FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(X)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended July 1, 1995
Commission file number 1-5555
WELLCO ENTERPRISES, INC.
(Exact name of Registrant as specified in charter)
North Carolina 56-0769274
(State of incorporation) (I.R.S. employer identification no.)
Waynesville, North Carolina 28786
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-456-3545
Securities registered pursuant to Section 12(b) of the Act:
Common Capital Stock - $1 par value American Stock Exchange
(Title of class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Capital Stock - $1 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
As of September 1, 1995, 884,806 common shares were outstanding, and the
aggregate market value of the common shares (based upon the closing price of
these shares on the American Stock Exchange on August 25, 1995) of Wellco
Enterprises, Inc. held by nonaffiliates was approximately $5,300,000.
Documents incorporated by reference:
Definitive Proxy Statement, to be dated October 17, 1995, in PART III.
Definitive Proxy Statement dated October 22, 1985, in PART IV.
Definitive Proxy Statement dated July 3, 1982, in PART IV.
<PAGE>
PART I
Item 1. Business.
The Company operates in one industry segment. Substantially all the Company's
revenues are derived from the sale of military footwear and related items,
whether sold by the Company or its licensees. The majority of revenues (66% in
1995, 74% in 1994) were from sales to the U. S. government, primarily the
Defense Logistics Agency.
For more than the last five years, the Company has manufactured and sold
military combat boots under firm fixed price contracts with the United States
government. Boot products are the general issue all-leather boot, the hot
weather boot and the desert boot, all manufactured using the government
specified Direct Molded Sole process. The government awards fixed price boot
contracts on the basis of bids from several qualified manufacturers.
The Company also provides, primarily under long-term licensing agreements,
technology, assistance and related services for manufacturing military and
commercial footwear to customers in the United States and abroad. Under these
agreements licensees receive technology, services and assistance, and the
Company earns fees based primarily on the licensees' sales volume. In addition
to providing technical assistance, the Company also helps supply certain foreign
military footwear manufacturers with some of their machinery and material needs.
The Company builds specialized footwear manufacturing equipment for use in its
own and its customers' manufacturing operations. This equipment is either sold
or leased.
During the 1995 fiscal year, pairs of combat boots sold were approximately 20%
less than the 1994 fiscal year. Except for Operation Desert Storm, which caused
pairs of combat boots sold to the U. S. government in fiscal year 1991 to
increase significantly, the government has for the last few years been reducing
its inventory of combat boots by purchasing fewer pairs than were consumed.
During 1995, the government accomplished this by extending the delivery schedule
for the second year of a multi-year contract from twelve to sixteen months.
On August 6, 1993, Wellco was awarded an indefinite quantity multi-year contract
from the U. S. government for between 277,000 and 416,000 pairs of combat boots
to be shipped during a one year period starting October, 1993. Against this
first year quantity, the government placed orders for its minimum required
quantity of 277,000 pairs. This contract contains two options under which the
government can exercise its right to buy between 277,000 and 416,000 pairs for
each option.
The government had initially planned to require delivery on each option over a
one year period, as was the case with the base year 277,000 pairs. In August,
1994 the government exercised its first option for the 277,000 minimum pairs.
However, actual consumption of combat boots during the first year of this
contract has been less than anticipated, resulting in the government extending
deliveries of this option's 277,000 pairs over sixteen months, or one-third
longer than the first year's delivery.
On August 2, 1995, the government exercised its second and last option under
this contract, again for the minimum 277,000 pairs. On September 26, 1995, the
Company agreed to a government request for a contract modification which reduced
the minimum second option pairs to 30,000. The Company understands that this
request was caused by the government's over-obligation of funds for its fiscal
year ending September 30, 1995, and they were correcting this by reducing their
obligation on items for which delivery orders had not yet been placed. The
Company agreed to this modification because the government could have otherwise
exercised its right to unilaterally cancel the contract for the convenience of
the government. This contract modification allows the Company to make a claim
against the government for the lost contribution to overhead, general and
administrative costs and profit caused by any reduction in the original 277,000
pairs and/or any delay in production.
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The government has indicated that their intent is to purchase all of the
original 277,000 pairs, but they will have to wait for their fiscal year 1996
funding appropriation before increasing the 30,000 pair committment. The Company
presently believes that this will result in a reduced production schedule of no
more than a few weeks, but if there is a significant delay in ordering boots
and/or if the government orders significantly less than their original 277,000
pair commitment, the operating results of the Company could be adversely
affected. The Company intends to file a claim for any lost overhead, general and
administrative costs and profit, but any such claim would be subject to final
verification and audit by the government. The Company believes that any adverse
effect would only be significant starting it its third fiscal quarter beginning
December 31, 1995.
Somewhat offsetting the effect of reduced combat boot shipments in 1995 was an
increase in machinery and material sales to licensees, including a military
combat boot factory in El Salvador, one new licensee and one long-term licensee.
These sales can vary significantly from year to year with the needs of these
customers.
During 1994, the Company was awarded an option under an existing U. S.
government research and development contract for further work on improvement to
the hot weather combat boot. This work was completed in 1995 and improvements
developed under this contract have now been incorporated into the hot weather
combat boot. In August, 1995, the Company was awarded a U. S. Government
research and development "cost plus fixed fee" contract with a total estimated
value of $1,184,000. The objective of this contract is to develop changes to the
combat boot that will result in fewer lower extremity disorders. Work has
started on this contract and could extend over three years.
This type of research and development work is vital to assuring that the U. S.
armed forces have the most serviceable combat boots available. Development work
of this type, done by the Company in a very short period of time in 1991, led to
the desert boot which was first used in Operation Desert Storm.
In 1995, Wellco, along with two other manufacturers of military clothing,
jointly bid on a trial contract to procure, warehouse and distribute all of the
standard clothing items to Air Force recruits at Lackland Air Force Base in
Texas for one year, with two options for one year each. The government has been
evaluating bids for many months, with the projected contract award date being no
later than October 24, 1995.
Bidding on contracts is open to any qualified U. S. manufacturer. In addition to
meeting very stringent manufacturing and quality specifications, contractors are
required to comply with precise delivery schedules and a significant investment
in specialized equipment is required.
The August, 1993 combat boot contract was the first one awarded the Company
under the U. S. government's "best value" system, under which contractors
offering the best value to the government receive the largest awards. Wellco
anticipates that during the latter half of the 1996 fiscal year the U. S.
Government will start the solicitation process on its next multi-year contract.
Until then, Wellco is continuing to improve its quality and on-time delivery,
two very important factors in the best value system.
The Company usually competes on U. S. government contracts with three other
companies, no one of which dominates the industry. Many factors affect the
government's demand for combat boots and the quantity purchased can vary from
year to year. Wellco anticipates that the government will continue buying fewer
pairs of combat boots than consumption for the next few years. Contractors
cannot influence the government's combat boot needs. Price, quality and
manufacturing efficiency are the areas emphasized by the Company that strengthen
its competitive position.
Government contracts are subject to partial or complete termination under the
following circumstances:
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(1) Convenience of the Government. The government's contracting
officer has the authority to partially or completely terminate
a contract for the convenience of the government only when it
is in the government's interest to terminate. The contracting
officer is responsible for negotiating a settlement with the
contractor.
(2) Default of the Contractor. The government's contracting
officer has the authority to partially or completely terminate
a contract because of the contractor's actual or anticipated
failure to perform his contractual obligations.
Under certain circumstances occasioned by the egregious conduct of a contractor,
contracts may be terminated and a contractor may be prohibited for a certain
period of time from receiving government contracts. The Company has never had a
contract either partially or completely terminated.
Because domestic commercial footwear manufacturers are adversely affected by
imports from low labor cost countries, the Company targets its marketing of
technology and assistance primarily to military footwear manufacturers. The
Company competes against several other footwear construction methods commonly
used for heavy-duty footwear with leather uppers. These methods include the
Goodyear Welt construction, as well as boots bottomed by injection molding.
These methods are used in work shoes, safety shoes, and hiking boots
manufactured both in the U. S. and abroad for the commercial market. The
Goodyear Welt method is also used for certain types of military boots, although
not for the models manufactured by the Company which are made only in the
government specified Direct Molded Sole construction. Quality, service and
reasonable manufacturing costs are the most important features used to market
the Company's technology, assistance and services.
The Company has a strong research and development program. While not all
research and development results in successful new products or significant
revenues, the continuing development of new products and processes has been and
will continue to be a significant factor in growth and development. The Company
developed the desert combat boot, first used in Operation Desert Storm. In 1993,
the Company completed initial development of improvements to the black hot
weather boot incorporating many of the features it developed for the desert
boot. In 1994 it was awarded an option under that contract for further
development. In August, 1995 it was awarded a contract to develop changes to
combat boots that will result in fewer lower extremity disorders.
Although not precisely quantified, the Company spends a significant amount of
time and effort on both Company and customer-sponsored research activities
related to the development of new products and processes and to the improvement
of existing ones. A significant amount of this cost is for the personnel costs
of mold engineers, rubber technicians, chemists, pattern engineers and
management, all of whom have many responsibilities in addition to research and
development. The Company estimates that the cost of research and development can
vary from $50,000 to $300,000 per year, depending on the number of research
projects and the specific needs of its customers.
See Note 14 to the consolidated financial statements in Item 8 for revenues by
class and information about export revenues. The Company does not have foreign
operations.
The Company's backlog of all sales, not including license fees and rentals, as
of September, 1995 was approximately $18,100,000 compared to $17,200,000 last
year. Of the current year backlog, the Company estimates that approximately
$10,400,000 will be shipped in the 1996 fiscal year.
Most of the raw materials used by the Company can be obtained from at least two
sources and are readily available. Because all materials in combat boots must
meet rigid government specifications and because quality is the first priority,
the Company purchases most of its raw materials from vendors who provide the
best materials at a reasonable cost. The loss of some vendors would cause some
difficulty for the entire industry, but the Company believes a suitable
replacement could be found in a reasonably short period of time. Major raw
materials include leathers, fabrics and rubber, and by government regulation all
are from manufacturers in the United States.
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Compliance with various existing governmental provisions relating to protection
of the environment has not had a material effect on the Company's capital
expenditures, earnings or competitive position.
The Company employed an average of 267 persons during the 1995 year.
Item 2. Properties.
The Company has manufacturing, warehousing and office facilities in Waynesville,
North Carolina and Aguadilla, Puerto Rico. The building and land in North
Carolina is owned by the Company. The Puerto Rico building and land are leased.
Management believes all its plants, warehouses and offices are in good condition
and are reasonably suited for the purposes for which they are presently used.
The volume of operations in 1995 caused both the Waynesville and Aguadilla
facilities to be used at less than normal capacity.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the Company's business, to which the Company or any of
its subsidiaries is a party or of which any of their property is subject.
Management does not know of any director, officer, affiliate of the Company, nor
any stockholder of record or beneficial owner of more than 5% of the Company's
common stock, or any associate thereof who is a party to a legal proceeding that
is adverse to the Company or any of its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders.
There were not any submissions of matters to a vote of security holders during
the fourth quarter of fiscal year 1995.
PART II
Items 5, 6, 7 and 8.
The information called for by the following items is in the Company's 1995
Annual Report to Shareholders which is incorporated starting on the following
page in this Form 10-K:
Annual Report
Page Number
Item 5. Market for the Registrant's Common
Equity and Related
Stockholder Matters 30
Item 6. Selected Financial Data 1
Item 7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-10
Item 8. Financial Statements and Supplementary Data 11-29, 31
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<PAGE>
WELLCO(R)
ENTERPRISES, INC.
ANNUAL REPORT
1995
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended
July 1, July 2, July 3, June 27, June 29,
1995 1994 (A) 1993 1992 1991
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ................................ $18,003 $18,255 $18,977 $16,928 $24,261
Net Income .............................. 969 1,542 (B) 1,980 2,349 2,027
Net Income Per Share
1.10 1.75 (B) 2.28 2.70 2.33
Cash Dividends Declared
Per Share of Common
Stock ................................... .25 (C) 6.25 .25 .25 .25
Total Assets at Year End ................ 22,738 20,995 25,013 22,953 21,358
Long-Term Liabilities at
Year End ................................ $ 1,897 $ 1,647 $ 1,770 $ 1,498 $ 1,493
</TABLE>
(A) Contains 53 weeks. All other years are 52 weeks.
(B) Increased by $260,000 ($.30 per share) representing the cumulative
effect at the beginning of the 1993 fiscal year of a change in
accounting for income taxes.
(C) Includes a special cash dividend of $6.00 per share.
See The Management's Discussion and Analysis section.
Independent Auditors
Deloitte & Touche LLP Charlotte, N.C.
Annual Meeting
November 21, 1995
Corporate Offices
Waynesville, N.C.
10-K Availability
The Company's Form 10-K (annual report filed with the Securities and Exchange
Commission) is available without charge to those who wish to receive a copy.
Write to: Corporate Secretary, Wellco Enterprises, Inc., Box 188, Waynesville,
N.C. 28786
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<PAGE>
Dear Fellow Shareholder:
As it has been for a number of years, your company's most important activity
continues to be the development, manufacture and sale of military footwear.
Although heavily influenced by the size of our country's military establishment
and by Government purchasing patterns, we feel this business continues to
represent a very promising long-term future for a small number of dedicated and
specialized producers, such as Wellco, and we intend to maintain our
concentration on this business, while continuing also to seek opportunities in
related and compatible fields for military and commercial consumption at home
and abroad.
The decline in net income in Fiscal Year 1995 resulted primarily from reduced
shipments of military boots to the U.S. Government, as well as a $420,000
reduction in net investment and dividend and interest income.
Several developments that have taken place in recent months could have a
significant favorable impact on the company's earnings, beginning with the
second half of its 1996 Fiscal Year:
1. Wellco's sales to the U.S. Government for the past two years have largely
been against a contract awarded in August 1993, which called for a minimum
basic quantity of 277,000 pr of military combat boots, with two options for
additional like quantities to be exercised at one-year intervals. The basic
award called for shipments over a one-year period. When the first option
was exercised in August 1994, the Government specified a sixteen month
delivery schedule for the purpose of reducing its inventories. This
stretched-out delivery schedule is the cause of reduced current sales to
the Government. The sixteen month delivery cycle will end in December 1995.
On August 2, 1995, the government exercised its second and last option
under this contract, again for the minimum 277,000 pairs. On September 26,
1995, the Company agreed to a government request for a contract
modification which reduced the minimum second option pairs to 30,000.
The Company understands that this request was caused by the
government's over-obligation of funds for its fiscal year ending September
30, 1995, and they were correcting this by reducing their obligation on
items for which delivery orders had not yet been placed. The Company
agreed to this modification because the government could have otherwise
exercised its right to unilaterally cancel the contract for the
convenience of the government. This contract modification allows the
Company to make a claim against the government for the lost contribution
to overhead, general and administrative costs and profit caused by any
reduction in the original 277,000 pairs and/or any delay in production.
The government has indicated that their intent is to purchase all of the
original 277,000 pairs, but they will have to wait for their fiscal year
1996 funding appropriation before increasing the 30,000 pair commitment.
The Company presently believes that this will result in a reduced
production schedule of no more than a few weeks, but if there is a
significant delay in ordering boots and/or if the government orders
significantly less than their original 277,000 pair commitment, the
operating results of the Company could be adversely affected. The Company
intends to file a claim for any lost overhead, general and administrative
costs and profit, but any such claim would be subject to final verification
and audit by the government. The Company believes that any adverse effect
would only be significant starting in its third fiscal quarter beginning
December 31, 1995.
2. On August 31, 1995 Wellco's subsidiary, Ro-Search Inc., was awarded a
$1,184,000 Development Contract by U.S. Army Natick Research, Development
and Engineering Center, with the object of developing improvements in
military combat footwear for the purpose of reducing the incidence of lower
extremity disorders. Work on this contract could extend over a three year
period and, if successful, could contribute significantly to maintaining
and enhancing the Company's leadership position in the development and
production of military boots.
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3. In recent months the Company has received several orders for the production
of military footwear for Latin American and Middle East countries. We feel
that foreign countries are beginning to recognize the superior quality of
U.S.-made boots, in comparison with lower-cost products made in the Far
East and elsewhere.
4. The blast protective boots and overboots developed by Ro-Search, Inc.,
designed to eliminate or reduce foot and leg injuries among military
personnel operating in mine-infested areas and engaged in mine clearance
operations, are attracting widening attention for use in parts of the world
where guerilla warfare and other conflicts have taken place. Such boots are
presently being produced for use in Turkey and in Peru.
5. The Company's largest commercial licensee, Georgia Boot Inc., is presently
relying on Wellco to bottom several hundred pairs daily of work and safety
shoes, using Ro-Search's proprietary Process 82. Similar production of
commercial footwear for other clients is under consideration.
6. Wellco, together with two other manufacturers of military apparel, is
participating in a joint venture which has bid to manufacture and/or
procure and to distribute all standard items of clothing to all U. S. Air
Force recruits. This is a test contract whose purpose we understand to be
an evaluation of the use of contractors to replace some of the Government's
purchasing and distribution system. The Government is presently evaluating
bids and has projected a contract award during this Fall. If awarded to
Wellco and its partners, such a contract could have a favorable effect on
future revenues and earnings.
The dedication, experience and talents of our co-workers in Waynesville, North
Carolina and Aguadilla, Puerto Rico have always been and will continue to be a
key component of whatever we may accomplish.
Our heartfelt gratitude is extended to all of them.
Respectfully,
Horace Auberry Rolf Kaufman
Chairman President
September 28, 1995
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WELLCO'S INVOLVEMENT IN BOOT DEVELOPMENT
Wellco was founded fifty-five years ago. One of the activities of the Company
and its employees that has brought us this far is our work in footwear
development, especially in the development of combat boots that meet the needs
of the U. S. armed forces. The individual soldier is our customer and the
purpose of our development efforts is to provide them with the best, most
serviceable boots available.
Our financial releases frequently mention various development work. This year we
are providing you with a history of Wellco's involvement in footwear
development, which, in light of the importance of combat boots to current
operations, is primarily about combat boot development.
The first development work goes back to the early 1930's, even prior to Wellco's
founding in 1941. At that time, the Company's founders, then operating in
Germany, developed and patented the initial technology for simultaneously
forming, vulcanizing and attaching a one-piece rubber sole and heel to a shoe
upper.
Wellco's founders, the Rollman and Kaufman families, had to flee Nazi Germany.
Although they brought few physical possessions, they were able to bring their
knowledge and desire to develop and improve footwear. Upon coming to the U.S.
and founding Wellco in Waynesville, North Carolina, they first applied this
knowhow to the production of a broad line of slippers and casual footwear, while
continuing to perfect the process for use in heavy duty rugged footwear,
including military boots. This continuing development activity led to the
patenting in 1957 of "Process 82(R)," a version of the technology that has been
widely licensed and used and continuously improved for the production of work
and safety footwear and other products worldwide. In 1963, the Company was
successful in demonstrating to the U.S. Military the superiority of another
version of the original technology for use in military footwear, which became
known as the DMS (Direct Molded Sole) construction.
