##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(x)    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Quarter Ended January 31, 2004.

OR

(   )     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________________ to ____________________

Commission file number 1-8578

McRae Industries, Inc.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 56-0706710
(I.R.S. Employer Identification No.)

400 North Main Street
Mt. Gilead, North Carolina 27306
(Address of principal executive offices)

Telephone Number (910) 439-6147
(Registrants telephone number, including area code)

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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes (X)       No (  )

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes (  )       No (X)

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date.

|                                     |  |                                       
|------------------------------------ |  | --------------------------------------
|Common Stock, $l Par Value  Class A |  | 1,935,443 shares as of March 11, 2004.
|Common Stock, $1Par Value  Class B  |  | 833,556 shares as of March 11, 2004.  

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McRae Industries, Inc. and Subsidiaries

INDEX

|        |  |                                                                                       |  |                                                      |      |          |     | 
|------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ---- | -------- | --- | 
|        |  |                                                                                       |  |                                                      |      | Page No.
|        |  |                                                                                       |  | PART I.
FINANCIAL INFORMATION                        |      |          |     | 
|ITEM 1. |  | Condensed Consolidated Financial Statements                                           |  |                                                      |      |         
|        |  |                                                                                       |  | Condensed Consolidated Balance Sheet                 |      |          | 3-4 | 
|        |  |                                                                                       |  | Condensed Consolidated Statement of Operations       |      |          | 5   | 
|        |  |                                                                                       |  | Condensed Consolidated Statement of Cash Flows       |      |          | 6   | 
|        |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements |      |          | 7-8 | 
|ITEM
2. |  | Managements Discussion And Analysis of Financial
Condition and Results of Operations |  |                                                      | 9-16 |         
|ITEM
3. |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                      | 16   |         
|ITEM 4. |  | Controls and
Procedures                                                               |  |                                                      | 17   |         
|        |  |                                                                                       |  | PART II. OTHER INFORMATION                           |      |          |     | 
|ITEM 1. |  | Legal Proceedings                                                                     |  |                                                      | 17   |         
|ITEM 2. |  | Changes in Securities and Use of Proceeds                                             |  |                                                      | 17   |         
|ITEM 3. |  | Defaults upon Senior Securities                                                       |  |                                                      | 17   |         
|ITEM 4. |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                      | 17   |         
|ITEM 5. |  | Other Information                                                                     |  |                                                      | 17   |         
|ITEM 6. |  | Exhibits and Reports on Form 8-K                                                      |  |                                                      | 18   |         
|        |  |                                                                                       |  | Signatures                                           |      |          | 18  | 

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McRae Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET


ASSETS


(In thousands, except share and per share data)


|                            |                                           |                      |              |        |                  |        |                |        |        |        | 
|--------------------------- | ----------------------------------------- | -------------------- | ------------ | ------ | ---------------- | ------ | -------------- | ------ | ------ | ------ | 
|                            |                                           |                      |              |        | January 31, 2004 |        | August 2, 2003
|                            |                                           |                      |              |        |                  |        |               
|ASSETS                      |                                           |                      |              |        |                  |        |                |       
|Current assets:             |                                           |                      |              |        |                  |        |                |       
|                            | Cash and cash equivalents                 |                      | $            | 4,113  |                  |        | $              | 6,192  |       
|                            | Accounts and notes receivable, net        |                      |              | 9,971  |                  |        |                | 10,334 |       
|                            | Inventories (see Note B)                  |                      |              | 15,853 |                  |        |                | 17,559 |       
|                            | Net investment in capitalized leases      |                      |              | 146    |                  |        |                | 146    |       
|                            | Prepaid income taxes                      |                      |              | 1,399  |                  |        |                | 314    |       
|                            | Prepaid expenses and other current assets |                      |              | 560    |                  |        |                | 242    |       
|                            |                                           |                      |              |        |                  |        |                |       
|                            |                                           | Total current assets |              |        | 32,042           |        |                |        | 34,787 |       
|                            |                                           |                      |              |        |                  |        |                |       
|Property and equipment, net |                                           |                      | 5,015        |        |                  |        | 4,541          |       
|Other assets:               |                                           |                      |              |        |                  |        |                |       
|                            | Net investment in capitalized leases      |                      |              | 1,613  |                  |        |                | 1,716  |       
|                            | Notes receivable                          |                      |              | 40     |                  |        |                | 71     |       
|                            | Real estate held for investment           |                      |              | 1,449  |                  |        |                | 1,390  |       
|                            | Goodwill                                  |                      |              | 362    |                  |        |                | 362    |       
|                            | Cash surrender value of life insurance    |                      |              | 2,220  |                  |        |                | 2,220  |       
|                            | Trademarks                                |                      |              | 1,049  |                  |        |                | 1,049  |       
|                            | Other                                     |                      |              | 12     |                  |        |                | 13     |       
|                            |                                           |                      |              |        |                  |        |                |       
|                            |                                           | Total other assets   |              |        | 6,745            |        |                |        | 6,821  |       
|                            |                                           |                      |              |        |                  |        |                |       
|                            |                                           |                      | Total Assets |        | $                | 43,802 |                |        | $      | 46,149 | 
|                            |                                           |                      |              |        |                  |        |                |       

See notes to condensed consolidated financial statements

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McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS EQUITY

