SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For Fiscal Quarter Ended September 6, 1997 Commission File Number 33-54928
------------------- ----------
</TABLE>
FF HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2506294
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7530 TIDEWATER DRIVE, P. O. BOX 1289, NORFOLK, VIRGINIA 23501
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (757)480-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding shares at October 21, 1997
- -------------------------------------------------- --------------------------------------
<S> <C>
Class A common stock, par value $.01 per share 41,480
Class B common stock, par value $.01 per share 2,458,520
Class C common stock, par value $.01 per share 1
</TABLE>
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Index to Unaudited Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information:
Item 1. Unaudited Condensed Consolidated Financial Statements:
Unaudited Condensed Consolidated Balance Sheets -
December 28, 1996 and September 6, 1997 1
Unaudited Condensed Consolidated Statements of Loss - 12 weeks ended
September 7, 1996 and September 6, 1997 and
36 weeks ended September 7, 1996 and September 6, 1997 3
Unaudited Condensed Consolidated Statement of Stockholders' Deficit -
36 weeks ended September 6, 1997 4
Unaudited Condensed Consolidated Statements of Cash Flows -
36 weeks ended September 7, 1996 and September 6, 1997 5
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 11
</TABLE>
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 28, September 6,
Assets 1996 1997
------ ------------- ------------
(Unaudited)
<S> <C>
Current assets:
Cash $ 853,560 $ 622,313
Accounts receivable, net of
allowance for doubtful accounts
of $1,003,038 at December 28, 1996 and
$1,054,154 at September 6, 1997 14,792,965 13,793,077
Merchandise inventories:
Assuming the first-in, first-out method 54,164,510 46,753,916
Less adjustment to the last-in, first-out method 3,355,394 3,632,315
----------- ------------
50,809,116 43,121,601
----------- ------------
Prepaid expenses and other current assets 1,355,115 2,429,190
----------- ------------
Total current assets 67,810,756 59,966,181
------------ ------------
Assets held for sale 9,998,102 7,709,426
Property and equipment:
Land 8,727,365 8,727,365
Buildings 62,675,865 66,038,631
Leasehold improvements 35,955,672 35,405,154
Fixtures and equipment 87,093,915 91,228,974
Transportation equipment 608,037 549,257
Construction in progress 894,515 -
------------- -----------
195,955,369 201,949,381
Less accumulated depreciation and amortization 91,778,403 100,832,903
------------ -----------
Net property and equipment 104,176,966 101,116,478
----------- -----------
Favorable lease rights, net of accumulated
amortization of $6,961,559 at December 28, 1996
and $7,392,091 at September 6, 1997 3,540,441 3,105,929
Goodwill, net of accumulated amortization of
$2,348,851 at December 28, 1996 and $3,286,677 at
September 6, 1997 7,227,683 6,289,857
Deferred financing costs, net of accumulated
amortization of $6,372,914 at December 28, 1996
and $7,635,569 at Septembmer 6, 1997 7,859,675 8,130,892
Other, net 175,677 543,376
------------ ------------
$200,789,300 $186,862,139
=========== ===========
(continued)
</TABLE>
-1-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Deficit December 28, September 6,
1996 1997
(Unaudited)
<S> <C>
Current liabilities:
Revolving credit facility (notes 4 and 5) $ - $ 24,681,895
Current installments of notes payable 801,467 377,916
Current installments of obligations under capital leases 3,040,132 3,240,878
Convertible subordinated debentures (note 5) - 4,255,040
Trade accounts payable 36,149,820 26,000,868
Accrued expenses:
Licenses and other taxes 5,407,620 5,187,148
Interest 10,261,199 17,067,222
Insurance claims 4,125,522 6,632,846
Other 7,710,665 6,784,900
------------ ------------
Total accrued expenses 27,505,006 35,672,116
------------ ------------
Accrued costs relating to closed stores, current portion 1,901,305 2,062,682
------------ -------------
Total current liabilities 69,397,730 96,291,395
------------ ------------
Long-term debt, excluding current installments:
Revolving credit facility 24,289,957 -
Notes payable 919,698 643,095
