FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2O549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 26, 1998
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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
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)
Registrant's telephone number, including area code: (757) 393-6007
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $1.00
(Title of Class)
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.
X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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Aggregate market value of voting stock held by non-affiliates of the registrant
as of February 26, 1999 (See Note, Item 5, for explanation of calculation):
$ 8,383,784
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Indicate the number of shares of Common Stock outstanding as of February 26,
1999:
1,495,023
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DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I.
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ITEM 1. BUSINESS
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General
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Doughtie's Foods, Inc. (the "Company") was incorporated in Virginia in
November 1971 to engage in the sale and distribution of a wide variety of meat
and seafood products and other food items. Many of the meat and seafood products
sold by the Company were historically manufactured, processed or produced by it,
while other food items sold by the Company, such as fruits, vegetables,
condiments, and seasonings, have always been purchased by the Company from other
sources. Since completion of the sale in February 1997 of certain assets related
to the Company' s manufacture of barbecue and chili products and the sale of the
deli-meats business in April 1997(see below: Material Transactions), the
Company's business has consisted solely of distributing food products to
commercial and institutional customers, including supermarkets, restaurants,
cafeterias, independent food distributors, schools, hospitals, and other public
and private facilities. The Company's marketing area covers the central,
northern, and eastern portions of Virginia, as well as Maryland, Washington, DC,
portions of North Carolina, and small areas of Delaware. Although the Company is
no longer engaged in the manufacture of food products, it continues to
distribute its traditional "Doughtie's" label products pursuant to product
supply agreements with the respective buyers of the manufacturing business. (See
below PART I, ITEM 1, BUSINESS, Products and Services.)
Recent Developments
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In January 1999, the Company announced that in response to certain
recent inquiries by outside third parties, the Board of Directors of the Company
had engaged the investment banking firm of Mann, Armistead & Epperson, Ltd.,
Richmond, Virginia, for the purpose of attempting to maximize shareholder value,
and had directed Mann, Armistead & Epperson, Ltd. to examine the Company's
options, including the possible sale of the Company.
On February 8, 1999, the Company and SYSCO Corporation (SYSCO) signed a
Letter of Intent whereby a subsidiary of SYSCO and the Company will merge. Under
the Letter of Intent, the stockholders of the Company will receive $17 per share
in cash or shares of SYSCO common stock subject to adjustments under certain
circumstances. Consummation of the merger is subject to, among other things,
negotiation of a definitive Merger Agreement and approval by the Company's
shareholders.
Material Transactions
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In February 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.
In April 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 note. Deli meat sales accounted for less than 5% of consolidated 1996
sales volume. The net pretax gain on the sale was approximately $140,000. Upon
completion of the sales in February and April of 1997, the Company ceased its
manufacturing operations.
In September 1995, the Company sold substantially all of the assets of
its Home Food Service operation (the "Home Food Service") 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
$1,154,000 with a $115,000 cash down payment and the balance of $1,039,000 in
the form of a secured note, which was paid in full in November 1996. The assets
were sold primarily at net book value, except for finance receivables, which
were discounted by ten percent. The net pretax loss on the sale, including
abandoned assets and other write-offs, was approximately $96,000.
In August 1994, the Company entered into a joint venture with Loetitia
Adam-St. James and Chris L. St. James (collectively, the "St. James"), trading
as Thunder Bay Gourmet Foods, who manufactured and sold a line of specialty
gourmet food products (the "Thunder Bay Line"). Under the terms of the joint
venture agreement, (i) the Company and the St. James formed TWB Gourmet Foods,
Inc., a Virginia corporation("TWB"), (ii) TWB acquired substantially all of the
assets of Thunder Bay Gourmet Foods, and (iii) the St. James and TWB entered
into a license agreement granting TWB a perpetual, exclusive license and right
to manufacture, sell, market, advertise, promote and exploit the Thunder Bay
Line, and to use the related trademarks, including "Thunder Bay," worldwide.
Until September 1996, the Company owned seventy percent of the outstanding
capital stock of TWB, and the remaining thirty percent of TWB was owned by the
St. James, who managed the business. During the fourth quarter of 1995, the
Company determined to exit the gourmet foods business as TWB had incurred
substantial net operating losses since its inception. Accordingly, the Company
incurred a $763,000 pretax charge in the fourth quarter to reduce the carrying
value of TWB's fixed assets and inventories to estimated net realizable value
and to provide for other costs to exit this business. On September 6, 1996, the
Company sold certain assets of TWB and discontinued manufacturing of the
associated gourmet food products. The terms of the sale were a $30,000 cash down
payment, $20,000 assigned accounts receivable and $137,000 of free trade credit
from the buyer for a total sale price of $187,000. No gain or loss was
recognized as a result of this sales transaction. In conjunction with the
transaction, the St. James surrendered their stock in TWB and are no longer
affiliated with TWB, which is now wholly owned by the Company.
On August 28, 1996, the Company merged its Dutterer's of Manchester
Corporation subsidiary into TWB Gourmet Foods, Inc. The purpose of the merger
was to simplify corporate structure.
Products and Services
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The Company maintains distribution centers in Portsmouth and Norfolk,
Virginia, from which it handles the Company's commercial and institutional food
sales. The Company offers to its customers a broad range of food items including
meat products, frozen, refrigerated, canned, and dry items in the seafood,
fruit, vegetable, and other lines. Most items needed by such customers for the
operation of their business are offered by the Company, including eggs, produce,
staples such as flour and sugar, restaurant supplies, and a limited amount of
cooking and processing equipment. Availability of such items is generally good.
The Company has no material long-term contract with respect to the
supply of any of such items, except (i) pursuant to the Product Supply Agreement
dated as of February 28, 1997, between the Company and The Smithfield Ham and
Products Company, Incorporated ("Smithfield"), the Company agreed to purchase
from Smithfield its requirements of barbecue and chili products for a period of
five years and (ii) pursuant to the Product Supply Agreement dated as of April
14, 1997, between the Company and Coddle Roasted Meats, Inc. ("Coddle"), the
Company agreed to purchase from Coddle's its requirements of delicatessen-style
meat products for a period of five years. Many of these products are packaged
and marketed under the registered trade name and service mark "Doughtie's."
Registration covering this mark remains in force twenty years from the date of
registration and may be renewed for periods of twenty years.
Sales of products are made through a system of advance salespersons who
take orders for subsequent delivery. A fleet of approximately 36 trucks and 10
trailers is employed in the delivery phase of the wholesale operations. The
Company experiences increased sales to customers in resort areas and parks
during the summer months as a result of increased patronage of these businesses.
The decline in sales to such customers during the winter months is partially
offset by sales to schools.
Prior to the sale of the manufacturing division, the Portsmouth
facility was also involved in the manufacture of pork and beef barbecue, hot dog
sauce, meat loaf, chili and other cooked meat products. The Company's
subsidiary, TWB, also manufactured and sold a line of specialty gourmet food
products until that portion of the business was sold in September 1996. (See
above PART I, Item 1, BUSINESS, Material Transactions.)
Customers
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During 1998, 1997 and 1996, the Company recorded sales under a contract
with the Department of Defense aggregating approximately 13.2%, 15.8% and 11.5%,
respectively, of net sales. The current contract with the Department of Defense
expires in February 2000. The Company had receivables from one of its commercial
customers representing 12.5% and 13.1% of trade accounts receivable at December
26, 1998 and December 27, 1997, respectively.
Competition
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The Company's commercial and institutional food distribution operations
face substantial competition from other food distributors in the region. There
are many companies engaged in one or more of the same areas of the industry as
the Company, some of which are national companies having greater resources and
sales than the Company. There are also a large number of regional and local
companies that compete with the Company. Within these areas of the food
industry, competition is based primarily upon price, service, and product
quality. The Company believes it is reasonably competitive with respect to all
of these factors.
Backlog
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Due to the nature of its business, the Company does not have a material
amount of backlog at any given time.
Regulation
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The Company is subject to various statutes, such as the Federal Food,
Drug and Cosmetic Act, the Consumer Product Safety Act, the Occupational Safety
and Health Act, and various consumer credit acts, regulating ingredients,
packaging, general working conditions for employees, vehicles, credit, and other
matters. The Company has not experienced any unusual difficulty in complying
with such regulations.
Although the Company has never experienced a fuel shortage, its
operations could be adversely affected if sufficient quantities of diesel or
other fuels could not be obtained due to shortages or for other reasons.
The Company has not experienced any unusual difficulty in complying
with environmental regulations at any of its facilities. The Portsmouth facility
is subject to open air burning restrictions which require refuse to be hauled
off the premises rather than burned.
Employees
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As of December 26, 1998, the Company had approximately 211 employees.
Approximately 33 of these employees working at the Company's Portsmouth and
Norfolk facilities are members of the Bakery, Confectionery and Tobacco Workers'
International Union, AFL-CIO, under a contract which expires in November, 2001.
Executive Officers
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STEVEN C. HOUFEK, 50, is the Company's President and Chief Executive
Officer. Mr. Houfek has been President of the Company since August 1992 and was
named Chief Executive Officer in May 1994. Prior to May 1992, Mr. Houfek held
various management positions with the Company, including Executive Vice
President from May 1987 to August 1992.
VERNON W. MULES, 69, is Chairman of the Board of Directors of the
Company. Prior to May 1994, Mr. Mules served as the Company's Chief Executive
Officer.
MARION S. WHITFIELD, JR., 53, has served as Senior Vice President of
the Company since May 1987. He served as Vice President of the Company from May
1983 until May 1987.
MICHAEL S. LAROCK, 35, joined the Company in November 1994 and has
served as the Company's Treasurer and Secretary since that time. Prior to
November 1994, Mr. LaRock was an accountant with Price Waterhouse LLP in
Norfolk, Virginia.
THOMAS G. BROWN, 55, has served as Vice President - Purchasing since
February 1994. Prior to that time, he was Director of Purchasing.
WILLIAM E. MOODY, JR., 49, has been Vice President - Sales since
February 1994. Prior to that time, he was Sales Manager.
JERRY D. NIXON, 42, was elected Vice President - Government Contract
Operations, in February 1996. Mr. Nixon served as Vice President - Operations
from February 1994 until February 1996. Prior to that time, Mr. Nixon was
Operations Manager.
WILLIAM G. RATLIFF, 43, was elected Vice President - Operations in
February 1996. Since joining the Company in October 1994, Mr. Ratliff served
as Project Manager. Prior to October 1994, Mr. Ratliff was a United States Navy
Supply Corps Officer.
ROBERT F. HORTON, 31, was elected Vice President - Business Development
in February 1996. Mr. Horton served as a district sales manager since
October 1995. Prior to that time, he was Program Accounts Manager.
ITEM 2. PROPERTIES
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The principal facilities of the Company and its subsidiary are listed
below. Except as noted, all are fully utilized by the Company and are adequate
for the Company's purposes and needs.
(a) The Company owns approximately 10.2 acres of land in Portsmouth,
Virginia, on which are located a building complex, including cooler, freezer,
and dry storage warehousing, complete truck docking facilities, a garage, and
the Company's principal executive offices. The Company's three loans are secured
by a lien on this property.
(b) The Company's wholly-owned subsidiary, TWB Gourmet Foods, Inc.,
owns approximately 4.5 acres of land in Manchester, Maryland, on which are
located a 20,000 square foot packing house with a stock yard and sewage plant.
An adjacent 45-acre farm is also owned by the Subsidiary. In December, 1991, the
Company transferred the operations of its Manchester facility to its Portsmouth,
Virginia plant. The Company's three loans are secured by a lien on this
property.
(c) The Company leases approximately 15,000 square feet of warehouse
space in Portsmouth, Virginia. This property is leased on a month to month basis
with monthly rental payments of $2,275.
(d) The Company leases approximately 36,800 square feet of freezer,
cooler, warehouse and office space in a warehouse building in Norfolk, Virginia,
under a lease which calls for monthly rental payments of $20,000. This lease
expires in February 2000.
ITEM 3. LEGAL PROCEEDINGS
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
PART II.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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Market and Price Information
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The Company's common stock, $1.00 par value (the "Common Stock"), is
traded on the Nasdaq Stock Market. The following table provides the high and low
bid quotations with respect to shares of the Common Stock for the periods
indicated, as reported by the Dow Jones Historical Stock Quote Reporter Service
and Nasdaq. These amounts have been adjusted retroactively to reflect the 50%
stock split paid on January 12, 1998, to stockholders of record on December 12,
1997.
First Quarter Second Quarter
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High Low High Low
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1997 3.583 2.667 3.667 2.500
1998 8.750 6.125 8.500 7.125
Third Quarter Fourth Quarter
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High Low High Low
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1997 5.083 3.583 7.500 4.500
1998 7.875 4.875 8.250 6.000
The foregoing quotations of high and low bid prices, as adjusted,
represent prices between dealers and do not include retail mark-up, mark-down,
or commissions. They do not necessarily represent actual transactions. The
highest bid on each day is reported.
Number of Stockholders
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As of February 26, 1999, there were 232 record holders of the Common
Stock.
Dividends
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The cash dividends declared per common share by quarter for the two
most recent fiscal years are summarized below. These amounts have been adjusted
retroactively to reflect the 50% stock split paid on January 12, 1998, to
stockholders of record on December 12, 1997.
1998 1997
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First Quarter $ .03 $ .027
Second Quarter .03 .027
Third Quarter .03 .027
Fourth Quarter .03 .026
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Total $ .12 $ .107
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Management presently expects to continue declaring quarterly cash
dividends if it proves possible to do so and if the merger with a subsidiary of
SYSCO is not consummated (PART I, ITEM 1, Recent Developments).
NOTE: The aggregate market value of voting stock held by 216 non-affiliates of
the registrant as of February 26, 1999, shown on the cover page was calculated
as follows: The number of shares beneficially owned by the officers and
directors of the Company as a group or by members of the Doughtie family was
subtracted from 1,495,023, the total number of shares outstanding on that date.
The resulting figure was then multiplied by $ 14.50, the average of the bid and
asked prices of the Company's stock in the Nasdaq SmallCap Market on that date.
The foregoing calculation should not be deemed an admission that any of the
officers and directors of the Company or any of the members of the Doughtie
family are "affiliates."
