McRae Industries, Inc.
Filed 10/26/01
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
(BOX WITH AN X) EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
(EMPTY BALLOT BOX) EXCHANGE ACT OF 1934
For the fiscal year ended July 28, 2001
Commission file number: 1-8578
McRAE INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 56-0706710
(State of Incorporation) (I.R.S. Employer Identification No.)
400 North Main Street, Mount Gilead, North Carolina 27306
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (910) 439-6147
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock, $1 Par Value American Stock Exchange
Class B Common Stock, $1 Par Value American Stock Exchange
Securities Registered Pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (BOX WITH AN X) No
(EMPTY BALLOT BOX)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment of this Form 10-K. (BOX WITH AN X)
The aggregate market value of shares of the Registrant's $1 par value Class A and Class B Common Stock held by
non-affiliates as of October 22, 2001 was approximately $4,947,000 and $1,220,000, respectively. On October 22, 2001,
1,861,817 Class A shares and 906,682 Class B shares of the Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held on December 20, 2001 are incorporated by
reference into Part III.
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Part I
ITEM 1. BUSINESS
The Registrant is a Delaware corporation organized in 1983 and is the successor to a North Carolina corporation organized in
1959. The Registrant's principal lines of business are: manufacturing and selling bar code reading and related printing
devices; manufacturing and selling military combat boots, western and work boots; and selling, leasing, and servicing office
equipment. The Registrant's commercial printing and packaging business was discontinued during fiscal 2001. Additional
financial information about these lines of business can be found in Note 17 to the financial statements.
Bar Code Operations
The bar code unit manufactures and sells bar code reading and printing devices and other items related to optical data
collection, including licensing and selling computer software through Compsee, Inc. (Compsee), a 99% owned
subsidiary. Compsee markets, sells, and services its products directly through sales centers located throughout the United
States. Compsee also sells its products worldwide; however, net revenues from foreign sales are negligible when compared to
the Registrant's consolidated net revenues.
Compsee designs and manufactures QuickReader and QuickLink bar code readers. Principal materials used in Compsee's assembly
operations consist of various electrical and electronic components that are readily available from a number of
sources. Compsee's portable bar code scanner equipment includes the APEX II which was introduced in fiscal 1996 and the APEX
III which was introduced in fiscal 2001. These products were well received in the market and provided 13%, 10% and 11% of
Compsee sales for fiscal 2001, 2000, 1999, respectively. A companion product, the APEX II cradle, which facilitates data
transfer and provides battery-recharging capabilities, was added to the product line in fiscal 1997. Compsee's wedge product
line was upgraded in fiscal 1998 with the introduction of the Turbowedge line of bar code wedge readers. These products
offer several new features and were well received in the market. During fiscal 2000 Compsee purchased an enterprise
integration software program that enhances and facilitates mobile bar code applications. This software provides specific
competitive advantages for Compsee's wireless products. During the last half of fiscal 2001, Compsee introduced the APEX III
portable data collector. This product provides batch and wireless data collection capability. The APEX IV portable data
collection unit is expected to be introduced to the market in fiscal 2002. This unit is a more rugged, pistol grip version
of the APEX III product. The markets in which this business unit operates are generally highly competitive. The Registrant
is not aware of any reliable statistics that would enable the Registrant to determine the relative position of Compsee or
its products within the industry. Competition in the industry is principally based on product features, customer service,
and price. The major competitors in the industry include PSC, Unitech, and Handheld Products.
Net revenues derived from this unit in fiscal 2001, 2000, and 1999 were 22%, 29%, and 31% of the Registrant's consolidated
net revenues, respectively. QuickReader, QuickLink, and Turbowedge bar code readers developed and marketed by Compsee
accounted for 11%, 11%, and 12% of Compsee's net revenues for fiscal 2001, 2000, and 1999, respectively, and for 3% of the
Registrant's consolidated net revenues during each of the last three fiscal years. There was no significant backlog of firm
orders for this unit at July 28, 2001.
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Footwear Manufacturing
The Registrant's footwear manufacturing operations include the manufacture and sale of military combat boots. The Registrant
has manufactured Direct Molded Sole military combat boots for the United States Government (the Government) since 1966. On
April 30, 1996, the Registrant acquired American West Trading Company (American West), which manufactures western boots,
work boots, military dress oxfords, and military safety boots.
Whenever the Government determines a need for producing combat boots because of the number of new recruits entering the
services, and the need to replenish its inventory to replace worn out boots, the Government solicits contracts from
U. S. boot manufacturers. The solicitation process typically includes the evaluation by the Government of written technical
and cost proposals. The Government awards contracts on negotiated per pair contract prices based on estimated allowable
costs as projected for the subsequent fiscal year plus a reasonable profit margin. This profit margin is subject to the
Government's determination that the prices are "fair" and "reasonable." All recent Government contracts for military boots
have been awarded to four manufacturers including the Registrant. The Registrant is currently in the fifth year of the most
recent contract awarded by the Government in April 1997 (the Contract). The Contract provides for a base year and four
one-year extensions which may be exercised by the Government at its sole discretion for the purchase of additional option
quantities of military combat boots. The current and final option period will expire in April 2002. The Government continues
to evaluate a new military combat boot construction that is not compatible with the Registrant's current manufacturing
process that could require future military combat boot purchases to meet the new boot construction specification. While the
Registrant is positioned to accommodate any military combat boot specification changes, there can be no assurances that the
Registrant would be successful in any solicitation of another contract with the Government upon termination of the current
Contract.
In September 2001, the Government notified the Registrant to increase its production levels of military combat boots as a
result of the deployment of troops in the war on terrorism. The increased production levels represent an approximate 60%
increase over the quantities normally purchased by the Government under the Contract.
No one company dominates the Government military boot industry. The Registrant's major competitors in the military boot
market include Wellco, Inc., Belleville Shoe Manufacturing Company, and Altama Delta Corporation. Price, quality,
manufacturing efficiency, and delivery are the areas emphasized by the Registrant to strengthen its competitive
position. The Registrant also sells boots to civilian and other military customers including other countries. Military boot
sales under the Government contract were $11.7 million, $7.2 million, and $6.9 million, for fiscal 2001, 2000, and 1999,
respectively. Sales of military boots to foreign countries were $4.6 million, $4.7 million, and $76,000 for the past three
fiscal years, respectively. Approximately 89% of foreign country sales for fiscal 2001 were to Israel.
The Registrant's contracts with the Government are subject to partial or complete termination under certain specified
circumstances including, but not limited to, the following: for the convenience of the Government, for the lack of funding,
and for the Registrant's actual or anticipated failure to perform its contractual obligations. If a contract is partially or
completely terminated for its convenience, the Government may negotiate a settlement with the Registrant to cover costs
already incurred. The Registrant has never had a contract either partially or completely terminated.
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Leather and synthetic rubber, currently available from one source, are the principal material components used in the boot
manufacturing process. Pursuant to Government contracts for military combat boots, all materials used in manufacturing these
boots must be and are produced in the United States and must be certified as conforming to military specifications.
The Registrant has a technical assistance agreement with Ro-Search, Inc., a subsidiary of Wellco, Inc., a competitor to whom
the Registrant pays a fee for each pair of Direct Molded Sole boots it produces.
American West designs, manufactures, sells, and distributes western and work boots for men and women who wear boots for work
and everyday activities, including casual wear. American West utilizes seasoned and highly respected independent sales
representatives to market and sell its boots nationwide to major retail discount stores, regional specialty chain stores,
and major western boot distributors. The boots are marketed primarily under the retailer's private label and under the
"American West Trading Company" brand.
On June 29, 2001, American West acquired the Dingo brand name and certain inventory from Lucchese, Inc., a wholly owned
subsidiary of Arena Brands, Inc. The Dingo footwear line provides a "lifestyle" product to supplement American West's
western boot products. Also, in early October 2001, American West purchased the Dan Post brand name and certain inventory
from Lucchese, Inc. The Dan Post brand is a high quality, traditional western product and is well recognized by both
retailers and consumers. This addition to the product mix allows the Registrant to compete in the hand crafted boot market
segment.
In addition to the western and work boot product lines, American West began producing two styles of military footwear
(military dress oxfords and military safety shoes) in fiscal 1997 and continues to bid on future "welt" construction
military solicitations to supplement the western boot product lines. Sales of military footwear (excluding Direct Molded
Sole boots) amounted to $520,000, $734,000, and $575,000 in fiscal 2001, 2000, and 1999, respectively.
During fiscal 2000, American West expanded its western boot product line with imported children boots from India and
China. In addition, American West imports ladies cement construction western boots from Mexico. Net revenues from these
imported products amounted to approximately $632,000 and $107,000 for fiscal 2001 and fiscal 2000, respectively.
American West consolidated its manufacturing operation in fiscal 1997 by combining all manufacturing operations at the
Waverly, Tennessee facility. The Dresden, Tennessee location continues to provide storage, warehouse, and shipping
functions. The "upper" parts of boots produced at American West are constructed from leather and/or synthetic material and
the sole and heels consist of either leather, rubber and/or rubber-plastic blended material. All raw materials necessary for
manufacturing the boots are readily available from several suppliers, both domestic and abroad.
The western and work boot markets are highly competitive. The Registrant is not aware of any reliable statistics that would
enable it to determine its relevant position within the industry; however, it believes it has established a solid position
in the market for all price ranges.
American West coordinates its manufacturing and inventory according to the seasonality of its business, which tends to have
higher sales occurring generally in the fall and winter months. American West contributed $9.4 million, $7.9 million, and
$6.4 million of net revenues for fiscal 2001, 2000, and 1999, respectively.
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The Registrant's backlog of firm orders for military combat boots at July 28, 2001 and July 29, 2000 totaled approximately
$3 million (all of which is expected to be filled during the current fiscal year) and $8.6 million, respectively. The
backlog of firm orders for western and work boots at July 28, 2001 and July 29, 2000 totaled approximately $1,358,000 (all
of which is expected to be filled during the current year) and $436,000, respectively.
Net revenues derived from the military combat boot segment in fiscal 2001, 2000, and 1999 were 29%, 21%, and 15%,
respectively, of the Registrant's consolidated net revenues.
Net revenues derived from the western and work boot segment in fiscal 2001, 2000, and 1999 were 16%, 14%, and 13%,
respectively, of the Registrant's consolidated net revenues.
Office Products
McRae Office Solutions, Inc. (Office Solutions), formerly McRae Graphics, Inc., a wholly owned subsidiary, is a
non-exclusive distributor of Toshiba photocopier and facsimile machines in North Carolina and parts of Virginia and South
Carolina. Office Solutions operates seven district sales offices throughout the state of North Carolina. Office Solutions is
also the sole distributor in North Carolina of RISO digital duplicators. Machines, components, and certain supplies sold by
Office Solutions during fiscal 2001 are generally available only from Toshiba and RISO.
McRae Office Solutions purchased the rights to a software package designed to scan, store, and provide easy retrieval of
various document types in fiscal 2000. During fiscal 2001 the software was reformatted to conform with current
technology. This product is expected to be part of the product mix in fiscal 2002.
The office products business is generally highly competitive, with price and service being the dominant factors. The
Registrant is not aware of any reliable statistics that would indicate its relative position within this industry in the
geographical area in which it competes.
Net revenues derived from the office products segment during fiscal 2001, 2000, and 1999 were 33%, 36%, and 41%,
respectively, of the Registrant's consolidated net revenues. There was no significant backlog of firm orders for these
segments.
Other Businesses
The Registrant's Financing and Leasing Division manages the Registrant's short-term investments and marketable
securities. This division is also engaged in equipment leasing and the financing of receivables for other businesses and
individuals.
Foreign Sales
It is not practicable for the Registrant to calculate the amounts of revenues derived from domestic and foreign
customers. The only business that experiences significant foreign sales is the military boot business. Sales of military
boots to foreign countries were $4.6 million (27.4% of total military boot sales), $4.7 million (37.9%) and $76,000 (1.0%)
for the past three fiscal years, respectively. Approximately 89% of foreign military boot sales for fiscal 2001 were to
Israel.
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Other Investment Interests
The Registrant has an investment in the outstanding Common Stock of American Mortgage and Investment Company (AMIC). AMIC is
located in Charleston, South Carolina and is engaged in real estate development and sales, primarily lots for single family
dwellings, in the coastal region of South Carolina. D. Gary McRae, President of the Registrant, is President of AMIC. The
Registrant also owns 100% of the outstanding 20% cumulative convertible preferred stock of AMIC. The investment in this
preferred stock was written down to zero by the Registrant during fiscal 1990. Write downs in subsequent periods totaling
approximately $273,000 have been made on the Registrant's books to reduce notes and accounts receivable due from AMIC in
order to reflect the Registrant's equity in AMIC. AMIC has been operating under Chapter X of the United States Bankruptcy
Act since 1974.
Environmental Matters
The Registrant is subject to various laws and regulations concerning environmental matters and employee safety and
health. The Registrant has been able to comply with such laws and regulations with no material adverse effect on its
business. In the opinion of management, the Registrant is not in violation of any environmental laws or regulations that
would have a material adverse effect on the financial condition of the Registrant.
Employment
As of July 28, 2001, the Registrant employed approximately 506 persons in all divisions and subsidiaries. None of the
Registrant's employees are represented by collective bargaining or a labor union. The Registrant considers its relationship
with its employees to be good.
Financial Information about Operating Segments
Financial information for the past three fiscal years with respect to the Registrant's operating segments are incorporated
herein by reference to Note 17 to the consolidated financial statements included in this Report.
Research and Development
Research and development costs related to future products amounted to $496,000, $538,000, and $524,000 for fiscal 2001,
2000, and 1999, respectively.
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ITEM 2. PROPERTIES
The following table describes the location, principal use, and approximate size of the principal facilities of the
Registrant and its subsidiaries, all of which are owned by the Registrant and/or its subsidiaries.
Location Principal Use Size
400 North Main Street Corporate headquarters,
Mt. Gilead, N.C manufacturing, and sales 71,000 square feet
Highway 109 North
Mt. Gilead, N.C Footwear manufacturing 57,600 square feet
2500 Port Malabar Blvd.
Palm Bay, Florida Compsee bar code sales office 5,250 square feet
Highway 109 North
Mt. Gilead, N.C Footwear warehouse 3,500 square feet
Highway 109
Richmond County, N.C Footwear storage 11,200 square feet
Highway 24-27 Footwear manufacturing and
Troy, N.C warehousing 35,000 square feet
Highway 109 North
Mt. Gilead, N.C Footwear storage 4,800 square feet
601 E. Railroad Street
Waverly, TN Footwear manufacturing 71,520 square feet
100 Hillcrest Street
Dresden, TN Footwear storage and warehouse 5,000 square feet
In addition to these principal locations, the Registrant and its subsidiaries lease other offices throughout the United
States. The Registrant also owned approximately 500 acres of undeveloped land on July 28, 2001 that is being held for
investment purposes.
The Waverly, Tennessee and Dresden, Tennessee facilities are encumbered by a deed of trust in favor of The Fidelity Bank to
secure a loan in the amount of approximately $5,000,000.
ITEM 3. LEGAL PROCEEDINGS
While the Registrant and its subsidiaries are engaged in litigation from time to time in the ordinary course of business
incidental to their respective operations, management does not believe that any such litigation is likely to have a material
adverse effect on the Registrant's consolidated financial position or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Each of the Registrant's classes of Common Stock is traded on the American Stock Exchange (ticker symbol MRI-A and
MRI-B). As of October 22, 2001, there were approximately 418 record holders of the Registrant's Class A Common Stock and
approximately 388 record holders of the Class B Common Stock. High and low stock prices and dividends declared per share for
the last two fiscal years were:
CLASS A COMMON STOCK:
Fiscal 2001 Fiscal 2000
Sales Price Cash Sales Price Cash
Dividends Dividends
Quarter High Low Declared High Low Declared
First $ 5.63 $ 4.75 $ .09 $ 6.13 $ 4.94 $ .09
Second 5.38 4.88 .09 5.63 4.75 09
Third 5.24 3.95 .05 5.75 4.94 09
Fourth 4.25 3.85 .05 6.38 4.13 09
CLASS B COMMON STOCK:
Fiscal 2001 Fiscal 2000
Sales Price Sales Price
Quarter High Low High Low
First $ 5.75 $ 5.00 $ 5.88 $ 5.38
Second 5.38 5.13 5.38 5.13
Third 5.30 4.10 5.63 5.00
Fourth 4.25 3.90 6.50 4.13
The Registrant has no policy with respect to payment of dividends, but expects to continue paying regular cash dividends on
its Class A Common Stock. Dividends paid on Class B Common Stock, if any, must also be paid on Class A Common Stock in an
equal amount. No dividends were paid on Class B Common Stock during the prior three fiscal years. There can be no assurance
as to future dividends on either class of Common Stock, as the payment of any dividends is dependent on future actions of
the Board of Directors, earnings, capital requirements, and financial condition of the Registrant.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data of the Registrant presented below for each of the five years in the
period indicated has been derived from the Registrant's audited and consolidated financial statements. The Selected
Consolidated Financial Data should be read in conjunction with the Consolidated Financial Statements and Notes thereto,
"Management's Discussion and Analysis of Financial Conditions and Results of Operations", and the other financial data
included elsewhere herein.
Fiscal Years Ended 7-28-01 7-29-00 7-31-99 8-1-98 8-2-97
Income Statement
Data:
Net revenues $ 57,145,000 $ 57,141,000 $ 48,289,000 $ 57,151,000 $ 56,397,000
Net
(loss) earnings from
continuing operations (571,000 ) 1,502,000 815,000 2,192,000 2,312,000
Net
(loss) earnings from
discontinued operations (126,000 ) (145,000 ) (33,000 ) 73,000 27,000
Net
(loss) earnings (697,000 ) 1,357,000 782,000 2,265,000 2,339,000
Net
(loss) earnings, from
continuing operations per
common share: (0.21 ) 0.54 0.29 0.79 0.84
Balance Sheet
Data:
Total assets $ 38,977,000 $ 42,697,000 $ 39,951,000 $ 40,457,000 $ 39,725,000
Long-term
liabilities 4,598,000 5,057,000 5,280,000 5,594,000 5,854,000
Working capital 21,202,000 22,520,000 20,962,000 21,408,000 18,412,000
Shareholders'
equity 27,371,000 28,589,000 27,901,000 27,784,000 26,174,000
Weighted average
number of common shares
outstanding(a) 2,768,499 2,768,499 2,768,499 2,768,499 2,761,825
Cash dividends
declared per common
share(b) $ 0.28 $ 0.36 $ 0.36 $ 0.36 $ 0.36
----------------------
(a) Includes both Class A and Class B Common Stock
(b) Dividends were paid only on Class A Common Stock
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS SEGMENTS
The Registrant has four primary business units: the bar code unit operates under the name Compsee, Inc. (Compsee); the
office products unit operates under the name McRae Office Solutions, Inc. (Office Solutions); the military boot unit
operates under the name McRae Footwear and the western and work boot unit operates under the name American West Trading
Company (American West). The commercial printing unit, which was discontinued in fiscal 2001, operated under the name
Rae-Print, Inc. (Rae-Print). The Company also operates other smaller businesses.
A summary of the net revenues; gross profits; selling, general and administrative expenses; and operating profits of the
major business units for fiscal years 1999 through 2001 is presented in the following chart. Certain reclassifications have
been made to the prior year amounts to conform with the current year presentation. In particular, the prior year amounts
have been adjusted to reflect the discontinuance of the commercial printing unit in fiscal 2001.
Fiscal Year Percent change Fiscal Year
2001 2000 1999 over prior period 2001 2000 1999
Dollars (In thousands) 2001 2000 Percent of Net Revenues
Net
Revenues
Bar Code $ 12,454 $ 16,422 $ 14,695 (24.2 ) 11.8 22 29 31
Office
Products 18,640 20,678 19,846 (9.9 ) 4.2 33 36 41
Military
Boots 16,792 12,395 7,365 35.5 68.3 29 21 15
Western/W
Boots 9,371 7,866 6,402 19.1 22.9 16 14 13
Eliminations/other (112 ) (220 ) (19 ) NM NM 0 0 0
Consolidated $ 57,145 $ 57,141 $ 48,289 0.0 18.3 100 100 100
Gross Profit Percentage
Gross Profit
Bar Code $ 3,668 $ 5,319 $ 5,233 (31.0 ) 1.6 29 32 36
Office
Products 3,492 5,726 6,129 (39.0 ) (6.6 ) 19 28 31
Military
Boots 4,034 2,786 1,663 44.8 67.5 24 22 23
Western/W
Boots 1,715 1,106 703 55.1 57.3 18 14 11
Eliminations/other (27 ) (74 ) (80 ) NM NM 0 0 0
Consolidated $ 12,882 $ 14,863 $ 13,648 (13.3 ) 8.9 23 26 28
Percentage of Net Revenues
Selling, General and Administrative Expenses
Bar Code $ 5,601 $ 5,525 $ 5,087 1.4 8.6 45 34 35
Office
Products 5,520 4,688 5,408 17.7 (13.3 ) 30 23 27
Military
Boots 628 457 347 37.4 31.7 4 4 5
Western/W
Boots 2,265 1,648 1,407 37.4 17.1 24 21 22
Eliminations/other (84 ) (22 ) (8 ) NM NM 0 0 0
Consolidated $ 13,930 $ 12,296 $ 12,241 13.3 .4 25 22 25
Percentage of Net Revenues
Operating Profit (Loss)
Bar Code $ (1,933 ) $ (206 ) $ 146 (838.3 ) (241.1 ) (16 ) (2 ) 1
Office
Products (2,028 ) 1,038 721 (295.4 ) 44.0 (11 ) 5 4
Military
Boots 3,406 2,329 1,316 46.2 77.0 20 18 18
Western/W
Boots (550 ) (542 ) (704 ) (1.5 ) 23.0 (6 ) (7 ) (11 )
Eliminations/other 57 (52 ) (72 ) NM NM 0 0 0
Consolidated $ (1,048 ) $ 2,567 $ 1,407 (140.8 ) 82.4 (2 ) 4 3
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CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2001 COMPARED TO FISCAL 2000
Consolidated net revenues for fiscal 2001 amounted to $57.1 million and were flat as compared to the consolidated net
revenues for fiscal 2000. The military combat boot business and the western and work boot business posted increased net
revenues of 35.5% and 19.1%, respectively, over the net revenues reported for fiscal 2000. Net revenues for the bar code
business and office products business declined 24.2% and 9.9%, respectively, as compared to the net revenues reported for
fiscal 2000.
