FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 27, 1997
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.)
150 Westwood Circle, P.O. Box 188, Waynesville, NC 28786
(Address of Principal Executive Office)
Registrant's telephone number, including area code 704-456-3545
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 .
1,160,646 shares of $1 par value common stock were outstanding on November 11,
1997.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WELLCO ENTERPRISES, INC.
CONSOLIDATED FINANCIAL STATEMENTS FILED WITH FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 27, 1997
The attached unaudited financial statements reflect all adjustments which are,
in the opinion of management, necessary to reflect a fair statement of the
financial position, results of operations, and cash flows for the interim
periods presented. All significant adjustments are of a normal recurring nature.
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1997 AND JUNE 28, 1997
(in thousands)
ASSETS
<TABLE>
<CAPTION>
(unaudited)
SEPTEMBER 27, JUNE 28,
1997 1997
------------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash ........................................ $ 224 $ 181
Receivables ................................. 2,333 4,926
Inventories-
Finished goods .......................... 2,870 2,551
Work in process ......................... 2,715 2,647
Raw materials ........................... 2,599 2,479
-------- --------
Total ................................... 8,184 7,677
Deferred taxes and prepaid expenses ......... 549 347
-------- --------
Total ....................................... 11,290 13,131
-------- --------
MACHINERY LEASED TO LICENSEES
(less accumulated depreciation of
$1,488 and $1,483) .......................... 31 36
PROPERTY, PLANT AND EQUIPMENT:
Land ........................................ 107 107
Buildings ................................... 775 774
Machinery and equipment ..................... 3,340 2,797
Furniture and automobiles ................... 648 610
Leasehold Improvements ...................... 63 63
-------- --------
Total cost .................................. 4,933 4,351
Less accumulated depreciation and
amortization ............................. (3,124) (3,038)
-------- --------
Net ......................................... 1,809 1,313
-------- --------
INTANGIBLE ASSETS:
Excess of cost over net assets of
subsidiary at acquisition ................ 228 228
Intangible pension asset .................... 511 511
-------- --------
Total ....................................... 739 739
DEFERRED TAXES ................................... 433 433
-------- --------
TOTAL ............................................ $ 14,302 $ 15,652
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1997 AND JUNE 28, 1997
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(unaudited)
SEPTEMBER 27, JUNE 28,
1997 1997
------------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowing from bank (Note 2) ....... $ 300 $ 1,687
Accounts payable .............................. 2,487 2,064
Accrued compensation .......................... 1,077 1,062
Accrued pension ............................... 133 133
Accrued income taxes .......................... 252 357
Other liabilities ............................. 270 375
Current maturity of note payable .............. 260 107
-------- --------
Total ..................................... 4,779 5,785
-------- --------
LONG-TERM LIABILITIES:
Pension obligation ............................ 1,742 1,759
Note payable .................................. 878 1,030
CONTINGENCY (Note 5)
STOCKHOLDERS' EQUITY (Note 3):
Common stock, $1.00 par value ................. 1,161 1,151
Additional paid-in capital .................... 167 119
Retained earnings ............................. 6,197 6,430
Pension liability adjustment .................. (622) (622)
-------- --------
Total ..................................... 6,903 7,078
-------- --------
TOTAL .............................................. $ 14,302 $ 15,652
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL THREE MONTHS ENDED
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(in thousands except per share and number of shares)
<TABLE>
<CAPTION>
(unaudited)
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
REVENUES (Note 4) ............................ $ 5,676 $ 4,990
----------- -----------
COSTS AND EXPENSES:
Cost of sales and services .............. 5,435 4,086
General and administrative expenses ..... 538 522
----------- -----------
Total ................................... 5,973 4,608
----------- -----------
OPERATING INCOME (LOSS) ...................... (297) 382
----------- -----------
INTEREST EXPENSE ............................. (26) (1)
DIVIDEND AND INTEREST INCOME ................. 4 17
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ............ (319) 398
PROVISION (BENEFIT) FOR INCOME TAXES ........ (86) 100
----------- -----------
NET INCOME (LOSS) ............................ $ (233) $ 298
=========== ===========
PER SHARE OF COMMON STOCK (based on
weighted average number of
shares outstanding) (Note 1) ............ $ (0.20) $ 0.27
=========== ===========
Weighted average number of shares
outstanding ............................. 1,156,855 1,123,146
