Reports Earnings for the Third Quarter for Fiscal 2003

MOUNT GILEAD, N.C., June 17, 2003 -- McRae Industries, Inc. (Amex: MRI) reported consolidated net revenues for the third quarter of fiscal 2003 of $18,976,000, compared to consolidated net revenues of $18,477,000 reported for the third quarter of fiscal 2002. Consolidated net earnings for the third quarter of fiscal 2003 were $568,000, or $.20 per share, as compared to $678,000, or $.24 per share, for the same period of fiscal 2002.

The growth in net revenues for the third quarter of fiscal 2003 was primarily attributable to increased sales of military combat boots to the U.S. Government (the Government) and the delivery of office equipment to several large countywide school systems. The increase in net revenues was partially offset by lower sales of bar code and western boot products for the third quarter of fiscal 2003 as compared to the third quarter of fiscal 2002 primarily attributable to depressed market conditions for these products.

Net earnings for the third quarter of fiscal 2003 declined approximately 16% from the net earnings reported for the third quarter of fiscal 2002 primarily as the result of lower product sales prices, higher per unit manufacturing costs, changing product sales mixes and depressed market conditions.

Consolidated net revenues for the first nine months of fiscal 2003 totaled $55,852,000 as compared to $53,753,000 for the first nine months of fiscal 2002. This growth in net revenues was primarily the result of higher military boot requirements for the Government and increased western boot sales attributable to the positive contribution of the Dan Post and Dingo brand products. The increase in net revenues for the first nine months of fiscal 2003 was partially offset by lower net revenues in the bar code and office products businesses where net revenues were down 7.2% and 8.2%, respectively.

Consolidated net earnings for the first nine months of fiscal 2003 amounted to $1,479,000, or $.53 per share, as compared to $1,731,000, or $.63 per share, for the first nine months of fiscal 2002. This decrease in net earnings was primarily the result of the same operating conditions as noted above.

The ordering period under our current Contract (the Contract) under which we provide military combat boots to the Government was recently extended to June 11, 2003.

The Government has issued two solicitations for future military combat boot requirements. One solicitation covers the three current direct-molded sole (DMS) styles of military combat boots, including the standard issue all-leather combat boot that has historically accounted for the majority of the Government's orders under the Contract. The second solicitation covers the newly adopted infantry combat boot, which incorporates a waterproof membrane construction. This boot will replace the current all-leather boot as the Army's standard issue combat boot. We submitted bids for both solicitations.

On March 11, 2003, we received an official award against the Contract for a minimum of 93,734 pairs and a maximum of 187,903 pairs. Also, on March 11, 2003, we were advised that we did not win a contract to produce the new infantry combat boot. We are still awaiting the Government's award decision on the solicitation covering the current DMS styles of boots and while the Government has announced its intention to make as many as four awards, there are no assurances that we will be successful in obtaining an award under this solicitation to produce boots for the Government.

During the first nine months of fiscal 2003, revenues attributable to sales of the current standard all-leather issue combat boots were approximately $4.0 million. We expect to ship approximately $4.8 million in additional orders for these boots through the first quarter of fiscal 2004. We believe it may take the vendors that won contracts to produce the new infantry combat boot as many as 6-8 months from award to begin shipping completed orders to the Government. During this period we expect additional orders from the Government for the all-leather DMS boot we manufacture to fill the Army's recruit needs and replacement. However, we do not expect further orders for the current all-leather boot once the new boot is available for issue. Because of the current global uncertainties and the continued presence of U.S. troops in the Middle East, we believe there will continue to be a demand for the desert boot for the foreseeable future. Also we expect to continue to produce DMS style boots for sale under our current contract with Israel as well as for sale in the commercial market.

In addition to historical information, this press release includes certain forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Important factors that could cause actual results or events to differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements include: the effect of competitive products and pricing, risks unique to selling goods to the Government (including variation in the Government's requirements for our products and the Government's ability to terminate its contracts with vendors), loss of key customers, acquisitions, supply interruptions, additional financing requirements, loss of key management personnel, our ability to successfully develop new products and services, and the effect of general economic conditions in our market.