FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2O549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission file number 0-7166
--------------
DOUGHTIE'S FOODS, INC.
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0903892
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2410 WESLEY STREET, PORTSMOUTH, VIRGINIA 23707
(Address of principal executive offices)
(804) 393-6007
(Registrant's telephone number, including area code)
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $1 par value - 1,000,627 shares as of March 30, 1996
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) <F1>
<CAPTION>
March 30, December 30,
1996 1995
_____________ ____________
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 304,517 $ 513,319
Accounts receivable, net:
Trade 6,375,435 5,758,536
Officers and employees 0 3,323
Inventories 5,014,742 4,849,104
Deferred income taxes 193,339 193,339
Prepaid expenses and other
current assets 274,646 246,679
_____________ ____________
Total Current Assets 12,162,679 11,564,300
_____________ ____________
PROPERTY, PLANT AND EQUIPMENT -
AT COST:
Land 280,827 280,827
Buildings 4,290,986 4,290,986
Delivery equipment 361,474 375,408
Plant and refrigeration equipment 3,954,620 3,869,561
Office equipment 726,539 695,034
Leasehold improvements 1,675 0
_____________ ____________
9,616,121 9,511,816
Less - accumulated depreciation 5,916,020 5,823,208
_____________ ____________
3,700,101 3,688,608
_____________ ____________
OTHER ASSETS 577,511 833,169
_____________ ____________
$ 16,440,291 $ 16,086,077
_____________ ____________
_____________ ____________
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 133,333 $ 133,333
Accounts payable 2,132,432 1,547,107
Income taxes payable 78,182 0
Accrued salaries, commissions and
bonuses 46,433 76,706
Accrued employee group insurance 20,626 174,026
Other accrued liabilities 276,317 113,580
_____________ ____________
Total Current Liabilities 2,687,323 2,044,752
LONG-TERM DEBT - less current portion 6,440,000 6,688,334
DEFERRED INCOME TAXES 49,931 49,931
_____________ ____________
Total Liabilities 9,177,254 8,783,017
_____________ ____________
STOCKHOLDERS' EQUITY:
Common stock - $1 par value;
authorized 2,000,000 shares, issued
and outstanding 1,000,627 shares at
March 30,1996 and 1,002,527 shares
at December 30,1995 1,000,627 1,002,527
Additional paid-in capital 2,818,609 2,823,597
Retained earnings 3,443,801 3,476,936
_____________ ____________
Total Stockholders' Equity 7,263,037 7,303,060
_____________ ____________
$ 16,440,291 $ 16,086,077
_____________ ____________
_____________ ____________
<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <F1>
<CAPTION>
THREE MONTHS ENDED
____________________________________
March 30, April 1,
1996 1995
_____________ _____________
<S> <C> <C>
NET SALES $ 15,979,850 $ 16,401,046
COST OF GOODS SOLD 13,315,109 13,346,804
_____________ _____________
GROSS PROFIT 2,664,741 3,054,242
_____________ _____________
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,552,971 3,275,030
INTEREST EXPENSE 100,625 89,563
_____________ _____________
2,653,596 3,364,593
_____________ _____________
INCOME (LOSS) BEFORE INCOME TAXES 11,145 (310,351)
INCOME TAX EXPENSE (BENEFIT) 4,179 (52,200)
_____________ _____________
NET INCOME (LOSS) $ 6,966 $ (258,151)
_____________ _____________
_____________ _____________
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER SHARE 1,001,894 1,008,518
_____________ _____________
_____________ _____________
EARNINGS (LOSS) PER SHARE $ .01 $ (0.26)
_____________ _____________
_____________ _____________
CASH DIVIDENDS PER SHARE $ .04 $ .04
_____________ _____________
_____________ _____________
<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <F1>
<CAPTION>
THREE MONTHS ENDED
___________________________________
March 30, April 1,
1996 1995
_____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,966 $ (258,151)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operations:
Depreciation 107,055 161,353
Gain on sale of property, plant
and equipment 0 (3,599)
(Increase) decrease in assets:
Accounts receivable, net (613,576) 40,940
Inventories (165,638) (281,984)
Prepaid expenses and other current
assets (27,967) (182,631)
Other assets 255,658 1,300
Increase (decrease) in liabilities:
Accounts payable 585,325 (289,611)
Income taxes payable 78,182 (294,194)
Accrued salaries, commissions and
bonuses (30,273) (73,730)
Accrued employee group insurance (153,400) 1,036
Other accrued liabilities 162,737 74,740
_____________ ____________
205,069 (1,104,531)
_____________ ____________
<PAGE>
Cash flows from investing activities:
Additions to property, plant and
equipment (118,548) (218,113)
Proceeds from sale of property,
plant and equipment 0 3,598
_____________ ____________
(118,548) (214,515)
_____________ ____________
Cash flows from financing activities:
Changes in long-term debt, including
current portion (248,334) 451,667
Acquisition of treasury stock (6,888) 0
Cash dividends (40,101) (40,341)
_____________ ____________
(295,323) 411,326
_____________ ____________
Net decrease in cash (208,802) (907,720)
Cash at beginning of period 513,319 1,361,207
_____________ ____________
Cash at end of period $ 304,517 $ 453,487
_____________ ____________
_____________ ____________
<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1
- ------
The consolidated financial statements include the accounts of Doughtie's
Foods, Inc. (the "Company") and its two majority-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Although the accompanying financial statements are unaudited, management
believes that they contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial position as of
March 30, 1996 and December 30, 1995, results of operations for the three
months ended March 30, 1996 and April 1, 1995, and cash flows for the three
months ended March 30, 1996 and April 1, 1995. The results of operations for
the periods cited above are not necessarily indicative of the results to be
expected for the full year.
