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 27, 1997
                                         ----------------------

                                OR

   [   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934

            For the transition period from                   to
                                           -----------------    ----------------


                         Commission file number 0-7166



                             DOUGHTIE'S FOODS, INC.
            (Exact name of Registrant as specified in its charter)


          VIRGINIA                                      54-0903892
(State or other jurisdiction of                      (I.R.S. employer
 incorporation or organization)                   identification number)


               2410  WESLEY  STREET,  PORTSMOUTH,  VIRGINIA  23707  
                    (Address of principal executive offices)


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
                                                -------      -------


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.


                                                                -------

Aggregate market value of voting stock held by  non-affiliates of the registrant
as of March 20, 1998 (See Note, Item 5, for explanation of calculation):

                                                          $ 3,719,897
                                                        ----------------


Indicate the number of shares of Common Stock outstanding as of March 20, 1998:

                                                             1,495,023
                                                       -----------------


                   DOCUMENTS INCORPORATED BY REFERENCE

Part III  incorporates  by reference  information  from the  registrant's  proxy
statement for its annual meeting of stockholders scheduled for May 21, 1998.


<PAGE>

PART I.
-------

ITEM 1.   BUSINESS
------------------

General
-------

         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.  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),  completed the Company's  divestment of its
non-profitable  manufacturing  operations  so  that  it can  concentrate  on its
business  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.

         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 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.

         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.  The note 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
--------

         The  Company's  distribution  facilities  are  located  in  Portsmouth,
Virginia. Prior to the sale of the manufacturing division, these facilities were
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  ITEM I,  PART 1,
BUSINESS:
General.

         The Company  markets many of its products under its own label.  Most of
its  products  are  packaged  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.

         The Company  offers to its  institutional  and  commercial  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.

Marketing and Distribution
--------------------------

         The Company  maintains  a central  distribution  center in  Portsmouth,
Virginia,  from which it handles the Company's commercial and institutional food
sales.

         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.

Customers
---------

         With the  exception of the United States  Department of Defense,  whose
total  purchases  were $13.5 million or 15.8% of revenue,  none of the Company's
customers  accounted  for 10% or more of the Company's  consolidated  revenue in
fiscal year 1997.

Competition
-----------

         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.

Research and Development
------------------------

         Due to the sale of the manufacturing  division in 1997, the Company has
discontinued its research and development activities.

Backlog
-------

         Due to the nature of its business, the Company does not have a material
amount of backlog at any given time.

Regulation
----------

         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
---------

         As of December 27, 1997, the Company had  approximately  210 employees.
Approximately  33  of  these  employees  working  at  the  Company's  Portsmouth
facilities  are  members  of the  Bakery,  Confectionery  and  Tobacco  Workers'
International Union, AFL-CIO, under a contract which expires in October, 1998.

Executive Officers
------------------

         STEVEN C. HOUFEK,  49, 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 May 1992.

         VERNON W.  MULES,  68, 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., 52, 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,  34,  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,  54, has served as Vice  President - Purchasing  since
February 1994. Prior to that time, he was Director of Purchasing.

         WILLIAM E.  MOODY,  JR.,  48,  has been Vice  President  - Sales  since
February 1994. Prior to that time, he was Sales Manager.

         JERRY D. NIXON,  41, 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,  42, was elected Vice  President -  Operations  in
February 1996. Since joining the Company in October 1994, Mr. Ratliff has served
as Project Manager.  Prior to October 1994, Mr. Ratliff was a United States Navy
Supply Corps Officer.

         ROBERT F. HORTON, 30, was elected Vice President - Business Development
in  February  1996.  Mr.  Horton has served as a district  sales  manager  since
October 1995. Prior to that time, he was Program Accounts Manager.


                           ---------------------------
                           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 2.   PROPERTIES
--------------------

         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 1999, and includes two one-year renewal options.

ITEM 3.   LEGAL PROCEEDINGS
---------------------------

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------

     None.

PART II.
--------

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS
-----------------------------------------------------------


Market and Price Information
----------------------------

         The Company's common stock,  $1.00 par value (the "Common  Stock"),  is
traded in the over-the-counter 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 payable on January 12, 1998, to  stockholders  of record on December
12, 1997.

                             First Quarter     Second Quarter
                             --------------    --------------
                             High      Low     High      Low
                             -----    -----    -----    -----

               1996          2.917    2.167    2.833    2.167
               1997          3.583    2.667    3.667    2.500

                             Third Quarter     Fourth Quarter
                             --------------    --------------
                             High      Low     High      Low
                             -----    -----    -----    -----

               1996          3.167    2.000    3.500    2.667
               1997          5.083    3.583    7.500    4.500


         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
----------------------

         As of March 20,  1998,  there  were 253  record  holders  of the Common
Stock.

Dividends
---------

         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  payable on January 12,  1998,  to
stockholders of record on December 12, 1997.