(In thousands, except share and per share data)


|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |       |        |        | 
|-------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----- | ---------------- | ------ | -------------- | ----- | ------ | ------ | 
|                                             |                                        |                                                                                                                    |                                            |       | January 31, 2004 |        | August 2, 2003
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |               
|Liabilities and Shareholders Equity         |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|Current liabilities:                         |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|                                             | Notes payable, banks - current portion |                                                                                                                    | $                                          | 577   |                  |        | $              | 577   |       
|                                             | Accounts payable                       |                                                                                                                    |                                            | 3,424 |                  |        |                | 5,211 |       
|                                             | Accrued employee benefits              |                                                                                                                    |                                            | 194   |                  |        |                | 427   |       
|                                             | Deferred revenues                      |                                                                                                                    |                                            | 671   |                  |        |                | 1,012 |       
|                                             | Accrued payroll and payroll taxes      |                                                                                                                    |                                            | 885   |                  |        |                | 913   |       
|                                             | Contract contingencies                 |                                                                                                                    |                                            | 400   |                  |        |                | 400   |       
|                                             | Other                                  |                                                                                                                    |                                            | 1,073 |                  |        |                | 1,044 |       
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|                                             |                                        | Total current liabilities                                                                                          |                                            |       | 7,224            |        |                |       | 9,584  |       
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|Notes payable, banks, net of current portion |                                        |                                                                                                                    | 3,022                                      |       |                  |        | 3,307          |      
|Lease guarantees                             |                                        |                                                                                                                    | 1,552                                      |       |                  |        | 1,568          |      
|Minority interest                            |                                        |                                                                                                                    | 83                                         |       |                  |        | 88             |      
|Commitment and contingencies                 |                                        |                                                                                                                    |                                           |       |                  |        |               |      
|Shareholders equity:                        |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|                                             | Common stock:                          |                                                                                                                    |                                            |       |                  |        |                |       |       
|                                             |                                        | Class A, $1 par; Authorized 5,000,000 shares;
Issued and outstanding, 1,929,943 and
1,914,972 shares, respectively |                                            |       | 1,930            |        |                |       | 1,915  |       
|                                             |                                        | Class B, $1 par; Authorized 2,500,000 shares;
Issued and outstanding, 838,556 and 853,527
shares, respectively     |                                            |       | 839              |        |                |       | 853    |       
|Additional paid-in capital                   |                                        |                                                                                                                    | 791                                        |       |                  |        | 791            |      
|Retained earnings                            |                                        |                                                                                                                    | 28,361                                     |       |                  |        | 28,043         |      
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|                                             |                                        | Total shareholders equity                                                                                         |                                            |       | 31,921           |        |                |       | 31,602 |       
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |      
|                                             |                                        |                                                                                                                    | Total liabilities and shareholders equity |       | $                | 43,802 |                |       | $      | 46,149 | 
|                                             |                                        |                                                                                                                    |                                            |       |                  |        |                |      

|      |  |                                                                                                                                                                                                                                                                                 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE: |  | The condensed consolidated balance sheet at August 2, 2003 has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.

See notes to condensed consolidated financial statements

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McRae Industries, Inc. and
Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS


(In thousands, except share and per share data)
(Unaudited)


|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------- |  | ------------------ | --------- | ---------------- |  | ----------- | --------- | ----------- |  | - | --------- | - |  | - | --------- | -
|                                                                          |  | Three Months Ended |           | Six Months Ended
|                                                                          |  | January 31,        |           | February 1,      |  | January 31, |           | February 1,
|                                                                          |  | 2004               |           | 2003             |  | 2004        |           | 2003       
|                                                                          |  |                    |           |                  |  |             |           |            
|Net revenues                                                              |  | $                  | 19,427    |                  |  | $           | 17,611    |             |  | $ | 40,823    |   |  | $ | 37,408    |  
|Cost of revenues                                                          |  |                    | 15,190    |                  |  |             | 13,368    |             |  |   | 31,485    |   |  |   | 28,430    |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Gross profit                                                              |  |                    | 4,237     |                  |  |             | 4,243     |             |  |   | 9,338     |   |  |   | 8,978     |  
|Costs and expenses:                                                       |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Research & development                                                    |  |                    | 479       |                  |  |             | 265       |             |  |   | 833       |   |  |   | 425       |  
|Selling, general and
administrative                                       |  |                    | 3,789     |                  |  |             | 3,687     |             |  |   | 7,651     |   |  |   | 7,361     |  
|Other expense (income), net                                               |  |                    | (43       | )                |  |             | (354      | )           |  |   | (57       | ) |  |   | (382      | )
|Interest expense                                                          |  |                    | 34        |                  |  |             | 44        |             |  |   | 71        |   |  |   | 93        |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Total costs and expenses                                                  |  |                    | 4,259     |                  |  |             | 3,642     |             |  |   | 8,498     |   |  |   | 7,497     |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Earnings (loss) from
operations before income
taxes and minority interest |  |                    | (22       | )                |  |             | 601       |             |  |   | 840       |   |  |   | 1,481     |  
|Provision for income taxes                                                |  |                    | (5        | )                |  |             | 232       |             |  |   | 297       |   |  |   | 574       |  
|Minority shareholders
interest in earnings of
subsidiary                 |  |                    | (3        | )                |  |             | (3        | )           |  |   | (5        | ) |  |   | (4        | )
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Net (loss) earnings                                                       |  | $                  | (14       | )                |  | $           | 372       |             |  | $ | 548       |   |  | $ | 911       |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Net earnings per common share                                             |  | $                  | .00       |                  |  | $           | .14       |             |  | $ | .20       |   |  | $ | .33       |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  
|Weighted average number of
common shares outstanding                      |  |                    | 2,768,499 |                  |  |             | 2,768,499 |             |  |   | 2,768,499 |   |  |   | 2,768,499 |  
|                                                                          |  |                    |           |                  |  |             |           |             |  |   |           |   |  |   |           |  