Consolidated gross profit fell from $14.9 million reported for fiscal 2000 to $12.9 million for fiscal 2001 and as a
percentage of consolidated net revenues from 26% to 23% for the same comparative fiscal periods. These declines were
primarily attributable to decreased product sales and competitive price pressures in the higher margined bar code and office
products businesses and were partially offset by increased demand for footwear products.
Consolidated selling, general and administrative (SG&A) expenses increased by approximately $1.6 million, or 13.3%, from the
$12.3 million reported for fiscal 2000 to $13.9 million for fiscal 2001. The increase in SG&A expenditures was primarily the
result of higher personnel related costs; advertising and promotional expenses; bad debt charges; and impaired goodwill
write-offs which were partially offset by lower professional fees, business insurance costs, and general maintenance
expenditures.
A consolidated operating loss of $1.0 million was reported for fiscal 2001 as compared to an operating profit of
$2.6 million for fiscal 2000. The decrease in operating profit resulted from lower gross margins and increased SG&A costs.
The Registrant's results of operations for fiscal 2001 and fiscal 2000 have been adjusted to reflect the discontinuance of
the commercial printing unit during fiscal 2001.
BAR CODE UNIT RESULTS OF OPERATIONS, FISCAL 2001 COMPARED TO FISCAL 2000
Compsee is a manufacturer and distributor of "hi-tech" bar code reading and printing devices, other peripheral equipment,
and supplies related to optical data collection. Compsee is a global company and continues to explore new markets throughout
the United States and other parts of the world.
Net revenues for fiscal 2001 amounted to $12.5 million, down 24.2% from the $16.4 million reported for fiscal 2000. This
decrease in net revenues was primarily attributable to lower product demand resulting from a soft economic climate,
increased competition, and the delay in bringing the new APEX III product to market. Gross profit declined from $5.3 million
for fiscal 2000 to $3.7 million for fiscal 2001 and as a percentage of net revenues from 32% to 29%, respectively, for the
same reporting periods. The lower gross profit was the result of decreased sales, competitive price pressure in the market,
depressed software support business, and write-offs for obsolete inventory. SG&A expenses were up slightly, from
$5.5 million for fiscal 2000 to $5.6 million for fiscal 2001. This increase in SG&A costs was primarily attributable to bad
debt write-offs, impaired goodwill write-offs, and new product development charges. Goodwill was considered impaired based
on the carrying value of the goodwill exceeding the undiscounted cash flows of products incorporating the purchased
technology. These increased SG&A costs were partially offset by cost containment programs that decreased sales personnel
related expenses, advertising and promotional costs, and professional fees. Lower sales and depressed margins coupled with
increased SG&A expenses produced a $1.9 million operating loss for fiscal 2001 as compared to an approximate $206,000 loss
for fiscal 2000.
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OFFICE PRODUCTS UNIT RESULTS OF OPERATIONS, FISCAL 2001 COMPARED TO FISCAL 2000
McRae Office Solutions distributes Toshiba photocopiers, Toshiba facsimile machines, RISO digital printing equipment and
provides related service and supplies for these products throughout the state of North Carolina and parts of Virginia and
South Carolina.
Net revenues decreased 9.9%, down from the $20.7 million reported for fiscal 2000 to $18.6 million reported for fiscal
2001. This decline in net revenues was primarily attributable to lower commercial account sales that resulted from a
smaller, less experienced sales force; a procurement freeze placed on North Carolina state contract purchases; and
competitive pressure in the county-wide educational system program. Gross profit amounted to $3.5 million for fiscal 2001,
down 39.0% from the $5.7 million reported for fiscal 2000. As a percentage of net revenues, gross profit fell from 28% to
19% for fiscal 2000 and 2001, respectively. The decline in gross profit resulted from lower sales volume; a higher
percentage of lower margined county-wide educational system sales in the overall sales mix; inventory write-offs; and
increased loss contingencies related to future costs associated with the county-wide educational system programs. SG&A
expenses increased by approximately $832,000 or 17.7% from fiscal 2000 to fiscal 2001 and was primarily attributable to
sales and administrative personnel costs; office and equipment rental expenditures; advertising and promotional costs; and
bad debt write-offs. Lower professional fees provided a partial offset to the higher SG&A costs. The decrease in net
revenues, decline in gross profit, and higher SG&A costs resulted in an operating loss of approximately $2.0 million for
fiscal 2001 as compared to a $1.0 million operating profit for fiscal 2000.
FOOTWEAR UNIT RESULTS OF OPERATIONS, FISCAL 2001 COMPARED TO FISCAL 2000
The footwear business unit manufactures and distributes military combat boots, military dress shoes, military safety boots,
western boots, and work boots. The military footwear is primarily for the U. S. Government and foreign governments while the
western and work boot products are for dress and casual wear for men and women. In addition, this business unit imports
western boots from several countries around the world primarily for women and children.
Net revenues for the military combat boot business for fiscal 2001 amounted to approximately $16.8 million, an increase of
35.5% over the $12.4 million reported for fiscal 2000. This increase in net revenues was primarily attributable to higher
boot requirements by the U. S. Government. Demand for military boots by foreign governments remained strong in fiscal 2001
as revenues remained consistent with fiscal 2000. Gross profit increased 44.8%, up from the $2.8 million reported for fiscal
2000 to $4.0 million for fiscal 2001 and resulted primarily from the increase in net revenues. As a percentage of net
revenues, gross profit increased from 22% for fiscal 2000 to 24% for fiscal 2001. This improvement in gross profit
percentage was attributable to lower per unit costs associated with higher production levels. SG&A expenses grew from
$457,000 in fiscal 2000 to $628,000 for fiscal 2001 and resulted from increased professional fees, employee benefit costs
and higher corporate allocations. The operating profit for fiscal 2001 amounted to $3.4 million, an increase of 46.2 % over
the $2.3 million reported for fiscal 2000.
The Registrant's military footwear business is currently operating in the final year of the most recent contract (the
Contract) awarded by the United States Government (the Government) in April 1997. The Contract provides for a base year and
four one-year extensions that may be exercised by the Government at its sole discretion for the purchase of additional
option quantities of military combat boots. While the Government exercised the final year's option, there was no indication
of a specified quantity of military combat boots to be purchased under this option. In addition, the Government has
indicated that it will switch to a new type of military combat boot and has issued a solicitation
12
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for bids to which the Registrant has responded. While the Registrant has positioned itself to manufacture the new type of
military combat boots and continues to manufacture boots for the Contract option, there are no assurances that the
Government will continue to order any boots under the Contract option or that the Registrant will be successful in the
solicitation of the right to manufacture the new type of military boot.
In September 2001, the Government notified the Registrant to increase its production levels of military combat boots as a
result of the deployment of U. S. troops on the war against terrorism. The increased production levels represent an
approximate 60% increase over the quantities normally purchased by the Government under the Contract. This increase is
expected to have a favorable impact on the Registrant's net revenues of an additional $2 million to $4 million for fiscal
2002, or more if the increased production levels are sustained throughout the remainder of fiscal 2002.
Net revenues for the western and work boot business for fiscal 2001 amounted to approximately $9.4 million, an increase of
$1.5 million or 19.1% over the amount reported for fiscal 2000. This growth in net revenues is primarily attributable to
increased market penetration by the sales force and higher demand for imported western boots for women and children. Gross
profit climbed to $1.8 million for fiscal 2001, up 55.1% from the $1.1 million for fiscal 2000 and as percentage of net
revenues was 18% for fiscal 2001 as compared to 14% for fiscal 2000. These increases were primarily the result of higher net
revenues, lower per unit costs associated with higher production levels, and higher margins on sales of imported
products. SG&A expenses for fiscal 2001 amounted to $2.3 million, approximately $600,000 greater than the amount reported
for fiscal 2000. This increase in SG&A expenditures was primarily attributable to additional personnel and related costs;
higher advertising and promotional outlays, bad debt write-offs, and larger professional fee charges. The operating loss of
$550,000 for fiscal 2001 was slightly higher than the $542,000 operating loss for fiscal 2000 as SG&A expenses outpaced the
growth in net revenues and gross profit.
OTHER BUSINESS UNIT RESULTS OF OPERATIONS, FISCAL 2001 COMPARED TO FISCAL 2000
In August 2000, the Registrant's management decided to phase out and discontinue the operations of the printing and
packaging business. Normal operations of this unit ceased on April 28, 2001. Net revenues amounted to approximately
$2.0 million and the loss from operations amounted to $41,000, net of income tax benefit. The loss on disposal amounted to
$85,000, net of income tax benefit. The remaining assets have an estimated fair value of $200,000.
CONSOLIDATED RESULTS OF OPERATIONS, FISCAL 2000 COMPARED TO FISCAL 1999
Consolidated net revenues for fiscal 2000 amounted to $57.1 million, an increase of 18.3% over the $48.3 million reported
for fiscal 1999, primarily attributable to the military combat boot business, the western and work boot business, and the
bar code business. These business units posted net revenue increases of 68.3%, 22.9%, and 11.8%, respectively, over the net
revenues reported for fiscal 1999.
Consolidated gross profit as a percentage of net revenues declined from the 28% reported for fiscal 1999 to 26% for fiscal
2000 and was primarily the result of changes in consolidated and business unit product mix, competitive price pressures in
the market, and additional operating costs associated with new bar code software products and services. The decrease in
gross profit percentage was partially offset by lower western boot unit costs generated by larger production levels.
Selling, general and administrative (SG&A) expenses decreased as a percentage of net revenues from 25% for fiscal 1999 to
22% for fiscal 2000. Lower sales salaries, sales commissions, and advertising and promotional costs were partially offset by
increases in
13
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sales travel expenses, group health insurance costs, professional fees, and bad debt expense.
Consolidated operating profit increased 82.4% from the $1.4 million reported for fiscal 1999 to the $2.6 million reported
for fiscal 2000. The increase in consolidated operating profit resulted from increased revenues and lower SG&A
expenditures. As a percentage of net revenues, consolidated operating profit was 4%, as compared to 3% reported for fiscal
1999.
The Registrant's results of operations for fiscal 2000 and fiscal 1999 have been adjusted to reflect the discontinuance of
the commercial printing unit during 2001.
Bar Code Unit Results of Operations, Fiscal 2000 Compared to Fiscal 1999
Net revenues amounted to $16.4 million for fiscal 2000. This 11.8% increase over the $14.7 million reported for fiscal 1999
was primarily the result of higher demand for "wireless" system sales and Compsee manufactured products. Gross profit as a
percentage of net revenue decreased from 36% for fiscal 1999 to 32% for fiscal 2000. This decline in gross profit was
primarily the result of continued price pressures in the market and to additional costs associated with the acquisition and
development of software used primarily in "wireless" applications. SG&A expenses increased by approximately $438,000, or
8.6%, over fiscal 1999 as sales salaries and commissions, travel expenditures, group health insurance costs, professional
fees, and "one-time" costs associated with the purchased software outpaced lower expenditures for advertising and
promotional materials. The lower gross profit margins coupled with the increase in SG&A expenditures resulted in an
operating loss of approximately $206,000 as compared to an operating profit of approximately $146,000 in fiscal 1999.
Office Products Unit Results of Operations, Fiscal 2000 Compared to Fiscal 1999
Net revenues amounted to $20.7 million in fiscal 2000, an increase of 4.2% over the $19.8 million reported for fiscal
1999. This growth in revenue primarily resulted from the continued strong demand for copier and duplicating equipment by
county-wide educational systems. Gross profit decreased from $6.1 million for fiscal 1999 to $5.7 million for fiscal 2000
primarily because a greater percentage of the revenue mix comes from low margin sales to county-wide school systems. SG&A
expenses amounted to $4.7 million, down 13.3% from the $5.4 million for fiscal 1999. This decrease in costs was primarily
the result of reduced sales salaries and commissions associated with the commercial business, reduced training costs,
reduced advertising expenditures, and reduced use taxes, partially offset by increased expenditures for telephone, group
health insurance, administrative salaries, and professional fees. The $300,000 increase in operating profit from fiscal 1999
to fiscal 2000 was primarily the result of higher net revenues and lower SG&A expenses.
Footwear Unit Results of Operations, Fiscal 2000 Compared to Fiscal 1999
Military combat boot net revenues for fiscal 2000 amounted to approximately $12.4 million, an increase of 68.3% from the
$7.4 million reported for fiscal 1999. This increase in net revenues resulted primarily from higher demand for military
boots by foreign governments. Net revenues associated with military combat boot sales to the Government increased by
approximately 12.6% from the level reported for fiscal 1999 as a result of higher boot requirements by the Government. Gross
profit as a percentage of net revenues decreased by 1% from fiscal 1999 to fiscal 2000 and was primarily attributable to
higher manufacturing labor costs. SG&A expense as a percentage of net revenues for fiscal 2000 was 4%, down 1% from fiscal
1999. Increased employee benefit costs were responsible for the increase in SG&A expenditures from $347,000 for fiscal 1999
to $457,000 for fiscal 2000.
14
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Western and work boot net revenues for fiscal 2000 were up 22.9% over net revenues for fiscal 1999 primarily attributable to
the success of the sales and marketing strategies implemented during the last half of fiscal 1999. One facet of that
strategy was to develop and deploy a team of experienced, independent sales representatives to cover areas of the market
that had significant growth potential. Gross profit as a percentage of net revenues for fiscal 2000 was 14%, a 3%
improvement over the 11% for fiscal 1999. This increase in gross profit percentage was primarily the result of higher
production levels providing lower per unit costs. SG&A expenses for fiscal 2000 amounted to $1.6 million, an increase of
approximately 17.1% over the level reported for fiscal 1999 and was primarily the result of higher sales commissions and bad
debt charges. As a percentage of net revenues, SG&A expenditures decreased from 22% for fiscal 1999 to 21% for fiscal
2000. The operating loss for fiscal 2000 showed a 23.0% improvement over the operating loss for fiscal 1999 and was
primarily attributable to increased boot sales and improved gross margin levels.
Other Business Unit Results of Operations, Fiscal 2000 Compared to Fiscal 1999
Net revenues for the printing and packaging business decreased by approximately $100,000 for fiscal 2000, down 2.9% from
fiscal 1999 primarily the result of competitive pressure in the market. Gross profit for fiscal 2000 was down 93.5% from
fiscal 1999 primarily attributable to labor inefficiencies, equipment downtime and repair costs, and higher group health
insurance expenditures. SG&A expenses amounted to $225,000, down 1.3% from the SG&A expense level for fiscal 1999 resulting
from lower corporate charges and professional fees. The operating loss increased from $73,000 for fiscal 1999 to $215,000
for fiscal 2000 primarily as a result of lower gross margin.
During the first quarter of fiscal 2001, the Registrant's management decided to phase out and discontinue the operations of
this business during fiscal year 2001.
FINANCIAL CONDITION
The Registrant's financial condition at July 28, 2001 continued to be strong as cash and cash equivalents amounted to
approximately $7.3 million. Working capital amounted to $21.2 million with a current ratio of 4.1 to 1.
Operating activities generated approximately $2.8 million of cash. Earnings from operations, adjusted for depreciation and
amortization, provided approximately $852,000 of positive cash flow. The decrease in trade accounts receivable contributed
approximately $1.4 million of cash as the timing of collection of open accounts for the bar code and military business
outpaced sales and the funding of large county-wide educational system sales before year-end. The western boot business
partially offset the trade accounts receivable reduction by approximately $400,000 as collection on higher fourth quarter
sales were made after year-end. Inventory reductions accounted for approximately $2.5 million of cash and were primarily
attributable to heavy fourth quarter sales to county-wide educational systems and the asset disposal related to the printing
and packaging business. The decrease in inventory was partially offset by an inventory buildup in the western boot business
as a result of increased demand for western boot products and the purchase of inventory related to the Dingo brand. Net
investment in capitalized leases provided approximately $603,000 of cash as a result of using third party financing to fund
a larger percentage of the office products business sales. The decrease in accounts payable used approximately $1.1 million
of cash primarily attributable to the elimination of VEST quantity deficiencies under the Contract with the
Government. Contract contingency reserves increased by $224,000 to cover future service and supply costs associated with the
county-wide education system cost per copy program. Income tax liabilities decreased by approximately $1.4 million as result
of the current year's operating loss and the payment of the final installment of fiscal 2000 tax liability and first quarter
estimated tax amounts.
15
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Investing activities used approximately $1.9 million of cash. Capital expenditures amounted to approximately $1.3 million
primarily for rental equipment for the county-wide education cost per copy program, various manufacturing equipment,
computer equipment, and office machines. Other asset purchases used $333,000 of cash and related primarily to the purchase
of the Dingo brand name. The purchase of 5% of the bar code business (Compsee) common stock from the minority shareholder
used approximately $605,000 of cash.
Quarterly dividend payments and principal payments on long-term debt used approximately $521,000 and $298,000 of cash,
respectively.
The Registrant's primary sources of liquidity at July 28, 2001 consisted of cash, cash equivalents, and short-term
investments totaling approximately $7.3 million, and $2.75 million of availability at year-end in two lines of credit. It is
management's opinion that the cash on hand, cash generated from operations, and the current credit facilities will be
sufficient to meet the Registrant's capital requirements for fiscal 2002, including the purchase the Dan Post brand name and
certain inventory amounting to approximately $2.6 million.
INFLATION
The Registrant does not believe inflation has had a material impact on sales or operating results for the periods covered in
this discussion.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued and established the
accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 became effective for the
Registrant for the fiscal year beginning July 30, 2000, as amended by SFAS No. 137 and SFAS No. 138. Currently, the
Registrant is not involved in any derivative or hedging activities.
In June 2001, SFAS No. 141, "Business Combinations" was issued and established the accounting and reporting for business
combinations. SFAS No. 141 is effective for the Registrant for periods after June 30, 2001. The Registrant is in compliance
with this reporting requirement.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued and established the accounting and reporting
for acquired goodwill and other intangible assets. SFAS No. 142 is effective for the Registrant for periods beginning after
December 15, 2001. The Registrant is evaluating the effects of this pronouncement on recorded goodwill and trade names.
In 1999, SAB 101 "Revenue Recognition in Financial Statements" was released by the SEC to provide additional guidance in
interpreting revenue recognition under generally accepted accounting principals. SAB 101 was effective for the Registrant no
later than the fourth quarter of fiscal year 2001. This SAB had no effect on the Registrant's revenue recognition
procedures.
16
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report includes certain forward-looking statements as such term is
defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements involve
certain risks and uncertainties, including but not limited to acquisitions, additional financing requirements, development
of new products and services, the effect of competitive products and pricing, risks unique to selling goods to the
Government (including the impact of the war on terrorism and termination of the Contract), and the effect of general
economic conditions, that could cause actual results to differ materially from those in such forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Registrant is exposed to the impact of interest rate changes due to its aggregate $2.75 million lines of credit and a
term loan through its wholly owned subsidiary, American West Trading Company. As of July 28, 2001, there was no outstanding
indebtedness under the lines of credit and $4.8 million was outstanding on the term loan. The Registrant does not buy or
sell derivative financial instruments for trading purposes. Borrowings under the Registrant's credit facilities described
above bear interest at rates based upon the "Prime Rate" or the "Prime Rate" less a margin of one-half percent offered by
the applicable lender. The Registrant has not entered into any swap agreements or engaged in any other hedging activities
with respect to this variable rate indebtedness. A 10% increase in the interest rates under the Registrant's credit
facilities would increase annual interest expense by approximately $35,000 (assuming the Registrant's aggregate borrowings
under the credit facilities averaged $4.7 million during a fiscal year).