The first military application of the DMS construction was in the production of
the Tropical Combat Boot, initially known as the "Vietnam Boot." The U. S. armed
forces did not have a combat boot that protected their feet in the hot, wet
climate of Viet Nam. They also needed protection against certain unique hazards
which they encountered. This boot has been in continuous use for more than
thirty years, with a succession of improvements developed by Ro-Search in
conjunction with U.S. Army Natick Research, Development and Engineering Center
(Natick), leading to the adoption of the most recent improvements in 1994.
In 1968 the U.S. military's general purpose all-leather combat boot was changed
to the DMS construction. This boot replaced one made with the Goodyear Welt
construction and gave the U. S. armed forces a much more comfortable and
serviceable boot. The current version of this boot was designed and adopted in
1985, although it too has been variously refined since that time, always as a
result of cooperative efforts between Wellco/Ro-Search and Natick.
In 1991 a Wellco/Ro-Search developed prototype was selected as the U.S.
Military's desert boot, presently known as Hot Weather Boot - Type II. This boot
was designed under emergency conditions for Operations Desert Shield and Desert
Storm, in response to the requirements personally set forth by General Norman H.
Schwarzkopf. U. S. armed forces needed a boot that provided protection and
performance in a hot, dry and sandy climate. In record time, the Company
developed a boot meeting the soldiers' needs, wrote the boot specification and
started contract production of this boot. This boot today has become the
standard for use by military forces operating in arid climates.
On August 31, 1995, Ro-Search was awarded a $1,184,000 development contract by
Natick. While military combat boots used by our country's armed forces are the
finest in the world, there is always room for improvement. The contract just
awarded seeks to improve the wearer's foot health and comfort by increasing
flexibility and enhancing impact characteristics of such footwear, while
retaining the excellent support, wearability and resistance to the elements that
are characteristic of the present product. To carry
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out this assignment and consider all options, the Company has enlisted the aid
of several sub-contractors specialized in various footwear constructions other
than the DMS (Direct Molded Sole) construction of the present combat boots,
and/or specialized in testing and evaluation of factors that influence the
incidence of foot and leg disorders and injury. The contract just awarded
includes three phases that could extend over a three-year period and is expected
to result in the adoption of a new or improved design for soldier use by
approximately 1998. The importance of this contract to the Company rests not as
much in the revenue and net income which may be associated with it as it does in
the opportunity to develop military footwear. We again have the opportunity to
be of service to our primary customer, the U. S. armed forces, and we look
forward to again improving the combat boots he relies upon in protecting all of
us.
There is one more area where our boot development makes a significant
contribution to soldiers. For several years, Ro-Search has been perfecting boots
which reduce injuries among troops operating in mine- infested areas and/or
engaged in mine clearance operations. To this end, a blast protective boot has
been developed, incorporating a metal honeycomb in the sole deigned to absorb
and deflect the blast produced by land mines. A blast protective overboot,
incorporating the same honeycomb in its sole, supplemented by Kevlar(R)
impact-resistant material, has been developed for use in combination with the
blast protective boot in areas of greatest danger. These boots have been tested
by the U.S. Military at Natick and at Aberdeen Proving Grounds and have been
worn under guerilla warfare conditions in El Salvador and by Canadian forces
engaged in mine clearance in U.N. operations in Kuwait and Bosnia. Such boots
are presently being produced for use in Peru and Turkey and are attracting a
high level of interest from the military forces of a number of other countries,
besides the U.S.A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
Comparing The Year Ended July 1, 1995 and July 2, 1994:
Income before income taxes in the current year was $1,212,000 compared to
$2,034,000 in the prior one. Several factors resulted in the $822,000 decrease,
the more significant ones being:
1. Pairs of combat boots sold decreased almost 20%. Most of this decrease
was in shipments to the U. S. government. In November, 1994, Wellco
made its first shipments against an option awarded under its current
military boot contract. This option has a delivery schedule of sixteen
months, compared to a twelve month schedule for boots shipped in
fiscal year 1994.
2. 1994 includes $255,000 in favorable adjustments to previous estimates
of contracting actions which were finalized in the fourth quarter.
From time to time contract changes will occur whose financial effect
on the Company are included in the financial statements at estimated
amounts until final amounts are negotiated and settled with the
government. Most of this $255,000 adjustment relates to estimates
recorded in the years 1991-1993.
3. Somewhat offsetting the effect of lower combat boots sales was an
increase in machinery and materials sales. A significant shipment of
machinery and boot materials was made to a combat boot manufacturing
factory in El Salvador, which did not occur in 1994. 1995 also
includes substantial machinery sales to one new boot manufacturing
customer and to one long-time customer. These sales can vary
significantly from year to year with the needs of these customers.
4. Revenues from technical assistance fees and equipment rentals from
licensees, which vary with their shipments, decreased because the
Company's U. S. combat boot manufacturing licensees were also affected
by the government's longer delivery schedule .
5. While revenues decreased $252,000, certain manufacturing expenses
increased, and this reduced margins. Group health insurance costs, for
which the Company is self funded, increased $131,000. This cost varies
from period to period with the actual amount of health costs incurred
by employees. Workers' compensation insurance premiums also increased,
but this was more than offset by decreases in the cost of utilities
and maintenance.
6. General and administrative expense decreased $6,000 in 1995. Employee
bonus compensation decreased $69,000 with the lower net income.
7. Dividend and interest income decreased $52,000. Investment income
decreased $368,000 in the current year, primarily because two equity
securities were sold for prices less than their carrying value.
The percentage of income tax provision to pretax income decreased in 1995. The
untaxed portion of dividend income from corporate equity securities did not
decrease in proportion to the decrease in pretax income.
In 1995, Wellco adopted Statement of Financial Accounting Standards No. 115,
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"Accounting for Certain Investments in Debt and Equity Securities". This
resulted in the carrying value of Marketable Securities, as shown in the
Consolidated Balance Sheets, being increased by the $730,000 excess of fair
value over their adjusted cost, and a corresponding increase, net of the effect
of income taxes, in Stockholders' Equity of $482,000.
On December 30, 1994, Wellco purchased 400,000 shares of the common stock of
Alba Waldensian, Inc. (21.5% of total shares outstanding). This investment is
being accounted for on the equity method. Included in the 1995 pretax income is
$69,000 representing Wellco's share of Alba's net income from the date of
purchase through July 1, 1995, and the amortization of the excess of Wellco's
proportionate share of Alba's net assets over Wellco's basis in the stock.
Forward Looking Information:
In August, 1993 Wellco was awarded a U. S. government combat boot contract for
277,000 pairs to be shipped over a twelve month period. The contract also
contains two options for the same quantity. During the first year and each
option period, the government can increase its total purchases by up to 50%,
with the specific additional quantity awarded to each contractor being based on
an evaluation of the contractors' performance during the prior year. To date,
the government has not increased its purchases, and the Company understands that
it will not during the remaining option periods of this contract.
In August, 1994 the government exercised the first option for a total of 277,000
pairs. The delivery period for shipments under this option is sixteen months, or
a one-third longer period than the first year's award. This delivery extension
was caused by a government program to reduce its combat boot inventories by
buying fewer boots than are consumed. Deliveries under this option will be
substantially completed by December, 1995.
On August 2, 1995, the government exercised its second and last option under
this contract, again for the minimum 277,000 pairs. On September 26, 1995, the
Company agreed to a government request for a contract modification which reduced
the minimum second option pairs to 30,000. The Company understands that this
request was caused by the government's over-obligation of funds for its fiscal
year ending September 30, 1995, and they were correcting this by reducing their
obligation on items for which delivery orders had not yet been placed. The
Company agreed to this modification because the government could have otherwise
exercised its right to unilaterally cancel the contract for the convenience of
the government. This contract modification allows the Company to make a claim
agains the government for the lost contribution to overhead, general and
administrative costs and profit caused by any reduction in the original 277,000
pairs and/or any delay in production.
The government has indicated that their intent is to purchase all of the
original 277,000 pairs, but they will have to wait for their fiscal year 1996
funding appropriation before increasing the 30,000 pair commitment. The Company
presently believes that this will result in a reduced production schedule of no
more than a few weeks, but if there is a significant delay in ordering boots
and/or if the government orders significantly less than their original 277,000
pair commitment, the operating results of the Company could be adversely
affected. The Company intends to file a claim for any lost overhead, general and
administrative costs and profit, but any such claim would be subject to final
verification and audit by the government. The Company believes that any adverse
effect would only be significant starting in its third fiscal quarter beginning
December 31, 1995.
The Company also understands that the government's combat boot inventory is
significantly greater than what they want it to be. They are presently buying
fewer pairs than consumption and will probably continue to do so for the next
few years.
-7-
<PAGE>
In late August, 1995, the Company was awarded a $1,184,000 development boot
contract from the U. S. government. The objective of this contract is to develop
changes to the combat boot that will result in fewer lower extremity disorders.
Work has started on this contract and could extend over three years.
Wellco, along with two other manufacturers of military clothing, have jointly
bid on a trial contract to procure, warehouse and distribute all of the standard
clothing items to Air Force recruits at Lackland Air Force Base in Texas for one
year, with two options for one year each. The government has been evaluating
bids for many months, with the projected contract award date being no later than
October 24, 1995.
Subsequent to July 1, 1995, Wellco received several orders from foreign
customers for its anti-personnel mine protective boot. Interest in this product
has increased significantly, but at this point it is too early to project if it
will become a significant contributor to future operations.
Comparing The Year Ended July 2, 1994 and July 3, 1993:
Income before income taxes in the current year was $2,034,000 compared to
$2,423,000 in the prior one.
Several factors resulted in the $389,000 decrease, the more significant ones
being:
1. Operations in the prior year included significant equipment sales
under contract to a military boot factory in Colombia, South America.
This contract represented a complete retooling of an existing factory,
and a contract of this type and significance did not exist in 1994.
Somewhat offsetting this were $255,000 in favorable adjustments to
previous estimates of contracting actions which were finalized in the
fourth quarter of the 1994 year. From time to time contract changes
will occur whose financial effect on the Company are included in the
financial statements at estimated amounts until final amounts are
negotiated and settled with the government. Most of this $255,000
adjustment relates to estimates recorded in the years 1991-1993. If
prior year estimates were adjusted for the actual settlement amounts,
pretax income for 1993, 1992 and 1991 would be increased by
approximately $101,000, $93,000 and $41,000.
2. Revenues from technical assistance fees and equipment rentals from
licensees decreased because the prior period included certain fee
surcharges which did not occur in the current period. Somewhat
offsetting this was the effect of certain licensees having higher
sales, on which these variable fees are earned.
3. Despite the decrease in total revenues, certain manufacturing expenses
increased, and this reduced margins. Group health insurance costs, for
which the Company is self funded, increased $82,000. The cost of
workers' compensation insurance also increased.
4. General and administrative expense decreased in 1994 because the prior
year includes $137,000 incurred by a special committee of Wellco's
Board of Directors in the investigation of a potential acquisition.
Also, employee bonus compensation decreased with the lower net income.
5. Dividend and interest income decreased because the payment of a
special cash dividend in September, 1993 totaling $5,300,000 reduced
invested funds.
The percentage of income tax provision to pretax income decreased in 1994. The
primary reason for this was a reduction in the previously accrued liability for
Puerto Rico taxes on undistributed earnings of the Company's subsidiary which
operates in Puerto Rico. The subsidiary was able, under a new law of Puerto
Rico, to prepay, at a 20% lower rate, certain of these taxes normally paid when
that subsidiary pays a dividend to the Company.
-8-
<PAGE>
In fiscal year 1993, Wellco elected to adopt early Financial Accounting
Standards Board Opinion No. 109, "Accounting for Income Taxes". The cumulative
prior year effect of adopting SFAS No. 109 was recorded in 1993 and increased
net income by $260,000.
LIQUIDITY AND CAPITAL RESOURCES
Wellco uses cash from operations to supply most of its liquidity needs. A bank
line of credit is maintained for supplying any unforeseen cash needs.
The following table summarizes at the end of each year the availability of cash
from the Company's most liquid assets and from its existing borrowing sources:
(in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash .................................... $ 2,423 $ 2,528 $ 3,188
Marketable Securities, Current .......... 996 2,894 6,469
Unused Line of Credit ................... 1,480 1,480 1,480
------- ------- -------
Total ................................... $ 4,899 $ 6,902 $11,137
</TABLE>
The decrease at the end of 1995 was primarily caused by the investment in Alba
Waldensian, Inc. The decrease at the end of 1994 was caused by the payment of a
special cash dividend totaling $5,300,000 in September, 1993. This dividend was
paid out of monies determined by the Board of Directors to not be otherwise
needed in the foreseeable future.
The following table summarizes the major sources (uses) of cash for the last
three years:
(in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income Plus Depreciation and Equity in
Earnings of Affiliate, Less Net Investment Income ...................... $ 1,214 $ 1,490 $ 1,853
Net Change in Accounts Receivable, Inventory,
Accounts Payable and Accrued Liabilities ............................... 192 (1,970) 978
Other .................................................................. (173) (119) (281)
Net Cash Provided (Used) By Operations ................................. 1,233 (599) 2,550
Net Cash From Sale of (Purchases of) Marketable
Securities ............................................................. 3,653 5,563 (1,490)
Cash Used to Purchase Affiliate ........................................ (4,475)
Cash Used to Purchase Equipment ........................................ (295) (322) (299)
Cash Dividends Paid .................................................... (221) (5,530) (217)
Other .................................................................. 228 (11)
Net Increase (Decrease in Cash) ........................................ $ (105) $ (660) $ 533
</TABLE>
-9-
<PAGE>
In 1995, cash from the sale of marketable securities was used to pay for part of
the purchase of Alba Waldensian, Inc. (the affiliate) common stock. Cash from
1995 operations was also used to purchase Alba's stock, purchase equipment and
pay the cash dividend. Cash from 1994 operations was used to increase inventory
and to provide monies for the increase in accounts receivable. Cash from the
sale of marketable securities and some of the cash from July 3, 1993 was used to
pay 1994 cash dividends, including the $5,300,000 special dividend.
Cash resources are adequate to meet presently known operating activity needs.
The Company has no material commitments for capital equipment. The Company does
not know of any demands, commitments, uncertainties, or trends that will result
in or that are reasonably likely to result in its liquidity increasing or
decreasing in any material way.
The bank line of credit, which provides for total borrowings of $1,500,000, will
expire and be subject to renewal on December 30, 1995.
-10-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED
JULY 1, 1995, JULY 2, 1994 AND JULY 3, 1993
(in thousands except per share and number of shares)
<TABLE>
<CAPTION>
JULY 1, JULY 2, JULY 3,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
REVENUES (Notes 1, 6, 14 and 15) .............. $ 18,003 $ 18,255 $ 18,977
COSTS AND EXPENSES:
Cost of sales and services ............... 15,128 14,903 15,254
General and administrative ............... 2,196 2,202 2,398
expenses ................................. -- -- --
Total .................................... 17,324 17,105 17,652
-------- -------- --------
DIVIDEND AND INTEREST INCOME .................. 446 498 629
NET INVESTMENT INCOME (Note 4) ................ 18 386 469
-------- -------- --------
INCOME BEFORE EQUITY IN EARNINGS
OF AFFILIATE ............................. 1,143 2,034 2,423
EQUITY IN EARNINGS OF AFFILIATE
(Notes 1 and 5) .......................... 69
-------- -------- --------
INCOME BEFORE INCOME TAXES .................... 1,212 2,034 2,423
PROVISION FOR INCOME TAXES
(Notes 1 and 12) ......................... 243 492 703
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING FOR
INCOME TAXES ............................. 969 1,542 1,720
======== ======== ========
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME
TAXES (Note 12) .......................... 260
-------- -------- --------
NET INCOME .................................... $ 969 $ 1,542 $ 1,980
======== ======== ========
PER SHARE OF COMMON STOCK (based on
weighted average number of shares
outstanding)-
Before cumulative effect of change
in accounting for income ............. $ 1.10 $ 1.75 $ 1.98
taxes
Cumulative effect of change in
accounting for income taxes .......... 0.30
-------- -------- --------
Net income ............................... $ 1.10 $ 1.75 $ 2.28
======== ======== ========
Weighted average number of
shares
outstanding .............................. 884,806 881,267 869,357
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-11-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
JULY 1, 1995 AND JULY 2, 1994
(in thousands)
<TABLE>
<CAPTION>
ASSETS
JULY 1, JULY 2,
1995 1994
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash ........................................... $ 2,423 $ 2,528
Marketable securities,current
(Notes 1 and 4) ............................. 996 2,894
Receivables (Note 2) ........................... 3,267 4,400
Inventories (Notes 1 and 3) .................... 4,295 3,522
Deferred taxes and prepaid
expenses
(Note 12) ................................... 429 354
------- -------
Total .......................................... 11,410 13,698
------- -------
MARKETABLE SECURITIES,non-current
(Notes 1 and 4) ................................ 3,787 4,794
INVESTMENT IN AFFILIATE (Notes 1 and 5) ............ 5,529
MACHINERY LEASED TO LICENSEES
(Notes 1 and 6) ................................ 111 182
PROPERTY, PLANT AND EQUIPMENT:
(Notes 1 and 7) ................................ 1,031 997
INTANGIBLE ASSETS:
Excess of cost over net
assets of
subsidiary at acquisition ................... 228 228
(Note 1)
Intangible pension asset ....................... 642 575
(Note 10)
------- -------
Total .......................................... 870 803
------- -------
DEFERRED TAXES (Note 12) ........................... 521
------- -------
TOTAL .............................................. $22,738 $20,995
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
-12-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
JULY 1, 1995 AND JULY 2, 1994
(in thousands)
<TABLE>
<CAPTION>
LIABILITIES AND EQUITY
JULY 1, JULY 2,
1995 1994
------- -------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowing from bank ............ $ 20 $ 20
(Note 8)
Accounts payable .......................... 1,533 1,825
Accrued liabilities (Note 9) .............. 1,418 1,148
Accrued income taxes (Note 12) ............ 207 353
----------- -----------
Total ................................. 3,178 3,346
=========== ===========
LONG-TERM LIABILITIES:
Pension obligation (Note 10) .............. 1,887 1,647
Deferred taxes (Note 12) .................. 10
COMMITMENT (Note 16)
STOCKHOLDERS' EQUITY (Notes 13 and 16):
Preferred 5% cumulative redeemable,
convertible stock; $100 par value:
3,000 shares authorized, none
outstanding
Common stock, $1.00 par value;
2,000,000 shares authorized;
884,806 shares
issued and outstanding ................ 885 885
Additional paid-in capital ................ 1,409 759
(Note 5)
Retained earnings ......................... 15,412 14,664
Pension liability adjustment .............. (525) (306)
(Note 10)
Unrealized gain on marketable
securities (Notes 1 and 4 ) .......... 482
----------- -----------
Total ................................. 17,663 16,002
----------- -----------
TOTAL .......................................... $ 22,738 $ 20,995
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-13-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED
JULY 1, 1995, JULY 2, 1994 AND JULY 3, 1993
(in thousands)
<TABLE>
<CAPTION>
JULY 1, JULY 2, JULY 3,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income ................................ $ 969 $ 1,542 $ 1,980
------- ------- -------
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization ........... 332 334 342
Net investment income ................... (18) (386) (469)
Equity in earnings of ................... (69)
affiliate
(Increase) decrease in-
Accounts receivable .................. 1,133 (767) 1,055
Inventories .......................... (773) (1,047) (440)
Other current assets ................. (75) (97) (120)
Increase (decrease)in-
Accounts payable ..................... (292) (31) 472
Accrued liabilities .................. 270 (7) (71)
Accrued income taxes ................. (146) (118) (38)
Pension obligation ................... (46) 22 219
Other ................................ (52) (44) (380)
------- ------- -------
Total adjustments ......................... 264 (2,141) 570
------- ------- -------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES ...................... 1,233 (599) 2,550
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliate ................... (4,475)
Net sales (purchases) of current
marketable securities ................... 1,898 3,766 (3,997)
Purchases of noncurrent
marketable securities ................... (2,343) (588) (2,809)
Sales of noncurrent
marketable securities ................... 4,098 2,385 5,316
Purchases of equipment .................... (295) (322) (299)
------- ------- -------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ..................... (1,117) 5,241 (1,789)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from bank ............................ 2,050
Repayment of bank loan .................... (2,050)
Cash dividends paid ....................... (221) (5,530) (217)
Purchase of common stock .................. (24)
Stock option exercise ..................... 228 13
------- ------- -------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES ...................... (221) (5,302) (228)
------- ------- -------
NET INCREASE (DECREASE) IN CASH ............... (105) (660) 533
CASH AT BEGINNING OF PERIOD ................... 2,528 3,188 2,655
------- ------- -------
CASH AT END OF PERIOD ............. $ 2,423 $ 2,528 $ 3,188
======= ======= =======
</TABLE>
(continued on next page)
-14-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED
JULY 1, 1995, JULY 2, 1994, AND JULY 3, 1993
<TABLE>
<CAPTION>
JULY 1, JULY 2, JULY 3,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
Interest ................................ $ 44 $ 20 $ 24
Income taxes ............................ 779 745 907
Noncash increase in marketable
securities to fair value ................ 730
Noncash increase in Investment
in Affiliate ............................ 986
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
-15-
<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE FISCAL YEARS ENDED
JULY 1, 1995, JULY 2, 1994 AND JULY 3, 1993
(in thousands except number of shares)
<TABLE>
<CAPTION>
JULY 1, JULY 2, JULY 3,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
COMMON STOCK (Notes 13 and 16):
Balance at beginning of year ........... $ 885 $ 869 $ 869
Purchase of common stock ............... (1)
Stock option exercise .................. 16 1
-------- -------- --------
Balance at end of year ................. 885 885 869
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL:
(Notes 5, 13 and 16):
Balance at beginning of year ........... 759 547 536
Excess of basis over cost
of investment in affiliate ............. 650
Purchase of common stock ............... (1)
Stock option exercise .................. 212 12
-------- -------- --------
Balance at end of year ................. 1,409 759 547
-------- -------- --------
RETAINED EARNINGS:
Balance at beginning of year ........... 14,664 18,652 16,911
Purchase of common stock ............... (22)
Net income ............................. 969 1,542 1,980
Cash dividends (per share: 1995
and 1993, $.25; 1994 $6.25)........ (221) (5,530) (217)
-------- -------- --------
Balance at end of year ................. 15,412 14,664 18,652
-------- -------- --------
PENSION LIABILITY ADJUSTMENT
(Note 10):
Balance at beginning of year ........... (306) (327)
Change for the year .................... (219) 21 (327)
-------- -------- --------
Balance at end of year ................. (525) (306) (327)
-------- -------- --------
UNREALIZED GAIN ON
MARKETABLE SECURITIES (Notes 1 and 4) .. 482
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY ................. $ 17,663 $ 16,002 $ 19,741
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-16-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended July 1, 1995, July 2, 1994 and July 3, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying financial statements include the consolidated
accounts of the Company and its wholly-owned subsidiaries.