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL THREE MONTHS ENDED
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ........................... $ (233) $ 298
------- -------
Adjustments to reconcile net income
to net cash provided (used)
Depreciation and amortization ........... 91 78
(Increase) decrease in-
Accounts receivable ................. 2,593 605
Inventories ......................... (507) (322)
Other current assets ................ (202) (40)
Increase (decrease)in-
Accounts payable .................... 423 262
Accrued liabilities ................. 15 (82)
Accrued income taxes ................ (105) 103
Pension obligation .................. (17) (19)
Other ............................... (105) --
------- -------
Total adjustments ........................... 2,186 585
------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ........................ 1,953 883
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment ...................... (581) (60)
------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ....................... (581) (60)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank loans ..................... (1,387) --
Exercise of stock options ................... 58 --
------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ........................ (1,329) --
------- -------
NET INCREASE IN CASH ............................. 43 823
CASH AT BEGINNING OF PERIOD ...................... 181 673
------- -------
CASH AT END OF PERIOD ............................ $ 224 $ 1,496
======= =======
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL THREE MONTHS ENDED
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(in thousands)
(unaudited)
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
Interest .................................. $ 4 $ 1
Income taxes .............................. 105 1
==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
WELLCO ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE FISCAL THREE MONTHS ENDED
SEPTEMBER 27, 1997
(in thousands except number of shares)
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
----------------
Par Paid-In Retained
Shares Value Capital Earnings
------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 28, 1997 1,151 $ 1,151 $ 119 $ 6,430
Net loss for the
fiscal three months
ended September 27, 1997 (233)
Exercise of stock options 10 10 48
------------------------------------------------
BALANCE AT SEPTEMBER 27, 1997 1,161 $ 1,161 $ 167 $ 6,197
------------------------------------------------
Pension
Liability
Adjustment
----------------
<S> <C>
BALANCE AT JUNE 28, 1997 $ (622)
Change for the fiscal three
months ended
September 27, 1997 -
BALANCE AT SEPTEMBER 27, 1997 $ (622)
----------------
</TABLE>
See Notes to Consolidated Financial Statements.
-8-
<PAGE>
WELLCO ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL THREE MONTHS ENDED SEPTEMBER 27, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Recent Statement of the Financial Accounting Standards Board
In February 1997 the Financial Accounting Standards Board issued
the Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share." This Statement changes the computation,
presentation and disclosure of earnings per share. Under SFAS
128, the Company will compute and disclose both basic and diluted
earnings per share. The Company's outstanding stock options will
affect the computation of diluted earnings per share, and this
effect is not expected to be significant. This Statement is
effective for the Company's fiscal quarter ending December 27,
1997.
2. LINES OF CREDIT:
The Company maintains a $1,500,000 unsecured bank line of credit. The
unsecured line, which expires December 31, 1997, can be renewed annually
at the bank's discretion. At September 27, 1997, borrowings on the
unsecured line was $300,000.
The bank credit agreement contains, among other provisions, defined levels
of net worth and current ratio requirements and the Company was in
compliance with these requirements at September 27, 1997.
During fiscal year 1997, the Company entered into a second bank line of
credit for $3,000,000 which was used to provide cash for a significant
increase in inventory. The bank's commitment for the $3,000,000 line of
credit expired on September 24, 1997.
The Company began construction of a warehouse addition adjoining its
existing facilities in Waynesville, North Carolina, at a cost of between
$350,000 and $400,000. A bank has provided a $400,000 three-year term loan
commitment to finance the construction if needed. As of September 27,
1997, there have been no borrowings under this loan.
3. STOCK OPTIONS:
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," was effective as of the
beginning of the 1997 fiscal year. SFAS 123 provides for a choice of using
a fair value method to record compensation expense related to stock-based
compensation, or to continue using the compensation recognition provisions
of Accounting Principles Board Opinion 25 (APB 25). The Company chose to
continue using APB 25 under which compensation expense is generally
recognized if there is a difference between the award price for stock
options and the stock's market price at the date of award.