ITEM 6. SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 87,194,488 $ 85,233,420 $ 80,632,688 $ 76,585,835 $ 73,368,742
Net income (loss) $ 1,196,657 $ 947,498 $ 927,820 $ (1,212,284) $ 364,073
Weighted average
number of shares
outstanding:
Basic 1,495,023 1,496,085 1,500,468 1,511,652 1,516,845
Diluted 1,496,298 1,496,085 1,500,468 1,511,652 1,516,845
Net earnings (loss)
per share:
Basic $ .80 $ .63 $ .62 $ (.80) $ .24
Diluted $ .80 $ .63 $ .62 $ (.80) $ .24
Cash dividends per
share $ .12 $ .11 $ .11 $ .11 $ .11
Total assets $ 15,222,817 $ 16,444,817 $ 15,932,286 $ 16,086,077 $ 16,797,863
Long-term debt, less
current portion $ 683,334 $ 2,737,910 $ 5,065,000 $ 6,688,334 $ 5,031,667
Total stockholders'
equity $ 9,853,617 $ 8,836,363 $ 8,054,907 $ 7,303,060 $ 8,700,431
Stockholders' equity
per share $ 6.59 $ 5.91 $ 5.38 $ 4.86 $ 5.75
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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Results of Operations
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Net sales of the Company increased 2.3% in 1998. For the 1998 fiscal year,
the Company reported net sales of $87.2 million compared to net sales of $85.2
million in 1997. Sales under a contract with the United States Department of
Defense decreased from $13.5 million in 1997 to $11.5 million in 1998, which
represented 15.8% and 13.2% of the Company's consolidated revenue, respectively.
The volume increases from multi-unit accounts more than offset the reduction in
sales to the Department of Defense. There were no significant price changes in
1998.
Net sales of the Company increased 5.7% in 1997. For the 1997 fiscal year,
the Company reported net sales of $85.2 million compared to net sales of $80.6
million in 1996. Sales under a contract with the United States Department of
Defense increased from $9.3 million in 1996 to $13.5 million in 1997, which
represented 11.5% and 15.8% of the Company's consolidated revenue, respectively.
Additional volume increases resulted from new multi-unit accounts obtained
during the third quarter. These increases were offset by a reduction in sales
caused by the sales of the Company's manufacturing operations. Manufacturing
operations represented less than 2% and 8% of sales in 1997 and 1996,
respectively.
The Company's gross profit margin (gross profit as a percentage of net
sales) decreased slightly from 16.5% in 1997 to 16.2% in 1998. The decline is
due to the 1997 disposition of the manufacturing division, which had a higher
markup. The Company's gross profit margin increased from 16.3% in 1996 to 16.5%
in 1997.
The Company's selling, general and administrative expenses, expressed as a
percentage of net sales, decreased to 13.8% in 1998 from 14.5% in 1997. The
Company's selling, general and administrative expenses, expressed as a
percentage of net sales, decreased slightly to 14.5% in 1997 from 14.8% in 1996.
During 1997, the Company experienced an increase in accounts past due
greater than 60 days from approximately 10.6% to 20.8% of accounts receivable
and an increase in accounts written off which led to an increase of $468,000 in
bad debt expense for 1997 as compared to 1996 and an increase in the allowance
for doubtful accounts at December 27, 1997. Management attributed the increase
in past due accounts to inadequate collection efforts and financial difficulties
experienced by several customers. Management made administrative changes to
address the collection issue, including appointment of a new credit manager in
March 1998. During 1998, the Company's collections have improved and accounts
past due greater than 60 days have decreased to 15.2%. In addition, accounts
written off have decreased from $387,000 in 1997 to $149,000 in 1998. As a
result of improved customer credit quality during the fourth quarter of 1998,
including collection of amounts previously considered doubtful, the allowance
for doubtful accounts was reduced to $360,000 as compared to $628,000 at
December 27, 1997 and bad debt expense for the year ended December 26, 1998
decreased $790,000, as compared to 1997.
The decline in selling, general and administrative expense as a percentage
of sales in both 1998 and 1997 also reflects the increase in sales without a
corresponding increase in expenses.
Interest expense was $162,000 in 1998 compared to $242,000 in 1997 and
$469,000 in 1996. Decreased average borrowing levels and lower average interest
rates were the cause of the lower expense in 1998 and 1997. As the interest on
the Company's debt is both London Interbank Offered Rate (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 $747,000 for 1998 compared to expense of $566,000 in
1997 and income tax benefit of $202,000 for 1996. During the fiscal year ended
December 28, 1996, the Company eliminated the valuation allowance related to the
net operating losses of a subsidiary as a result of utilization of the net
operating loss carryforward becoming more likely than not.
During 1994 and 1995, the Company owned 70% of TWB Gourmet Foods, Inc.
(TWB). TWB was not included in the Company's consolidated returns for 1994 and
1995, and the realization of the net operating loss (NOL) carryforward of TWB
was not considered to be a likely occurrence. On August 28, 1996, the Company
acquired the remaining 30% of TWB's stock and simultaneously merged Dutterer's
of Manchester, its wholly-owned subsidiary, into TWB. TWB, as the wholly-owned
surviving entity of the merger, was included in the Company's 1996 consolidated
tax return.
As a result of the transaction and inclusion of TWB in the Company's
consolidated tax return during 1996, the Company utilized approximately $600,000
of the TWB net operating loss (NOL). Accordingly, management concluded that it
was now "more likely than not" that the remaining net operating loss would be
utilized and did not provide a reserve for the balance of the deferred tax
asset. In 1997, the Company utilized an additional $284,000 of the TWB NOL
carryforward. The remaining $248,000 was utilized in 1998.
The Company reported net income of $1,197,000 or $0.80 per share in 1998
compared to $947,000 or $0.63 per share for 1997 and $928,000 or $0.62 per share
for 1996.
Effects of Inflation
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Over the past three years, the effects of inflation on the Company's
operations have been negligible, averaging less than 4% per year.
Liquidity
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The Company uses a number of liquidity indicators for internal evaluation
purposes. Certain of these indicators are set forth below as of the close of the
past three fiscal years:
1998 1997 1996
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Total debt to total debt plus
stockholders' equity .11 .27 .41
Current assets to current
liabilities 2.68 2.81 4.36
Inventory turnover
(cost of goods sold
to ending inventory) 15.79 15.23 15.00
The decrease in total debt to total debt plus stockholders' equity from
1996 to 1997 relates to the sales of the manufacturing operations, the proceeds
of which were used to reduce long-term debt. The decrease from .27 at December
27, 1997 to .11 at December 26, 1998 was due to improved financial results and
decreased accounts receivable, which enabled the Company to continue to reduce
its long-term debt.
The ratio of current assets to current liabilities from 1997 to 1998
remained relatively unchanged. The decrease in current assets to current
liabilities in 1997 was a result of an increase in accounts payable due to
changes in terms with vendors.
The inventory turnover rate increased from 15.00 in 1996 to 15.23 in 1997
and 15.79 in 1998, as a result of increased sales and management focus on
inventory levels, due primarily to warehouse constraints.
The Company supplements its cash requirements by borrowing against existing
credit lines. As of December 26, 1998, and February 27, 1999, the Company had
borrowing capacity under its credit line of $6,400,000 and $6,100,000,
respectively.
Capital Resources
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The Company's debt financing at December 26, 1998, consisted of the
following:
1. A $7,500,000 revolving bank note at LIBOR plus 1.50%. The LIBOR rate at
December 26, 1998 was 5.63%. The note is due three years after the annual
renewal date, currently July, 2001, subject to annual renewal. As of December
26, 1998, the Company had no borrowings against this credit line.
2. 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 December 26, 1998, the outstanding
balance was $467,000.
3. A $1,750,000 bank term loan at LIBOR plus 1.50%. The loan is to be repaid in
quarterly installments of $100,000 plus interest through January 1, 2001. As of
December 26, 1998, the outstanding balance was $750,000. 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 1999. The
current contract expires in February 2000. The United States Department of
Defense had estimated annual sales volume to be approximately $19 million.
Actual sales volume for fiscal 1998 was $11.5 million.
The loan agreements associated with the Company's long-term debt financing
contain restrictive covenants including a minimum amount of tangible net worth,
a minimum working capital ratio and a maximum debt to equity ratio. All
requirements were met for 1998 and 1997.
While the Company does not anticipate any other 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.
Year 2000 Compliance
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Many computer systems, programs, components, and other hardware with
embedded microcontrollers currently record years in a two-digit format. Such
systems, if not modified, will be unable to recognize properly dates beyond 1999
- -- the so-called "Year 2000 Problem." The Company relies on its computer
systems, applications and devices in operating and monitoring various aspects of
its business. The Company also relies, directly and indirectly, on systems of
customers, suppliers, and financial institutions. Management has divided this
issue into three sections: its own computer systems, its own embedded systems,
and the computer systems of third party suppliers and customers.
With respect to the Company's computer systems, Management believes all
critical hardware and third party software to be "Year 2000 Compliant." The
Company's custom software has been modified. Testing of the computer system
began in 1998 and should be completed by March 31, 1999. Management believes its
computer systems will be "Year 2000 Compliant" at that time. The Company
estimates the total cost of modifying its computers and software to be about
$50,000, with about $30,000 having been expensed in 1998. The Company has been
funding and expects to continue to fund the costs of Year 2000 compliance
through operating cash flows.
The Company uses several time-sensitive non-computer systems. The Company
has completed an inventory of these systems and related components. Based upon
information received from suppliers, Management believes that all significant
non-computer equipment is compliant. The Company is accepting no new equipment
of any type that does not meet standards of compliance for the Year 2000.
The Company relies on the computer systems of third party suppliers and
customers. While the Company is querying major suppliers and customers regarding
their readiness for the Year 2000, Management cannot guarantee the accuracy of
the representations. The Company expects to have contacted all of its
significant suppliers and customers by March 31, 1999, and will summarize and
review the responses and follow up with suppliers' and customers' assessments.
The Company purchases its inventory from numerous vendors and believes that the
failure of a limited number of suppliers to be Year 2000 Compliant would not
materially affect the Company's operations given the number of alternative
suppliers. The Company has also considered the possibility of one or more major
customers being temporarily unable to meet its financial obligations because of
the Year 2000 Problem and believes that the Company's existing lines of credit
are sufficient to compensate for such potential temporary shortfall in cash
flow.
There are numerous uncertainties relating to addressing Year 2000 issues,
including the actual cost and effort of implementing corrective measures, the
degree to which outside parties appropriately address their Year 2000 issues,
and other factors, some of which are beyond the Company's control, and all of
which may cause results to be different from those currently anticipated by the
Company. Doughtie's has developed contingency plans to cover minor failure due
to supplier or customer problems. Management believes that the internal systems
will work properly due to the extensive analysis and testing that has been
completed. Testing of internal systems has indicated only minor problems, which
appear to be cosmetic only and are expected to be corrected before March 31,
1999.
---------------------------
Forward-Looking Information
---------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward- looking statements. This Form 10-K, the Company's Annual
Report to Shareholders, 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 may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. Forward-looking statements
are inherently subject to the uncertainties of future events, so that actual
results could differ materially from expectations which are stated or implied
in, or could be inferred from such forward-looking statements. Among the kinds
of uncertainties that can affect and should be considered in evaluating the
Company's forward-looking statements are uncertainties related to economic
conditions, government and regulatory policies, customer plans and commitments,
changes in the capital markets affecting the Company's capital structure and
cost of capital, and the Company's competitive environment. Readers are
therefore cautioned not to place undue reliance on any forward-looking
statement, which speaks only as of the date such statement is made.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not conducted transactions, established commitments, or
entered into relationships requiring disclosure beyond those provided elsewhere
in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
----
Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets at December 26, 1998 and
December 27, 1997
Consolidated Statements of Income for the three years ended
December 26, 1998
Consolidated Statements of Stockholders' Equity for the three
years ended December 26, 1998
Consolidated Statements of Cash Flows for the three years ended
December 26, 1998
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II - Consolidated Valuation and Qualifying Accounts
All other schedules are omitted as the required information is either
immaterial, inapplicable or is presented in the consolidated financial
statements and related notes thereto.
