Dear Fellow Shareholders,
I write to you today with good news regarding the operating results for McRae Industries for the
2011 fiscal year. Your company showed significant improvement in both net revenues and net earnings.
Net revenues increased 19.5%, up from $62,571,000 for fiscal 2010 to $74,748,000 for fiscal 2011. Net earnings grew from $2,952,000 for fiscal 2010 to $3,829,000 for fiscal 2011, an increase of 29.7%. These results were attributable to improvements in both of our boot segments, our western/lifestyle business and our work boot business.
Our work boot segment, which includes the Dan Post, Laredo, John Deere and McRae Industrial branded work boot products and our military boots, recorded a 43.4% increase in net revenues for fiscal 2011. This growth in net revenues was attributable to our military boot business, which posted an 84% increase in net revenues over the previous year as a result of an additional U. S. Government contract to provide military boots for the Air Force. Gross profit margin for this segment fell from 16.5% for fiscal 2010 to 14.8% for fiscal 2011. Gross profit margins for both fiscal years were adversely affected by low margins associated with military boots made under contract with the U. S. Government. These lower profit margins resulted primarily from a very competitive bidding environment coupled with significantly reduced production levels governed by the “minimum” level set in the government contract, for which there are no assurances that the Government will increase their requirements over the remaining contract period.
Our western/lifestyle boot segment, which includes western wear, ladies fashion and children’s footwear products, experienced a 7.6% increase in net revenues, up from $40,154,000 for fiscal 2010 to
$43,208,000. Consistent with fiscal 2010, this growth in net revenues centered on our women’s Dan Post and Laredo boot products, which continued to have strong market demand. Gross profit margins for this segment were slightly higher, rising from 35.8% for fiscal 2010 to 36.6% for fiscal 2011. We continue to place a strong emphasis on introducing new designs and styles that will keep our products fresh and appealing in the marketplace.
I am pleased to report that the Company’s financial position at the end of fiscal 2011 continued to be strong as working capital increased from $33.9 million for fiscal 2010 to $36.6 million for fiscal 2011. Our current ratio increased to 7.7 for fiscal 2011, up from 6.6 for fiscal 2010. The Company’s book value per common share amounted to $19.06 for fiscal 2011 as compared with $17.78 for fiscal 2010. In addition to the $10.3 million cash position at July 30, 2011,