See notes to condensed consolidated financial statements

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McRae Industries, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


(In thousands)
(Unaudited)


|                                                    |  |                  |        |                  |  |   |        |  
|--------------------------------------------------- |  | ---------------- | ------ | ---------------- |  | - | ------ | -
|                                                    |  | Six Months Ended
|                                                    |  | January 31, 2004 |        | February 1, 2003
|                                                    |  |                  |        |                 
|Net cash used in operating activities               |  | $                | (1,251 | )                |  | $ | (1,241 | )
|                                                    |  |                  |        |                  |  |   |        |  
|Cash flows from investing activities:               |  |                  |        |                  |  |   |        |  
|Proceeds from sales of assets                       |  |                  | 5      |                  |  |   | 375    |  
|Purchase of trade names and other assets            |  |                  |       |                  |  |   | (150   | )
|Capital expenditures                                |  |                  | (349   | )                |  |   | (234   | )
|Net collections of long-term receivables            |  |                  | 31     |                  |  |   | 29     |  
|                                                    |  |                  |        |                  |  |   |        |  
|Net cash (used in) provided by investing activities |  |                  | (313   | )                |  |   | 20     |  
|                                                    |  |                  |        |                  |  |   |        |  
|Cash flows from financing activities:               |  |                  |        |                  |  |   |        |  
|Principal repayments of notes payable               |  |                  | (285   | )                |  |   | (263   | )
|Dividends paid                                      |  |                  | (230   | )                |  |   | (226   | )
|                                                    |  |                  |        |                  |  |   |        |  
|Net cash used in financing activities               |  |                  | (515   | )                |  |   | (489   | )
|                                                    |  |                  |        |                  |  |   |        |  
|Net decrease in cash and cash equivalents           |  |                  | (2,079 | )                |  |   | (1,710 | )
|Cash and cash equivalents at beginning of period    |  |                  | 6,192  |                  |  |   | 5,822  |  
|                                                    |  |                  |        |                  |  |   |        |  
|Cash and cash equivalents at end of period          |  | $                | 4,113  |                  |  | $ | 4,112  |  
|                                                    |  |                  |        |                  |  |   |        |  

NOTE:Non-cash operating and investing activities excluded from this statement
of cash flows relate to the transfer
of office equipment from inventory to property and equipment amounted to
$719,000 and $648,000 for the first six months of fiscal 2004 and 2003,
respectively.

See notes to condensed consolidated financial statements

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McRae Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulation of the
Securities and Exchange Commission (SEC). Accordingly, they do not include all
of the information and footnotes required by the accounting principals
generally accepted in the United States for complete financial statements. In
addition, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the six months ended January 31, 2004 are not necessarily
indicative of the results that may be expected for the year ending July 31,
2004. The interim condensed consolidated financial information should be read
in conjunction with the Companys August 2, 2003 audited consolidated financial
statements and footnotes thereto included in the McRae Industries, Inc. Annual
Report filed on Form 10-K with the SEC.

Certain reclassifications have been made to the prior years financial
statements to conform with the current years presentation.

NOTE B - INVENTORIES

The components of inventory consist of the following (in thousands):

|                |  |                  |        |                |  |   |        | 
|--------------- |  | ---------------- | ------ | -------------- |  | - | ------ | 
|                |  | January 31, 2004 |        | August 2, 2003
|                |  |                  |        |               
|Raw materials   |  | $                | 2,570  |                |  | $ | 3,293  | 
|Work-in-process |  |                  | 1,337  |                |  |   | 1,081  | 
|Finished goods  |  |                  | 11,946 |                |  |   | 13,185 | 
|                |  |                  |        |                |  |   |        | 
|                |  | $                | 15,853 |                |  | $ | 17,559 | 
|                |  |                  |        |                |  |   |        | 

NOTE C - SUBSEQUENT EVENTS

On March 1, 2004, the Company declared a cash dividend of $.06 cents per share
on its Class A Common Stock payable on March 26, 2004, to shareholders of
record on March 12, 2004.

7



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NOTE D  SUMMARY OF BUSINESS SEGMENTS