Separate financial statements and supplemental schedules of the registrant are
omitted because there are no restricted net assets of subsidiaries as defined in
Rules 4-08 and 12-04 of Regulation S-X.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of Doughtie's Foods, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Doughtie's Foods, Inc. and its subsidiaries at December 26, 1998 and December
27, 1997, and the results of their operations and their cash flows for each of
the three fiscal years in the period ended December 26, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Virginia Beach, Virginia
February 10, 1999
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------
<CAPTION>
December 26, December 27,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,706 $ 26,929
Accounts receivable, net 7,651,940 8,566,995
Inventories 4,625,780 4,669,291
Deferred income taxes 175,179 372,220
Prepaid expenses and other current assets 109,042 68,166
----------- -----------
Total current assets 12,578,647 13,703,601
----------- -----------
Property, plant and equipment - at cost:
Land 280,827 280,827
Buildings 3,608,055 3,608,055
Delivery equipment 251,980 169,195
Plant and refrigeration equipment 1,648,195 1,590,626
Office equipment 505,698 491,078
----------- -----------
6,294,755 6,139,781
Less - accumulated depreciation 3,762,874 3,513,216
----------- -----------
2,531,881 2,626,565
----------- -----------
Other assets 112,289 114,651
----------- -----------
$15,222,817 $16,444,817
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 533,333 $ 533,333
Accounts payable 3,375,081 3,198,641
Income taxes payable 468,061 891,657
Accrued salaries, commissions and bonuses 259,873 182,965
Other accrued liabilities 49,518 63,948
----------- -----------
Total current liabilities 4,685,866 4,870,544
Long-term debt - less current portion 683,334 2,737,910
----------- -----------
Total liabilities 5,369,200 7,608,454
----------- -----------
Stockholders' equity:
Common stock - $1 par value; authorized 4,000,000 shares at December 26, 1998
and 2,000,000 at December 27, 1997; issued and outstanding 1,495,023 shares
at December 26, 1998 and December 27, 1997 1,495,023 1,495,023
Additional paid-in capital 2,807,037 2,807,037
Retained earnings 5,551,557 4,534,303
----------- -----------
Total stockholders' equity 9,853,617 8,836,363
----------- -----------
$15,222,817 $16,444,817
----------- -----------
----------- -----------
Commitments (Note 8)
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------
<CAPTION>
Year ended Year ended Year ended
December 26, December 27, December 28,
1998 1997 1996
<S> <C> <C> <C>
Net sales $ 87,194,488 $ 85,233,420 $ 80,632,688
Cost of sales 73,043,280 71,133,101 67,481,372
------------ ------------ ------------
Gross profit 14,151,208 14,100,319 13,151,316
------------ ------------ ------------
Selling, general and administrative
expenses 12,045,931 12,344,934 11,956,604
Interest expense 162,087 241,696 468,652
------------ ------------ ------------
12,208,018 12,586,630 12,425,256
------------ ------------ ------------
Income before income taxes 1,943,190 1,513,689 726,060
Income tax expense (benefit) 746,533 566,191 (201,760)
------------ ------------ ------------
Net income $ 1,196,657 $ 947,498 $ 927,820
------------ ------------ ------------
------------ ------------ ------------
Earnings per share:
Basic $ .80 $ .63 $ .62
------------ ------------ ------------
------------ ------------ ------------
Diluted $ .80 $ .63 $ .62
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares
outstanding - basic 1,495,023 1,496,085 1,500,468
Dilutive effect of stock options 1,275 - -
------------ ------------ ------------
Weighted average shares outstanding -
including dilutive potential shares 1,496,298 1,496,085 1,500,468
------------ ------------ ------------
------------ ------------ ------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
<S> <C> <C> <C> <C>
Balances at December 30, 1995 $ 1,503,791 $ 2,820,629 $ 2,978,640 $ 7,303,060
Cash dividends ($.11 per share) - - (160,072) (160,072)
Net income for the year ended
December 28, 1996 - - 927,820 927,820
Acquisition of treasury stock,
at cost - 6,713 shares (6,713) (9,188) - (15,901)
----------- ----------- ----------- -----------
Balances at December 28, 1996 1,497,078 2,811,441 3,746,388 8,054,907
Cash dividends ($.11 per share) - - (159,583) (159,583)
Net income for the year ended
December 27, 1997 - - 947,498 947,498
Acquisition of treasury stock,
at cost - 2,055 shares (2,055) (4,404) - (6,459)
----------- ----------- ----------- -----------
Balances at December 27, 1997 1,495,023 2,807,037 4,534,303 8,836,363
Cash dividends ($.12 per share) - - (179,403) (179,403)
Net income for the year ended
December 26, 1998 - - 1,196,657 1,196,657
----------- ----------- ---------- -----------
Balances at December 26, 1998 $ 1,495,023 $ 2,807,037 $ 5,551,557 $ 9,853,617
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------
<CAPTION>
Year ended Year ended Year ended
December 26, December 27, December 28,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,196,657 $ 947,498 $ 927,820
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation 309,097 274,686 469,445
Deferred income taxes 197,041 14,051 (242,863)
Provision for doubtful accounts (120,000) 674,000 206,413
Loss (gain) on sale of property,
plant and equipment (2,264) 5,932 (99,129)
(Increase) decrease in assets:
Accounts receivable 1,035,055 (2,316,339) (1,369,210)
Inventories 43,511 (171,592) 351,405
Prepaid expenses and other current
assets (40,876) 22,876 155,637
Other assets 2,362 (23,094) 741,612
Increase (decrease) in liabilities:
Accounts payable 176,440 1,567,527 84,007
Income taxes payable (423,596) 444,882 446,775
Accrued salaries, commissions and
bonuses 76,908 42,348 63,911
Accrued employee group insurance - - (174,026)
Other accrued liabilities (14,430) 3,408 (53,040)
----------- ----------- -----------
2,435,905 1,486,183 1,508,757
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, plant and
equipment (246,102) (266,544) (250,782)
Proceeds from sale of property, plant
and equipment 33,953 927,735 700
----------- ----------- -----------
(212,149) 661,191 (250,082)
----------- ----------- -----------
Cash flows from financing activities:
Long-term borrowings - - 2,150,000
Reductions of long-term debt (2,054,576) (2,327,090) (3,373,334)
Cash dividends (179,403) (159,583) (160,072)
Acquisition of treasury stock - (6,459) (15,901)
----------- ----------- -----------
(2,233,979) (2,493,132) (1,399,307)
----------- ----------- -----------
Net decrease in cash and cash equivalents (10,223) (345,758) (140,632)
Cash and cash equivalents at beginning
of year 26,929 372,687 513,319
----------- ----------- -----------
Cash and cash equivalents at end of year $ 16,706 $ 26,929 $ 372,687
----------- ----------- -----------
----------- ----------- -----------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Principles of consolidation - The consolidated financial statements include the
accounts of Doughtie's Foods, Inc. (the Company) and its wholly-owned subsidiary
in 1998 and 1997 (and its majority-owned and wholly-owned subsidiaries in 1996).
All material intercompany accounts and transactions have been eliminated in
consolidation. The consolidated group operates in one segment and is engaged in
the processing, manufacturing (1997 and 1996 only) and wholesaling of a broad
line of meat products and other food items.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Allowance for doubtful accounts - The Company and its subsidiaries maintain
allowances for doubtful accounts based on an analysis of previous loss
experience and current conditions.
Inventories - Inventories, consisting principally of raw materials and finished
food products, are stated at the lower of last-in, first-out (LIFO) cost, or
market value.
Property, plant and equipment - Property, plant and equipment are stated at
cost. Accelerated methods are used to provide for depreciation on all assets
other than buildings. The straight-line method is used for buildings.
The estimated useful asset lives used in computing depreciation are as follows:
Buildings 8 to 40 years
Delivery equipment 3 to 7 years
Plant and refrigeration equipment 3 to 7 years
Office equipment 3 to 7 years
Leasehold improvements 1 to 7 years
The cost and accumulated depreciation applicable to assets retired or sold are
removed from the respective accounts, and gains and losses thereon are included
in income.
Accounts payable - At December 26, 1998 and December 27, 1997, approximately
$1,247,000 and $1,414,000, respectively, of outstanding checks are included in
accounts payable.
Fair value of financial instruments - The carrying value of financial
instruments including cash and cash equivalents, net accounts receivable,
accounts payable, accrued liabilities and long-term debt approximated fair value
at December 26, 1998 and December 27, 1997.
Income taxes - The Company files a consolidated federal income tax return. Prior
to the acquisition of the minority interest during 1996, one subsidiary was
required to file a separate return.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts of
assets and liabilities and their respective tax bases. The provision for income
taxes is based on taxes currently payable and the changes in deferred tax assets
and liabilities.
Earnings per share - Earnings per share (EPS) are based on the weighted average
number of shares outstanding. The Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), "Earnings per Share" during 1997. The
statement replaces the presentation of primary and fully diluted EPS with a
presentation of basic and diluted EPS. For the Company, there is no difference
between the calculation of basic and primary EPS. The Company had no potentially
dilutive securities at December 27, 1997 or December 28, 1996. At December 26,
1998, diluted earnings per share includes the dilutive effect of the stock
options issued in 1998.
Stock split - On November 25, 1997, the Board of Directors declared a 50% stock
split payable on January 12, 1998, to stockholders of record on December 12,
1997. All references in the consolidated financial statements referring to
shares, share prices and per share amounts have been adjusted retroactively for
the 50% stock split.
Concentrations of credit risk and significant customers - One of the Company's
commercial customers represents 12.5% and 13.1% of trade accounts receivable at
December 26, 1998 and December 27, 1997, respectively. During 1998, 1997 and
1996, the Company had sales under a contract with the United States Department
of Defense which aggregated approximately 13.2%, 15.8% and 11.5%, respectively,
of net sales. This contract expires in February 2000.
New accounting standard - In June 1998, the Financial Accounting Standards Board
issued FAS No. 133, ACCOUNTING FOR DERIIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. This Statement is
not currently applicable to the Company, since the Company does not have any
derivative instruments and is not involved in hedging activities.
Reclassifications - Certain prior year amounts have been reclassified to conform
with the current year presentation.
Note 2 - Accounts Receivable
Accounts receivable are net of allowances for doubtful accounts as follows:
December 26, December 27,
1998 1997
Trade accounts receivable $8,011,565 $9,195,367
Allowances for doubtful accounts (359,625) (628,372)
---------- ----------
$7,651,940 $8,566,995
---------- ----------
---------- ----------
Earnings for the year and the quarter ended December 26, 1998 include a $180,000
increase to income after income taxes or $.12 per basic and diluted share
related to improved customer credit quality during the fourth quarter of 1998,
including collection of certain accounts previously considered doubtful.
Note 3 - Inventories
Inventories used in determining cost of sales are as follows:
Raw Finished
Total materials products
December 30, 1995 $4,849,104 $1,163,240 $3,685,864
December 28, 1996 $4,497,699 $ 549,161 $3,948,538
December 27, 1997 $4,669,291 - $4,669,291
December 26, 1998 $4,625,780 - $4,625,780
The differences between first-in, first-out (FIFO) and LIFO inventory values are
as follows:
December 26, December 27, December 28, December 30,
1998 1997 1996 1995
FIFO cost $5,342,882 $5,419,163 $5,517,080 $5,680,063
LIFO reserves (717,102) (749,872) (1,019,381) (830,959)
----------- ---------- ---------- ----------
LIFO cost $4,625,780 $4,669,291 $4,497,699 $4,849,104
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The $32,770 change in LIFO reserves in 1998 increased net income and basic and
diluted earnings per share by approximately $20,200 and $.01, respectively. The
$269,509 change in LIFO reserves in 1997 increased net income and basic and
diluted earnings per share by approximately $166,000 and $.11, respectively. The
$188,422 change in LIFO reserves in 1996 decreased net income and basic and
diluted earnings per share by approximately $121,000 and $.08, respectively.
Note 4 - Long-term Debt
Long-term debt consists of the following:
December 26, December 27,
1998 1997
Long-term revolving bank note $ - $1,521,243
Bank term loan 750,000 1,150,000
Industrial Revenue Bond 466,667 600,000
---------- ----------
1,216,667 3,271,243
Less - current portion 533,333 533,333
---------- ----------
Long-term debt - less current portion $ 683,334 $2,737,910
---------- ----------
---------- ----------
Principal payments are due as follows: 1999 - $533,333, 2000 - $483,333, and
2001 - $200,001.
The Company has a $7,500,000 revolving bank note at LIBOR plus 1.50%. The LIBOR
rate at December 26, 1998 was 5.63%. The note is due three years after the
annual renewal date, currently July 2001, subject to annual renewal. The amount
available under this line is limited to the sum of 85% of qualifying accounts
and notes receivable and 20% of qualifying inventory on hand. The Company had
$6,400,000 of borrowing capacity available on this credit line at December 26,
1998.
The Company has a bank term loan at LIBOR plus 1.50%. The loan is payable in
quarterly installments of $100,000 plus interest through January 1, 2001.
The Company has a $2,000,000 Industrial Revenue Bond from a bank for the purpose
of expanding its plant and office facilities in Portsmouth, Virginia, at an
interest rate of 91.5% of prime. The prime rate at December 26, 1998, was 7.75%.
The bond is payable in monthly installments of $11,111 plus interest through
July 1, 2001 with a final payment of the outstanding balance due on July 1,
2001.
Cash paid for interest totaled $162,087, $241,696, and $468,652 in 1998, 1997
and 1996, respectively.
Each of the three loans is collateralized by all accounts and notes receivable,
inventories, contract rights and property, plant and equipment of the
consolidated group. These loan agreements contain restrictive covenants
including a minimum amount of tangible net worth, a minimum working capital
ratio, and a maximum debt to equity ratio. All requirements were met for 1998.
Note 5 - Retirement Plans
The Company has a retirement savings and 401(k) plan which covers substantially
all full-time employees except those covered by a collective bargaining
agreement. The Company makes contributions to the plan based on 50% of the
participants' contributions, which can range from 1% to 6% of their total
compensation. In addition to the matched contribution, participants may make
additional unmatched contributions of up to 9% of their compensation. The
Company may also make discretionary contributions to the plan. Contributions to
the retirement savings and 401(k) plan for 1998, 1997 and 1996 were $75,765,
$79,955 and $91,517, respectively.
Note 6 - Income Taxes
The provision for income taxes is based on taxes currently payable and the
changes in deferred tax assets and liabilities.
The components of income tax expense (benefit) are as follows:
1998 1997 1996
Current federal $ 498,949 $ 459,623 $ 52,109
Current state 50,543 92,517 (11,006)
Deferred federal 163,591 2,386 (201,635)
Deferred state 33,450 11,665 (41,228)
--------- --------- ---------
$ 746,533 $ 566,191 $(201,760)
--------- --------- ---------
--------- --------- ---------
The effective income tax rates vary from the statutory U.S. federal income tax
rate as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- -----------------
Percent Percent Percent
of of of
Dollar pretax Dollar pretax Dollar pretax
amount income amount income amount income
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rates $660,685 34.0% $514,654 34.0% $ 246,860 34.0%
State income taxes, net
of federal income tax
benefit 60,444 3.1 64,937 4.3 31,148 4.3
Fuel tax credit (15,278) (0.8) (15,278) (1.0) (15,278) (2.1)
Nondeductible merger
expenses 25,996 1.3 - - - -
Recognition of
subsidiary operating
loss - - - - (467,954) (64.5)
Other 14,686 0.8 1,878 0.1 3,464 0.5
-------- ----- -------- ----- ---------- --------
$746,533 38.4% $566,191 37.4% $(201,760) (27.8)%
-------- ----- -------- ----- ---------- --------
-------- ----- -------- ----- ---------- --------
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows:
December 26, December 27,
1998 1997
Simplified LIFO differences $ 54,916 $ 57,425
Capitalized inventory cost 25,836 24,687
Allowances for doubtful accounts 137,700 240,604
Net operating loss of subsidiary - 94,996
--------- --------
Gross deferred tax asset 218,452 417,712
Involuntary conversion (43,273) (45,492)
--------- --------
Net deferred tax asset $ 175,179 $372,220
--------- --------
--------- --------
Cash paid (refunded) for income taxes totaled $973,088, $73,037 and $(185,033)
in 1998, 1997 and 1996, respectively.
Note 7 - Stock Incentive Plan
In 1998, the Company adopted a Stock Incentive Plan. The Company has elected to
follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) in accounting for its employee stock options. In electing
to account for its stock options under APB 25, the Company is required by FAS
No. 123, "Accounting for Stock-Based Compensation," to disclose pro forma
information regarding net income and earnings per share as if the Company had
adopted FAS No. 123.
Under the Company's Stock Incentive Plan, selected employees of the Company and
certain directors may be granted options to purchase common stock. The exercise
price of the options may not be less than 100% of the fair market value of the
Company's common stock on the date of grant of such options, and the options
must be exercised within ten years. A maximum of 112,500 shares of common stock
may be granted under this plan. The options vest immediately upon a change of
ownership (Note 10) or one-half at the grant date and the remaining balance over
a two year period.
