McRae Industries, Inc., the maker of military and western footwear, reported consolidated net revenues for the second quarter of fiscal 2014 of $26.6 million as compared to $26.1 million for the second quarter of fiscal 2013. Net earnings for the second quarter of fiscal 2014 amounted to $1,501,000 or $0.73 per diluted Class A common share as compared to net earnings of $1,867,000, or $1.26 per diluted Class A common share, for the second quarter of fiscal 2013.

Consolidated net revenues for the first six months of fiscal 2014 totaled $58,257,000 as compared to $50,946,000 for the first six months of fiscal 2013. Net earnings for the first six months of fiscal 2014 amounted to $4,546,000, or $2.06 per diluted Class A common share, as compared to net earnings of $3,810,000, or $2.13 per diluted Class A common share, for the first six months of fiscal 2013.

SECOND QUARTER FISCAL 2014 COMPARED TO SECOND QUARTER FISCAL 2013

Consolidated net revenues totaled $26.6 million for the second quarter of fiscal 2014 as compared to $26.1 million for the second quarter of fiscal 2013. Revenues from our western and lifestyle footwear products totaled approximately $17.5 million for both second quarters of fiscal 2014 and 2013 as heavy first quarter sales negatively impacted second quarter revenue growth for this segment. Revenues related to our work boot products, which include our licensed, private label, and military boot products, increased from $8.5 million for the second quarter of fiscal 2013 to $9.0 million for the second quarter of fiscal 2014. This net revenue growth for the work boot segment was primarily attributable to increased military boot sales related to our new Israeli boot contract. Net revenues associated with our other work boot products were down slightly, primarily the result of supplier and shipping delays. We are cautiously optimistic that our western and life style business activity will remain steady for the remainder of fiscal 2014. In addition, we expect our work boot business to gain momentum as the economy and weather improves and our military boot orders remain at their current production levels.

Consolidated gross profit amounted to approximately $7.4 million for the second quarter of fiscal 2014, down slightly from approximately $7.8 million for the second quarter of fiscal 2013. The gross profit associated with our western and lifestyle product sales totaled $5.9 million for the second quarter of fiscal 2014, down from $6.3 million for the second quarter of fiscal 2013. This decline in gross profit was the result of several operating factors which included higher inbound freight charges, the implementation of a customer shipping incentive program, a slight shift away from our premium brand products and the impact of under-absorbed import costs. The gross profit from our work boot product sales was approximately $1.4 million for the second quarter of fiscal 2014 as compared to $1.5 million for fiscal 2013. Lower sales from our branded work boot products offset the gross profit gain associated with the increase in military boot net revenues.

Consolidated operating costs and expenses totaled approximately $4.8 million for both second quarters of fiscal 2014 and fiscal 2013. Increased consolidated operating costs and expenses for advertising and marketing expenses and office related expenditures were offset by reduced sales compensation costs, administrative salaries, and employee benefit charges.

As a result of the above, consolidated operating profit amounted to $2.6 million for the second quarter of fiscal 2014 as compared to $3.0 million for the second quarter of fiscal 2013.

FIRST SIX MONTHS FISCAL 2014 COMPARED TO FIRST SIX MONTHS FISCAL 2013

Consolidated net revenues for the first six months of fiscal 2014 totaled $58.3 million as compared to $50.9 million for the first six months of fiscal 2013. Our western and lifestyle product sales totaled $39.9 million for the first six months of fiscal 2014 as compared to $36.1 million for the first six months of fiscal 2013, as demand for these products remained strong. Net revenues from our work boot business grew nearly 23%, up from $14.8 million for the first six months of fiscal 2013 to $18.3 million for the first six months of fiscal 2014. The increase in work boot products net revenues resulted primarily from higher military boot shipments associated with our U. S. Government and Israeli contracts.

Consolidated gross profit totaled $17.7 million for the first six months of fiscal 2014 as compared to $15.7 million for the first six months of fiscal 2013. Gross profit attributable to our western and lifestyle products totaled $14.4 million for the first six months of fiscal 2014 as compared to $13.1 million for the first six months of fiscal 2013. This increase in gross profit resulted from the 10% increase in net revenues. Gross profit attributable to our work boot products grew from $2.5 million for the first six months of fiscal 2013 to $3.2 million for the first six months of fiscal 2014. This increase in gross profit was primarily attributable to the improvement in net revenues associated with our military boot products.

Consolidated operating costs and expenses amounted to $10.3 million for the first six months of fiscal 2014 as compared to $9.6 million for the first six months of fiscal 2013. This increase in operating costs and expenses resulted primarily from higher outlays for sales compensation costs, office expenses, advertising and marketing costs, computer services, depreciation expense, donations, and employee benefit charges, which were partially offset by reduced expenditures for administrative salaries and group health insurance costs.

As a result of the above, the consolidated operating profit amounted to $7.4 million for the first six months of fiscal 2014 as compared to $6.1 million for the first six months of fiscal 2013.

FINANCIAL CONDITION AND LIQUIDITY

Our financial condition remained strong at February 1, 2014 as cash and cash equivalents totaled approximately $12.6 million as compared to $10.8 million at August 3, 2013. Our working capital amounted to $47.1 million at February 1, 2014 as compared to $43.1 million at August 3, 2013.

At February 1, 2014 we maintained two lines of credit with a bank totaling $6.75 million, all of which was available at the end of the second quarter. One credit line totaling $1.75 million (which is restricted to one hundred percent of the outstanding receivables due from the U. S. Government) expires in January 2015. Our $5.0 million line of credit, which also expires in January 2015, 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 2014.

For the first six months of fiscal 2014, operating activities provided approximately $2.6 million of cash. Net earnings, as adjusted for depreciation, provided $4.9 million of cash. Accounts and notes receivable, as adjusted for valuation allowances, used approximately $709,000 of cash as a result of timing of payments related to increased year to date sales. Reduced inventory levels provided $342,000 of cash. The timing of payments for inventory, employee benefit distributions, accrued payroll and payroll taxes, and income tax payments used approximately $2.0 million of cash.

Investing activities for the first six months of fiscal 2014 used approximately $346,000 of cash. Capital expenditures, primarily for manufacturing equipment and computer related purchases used approximately $345,000 of cash.

Dividend payments used approximately $534,000 of cash for the first six months of fiscal 2014.