|                                     |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|------------------------------------ |  | ------------------ | ------ | ---------------- |  | ----------- | ------ | ----------- |  | - | ------ | - |  | - | ------ | -
|                                     |  | Three Months Ended |        | Six Months Ended
|                                     |  | January 31,        |        | February 1,      |  | January 31, |        | February 1,
|                                     |  | 2004               |        | 2003             |  | 2004        |        | 2003       
|                                     |  |                    |        |                  |  |             |        |            
|(In thousands)                       |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|Net revenues                         |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|Bar Code                             |  | $                  | 2,655  |                  |  | $           | 2,118  |             |  | $ | 4,911  |   |  | $ | 5,039  |  
|Office Products                      |  |                    | 4,531  |                  |  |             | 4,501  |             |  |   | 9,904  |   |  |   | 9,342  |  
|Military Boots                       |  |                    | 7,421  |                  |  |             | 4,712  |             |  |   | 15,742 |   |  |   | 9,910  |  
|Western/Work Boots                   |  |                    | 5,119  |                  |  |             | 6,307  |             |  |   | 10,998 |   |  |   | 13,067 |  
|Eliminations/Other                   |  |                    | (299   | )                |  |             | (27    | )           |  |   | (732   | ) |  |   | 50     |  
|                                     |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|                                     |  |                    | 19,427 |                  |  |             | 17,611 |             |  |   | 40,823 |   |  |   | 37,408 |  
|                                     |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|Net (loss) earnings
from operations  |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|Bar Code                             |  |                    | (358   | )                |  |             | (496   | )           |  |   | (721   | ) |  |   | (714   | )
|Office Products                      |  |                    | (228   | )                |  |             | (192   | )           |  |   | (649   | ) |  |   | (530   | )
|Military Boots                       |  |                    | 592    |                  |  |             | 702    |             |  |   | 2,076  |   |  |   | 1,531  |  
|Western/Work Boots                   |  |                    | (178   | )                |  |             | 169    |             |  |   | (165   | ) |  |   | 650    |  
|Eliminations/Other                   |  |                    | 150    |                  |  |             | 418    |             |  |   | 299    |   |  |   | 544    |  
|                                     |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  
|                                     |  |                    | (22    | )                |  |             | 601    |             |  |   | 840    |   |  |   | 1,481  |  
|Provision for income
taxes (benefit) |  |                    | (5     | )                |  |             | 232    |             |  |   | 297    |   |  |   | 574    |  
|Minority shareholders
interest      |  |                    | (3     | )                |  |             | (3     | )           |  |   | (5     | ) |  |   | (4     | )
|Net (loss) earnings                  |  | $                  | (14    | )                |  | $           | 372    |             |  | $ | 548    |   |  | $ | 911    |  
|                                     |  |                    |        |                  |  |             |        |             |  |   |        |   |  |   |        |  

|                   |  |             |        |           |  |   |        |  |  |  |  |  |  |  |  | 
|------------------ |  | ----------- | ------ | --------- |  | - | ------ |  |  |  |  |  |  |  |  | 
|                   |  | January 31, |        | August 2,
|                   |  | 2004        |        | 2003     
|                   |  |             |        |          
|Assets             |  |             |        |           |  |   |        | 
|Bar Code           |  | $           | 4,694  |           |  | $ | 4,987  | 
|Office Products    |  |             | 11,862 |           |  |   | 13,074 | 
|Military Boots     |  |             | 6,962  |           |  |   | 6,328  | 
|Western/Work Boots |  |             | 11,754 |           |  |   | 14,214 | 
|Eliminations/Other |  |             | 8,530  |           |  |   | 7,546  | 
|                   |  |             |        |           |  |   |        | 
|                   |  | $           | 43,802 |           |  | $ | 46,149 | 
|                   |  |             |        |           |  |   |        | 

8



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the attached
unaudited condensed consolidated financial statements and notes thereto, and
with the Companys Annual Report on Form 10-K for the fiscal year ended August
2, 2003, including the financial information and managements discussion and
analysis contained therein.

CRITICAL ACCOUNTING ESTIMATES

Our timely preparation of financial reports and related disclosures requires us
to use estimates and assumptions that may cause actual results to be materially
different from our estimated results. Specifically, we use estimates when
accounting for depreciation, amortization, cost per copy contract
contingencies, useful lives for intangible assets, and asset valuation
allowances (including those for bad debts, inventory, and deferred income tax
assets). Our most critical accounting estimates include the following:

Contract Contingencies

Our office products business leases equipment (usually for a sixty-month
period) to county-wide education systems and sells the lease to third party
leasing companies. Under this program the school system is billed on a monthly,
quarterly or annual basis at a specified rate for each copy they make. The cost
per copy charged to the school system is designed to cover the equipment cost,
supplies (except for paper and staples), service, and a finance charge. On a
quarterly basis, on a program-by-program basis, we project an expected outcome
over the life of the program. We use historical copy usage to predict the
number of copies to be made over the remaining life of the program. We adjust
this estimate of the number of expected future copies based on known factors
that will influence copy rates in each program. We use historical service and
supply costs incurred on each program to estimate future service and supply
costs on a per copy basis. We adjust these estimated costs for known factors
that will impact service and supplies in the future. We also estimate any other
costs expected to be incurred such as depreciation on rental equipment. On
programs where the sum of the estimated future costs exceeds the expected
future revenue, we recognize a provision for 100% of the expected losses for
these programs.

Intangible Assets

We determine the utility of goodwill and trademarks based on estimated future
cash flows and test for impairment in accordance with applicable accounting
pronouncements. We estimate future cash flows based on historical performance
and our knowledge of known factors likely to impact future cash flows.

Inventories

Inventories are recorded at the lower of cost or market value. We regularly
review inventory quantities on hand and record a provision for excess and
obsolete inventory based primarily on our estimated forecast and demand
requirements for the next twelve months. Actual demand and market conditions
may be different from those projected by our management.

Revenue Recognition

We recognize revenue under our current boot contract when the boots are
inspected and accepted by the Governments Quality Assurance Representative
(QAR), thereby transferring ownership to the Government. Pursuant to the
contract, the boots become Government-owned property after inspection and
acceptance by the QAR. The boots are transferred and stored in our warehouse,
which is a designated storage facility approved by the Government, and
accounted for as bill and hold sales in accordance

9



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with Securities and Exchange Commission Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements.

Income Taxes

As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes in each of the jurisdictions in which
we operate. This process involves us estimating our actual current exposure
together with assessing temporary differences resulting from differing
treatment of items, such as leasing activity, allowances, and depreciation, for
tax and accounting purposes. These differences result in deferred tax assets
and liabilities, which are included within our consolidated balance sheet. We
then assess the likelihood that our deferred tax assets will be recovered from
future taxable income and to the extent we believe that recovery is not likely,
we establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we include an expense within
the tax provision in the statement of operations. Significant management
judgment is required in determining our provision for income taxes, our
deferred tax assets and liabilities, and any valuation allowance recorded
against our net deferred tax assets. In the event that actual results differ
from these estimates or we adjust these estimates in future periods, we would
establish an additional valuation allowance, which could materially impact our
financial position and results of operations.

