United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
{x} Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the Period Ended April 29,1995
or
{ } Transaction Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 1-85-78
McRae Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 56-0706710
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporated or organization)
402 North Main Street
Mt. Gilead, North Carolina 27306
(Address of principal (Zip Code)
executive offices)
(910) 439-6147
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address or fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $1 Par Value--Class A 1,778,573 shares as of June 5, 1995
Common Stock, $1 Par Value--Class B 952,637 shares as of June 5, 1995
Page 1 of 9
INDEX
McRae Industries, Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page No.
Consolidated Balance Sheets - April 29, 1995 and
and July 30, 1994 3
Condensed Consolidated Statements of Operations - Three and nine
months ended April 29, 1995 and April 30, 1994 4
Condensed Consolidated Statements of Cash Flows - Nine months
ended April 29, 1995 and April 30, 1994 5
Notes to Consolidated Financial Statements - April 29, 1995 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information 8
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 9
2
Part I.Financial Information
McRae Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
April 29, July 30,
1995 1994
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 4,393,000 $ 6,542,000
Marketable securities 910,000 871,000
Accounts and notes receivable, net 4,671,000 4,582,000
Inventories 6,476,000 5,888,000
Net investment in capitalized leases 854,000 761,000
Prepaid expenses and other current assets 420,000 258,000
Total current assets 17,724,000 18,902,000
Property, plant and equipment, net 4,469,000 4,058,000
Other assets:
Notes and accounts receivable,
related parties 2,157,000 2,055,000
Real estate held for investment 412,000 375,000
Notes receivable 815,000 905,000
Net investment in capitalized leases 1,542,000 1,319,000
Other 1,186,000 522,000
Total other assets 6,112,000 5,176,000
Total assets $28,304,000 $28,136,000
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable to banks $ 150,000 $ 962,000
Accounts payable 1,374,000 1,294,000
Accrued employee benefits 1,103,000 1,290,000
Accrued payroll and payroll taxes 565,000 476,000
Deferred revenues 1,043,000 1,127,000
Due to related parties 55,000 88,000
Income taxes 383,000 526,000
Other 584,000 500,000
Total current liabilities 5,257,000 6,263,000
Minority Interest 881,000 772,000
Shareholders' Equity:
Common Stock:
Class "A", $1 par; Authorized
5,000,000 shares; Issued and
outstanding, 1,778,573 and
1,735,363 shares; respectively 1,778,000 1,735,000
Class "B", $1 par, Authorized 2,500,000
shares; Issued and outstanding 952,637
and 995,847 shares, respectively 953,000 996,000
Additional Paid-in Capital 676,000 676,000
Retained Earnings 18,759,000 17,694,000
Total shareholders' equity 22,166,000 21,101,000
Total liabilities and shareholders' equity $28,304,000 $28,136,000
Note - The balance sheet at July 30, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to consolidated financial statements.
3
McRae Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Operation - (Unaudited)
Three Months Ended Nine Months ended
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
Net revenues $10,451,000 $ 9,277,000 $30,268,000 $29,753,000
Costs and expenses:
Cost of revenues 7,080,000 6,046,000 20,464,000 19,910,000
Selling general and
administrative 2,549,000 2,315,000 7,418,000 6,703,000
Other income, net ( 94,000) ( 96,000) (298,000) (201,000)
Equity in net loss of
investee -0- (21,000) -0- 32,000
Total costs and expenses 9,535,000 8,244,000 27,589,000 26,444,000
Earnings before income taxes
and minority interest 916,000 1,033,000 2,684,000 3,309,000
Provision for income taxes 352,000 391,000 1,050,000 1,298,000
Minority shareholder's
interest in earnings of
subsidiary 39,000 31,000 109,000 93,000
Net Earnings $ 525,000 $ 611,000 $1,525,000 $ 1,918,000
Net Earnings per Common Share$ .19 $ .22 $ .56 $ .70
Weighted average number of
Common Shares outstanding 2,731,210 2,729,364 2,731,210 2,729,284
See notes to consolidated financial statements.