During 1998, the Company issued 40,500 options to certain employees and 1,600
options to certain directors at a weighted average exercise price of $6.54. The
range of exercise prices for options issued during 1998 was $6.50 - $7.50. At
December 26, 1998, all options were outstanding and 21,050 of the options were
vested at a weighted-average exercise price of $6.54.
The fair value of each stock option granted in fiscal 1998 was estimated using
the Black-Scholes option model with the following weighted average assumptions:
dividend yield of 1.83%, expected volatility of 53.83%, weighted average
risk-free interest rate of 4.30% and an expected life of one and one half years.
The weighted average fair value of options granted in fiscal 1998 is $1.73. Had
compensation cost for the Company's stock options been determined based on the
fair value at the grant dates for awards consistent with the requirements of
SFAS No. 123, the Company's pro forma net income would have decreased by $34,000
or $.02 per basic and diluted share for the year ended December 26, 1998. No
options were granted in prior years.
Note 8 - Operating Leases
In January 1996, the Company entered into a seven-year full service operating
lease covering thirty-six new trucks and ten new trailers. The lease provides
for increases in rentals based on increases in the Consumer Price Index.
Minimum annual rentals under the aforementioned lease are set forth in the table
below. These minimum rental commitments do not include contingent rentals which
are based on usage.
Trucks
and
Trailers
1999 $ 527,724
2000 527,724
2001 527,724
2002 527,724
2003 263,862
----------
$2,374,758
----------
----------
Total rent expense charged to consolidated operations in 1998, 1997, and 1996
was $1,251,975, $1,182,909 and $1,043,642, respectively. Rental expense in 1998,
1997 and 1996 included contingent rentals of approximately $437,489, $380,681
and $396,191, respectively.
Note 9 - Sale of Assets
On August 28, 1996, the Company merged its Dutterer's of Manchester Corporation
subsidiary into TWB Gourmet Foods, Inc. in order to streamline operations.
Simultaneously, the Company acquired the remaining 30% interest in TWB from the
minority stockholder.
On September 6, 1996, the Company sold certain assets of TWB and discontinued
manufacturing of the associated gourmet food products. The terms of the sale
were a $30,000 cash down payment, $20,000 assigned accounts receivable and
$137,000 of free trade credit from the buyer for a total sale price of $187,000.
No gain or loss was recognized as a result of this sales transaction.
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 10 - Subsequent Event
On February 8, 1999, the Company and SYSCO Corporation (SYSCO) signed a Letter
of Intent whereby a subsidiary of SYSCO and the Company will merge (the Merger).
Under the Letter of Intent, the stockholders of the Company will receive $17.00
per share in cash or shares of SYSCO common stock subject to adjustment under
certain circumstances. In addition, all options outstanding will become fully
vested and exercisable and shall be deemed exercised as of the closing of the
Merger. Consummation of the Merger is subject
to, among other things, negotiation of a definitive Merger Agreement and
approval by the Company's stockholders.
Note 11 - Quarterly Financial Data (Unaudited)
The following is a summary of the results of operations by quarters:
Basic and
Diluted
Gross Net Earnings
Quarter Net Sales Profit Income Per Share
1998
First $19,308,576 $ 3,250,598 $ 180,711 $ .12
Second 22,987,483 3,638,347 252,685 .17
Third 23,596,821 3,657,243 271,994 .18
Fourth 21,301,608 3,605,020 491,267 .33
----------- ----------- ---------- --------
$87,194,488 $14,151,208 $1,196,657 $ .80
----------- ----------- ---------- --------
----------- ----------- ---------- --------
1997
First $18,692,236 $ 3,182,477 $ 143,543 $ .09
Second 21,683,108 3,587,253 341,622 .23
Third 24,172,942 3,720,523 329,462 .22
Fourth 20,685,134 3,610,066 132,871 .09
----------- ----------- ---------- --------
$85,233,420 $14,100,319 $ 947,498 $ .63
----------- ----------- ---------- -------
----------- ----------- ---------- -------
Unusual items affecting 1998 and 1997 net income in the above quarterly data are
discussed in Notes 2 and 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------------
None.
PART III.
- ---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Directors
- ---------
VERNON W. MULES is Chairman of the Board of the Company. He served as
the Company's Chief Executive Officer between May 1986 and May 1994. He has
served as Chairman of the Board of Directors since February 1982. Mr. Mules
served as President of the Company from May 1973 until May 1986. He is a member
of the Executive Committee of the Company's Board of Directors.
STEVEN C. HOUFEK has been President of the Company since August 1992
and has served as the Company's Chief Executive Officer since May 1994. From May
1987 until August 1992, he served as Executive Vice President of the Company.
Between November 1977 and May 1987, Mr. Houfek served the Company in various
management capacities, including Senior Vice President. He is a member of the
Executive Committee of the Company's Board of Directors.
MARION S. WHITFIELD, JR. has been Senior Vice President of the Company
since May 1987. He served as Vice President of the Company from May 1983 until
May 1987. He is a member of the Executive Committee of the Company's Board of
Directors.
ADOLPHUS W. HAWKINS, JR., an international business consultant, was
Vice President of Scott & Stringfellow, Inc., an investment banking firm located
in Richmond, Virginia, from July 1979 to August 1983. He is a member of the
Compensation Committee and the Audit Committee of the Company's Board of
Directors and has been a Director of the Company since 1972.
DONALD B. RATCLIFFE, an architect, has owned his own firm, Donald B.
Ratcliffe, AIA, Associates, Inc., located in Baltimore, Maryland, since 1954. He
is a member of the Executive Committee, the Compensation Committee and the Audit
Committee of the Company's Board of Directors.
JAMES F. CERZA, JR. has served as Executive Vice President of
Heilig-Meyers Company, a Richmond, Virginia-based furniture retailer, since
August 1989. From November 1988 to August 1989, he served as Regional Vice
President, Operations for the same company. He is a member of the Compensation
Committee and the Audit Committee of the Company's Board of Directors.
WILLIAM R. WADDELL has been a partner in the law firm of McGuire,
Woods, Battle & Boothe, L.L.P., since 1969 and Managing Partner of the firm's
office in Norfolk, Virginia, since 1995. He is a member of the Compensation
Committee and the Audit Committee of the Company's Board of Directors.
Executive Officers
- ------------------
With respect to information concerning the Company's executive officers,
see PART I, ITEM 1, BUSINESS: Executive Officers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and to provide copies of the reports to the Company.
Each of Thomas G. Brown, Robert F. Horton, Steven C. Houfek, Michael S. LaRock,
William E. Moody, Jr., Jerry D. Nixon, William G. Ratliff, Marion S. Whitfield,
Jr., James F. Cerza, Jr., Adolphus W. Hawkins, Jr., Donald B. Ratcliffe, and
William R. Waddell, directors and/or officers of the Company, were granted stock
options under the 1998 Stock Incentive Plan in the fiscal year ending December
26, 1998, which were not timely reported on Form 3 or Form 4, as applicable,
pursuant to the requirements of Section 16(a). Except as set forth above, to the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required to be filed during the fiscal year ended December 26, 1998, the
Company's directors, executive officers, and stockholders beneficially owning
more than ten percent of the Company's Common Stock complied with their
respective Section 16(a) reporting requirements.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Summary Compensation Table
The following summary compensation table presents information about the
compensation paid by the Company during its three most recent fiscal years to
those individuals who were, as of the end of the last completed fiscal year, the
Company's Chief Executive Officer and its four next highest paid executive
officers.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
-------------------------- ------------
Other All
Annual Other
NAME AND Compen- Securities Compen-
PRINCIPAL sation Underlying sation
POSITION Year Salary($) Bonus($) ($)(3) Options (#)(4) ($)(2)
- ----------------------------------------------------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Steven C. Houfek 1998 140,041 29,000 5,448 15,000 4,624
President and Chief 1997 130,489 25,000 5,045 -0- 4,666
Executive Officer 1996 125,597 20,000 4,583 -0- 3,914
Vernon W. Mules 1998 152,573 15,000 -0- -0- 4,577
Chairman of 1997 152,573 -0- -0- -0- 4,577
the Board 1996 152,573 -0- -0- -0- 4,577
Marion S. Whitfield, Jr. 1998 112,523 20,000 2,173 3,000 3,891
Senior Vice President 1997 107,175 15,000 2,069 -0- 3,637
1996 102,339 12,000 1,973 -0- 3,129
Thomas G. Brown 1998 86,289 17,000 -0- 3,000 3,009
Vice President -- 1997 79,764 14,000 1,623 -0- 2,802
Purchasing 1996 70,822 12,000 3,053 -0- 2,396
Robert F. Horton 1998 84,114 19,000 -0- 7,500 2,883
Vice President -- 1997 67,270 12,000 -0- -0- 2,168
Business Development 1996 54,635 5,000 -0- -0- 1,639
</TABLE>
(1) While the five named individuals received perquisites or other personal
benefits in the years shown, in accordance with Securities and Exchange
Commission regulations, the value of these benefits are not indicated
since they did not exceed the lesser of $50,000 or 10% of the
individual's salary and bonus in any year.
(2) The amounts shown in the column captioned "All Other Compensation"
consist entirely of the Company's matching contributions to the 401(k)
Plan for the benefit of the named executive. The 401(k) Plan, which
became effective as of July 1, 1992, covers virtually all full-time
employees except those covered by a collective bargaining agreement.
The Company makes contributions to the plan based on 50% of the
participants' contributions, which can range from 1% to 6% of total
compensation. Participating employees may also make unmatched
contributions to the 401(k) Plan up to 15% of total compensation.
(3) The amounts shown in the column captioned "Other Annual Compensation"
consist entirely of amounts paid in lieu of accrued vacation.
(4) The amounts shown in the column captioned "Securities Underlying
Options" represent the number of options for Common Stock granted on
January 9, 1998, subject to shareholder approval, which approval was
obtained at the annual meeting of shareholders on May 21, 1998,
pursuant to the terms of the 1998 Stock Incentive Plan. One-half of the
options granted to each officer were exercisable on September 22, 1998,
one-quarter of such options were exercisable after January 9, 1999, and
one-quarter of such options are exercisable after January 9, 2000.
However, all options shall vest and become immediately exercisable upon
a change in control of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
------------------------------------------- AT ASSUMED ANNUAL RATES OF
% OF TOTAL OPTIONS STOCK PRICE APPRECIATION
NUMBER OF SECURITIES GRANTED TO FOR OPTION TERM (3)
UNDERLYING OPTIONS EMPLOYEES IN FISCAL --------------------------
NAME GRANTED (#)(2) YEAR 5%($) 10%($)
- ---- -------------------- ------------------- ---------- ------------
<S> <C> <C> <C> <C>
Steven C. Houfek 15,000 37.0% 390,000 877,500
Vernon W. Mules -0- 0.0% -0- -0-
Marion S. Whitfield, Jr. 3,000 7.4% 78,000 175,000
Thomas G. Brown 3,000 7.4% 78,000 175,000
Robert F. Horton 7,500 18.5% 195,000 438,750
</TABLE>
(1) All options granted expire January 9, 2008 and are exercisable at a base
price of $6.50.
(2) The options are exercisable with respect to the underlying shares as
follows: 50 percent on September 22, 1998; 25 percent after January 9, 1999 and
the remaining 25 percent after January 9, 2000.
(3) The potential realizable value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of the option,
assuming that the shares appreciate in value from the option grant date
compounded annually until the end of the option term at the rate specified (5%
or 10%) and that the option is exercised and sold on the last day of the option
term for the appreciated share price. Potential realizable value is net of the
option exercise price. The assumed rates of appreciation are specified in the
rules and regulations of the SEC and do not represent the Company's estimate or
projection of future prices of the shares.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/26/98 AT 12/26/98 ($)(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven C. Houfek -0- -0- 7,500 7,500 2,348 2,348
Vernon W. Mules -0- -0- -0- -0- -0- -0-
Marion S. Whitfield, Jr. -0- -0- 1,500 1,500 470 470
Thomas G. Brown -0- -0- 1,500 1,500 470 470
Robert F. Horton -0- -0- 3,750 3,750 1,174 1,174
</TABLE>
(1) Value based on the closing price of a share of Common Stock of $6.813 on
December 24, 1998, as reported on the Nasdaq SmallCap Market, minus the exercise
price, rounded to the nearest dollar.
Directors' Compensation
Directors who are not officers of the Company are paid an annual salary
of $4,000, plus a fee of $500 per meeting attended, as well as reimbursement for
travel and lodging expenses incurred in connection with such attendance. Each of
the non-employee directors was awarded 400 nonstatutory stock options under the
terms of the 1998 Plan on May 21, 1998, with one-third of such options
exercisable on May 22, 1998, one-third of such options exercisable on the date
of the second annual meeting after May 21, 1998, and one-third exercisable on
the date of the third annual meeting after May 21, 1998. However, all options
shall vest and become immediately exercisable upon a change in control of the
Company.
Compensation Committee Interlocks and Insider Participation
Mr. Waddell, a director since 1996 and a member of the Compensation
Committee, is a partner in the law firm of McGuire, Woods, Battle & Boothe,
L.L.P., which has served as counsel to the Company on a regular basis since
1974.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- -------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 19, 1999, as to
shares of Common Stock owned by (i) each director of the Company, (ii) each
executive officer named in the Summary Compensation Table, (iii) all Directors
and officers as a group, and (iv) each person who is known by the Company to own
beneficially more than five percent of the Company's Common Stock, together with
their respective percentages.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED, DIRECTLY OR PERCENT
INDIRECTLY, AS OF OF
NAME MARCH 19, 1999(1) CLASS
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Vernon W. Mules 134,889 (2) 9.02
Steven C. Houfek 706,314 (3) 46.89
Marion S. Whitfield, Jr. 6,450 (9) *
Adolphus W. Hawkins, Jr. 1,448 (9) *
Donald B. Ratcliffe 133 (9) *
James F. Cerza, Jr. 766 (4), (9) *
William R. Waddell 1,579 (9) *
Thomas G. Brown 2,250 (9) *
Robert F. Horton 12,979 (9) *
All officers and directors
as a group (13 persons) 866,976 (2), (3), (4), (9) 57.55
Voting Trust u/a
dated June 17, 1986, as
extended 672,021 (5) 44.95
Mary D. Houfek 702,129 (6), (7) 46.60
Elsie D. Waddell 747,743 (6), (8) 50.00
Barbara D. Horton 675,870 (6), (10) 45.21
Performance Food Group Company 110,750 (11) 7.41
- -------------------------------------------------------------------------------------------
</TABLE>
* Less than 1% of outstanding shares of Common Stock.