FINANCIAL CONDITION AND LIQUIDITY

Our cash and cash equivalents for the six months ended January 31, 2004,
totaled approximately $4.1 million as compared to approximately $6.2 million at
August 2, 2003. Working capital at the end of the first six months of fiscal
2004 amounted to $24.8 million, down slightly from $25.2 million at August 2,
2003.

Currently, we have two lines of credit with a bank totaling $4.75 million, all
of which was available at January 31, 2004. One credit line totaling $1.75
million expires in June 2004. The $3.0 million credit line expires in November
2004. In January 2004, we obtained a $600,000 construction loan from a bank,
all of which was available at January 31, 2004, to finance the expansion of our
military boot facility. Principal and interest on this loan is due on July 11,
2004.

We believe that our current cash and cash equivalents, cash generated from
operations, and available line of credit will be sufficient to meet our capital
requirements for the remainder of fiscal 2004. Our contractual commitments for
fiscal 2004 are approximately $833,000.

Selected cash flow data for the first six months of fiscal 2004 are presented
below (in thousands):

|                                       |  |                          |        |  
|-------------------------------------- |  | ------------------------ | ------ | -
|                                       |  | For the six months ended
|                                       |  | January 31, 2004        
|                                       |  |                         
|Source (Use) of Cash                   |  |                          |        |  
|Operating activities:                  |  |                          |        |  
|Net earnings adjusted for depreciation |  | $                        | 1,138  |  
|Accounts receivable                    |  |                          | 363    |  
|Inventories                            |  |                          | 1,706  |  
|Accounts payable                       |  |                          | (1,787 | )
|Income taxes                           |  |                          | (1,085 | )
|Net cash used in operating activities  |  |                          | (1,251 | )
|                                       |  |                          |        |  

Net cash used in operating activities for the first six months of fiscal 2004
totaled approximately $1.25 million as adjusted for non-cash transfers from
inventory to rental equipment for the office products business. Net earnings
adjusted for depreciation provided $1.1 million of cash. Trade accounts
receivable

10



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provided $363,000 of cash primarily attributable to the timing of collection of
accounts related to the heavier fall sales season and the decrease in second
quarter demand for western boot products. This decrease in accounts receivable
was partially offset by the timing of collection on increased military boot
sales to the U.S. Government and bar code product sales in January. Inventory,
net of transfers to rental equipment for the office products business,
decreased by approximately $987,000 primarily the result of the planned
reduction in the number of boot styles in the western boot business and the
timing of inventory purchases to replace higher bar code product sales. This
decrease in inventory was partially offset by higher material requirements for
the military boot business and the timing of sales of office equipment to large
countywide education and state government systems. The decrease in accounts
payable used approximately $1.8 million of cash primarily attributable to the
timing of payments for inventory related to heavy fourth quarter sales of
office equipment to large county-wide school systems. Income tax payments for
prior years tax liability and current years estimated tax payments used
approximately $1.1 million of cash for the first six months of fiscal 2004.

Capital expenditures consisting primarily of production equipment for the
military boot business totaled approximately $349,000. Rental equipment related
to the office products business cost per copy program increased by
approximately $719,000, all of which was transferred from inventory, for the
first six months of fiscal 2004.

For the first six months of fiscal 2004, we used approximately $322,000 for
principal and interest payments related to our long-term debt. Dividend
payments amounted to approximately $230,000.

The increase in military boot sales to the U.S. Government may require
substantial investment in raw materials, production equipment, and plant
facilities. We will be required to invest approximately $1.0 million in
manufacturing equipment and supplies to comply with the U.S. Government
Contract requirements. (See discussion below under Military Boot Business).

Off-Balance Sheet Arrangements

As of January 31, 2004, we did not utilize any off-balance sheet financing
arrangements and do not anticipate doing so in the future.

SECOND QUARTER FISCAL 2004 COMPARED TO SECOND QUARTER FISCAL 2003

Consolidated net revenues for the second quarter of fiscal 2004 totaled $19.4
million, a 10% increase over net revenues of $17.6 million for the second
quarter of fiscal 2003. This increase in net revenues resulted primarily from
significantly higher military boot requirements for the U.S. Government (the
Government) and slight market improvement for bar code products. The increase
in military boot and bar code product sales was partially offset by reduced
demand for western and work boots.

Consolidated gross profit amounted to $4.2 million for the second quarters of
both fiscal 2004 and 2003. As a percentage of net revenues, gross profit for
the second quarter of fiscal 2004 was 22% as compared to 24% for the second
quarter of fiscal 2003. This decline in gross profit resulted primarily from
manufacturing inefficiencies associated with tripling military boot production
to meet the surge in the Governments requirements and lower selling prices for
military boots.

Consolidated research and development (R&D) costs for the second quarter of
fiscal 2004 totaled $479,000 as compared to $265,000 for the same period of
fiscal 2003. This increase in research and development costs was primarily
related to the continuing development of a new bar code product.

Consolidated selling, general and administrative (SG&A) expenses for the
second quarter of fiscal 2004 equaled $3.8 million as compared to $3.7 million
for the second quarter of fiscal 2003. As a percentage of

11



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net revenues, SG&A expenditures decreased from 20.9% for the second quarter of
fiscal 2003 to 19.5% for the second quarter of fiscal 2004. Increased
expenditures for health insurance were partially offset by decreased
expenditures for sales and marketing activities and supplies.

