McRae orders keep marching into battle. (Money Matters).

The fighting in Afghanistan might be turning into another Vietnam for McRae Industries of Mount Gilead. And for CEO Gary McRae, that's good news.

That's because the boots U.S. soldiers are using to kick Taliban tall come from McRae's footwear division. In September, McRae (AMEX: MRIA) began revving up production from 750 pairs a day to 1,200.

The surge comes at a good time for McRae. Last year, it lost $697,000 on sales of $57.1 million. The year before, it made more than $1.3 million on about the same amount of sales. Its military-boot division turned a profit in 2001, but it was the exception. McRae also makes western and work boots as well as barcode readers and printers. And it sells, services and leases office supplies. Weak demand for bar-code readers and office supplies, plus higher costs in its Western-boot division, contributed to McRae's loss.

With the war, McRae's struggling stock perked up, going from a 52-week low of $3.50 on Sept. 17 to a new 52-week high of $5.85 in mid-January. The price gain is a bonus for investors, who McRae says probably buy the stock for its dividend. Since going public in 1982, McRae, which is controlled by the McRae family, had paid a 9-cent dividend every quarter until the second of 2001, when it was cut to 5 cents.

But even that reduced dividend may be in doubt. McRae has tried many businesses in its 43 years, including trucking, a motel, contact lenses and a chain of fast-food delis. Some have been profitable. But since 1966 -- when the military contract saved McRae, then a struggling maker of kids' shoes -- that business has been the only constant.

Come April, though, when its military contract expires, the Army might give McRae less lucrative marching orders. The Army is moving from the waterproof rubber-molded-sole boot that is the specialty of McRae and only three other companies to a dry-weather boot that can be made by more companies. The Army will probably still order some of the old-style boots. "We don't know how many, but probably a much smaller quantity than they've ordered in the past," McRae admits.

McRae's 35-year record with the military and its proven ability to meet surges in demand should carry weight with government buyers. But the new boots give other companies a chance to gain a toehold on McRae's sole money maker in 2001. "We don't know what's going to happen," McRae says. "We'll bid like we normally do and see what happens after April."

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