17
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following documents are filed as part of this report:
Page
1. Independent Auditor's Report 19
2. McRae Industries, Inc. and Subsidiaries Consolidated Financial Statements:
Consolidated Balance Sheets as of July 28, 2001 and July 29, 2000. 20-21
Consolidated Statements of Operations for the Years Ended July 28, 2001, July 29, 2000, and July 31, 1999. 22
Consolidated Statements of Shareholders' Equity for the Years Ended July 28, 2001, July 29, 2000, and
July 31, 1999. 23
Consolidated Statements of Cash Flows for the Years Ended July 28, 2001, July 29, 2000, and July 31, 1999. 24
Notes to Consolidated Financial Statements 25-37
3. Financial Statement Schedule:
Schedule II 38
Schedules other than those listed above have been omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
18
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Gleiberman Spears Shepherd & Menaker, P. A.
Independent Auditors' Report
To the Board of Directors
and Shareholders of
McRae Industries, Inc.
Mount Gilead, North Carolina
We have audited the accompanying consolidated balance sheets of McRae Industries, Inc. and subsidiaries as of July 28, 2001,
and July 29, 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of
the three years in the period ended July 28, 2001, and the financial statement schedule listed under Item 8. These financial
statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with United States generally accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements and schedule are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and schedule. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of McRae Industries, Inc. and subsidiaries as of July 28, 2001, and July 29, 2000, and the results of
their operations and their cash flows for each of the three years in the period ended July 28, 2001, in conformity with
United States generally accepted accounting principles. Further, in our opinion, the financial statement schedule referred
to above presents fairly, in all material respects, the information stated therein, when considered in relation to the
financial statements taken as a whole.
/s/ Gleiberman Spears Shepherd & Menaker, P.A.
October 16, 2001
Bank of America Plaza, Suite 2500
Charlotte, North Carolina 28280
Telephone 704-377-0220 Telefax 704-377-7612
Certified Public Accountants
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CONSOLIDATED BALANCE SHEETS
McRae Industries, Inc. and Subsidiaries
July 28, July 29,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $ 7,341,000 $ 7,219,000
Marketable securities (Note 2) 5,000 61,000
Accounts receivable, less allowances for doubtful accounts of
$273,000 and $328,000, respectively (Note 6) 5,048,000 6,430,000
Notes receivable, current portion
Employees 311,000 50,000
Other 83,000 114,000
Inventories (Notes 3 and 6) 13,806,000 16,294,000
Net investment in capitalized leases, current portion (Note 4) 567,000 595,000
Income tax receivable (Note 8) 881,000 --
Prepaid expenses and other current assets 60,000 82,000
Total current assets 28,102,000 30,845,000
Property and equipment, net (Notes 5 and 6) 5,204,000 5,601,000
Other assets:
Notes and accounts receivable, related entities (Notes 11 and 12) 527,000 652,000
Net investment in capitalized leases, net of current portion (Note 4) 960,000 1,533,000
Notes receivable, net of current portion
Employees 4,000 33,000
Other 199,000 273,000
Real estate held for investment 652,000 645,000
Goodwill 392,000 510,000
Cash surrender value life insurance (Note 13) 2,041,000 1,830,000
Other 896,000 775,000
Total other assets 5,671,000 6,251,000
Total assets $ 38,977,000 $ 42,697,000
See notes to consolidated financial statements
20
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CONSOLIDATED BALANCE SHEETS
McRae Industries, Inc. and Subsidiaries
July 28, July 29,
2001 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable, banks (Note 6) $ 407,000 247,000
Accounts payable 3,545,000 4,676,000
Accrued employee benefits (Note 7) 239,000 276,000
Deferred revenues 983,000 1,039,000
Accrued payroll and payroll taxes 578,000 613,000
Income taxes (Note 8) -- 478,000
Contract contingencies 650,000 426,000
Other 498,000 570,000
Total current liabilities 6,900,000 8,325,000
Notes payable, banks, net of current portion (Note 6) 4,598,000 5,057,000
Minority interest (Note 9) 108,000 726,000
Commitments and contingencies (Note 9)
Shareholders' equity: (Note 10)
Common stock:
Class A, $1 par value; authorized 5,000,000 shares; issued and
outstanding, 1,861,817 and 1,859,692 shares, respectively 1,862,000 1,860,000
Class B, $1 par value; authorized 2,500,000 shares; issued and
outstanding, 906,682 and 908,807 shares, respectively 907,000 909,000
Additional paid-in capital 791,000 791,000
Retained earnings 23,811,000 25,029,000
Total shareholders' equity 27,371,000 28,589,000
Total liabilities and shareholders' equity $ 38,977,000 $ 42,697,000
See notes to consolidated financial statements
21
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CONSOLIDATED STATEMENTS OF OPERATIONS
McRae Industries, Inc. and Subsidiaries
For the Years Ended July 28, July 29, July 31,
2001 2000 1999
Net revenues $ 57,145,000 $ 57,141,000 $ 48,289,000
Cost of revenues 44,263,000 42,278,000 34,641,000
Gross profit 12,882,000 14,863,000 13,648,000
Selling, general and administrative expenses 13,930,000 12,296,000 12,241,000
Operating profit (loss) from continuing
operations (1,048,000 ) 2,567,000 1,407,000
Other income, net 502,000 312,000 322,000
Interest expense (Note 6) (413,000 ) (391,000 ) (420,000 )
Earnings (loss) from continuing operations
before income taxes and minority interest (959,000 ) 2,488,000 1,309,000
Provision (benefit) for income taxes (Note 8) (375,000 ) 979,000 470,000
Minority interest (Note 9) 13,000 (7,000 ) (24,000 )
Net earnings (loss) from continuing operations (571,000 ) 1,502,000 815,000
Discontinued operations: (Note 15) Loss from
discontinued operations, net of income tax benefits of
$(19,000) for 2001, $(93,000) for 2000, and $(18,000) for
1999 (41,000 ) (145,000 ) (33,000 )
Loss on disposal of business segment net of
income tax benefit of $39,000 for fiscal 2001 (85,000 ) -- --
Net earnings (loss) $ (697,000 ) $ 1,357,000 $ 782,000
Earnings (loss) per common share:
Earnings (loss) from continuing operations $ (.21 ) $ .54 $ .29
Loss from discontinued operations (0.4 ) (.05 ) (.01 )
Net earnings (loss) $ (0.25 ) $ 0.49 $ 0.28
Weighted average number of common shares
outstanding 2,768,499 2,768,499 2,768,499
See notes to consolidated financial statements
22
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
McRae Industries, Inc. and Subsidiaries
Common Stock, $1 par value
Class A Class B Additional Retained
Paid-in
Shares Amount Shares Amount Capital Earnings
Balance
August 1, 1998 1,819,728 $ 1,820,000 948,771 $ 949,000 $ 791,000 $ 24,224,000
Convers
of Class B to
Class
stock 38,046 38,000 (38,046 ) (38,000 )
Cash
dividend ($.36
per Class A
common stock) (665,000 )
Net
earnings 782,000
Balance
July 31, 1999 1,857,774 1,858,000 910,725 911,000 791,000 24,341,000
Convers
of Class B to
Class A stock 1,918 2,000 (1,918 ) (2,000 )
Cash
dividend ($.36
per Class A
common stock) (669,000 )
Net
earnings 1,357,000
Balance
July 29, 2000 1,859,692 1,860,000 908,807 909,000 791,000 25,029,000
Convers
of Class B to
Class A stock 2,125 2,000 (2,125 ) (2,000 )
Cash
dividend ($.28
per Class A
common stock) (521,000 )
Net
loss (697,000 )
Balance
July 28, 2001 1,861,817 $ 1,862,000 906,682 $ 907,000 $ 791,000 $ 23,811,000
See notes to consolidated financial statements
23
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CONSOLIDATED STATEMENTS OF CASH FLOWS
McRae Industries, Inc. and Subsidiaries
For the Years Ended July 28, July 29, July 31,
2001 2000 1999
Cash Flows from Operating Activities:
Net earnings (loss) $ (697,000 ) $ 1,357,000 $ 782,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,549,000 1,525,000 1,566,000
Equity in net (income) loss of investee (83,000 ) 40,000 29,000
Minority shareholder's interest in earnings
(loss) of subsidiary (13,000 ) 7,000 24,000
Loss (Gain) on sale of assets 39,000 59,000 (7,000 )
Contract contingencies 224,000 426,000
Changes in operating assets and liabilities:
Accounts receivable 1,382,000 1,136,000 1,542,000
Inventories 2,487,000 (2,833,000 ) (1,993,000 )
Net investment in capitalized leases 603,000 948,000 (351,000 )
Prepaid expenses and other current assets 22,000 130,000 30,000
Accounts payable (1,131,000 ) 2,087,000 565,000
Accrued employee benefits (37,000 ) 26,000 (300,000 )
Deferred revenues (56,000 ) (299,000 ) (198,000 )
Accrued payroll and payroll taxes (36,000 ) (23,000 ) 75,000
Income taxes (1,359,000 ) 367,000 (710,000 )
Other (72,000 ) (258,000 ) 210,000
Net cash provided by operating activities 2,822,000 4,695,000 1,264,000
Cash Flows from Investing Activities:
Proceeds from sale of property 214,000 632,000 226,000
Proceeds from sale of short term investments 55,000 2,000
Purchase of land (16,000 ) (151,000 )
Purchase of other assets (333,000 ) (963,000 ) (322,000 )
Purchase of minority interest (605,000 )
Capital expenditures (1,277,000 ) (1,367,000 ) (1,795,000 )
Advances to related parties (206,000 ) (108,000 ) (66,000 )
Collections from related parties 414,000 357,000 61,000
Advances on notes receivable (300,000 ) (5,000 )
Collections on notes receivable 173,000 361,000 531,000
Net cash (used in) provided by investing
activities (1,881,000 ) (1,237,000 ) (1,370,000 )
Cash Flows from Financing Activities:
Principal repayments of long-term debt (298,000 ) (271,000 ) (290,000 )
Dividends paid (521,000 ) (669,000 ) (665,000 )
Net cash (used in) financing activities (819,000 ) (940,000 ) (955,000 )
Net Increase (Decrease) in Cash and Cash
Equivalents 122,000 2,518,000 (1,061,000 )
Cash and Cash Equivalents at Beginning of Year 7,219,000 4,701,000 5,762,000
Cash and Cash Equivalents at End of Year $ 7,341,000 $ 7,219,000 $ 4,701,000
See notes to consolidated financial statements
24
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
McRae Industries, Inc. and Subsidiaries
For the Years Ended July 28, 2001, July 29, 2000, and July 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Minority interest represents
the minority shareholder's proportionate share of the equity of a majority-owned subsidiary. The investment in an investee
is accounted for on the equity method. Significant inter-company transactions and balances have been eliminated in
consolidation.
Use of Estimates
The timely preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could
differ from those estimates. Significant estimates expected to change in the near term include the allowance for contract
contingencies.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments such as certificates of deposit and commercial paper purchased
with an original maturity date of three months or less.
Marketable Securities
Investments in marketable equity and debt securities have been classified as available for sale and as a result are stated
at fair value based on quoted market prices. Unrealized holding gains and losses, if applicable, are included as a separate
component of shareholders' equity until realized.
Inventories
Inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method for military boots and
photocopier inventories and using the first-in, first-out (FIFO) method for all other inventories.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are provided on the straight-line method for
financial reporting purposes and by accelerated methods for income tax purposes.
Revenue Recognition
Service maintenance agreements are sold for certain products. Revenues related to these agreements are deferred and
recognized over the term of the related agreements.
25
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The Company sells equipment under sales-type equipment leasing and third party leasing companies. Sales of the equipment
under cost per copy lease agreements are recognized when third party or sales-type lease agreements are signed and the
equipment is installed. Revenue from copy usage in excess of the lease minimum is recognized when billed quarterly or
monthly based on the actual usage. Maintenance and supply expenses related to these cost per copy lease agreements are
recognized as incurred. Provision for losses are recognized when determined.
Orders under the current U.S. Government military combat boot contract awarded in April 1997 were modified in May 2001 to
require the Company to implement a "bill and hold" program for remaining military boot shipments. Revenue on these orders is
recognized when the boots are inspected by the U. S. Government and accepted into the Company's warehouse.
All other sales of the Company are recognized as revenues when title passes to the buyer.
Goodwill
Goodwill represents the excess of the purchase prices over the fair value of the net assets acquired in business
combinations in prior years and is being amortized by the straight-line method over periods ranging up to 20 years. On a
periodic basis, the Company estimates the future undiscounted cash flow of the businesses to which goodwill relates to
assess that the carrying value of such goodwill has not been impaired. During fiscal 2001, the Company wrote-off
approximately $78,000 of impaired goodwill related to the bar code business. This goodwill was considered impaired based on
the undiscounted cash flow of the products incorporating the purchased technology.
Income Taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax-reporting using
enacted tax rates. Deferred tax expense (benefit) results from the change during the year of the deferred tax assets and
liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be
realized.
Earnings Per Share
Earnings per share are based on the weighted average number of shares of common stock outstanding during the year.
Recently Issued Accounting Standards
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued and established the
accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 became effective for the
Company for the fiscal year beginning August 1, 2000, as amended by SFAS No. 137 and SFAS No. 138. Currently, the Company is
not involved in any derivative or hedging activities.
In June 2001, SFAS No. 141, "Business Combinations" was issued and established the accounting and reporting standards for
business combinations. SFAS No. 141 is effective for the Company for periods after June 30, 2001. The Company is in
compliance with this reporting requirement.
26
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In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued and established the accounting and reporting
standards for acquired goodwill and other intangible assets. SFAS No. 142 is effective for the Company for periods beginning
after December 15, 2001. The Company is evaluating the effects of this pronouncement on recorded goodwill and trade names.
In 1999, SAB 101, "Revenue Recognition in Financial Statements", was released by the SEC to provide additional guidance in
interpreting revenue recognition under generally accepted accounting principals. SAB 101 was effective for the Company no
later than the fourth quarter of fiscal year 2001. This SAB had no effect on the Company's revenue recognition procedures.
Research and Development
Research and development costs related to future products are expensed in the year incurred. Research and development
expense for fiscal 2001, 2000, and 1999 were $496,000, $538,000, and $524,000, respectively.
Advertising
The Company expenses advertising costs when incurred. Advertising expense amounted to $406,000, $157,000, and $210,000 for
fiscal 2001, 2000, and 1999, respectively.
Reclassifications
Certain reclassifications have been made to the prior years' financial statements and notes thereto to conform with the
current year presentation. In particular, the prior year's financial statements and notes have been adjusted to reflect the
discontinuance of the commercial printing business in fiscal 2001.
2. MARKETABLE SECURITIES
The following is a summary of the estimated fair market value of available for sale securities:
2001 2000
Munici
Bonds $ -0- $ 55,000
Common
Stocks 5,000 6,000
$ 5,000 $ 61,000
Expected maturities may differ from contractual maturities of the municipal bonds because the issuers of the securities may
have the right to prepay obligations without prepayment penalties. There were no significant unrealized gains and losses at
July 28, 2001 or July 29, 2000.
3. INVENTORIES
Current costs exceed the LIFO value of inventories by approximately $837,000 and $715,000 at July 28, 2001 and July 29,
2000, respectively. Year-end inventories valued under the LIFO method were $5,483,000 and $8,788,000 at July 28, 2001, and
July 29, 2000, respectively. An increase in fiscal 2001 LIFO reserves was due to changes in FIFO pricing which resulted in
decreased net earnings of $74,000. The decrease in fiscal 2000 LIFO reserves was due to both changes in FIFO pricing and
reduction in fiscal 1999 inventory quantities, which resulted in, increased net earnings of $18,000. The components of
inventory at each year-end are as follows:
27
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2001 2000
Raw
materials $ 2,843,000 $ 3,033,000
Work-in-process 746,000 979,000
Finish
goods 10,217,000 12,282,000
$ 13,806,000 $ 16,294,000
4. LEASES
The Company leases photocopier products under sales-type leases. The Company's net investment in these leases is as follows:
2001 2000
Minimum lease payments
receivable $ 1,663,000 $ 2,415,000
Estimated unguaranteed
residual values 116,000 135,000
Unearned income (172,000 ) (309,000 )
Allowance for doubtful
accounts (80,000 ) (113,000 )
Net investment 1,527,000 2,128,000
Less: Current portion 567,000 595,000
$ 960,000 $ 1,533,000
The scheduled maturities for the above minimum lease payments receivable at July 28, 2001 is as follows:
Fiscal Years Ending
2002 $ 752,000
2003 551,000
2004 252,000
2005 91,000
2006 and thereafter 17,000
Total minimum lease payments
receivable $ 1,663,000
5. PROPERTY AND EQUIPMENT
2001 2000
Land and improvements $ 762,000 $ 732,000
Buildings 4,279,000 4,268,000
Machinery and
equipment 7,980,000 8,086,000
Furniture and
fixtures 2,364,000 2,684,000
15,385,000 15,770,000
Less: Accumulated
depreciation 10,181,000 10,169,000
$ 5,204,000 $ 5,601,000
Depreciation expense for fiscal 2001, 2000, and 1999 was $1,431,000, $1,484,000, and $1,526,000, respectively.
28
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6. NOTES PAYABLE AND LINES OF CREDIT
NOTES PAYABLE:
July 28, 2001 July 29, 2000
Note payable, bank, due in monthly installments of $56,477 including
interest at the prime rate less 0.5% through July, 2011. All inventory, accounts
receivable and property and equipment, which originally cost $8,991,000, of the
Company's American West subsidiary are pledged as collateral $ 4,755,000 $ 5,035,000
Note payable, State of Tennessee, due March, 2013. Note is payable in
60 monthly installments of $1,930 including interest at 1.5%, then 60 monthly
installments of $2,073 including interest at 2.5% and then 120 monthly
installments of $2,175 including interest at 3.5%
Land, buildings and building improvements, which originally cost
$847,000, of the Company's American West subsidiary, are pledged as collateral 250,000 269,000
5,005,000 5,304,000
Less: Current portion 407,000 247,000
$ 4,598,000 $ 5,057,000
Annual maturities of long-term debt are as follows:
Fiscal Years Ending:
2002 $ 407,000
2003 432,000
2004 458,000
2005 488,000
2006 519,000
thereafter 2,701,000
$ 5,005,000
LINES OF CREDIT:
The Company has an unsecured $1,000,000 revolving line of credit with a bank. The Company had no outstanding borrowings
under the line of credit as of July 28, 2001 and July 29, 2000. This line of credit was replaced in September 2001 with a
$3,000,000 revolving line of credit with a bank and provides for interest on outstanding balances to be payable monthly at
the prime rate less 0.5%. The new line of credit expires in November 2002 and is secured by the inventory and accounts
receivable of American West.
The Company has an additional $1,750,000 line of credit with a bank. This line is restricted to 100% of the outstanding
accounts receivable due from the U. S. Government. There were no outstanding borrowings under this line of credit as of
July 28, 2001 and July 29, 2000. The line of credit expires in June 2002 and provides for interest on outstanding balances
to be payable monthly at the prime rate.
Cash paid for interest during fiscal years 2001, 2000, and 1999 was approximately $403,000, $430,000, and $420,000,
respectively.
29
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7. EMPLOYEE BENEFIT PLANS
The Company's employee benefit program consists of an employee stock ownership plan, a 401-K retirement plan, a cash bonus
program, incentive awards, and other specified employee benefits as approved by the Board of Directors. At its sole
discretion, the Board of Directors determines the amount and the timing of payment for benefits under these plans.
The employee stock ownership plan (ESOP) covers substantially all employees. Its principal investments include shares of
Class A and B Common Stock of the Company and collective funds consisting of short-term cash, fixed-income, and equity
investments.
The Company has a 401-K retirement plan, which covers substantially all employees. Employees can contribute up to 15% of
their salary. At its sole discretion, the Board of Directors determines the amount and timing of any Company matching
contribution. The Company's contribution was $184,000, $191,000, and $229,000 for the years ended July 28, 2001, July 29,
2000, and July 31, 1999, respectively.
Employee benefit program expense amounted to $239,000, $261,000, and $247,000 in 2001, 2000, and 1999, respectively. To the
extent the amounts of these benefits are not disbursed, the Board may, at its sole discretion, reduce any remaining
accruals.
8. INCOME TAXES
Significant components of the provision for income taxes are as follows:
2001 2000 1999
Current expense
(benefit)
Federal $ (23,000 ) $ 929,000 $ 98,000
State 294,000 287,000 138,000
271,000 1,216,000 236,000
Deferred expense
(benefit)
Federal (549,000 ) (201,000 ) 199,000
State (97,000 ) (36,000 ) 35,000
(646,000 ) (237,000 ) 234,000
$ (375,000 ) $ 979,000 $ 470,000
The components of the provision for deferred income taxes are as follows:
2001 2000 1999
Depreciation $ (73,000 ) $ (115,000 ) $ (31,000 )
Leasing activities (173,000 ) (111,000 ) 130,000
Accrued employee benefits 10,000 (85,000 ) 118,000
Allowances for doubtful accounts 37,000 50,000 64,000
Inventory (6,000 ) 24,000 (47,000 )
Contract contingencies (255,000 ) -- --
State net operating loss carry
forward (201,000 )
Other 15,000 -- --
Deferred income taxes, expense
(benefit) $ (646,000 ) $ (237,000 ) $ 234,000
30
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Deferred tax liabilities and assets at each year-end are as follows:
Deferred tax liabilities:
2001 2000
Depreciation $ (18,000 ) $ (91,000 )
Leasing activities (430,000 ) (603,000 )
Total deferred tax
liabilities (448,000 ) (694,000 )
Deferred tax assets:
Accrued employee benefits 94,000 104,000
Allowances for doubtful
accounts 155,000 191,000
Inventory 159,000 137,000
Contract contingency 255,000 --
State net operating loss
carry forward 201,000 --
Other 32,000 --
Total deferred tax assets 896,000 432,000
Net deferred tax asset
(liabilities) $ 448,000 $ (262,000 )
State net operating loss carry forwards will expire in fiscal 2016.
