WLC Wellco Enterprises

Wellco Enterprises, Inc. (AMEX:WLC) today reported net income for the fourth quarter of fiscal year 2006 (current quarter), which ended July 1, 2006 of $1,005,000 equivalent to basic earnings per share of $0.79 ($0.79 diluted), from revenues of $11,268,000. This compares to net income $780,000 equivalent to basic earnings per share of $0.62 ($0.60 diluted), from revenues of $11,226,000 in the prior year fiscal fourth quarter (prior quarter) that ended July 2, 2005. Compared to the prior quarter, total revenues in the current quarter increased by $42,000. The Company�s primary customer is the Defense Supply Center Philadelphia (DSCP), the Department of Defense (DOD) agency with which the Company contracts for the manufacture of boots used by U. S. Armed Forces personnel. In the current quarter, the Company shipped 16,000 pairs more of DOD contract boots than the prior quarter. Partially offsetting the increase in DOD shipments, the Company shipped 8,000 fewer pairs of commercial boots in the current quarter than in the prior quarter. In the current quarter, the gross profit margin was 16% and the prior quarter gross profit margin was 14%. The gross profit margin increase is due to increased manufacturing efficiencies during the current quarter. General and administrative expenses increased $175,000 primarily due to an increase in administrative compensation, directors fees and legal expenses related to the hiring of a new Chief Executive Officer and one additional executive related to a change in management structure. The majority of the Company�s boot manufacturing operations occurs at the factory of a wholly-owned subsidiary located in Puerto Rico. The Company is participating in a Puerto Rican government program to assist manufacturers in the training of new or expanded work force under which the Company is reimbursed for part of the compensation paid to certain employees. Under this program, the Company received and recognized as revenues $193,000 in the current quarter as compared to $220,000 in the prior quarter. The Company�s policy is to recognize the reimbursement in the period that it is received. In the current quarter, the Company had an $18,000 benefit from income taxes. The majority of the current quarter�s income was earned by the Company�s Puerto Rico subsidiary, which is exempt from Puerto Rico income tax and is partially exempt from U. S. income taxes. Fiscal year 2006 is the last year in which this subsidiary has an exemption from U. S. income taxes. In addition, for the current quarter, the Company has reversed part of a previously recorded valuation allowance on deferred tax assets that are now likely to be realized. For the fiscal year ended July 1, 2006 (current fiscal year), net income was $746,000, equivalent to basic earnings per share of $0.59 ($0.58 diluted), from revenues of $44,022,000. This compares with net income of $1,907,000, equivalent to basic earnings per share of $1.51 ($1.47 diluted) from revenues of $50,467,000 for the prior fiscal year ended July 2, 2005 (prior fiscal year). In the current fiscal year, revenues decreased by $6,445,000 when compared to the prior fiscal year. The primary reason for the decrease was a 15% reduction of total pairs of boots shipped to the U.S. government. During the prior year, the Company was awarded and completed an exigency contract for 110,000 pairs of the Temperate Weather Army Combat Boot (TW). Comparing fiscal years 2006 and 2005, pairs shipped of the TW boot decreased 55,000 pairs because fiscal year 2005 included the exigency contract. Also, pairs sold of the Hot Weather boot (HW) deceased 88,000 pairs during fiscal year 2006 when compared to the prior period due to DSCP reducing inventories of certain boots. However, in fiscal year 2006, DSCP increased their purchases of the Extreme Cold Weather boot by 56,000 pairs. As mentioned above, the Company�s Puerto Rico subsidiary participates in a Puerto Rico government program under which certain portions of wages paid to new employees in training are reimbursed to that subsidiary. In the current fiscal year, the Company received from the Government of Puerto Rico $598,000 under this program. This is $787,000 less than the $1,385,000 received during the prior fiscal year. Gross profit for the current fiscal year was 8.2% of revenues as compared to gross profit of 10.4% for the prior period. This decrease in gross profit as a percentage of revenues is primarily due to a higher per unit manufacturing costs associated with lower production levels during the first three quarters of fiscal year 2006 and the decrease of $787,000 in reimbursement of wages from the Puerto Rican government mentioned above. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION Statements throughout this report that are not historical facts are forward-looking statements. These statements are based on current expectations and beliefs, and involve numerous risks and uncertainties. Many factors could affect the Company�s actual results, causing results to differ materially from those expressed in any such forward-looking information. These factors include, but are not limited to, the receipt of contracts from the U. S. government and the performance thereunder; the ability to control costs under fixed price contracts; the cancellation of contracts; and other risks detailed from time to time in the Company�s Securities and Exchange Commission filings, including Form 10-K for the year ended July 1, 2006. Those statements include, but may not be limited to, all statements regarding intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management. Actual results may differ materially from management expectations. The Company assumes no obligation to update any forward-looking statements. WELLCO ENTERPRISES, INC. CONSOLIDATED OPERATING RESULTS (000's omitted except for per share amounts and number of shares) � (unaudited) Fiscal Quarter Ended (audited) Fiscal Year Ended � July 1, 2006 July 2, 2005 July 1, 2006 July 2, 2005 Revenues $11,268� $11,226� $44,022� $50,467� Operating Income 1,044� 1,016� 1,080� 2,653� Net Interest Expense 57� 50� 264� 253� Income Before Income Taxes 987� 966� 816� 2,400� (Benefit) Provision for Income Taxes (18) 186� 70� 493� Net Income 1,005� 780� 746� 1,907� Basic Earnings Per Share 0.79� 0.62� 0.59� 1.51� Diluted Earnings Per Share $0.79� $0.60� $0.58� $1.47� Weighted Average Number of Common Shares Outstanding: � � � � For Basic Earnings Per Share 1,270,746� 1,270,746� 1,270,746� 1,263,938� For Diluted Earnings Per Share 1,278,537� 1,297,403� 1,277,604� 1,298,300� Wellco Enterprises, Inc. (AMEX:WLC) today reported net income for the fourth quarter of fiscal year 2006 (current quarter), which ended July 1, 2006 of $1,005,000 equivalent to basic earnings per share of $0.79 ($0.79 diluted), from revenues of $11,268,000. This compares to net income $780,000 equivalent to basic earnings per share of $0.62 ($0.60 diluted), from revenues of $11,226,000 in the prior year fiscal fourth quarter (prior quarter) that ended July 2, 2005. Compared to the prior quarter, total revenues in the current quarter increased by $42,000. The Company's primary customer is the Defense Supply Center Philadelphia (DSCP), the Department of Defense (DOD) agency with which the Company contracts for the manufacture of boots used by U. S. Armed Forces personnel. In the current quarter, the Company shipped 16,000 pairs more of DOD contract boots than the prior quarter. Partially offsetting the increase in DOD shipments, the Company shipped 8,000 fewer pairs of commercial boots in the current quarter than in the prior quarter. In the current quarter, the gross profit margin was 16% and the prior quarter gross profit margin was 14%. The gross profit margin increase is due to increased manufacturing efficiencies during the current quarter. General and administrative expenses increased $175,000 primarily due to an increase in administrative compensation, directors fees and legal expenses related to the hiring of a new Chief Executive Officer and one additional executive related to a change in management structure. The majority of the Company's boot manufacturing operations occurs at the factory of a wholly-owned subsidiary located in Puerto Rico. The Company is participating in a Puerto Rican government program to assist manufacturers in the training of new or expanded work force under which the Company is reimbursed for part of the compensation paid to certain employees. Under this program, the Company received and recognized as revenues $193,000 in the current quarter as compared to $220,000 in the prior quarter. The Company's policy is to recognize the reimbursement in the period that it is received. In the current quarter, the Company had an $18,000 benefit from income taxes. The majority of the current quarter's income was earned by the Company's Puerto Rico subsidiary, which is exempt from Puerto Rico income tax and is partially exempt from U. S. income taxes. Fiscal year 2006 is the last year in which this subsidiary has an exemption from U. S. income taxes. In addition, for the current quarter, the Company has reversed part of a previously recorded valuation allowance on deferred tax assets that are now likely to be realized. For the fiscal year ended July 1, 2006 (current fiscal year), net income was $746,000, equivalent to basic earnings per share of $0.59 ($0.58 