Appropriate eliminations have been made of intercompany
transactions and balances.
Inventories
Raw materials and supplies are valued at the lower of
first-in, first-out cost or market. Finished goods and work in
process are valued at the lower of actual cost, determined on
a specific basis, or market.
Income Taxes
The provision for income taxes is based on taxes currently
payable adjusted for the net change in the deferred tax asset
or liability during the current year. A deferred tax asset or
liability arises from temporary differences between the
carrying value of assets and liabilities for financial
reporting and income tax purposes.
Marketable Securities
Marketable securities consist of corporate equity and debt
securities and the notes of various U. S. government agencies.
Statement of Financial Accounting Standards No. 115 (SFAS
115), "Accounting for Certain Investments in Debt and Equity
Securities", was effective as of the beginning of the 1995
fiscal year. Under SFAS 115, corporate equity and debt
securities are classified as available-for-sale and are valued
in the Consolidated Balance Sheets at their fair value
(usually market value). The difference between fair value and
the securities' adjusted cost, net of the effect of income
taxes, is reflected in Stockholders' Equity.
U. S. government agency notes, purchased at a discount to
their face value and held for a very short period prior to
their maturity, are classified as held-to-maturity. These
securities are valued in the Consolidated Balance Sheets at
their cost, which is not significantly less than amortized
cost, and the difference between cost and the amount realized
at maturity is included with Interest Income in the
Consolidated Statements of Operations.
Retroactive application of SFAS 115 is not permitted. Prior to
the 1995 fiscal year, the Company's method of accounting for
marketable securities was to reflect their value at cost.
Under both SFAS 115 and the prior accounting method, an
unrealized loss is recognized for any decline in an individual
investment's fair value below cost that is judged to be other
than temporary. Realized gains and losses on the sales of
investments are determined on the specific identification
basis.
Depreciation
-17-
<PAGE>
The Company uses the straight-line method to compute
depreciation on machinery leased to licensees and property,
plant and equipment.
Investment in Affiliate
Investment in affiliate, defined as owned more than 20% but
not more than 50%, is accounted for on the equity method.
Because this affiliate was purchased from a more-than- 50%
owner of Wellco, the investment was initially recorded at that
entity's basis at the date of Wellco's acquisition. The excess
of that basis over Wellco's cost of acquisition ($650,000, net
of the effect of income taxes) was recorded as an increase in
Additional Paid-In Capital.
Machinery Leased to Licensees
Certain shoe-making machinery is leased to licensees under
cancelable operating leases. Such activity is accounted for by
the operating method whereby leased assets are capitalized and
depreciated over their estimated useful lives (5 to 10 years)
and rentals, based primarily on the volume of shoes produced
or shipped by the lessees, are recorded during the period
earned.
Intangible Asset
The excess of the fair value (as determined by the Board of
Directors) of Wellco Enterprises, Inc. common stock issued
over the net assets of Ro-Search, Incorporated at acquisition
is not being amortized. This asset arose prior to 1970 and, in
the opinion of management, there has not been any diminution
in its value.
Pensions
The Company has two non-contributory, defined benefit pension
plans covering substantially all employees at its North
Carolina plant. The Company's policy is to fund the minimum
amount required by the Employee Retirement Income Security
Act.
Revenue Recognition
All government combat boot production contracts are fixed
price and usually have a delivery schedule of twelve to
sixteen months. Revenue is recognized for each boot shipment
after it has been inspected and accepted by the government's
Quality Assurance Representative.
Government research and development contracts are typically no
more than one year in duration. Revenue is recognized as
services are performed and invoiced. Revenues from licensees
are recognized in the period services are rendered or products
are shipped.
Statements of Cash Flows
For the purpose of these statements, current marketable
securities are not considered to be cash equivalents since
they are purchased for yield and represent a part of the
Company's investing activities.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to June
30. Because of this, the 1993 fiscal contains 53 weeks, and
all other years presented contain 52 weeks.
-18-
<PAGE>
Postemployment Benefits
Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits", is
effective for the Company's 1995 fiscal year. As it applies to
the Company, SFAS No. 112 requires the recording of an expense
and liability for the cost of insurance benefits to employees
who are not actively at work due to illness or layoff. The
amount of this liability at July 1, 1995 was not significant.
2. RECEIVABLES:
The majority of receivables at July 1, 1995 are from the U. S. government.
The Company's policy is to require either a confirmed irrevocable bank
letter of credit or advance payment on significant order from foreign
customers. Allowances for doubtful accounts in 1995 and 1994 are not
significant.
3. INVENTORIES:
The components of inventories are:
(in thousands)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Finished Goods ............................... $1,723 $ 734
Work in Process .............................. 1,415 1,183
Raw Materials and Supplies ................... 1,157 1,605
------ ------
Total ........................................ $4,295 $3,522
====== ======
</TABLE>
4. MARKETABLE SECURITIES:
Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting
for Certain Investments in Debt and Equity Securities", was effective as of
the beginning of the 1995 fiscal year. Under SFAS 115, corporate equity and
debt securities are classified as available-for-sale and are valued in the
Consolidated Balance Sheets at their fair value (usually market value). The
difference between fair value and the securities adjusted cost, net of the
effect of income taxes, is reflected in Stockholders' Equity. U. S.
government agency notes are classified as held-to-maturity and are valued at
their cost which approximates amortized cost. Restatement of previously
issued financial statements is not permitted under SFAS 115. The Company's
previous method of accounting for investments was to reflect their value at
cost and only adjust cost by any declines in fair value below cost that were
judged to be other than temporary. Under both SFAS 115 and the previous
method of accounting, any decline in fair value below cost that is judged to
be other than temporary is recognized as an unrealized loss.
Applying FAS 115 to the July 1, 1995 Consolidated Financial Statements
resulted in corporate equity and debt securities being stated at their fair
value (an increase of $730,000 over adjusted cost) with an increase in
Stockholders' Equity, after the effect of income taxes, of $482,000. Fair
value is usually current market value at the financial statement date.
Adjusted cost, gross unrealized gains and losses and the fair value of all
Marketable Securities at July 1, 1995 is :
-19-
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
Gross Gross
Unrealized Unrealized Fair
Adjusted Cost Gain Loss Value
------------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Corporate Equity Securities ............................ $3,057 $ 778 $ 48 $3,787
Corporate Debt Securities .............................. 0 0 0 0
U. S. Government Agency Note ........................... 996 0 0 996
------ ------ ------ ------
Total .................................................. $4,053 $ 778 $ 48 $4,783
====== ====== ====== ======
</TABLE>
Proceeds from the sale of Marketable Securities classified under FAS 115 as
available-for-sale in the fiscal year ended July 1, 1995 were $4,098,000,
resulting in gross realized gains of $354,000 and gross realized losses of
$142,000. An unrealized loss ($194,000) was recognized on one corporate
equity security whose fair value's decline below cost was judged to be
other than temporary. Realized gains and losses are determined on a
specific identification basis. The U. S. Government agency note matured in
July, 1995.
The adjusted cost and fair value of marketable securities at July 2, 1994
were:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Adjusted Cost:
Corporate Equity Securities ................................. $3,334
Corporate Debt Securities ................................... 1,460
U. S. Government Agency Note ................................ 2,894
------
Total ....................................................... $7,688
------
Aggregate Fair Value ........................................ $7,900
</TABLE>
Recognized and unrecognized investment gains and losses for the 1994 and 1993
fiscal years were:
<TABLE>
<CAPTION>
(in thousands)
1994 1993
---- ----
<S> <C> <C>
Recognized During the Year-
Realized Gains ............................... $ 663 $ 1,146
Unrealized Losses ............................ (277) (677)
------- -------
Net Gain ..................................... 386 469
Unrecognized at End of Year-
Gains ........................................ 515 78
Losses ....................................... (303) (649)
------- -------
Net Unrealized Gain .......................... $ 212 $ 132
</TABLE>
-20-
<PAGE>
5. INVESTMENT IN AFFILIATE:
On December 30, 1994 Wellco purchased from Coronet Insurance Company for
cash 400,000 shares of the common stock of Alba Waldensian, Inc. (Alba)
$4,250,000 was paid to Coronet and $225,000 was paid for investment bankers
fees, legal fees and other investigation costs. This represents 21.5% of
total Alba common shares. At December 30, Coronet owned 58.79% of the total
outstanding common stock of Wellco. Because Coronet owned more than 50% of
Wellco, the investment was recorded at the basis of Coronet in these Alba
shares ($5,461,000), and the excess of that basis over Wellco's cost
increased Additional Paid-In Capital by $650,000, net of the effect of
income taxes. The total market value of these shares, based on the closing
price of Alba common stock on the American Stock Exchange on June 29,1995
was $3,650,000. Management has evaluated the reasons for the decline in
Alba's market price since its acquisition and has concluded that the
decline is temporary.
Wellco has an option to purchase up to 538,000 additional Alba shares from
Coronet. If all of this option was exercised, Wellco would own 50.4% of
total Alba common shares.
The investment in Alba is accounted for using the equity method. The excess
of Wellco's equity in the underlying net assets of Alba ($747,000) over its
basis is being amortized to income over a remaining period of approximately
7 years. Amortization included in Equity in Earnings of Affiliate in the
Consolidated Statements of Operations is $50,000 in the year ended July 1,
1995.
Alba is a manufacturer of both men's and women's apparel products as well
as medical specialty products. Other than this investment, there are no
business relationships or transactions between Wellco and Alba.
Summarized financial information (unaudited) for Alba is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Financial Position at July 2, 1995:
Current Assets ................................................ $29,291
Noncurrent Assets ............................................. 23,673
-------
Total Assets .................................................. 52,964
Current Liabilities ........................................... 8,270
Noncurrent Liabilities ........................................ 15,500
Stockholders' Equity .......................................... 29,194
-------
Total Liabilities and Stockholders' Equity .................... $52,964
Operating Results for the Six Months Ended
July 2, 1995:
Net Revenues .................................................. $30,630
Income Before Income Taxes .................................... 144
Net Income .................................................... $ 90
</TABLE>
-21-
<PAGE>
6. MACHINERY LEASED TO LICENSEES:
Accumulated depreciation netted against the cost of leased assets in the
1995 and 1994 consolidated balance sheets is $1,408,000 and $1,337,000.
Rental revenues for the fiscal years 1995, 1994, and 1993 were $122,000,
$146,000 and $114,000, substantially all of which vary with lessee's
production or shipments.
7. PROPERTY, PLANT AND EQUIPMENT:
The cost and accumulated depreciation of property, plant and equipment is
summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
1995 1994 Estimated Useful
Life
---- ---- ----------------
<S> <C> <C> <C>
Land ................................ $ 107 $ 107
Buildings ........................... 774 774 45 Years
Machinery &
Equipment ........................... 2,226 2,190 2-20 Years
Furniture & Fixtures ................ 411 337 2-10 years
Leasehold Improvements .............. 63 63 *
------ ------ ----------
Total Cost .......................... $3,581 $3,471
Total Accumulated
Depreciation ........................ $2,550 $2,474
</TABLE>
*Leasehold improvements are amortized using the straight-line method over the
shorter of the estimated useful lives of the improvements or the period of
the respective leases.
8. LINE OF CREDIT:
The Company has a $1,500,000 unsecured bank line of credit. Interest is at
the bank's prime rate. The line, which expires December 30, 1995, can be
renewed annually at the bank's discretion. At July 1, 1995, $1,480,000 was
available for borrowing under this line.
9. ACCRUED LIABILITIES:
The components of accrued liabilities are:
<TABLE>
<CAPTION>
(in thousands)
1995 1994
---- ----
<S> <C> <C>
Compensation ............................. $ 744 $ 810
Pension .................................. 286 120
Other .................................... 388 218
------ ------
Total .................................... $1,418 $1,148
</TABLE>
-22-
<PAGE>
10. PENSION PLANS:
The Company's pension plans provide retirement benefits based on either
years of service or final average annual earnings.
The components of pension expense computed in accordance with Statement of
Financial Accounting Standards No. 87 (Employers' Accounting For Pensions)
are:
<TABLE>
<CAPTION>
(in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Benefits Earned for Service in the
Current Year ............................... $ 134 $ 97 $ 90
Interest on the Projected Benefit
Obligation ................................. 357 373 374
Return on Plan Assets ...................... (207) (196) (201)
Amortization of: Unrecognized Net
Pension Obligation at July 1, 1987;
Cost of Benefit Changes Since That
Date; and Gains and Losses Against
Actuarial Assumptions ..................... 129 131 119
----- ----- -----
Pension Expense ............................ $ 413 $ 405 $ 382
</TABLE>
The liability of the plans at July 1, 1995 and July 2, 1994, and the
components of the pension liability accrued in the balance sheets are:
<TABLE>
<CAPTION>
(in thousands)
Pension Liability: 1995 1994
---- ----
<S> <C> <C>
Accumulated Benefit Obligation,
Substantially All Vested ....................... $ 4,742 $ 4,301
Obligation for Actuarially Projected
Future Salary Increases ........................ 322 352
Projected Benefit Obligation ..................... 5,064 4,653
Plan Assets at Fair Value ........................ (2,568) (2,534)
Projected Obligation Greater than Assets ......... 2,496 2,119
Less Projected Future Salary Increases ........... (322) (352)
Pension Liability Recognized in the
Consolidated Financial Statements ................ $ 2,174 $ 1,767
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
1995 1994
---- ----
<S> <C> <C>
Components of Pension Liability:
Unamortized Costs Not Yet Charged
Against Operations-
Net Obligation at July 1, 1987 ..................... $ 497 $ 568
Net Obligation From Changes to the
Plans Since July 1, 1987 ......................... 369 412
Net Loss From Actuarial Assumptions
Being Different Than
Actual ........................................... 893 411
Less Projected Future Salary Increases ............. (322) (352)
Total Liability Not Yet Charged Against
Operations ....................................... 1,437 1,039
Amount of Liability That Has Been Charged
Against Operations ............................... 737 728
------- -------
Total Pension Liability ............................ $ 2,174 $ 1,767
</TABLE>
The pension liability not yet charged against operations is a part of the
long-term pension obligation liability. This liability at July 1, 1995 is
offset by an intangible pension asset of $642,000 ($575,000 at July 2,
1994) and an equity reduction, net of income taxes, of $525,000 ($306,000
at July 2, 1994).
Plan assets are invested in the General Investment Account of the Company's
actuary. This account invests primarily in high-quality, fixed income
mortgage obligations and corporate bonds. The assumed average discount rate
and the expected long-term rate of return on plan assets is 7.5% ( 8% for
1994). To the extent projected benefits are based on final average annual
earnings, the assumed rate of annual increase in future salary levels is
5.5% (6.5% for 1994).
11. RETIREE HEALTH BENEFITS:
The Company provides health insurance benefits for qualified retired
employees of its North Carolina plant. Statement of Financial Accounting
Standards No. 106, "Employers Accounting for Postretirement Benefits Other
Than Pensions" (FAS 106) was effective for the 1994 fiscal year. This
Statement requires the recognition of the cost of postretirement benefits
over the service lives of employees and the recognition, either immediately
upon adoption of the Statement or over average remaining future service
lives, of the liability at the date of adoption (July 4, 1993). The 1995
and 1994 Consolidated Financial Statements reflect the Statement's adoption
and the Company elected to recognize the liability over remaining future
service lives. Restatement of previously issued financial statements is not
permitted. The Company's previous accounting method for postretirement
health benefits was to expense costs in the period paid.
Employees of the North Carolina plant who meet certain criteria and retire
early (age 62-64) or disabled receive for themselves, but not for their
dependents, the same health insurance benefits received by active
employees. All benefits terminate when the employee becomes eligible to
receive Medicare (usually age 65 or 30 months after disability date). This
benefit is provided at no cost to the employee and the Company does not
fund the cost of this benefit prior to costs actually being incurred.
