UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
{x} Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the Quarter Ended January 27, 1996
( ) Transition 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
(Reqistrant's telephone number, including area code)
Not Applicable
(Former name, address and 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, Sl Par Value--Class A 1,780,187 shares as of February 23, 1996
Common Stock, $1 Par Value--Class B 951,213 shares as of February 23, 1996
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Part I. Financial Information
McRae Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
Amounts in thousands, except share and per share data
January 27, 1996 July 29, 1995
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 1,034 $ 628
Securities 1,999 3,244
Accounts and notes receivable,net 5,956 5,860
Inventories 7,659 7,273
Net investment in capitalized leases 927 944
Prepaid expenses and other current assets 289 352
Total current assets 17,864 18,301
Property, plant and equipment,net 4,633 4,541
Other assets:
Notes and accounts receivable,related entities 2,347 2,287
Net investment in capitalized leases 1,848 1,690
Notes receivable 865 903
Real estate held for investment 470 426
Goodwill 688 708
Other 901 727
7,119 6,741
$29,616 $29,583
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,044 $ 1,897
Accrued employee benefits 1,152 1,301
Deferred revenues 1,276 1,335
Accrued payroll and payroll taxes 521 595
Income taxes 297 353
Other 407 514
Total current liabilities 5,697 5,995
Minority Interest 786 919
Shareholders' Equity:
Common stock:
Class "A", $1 par; Authorized 5,000,000
shares; Issued and outstanding, 1,783,087
and 1,778,573, shares;respectively 1,783 1,778
Class "B", $1 par, Authorized 2,500,000
shares; Issued and outstanding 948,313
and 952,637 shares, respectively 948 953
Treasury Stock (17)
Additional Paid-in Capital 676 676
Retained Earnings 19,743 19,262
23,133 22,669
$29,616 $29,583
Note - The balance sheet at July 29, 1995 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 quarterly financial statements.
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McRae Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations - (Unaudited)
Amounts in thousands, except share and per share data
Three Months Ended Six Months Ended
Jan 27, Jan 28, Jan 27, Jan 28,
1996 1995 1996 1995
Net revenues $10,142 $10,041 $20,554 $19,817
Costs and expenses:
Cost of revenues 6,935 6,754 14,278 13,384
Selling and administrative 2,582 2,458 5,118 4,869
Other income, net (125) (114) (200) (204)
Total costs and expenses 9,392 9,098 19,196 18,049
Earnings before income taxes
and minority interest 750 943 1,358 1,768
Provision for income taxes 287 377 516 698
Minority shareholder's interest
in earnings of subsidiary 14 33 49 70
Net earninqs $ 449 $ 533 $ 793 $1,000
Net earnings per Common Share $ .16 $ .20 $ .29 $ .37
Weighted average number of Common
Shares Outstanding 2,729,375 2,729,210 2,730,144 2,729,210
See notes to quarterly financial statements.
<PAGE>
McRae Industries, Inc and Subsidiaries
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Amounts in thousands
Six Months Ended
January 27, January 28,
1996 1995
Net cash provided by operating activities $ 197 $ 815
Cash flows from investing activities:
Proceeds from (purchase of) securities 1,245 (37)
Capital expenditures ( 423) (873)
Net (advances) payments of long term receivables ( 99) (27)
Purchase of subsidiary,net of cash acquired -0- (601)
Purchase of minority interests ( 186) -0-
Net cash provided by (used in)investing activities 537 (1,538)
Cash flows from financing activities:
Principal repayments of notes payable -0- ( 444)
Purchase Treasury Stock ( 17) -0-
Dividends paid ( 311) ( 290)
Net cash used in financing activities ( 328) ( 734)
Net increase (decrease) in cash and cash equivalents 406 (1,457)
Cash and Cash Equivalents at Beginning of Period 628 6,542
Cash and Cash Equivalents at End of Period $1,034 $5,085
See notes to quarterly financial statements.
<PAGE>
McRae Industries, Inc. and Subsidiaries
Notes to Quarterly Financial Statements - (Unaudited)
January 27, 1996
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 three and six months ended January 27,
1996 are not necessarily indicative of the results that may be expected for the
year ended August 3, 1996. 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 29, 1995.
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 forces beyond management's control, interim calculations, if
any, are subject to the final year-end LIFO inventory valuation.
The components of inventory consist of the following (in thousands):
January 27, July 29,
1996 1995
Raw materials $ 1,190 $ 1,093
Work in process 371 444
Finished goods 6,098 5,736
$ 7,659 $ 7,273
Note C - Dividends Declared
On February 21, 1996, the Company declared a cash dividend of 8.75 cents per
share on its Class A Common Stock, payable to shareholders of record of March 8,
1996 on March 29, 1996.
<PAGE>
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 securities at January 27, 1996 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
$311,000 and to fund capital expenditures of $423,000 during the first two\
quarters. The Company continues to have available an aggregate maximum of $3.75
million under its credit lines with various banks, all of which is available as
of January 27, 1996.
Cash, cash equivalents and securities are down approximately $839,000 since July
29, 1995. This decrease is caused primarily by the increases in other working
capital items, additions to fixed assets, and the payment of dividends. The
receivables in our Footwear unit increased approximately $1,215,000 because of
a Government slow down in payments. McRae Graphics' inventories continue to
increase to meet the demands of its customers.
Second Quarter Fiscal 1996 Compared to Second Quarter Fiscal 1995
Consolidated revenues for the second quarter of 1996 increased $101,000 to
$10,142,000 compared to $10,041,000 for the same quarter in 1995. Footwear and
McRae Graphics' revenues increased 18% and 4%, respectively, while Compsee's
revenues decreased 11% during the second quarter of 1996 as compared to the
second quarter of 1995.
The gross profit percentage rate declined slightly to 32% compared to 33% for
the second quarter of 1995 principally caused by the lower margins at Compsee
and McRae Graphics. Compsee's margins are decreasing because of increased
competitive pressures on selling prices while McRae Graphics' decrease is being
caused by increased service costs and decreases in gross profits for equipment
and supplies.
Selling and administrative expenses for the second quarter of 1996 increased
$124,000 to $2,582,000 compared to the same quarter in 1995.
The effective tax rate for the second quarter of 1996 was 38% as compared to 40%
for the second quarter of 1995.
First Six Months Fiscal 1996 Compared to First Six Months Fiscal 1995
Consolidated revenues for the first six months of fiscal 1996 exceeded last
year's first six months by $737,000 or 4%. All three major operating units
increased revenues over last year's first six months. The decrease in the gross
profit percentage for the first six months of 1996 was caused principally by
decreases in Compsee and McRae Graphics profit margins.
<PAGE>
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 six months ended January 27, 1996.
<PAGE>
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: March 7, 1996 By: /s/ B. J. McRae
B.J. McRae
President
(Principal Executive Officer)
Date: March 7, 1996
By: /s/ David K. Helms
David K. Helms
Vice President-Finance
(Principal Financial Officer)
<PAGE>
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