diluted), from revenues of $44,022,000. This compares with net income of $1,907,000, equivalent to basic earnings per share of $1.51 ($1.47 diluted) from revenues of $50,467,000 for the prior fiscal year ended July 2, 2005 (prior fiscal year). In the current fiscal year, revenues decreased by $6,445,000 when compared to the prior fiscal year. The primary reason for the decrease was a 15% reduction of total pairs of boots shipped to the U.S. government. During the prior year, the Company was awarded and completed an exigency contract for 110,000 pairs of the Temperate Weather Army Combat Boot (TW). Comparing fiscal years 2006 and 2005, pairs shipped of the TW boot decreased 55,000 pairs because fiscal year 2005 included the exigency contract. Also, pairs sold of the Hot Weather boot (HW) deceased 88,000 pairs during fiscal year 2006 when compared to the prior period due to DSCP reducing inventories of certain boots. However, in fiscal year 2006, DSCP increased their purchases of the Extreme Cold Weather boot by 56,000 pairs. As mentioned above, the Company's Puerto Rico subsidiary participates in a Puerto Rico government program under which certain portions of wages paid to new employees in training are reimbursed to that subsidiary. In the current fiscal year, the Company received from the Government of Puerto Rico $598,000 under this program. This is $787,000 less than the $1,385,000 received during the prior fiscal year. Gross profit for the current fiscal year was 8.2% of revenues as compared to gross profit of 10.4% for the prior period. This decrease in gross profit as a percentage of revenues is primarily due to a higher per unit manufacturing costs associated with lower production levels during the first three quarters of fiscal year 2006 and the decrease of $787,000 in reimbursement of wages from the Puerto Rican government mentioned above. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION Statements throughout this report that are not historical facts are forward-looking statements. These statements are based on current expectations and beliefs, and involve numerous risks and uncertainties. Many factors could affect the Company's actual results, causing results to differ materially from those expressed in any such forward-looking information. These factors include, but are not limited to, the receipt of contracts from the U. S. government and the performance thereunder; the ability to control costs under fixed price contracts; the cancellation of contracts; and other risks detailed from time to time in the Company's Securities and Exchange Commission filings, including Form 10-K for the year ended July 1, 2006. Those statements include, but may not be limited to, all statements regarding intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management. Actual results may differ materially from management expectations. The Company assumes no obligation to update any forward-looking statements. -0- *T WELLCO ENTERPRISES, INC. CONSOLIDATED OPERATING RESULTS (000's omitted except for per share amounts and number of shares) ---------------------------------------------------------------------- (unaudited) (audited) Fiscal Quarter Ended Fiscal Year Ended ---------------------------- -------------------- -------------------- July 1, July 2, July 1, July 2, 2006 2005 2006 2005 ---------------------------- -------------------- -------------------- Revenues $11,268 $11,226 $44,022 $50,467 ---------------------------- -------------------- -------------------- Operating Income 1,044 1,016 1,080 2,653 ---------------------------- -------------------- -------------------- Net Interest Expense 57 50 264 253 ---------------------------- -------------------- -------------------- Income Before Income Taxes 987 966 816 2,400 ---------------------------- -------------------- -------------------- (Benefit) Provision for Income Taxes (18) 186 70 493 ---------------------------- -------------------- -------------------- Net Income 1,005 780 746 1,907 ---------------------------- -------------------- -------------------- Basic Earnings Per Share 0.79 0.62 0.59 1.51 ---------------------------- -------------------- -------------------- Diluted Earnings Per Share $0.79 $0.60 $0.58 $1.47 ---------------------------- -------------------- -------------------- Weighted Average Number of Common Shares Outstanding: ---------------------------- -------------------- -------------------- For Basic Earnings Per Share 1,270,746 1,270,746 1,270,746 1,263,938 ---------------------------- -------------------- -------------------- For Diluted Earnings Per Share 1,278,537 1,297,403 1,277,604 1,298,300 ---------------------------- -------------------- -------------------- *T