WLC Wellco Enterprises

Wellco Enterprises, Inc. (AMEX:WLC) today reported net income for the second fiscal quarter ended December 31, 2005 of its 2006 fiscal year (current three month period) of $225,000, equivalent to basic earnings per share of $.18 ($.17 diluted), from revenues of $11,041,000. This compares to net income of $521,000, equivalent to basic earnings per share of $.41 ($.40 diluted), from revenues of $14,358,000 in the prior year three month period ended January 1, 2005 (prior three month period). Compared to the prior three month period, total revenues in the current three month period decreased by $3,317,000. In the current three month period, pairs of boots shipped under U. S. Department of Defense (DOD) contracts decreased by 23%. In early August 2005, the only U.S. supplier of a DOD required component had a quality problem that significantly impaired production volume. Although this problem was substantially resolved in late September 2005, production and shipments in the early part of the current three month period were also impaired by the time required to reestablish an adequate supply of this component. 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 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 in the current three month period $381,000, compared to $384,000 in the prior three month period. The Company's policy is to record these reimbursements in the fiscal period in which they are received. The Company has filed reimbursement claims totaling $840,000 at December 31, 2005, that have not been received or recorded as revenues. For the six month period ended December 31, 2005 (current six month period) the Company had a net loss of ($421,000), equivalent to basic and diluted loss per share of ($.33), from revenues of $19,359,000. This compares with net income of $918,000, equivalent to basic earnings per share of $.73 ($.70 diluted), from revenues of $25,760,000 in the prior year six months ended January 1, 2005 (prior six month period). Compared to the prior six month period, total revenues in the current six month period decreased by $6,401,000. In the current six-month period, pairs of boots shipped under U. S. Department of Defense (DOD) contracts decreased by 33%. This decrease was caused by the supplier component problem mentioned above and to the Iraq surge being substantially completed in the prior period. Reimbursement of compensation cost under the Puerto Rican government program was $381,000, $784,000 less than the $1,165,000 received and recognized in the prior year six month period. At a February 14, 2006 meeting, the Wellco Board of Directors declared a cash dividend of $.15 per share payable on March 31, 2006 to shareholders of record on March 3, 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. -0- *T CONSOLIDATED OPERATING RESULTS (000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES) ---------------------------------------------------------------------- (unaudited) (unaudited) Fiscal Three Months Fiscal Six Months Ended Ended ---------------------------------------------------------------------- December 31, January 1, December 31, January 1, 2005 2005 2005 2005 ---------------------------------------------------------------------- Revenues $ 11,041 $ 14,358 $ 19,359 $ 25,760 ----------------------- ----------- ---------- ----------- ---------- Operating Income (Loss) 301 764 (330) 1,310 ----------------------- ----------- ---------- ----------- ---------- Interest Expense (66) (89) (109) (137) ----------------------- ----------- ---------- ----------- ---------- Income (Loss) Before Income Taxes 235 675 (439) 1,173 ----------------------- ----------- ---------- ----------- ---------- Income Tax Provision (Benefit) 10 154 (18) 255 ----------------------- ----------- ---------- ----------- ---------- Net Income (Loss) 225 521 (421) 918 ----------------------- ----------- ---------- ----------- ---------- Basic Earnings (Loss) Per Share $ .18 $ .41 ($.33) $ .73 ----------------------- ----------- ---------- ----------- ---------- Diluted Earnings (Loss) Per Share $ .17 $ .40 ($.33) $ .70 ----------------------- ----------- ---------- ----------- ---------- Weighted Average Number of Common Shares Outstanding: ---------------------------------------------------------------------- For Basic Earnings (Loss) Per Share 1,270,746 1,266,402 1,270,746 1,257,092 ----------------------- ----------- ---------- ----------- ---------- For Diluted Earnings (Loss) Per Share 1,292,157 1,303,970 1,270,746 1,312,888 ----------------------- ----------- ---------- ----------- ---------- *T