NOTE 2
- ------
On July 20, 1995, the Company sold certain properties located in Carrol
County, Maryland. The gross sale price was $165,000, with net cash proceeds
of $135,610. The cash was used to reduce the Company's long-term debt. The
net pretax gain on the sale was $130,055.
On September 3, 1995, the Company sold substantially all of the assets of the
Home Food Service operation to Value Added Food Services, Inc., a Maryland
corporation ("VAFS") and ceased operations in the consumer portion of its
business due to unprofitability. Vernon W. Mules, Chairman of the Board of the
Company, and his wife, are the principal stockholders of VAFS. All finance
receivables, inventory, delivery equipment, processing equipment and office
equipment were sold. The total sale price was $1,154,173 with a $115,417 cash
downpayment and the balance of $1,038,756 in the form of a note secured by the
assets sold and personal guarantee of the Chairman. The note is due in twelve
monthly payments beginning September 3, 1996. Interest is due monthly at the
prime rate of the Company's bank. The assets were sold primarily at net book
value, except for finance receivables which were discounted by 10%. The net
pretax loss on the sale, including abandoned assets and other write-offs, was
$96,498.
During the fourth quarter of 1995, the Company incurred a $763,000 pretax
charge primarily to reduce the carrying value of fixed assets and inventories
of its TWB Gourmet Foods, Inc. 70% joint venture to estimated net realizable
value and to provide for other costs to exit the business. TWB has incurred
net operating losses since inception in the fourth quarter of 1994; the 1995
net operating loss approximated $1,390,000 including the $763,000 charge. On
April 24, 1996, the Company entered into an agreement to sell most of the
assets of TWB. If all conditions of the sale are met, settlement will occur
in the second quarter of 1996 with a total sale price of approximately
$476,000.
NOTE 3
- ------
Inventories are stated at the lower of last-in, first-out (LIFO) cost or
market. Because inventory valuations under the LIFO method are based on an
annual determination, estimates must be made at interim dates of year-end
costs and levels of inventories. The possibility of variations between
estimated year-end costs and levels of LIFO inventories and the actual year-end
amounts may materially affect the results of operations as finally
determined for the full year.
NOTE 4
- ------
Cash paid for interest totaled $100,625 and $89,563 for the three months ended
March 30, 1996 and April 1, 1995, respectively.
Income taxes resulted in a net refund of $166,900 for the three months ended
March 30, 1996 and cash payments of $234,000 for the three months ended April
1, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Sales for the quarter ended March 30, 1996 were $16.0 million or 2.4%
lower than sales for the prior year's first quarter of $16.4 million. The sale
of the consumer operation in the third quarter of 1995 accounted for an
$814,000 decline in sales. This decrease was partially offset by unit volume
increases in institutional sales.
The Company's gross profit margin (gross profit as a percentage of net
sales) decreased from 18.62% in the quarter ended April 1, 1995 to 16.68% for
the quarter ended March 30, 1996. The elimination of the consumer division
with its higher mark up was the cause of this decline.
The Company's selling, general and administrative expenses, expressed as
a percentage of net sales, decreased from 19.96% in the first quarter of 1995
to 15.98% in 1996. The sale of the consumer division was the primary cause of
this decline. The remainder of the decline was due to a $143,000 decrease in
health and commercial insurance costs offset by $45,000 of startup costs
associated with the military contract.
Interest expense for the quarter ended March 30, 1996 marginally
increased to .63% of sales compared to .55% of sales for the first quarter of
1995. Increased borrowing levels was the cause of the increased expense. As
the interest on the Company's debt is prime related, interest expense will
increase or decrease in subsequent periods based on fluctuations in the prime
rate and the borrowing levels of the Company.
Income tax expense was $4,000 for the three months ended March 30, 1996
compared to an income tax benefit of $52,000 for the corresponding period of
1995. The lower effective tax benefit in 1995 resulted from the non-recognition
of tax benefits for the net operating loss of a subsidiary that is
not a member of the controlled group for income tax purposes.
The Company reported net income of $7,000 or $.01 per share for the first
three months of 1996 compared to a net loss of $258,000 or $.26 per share in
the first three months of 1995. Losses incurred by TWB Gourmet Foods, Inc.
accounted for $.17 of the 1995 per share net loss. TWB incurred no loss or
income in 1996 due to the $763,000 pretax charge established in the fourth
quarter of 1995.