(1) Unless otherwise indicated by footnote, each individual has sole voting
power and sole investment power with respect to the shares set forth
opposite his name.
(2) Includes 1,731 shares owned of record by Mr. Mules' wife, the control
of which shares Mr. Mules disclaims. Mr. Mules' business address is
Doughtie's Foods, Inc., 2700 Lord Baltimore Drive, Baltimore, Maryland
21244.
(3) Includes 690,879 shares beneficially held by Mr. Houfek's wife, Mary D.
Houfek, the control of which shares Mr. Houfek disclaims. Ms. Houfek's
beneficial holdings are set forth in the table and Notes 6 and 7. Mr.
Houfek's business address is Doughtie's Foods, Inc., 2410 Wesley
Street, Portsmouth, Virginia 23707.
(4) Includes 633 shares owned of record by Mr. Cerza's wife, the control of
which Mr. Cerza disclaims.
(5) The shares are owned of record by Mary D. Houfek, Barbara D. Horton and
Elsie D. Waddell as trustees of the trust (the "Voting Trust"), which
was created under a voting trust agreement among Ms. Houfek, Ms.
Horton, Ms. Waddell, and Mary H. Doughtie dated June 17, 1986. Ms.
Houfek, Ms. Horton and Ms. Waddell share voting and investment power
with respect to these shares. On February 23, 1995, the parties to the
voting trust agreement agreed to extend the term of the Voting Trust
until December 31, 2004. The Voting Trust's address is 103 South
Dogwood Road, Virginia Beach, Virginia 23451.
(6) Includes 672,021 shares held by Ms. Houfek, Ms. Horton and Ms. Waddell
as trustees of the Voting Trust. See Note 5 above.
(7) Includes 14,673 shares held by Ms. Houfek as custodian for certain of
her children and 15,435 shares and exercisable options owned by Ms.
Houfek's husband, the control of which shares Ms. Houfek disclaims. Ms.
Houfek's address is 103 South Dogwood Road, Virginia Beach, Virginia
23451. Ms. Houfek is the wife of Steven C. Houfek, President and
director of the Company.
(8) Ms. Waddell's address is 2777 Broad Bay Road, Virginia Beach, Virginia
23451.
(9) Includes shares pursuant to options exercisable within 60 days as
follows: Mr. Houfek--11,250; Mr. Whitfield--2,250; Mr.Hawkins--133; Mr.
Ratcliffe--133; Mr. Cerza--133; Mr. Waddell, 133; Mr. Brown--2,250; and
Mr. Horton--5,625.
(10) Includes 3,849 shares owned of record by Ms. Horton's husband, the
control of which Ms. Horton disclaims. Ms. Horton's address is 5200
Lake Circle Drive, Portsmouth, Virginia 23703.
(11) Performance Food Group Company's address is 6800 Paragon Place, Suite
500, Richmond, Virginia 23230. Information is based on Schedule 13D
filed with the SEC on June 16, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Mr. Waddell, a director since 1996, is a partner in the law firm of
McGuire, Woods, Battle & Boothe, L.L.P., which has served as counsel to the
Company on a regular basis since 1974.
PART IV.
- --------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- -----------------------------------------------------------------
(a)(1)
Financial Statements (Included in Part II):
-------------------------------------------
See Item 8 in Part II.
(a)(2)
Financial Statement Schedules (Included in Part IV):
----------------------------------------------------
See Item 8 in Part II
(a)(3)
List of Exhibits:
-----------------
Exhibit
Number Description
- ------ -----------
2(a)(1). Articles of Merger (with attached Plan of Merger) Merging Dutterer's
of Manchester Corporation (a Maryland corporation) and TWB Gourmet
Foods, Inc. (a Virginia corporation), filed with the Virginia State
Corporation Commission on August 28, 1996 (incorporated by reference
to Exhibit 2(a)(1) to the Company's Annual Report on Form 10-K for the
year ended December 28, 1996).
2(a)(2). Articles of Merger Merging Dutterer's of Manchester Corporation Into
TWB Gourmet Foods, Inc., filed with the Maryland State Department of
Assessments and Taxation on August 27, 1996 (incorporated by reference
to Exhibit 2(a)(2) to the Company's Annual Report on Form 10-K for the
year ended December 28, 1996).
3(a). Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 27, 1998).
3(b). Bylaws of the Company (incorporated by reference to Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the year ended December
30, 1995).
4(a)(1). Amended and Restated Credit Agreement dated as of June 14, 1996,
between the Company and Crestar Bank relating to a $7,500,000
revolving credit commitment and a $1,750,000 term loan (incorporated
by reference to Exhibit 4(a)to the Company's Annual Report on Form
10-K for the year ended December 28, 1996).
4(a)(2). First Amendment to Amended and Restated Credit Agreement dated as of
September 30, 1996 between the Company and Crestar Bank (incorporated
by reference to Exhibit 4(a)(2) to the Company's Annual Report on Form
10-K for the year ended December 27, 1997).
4(a)(3). Second Amendment to Amended and Restated Credit Agreement dated as of
July 1, 1997 between the Company and Crestar Bank (incorporated by
reference to Exhibit 4(a)(3) to the Company's Annual Report on Form
10-K for the year ended December 27, 1997).
4(b)(1). Commercial Note dated June 14, 1996, made by the Company in favor of
Crestar Bank in the principal amount of $7,500,000 (incorporated by
reference to Exhibit 4(b)(1) to the Company's Annual Report on Form
10-K for the year ended December 28, 1996).
4(b)(2). Commercial Note dated June 14, 1996, made by the Company in favor of
Crestar Bank in the principal amount of $1,750,000 (incorporated by
reference to Exhibit 4(b)(2) to the Company's Annual Report on Form
10-K for the year ended December 28, 1996).
9. Voting Trust Agreement Dated June 17, 1986, among Mary H. Doughtie,
Mary D. Houfek, Barbara D. Horton and Elsie D. Waddell, as Amended
(incorporated by reference to Exhibit 9 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10(a)(1). Agreement dated November 2, 1998 between the Company and the Bakery,
Confectionery and Tobacco Workers' International Union, Local No. 66.
10(b)(1). Lease Agreement Dated January 26, 1996, Between Keen Leasing, Inc.,
Lessor, and the Company, Lessee, relating to the leasing of certain
trucks (incorporated by reference to Exhibit 10(b)(3) to the Company's
Annual Report on Form 10-K for the year ended December 30, 1995).
10(c)(1). Security Agreement dated as of June 14, 1996, made by the Company to
Crestar Bank granting a security interest in accounts, inventory,
equipment, and general intangibles (incorporated by reference to
Exhibit 10(c)(1) to the Company's Annual Report on Form 10-K for the
year ended December 28, 1996).
10(c)(2). Security Agreement dated as of June 14, 1996, made by Dutterer's of
Manchester Corporation to Crestar Bank granting a security interest in
a promissory note dated September 3, 1995, made by Value Added Food
Services, Inc., payable to the order of the holder in the original
principal amount of $1,038,756 (incorporated by reference to Exhibit
10(c)(2) to the Company's Annual Report on Form 10-K for the year
ended December 28, 1996).
10(c)(3). Guaranty Agreement dated as of June 14, 1996, made by Dutterer's of
Manchester Corporation for the benefit of Crestar Bank (incorporated
by reference to Exhibit 10(c)(3) to the Company's Annual Report on
Form 10-K for the year ended December 28, 1996).
10(c)(4). Assignment dated as of June 14, 1996, made by the Company to Crestar
Bank assigning as a security interest the Company's rights to receive
all monies under Contract No.SP0300-967-D-2900 dated January 26, 1996
between the Company and the United States Department of Defense
(incorporated by reference to Exhibit 10(c)(4) to the Company's Annual
Report on Form 10-K for the year ended December 28, 1996).
10(c)(5). Credit Line Deed of Trust dated as of June 14, 1996, made by the
Company for the benefit of Crestar Bank relating to certain property
located at 2410 and 2415 Wesley Street and 149 Chautauqua Avenue,
Portsmouth, Virginia, securing the maximum principal amount of
$3,025,000 (incorporated by reference to Exhibit 10(c)(5) to the
Company's Annual Report on Form 10-K for the year ended December 28,
1996).
10(c)(6). Indemnity Deed of Trust dated as of June 12, 1996, made by Dutterer's
of Manchester Corporation for the benefit of Crestar Bank relating to
certain property located in Carroll County, Maryland, securing the
maximum principal amount of $1,200,000 (incorporated by reference to
Exhibit 10(c)(6) to the Company's Annual Report on Form 10-K for the
year ended December 28, 1996).
10(d)(1). Asset Purchase Agreement dated as of January 30, 1997, among the
Company, The Smithfield Ham and Products Company, Incorporated (the
"Buyer"), The Smithfield Companies, Inc., Vernon W. Mules, and Steve
Houfek, pursuant to which the Company agreed to sell the assets
connected with the manufacture of the Company's barbecue and chili
products (incorporated by reference to Exhibit 10(e)(1) to the
Company's Annual Report on Form 10-K for the year ended December 28,
1996).
10(d)(2). Product Supply Agreement dated as of February 28, 1997, between the
Company and The Smithfield Ham and Products Company, Incorporated
("Smithfield"), pursuant to which the Company agreed to purchase its
requirements of barbecue and chili products for a period of five years
(incorporated by reference to Exhibit 10(e)(2) to the Company's Annual
Report on Form 10-K for the year ended December 28, 1996).
10(d)(3). Trademark License Agreement dated as of February 28, 1997, between the
Company and The Smithfield Ham and Products Company, Incorporated
("Smithfield"), pursuant to which the Company granted a license to
Smithfield to use the Company's registered Doughtie's trademark in
connection with the manufacture and sale of certain barbecue, chili,
and related products (incorporated by reference to Exhibit 10(e)(3) to
the Company's Annual Report on Form 10-K for the year ended December
28, 1996).
10(e). Asset Purchase Agreement dated as of September 6, 1996 by and among
Loetitia Adam St. James and Chris L. St. James, TWB Gourmet Foods,
Inc. (TWB), CP Specialty Foods, Inc. (CP), and Doughtie's Foods, Inc.,
pursuant to which TWB sold certain assets to CP (incorporated by
reference to Exhibit 10(g)to the Company's Annual Report on Form 10-K
for the year ended December 28, 1996).
10(e)(1). Asset Purchase Agreement dated as of March 18, 1997, among the
Company, Bruce R. Biddle and Levis E. Cothran, or their assigns (the
"Buyer"), Vernon W. Mules, and Steve Houfek, pursuant to which the
Company agreed to sell to the Buyer the assets connected with the
manufacture of the Company's delicatessen-style meat products
(incorporated by reference to Exhibit 10(h)(1) to the Company's Annual
Report on Form 10-K for the year ended December 27, 1997).
10(e)(2). Product Supply Agreement dated as of April 14, 1997, between the
Company and Coddle Roasted Meats, Inc. ("Coddle"), pursuant to which
the Company agreed to purchase from Coddle's its requirements of
delicatessen-style meat products for a period of five years
(incorporated by reference to Exhibit 10(h)(2) to the Company's Annual
Report on Form 10-K for the year ended December 27, 1997).
10(e)(3). Trademark License Agreement dated as of April 14, 1997, between the
Company and Coddle, pursuant to which the Company granted a license to
Coddle to use the Company's registered Doughtie's trademark in
connection with the manufacture and sale of certain delicatessen-style
meat products (incorporated by reference to Exhibit 10(h)(3) to the
Company's Annual Report on Form 10-K for the year ended December 27,
1997).
10(f) 1998 Stock Incentive Plan (incorporated by reference to Exhibit 99 of
the Company's Registration Statement on Form S-8 (File No. 333-56951)
effective June 16, 1998).
21 List of Subsidiaries
23 Consent of Independent Accountants
27 Financial Data Schedule
b)
Reports on Form 8-K:
- --------------------
The Company filed no reports on Form 8-K during the last quarter of the
Company's fiscal year ended December 26, 1998.
<PAGE>
<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
SCHEDULE II--CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------
Balance at Charged to Balance at
beginning costs and Deductions end of
Description of period expenses (A) period
Valuation account deducted
from asset to which it applies
- for doubtful trade receivables:
<S> <C> <C> <C> <C>
Year ended December 28, 1996 $ 333,308 $ 206,413 $ 198,243 $ 341,478
Year ended December 27, 1997 $ 341,478 $ 674,000 $ 387,106 $ 628,372
Year ended December 26, 1998 $ 628,372 $(120,000) $ 148,747 $ 359,625
Valuation account deducted
from asset to which it applies
- for deferred tax asset:
Year ended December 28, 1996 $ 525,344 $(525,344) $ - $ -
Year ended December 27, 1997 $ - $ - $ - $ -
Year ended December 26, 1998 $ - $ - $ - $ -
(A) Accounts written off during the year net of recoveries.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 26, 1999 /s/ STEVEN C. HOUFEK
------------------------
Steven C. Houfek
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: March 26, 1999 /s/ STEVEN C. HOUFEK
------------------------------
Steven C. Houfek
President, Chief Executive
Officer and Director
Dated: March 26, 1999 /s/ MARION S. WHITFIELD, JR.
------------------------------
Marion S. Whitfield, Jr.
Senior Vice President and
Director (Principal
Financial and Accounting
Officer)
Dated: March 22, 1999 /s/ VERNON W. MULES
------------------------------
Vernon W. Mules
Director
Dated: March 23, 1999 /s/ ADOLPHUS W. HAWKINS, JR.
------------------------------
Adolphus W. Hawkins, Jr.
Director
Dated: March 23, 1999 /s/ DONALD B. RATCLIFFE
------------------------------
Donald B. Ratcliffe
Director
Dated: March 22, 1999 /s/ JAMES F. CERZA, JR.
------------------------------
James F. Cerza, Jr.
Director
Dated: March 25, 1999 /s/ WILLIAM R. WADDELL
------------------------------
William R. Waddell
Director
EXHIBIT (a)(1)
AGREEMENT
between
BAKERY, CONFECTIONERY, AND
TOBACCO WORKER'S
INTERNATIONAL UNION,
AFL-CIO, LOCAL NO. 66
and
DOUGHTIE'S FOODS, INC.