At September 27, 1997, the Company has stock options outstanding for
15,000 shares from the 1996 Stock Option Plan. Also, on July 2, 1997, the
Board of Directors approved the 1997 Stock Option Plan providing for the
granting of options for the purchase of up to 115,000 shares of the
Company's common stock. The Compensation Committee of the Board of
Directors has granted to certain key employees and non-employee directors
options for the purchase of 105,000 shares at the market price on the date
granted ($12.00 per share). No compensation expense has been recorded
since the option price and the market price were the same on the
measurement date. The 1997 Stock Option Plan is subject to, and the grants
thereunder are contingent upon, shareholder approval at the November 18,
1997 Annual
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<PAGE>
Meeting of Wellco shareholders.
4. GOVERNMENT BOOT CONTRACT REVENUES:
Revenues in the three-month period ended September 27, 1997 include
$58,000 representing the estimated amount of contract change orders that
have not as yet been negotiated with the government. Any differences
between the estimates and the actual amounts negotiated will be recorded
in the period in which negotiations are completed.
5. CONTINGENCY
In April 1997, the Company was served with a subpoena issued by a grand
jury empaneled in the United States District Court for the Eastern
District of Pennsylvania which requires the production of certain
documents for the period January 1, 1990 until April 29, 1997. The
subpoena was subsequently modified to provide that the initial production
of documents would start with documents dated January 1, 1993. In October,
1997, Wellco completed this initial document production by submitting more
than 200,000 documents. The Company has been informed through its legal
counsel that the grand jury is investigating possible violations of
antitrust laws primarily involving alleged collusive activities among
manufacturers of combat boots for the U. S. government. The Company
believes that this investigation includes all U. S. manufacturers of
combat boots for the U. S. government. The Company is cooperating in this
investigation, does not believe it has engaged in any illegal conduct and
does not believe that this matter will have a material adverse effect on
the Company's financial position or results of future operations. However,
the Company cannot predict what the final outcome of this matter will be.
In 1988, the Company and the other military combat boot manufacturers
responded to subpoenas which investigated possible violation of antitrust
laws involving bids submitted on military combat boot procurements for
January 1, 1979 through May 6, 1988. This investigation was closed in
February, 1992 and no legal action of any kind resulted from it.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Comparing The Three Months Ended September 27, 1997 and September 28, 1996
- ---------------------------------------------------------------------------
For the three months ended September 27, 1997, Wellco had an operating loss of
$297,000 compared to an operating profit of $382,000 in the prior year three
month period ended September 28, 1996. The current period loss was caused by
costs incurred in the initial production of the new Infantry Combat Boot.
On June 25, 1997 the U.S. Defense Personnel Support Center (DPSC) awarded Wellco
a contract to supply a new boot, called the Infantry Combat Boot (ICB), which
will be used by the Marine Corps. A total of two contracts were awarded and
Wellco's contract is for 60% of total pairs to be bought in the first year.
Wellco had not previously manufactured a boot exactly like the ICB. The contract
required that Wellco, within 90 days after contract award, manufacture and have
in inventory a significant quantity of this boot. At the end of this 90 days,
the contract also required Wellco to have the capacity to quickly deliver orders
for this boot to all Marine recruit induction centers and major Marine clothing
stores. This 90 day period compares to a normal "make ready" time in government
boot contracts of 165 days or longer.
During this 90 day period, Wellco rearranged its production lines, purchased and
installed significant new manufacturing equipment, hired and trained new
employees, tested new materials, and developed many new manufacturing procedures
and methods. If time had permitted, this should have been done with small trial
production runs. With only 90 days, Wellco had to simultaneously do all of this
and reach full production without the benefit and efficiencies of trial
production runs.
Approximately $700,000 of excess manufacturing costs were charged against
operating income in the three months ended September 27, 1997 related to ICB
start-up. In addition to labor inefficiencies in training new employees,
significant overtime premiums were paid. Bonuses were paid to direct labor
personnel for meeting production quotas. Instead of using ocean freight,
expensive air freight costs were incurred to send materials to the Company's
plant in Puerto Rico and then to send completed boot uppers to the North
Carolina plant for bottoming and finishing. Because the 90 day period did not
give enough time to develop manufacturing procedures and methods using small
trial production runs, significant material losses were incurred. Full
production quantities of materials were purchased and a significant amount was
scrapped when either the material did not perform as expected and had to be
replaced with another material, or when manufacturing procedures and methods had
to be modified.
The start-up of ICB production proved to be more expensive than initially
anticipated. Management's judgement is that, if Wellco had included in its bid
prices an adequate amount of start-up costs, those prices would have been so
much higher than the prices of other bidders that Wellco would not have received
the contract award.
