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/

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