The reconciliation of income tax computed at the U. S. federal statutory tax rate to actual income tax expense are (in
thousands):
2001 2000 1999
Amount Percent Amount Percent Amount Percent
Tax at U. S. statutory rate $ (326 ) (34.0 )% $ 849 34.0 % $ 445 34.0 %
State income taxes, net of federal
tax benefit (60 ) (6.3 ) 157 6.3 82 6.3
Other -- net 11 1.2 (27 ) (0.9 ) (57 ) (4.4 )
$ (375 ) (39.1 )% $ 979 39.4 % $ 470 35.9 %
Total income tax payments during fiscal years 2001, 2000, and 1999 were approximately $965,000, $671,000, and $1,244,000,
respectively.
31
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9. COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company leases certain sales offices and equipment under non-cancelable operating leases. Rental expenses on all
operating leases were $786,000, $487,000, and $423,000 for fiscal 2001, 2000, and 1999. The future minimum annual rental
payments under non-cancelable operating leases are as follows:
Fiscal Years Ending
2002 $ 318,000
2003 134,000
2004 15,000
2005 -0-
2006 -0-
$ 467,000
Minority Interest
The Company has entered into a restrictive stock agreement with the minority shareholder of its majority owned
subsidiary. Under the terms of the agreement, the Company has the right of first refusal to purchase at any time any shares
representing the minority interest in the subsidiary at a defined book value of said shares. The minority shareholder has
the right to sell twenty percent of his shares per year to the Company, at the defined book value of such shares, provided
the minority shareholder remains employed by the subsidiary.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally
of cash investments, receivables, and capitalized leases. The Company maintains substantially all of its cash and
certificates of deposits with various financial institutions in amounts that are in excess of the federally insured
limits. Management performs periodic evaluations of the relative credit standing of those financial institutions.
Concentrations of credit risk with respect to receivables and capitalized leases are limited due to the large number of
entities comprising the Company's customer base and their dispersion across many different industries. The Company does not
require collateral on trade accounts receivable. As of July 28, 2001, five customers accounted for 19% of accounts
receivable and five customers accounted for 37% of the net investment in capitalized leases. For July 28, 2001 sales to the
U.S. Government amounted to 20% of total consolidated net revenues.
As of July 29, 2000, seven customers accounted for 26% of the accounts receivable and three customers accounted for 35% of
the net investment in capitalized leases.
For July 29, 2000 sales to the U.S. Government amounted to 13% of total consolidated net revenues.
Other
Under the terms of sale to the U.S. Government, the negotiated contract prices of combat boots are subject to renegotiation
if certain conditions are present. Management is of the opinion that renegotiation, if any, will have no material adverse
effect on the Company's consolidated financial position or results of operations.
32
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The Company has committed to provide maintenance and supplies (excluding paper) on $17.5 million of office products
equipment under certain lease agreements. Under these lease agreements, customers are charged on a cost per copy basis and
have agreed to a minimum copy usage per quarter over the term of the lease. The terms of the lease agreements range from
three to six years. The minimum copy usage over the lease term should cover the cost of the equipment, supplies, and
service. The average cost per copy rate in these lease agreements is $0.02. Although the Company has committed to provide
maintenance and supplies (excluding paper), the Company's ability to recognize additional revenue on these lease agreements
is contingent upon the customers' actual copy usage exceeding the minimum copy usage in the lease agreement. As a result of
this contingency, the Company has provided approximately $224,000 in fiscal 2001 and $426,000 in fiscal 2000 to offset any
possible increase in the operating costs of these programs or copy usage below estimated levels. For the last three fiscal
years, the Company recognized revenue in excess of the related maintenance and supplies expenses for these lease agreements
as the actual copy usage had significantly exceeded the minimum copy usage for the lease agreements.
10. SHAREHOLDERS' EQUITY
Common Stock
Each share of Class A Common Stock is entitled to one-tenth vote and each share of Class B Common Stock is entitled to one
full vote at meetings of shareholders, except that Class A shareholders are entitled to elect 25% and Class B shareholders
are entitled to elect 75% of the directors. Each share of Class B Common Stock can be converted to Class A Common Stock on a
share for share basis. All dividends paid on Class B Common Stock must also be paid on Class A Common Stock in an equal
amount.
During fiscal 1999, the Company adopted the McRae Industries, Inc. 1998 Incentive Equity Plan (the "Plan"). The Plan has
reserved 100,000 shares of the Company's Class A Common Stock for issuance to certain key employees of the Company. At
July 28, 2001, there were 100,000 shares available for future grants under the Plan.
11. RELATED PARTY TRANSACTIONS
Notes and accounts receivable from related entities that are included in the balance sheet are as follows:
2001 2000
Investments in and advances to investee (see
Note 12) $ 527,000 $ 652,000
33
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12. INVESTMENT IN AMIC
The Company has an investment in a real estate development company, American Mortgage & Investment Company (AMIC). AMIC has
been operating under Chapter X of the United States Bankruptcy Act since 1974, and the court has imposed certain
restrictions under a Plan of Reorganization. The President of the Company is also the President of the AMIC. The Company
adjusts its investment in and advances to the AMIC by the equity method. Summarized financial data of the AMIC is as
follows:
2001 2000 1999
Balance Sheet
Assets $ 1,457,000 $ 1,543,000 $ 1,579,000
Liabilities 1,559,000 1,728,000 1,724,000
Shareholders'
deficiency (102,000 ) (185,000 ) (145,000 )
Results of
Operations
Revenues $ 573,000 $ 165,000 $ 297,000
Net income
(loss) 83,000 (40,000 ) (29,000 )
The following table summarizes the activity of the Company's investment in AMIC:
2001 2000 1999
Beginning investment $ 652,000 $ 729,000 $ 693,000
Equity in income (loss) 83,000 (40,000 ) (29,000 )
Additional investments
(repayments) (208,000 ) (37,000 ) 65,000
Ending investment $ 527,000 $ 652,000 $ 729,000
13. FINANCIAL INSTRUMENTS
All financial instruments are held or issued for other than trading purposes.
Management used the following methods and assumptions to estimate the fair value of financial instruments:
Cash and cash equivalents: Because of the close proximity to maturity, the carrying value of cash and cash equivalents
approximates fair value.
Marketable Securities: The fair values of marketable debt and equity securities are based on quoted market prices.
Notes Receivable: For notes receivable, fair value is estimated by discounting future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Cash Surrender Value Life Insurance: Represents officer's life insurance policies recorded at their cash surrender value,
which approximates fair value.
Long and short-term debt: The carrying amounts of the borrowings under short-term revolving credit agreements approximate
its fair value. The fair value of long-term debt was estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
34
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Carrying Fair
Assets Amount Value
Cash and cash equivalents $ 7,341,000 $ 7,341,000
Short-term investments 5,000 5,000
Notes receivable, related
entities 527,000 527,000
Notes receivable, current and
long-term 597,000 597,000
Cash surrender value life
insurance 2,041,000 2,041,000
Liabilities
Long and short-term debt 5,005,000 5,005,000
14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
The following table sets forth unaudited quarterly financial information for the years ended July 28, 2001 and July 29,
2000:
First Second Third Fourth
July 28, 2001
Net revenues $ 16,525,000 $ 13,835,000 $ 12,786,000 $ 13,999,000
Gross profit 3,896,000 3,345,000 2,951,000 2,690,000
Operating income (loss) 430,000 (137,000 ) (497,000 ) (844,000 )
Income (loss) from continuing
operations 267,000 (143,000 ) (298,000 ) (397,000 )
Income (loss) from
discontinued operations, net of income
tax (238,000 ) (26,000 ) (1,000 ) 139,000
Net income (loss) 29,000 (169,000 ) (299,000 ) (258,000 )
Net income (loss) per common
share .01 (.06 ) (.11 ) (.09 )
July 29, 2000
Net revenues $ 14,178,000 $ 13,225,000 $ 14,525,000 $ 15,213,000
Gross profit 4,108,000 3,512,000 3,510,000 3,733,000
Operating income 967,000 695,000 301,000 606,000
Income from continuing
operations 588,000 415,000 197,000 302,000
Income (loss) from
discontinued operations, net of income
tax (25,000 ) (21,000 ) (33,000 ) (66,000 )
Net income 563,000 394,000 164,000 236,000
Net income per common share .20 .14 .06 .09
Reclassifications affecting cost of sales for certain employee benefit costs have been made to the prior quarters and prior
year amounts to conform with the current year presentation.
15. DISCONTINUED OPERATIONS
In August 2000, the Company adopted a plan to discontinue the operations of Rae-Print and operations ceased on April 28,
2001. This subsidiary generated revenues of approximately $2.0 million, $3.1 million, and $3.2 million and incurred
operating losses of approximately $41,000, $145,000, and $33,000 in fiscal 2001, 2000, and 1999, respectively. At July 28,
2001, receivables, inventory, and equipment with an estimated fair market value of $200,000 were included in accounts
receivable.
35
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16. SUBSEQUENT EVENTS
On August 28, 2001, the Company declared a cash dividend of $.05 cents per share of its Class A Common Stock payable on
September 28, 2001 to shareholders of record on September 14, 2001.
In September 2001, the U.S. Government notified the Company to increase the production levels of military combat boots as a
result of the deployment of American troops in the war against terrorism. The higher production levels represent an
approximate 60% increase over the quantities normally purchased by the U.S. Government under the existing contract.
On October 3, 2001, the Company's American West subsidiary purchased the Dan Post brand name and certain inventory from
Lucchese, Inc., a wholly owned subsidiary of Arena Brands, Inc., for approximately $2.6 million.
36
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17. OPERATING SEGMENT INFORMATION
The Company's principal operations have been classified into four business segments: bar code operations; office products;
printing and packaging; and footwear manufacturing. The bar code segment manufactures and sells bar code reading and related
printing devices and other products related to optical data collection to customers throughout the United States. The office
products segment sells, provides maintenance and leases Toshiba photocopiers, Toshiba facsimile machines, and RISO digital
duplicators, principally to customers in North Carolina and parts of Virginia and South Carolina. Machines, components, and
certain supplies sold by the office products segment are generally available only from Toshiba and RISO. The footwear
segment manufactures combat boots, military dress oxfords, and military safety boots for the U.S. Government and foreign
governments, and western and work boots for customers throughout the United States. The printing and packaging segment
provided print materials and packaging services for commercial and industrial customers, and was discontinued during fiscal
2001. Total consolidated revenues related to sales to the U.S. Government were 20% in 2001, 14% in 2000, and 14% in
1999. There were no significant inter-segment sales or transfers during 2001, 2000, and 1999. Operating profits by business
segment exclude allocated corporate interest income, income taxes, minority interest, and equity in net loss of
investee. Corporate assets consist principally of cash, short-term investments, certain receivables, and real estate held
for investment.
Western/
Military Work Office Corporate
(In Thousands) Boots Boots Bar Code Products Printing & Other Consolidated
For the
Year Ended
July 28, 2001
Net
Revenues $ 16,792 $ 9,371 $ 12,454 $ 18,640 $ 1,979 $ (112 ) $ 59,124
Earning
(loss) from
operations 3,406 (550 ) (1,933 ) (2,028 ) (65 ) 57 (1,113 )
Identif
assets 1,552 8,599 8,748 12,903 0 6,294 38,096
Capital
expenditures 25 118 47 993 0 12 1,195
Depreci
expense and
amortization 103 96 224 748 32 228 1,431
For the
Year Ended
July 29, 2000
Net
Revenues $ 12,395 $ 7,866 $ 16,422 $ 20,678 $ 3,071 $ (220 ) $ 60,212
Earning
(loss) from
operations 2,329 (542 ) (206 ) 1,038 (215 ) (52 ) 2,352
Identif
assets 2,381 5,791 11,159 15,462 1,523 6,385 42,701
Capital
expenditures 122 0 256 633 141 215 1,367
Depreci
expense and
amortization 108 213 168 751 29 256 1,525
For the
Year Ended
July 31, 1999
Net
Revenues $ 7,365 $ 6,402 $ 14,695 $ 19,846 $ 3,164 $ (19 ) $ 51,453
Earning
(loss) from
operations 1,316 (704 ) 146 721 (73 ) (72 ) 1,334
Identif
assets 2,130 5,828 9,169 15,157 1,955 5,712 39,951
Capital
expenditures 24 64 206 1,400 5 96 1,795
Depreci
expense and
amortization 119 318 181 653 25 270 1,566
37
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SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
McRAE INDUSTRIES, INC. AND SUBSIDIARIES
ADDITIONS
(1) (2)
DESCRIPTION BALANCE AT CHARGED TO CHARGED DEDUCTION BALANCE
BEGINNING COSTS AND TO OTHER DESCRIBE AT END OF
OF PERIOD EXPENSES ACCOUNTS PERIOD
DESCRIBE
Year ended July 28, 2001
Deducted from Assets
Accounts:
Allowance for Doubtful
Accounts $ 440,000 $ (251,000 ) $ 164,000 (1) $ 353,000
Employee Benefit Accrual 276,000 240,000 (277,000 )(2) 239,000
Health Insurance Accrual 250,000 -- -- 250,000
Allowance for contract
contingencies 426,000 224,000 -- 650,000
Year ended July 29, 2000
Deducted from Assets
Accounts:
Allowance for Doubtful
Accounts $ 561,000 $ (235,000 ) $ 114,000 (1) $ 440,000
Employee Benefit Accrual 250,000 262,000 (236,000 )(2) 276,000
Health Insurance Accrual 212,000 -- 38,000 (2) 250,000
Allowance for contract
contingencies -- 426,000 -- 426,000
Year ended July 31, 1999
Deducted from Assets
Accounts:
Allowance for Doubtful
Accounts $ 718,000 $ (233,000 ) $ 76,000 (1) $ 561,000
Employee Benefit Accrual 550,000 4,000 (304,000 )(2) 250,000
Health Insurance Accrual 192,000 -- 20,000 (2) 212,000
----------------------
(1) Uncollectible accounts written off
(2) Payments and/or expenses charged to operations
38
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE
None.
PART III
Items 10 through 13 are incorporated herein by reference to the sections captioned Principal Stockholders and Holdings of
Management; Election of Directors; Director Compensation; Executive Officers; Compensation Committee Interlocks and Insider
Participation; Certain Relationships and Related Transactions; Executive Compensation; Stock Performance Graph; Compensation
Committee Report; and Section 16 (a) Beneficial Ownership Reporting Compliance in the Registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held December 20, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Independent auditor's report McRae Industries, Inc. and Subsidiaries consolidated financial statements:
Consolidated Balance Sheets as of July 28, 2001 and July 29, 2000.
Consolidated Statements of Operations for the Years Ended July 28, 2001, July 29, 2000, and July 31, 1999.
Consolidated Statements of Shareholders' Equity for the Years Ended July 28, 2001, July 29, 2000, and July 31,
1999.
Consolidated Statements of Cash Flows for the Years Ended July 28, 2001, July 29, 2000, and July 31, 1999.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedule:
Schedule II
(3) Exhibits:
Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant's Form S-14, Registration
3.1 No. 2-85908)
Amendment to the Certificate of Incorporation (Incorporated by reference to Exhibit 3 to the Registrant's Form
3.2 10-K for the year ended August 1, 1987)
3.3 Restated Bylaws of the Registrant effective May 29, 2001 (filed herein). Pages 43-52.
39
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1985 McRae Industries, Inc. Non-Qualified Stock Option Plan (Incorporated by reference to Exhibit 10 to the
10.1 Registrant's Form 10-K for the fiscal year ended August 3, 1985).*
Technical Assistance Agreement dated September 13, 1984 between the Registrant and Ro-Search, Incorporated
10.2 (Incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-K for the fiscal year ended July 28, 1984)
Stock Purchase Agreement and Guaranty Agreement as of April 7, 1996 among Walter A. Dupuis, Kenneth O. Moore,
William Glover, and McRae Industries, Inc., was filed as Exhibit 2 to the Registrant's current report on Form 8-K
10.3 filed May 11, 1996 and is incorporated herein by reference.
Promissory Note, Security Agreement and Guaranty Agreement dated July 25, 1996 among American West Trading Company,
as borrower, The Fidelity Bank, as lender, and the Registrant, as Guarantor (Incorporated by reference to
10.4 Exhibit 10.5 to the Registrant's Form 10-K for the fiscal year ended August 3, 1996)
Deed of Trust between American West Trading Company and The Fidelity Bank, dated July 25, 1996 (Incorporated by
10.5 reference to Exhibit 10.6 to the Registrant's Form 10-K for the fiscal year ended August 3, 1996)
Security Agreement pertaining to inventory, accounts receivable and equipment between American West Trading Company
and The Fidelity Bank, dated July 25, 1996 (Incorporated by reference to Exhibit 10.7 to the Registrant's Form 10-K
10.6 for the fiscal year ended August 3, 1996)
Award/Contract between Defense Personnel Support Center and McRae Industries, Inc. dated April 15, 1997
10.7 (Incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended August 2, 1997)
McRae Industries, Inc. Incentive Equity Plan (Incorporated by reference to Exhibit 4 to the Registrant's Form S-8
10.8 dated January 6, 1999).*
Modification of Award/Contract between Defense Personnel Support Center and McRae Industries, Inc. dated May 1,
10.9 2001. (Filed herein). Pages 53-76.
21 Subsidiaries of the Registrant (Filed herein). Page 77.
23 Consent of Independent Auditors (Filed herein). Page 78.
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*Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K for the fiscal year ended July 28, 2001.
40
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
McRAE INDUSTRIES, INC.
/s/ D. Gary McRae
D. Gary McRae
Dated: October 26, 2001 By: President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE DATE
/s/ D. Gary McRae
D. Gary McRae
President, Treasurer, and Director
(Principal Executive Officer) October 26, 2001
/s/ George M. Bruton
George M. Bruton
Director October 26, 2001
/s/ Hilton J. Cochran
Hilton J. Cochran
Director October 26, 2001
/s/ Brady W. Dickson
Brady W. Dickson
Director October 26, 2001
/s/ Victor A. Karam
Victor A. Karam
President -- McRae Footwear and Director October 26, 2001
/s/ James W. McRae
James W. McRae
Vice President, Secretary, and Director October 26, 2001
/s/ Harold W. Smith
Harold W. Smith
Vice President -- McRae Office Solutions
and Director October 26, 2001
/s/ Marvin G. Kiser, Sr.
Marvin G. Kiser, Sr.
Controller
(Principal Financial and Accounting Officer) October 26, 2001
41
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EXHIBIT INDEX
Certificates of Incorporation (Incorporation by reference to Exhibit 3.1 to the Registrant's Form S-14, Registration
3.1 No. 2-85908)
Amendment to the Certificate of Incorporation (Incorporated by reference to Exhibit 3 to the Registrant's Form 10-K
3.2 for the fiscal year ended August 1, 1987)
3.3 Restated Bylaws of the Registrant effective May 29, 2001 (filed herein). Pages 43-52.
1985 McRae Industries, Inc. Non-Qualified Stock Option Plan (Incorporated by the reference to Exhibit 10 to the
10.1 Registrant's Form 10-K for the fiscal year ended August 3, 1985)
Technical Assistance Agreement dated September 13, 1984 between the Registrant and Ro-Search, Incorporated
10.2 (Incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-K for the fiscal year July 28, 1984)
Stock Purchase Agreement and Guaranty Agreement as of April 17, 1996 among Walter A. Dupuis, Kenneth O. Moore,
William Glover, and McRae Industries, Inc., was filed as Exhibit 2 to the Registrant's current report on Form 8-K
10.3 filed May 11, 1996 and is incorporated herein by reference.
Promissory Note, Security Agreement and Guaranty Agreement dated July 25, 1996 among American West Trading Company,
as borrower, The Fidelity Bank, as lender and the Registrant, as Guarantor (Incorporated by reference to
10.4 Exhibit 10.5 to the Registrant's Form 10-K for the fiscal year ended August 3, 1996)
Deed of Trust between American West Trading Company and The Fidelity Bank, dated July 25, 1996 (Incorporated by
10.5 reference to Exhibit 10.6 to the Registrant's Form 10-K for the fiscal year ended August 3, 1996)
Security Agreement pertaining to inventory, accounts receivable and equipment between American West Trading Company
and The Fidelity Bank, dated July 25, 1996 (Incorporated by reference to Exhibit 10.7 to the Registrant's Form 10-K
10.6 for the fiscal year ended August 3, 1996)
Award/Contract between Defense Personnel Support Center and McRae Industries, Inc. dated April 15, 1997
10.7 (Incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended August 2, 1997)
McRae Industries, Inc. Incentive Equity Plan (Incorporate by reference to Exhibit 4 to the Registrant's Form S-8
10.8 dated January 6, 1999)
Modification of Award/Contract between Defense Personnel Support Center and McRae Industries, Inc. dated May 1,
10.9 2001. (Filed herein). Pages 53-76.