Other income for the second quarter of fiscal 2004 did not include any
significant gains on sale of assets as compared to $314,000 for the sale of our
motel property in the second quarter of fiscal 2003.

As a result of the above, a consolidated loss from operations amounted to
$22,000 for the second quarter of fiscal 2004 as compared to earnings from
operations of $601,000 for the second quarter of fiscal 2003.

Bar Code Business

Net revenues for the bar code business for the second quarter of fiscal 2004
amounted to $2.7 million as compared to $2.1 million for the second quarter of
fiscal 2003. The market for bar code products continues to improve as the
economic recovery continues.

Gross profit totaled $792,000 for the second quarter of fiscal 2004 as compared
to $537,000 for the same quarter of fiscal 2003. This growth in gross profit
resulted primarily from higher net revenues and improved sales of higher margin
manufactured products.

R&D costs for the second quarter
of fiscal 2004 increased to $450,000 as
compared to $227,000 for the second quarter of fiscal 2003 as a result of
intensified efforts to bring a new product to market.

SG&A expenses decreased from $813,000 for the second quarter of fiscal 2003 to
$714,000 for the second quarter of fiscal 2004 primarily attributable to
reduced travel costs, sales and marketing expenditures, and depreciation
charges.

As a result of the above, the bar code business loss from operations for the
second quarter of fiscal 2004 amounted to $358,000 as compared to a loss from
operations of $496,000 for the second quarter of fiscal 2003.

Office Products Business

Net revenues for the office products business remained steady at $4.5 million
for the second quarter of fiscal 2004 and 2003, respectively. Service and
supply sales continue to remain steady with a slight decrease in hardware,
rental, and lease income.

Gross profit for the second quarter of fiscal 2004 amounted to $1.3 million, up
8.3% from $1.2 million for the second quarter of fiscal 2003. This increase in
gross profit was primarily the result of increased service and supply sales.
Gross profit as a percentage of net revenues for the second quarter of fiscal
2004 increased to 28.9% as compared to 26.7% for the second quarter of fiscal
2003.

Research and development costs
decreased from $38,000 for the second quarter of
fiscal 2003 to $29,000 for the second quarter of fiscal 2004.

SG&A costs for the second quarter of fiscal 2004 increased to $1.4 million as
compared to $1.3 million for the second quarter of fiscal 2003. This 7.7%
increase was primarily the result of higher sales salaries and group health
insurance costs.

As a result of the above, the office products business loss from operations was
$228,000 for the second quarter of fiscal 2004 as compared to a loss from
operations of $192,000 in fiscal 2003.

12



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Military Boot Business

Net revenues for the military boot business for the second quarter of fiscal
2004 totaled $7.4 million, up 57% from $4.7 million for the second quarter of
fiscal 2003. This increase in net revenues was primarily the result of higher
military boot requirements for the U.S. Government (the Government).

Gross profit amounted to $923,000 for the second quarter of fiscal 2004 as
compared to $943,000 for the second quarter of fiscal 2003. As a percentage of
net revenues, gross profit fell from 20% for the second quarter of fiscal 2003
to 12.4% for the second quarter of fiscal 2004. This decline in gross profit
resulted primarily from lower selling prices for Government boots, smaller
contribution of higher margin foreign and commercial boots in the sales mix,
and manufacturing inefficiencies associated with expanded production
requirements.

SG&A expenditures increased from $242,000 for the second quarter of fiscal 2003
to $338,000 for the second quarter of fiscal 2004 primarily as a result of
higher administrative salaries, group health insurance costs, and professional
fees.

As a result of the above, the military boot business earnings from operations
totaled $592,000 for the second quarter of fiscal 2004 as compared to $702,000
for the same period of fiscal 2003.

During the second quarter of fiscal 2004, we completed our production
obligations for military boots under the various extensions of the contract
that was scheduled to expire on April 12, 2002. In addition, we began
production of military boots under the U.S. Government contract (the
Contract) awarded to us on September 30, 2003. Also, the Government issued a
contract modification to change the sole construction of the boots covered by
the Contract. While the Government is expected to allow price changes to cover
the costs of this boot construction change, we will be required to invest
approximately $1.0 million in manufacturing equipment and supplies to comply
with the Contract requirements.

Western and Work Boot Business

Net revenues for the western and work boot business for the second quarter of
fiscal 2004 amounted to $5.1 million as compared to $6.3 million for the second
quarter of fiscal 2003. This decrease in net revenues was primarily the result
of a soft market for western footwear.

Gross profit for the second quarter of fiscal 2004 totaled $1.2 million as
compared to $1.6 million for the second quarter of fiscal 2003. As a percentage
of net revenues, gross profit fell from 25.4% for the second quarter of fiscal
2003 to 23.5% for the second quarter of fiscal 2004. This decrease in gross
profit was primarily the result of unabsorbed import costs, inventory markdowns
and write-offs, manufacturing inefficiencies, and training costs related to the
conversion of the factory to military boot production (discussed below).

SG&A expenditures amounted to approximately $1.25 million for the second
quarters of both fiscal 2004 and 2003. Lower sales commissions and marketing
expenses were partially offset by increased expenditures for travel costs and
bad debt write-offs.

As a result of the above, the western and work boot business net loss from
operations amounted to $178,000 for the second quarter of fiscal 2004 as
compared to net earnings from operations of $169,000 for the second quarter of
fiscal 2003.

During the second quarter, management decided to discontinue the manufacture of
western and work boots at the Waverly, Tennessee plant. Future western and work
boot products will be imported from global contract manufacturers. The
Tennessee plant was converted to full military boot production in January 2004.

