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 28, 1998
-------------------------------------
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 - 1,495,023 shares as of March 28,1998
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited) <F1>
<CAPTION>
March 28, December 27,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 28,878 $ 26,929
Accounts receivable - trade, net 7,585,540 8,566,995
Inventories 4,278,591 4,669,291
Deferred income taxes 372,220 372,220
Prepaid expenses and other
current assets 189,518 68,166
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Total Current Assets 12,454,747 13,703,601
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PROPERTY, PLANT AND EQUIPMENT -
AT COST:
Land 280,827 280,827
Buildings 3,608,055 3,608,055
Delivery equipment 270,102 169,195
Plant and refrigeration equipment 1,653,266 1,590,626
Office equipment 492,894 491,078
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6,305,144 6,139,781
Less - accumulated depreciation 3,583,878 3,513,216
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2,721,266 2,626,565
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OTHER ASSETS 112,669 114,651
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$ 15,288,682 $ 16,444,817
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 533,333 $ 533,333
Accounts payable 3,074,243 3,198,641
Income taxes payable 596,084 891,657
Accrued salaries, commissions and
bonuses 36,965 182,965
Other accrued liabilities 41,840 63,948
------------- ------------
Total Current Liabilities 4,282,465 4,870,544
LONG-TERM DEBT - less current portion 2,033,993 2,737,910
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Total Liabilities 6,316,458 7,608,454
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STOCKHOLDERS' EQUITY:
Common stock - $1 par value;
authorized 2,000,000 shares, issued
and outstanding 1,495,023 shares at
March 28, 1998 and December 27, 1997 1,495,023 1,495,023
Additional paid-in capital 2,807,037 2,807,037
Retained earnings 4,670,164 4,534,303
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Total Stockholders' Equity 8,972,224 8,836,363
------------- ------------
$ 15,288,682 $ 16,444,817
============= ============
<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>
THREE MONTHS ENDED
------------------------------------
March 28, March 29,
1998 1997
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<S> <C> <C>
NET SALES $ 19,308,576 $ 18,692,236
COST OF GOODS SOLD 16,057,978 15,509,759
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GROSS PROFIT 3,250,598 3,182,477
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SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,914,860 2,881,229
INTEREST EXPENSE 46,600 71,579
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2,961,460 2,952,808
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INCOME BEFORE INCOME TAXES 289,138 229,669
INCOME TAX EXPENSE 108,427 86,126
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NET INCOME $ 180,711 $ 143,543
============= =============
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER SHARE 1,495,023 1,497,078
============= =============
EARNINGS PER SHARE:
BASIC $ .12 $ .10
============= =============
DILUTED $ .12 $ .10
============= =============
CASH DIVIDENDS PER SHARE $ .03 $ .027
============= =============
<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>
THREE MONTHS ENDED
-----------------------------------
March 28, March 29,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 180,711 $ 143,543
Adjustments to reconcile net income
to net cash provided by
(used for) operations:
Depreciation 70,662 80,841
Loss on sale of property, plant
and equipment 0 5,498
(Increase) decrease in assets:
Accounts receivable - trade, net 981,455 304,879
Inventories 390,700 744,350
Prepaid expenses and other current
assets (121,352) (167,354)
Other assets 1,982 (26,969)
Increase (decrease) in liabilities:
Accounts payable (124,398) 340,423
Income taxes payable (295,573) 86,126
Accrued salaries, commissions and
bonuses (146,000) (92,169)
Other accrued liabilities (22,108) 76,865
------------- ------------
916,079 1,496,033
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Cash flows from investing activities:
Additions to property, plant and
equipment (165,363) (102,115)
Proceeds from sale of property,
plant and equipment 0 614,726
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(165,363) 512,611
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Cash flows from financing activities:
Changes in long-term debt, including
current portion (703,917) (1,983,333)
Cash dividends (44,850) (39,922)
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(748,767) (2,023,255)
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Net increase (decrease) in cash 1,949 (14,611)
Cash at beginning of period 26,929 372,687
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Cash at end of period $ 28,878 $ 358,076
============= ============
<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 March 28,
1998 and December 27, 1997, results of operations for the three months ended
March 28, 1998 and March 29, 1997, and cash flows for the three months ended
March 28, 1998 and March 29, 1997. 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 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. 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 $46,600 and $71,579 for the three months ended
March 28, 1998 and March 29, 1997, respectively.