21 Subsidiaries of the Registrant (Filed herein). Page 77.
23 Consent of Independent Auditors (Filed herein). Page 78.
42
EXHIBIT 3.3
RESTATED
BYLAWS
OF
MCRAE INDUSTRIES, INC.
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BYLAWS
OF
MCRAE INDUSTRIES, INC.
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ARTICLE I
OFFICES
Section 1.01. Principal Office. The principal office of
the Corporation shall be located in Mt. Gilead, Montgomery County, North
Carolina.
Section 1.02. Registered Office. The registered office of
the Corporation in the State of Delaware shall be established and maintained at
the office of The Corporation Trust Company, 100 West Tenth Street, in the City
of Wilmington, County of New Castle and such corporation shall be the
Registered Agent of the Corporation in charge thereof.
Section 1.03. Other Offices. The Corporation may have
other offices, either within or without the State of Delaware, at such place or
places as the Board of Directors may from time to time appoint or the business
of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Annual Meetings. Annual meetings of
shareholders for the election of directors and for the transaction of any
proper business shall be held on the third Thursday in December, or at such
other date as the Board of Directors in its discretion may determine, at the
principal office of the Corporation or at such other place, either within or
without the State of Delaware, as the Board of Directors by resolution shall
determine and as set forth in the notice of the meeting. If the annual meeting
of shareholders is not held on the date designated therefor, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
At each annual meeting the shareholders entitled to vote shall elect a Board of
Directors and transact such other corporate business as may properly be brought
before the meeting.
Section 2.02. Voting. Each holder of Class A and Class B
Common Stock shall be entitled to the voting rights granted to the holders of
the respective classes of stock by the Certificate of Incorporation. Each
shareholder shall be entitled to vote in person or by proxy, but no proxy shall
be voted after three years from its date unless such proxy provides for a
longer period. When a quorum is present at any meeting, any question brought
before such meeting shall be decided by the majority vote of the holders of the
shares of stock present in person or represented by proxy (with the holder of
each share entitled to one or one tenth vote as provided in the Certificate of
Incorporation or these Bylaws), unless the question is one upon which by
express provision of a statute, the Certificate of Incorporation or these
bylaws a different vote is required, in which case such express provision shall
govern and control the decision of such question. In cases where a class vote
is required by a statute, the Certificate of Incorporation or these Bylaws, any
question brought before such class at a meeting when a quorum of such class is
present shall be decided by the majority vote of the shareholders of such class
present in person or represented by proxy, unless the question is one upon
which by express provision of a statute, the Certificate of Incorporation or
these Bylaws a different vote is required, in which case such express provision
shall govern and control the decision of such question.
44
The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each
shareholder. Such list shall be open to the examination of any shareholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city or town where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
shareholder who is present.
Section 2.03. Quorum. At all meetings of shareholders,
except as otherwise required by statute or by the Certificate of Incorporation
and except in cases where a class vote is required by the express provision of
a statute, the Certificate of Incorporation or these Bylaws, the presence, in
person or by proxy, of the holders of a majority of the stock outstanding and
entitled to vote thereat (with each share of Class A Common Stock being counted
as one tenth of a share and each share of Class B Common Stock being counted as
one share) shall be requisite for, and shall constitute a quorum for, the
transaction of business. In cases where a class vote is required by a statute,
the Certificate of Incorporation or these Bylaws, the presence, in person or by
proxy, of a majority of the shares of the stock outstanding of a particular
class entitled to vote as a class shall be requisite for, and shall constitute
a quorum for, the transaction of business by that class. In case a quorum shall
not be present at any meeting, a majority in interest of the shareholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until the requisite amount of shares entitled to vote shall be
present or represented. At any such adjourned meeting at which the requisite
amount of shares entitled to vote shall be present or represented, any business
may be transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
Section 2.04. Special Meetings. Special meetings of the
shareholders for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
or the Secretary and shall be called by the President or the Secretary at the
request of the Board of Directors or at the request in writing of the holders
of a majority of the shares of stock outstanding and having voting power (with
each share of Class A Common Stock being counted as one tenth of a share and
each share of Class B Common Stock being counted as one share). Such request
shall state the purpose or purposes of the proposed meeting. Special meetings
may be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting.
Section 2.05. Notice of Meetings. Written notice, stating
the place, date and time of any meeting, annual or special, and, if a special
meeting, the purpose or purposes for which the meeting is called, shall be
given to each shareholder entitled to vote thereat, not less than ten nor more
than sixty days before the date of the meeting.
Section 2.06. Action Without Meeting. Any action required
to be taken at any annual or special meeting of shareholders, or any action
which may be taken at any annual or special meeting of the shareholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those shareholders who have not consented in writing.
45
ARTICLE III
DIRECTORS
Section 3.01. Number and Term. The number of directors of
the Corporation shall be seven and shall be elected as follows:
(i) So long as the number of issued and outstanding
shares of Class A Common Stock is equal to or greater than 10% of the
aggregate number of issued and outstanding shares of Class A and Class
B Common Stock and the number of issued and outstanding shares of
Class B Common Stock is equal to or greater than 350,000, the holders
of Class A Common Stock shall be entitled to elect two directors and
the holders of Class B Common Stock shall be entitled to elect five
directors.
(ii) If the number of issued and outstanding shares of
Class A Common Stock is less than 10% of the aggregate number of
issued and outstanding shares of Class A and Class B Common Stock and
the number of issued and outstanding shares of Class B Common Stock is
equal to or greater than 350,000, the holders of Class A and Class B
Common Stock will vote together for directors with each share of Class
A Common Stock being entitled to one tenth of a vote and each share of
Class B Common Stock being entitled to one vote.
(iii) If the number of issued and outstanding shares of
Class A Common Stock is equal to or greater than 10% of the aggregate
number of issued and outstanding shares of Class A and Class B Common
Stock and the number of issued and outstanding shares of Class B
Common Stock is less than 350,000, the holders of Class A Common Stock
shall be entitled to elect two directors and the holders of Class A
and Class B Common Stock will vote together to elect five directors
with each share of Class A Common Stock being entitled to one tenth of
a vote and each share of Class B Common Stock being entitled to one
vote.
(iv) If the number of issued and outstanding shares of
Class A Common Stock is less than 10% of the aggregate number of
issued and outstanding shares of Class A and Class B Common Stock and
the number of issued and outstanding shares of Class B Common Stock is
less than 350,000, the holders of Class A and Class B Common Stock
will vote together for directors with each share of Class A Common
Stock being entitled to one tenth of a vote and each share of Class B
Common Stock being entitled to one vote.
If the number of directors is changed, an increase or
decrease in the number of directors shall be apportioned between the Class A
and Class B Common Stock as provided by the Certificate of Incorporation.
Directors shall be elected at the annual meeting to serve for one year terms,
or until their respective successors are elected and qualified. Directors need
not be residents of the State of Delaware or shareholders.
Section 3.02. Resignation. Any director or member of a
committee may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein or, if no time be specified, at
the time of its receipt by the President or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
Section 3.03. Vacancies. Vacancies may be filled by a
majority of the directors then in office elected by the same class who elected
the director whose resignation, removal or death created the vacancy or if such
a director was elected by both classes voting together, by a majority of the
directors then in office, and said election shall be valid though the directors
voting shall be less than a quorum or a sole remaining director; and the
directors so choses shall
46
hold office only until the next meeting of shareholders at which directors are
elected and until their successors shall be elected and qualified.
Newly created directorships to be elected by a class may be
filled by a majority of the directors elected by such class or by a sole
remaining director so elected. Newly created directorships to be elected by
both classes voting together may be filled by the majority of the directors
then in office or by a sole remaining director. The directors so chosen shall
hold office only until the next meeting of shareholders at which directors are
elected.
In the event that a vacancy shall not have been filled by the
Board of Directors, the director may be elected by the shareholders entitled to
vote thereon, either at an annual meeting of shareholders or at a special
meeting called for the purpose. The director so chosen shall hold office until
the next meeting of shareholders at which directors are elected and until his
successor shall be elected and qualified.
Section 3.04. Removal. A director may be removed, with or
without cause, at any time by the holders of a majority of the shares of that
class of stock which elected the director then entitled to vote at an election
of directors. The vacancy created by such removal may be filled either at the
meeting of shareholders at which the director was so removed, or at any
subsequent meeting of shareholders or by the board of directors as provided in
Section 3.03 hereof if the shareholders have not previously filled the vacancy.
Section 3.05. Powers. The business and affairs of the
Corporation shall be managed by the Board of Directors, which may exercise all
the powers of the Corporation and do all lawful acts and things which are not
conferred upon or reserved to the shareholders by law, by the Certificate of
Incorporation or by these bylaws.
Section 3.06. Committees of the Board. The Board of
Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one or more committees, each committee to consist of two
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee and any alternate
members of such committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or the
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the shareholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the shareholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 3.07. Meetings. Meetings of the Board of
Directors shall be held at such place, either within or without the State of
Delaware, as the Board of Directors shall from time to time designate or as may
be specified in the notice of such meeting.
47
Special Meetings of the Board of Directors may be held at any
time upon the call of the President or Secretary. The person or persons calling
a special meeting of the Board of Directors shall, at least two days before the
meeting, give notice thereof by any usual means of communication, which notice
need not specify the purpose for which the meeting is called unless required by
a statute, the Certificate of Incorporation or these Bylaws.
Regular Meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors. The first meeting of a newly elected
Board of Directors shall be held without notice immediately after each annual
meeting of the shareholders at the same place at which such meeting was held,
provided a quorum is present. If a quorum is not present, such first meetings
may be held at such time and such place as shall be specified in a notice given
as herein provided for special meetings of the Board of Directors.
Organization. Each meeting of the Board of Directors shall be
presided over by the President, or in his absence or at his request, by any
person selected to preside by vote of a majority of the directors present. The
Secretary, or in his absence or at his request, any person designated by the
Chairman of the meeting, shall act as Secretary of the meeting.
Section 3.08. Quorum. Except as otherwise provided in
these Bylaws, not less than a majority of the total number of directors fixed
in accordance with Section 3.01 hereof shall constitute a quorum for the
transaction of business. If at any meeting of the Board of Directors there
shall be less than a quorum present, a majority of those present may adjourn
the meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned; provided, however, that if there is a vacancy on the Board which
may be filled pursuant to Section 3.03 hereof, no meeting will be adjourned for
lack of a quorum until the directors entitled to fill the vacancy have taken
action to fill the vacancy or decided to submit the matter to the shareholders.
The vote of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors unless a statute
or the Certificate of Incorporation shall require a vote of a greater number.
Section 3.09. Compensation. Directors shall not receive
any stated salary for their services as directors or as members of committees,
but by resolution of the Board of Directors a fixed fee and expenses of
attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity as an officer, agent or otherwise and
receiving compensation therefor.
Section 3.10. Action Without Meeting; Presence at
Meetings. Unless otherwise restricted in the Certificate of Incorporation, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
the members of the Board of Directors or the committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee.
Unless otherwise restricted by the Certificate of
Incorporation, members of the Board of Directors, or any committee designated
by such Board, may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear one another, and such
participation in a meeting shall constitute presence in person at such meeting.
48
ARTICLE IV
OFFICERS
Section 4.01. Officers. The officers of the Corporation
shall be the President, a Secretary and a Treasurer. The Board of Directors
also may elect one or more Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers. The officers shall be elected annually by
the Board of Directors at its first meeting following the annual meeting of
shareholders and shall hold office until their successors are chosen and have
qualified. Any number of offices may be held by the same person.
Section 4.02. Other Officers and Agents. The Board of
Directors may appoint such other officers and agents as may from time to time
appear to be necessary or advisable in the conduct of the affairs of the
Corporation, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors.
Section 4.03. Removal. Any officer may be removed with or
without cause at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office shall be filled for the
unexpired portion of the term by the Board of Directors.
Section 4.04. President. The President shall be the Chief
Executive Officer of the Corporation. The President shall have general and
active control of the Corporation's business, finances and affairs, subject to
the control of the Board of Directors. Except as may otherwise be provided by
the Board of Directors from time to time, the President shall have general
power to execute bonds, deeds, contracts, conveyances and other instruments in
the name of the Corporation and to affix the corporate seal; to appoint all
employees and agents of the Corporation whose appointment is not otherwise
provided for and to fix the compensation thereof subject to the provisions of
these Bylaws and as subject to the approval of the Board of Directors; to
remove or suspend any employee or agent who shall not have been appointed by
the Board of Directors; to suspend for cause, pending final action by the body
which shall have appointed him, any officer other than an elected officer, or
any employee or agent who shall have been appointed by the Board of Directors.
He shall have such further powers and duties as may be conferred on him by the
Board of Directors.
Section 4.05. Vice Presidents. The Vice Presidents, if
any, shall have such powers and perform such duties as may be respectively
assigned to them from time to time by the President. In the absence of the
President, or in the event of the inability of the President to act, the Vice
Presidents, if any, in the order of their annual election, shall authority to
exercise the power and perform the duties of the President.
Section 4.06. Treasurer. The Treasurer shall have the
care and custody of all the funds of the Corporation and shall receive, deposit
or disburse the same in such banks or other depositories as the Board of
Directors, or any officer or officers, or any officer and agent jointly, duly
authorized by the Board of Directors, shall, from time to time, direct or
approve. He shall disburse the funds of the Corporation under the direction of
the Board of Directors or the Chief Executive Officer. He shall keep a full and
accurate account of all monies received and paid on account of the Corporation
and shall render a statement of his accounts whenever the Board of Directors
shall require. He shall perform all other necessary acts and duties in
connection with the administration of the financial affairs of the Corporation
and shall generally perform all the duties usually appertaining to the office
of treasurer of a corporation. When required by the Board of Directors, he
shall give bonds for the faithful discharge of his duties in such sums and with
such sureties as the Board of Directors shall approve.
49
Section 4.07. Secretary. The Secretary shall attend all
meetings of the Board of Directors and the shareholders and shall record all
votes and the minutes of all proceedings in a book to be kept for that purpose
and shall, when requested, perform like duties for all committees of the Board
of Directors. He shall attend to the giving of notice of all meetings of the
shareholders and, if notice is required, of meetings of the Board of Directors
and of committees thereof; he shall have custody of the corporate seal and,
when authorized by the Board of Directors, shall have authority to affix the
same to any instrument and, when so affixed, it shall be attested by his
signature or by the signature of the Treasurer or an Assistant Secretary or an
Assistant Treasurer. He shall keep the account for all books, documents,
papers, and records of the Corporation, except those for which some other
officer or agent is properly accountable. He shall generally perform all the
duties appertaining to the office of secretary of a corporation. In the absence
of the Secretary and any Assistant Secretaries, such person as shall be
designated by the Chief Executive Officer shall perform his duties.
Section 4.08. Assistant Secretaries. Each Assistant
Secretary shall perform such duties and have such powers as may from time to
time be assigned to him by the Board of Directors, President or Secretary. In
the absence or disability of the Secretary, his duties shall be performed and
his powers may be exercised by the Assistant Secretary or the Assistant
Secretaries in the order determined by the Board of Directors or, failing such
designation, in the order of their last election to that office.
Section 4.09. Assistant Treasurers. Each Assistant
Treasurer shall perform such duties and have such powers as may from time to
time be assigned to him by the Board of Directors, President or Treasurer. In
the absence of disability of the Treasurer, his duties shall be performed and
his powers may be exercised by the Assistant Treasurer or the Assistant
Treasurers in the order determined by the Board of Directors or, failing such
designation, in the order of their last election to that office.
Section 4.10. Compensation. The Board of Directors shall
have the power to fix the compensation of all officers of the Corporation.
ARTICLE V
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 5.01. Certificates of Stock. The shares of stock
of the Corporation shall be represented by certificates in such form as shall
be determined by the Board of Directors and shall be signed by the President or
a Vice President and the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and shall be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers may be facsimiles if the
certificate is countersigned by a Transfer Agent or registered by a Registrar
other than the Corporation or its employee. In case any officer who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer at the date
of issue.
Section 5.02. Transfer Agents and Registrars. The Board
of Directors may, in its discretion, appoint one or more banks or trust
companies in such city or cities as the Board of Directors may deem advisable,
from time to time, to act as Transfer Agents and Registrars of the shares of
stock of the Corporation; and, upon such appointments being made, no
certificate representing shares shall be valid until countersigned by one of
such Transfer Agents and registered by one of such Registrars.
50
Section 5.03. Lost Certificates. In case any certificate
representing shares shall be lost, stolen or destroyed, the Board of Directors,
or any officer or officers authorized by the Board of Directors, may authorize
the issue of a substitute certificate in place of the certificate so lost,
stolen or destroyed, and, if the Corporation shall have a Transfer Agent and
Registrar, may cause or authorize such substitute certificate to be
countersigned by the appropriate Transfer Agent and registered by the
appropriate Registrar. In each such case, the applicant for a substitute
certificate shall furnish to the Corporation and to such of its Transfer Agents
and Registrars as may require the same, evidence to their satisfaction, in
their discretion, of the loss, theft or destruction of such certificate and of
the ownership thereof, and also such security or indemnity as may by them be
required.
Section 5.04. Transfer of Shares. Transfers of shares
shall be made on the books of the Corporation only by the person named in the
certificates or by his attorney lawfully constituted in writing, and upon
surrender and cancellation of a certificate or certificates of a like number of
shares, with duly executed assignment and power of transfer endorsed thereon or
attached thereto, and with such proof of the authenticity of the signatures as
the Corporation or its agents may reasonably require.
Section 5.05. Shareholders Record Date. In order that the
Corporation may determine the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjournment meeting.
Section 5.06. Registered Shareholders. The Corporation
shall be entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends and other distributions,
and to vote as such owner, and to hold liable for calls and assessments the
person registered on its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE VI
GENERAL PROVISIONS
Section 6.01. Dividends. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of funds legally
available therefor, at any regular or special meeting declare dividends upon
the capital stock of the Corporation as and when they deem expedient. Before
declaring any dividends there may be set apart, out of any funds of the
Corporation available for dividends, such sum or sums as the directors from
time to time in their discretion deem proper for working capital or as a
reserve fund to meet contingencies or for equalizing dividends or for such
other purposes as the directors shall deem conducive to the interests of the
Corporation; and in its discretion the Board of Directors may decrease or
abolish any such reserve.
Section 6.02. Seal. The corporate seal shall be circular
in form and shall contain the name of the Corporation, the year of its
organization and the words "CORPORATE SEAL, DELAWARE." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
51
Section 6.03. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 6.04. Checks. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers, agent
or agents of the Corporation and in such manner as shall be determined from
time to time by resolution of the Board of Directors.
Section 6.05. Execution of Proxies. The President, or in
the absence or disability of the President, a Vice President, may authorize
from time to time the signature and issuance of proxies to vote upon shares of
stock of other corporations standing in the name of the Corporation or
authorize the execution of consents to action taken or to be taken by such
other corporation. All such proxies and consents shall be signed in the name of
the Corporation by the President or a Vice president and by the Secretary of an
Assistant Secretary.
Section 6.06. Notice and Waiver of Notice. Whenever any
notice is required to be given under the provisions of any law, of the
Certificate of Incorporation or of these Bylaws, personal notice is not meant
unless expressly so stated, and any notice so required shall be deemed to be
sufficient if given by depositing the same in the United States mail, postage
prepaid, addressed to the person entitled thereto at his address as it appears
on the records of the Corporation, and such notice shall be deemed to have been
given on the day of such mailing. Notice to directors may also be given by
telex, cable or telegram, and such notice shall be deemed to have been given on
the day that it is sent. Shareholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatever is required to be given under
the provisions of any law or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended or repealed, and new
Bylaws may be adopted, by the shareholders or, so long as such power is
conferred upon the Board of Directors by the Certificate of Incorporation, by
the Board of Directors, at any regular meeting of the shareholders or of the
Board of Directors or at any special meeting of the shareholders or of the
Board of Directors if notice of the proposed alteration, amendment, repeal or
adoption be contained in the notice of such special meeting.
52
EXHIBIT 10.9
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT PAGES
OF PAGES
1 of 21
1. CONTRACT ID CODE
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE
POOOO 16 May 1, 2001
4. REQUISITION/PURCHASE RED. NO. 5. PROJECT NO.
6. ISSUED BY
DEFENSE SUPPLY CENTER, PHILADELPHIA
700 ROBBINS AVENUE
PHILADELPHIA, PA 19111
MARY MARKER, DSCP-CRFA (215) 737-5825
7. ADMINISTERED BY (If other than Item & 6)
DCMD, ATLANTA CODE: S11031
805 WALKER STREET
MARIETTA, GA 30060
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and Zip Code)
MC RAE INDUSTRIES, INC.
