MOUNT GILEAD, N.C. , Sept. 23, 2020 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the fourth quarter of fiscal 2020 ending on August 1, 2020 of $12,020,000 as compared to $22,209,000 for the fourth quarter of fiscal 2019. The company experienced a net loss for the fourth quarter of fiscal 2020 in the amount of $1,178,000 , or ($0.50) per diluted Class A common share as compared to net earnings of $808,000 , or $0.34 per diluted Class A common share, for the fourth quarter of fiscal 2019.
Consolidated net revenues for fiscal 2020 totaled $69,311,000 as compared to $82,154,000 for fiscal 2019. Net losses for fiscal 2020 amounted to $114,000 , or ($0.05) per diluted Class A common share, as compared to net earnings of $2,118,000 , or $0.89 per diluted Class A common share, for fiscal 2019.
FOURTH QUARTER FISCAL 2020 COMPARED TO FOURTH QUARTER FISCAL 2019
Consolidated net revenues totaled $12.0 million for the fourth quarter of fiscal 2020 as compared to $22.2 million for the fourth quarter of fiscal 2019. Sales related to our western/lifestyle boot products were $7.1 million for the fourth quarter of fiscal 2020 as compared to $12.0 million for the fourth quarter of fiscal 2019. This was primarily driven by a decline across all brands due to the effects of the coronavirus pandemic as described below. Revenues from our work boot products decreased from $10.2 million for the fourth quarter of fiscal 2019 to $4.9 million for the fourth quarter of fiscal 2020. This was primarily a result of decreased sales in our military boots due to the impacts of the coronavirus pandemic described below. There was also a decrease in John Deere boot sales as we exited that brand, offset by an increase in our Dan Post brand.
Consolidated gross profit for the fourth quarter of fiscal 2020 amounted to approximately $2.1 million as compared to $5.2 million for the fourth quarter of fiscal 2019. This drop was driven by the decline in sales, as well as the production inefficiencies created by the coronavirus.
Consolidated selling, general and administrative ("SG&A") expenses have decreased from $4.4 million for the fourth quarter of fiscal 2019 to $3.7 million for the fourth quarter of fiscal 2020. This resulted from decreased spending in a number of areas, including advertising, travel and entertainment, and salaries.
As a result of the above, the consolidated operating loss for the fourth quarter of fiscal 2020 amounted to $1.5 million as compared to an operating profit of $0.8 million for the fourth quarter of fiscal 2019.
FISCAL 2020 COMPARED TO FISCAL 2019
Consolidated net revenues for fiscal 2020 totaled $69.3 million as compared to $82.2 million for fiscal 2019. Our western and lifestyle product sales totaled $40.1 million for fiscal 2020 as compared to $46.2 million for fiscal 2019. This was primarily driven by a decline across all brands due to the effects of the coronavirus pandemic as described below, as well as a decrease in the John Deere sales due to the exit of that brand. Net revenues from our work boot business decreased from $35.6 million for fiscal 2019 to $29.0 million for fiscal 2020. This decrease resulted primarily from lower military boot due to the effects of the coronavirus pandemic as described below. There was also a decrease due to the exit of the John Deere brand, offset by increased sales of Dan Post work boots.
Consolidated gross profit totaled $15.5 million for fiscal 2020 as compared to $19.3 million for fiscal 2019. Gross profit attributable to our western and lifestyle products totaled $13.5 million for fiscal 2020, down from $14.9 million for fiscal 2019. This decrease was directly correlated with the decrease in sales. Our work boot products gross profit decreased from $4.2 million for fiscal 2019 to $1.9 million for fiscal 2020. This decline was mainly driven by the lower military boots and John Deere brand sales, as well as the production inefficiencies experienced in the third and fourth quarter.
Consolidated selling, general, and administrative ("SG&A") expenses have decreased from $17.0 million for fiscal 2019 to $16.0 million for fiscal 2020. This resulted from lower commissions, as well as decreased spending on travel and entertainment, and professional services.
As a result of the above, the consolidated operating loss amounted to $0.4 million for fiscal 2020 as compared to an operating profit of $2.3 million for fiscal 2019.
Financial Condition and Liquidity
Our financial conditions remain strong at August 1, 2020 as cash and cash equivalents totaled $21.0 million as compared to $12.8 million at August 3 , 2019. Our working capital decreased from $54.5 million at August 3, 2019 to $53.4 million at August 1, 2020 .
We currently have two lines of credit totaling $6.75 million , all of which was fully available at August 1 , 2020. 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 2021. Our $5.0 million line of credit, which also expires in January 2021 , 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 coming year.
For fiscal 2020, operating activities provided approximately $6.8 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $1.0 million of cash. A reduction in inventory and accounts receivables provided approximately $6.9 million of cash. Other assets and employee related expenses, along with accrued income taxes used approximately $1.5 million .
Net cash provided by investing activities totaled approximately $2.8 million , which was primarily due to the sale of securities offset by purchases of securities.
