18 Dec McRae Industries Shows Modest Revenue Gain in Q1
McRae Industries, Inc., the maker of military, work and western boots, reported consolidated net revenues for the first quarter of fiscal 2016 of $31.7 million as compared to $29.2 million for the first quarter of fiscal 2015. Net earnings for the first quarter of fiscal 2016 amounted to $1,995,000, or $0.93 per diluted Class A common share as compared to $2,347,000, or $1.07 per diluted Class A common share, for the first quarter of fiscal 2015.
McRae’s footwear brandes include McRae, Dan Post, Laredo Western Boots, Dingo and John Deere.
FIRST QUARTER FISCAL 2016 COMPARED TO FIRST QUARTER FISCAL 2015
Consolidated net revenues totaled $31.7 million for the first quarter of fiscal 2016 as compared to $29.2 million for the first quarter of fiscal 2015. Sales related to our western/lifestyle boot products for the first quarter of fiscal 2016 totaled $18.4 million as compared to $19.4 million for the first quarter of fiscal 2015. This 5 percent decrease in net revenues was primarily attributable to the general slowdown in the apparel and footwear industries, which looks to be continuing into the second quarter. Revenues from our work boot products grew approximately 35 percent, from $9.8 million for the first quarter of fiscal 2015 to $13.3 million for the first quarter of fiscal 2016 as the production of military boots related to our multiple government contracts continues to increase.
Consolidated gross profit for the first quarter of fiscal 2016 amounted to approximately $8.7 million as compared to $8.9 million for the first quarter of fiscal 2015. This decrease in gross profit was attributable to the sales mix being more heavily weighted towards lower margin products. Gross profit as a percentage of net revenues was down from 30.3 percent for the first quarter of fiscal 2015 to 27.2 percent for the first quarter of fiscal 2016, primarily attributable to the decline in overall profit margins for our military boot products. As we strive to improve labor inefficiencies due to a significant number of new employees compared to the same quarter last year, we expect to see improved margins.
Consolidated selling, general and administrative (“SG&A”) expenses totaled approximately $5.5 million for the first quarter of fiscal 2016 as compared to $5.1 million for the first quarter of fiscal 2015. This increase in SG&A expenses resulted primarily from increased expenditures for advertising, salaries and heath insurance costs. As a percentage of net revenues, SG&A expenses remained relatively constant at 17.2 percent for the first quarter of fiscal 2016 as compared to 17.3 percent for the first quarter of fiscal 2015.
As a result of the above, the consolidated operating profit for the first quarter of fiscal 2016 amounted to $3.2 million as compared to $3.8 million for the first quarter of fiscal 2015.
Financial Condition and Liquidity
Our financial condition remained strong at October 31, 2015 as cash and cash equivalents totaled $12.0 million as compared to $15.4 million at August 1, 2015. Our working capital increased from $49.7 million at August 1, 2015 to $50.8 million at October 31, 2015.
We currently have two lines of credit with a bank totaling $6.75 million, all of which was fully available at October 31, 2015. 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 2016. Our $5.0 million line of credit, which also expires in January 2016, 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 remainder of fiscal 2016.
Net cash used by operating activities for the first quarter of fiscal 2016 amounted to $2,483,000. Net earnings, as adjusted for depreciation, contributed approximately $2.2 million of cash. Accounts and notes receivable used approximately $3.0 million of cash as first quarter sales outpaced customer payments. Inventory levels in both of our boot businesses used approximately $2.6 million of cash as product demand remained strong. The timing of payments for accounts payable, employee benefits, and income taxes provided approximately $0.9 million of cash.
Net cash used by investing activities totaled approximately $589,000, primarily for a building addition and manufacturing equipment.
Net cash used in financing activities totaled $338,000, which was mainly used for dividend payments.