McRae Industries, Inc. Earnings Report For 2003 Fiscal Year Ended August 2, 2003 MOUNT GILEAD, N.C., Oct. 31 /PRNewswire-FirstCall/ -- McRae Industries, Inc. reported consolidated net revenues for fiscal 2003 of $77,042,000 as compared to consolidated net revenues of $74,531,000 for fiscal 2002. Net earnings for fiscal 2003 were $2,477,000 or $.89 per share as compared to $2,585,000 or $.93 per share for fiscal 2002. Consolidated net revenues for the fourth quarter of fiscal 2003 were $21,190,000 as compared to $20,778,000 reported for the fourth quarter of fiscal 2002. Consolidated net earnings amounted to $998,000 or $.36 per share for the fourth quarter of fiscal 2003 as compared to a $854,000 or $.31 per share for the fourth quarter of fiscal 2002. The 17% improvement in operating performance for the fourth quarter of fiscal 2003 was primarily attributable to the increased requirements for military combat boots by the U.S. Government as a result of various conflicts related to the war on terrorism. The other primary business units partially offset this increase in operating performance due to the decreased demand for western boots as a result of the slow moving retail market, reduced office equipment sales in county-wide educational systems, and a depressed bar code market. Consolidated net revenues for fiscal 2003 totaled $77.0 million, an increase of 3.4% over $74.5 million for fiscal 2002. This growth in consolidated net revenues was the result of significantly higher requirements for military boots by the U.S. Government and increased sales of our branded western boot products. Lower net revenues in the bar code and office products businesses partially offset the increases of the footwear businesses resulting primarily from a depressed bar code market and reduced office equipment sales to countywide educational systems. Consolidated net earnings fell slightly from $2.6 million for fiscal 2002 to $2.5 million for fiscal 2003. This decline in net earnings was primarily the result of reduced gross profit margins caused primarily by lower sales prices, higher per unit manufacturing, changing product sales mixes, and depressed market conditions. Selling, general and administrative expenses increased approximately 2.5% for fiscal 2003 as a result of higher selling expenses, advertising and marketing expenditures, group health insurance costs, and professional fees. For fiscal 2003, we operated under several extensions of our contract with the Government dated April 15, 1997. The Government issued two solicitations for future boot requirements to replace the original contract that was set to expire on April 15, 2002. One solicitation covered the three current direct molded sole (DMS) styles of military combat boots, including the standard issue all-leather combat boot that has historically accounted for the majority of the Government's orders under the contract. The second solicitation covered the newly adopted infantry combat boot, which incorporated a waterproof membrane construction. This boot replaced the previous all-leather boot as the Army's standard issue combat boot. We submitted bids for both solicitations. On March 11, 2003, we were advised that we did not win a contract to produce the new infantry combat boot. On September 30, 2003, the Government notified us that we had been awarded a new contract (the Contract) to produce direct molded sole military combat boots. The Contract covers a base year and two one-year option periods. The Contract base year provides for a minimum boot requirement of 135,102 pair and a maximum boot requirement of 544,778 pair with a minimum and maximum dollar value of approximately $7.4 million and $30.1 million, respectively. The first year option provides for a minimum and a maximum boot requirement of 276,460 pair and 1,077,522 pair, respectively. The second year option ranges from a minimum of 236,460 pair to a maximum of 852,552 pair. Fiscal 2003 military boots sales to the Government were $15.7 million. Therefore, if in the first year of the Contract the Government were only to order the minimum number of boots covered by the Contract, our fiscal 2004 military boot sales would be significantly lower than fiscal 2003 sales. Based on current order volume we expect the Government to order significantly more than the minimum during the first year of the Contract. 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 and Section 21E of the Exchange Act. 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 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, acquisitions, supply interruptions, additional financing requirements, loss of key management personnel, our ability to successfully develop new products and services, our expectations about future Government orders for military boots, and the effect of general economic conditions in our markets. McRae Industries, Inc. Condensed and Consolidated Statements of Income Fourth Quarter of Fiscal 2003 For the Three and Twelve Months Ended August 2, 2003 and August 3, 2002 Three Months Ended Twelve Months Ended August 2, August 3, August 2, August 3, 2003 2002 2003 2002 Net Revenues $ 21,190,000 $20,778,000 $77,042,000 $74,531,000 Earnings before income taxes $ 1,809,000 $ 1,457,000 $ 4,108,000 $ 4,267,000 Income taxes provision $ 813,000 $ 607,000 $ 1,640,000 $ 1,693,000 Minority shareholder's interest $ (2,000) $ (4,000) $ (9,000) $ (11,000) Net earnings $ 998,000 $ 854,000 $ 2,477,000 $ 2,585,000 Net earnings per common share $ .36 $ .31 $ .89 $ .93 Weighted average number of common shares outstanding 2,768,499 2,768,499 2,768,499 2,768,499 DATASOURCE: McRae Industries, Inc. CONTACT: D. Gary McRae of McRae Industries, Inc., +1-910-439-6147

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