-24-
<PAGE>
The cost of retiree health benefits for the 1995 and 1994 fiscal year as
computed under FAS 106 was:
<TABLE>
<CAPTION>
(in thousands)
1995 1994
---- ----
<S> <C> <C>
Benefits Earned for Current Service ...................... $20 $19
Interest Cost on Accumulated Liability ................... 20 21
Amortization of the July 4, 1993 Liability ............... 13 15
--- ---
Total Cost ............................................... $53 $55
</TABLE>
Retirement health benefit costs expensed in the fiscal year 1993, under the
Company's previous accounting method, was $26,000.
The reconciliation of the total liability to the amount included as a
liability in the Consolidated Balance Sheet at July 1, 1995 and July 2,
1994 is:
<TABLE>
<CAPTION>
(in thousands)
1995 1994
---- ----
<S> <C> <C>
Accumulated Liability For-
Retired Employees .................................... $ 12 $ 46
Fully Qualified Employees ............................ 0 9
Other Employees ...................................... 267 215
----- -----
Total ................................................ 279 270
Less Balance of Unrecognized
Liability at July 4, 1993 .......................... (254) (268)
Unrecognized Net Gain Since July 4, 1993 ............. 32 29
Liability Recognized in the Consolidated
Balance Sheet ..................................... $ 57 $ 31
</TABLE>
The assumed health care cost trend rate used to project expected future
cost was 13.2% in 1995 (14% in 1994), gradually decreasing to 6% by 2004
and remaining at 6% thereafter. The assumed discount rate used to determine
the accumulated liability was 8% at July 1, 1995 ( 7.5% at July 2, 1994).
The effect of a 1% increase in the assumed health care cost trend rate for
each future year would not have a significant effect on the service and
interest cost components of the current period cost or on the accumulated
liability.
12. INCOME TAXES:
In fiscal year 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Standard requires
that an asset and liability approach be used in accounting for income taxes
and provides revised criteria for the recognition of deferred tax assets.
As permitted by the Standard, prior year financial statements have not been
restated. The cumulative prior year effect of adopting SFAS No. 109 was
recorded in 1993 and increased net income by $260,000.
-25-
<PAGE>
This primarily represents the benefit of being able to reduce future years'
taxable income by certain expenses previously recognized for financial
statement purposes.
The provision for income taxes consist of the following:
<TABLE>
<CAPTION>
(in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal-
Currently Payable .................. $ 143 $ 458 $ 556
Deferred ........................... 45 (84) (10)
----- ----- -----
Total Federal ...................... 188 374 546
State .............................. 55 118 157
----- ----- -----
Total Provision .................... $ 243 $ 492 $ 703
</TABLE>
A reconciliation of the effective income tax rate for the 1995, 1994 and
1993 fiscal years is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory Federal Income Tax Rate ............. 34% 34% 34%
Current Period Income of Puerto Rico
Subsidiary
Substantially Exempt From Puerto Rican
and Federal Income Taxes .................... (11%) (11%) (10%)
State Taxes, Net of Federal Tax Benefit ....... 4% 4% 5%
Untaxed Portion of Dividend Income ............ (5%) * *
Other ......................................... (2%) (3%)
Effective Income Tax Rate ..................... 20% 24% 29
* less than 1%
</TABLE>
Income earned in Puerto Rico by the Company's Puerto Rican subsidiary is
not subject to United States federal income tax and is 90% exempt from
Puerto Rican income tax through 2000.
The accumulated undistributed earnings ($4,335,000 at July 1, 1995) of this
subsidiary are subject to a Puerto Rican tollgate tax (5%) when remitted to
the parent company. Accrued tax liabilities have been provided for the
tollgate tax reasonably expected to be paid in the future. In 1994 under a
new Puerto Rican law, the Company elected to prepay at a 8% rate certain
tollgate taxes previously accrued at 10%. This is the primary reason for
the decrease in the 1994 effective tax rate.
-26-
<PAGE>
Significant components of the Company's deferred tax assets (no valuation
allowance considered necessary) and liabilities as of the end of fiscal
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1995 1994
---- ----
<S> <C> <C>
Deferred Tax Assets:
Investment Write Downs Recognized
in Financial Statements,
Not Yet Deducted From Taxable Income ..................... $209 $215
Pension Cost Charged Against Financial
Statement Income, Not Yet Deducted
From Taxable Income .................................... 153 207
Tax Effect of Pension Liability Charged
Against Equity ......................................... 270 158
Employee Compensation Charged Against
Financial Statement Income, Not Yet
Deducted From Taxable Income ........................... 132 137
Other .................................................... 97 71
---- ----
Total Deferred Tax Asset ................................. 861 788
Deferred Tax Liabilities:
Depreciation Deducted From Taxable Income
Not Yet Charged Against Financial Statement
Income ................................................. 51 63
Deferred Tax Liability on the Adjustment of
Marketable Securities to Fair Value .................... 248
Deferred Tax Liability on Increase in Basis
of Investment in Affiliate ............................. 335
Other .................................................... 23 5
---- ----
Total Deferred Tax Liability ............................. 657 68
---- ----
Net Deferred Tax Asset ................................... $204 $720
</TABLE>
13. STOCK OPTIONS:
All options under the Company's 1985 Stock Option Plan have been granted.
Options have a term of 10 years from the date granted and have an exercise
price equal to the fair market value on the date granted. Shares under
option and fully exercisable at the end of the last three fiscal years are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Options Granted February 10, 1986 for the
Purchase of 6,000 Shares at $10.125 Each ...... 6,000
Options Granted June 14, 1989 for the
Purchase of 10,880 Shares at $16.50 Each ...... 700 700 10,800
</TABLE>
In September, 1993, 16,100 shares of the Company's Common stock was issued
upon employees' exercise of stock options. The excess of the amount
received over the par value of shares issued
-27-
<PAGE>
increased Additional Paid-in Capital.
14. SEGMENT AND REVENUE INFORMATION:
The Company operates in one industry segment. Substantially all the
Company's operating activity is from the sale of military footwear and
related items, whether sold directly by the Company or its licensees.
Revenues by class of product, major customer and export revenues for 1995,
1994 and 1993 were:
<TABLE>
<CAPTION>
Percent of Total Revenues
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues By Class of Product:
Sales of Footwear and Related Items ........... 96% 96% 95%
Revenues From Licensees ....................... 4% 4% 5%
--- --- ---
Total ......................................... 100% 100% 100%
Major Customer-U. S. Government ............... 66% 74% 62%
Export Revenues ............................... 12% 6% 14%
</TABLE>
The majority of export revenues are to Central and South American
countries.
15. GOVERNMENT BOOT CONTRACT REVENUES:
In 1994 two contract actions were settled with the U. S. government, and
this resulted in an increase in income before income taxes of $255,000.
This amount is the excess of the actual settlement amounts over previously
recorded estimates. At July 1, 1995, all significant contract items had
been settled.
16. COMMITMENT:
Under a Resolution of its Board of Directors, Wellco is committed to
purchase its Common Stock, which, as of September 6, 1990, was owned by or
under option with an active or retired employee at that date. This purchase
is at the employee or retiree option and is activated only by the
termination of employment or death of the retiree. The purchase price is to
be based on Wellco's tangible book value at the time of purchase. The
maximum shares that could be purchased at July 1, 1995 is approximately
34,000.
-28-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Wellco Enterprises, Inc.
Waynesville, North Carolina
We have audited the accompanying consolidated balance sheets of Wellco
Enterprises, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended July 1, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Wellco Enterprises, Inc. and
subsidiaries as of July 1, 1995 and July 2, 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for marketable securities during fiscal year
1995 to conform with Statement of Financial Accounting Standards No. 115. As
discussed in Note 12 to the consolidated financial statements, the Company
changed its method of accounting for income taxes during fiscal year 1993 to
conform with Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
September 11, 1995
-29-
<PAGE>
WELLCO ENTERPRISES, INC.
PRICE RANGE, DIVIDENDS AND MARKET OF COMMON STOCK
Fiscal Year 1995 Quarter
<TABLE>
<CAPTION>
First Second Third Fourth
<S> <C> <C> <C> <C>
Market Price-
High ....................................................... 17 3/8 18 17 1/2 17 1/8
Low ........................................................ 14 3/4 15 5/8 14 7/8 15
Per Share Cash Dividend Declared ........................... $.12 1/2 $.12 1/2
Fiscal Year 1994 Quarter
First Second Third Fourth
<S> <C> <C> <C> <C>
Market Price-
High ..................................................... 34 7/8 21 7/8 15 1/4 14 3/4
Low ...................................................... 15 3/4 13 7/8 14 1/4 14
Per Share Cash Dividend Declared ......................... $ 6.00 $.12 1/2 $.12 1/2
</TABLE>
The Company's Common Stock is traded on the American Stock Exchange.
The number of holders of record of Wellco's Common Stock as of August 29, 1995
was 321.
Registrar and Transfer Agent
Chemical Bank
New York, N. Y.
-30-
<PAGE>
WELLCO ENTERPRISES, INC.
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
(In Thousands Except for Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year 1995 Quarter
First Second Third Fourth
<S> <C> <C> <C> <C>
Revenues ...................................... $4,908 $5,045 $4,255 $3,795
Cost of Sales and Services .................... 4,174 4,047 3,775 3,132
Net Income .................................... 220 380 139 (A) 230
Net Income Per Share .......................... $ .25 $ .43 $ .16 $ .26
Fiscal Year 1994 Quarter
First Second Third Fourth
<S> <C> <C> <C> <C>
Revenues ................................... $3,398 $4,524 $4,396 $5,937
Cost of Sales and Services ................. 3,044 3,829 3,523 4,507
Net Income ................................. 81 (B) 393 376 (C) 692
Net Income Per Share ....................... $ .09 $ .44 $.42 $ .78
</TABLE>
(A) Increased by $116,000 representing the adjustment of tax provisions for the
first three quarters, made at estimated annual effective tax rates, to the
actual rate for the year.
Reflects $89,000 charitable contribution to the Wellco Foundation.
(B) Includes $212,000 gain on sale of investments.
(C) Increased, by $143,000 in the fourth quarter and $61,000 in the third
quarter, by the settlement of certain U. S. government contract actions at
amounts different than the previously recorded estimates.
The fourth quarter also reflects -
$138,000 charitable contribution to the Wellco Foundation.
$50,000 reduction in tax provision from the prepayment of certain taxes at
a rate lower than that previously provided.
-31-
<PAGE>
Officers and Directors
HORACE AUBERRY
Chairman of the Board
ROLF KAUFMAN
President
Officers
DAVID LUTZ
Secretary-Treasurer
SVEN E. OBERG
V. P. - Technical Director
RICHARD A. WOOD, Jr.
Assistant Secretary; Attorney, Member of the law firm of McGuire, Wood &
Bissette, P. A.
Directors
WILLIAM M. COUSINS, Jr.
President of William M. Cousins, Jr., Inc.
(Management Consultants)
CLYDE Wm. ENGLE
Chairman of the Board and Chief Executive Officer of Telco Capital Corporation
JAMES M. FAWCETT, Jr.
Registered Representative and Agent for The Equitable Companies, Inc.
JOSEPH MINIO
President and Chief Executive Officer of Belle Haven Management, Ltd.
LEE M. MORTENSON
President and Chief Operating Officer of Sunstates Corporation
J. AARON PREVOST
Retired Banker
WILLIAM D. SCHUBERT
Principal of Advanced Management Concepts
(Management Consultants)
-32-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no resignations by or dismissals of any independent accountant
engaged by the Company during the 1994 or 1995 fiscal years or during the period
from the end of the 1995 fiscal year through the date of filing this Form 10-K.
PART III
Responsive information called for by the following Items 10, 11, 12 and 13,
except for certain information about executive officers provided below, will be
filed not later than 120 days after the close of the fiscal year with the
Securities and Exchange Commission in a Proxy Statement dated October 17, 1995,
and is incorporated herein by reference. After each item and shown in
parenthesis is the proxy heading for the section containing the responsive
information.
Item 10. Directors and Executive Officers of the Registrant.
(Board of Directors)
The Proxy Statement is not expected to contain information
disclosing delinquent Form 4 filers.
Identification of Executive Officers:
Name Age Office
Horace Auberry 64 Chairman of the Board of Directors
Rolf Kaufman 64 President and Director
Sven Oberg 56 Vice President-Technical Director
David Lutz, CPA 50 Secretary-Treasurer
Richard A. Wood, Jr. 58 Assistant Secretary
There are no arrangements or understandings pursuant to which any of the
officers are elected, and all are elected to serve for one year terms. All
officers have served in their indicated capacities for more than 5 years.
Item 11. Executive Compensation.
(Executive Compensation)
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(Security Ownership)
Item 13. Certain Relationships and Related Transactions.
(Board of Directors/Security Ownership)
Since the beginning of the 1995 fiscal year, no executive officer of the
Registrant or member of his immediate family has had any transaction or series
of similar transactions with the Registrant or any of its subsidiaries exceeding
$60,000, and there are no currently proposed transactions exceeding $60,000.
-5-
<PAGE>
Since the beginning of the 1995 fiscal year, no -
(1) executive officer of the Registrant or member of his immediate family,
(2) corporation or organization of which any such person is an executive
officer, partner, owner or 10% or more beneficial owner, or
(3) trust or other estate in which any such person has a substantial interest
or as to which such person serves as trustee or in a similar capacity,
was indebted to the Registrant or its subsidiaries in an amount exceeding
$60,000.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. All Financial Statements
Page
Number
Independent Auditors' Report 9
The following consolidated financial statements
of Wellco Enterprises, Inc. are in the
Registrant's 1995 Annual Report which is integrated
into Part II of this Form 10-K
immediately after page 4
Balance Sheets-at July 1, 1995 and July 2, 1994 12-13*
Statements of Operations-years ended July 1, 1995,
July 2, 1994 and July 3, 1993 11*
Statements of Cash Flows-years ended July 1, 1995,
July 2, 1994 and July 3, 1993 14-15*
Statements of Stockholders' Equity-years ended July 1, 1995,
July 2, 1994 and July 3, 1993 16*
Notes to Consolidated Financial Statements 17-28*
* Page number in the 1995 Annual Report to Shareholders integrated in Part II of
this Form 10-K.
2. Financial Statement Schedules
Page
Number
Schedule II Valuation and Qualifying Accounts 11
The audited financial statements of Alba-Waldensian, Inc., a less than 50% owned
significant subsidiary, for their fiscal year ended December 31, 1995 will be
filed as an amendment to this Form 10-K within 90 days after December 31, 1995.
All other schedules are omitted because they are not applicable or not required.
-6-
<PAGE>
3. Exhibits
Exhibit Page
Number Description Number
3 Articles of Incorporation and By-Laws 13
10 Material Contracts:
A. Bonus Arrangement* (a)
B. 1985 Stock Option Plan for Key Employees of Wellco
Enterprises, Inc.* (b)
21 Subsidiaries of Registrant 14
23 Consent of Experts (c)
27 Financial Data Schedule 15
* Management Compensation Arrangement/Plan.
Copies of the below listed exhibits may be obtained on written request to
Corporate Secretary, Wellco Enterprises, Inc., Box 188, Waynesville, N. C.
28786, accompanied by payment of the following amounts for each copy;
Exhibit 3 $40.00
Exhibit 10 A. 2.00
Exhibit 10 B. 3.00
(a) Exhibit was filed in PART IV of Form 10-K for the fiscal year ended July 3,
1982, and is incorporated herein by reference.
(b) Exhibit was filed as Exhibit A to the Proxy Statement dated October 22,
1985, and is incorporated herein by reference.
(c) Consent is contained in opinion of independent certified public accountants
on page 9.
Item 14 (b) - Reports on Form 8-K
There were no reports on Form 8-K for the three months ended July 1, 1995.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Wellco Enterprises, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WELLCO ENTERPRISES, INC.
/s/ Horace Auberry /s/David Lutz
By: Horace Auberry, Chairman By: David Lutz, Secretary-Treasurer
(Co-Principal Executive Officer) (Principal Financial and Accounting Officer)
/s/ Rolf Kaufman
By: Rolf Kaufman, President
(Co-Principal Executive Officer)
Date: September 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ Horace Auberry /s/ J. Aaron Prevost
Horace Auberry J. Aaron Prevost
(Chairman) (Director)
/s/ Rolf Kaufman /s/ James M. Fawcett, Jr.
Rolf Kaufman James M. Fawcett, Jr.
(Director) (Director)
/s/ William M. Cousins, Jr.
William M. Cousins, Jr.
(Director)
Date: September 27, 1995
-8-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Wellco Enterprises, Inc.
Waynesville, North Carolina
We have audited the accompanying consolidated balance sheets of Wellco
Enterprises, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended July 1, 1995. Our audits
also included the financial statement schedule filed under Part IV of Item
14(a)2. These financial statements and financial statement schedule are the
responsiblility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Wellco Enterprises, Inc. and
subsidiaries as of July 1, 1995 and July 2, 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 1995 in conformity with generally accepted accounting principles. Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for marketable securities during fiscal year
1995 to conform with Statement of Financial Accounting Standards No. 115. As
discussed in Note 12 to the consolidated financial statements, the Company
changed its method of accounting for income taxes during fiscal year 1993 to
conform with Statement of Financial Accounting Standards No. 109.
We consent to the incorporation by reference of the above report in the
Prospectus constituting part of the Registration Statement 33-8246 of Wellco
Enterprises, Inc. on Form S-8.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
September 11, 1995
-9-
<PAGE>
WELLCO ENTERPRISES, INC.
FORM 10-K
FISCAL YEAR ENDED JULY 1, 1995
INDEX TO FINANCIAL STATEMENT SCHEDULE AND EXHIBITS
Page
Financial Statement Schedule: Number
Schedule II-Valuation and Qualifying Accounts 11
Audited Financial Statements of Less Than 50%
Owned Significant Subsidiary 12
Exhibits:
Exhibit 3-Articles of Incorporation and By-Laws 13
Exhibit 10 A.-Bonus Arrangement (a)
Exhibit 10 B.-1985 Stock Option Plan for Key
Employees of Wellco Enterprises, Inc. (b)
Exhibit 21-Subsidiaries of Registrant 14
Exhibit 23-Consent of Experts (c)
Exhibit 27-Financial Data Schedule 15
(a) Exhibit was filed in PART IV of Form 10-K for the fiscal year ended July 3,
1982, and is incorporated herein by reference.
(b) Exhibit was filed as Exhibit A to the Proxy Statement dated October 22,
1995, and is incorporated herein by reference.
(c) Consent is contained in opinion of Independent Certified Public Accountants
on page 9.
-10-
<PAGE>
SCHEDULE II
WELLCO ENTERPRISES, INC. AND WHOLLY-OWNED SUBSUDIARIES
VALUATION ACCOUNTS
FOR THE FISCAL YEARS ENDED JULY 1, 1995, JULY 2, 1994 AND JULY 3, 1995
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION YEAR INCOME DEDUCTIONS END OF YEAR
Allowance for
doubtful
accounts-
<S> <C> <C> <C> <C>
1995 $43 $ 6(A) $37
1994 61 18(A) 43
1993 67 6(A) 61
</TABLE>
(A) Write off of uncollectable accounts.
-11-
<PAGE>
WELLCO ENTERPRISES, INC.