Obligations under capital leases 33,958,653 36,764,569
12.25% senior notes 165,000,000 165,000,000
12.25% senior notes, series A (note 6) 37,074,410 36,874,113
14.25% senior notes (note 6) 85,524,614 91,747,043
Convertible subordinated debentures 4,380,243 -
------------ -----------
Total long-term debt 351,147,575 331,028,820
----------- -----------
Accrued costs relating to closed stores 7,470,884 6,459,562
Deferred credits and other liabilities 3,424,988 2,707,417
------------ ------------
Total liabilities 431,441,177 436,487,194
----------- -----------
14.25% cumulative preferred stock, authorized 700,000 shares; issued 191,679
shares; stated at liquidation value of $100 per share plus accrued
and unpaid dividends 34,427,346 37,810,649
Stockholders' deficit:
Class A common stock; $.01 par value; authorized
2,500,000 shares; issued 41,480 shares 415 415
Class B common stock; $.01 par value; authorized
3,500,000 shares; issued 2,458,520 shares 24,585 24,585
Class C common stock; $.01 par value, authorized
and issued 1 share - -
Additional paid-in capital 10,975,050 10,975,050
Accumulated deficit (274,970,333) (297,326,814)
Stockholder loans (1,108,940) (1,108,940)
------------ ------------
Total stockholders' deficit (265,079,223) (287,435,704)
Commitments, contingencies and subsequent events (note 6)
$200,789,300 $186,862,139
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Loss
12 Weeks Ended September 7, 1996 and September 6, 1997 and
36 Weeks Ended September 7, 1996 and September 6, 1997
(Unaudited)
<TABLE>
<CAPTION>
12 weeks ended 36 weeks ended
September 7, September 6, September 7, September 6,
1996 1997 1996 1997
----------------- ----------------- ----------------- -----------
<S> <C>
Sales $ 180,581,478 $ 160,161,995 $539,568,127 $483,665,004
Cost of sales 139,406,428 121,721,424 414,371,763 367,590,863
----------- ----------- ----------- -----------
Gross profit 41,175,050 38,440,571 125,196,364 116,074,141
Depreciation and amortization (5,072,344) (4,576,528) (14,002,887) (13,715,331)
Other selling, general and
administrative expenses (31,893,044) (28,356,991) (96,394,420) (86,851,066)
Interest expense (10,679,035) (10,867,444) (31,553,453) (32,825,647)
Loss on disposition of assets (153,910) (2,105,470) (251,239) (1,665,818)
Other, net 228,528 1,972 288,971 10,543
----------- ----------- ----------- -----------
Net loss (6,394,755) (7,463,890) (16,716,664) (18,973,178)
Dividends on cumulative preferred stock (1,007,248) (1,141,798) (2,960,498) (3,383,303)
----------- ----------- ----------- -----------
Net loss to common stockholders $ (7,402,003) $ (8,605,688) $ (19,677,162) $ (22,356,481)
=========== =========== ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Deficit
36 Weeks Ended September 6, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common stock Additional Total
Class A Class B Class C Paid-in Accumulated Stockholder Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Loans Deficit
------- ------ ------ ------ ------ ------ ------- ------- ----- -------
<S> <C>
Balance at
December 28,
1996 41,480 $ 415 2,458,520 $24,585 1 $ - 10,975,050 (274,970,333) (1,108,940) (265,079,223)
Net loss - - - - - - - (18,973,178) - (18,973,178)
Preferred stock
dividends - - - - - - - (3,383,303) - (3,383,303)
---------------------------------------------------- ---------------------------------------------------------------
Balance at
September 6,
1997 41,480 $ 415 2,458,520 $24,585 1 $ - 10,975,050 (297,326,814) (1,108,940) (287,435,704)
======== ===== ========== ======== ======= ======= =========== ============ ============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
36 Weeks Ended
September 7, September 6,
1996 1997
------------- -------------
<S> <C>
Cash flows from operating activities:
Net loss $ (16,716,664) $ (18,973,178)
------------ ------------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 14,002,887 13,715,331
Additional 14.25% senior notes issued in lieu of interest 5,368,021 6,160,215
Loss on disposition of assets 251,239 1,665,818
Gain on conversion of convertible subordinated debentures (269,439) (6,546)
Amortization of premium on 12.25% senior notes, series A (179,263) (200,297)
Amortization of discount on 14.25% senior notes 35,577 62,214
