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 April 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,former address and former 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, $l Par Value--Class A 1,788,286 shares as of May 24, 1996
Common Stock, $1 Par Value--Class B 951,213 shares as of May 24, 1996
Page 1 of 8
Part I. Financial Information
McRae Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
Amounts in thousands, except share and per share data
April 27, 1996 July 29, 1995
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 256 $ 628
Securities 1,241 3,244
Accounts and notes receivable,net 6,265 5,860
Inventories 8,785 7,273
Net investment in capitalized leases 918 944
Prepaid expenses and other current assets 376 352
Total current assets 17,841 18,301
Property, plant and equipment,net 4,622 4,541
Other assets:
Receivables,related entities 2,360 2,287
Net investment in capitalized leases 1,771 1,690
Notes receivable 853 903
Real estate held for investment 470 426
Goodwill 678 708
Other 1,059 727
7,191 6,741
$29,654 $29,583
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,847 $ 1,897
Accrued employee benefits 786 1,301
Deferred revenues 1,182 1,335
Accrued payroll and payroll taxes 643 595
Income taxes 510 353
Other 537 514
Total current liabilities 5,505 5,995
Minority Interest 794 919
Shareholders' Equity:
Common stock:
Class "A", $1 par; Authorized 5,000,000
shares; Issued and outstanding, 1,780,187
and 1,778,573, shares;respectively 1,780 1,778
Class "B", $1 par, Authorized 2,500,000
shares; Issued and outstanding 951,213
and 952,637 shares, respectively 951 953
Treasury Stock (24)
Additional Paid-in Capital 676 676
Retained Earnings 19,972 19,262
23,355 22,669
$29,654 $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.
2
McRae Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations - (Unaudited)
Amounts in thousands, except share and per share data
Three Months Ended Nine Months Ended
Apr 27, Apr 29, Apr 27, Apr 29,
1996 1995 1996 1995
Net revenues $11,069 $10,451 $31,623 $30,268
Costs and expenses:
Cost of revenues 7,830 7,080 22,108 20,454
Selling and administrative 2,700 2,549 7,818 7,418
Other income, net (89) (94) (289) (298)
Total costs and expenses 10,441 9,535 29,637 27,589
Earnings before income taxes
and minority interest 628 916 1,986 2,684
Provision for income taxes 236 352 752 1,050
Minority shareholder's interest
in earnings of subsidiary 8 39 57 109
Net earninqs $384 $ 525 $1,177 $1,525
Net earnings per Common Share $ .14 $ .19 $ .43 $ .56
Weighted average number of Common
Shares Outstanding 2,728,185 2,731,210 2,729,491 2,731,210
See notes to quarterly financial statements.
3
McRae Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Amounts in thousands
Nine Months Ended
April 27, April 29,
1996 1995
Net cash provided by operating activities $ (806) $ 722
Cash flows from investing activities:
Proceeds from (purchase of) securities 2,025 (39)
Capital expenditures (526) (837)
Purchase of other assets (340) (110)
Net (advances) payments of long term receivables (50) (12)
Purchase of subsidiary,net of cash acquired -0- (601)
Purchase of minority interests (184) -0-
Net cash provided by (used in)investing activities 925 (1,599)
Cash flows from financing activities:
Principal repayments of notes payable -0- ( 812)
Purchase Treasury Stock (24) -0-
Dividends paid (467) ( 460)
Net cash used in financing activities (491) (1,272)
Net decrease in cash and cash equivalents (372) (2,149)
Cash and Cash Equivalents at Beginning of Period 628 6,542
Cash and Cash Equivalents at End of Period $ 256 $4,393
See notes to quarterly financial statements.