P.O. BOX 1239
MT. GILEAD, N.C. 27306
CODE: 3A059 FACILITY CODE
[X] 9A. ADMENDMENT OF SOLICITATION NO.
9B. DATED (See ITEM 11)
[X] 10A. MODIFICATION OF CONTRACT/ORDER NO.
SPO 100-97-D-0326
10B. DATED (SEE ITEM 13)
15 APRIL 1997
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
The above numbered solicitation is amended as set forth in Item 14. The hour
and date specified for receipt of Offers [ ] is extended [ ] is not extended
Offer must acknowledge receipt, of this amendment prior to the hour and date
specified in the solicitation or as amended, by one of the following methods:
(a) By completing Items 8 and 15, and returning ____ copies of the amendment;
(b) By acknowledging receipt of this amendment an each copy of the offer
submitted; or (c) By separate letter or telegram which includes a reference to
the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE
RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR
AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. It by virtue of this
amendment you desire to change an offer already submitted, such change may he
made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour
and date specified.
12. Accounting and Appropriation Data (If required) ___________________________
ITEM: BOOTS, VARIOUS TYPES TG: 97X4930.5CT0 01 26.0 S33150
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
[X] A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE
CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN
ITEM 10A.
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE
ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation data, etc). SET FORTH IN ITEM 14, PURSUANT TO THE
AUTHORITY OF FAR 43.103(b).
X C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
MUTUAL AGREEMENT OF PARTIES - IMPLEMENTATION OF BILL AND HOLD
D. OTHER (Specify type of modification and authority)
E. IMPORTANT: Contractor [ ] is not
[X] is required m sign this document and return
1 copies to the issuing office
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UFC section headings,
including solicitation/contract subject matter where feasible.)
See the following Pages 1A thru 21
Except as provided herein, all terms and conditions of the document referenced
in Item 9A or 10A, as heretofore changed, remains unchanged and in full force
and effect.
53
15A. NAME AND TITLE OF SIGNER (Type or print)
Victor A. Karam President 4/26/01
15B. CONTRACTOR/OFFICER 15C. DATE SIGNED
4-26-01
16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
SCOTT REIFSNYDER
16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
5-1-01
BY:
(SIGNATURE OF CONTRACTING OFFICER)
NSN 7540-01-152-9070
PREVIOUS EDITION UNUSABLE
PERFORM (DL A1
STANDARD FORM 30 (REV. 1083)
Prescribeb by GSA
FAR (48 CFR) 53.243
54
SPO100-97-D-0326 Page 1A
McRae Industries, Inc. Modification P00016
A. In lieu of Depot/DVD initiatives stated in the contract, the
contractor shall begin a Bill and Hold initiative as outlined in the attached
Statement of Work. The target effective date for the processing of MRO's under
Bill and Hold is on or around I June 2001.
B. Under Bill and Hold the Government will issue a Delivery Order and the
contractor will produce the item and "ship it into inventory" in their own
storage facility. All shipments under this contract, unless otherwise directed,
shall be made directly to the contractor's storage facility. Upon Inspection
and Acceptance by the Government QAR, shipment shall be made to the storage
facility. The RIC Code shall be SEJ and the DODAAC shall be SC0106.
C. The address of the contractor's storage facility is as follows:
McRae Footwear Distribution Warehouse Facility
1737 Highway 24/27 West
Troy, NC 27271
D. Once shipment is made, receipt shall be posted in the automated system
via a material receipt (D4S) transaction. The D4S will post the stock on DSCP's
records against the contractor's RIC code. See Appendix B-20, Material Receipt
Transaction, Page 18 of this modification.
E. As requisitions are received from customers, a material release order
will be sent to the contractor. This transaction will outline the stock number,
quantity and location to ship. See Appendix B-7, Material Release Order/MRO
Transmittal Data Document, Page 16 of this modification.
F. The Government will begin to issue MROS on or around 1 June 2001.
G. Delivery Orders will be issued at intervals throughout the effective
period of the contract and will reflect sizes/quantities necessary to satisfy
the Government's requirements. Production Leadtime for the Delivery Orders
shall be 60 days.
H. When stock is shipped from storage, the contractor will send a
material release confirmation (ARO) transaction to DSCP, which will post the
shipment to DSCP's record See Appendix B-14, Material Release/Redistribution
Order Confirmation Document, Page 21 of this modification.
I. The software package DAMES (DAASC Automated Message Exchange System)
shall be provided to the contractor from Defense Automatic Addressing System
Center, Wright Patterson AFB) at no cost to support these transactions. The
DAMES package can be requested by contacting Wilma Blackman (937) 656-3788.
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SPOI00-97-D-0326 Page 1B
McRae Industries, Inc. Modification P00016
J. The transportation costs as outlined in the contract that are included
in the present contract prices shall be removed and the Transportation
Reconciliation Clause will no longer apply as it is currently stated in the
contract. The transportation costs associated with the contractor's MRO
shipments will be invoiced in accordance with Section 3.4.10 of the Statement
of Work, Transportation Costs. In accordance with SUBJECT SECTION, MRO
TRANSACTION CLIN WILL BE ESTABLISHED ON DELIVERY ORDERS as follows:
CLIN 9999AA MRO Transportation
K. As a result of the above the unit prices under subject contract are
hereby changed as follows:
CURRENT DECREASE BILLABLE
ITEM PRICE (-TRANS COST) PRICE*
---- ----- ------------- ------
Boot, Hot Weather $60.0362 $1.25 $58.7862
Boot, Desert Tan $60.5305 $1.25 $59.2805
Boot, Combat $69.6977 $1.25 $68.4477
* This is the billable price which will appear on the DD 250'S. The MRO
transportation cost of $1.25 per unit will be billed on a monthly basis as a
separate line item after units are shipped to customers (MRO shipments).
L. Due to the fact that we are changing the mode of operation hereunder,
under the Vendor Enhanced Storage Concept, contractor is entitled to
Distribution Fee for that quantity stored under Delivery Order 0001. Funds will
be obligated via a modification to an existing Delivery Order to reimburse
contractor the Distribution Fee minus Transportation Costs for the entire VEST
quantity.
$3.2963 (Dist Fee) - $1.25 (Trans Cost) -- $2.0453 x 29,332 Pair
(VEST qty) - $60,022.07
M. Reference Page 64 of the solicitation portion of above cited contract
- Transportation Cost Reconciliation (DVD). This clause is hereby deleted for
the Bill and Hold Portion of subject contract and the following clause is
hereby substituted:
TRANSPORTATION COST RECONCILIATION (BILL AND HOLD): In accordance with
Paragraph 3.4.10 Transportation Costs of the Bill and Hold Statement of Work,
$1.25 per pair has been established for Contractor's monthly invoicing for the
MRO "Transportation Cost on the actual number of MRO units shipped during the
previous month (Clin 9999AA). It is agreed that this amount will be adjusted on
a quarterly basis utilizing the actual transportation costs experienced and
documented by the contractor and reported to the Administrative Contracting
Officer on a quarterly basis. The Administrative Contracting Officer shall make
the necessary adjustment no later than fifteen (15) days after the receipt of
the contractor's quarterly transportation report.
N. All other terms and conditions rernain the same.
O. This document contains the complete agreement of the parties. There
are no collateral agreements, reservations, or understandings other than
expressly set forth herein. It is agreed that no subsequent modification of
this agreement shall be binding unless reduced to writing and signed by both
parties.
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SP0100-97-D-0326 Page 2
McRae Industries, Inc. Modification P00016
BILL AND HOLD STATEMENT OF WORK - PREFACE
Under Bill and Hold, the contractor will receive a Delivery Order with specific
items and quantities and a schedule of shipments that the contractor will make
directly to their own storage facility. The contractor produces the items
according to schedule, and upon Inspection and Acceptance by the Government
QAR, shipment shall be made to the contractor's own storage facility. All
Delivery Order shipments under this contract, unless otherwise directed, shall
be made directly to the contractor's own storage facility.
The contractor is required to send and receive electronic transactions, using
various transaction Document Identifier Codes (DICs) in specific 80 card column
formats, through the DAMES software (see below) to and from DSCP's automated
system SAMMS.
Once a shipment has been placed into inventory (received) at the contractor's
storage facility, SAMMS receipt transactions (DI( D4S) shall be transmitted by
the contractor (via DAMES) to DSCP. The D4S transactions will post the stock to
the National Inventory Record (NIR) against the contractor's Routing Identifier
Code (RIC, to be assigned to the Bill & Hold contractor). Attachment 3,
Materiel Receipt Transaction, which follows the Bill and Hold Statement of
Work, details the 80 card column file layout for this transaction.
At this point, the contractor can invoice the Payment Office for payment using
a DD Form 250.
The customer submits their order to DSCP in the form of a requisition
(typically an AOA transaction). SAMMS in turn generates Materiel Release Order
(MRO, typically an A5A transaction) to the Bill & Hold contractor ordering
shipment to the customer. This transaction will outline the stock number,
quantity, and customer's address. Attachment 1, Materiel Release Order
Document, which follows the Bill and Hold Statement of Work, details the file
layout for this transaction.
In addition, the contractor may be required to ship materiel to a wholesale
distribution facility (depot site) upon receipt of a Redistribution Order (RDO,
an A2A transaction). Attachment 5, Redistribution Order, which follows the Bill
and Hold Statement of Work, details the 80 card column file layout for this
transaction.
The Government can begin to issue Materiel Release Orders and/or Redistribution
Orders to the Bill and Hold contractor immediately upon receipt of the first
shipment (posting of the first shipment to the NIR).
A MRO is a line of data, in 80 card column format, such as the following:
1 2 3 4 5 6 7 8
12345678901234567890123456789012345678901234567890123456789012345678901234567890
----------------------------------------------------------------------------------
A5ASGZS8405014500074 EA00001W814A291070001NSC0109BXP 7536421S9TAA 0000324
Important fields:
1-3 A5A Document Identifier Code. Identifies the transaction as a MRO.
4-5 SGZ Routing Identifier Code. Three digit code that electronically routes the transaction to the
Bill & Hold contractor.
8-20 8405014500074 National Stock Number (NSN) of the item ordered.
23-24 EA Unit of Issue code corresponding to the NSN.
25-29 00001 Quantity being ordered.
30-43 W814A291070001 Requisition Number
(also referred to as the Document
Number). Positions 30 through 35
indicate the customer's six digit
DoDAAC, or Department of Defense
Activity Address Code.
45-50 SCO109 Supplementary Address (also a DoDAAC).
51 B Signal Code. If a Signal Code is A, B, C, or D, ship to the requisitioner (DaDAAC in first
six digits of the requisition number, which is card columns 30-35). If the Signal Code is J,
K, L, or M, ship to the Supplementary Address (DoDAAC in card columns 45-50).
60-61 15 Priority Code. Indicates the urgency of the customer's order. The lower the number, the
57
SP0100-97-D-0326 PAGE 3
McRae Industries, Inc. Modification P00016
more urgently the order is needed.
62-64 364 Required Delivery Date. The julian date by which the customer requires delivery of the
item(s).
Note that on the MRO Transmittal Document the customer will have sometimes
filled in the Standard Unit Prices for the item in col. 74-80. These prices are
not the same as the contract prices and do not affect the prices under the
contract.
Upon receipt of the MRO or RDO, the Bill and Hold contractor pulls the order
quantity from inventory and ships to the customer or other distribution
facility (the second type of delivery on this contract). A packing slip is used
with this type of shipment, not a DD 250. A set transportation cost will be
used as set forth in the contract, and the set shipping costs will be
reconciled against actual costs on a quarterly basis.
Immediately after the stock is shipped from storage, the contractor will
electronically send a materiel release confirmation, ARO transaction, to DSCP,
which will post the shipment to DSCP's records. Attachment 2, Materiel
Release/Redistribution Order Confirmation Document, which follows the Bill and
Hold Statement of Work, details the file layout for this transaction.
The current software package that enables the contractor to send/receive these
three transactions is called DAMES (DAASC Automated Message Exchange System).
It will be provided to the awardee (from Defense Automated Addressing System
Center located at Wright Patterson AFB, OH) at no cost to allow the electronic
exchange of these transactions.
Any transportation costs involved with shipping the items to the contractor's
own storage facility should be included in the item's unit price based on FOB
Destination. The transportation costs associated with the contractor's MRO
shipments to customers will be invoiced and paid in accordance with Section
3.4.10 of the Statement of Work, Transportation Costs.
The award unit prices are the billable prices which will appear on the DD250s.
The MRO transportation costs will be billed weekly or monthly as a separate
line item only after units are shipped to customers (MRO shipments).
58
SP0100-97-D-0326 PAGE 4
McRae Industries, Inc, Modification P00016
BILL AND HOLD
STATEMENT OF WORK
1. GENERAL OVERVIEW
1.1 SCOPE OF WORK. This Statement of Work (SOW) establishes the scope of
work and accountability for the Bill and Hold initiative with the Defense
Supply Center Philadelphia (DSCP) Clothing and Textiles Directorate. It
describes facilities, personnel, and equipment that shall be used in the
performance of this contract, as well as the Government's expected performance
or work. The contractor shall furnish all facilities, personnel, supervision,
equipment, tools, supplies, services, and materials required to perform the
work outlined herein.
1.2 GOVERNMENT EXPECTATIONS. The Contractor shall ship Delivery Order
requirements as designated in the contract to their own storage facility. The
Contractor shall provide for warehouse materiel handling, storage, packaging,
and distribution of the stored supplies. The contractor shall utilize a
warehouse facility that conforms to commercially acceptable standards. Upon
receipt of automated, written or authorized verbal Materiel Release Order (MRO)
or Redistribution Order (RDO), the contractor shall determine availability;
verify quantity, nomenclature, unit of issue; and process the MRO or RDO for
shipment of materiel to the DSCP customer o wholesale distribution facility.
The Contractor shall store, stack and palletize items considering package size,
shape, weight, quantity, and potential for degradation in storage. The
Contractor shall ensure that items are properly packed, marked, tagged, and
labeled for shipment to various locations worldwide. The Contractor shall
report status of available items, receipts (customer returns), and outbound
shipment status on a daily basis into an automated system. Warehousing and
distribution procedures shall be performed at a level of competency and
responsibility which will require minimum Government direction.
DISTRIBUTION SITE STORAGE FACILITY
FILL-IN
------------------------- -------------------------
1.3 PERSONNEL. The Contractor shall provide all of the necessary, fully
qualified personnel required to accomplish all contract work within the
timeframes established in this SOW. The Contractor shall provide a Contract
Manager and an alternate who shall be responsible to oversee contract
performance and shall act as the point of contact with the Government. The
names, titles, and telephone numbers of the Contract Manager and alternate
shall be designated in writing to the PCO within a eek after this contract
award/modification. The Contract Manager or alternate shall be available during
normal operating hours s specified in Section 1.4.1 for telephonic or personal
contact with the PCO. The contractor shall notify the PCO within 48 hours of
any changes to the Contract Manager or alternate. Written notification should
follow the verbal notification within 7 business days.
1.4 HOURS OF OPERATION
1.4.1 NORMAL OPERATING HOURS. The Contractor is required to provide
all of the services under this contract during the Contractor's normal
operating hours, except for National holidays as specified below. Normal
operating hours shall be at least 40 hours per week, 8 hours per day, and shall
be consecutive hours between the time period of 6:00 A.M. through 5:30 P.M.
Where National holidays listed below are not observed by the Contractor and
business is transacted with the general public, such shall be considered normal
operating days.
New Year's Day Martin Luther King's Birthday
President's Day Memorial Day
Independence Day Labor Day
Columbus Day Veteran's Day
Thanksgiving Day Christmas Day
1.4.2 EMERGENCIES/MOBILIZATION. During emergency situations and/or
military mobilization situations, the Contractor may be required to provide
services beyond their normal operating hours, on weekends and holidays. The
Contractor must receive authorization from the PCO prior to providing this
service. Extra services provided without PCO authorization shall be the
responsibility of the Contractor and will not be reimbursed.
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SP0100-97-D-0326 PAGE 5
McRae Industries, Inc. Modification P00016
1.5 CONFLICT OF INTEREST. The Contractor shall not employ any employee of
the United States Government or the Department of Defense, either military or
civilian, if such employment would create a conflict of interest. The
Contractor shall not employ any person who is an employee of the Department of
Defense unless such person receives prior approval in writing from the PCO.
1.6 DISCLOSURE OF INFORMATION
1.6.1 AUTHORITY TO DISCLOSE INFORMATION. Performance under this
contract may require the Contractor to access data and information proprietary
to a Government Agency or of such nature that its dissemination or use other
than as specified in this work statement would be adverse to the interests of
the Government or others. Neither the Contractor, nor contractor personnel,
shall divulge or release data or information developed or obtained under this
work statement or obtained during the performance of the contract, except to
authorized Government personnel or upon written approval of the PCO. The
Contractor shall not use, disclose, or reproduce proprietary data which bears a
restrictive legend, other than as specified in this work statement.
1.6.2 INQUIRIES. The Contractor shall direct to the PCO all
inquiries, comments, or complaints arising from matters observed, experienced
or learned as a result of, or in connection with the performance of this
contract, when the resolution of such may require the dissemination of official
information.
1.6.3 FREEDOM OF INFORMATION ACT (FOIA). Inquiries received by the
Contractor for work performed under this contract shall be referred to the
Government for evaluation under the Freedom of Information Act of 1975, Public
Law 93-5-2, 5 U.S.C., Section 552. The determination of whether, records will
be released will remain with the PCO. The Contractor shall be responsible for
search and submission of records upon request by the Government.
2. DEFINITION OF TERMS
2.1 ADMINISTRATIVE CONTRACTING OFFICER (ACO): A Government Contracting
Officer located at a contract administration office who is assigned the
responsibility for the administration of Government contracts and having the
authority, only as delegated by the Contracting Officer, to bind the Government
contractually, either verbally or in writing, or to enforce and! make changes
to the contract terms and conditions.
2.2 BUSINESS DAY: A 24 hour period, from Monday through Friday, excluding
weekends and National holidays as specified in Section 1.4.1.
2.3 CONTRACTING OFFICER (KO) OR PROCUREMENT CONTRACTING OFFICER (PCO): A
Government official having the sole authority to bind the Government
contractually, either verbally or in writing, to enforce and make changes to
the contract terms and conditions.
2.4 CONTRACTING OFFICER'S REPRESENTATIVE (COR): An individual designated
in writing by the Contracting office to perform specific contract
administration functions. This individual has no authority to enter into or
change existing U.S. Government contracts.
2.5 CONTRACTOR: An entity in private industry which enters into contract
with the Government to provide goods or services.
2.6 CONTRACTOR FURNISHED PROPERTY (CFP): Standard items hardware,
electrical equipment, and other standard production or commercial items
furnished by a prime contractor as materiel required to perform the contract.
2.7 DEFECT: Any nonconformance of a unit of service with specified
requirements.
2.8 DISCREPANCY IN SHIPMENT REPORT (DISREP), SF 361: A Standard Form used
to report shipping discrepancies.
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McRae Industries, Inc. Modification P00016
2.9 CLOTHING & TEXTILES' EMERGENCY SUPPLY OPERATIONS CENTER (ESOC): An
organization within the Defense Supply Center Philadelphia which provides
heightened management of high priority requisitions.
2.10 FISCAL YEAR (FY): A U.S. Government year which begins 1 October and
ends 30 September (12 months).
2.11 GOVERNMENT OWNED PROPERTY (GOP): All equipment, goods, and land
possessed by the Government and, subsequently, delivered or otherwise made
available to the contractor.
2.12 ISSUE PRIORITY DESIGNATOR (IPD): A two digit numeric code which
indicates the priority for handling materiel based on the mission and need of
the requiring activity. The IPD is a subset of IPG. See definition of
"PRIORITY" below.
2.13 ISSUE PRIORITY GROUP (IPG): A one digit numeric code (1,2,or 3) which
indicates priority for handling materiel based on mission and need of the
requiring activity.
2.14 MATERIEL ACQUISITION UNIT COST (MAUC): The average acquisition cost of
a National Stock Numbered (NSN) item in the Standard Automated Materiel
Management System's (SAMMS) Supply Control File.
2.15 MATERIEL INSPECTION AND RECEIVING REPORT, FORM DD250: A multi-purpose
Department of Defense form which serves as evidence of inspection and
acceptance, a shipping document, a contractor release, and/or contractor
invoice.
2.16 MATERIEL RELEASE ORDER (MRO): An order issued by an accountable supply
system manager directing a distribution activity (in this case, the Bill & Hold
contractor) to release and ship materiel to a DSCP customer.
2.17 NATIONAL STOCK NUMBER (NSN): The Government stock number which
identifies a particular item type and size. Equivalent to a model number or SKU
number in commercial items.
2.18 PERFORMANCE INDICATOR: A characteristic of an output of a work process
that can be measured.
2.19 PILFERABLE ITEM: Items which are vulnerable to theft because of their
ready resale potential.