LIFO charge to earnings 276,300 276,921
Noncash recognition of deferred revenue (792,581) (738,116)
Changes in assets and liabilities that increase (decrease) cash flows from
operating activities:
Accounts receivable, net 1,140,293 999,888
Merchandise inventories 4,902,566 6,809,046
Prepaid expenses and other current assets (1,007,932) (1,074,075)
Trade accounts payable 210,044 (10,148,952)
Accrued expenses 5,818,991 8,167,110
Accrued costs relating to closed stores (1,441,392) (999,945)
Deferred credits and other liabilities 97,612 20,545
Other, net 246,199 (97,141)
------------ -------------
Total adjustments 28,659,122 24,612,016
----------- -----------
Net cash provided by operating activities 11,942,458 5,638,838
----------- -----------
Cash flows from investing activities:
Acquisitions of property and equipment (16,316,415) (4,589,472)
Proceeds from sale of property and equipment 4,535,822 2,765,586
----------- -----------
Net cash used in investing activities (11,780,593) (1,823,886)
----------- -----------
Cash flows from financing activities:
Borrowings under revolving credit facility 98,225,233 77,456,500
Repayments under revolving credit facility (93,353,394) (77,064,562)
Repayments of long-term debt (780,351) (655,741)
Principal repayments of obligations under capital leases (1,363,656) (2,085,454)
Payment upon conversion of convertible subordinated debentures (3,344,791) (163,070)
Payment of financing costs (617,557) (1,533,872)
----------- -----------
Net cash used in financing activities (1,234,516) (4,046,199)
----------- -----------
Net decrease in cash (1,072,651) (231,247)
Cash at beginning of period 2,322,320 853,560
----------- -----------
Cash at end of period $ 1,249,669 $ 622,313
=========== ===========
(continued)
</TABLE>
-5-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
36 Weeks Ended
September 7, September 6,
1996 1997
--------------- -------------
<S> <C>
Cash paid during the period for:
Interest $ 19,177,951 $ 19,797,414
=========== ===========
Income taxes $ - $ -
=============== ===========
</TABLE>
Supplemental information on non-cash investing activities:
During the 36 week periods ended September 7, 1996 and September 7, 1997, the
Company entered into capital lease obligations of $4,277,847 and $5,092,116,
respectively.
See accompanying notes to condensed consolidated financial statements.
-6-
<PAGE>
FF HOLDINGS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 6, 1997
(Unaudited)
1. Nature of Business
FF Holdings Corporation ("FF Holdings") is the parent of Farm Fresh, Inc.
("Farm Fresh"), a Virginia supermarket chain operating 47 supermarkets (FF
Holdings and Farm Fresh collectively the "Company"). FF Holdings has no
independent operations from Farm Fresh.
2. Basis of Presentation
The condensed consolidated financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and note disclosures required by generally accepted
accounting principles. These statements should be read in conjunction with the
fiscal 1996 Form 10-K filed by FF Holdings. The accompanying condensed financial
statements have not been audited by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management such
condensed financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to summarize fairly FF Holdings
financial position and results of operations.
3. Definition of Fiscal Year
FF Holdings uses a fifty-two/fifty-three week fiscal year ending on the
Saturday nearest to December 31 which is divided into 13 four-week periods for
accounting purposes. Therefore, the first three quarters are comprised of three
periods (twelve weeks) and the fourth quarter is comprised of four periods
(sixteen weeks). The fiscal year ending January 3, 1998 will have fifty-three
weeks of operations with a seventeen week fourth quarter.
4. Revolving Credit Facility
Farm Fresh's current revolving credit facility is scheduled to mature in
January 1998 and therefore has been classified as a current liability on the
accompanying September 6, 1997 Condensed Consolidated Balance Sheet.
5. Convertible Subordinated Debentures
Although the Farm Fresh's convertible subordinated debentures are
convertible on demand, a portion of the revolving credit facility has been
reserved to finance the conversion of all outstanding debentures as they occur.
