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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 November 1, 2003

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)

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 1,919,972 shares as of December 10, 2003. Common Stock, $1 Par Value—Class B 848,527 shares as of December 10, 2003.

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McRae Industries, Inc. and Subsidiaries

INDEX

PART I. FINANCIAL INFORMATION

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)

See notes to condensed consolidated financial statements

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McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)

See notes to condensed consolidated financial statements

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					November 1, 2003				August 2, 2003
Liabilities and Shareholders’ Equity
Current liabilities:
		Notes payable, banks — current portion			$	577			$	577
		Accounts payable				3,974				5,211
		Accrued employee benefits				552				427
		Deferred revenues				872				1,012
		Accrued payroll and payroll taxes				885				913
		Contract contingencies				400				400
		Other				1,059				1,044
		Total current liabilities				8,319				9,584
Notes payable, banks, net of current portion						3,165				3,307
Lease guarantees						1,538				1,568
Minority interest						86				88
	Shareholders’ equity: Common stock:      Class A, $1 par; Authorized 5,000,000      shares; Issued and outstanding, 1,919,972      and 1,914,972 shares, respectively					1,920				1,915
	Class B, $1 par; Authorized 2,500,000      shares; Issued and outstanding, 848,527      and 853,527 shares, respectively					849				853
	Additional paid-in capital					791				791
	Retained earnings					28,491				28,043
			Total shareholders’ equity			32,051				31,602
					$	45,159			$	46,149

McRae Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

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)

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 principles 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 three months ended November 1, 2003 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 on Form 10-K filed 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):

NOTE C — SUBSEQUENT EVENTS

On November 25, 2003, the Company declared a cash dividend of $.06 cents per share on its Class A Common Stock payable on December 26, 2003 to shareholders of record on December 12, 2003.

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NOTE E – SUMMARY OF BUSINESS SEGMENTS