Mcrae Industries, Inc. Earnings Report for the First Quarter of Fiscal 2004 Ended November 1, 2003 MOUNT GILEAD, N.C., Dec. 16 /PRNewswire-FirstCall/ -- McRae Industries, Inc. (Amex: MRIA; MRIB) reported consolidated net revenues for the first quarter of fiscal 2004 of $21,396,000, an increase of 8% over consolidated net revenues of $19,797,000 reported for the first quarter of fiscal 2003. Consolidated net earnings for the first quarter of 2004 amounted to $562,000 or $.20 per share, compared to consolidated net earnings of $539,000 or $.19 per share for the first quarter of fiscal 2003. The increase in consolidated net revenues resulted from the continued high demand for military combat boots for the U.S. Government and improved equipment, service and supply sales in the office products business. Net revenues for the bar code and western boot businesses were down 21% and 13%, respectively, for the first quarter of fiscal 2004 as compared to the first quarter of fiscal 2003 primarily attributable to weak markets for these products. Consolidated gross profit for the first quarter of fiscal 2004 grew as a result of the increase in net revenues, and was offset by increased expenditures for research and development, and selling and general administrative costs. As a result, the slight increase in net earnings was primarily the result of lower income taxes achieved through improved tax planning. 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 maximum boot requirement of 276,460 pair and 1,077,552 pair, respectively. The second year option ranges from a minimum of 236,460 pair to a maximum of 852,552 pair. We expect to begin shipping boots under this contract in the second quarter of fiscal 2004. 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 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, and the effect of general economic conditions in our market. McRae Industries, Inc. Condensed and Consolidated Statements of Income First Quarter of Fiscal 2004 For the Three Months Ended November 1, 2003 and November 2, 2002 Three Months Ended November 1, 2003 November 2, 2002 Net revenues $21,396,000 $19,797,000 Earnings before income taxes $862,000 $880,000 Income taxes provision $302,000 $342,000 Minority shareholder's interest $(2,000) $(1,000) Net earnings $562,000 $539,000 Net earnings per common share $.20 $.19 Weighted average number of common shares outstanding 2,768,499 2,768,499 DATASOURCE: McRae Industries, Inc. CONTACT: D. Gary McRae, President of McRae Industries, Inc., +1-910-439-6147

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