McRae Industries Inc., the maker of military combat boots and western and work boots, reported revenues for the third quarter of fiscal 2020 ending on May 2 of $14.29 million as compared to $18.6 million for the third quarter of fiscal 2019. The company experienced a net loss for the third quarter of fiscal 2020 in the amount of $504,000, or 22 cents a share, compared to net earnings of $386,000, or 16 cents, for the third quarter of fiscal 2019.

Sales related to western/lifestyle boot products were $6.5 million for the third quarter of fiscal 2020 as compared to $9.6 million for the third quarter of fiscal 2019. This was primarily driven by a decline across all brands due to the coronavirus pandemic, which especially had an impact on its popular-priced western boots sales. Revenues from its work boot products decreased from $8.8 million for the third quarter of fiscal 2019 to $7.6 million for the third quarter of fiscal 2020. This was primarily a result of decreased sales in its military boots and the John Deere brand, offset by an increase in our Dan Post brand.

Consolidated net revenues for the first nine months of fiscal 2020 totaled $57,291,000 as compared to $59,945,000 for the first nine months of fiscal 2019. Net earnings for the first nine months of fiscal 2020 amounted to $1,063,000, or $0.45 per diluted Class A common share, as compared to net earnings of $1,310,000, or $0.55 per diluted Class A common share, for the first nine months of fiscal 2019.

Financial Condition and Liquidity
McRae said its financial conditions remain strong at May 2, 2020 as cash and cash equivalents totaled $23.2 million as compared to $12.8 million at August 3, 2019.

The company said, “Given the current economic climate, we put our short term investing on hold, which drove the majority of this increase. Our working capital slightly increased from $54.5 million at August 3, 2019 to $54.8 million at May 2, 2020.

“We currently have two lines of credit totaling $6.75 million, all of which was fully available at May 2, 2020. 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 2021. Our $5.0 million line of credit, which also expires in January 2021, 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 2020.”

Net cash provided by investing activities totaled approximately $10.0 million, which was primarily due to the sale of securities.

Net cash used in financing activities totaled approximately $1.0 million, which was used primarily for dividend payments.

COVID-19 Developments
“For McRae Industries, Inc., the COVID-19 has had a dramatic effect on our production, sales, and profitability during the third quarter of fiscal 2020.

“Dan Post Boot Company experienced a decrease in shipments of over 70 percent in April when compared to the same month last year. This decrease was a direct result of our retail customers shutting down their businesses and consumers staying home due to shelter in place orders issued by their local authorities. Our Dan Post offices in Clarksville, Tennessee were closed on March 30th and all of our personnel were equipped to work from home. Our distribution center in Waverly, Tennessee has declared an essential business that enabled us to continue shipping during this time. Although our salespeople were not permitted to visit customers, they stayed in contact with them to make sure they were doing okay and let them know that Dan Post was there to help them in any way possible. Dan Post sales rebounded some in May and were approximately 50 percent below the same month last year. During April and May, e-commerce sales and stores in the farm channel helped boost the sales numbers. Our Dan Post offices in Clarksville reopened May 18th with a staggered schedule and numerous employees continuing to work from home.

“For Dan Post Boot Company, the fourth quarter of fiscal 2020 and all of fiscal 2021 will be challenging. We expect some improvement in sales and are cautiously optimistic about returning to the pre-COVID-19 level of sales during the fourth quarter of fiscal 2021. However, based on numerous factors, this could happen sooner or later. Dan Post has strong brands, a diversified customer base, and a great team, which should help accelerate our recovery.

“McRae Footwear was designated an Essential Critical Infrastructure Industry and as such was required to continue operating during the COVID-19 pandemic producing military boots for the United States Government. We implemented numerous procedures to protect our employees from COVID-19 and closely followed CDC and OSHA guidelines as they were issued.

“In the month of April, McRae Footwear saw production in some departments decrease by 40 percent from the previous month due to absenteeism related to COVID-19. Numerous employees stayed home to care for their children because of unexpected school and daycare closings, while others stayed home due to health care concerns.

“We expect the fourth quarter of fiscal 2020 to also be challenging for McRae Footwear. We do not expect to return to March production levels until our employment numbers return to normal in July or August. Production and sales forecast for fiscal 2021 is hard to determine at this time. We hope to have more clarity after the fourth quarter of fiscal 2020 as we get updated guidance from the United States Government and our commercial retail customers reopen their stores.”

Photo courtesy McRae Industries