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 June 28, 1997
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-7166
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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)
(757) 393-6007
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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 - 996,727 shares as of August 6, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited) <F1>
<CAPTION>
June 28, December 28,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 211,675 $ 372,687
Accounts receivable trade, net 7,244,977 6,924,656
Inventories 4,754,443 4,497,699
Deferred income taxes 386,271 386,271
Prepaid expenses and other
current assets 274,736 91,042
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Total Current Assets 12,872,102 12,272,355
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PROPERTY, PLANT AND EQUIPMENT -
AT COST:
Land 280,827 280,827
Buildings 3,599,585 4,112,608
Delivery equipment 183,866 347,242
Plant and refrigeration equipment 1,662,587 4,170,355
Office equipment 679,142 699,019
Leasehold improvements 0 6,062
------------- ------------
6,406,007 9,616,113
Less - accumulated depreciation 3,747,684 6,047,739
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2,658,323 3,568,374
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OTHER ASSETS 118,214 91,557
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$ 15,648,639 $ 15,932,286
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 533,333 $ 533,333
Accounts payable 3,050,063 1,631,114
Income taxes payable 662,874 446,775
Accrued salaries, commissions and
bonuses 37,621 140,617
Other accrued liabilities 129,268 60,540
------------- ------------
Total Current Liabilities 4,413,159 2,812,379
LONG-TERM DEBT - less current portion 2,781,711 5,065,000
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Total Liabilities 7,194,870 7,877,379
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STOCKHOLDERS' EQUITY:
Common stock - $1 par value;
authorized 2,000,000 shares, issued
and outstanding 996,727 shares at
June 28, 1997 and 998,052 shares at
December 28, 1996 996,727 998,052
Additional paid-in capital 2,807,037 2,812,171
Retained earnings 4,650,005 4,244,684
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Total Stockholders' Equity 8,453,769 8,054,907
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$ 15,648,639 $ 15,932,286
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<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <F1>
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
------------------------------------ -----------------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 21,683,108 $ 22,457,784 $ 40,375,344 $ 38,437,634
COST OF GOODS SOLD 18,095,855 18,537,061 33,605,614 31,852,170
------------- ------------- ------------- ------------
GROSS PROFIT 3,587,253 3,920,723 6,769,730 6,585,464
------------- ------------- ------------- ------------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,996,840 3,125,789 5,878,068 5,678,760
INTEREST EXPENSE 43,819 133,409 115,398 234,034
------------- ------------- ------------- ------------
3,040,659 3,259,198 5,993,466 5,912,794
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INCOME BEFORE INCOME TAXES 546,594 661,525 776,264 672,670
INCOME TAX EXPENSE 204,972 248,072 291,099 252,251
------------- ------------- ------------- ------------
NET INCOME $ 341,622 $ 413,453 $ 485,165 $ 420,419
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER SHARE 998,052 1,000,627 998,052 1,000,956
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
EARNINGS PER SHARE $ .35 $ .41 $ .49 $ .42
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
CASH DIVIDENDS PER SHARE $ .04 $ .04 $ .08 $ .08
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <F1>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
June 28, June 29,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 485,165 $ 420,419
Adjustments to reconcile net income
to net cash provided by
(used for) operations:
Depreciation 141,656 218,652
Loss (gain) on sale of property,
plant and equipment 5,408 (200)
(Increase) decrease in assets:
Accounts receivable, net (320,321) (1,453,839)
Inventories (256,744) (1,012,046)
Prepaid expenses and other current
assets (183,694) (85,152)
Other assets (26,657) 236,941
Increase (decrease) in liabilities:
Accounts payable 1,418,949 (69,528)
Income taxes payable 216,099 326,254
Accrued salaries, commissions and
bonuses (102,996) (30,931)
Accrued employee group insurance 0 (173,276)
Other accrued liabilities 68,728 188,775
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1,445,593 (1,433,931)
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Cash flows from investing activities:
Additions to property, plant and
equipment (161,771) (210,420)
Proceeds from sale of property,
plant and equipment 924,758 200
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762,987 (210,220)
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Cash flows from financing activities:
Changes in long-term debt, including
current portion (2,283,289) 1,768,333
Acquisition of treasury stock (6,459) (6,888)
Cash dividends (79,844) (80,126)
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(2,369,592) 1,681,319
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Net increase (decrease) in cash (161,012) 37,168
Cash at beginning of period 372,687 513,319
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Cash at end of period $ 211,675 $ 550,487
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<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1
- ------
The consolidated financial statements include the accounts of Doughtie's Foods,
Inc. (the "Company") and its wholly-owned subsidiary. 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 June 28, 1997
and December 28, 1996, results of operations for the quarters ended June 28,
1997 and June 29, 1996 and the six months ended June 28, 1997 and June 29, 1996
and cash flows for the six months ended June 28, 1997 and June 29, 1996. 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
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On February 28, 1997, the Company sold the assets of its manufacturing
division's barbecue and chili business for approximately $840,000 in cash.
Barbecue and chili sales accounted for less than 5% of consolidated 1996 sales
volume. The net pretax gain on the sale was approximately $50,000.
On April 14, 1997, the Company sold the assets of its manufacturing division's
deli meats business for approximately $486,000. The terms of the sale were a
$286,000 cash down payment with the $200,000 balance in the form of secured
notes to be paid prior to April 15, 1998. Deli meat sales accounted for less
than 5% of consolidated 1996 sales volume.
The net pretax gain on the sale was approximately $140,000.
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 $43,819 and $133,409 for the quarters ended June
28, 1997 and June 29, 1996 and $115,398 and $234,034 for the six months ended
June 28, 1997 and June 29,1996, respectively.