As a result of classifying the revolving credit facility as a current liability
as of September 6, 1997 as discussed in Note 4, the convertible subordinated
debentures have been classified as a current liability on the accompanying
September 6, 1997 Condensed Consolidated Balance Sheet.
6. Subsequent Events
As previously announced, on September 9, 1997 Farm Fresh reached an
agreement in principle for Richfood Holdings, Inc. to acquire substantially all
of the operating assets of Farm Fresh and to assume substantially all of the
operating liabilities, including all trade liabilities, of Farm Fresh (the
"Acquisitions"), which Acquisition was approved by an informal committee
comprised of holders of a substantial majority of Farm Fresh's 12.25% Senior
Notes and 12.25% Senior Notes, Series A (collectively, the "Senior Notes"). The
agreement in principle is subject to the negotiation and execution of a
definitive agreement and the terms and conditions contained therein. The
Acquisition transaction is expected to close during the first quarter of 1998.
On October 1, 1997, Farm Fresh failed to make the required interest payment due
under the Senior Notes as scheduled in order to preserve working capital.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FF Holdings Corporation ("FF Holdings") is the parent of Farm Fresh, Inc. ("Farm
Fresh"), a Virginia supermarket chain operating 47 supermarkets (FF Holdings and
Farm Fresh collectively, the "Company"), FF Holdings has no independent
operations from Farm Fresh. All statements and information herein, other than
statements of historical fact, are forward looking statements that are based
upon a number of assumptions concerning future conditions that ultimately may
prove to be inaccurate. These forward looking statements may be identified by
the use of words such as "belief," "anticipate," and "expect," and concern,
among other things, Farm Fresh's ability to maintain margins by adjusting its
selling prices; its ability or inability to make cash dividends to FF Holdings
and the consequences associated with such; its short-term business strategy; and
its ability to maintain its credit terms with its suppliers. Many phases of the
Company's operations are subject to influences outside its control. Any one or
any combination of factors could have material adverse effect on Farm Fresh's
business, financial condition and results of operations. These factors include
Farm Fresh's dependence on its revolving credit facility, which is scheduled to
mature in January 1998, capital expenditure limitations, economic, competitive
and other factors affecting Farm Fresh's operations. The following discussion
should be read in conjunction with Item 1. Unaudited Condensed Consolidated
Financial Statements.
Comparison of 12 Weeks and 36 Weeks ended September 6, 1997 with 12 Weeks and 36
Weeks ended September 7, 1996.
Sales. Sales for the 12 week period ended September 6, 1997 decreased 11.3% to
$160.2 million from $180.6 million for the comparable period in 1996. For the 36
week period ended September 6, 1997, sales were $483.7 million compared to
$539.6 million for the corresponding period in 1996, a decrease of 10.4%. Same
store sales for the third quarter of 1997 and year to date 1997 decreased 6.7%
and 8.0%, respectively. The decrease in sales was attributable to the closure of
four stores and the sale of two combination stores in 1996. The Company also
closed a combination store, a super warehouse store and a "3 Stores, 1 Roof"
store in 1997. The decrease in sales was partially offset by the opening of two
stores operating under the name "3 Stores, 1 Roof", one in June 1996 (which was
subsequently closed in 1997) and one in March 1997. Same store sales declined
primarily as a result of the impact of nineteen new stores opened by competitors
in the last twelve months.
Cost of Sales. Cost of sales amounted to $121.7 million and $367.6 million, each
representing 76.0% of sales, in the 12 and 36 week periods in 1997,
respectively, compared to $139.4 million, or 77.2% of sales, and $414.4 million,
or 76.8% of sales, respectively, in the corresponding periods in 1996. This
decrease as a percentage of sales was primarily due to improved promotional
pricing practices and a shift in the sales mix to higher margin products.
Depreciation and Amortization. Depreciation and amortization for the 12 week
period ended September 6, 1997 amounted to $4.6 million, a decrease of $0.5
million from the comparable period in 1996. For the 36 week period ended
September 6, 1997, depreciation and amortization totalled $13.7 million, a
decrease of $0.3 million from the comparable period in 1996.