4
McRae Industries, Inc. and Subsidiaries
Notes to Quarterly Financial Statements - (Unaudited)
April 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 nine months ended April 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):
April 27, July 29,
1996 1995
Raw materials $ 1578 $ 1093
Work in process 563 444
Finished goods 6,644 5,736
$8,785 $ 7,273
Note C - Subsequent Events
On April 30, 1996, the Company acquired all of the outstanding shares of
American West Trading Company, a manufacturer of western and work boots, for
cash of $325,000, notes of $45,000, McRae's Class A common stock of $60,000,
$120,000 for an employment and not to compete agreement, and certain
acquisition costs. The acquisition will be accounted for using the purchase
method of accounting, and, accordingly, the purchase
price will be allocated to the assets purchased and the liabilities assumed,
approximately $7,000,000 each, based upon the fair values on April 30, 1996.
Consolidated pro forma information is not available at this time, however, the
operating results of American West will be included in the consolidated
statement of operations from the date of acquisition.
On May 27, 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 June
12, 1996 on June 28,1996.
McRae Industries, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
The Company has sufficient amounts of working capital and credit lines to meet
its anticipated future financing needs by internally generated funds and
marketable securities. This enabled the Company to pay dividends of
$467,000 and to fund capital expenditures of $526,000 during the first nine
months of fiscal 1996. The Company also 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 April 27, 1996 .Cash, cash equivalents and
securities are down approximately $2,375,000 since July 29, 1995. This
decrease is caused primarily by the increases in other working capital items,
additions to fixed and other assets,the purchase of a portion of the minority
interest, and the payment of dividends.
Third Quarter Fiscal 1996 Compared to Third Quarter Fiscal 1995
Consolidated revenues for the third quarter of 1996 increased $618,000 or 6% to
$11,069,000 compared to $10,451,000 for the same quarter in 1995. Footwear's
revenues increased $1,171,000 or 54% over the 1995 third quarter revenues.
McRae Graphic revenues were up slightly while Compsee's revenues were down
$554,000 or 12%.
The gross profit percentage rate declined to 29% during the third quarter of
1996 from 32% during the 1995 third quarter. Lower margins from both Compsee
and McRae Graphics caused the overall decline in the consolidated gross
profit rate.
Selling and administrative expenses for the third quarter of 1996 increased
$151,000 or 6% over the 1995 amounts, caused principally by Compsee and
McRae Graphics.
First Nine Months Fiscal 1996 Compared to First Nine Months Fiscal 1995
Consolidated revenues for the first nine months of fiscal 1996 exceeded last
year's first nine months by $1,355,000 or 4%. Footwear's revenues were up
$1,573,000 or 22% while Compsee and McRae Graphics' revenues were relatively
stable for the nine months.
The gross profit percentage rate declined to 30% compared to 32% for the nine
months principally caused by 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 nine months of 1996 increased
$400,000 to $7,818,000 or 5% compared to the same period in 1995. This
increase was caused principally by Compsee and McRae Graphics.
The effective tax rate for the nine months of 1996 was 38% as compared to 39%
for the same period of 1995.
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 filed Form 8-K dated May 10, 1996.
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: May 30, 1996 By: /s/ B.J. McRae
B.J. McRae
President
(Principal Executive Officer)
Date: May 30, 1996
By: /s/ David K. Helms
David K. Helms
Vice President-Finance
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE>5
<CIK>0000729284
<NAME>MCRAE INDUSTRIES, INC.
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-START> JUL-30-1995
<PERIOD-END> APR-27-1996
<CASH> 256
<SECURITIES> 1,241
<RECEIVABLES> 6,265
<ALLOWANCES> 136
<INVENTORY> 8,785
<CURRENT-ASSETS> 17,841
<PP&E> 10,340
<DEPRECIATION> 5,718
<TOTAL-ASSETS> 29,654
<CURRENT-LIABILITIES> 5,505
<BONDS> 0
<COMMON> 2,731
0
0
<OTHER-SE> 20,624
<TOTAL-LIABILITY-AND-EQUITY> 29,654
<SALES> 31,623
<TOTAL-REVENUES> 31,623
<CGS> 22,108
<TOTAL-COSTS> 7,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,986
<INCOME-TAX> 752
<INCOME-CONTINUING> 1,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,177
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