Cash paid for income taxes totaled $404,000 and $100 for the three months ended
March 28, 1998 and March 29, 1997, respectively.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Sales for the quarter ended March 28, 1998 were $19.3 million or 3.2%
higher than sales for the prior year's first quarter of $18.7 million. Sales to
multi-unit customers account for the majority of the increase. This increase was
offset by a reduction in sales caused by the sales of the manufacturing division
in the first and second quarters of 1997.
The Company's gross profit margin (gross profit as a percentage of net
sales) decreased from 17.03% in the quarter ended March 29, 1997 to 16.83% for
the quarter ended March 28, 1998. This decrease was a result of the sales of the
manufacturing division, which had a higher markup.
The Company's selling, general and administrative expenses, expressed as a
percentage of net sales, decreased from 15.42% in the first quarter of 1997 to
15.09% in 1998. The decrease was a result of the increase in sales from
multi-unit accounts without a corresponding increase in selling, general and
administrative expense.
Interest expense for the quarter ended March 28, 1998 decreased to 0.24% of
sales compared to 0.38% of sales for the first quarter of 1997. Decreased
borrowing levels and lower interest rates were the cause of the decreased
expense. As the interest on the Company's debt is both London Interbank Offered
Rates (LIBOR) and prime related, interest expense will increase or decrease in
subsequent periods based on fluctuations in these rates and the borrowing levels
of the Company.
Income tax expense was $108,000 for the quarter ended March 28,1998
compared to $86,000 for the corresponding period of 1997.
The Company reported net income of $181,000 or $.12 per share for the first
quarter of 1998 compared to net income of $144,000 or $.10 per share in the
first quarter of 1997.
Liquidity
- ---------
The Company uses a number of liquidity indicators for internal evaluation
purposes. Certain of these measures as of March 28, 1998 and December 27,1997
are set forth below:
March 28, December 27,
1998 1997
------------ ------------
Total Debt to Total Debt Plus
Stockholders' Equity .22 .27
Current Assets to Current
Liabilities 2.91 2.81
Inventory Turnover (The
Annualized Cost of Goods
Sold to Ending Inventory) 15.01 15.23
The Company's liquidity indicators remained relatively unchanged from
December 27,1997 until March 28, 1998.
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. 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 March 28, 1998, consisted of the following:
A $7,500,000 revolving bank note at LIBOR plus 1.50%. The LIBOR rate at
March 28, 1998 was 5.69%. The note is due three years after the annual renewal
date, currently July, 2000, subject to annual renewal. As of March 28, 1998, the
Company had borrowed $950,660 against this credit line and had $6,549,340 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. The prime rate at March 28, 1998 was
8.5%. As of March 28, 1998, the Company had fully utilized the Industrial
Revenue Bond and the outstanding balance was $566,666.
A $1,750,000 bank term loan at LIBOR plus 1.50%. The loan is to be repaid
in quarterly installments of $100,000. As of March 28, 1998, the outstanding
balance was $1,050,000. 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 1998. 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
$13 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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) 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 28,
1998.
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.
-----------------------------------------
May 12, 1998 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
THREE MONTHS ENDED MARCH 28, 1998, 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-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-28-1998
<CASH> 29
<SECURITIES> 0
<RECEIVABLES> 8,277
<ALLOWANCES> 691
<INVENTORY> 4,279
<CURRENT-ASSETS> 12,455
<PP&E> 6,305
<DEPRECIATION> 3,584
<TOTAL-ASSETS> 15,289
<CURRENT-LIABILITIES> 4,283
<BONDS> 2,034
<COMMON> 1,495
0
0
<OTHER-SE> 7,477
<TOTAL-LIABILITY-AND-EQUITY> 15,289
<SALES> 19,309
<TOTAL-REVENUES> 19,309
<CGS> 16,058
<TOTAL-COSTS> 18,973
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 289
<INCOME-TAX> 108
<INCOME-CONTINUING> 181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
