UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 2007
WELLCO ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 1-5555 56-0769274
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
150 Westwood Circle, P.O. Box 1888, Waynesville, NC 28786
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (828) 456-3545
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[ ] Written communication pursuant of Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 2 Financial Information
ITEM 2.02 Results of Operations and Financial Condition
On February 13, 2007, Wellco Enterprises, Inc. issued a press release announcing
the financial results for the second quarter ended December 30, 2006. A copy of
Wellco Enterprises, Inc. press release is attached as Exhibit 99(a) to this
report and incorporated by reference.
The information furnished pursuant to this Item 2.02 and the exhibit hereto
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and shall not be deemed
to be incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act except as shall be expressly set forth by
specific reference in such filing.
Exhibit Index
99(a) Press release, dated: February 13, 2007, issued by Wellco Enterprises,
Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLCO ENTERPRISES, INC.
/s/ Tammy Francis
---------------------------
Tammy Francis
VP of Finance and Treasurer
Dated: February 14, 2007
Exhibit 99(a)
WELLCO ENTERPRISES, INC. ANNOUNCES OPERATING RESULTS
FOR THE FISCAL QUARTER AND SIX MONTHS ENDED DECEMBER 30, 2006
Waynesville, North Carolina, February 13, 2007--Wellco Enterprises, Inc.
(AMEX-WLC) today reported net loss for the second fiscal quarter ended December
30, 2006 of its 2007 fiscal year (current three-month period) of $256,000,
equivalent to basic and diluted loss per share of $.20, from revenues of
$6,255,000. This compares to net income of $225,000, equivalent to basic
earnings per share of $.18 ($.17 diluted), from revenues of $11,041,000 in the
prior year three-month period ended December 31, 2005 (prior three-month
period).
Compared to the prior three-month period, total revenues in the current
three-month period decreased by $4,786,000. In the current three-month period,
pairs of boots shipped under U. S. Department of Defense (DOD) contracts
decreased by 47% due to DSCP reducing inventories of certain boots.
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
$181,000, compared to $381,000 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 $491,000 at
December 30, 2006, that have not been received or recorded as revenues.
During the current period, the $100,000 increase in general and administrative
expenses was primarily caused by an increase in administrative salaries,
professional fees and health care costs. The Company's employee group health
insurance costs vary with actual health care costs because the Company is
self-funded.
On February 7, 2007, the Company announced a definitive merger agreement to be
acquired in an all-cash transaction valued at $14.00 per share by Golden Gate
Capital. As a result of the Merger, each holder of the Company's common stock
will be entitled to receive $14.00 per share in cash. In addition, the Merger
Agreement provides that each holder of an outstanding option to purchase shares
of the Company common stock issued under the Company stock option plans will be
entitled to receive cash in an amount per share to the difference between $14.00
and the exercise price of the option contingent upon the holder entering into an
acknowledgement canceling the options upon consummation of the Merger.
The proposed merger agreement has received unanimous approval from a committee
of independent directors of the Company and its Board of Directors. Soles Brower
Smith & Co. advised the independent committee and provided it and the Board of
Directors with a fairness opinion. The parties anticipate closing the
transaction in the first half of calendar 2007. The closing is subject to
certain customary closing conditions, including receipt of required regulatory
approvals and the Company's shareholder approval. Also, part of the merger
agreement is a restriction prohibiting the Company from paying any further
dividends on its common stock.
The Company has agreed to file a proxy statement in connection with the
proposed merger agreement and related transactions. The proxy statement
will be mailed to the shareholders of the Company and they are urged to
read the proxy statement and other relevant materials when they become
available.
As a result of the planned Merger, the Consolidated Statements of Operations for
the six month and three month period ended December 30, 2006 include $135,000 in
costs directly related to the Merger as a component of operating loss.
For the six-month period ended December 30, 2006 (current six month period) the
Company had a net loss of $627,000, equivalent to basic and diluted loss per
share of $.49, from revenues of $11,584,000. This compares with net loss of
$421,000, equivalent to basic and diluted loss per share of $.33, from revenues
of $19,359,000 in the prior year six months ended December 31, 2005 (prior
six-month period).
Compared to the prior six-month period, total revenues in the current six-month
period decreased by $7,775,000. In the current six-month period, pairs of boots
shipped under U. S. Department of Defense (DOD) contracts decreased by 44% due
to DSCP reducing inventories. Reimbursement of compensation cost under the
Puerto Rican government program was $340,000 for the current period as compared
to $381,000 received and recognized in the prior year six-month period.
Gross profit for the six months ended December 30, 2006 was $690,000 on much
lower sales volume as compared to a gross profit of $830,000 for the prior
period. During the current period, the gross profit margin was 6% of revenues
due to an extremely low level of production and sales volume. Fixed costs (such
as depreciation, insurance and rent) and semi-variable costs did not decrease
proportionately to the decrease in the production and sales volume.
During the prior six-month period, the gross profit was 4.3% of revenues. 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. The supplier agreed to
reimburse certain excess manufacturing costs and this reimbursement has been
reflected in the Cost of Sales and Services for the six months ending December
31, 2005. However, some of the excess costs could not be recouped from the
supplier.
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.
Contact:
Wellco Enterprises, Inc.
Waynesville, North Carolina
Lee Ferguson, President and Chief Executive Officer
Phone: 828-456-3545, extension 167
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CONSOLIDATED OPERATING RESULTS
(000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
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(unaudited) (unaudited)
Fiscal Three Months Ended Fiscal Six Months Ended
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December December December December
30,2006 31,2005 30,2006 31,2005
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Revenues $6,255 $11,041 $11,584 $19,359
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Operating Income (Loss) (363) 301 (818) (330)
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Interest Expense (26) (66) (40) (109)
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Income (Loss) Before
Income Taxes (389) 235 (858) (439)
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Income Tax Provision
(Benefit) (133) 10 (231) (18)
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Net Income (Loss) (256) 225 (627) (421)
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Basic Earnings (Loss)
Per Share ($.20) $.18 ($.49) ($.33)
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Diluted Earnings (Loss)
Per Share ($.20) $.17 ($.49) ($.33)
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Weighted Average Number
of Common Shares
Outstanding:
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For Basic Earnings (Loss)
Per Share 1,270,746 1,270,746 1,270,746 1,270,746
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For Diluted Earnings
(Loss) Per Share 1,270,746 1,292,157 1,270,746 1,270,746
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