                                    1997              1996
                                  ------            ------

         First Quarter            $ .027            $ .027
         Second Quarter             .027              .027
         Third Quarter              .027              .027
         Fourth Quarter             .026              .026
                                  ------            ------
                  Total           $ .107            $ .107
                                  ------            ------
                                  ------            ------


         Management  presently  expects to  continue  declaring  quarterly  cash
dividends if it proves possible to do so.

NOTE: The aggregate market value of voting stock held by 240  non-affiliates  of
the  registrant as of March 20, 1998,  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 $ 6.438,  the  average of the bid and
asked prices of the Company's stock in the over-the-counter 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
-------------------------------

<TABLE>
<CAPTION>
                                 1997             1996              1995              1994             1993
<S>                         <C>               <C>              <C>               <C>              <C>
Net sales                   $   85,233,420    $  80,632,688    $   76,585,835    $  73,368,742    $   70,771,064

Income (loss) before
  cumulative effect of
  change in accounting
  for income taxes          $      947,498    $     927,820    $   (1,212,284)   $     364,073    $      141,109

Cumulative effect of
  change in accounting
  for income taxes          $          -      $         -      $          -      $         -      $      134,000

Net income (loss)           $      947,498    $     927,820    $   (1,212,284)   $     364,073    $      275,109

Weighted average number
  of shares outstanding          1,496,085        1,500,468         1,511,652        1,516,845         1,522,223

Earnings (loss) per share
  before cumulative effect
  of change in accounting
  for income taxes          $          .63    $         .62    $         (.80)   $         .24    $          .09

Cumulative effect per
  share of change in
  accounting for  income
  taxes                     $          -      $         -      $          -      $         -      $          .09

Net earnings (loss) per share:
 Basic                      $          .63    $         .62    $         (.80)   $         .24    $          .18
 Diluted                    $          .63    $         .62    $         (.80)   $         .24    $          .18

Cash dividends per share    $          .11    $         .11    $          .11    $         .11    $          .11

Total assets                $   16,444,817    $  15,932,286    $   16,086,077    $  16,797,863    $   14,838,266

Long-term debt, less
  current portion           $    2,737,910    $   5,065,000    $    6,688,334    $   5,031,667    $    4,390,000

Total stockholders'
  equity                    $    8,836,363    $   8,054,907    $    7,303,060    $   8,700,431    $    8,519,329

Stockholders' equity per
  share                     $         5.91    $        5.38    $         4.86    $        5.75    $         5.60

</TABLE>


<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------


Results of Operations
---------------------

     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.

      Net  sales in 1996  were 5.3%  ahead of the 1995  sales of $76.6  million.
Sales  under a contract  with the United  States  Department  of Defense of $9.3
million more than offset a decrease in sales of $2.0 million  resulting from the
sale of the  consumer  operation  in the third  quarter of 1995 and $0.8 million
from the sale of the  Company's  gourmet  foods  operation in the third  quarter
1996.

     The  Company's  gross profit  margin  (gross  profit as a percentage of net
sales)  increased  slightly  from 16.3% in 1996 to 16.5% in 1997.  The Company's
gross  profit  margin  decreased  from  17.7%  in 1995 to  16.3%  in  1996.  The
elimination  of the consumer  division  with its higher  mark-up was the primary
cause of the 1996 decline.

     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.
The 1997  decrease was the result of the increase in unit volume sales without a
corresponding  increase in selling,  general and administrative  expenses.  This
decrease was offset by a $468,000 increase in the Company's bad debt expense.

      Selling, general and administrative expenses, expressed as a percentage of
net sales,  decreased  in 1996 to 14.8% from 18.6% in 1995.  In 1996 the sale of
the consumer operation was the primary cause of the decline in selling,  general
and  administrative  expenses,  along  with a  $400,000  decrease  in health and
commercial insurance.  The remainder of the decline was due to a $763,000 pretax
charge the  Company  recorded  during  the fourth  quarter of 1995 to reduce the
carrying value of fixed assets and  inventories  of the Company's  gourmet foods
operation,  TWB Gourmet Foods, Inc.  ("TWB"),  to estimated net realizable value
and to provide for other costs to exit the gourmet foods business.  TWB incurred
substantial net operating losses since its inception in 1994.

     Interest  expense  was  $242,000  in 1997  compared to $469,000 in 1996 and
$462,000 in 1995.  Decreased  borrowing levels and lower interest rates were the
cause of the lower  expense in 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 $566,000 for 1997  compared to income tax benefit of
$202,000 for 1996 and expense of $97,000 for 1995.  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.

     The  Company  reported  net income of  $947,000 or $0.63 per share for 1997
compared to a net income of $928,000 or $0.62 per share for 1996 and net loss of
$1,212,000  or $.80 per  share  in 1995.  Losses  incurred  by TWB in 1995  were
$1,390,000, or $0.92 per share, which included an operating loss of $627,000 and
the previously described $763,000 pretax charge.


Effects of Inflation
--------------------

     Over the past three  years,  the  effects  of  inflation  on the  Company's
operations have been negligible, averaging less than 4% per year.