AUDITED FINANCIAL STATEMENTS OF LESS THAN 50% OWNED SIGNIFICANT SUBSIDIARY
The audited financial statements of Alba-Waldensian, Inc., a less than 50% owned
significant subsidiary, for their fiscal year ended December 31, 1995 will be
filed as an amendment to this Form 10-K within 90 days after December 31, 1995.
-12-
<PAGE>
EXHIBIT 3
WELLCO ENTERPRISES, INC.
ARTICLES OF INCORPORATION AND BY-LAWS
The following pages, not numbered in this Form 10-K, are the complete Articles
of Incorporation and By-Laws of the registrant.
The Articles of Incorporation and By-Laws were amended, effective November 15,
1994, to reduce the required number of directorships from eleven to nine.
-13-
<PAGE>
CERTIFICATE OF INCORPORATION
OF
WELLCO SHOE CORPORATION
THIS IS TO CERTIFY, that we, the undersigned, do hereby associate
ourselves into a corporation under and by virtue of the laws of the State of
North Carolina, as contained in Chapter 22 of the Consolidated Statutes,
entitled "Corporations" and the several amendments thereto, and do severally
agree to take the number of shares of capital stock in the said corporation set
opposite our respective names, and to that and do hereby set forth:
1. The name of this corporation is WELLCO SHOE CORPORATION.
2. The location of the principal office of the corporation in this
State is at 58 North Main Street in the City of Waynesville, County of Haywood;
but it may have one or more branch offices and places of business out of the
State of North Carolina, as well as in said State.
3. The objects for which this corporation is formed are as follows:
To manufacture, buy, sell, import, export and otherwise deal in shoes,
slippers, rubbers and boots for men, women and children, hats, gloves, mittens,
raincoats, and other goods made of rubber or leather for hand or footwear,
including any and all accessories in connection therewith; to acquire, maintain
and operate tanneries, textile plants, and otherwise manufacture and deal in all
types of textiles; to acquire, maintain and operate plants for the manufacture
of raw rubber into rubber goods of every kind and description; to acquire and
hold such store or stores as may be necessary to the proper conduct of the
business and to do and perform every other act that may be legally performed by
a corporation engaged in such business.
And in order properly to prosecute the objects and purposes above set
forth the corporation shall have full power and authority to purchase, lease and
otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds of
property, both real and personal, both within North Carolina and in all other
states, territories and dependencies of the United States; to purchase the
business, good will and all other property of any individual, firm or
corporation as a going concern and to assume all its debts, contracts and
obligations, provided said business is authorized by the powers contained
herein; to construct, equip and maintain buildings, works, factories and plants;
to install, maintain and operate all kinds of machinery and appliances; to
operate same by steam, water, electricity or other motive power, and generally
to perform all acts which may be deemed necessary or expedient for the proper
and successful prosecution of the objects and purposes for which the corporation
is created.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade-marks and trade names, relating to
or useful in connection with any business of the corporation.
To purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations
organized under the laws of this state or any other state, country, nation or
government, and while the owner thereof to exercise all the rights, powers and
privileges of ownership, including the right to vote thereon.
To borrow or raise moneys for any of the purposes of the corporation
and from time to time without limit as to amount to draw, make, accept, endorse,
execute and issue promissory notes,
<PAGE>
drafts, bills of exchange, warrants, bonds, debentures and other negotiable or
non-negotiable instruments and evidence of indebtedness and to secure the
payment of any thereof and of the interest thereon by mortgage upon or pledge,
conveyance or assignment in trust of the whole or any part of the property of
the corporation, whether at the time owned or thereafter acquired and to sell,
pledge or otherwise dispose of such bonds or other obligations of the
corporation for its corporate purposes.
To purchase, hold, sell and transfer the shares of its own capital
stock, provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital; and provided further that shares of its own capital stock belonging to
it shall not be voted upon directly or indirectly.
4. The total authorized capital stock of this corporation is One
Thousand (1,000) Shares of preferred stock of the par value of One Hundred
($100.00) Dollars per share amounting in the aggregate to One Hundred Thousand
($100,000.00) Dollars, and One Hundred (100) Shares of common stock without
nominal or par value.
5. The respective designations, preferences, privileges and voting
powers or restrictions or qualifications of each class of stock, are to be as
follows:
(a) The holders of the preferred stock shall be entitled to cumulative
dividends thereon at the rate of Five ($5.00) Dollars per share per
annum and no more, payable out of any and all surplus or net profits of
the corporation, quarterly, half-yearly or yearly, as and when declared
by the Board of Directors, before any dividends shall be declared set
apart for or paid upon the common shares of the corporation. Said
dividends on the preferred stock shall be cumulative from the date of
issue so that if the corporation shall fail in any year to pay such
dividends on all of the issued and outstanding preferred stock, such
deficiency in the dividends shall be fully paid, but without interest,
before any dividends shall be paid or set apart on the common stock.
Subject to the foregoing provisions, said preferred stock shall not be
entitled to participate in any other or additional surplus or net
profits of the corporation.
(b) In the event of the dissolution of liquidation of the corporation,
or a sale of all its assets, whether voluntary or involuntary, or in
event of its insolvency or upon any distribution of its capital, there
shall be paid to the holders of the preferred stock the par value
thereof, to wit, One Hundred ($100.00) Dollars per share and the amount
of all unpaid accrued dividends thereon, before any sum shall be paid
or any assets distributed among the holders of the common shares; and
after the payment to the holders of the preferred stock of its par
value and the unpaid accrued dividends thereon, the remaining assets
and funds of the corporation shall be divided among and paid to the
holders of all the common stock in proportion to their respective
holdings of such shares.
(c) The Board of Directors, in their discretion, may declare and pay
dividends on the common shares concurrently with dividends on the
preferred stock, for any dividend period of any fiscal year when such
dividends are applicable to the common shares; provided, that all
accumulated dividends on the preferred stock for all previous fiscal
year and all dividends on the preferred stock for the previous dividend
periods for the fiscal year shall have been paid in full. The holders
of the common stock shall be entitled to share in any dividends
declared upon the common stock of the corporation.
<PAGE>
(d) The common stock shall be the sole voting stock to be issued by the
corporation, and except as made mandatory by law, the preferred stock
shall have no voting rights whatsoever.
(e) No holder of either the preferred or common stock shall be entitled
as of right to purchase or subscribe for any part of any unissued stock
of either class, or any additional preferred or common stock to be
issued by reason of any increase of the authorized capital stock of the
corporation of either common or preferred stock, or bonds, certificates
of indebtedness, debentures or other securities convertible into stock
of the corporation, but any such unissued stock or such additional
authorized issue of new stock or of other securities convertible into
stock may be issued and disposed of pursuant to resolution of the Board
of Directors to such persons, firms, corporations or associations and
upon such terms as may be deemed advisable by the Board of Directors in
the exercise of their discretion.
(f) Said common stock without nominal or par value may be issued by the
corporation from time to time for such cash, property, services or
expenses as may be determined from time to time by the Board of
Directors thereof.
6. The names and post office addresses of the subscribers for stock and
the number of shares subscribed for by each, the aggregate of which being the
amount of capital stock with which the corporation will commence business, are
as follows:
NAME POST OFFICE ADDRESS NO. OF SHARES COMMON
BERTHA SIMINOW 285 Madison Avenue, N.Y.C. One (1)
ELIZABETH PEYSER 285 Madison Avenue, N.Y.C. One (1)
J. H. WOODY Waynesville, N.C. One (1)
7. The period of existence of this corporation is sixty (60) years from
the filing of this certificate in the office of the Secretary of State.
8. In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized;
To make, alter, amend and rescind the by-laws of this corporation
without the assent or vote of the stockholders;
To fix the amount to be reserved as working capital over and above its
capital stock paid in;
To authorize and cause to be executed mortgages and liens upon the real
and personal property of this corporation;
If the by-laws so provide, to designate two or more of its number to
constitute an executive committee, which committee shall for the time being, as
provided in said resolution or in the by-laws of this corporation, have and
exercise any and all of the powers of the Board of Directors in the management
of the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it.
To sell, transfer and convey all of the corporate property when
approved by the affirmative
<PAGE>
vote of the holders of two-thirds of the issued and outstanding stock entitled
to vote at a stockholders' meeting, notice of which contains notice of the
proposed sale.
To sell, transfer and convey any part of the corporate, real or
personal property.
This corporation may in its by-laws confer powers upon its directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon them by statute.
9. Directors shall have power, if the by-laws so provide, to hold their
meetings, and to keep the books of the corporation (except the stock and
transfer books), outside of the State of North Carolina at such places as may be
from time to time designated by the Board of Directors.
10. This corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN TESTIMONY WHEREOF, we have hereunto set our hands and affixed our
seals, this the 12th day of March, 1941.
BERTHA SIMINOW (SEAL)
ELIABETH PEYSER (SEAL)
J H WOODY (SEAL)
<PAGE>
AGREEMENT OF MERGER made this 29th day of June, 1946, between WELLCO
SHOE CORPORATION, a corporation organized under the laws of the State of North
Carolina (the constituent corporation which will survive), and WELLCO SALES
COMPANY, INC., a corporation organized under the laws of the State of New York
(the other constituent corporation).
W I T N E S S T H:
WHEREAS, Wellco Shoe Corporation (hereinafter called "Wellco Shoe",
"the corporation", or "the surviving corporation"), is a corporation duly
organized and existing under the laws of the State of North Carolina, having
been incorporated under the laws of the State of North Carolina as contained in
Chapter 22 of the Consolidated Statutes entitled "Corporations", and the several
amendments thereto, on the 19th day of March, 1941, and
WHEREAS, Wellco Sales Company, Inc. (hereinafter called "Wellco
Sales"), is a corporation duly organized and existing under the laws of the
state of New York, having been incorporated pursuant to Article Two of the Stock
Corporation Law of the State of New York, on the 2nd day of March, 1944, and
WHEREAS, Wellco Shoe has an authorized capital stock of one thousand
(1,000) shares of Preferred Stock of the par value of One Hundred ($100.00)
Dollars per share, and one hundred (100) shares of Common Stock, without nominal
or par value, all of which are presently outstanding, and
WHEREAS, Wellco Sales has an authorized capital stock of six hundred
(600) shares, of which one hundred (100) shares having a par value of One
Hundred ($100.00) Dollars each are Preferred Stock, and five hundred (500)
shares are Common Stock without par value, of which three hundred (300) shares
of Common Stock without par value are presently outstanding (fifty (50) shares
of Preferred Stock previously outstanding having been redeemed by said Wellco
Sales), and
WHEREAS, Wellco Shoe and Wellco Sales desire to merge under and
pursuant to the provisions of Chapter 55 of the General Statutes of North
Carolina of 1943 entitled "Corporations" and other related provisions of the
laws of the State of North Carolina, and Section 91 of the Stock Corporation Law
of the State of New York;
NOW, THEREFORE, in consideration of the premises and the mutual
agreement, covenants and provisions herein contained, it is hereby agreed by and
between said parties hereto, and in accordance with Chapter 55 of the General
Statutes of North Carolina of 1943 entitled "Corporations" and other related
provisions of the laws of North Carolina, and Section 91 of the Stock
Corporation Law of the State of New York, that Wellco Sales shall be and it
hereby is merged into the constituent corporation, Wellco Shoe, and Wellco Shoe,
as the surviving corporation, shall continue to exist under and by virtue of the
laws of the State of North Carolina. Wellco Sales shall, pursuant to this
agreement, and a resolution of its stockholders, be completely liquidated, and
all of its properties and assets shall be transferred and distributed to Wellco
Shoe in complete cancellation of all of the stock of Wellco Sales; and the
stockholders of Wellco Sales shall, in exchange for their stock of Wellco Sales,
receive shares of stock of Wellco Shoe as hereinafter provided.
The terms and conditions of said merger and the mode of carrying it
into effect, shall be as
<PAGE>
set forth in the following Articles "First" to "Thirteenth", inclusive.
Article First: The name of the corporation shall continue to be WELLCO
SHOE CORPORATION.
Article Second: The location of the principal office of the corporation
in the State of North Carolina is in the city of Waynesville, County of Haywood;
but it may have one or more branch offices and places of business out of the
State of North Carolina, as well as in said State.
Article Third: The objects for which the surviving corporation is
formed are as follows:
To manufacture, buy, sell, import, export and otherwise deal in shoes,
slippers, rubbers and boots for men, women and children, hats, gloves, mittens,
raincoats, and other goods made of rubber or leather for hand or footwear,
including any and all accessories in connection therewith; to acquire, maintain
and operate tanneries, textile plants, and otherwise manufacture and deal in all
types of textiles; to acquire, maintain and operate plants for the manufacture
of raw rubber into rubber goods of every kind and description; to acquire and
hold such store or stores as may be necessary to the proper conduct of the
business and to do and perform every other act that may be legally performed by
a corporation engaged in such business.
And in order properly to prosecute the objects and purposes above set
forth the corporation shall have full power and authority to purchase, lease and
otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds of
property, both real and personal, both within North Carolina and in all other
states, territories and dependencies of the United States; to purchase the
business, good will and all other property of any individual, firm or
corporation as a going concern and to assume all its debts, contracts and
obligations, provided said business is authorized by the powers contained
herein; to construct, equip and maintain buildings, works, factories and plants;
to install, maintain and operate all kinds of machinery and appliances; to
operate same by steam, water, electricity or other motive power, and generally
to perform all acts which may be deemed necessary or expedient for the proper
and successful prosecution of the objects and purposes for which the corporation
is created.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade marks and trade names, relating to
or useful in connection with any business of the corporation.
To purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations
organized under the laws of this state or any other state, country, nation or
government, and while the owner thereof to exercise all the rights, powers and
privileges of ownership, including the right to vote thereon.
To borrow or raise moneys for any of the purposes of the corporation
and from time to time without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation, whether at
the time owned or thereafter acquired and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.
<PAGE>
To purchase, hold, sell and transfer the shares of its own capital
stock, provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital; and provided further that shares of its own capital stock belonging to
it shall not be voted upon directly or indirectly.
Article Fourth: The total authorized capital stock of the corporation
shall be one thousand (1,000) shares of Preferred Stock of the par value of One
Hundred ($100.00) Dollars per share, amounting in the aggregate to One Hundred
Thousand ($100,000.00) Dollars, and two hundred (200) shares of Class A Common
Stock without nominal or par value, and three hundred (300) shares of Class B
Common Stock without nominal or par value.
Article Fifth: The respective designations, preferences, privileges
and voting powers or restrictions or qualifications of each class of stock, are
to be as follows:
(a) The holders of the Preferred Stock shall be entitled to cumulative
dividends thereon at the rate of Five ($5.00) Dollars per share per
annum and no more, payable out of any and all surplus or net profits of
the corporation, quarterly, half-yearly, or yearly, as and when
declared by the Board of Directors, before any dividends shall be
declared set apart for or paid upon the Common Shares of the
corporation. Said dividends on the Preferred Stock shall be cumulative
from the date of issue so that if the corporation shall fail in any
year to pay such dividends on all of the issued and outstanding
Preferred Stock, such deficiency in the dividends shall be fully paid,
but without interest, before any dividends shall be paid or set apart
on the common stock. Subject to the foregoing provisions, said
Preferred Stock shall not be entitled to participate in any other or
additional surplus or net profits of the corporation.
(b) In the event of the dissolution or liquidation of the corporation,
or a sale of all its assets, whether voluntary or involuntary, or in
event of its insolvency or upon any distribution of its capital, there
shall be paid to the holders of the Preferred Stock the par value
thereof, to wit, One Hundred ($100.00) Dollars per share and the amount
of all unpaid accrued dividends thereon, before any sum shall be paid
or any assets distributed among the holders of the Common shares; and
after the payment to the holders of the Preferred Stock of its par
value and the unpaid accrued dividends thereon, the remaining assets
and funds of the corporation shall be divided among and paid to the
holders of all the Common shares in proportion to their respective
holdings of such shares, irrespective of the class to which such shares
belong.
(c) The Board of Directors, in their discretion, may declare and pay
dividends on the Common shares concurrently with dividends on the
Preferred Stock, for any dividend period of any fiscal year when such
dividends are applicable to the Common shares; provided, that all
accumulated dividends on the Preferred Stock for all previous fiscal
years and all dividends on the Preferred Stock for the previous
dividend periods for the fiscal year shall have been paid in full. The
holders of the Common Stock shall be entitled to share in any dividends
declared upon the Common Stock of the corporation.
(d) The Class A Common Stock shall be the sole voting stock to be
issued by the corporation, and except as made mandatory by law, the
Preferred Stock and the Class B Common Stock shall have no voting
rights whatsoever.
(e) No holder of either the Preferred or Common stock shall be entitled
as of right to purchase or subscribe for any part of any unissued stock
of either class, or any
<PAGE>
additional Preferred or Common Stock to be issued by reason of any
increase of the authorized capital stock of the corporation of either
Common or Preferred Stock, or bonds, certificates of indebtedness,
debentures or other securities convertible into stock of the
corporation, but any such unissued stock or such additional authorized
issue of new stock or of other securities convertible into stock may be
issued and disposed of pursuant to resolution of the Board of Directors
to such persons, firms, corporations or associations and upon such
terms as may be deemed advisable by the Board of Directors in the
exercise of their discretion.
(f) Said Common Stock without nominal or par value may be issued by the
corporation from time to time for such cash, property, services or
expenses as may be determined from time to time by the Board of
Directors hereof.
(g) Except with respect to the voting rights as hereinbefore provided
in subdivision "(d)" hereof, there shall be no distinction between the
Class A and Class B Common Stock of the corporation, and the rights of
the respective holders of said classes of stock shall at all times be
the same.
Article Sixth: The period of existence of this corporation is sixty
(60) years from the filing of this certificate in the office of the Secretary of
State.
Article Seventh: In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
To make, alter, amend and rescind the by-laws of this corporation
without the assent or vote of the stockholders;
To fix the amount to be reserved as working capital over and above its
capital stock paid in;
To authorize and cause to be executed mortgages and liens upon the real
and personal property of this corporation;
If the by-laws so provide, to designate two or more of its number to
constitute an executive committee, which committee shall for the time being, as
provided in said resolution or in the by-laws of this corporation, have and
exercise any and all of the powers of the Board of Directors in the management
of the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it.
To sell, transfer and convey all of the corporate property when
approved by the affirmative vote of the holders of two-thirds of the issued and
outstanding stock entitled to vote at a stockholder meeting, notice of which
contains notice of the proposed sale.
To sell, transfer and convey any part of the corporate, real or
personal property.
This corporation may in its by-laws confer powers upon its directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon them by statute.
Article Eighth: Directors shall have power, if the by-laws so provide,
to hold their meetings, and to keep the books of this corporation (except the
stock and transfer books), outside of the State of North Carolina at such places
as may be from time to time designated by the Board of Directors.
Article Ninth: The initial Board of Directors of the corporation who
shall hold their offices until
<PAGE>
their successors be chosen, according to the by-laws of the corporation, shall
consist of five members who shall be the following persons, whose places of
residence are set opposite their respective names:
LEO WEILL - Waynesville, N. C.
OTTO FEISTMANN - Jackson Bldg., Asheville, N. C.
HEINZ ROLLMAN - Waynesville, N. C.