13



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FIRST SIX MONTHS FISCAL 2004 COMPARED TO FIRST SIX MONTHS FISCAL 2003 Consolidated net revenues for the first six months of fiscal 2004 totaled $40.8
million as compared to $37.4 million for the first six months of fiscal 2003.
This increase in net revenues was primarily attributable to higher military
boot requirements by the Government partially offset by lower sales of western
and work boots and lower selling prices for military boots. Consolidated gross profit amounted to $9.3 million for the first six months of
fiscal 2004 as compared to $9.0 million for the first six months of fiscal
2003. As a percentage of net revenues, gross profit decreased from 24% to 23%
for the first six months of fiscal 2003 and 2004, respectively. Gross profit
increases attributable to higher net revenues were partially offset by lower
sales prices and greater per unit manufacturing costs for military boots. Consolidated research and development (R&D) costs for the first six months of
fiscal 2004 totaled $833,000 as compared to $425,000 for the same six-month
period of fiscal 2003. The increase in R&D was the result of intensified
efforts to bring a new bar code product to market. Consolidated selling, general and administrative (SG&A) expenditures for the
first six months of fiscal 2004 totaled $7.7 million as compared to $7.4
million for the first six months of fiscal 2003. This 4% growth in SG&A costs
for the comparative periods was primarily attributable to increased
expenditures for administrative salaries, sales commissions, group health
insurance, professional fees, and bad debt write-offs that were partially
offset by lower charges for sales and marketing costs and depreciation. Other income for the first six months of fiscal 2004 did not include any
significant gains on sale of assets as compared to $314,000 for the sale of our
motel property in the first six months of fiscal 2003. As a result of the above, consolidated earnings from operations for the first
six months of fiscal 2004 totaled $840,000 as compared to $1.5 million for the
first six months of fiscal 2003. Bar Code Business Net revenues for the bar code business for the first six months of fiscal 2004
totaled $4.9 million as compared to $5.0 million for the first six months of
fiscal 2003. The soft bar code products market was the primary reason for the
depressed net revenues for these comparative six-month periods of fiscal 2004
and 2003. Gross profit for the first six months of fiscal 2004 amounted to $1.5 million
as compared to $1.3 million for the first six months of fiscal 2003. As a
percent of net revenues, gross profit improved from 26% for the first six
months of fiscal 2003 to 31% for the first six months of fiscal 2004. This
growth in gross profit resulted primarily from increased contribution to the
sales mix of higher margin manufactured bar code products. R&D costs for the first six months of fiscal 2004 were $788,000 as compared to
$374,000 for the same period of fiscal 2003 as a result of intensified efforts
to bring the new product to market. SG&A expenditures for the first six months of fiscal 2004 totaled $1.4 million,
a reduction of 17.6% from $1.7 million for the first six months of fiscal 2003.
This decrease in SG&A expenditures was primarily attributable to reduced sales
and administrative salaries, sales and marketing costs, real estate and
equipment rentals, travel expenses, and depreciation charges. 14




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As a result of the above, the bar code business net loss amounted to $700,000
for the first six months of fiscal 2004 and 2003. Office Products Business Net revenues for the office products business totaled $9.9 million for the
first six months of fiscal 2004 as compared to $9.3 million reported for the
first six months of fiscal 2003. This 6.5% increase was primarily the result
of increased rental income and service and supply sales offset slightly by a
decrease in hardware, lease, and freight income. Gross profit for the first six months of fiscal 2004 amounted to $2.4 million,
a 14.3% increase from the $2.1 million reported in fiscal 2003. This increase
in gross profit is primarily attributable to an increase in service and supply
sales while costs remained stable. Research and development costs for the first six months of fiscal 2004 amounted
to $44,000, a decrease of 13.7% from $51,000 reported for first six months of
fiscal 2003. SG&A expenses for the first six months of fiscal 2004 were $2.9 million as
compared to $2.5 million reported in the first six months of fiscal 2003.
This increase in SG&A expenses was primarily attributable to increased sales salaries, commissions, travel expenses, administrative
salaries, group health insurance and professional fees. As a result of the above, the operating loss for the office products business
amounted to $649,000 for the first six months of fiscal 2004 as compared to
$530,000 reported for the first six months of fiscal 2003. Military Boot Business Net revenues for the military boot business for the first six months of fiscal
2004 totaled $15.7 million as compared to $9.9 million for the first six months
of fiscal 2003. This 59% increase in net revenues was the result of
significantly higher military boot requirements for the Government. Gross profit was $2.7 million for the first six months of fiscal 2004 as
compared to $2.0 million for the first six months of fiscal 2003. This growth
in gross profit resulted from the increase in net revenues. As a percentage of
net revenues, gross profit decreased from 20.2% for the first six months of
fiscal 2003 to 17.2% for the first six months of fiscal 2004. The decline in
gross profit percentage was primarily attributable to lower military boot sales
prices, decreased contribution of higher margin foreign and commercial boot
sales in the overall sales mix, and higher per unit manufacturing costs. SG&A expenditures for the first six months of fiscal 2004 totaled $671,000 as
compared to $449,000 for the first six months of fiscal 2003. This increase in
SG&A expenses resulted from higher administrative salaries, group health
insurance costs, and professional fees. As a result of the above, the military boot business net earnings from
operations amounted to $2.1 million for the first six months of fiscal 2004 as
compared to $1.5 million for the first six months of fiscal 2003. Western and Work Boot Business Net revenues for the western and work boot business totaled $11.0 million for
the first six months of fiscal 2004 as compared to $13.1 million for the first
six months of fiscal 2003. The decrease in net revenues was primarily the
result of a soft market for western and work boot products. 15




