McRAE INDUSTRIES, INC. REPORTS EARNINGS FOR THE SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2022

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Mar 18, 2022, 16:30 ET

MOUNT GILEAD, N.C., March 18, 2022 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets: MCRAA and MCRAB) reported consolidated net revenues for the second quarter of fiscal 2022 of $31,426,000 as compared to $20,239,000 for the second quarter of fiscal 2021. Net earnings for the second quarter of fiscal 2022 amounted to $2,536,000, or $1.12 per diluted Class A common share as compared to $728,000, or $0.32 per diluted Class A common share, for the second quarter of fiscal 2021.

Consolidated net revenues for the first six months of fiscal 2022 totaled $59,014,000 as compared to $39,178,000 for the first six months of fiscal 2021. Net earnings for the first six months of fiscal 2022 amounted to $4,758,000, or $2.11 per diluted Class A common share, as compared to net earnings of $1,222,000, or $0.53 per diluted Class A common share, for the first six months of fiscal 2021.

SECOND QUARTER FISCAL 2022 COMPARED TO SECOND QUARTER FISCAL 2021

Consolidated net revenues totaled $31.4 million for the second quarter of fiscal 2022 as compared to $20.2 million for the second quarter of fiscal 2021. Sales related to our western/lifestyle boot products for the second quarter of fiscal 2022 totaled $23.5 million as compared to $13.7 million for the second quarter of fiscal 2021. This increase in net revenues was seen across the board for all product lines, as the demand for western boots continues to grow because of fashion and lifestyle influences in the market place. Revenues from our work boot products increased from $6.5 million for the second quarter of fiscal 2021 to $7.0 million for the second quarter of fiscal 2022. This was primarily a result of increased military and Dan Post work boot sales.

Consolidated gross profit for the second quarter of fiscal 2022 amounted to approximately $9.2 million as compared to $5.6 million for the second quarter of fiscal 2021. Gross profit, as a percentage of net revenues, was up from 27.5% for the second quarter of fiscal 2021 to 29.1% for the second quarter of fiscal 2022. This is primarily due to our lower margin military boot sales making up a smaller percentage of total sales, in addition to better margins on closeout sales.

Consolidated selling, general and administrative expenses totaled approximately $5.7 million for the second quarter of fiscal 2022 as compared to $4.8 million for the second quarter of fiscal 2021. This increase resulted primarily from increased commissions.

As a result of the above, the consolidated operating profit for the second quarter of fiscal 2022 amounted to $3.43 million as compared to $0.81 million for the second quarter of fiscal 2021.

FIRST SIX MONTHS FISCAL 2022 COMPARED TO FIRST SIX MONTHS FISCAL 2021

Consolidated net revenues for the first six months of fiscal 2022 totaled $59.0 million as compared to $39.2 million for the first six months of fiscal 2021. Our western and lifestyle product sales totaled $43.4 million for the first six months of fiscal 2022 as compared to $25.8 million for the first six months of fiscal 2021. Consistent with the quarter, this increase in net revenues was seen across the board for all product lines. Net revenues from our work boot business increased from $13.4 million for the first six months of fiscal 2021 to $14.2 million for the first six months of fiscal 2022. This increase resulted primarily from an increase in our Dan Post work boot sales.

Consolidated gross profit totaled $17.1 million, or 29.0%, for the first six months of fiscal 2022 as compared to $10.6 million, or 27.1%, for the first six months of fiscal 2021. Consistent with the quarter, this is primarily due to our lower margin military boot sales making up a smaller percentage of total sales, in addition to better margins on closeout sales.

Consolidated selling, general and administrative expenses totaled approximately $10.9 million for the first six months of fiscal 2022 as compared to $9.1 million for the first six months of fiscal 2021. This increase resulted primarily from increased commissions.

As a result of the above, the consolidated operating profit amounted to $6.3 million for the first six months of fiscal 2022 as compared to $1.5 million for the first six months of fiscal 2021.

Financial Condition and Liquidity

Our financial condition remained strong at January 29, 2022 as cash and cash equivalents totaled $15.1 million as compared to $23.5 million at July 31, 2021. Our working capital increased from $58.0 million at July 31, 2021 to $62.7 million at January 29, 2022.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at January 29, 2022. 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 2023. Our $5.0 million line of credit, which also expires in January 2023, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.

For the first six months of fiscal 2022, operating activities used approximately $10.0 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $5.3 million of cash. Increased inventory, accounts receivable, and other assets used approximately $16.0 million of cash. Decreased accounts payable and other accrued liabilities provided approximately $0.9 million of cash.