J. H. WOODY - Waynesville, N. C.
GEORGE M. JAFFIN - 285 Madison Ave., New York City
Article Tenth: This corporation reserves the right to amend, alter,
change or repeal any provision contained in this agreement of merger, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Article Eleventh: The manner of converting shares of the constituent
corporations into shares of the surviving corporation, shall be as follows:
(a) Each of the outstanding shares of the Preferred Stock of Wellco
Shoe shall continue to remain outstanding shares of Preferred Stock without
change.
(b) Each of the outstanding shares of the Common Stock of Wellco Shoe
held by any person, shall forthwith upon the filing and recording of this
agreement as required by law, be converted into two (2) shares of the Class A
Common Stock of the surviving corporation, and each holder of a certificate or
certificates of such Common Stock of Wellco Shoe, upon surrender of his
certificate or certificates therefor to the surviving corporation for
cancellation, shall be entitled to receive certificates for the number of shares
of Class A Common Stock of the surviving corporation to which he may be
entitled.
(c) Each of the outstanding shares of the Common Stock of Wellco Sales
held by any person shall, forthwith upon the filing and recording of this
agreement as required by law, be converted into one (1) share of the Class B
Common Stock of the surviving corporation, and each holder of a certificate or
certificates of such Common Stock of Wellco Sales, upon surrender of his
certificate or certificates therefor to the surviving corporation for
cancellation, shall be entitled to receive certificates for the number of shares
of Class B Common Stock of the surviving corporation to which he may be
entitled.
(d) The fifty (50) shares of Preferred Stock of Wellco Sales heretofore
redeemed by Wellco Sales, shall be canceled and no new stock shall be issued by
the surviving corporation therefor.
(e) Until surrender for new stock certificates of the surviving
corporation in accordance with the provisions of this Article Eleventh, the
outstanding certificates of stock of Wellco Shoe and Wellco Sales to be
converted into such stock of the surviving corporation as provided in this
agreement of merger, may be treated by the surviving corporation for all
corporate purposes as evidencing respectively the ownership of the number of
shares of stock of the surviving corporation to which the respective holders
thereof shall be entitled upon surrender thereof in exchange for stock of the
surviving corporation.
Article Twelfth: It shall be a condition precedent to the effectuation
of the merger provided for herein that the holders of all of the outstanding
Common Stock of Wellco Sales and all of the Preferred Stock and Common Stock of
Wellco Shoe, shall either vote in favor of or otherwise irrevocably assent to
this agreement of merger. Upon the failure of the foregoing conditions, this
agreement of merger shall be deemed to be terminated.
<PAGE>
Article Thirteenth: When this agreement shall have been signed,
acknowledged, filed and recorded as required by Chapter 55 of the General
Statutes of North Carolina of 1943 "Corporations" and other related provisions
of the laws of the State of North Carolina, and Section 91 of the Stock
Corporation Law of the State of New York, Wellco Sales shall be merged into
Wellco Shoe and it thereupon shall be liquidated and cease to exist, and Wellco
Shoe, as the surviving corporation, shall continue in existence and shall
possess all the rights, privileges, powers and franchises and all and singular
the rights, privileges, powers and franchises of each of the constituent
corporations, and all property, real, personal and mixed, and all debts due to
each of them on whatever account, as well for stock subscriptions as of other
things in action or belonging in each of them, shall be vested in Wellco Shoe as
the surviving corporation, and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the surviving corporation as they were of the constituent
corporations, and title to any real estate, whether by deed or otherwise, under
the laws of the States of North Carolina and New York vested in Wellco Shoe or
Wellco Sales, shall not revert or be in any way impaired by reason of this
merger; provided that all rights of creditors and all liens upon the property of
either of the constituent corporations shall be preserved unimpaired, and all
debts, liabilities and duties of the constituent corporations shall thenceforth
attach to the surviving corporation and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
IN WITNESS WHEREOF, this agreement of merger has been executed by each
of the constituent corporations, and the corporate seal of each of the
constituent corporations has hereunto been affixed and attested as of the day
and year first above written.
WELLCO SHOE CORPORATION
ATTEST:
BY: LEO WEILL
RUDOLF HOLLAUS President
Secretary
(Corporate seal)
WELLCO SALES COMPANY, INC.
ATTEST:
BY: OTTO FEISTMANN
HARRY SCHNEIDER President
Secretary
(Corporate seal)
<PAGE>
ARTICLES OF AMENDMENT TO THE CHARTER
OF
WELLCO SHOE CORPORATION
The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, known as the Business Corporation Act, and
particularly pursuant to Section 55-103 thereof, hereby executes the following
Articles of Amendment.
1. The name of the corporation at the date of execution of these
Articles of Amendment is Wellco Shoe Corporation, but one of the changes
effected by these Articles of Amendment is to change the name of the corporation
to Wellco Ro-Search Industries, Inc.
2. The amendment adopted by action of the Board of Directors and the
Shareholders is that the Charter of Wellco Shoe Corporation be amended by
striking out all of the Articles thereof numbered First, Second, Fourth and
Fifth, as set forth in the Charter of Wellco Shoe Corporation as the same has
been heretofore amended and filed in the Office of the Secretary of State of the
State of North Carolina, and be inserting in lieu thereof the Articles numbered
First, Second, Fourth and Fifth set forth in Exhibit "A" attached hereto.
3. The date of the adoption of this amendment by the Shareholders was
October 31, 1961.
4. The number of shares of the corporation outstanding at the time of
the adoption of said amendment was 1,544 shares of 5% Cumulative Preferred
Stock, 12,507 shares of Class A Common Stock, and 23,277 shares of Class B
Common Stock, all of which shares were entitled to vote thereon. The 1,544
shares of 5% Cumulative Preferred Stock were entitled to vote thereon as a
class. The 35,734 shares of Common Stock, consisting of 12,507 shares of Class A
Common Stock and 23,277 shares of Class B Common Stock, were entitled to vote
thereon as a class.
5. The number of shares voted for such amendment was 1,412 shares of 5%
Cumulative Preferred Stock and 35,669 shares of Common Stock (both Class A and
Class B Common Stock voting together as a class and being in this paragraph
referred to as "Common Stock"), and the number of shares voted against such
amendment was 8 shares of 5% Cumulative Preferred Stock. Voting within each
class entitled to vote as a class was as follows:
Class Number of Shares Voted
For Against
5% Cumulative Preferred Stock 1,412 8
Common Stock 35,669 None
6. Any exchange, reclassification or cancellation of issued shares will
be effected in the following manner: Each share of 5% Cumulative Preferred Stock
heretofore issued and presently outstanding shall be reclassified and exchanged
on a share-for-share basis into one share of 5% Cumulative Convertible Preferred
Stock authorized by the amendment effected hereby, and the Class B Common Stock
shall be exchanged and reclassified and the Class A Common Stock shall be
convertible in the manner set forth in the amendment.
<PAGE>
7. Such amendment does not effect a change in the amount of stated
capital of the corporation.
8. The amendment hereby effected does not give rise to dissenter's
rights under G. S. 55- 101(b) for the reason that the amendment does not change
the corporation into a non-profit corporation or cooperative organization, nor
does the amendment effect any changes as described in paragraphs (1), (2), (3),
(4) and (5) of Subsection (a) of G. S. 55-101 in the 5% Cumulative Preferred
Stock heretofore authorized, issued and outstanding, nor would the amendment to
the prejudice of any holder of such shares create or increase any priority,
dividend preference, cumulative dividend right, redemption price or liquidation
preference of any other then issued shares; nor would the amendment authorize
the corporation to issue shares of any new class having preferences as to
dividends or liquidation prior to such shares.
IN WITNESS WHEREOF, said corporation has caused these Articles of
Amendment to be executed in its corporate name by its President and Secretary
and its corporate seal to be hereunto affixed, this the 12th day of December,
1961.
WELLCO SHOE CORPORATION
(Name Changed Hereby To
WELLCO RO-SEARCH INDUSTRIES, INC.)
BY: HEINZ ROLLMAN
President
ATTEST:
ERNEST ROLLMAN
Secretary
STATE OF NORTH CAROLINA
COUNTY OF HAYWOOD
HEINZ W. ROLLMAN, being the President, and ERNEST E. ROLLMAN, being the
Secretary of the above named corporation, each being duly sworn, deposes and
says that the facts stated in the foregoing "Articles of Amendment" are true and
correct.
HEINZ ROLLMAN
ERNEST ROLLMAN
Sworn to and subscribed before me this 12th day of December, 1961.
MARGUERITE W. SHOOK
Notary Public
My commission expires:
October 5, 1962
<PAGE>
EXHIBIT "A"
AMENDMENTS TO THE CHARTER OF WELLCO SHOE CORPORATION
AS ADOPTED BY VOTE OF STOCKHOLDERS
AT SPECIAL STOCKHOLDERS' MEETING OCTOBER 31, 1961
ARTICLE FIRST: The name of the corporation shall be Wellco Ro-Search
Industries, Inc.
ARTICLE SECOND: The location of the principal office of the corporation
in the State of North Carolina is at Georgia and Pine Streets in the Town of
Hazelwood, County of Haywood, North Carolina; but it may have one or more branch
offices and places of business out of the State of North Carolina, as well as in
said State.
ARTICLE FOURTH: The total authorized capital stock of the corporation
shall be three thousand (3,000) shares of five per cent. (5%) Cumulative
Convertible Preferred Stock, of the par value of ONE HUNDRED AND NO/100 DOLLARS
($100.00) per share, amounting in the aggregate to THREE HUNDRED THOUSAND AND
NO/100 DOLLARS ($300,000.00), and fifteen thousand (15,000) shares of Class A
Common Stock without nominal or par value, and five hundred thousand (500,000)
shares of Class B Common Stock of the par value of ONE AND NO/100 DOLLARS
($1.00) per share. Each share of the heretofore authorized and presently issued
and outstanding shares of Class B Common Stock without nominal or par value is
hereby changed and converted into ten (10) shares of the hereby authorized Class
B Common Stock of the par value of ONE AND NO/100 DOLLARS ($1.00) per share.
Each share of Class A Common Stock shall be convertible at the option of the
respective holders thereof into ten (10) shares of Class B Common Stock, and
after the conversion of all of the outstanding shares of Class A Common Stock
into Class B Common Stock, the authorized Class A Common Stock shall thereby be
eliminated, and all authorized Class B Common Stock of the par value of ONE AND
NO/100 DOLLARS ($1.00) per share (including all amounts thereof then
outstanding) shall thereafter be designated as the Common Stock of the
Corporation.
ARTICLE FIFTH: The designations, preferences, privileges, limitations,
voting powers and relative rights of the shares of each class of stock and the
restrictions or limitations thereof shall be as follows:
(a) The 5% Cumulative Convertible Preferred Stock shall be entitled, in
preference to the Common Stock, when and as declared by the Board of Directors
from funds legally available therefor, to dividends at the rate of five per cent
(5%) of the par value thereof per annum, payable quarterly on January 1, April
1, July 1, and October 1, of each year, or otherwise as the Board of Directors
may determine (the periods between such dates, commencing on such dates, being
herein referred to as "dividend periods"). Such dividends of the 5% Cumulative
Convertible Preferred Stock shall be cumulative from the date of issuance
thereof. If, at the time of the issuance of any shares of 5% Cumulative
Convertible Preferred Stock, dividends upon the shares of 5% Cumulative
Convertible Preferred Stock at the time outstanding shall not then have been
paid or declared and set apart for payment, at the full rate to which said
shares are entitled, to the beginning of the then current dividend period, no
dividends shall be declared or paid on the shares of the 5% Cumulative
Convertible Preferred Stock issued at such time until all such dividends in
arrears shall have been paid or declared and set apart for payment as aforesaid,
and none of the provisions hereof shall be deemed to prevent the declaration and
payment of such dividends in arrears without a declaration
<PAGE>
or payment of dividends on additional shares so issued. No dividends shall be
paid or set apart for payment on the Common Stock at any time unless the total
amount of dividends theretofore paid or declared and set apart for payment on
then outstanding 5% Cumulative Convertible Preferred Stock shall be equal to
Five Dollars ($5.00) per annum for each share of such 5% Cumulative Convertible
Preferred Stock from the date when it became cumulative to the end of the
current dividend period.
Whenever full cumulative dividends, as aforesaid, on all shares of 5%
Cumulative Convertible Preferred Stock then outstanding for all past dividend
periods and for the current dividend period shall have been paid or declared and
set apart for payment, dividends may be declared and paid or set apart for
payment on the Common Stock, when and to the extent that the Board of Directors
shall determine, and no holder of any shares of 5% Cumulative Convertible
Preferred Stock as such shall be entitled to share therein.
(b) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, or any proceedings
resulting in any distribution of all its assets to its stockholders, before any
distribution shall be made to the holders of the Common Stock, each holder of
shares of 5% Cumulative Convertible Preferred Stock shall be entitled to be paid
on each share of such stock held by him the sum of One Hundred Dollars
($100.00), plus an amount equal to accrued dividends. After such payment to the
holders of the 5% Cumulative Convertible Preferred Stock of the full
preferential amounts hereinbefore provided for, the holders of the 5% Cumulative
Convertible Preferred Stock as such shall have no right or claim to the
remaining assets and funds shall (subject to the rights, if any, of others
therein) be divided and distributed among the holders of the Common Stock of the
Corporation according to their respective interests. The Board of Directors, by
vote of a majority of the members thereof, may distribute in kind to the holders
of the Common Stock such remaining assets of the Corporation to which such
holders may be entitled at such valuations as it in its sole discretion shall
determine. The sale of all the property of the Corporation to, or the merger or
consolidation of the Corporation into or with any other corporation shall not be
deemed to be a distribution of assets or a dissolution, liquidation or winding
up or proceeding resulting in a distribution of all its assets to its
stockholders for the purpose of this subdivision.
(c) At the option of the Board of Directors of the Corporation, the 5%
Cumulative Convertible Preferred Stock may be redeemed in whole or in part, at
any time and from time to time after the issuance thereof, at One Hundred
Dollars ($100.00) per share and accrued dividends to the date of redemption. If
less than all the shares of the 5% Cumulative Convertible Preferred Stock are to
be redeemed, the shares to be redeemed shall be selected by lot or in such other
equitable manner as the Board of Directors shall determine.
Notice of the intention of the Corporation to redeem shares of the 5%
Cumulative Convertible Preferred Stock or any part thereof, and of the date and
place of redemption, shall be mailed not less than thirty nor more than sixty
days previous to the date of redemption to each holder of record of the shares
to be redeemed at his last known post office address as shown by the records of
the Corporation. Such notice shall also contain notification of the right of
each holder of record of the shares to be redeemed to convert any or all of such
shares into shares of Common Stock as hereinafter set forth, provided such
conversion right is exercised on or before, but not after, the close of business
on the seventh calendar day preceding the redemption date specified in such
notice. The holders of any shares of 5% Cumulative Convertible Preferred Stock
so called for redemption shall, as to any of such shares as to which they shall
not have theretofore exercised the right of conversion into shares of Common
Stock as hereinafter provided, on the redemption date specified in such notice,
provided the redemption price is then made available to them, cease to be
stockholders of the Corporation with respect to such shares, and all rights with
respect to said shares so called for redemption shall, on such redemption date,
cease and terminate, except only
<PAGE>
the rights of the holders thereof to receive the redemption price therefor
without interest.
At any time after the close of business on the seventh calendar day
preceding the redemption date specified in such notice, the Corporation may
deposit the aggregate redemption price (or the portion thereof not already paid
in the redemption of shares so to be redeemed) with any bank or trust company in
the City of New York, State of New York, or in the City of Asheville, State of
North Carolina, having a capital and surplus of not less than One Million
Dollars ($1,000,000.00), named in a notice mailed to the holders of the shares
called for redemption and represented by certificates not theretofore
surrendered, payable in the amounts aforesaid to the respective orders of the
record holders of such shares to be redeemed, on endorsement, if required, and
surrender of their certificates for said shares, and from and after the making
of any such deposit, said holders shall have not interest in or claim against or
rights as a stockholder of the Corporation with respect to said shares but shall
be entitled only to receive said moneys from said bank or trust company without
interest, on endorsement, if required, and surrender of their certificates as
aforesaid. The Corporation shall be entitled to receive from any such bank or
trust company on any moneys deposited as in this subdivision provided, and the
holders of any shares so redeemed shall have no claim to any such interest. Any
moneys so deposited and remaining unclaimed at the end of six years from the
date fixed for redemption shall, if thereafter requested by resolution of the
Board of Directors, be repaid to the Corporation, and in the event of such
repayment to the Corporation such holders of record of the shares so redeemed,
as shall not have made claim against such moneys prior to such repayment to the
Corporation, shall be deemed to be unsecured creditors of the Corporation, but
only for a period of two years from the date of such repayment (after which all
rights of the holders of said shares, as unsecured creditors or otherwise, shall
cease) for an amount equivalent to the amount deposited as above states for the
redemption of such shares and so repaid to the Corporation but shall in no event
be entitled to any interest.
(d) Subject to and upon compliance with the provisions of this
paragraph (d), each share of 5% Cumulative Convertible Preferred Stock may, at
the option of the holder thereof and at any time so long as the conversion right
shall continue in effect as herein provided, be converted into as many fully
paid and non-assessable whole shares of Common Stock of the Corporation as
result from dividing the par value of the 5% Cumulative Convertible Preferred
Stock so being converted by the conversion price, which shall be Eight Dollars
($8.00) per share unless such price has been adjusted as provided in
subdivisions A or B of this paragraph (d), in which case such adjusted price
shall be the conversion price. The conversion right herein provided shall, as to
any share of 5% Cumulative Convertible Preferred Stock, continue in effect
unless (and until such share shall be called for redemption, and in such case,
shall continue in effect until) and including, but not after, the close of
business on the seventh calendar day preceding the redemption date which may be
specified in the notice of redemption issued with respect to such share.
In order to exercise the conversion privilege, any holder of a share or
shares shall continue in effect as hereinabove provided, surrender the
certificate for such share or shares of the 5% Cumulative Convertible Preferred
Stock so to be converted, duly endorsed for transfer, to the Corporation at its
home office or any place or places where the Corporation shall maintain a
transfer agency, together with written notice that the holder elects to convert
the shares represented by such certificate. As promptly as practicable
thereafter, the Corporation shall issue and deliver to such holder a certificate
or certificates for the number of whole shares of Common Stock issuable upon
such conversion, together with payment of accrued dividends to the date of
conversion. The Corporation shall not be required to issue fractions of shares
of Common Stock upon conversion of the 5% Cumulative Convertible Preferred
Stock, but if any fractional interest in a share of Common Stock shall be
deliverable upon such conversion, the Corporation shall purchase such fractional
interest for an amount in cash equal to the product obtained by multiplying the
conversion price by such fraction. The conversion shall be deemed to have been
effected on the date on which the
<PAGE>
certificate for 5% Cumulative Convertible Preferred Stock shall have been
surrendered and written notice of the election to convert shall have been
received by the Corporation as aforesaid and the person or persons in whose name
or names any certificate or certificates shall be deemed to have become, at such
time, a holder or holders of record of the shares represented thereby.
