six months of fiscal 2022, as our increases from the first quarter outweighed the decreases in the second.
As noted in our first quarter earnings release, we do expect sales for these products to continue to decrease during the remainder of Fiscal 2023 as compared to the prior year.
Net revenues from our work boot business increased from $14.2 million for the first six months of fiscal 2022 to $15.1 million for the first six months of fiscal 2023.
This was primarily a result of increased military boot sales, offset by a decrease in Dan Post work boot sales.

Consolidated gross profit totaled $18.3 million, or 28.3%, for the first six months of fiscal 2023 as compared to $17.1 million, or 29.0%, for the first six months of fiscal 2022.
This is primarily due to our lower margins on military boot sales as discussed for the quarter.
This was exacerbated by the fact that military boot sales made up a larger percentage of total sales for the first six months of 2023 as compared to 2022.

Consolidated selling, general and administrative expenses totaled approximately $12.2 million for the first six months of fiscal 2023 as compared to $10.9 million for the first six months of fiscal 2022.
This increase resulted primarily from increased commissions and employee related expenses.

As a result of the above, the consolidated operating profit amounted to $6.1 million for the first six months of fiscal 2023 as compared to $6.3 million for the first six months of fiscal 2022.

Financial Condition and Liquidity

Our financial condition remained strong at January 28, 2023 as cash and cash equivalents totaled $15.4 million as compared to $15.3 million at July 30, 2022.
Our working capital increased from $67.0 million at July 30, 2022 to $69.7 million at January 28, 2023.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 28, 2023.
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 2024.
Our $5.0 million line of credit, which also expires in January 2024, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.

For the first six months of fiscal 2023, operating activities provided approximately $2.6 million of cash.
Net earnings, as adjusted for depreciation, contributed approximately $5.1 million of cash.
Increased inventory, accounts payable, and employee benefits used approximately $8.5 million of cash.
Decreased accounts receivable provided approximately $6.2 million of cash.

Net cash used by investing activities totaled approximately $0.8 million, primarily due to the purchase of fixed assets and securities.

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

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 2023.

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: uncertainties associated with COVID-19 or coronavirus, including its possible effects on our operations, supply chain, and the demand for our products and services, 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,
2023


July 30,
2022


ASSETS





Current assets:










Cash and cash equivalents


$15,350


$15,315






Equity investments


6,227


6,088






Debt securities


4,458


4,458






Accounts receivable, net


19,890


26,092






Inventories, net


29,726


24,484






Prepaid expenses and other current assets


491


317






Total current assets


76,142


76,754






Property and equipment, net


5,248


5,151






Other assets:










Deposits


14


14






Notes receivable


994


977






Real estate held for investment


3,036


3,036






Amounts due from split-dollar life insurance


2,288


2,288






Trademarks


2,824


2,824






Total other assets


9,156


9,139






Total assets


$90,546


$91,044

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








January 28,
2023


July 30,
2022


LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:










Accounts payable


$3,002


$5,168






Accrued employee benefits


1,124


2,172






Accrued payroll and payroll taxes


1,051


1,188






Income tax payable


236


284






Other


1,034


958






Total current liabilities


6,447


9,770






Deferred tax liabilities


25


25






Total liabilities


6,472


9,795






Shareholders' equity:





Common Stock:





Class A, $1 par value; authorized 5,000,000 shares
issued and outstanding, 1,895,135 and 1,895,035
shares, respectively


1,895


1,895






Class B, $1 par value; authorized 2,500,000 shares;
issued and outstanding, 365,025 and 365,125 shares,
respectively


365


365






Retained earnings


81,814


78,989






Total shareholders' equity


84,074


81,249






Total liabilities and shareholders' equity


$90,546


$91,044

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)










Three Months Ended


Six Months Ended


January 28,


January 29,


January 28,


January 29,

2023

2022

2023

2022









Net revenues

$30,769


$31,426


$64,552


$59,014









Cost of revenues

22,788


22,273


46,277


41,877









Gross profit

7,981


9,153


18,275


17,137









Selling, general and administrative expenses

6,134


5,723


12,180


10,859









Operating profit

1,847


3,430


6,095


6,278









Other income

456


(21)


267


187









Earnings before income taxes

2,303


3,409


6,362


6,465









Provision for income taxes

574


873


1,776


1,707









Net earnings

$1,729


$2,536


$4,586


$4,758

























Earnings per common share:

















Diluted earnings per share:










Class A

0.76


1.12


2.02


2.11



Class B

NA


NA


NA


NA









Weighted average number of common shares outstanding:










Class A

1,895,062


1,893,486


1,895,049


1,893,454



Class B

365,098


366,674


365,111


366,706



Total

2,260,160


2,260,160


2,260,160


2,260,160

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)











Common Stock, $1 par value

Accumulated Other




Class A

Class B

Comprehensive

Retained



Shares

Amount

Shares

Amount


Income (Loss)


Earnings

Balance, July 31, 2021


1,893,423

$1,893

366,737

$367

$0

$69,986









Cash Dividend ($0.13 per
Class A common stock)







(246)









Cash Dividend ($0.13 per Class B common stock)







(47)









Net earnings







2,222

Balance, October 30, 2021


1,893,423

$1,893

366,737

$367

$0

$71,915









Conversion of Class B


212

1

(212)

(1)


-


to Class A Stock
















Cash Dividend ($0.13 per
Class A common stock)







(246)









Cash Dividend ($0.13 per Class B common stock)







(47)









Net earnings







2,536

Balance, January 29, 2022


1,893,635

$1,894

366,525

$366

$0

$74,158



















Common Stock, $1 par value

Accumulated Other




Class A

Class B

Comprehensive

Retained



Shares

Amount

Shares

Amount


Income (Loss)


Earnings

Balance, July 30, 2022


1,895,035

$1,895

365,125

$365

$0

$78,989









Cash Dividend ($0.14 per
Class A common stock)







(265)









Cash Dividend ($0.14 per Class B common stock)







(51)









Net earnings







2,857

Balance, October 29, 2022


1,895,035

$1,895

365,125

$365

$0

$81,530









Conversion of Class B


100

-

(100)

-


-


to Class A Stock
















Cash Dividend ($0.64 per
Class A common stock)







(1,212)









Cash Dividend ($0.64 per Class B common stock)







(233)









Net earnings







1,729

Balance, January 28, 2023


1,895,135

$1,895

365,025

$365

$0

$81,814

McRae Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)








Six Months Ended



January 28,


January 29,



2023

2022






Cash Flows from Operating Activities:










Net earnings


4,586


4,758






Adjustments to reconcile net earnings to net cash used in operating activities


(1,960)


(14,756)






Net cash used in operating activities


2,626


(9,998)






Cash Flows from Investing Activities:










Proceeds from sale of assets


-


564






Capital expenditures


(594)


(211)






Purchase of securities


(246)


(687)






Proceeds from sale of securities


10


2,542






Net cash provided by investing activities


(830)


2,208






Cash Flows from Financing Activities:










Dividends paid


(1,761)


(586)






Net cash used in financing activities


(1,761)


(586)






Net (Decrease) Increase in Cash and Cash equivalents


35


(8,376)






Cash and Cash Equivalents at Beginning of Year


15,315


23,489






Cash and Cash Equivalents at End of Period


$15,350


$15,113

SOURCE McRae Industries, Inc.

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