The persistence of Wellco's employees did result in a successful, although
costly, start-up. The first customer delivery orders were received in early
October, 1997, and Wellco has timely-shipped all orders to date.
Besides the significant losses incurred in the start-up of ICB production, the
comparative operating results were affected by the following:
1. Revenues increased $686,000. While total pairs of boots sold to
the U. S. government were approximately the same in the
comparative periods, the September 27, 1997 period includes sales
of the Intermediate Cold/Wet boot that are not in the prior year
period. The contract for this
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<PAGE>
boot was awarded to Wellco in February, 1997, and has a higher
per pair price than combat boots which made up all of the sales
to the U.S. government in the prior period.
2. Revenues from technical assistance fees and equipment rentals
from licensees were greater in the current period. In addition to
increased licensee shipments on which these fees are based, the
current period also reflects an additional fee, which is being
earned through April, 1998, related to supplying certain of these
customers with additional services.
3. General and administrative expenses increased $16,000, which
includes $18,000 of costs related to Wellco's response to a
subpoena (see Note 5 to the Consolidated Financial Statements).
Bonus expense, the majority of which is based on profits,
decreased significantly in the quarter ended September 27, 1997.
A tax benefit was recognized at September 27, 1997 for the loss incurred. This
benefit will be realized by either offsetting taxes on taxable income earned in
the remainder of the 1998 fiscal year or the refund of taxes paid in prior
years.
Forward Looking Information:
On April 15, 1997, Wellco and three other contractors were awarded combat boot
contracts from DPSC for the one year period starting April 15, with options for
each of the ensuing four years. Wellco's award is for 25% of total combat boot
purchases in this first year, with the other three contractors receiving 35%,
20% and 20% of total purchases. DPSC had estimated award to be in December,
1996, and Wellco substantially completed shipments under its prior contract in
that month. Instead of ceasing combat boot manufacturing operations from
January, 1997 to contract award, Wellco continued to manufacture and inventory
boots in anticipation of a contract award.
This resulted in Wellco having a significant inventory of combat boots at the
date of contract award, and in Wellco being the only contractor which was in
position to start shipping immediately upon contract award. During the fourth
quarter of the 1997 year and continuing into part of the quarter ended September
27, 1997, Wellco was allowed to accelerate its first year shipments. Starting in
October, 1997, DPSC significantly reduced the pairs ordered from Wellco under
this contract in order to allow the other three contractors, who did not start
shipping until months after Wellco started shipping , to "catch up". DPSC
estimates that Wellco's reduced combat boot orders will last through February,
1998, after which pairs ordered will significantly increase until the end of the
first contract year, April 15, 1998.
This temporary reduction in pairs of combat boots ordered from Wellco will have
a negative effect on operating results through the third quarter of fiscal year
1998 ended March 28, 1998. Somewhat offsetting this, will be shipments under
contracts for the Intermediate Cold/Wet boot and the Infantry Combat Boot, both
of which are new boot items for Wellco. Only one shipment of the Intermediate
Cold/Wet boot occurred in the 1997 fiscal year, and shipments of the infantry
combat boot did not start until the current fiscal year.
Ro-Search, Inc., Wellco's machinery and licensing subsidiary, is working on its
largest-ever footwear mold order ($900,000), and is completing work on machinery
for a new customer. Both of these will be completed and shipped in the 1998
fiscal year. Ro-Search is also working on the second phase of a U. S. government
research and development contract the purpose of which is to develop a combat
boot that is more impact resistant and flexible. Work on this second phase will
be completed in the 1998 fiscal year.
See Note 5 to the Consolidated Financial Statements for information about a
subpoena served on the Company in April, 1997.
Except for historical information, this Form 10-Q includes forward looking
statements that involve risks and uncertainties, including, but not limited to,
the receipt of contracts from the U. S. government and the
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<PAGE>
performance thereunder, the ability to control costs under fixed price
contracts, the cancellation of contracts, and other risks detailed from time to
time in the Company's Securities and Exchange Commission filings, including Form
10-K for the year ended June 28, 1997. Actual results may differ materially from
management expectations.