A. In case the Corporation shall at any time or from time to time
hereafter issue or sell any shares of its Common Stock (except as provided in
clause (6) of this subdivision A) for a consideration per share less than any
conversion price in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, said conversion price shall (until
another such issue or sale) be reduced to a price determined by dividing:
(i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, multiplied
by the then existing conversion price, and (b) the consideration, if
any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately
after such issue or sale;
provided, however, that no adjustment shall be made if the amount of such
adjustment shall be less than 10 cents per share.
For the purposes of any computation to be made in accordance with the
provisions of this subdivision A, the following provisions shall be applicable:
(1) In case of the issuance of additional shares of Common Stock for
cash, the consideration received by the Corporation therefor shall be deemed to
be the amount of cash received by the Corporation for such shares, after
deducting any all commissions and other expenses paid or incurred by the
Corporation for any underwriting of, or otherwise in connection with, the
issuance of such shares.
(2) In case of the issuance (otherwise than upon conversion or exchange
of obligations or shares of stock of the Corporation) of additional shares of
Common Stock for a consideration other than cash or a consideration a part of
which shall be other than cash, the amount of the consideration other than cash
received by the Corporation for such shares shall be deemed to be the value of
such consideration as determined in good faith by the Board of Directors of the
Corporation.
(3) In the case of the issuance of any rights to subscribe for or to
purchase, or of any options for the purchase of, additional shares of Common
Stock at a price per share for the additional shares of Common Stock issuable
upon the exercise of such rights or options less than the current conversion
price in effect immediately prior to the issuance of such rights or options,
then the issuance of such rights or options shall be deemed to be an issuance
(as of the date of issuance of such rights or options) of the total maximum
number of shares of Common Stock issuable upon the exercise of all such rights
or options. In such case, any amount received or receivable by the Corporation
in consideration of the issuance of such rights or options (plus the minimum
aggregate amount of premium or additional consideration payable to the
Corporation upon the exercise of such rights or options) after deducting
therefrom any commissions or other expenses paid or incurred by the Corporation
for any underwriting of, or otherwise in connection with, the issuance of such
rights or options, shall be deemed to be the consideration actually received (as
of the date of issuance of such rights or options) for the issuance of such
additional shares of Common Stock.
<PAGE>
(4) In case of the issuance of any obligations or of any shares of
stock of the Corporation that shall be convertible into or exchangeable for
shares of Common Stock, then the issuance of such obligations or shares shall be
deemed to be an issuance (as of the date of issuance of such obligations or
shares) of the total maximum number of additional shares of Common Stock
issuable upon the conversion or exchange of all such obligations or shares. In
such case, any amount received or receivable by the Corporation in consideration
of the issuance of such obligations or shares convertible into or exchangeable
for shares of Common Stock (plus the minimum aggregate amount of premium or
additional consideration payable to the Corporation upon the conversion or
exchange of such obligations or shares) after deducting therefrom any
commissions or other expenses paid or incurred by the Corporation for any
underwriting of, or otherwise in connection with, the issuance of such
obligations or shares, shall be deemed to be the consideration actually received
(as of the date of issuance of such additional shares of Common Stock.
(5) In case of the issuance of additional shares of Common Stock as a
dividend, the aggregate number of shares of Common Stock issued in payment of
such dividend shall be deemed to have been issued and to be outstanding on the
day next succeeding the record date for the determination of stockholders
entitled to such dividend and shall be deemed to have been issued without
consideration.
(6) The number of shares of Common Stock at any time outstanding shall
include any shares of Common Stock then owned or held by or for the account of
the Company.
(7) No adjustment of the conversion price shall be made in connection
with the issuance of shares of 5% Cumulative Convertible Preferred Stock or in
connection with the issuance of shares of Common Stock upon conversion of any
shares of 5% Cumulative Convertible Preferred Stock.
B. In case the Corporation shall at any time subdivide or combine the
outstanding shares of Common Stock, each conversion price shall be
proportionately decreased in the case of subdivision or increased in the case of
combination, effective at the close of business on the date of such subdivision
or combination.
In case of any reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Corporation with, or merger
of the Corporation into, another corporation (other than a consolidation with a
subsidiary in which consolidation the Corporation is the continuing corporation
and which does not result in any reclassification or change of outstanding
shares of the Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, the holders of the 5% Cumulative Convertible Preferred Stock
shall have the right to convert the 5% Cumulative Convertible Preferred Stock
into the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into which the 5%
Cumulative Convertible Preferred Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance.
If, in any case, the terms and conditions set forth in subparagraphs A
or B of this paragraph (d) of ARTICLE FIFTH are for any reason not specifically
applicable to any state of facts which shall in fact arise, the conversion price
shall be adjusted by the Board of Directors in its discretion so as to carry out
as nearly as practicable the purposes and objectives of the provisions as herein
set forth and any such determination by the Board of Directors shall be binding
for the purposes hereof on all persons claiming rights as holders of shares of
Preferred Stock.
<PAGE>
Whenever a conversion price is adjusted as herein provided, the
Corporation shall mail to the holders of the 5% Cumulative Convertible Preferred
Stock a certificate signed by or bearing the facsimile signature of an officer
of the Corporation showing the new conversion price and the computation thereof.
(e) The Corporation may purchase to the extent permitted by law, in the
open market, or otherwise, for such consideration as its Board of Directors may
deem adequate, any shares of its 5% Cumulative Convertible Preferred Stock or
any shares of its Common Stock.
(f) Each holder of record of Common Stock shall be entitled to one vote
for each share of stock standing in his name on the books of the Corporation.
Except as hereinafter stated, or as may be otherwise provided by law, the
holders of the 5% Cumulative Convertible Preferred Stock shall not be entitled
to vote at any meeting of stockholders or election of the Corporation or
otherwise to participate in any action taken by the Corporation or the
stockholders thereof. In any instance where the holders of 5% Cumulative
Convertible Preferred Stock shall be entitled to vote as hereinafter stated,
each holder of record of 5% Cumulative Convertible Preferred Stock shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation.
(g) Upon the vote of a majority of all the Directors of the Corporation
and of the holders of a majority of the total number of shares then issued and
outstanding and entitled to vote, the Corporation may from time to time increase
or decrease the amount of the authorized 5% Cumulative Convertible Preferred
Stock or Common Stock or both; provided, however, that the authorized number of
shares of 5% Cumulative Convertible Preferred Stock shall not be increased,
unless the stockholders voting therefor shall include the holders of not less
than two-thirds of the total number of shares of 5% Cumulative Convertible
Preferred Stock then issued and outstanding.
Upon the vote of a majority of all the Directors of the Corporation and
of the holders of a majority of the total number of shares then issued and
outstanding and entitled to vote, the Corporation may from time to time create
or authorize one or more other classes of stock, any or all of which classes may
be stock with par value or stock without par value with such voting powers, full
or limited, or without voting powers, and with such designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as shall be determined by said vote
which may be the same or different from the voting powers, designation,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the classes of stock of the
Corporation then authorized, provided, however, that no new class of stock shall
hereafter be created which is entitled to dividends or shares in distribution of
assets on a parity with or in priority to the 5% Cumulative Convertible
Preferred Stock unless either (1) the stockholders voting for the creation of
such new class of stock shall include the holders of not less than two-thirds of
the number of shares of the 5% Cumulative Convertible Preferred Stock then
outstanding, or (2) the holders of not less than two-thirds of the number of
shares of 5% Cumulative Convertible Preferred Stock then outstanding shall
consent thereto in writing.
Neither the amounts which the holders of the 5% Cumulative Convertible Preferred
Stock are entitled to receive as dividends or in distribution of assets in
preference to the holders of the Common Stock, nor the price at which the 5%
Cumulative Convertible Preferred Stock may be redeemed shall be decreased nor
may the conversion privileges of the holder of the 5% Cumulative Convertible
Preferred Stock be adversely modified, unless the holders of at least 90% of the
number of shares of 5% Cumulative Convertible Preferred Stock then outstanding
consent in writing to or vote for such decrease.
(h) The term "accrued dividends" shall be deemed to mean in respect of
any share of the 5%
<PAGE>
Cumulative Convertible Preferred Stock, as of any given date, the amount, if
any, by which the product of the rate of the full dividend per annum multiplied
by the number of years and any fractional part of a year which shall have
elapsed from the date after which dividends on such stock became cumulative to
such given date, exceeds the sum of the total dividends actually paid on such
stock and dividends declared and set apart for payment. Accumulations of
dividends shall not bear interest.
(i) No holder of any stock of the Corporation shall be entitled as of
right to purchase or subscribe for any part of any stock of the Corporation
previously authorized by this certificate or of any additional stock of any
class to be issued by reason of any increase of the authorized stock of the
Corporation or of any bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the Corporation, but any stock previously
authorized or authorized by this certificate, or any such additional authorized
issue of new stock or of securities convertible into stock may be issued and
disposed of by the Board of Directors to such persons, firms, corporations or
associations for such consideration and upon such terms and in such manner as
the Board of Directors may in its discretion determine without offering any
thereof on the same terms or on any terms to the stockholders then of record or
to any class of stockholders.
<PAGE>
ARTICLES OF AMENDMENT TO THE CHARTER
OF
WELLCO RO-SEARCH INDUSTRIES, INC.
The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, known as the Business Corporation Act, and
particularly pursuant to Section 55-103 thereof, hereby executes the following
Articles of Amendment:
1. The name of the corporation at the date of execution of these
Articles of Amendment is Wellco Ro-Search Industries, Inc., but the change to be
effected by these Articles of Amendment is to change the name of the corporation
to Wellco Enterprises, Inc.
2. The amendment adopted by action of the Board of Directors and the
Shareholders is that the charter of Wellco Ro-Search Industries, Inc. be amended
by striking out all of Article First as set forth in the charter of Wellco
Ro-Search, Inc. as the same has been heretofore amended and filed in the Office
of the Secretary of State of North Carolina and by inserting in lieu thereof the
following:
"ARTICLE FIRST: The name of the corporation shall be Wellco Enterprises
, Inc."
3. The date of the adoption of this amendment by the Shareholders was
November 21, 1967.
4. The number of shares of the corporation outstanding at the time of
the adoption of this amendment was 395,027 shares of Common Stock, all of which
shares were entitled to vote thereon. There were no shares of Preferred Stock
outstanding.
5. The number of shares voted for such amendment was 229,452 shares of
said Common Stock and the number of shares voted against such amendment was none
shares of said Common Stock.
6. The amendment hereby effected does not give rise to dissenter's
rights to payment for the reason that the only effect of such amendment is to
change the name of the corporation.
IN WITNESS WHEREOF, said corporation has caused these Articles of
Amendment to be executed in its corporate name by its President and Secretary
and its corporate seal to be hereunto affixed, this the 21st day of November,
1967.
WELLCO RO-SEARCH INDUSTRIES, INC.
(Name Changed Hereby To
WELLCO ENTERPRISES, INC.
BY: HEINZ ROLLMAN
President
ATTEST: ERNEST ROLLMAN
Secretary
<PAGE>
ARTICLES OF AMENDMENT TO CHARTER
WELLCO ENTERPRISES, INC.
The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, and particularly pursuant to the provisions of
Section 55-103 thereof, hereby executes the following Articles of Amendment to
its Charter heretofore filed in the Office of the Secretary of State of North
Carolina:
1. The name of the corporation is WELLCO ENTERPRISES, INC.
2. The following amendment to the charter of the corporation was
adopted by its stockholders at the annual stockholders meeting held on the 19th
day of November, 1968, in the manner prescribed by law:
"RESOLVED, that the present 'Article Fourth' of the Charter of Wellco
Enterprises, Inc., be deleted in its entirety and an new 'Article
Fourth' be substituted in lieu thereof, said new 'Article Fourth'
providing as follows:
ARTICLE FOURTH: The total authorized capital stock of the corporation
shall be three thousand (3,000) shares of five per cent (5%) Cumulative
Convertible Preferred Stock, of the par value of ONE HUNDRED AND NO/100
DOLLARS ($100.00) per share, amounting in the aggregate to THREE
HUNDRED THOUSAND ($300,000.00) DOLLARS and two million (2,000,000)
shares of common stock of the par value of ONE AND NO/100 DOLLAR
($1.00) per share."
3. The number of shares of the corporation outstanding at the time of
such adoption was 420,027; and the number of shares entitled to vote thereon was
420,027.
4. The number of shares represented at the meeting at which said
amendment was approved was 274,066; the number of shares voted for such
amendment was 267,955; the number of shares voted against such amendment was
3,513.
5. The amendment herein effected does not result in any change in the
stated capital of the corporation.
6. The amendment herein effected does not give rise to dissenter's
rights to payment for the reason that the only effect of such amendment is to
increase the amount of authorized common stock of the corporation.
IN WITNESS WHEREOF, these articles are signed by the President and
Secretary of the corporation this 19th day of November, 1968.
WELLCO ENTERPRISES, INC.
By: ROLF KAUFMAN
President
ATTEST: ERNEST ROLLMAN
Secretary
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF HAYWOOD
I, GRACE B. ROGERS, a Notary Public, hereby certify that on this 19th
day of November, 1968, personally appeared before me ROLF KAUFMAN and ERNEST
ROLLMAN, each of whom being by me first duly sworn, declared that he signed the
foregoing document in the capacity indicated, and that the statements contained
therein are true.
GRACE B. ROGERS
Notary Public
My Commission Expires:
March 26, 1970
<PAGE>
ARTICLES OF AMENDMENT TO CHARTER
OF
WELLCO ENTERPRISES, INC.
The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger with Wellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, and particularly pursuant to the provisions of
Section 55-103 thereof, hereby executes the following Articles of Amendment to
its Charter heretofore filed in the Office of the Secretary of State of North
Carolina.
1. The name of the corporation is WELLCO ENTERPRISES, INC.
2. The following amendments to the charter of the corporation were
adopted by its stockholders at the annual stockholders meeting of said
corporation held on the 16th day of November, 1976, in the manner prescribed by
law:
"RESOLVED, that the present 'Article Ninth' of the Charter of Wellco
Enterprises, Inc., be deleted in its entirety and a new 'Article Ninth'
provided as follows:
Article Ninth: The property and business of this corporation shall be
managed by its Board of Directors. The number of Directors which shall
constitute the whole Board shall be nine, divided and classified into
three Classes, to be designated, respectively, Class I, Class II and
Class III, each Class to consist of three Directors. At the 1976 annual
meeting of stockholders, all of the Directors shall be elected; Class I
for a term to expire at the 1977 annual meeting of stockholders; Class
II for a term to expire at the 1978 annual meeting of stockholders;
Class III for a new term to expire at the 1979 annual meeting of
stockholders; and in the case of each Class, until their respective
successors are duly elected and qualified, or until their resignation,
death, or removal by stockholders for cause. At each annual meeting of
stockholders commencing in 1977, directors shall be elected to fill any
vacancies then existing and to succeed those whose terms have expired,
and the directors so elected shall be identified as being of the same
class as the directors they succeed and shall be elected to hold office
for the term of the class to which each is elected, and until their
respective successors are duly elected and qualified, or until their
resignation, death, or removal by stockholders for cause. If any
vacancy shall occur in the Board of Directors by reason of the death,
resignation, or disqualification as by law provided, the directors then
in office, although less than a quorum, may by majority vote fill any
such vacancy, and any director so chosen shall hold office until the
next annual meeting of the stockholders and until his successor shall
be duly elected and qualified; provided, however, that if in the event
of any such vacancy, the directors remaining in office shall be unable,
by majority vote, to fill such vacancy within thirty (30) days after
the occurrence thereof, the President or the Secretary may call a
special meeting of the stockholders at which such vacancy shall be
filled. Any Director elected by stockholders may be removed from office
as a Director at any time, but only for cause, by the affirmative vote
of stockholders of record holding a majority of the outstanding shares
of stock of the corporation entitled to vote in elections of Directors
given at a meeting of stockholders duly called for that purpose.
AND FURTHER RESOLVED, that the present 'Article Tenth' of the Charter
of Wellco Enterprises, Inc., be deleted in its entirety and a new
'Article Tenth' be substituted in lieu thereof, said new 'Article
Tenth' providing as follows:
<PAGE>
Article Tenth: This corporation reserves the right to amend, alter,
change, or repeal any provision contained in this corporation's
Articles of Incorporation in effect from time to time, in the manner
new or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation; provided,
however, that the foregoing Article Ninth may be amended only by the
affirmative vote of stockholders of record holding two-thirds of the
outstanding shares of stock of this corporation entitled to vote upon
such amendment given at a meeting of stockholders duly called for that
purpose and no amendment to this Article Tenth modifying such
requirement may be adopted except upon the same affirmative vote."
3. The number of shares of the corporation outstanding as of the
October 1, 1976 record date for said meeting was 418,903, all of which were
entitled to vote upon said amendments.
4. The number of shares represented at the meeting at which said
amendments were approved was 338,201; the number of shares voted for said
amendments was 274,782; the number of shares voted against said amendments was
46,210; the number of shares withholding vote with reference to said amendments
was 17,209.
5. The amendments herein effected do not result in any change in the
stated capital of the corporation.
6. The amendments herein effected do not give rise to dissenter's
rights to payment for the reason that the only effect of such amendments is to
increase the composition of the Board of Directors and related matters.
IN WITNESS WHEREOF, these articles are signed by the President and
Secretary of the corporation this 16th day of November, 1976.
WELLCO ENTERPRISES, INC.
(CORPORATE SEAL)
By ROLF KAUFMAN
Rolf Kaufman, President
ATTEST:
ERNEST ROLLMAN
Ernest Rollman, Secretary
STATE OF NORTH CAROLINA
COUNTY OF HAYWOOD
I, Donna M. Overman, a Notary Public, hereby certify that on this 16th
day of November, 1976, personally appeared before me ROLF KAUFMAN and ERNEST
ROLLMAN, each of whom being by me first duly sworn, declared that he signed the
foregoing document in the capacity indicated, and that the statements contained
herein are true.
DONNA M. OVERMAN
Notary Public
<PAGE>
ARTICLES OF AMENDMENT
TO THE CHARTER OF
WELLCO ENTERPRISES, INC.
The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger withl Wellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, particularly the provisions of Section 55-103
thereof, hereby executes the following Articles of Amendment to its Charter
heretofore filed in the Office of the Secretary of State of North Carolina:
1. The name of the Corporation is WELLCO ENTERPRISES, INC.
2. The following Amendment to the Charter of the Corporation was
adopted by its stockholders at the annual stockholders meeting of said
corporation held on the 17th day of November, 1987, in the manner prescribed by
law:
"RESOLVED, that the Charter of Wellco Enterprises, Inc. be amended by
adding a new Article Fourteenth thereof, said new Article Fourteenth
providing as follows:
ARTICLE FOURTEENTH: No director of the Corporation shall be personally
liable arising out of an action whether by or in the right of the
Corporation or otherwise, for monetary damages for breach of his duties
as a director; provided, however, that this Article Fourteenth shall
not be effective with respect to (i) acts or omissions not made in good
faith that the director at the time of such breach knew or believed
were in conflict with the best interests of the Corporation, (ii) any
liability under Section 55-32 of the General Statutes of North
Carolina, (iii) any transaction from which the director derived an
improper personal benefit, or (iv) acts or omissions occurring prior to
the effective date of this charter amendment. As used herein, the term
'improper personal benefit' does not include a director's compensation
or other incidental benefits for or on account of his services as a
director, officer, employee, independent contractor, attorney or
consultant of the Corporation."