2.20 PRIORITY: A customer's Issue Priority Designator (IPD: the two digit
numeric found in card columns 60 through 61 of standard 80 card column
requisition document) and RDD most affect delivery of an order. Issue Priority
Designators can range from 01 through 15. An Issue Priority Designator (IPD) 01
identifies the highest priority order. An IPD of 15 identifies the lower
priority order. Contractors should consult the Statement of Work for the
delivery time frames associated with a specific Issue Priority Designator (IPD)
2.21 PROJECT CODES: This is a 3 digit alphanumeric code such as 9BU or 9FF
found in card columns 67 through 59 of standard 80 card column requisition
document. Project Codes are assigned by the military services or Defense
Logistics Ager (DLA) to identify specific programs or purposes for which
materiel is required. A requisition document with a Project Code, a high issue
priority designator (IPD), and an RDD should be processed before any other
order. A requisition document with a Project Code but no RDD should be
processed in accordance with the IPD.
2.22 QUALITY ASSURANCE: Those actions taken by the Government to assure
that the quality of purchased goods and services received are acceptable in
accordance with established standards and requirements of the contract.
2.23 QUALITY ASSURANCE PLAN: A written document used by the Government for
quality assurance surveillance. The document contains specific methods to
perform surveillance of the Contractor's performance.
2.24 QUALITY ASSURANCE REPRESENTATIVE (QAR): A Government representative
responsible for performing surveillance and inspection of Contractor
performance.
2.25 QUALITY CONTROL: Those actions taken by the Contractor to control the
production of goods or services so that the meet the requirements of the
contract.
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2.26 REDISTRIBUTION ORDER (RDO): An order issued by an accountable supply
system manager directing a distribution activity (in this case, the Bill & Hold
contractor) to release and ship materiel to another DSCP wholesale distribution
facility.
2.27 REQUIRED DELIVERY DATE (RDD): A Julian date in card-columns 62 through
64 of a standard 80 card column requisition document identifies the julian date
the ordering activity needs the item delivered. A 777, 999, N01, N02, or N03 in
these card columns indicates that the customer has authorized air shipment. On
very large and costly bulk orders for which the ordering activity has
authorized air shipment, contractors should verify the requirement with DSCP
prior to taking action.
2.28 STATEMENT OF WORK (SOW): Contains the full description of services to
be provided by the contractor under this contract in addition to providing the
required supplies and the terms and conditions of the contract.
2.29 TRANSPORTATION DISCREPANCY REPORT, FORM SF361 : A standard form used
by a customer to report to an accountable supply system manager discrepancies
in shipments/transportation.
3. CONTRACTOR TASKS
3.1 GENERAL. After manufacturing the item in accordance with the
specification or commercial item description and the contract, the Contractor
shall provide for warehouse materiel handling, storage, packaging, and
distribution of the manufactured suppliesin support of the Defense Supply
Center Philadelphia (DSCP) in accordance with this statement of work. Normal
operating hours are listed in Section 1.4.1. After manufacturing the item, the
Contractor shall perform the following major activities:
- RECEIVE SHIPMENT
- STORE MATERIEL
- SHIP MATERIEL RELEASE ORDERS TO NUMEROUS LOCATIONS
- SHIP REDISTRIBUTION ORDERS TO VARIOUS LOCATIONS
- PROCESS EMERGENCY ORDERS
- PERFORM ADMINISTRATIVE FUNCTIONS
- PREPARE AND SUBMIT REQUIRED REPORTS
- PERFORM SCHEDULED AND REQUESTED INVENTORIES
3.2 RECEIPT OF SHIPMENT INTO STORAGE
3.2.1 GENERAL. The Contractor shall make shipments as required to
their own storage facility after the manufactured items have been inspected and
accepted by the Government QAR. Once accepted and approved for `shipment', the
Contractor shall notify DSCP of 'receipt' of the inventory through the
automated system. This is accomplished by transmitting D4S transactions via
DAMES to DSCP as outlined in the attached Attachment 3.
3.2.2 PROCESSING RECEIVING REPORTS AND RELATED DOCUMENTATION.
Timely and efficient receipt processing is critical to maintaining accurate
inventory records. The Contractor shall process all receiving reports the same
day they place the 'received' materiel into inventory at their storage
facility. The Contractor shall maintain appropriate management control over
receipt procedures to maintain the integrity of inventory. The Contractor shall
process all receipts in accordance with the Document Identifier Codes (DIC)
provided in the attached Appendix A-13.
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3.2.3 CONTRACTOR RECORDS RETENTION. The Contractor shall make
available books, records, documents, and other supporting evidence to satisfy
contract negotiation, administration, and audit requirements of the contract
unless specified otherwise for certain records. Copies of the shipment DD250s
shall be maintained IAW this paragraph and furnished to the PCO within one
business day via facsimile.
3.3 STORAGE OF MATERIAL
3.3.1 GENERAL. The Contractor shall store Government-owned materiel
received from Delivery Order shipments under the manufacturing portion of the
contract in Contractor furnished storage facilities. While in inventory, all
Government owned materiel shall be maintained in appropriate condition and
accurately tracked.
3.3.2 STORAGE OF RECEIVED GOODS. The Contractor's storage facility
must accomplish efficient space utilization, safeguard Government Owned
Property, and allow Government access for surveillance and inspection. The
contractor is required to store inventory in such a way that First-In/First-Out
procedures are followed and the oldest stock is utilized first.
3.3.3 SECURITY OF ITEMS. The Contractor shall develop and maintain
procedures to assure security of Government-owned materiel.
3.3.4 INVENTORY RECONCILIATION. The Contractor shall electronically
provide a quarterly inventory report, by NSN, to the PCO (in spreadsheet or
text file format) which will be used to reconcile any differences in inventory
balances between DSCP and the Bill & Hold contractor's records. The contractor
shall be required to advise DSCP of the quantity per NSN being held in
inventory at their facility, as of the established inventory cutoff date, less
any outstanding MRO/RDO quantities (any MROs or RDOs received but not actually
pulled from inventory as of the cutoff date). The QAR is to verify the accuracy
of the listing and conduct occasional spot checks, via a random sampling of
NSNs.
3.4 SHIPMENT OF MATERIEL RELEASE ORDERS AND REDISTRIBUTION ORDERS
3.4.1 GENERAL. The Contractor is responsible for preparing orders
for shipment authorized by the Government through the automated computer system
(A5_ or A2A transaction, see attachments 1 & 5) or by written shipping order,
in the exact stock number (NSN) and quantity, not to exceed the quantity
indicated by the MRO or RDO. The Contractor must also coordinate, as necessary,
with carriers for pickup and shipment of materiel to fulfill MROs or RDOs. The
Contractor shall be assessed additional transportation and related charges for
material shipped erroneously. When the Contractor uses an inappropriate mode of
shipment or carrier that results in extra cost to the Government, the
Contractor shall be assessed the additional costs. The Contractor shall
determine the type of over-packing, packaging, and labeling requirements for
materiel destined for shipment in accordance with the best commercial practices
for less than full carton shipments. Mode of shipment will be established
according to requisition priority. Once the MRO is shipped, the contractor
shall notify DSCP of shipment via the automated system. This is accomplished by
generating an AR0 transaction as outlined in attached Attachment 2. ***PLEASE
NOTE: In addition to A5_ or A2A transactions, Contractor may receive
transactions with document identifier codes such as AC_ or AF6. These documents
are NOT MROs or RDOs. AC _ documents are cancellations of MROs or RDOs and
shipment processing should be stopped immediately, if possible. AF6 documents
are a followup from DSCP requesting shipment status. These documents usually
mean that there is a problem with the ARO (shipment confirmation) transmission.
The Contractor should review the ARO input, make necessary corrections, and
resubmit the document.
3.4.2 FREIGHT SHIPMENT MODE. The Contractor shall use the most
economical means to meet the required Receipt Date. (See 3.6). The Contractor
should consider combining shipments to same location to save shipping costs.
3.4.3 ADMINISTRATIVE CONTROLS. The Contractor should maintain a
reference library covering mandated requirements for packing, packaging,
documenting, and transporting material via U.S. Postal Service, etc,, truck,
water surface, or air to destinations worldwide. The Contractor should also
maintain a liaison with various shipping organizations to ensure materiel is
properly described, labeled, and packed to meet varying modes of
transportation.
3.4.4 PROCESSING. Contractor personnel shall compare documentation
with the material to determine packing, marking, and labeling requirements,
based upon who and where the customer is, the nature and quantity of the
material, the mode of shipment, and other factors. Plan resources/material to
maximize consolidation of freight with shipping activity schedule. Establish
procedures for the construction/acquisition of appropriate sized skid bases,
plywood boxes, crates, v boards, cap and pallet boards, etc.
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3.4.5 PACKING/PACKAGING/LABELING REQUIREMENTS. The Contractor will
use the best commercial practice for Packing, Packaging, and Labeling
requirements for contiguous United States shipments. When directed, the
Contractor will use Military Standard MIL-STD-129, Marking For Shipment and
Storage (Parts 1-4) as the document to ascertain Packing, Packaging, and
Labeling requirements. Assemble, construct, and pack material into crates,
boxes, skids, and pallets, as appropriate. Apply stencil markings, labels,
strapping, stretch wrap, block/brace, as appropriate. Determine pieces, weight
and: cube, and process completed documentation. For the marking requirements of
overseas shipments, please see Paragraph 3.4 below.
Refer to clause 52.247-9007, Additional Bar Coding Requirements for Contractor
or Vendor-Originated Shipments, located in the solicitation/contract, for
bar-coding requirements on packages.
Attached to each packing list, the contractor shall provide "Instructions" to
customers of action to take if not satisfied with products received [e.g.
One-for-One Replacement Warranty applies. Problems with your order? Call us at
(insert contractor's name and phone number).]. After award, contractor is to
submit to DSCP a sample of these "Instructions" for review and approval by the
PCO.
3.4.6 DOCUMENTATION. Complete and accurate documentation of the
processing of materiel shipments is necessary to verify Contractor work.
Documentation will generate complete history files and fulfill communication
requirements imposed by the Government supply system. Documentation shall be
maintained three years beyond the contract period.
3.4.7 ACCOUNTABILITY FOR ALL SHIPMENTS AND SHIPMENT DOCUMENTATION.
The Contractor is responsible for verifying all lines shipped, including lines
shipped by freight and small package carrier. The Contractor shall confirm all
shipments made via AR0 transaction) within two business days of the actual
consignment date. The Contractor will be responsible to provide tracer
information to DSCP when requested.
3.4.8 BEARER PICK-UP. In very few cases, a customer may need to
physically pick up materiel directly from the Contractor facility. In this
event, the Government will notify the Contractor as soon as possible of this
requirement and provide all pertinent information.
3.4.9 ADDRESSES FOR SHIPMENT.
DODAAC. A DoDAAC is a six digit alpha/numeric code that translates to an
address. MRO positions 30 through 35 indicate the requisitioning activity's
DoDAAC. If a Signal Code in column 51 is A, B, C, or D then the item is to be
shipped to the DoDAAC is the requisition (positions 30-35). If the Signal Code
is J, K, L, or M then the item is to be shipped to the DODAAC in the
Supplementary Address (positions 45-50).
The internet web site http://davnt6.daas.dla.mil/dodaac/dodaac.htm should be
used to translate the DoDAAC into a shipping address. After entering the
DoDAAC, a page will list up to three Type of Address Codes JAC), TAC 1
indicates the mailing address. TAC 2 indicates the shipping address. TAC 3
indicates the billing address (which will never be used by ,_a Bill and Hold
contractor). Generally the TAC 2 address should be used. If a shipment is LESS
THAN 30 POUNDS, you can use the TAC 1 MAILING address in lieu of the TAC 2
SHIPPING address cited in the above DODAAC web site. If there is no TAC 2
address, ship to the TAC 1 address.
The first letter of a DoDAAC can be used as a quick reference guide to the
military service ordering the item. W identifies an Army activity. F identifies
an Air Force activity. M identifies a Marine Corps activity. N, R, and V
identify Navy activities (R & V being ships). H identifies Army/Air Force
Exchange Stores. These are our most common customers. B, D, P, K, and T
identify Foreign Military Service (FMS) customers ordering through the Military
Assistance Program (MAP). Contractors should contact the Emergency Supply
Operations Center (ESOC) at (215) 737-9146 and request agent ID # 4023 for
translation of FMS DoDAACs into a shipping address.
OVERSEAS SHIPMENTS: On orders that require delivery to overseas locations, the
contractor has the option of either shipping direct or shipping through a
consolidation point. To ship direct, a contractor must have: 1) the capability
to ship internationally, a TAC 2 address, 3) a point of contact at the delivery
destination (such as Transportation Officer or a
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more specific title/name), and 4) a commercial phone number. Not all Department
of Defense Activity Address Codes (DoDAACs) provide this information.
EXCEPTION: DoDAACs starting with N, V, or R may cite other shipping
instructions on the web site, especially when the customer is a ship.
CONSOLIDATION POINTS for overseas shipments:
SHIPMENTS TO ALL PACIFIC REGION DESTINATIONS:
XU Defense Distribution Region West
Distribution Depot San Joaquin
Consolidation and Containerization Point Bldg. 208
French Camp, CA 95231-0001
SHIPMENTS TO NON-PACIFIC DESTINATIONS (INCLUDING PANAMA):
ARMY & AIR FORCE CUSTOMERS ONLY:
Consolidation and Containerization Point
DDSP - New Cumberland Facility
Building CCPOINT Door 135-168
New Cumberland, PA 17070-5002
SHIPMENTS TO NON-PACIFIC DESTINATIONS (CONT.):
NAVY & MARINE CORPS HIGH PRIORITY REQUISITIONS (PRI. 03 AND ABOVE OR
PRI. 06 WITH A 777 RDD):
Norfolk Naval Air Terminal
Building LP 205
8449 Air Cargo Road
Norfolk, VA 23511-4497
NAVY & MARINE CORPS NON-HIGH PRIORITY REQUISITIONS:
Code 302
Ocean Terminal Division
1968 Gilbert Street, Suite 600
Norfolk, VA 23511-3392
When shipping to a Consolidation Point, the package SHALL be marked as follows:
SHIP TO: Applicable consolidation address above
MARK FOR: Customer address INCLUDING THE DOCUMENT/REQUISITION
NUMBER
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3.4.10 TRANSPORTATION COSTS. The contract will include a separate
line item (OLIN 9999AA) as MRO/RDO Transportation Cost to cover the costs
associated with shipping Material Release Orders to customers and
Redistribution Orders to other DSCP distribution facilities. The transportation
costs (NOTE: covering shipment of Material Release Orders or Redistribution
Orders, not shipment of supplies from manufacturing facility to storage
facility) will be processed according to one of the two following alternatives:
ALTERNATIVE #1:
- On or near the first of each month, the Contractor shall submit an
invoice to DFAS for the MRO/RDO Transportation Cost CLIN based on the actual
number of MRO/RDO units shipped during the previous, month and the per unit
specified Transportation Cost Reconciliation amount.
NOTE: Block 1 of the DD250 must refer to a Delivery Order Number. It
is possible to have several Delivery Orders under the contract all
shipping to storage. When billing for MRO/RDO transportation, the
Contractor may use the D.O. number for any OPEN order. Also, the
Contractor must adhere to the CLIN numbering system. For example, if
the Contractor's first invoice for Bill and Hold Transportation Costs
references D.O. 0001, the CLIN is 9999AA. On subsequent invoices for
transportation that reference D.O. 0001, the CLIN shall be numbered as
9999AB, 9999AC, 9999AD, etc. If D.O. 0001 completes and shipments to
storage continue under D.O. 0002, on the first invoice for
transportation that references D.O. 0002 the CLIN will become 9999AA
and start the numbering cycle over again.
- On a quarterly basis, a Transportation Reconciliation Report shall be
submitted by the Contractor to the ACO. This report shall list the following:
Month (Date)
Total Quantity of Units Shipped under MROs and/or RDOs Total
Transportation Payments Received (include invoice numbers and dates)
Actual Transportation Costs (include documentation from carriers)
Difference (Plus or Minus)
- Within fifteen days the ACO will reconcile these costs and issue a
modification for either upward or downward adjustment. In the event that
premium transportation methods were used, the ACO must verify that the IPD
priority code for that requisition required expedient shipment and that premium
transportation did represent the most expedient method to meet the required
delivery. As indicated in Paragraph 3.4.1, the Contractor will be assessed
additional transportation costs for both erroneously shipped MROs/RDOs and the
use of an inappropriate mode of shipment or carrier that results in excess
costs to the Government.
ALTERNATIVE #2:
- On or near the first of each month, the Contractor shall submit an
invoice to DFAS for the MRO/RDO Transportation Cost CLIN based on the actual
transportation costs of MRO/RDO units shipped during the previous month. NOTE:
Block 1 of the DD250 must refer to a Delivery Order Number. It is possible to
have several Delivery Orders under the contract all shipping to storage. When
billing for MRO/RDO transportation, the Contractor may use the D.O. number for
any OPEN order. Also, the Contractor must adhere to the CLIN numbering system.
For example, if the Contractor's first invoice for Bill and Hold Transportation
Costs references D.O. 0001, the CLIN is 9999AA. On subsequent invoices for
transportation that reference D.O. 0001, the CLIN shall be numbered as 9999AB,
9999AC, 9999AD, etc. If D.O. 0001 completes and shipments to storage continue
under D.O. 0002, on the first invoice for transportation that references D.O.
0002 the CLIN will become 9999AA and start the numbering cycle over again.
- On a monthly or quarterly basis, as determined by the ACO, a
Transportation Report shall be submitted by the Contractor to the ACO. This
report shall list the following:
Month (Date)
Total Quantity of Units Shipped under MROs and/or RDOs
Actual Transportation Costs (include documentation from carriers)
- Within fifteen days the ACO will analyze these costs. In the event
that premium transportation methods were used, the ACO must verify that the IPD
priority code for that requisition required expedient shipment and that premium
transportation did represent the most expedient method to meet the required
delivery. As indicated in Paragraph 3.4.1, the Contractor
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will be assessed additional transportation costs for both erroneously shipped
MROs/RDOs and the use of an inappropriate mode of shipment or carrier that
results in excess costs to the Government.
3.4.11 CONTINUED MRO/RDO PROCESSING. For a minimum of 3 months and a
maximum of 6 months after the final "Sill and Hold" shipment to inventory, the
contractor will continue to process customer requisitions via MROs and/or
Redistribution Orders to draw down Bill and Hold inventory. Within the 6 month
period, the contractor will be given disposition instructions for the remaining
inventory.
3.5 ADMINISTRATIVE CONTROL
3.5.1 RECORDS. The Contractor shall establish and maintain
administrative controls over records and files related to the contract.
3.5.2 UNSHIPPED FILE. The Government will periodically request an
unshipped file listing. The Contractor shall provide information to the PCO to
facilitate the determination of actual shipment status.
3.6 PROCESSING AND SHIPMENT OF MATERIEL RELEASE ORDERS AND REDISTRIBUTION
ORDERS
3.6.1 ROUTINE CONTRACTOR FACILITY PROCESSING TIME. Upon receipt of
a MRO or RDO, the Contractor will ship the requested materiel according to the
timeframes specified below.
3.6.2 EMERGENCY SUPPLY OPERATIONS CENTER (ESOC). MROs under this
category require not more than a total of 24 hours processing and transit time.
3.6.3 HIGH PRIORITY. MROs/RDOs under this category require not more
than 1 business day warehouse facility processing and not more than 1 business
day transit time. This applies to any request with an IPD 01-03 or an RDD entry
of 999, NXX, EXX.
3.6.4 PRIORITY. (IPD 04-08) MROs/RDOs under this category require a
total or not more than 5 business days processing and transit time. This
applies to any request.
3.6.5 ROUTINE. (IPD 09-15) MROs/RDOs under this category require a
total or not more than 7 business days processing and transit times.
PROCESSING AND SHIPMENT MATRIX
CATEGORY IDENTITY RECEIPT
-------- -------- TIMES
-----
ESOC ESOC communication 24 hours
(Phone, Fax, MRO)
IPD 01-02
HIGH PRIORITY IPD 03 2 Business
days
PRIORITY IPD 04-08 5 Business
days
ROUTINE IPD 09-15 7 Business
(Consolidation point for days
Overseas shipment)
3.6.6 PRIORITY EFFECTIVENESS. Priority effectiveness is the
percentage of items shipped on time from the time the contractor receives the
MRO or RDO to the time the customer or distribution facility receives the
order. Shipping must be via the appropriate mode of transportation to meet
standards listed in Paragraph 3.6, Standard Process and Shipping. The
Government will not fault the Contractor for shipments not meeting the
described time standard when the
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deficiencies are caused by inventory holds, computer error, or any other reason
not the fault of the Contractor as determined by the PCO. The Government will
review the Contractor's priority effectiveness on a monthly basis (see 3.7.2
below).
3.7 REPORTS
3.7.1 CARRIER ON-TIME FILL REPORT. Will be provided to the ACO on a
monthly basis if the information is available at no additional cost to the
Contractor or the Government.