Liquidity
---------

     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:


                                    1997           1996          1995
                                    ----           ----          ----

Total debt to total debt plus
 stockholders' equity                .27            .41           .48

Current assets to current
 liabilities                        2.81           4.36          5.66

Inventory turnover
 (cost of goods sold
 to ending inventory)              15.23          15.00         12.99

      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 .48 at December
30, 1995 to .41 at December 28, 1996 was due to improved financial results which
enabled the Company to reduce its long-term debt. The ratio of current assets to
current liabilities decreased to 4.36 at December 28, 1996 from 5.66 at December
30, 1995,  primarily due to increases in the current  portion of long-term  debt
and income taxes payable.

      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 12.99 in 1995 to 15.00 in 1996
and  15.23 in 1997,  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 27, 1997, the Company had $5,979,000 of additional
borrowing capacity under its credit line.

     The Company's business is characterized by high unit volume sales and rapid
turnover of inventories and accounts  receivable.  Because of the rapid turnover
rate,  the Company  considers its  inventories  and accounts  receivable  highly
liquid and readily  convertible  into cash.  The Company is aware of no demands,
commitments,  events, or uncertainties that are reasonably likely to result in a
material increase or decrease in its liquidity in the foreseeable future.

     In September 1995, the Company sold  substantially all of the assets of 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 is included in the
Other Assets section of the Company's consolidated balance sheet at December 30,
1995.  The note was paid 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 $96,000.

Capital Resources
-----------------

     The  Company's  debt  financing  at December  27,  1997,  consisted  of the
following:

1. A  $7,500,000  revolving  bank note at LIBOR  plus  1.50%.  The LIBOR rate at
December  27,  1997 was  5.97%.  The note is due three  years  after the  annual
renewal date,  currently July, 2000,  subject to annual renewal.  As of December
27, 1997, the Company had borrowed  $1,521,000  against this credit line and had
$5,979,000 of additional borrowing capacity.

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 27, 1997, the Company had fully
utilized the Industrial Revenue Bond and the outstanding balance was $600,000.

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.  As of December 27, 1997, the  outstanding
balance was $1,150,000.  The funds were used to finance the increased  inventory
and accounts  receivable  required to service a one-year contract awarded to the
Company in January 1996 by the United  States  Department  of Defense to furnish
food items to various military installations. The contract contains three yearly
renewal  options and was  renewed  for 1998.  The United  States  Department  of
Defense had  estimated  annual  sales  volume to be  approximately  $19 million.
Actual sales volume for fiscal 1997 was $13.5 million.

     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
--------------------

     Many computer systems, programs, and components currently record years in a
two-digit  format.  Such computer  systems,  if not modified,  will be unable to
recognize  properly  dates  beyond  the  year  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 computer systems of customers,  suppliers,
and  financial  organizations  for  accurate  exchange of data.  Management  has
preliminarily  assessed  risks and costs  related  to  addressing  the Year 2000
Problem as it relates to the Company  and its  information  systems.  Based upon
this  assessment,  the Company  does not believe  that the  modification  of the
Company's  systems to address such  matters  will have a material  impact on the
Company's  financial  position  or results of  operations.  There are,  however,
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 may be beyond the  Company's  control,  and all of which may cause
results to be different from those currently anticipated by the Company.



<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

                                                                          Page
                                                                          ----
Financial Statements

   Report of Independent Accountants
   Consolidated Balance Sheets at December 27, 1997 and
     December 28, 1996
   Consolidated Statements of Income for the three years ended
     December 27, 1997
   Consolidated Statements of Stockholders' Equity for the three
     years ended December 27, 1997
   Consolidated Statements of Cash Flows for the three years ended
     December 27, 1997
   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 27, 1997 and December
28,  1996, and  the results of their operations and their cash flows for each of
the three fiscal years in the period ended December 27, 1997, 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.



Price Waterhouse LLP
    (Signature)

Norfolk, Virginia
February 12, 1998







<PAGE>

<TABLE>
DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                            December 27,          December 28,
                                                                                1997                  1996
<S>                                                                       <C>                  <C>
                        ASSETS

Current assets:
   Cash                                                                   $         26,929     $         372,687
   Accounts receivable - trade, net                                              8,566,995             6,924,656
   Inventories                                                                   4,669,291             4,497,699
   Deferred income taxes                                                           372,220               386,271
   Prepaid expenses and other current assets                                        68,166                91,042
                                                                          ----------------     -----------------

      Total current assets                                                      13,703,601            12,272,355
                                                                          ----------------     -----------------

Property, plant and equipment - at cost:
   Land                                                                            280,827               280,827
   Buildings                                                                     3,608,055             4,112,608
   Delivery equipment                                                              169,195               347,242
   Plant and refrigeration equipment                                             1,590,626             4,170,355
   Office equipment                                                                491,078               699,019
   Leasehold improvements                                                              -                   6,062
                                                                          ----------------     -----------------
                                                                                 6,139,781             9,616,113
   Less - accumulated depreciation                                               3,513,216             6,047,739
                                                                          ----------------     -----------------
                                                                                 2,626,565             3,568,374
                                                                          ----------------     -----------------
Other assets                                                                       114,651                91,557
                                                                          ----------------     -----------------
                                                                          $     16,444,817     $      15,932,286
                                                                          ================     =================