4
McRae Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Nine Months Ended
April 29, April 30,
1995 1994
Net cash provided by operating activities $612,000 $1,521,000
Cash flows from investing activities:
Purchase of marketable securities ( 39,000) ( 17,000)
Capital expenditures ( 837,000) (425,000)
Net advances and payments of long term receivables ( 12,000) (204,000)
Addition to other assets ( 601,000) 25,000
Net cash used in investing activities (1,489,000) (621,000)
Cash flows from financing activities:
Borrowings of debt -0- 225,000
Principal repayments of notes payable ( 812,000) (340,000)
Proceeds from issuance of Common Stock -0- 4,000
Dividends paid ( 460,000) (444,000)
Net cash used in financing activities (1,272,000) (555,000)
Net decrease in cash and cash equivalents (2,149,000) (345,000)
Cash and Cash Equivalents at Beginning of Period 6,542,000 6,098,000
Cash and Cash Equivalents at End of Period $4,393,000 $6,443,000
See notes to consolidated financial statements.
5
McRae Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Unaudited)
April 28, 1995
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended April 29, 1995 are not necessarily indicative of the
results that may be expected for the year ended July 29, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the McRae Industries, Inc. annual report on Form 10-K for
the year ended July 30, 1994.
Certain reclassifications have been made to the prior year's financial
statements to conform with the current year's presentation.
Note B - Inventories
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many factors beyond management's control, interim
calculations, if recorded, are subject to the final year-end LIFO inventory
valuation.
The components of inventory consist of the following:
April 29, July 30,
1995 1994
Raw materials $ 829,000 $ 857,000
Work in process 224,000 472,000
Finished goods 5,423,000 4,559,000
Total inventories $ 6,476,000 $ 5,888,000
6
McRae Industries, Inc and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
The financial condition of the Company continues to be strong as demonstrated
by the amount of cash, cash equivalents and marketable securities at April
29, 1995 with sufficient amounts of working capital to meet the future
anticipated financing needs of the Company. The Company's financing needs
continue to be met by internally generated funds which enabled the Company to
pay dividends of $460,000 and fund capital expenditures of $837,000 during the
nine month period. The Company continues to have available an aggregate
maximum of $3.75 million under its credit lines with various banks, of which
only $150,000 had been borrowed as of April 29, 1995.
On September 2, 1994, the Company purchased DataScan Corporation for
approximately $523,000. The acquisition has been accounted
for under the purchase method and, accordingly, the operating results of
DataScan have been included in the consolidated operating results since the
date of acquisition. The acquisition resulted in goodwill of $601,000,
included in other assets, which is being amortized over fifteen years. Pro
forma results of operations, assuming DataScan had been purchased at the
beginning of the fiscal year, would not be materially different from the
results presented.
The decrease in the cash and cash equivalents was caused principally by lower
earnings, certain working capital requirments, increased levels or capital
expenditures, the puchase of DataScan, and payments on the notes payable.
Results of Operations
Although consolidated revenues increased slightly, revenues for Compsee and
Graphics increased 27% and 22%, respectively for the first nine months of
fiscal year 1995. Footwear's revenues are down 35% because of reduced
requirements from the U. S. Government. Profit margins from all significant
operating units are down because of increased competitive pressures or reduced
production levels.
Consolidated selling expenses have increased, both in amount and as a percent
of sales because Footwear's decrease in revenues and the increases in
Compsee's and Graphic's revenues and their related selling expenses.
Other income has increased because amounts are being invested at higher
rates than in the previous period.
Net consolidated earnings are down this year, principally because of the loss
of revenues at Footwear and the increases in costs described above.
7
Part II. Other Information
McRae Industries, Inc. and Subsidiaries
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the nine months ended April 29, 1995.
8
McRae Industries, Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
McRae Industries, Inc.
(Registrant)
Date: June 7, 1995 By: /s/ B.J. McRae
President
(Principal Executive Officer)
Date: June 7, 1995 By: /s/ David K. Helms
Vice President-Finance
(Principal Financial Officer)
9
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