Other Selling, General and Administrative Expenses. Other selling, general and
administrative expenses for the third quarter of 1997 and 1996 were $28.4
million and $31.9 million, respectively, each representing $17.7% of sales.
Other selling, general and administrative expenses for the 36 week period ended
September 6, 1997 were $86.8 million, compared to $96.4 million for the
corresponding period in 1996, each representing 17.9% of sales. The decrease in
selling, general and administrative expenses is primarily attributable to the
reductions in variable expenses as a result of the decreased sales volume and
the reduction in operating and administrative expenses in connection with the
Company's short-term cost reduction strategy implemented in March 1997.
Interest Expense. Interest expense for the 12 week periods ended September 6,
1997 was $10.9 million compared to $10.7 million for the comparable period in
1996. For the 36 weeks ended September 6, 1997, interest expense totalled $32.8
million, an increase of $1.3 million over the same period in 1996. The increase
is primarily attributable to a higher average outstanding balance on Farm
Fresh's revolving credit facility, an increase in capital lease obligations and
higher outstanding amount of FF Holdings' 14.25% Senior Notes (the "Holding
Company Notes") due to interest paid in additional notes rather than cash.
Loss on Disposition of Assets. The Company recognized a loss on disposition of
assets of $2.1 million and $1.7 million, respectively, in the 12 weeks and 36
weeks ended September 6, 1997 compared to a loss of approximately $0.2 million
in the comparable periods in 1996. During 1997, the Company recorded a loss of
$2.4 million related to the writeoff of leasehold improvements applicable to two
closed stores. This loss was partially offset by the aggregate gain realized on
the sale of an outparcel and a partnership interest of $0.7 million.
-8-
<PAGE>
Inflation
The Company's cost of sales and certain other operating expenses are affected by
a number of factors that are beyond the Company's control, including the cost of
merchandise, the competitive climate and general and regional economic
conditions. As is typical in the retail food industry, the Company has generally
been able to maintain margins by adjusting its selling prices, but competitive
conditions may, from time to time, render it unable to do so while maintaining
or increasing its market share.
Liquidity and Capital Resources
Liquidity
Cash flow from operations as well as amounts available under Farm Fresh's
existing revolving credit facility, which is scheduled to mature in January
1998, represent the Company's primary sources of short-term liquidity. At
September 6, 1997, Farm Fresh had approximately $15.3 million available under
the revolving credit facility subject to certain borrowing base limitations,
less $3.9 million reserved for the redemption of convertible subordinated
debentures and $2.3 million related to outstanding letters of credit.
As previously announced, on September 9, 1997 Farm Fresh reached an agreement in
principle for Richfood Holdings, Inc. to acquire substantially all of the
operating assets of Farm Fresh and to assume substantially all of the operating
liabilities, including all trade liabilities, of Farm Fresh (the
"Acquisitions"), which Acquisition was approved by an informal committee
comprised of holders of a substantial majority of Farm Fresh's 12.25% Senior
Notes and 12.25% Senior Notes, Series A (collectively, the "Senior Notes"). The
agreement in principle is subject to the negotiation and execution of a
definitive agreement and the terms and conditions contained therein. The
Acquisition transaction is expected to close during the first quarter of 1998.
Farm Fresh will seek to negotiate an extension of the maturity date of Farm
Fresh's existing revolving credit facility or, if applicable, a replacement
facility. There can be no guarantee, however, that Farm Fresh will be able to
complete such an extension or refinancing, or that the terms of such extension
or refinancing will not be on terms less favorable than those currently in
place. On October 1, 1997, Farm Fresh failed to make the required interest
payment due under the Senior Notes as scheduled in order to preserve working
capital. There can be no assurance that the acquisition transaction, or any
other options available to Farm Fresh, will generate sufficient capital to
satisfy its obligations.
FF Holdings is a holding company with no independent operations from Farm Fresh.