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                      $        533,333     $         533,333
   Accounts payable                                                              3,198,641             1,631,114
   Income taxes payable                                                            891,657               446,775
   Accrued salaries, commissions and bonuses                                       182,965               140,617
   Other accrued liabilities                                                        63,948                60,540
                                                                          ----------------     -----------------
      Total current liabilities                                                  4,870,544             2,812,379
Long-term debt - less current portion                                            2,737,910             5,065,000
                                                                          ----------------     -----------------
      Total liabilities                                                          7,608,454             7,877,379
                                                                          ----------------     -----------------

Stockholders' equity:
   Common  stock  - $1  par  value;  authorized  2,000,000  shares,
     issued  and outstanding 1,495,023 shares at December 27,
     1997 and 1,497,078 shares at December 28, 1996                              1,495,023             1,497,078
   Additional paid-in capital                                                    2,807,037             2,811,441
   Retained earnings                                                             4,534,303             3,746,388
                                                                          ----------------     -----------------
      Total stockholders' equity                                                 8,836,363             8,054,907
                                                                          ----------------     -----------------
                                                                          $     16,444,817     $      15,932,286
                                                                          ================     =================

Commitments (Note 7)

                 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 27,          December 28,          December 30,
                                                          1997                  1996                  1995
<S>                                                 <C>                   <C>                  <C>
Net sales                                           $     85,233,420      $     80,632,688     $      76,585,835
Cost of sales                                             71,133,101            67,481,372            63,012,874
                                                    ----------------      ----------------     -----------------
Gross profit                                              14,100,319            13,151,316            13,572,961
                                                    ----------------      ----------------     -----------------
Selling, general and administrative
  expenses                                                12,344,934            11,956,604            14,225,899
Interest expense                                             241,696               468,652               462,231
                                                    ----------------      ----------------     -----------------
                                                          12,586,630            12,425,256            14,688,130
                                                    ----------------      ----------------     -----------------
Income (loss) before income taxes                          1,513,689               726,060            (1,115,169)
Income tax expense (benefit)                                 566,191              (201,760)               97,115
                                                    ----------------      ----------------     -----------------
Net income (loss)                                   $        947,498      $        927,820     $      (1,212,284)
                                                    ================      ================     =================

Earnings (loss) per share:
  Basic                                             $            .63      $            .62     $            (.80)
                                                    ================      ================     =================
  Diluted                                           $            .63      $            .62     $            (.80)
                                                    ================      ================     =================


                 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 31, 1994          $     1,512,777    $     2,835,607     $     4,352,047    $     8,700,431

Cash dividends ($.11 per share)                    -                  -              (161,123)          (161,123)

Net loss for the year ended
  December 30, 1995                                -                  -            (1,212,284)        (1,212,284)

Acquisition of treasury stock,
  at cost - 8,986 shares                        (8,986)           (14,978)                -              (23,964)
                                       ---------------    ---------------     ---------------    ---------------
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
                                       ===============    ===============     ===============    ===============

</TABLE>


                 See notes to consolidated financial statements.










<PAGE>

<TABLE>


DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                       Year ended            Year ended            Year ended
                                                      December 27,          December 28,          December 30,
                                                          1997                  1996                  1995
<S>                                                 <C>                   <C>                  <C>
Cash flows from operating activities:
   Net income (loss)                                $        947,498      $        927,820     $      (1,212,284)
   Adjustments to reconcile net income
     (loss) to net cash provided by (used
     for) operations:
      Depreciation                                           274,686               469,445               675,681
      Loss (gain) on sale of property, plant
        and equipment                                          5,932               (99,129)              300,644
      (Increase) decrease in assets:
          Accounts receivable, net                        (1,642,339)           (1,162,797)              373,661
          Inventories                                       (171,592)              351,405              (327,351)
          Deferred income taxes                               14,051              (192,932)               54,957
          Prepaid expenses and other current
            assets                                            22,876               155,637              (106,793)
          Other assets                                       (23,094)              741,612              (697,634)
      Increase (decrease) in liabilities:
          Current portion of long-term debt                      -                 400,000                   -
          Accounts payable                                 1,567,527                84,007              (547,992)
          Income taxes payable                               444,882               446,775              (399,504)
          Accrued salaries, commissions
            and bonuses                                       42,348                63,911               (51,211)
          Accrued employee group insurance                       -                (174,026)              (41,383)
          Other accrued liabilities                            3,408               (53,040)               67,977
          Deferred income taxes, long-term                       -                 (49,931)                1,031
                                                    ----------------      ----------------     -----------------
                                                           1,486,183             1,908,757            (1,910,201)
                                                    ----------------      ----------------     -----------------

