McRae Industries, Inc. Reports Earnings For The Third Quarter And First Nine Months Of Fiscal 2021

MOUNT GILEAD, N.C., June 23, 2021 /PRNewswire/ -- McRae Industries, Inc. (Pink Sheets:  MCRAA and MCRAB) reported consolidated net revenues for the third quarter of fiscal 2021 of $21,580,000 as compared to $14,292,000 for the third quarter of fiscal 2020.  Net earnings for the third quarter of fiscal 2021 amounted to $1,197,000, or $0.52 per diluted Class A common share as compared to a net loss of $504,000, or ($0.22) per diluted Class A common share, for the third quarter of fiscal 2020.

Consolidated net revenues for the first nine months of fiscal 2021 totaled $60,758,000 as compared to $57,291,000 for the first nine months of fiscal 2020.  Net earnings for the first nine months of fiscal 2021 amounted to $2,419,000, or $1.05 per diluted Class A common share, as compared to net earnings of $1,063,000, or $0.45 per diluted Class A common share, for the first nine months of fiscal 2020.

THIRD QUARTER FISCAL 2021 COMPARED TO THIRD QUARTER FISCAL 2020

Consolidated net revenues totaled $21.6 million for the third quarter of fiscal 2021 as compared to $14.3 million for the third quarter of fiscal 2020.  Sales related to our western/lifestyle boot products for the third quarter of fiscal 2021 totaled $14.6 million as compared to $6.5 million for the third quarter of fiscal 2020.  This increase in net revenues is primarily a result of increased sales in both our popular priced western boot sales and in our premium western boot sales.  Revenues from our work boot products decreased approximately 7%, from $7.6 million for the third quarter of fiscal 2020 to $7.0 million for the third quarter of fiscal 2021.  This was primarily a result of decreased military boot sales offset by an increase in our Dan Post work boot sales.

Consolidated gross profit for the third quarter of fiscal 2021 amounted to approximately $5.9 million as compared to $2.7 million for the third quarter of fiscal 2020. Gross profit, as a percentage of net revenues, was up from 18.9% for the third quarter of fiscal 2020 to 27.5% for the third quarter of fiscal 2021. This is primarily due to our lower margin military boot sales making up a smaller percentage of total sales.

Consolidated selling, general and administrative expenses totaled approximately $4.4 million for the third quarter of fiscal 2021 as compared to $3.4 million for the third quarter of fiscal 2020. This increase resulted primarily from increased commissions, healthcare and employee benefit expenses, offset by decreased spending in advertising.

As a result of the above, the consolidated operating profit for the third quarter of fiscal 2021 amounted to $1.5 million as compared to net operating loss of $0.7 million for the third quarter of fiscal 2020.

FIRST NINE MONTHS FISCAL 2021 COMPARED TO FIRST NINE MONTHS FISCAL 2020

Consolidated net revenues for the first nine months of fiscal 2021 totaled $60.8 million as compared to $57.3 million for the first nine months of fiscal 2020. Our western and lifestyle product sales totaled $40.3 million for the first nine months of fiscal 2021 as compared to $33.1 million for the first nine months of fiscal 2020, with the increase primarily resulting from an increase in all our western boot sales. Net revenues from our work boot business decreased from $24.0 million for the first nine months of fiscal 2020 to $20.5 million for the first nine months of fiscal 2021. This decrease resulted primarily from decreased military boot sales offset by an increase in our Dan Post work boot sales.

Consolidated gross profit totaled $16.5 million for the first nine months of fiscal 2021 as compared to $13.4 million for the first nine months of fiscal 2020. Gross profit attributable to our western and lifestyle products increased to $14.5 million for the first nine months of fiscal 2021, as compared to $11.3 million for the first nine months of fiscal 2020.  Our work boot products gross profit declined from $2.0 million for the first nine months of fiscal 2020 to $1.9 million for the first nine months of fiscal 2021.

Consolidated selling, general and administrative expenses totaled approximately $13.5 million for the first nine months of fiscal 2021 as compared to $12.3 million for the first nine months of fiscal 2020. This increase resulted primarily from increased commissions, healthcare, employee benefits, and computer services expenses, offset by decreased spending in advertising.

As a result of the above, the consolidated operating profit amounted to $3.0 million for the first nine months of fiscal 2021 as compared to $1.1 million for the first nine months of fiscal 2020.

Financial Condition and Liquidity

Our financial condition remained strong at May 1, 2021 as cash and cash equivalents totaled $23.0 million as compared to $21.0 million at August 1, 2020. Our working capital increased from $57.5 million at August 1, 2020 to $59.0 million at January 30, 2021.

We currently have two lines of credit totaling $6.75 million, all of which was fully available at May 1, 2021. 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 2022. Our $5.0 million line of credit, which also expires in January 2022, is secured by the inventory and accounts receivable of our Dan Post Boot Company subsidiary.

For the first nine months of fiscal 2021, operating activities provided approximately $0.4 million of cash. Net earnings, as adjusted for depreciation, contributed approximately $3.2 million of cash. Decreased inventory, other assets, and accrued income taxes provided approximately $7.3 million of cash. Accounts receivable and accounts payable used approximately $10.3 million of cash.

Net cash provided by investing activities totaled approximately $3.8 million, primarily due to the sale of securities offset by the purchase of securities.

Net cash used in financing activities totaled $2.1 million, which was used primarily for repurchasing stock and 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 2021.

For the third quarter of fiscal 2021, our western/lifestyle and western work product orders continued the upward trend we observed in the first and second quarters.  Orders for these segments of our business were up 233% over the orders in the third quarter of fiscal 2020. This also represents an increase of 89% over orders in the third quarter of 2019 resulting in an open order position that is substantially larger than normal for this time of year.  We are working with our manufacturing partners to increase our inventory levels as quickly as possible, but do not expect to be back in a normal stock of products before the end of the calendar year.  This is of course dependent on the level of orders we continue to receive.  Shipments in the fourth quarter could be negatively impacted by the shortage of inventory.

The Company, through our affiliate American Mortgage and Investment Company (AMIC), currently has purchase sales agreements on two of our properties held for investment.

On February 12, 2020, AMIC signed a purchase sales agreement with Lennar Carolinas, LLC under which Lennar would purchase from AMIC 78 acres of undeveloped land in Berkeley County, South Carolina for $1,650,000.00.  This agreement originally had an investigation period of 120 days, but due to Covid-19, wetlands, and other issues, the investigation period was extended until November 29, 2021.  Lennar is currently working through wetland issues with the Army Corps of Engineers and hopes to satisfactorily resolve these issues so that the project is feasible.  Lennar can terminate this agreement for any reason prior to the expiration of the investigation period.

The second property is under a May 2021 purchase sales agreement between Levi Grantham, LLC and AMIC.  This agreement provides for Levi Grantham's purchase of approximately 167.82 acres of undeveloped land in Berkeley County, South Carolina for $1,600,000.00.  Levi Grantham has a due diligence period of 30 days which began on June 3, 2021 and they can cancel this agreement for any reason prior to expiration of the due diligence period.  Closing will be on or before the later of the date that is sixty days after the expiration of the due diligence period or thirty days following the satisfaction of all contingencies set forth in the agreement.

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, our ability to complete the sale of our properties held for investment that are under contract, 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.

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SOURCE McRae Industries, Inc.