Wellco (AMEX:WLC)
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Wellco Enterprises, Inc. (AMEX: WLC) today reported net
income for the third fiscal quarter ended April 1, 2006 (current three
month period) of $162,000, equivalent to basic and diluted earnings
per share of $0.13 from revenues of $13,395,000. This compares to net
income $209,000, equivalent to basic and diluted earnings per share of
$0.16 from revenues of $14,646,000 in the prior year three month
period ended April 2, 2005 (prior three month period).
Compared to the prior period, total revenues in the current period
decreased by $1,251,000. DOD contract pairs sold during the current
period and prior period were comparatively similar. However, during
the current period the Company shipped more pairs of a lower contract
priced boot. Also, during the prior quarter the Company shipped more
commercial pairs of boots due to some large sales to foreign
customers.
Gross profit for the three months ended April 1, 2006 was
$1,006,000 or 7.5% of revenues as compared to gross profit of $915,000
or 6.2% for the prior period.
For the nine month period ended April 1, 2006 (current nine month
period) the Company had a net loss of ($259,000), equivalent to basic
and diluted loss per share of ($.20), from revenues of $32,754,000.
This compares with net income of $1,127,000, equivalent to basic
earnings per share of $.89 ($.87 diluted), from revenues of
$40,406,000 in the prior year nine months ended April 2, 2005 (prior
nine month period).
In the current period, the Company shipped 377,000 pairs of boots
under contract with the U.S. Department of Defense as compared to
480,000 pairs in the prior period, a decrease of 103,000 or 21%. In
the prior period, delivery orders issued by the DOD for Hot Weather
boots incorporated a "surge" requirement to meet the need in Iraq. The
"surge" requirement was substantially completed in the prior period.
The majority of the Company's boot manufacturing operations occur
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 and expanded work force
under which the Company is reimbursed for part of the compensation
paid to certain employees. During the current nine month period, the
Company received $405,000 of reimbursement under this program, which
is included in revenues. In the prior nine month period, the Company
received $1,165,000. The Company's policy is to recognize the
reimbursements as revenue in the period in which it is received, and
not when the related compensation is paid.
Gross profit for the nine months ended April 1, 2006 was
$1,836,000 or 5.6% of revenues as compared to gross profit of
$3,618,000 or 9.0% for the prior nine month period. This decrease in
gross profit as a percentage of revenues is primarily due to higher
per unit manufacturing costs associated with lower production levels
and the decrease of $760,000 in reimbursement revenues from the Puerto
Rican government mentioned above. In addition, in early August 2005,
the only U.S. supplier of a DOD required component had a significant
quality problem. The rate of boot production was reduced due to the
limited supply of this component. After this supplier solved its
quality problem, the rate of production continued to be impaired, as
it took that supplier several weeks to reestablish full production.
For the current nine month period, the Company reflected income
tax expense of $88,000 on a pretax loss of $171,000. This is the
result of the U.S. parent and one subsidiary having consolidated
income before taxes and the Puerto Rican subsidiary having a pretax
loss. The Puerto Rican subsidiary's losses are not available to offset
the taxable income for the U.S. jurisdiction companies who file a
consolidated federal income tax return. The composition of the pretax
income or loss between the parent and each of the subsidiaries impacts
the income tax expense or benefit for each interim period. The
effective income tax rate for the prior period was 21% of pretax
income.
At a May 16, 2006 meeting, the Wellco Board of Directors declared
a cash dividend of $.15 per share payable on June 30, 2006 to
shareholders of record on June 2, 2006.
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 2, 2005. 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.
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WELLCO ENTERPRISES, INC.
CONSOLIDATED OPERATING RESULTS
(UNAUDITED)
(000's omitted except for per share amounts and number of shares)
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Fiscal Nine Months Fiscal Three Months
Ended Ended
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April 1, April 2, April 1, April 2,
2006 2005 2006 2005
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Revenues $32,754 $40,406 $13,395 $14,646
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Operating Income 36 1,637 366 327
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Net Interest Expense 207 203 98 66
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Income (Loss) Before Income Taxes (171) 1,434 268 261
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Provision for Income Taxes 88 307 106 52
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Net Income (Loss) $(259) $1,127 $162 $209
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Basic Earnings (Loss) Per Share (0.20) 0.89 0.13 0.16
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Diluted Earnings (Loss) Per
Share (0.20) 0.87 0.13 0.16
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Weighted Average Number of Common Shares
Outstanding:
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For Basic Earnings
Per Share 1,270,746 1,261,660 1,270,746 1,270,746
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For Diluted Earnings
Per Share 1,270,746 1,297,748 1,286,035 1,305,000
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