Cash flows from investing activities:
   Additions to property, plant and
     equipment                                              (266,544)             (250,782)             (599,763)
   Proceeds from sale of property, plant
     and equipment                                           927,735                   700               190,496
                                                    ----------------      ----------------     -----------------
                                                             661,191              (250,082)             (409,267)
                                                    ----------------      ----------------     -----------------

Cash flows from financing activities:
   Long-term borrowings                                          -               1,750,000             1,790,000
   Reductions of long-term debt                           (2,327,090)           (3,373,334)             (133,333)
   Cash dividends                                           (159,583)             (160,072)             (161,123)
   Acquisition of treasury stock                              (6,459)              (15,901)              (23,964)
                                                    ----------------      ----------------     -----------------
                                                          (2,493,132)           (1,799,307)            1,471,580
                                                    ----------------      ----------------     -----------------
Net decrease in cash                                        (345,758)             (140,632)             (847,888)
Cash at beginning of year                                    372,687               513,319             1,361,207
                                                    ----------------      ----------------     -----------------
Cash at end of year                                 $         26,929      $        372,687     $         513,319
                                                    ================      ================     =================

                 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 1997 (and its majority-owned and wholly-owned subsidiaries in 1996 and 1995).
All material  intercompany  accounts and  transactions  have been  eliminated in
consolidation.   The   consolidated   group  is  engaged   in  the   processing,
manufacturing  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.

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  -  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

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. In addition,  the Company had no potentially dilutive securities at
December 27, 1997 and accordingly basic and diluted EPS are the same.



<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


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.

NOTE 2 - ACCOUNTS RECEIVABLE

Accounts receivable are net of allowances for doubtful accounts as follows:
<TABLE>
<CAPTION>

                                                                            December 27,          December 28,
                                                                                1997                  1996
<S>                                                                       <C>                  <C>
Trade accounts receivable                                                 $      9,195,367     $       7,266,134
Allowances for doubtful accounts                                                  (628,372)             (341,478)
                                                                          ----------------     -----------------
                                                                          $      8,566,995     $       6,924,656
                                                                          ================     =================

NOTE 3 - INVENTORIES

Inventories used in determining cost of sales are as follows:
<CAPTION>

                                                                                 Raw                Finished
                                                          Total               materials             products

December 31, 1994                                   $      4,521,753      $      1,497,222     $       3,024,531
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

The differences between FIFO and LIFO inventories are as follows:
<CAPTION>

                                December 27,           December 28,         December 30,          December 31,
                                    1997                   1996                 1995                  1994

FIFO cost                     $       5,419,163     $      5,517,080      $      5,680,063     $       5,197,592
LIFO reserves                          (749,872)          (1,019,381)             (830,959)             (675,839)
                              -----------------     ----------------      ----------------     -----------------
LIFO cost                     $       4,669,291     $      4,497,699      $      4,849,104     $       4,521,753
                              =================     ================      ================     =================
</TABLE>

The $269,509  change in LIFO reserves in 1997  increased net income and earnings
per share by approximately $166,000 and $.11, respectively.  The $188,422 change
in LIFO  reserves  in 1996  decreased  net  income  and  earnings  per  share by
approximately  $121,000  and $.08,  respectively.  The  $155,120  change in LIFO
reserves in 1995  decreased  net income and earnings per share by  approximately
$100,000 and $.07, respectively.


<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


NOTE 4 - LONG-TERM DEBT

Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                            December 27,          December 28,
                                                                                1997                  1996
<S>                                                                       <C>                  <C>
Long-term revolving bank note                                             $      1,521,243     $       3,315,000
Bank term loan                                                                   1,150,000             1,550,000
Industrial Revenue Bond                                                            600,000               733,333
                                                                          ----------------     -----------------
                                                                                 3,271,243             5,598,333
Less - current portion                                                             533,333               533,333
                                                                          ----------------     -----------------
Noncurrent portion                                                        $      2,737,910     $       5,065,000
                                                                          ================     =================
</TABLE>

Principal payments are due as follows: 1998 - $533,333;  1999 - $533,333; 2000 -
$2,004,576 and 2001 - $200,001.

The Company has a $7,500,000  revolving bank note at LIBOR plus 1.50%. The LIBOR
rate at  December  27,  1997 was 5.97%.  The note is due three  years  after the
annual renewal date,  currently July 2000, 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
$5,978,757 of  additional  borrowing  capacity  available on this credit line at
December 27, 1997.

The  Company  has a  $1,750,000  bank term loan with an  outstanding  balance of
$1,150,000 at LIBOR plus 1.50%. The loan is payable in quarterly installments of
$100,000 plus interest through January 1, 2001.

The Company  obtained an 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 27, 1997 was 8.50%.
The bond is payable in monthly  installments  of $11,111 plus  interest  through
July 1, 2001.

Cash paid for interest totaled $241,696, $468,652 and $462,231 in 1997, 1996 and
1995, respectively.

Each of the  three  loans is  secured  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 1997.

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 1997,  1996 and 1995 were  $79,955,
$91,517 and $107,365, respectively.