Net cash used in financing activities totaled approximately $1.5 million , which was used primarily for dividend payments and stock buybacks.
COVID-19 Developments
The COVID-19 pandemic has affected people throughout our nation and the entire world. Our hearts go out to those whose lives and families have been affected by this unprecedented situation.
For McRae Industries, Inc., the COVID-19 has had a dramatic effect on our production, sales, and profitability during fiscal 2020.
Dan Post Boot Company experienced a decrease in sales of 37% and orders of 31% for the fourth quarter of fiscal 2020 when compared to the same quarter last year. These decreases were primarily attributable to the COVID-19 pandemic. Monthly year over year comparisons improved during the quarter with shipments for May at -49%, June at -30%, and July at -33%. Orders for May were at -57%, June at -6%, and July at -11%. Sales for August 2020 decreased by 25% when compared to the same month last year while orders increased by 14% when compared to the same month last year.
The improvement in sales and orders is primarily the result of increased e-commerce sales and increased sales by the farm and ranch retailers. Many of our western retailers continue to suffer from a lack of events such as rodeos and music concerts which drive a considerable portion of their western boot sales.
While we have seen some improvement in sales and orders at Dan Post Boot Company over the past several months, we still expect fiscal 2021 to be a challenging year. We believe that COVID-19 poses the biggest risk to our financial performance as it continues to have a negative impact on our retailers, consumers, and vendors.
McRae Footwear's revenue suffered greatly during the fourth quarter of fiscal 2020 due to absenteeism and other issues related to COVID-19. Our sales decreased by 60% when compared to the same quarter last year. During the month of August, we began having employees return to work and hope to be at a pre-COVID-19 level of production by the end of the first quarter of fiscal 2021.
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)
|
|
|
|
|
|
|
|
August 1,
2020
|
|
August 3,
2019
|
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$20,959
|
|
$12,799
|
|
|
|
|
|
|
Short term securities
|
|
9,750
|
|
13,209
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
8,027
|
|
12,975
|
|
|
|
|
|
|
Inventories, net
|
|
18,255
|
|
19,761
|
|
|
|
|
|
|
Income tax receivable
|
|
954
|
|
406
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
858
|
|
634
|
|
|
|
|
|
|
Total current assets
|
|
58,803
|
|
59,784
|
|
|
|
|
|
|
Property and equipment, net
|
|
6,060
|
|
6,612
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
14
|
|
14
|
|
|
|
|
|
|
Long term securities
|
|
4,131
|
|
4,032
|
|
|
|
|
|
|
Real estate held for investment
|
|
3,784
|
|
3,800
|
|
|
|
|
|
|
Amounts due from split-dollar life insurance
|
|
2,288
|
|
2,288
|
|
|
|
|
|
|
Trademarks
|
|
2,824
|
|
2,824
|
|
|
|
|
|
|
Total other assets
|
|
13,041
|
|
12,958
|
|
|
|
|
|
|
Total assets
|
|
$77,904
|
|
$79,354
|
|
McRae Industries, Inc. and Subsidiaries
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(In thousands, except share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
August 1,
2020
|
|
August 3,
2019
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ 3,871
|
|
$ 3,403
|
|
|
|
|
|
|
Accrued employee benefits
|
|
400
|
|
460
|
|
|
|
|
|
|
Accrued payroll and payroll taxes
|
|
457
|
|
713
|
|
|
|
|
|
|
Other
|
|
692
|
|
751
|
|
|
|
|
|
|
Total current liabilities
|
|
5,420
|
|
5,327
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
704
|
|
704
|
|
|
|
|
|
|
Total liabilities
|
|
6,124
|
|
6,031
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
Common Stock:
|
|
|
|
|
|
Class A, $1 par value; authorized 5,000,000 shares
issued and outstanding, 1,957,142 and 1,967,559
shares, respectively
|
|
1,957
|
|
1,967
|
|
|
|
|
|
|
Class B, $1 par value; authorized 2,500,000 shares;
issued and outstanding, 373,233 and 373,675 shares,
respectively
|
|
373
|
|
374
|
|
|
|
|
|
|
Unrealized gains(losses) on investments, net of tax
|
|
-
|
|
(12)
|
|
|
|
|
|
|
Retained earnings
|
|
69,450
|
|
70,994
|
|
|
|
|
|
|
Total shareholders' equity
|
|
71,780
|
|
73,323
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$77,904
|
|
$79,354
|
|
McRae Industries, Inc. and Subsidiaries
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands, except share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
August 1,
|
|
August 3,
|
|
August 1,
|
|
August 3,
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$12,020
|
|
$22,209
|
|
$69,311
|
|
$82,154
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
9,890
|
|
16,980
|
|
53,763
|
|
62,851
|
|
|
|
|
|
|
|
|
|
Gross profit
|
2,130
|
|
5,229
|
|
15,548
|
|
19,303
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
3,671
|
|
4,428
|
|
15,973
|
|
17,005
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
(1,541)
|
|
801
|
|
(425)
|
|
2,298
|
|
|
|
|
|
|
|
|
|
Other income
|
58
|
|
217
|
|
562
|
|
651
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on investments
|
(59)
|
|
-
|
|
(59)
|
|
-
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
(1,542)
|
|
1,018
|
|
78
|
|
2,949