As a result, the ability of FF Holdings to meet its obligations is dependent
upon Farm Fresh's ability to pay dividends to FF Holdings in an amount
sufficient to satisfy such obligations. The ability of Farm Fresh to pay these
dividends will be dependent upon Farm Fresh's future performance and its ability
to refinance or restructure its existing debt, including Farm Fresh's revolving
credit facility, which is scheduled to mature in January 1998. FF Holdings will
be required to make level, semi-annual cash interest payments of $7.1 million to
noteholders beginning April 1, 1998, through the maturity date of Holding
Company Notes. Even in the unlikely event that Farm Fresh has sufficient cash
flow to pay the required dividends to FF Holdings, covenants in the indentures
governing the Notes (the "Farm Fresh Indentures") and other instruments
evidencing the Company's debt obligations will restrict Farm Fresh's ability to
make cash dividend payments to FF Holdings. Assuming Farm Fresh were unable to
make cash dividends to FF Holdings, FF Holdings would be unable to pay cash
interest on the Holding Company Notes and would go into default under the
indenture governing the Holding Company Notes (the "FF Holdings Indenture"). In
the event of such a default, the trustee would be entitled to exercise all of
its rights under the FF Holdings Indenture including the acceleration of the
principal of the Holding Company Notes. It is also possible that such an event
could lead the FF Holdings noteholders to acquire a controlling interest in Farm
Fresh, which could in turn trigger a "Change of Control" as defined in the Farm
Fresh Indentures. A change of control would require Farm Fresh to offer to
repurchase the Notes, requiring an effective acceleration of the maturity of the
Notes. There can be no assurance that Farm Fresh would be able to finance such a
repurchase. If it were not able to finance such a repurchase, then Farm Fresh
would be in default under the Farm Fresh Indentures. There can be no assurance
that the acquisition transaction, or any other options available to the Company,
will generate sufficient capital to satisfy its obligations.
Beginning April 1, 1997 the Company implemented a new short-term business
strategy to improve its financial performance and liquidity. The focus is to
conserve capital, reduce administrative and operating expenses, and direct
management attention toward the operation of existing stores.
The Company's relationship with its suppliers is an important component of its
liquidity. While the Company continues to pursue the Acquisition, discussed
above, management expects that credit terms with suppliers will remain
substantially consistent with past practices. However, if credit with its major
suppliers is curtailed, the Company's liquidity would be adversely effected.
-9-
<PAGE>
Capital Resources
The Company plans to fund cash capital expenditures of approximately $5.0
million with cash generated from operations and amounts available under Farm
Fresh's revolving credit facility. The Company opened one new store in March
1997 operating under the name "3 Stores, 1 Roof". The Company does not intend to
commence any additional new store construction in 1997. In the near term, the
Company believes that a reduction or postponement of its new store program will
not substantially impact current operations. However, in the long-term, if this
program is substantially reduced, management believes that the Company's
operations and ultimately its cash flow would be adversely impacted.
At December 28, 1996, the Company reflected three closed stores and several
parcels of undeveloped land as assets held for sale on its balance sheet at the
estimated net realizable value of the assets less costs to sell of $10.0
million. The Company sold one closed store and one parcel of land for gross
proceeds of $2.8 million during the first three quarters of 1997.
-10-
<PAGE>
Part II - Other Information
Item 5. Other Information
On September 15, 1997, the Company's Bylaws were amended to provide that
the Company's Board of Directors consist of four members, and Richard E.
Mayberry, Jr. was elected to fill the vacant position.
-11-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FF Holdings Corporation
Date October 21, 1997
----------------------------
Richard D. Coleman
Executive Vice President,
Chief Financial Officer
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FF Holdings Corporation
Date October 21, 1997 Richard D. Coleman /s/
------------------- ----------------------------
Richard D. Coleman
Executive Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000838448
<NAME> FF HOLDINGS INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-06-1997
<CASH> 622
<SECURITIES> 0
<RECEIVABLES> 14,847
<ALLOWANCES> 1,054
<INVENTORY> 43,122
<CURRENT-ASSETS> 59,966
<PP&E> 201,949
<DEPRECIATION> 100,833
<TOTAL-ASSETS> 186,862
<CURRENT-LIABILITIES> 96,291
<BONDS> 293,621
0
37,811
<COMMON> 25
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 186,862
<SALES> 483,665
<TOTAL-REVENUES> 483,665
<CGS> 367,591
<TOTAL-COSTS> 367,591
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