<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


Note 6 - Income Tax Expense

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:
<TABLE>
<CAPTION>

                                                                     1997             1996              1995
<S>                                                              <C>              <C>              <C>
Current federal                                                  $     459,623    $      52,109    $      27,169
Current state                                                           92,517          (11,006)          13,958
Deferred federal                                                         2,386         (201,635)          45,443
Deferred state                                                          11,665          (41,228)          10,545
                                                                 -------------    -------------    -------------
                                                                 $     566,191    $    (201,760)   $      97,115
                                                                 =============    =============    =============

The effective income tax rates vary from the statutory U.S. federal income tax rate as follows:

<CAPTION>

                                            1997                        1996                        1995
                                --------------------------     ----------------------      ---------------------
                                                  Percent                    Percent                     Percent
                                                    of                         of                          of
                                    Dollar        pretax       Dollar        pretax        Dollar        pretax
                                    amount        income       amount        income        amount        income

Income taxes computed
  at statutory rates            $     514,654      34.0%   $     246,860       34.0%   $    (379,157)     (34.0)%
State income taxes, net
  of federal income tax
  benefit                              64,937       4.3           31,148        4.3           16,172        1.5
Fuel tax credit                       (15,278)     (1.0)         (15,278)      (2.1)         (16,975)      (1.5)
Nonrecognition (recognition)
  of subsidiary net
  operating loss                          -         -           (467,954)     (64.5)         472,546       42.3
Other                                   1,878       0.1            3,464        0.5            4,529        0.4
                                -------------      ----    -------------       ----    -------------      -----
                                $     566,191      37.4%   $    (201,760)    (27.8)%   $      97,115       8.7%
                                =============      ====    =============     =====     =============       ===
</TABLE>









<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


Significant  components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>

                                                                            December 27,          December 28,
                                                                                1997                  1996
<S>                                                                       <C>                  <C>
Simplified LIFO differences                                               $         57,425     $          78,065
Capitalized inventory cost                                                          24,687                23,539
Allowances for doubtful accounts                                                   240,604               130,752
Net operating loss of subsidiary                                                    94,996               201,627
                                                                          ----------------     -----------------
Gross deferred tax asset                                                           417,712               433,983
Involuntary conversion                                                             (45,492)              (47,712)
                                                                          ----------------     -----------------
Net deferred tax asset                                                    $        372,220     $         386,271
                                                                          ================     =================
</TABLE>

Cash paid (refunded) for income taxes totaled  $73,037,  $(185,033) and $574,876
in 1997, 1996 and 1995, respectively.

NOTE 7 - 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

             1998                                             $        527,724
             1999                                                      527,724
             2000                                                      527,724
             2001                                                      527,724
             2002                                                      527,724
             2003                                                      263,862
                                                              ----------------
                                                              $      2,902,482
                                                              ================

Total rental expense charged to  consolidated  operations in 1997, 1996 and 1995
was $1,182,909, $1,043,642 and $1,004,855, respectively. Rental expense in 1997,
1996 and 1995 included  contingent rentals of approximately  $380,681,  $396,191
and $360,005, respectively.

NOTE 8 - SALE OF ASSETS

On July 20, 1995, the Company sold certain  properties located in Carrol County,
Maryland. The gross sale price was $165,000, with net cash proceeds of $135,610.
The cash was used to reduce the Company's long-term debt. The net pretax gain on
the sale of  $130,055  was  included  in  selling,  general  and  administrative
expenses.












<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


On September 3, 1995,  the Company sold  substantially  all of the assets of the
Home Food  Service  operation  to Value Added Food  Services,  Inc.,  a Maryland
corporation  ("VAFS"),  and ceased  operations  in the  consumer  portion of its
business due to unprofitability.  Vernon W. Mules,  Chairman of the Board of the
Company,  and his wife,  are the  principal  stockholders  of VAFS.  All finance
receivables,  inventory,  delivery  equipment,  processing  equipment and office
equipment were sold.  The total sale price was  $1,154,173  with a $115,417 cash
down payment and the balance of  $1,038,756 in the form of a note secured by the
assets sold and personal guarantee of the Chairman. The note was paid in full in
1996, including all accrued interest at prime. The assets were sold primarily at
net book value, except for finance receivables which were discounted by 10%. The
net pretax loss on the sale, including abandoned assets and other writeoffs, was
$96,498.

During  the fourth  quarter  of 1995,  the  Company  incurred a $763,000  pretax
charge, which is included in selling, general and administrative expenses in the
consolidated  statement of income,  primarily  to reduce the  carrying  value of
fixed assets and  inventories  of its TWB Gourmet  Foods,  Inc.  (TWB) 70% joint
venture to estimated net realizable value and to provide for other costs to exit
the business.  TWB incurred net operating  losses since  inception in the fourth
quarter of 1994; the 1995 net operating loss approximated  $1,390,000  including
the $763,000 charge.

On 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  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
$136,829 of free trade credit from the buyer for a total sale price of $186,829.
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.








