Mcrae (AMEX:MRI.A)
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McRae Industries, Inc. Reports Earnings for Third Quarter of
Fiscal 2005
MOUNT GILEAD, N.C., June 14 /PRNewswire-FirstCall/ -- McRae Industries, Inc.
(Amex: MRIA; MRIB) reported consolidated net revenues from continuing
operations for the third quarter of fiscal 2005 of $12,768,000, as compared to
$17,585,000 for the third quarter of fiscal 2004. Net earnings for the third
quarter of fiscal 2005 amounted to $124,000, or $.05 per share, as compared to
net earnings of $790,000, or $.28 per share, for the same period of fiscal
2004.
The 27.3% decrease in consolidated net revenues from continuing operations was
primarily due to reduced military boot requirements for the U.S. Government
(the "Government") as in the first quarter of fiscal 2005 the Government moved
from "surge" levels to their normal contract levels. Currently we expect these
lower levels to continue through at least December 31, 2005. The western and
work boot business partially offset the decline in military footwear as net
revenues increased 17% on strong demand for western and work products related
to current fashion trends and market consolidation.
Consolidated net earnings from continuing operations for the third quarter of
fiscal 2005 amounted to $143,000, as compared to $478,000 for the third quarter
of fiscal 2004 primarily attributable to lower net revenues and higher selling
and administrative costs. Discontinued operations related to our office
products business contributed to the lower net earnings as earnings fell from
$312,000 for the third quarter fiscal 2004 to a net loss of $19,000 for the
third quarter of fiscal 2005.
Consolidated net revenues from continuing operations for the first nine months
of fiscal 2005 totaled $48.7 million as compared to $48.5 million for the first
nine months of fiscal 2004. This increase in net revenues resulted primarily
from the continued strong demand for western and work boot products and
slightly improved performance of the bar code business.
Net earnings for the first nine months of fiscal 2005, which included
$2,174,000 of estimated gain, net of income tax expense, on the sale of the
office products business, amounted to $3,319,000, or $1.20 per share, as
compared to $1,338,000, or $.48 per share for the first nine months of fiscal
2004. Net earnings from continuing operations were $1.4 million for the first
nine months of both fiscal 2005 and 2004. Net earnings from discontinued
operations amounted to $1.9 million for the first nine months of fiscal 2005,
as compared to a net loss of $90,000 for the same period of fiscal 2004.
In May 2005, the Company negotiated the terms of an asset purchase agreement
providing for the purchase by the Company of certain trademarks and other
assets from Texas Boot, Inc. Texas Boot is currently operating as a
debtor-in-possession in a case under Chapter 11 of the United States Bankruptcy
Code. Under the terms of the asset purchase agreement, the Company would
acquire Texas Boot's trademarks (including the marks Laredo, J. Chisolm, Code
West and Performair), its outstanding accounts receivable and certain inventory
for approximately $1.175 million plus an amount equal to 75% of the gross book
value of the acquired accounts receivable. The asset purchase is subject to
higher and better offers at auction, which, if competing bids are received,
will be conducted on June 23, 2005. The Bankruptcy Court will then consider
approval of the asset sale to the Company or the successful bidder at the
auction at a hearing scheduled for June 24, 2005. There is no assurance that
the asset purchase agreement will be approved or that we will be successful in
obtaining these assets.
On June 10, 2005, our Board of Directors approved a 1-for-200 reverse stock
split, to be followed immediately by a 200-for-1 forward stock split, of the
outstanding shares of both classes of our common stock (Class A and Class B).
If the transaction is approved by the Company's stockholders and implemented,
the Company expects to have fewer than 300 stockholders of record of each class
of its common stock, in which event the Company intends to have its shares
delisted from the American Stock Exchange and to deregister its shares and
cease to be a reporting company under the Securities Exchange Act of 1934.
Pursuant to the transaction, stockholders holding fewer than 200 shares of the
Company's common stock of a particular class immediately before the transaction
would have such shares cancelled and converted into the right to receive from
the Company a cash payment of $14.25 for each such share owned before the
reverse stock split. Stockholders holding 200 or more shares of the Company's
common stock of a particular class immediately before the transaction would
continue to hold the same number of shares of that class after completion of
the transaction and would not receive any cash payment for their shares of that
class.
The Board of Directors created a Special Committee of non-employee, independent
directors to review the proposed transaction. The Special Committee received an
opinion from its financial advisor, Oxford Advisors, LLC, that the cash
consideration to be paid in the proposed transaction is fair, from a financial
point of view, to the Company's stockholders.
The proposed transaction is subject to approval by the holders of a majority of
the issued and outstanding shares of each class of the Company's common stock.
Stockholders will be asked to approve the transaction at a special meeting of
stockholders, currently expected to be held in August 2005. Even if the
stockholders approve the transaction, the Board of Directors reserves the right
to defer or not to implement the transaction.
In addition to historical information, this Press Release includes certain
forward-looking statements as such term is defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
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: the proposed reverse/forward stock split
transaction and subsequent termination of SEC registration are each subject to
various conditions and may not occur; 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), loss of key customers, possible asset
acquisitions and distributions, supply interruptions, additional financing
requirements, loss of key management personnel, our ability to successfully
develop new products and services, and the effect of general economic
conditions in our markets.
McRae Industries, Inc.
Condensed and Consolidated Statements of Income
Third Quarter of Fiscal 2005
For the Nine Months Ended
April 30, 2005 and May 1, 2004
Three Months Ended Nine Months Ended
April 30, 2005 May 1, 2004 April 30, 2005 May 1, 2004
Net revenues from
continuing operations $12,768 $17,585 $48,726 $48,504
Earnings from continuing
operations before
income taxes 220 761 2,162 2,250
Income taxes
provision 77 283 728 827
Minority shareholder's
interest - - - (5)
Net earnings from
continuing operations 143 478 1,434 1,428
Earnings (loss) from
discontinued operations,
net of income tax (19) 312 1,885 (90)
Net earnings $124 $790 $3,319 $1,338
Net earnings (loss) per
common share:
Continuing operations $ .06 $.17 $.52 $ .51
Discontinued operations (.01) .11 .68 (.03)
Net earnings per common
share $ .05 $.28 $1.20 $ .48
Weighted average
number of common
shares outstanding 2,768,499 2,768,499 2,768,499 2,768,499
DATASOURCE: McRae Industries, Inc.
CONTACT: Gary McRae, President of McRae Industries, Inc.,
+1-910-439-6147
Web site: http://www.mcraeindustries.com/