Income taxes resulted in a cash payment of $72,900 and a net refund of $166,900
for the quarters ended June 28, 1997 and June 29, 1996 and a cash payment of
$73,000 and a net refund of $166,900 for the six months ended June 28, 1997 and
June 29, 1996, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Sales for the quarter ended June 28, 1997 were $21.7 million or 3.4% lower
than sales for the prior year's second quarter of $22.5 million. Sales for the
six months ended June 28, 1997 were $40.4 million or 5.0% higher than sales of
$38.4 million for the prior year's first six months. Sales under a contract with
the United States Department of Defense increased from $3.0 million in the first
six months of 1996 to $6.8 million for the six months ended June 28, 1997. This
increase was offset by a reduction in sales caused by the sales of the Company's
manufacturing operations.
The Company's gross profit margin (gross profit as a percentage of net
sales) decreased from 17.46% in the quarter ended June 29, 1996, to 16.54% for
the quarter ended June 28, 1997. The gross profit margin for the six months
decreased from 17.13% in 1996 to 16.77% in 1997. The slight decline is due to
sales made to the Department of Defense at a lower gross profit margin.
The Company's selling, general and administrative expenses, expressed as a
percentage of net sales decreased from 13.92% for the second quarter of 1996 to
13.82% for the quarter ended June 28, 1997 and decreased from 14.77% for the
first six months of 1996 to 14.56% for the six months ended June 28, 1997. The
slight decrease was a result of the increase in sales from the military contract
without a corresponding increase in selling, general and administrative expense.
Interest expense for the quarter ended June 28, 1997 decreased to .20% of
sales compared to .59% of sales for the second quarter of 1996 and decreased to
.29% of sales for the six months ended June 28, 1997 compared to .61% of sales
for the first six months of 1996. Decreased borrowing levels was the cause of
the decreased 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 $291,100 for the six months ended June 28, 1997
compared to $252,300 for the corresponding period of 1996. The increase in
income tax expense relates to increased earnings, as the effective tax rate was
unchanged.
The Company reported net income of $485,200 or $.49 per share for the first
six months of 1997 compared to net income of $420,400 or $.42 per share in the
first six months of 1996.
Liquidity
- ---------
The Company uses a number of liquidity indicators for internal evaluation
purposes. Certain of these measures as of June 28, 1997 and December 28,1996 are
set forth below:
June 28, December 28,
1997 1996
------------ ------------
Total Debt to Total Debt Plus
Stockholders' Equity .28 .41
Current Assets to Current
Liabilities 2.92 4.36
Inventory Turnover (The
Annualized Cost of Goods
Sold to Ending Inventory) 14.14 15.00
The decrease in total debt to total debt plus stockholders' equity relates
to the sales of the manufacturing operations, the proceeds of which were used to
reduce long-term debt. The decrease in current assets to current liabilities was
a result of an increase in accounts payable due to changes in terms with
vendors. The decrease in inventory turnover was caused by an increase in
inventory purchased in anticipation of increased sales in the third quarter.
On February 28, 1997, the Company sold the assets of its manufacturing
division's barbecue and chili business for approximately $840,000 in cash.
Barbecue and chili sales accounted for less than 5% of consolidated 1996 sales
volume. The net pretax gain on the sale was approximately $50,000.
On April 14, 1997, the Company sold the assets of its manufacturing
division's deli meats business for approximately $486,000. The terms of the sale
were a $286,000 cash down payment with the $200,000 balance in the form of
secured notes to be paid prior to April 15, 1998. Deli meat sales accounted for
less than 5% of consolidated 1996 sales volume. The net pretax gain on the sale
was approximately $140,000.
Capital Resources
- -----------------
The Company's debt financing at June 28, 1997, consisted of the following:
A $7,500,000 revolving bank note at prime. The prime rate at June 28, 1997
was 8.50%. The note is due three years after the annual renewal date, currently
July, 1998, subject to annual renewal. As of June 28, 1997, the Company had
borrowed $1,298,377 against this credit line and had $6,201,623 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 June 28, 1997, the Company had
fully utilized the Industrial Revenue Bond and the outstanding balance was
$666,667.
A $1,750,000 bank term loan at prime plus 0.50%. The loan is to be repaid
in quarterly installments of $100,000. As of June 28, 1997, the outstanding
balance was $1,350,000. The funds were used to finance the increased inventory
and accounts receivable required to service a one-year contract awarded to the
Company in January 1996 by the United States Department of Defense to furnish
food items to various military installations. The contract contains three yearly
renewal options and was renewed for 1997. The United States Department of
Defense had estimated annual sales volume to be approximately $19 million. Based
on actual sales volume to date, estimated annual sales volume should approximate
$12 million.
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>
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 its
subsidiary 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) List of Exhibits
Exhibit
Number Description
- ------- -----------
27. Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended June 28,
1997.
<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.
/s/ Marion S. Whitfield, Jr.
-----------------------------------------
August 8, 1997 By: Marion S. Whitfield, Jr
(Signature)
Senior Vice President
(Principal Financial and
Accounting Officer)
<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 SIX MONTHS ENDED JUNE 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 212
<SECURITIES> 0
<RECEIVABLES> 7,749
<ALLOWANCES> 504
<INVENTORY> 4,754
<CURRENT-ASSETS> 12,872
<PP&E> 6,406
<DEPRECIATION> 3,748
<TOTAL-ASSETS> 15,649
<CURRENT-LIABILITIES> 4,413
<BONDS> 2,782
0
0
<COMMON> 997
<OTHER-SE> 7,457
<TOTAL-LIABILITY-AND-EQUITY> 15,649
<SALES> 40,375
<TOTAL-REVENUES> 40,375
<CGS> 33,606
<TOTAL-COSTS> 39,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115
<INCOME-PRETAX> 776
<INCOME-TAX> 291
<INCOME-CONTINUING> 485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 485
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