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Gross profit for the first six months of fiscal 2004 amounted to $2.7 million,
down from the $3.5 million for the first six months of fiscal 2003. This
reduction in gross profit was primarily attributable to lower net revenues. As
a percentage of net revenues, gross profit decreased from 26.7% for the first
six months of fiscal 2003 to 24.5% for the first six months of fiscal 2004.
This decline in gross profit percentage resulted from inventory write-offs and
manufacturing costs associated with assisting the military footwear business in
making military boots for the Government. SG&A expenditures for the first six months of both fiscal 2004 and 2003
amounted to $2.5 million as a result of lower sales commissions, sales and
marketing costs, and employee benefits that were offset by higher professional
fees and bad debt write-offs. As a result of the above, the western and work boot business loss from
operations amounted to $165,000 for the first six months of fiscal 2004 as
compared to earnings from operations of $650,000 for the first six months of
fiscal 2003. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, was issued and established
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. This statement
is effective for us beginning with the first quarter of fiscal 2004. FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report 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), our expectations about future
Government orders for military boots, 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 markets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to the impact of interest rate changes due to its
aggregate $4.75 million lines of credit and a term loan through its wholly
owned subsidiary, Dan Post Boot Company. As of January 31, 2004, there was no
outstanding indebtedness under the lines of credit and approximately $3.4
million was outstanding on the term loan. The Company does not buy or sell
derivative financial instruments for trading or other purposes. Borrowings
under the Companys credit facilities described above bear interest at rates
based upon the prime rate or prime rate less a margin of one-half percent
offered by the applicable lender. The Company has not entered into any swap
agreements or engaged in any other hedging activities with respect to this
variable rate indebtedness. A 50% increase in the interest rates under the
Companys credit facilities would increase annual interest expense by
approximately $61,250 (assuming the Companys aggregate borrowings under the
credit facilities averaged $3.5 million during a fiscal year). 16




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ITEM 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including
the Chief Executive Officer and Vice President of Finance, we have evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Vice President of Finance have
concluded that these disclosure controls and procedures are effective. There
were no changes in our internal control over financial reporting that occurred
during the second quarter of fiscal 2004 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings While from time to time we are engaged in litigation incidental to our
business, we are not currently party to any material legal proceedings. Item 2. This
item is not applicable and has been omitted. Item 3. This
item is not applicable and has been omitted. Item 4. Submission of Matters to a Vote of Security Holders At the Companys Annual Meeting of Stockholders held on December 18, 2003, the
following individuals were elected to the Board of Directors: Votes For
    
    Votes WithheldClass A
    
    Class B
    
    Class A
    
    Class BD. Gary McRae
    
    
    N/A
    
    
    
    720,056
    
    
    
    N/A
    
    
    
    152William H. Swan
    
    
    N/A
    
    
    
    720,056
    
    
    
    N/A
    
    
    
    152Hilton J. Cochran
    
    
    N/A
    
    
    
    720,051
    
    
    
    N/A
    
    
    
    157Victor A. Karam
    
    
    N/A
    
    
    
    720,056
    
    
    
    N/A
    
    
    
    152James W. McRae
    
    
    N/A
    
    
    
    720,056
    
    
    
    N/A
    
    
    
    152Brady W. Dickson
    
    
    1,778,319
    
    
    
    N/A
    
    
    
    23,031
    
    
    
    N/AHarold W. Smith
    
    
    1,444,404
    
    
    
    N/A
    
    
    
    356,946
    
    
    
    N/A
 The following proposal was approved at the Companys Annual Meeting: Affirmative Votes
    
    Negative Votes
    
    Votes WithheldClass A
    
    Class B
    
    Class A
    
    Class B
    
    Class A
    
    Class BRatify the
appointment of
Grant Thornton LLP
as independent
certified public
accountants for the
current fiscal year
    
    
    1,794,157
    
    
    
    720,159
    
    
    
    7,122
    
    
    
    46
    
    
    
    71
    
    
    
    3
  Item 5. This item is not applicable and has been omitted. 17




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Item 6. Exhibits and Reports on Form 8-K (a) Exhibits  3.1
    
    Certificate of Incorporation (Incorporated by reference to
Exhibit 3.1 to the Registrants Form S-14, Registration No.
2-85908).3.2
    
    Amendment to the Certificate of Incorporation (Incorporated
by reference to Exhibit 3 to the Registrants Form 10-K for the year
ended August 1, 1987).3.3
    
    Restated Bylaws of the Registrant effective May 29, 2001.
(Incorporated by reference to Exhibit 3.3 to the Registrants Form
10-K for the year ended July 28, 2001).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification for D. Gary McRae,
President and CEO (Filed herein). Page 19.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification for Marvin G. Kiser,
Sr., Vice President of Finance (Filed herein). Page 20.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350), for D. Gary McRae, President
and CEO (Filed herein). Page 21.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350), for Marvin G. Kiser, Sr., Vice
President of Finance (Filed herein). Page 22. (b) No reports on Form 8-K were filed during the quarter ended January 31, 2004. SIGNATURES Pursuant to the requirements 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.
         (Registrant)Date: March 16, 2004
    By:
    /s/D. Gary McRaeD. Gary McRaePresident and CEO
(Principal Executive Officer) Date: March 16, 2004
    By:
    /s/Marvin G. Kiser, Sr.Marvin G. Kiser, Sr.(Principal Accounting Officer) 18