3.7.2 MRO/RDO SHIPMENTS REPORT. The Contractor shall provide a
weekly report to the ACO consisting of the following information: broken down
by NSN, corresponding contract number, requisition number, date received by
contractor, date shipped, and DATE RECEIVED BY THE CUSTOMER OR DISTRIBUTION
FACILITY. The report should be sorted by NSN. This report may be sent via email
attachment (as a database or text file) or facsimile, and shall also be
provided to the PCO if requested.
3.7.3 COMMERCIAL WARRANTY REPORTS. The contractor shall provide a
quarterly report to the PCO identifying each Customer Complaint received and
contractor action taken under Clause H005, Commercial Warranty. The report
shall consist of the following information: customer's requisition number, date
complaint received, date resolved by the contractor, an contractor action to
resolve complaint. This report may be sent via mail, facsimile or e-mail.
3.7.4 INVENTORY RECONCILIATION. The contractor shall electronically
provide a quarterly inventory report, by NSN, to the PCO (in spreadsheet or
text file format) which will be used to reconcile any differences in inventory
balances between DSCP and the Bill and Hold contractor's records. The
contractor shall be required to advise DSCP of the quantity per NSN being held
in inventory at their facility, as of the established inventory cutoff date,
less any outstanding MRO/RDO quantities (any MROs or RDOs received but not
actually pulled from inventory as of the cutoff date). The QAR is to verify the
accuracy of the listing and conduct occasional spot checks, via a random
sampling of NSNs.
4. GOVERNMENT OWNED PROPERTY (GOP)
4.1 HOLD HARMLESS AND INDEMNIFICATION AGREEMENT. The Contractor shall save
and hold harmless and indemnify the Government against any and all liability,
claims, and costs of whatsoever kind and nature for injury to or death of any
person or persons and for loss or damage to any property occurring in
connection with or in any way incident to or arising out of the occupancy, use,
service, operations, or performance of work under the terms of this contract,
which resulted in whole or in part through the negligent acts or omissions of
his employees, agent(s), or subcontractor(s).
4.2 DAMAGE TO GOVERNMENT PROPERTY FROM CAUSES OTHER THAN CONTRACTOR'S
NEGLIGENCE. Nothing in the above paragraphs shall be considered to preclude the
Government from receiving the benefits or any insurance the Contractor may
carry which provides for indemnification for loss or destruction of, or damage
to property in the custody and care of the Contractor where such loss,
destruction, or damage is to Government property. The Contractor shall do
nothing to prejudice the Government's right to recover against third parties
for loss, destruction of, or damage to Government property. Upon the request of
the PCO or the ACO, the Contractor shall, at the Government's expense, furnish
to the government all reasonable assistance and cooperation (including
assistance in the prosecution of suit and execution of instructions of
assignments in favor of the Government) in obtaining recovery.
4.3 CONTRACTOR LIABILITY FOR LOSS AND/OR DAMAGE INSURANCE. The Contractor
shall be liable for any and E goods lost or damaged while being processed or
stored in its facility and while being delivered to the end destination. The
Contractor shall take appropriate measures to protect materiel from weather
(all hazards including but not limited to temperature extremes and moisture),
pilferage, electronic magnetic hazards, or other hazards while in storage and
in transit.
4.4 INVENTORY
4.4.1 PHYSICAL INVENTORY. The Contractor shall perform a physical
inventory of all Government-owned property in its possession or control, at any
time, as directed by the PCO. A complete physical inventory of all NSNs will be
conducted prior to the end of each term and coordinated with the PCO. The
contractor shall be required to advise DSCP of the quantity per being held in
inventory at their facility, as of the established inventory cutoff date, less
any outstanding MRO/RDO quantities (any MROs or RDOs received but not actually
pulled from inventory as of the cutoff date). THE CONTRACTOR SHALL REIMBURSE
THE GOVERNMENT THE CONTRACT PRICE FOR ANY INVENTORY SHORTAGES IDENTIFIED AS THE
RESULT OF AN INVENTORY.
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4.4.2 END OF TERM INVENTORY PROCEDURES. Upon completion of the
physical inventory, a comparison of on hand balances will be made to ensure
that the DSCP record (NIR) agrees with the contractor's physical count. The
accountable record/balance shall be maintained by the Contractor.
4.4.2.1 Reconciliation of discrepancies between the actual
physical count and the NIR will require extensive coordination between the
Contractor or subcontractor authorized by the Contractor to conduct the
physical inventory and the Government. Reconciliation is to be completed and a
database file or text file showing the inventory count and outstanding MRO/RDO
count for each NSN is to be provided by the contractor to DSCP. The Government
reserves the right to conduct an audit of inventory maintained at the
contractor's plant at any time.
4.4.3 ACCOUNTABLE INVENTORY BALANCES
4.4.3.1 FIRST YEAR: All receipts recorded by the
Contractor's facility minus all MROs and RDOs pulled
from inventory.
4.4.3.2 OPTION YEARS: Beginning of year on-hand balance
(after completion of inventory) plus all receipts
minus all MROs and RDOs pulled from inventory.
4.5 INVENTORY UPON CONTRACT COMPLETION. Upon contract completion or end of
performance, the Contractor will conduct a wall-to-wall inventory of
Government-owned property. In accordance with paragraph 3.4.11, the PCO will
provide disposition instructions for the Government-owned property remaining at
the Contractor's facility. The Contractor will return all Government-owned
property in inventory in accordance with the disposition instructions provided
by the PCO. THE CONTRACTOR SHALL REIMBURSE THE GOVERNMENT THE CONTRACT PRICE
FOR ALL INVENTORY NOT AVAILABLE TO RETURN TO THE GOVERNMENT.
5. CONTRACTOR FURNISHED PROPERTY (CFP)
5.1 GENERAL. The Contractor shall furnish all property necessary to
perform the requirements of this contract. Contractor furnished property and
services shall be compatible with existing Government systems.
5.2 MATERIALS. The Contractor is responsible for providing all supplies,
materials and equipment needed to perform the tasks stated in Section 3,
Contractor Tasks, of this contract.
5.3 AUTOMATED DATA PROCESSING EQUIPMENT (ADPE). The Contractor is
responsible for software installation and programming which will interface with
the Government's ADPE. The preferred software communication link between the
automated systems is DAMES. The Contractor's ADPE must be able to interface
with Government's ADPE using the SAMMS DICs listed. The ADPE interface shall be
operational two weeks prior to the first shipment of goods to the Contractor's
storage facility as coordinated with and agreed to by the Contractor and the
Government.
6. QUALITY
6.1 QUALITY CONTROL
6.1.1 GENERAL. The Contractor shall establish and maintain a
complete Government approved Quality Control Plan (QCP) to assure the
requirements of the contract are provided as specified. The Contractor's QCP
shall provide at the minimum, their inspection systems for all services
required under this SOW, including: an organizational chart, Points-of-Contact,
inspection points, system(s) for identification and correction of deficiencies,
and a staffing plan for inspection functions. The program will include, but is
not limited to, the following components.
6.1.2 INSPECTION SYSTEM. An inspection system is required covering
the performance requirements stated in Section 3, Contractor Tasks, of this
SOW. It must specify areas to be inspected on either a scheduled or unscheduled
basis and title of individual(s) who will do the inspection. A method of
identifying deficiencies in the quality of services
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performed is required, as well as method of maintaining a file of inspections
conducted by the Contractor and any corrective actions taken. These documents
shall be available to the Government at any time during the term of the
contract.
6.2 QUALITY ASSURANCE
6.2.1 GENERAL. The Government will monitor the Contractor's
performance in accordance with the Contractor's Quality Control Program.
6.2.2 PERFORMANCE EVALUATION MEETINGS. The Contract Manager may be
required to meet with the PCO/ACO and QAR personnel at least once monthly
during the first six months of operating Bill and Hold. The ACO will notify the
Contractor at least 7 days prior to the meeting date. Meetings will be as often
as necessary thereafter as determined by the PCO or ACO. However, a meeting
will be held whenever a Contract Discrepancy Report (CDR) is issued. A mutual
effort will b made to resolve all problems identified. The written minutes of
these meetings shall be signed by the Contract Manager, ACO, and QAR. Should
the Contractor not concur with the minutes, he/she shall state in writing to
the ACO any areas of nonconcurrence.
6.2.3 PLANT ACCESS. The Contractor shall provide access to storage
areas to any personnel authorized by the PCO/ACO for the purpose of touring
and/or inspecting those areas.
6.2.4 PHYSICAL SECURITY. The Contractor shall implement a physical
security plan. The physical security plan shall include all Government owned
property furnished for the performance of this contract. The Government will
not be responsible in any way for damage to the Contractor's supplies,
materials, equipment, and property or to Contractor personnel= personal
belongings that are damaged or destroyed by fire, theft, accident, or other
disaster.
6.3 WARRANTY PROVISIONS
6.3.1 WARRANTY FOR MRO/RDO SHIPMENTS. Clause H005, Commercial
Warranty Provisions, shall now apply all MRO/RDO shipments.
6.3.2 WARRANTY FOR STORAGE SHIPMENTS. In addition, Clause
52.246-9P35, Warranty of Supplies, shall apply to all units shipped in place to
the contractor's storage facility and all units shipped to a government storage
facility (including at contract completion). This warranty shall apply 13
months from the date of the "z" or final shipment under the contract.
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McRae Industries, Inc. Modification P00016
Attachment 1.
MATERIEL RELEASE ORDER DOCUMENT (from SAMMS Appendix B-7)
1. The MRO is the document by which a Defense Supply Center directs the
release of materiel by a distribution activity to a customer.
2. The following are the fields in the document:
FIELD FIELD
LEGEND POSITIONS EXPLANATION/INSTRUCTIONS
------ --------- ------------------------
Document Identifier Code 1-3 Enter A5_
Routing Identifier Code 4-6 Enter the appropriate code applicable to distribution depot to which
the MRO is directed (i.e. contractor's RIC code)
Media and Status Code 7 Enter the code as shown on the requisition.
National Stock Number 8-20 Enter the NSN of the item ordered shipped.
Blank 21-22 Leave blank.
Unit of Issue 23-24 Enter the UI applicable to NSN.
Quantity 25-29 Enter the quantity of the item ordered shipped (field zero-filled
from left).
Document Number 30-43 Enter the document number as shown on the requisition.
Suffix Code 44 When the requisition quantity is divided due to multiple supply
actions, enter the Suffix Code applicable to this portion of the original
requisition quantity. When the requisitioned quantity is not
divided, this field will be left blank.
Supplementary Address 45-50 Enter code as shown on the requisition.
Signal Code 51 Enter code as shown on the requisition.
Fund Code 52-53 Enter code as shown on the requisition.
Distribution Code/MDN 54-56 Enter code as shown on the requisition.
Project 57-59 Enter code as shown on the requisition.
Priority 60-61 Enter code as shown on the requisition.
Required Delivery Date 62-64 Enter the date as shown on the requisition; if none, blank.
Advice Code 65-66 Enter code as shown on the requisition.
Routing Identifier Code (From) 67-69 Enter the code applicable to the DSC originating the MRO (DSCP is S9T).
Ownership/Purpose Code 70 Enter applicable
Ownership/Purpose Code.
Condition Code 71 Enter applicable Condition Code.
Management Code 72 Enter applicable Management Code.
Blank 73 Leave blank.
Standard Price 74-80 Enter the Standard Unit Price applicable to the NSN.
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McRae Industries, Inc, Modification P00016
Attachment 2.
MATERIEL RELEASE/REDISTRIBUTION ORDER CONFIRMATION DOCUMENT
(from SAMMS Appendix B-14)
1. These documents are received by the Defense Supply Center from the
distribution activity as confirmation of shipment of materiel.
2. The following are the fields in the MRO/RDO Confirmation Document:
FIELD FIELD
LEGEND POSITIONS EXPLANATION/INSTRUCTIONS
------ --------- ------------------------
Document Identifier Code 1-3 DIC AR0 - To indicate exact quantity ordered has been shipped.
Routing Identifier (To) Code 4-6 Enter the RIC of the DSC receiving the shipment confirmation.
Media and Status Code/ 7 For other than FMS shipments, perpetuate M&S Code from MRO. For FMS
Transportation Bill Code (TBC) shipments,enter TBC applicable to the shipment.
National Stock Number 8-20 Enter the NSN to which confirmation is applicable.
Submission Time 21-22 Leave blank.
Unit of Issue 23-24 Enter the UI as shown on the MRO/RDO.
Quantity 25-29 Enter the quantity applicable to the item being supplied
(zero-filled from left).
Document Number 30-43 Enter the document number as shown on the MRO/RDO.
Suffix Code 44 Enter the Suffix Code contained in pos. 44 of the MRO, to indicate that the
requisitioned quantity was divided into separate supply actions by the
DSC. Leave blank when pos. 44 of the MRO/RDO is blank.
Supplementary Address 45-50 Enter the coded address as shown on the MRO/RDO.
Hold Code 51 Leave blank.
Fund Code 52-53 Enter the code as shown on the MRO/RDO.
Distribution Code 54-56 Enter the code as shown on the MRO/RDO.
Date Shipped 57-59 Enter date delivered to carrier.
Transportation Control # 60-76 Enter coding as follows.
(Requisition Document (60-73) Enter the requisition document number (DoDAAC, date of requisition, serial
Number) number of requisition).
(Suffix Code) (74) Enter the Suffix Code from requisition (X if none).
(Partial Shipment Code) (75) Code (alpha character except 1, O, X, and Z). The Last Partial Shipment is
Z. FULL SHIPMENT IS X.
(Split Shipment Code) (76) Enter Split Shipment Code (alpha character except 1, O, X, and Z). The
last Split Shipment is Z. FULL SHIPMENT IS X.
Mode of Shipment Code 77 Enter the appropriate code identifying the mode of shipment
(see attachment 4).
Date Available for Shipment 78-80 Leave blank.
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McRae Industries, Inc. Modification P00016
Attachment 3.
MATERIEL RECEIPT TRANSACTION (FROM SAMMS Appendix B-20)
1. This document is used by the storage activities for reporting receipt
of materiel from contract source.
2. The following are the fields in the transaction:
FIELD FIELD
LEGEND POSITIONS EXPLANATION/INSTRUCTIONS
------ --------- ------------------------
Document Identifier Code 1-3 Enter DIC D4S.
Routing Identifier Code (To) 4-6 Enter S9T.
Blank 7 Leave blank.
National Stock Number 8-20 Enter the NSN of the item received.
Blank 21-22 Leave blank.
Unit of Issue 23-24 Enter for item received.
Quantity 25-29 Enter the quantity of item received (preceding significant digits with zeros).
Procurement Instrument or 30-42 Enter contract number.
Blank 43 Leave blank.
Suffix Code 44 Leave blank.
Item Number 45-50 Identify the Contract Line Item Number (preceding significant digits with zeros).
Blank 51-53 Leave blank.
Distribution Code 54-56 Enter (or perpetuate) manufacturing directive number if applicable;
otherwise, leave blank.
Project Code (or ORC) 57-59 Leave blank.
Shipment Number 60-66 Enter Shipment Number from DD250 (preceding significant digits with zeros).
Routing Identifier Code 67-69 Enter the RIC of the storage activity at which the (From) materiel was
received (contractor's RIC).
Ownership/Purpose Code 70 Enter the letter A.
Condition Code 71 Enter the letter A.
Management Code 72 Leave blank.
Date 73-75 Enter Julian date when materiel was received into inventory.
Blank 76 Leave blank.
Call/Order Serial Number 77-80 Enter the contract delivery order number, if applicable.
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McRae Industries, Inc. Modification P00016
Attachment 4.
MODE OF SHIPMENT CODES (from SAMMS Appendix A-17)
1. This code is a one-digit alpha/numeric character that identifies the
initial method of movement from the shipping activity.
CODE EXPLANATION
A Motor, truckload
B Motor, Class Rating (Less than truckload)
C Van (unpacked, uncrated personal or Government property)
D Driveaway, truckaway, towaway
E Bus
F Military Airlift Command (Channel and Special Assignment Airlift Mission)
G Surface parcel post
H Air parcel post
I Government trucks, for shipment outside local delivery area
J Air-Small package carrier
K Rail, carload
L Rail, less than carload
M Surface-Freight forwarder
N LOGAIR
O Organic military air (including aircraft of foreign governments)
P Through Bill of Lading (TGBL)
Q Commercial Air Freight-Includes Regular and Expedited Service (Provided by Major Air Lines), Also includes
Charters and Air Taxi
R Reserved for Future Use
S Scheduled Truck Service (STS) (applies to contract carriage, guaranteed traffic routings and/or
scheduled service)
T Air freight forwarder
U QUICKTRANS
V SEAVAN
W Water, river, lake, coastal (commercial)
X Bearer, walk--thru (customer pickup of material)
Y Military Intratheater airlift service
Z MSC (controlled contract or arranged space)
* Includes Trailer/Container-On-Flat-Car (excluding SEAVAN).
2 Government watercraft, barge, lighter
3 RORO service
4 ARFCOS
5 Surface-Small Package Carrier
6 Military Official Mail (MOM)
7 Express mail
8 Pipeline
9 Local delivery by Government or commercial truck includes on base transfers, deliveries between air,
water, or motor terminals, and adjacent activities. Local delivery areas are identified in commercial
carriers' tariffs which are filed and approved by regulatory authorities.
74
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McRae Industries, Inc. Modification P00016
Attachment 5.
REDISTRIBUTION ORDER TRANSACTION (FROM SAMMS Appendix B-5)
1. The RDO is the document by which a Defense Supply Center directs the
shipment of materiel from one distribution facility to another distribution
facility.
2. The following are the fields in the document:
FIELD FIELD
LEGEND POSITIONS EXPLANATION/INSTRUCTIONS
------ --------- ------------------------
Document Identifier Code 1-3 Enter DIC A2A.
Routing Identifier Code 4-6 Enter S9T (RDO transaction comes from DSCP)
(From)
Media and Status Code 7 Enter 0.
National Stock Number 8-20 Enter the NSN of the item ordered shipped.
Blank 21-22 Leave blank.
Unit of Issue 23-24 Enter the UI applicable to NSN.
Quantity 25-29 Enter the quantity of the item ordered shipped (field zero-filled from
left).
Document Number 30-43 Enter the DSCP document number.
Suffix Code 44 Leave blank.
Supplementary Address 45-50 DoDAAC of the distribution activity the stock is to be shipped to.
Signal Code 51 Enter M.
Fund Code 52-53 Enter KK.
Blank Field 54-56 Leave blank.
Project 57-59 Enter a Project Code or leave blank.
Priority 60-61 Priority designator.
Blank Field 62-69 Leave blank.
Purpose Code 70 Enter A.
Condition Code 71 Enter applicable stock Condition Code (usually A).
Blank Field 72-73 Leave blank.
Routing Identifier Code 74-76 Contractor's RIC (RDO transaction goes to contractor)
(To)
Output Routing Code 77-78 Code of DSCP originator.
Blank Field 79-80 Leave blank.
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McRae Industries, Inc. Modification P00016
EXCERPT FROM APPENDIX B-14
Transportation Control (60-76) Enter the TCN. (See Note)
Number (TCN)
(Requisition Document (60-73) Enter the Requisition Document Number:
Number) Requisitioner, date of requisition and Serial Number of requisition.
(Suffix Code) (74) Enter the Suffix Code from requisition (X if none).
(Partial Shipment Code) (75) Code (alpha character except I, O, X, and Z). The Last Partial Shipment is Z.
Full Shipment is X.
(Split Shipment Code) (76) Enter Split Shipment Code (alpha character except I, O, X, and Z). The last Split
Shipment is Z. Full shipment is X.
Mode of Shipment Code (77) Enter the appropriate code identifying the mode of shipment (see appendix A-17).
Leave blank when shipment has not occurred.
Date Available for Shipment (78-80) Shipment Status or leave blank in response to follow-up when shipment has not
occurred.
a. CONUS - Enter date available for shipment.
b. Overseas - Enter date available for shipment. Leave blank
on parcel post and when shipment has not occurred.
c. For MAS transactions enter date available for shipment.
NOTE: In February 1997, the full 17 position TCN was mandated to be used for
all shipments.
76
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY STATE OF INCORPORATION
------------------ ----------------------
McRae Office Solutions, Inc. North Carolina
Rae-Print Packaging, Inc. North Carolina
Compsee, Inc. (99% ownership) North Carolina
Hoke Development Company, Inc. North Carolina
McRae Boot, Inc. North Carolina
DataScan Corporation South Carolina
System Integrators Plus, Inc. North Carolina
American West Trading Company Tennessee
EXHIBIT 23
GLEIBERMAN SPEARS SHEPHERD & MENAKER, P.A.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-70511 and No. 333-70513) of McRae Industries,
Inc. and subsidiaries of our report dated October 16, 2001 on the consolidated
financial statements and financial statement schedule of McRae Industries, Inc.
and subsidiaries included in its Annual Report on Form 10-K for the year ended
July 28, 2001.
/s/Gleiberman Spears Shepherd & Menaker, P. A.
Charlotte, North Carolina
October 16, 2001