For the period:
November 2, 1998 through November 9, 2001
[Index omitted]
THIS AGREEMENT is made this 2nd day of November, 1998, by and between DOUGHTIE'S
FOODS, INC., hereinafter referred to as "COMPANY" and the BAKERY, CONFECTIONERY,
AND TOBACCO WORKER'S INTERNATIONAL UNION, Local No. 66, affiliated with the
BAKERY, CONFECTIONERY AND TOBACCO WORKER'S INTERNATIONAL UNION, AFL-CIO
hereinafter referred to as "UNION".
WITNESSETH
That for the purpose of mutual understanding and in order that a harmonious
relationship may exist between the Company and the Union to the end that
continuous and efficient service will be rendered to and by both parties for the
benefit of both, it is hereby agreed that:
ARTICLE I. RECOGNITIONS & UNION SECURITY
Section 1. - Recognition
The Company recognizes the Union as the exclusive representative for the purpose
of collective bargaining with respect to rates of pay, hours of employment of
the employees and other conditions of employment in the classifications listed
in Appendix A, attached hereto, located in its Portsmouth, Virginia plant and
it's leased annex facility in Norfolk, Virginia. This recognition will not be
extended to any new types of businesses the Company may develop unless that
business is performed in the Portsmouth, Virginia plant or the currently leased
annex facility in Norfolk, Virginia. Should Doughtie's Foods relocate its
current facilities within the Hampton Roads area, the recognition criteria above
would be extended to those new facilities.
Section 2. - Discrimination
Both of the parties to this Agreement agree that they will not discriminate
against any employee or prospective employee because of his/her age, sex,
religion, national origin or Union affiliation.
Section 3. - Plant Visitations
The business representative of the Union, bearing credentials from the Union,
shall be allowed in the plant for the purpose of conducting Union business
during working hours at reasonable times provided that there shall be no
interference with work. Union representative will provide advance notice to the
company and will check in with management upon arrival.
Section 4. - Union Initiation Fees and Dues
The Company will deduct from the pay of the employees covered by this agreement,
who authorize it to do so, Union initiation fees and monthly dues during the
time of this agreement, and any extension thereof, unless and until any such
authority is revoked, in writing, by the employee who has authorized such
deduction. It is further agreed that, in the event Union ceases to be the
representative of the employees, all authorization for the said deductions shall
be considered revoked, canceled and ineffective for any and all purposes. The
Company shall be required to deduct Union fees and dues which it is authorized
to deduct, as herein above provided, weekly in the amount of $4.84 and the
company shall not be required to deduct dues in excess of the current weekly
dues and delinquent dues for two weeks. The Company agrees to remit once each
month the total amount of fees and dues collected as hereinabove provided to
such official as Union may designate.
The Company shall not be required to accept any authorization for such
deductions unless such authorization is in the following form:
"ASSIGNMENT OF UNION DUES"
Date___________________________________
I, ___________________________, an employee of___________________ hereby
authorize said Company to deduct from my wages the sum of $ _____________for
initiation fee and each week thereafter my Union membership dues in accordance
with the by-laws of the Bakery, Confectionery, and Tobacco Worker's
International Union, Local No. 66, AFL-CIO, of which I am a member. I further
authorize the amount so deducted to be turned over each month to the Financial
Secretary of said Union.
This authorization and assignment shall be effective until the anniversary date
of the current Labor Agreement between the Company and the Union, or for one
year from the date hereof, whichever period shall be shorter. Upon failure to
give the Bakery, Confectionery and Tobacco Worker's International Union, Local
No. 66, and my employer written notice within ten (10) days before the
anniversary date, that I do not want to renew this assignment, then this
agreement shall continue in force and effect and automatically renew itself for
a period of one year and from year to year thereafter, until such notice is
given.
Given under my hand and seal this ______________ day of _____________________ ,
.
_________________________ (SEAL)
Section 5. - Shop Steward
The union may appoint or elect members of this local to act as shop stewards,
whose duty it shall be to see that this agreement is not broken by either the
Company or the Union.
The shop steward or business representative of the Union will at all times, upon
request, have the right to take up any questions with management, with or
without the employee involved. This will be done at a time mutually agreed by
both parties.
Section 6. - Joint Literacy Clause
The Company and the Union shall appoint a joint committee, which shall meet over
the life of the agreement to develop joint approaches to promoting "work place
literacy." The committee shall attempt to determine the extent to which the
employees need to improve their reading and written communication skills and the
extent to which instruction in the English language is needed. The committee
shall also compile an estimate of what resources are needed to establish this
program which will meet the needs of the employees and the company.
If the parties agree to establish such programs it is understood that the
program will be funded by the company, and will include union participation in
course design and content.
If an employee is taken off the job to participate in planning meetings, it is
further agreed that the Company will pay the union members of the joint
committee at their regular straight time spent at the meeting.
Section 7. - Technology Clause
The Company agrees to provide the training and retraining necessary for present
employees to acquire the necessary skills to perform work on new equipment,
including any newly created jobs, or to perform other work to which they might
be reassigned or transferred. The Company will notify the department shop
steward and the business agent or chief steward of these changes or job openings
as they occur.
Section 8. - Orientation Clause
Upon hiring new employees, the Company agrees to introduce new employee to
department union steward.
Article II. MANAGEMENT RIGHTS
Union recognizes that, subject to the express provisions of this agreement, the
supervision, management and control of the Company's business operations,
working forces and premises are exclusively vested in the Company. Without
limiting the generality of the foregoing, Union recognizes that, subject to the
express provisions of this Agreement, the following rights are vested
exclusively in management: to plan, direct and control the Company's business,
operation location, methods and working force; to hire, suspend, assign,
promote, demote, transfer or lay-off employees and to discipline or discharge
employees for just cause; to determine reasonable standards of performance; to
introduce or discontinue any operation; and to require employees to observe the
Company's rules and regulations not inconsistent with this Agreement.
Article III. SENIORITY
Section 1. - Probationary Period
During the first sixty (60) calendar days of employment, a new employee shall be
on a trial basis, shall not acquire seniority rights, and may be discharged at
the discretion of the Company. Probationary employees will be supplied with
temporary foot covering during this period in processing areas only.
Section 2. - Application of Seniority
In the matter of filling a job vacancy or in making lay-offs, and recalls, the
ordinary rules of seniority and fitness for the work shall apply.
All employees have seniority rights in all departments.
Drivers with five (5) years of more seniority will not be used as extras more
than once each week unless on the day they are extra, they end up running a
route on the day they are an extra. Anytime during the week they are an "extra"
and end up running a route will not count towards the "once-per-week" extra
assignment rule. Additionally, Drivers with five (5) or more years seniority
will not be considered for "extra" driver assignment on Saturdays without the
Driver's permission.
Any employee's seniority shall be broken if he:
1. Quits.
2. Is discharged.
3. Is absent on any three (3) days without notice or excuse mutually agreeable
to employer and employee. 4. Fails to report after a lay-off within seven (7)
calendar days after the Company sends to the last address known to the Company a
written notification to return to work. 5. Has been out of employment by the
Company for a period of six (6) months. 6. Has been out of bargaining unit for
91 days. 7. When two (2) or more employees are hired on the same day, the
Company shall determine their relative seniority.
Section 3. - Job Vacancies
When new jobs are created or vacancies occur, notice of the availability of such
job shall be posted for a period of seventy-two (72) hours (excluding Saturday
and Sunday hours) for bids. In the event that an eligible bidder is on vacation
during such seventy-two (72) hour period and the job is awarded to another
employee, the vacationing employee shall have the right to bid on such jobs
within forty-eight (48) hours of his/her returning from vacation. If the
employee returning from vacation is the ultimately successful candidate, the
previously selected employee shall be returned to his/her previous position at
his/her prior rate of pay for such previous position.
The Company will move the transferred employee to the new position within 30
calendar days with the exception of special circumstances. Under no
circumstances will the move not be made within 90 days without mutual agreement
between the Company and the employee. The employee chosen for the job shall be
given a fifteen (15) working day training period. The Company will evaluate the
employee's performance with the employee within the fifteen (15) day training
period if the employee's performance is unsatisfactory. An additional period of
up to five (5) working days will be allowed, if required to allow the employee
at least five working days to correct unsatisfactory performance. At the end of
the training period of which he/she has not done the work satisfactorily, which
determination shall be made solely by the Company, he/she shall be returned to
his/her old job at his/her former rate of pay. If the training employee's job
performance jeopardizes safety, equipment, or business, the employee shall be
immediately removed from the new position and returned to their old job.
In the event of a vacancy occurring for a truck driver job, the successful
bidder must have a Department of Motor Vehicle driving record acceptable by the
Company, must pass a written examination for drivers, and also successfully be
certified in a road test as possessing sufficient driving skill to operate
safely the type of commercial motor vehicle used by the Company. (No unqualified
employees will be required to operate a motor vehicle.). All other provisions
set forth in the previous paragraph shall be applicable. Truck drivers must have
a Department of Motor Vehicles driving record acceptable by the Company, and
have a Commercial Drivers License.
Section 4. - Job Transfers
Job transfers between any classification will be authorized. Employees may not
transfer into another position until after they have been employed one year.
Employees with less than one year will be authorized to sign postings; but will
not be eligible for transfer unless management authorizes. Employees with a
disciplinary suspension on file within the last 180 days on the job will not be
permitted to transfer. When an employee does transfer from one position to
another, they will not be permitted to transfer
again for one year unless management initiates the transfer. If the senior
person that has signed the job posting is disqualified for reasons above, the
next senior person will be selected. If none of the employees signing the job
posting is qualified, the position will be posted one additional time before the
Company hires from outside the Company.
Section 5. - Extra Work (Does not apply to the continuation of regular shift
work).
Extra work shall go to the employee with the most seniority in the employee's
respective division (manufacturing or distribution) as long as this employee is
qualified to perform the necessary job (which qualification will be determined
by management). If no senior employee desires the extra work, the least senior
employee is required to work. This does not apply to the continuation of regular
shift work.
Section 6. - Lay-off
Lay-offs; with the exception of drivers, will be accomplished by seniority.
Probationary employees shall be laid off first. If further layoffs are
necessary, the last person hired shall be the first laid off. In the event of
recall, employees shall be recalled in the reverse order of layoff subject to
the same condition.
Truck Driver lay-offs; The driver with the least seniority will be the driver
who will be laid off. If this driver has the lowest seniority in the Division,
he will be on lay-off status. If this driver is not the lowest senior employee,
this driver will be transferred to the lowest senior employee's job in their
division. At that point the lowest senior person will go on lay-off status.
Article IV. HOURS OF WORK & OVERTIME
Section 1. - Workweek
A. The regular workweek shall begin at 12:01 a.m. on Sunday and conclude at
12:00 p.m. midnight Friday and employees must report to work at any scheduled
time except in the case of a bona fide emergency. An emergency shall be defined
as a natural disaster, fire, any other act of God or a customer service related
emergency. Employee must report to work when requested by their supervisor in
the case of a bona fide emergency. Any employee required to work in excess of
eight (8) hours in any day or forty (40) hours in any workweek shall be paid
overtime as provided in this Agreement. All work performed on Saturday shall be
paid at the rate of time and one-half (1 1/2).
B. It is agreed that six (6) minutes per day is a reasonable time for clocking
in after the scheduled start time before any employee is considered tardy. If an
employee punches in after the scheduled start time more than twice in any week,
the six (6) minute grace period will be waived and the third late incident in a
week will be considered a tardy for reporting purposes.
C. The day will begin at the posted scheduled time and end when the supervisor
authorizes the employee to leave.
Section 2. - Posting of Work Schedule
Schedules should be posted on Wednesday of each week and in no case later than
Thursday, showing the work days and hours of each employee for the workweek
Sunday through Saturday. Every effort shall be made to adhere to this schedule
as closely as possible but both parties should understand that some variable may
occur due to the nature of the business.
Section 3. - Daily Guarantee and Call In
A. Each regular employee who reports for work upon request by management, shall
be guaranteed not less than thirty-six (36) hours per week, provided they do
whatever work is assigned to him or her. When a holiday occurs in a workweek,
each employee shall be guaranteed not less than twenty-eight (28) hours work per
week.
Such guarantee is contingent upon there being no emergency condition beyond the
Company's control, which prevents or interferes with the normal operation of the
business.
B. Whenever any truck driver is scheduled to report to work and does report at
the time specified, such employee shall be guaranteed two (2) hours pay,
provided that said employee remains on the job until released by the night
dispatcher. The night dispatcher has permission to retain any driver if required
by management. The two (2) hour pay will include the time while waiting for the
dispatcher's release.
Drivers with higher seniority who come to work and find their route has been
cut, can bump the driver with less seniority, only if the senior driver can
perform the route within 1 1/2 hours of Roadnet time. Any driver who reports to
work and then tells management that they cannot work for any reason will not be
guaranteed two hours pay.
Section 4. - Overtime
A. Rate of Pay. Each employee shall be paid for all work performed in excess of
eight (8) hours a day or forty (40) hours in a regular workweek at the rate of
one and one-half (1 1/2) times his regular straight time hourly rate, whichever
is greater but not both.
B. No Pyramiding of Overtime. Time and one-half (1 1/2) shall be paid on the
weekly or daily basis, whichever is greater, but in no case both. In other
words, any hours for which overtime is payable on a daily basis shall be set
aside or excluded in determining the amount of overtime on a weekly basis.
C. Rest Period Overtime. Each employee is entitled to an unbroken rest period of
at least twelve (12) hours between shifts, and any employee, except for truck
drivers, requested to work during his/her twelve (12) hour rest period shall be
paid for such work at the rate of one and one-half (1 1/2) times his/her regular
straight time hourly rate provided they do whatever work is assigned to them.
Truck drivers should have at least an eight (8) hour rest period between shifts.
No disciplinary action may be taken against a truck driver unless he/she has had
his or her eight (8) hours rest period.
D. Offsetting of Overtime. No employee shall be given time off for the purpose
of offsetting overtime.
Section 5. - Incentive Programs
The Union has agreed to allow the Company to initiate, install and operate
incentive programs, which will allow employees to earn extra dollars over their
regular pay.
Article V. REST AND LUNCH PERIODS
Section 1. - Rest Periods
A. Each employee shall be given a fifteen (15) minute paid rest period during
the third (3rd) hour of work and a fifteen (15) minute paid rest period during
the seventh (7th) hour of work. An unpaid lunch period of thirty (30) minutes
shall be given after the fourth (4th) hour of work and be completed by the end
of five and one-half (5 1/2) hours of work. If any employee is required to work
ten (10) or more hours in one day, an additional fifteen (15) minute period of
rest shall be given such employee at the end of the tenth (10th) hour.