<PAGE>
Liquidity
- ---------
The Company uses a number of liquidity indicators for internal evaluation
purposes. Certain of these measures as of March 30, 1996 and December 30,
1995 are set forth below:
March 30, December 30,
1996 1995
____________ ____________
Total Debt to Total Debt Plus
Stockholders' Equity .48 .48
Current Assets to Current
Liabilities 4.53 5.66
Inventory Turnover (The
Annualized Cost of Goods
Sold to Ending Inventory) 10.62 12.99
The decreases in both the current assets to current liabilities ratio and
the inventory turnover ratio were caused by the increases in inventory and the
corresponding accounts payable that were required to service a sales contract
with the United States Department of Defense.
On July 20, 1995, the Company sold certain properties located in Carrol
County, Maryland. The gross sale price was $165,000, with net cash proceeds
of $135,610. The cash was used to reduce the Company's long-term debt. The
net pretax gain on the sale was $130,055.
On September 3, 1995, the Company sold substantially all of the assets of
the Home Food Service operation to Value Added Food Services, Inc., a Maryland
corporation ("VAFS") and ceased operations in the consumer portion of its
business due to unprofitability. Vernon W. Mules, Chairman of the Board of the
Company, and his wife, are the principal stockholders of VAFS. All finance
receivables, inventory, delivery equipment, processing equipment and office
equipment were sold. The total sale price was $1,154,173 with a $115,417 cash
downpayment and the balance of $1,038,756 in the form of a note secured by the
assets sold and personal guarantee of the Chairman. The note is due in twelve
monthly payments beginning September 3, 1996. Interest is due monthly at the
prime rate of the Company's bank. The assets were sold primarily at net book
value, except for finance receivables which were discounted by 10%. The net
pretax loss on the sale, including abandoned assets and other write-offs, was
$96,498.
During the fourth quarter of 1995, the Company incurred a $763,000 pretax
charge primarily to reduce the carrying value of fixed assets and inventories
of its TWB Gourmet Foods, Inc. 70% joint venture to estimated net realizable
value and to provide for other costs to exit the business. TWB has incurred
net operating losses since inception in the fourth quarter of 1994; the 1995
net operating loss approximated $1,390,000 including the $763,000 charge. On
April 24, 1996, the Company entered into an agreement to sell most of the
assets of TWB. If all conditions of the sale are met, settlement will occur
in the second quarter of 1996 with a total sale price of approximately
$476,000.
<PAGE>
Capital Resources
- -----------------
The Company's debt financing at March 30, 1996, consisted of the
following:
A $7,500,000 revolving bank note at prime. The prime rate at March 30,
1996 was 8.25%. The note is due three years after the annual renewal date,
currently July, 1997, subject to annual renewal. As of March 30, 1996, the
Company had borrowed $5,740,000 against this credit line and had $1,760,000 of
additional borrowing capacity.
A $2,000,000 Industrial Revenue Bond from a bank for the purpose of
expanding the Company's plant and office facilities in Portsmouth, Virginia at
an annual interest rate of 91.50% of prime. As of March 30, 1996, the Company
had fully utilized the Industrial Revenue Bond and the outstanding balance was
$833,000.
In January 1996, the Company was awarded a $19 million one-year contract
for the year 1996 by the United States Department of Defense to furnish food
items to various military installations. The contract contains three yearly
renewal options. The Company anticipates an increase in its capital
requirements and is currently negotiating to obtain $1.75 million of
additional long-term debt to finance the increased inventory and accounts
receivable to service this government contract.
While the Company does not anticipate a material increase in its capital
requirements in the near future, such an increase, if it occurs, is likely to
be met through additional long-term debt financing.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or any of
its subsidiaries is a party or to which any of their property is the subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the
quarter ended March 30, 1996.
<PAGE>
<PAGE>
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.
DOUGHTIE'S FOODS, INC.
-----------------------------------------
May 14, 1996 By: Marion S. Whitfield, Jr.
(Signature)
Senior Vice President
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF
DOUGHTIE'S FOODS, INC. FOR THE THREE MONTHS ENDED MARCH 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 305
<SECURITIES> 0
<RECEIVABLES> 6,701
<ALLOWANCES> 326
<INVENTORY> 5,015
<CURRENT-ASSETS> 12,163
<PP&E> 9,616
<DEPRECIATION> 5,916
<TOTAL-ASSETS> 16,440
<CURRENT-LIABILITIES> 2,687
<BONDS> 6,440
<COMMON> 1,001
0
0
<OTHER-SE> 6,261
<TOTAL-LIABILITY-AND-EQUITY> 16,440
<SALES> 15,980
<TOTAL-REVENUES> 15,980
<CGS> 13,315
<TOTAL-COSTS> 15,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 11
<INCOME-TAX> 4
<INCOME-CONTINUING> 7
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