<PAGE>

Doughtie's Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


NOTE 9 - QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the results of operations by quarters:
<TABLE>
<CAPTION>

                                                                                                        Basic and
                                                                                                         Diluted
                                                                      Gross                Net          Earnings
Quarter                                        Net Sales             Profit              Income         Per Share
<S>                                        <C>                  <C>                  <C>                <C>
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
                                           =================    =================    ===============    ========

1996:
   First                                   $      15,979,850    $       2,664,741    $         6,966    $    -
   Second                                         22,457,784            3,920,723            413,453         .28
   Third                                          22,017,932            3,428,855             61,906         .04
   Fourth                                         20,177,122            3,136,997            445,495         .30
                                           -----------------    -----------------    ---------------    --------
                                           $      80,632,688    $      13,151,316    $       927,820    $    .62
                                           =================    =================    ===============    ========
</TABLE>
Unusual items affecting 1997 and 1996 net income in the above quarterly data are
discussed in Notes 6 and 8.




<PAGE>

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------------

     None.


PART III.
---------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

     Information  as to the  Company's  Board of  Directors is  incorporated  by
reference to material  contained  under the heading  "Nominees" in the Company's
proxy  statement for its annual  meeting of  stockholders  scheduled for May 21,
1998.

     With respect to information  concerning the Company's  executive  officers,
see PART I, ITEM 1, BUSINESS: Executive Officers.


ITEM 11.  EXECUTIVE COMPENSATION
--------------------------------

     Information as to executive  compensation  is  incorporated by reference to
material contained under the headings  "Executive  Compensation" and "Directors'
Compensation"  in the  Company's  proxy  statement  for its  annual  meeting  of
stockholders scheduled for May 21, 1998.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT
-------------------------------------------------------------

     Information  as to  security  ownership  of certain  beneficial  owners and
management is incorporated by reference to material  contained under the heading
"Voting Securities and Principal  Stockholders" in the Company's proxy statement
for its annual meeting of stockholders scheduled for May 21, 1998.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     Information  as  to  certain  relationships  and  related  transactions  is
incorporated  by  reference  to material  contained  under the heading  "Certain
Transactions"  in the  Company's  proxy  statement  for its  annual  meeting  of
stockholders scheduled for May 21, 1998.

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  Annual Report on Form 10-K for the year
          ended December 29, 1984).

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.

4(a)(3).  Second  Amendment to Amended and Restated Credit Agreement dated as of
          July 1, 1997 between the Company and Crestar Bank.

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  October 11, 1996 between the Company and the Bakery,
          Confectionery and Tobacco Workers'  International  Union, Local No. 66
          (incorporated by reference to Exhibit 10(a)(1) to the Company's Annual
          Report on Form 10-K for the year ended December 28, 1996).

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). Crestar Bank  Defined  Contribution  Master Plan and Trust  Agreement,
          Basic Plan  Document  #01,  an employee  benefit  plan under which the
          Company   became  a   participating   employer   on  January  1,  1992
          (incorporated by reference to Exhibit 10(d)(1) to the Company's Annual
          Report on Form 10-K for the year ended December 26, 1992).

10(d)(2). Crestar Bank Adoption  Agreement  #005, Non  Standardized  Code 401(k)
          Profit  Sharing  Plan,  an  agreement  by which the  Company  became a
          participating employer in the Crestar Bank Defined Contribution Master
          Plan and Trust Agreement dated June 5, 1992 (incorporated by reference
          to Exhibit  10(d)(2) to the  Company's  Annual Report on Form 10-K for
          the year ended December 26, 1992).

10(e)(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(e)(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(e)(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(f)(1). Closing  Agreement dated as of September 3, 1995,  among Dutterer's of
          Manchester  Corporation,  Doughtie's  Foods,  Inc.,  Value  Added Food
          Services, Inc., Vernon W. Mules, and Kathryn M. Mules (incorporated by
          reference to Exhibit  10(f)(1) to the Company's  Annual Report on Form
          10-K for the year ended December 30, 1995).

10(f)(2). Term Note of Value Added Food Services,  Inc. dated as of September 3,
          1995, in the original principal amount of $1,077,821.00  (incorporated
          by reference to Exhibit  10(f)(2) to the  Company's  Annual  Report on
          Form 10-K for the year ended December 30, 1995).

10(f)(3). Amendment  to Term Note dated as of October  1,  1995,  between  Value
          Added Food  Services,  Inc. and  Dutterer's of Manchester  Corporation
          (incorporated by reference to Exhibit 10(f)(3) to the Company's Annual
          Report on Form 10-K for the year ended December 30, 1995).

10(f)(4). Assumption of  Liabilities  and  Obligations  dated as of September 3,
          1995,  by Value  Added  Food  Services,  Inc.  and Vernon W. Mules and
          Kathryn  M.  Mules  for  the  benefit  of   Dutterer's  of  Manchester
          Corporation and Doughtie's Foods,  Inc.  (incorporated by reference to
          Exhibit  10(f)(4)to  the Company's  Annual Report on Form 10-K for the
          year ended December 30, 1995).