B. When a driver is required to work in excess of ten (10) hours in any one day,
the Company shall provide a $3.75 supper allowance to said employee. In the
event of an emergency arising due to mechanical or tire failure beyond the
driver's control which necessitates a delay beyond twelve (12) hours, the driver
affected shall receive an additional $1.25 supper allowance.
Section 2. - Physical Relief
Necessary physical relief will be granted within reason without discrimination
of any source. Physical relief is defined as bladder, or intestinal relief.
Freezer and Seafood Department workers will be permitted to come out of the
freezer for five (5) minutes to get warm after any continuous exposure in the
freezer of ninety (90) minutes.
Section 3. - Drinking Water
Cool drinking water is to be available at all times for the employees in their
working areas.
Section 4. - Lunch Periods
A thirty (30) minute period shall be allowed for lunch each day, and such lunch
period shall be excluded from the working hours. In an emergency, which shall be
determined solely by the Company, the Company may schedule a sixty (60) minute
lunch period all of which time shall be excluded from working hours.
All employees, with the exception of drivers on the road, will be required to
punch out and in for their lunch period.
Article VI. WAGES & CLASSIFICATIONS
The classifications and rate of pay are set forth in Appendix A, which is
attached hereto and made a part hereof.
Article VII. HOLIDAYS/SICK LEAVE
Section 1. - Holidays
Each employee shall receive the following holidays with eight (8) hours pay:
New Years Day Thanksgiving Day
Memorial Day July 4th
Christmas Day Labor Day
Those employees who work on a holiday shall observe a work holiday within ninety
(90) days of such holiday. The exact day shall be mutually agreed upon by the
Company and employee. If an employee is denied the day off that is requested to
be taken as a result of having worked a holiday, they will be given an
additional 30 day period to take the day off. The employee must complete and
turn in to their supervisor a written extension request form which will be
provided by Management.
In addition to the above holidays, an employee shall receive one personal
holiday per calendar year of his/her choosing as long as fourteen (14) days
notice is given to management. This holiday cannot conflict with another
employee's personal holiday, or the three holiday weeks, or for Day Warehouse
Shift employees, the week before the Food Show , which are set aside as "no
vacation weeks" by management.
Section 2. - Qualifications of Holiday Pay
A. In order to receive pay for any such holiday, the employee must have been in
the employ of the Company for at least thirty (30) calendar days and worked
his/her regular scheduled work day preceding and his her regular scheduled work
day next following such holiday. In the event that an employee is unable to
complete his/her regular scheduled work day preceding, immediately following, or
the day of the holiday, he/she shall receive a pro-rata amount of holiday pay in
direct proportion to the hours worked on either day, provided that such employee
is excused by his/her supervisor.
B. If an employee is required to work on a holiday, he/she shall receive one and
one-half (1 1/2) times his/her regular straight time hourly rate for all hours
worked on such holiday in addition to his/her holiday pay. An employee who is
scheduled to work on any holiday and does not work shall receive no pay for such
holiday.
C. If an employee is absent on any such regular scheduled work day due to a
bona-fide excuse or sickness that can be legitimately documented prior to or
after a holiday, or on the actual holiday that said employee is scheduled to
work, they shall receive their holiday pay provided they have performed work
within the two (2) week period prior to the holiday week or during the holiday
work week itself. In the event that a dispute arises over the legitimacy of
documentation, the Company and the Union agree that it shall be resolved by the
use of the grievance procedure, short of arbitration.
D. If an employee works on a holiday, the hourly rate of the holiday shall equal
the pay of the job the employee is doing on that day.
Section 3. Sick Leave
Effective January 1, 1999, Employees will be entitled to two (2) paid
sick days per calendar year. Any sick day paid will not be counted as a day of
absence against the employee's attendance record.
Article VIII. VACATIONS
Section 1.
Regular employees who work not less than 1600 hours in their anniversary year
shall be entitled to vacation with pay, as follows:
One week................................... after one year of employment
Two weeks................................. after three years of employment
Three weeks.............................. after eight years of employment
Four weeks................................ after twelve years of employment
Five weeks................................ after eighteen years of employment
Regular part-time employees are employees regularly scheduled to work at least
three (3) six (6) hour work days a week. The yearly minimum work requirement of
a part-time employee for vacation shall be 750 hours and after one (1) year of
employment, part-time employees who qualify shall be given a pro-rated vacation
based on the above schedule for regular employees.
No employee, either regular or part-time, shall be entitled to a vacation until
he/she has been on the active payroll for period of one (1) year.
A regular employee or a regular part-time employee, who due to illness, injury,
or pregnancy leave, works less than the time above required for a vacation,
shall be entitled to a pro-rated vacation and pay therefore, based upon actual
number of hours worked during the above required length of service for a
vacation.
Section 2.
Vacation pay for regular employees shall be forty (40) times the employee's
regular straight time hourly rate for each week of vacation.
In order to receive such vacation pay, an employee must leave work for the
applicable vacation period.
Section 3.
If an employee has earned a two (2) or more weeks vacation, he/she may take
his/her weeks consecutively. The vacation period shall be between January 1st
and December 31st. The vacation schedule for the ensuing year shall be posted
during the entire month of December and each employee shall select his/her
vacation time therefrom for the ensuing year in accordance with their seniority:
employees with eight (8) years or more seniority will make their selection
during the first week; employees with five (5) years or more seniority will make
their selection during the second week; employees with three (3) years or more
seniority will make their selection during the third week and the remainder of
the workforce will make their selection during the fourth week. A seniority list
will be posted beside the vacation schedule so there will be no questions
regarding seniority. When the vacation list has been approved by the Company, no
changes will be made, except by mutual agreement and under no circumstances may
a more senior employee "bump" a lesser senior employee.
Whenever a holiday listed in Article VIII, Section 1, falls within an employee's
vacation period, the employee shall receive an extra day's pay in addition to
his/her vacation pay if its is mutually agreeable to both the Company and the
Union.
Because of peak demand in our business, the week before each of the following
holidays will not be available to employees. These holiday weeks are Memorial
Day, 4th of July and Labor Day. The week that the holiday is celebrated will be
available. The week before the Food Show will not be available for Day Shift
Warehouse employees.
Section 4.
Each employee shall receive his/her vacation pay immediately before his/her
vacation starts.
Section 5.
Any employee whose service is terminated after his/her first service anniversary
shall, unless he/she was discharged for dishonesty, be entitled to vacation pay
in accordance with the following schedule:
Completed Months of Service
Since Last Service Anniversary Vacation Pay
- ------------------------------ ------------
Less than six (6) months.....................................None
Six (6) months.............................................. 6/12
Seven (7) months........................................... 7/12
Eight (8) months........................................... 8/12
Nine (9) months............................................ 9/12
Ten (10) months.............................................10/12
Twelve (12) months..........................................11/12
If an employee has been granted a vacation prior to the end of the anniversary
year which entitled him to such vacation and fails to complete the year of
service required for such vacation, he/she shall refund the Company the
difference between the vacation pay he/she received and the pro-rated amount
he/she would have been paid by reason of his/her service having terminated prior
to the end of his/her anniversary year.
Article IX. LEAVES OF ABSENCE
Section 1. - Military Leaves
Company and Union agree to abide by the terms of the Selective Service and
Training Acts, as amended from time to time, or any other applicable law.
Section 2. - Family and Medical Leave
The Company agrees to comply with all federal regulations pertaining to the 1978
Amendments to the Civil Rights Act of 1964 with reference to pregnancy
discrimination and as well as the Family and Medical Leave Act.
Section 3. - Union Business Leave
The Company agrees, if reasonably possible, to give time off without pay, to any
official of the Union who may have any Union business to which he/she has to
attend at that time. The union official must notify the company in advance of
schedule posting in writing of foreseen absences for union business. The Company
will make reasonable exceptions for justifiable unforeseen union business
reasons. The Company will notify the union official that permission has been
granted or that they are requested to meet with the company to discuss the issue
further as soon as reasonably possible. No more than two employees from each
department shall be off at the same time to conduct union business. Any request
for an exception to that number shall be submitted in advance to management who
will not unreasonably withhold approval. Additionally, in the event that Union
shall select an employee as Business Representative, the Company agrees to let
him/her leave its employ with the understanding that he/she may return to work
at any time with standing and seniority comparable to that which he/she enjoyed
at the time he/she left.
Section 4. - Funeral Leave
It is agreed, in the event of a death in the immediate family, the employee
shall be granted three (3) days to attend the funeral. If any of these three (3)
days are working days, the employee shall suffer no loss in pay. The
requirements for the funeral leave period shall begin on the first full day of
absence following death and end on the day of the funeral. If in the opinion of
management, travel considerations in attending a funeral are involved, up to two
(2) calendar days immediately following the funeral may be considered as part
the funeral leave period. The term "immediate family" shall mean: Father,
Mother, Son, Daughter, Brother, Sister, Husband, Wife, Father-in-law,
Mother-in-law, Daughter-in-law, Son-in-law, Grandparents, and Grandchildren.
Proof of death and relationship of deceased is necessary before funeral leave
will be paid.
Section 5. - Jury Duty
Any full time employee who has been in the continuous employee of the Company
for three (3) months or more, and who is required to serve as a juror shall be
paid eight (8) hours daily at his or her regular straight time hourly rate
(excluding premiums or overtime) less such amount of compensation allowed by the
courts for his or her service, subject to the following conditions:
A. If on the day the employees serve on the jury they also work for the Company,
they shall receive no extra compensation: if they work their regular gang time.
In no event shall such difference payments exceed fifteen (15) work days in one
(1) year because of required jury duty.
B. No difference payments for jury duty shall be paid to employees who fail to
report for work and work the hours on any scheduled work day on which their
service is not required in court.
C. Employees who have received an official summons to serve as jurors shall give
notice and proof of such summons to their foreman a reasonable time in advance
of the date on which they are to serve.
D. At the end of the employee's service as juror, the employee shall obtain from
the Clerk of the Court statements showing the time served and the amount paid to
them as compensation for their services as jurors and shall promptly submit such
statements to the Time Office.
Section 6. Court Summons/Appearances
The Company agrees to allow unpaid time off for court dates provided proof is
shown to the employee's supervisor in writing before the court date. The Company
will determine the validity of the documentation.
Article X. HEALTH AND WELFARE
Section 1. - General
The Company agrees to maintain the following Group Insurance Plan during the
term of this agreement. This does not cover any work related accidents that are
covered by Workers Compensation.
Schedule of Benefits:
A. Death Benefit ......................................$10,000.00
Accidental Death and Dismemberment................. $10,000.00
Weekly Accident and Sickness Benefit.................up to $175.00
(Maximum of thirteen (13) weeks)
a. Equal to 66 2/3 percent of an employees straight time hourly wages
with maximum of $175.00 per week. b. Benefits shall begin on the first
day of an accident and the fourth day of an illness.
B. Hospital/medical, dental and prescription drug coverage shall be available to
employees at their option as provided under the terms and conditions stated in
the current negotiated insurance policy . Premiums for employee and dependent
coverage shall be paid by employees as provided in the attached Schedule A.
Premiums for dependent and employee coverage shall be increased to cover the
increased cost over and above the present coverage. The Company agrees to reopen
negotiations on the hospital plan if a new hospitalization program is adopted by
the Company if the new insurance carrier proposes to implement any changes that
might affect contractually negotiated benefits.
Section 2. - Employee Compliance
Employees shall comply with all regulations of the Company insurance carrier in
regard to all benefits provided in this article.
Section 3. - Employee Qualification
Any new employee shall qualify for such benefits upon the completion of ninety
(90) days continuous full-time service.
Article XI. GENERAL PROVISIONS
Section 1. - Bulletin Boards
Enclosed bulletin boards shall be provided by the Company for official business.
Other bulletin boards will be available for social notices. A signed copy of
this agreement shall be posted on such.
Section 2. - Medical Examinations
The Company agrees to pay for any doctor's examination which may be necessary to
obtain employment in the plant. If an employee is required to undergo a medical
examination or drug/alcohol screening, the Company will pay the employee for
time lost up to two hours unless the drug/alcohol screening results are
positive.
Section 3. - Uniforms
The Company agrees to furnish all clothing and equipment currently necessary for
the employee to do the required job without charge. Any employee leaving the
Company must return any issued clothing or equipment. Failure to return any
issued clothing or equipment upon leaving the Company will result in the
replacement value of the missing item being withheld from the employee's final
paycheck. It is understood that the truck drivers shall contribute $2.50 per
week to the laundering fee for the uniforms provided by the Company. The Company
further agrees to furnish boots to production employees whose jobs necessitate
wearing them.
Section 4. - Back Safety Support
The union has requested that back safety belts be worn by union employees when
performing tasks that involve lifting. The company has agreed to purchase safety
belts and split cost 50% with any employee wishing to wear such belt. The
employee will initiate such request to obtain a belt with their supervisor.
The employee who receives such belt must adhere to the following procedures: a.
The belt must be brought to work daily. b. The belt must be worn during the
lifting portion of the job. c. Employees who fail to wear the safety belt will
be written a "warning letter." On the third such "warning letter" the belt will
become the sole property of the employee and 50% of the cost of the belt will be
deducted from employee's payroll. The employee will at that time be released
from the mandatory wearing of the belt. d. The manufacturer's warranty will
determine the frequency of Company participation. e. Management may deny
continued participation in the program if it determines that the belts create a
health or safety problem.
Section 5. - Work by Supervisory Employees
No Supervisor shall perform any of the duties of any employee coming under the
jurisdiction of this Agreement except in the case of an emergency. It is agreed
that without limitation to other emergencies that may occur the following
conditions shall be deemed to be emergencies when:
1) A scheduled employee fails to report to, or perform his/her work. 2) It is
necessary for the supervisor to instruct an employee in how to perform his/her
work. 3) During his/her scheduled work hours an employee becomes unable to
perform his/her work by reason of physical disability.
Section 6. - Sickness
When an employee is sick, they must call in daily as soon as possible or at
least by 30 minutes prior to the scheduled work hour. Any employee who is out
sick for a period not exceeding two (2) days may return to work without a
doctor's permit. If such employee is out sick three (3) days or more a doctor's
permit will be required before he/she can return to work.
