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

Rhea-AI Summary

McRae Industries, Inc. (MCRAA, MCRAB) reported its Q2 fiscal 2023 consolidated net revenues at $30.8 million, down from $31.4 million year-over-year. Net earnings for the quarter were $1.7 million, or $0.76 per diluted share, compared to $2.5 million, or $1.12 per share in Q2 FY2022. For the first six months, revenues increased to $64.6 million, up from $59.0 million, while net earnings were $4.6 million versus $4.8 million in the prior year. The company noted challenges with inventory levels and rising costs impacting gross profit margins.

Positive

• Q2 FY2023 revenues for work boots increased to $8.2 million from $7.0 million in FY2022.
• Strong financial condition with cash and cash equivalents at $15.4 million.

Negative

• Q2 FY2023 consolidated gross profit declined to $8.0 million from $9.2 million in FY2022.
• Q2 gross profit margin decreased to 25.9% from 29.1% in FY2022.
• Increased selling, general and administrative expenses totaling $6.1 million in Q2 FY2023, up from $5.7 million in FY2022.

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

 

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SOURCE McRae Industries, Inc.

FAQ

What are McRae Industries' Q2 FY2023 earnings results?

McRae Industries reported Q2 FY2023 net earnings of $1.7 million, or $0.76 per diluted share.

How did McRae Industries' revenues perform in the first six months of FY2023?

For the first six months, revenues totaled $64.6 million, compared to $59.0 million in the same period last year.

What challenges did McRae Industries face in Q2 FY2023?

The company faced challenges such as decreased inventory demand and rising material costs, affecting gross profit margins.

What was the gross profit margin for McRae Industries in Q2 FY2023?

The gross profit margin for Q2 FY2023 decreased to 25.9%, down from 29.1% in Q2 FY2022.

What is the stock symbol for McRae Industries?

The stock symbols for McRae Industries are MCRAA and MCRAB.