MOUNT GILEAD, N.C., Oct. 28 /PRNewswire-FirstCall/ -- McRae Industries, Inc. (Amex: MRI.A; MRI.B) reported consolidated net revenues from continuing operations for the fourth quarter of fiscal 2005 of $13,677,000, as compared to $21,993,000 for the fourth quarter of fiscal 2004. Net earnings from continuing operations for the fourth quarter of fiscal 2005 amounted to $140,000, or $.11 per diluted Class A common share, as compared to net earnings from continuing operations of $1,778,000, or $.68 per diluted Class A common share, for the fourth quarter of fiscal 2004. The 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. The western and work boot business partially offset the decline in military footwear as net revenues grew from strong demand for western and work boot products related primarily to current fashion trends. Consolidated net earnings from continuing operations for the fourth quarter of fiscal 2005 amounted to $125,000, as compared to $1,671,000 for the fourth quarter of fiscal 2004 primarily attributable to lower net revenues and higher selling and administrative costs. The net loss from discontinued operations for the fourth quarter of fiscal 2005 amounted to $15,000 as compared to $107,000 for the fourth quarter of fiscal 2004. Consolidated net revenues from continuing operations for the twelve months of fiscal 2005 totaled $62,404,000 as compared to $70,496,000 for the twelve months of fiscal 2004. This 11.5% decrease in consolidated net revenues was attributable to reduced demand for military combat boots for the Government, partially offset by increased sales of western boots and bar code products. Consolidated gross profit from continuing operations fell by 1.7%, from $15.0 million for fiscal 2004 to $14.7 million for fiscal 2005. Declining gross profits in the military boot and bar code businesses were partially offset by improved gross profit in the western boot business. As a percentage of net revenues, gross profit improved from 21.3% to 23.6% primarily attributable to higher margins in the western boot business. Consolidated selling, general and administrative expenses from continuing operations, including research and development (R&D) costs, amounted to $12.3 million for fiscal 2005, an increase of 15.6% over $10.6 million for fiscal 2004 as higher expenditures for sales commissions, advertising and marketing costs, administrative salaries, professional fees, and business insurance were partially offset by lower expenditures for R&D, group health insurance, and reduced bad debt charges. Net earnings for fiscal 2005, which included a $1,870,000 gain, net of income tax expense, on the sale of the office products business, amounted to $3,444,000 or $1.46 per diluted Class A common share, as compared to $3,009,000, or $1.25 per diluted Class A common share for fiscal 2004. Net earnings from continuing operations were $1,574,000 and $3,206,000 for fiscal 2005 and 2004, respectively. Net earnings from discontinued operations amounted to $1,870,000 for fiscal 2005, as compared to a net loss of $197,000 for the same period of fiscal 2004. In addition to historical information, this Press Release includes certain forward-looking statements as such term is defined in Section 77A 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 distribution, 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 Fourth Quarter of Fiscal 2005 For the Three and Twelve Months Ended July 30, 2005 and July 31, 2004 Three Months Ended Twelve Months Ended July 30, July 31, July 30, July 31, 2005 2004 2005 2004 Net revenues from continuing operations $13,677 $21,993 $62,404 $70,496 Earnings from continuing operations before income Taxes 329 2,306 2,491 4,556 Income taxes provision 189 525 917 1,352 Minority shareholder's interest 0 3 0 (2) Net earnings from continuing operations 140 1,778 1,574 3,206 Earnings (loss) from discontinued operations, net of income tax (15) (107) 1,870 (197) Net earnings $125 $1,671 $3,444 $3,009 Earnings per common share: Earnings per common share from continuing operations: Basic earnings per share: Class A $.15 $.97 $ 1.09 $1.90 Class B 0 0 0 0 Diluted earnings per share: Class A .11 .68 .79 1.32 Class B NA NA NA NA Earnings per common share from discontinued operations: Basic earnings per share: Class A 0 (.05) .94 (.10) Class B 0 0 0 0 Diluted earnings per share: Class A 0 (.03) .67 (.07) Class B NA NA NA NA Net earnings per common share: Basic earnings per share: Class A .15 .92 2.03 1.80 Class B 0 0 0 0 Diluted earnings per share: Class A $.11 $ .65 $ 1.46 $ 1.25 Class B NA NA NA NA Weighted average number of common shares outstanding: Class A 2,136,232 1,943,543 1,993,172 1,929,965 Class B 632,267 824,956 775,327 838,534 Weighted average number of common shares outstanding 2,768,499 2,768,499 2,768,499 2,768,499 See notes to consolidated financial statements included in the Company's Annual Report on Form 10-K. 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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