Section 7. - Rules and Regulations
Both the Company and Union agree to the necessity of Rules and Regulation
governing the day-to-day operations of the business. Such rules and regulations
have been in effect since May 28, 1973. A Copy of these rules and regulations
are attached to this Agreement and are so noted as Exhibit A.
Article XII. NO STRIKE, NO LOCKOUT
Section 1. - General
The Company and the Union agree on the need of their service to the public with
out interruption. Both recognize the objective as necessary to the security of
the Company and its people. Both, therefore, specifically pledge themselves to
help assure that security by using the procedures agreed upon between them for
the adjustment of disputes and grievances in all cases where there is any
difference of opinion concerning the rights of either party under this contract,
or the interpretation or application of any provision of it.
Section 2. - No Strike, No Lockout
The Union agrees that there will be no strike, slow down, or other interference
with work by any or all of the employees during the life of this Agreement. The
company agrees that no lockout against any or all of the employees shall take
place during the life of this Agreement.
Section 3. - Discipline and Union Duties.
In the event of a walkout in violation of the above provision, any employee
found guilty of instigating, fomenting, actively supporting or condoning such
illegitimate strike shall be subject to discipline, including discharge. Union
agrees that all possible steps will be taken to preclude or to terminate as soon
as possible all strikes or contemplated strikes in violation of this Agreement.
Article XIII. GRIEVANCE AND ARBITRATION
Section 1.
In the event that a dispute arises at any time over wages, hours
working conditions or any other aspect of this Agreement, such disputes shall be
handled with the following procedure.
Section 2.
The procedure for the settlement or disposition of grievances shall be as
follows:
Step 1: The matter will be submitted in writing and first be discussed
between the aggrieved employee, the employee's shift supervisor and the Union
Steward if requested by the employee. Such discussion shall take place not later
than ten (10) working days after the occurrence of the event giving rise to the
grievance. The supervisor shall advise the employee and the Steward of his
decision in writing within five (5) working days after the discussion has taken
place.
Step 2: If the supervisor's decision is not acceptable to the Union, it
may, within five (5) working days after the supervisor's answer, appeal the
supervisor's decision by presenting the grievance in writing to the Director of
Human Resources which is to be dated and signed by the aggrieved employee and an
authorized Union representative.
A meeting between the designated Union Representative and the
designated Company representative shall be held to discuss the grievance within
five (5) working days after it has been presented to the Director of Human
Resources. Within five (5) working days after this meeting has been held, the
Company shall in writing advise the employee and the Union of its decision.
Step 3: If the Step 2 answer is not acceptable to the Union, it may
within five (5) working days after receiving the Company's Step 2 answer appeal
the grievance to the Director of Human Resources. A meeting between the Union
Representative, the Company's Representative and the Director of Human Resources
(or designated representative for any of them) shall be held to discuss the
grievance within five (5) working days after it has been appealed to the
Director of Human Resources. Within five (5) working days after this meeting has
been held, the Company shall, in writing, advise the Union Representative of its
position.
Section 3.
If a grievance has not been satisfactorily settled by the foregoing
procedure, the Union, if it so desires, may request arbitration in accordance
with the following Section by so advising the Company in writing within fifteen
(15) working days after receiving the Company's decision under the third step of
Section 2 of this Article.
Section 4.
When arbitration is requested by the Union, the parties within ten (10) working
days after the request has been served upon the Company shall attempt to agree
on the appointment of an impartial Arbitrator and if no agreement is reached the
parties will jointly request the Federal Mediation and Conciliation Service to
supply both parties with a panel of seven (7) impartial arbitrators. Either
party shall have the right to reject one entire list and to request the
submission of another panel. The parties shall alternately strike names from the
list and the person whose name last appears shall be designated as the
Arbitrator and his appointment shall be binding on both parties and the
employees.
Section 5.
Any decision or award of an Arbitrator shall be final and binding on the Union,
the Company and the employees.
Section 6.
In the event a discharge or suspension case is referred to an
Arbitrator he shall have the authority to modify the penalty and order
reinstatement with full, partial or no back pay. In the event a discharge or
suspension grievance is taken to arbitration and a back pay award is determined
to be appropriate by the Arbitrator, any interim earnings and unemployment
compensation benefits received by the employee shall be deducted from the amount
due.
Section 7.
The Company and the Union shall each pay their own costs incurred in
connection with the arbitration. The expense of the neutral arbitration and the
cost of the place for holding the hearing shall be shared equally between them.
Section 8.
Unless the time limits set forth in this Article are extended or waived
in writing, failure to comply therewith will constitute a waiver of the
grievance and the Company's last decision shall be final and binding. In the
event a Company representative does not answer a grievance in any step within
the time limit for the answer therein specified, the grievance may be presented
to the next succeeding step within five (5) working days from the expiration of
such time limit for the Company's answer.
Section 9.
It is expressly agreed and understood that no employee shall have the
right to compel the arbitration of his/her grievance without the written consent
of the Union.
Section 10.
The term "working days" as used in this Article means calendar days
exclusive of Saturdays, Sundays and holidays.
Article XIV. SCOPE & APPLICATION OF THIS AGREEMENT
Section 1. - General
This agreement incorporates the full and complete understanding of the parties
pertaining to the regulation of minimum wages and hours of employment of all the
production and maintenance employees of the Company who come within its terms
and are not excluded from its operation. This Agreement shall constitute a
complete accord and adjustment of all matters between the parties hereto and no
complaint shall be filed or considered on account of anything, which has
occurred prior to the execution hereof.
Section 2. - Severability
Any provision of this Agreement which may be in violation of State or Federal
Acts, statutes, regulations or orders, or revision thereof, now effective or
which become effective during the term of this Agreement, shall be considered
void. In the event that any provision of this Agreement is thus void, the
balance of the Agreement and its provisions shall remain in effect for the term
of this Agreement.
Article XV. PENSION
It is hereby agreed to provide pension and retirement benefits as follows:
A. The Company hereby agrees to be bound as a party by all the terms and
provisions of the Agreement and Declaration of Trust dated September 11, 1955,
as amended, established the Bakery and Tobacco Workers Unions and Industry
International Pension Fund (hereby called the Fund) and said Agreement is made
part hereof by reference.
B. Commencing with the last day of June 1977, the Company agrees to make
payments to the Fund for each employee working in job classifications covered by
the said Collective Bargaining Agreements.
Effective October 24, 1997, for each hour or portion thereof, for which an
employee subject to the Collective Bargaining Agreements, receives pay, the
Company shall make a contribution of sixty (60) cents to the above named pension
fund, up to a maximum of forty (40) hours in any week.
For the purpose of this Article, it is understood that contributions shall be
payable on behalf of employees from the first day of employment, whether said
employees are permanent, temporary or seasonal, full-time or part-time
employees, and regardless of whether or not they are members of the union.
C. The payment made in accordance with "B" above shall be allocated as follows:
sixty (60) cents per hour to provide for a normal, reduced early retirement and
disability pension (Plan A).
D. It is agreed that the pension plan adopted by the Trustees of the said
pension fund shall be such as will qualify for approval by the Internal Revenue
Service of the United States Treasury Department, so as to enable the Company to
treat contributions to the pension fund as a deduction for income purposes.
E. It is hereby agreed to provide pension and retirement benefits as follows:
1. The Company hereby agrees to be bound as a party by all the terms and
provisions of the Agreement and Declaration of Trust dated September 11, 1995,
as amended, establishing the Bakery and Confectionery Unions and Industry
International Pension Fund (herein after called the Fund) and said Agreement is
made part hereof by reference.
2. Commencing with the 1st day of ____________________ 19 ___________, the
Company agrees to make payments to the Bakery and Confectionery Union and
International Pension Fund for each employee working in job classifications
covered by the said Collective Bargaining Agreement as follows:
a. For each day or portion thereof, for which an employee subject to the
Collective Bargaining Agreement, receives pay, the Company shall make a
contribution of $ __________ to the above named Pension Fund, up to a maximum of
forty (40) hours in any week.
For the purpose of this Article, it is understood that contributions shall be
payable on behalf of employees from the first day of employment, whether said
employees are permanent, temporary, or seasonal, or full-time or part-time
employees, and regardless of whether or not they are members of the Union. The
term "Employee" does not include a self-employed person, corporate officer,
owner or partner.
3. The payment made in accordance with "2" above shall be allocated as follows:
______ per (day) (hour) to provide coverage for a Normal, Reduced, Early
Retirement and Disability Pension (Plan A) ______ per (day) (hour) to provide
coverage for Vested Deferred Pension (Plan B) _______ per (day) (hour) to
provide coverage for an Age and Service Pension (Golden Ninety Plan C) _______
per (day) (hour) to provide coverage for an Age and Service Pension in the event
of loss of covered employment due to a permanent reduction in force (Plan CC)
______ per (day) (hour) to provide coverage for an Age and Service Pension
(Golden Plan G) _______ per (day) (hour) to provide coverage for Supplemental
Pension (Plan D______) _______ per (day) (hour) to provide Health Benefits for
Pensioners in accordance with Plan W ______ of said Fund _______ per (day)
(hour) to provide Health Benefits for Pensioners in accordance with Plan P
_______ of said Fund
4. It is agreed that the Pension Plan adopted by the Trustees of said Pension
Fund shall be such as will qualify for approval by the Internal Revenue Service
of the United States Treasury Department, so as to enable the Company to treat
contributions to the Pension Fund as a deduction for income tax purposes.
5. Contributions provided for herein shall be paid monthly and shall be
accompanied by a completed remittance report. Both payment and report are due on
the tenth (10th) day of the month following the month covered by the report. In
the event the Company fails promptly to pay the amounts owed, the Company shall
pay such collection costs, including court costs, and reasonable attorneys fees,
as the Pension Fund shall incur, and shall pay interest at such a rate as the
Trustees shall fix from time to time.
6. The payments so made to the Fund shall be used by it to provide retirement
benefits for eligible employees in accordance with the Pension Plan for said
Fund, as determined by the Trustees of said Fund, to be applied to the eligible
employees based on the amount of employer contribution.
7. This clause encompasses the sole and total agreement between the Company and
the Union with respect to pensions or retirement.
8. This clause is subject in all respects to the provisions of the Labor
Management Relations Act of 1947, as amended and to any other applicable laws.
Company _______________________ Bakery, Confectionery and Tobacco
Workers International Local Union No. _____
By__________________________ By_______________________________
Date________________________ Date______________________________
F. Notwithstanding any provisions, if any, to the contrary contained in the
Collectible Bargaining Agreement between the Company and the Union, the Union
shall have the right to strikes by giving the Company written notice of its
intention to do so not less than forty-eight (48) hours in advance if the
Company shall fail to make payment of the contribution due to the Fund for any
month on or before the 10th day of the third calendar month following the month
for which such be taken by the Union unless and until the Administrative
Director of the Fund shall have certified in writing, to the Company and to the
Union, that the Company has so failed to pay such contribution. Any strike
pursuant to this provision shall be terminated as soon as the Company shall pay
the delinquent contribution or shall make arrangements for the payment of it,
which meets with the approval of the Administrative Director of the Fund.
G. The payments so made the Fund shall be used by it to provide retirement
benefits for eligible employees in accordance with the Pension Plan of said
Fund, as determined by the Trustees of said Fund, applied to the eligible
employees based on the amount of employer contribution. The Company hereby
affirms that he/she has no arrangement for the compulsory retirement of his/her
employees except set forth herein.
H. This clause encompasses the sole and total agreement between the Company and
the Union with respect to pensions or retirement.
I. This clause is subject in all respects to the provisions of the Labor
Management Relations Act of 1947, as amended and to any other applicable laws.
Article XVI. SUCCESSOR CLAUSE
This Agreement shall be binding upon the parties hereto, their successors,
administrators, executors and assigns.
Article XVII. EFFECTIVE DATE & DURATION FOR AGREEMENT
This Agreement shall become effective as of 12:01 a.m. on November 2, 1998, and
shall continue to be in full force and effect until November 9, 2001 at midnight
and thereafter from year to year, unless either party hereto shall notify the
other by registered letter or certified letter, mailed not less than sixty (60)
days prior to November 9, 2001, or any anniversary date thereof, of desire to
modify or terminate same, provided, however, in the event any change is made by
law, governmental/ruling or regulation in minimum rate of pay or in the present
requirement for pay at time and one half (1` 1/2) the regular hourly rate of pay
for hours worked in excess of forty (40) hours in any work week, which change
requires an adjustment of the wages and/or hours of an employee covered by this
Agreement. Either party may elect to reopen this Agreement as of the effective
date of any such law, governmental regulation or ruling, for the sole purpose of
renegotiating the wage schedule or work week and overtime provision in the said
contract or both, depending on which items are affected by such laws, rulings or
regulations, by notifying
Doughtie's Foods, Incorporated Bakery, Confectionery and Tobacco
Workers International Local Union No. 66
By /s/ W. G. Ratliff By /s/ Barry W. Baker
- ------------------------------ ----------------------------------
Vice President-Operations BCTWIU International Representative
- ------------------------------ -----------------------------------
(Title) (Title)
Witness Witness
By /s/ Sharon R. Stevens By Thomas C. Perry
- ------------------------------ -----------------------------------
Appendix "A"--[intentionally omitted]
Exhibit "A"--[intentionally omitted]
Schedule "A"--[intentionally omitted]
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
Name of Corporation State of Incorporation
------------------- ----------------------
TWB Gourmet Foods, Inc. Virginia
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-56951) of our report dated February 10, 1999
appearing under Item 8 of Doughtie's Foods, Inc.'s Annual Report on Form 10-K
for the year ended December 26, 1998.
/s/ PricewaterhouseCoopers LLP
Virginia Beach, Virginia
March 25, 1999
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF DOUGHTIE'S FOODS, INC. AND ITS
SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 26, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> Dec-28-1997
<PERIOD-END> DEC-26-1998
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 8,012
<ALLOWANCES> 360
<INVENTORY> 4,626
<CURRENT-ASSETS> 12,579
<PP&E> 6,295
<DEPRECIATION> 3,763
<TOTAL-ASSETS> 15,223
<CURRENT-LIABILITIES> 4,686
<BONDS> 683
<COMMON> 1,495
0
0
<OTHER-SE> 8,359
<TOTAL-LIABILITY-AND-EQUITY> 15,223
<SALES> 87,194
<TOTAL-REVENUES> 87,194
<CGS> 73,043
<TOTAL-COSTS> 85,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162
<INCOME-PRETAX> 1,943
<INCOME-TAX> 746
<INCOME-CONTINUING> 1,197
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,197
<EPS-PRIMARY> .80
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