10(f)(5). Bill of Sale dated as of September 3, 1995, by Doughtie's  Foods, Inc.
          and Dutterer's of Manchester Corporation to Value Added Food Services,
          Inc.  (incorporated  by reference to Exhibit  10(f)(5)to the Company's
          Annual Report on Form 10-K for the year ended December 30, 1995).

10(f)(6). Guaranty dated as of September 3, 1995, by Kathryn M. Mules,  in favor
          of Dutterer's of Manchester Corporation  (incorporated by reference to
          Exhibit  10(f)(6) to the Company's  Annual Report on Form 10-K for the
          year ended December 30, 1995).

10(f)(7). Guaranty  dated as of September 3, 1995, by Vernon W. Mules,  in favor
          of Dutterer's of Manchester Corporation  (incorporated by reference to
          Exhibit  10(f)(7) to the Company's  Annual Report on Form 10-K for the
          year ended December 30, 1995).

10(f)(8). Security  Agreement dated as of September 3, 1995, between Value Added
          Food  Services,   Inc.  And   Dutterer's  of  Manchester   Corporation
          (incorporated by reference to Exhibit  10(f)(8)to the Company's Annual
          Report on Form 10-K for the year ended December 30, 1995).

10(g).    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(h)(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.

10(h)(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.

10(h)(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.

21        List of Subsidiaries

27        Financial Data Schedule

b)
Reports on Form 8-K:
--------------------

     The  Company  filed one report on Form 8-K  during the last  quarter of the
Company's fiscal year ended December 27, 1997. In the Form 8-K filed on December
9, 1997, the Company reported under Item 5 that the Company's Board of Directors
had approved a three-for-two split of the Company's common stock effected in the
form of a stock  dividend,  with cash in lieu of fractional  shares,  and a cash
dividend of four cents per share (on a pre-split basis),  payable on January 12,
1998, to  shareholders  of record at the close of business on December 12, 1997.
No financial statements were filed with the referenced report.







<PAGE>

                     DOUGHTIE'S FOODS, INC. AND SUBSIDIARIES
          SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
          ------------------------------------------------------------

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------


           Column A                                    Column B        Column C        Column D        Column E

------------------------------------------------------------------------------------------------------------------


                                                      Balance at      Charged to                      Balance at
                                                       beginning       costs and                        end of






Description                                            of period       expenses      Deductions(A)      period
<S>                                                   <C>             <C>             <C>            <C>
Valuation account deducted from
  asset to which it applies -
  for doubtful trade receivables:

Year ended December 30, 1995                          $   261,946     $  183,531      $  112,169     $   333,308
                                                      ===========     ==========      ==========     ===========

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
                                                      ===========     ==========      ==========     ===========

Valuation account  deducted from
  asset to which it applies for 
  doubtful  finance receivables:

Year ended December 30, 1995                          $   178,893     $  (25,885)     $  153,008     $       -
                                                      ===========     ==========      ==========     ===========

Year ended December 28, 1996                          $       -       $      -        $      -       $       -
                                                      ===========     ==========      ==========     ===========

Year ended December 27, 1997                          $       -       $      -        $      -       $       -
                                                      ===========     ==========      ==========     ===========

Valuation account deducted from 
  asset to which it applies for  
  deferred  tax asset:

Year ended December 30, 1995                          $    52,798     $  472,546      $      -       $   525,344
                                                      ===========     ==========      ==========     ===========

Year ended December 28, 1996                          $   525,344     $ (525,344)     $      -       $       -
                                                      ===========     ==========      ==========     ===========

Year ended December 27, 1997                          $       -       $      -        $      -       $       -
                                                      ===========     ==========      ==========     ===========

(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, 1998                    /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, 1998                    /s/   STEVEN C. HOUFEK
                                          ------------------------------
                                          Steven C. Houfek

                                          President, Chief Executive
                                          Officer and Director


Dated:   March 26, 1998                    /s/   MARION S. WHITFIELD, JR.
                                          ------------------------------
                                                Marion S. Whitfield, Jr.

                                          Senior Vice President and
                                          Director (Principal
                                          Financial and Accounting
                                          Officer)


Dated:   March 26, 1998                   /s/   VERNON W. MULES
                                          ------------------------------
                                          Vernon W. Mules

                                          Director

Dated:   March 26, 1998                   /s/   JAMES F. CERZA, JR.
                                          ------------------------------
                                          James F. Cerza, Jr.

                                          Director

Dated:   March 26, 1998                   /s/   WILLIAM R. WADDELL
                                          ------------------------------
                                          William R. Waddell

                                          Director

Dated:   March __, 1998                  
                                          ------------------------------
                                          Donald B. Ratcliffe

                                          Director


Dated:   March 26, 1998                   /s/   ADOLPHUS W. HAWKINS, JR.
                                          ------------------------------
                                          Adolphus W. Hawkins, Jr.

                                          Director