McRae Industries, Inc. Reports Earnings For The Fourth Quarter And Full Year Fiscal 2020

Rhea-AI Summary

McRae Industries reported a significant decline in revenues for the fourth quarter and fiscal year 2020 due to COVID-19 impacts. The fourth quarter revenues dropped to $12.0 million from $22.2 million year-over-year, resulting in a net loss of $1.2 million (or $0.50 per share) compared to a profit of $808,000 in 2019. Full-year revenues totaled $69.3 million, down from $82.2 million, with a net loss of $114,000. The company’s cash and equivalents improved to $21.0 million, and SG&A expenses decreased. However, the overall outlook remains challenging due to ongoing pandemic effects.

Positive

• Cash and cash equivalents increased to $21.0 million from $12.8 million year-over-year.
• SG&A expenses decreased from $17.0 million to $16.0 million.

Negative

• Fourth quarter revenues dropped to $12.0 million from $22.2 million year-over-year.
• Net loss for fourth quarter reached $1.2 million compared to a profit of $808,000 in the same quarter last year.
• Fiscal year revenues decreased to $69.3 million from $82.2 million.
• Net loss of $114,000 for fiscal 2020, down from net earnings of $2.1 million in the previous year.

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.

 

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SOURCE McRae Industries, Inc.

FAQ

What were McRae Industries' fourth quarter revenues for fiscal 2020?

McRae Industries reported fourth quarter revenues of $12.0 million for fiscal 2020.

How did COVID-19 impact McRae Industries' financial performance in fiscal 2020?

COVID-19 significantly impacted McRae Industries, leading to a decline in sales and a net loss for the year.

What was the net loss reported by McRae Industries for fiscal 2020?

McRae Industries reported a net loss of $114,000 for fiscal 2020.

How did the sales for McRae Industries' Dan Post Boot Company compare year-over-year in Q4 2020?

Sales for Dan Post Boot Company decreased by 37% in the fourth quarter of fiscal 2020 compared to the same quarter last year.

What is the outlook for McRae Industries following fiscal 2020?

McRae Industries expects fiscal 2021 to be challenging due to continued impacts from COVID-19.