Patt Johnson

pjohnson@dmreg.com

Dahl's Foods Inc. has told former workers they will not receive scheduled retirement plan payments this year, potentially leaving hundreds of former employees without money they had expected to receive.

"Due to the past and ongoing financial challenges we face, Dahl's is unable to fund ESOP (employee stock ownership plan) distributions for the 2014 plan year. We are working continuously to improve the company results," the company said in a letter to ESOP members last month.

Craig Moore, Dahl's chief executive, confirmed that the company sent the letter but declined to talk about the ESOP or the company's financial status.

"While we do not comment on proprietary or company financial information, we do reaffirm our commitment to our employees, our customers and our stores," Moore said in an email. "As we work diligently to right this ship, our employee teams and stores have made progress."

For retirees like Jim Hubbartt, that progress can't come quickly enough. He retired as a store director in 2011 and was counting on his ESOP payments for retirement income.

"I stand to lose the rest of my retirement," Hubbartt said. He is teaching classes at the Des Moines Art Center to supplement his income.

"It doesn't look good for any of us getting paid," he said. "And for a lot of people, this was their retirement."

The 83-year-old local grocery store chain closed two under-performing stores in Ankeny and Ames this summer and will shutter a third this month at 1208 Prospect Ave. in West Des Moines. The company has sold five properties, including the three stores that have or will close, a 10.7-acre lot on Meredith Drive in Urbandale where Dahl's had long planned to build a store, and a small sliver of land near the Prospect Avenue location in West Des Moines all in the past six months.

Moore, who came to Dahl's earlier this year to help the struggling company, has set out an ambitious plan to remodel the remaining 10 stores. He's acknowledged that the company's declining reputation is a major stumbling block in returning Dahl's to a competitive position in a grocery market dominated by Hy-Vee, Wal-Mart, Target, Costco, Fareway and Aldi's.

Employee ownership

An employee stock ownership plan allows workers to receive ownership interest in a company. Employees receive or buy ownership stock with the earnings directed toward a retirement program.

Dahl's ESOP was formed in 1975. As of 2012 it had about 773 participants, according to documents the company filed with the Department of Labor.

According to Hubbartt, Dahl's ESOP owns 51 percent of the company. The remaining 49 percent of Dahl's stock is owned by company executives, store directors and managers, and department heads.

Hubbartt has received three payments from the company since he retired. His last check was 20 percent less than those he received the first two years. This year's payment would have been about 80 percent less than last year, he said.

Payouts are based on the price of the company's stock, which is not publicly traded. An independent company determines the value of Dahl's stock, Hubbartt said. He doesn't know the current value.

Susan Lenczewski, an employee benefits and executive compensation attorney in Minneapolis, said at first blush Dahl's decision not to make ESOP distributions is unusual but not unheard of.

"Sometimes a company hits a brick wall and is unable to finance a requirement of the ESOP," she said.

It's possible the company could resume payments later this year or next, Lenczewski said. "The need for inventory and keeping the shelves stocked would seem to be a higher priority" in keeping the company afloat than paying out ESOP distributions if the company's finances are dire, she said. She has not worked with Dahl's and was speaking about ESOPs in general.

Righting the ship

Moore has said that Dahl's directors have had to "make some difficult decisions along the way" to improve the company's performance.

Dahl's owns two of the buildings in which it operates. It sold several properties to Associated Wholesale Grocers of Kansas City in 2011. It now leases the space back from AWG, which also replaced SuperValu as Dahl's chief grocery supplier.

Hubbartt, who retired at age 62 from the Dahl's store on Beaver Avenue in Des Moines, said he suspected the company was in trouble and wanted his payout at retirement in one lump sum, but he didn't have that option.

"When I retired, the stock was at $5.26 a share. Now it's at 55 cents a share," he said, citing the price when he received his last benefit payment.

Greg Wagner, 59, started out as a sacker with Dahl's 36 years ago before working his way up to a job as a store director. After he retired in 2010, he received payouts from the company in 2011 and 2012. His 2013 check was much less, and he hasn't received another payment.

The company called together retirees and former workers in May at the Johnston store to let them know their payments would be made in a couple of months, Wagner said.

"That was kind of a shock," he said. So not getting a payment at all this year was not surprising.

"I don't have any expectations of ever seeing a penny," he said. "You can't get blood out of a turnip."

What are ESOPs?

Employee stock ownership plans are defined contribution plans governed by the Employee Retirement Income Security Act (ERISA). They operate through a plan trust. Generally, all full-time employees working for 1,000 hours or more per year become participants in the plans. They receive allocations of stock in their accounts from contributions made by the company. ESOPs range in size from companies with 10 or 20 employees to companies with tens of thousands. Google, Southwest Airlines and Starbucks all have ESOPs.

Source: National Center for Employee Ownership