3. The number of shares of the Corporation's common stock outstanding
as of the September 30, 1987 record date for said meeting was 875,706, all of
which were entitled to vote upon said Amendment.
4. The number of shares represented at the meeting at which said
Amendment were approved was 768,636; the number of shares voted for said
Amendment was 750,541; the number of shares voted against said Amendment was
14,688; the number of shares withholding vote with reference to said Amendment
was 3,407.
5. The Amendment herein effected do not result in any change in the
stated capital of the Corporation.
6. The Amendment herein effected does not give rise to dissenter's
rights to payment for the reason that the only effect of said Amendment is to
limit certain liabilities of members of the Board of Directors and does not
relate to those matters enumerated in N.C.G.S. Sec. 55-101(b).
IN WITNESS WHEREOF, these Articles are signed by the President and
Secretary of the
<PAGE>
Corporation, this 17th day of November, 1987.
WELLCO ENTERPRISES, INC.
(CORPORATE SEAL)
By: ROLF KAUFMAN
Rolf Kaufman, President
Attest:
DAVID LUTZ
David Lutz, Secretary
STATE OF NORTH CAROLINA
COUNTY OF HAYWOOD
I, DONNA M. CHAMBERS, a Notary Public of said State and County, hereby
certify that ROLF KAUFMAN and DAVID LUTZ personally appeared before me this day
and, each of whom being by me first duly sworn, declared that he signed the
foregoing Articles of Amendment to the Charter of Wellco Enterprises, Inc. in
the capacity above indicated and that the statements contained therein are true.
WITNESS my hand and Notarial Seal, this 17th day of November, 1987.
DONNA M. CHAMBERS
Notary Public
My commission expires:
March 9, 1991
<PAGE>
WELLCO ENTERPRISES, INC.
BY-LAWS
As in effect November 15, 1994
OFFICES
1. The principal office shall be in the City of Waynesville, County of
Haywood, State of North Carolina.
2. The Corporation may also have offices in the City of New York, State
of New York, and at such other places as the board of directors may from time to
time appoint or the business of the corporation may require.
SEAL
3. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal, North
Carolina." Said seal may be used by causing it or facsimile thereof to be
impressed or affixed or reproduced or otherwise.
STOCKHOLDERS' MEETINGS
4. All meetings of the stockholders for the election of directors
shall be held at the office of the corporation in Waynesville, N. C. Special
meetings of stockholders for any other purpose shall be held in the office of
the corporation in Waynesville, N. C., or at such place in North Carolina as
shall be stated in the notice of the meeting.
5. The annual meeting of the stockholders shall be held on the third
Tuesday of November in each year; provided, however, that if this day is the
Tuesday of the week including the Thanksgiving holiday, the annual meeting shall
be held on the Tuesday of the preceding week or the Tuesday of the following
week, as determined by unanimous resolution of the Board of Directors. If the
day so selected as the annual meeting date is a legal holiday, then the meeting
shall be on the next secular following day. The meeting shall be at 3:00 o'clock
P. M. or thereafter, as adjourned, at which time the shareholders shall elect by
a plurality vote, by ballot, members of the Board of Directors as provided in
these Bylaws, and transact such other business as may properly be brought before
the meeting.
6. The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by law, by the
certificate of incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person, or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the required amount of voting stock shall be
present. At such adjourned meeting at which the requisite amount of voting stock
shall be represented any business may be transacted which might have been
transacted at the meeting as originally notified.
7. At any meeting of the stockholders every stockholder having the
right to vote shall be
<PAGE>
entitled to vote in person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. Each
stockholder shall have one vote for each share of stock having voting power,
registered in his name on the books of the corporation, and except where the
transfer books of the corporation shall have been closed or a date shall have
been fixed as a record date for the determination of its stockholders entitled
to vote, no share of stock shall be voted on at any election of directors which
shall have been transferred on the books of the corporation within twenty days
next preceding such election of directors.
7A. The provisions of Article 9A of the North Carolina Business
Corporation Act, known as the North Carolina Control Share Acquisition Act, to
otherwise be effective as to the corporation from and after July 1, 1990, shall,
pursuant to N.C.G.S. Sec. 55-9A-09, not be applicable to the corporation.
8. Written notice of the annual meeting shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the stock
ledger of the corporation, not less than ten (10) nor more than (50) days before
the date of the meeting.
9. A complete list of the stockholders entitled to vote a the ensuing
election, arranged in alphabetical order, with the residence of each, and the
number of voting shares held by each, shall be prepared by the secretary and
filed in the office where the election is to be held, at least ten days before
every election, and shall at all times, during the usual hours for business, and
during the whole time of said election, be open to the examination of any
stockholder.
10. Special meetings of the stockholders, for any purpose, or purposes,
unless otherwise prescribed by statute, may be called by the president, and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
11. Business transacted at all special meetings shall be confined to
the objects stated in the call.
12. Written notice of a special meeting of stockholders, stating the
time and place and object thereof, shall be mailed, postage prepaid, not less
than ten (10) nor more than fifty (50) days before such meeting, to each
stockholder entitled to vote thereat, at such address as appears on the books of
the corporation.
DIRECTORS
13. The property and business of this corporation shall be managed by
its board of directors. The number of directors which shall constitute the whole
board shall be nine, divided and classified into three classes of three
directors each, to be designated, respectively, Class I, Class II, Class III.
The terms of each class shall continue until their respective successors are
duly elected and qualified, or until their resignation, death or removal by
stockholders for cause. The terms of the Class II Directors shall expire at the
1996 annual meeting of the stockholders. The terms of the Class I Directors
shall expire at the 1995 annual meeting of the stockholders. The terms of the
Class III Directors shall expire at the 1997 annual meeting of the stockholders.
At each annual meeting of stockholders commencing in 1995 and thereafter,
directors shall be elected to fill any vacancies then existing and to succeed
those whose terms have expired, and the directors so elected shall be
<PAGE>
identified as being of the same class as the directors they succeed and shall be
elected to hold office for the term of the class to which each is elected.
14. The directors may hold their meetings and have one or more offices,
and keep the books of the corporation, except the original or duplicate stock
ledger, outside of North Carolina at such place or places as they may from time
to time determine.
15. In addition to the powers and authorities by these by-laws
expressly conferred upon it, the board of directors may exercise all such powers
of the corporation and do all such lawful acts and things as are not required to
be exercised or done by the stockholders.
COMMITTEES OF DIRECTORS
16. The board of directors, may, by resolutions passed by a majority of
the whole board, designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation, and may have the power to authorize the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the board of directors.
17. The committees shall keep regular minutes of their proceedings and
report the same to the board when required.
MEETINGS OF THE BOARD
18. Each newly elected board may meet at such place ;and time either
within or without the State of North Carolina as shall be fixed by the vote of
the stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting; provided, a majority of the whole board shall be present; or they may
meet at such place and time as shall be fixed by the consent in writing of all
the directors.
19. Regular meetings of the board may be held without notice of such
time and place either within or without the State of North Carolina as shall
from time to time be determined by the board.
20. Special meetings of the board may be called by the president on one
(1) day's notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors.
21. At all meetings of the board three (3) directors shall be necessary
and sufficient to constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation or by
these by-laws.
OFFICERS
22. The officers of the corporation shall be chosen by the directors
and shall be a president, one or more executive vice presidents, a secretary and
a treasurer.
<PAGE>
The board of directors may also choose additional vice-presidents,
assistant secretaries and assistant treasurers and elect a chairman of the board
of directors and an honorary chairman of board of directors. Any two of more
offices may be held by the same person, but no officer may act in more than one
capacity where action of two or more officers is required.
23. The board of directors, at its first meeting after each annual
meeting of stockholders, shall choose a president and executive vice-president
from their own number, and a secretary and a treasurer, who need not be members
of the board.
24. The board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the board.
25. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors.
CHAIRMAN OF THE BOARD OF DIRECTORS
26. The chairman of the board of directors shall, if elected, preside
at all meetings of the stockholders and directors; and shall be an ex-officio
member of standing committees; and shall perform such other duties as may be
delegated to him from time to time by the board of directors. An honorary
chairman of the board of directors will have no duties whatsoever to perform
unless requested by the president.
THE PRESIDENT
27. The president shall be the chief executive officer of the
corporation; he shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect, and preside at stockholders and directors
meetings if no chairman of board elected.
28. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation.
29. He shall be an ex-officio member of all standing committees, and
shall have the general powers and duties of supervision and management usually
vested in the office of the president of a corporation.
VICE-PRESIDENTS
30. The vice-presidents in the order of their seniority shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president, and shall perform such other duties as the board of
directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
31. The secretary shall attend all sessions of the board of directors
and all meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors or president, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation, and when authorized by the board,
affix the same to any instrument requiring it,
<PAGE>
and when so affixed, it shall be attested by his signature or by the signature
of the treasurer or an assistant secretary.
32. The assistant secretaries in the order of their seniority shall, in
the absence or disability of the secretary, perform the duties and exercise the
powers of the secretary, and shall perform such other duties as the board of
directors shall prescribe.
THE TREASURER AND ASSISTANT TREASURER
33. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies, and other valuables effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of directors.
34. He shall disburse the funds of the corporation as may be ordered by
the board, taking proper vouchers for such disbursements, and shall render to
the president and directors, at the regular meetings of the board, or whenever
they may require it, an account of all his transactions as treasurer and of the
financial condition of the corporation.
35. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum, and
with surety or sureties as shall be satisfactory to this board, for the faithful
performance of the duties of his office, and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
36. The assistant treasurers in the order of their seniority shall, in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer, and shall perform such other duties as the board of
directors shall prescribe.
RESIGNATIONS AND VACANCIES
37. Any director or other elected officer or member of any committee of
the board of directors may resign his office at any time by delivering or
mailing his resignation to the president of the corporation. Resignations shall
take effect at the time of their receipt by the president, unless otherwise
expressly stated by their terms.
38. If any vacancy shall occur in the board of directors by reason of
death, resignation, disqualification as by law provided, or removal by
stockholders for cause, the directors then in office, although less than a
quorum, may by majority vote to fill any such vacancy, and any director so
chosen shall hold office until the next annual meeting of the stockholders and
until his successor shall be duly elected and qualified; provided, however, that
if in the event of any such vacancy, the directors remaining in office shall be
unable, by majority vote, to fill such vacancy within thirty (30) days after the
occurrence thereof, the president or the secretary may call a special meeting of
the shareholders at which such vacancy shall be filled.
39. Any director elected by stockholders may be removed from office as
a director at any time, but only for cause, by the affirmative vote of
stockholders of record holding a majority of the outstanding shares of stock of
the corporation entitled to vote in elections of directors given at a meeting of
stockholders duly called for that purpose.
<PAGE>
40. It is the policy of the corporation that its officers, directors,
employees and agents be and hereby are indemnified by the corporation against
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in any of the foregoing
capacities except in the case of an individual who undertakes or has undertaken
activities which are at the time taken known or believed by him to be clearly in
conflict with the best interest of the corporation.
The corporation shall also indemnify to the same extent any person who,
at the request of the corporation, is or was serving as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or as a trustee or administrator of the corporation's employee
benefit plan.
Pursuant to the policy of indemnification described above, an
individual so entitled pursuant to said policy may recover from the corporation
reasonable costs, expenses and attorneys' fees in connection with enforcement of
such rights.
Pursuant to N.C.G.S. Section 55-20, when by reason of the fact that a
person is or was serving as director, officer, employee or agent of the
corporation or in any such capacity at the request of the corporation in any
other corporation, partnership, joint venture, trust or plan, any person is or
was a party uproot or is threatened to be made a party to any criminal,
administrative or investigative, not brought by the corporation nor brought by
any party seeking derivatively to enforce a liability of such a person the
corporation for any expenses, including attorneys' fees, or any liabilities
which he may have incurred in consequence of such action, suit or proceeding,
under the following conditions:
1. If such person is wholly successful in his defense, or if the
proceeding is an administrative or investigative proceeding which does not
result in the indictment, fine or penalty of such person, he shall b e entitled
to reimbursement from the corporation of all his reasonable expenses of defense
or participation, including attorneys' fees.
2. If such person is not wholly successful or is unsuccessful in his
defense, or the proceeding to which he is a party results in his indictment,
fine or penalty, the corporation shall pay such expenses of defense or
participation, including attorneys' fees, and the amount of any judgment, money
decreed, fine, penalty or settlement for which he may have become liable, if
a. A plan for such payment is approved by a consent in writing signed
by the holders of all shares entitled to vote or such plan is sent to the
holders of all shares entitled to vote, with notice of a shareholders' meeting,
whether annual or special, to be held to take action thereon and if at such
meeting plan is approved by the holders of a majority of such shares, exclusive
of the shares held directly or indirectly by any persons to be benefited by the
plan if approved, or
b. A majority of a quorum consisting of directors who are not parties
to such action, suit or proceeding shall determine that such person acted in
good faith and in a manner he reasonable believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful, and the
corporation shall, not later than 60 days before any such payment or agreement
to pay is made, send to all shareholders of record on a record date not more
than 10 days prior to the date of mailing, at their registered addresses, a
statement specifying the persons to be paid, the amounts to be paid, and the
nature and status of the suit or proceedings at the time of mailing, or
c. In a proceeding brought by such person for such determination in the
superior court of the district where the corporation has its registered office
it shall be determined that such person acted
<PAGE>
on good faith and in a manner he reasonable believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. In
such a proceedings, the court in its discretion may order notice thereof to be
sent to the shareholders of the corporation in such manner and in such form as
it may deem appropriate, at the expense of the corporation; and it may allow all
shareholders so notified to be heard in opposition to the determination
requested.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in the best interests
of the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Pursuant to N.C.G.S. Section 55-21, when a present or former director,
officer, employee or agent of the corporation or any person who has served or is
serving in such capacity at the request of the corporation in any other
corporation, partnership, joint venture, trust or other enterprise, is sued,
alone or with others, in the courts of North Carolina, in any action seeking to
establish his liability to the corporation arising out of his alleged
dereliction of duty to the corporation, he shall in turn be entitled to
indemnification or reimbursement from the corporation for so much of his
expenses of defense, including attorneys' fees, as the court in its discretion,
upon motion for indemnification or reimbursement, duly made in such action,
finds to be reasonable, if;
(1) Such person is successful in whole or in part in the action against
him or in any settlement thereof and the court finds that his conduct fairly and
equitable merits such relief; or
(2) The court finds, despite his adjudication of liability, that such
person has acted honestly and reasonable an that, in view of all the
circumstances of the case, his conduct fairly and equitably merits such relief.
When such action is brought in another state and the result thereof is
such as would have entitled the defendant officer or director to make a motion
in the cause for indemnification or reimbursement of his expenses of defense if
the action had been brought in North Carolina, but no such relief is available
in the state in which the action is actually brought, the defendant officer or
director may bring a separate action against the corporation in North Carolina
for such indemnification or reimbursement as he might have recovered had the
suit against him been brought in North Carolina. Notice of said action for
indemnification or reimbursement shall be sent, in such form as the court may
approve and at the corporation's expense, to the party or parties plaintiff in
the prior action who shall be entitled to be heard.
Notwithstanding the foregoing policy, the corporation will first
endeavor to avail itself of the proceeds, cost of defense or other benefits of
any insurance policies insuring the corporation or any individual entitled to
indemnification under the foregoing policy before expending funds of the
corporation pursuant to the foregoing policy.
DUTIES OF OFFICERS MAY BE DELEGATED
41. In case of the absence of any officer of the corporation, or for
any other reason that the board may deem sufficient, the board may delegate, for
the time being, the powers or duties or any of them, of such officer to any
other officer, or to any director.
<PAGE>
CERTIFICATES OF STOCK
42. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary. If the corporation has a transfer agent
or an assistant transfer agent, or a transfer clerk acting on its behalf and a
registrar, the signature of any such officer may be facsimile.
TRANSFERS OF STOCK
43. Transfers of stock shall be made on the books of the corporation
only upon surrender of the certificates therefor endorsed by the person named in
the certificate or by attorney, lawfully constituted in writing.
CLOSING OF TRANSFER BOOKS
44. The board of directors shall have power to close the stock transfer
books of the corporation for a period not exceeding fifty days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for the allotment or rights or the date when any change or conversion
or exchange of capital stock shall go into effect; provided, however, that in
lieu of closing the stock transfer books as aforesaid, the board of directors
may fix in advance a date, not exceeding fifty days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend, or to any
such allotment of rights, or to exercise the rights in respect of any such
change, conversion, or exchange of capital stock, and in such case such
stockholders, and only such stockholders as shall be stockholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
REGISTERED STOCKHOLDERS
45. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and, accordingly,
shall on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of North Carolina.
LOST CERTIFICATE
46. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact and advertise the same in
such manner as the board of directors may require, and the board of directors
may, in its discretion, require the owner of the lost or destroyed certificate,
or his legal representative, to give the corporation a bond, sufficient to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. A new certificate of the
same tenor and for the same number of shares as the one
<PAGE>
alleged to be lost or destroyed may be issued without requiring any bond, when,
in the judgment of the directors, it is proper so to do.
CHECKS
47. All checks or demands for monies and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.
FISCAL YEAR
48. The fiscal year shall begin the first day of July in each year.
DIVIDENDS
49. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock.
50. Before payment of any dividend there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation of for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may abolish any such reserve in the manner in
which it was created.
DIRECTOR'S ANNUAL STATEMENT
51. The board of directors shall present at each annual meeting, and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and conditions of the
corporation.
NOTICES
52. Whenever under the provisions of these by-laws notice is required
to be given to any director or stockholder it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, by depositing
the same in the post office or letter box, in a postpaid sealed wrapper,
addressed to such stockholder or director at such address as appears on the
books of the corporation, or, in default of other address to such director or
stockholder at the General Post Office in the City of Waynesville, North
Carolina, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
53. Any stockholder or director may waive any notice required to be
given under these by-laws.
<PAGE>
AMENDMENTS
54. Paragraphs 13, 38, 39 and this Paragraph 54 may be amended only by
the affirmative vote of stockholders of record holding two-thirds of the
outstanding shares of stock of the corporation entitled to vote upon such
amendment given at a meeting of stockholders duly called for that purpose. All
other provisions of these by-laws may be altered amended or rescinded by the
affirmative vote of a majority of the board of directors at a duly held meeting
for such purpose, provided three days' written notice of the proposed action
shall have been given to each director.
<PAGE>
EXHIBIT 21
WELLCO ENTERPRISES, INC.
SUBSIDIARIES OF THE REGISTRANT
Percentage of Voting
Jurisdiction of Securities Owned by
Name of Company Incorporation Immediate Parent
Wellco Enterprises, Inc. North Carolina Registrant
Wholly-Owned Subsidaries:
Ro-Search, Incorporated North Carolina 100%
Ro-Search International Inc. Barbados, West Indies 100% (1)
Mo-Ka Shoe Corporation Delaware 100%
(1) Owned by Ro-Search, Incorporated.
All of the Registrant's wholly-owned subsidiaries are included in the
consolidated financial statements.
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMTNS FOR THE FISCAL YEAR ENDED JULY 1, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMMENTS.
</LEGEND>
<CIK> 0000105532
<NAME> WELLCO ENTERPRISES, INC.
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-START> JUL-02-1995
<PERIOD-END> JUL-01-1995
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<SECURITIES> 996
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0
0
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