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
(364)
|
|
210
|
|
192
|
|
831
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
$(1,178)
|
|
$ 808
|
|
$ (114)
|
|
$ 2,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Class A
|
$ (0.50)
|
|
$ 0.34
|
|
$ (0.05)
|
|
$ 0.89
|
|
Class B
|
NA
|
|
NA
|
|
NA
|
|
NA
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Class A
|
1,962,120
|
|
2,017,093
|
|
1,965,652
|
|
2,018,940
|
|
Class B
|
373,233
|
|
373,740
|
|
373,517
|
|
374,064
|
|
Total
|
2,335,353
|
|
2,390,833
|
|
2,339,169
|
|
2,393,004
|
|
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, August 3, 2019
|
|
1,967,559
|
$1,967
|
373,675
|
$374
|
($12)
|
$70,994
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(256)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(49)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
992
|
|
Balance, November 2, 2019
|
|
1,967,559
|
$1,967
|
373,675
|
$374
|
($14)
|
$71,682
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(1,033)
|
(1)
|
|
|
|
(25)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(256)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(48)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
576
|
|
Balance, February 1, 2020
|
|
1,966,526
|
$1,966
|
373,675
|
$374
|
$28
|
$71,929
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(1,882)
|
(2)
|
(442)
|
(1)
|
|
(51)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
(281)
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(256)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(49)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
(504)
|
|
Balance, May 2, 2020
|
|
1,964,644
|
$1,964
|
373,233
|
$373
|
($253)
|
$71,070
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(7,502)
|
(7)
|
|
|
|
(126)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
253
|
(13)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(254)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(48)
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
|
|
|
|
|
(1,178)
|
|
Balance, August 1, 2020
|
|
1,957,142
|
$1,957
|
373,233
|
$373
|
$0
|
$69,450
|
|
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 28, 2018
|
|
2,019,974
|
$2,020
|
374,272
|
$375
|
($28)
|
$72,622
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(325)
|
|
(76)
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
(99)
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.63 per Class A common stock)
|
|
|
|
|
|
|
(1,272)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.63 per Class B common stock)
|
|
|
|
|
|
|
(235)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
856
|
|
Balance, October 27, 2018
|
|
2,019,649
|
$2,020
|
374,196
|
$375
|
($127)
|
$71,959
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(563)
|
(1)
|
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(262)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(49)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
68
|
|
Balance, January 26, 2019
|
|
2,019,086
|
$2,019
|
374,196
|
$375
|
($125)
|
$71,704
|
|
|
|
|
|
|
|
|
|
Conversion of Class B to Class A Stock
|
|
212
|
|
(212)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(890)
|
(1)
|
(209)
|
(1)
|
|
(26)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(262)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(48)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
386
|
|
Balance, April 27, 2019
|
|
2,018,408
|
$2,018
|
373,775
|
$374
|
($33)
|
$71,753
|
|
|
|
|
|
|
|
|
|
Stock Buyback
|
|
(50,849)
|
(51)
|
(100)
|
|
|
(1,257)
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of tax
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class A common stock)
|
|
|
|
|
|
|
(262)
|
|
|
|
|
|
|
|
|
|
Cash Dividend ($0.13 per Class B common stock)
|
|
|
|
|
|
|
(48)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
808
|
|
Balance, August 3, 2019
|
|
1,967,559
|
$1,967
|
373,675
|
$374
|
($12)
|
$70,994
|
|
McRae Industries, Inc. and Subsidiaries
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In thousands)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
August 1,
|
|
August 3,
|
|
|
2020
|
2019
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$ 6,806
|
|
$ 395
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of land
|
|
15
|
|
153
|
|
|
|
|
|
|
Purchase of land for investment
|
|
(4)
|
|
(44)
|
|
|
|
|
|
|
Capital expenditures
|
|
(525)
|
|
(396)
|
|
|
|
|
|
|
Sale of securities
|
|
13,371
|
|
274
|
|
|
|
|
|
|
Purchase of securities
|
|
(10,075)
|
|
(11,389)
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
2,782
|
|
(11,402)
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Repurchase of company stock
|
|
(213)
|
|
(1,360)
|
|
|
|
|
|
|
Dividends paid
|
|
(1,215)
|
|
(2,439)
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
(1,428)
|
|
(3,799)
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash equivalents
|
|
8,160
|
|
(14,806)
|
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
12,799
|
|
27,605
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$20,959
|
|
$12,799
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
View original content: http://www.prnewswire.com/news-releases/mcrae-industries-inc-reports-earnings-for-the-fourth-quarter-and-full-year-fiscal-2020-301137007.html
SOURCE McRae Industries, Inc.