SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2O549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 7, 1999
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DOUGHTIE'S FOODS, INC.
(Exact name of Registrant as specified in its charter)
VIRGINIA 0-7166 54-0903892
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) File Number) 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)
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Item 5. Other Events
As previously reported, Doughtie's Foods, Inc. (the "Company") is
preparing to close the merger of the Company with a subsidiary of SYSCO
Corporation. So long as the Company continues to operate on a stand-alone basis,
or if the merger is not completed, there are certain important factors that
could cause the Company's actual results to differ materially from expectations
which are stated or implied in, or could be inferred from statements made in,
the Company's Annual Report to Shareholders, any Form 10-K, any Form 10-Q or any
Form 8-K of the Company or any other written or oral statements made by or on
behalf of the Company. Such factors include the following:
IF DOUGHTIE'S LOSES ITS LARGEST CUSTOMER, ITS NET SALES MAY DECREASE.
Doughtie's has a contract with the Department of Defense which produced
13.2% of net sales in 1998, 15.8% in 1997 and 11.5% in 1996. The contract
expires in January, 2000. Doughtie?s believes that it would have to settle for
smaller profit margins in order to bid successfully on a new contract. Therefore
even if the contract is renewed, Doughtie?s revenues may decrease both as a
result of the lost sales and the continuation of expenses related to the
contract which do not terminate immediately. The loss of a large commercial
customer could also result in decreased revenues.
DOUGHTIE'S MAY HAVE DIFFICULTY OBTAINING ENOUGH CAPITAL TO EXPAND ITS
BUSINESS AND COMPETE EFFECTIVELY.
Doughtie's physical plant is operating at capacity and there is no
adjacent land available for expansion. Although Doughtie?s currently leases
freezer, cooler and warehouse space, it would be inefficient to spread its
operations among even more locations. Expansion of the business would require
installation of new technology for warehousing and distribution. Therefore, the
only realistic option for expanding the business is to build a new, larger
facility which includes the new technology. Currently, Doughtie's has neither
the resources nor the borrowing capacity to build a new facility, and it is
uncertain whether Doughtie's could raise the capital or borrow the funds which
would be required.
DOUGHTIE'S MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH ITS COMPETITORS.
Because there are many food distribution companies, many of whom
operate nationally and have more assets and sales than Doughtie?s, Doughtie?s
may not be able to increase its share of the market. Larger companies may be
able to offer lower prices, a larger selection of products and greater
flexibility in delivery schedules because of their larger volume. In addition,
larger food distribution companies may offer Doughtie's employees better
compensation and benefits which may make it difficult to retain those employees.
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LOWER FOOD COSTS MAY REDUCE DOUGHTIE'S PROFIT LEVELS AND GENERAL
ECONOMIC CONDITIONS MAY AFFECT OPERATING RESULTS.
The food distribution industry has relatively low profit margins. A
significant portion of Doughtie's sales are made at prices based on product cost
plus a percentage markup. During periods of food price deflation, Doughtie's
profit may be lower even though the percentage markup stays the same. General
economic downturns may affect the demand for Doughtie's foodservice products and
make receivables more difficult to collect. An increase in fuel or
transportation expenses could affect Doughtie's profit.
IF DOUGHTIE'S SUPPLIES FOOD WHICH CAUSES INJURY, DOUGHTIE'S MAY BE
LIABLE FOR PRODUCT LIABILITY CLAIMS.
Doughtie's has liability insurance coverage of $3,000,000 and obtains
contractual indemnifications from its suppliers with respect to the safety of
their products. However, if insurance coverage is inadequate or indemnifying
parties are insolvent, a successful product liability claim could result in a
loss to Doughtie's.
BECAUSE DOUGHTIE'S HAS NO LONG-TERM SUPPLY CONTRACTS AND DOES NOT
CONTROL PRODUCTION OF ITS PRODUCTS, SOME OF THE PRODUCTS IT NEEDS MAY NOT BE
AVAILABLE.
Doughtie's obtains all of its food products from third-party suppliers
and has no long-term supply contracts with respect to those products. If
suppliers are affected by bad weather, strikes, crop conditions, transportation
problems or natural disasters, Doughtie?s may not be able to obtain the products
it needs or the required quantities of those products. Such supplier problems
may also increase the cost to Doughtie?s of its food products.
CHANGES IN GOVERNMENT REGULATIONS COULD NEGATIVELY AFFECT DOUGHTIE'S.
Doughtie's is subject to numerous government regulations, including
those relating to health and safety, labeling of products, weights and measures,
transportation, environmental matters and labor matters. Changes in government
regulations could increase the cost to Doughtie's of compliance or make certain
products or services no longer economically feasible.
THE INCREASED NUMBER OF CHAIN BUSINESSES MAY CAUSE DOUGHTIE'S NET SALES
TO DECREASE.
The trend in restaurants, supermarkets, hospitals and other private
facilities which are potential customers of Doughtie?s is toward chain
businesses rather than independent operations, which have historically been
Doughtie's primary customers. Chain businesses may prefer to deal with one
distributor which can supply its needs on a regional or nationwide basis and
which may be in a position to supply more favorable volume discounts.
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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.
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Registrant
/s/ Marion S. Whitfield, Jr.
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July 7, 1999 By: Marion S. Whitfield, Jr.
Senior Vice President