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 the most recent fiscal three months
and the last fiscal year the availability of cash from the Company's most liquid
assets and from its existing borrowing sources:
<TABLE>
<CAPTION>
(in thousands)
September 27, 1997 June 28, 1997
------------------ -------------
<S> <C> <C>
Cash ......................................... $ 224 $ 181
Unused Line of Credit ........................ 1,200 2,813
------ ------
Total ........................................ $1,424 $2,994
====== ======
</TABLE>
The following table summarizes the major sources (uses) of cash for the three
months ended September 27, 1997:
<TABLE>
<CAPTION>
(in thousands)
September 27,
1997
-------------
<S> <C>
Net Loss Plus Depreciation ...................................... ($ 142)
Net Change in Accounts Receivable, Inventories,
Accounts Payable, Accrued Liabilities, and Accrued
Income Taxes .................................................... 2,419
Other ........................................................... (324)
Net Cash Provided By Operations ................................. 1,953
Cash Used to Repay Lines of Credit .............................. (1,387)
Cash Used to Purchase Equipment ................................. (581)
Cash Provided By Exercise of Stock Options ...................... 58
Net Increase in Cash ........................................... $ 43
</TABLE>
As stated in the Results of Operations section, Wellco accelerated shipments of
combat boots in the fourth quarter of the 1997 fiscal year, which resulted in a
significant increase in accounts receivable at June 28, 1997. Cash for this
increase in accounts receivable was provided by the bank line of credit. Cash
from a $2,593,000 reduction in accounts receivable in the September 27, 1997
quarter was used to repay $1,387,000 of the bank line of credit and for the
$581,000 purchase of equipment. Equipment purchases for production of the
infantry combat boot caused total equipment purchases in the quarter ended
September 27, 1997 to be greater than normal.
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<PAGE>
In addition to a $1,500,000 unsecured line of credit which has been available
for many years, Wellco's bank provided a second $3,000,000 secured line of
credit which was used to finance the build up in combat boot inventories during
the period of delay in awarding the April 15, 1997 contract and the subsequent
increase in accounts receivable as Wellco accelerated its shipments after
contract award. The bank's commitment to provide this line expired on September
24, 1997. The bank's commitment to supply the $1,500,000 unsecured line is
subject to renewal on December 31, 1997.
The Company recently began construction of a warehouse addition adjoining its
existing facilities in Waynesville, North Carolina, at a cost of between
$350,000 and $400,000. Wellco's bank has provided a $400,000 three-year term
loan commitment if needed to finance this addition. As of September 27, 1997,
there have been no borrowings under this commitment.
Other than the warehouse addition mentioned above, the Company has no other
material commitments for capital equipment. The Company does not know of any
other demands, commitments, uncertainties, or trends that will result in or that
are reasonablely likely to result in its liquidity increasing or decreasing in
any material way.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not have any derivative financial instruments, other financial
instruments, or derivative commodity instruments that requires disclosures.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 5 to the Consolidated Financial Statements in Part I of
this Form 10-Q.
Item 2. Changes in Securities. N/A
Item 3. Defaults Upon Senior Securities. N/A
Item 4. Submission of Matters to a Vote of Security Holders. N/A
Item 5. Other Information. N/A
Item 6. Exhibits and Reports on Form 8-K.
a). Exhibits: None
b). Reports on Form 8-K: None
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Wellco Enterprises, Inc., Registrant
\s\ \s\
David Lutz, President and Treasurer Tammy Francis, Controller
November 11, 1997
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS FOR TEH 1ST QUARTER 10-Q, PERIOD ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000105532
<NAME> WELLCO ENTERPRISES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<EXCHANGE-RATE> 1
<CASH> 224
<SECURITIES> 0
<RECEIVABLES> 2,391
<ALLOWANCES> 58
<INVENTORY> 8,184
<CURRENT-ASSETS> 11,290
<PP&E> 6,452
<DEPRECIATION> 4,612
<TOTAL-ASSETS> 14,302
<CURRENT-LIABILITIES> 4,779
<BONDS> 878
0
0
<COMMON> 1,161
<OTHER-SE> 5,742
<TOTAL-LIABILITY-AND-EQUITY> 14,302
<SALES> 5,676
<TOTAL-REVENUES> 5,676
<CGS> 5,973
<TOTAL-COSTS> 5,973
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (319)
<INCOME-TAX> (86)
<INCOME-CONTINUING> (233)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