Net cash provided by investing activities totaled approximately $2.2 million. The sale of securities offset by the purchase of securities provided approximately $1.9 million and the sale of land provided approximately $0.6 million.

Net cash used in financing activities totaled $0.6 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 2022.

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 29, 2022	July 31, 2021
	January 29, 2022	July 31, 2021
ASSETS
Current assets:

Cash and cash equivalents	$15,113	$23,489

Equity investments	6,544	6,207

Debt securities	-	2,414

Accounts and notes receivable, net	29,765	16,382

Inventories, net	16,757	14,326

Prepaid expenses and other current assets	550	323

Total current assets	68,729	63,141

Property and equipment, net	5,052	5,363

Other assets:

Deposits	14	14

Notes receivable	1,033	1,017

Real estate held for investment	3,036	3,238

Amounts due from split-dollar life insurance	2,288	2,288

Trademarks	2,824	2,824

Total other assets	9,195	9,381

Total assets	$82,976	$77,885

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

	January 29, 2022	July 31, 2021
	January 29, 2022	July 31, 2021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

Accounts payable	$3,126	$2,714

Accrued employee benefits	988	660

Accrued payroll and payroll taxes	802	700

Income tax payable	296	236

Other	812	795

Total current liabilities	6,024	5,105

Deferred tax liabilities	534	534

Total liabilities	6,558	5,639

Shareholders' equity:
Common Stock:
Class A, $1 par value; authorized 5,000,000 shares issued and outstanding, 1,893,635 and 1,893,423 shares, respectively	1,894	1,893

Class B, $1 par value; authorized 2,500,000 shares; issued and outstanding, 366,525 and 366,737 shares, respectively	366	367

Retained earnings	74,158	69,986

Total shareholders' equity	76,418	72,246

Total liabilities and shareholders' equity	$82,976	$77,885

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)

	Three Months Ended		Six Months Ended
	January 29,	January 30,	January 29,	January 30,
	2022	2021	2022	2021

Net revenues	$31,426	$20,239	$59,014	$39,178

Cost of revenues	22,273	14,672	41,877	28,575

Gross profit	9,153	5,567	17,137	10,603

Selling, general and administrative expenses	5,723	4,762	10,859	9,120

Operating profit	3,430	805	6,278	1,483

Other income	(21)	241	187	291

Earnings before income taxes	3,409	1,046	6,465	1,774

Provision for income taxes	873	318	1,707	552

Net earnings	$2,536	$728	$4,758	$1,222



Earnings per common share:

Diluted earnings per share:
Class A	1.12	0.32	2.11	0.53
Class B	NA	NA	NA	NA

Weighted average number of common shares outstanding:
Class A	1,893,486	1,933,860	1,893,454	1,941,721
Class B	366,674	367,295	366,706	368,065
Total	2,260,160	2,301,155	2,260,160	2,309,786

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 1, 2020	1,957,142	$1,957	373,233	$373	$0	$69,487

Stock Buyback	(21,141)	(21)	(3,500)	(4)		(490)

Conversion of Class B	2,300	2	(2,300)	(2)		-
to Class A Stock

Cash Dividend ($0.13 per Class A common stock)						(253)

Cash Dividend ($0.13 per Class B common stock)						(48)

Net earnings						494
Balance, October 31, 2020	1,938,301	$1,938	367,433	$367	$0	$69,190

Stock Buyback	(14,478)	(14)	(696)	0		(320)

Cash Dividend ($0.13 per Class A common stock)						(252)

Cash Dividend ($0.13 per Class B common stock)						(47)

Net earnings						728
Balance, January 30, 2021	1,923,823	$1,924	366,737	$367	$0	$69,299


	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

McRae Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended
	January 29,	January 30,
	2022	2021

Net cash used in operating activities	(9,998)	140

Cash Flows from Investing Activities:

Proceeds from sale of assets	564	635

Purchase of land for investment	-	(160)

Capital expenditures	(211)	(202)

Purchase of securities	(687)	(5,118)

Proceeds from sale of securities	2,542	9,852

Net cash provided by investing activities	2,208	5,007

Cash Flows from Financing Activities:

Repurchase company stock	-	(850)

Dividends paid	(586)	(601)

Net cash used in financing activities	(586)	(1,451)

Net (Decrease) Increase in Cash and Cash equivalents	(8,376)	3,696

Cash and Cash Equivalents at Beginning of Year	23,489	20,959

Cash and Cash Equivalents at End of Period	$15,113	$24,655