<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
July 31, 1996 0-21486
HARRY'S FARMERS MARKET, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2037452
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 Upper Hembree Road, Roswell, Georgia 30076
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 667-8878
-----------------------------
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
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 X No
------------ --------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Class A Common 4,117,873
- ------------------------------ ------------------------------------
Class Outstanding at September 10, 1996
Class B Common 2,050,701
- ------------------------------ ------------------------------------
Class Outstanding at September 10, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Balance Sheets
Amounts in thousands (Unaudited)
July 31, January 31,
1996 1996
------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 1,111 $ 1,042
Accounts receivable, net of allowance 722 132
Inventories 9,012 7,894
Other receivables 457 174
Prepaid expenses 738 829
------ ------
Total current assets 12,040 10,071
PROPERTY AND EQUIPMENT
Buildings 34,470 34,329
Equipment 23,285 22,561
Vehicles 93 560
Construction in progress -- 24
------ ------
57,848 57,474
Accumulated depreciation (18,420) (16,615)
------ ------
39,428 40,859
Land 8,030 8,521
------ ------
47,458 49,380
OTHER ASSETS
Property held for sale 1,903 6,198
Deposits on equipment 455 454
Loan costs 329 326
Other 310 331
------ ------
2,997 7,309
------ ------
Total assets $62,495 $66,760
====== ======
</TABLE>
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Amounts in thousands (Unaudited)
July 31, January 31,
1996 1996
------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of notes payable $ 986 $ 3,792
Accounts payable - trade 5,791 4,701
Accrued insurance 117 156
Accrued payroll and payroll taxes payable 617 612
Sales taxes payable 327 238
Other accrued liabilities 855 682
----------- ------------
Total current liabilities 8,693 10,181
NOTES PAYABLE, net of current maturities 25,873 28,789
REDEEMABLE PREFERRED STOCK 10,238 10,124
STOCKHOLDERS' EQUITY
Common stock - Class A 34,623 34,578
Common stock - Class B 3,936 3,976
Additional Paid-in Capital 257 372
Accumulated deficit (21,125) (21,260)
----------- ------------
Total stockholders' equity 17,691 17,666
----------- ------------
Total liabilities and stockholders'
equity $ 62,495 $ 66,760
=========== ============
</TABLE>
-3-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands, except per share data
For the Thirteen Weeks Ended,
---------------------------------------
July 31, 1996 August 2, 1995
---------------------------------------
<S> <C> <C> <C> <C>
Net sales $38,224 100.0% $40,940 100.0%
Cost of goods sold 28,172 73.7% 30,941 75.6%
----------------- -----------------
Gross profit 10,052 26.3% 9,999 24.4%
Operating expenses
Direct store expenses 5,804 15.2% 6,598 16.1%
Selling, general & administrative 2,756 7.2% 2,848 7.0%
Depreciation and amortization 868 2.3% 1,006 2.5%
Preopening amortization - 0.0% 196 0.5%
----------------- -----------------
Total operating expenses 9,428 24.7% 10,648 26.0%
Operating income (loss) 624 1.6% (649) -1.6%
Interest expense 666 1.7% 744 1.8%
Other income (439) -1.1% (266) -0.6%
----------------- -----------------
Pretax income (loss) 397 1.0% (1,127) -2.8%
Income taxes - 0.0% - 0.0%
----------------- -----------------
Net income (loss) 397 1.0% (1,127) -2.8%
Provision for accretion of warrants (57) -0.1% (57) -0.1%
----------------- -----------------
Net income (loss) applicable to
common shareholders $ 340 0.9% $(1,184) -2.9%
================= =================
Earnings per common and
common equivalent share:
Primary $ 0.05 $ (0.19)
================= =================
Shares used in computing earnings per
common and common equivalent share:
Primary 6,205 6,164
</TABLE>
-4-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands, except per share data
For the Twenty-six Weeks Ended,
---------------------------------------
July 31, 1996 August 2, 1995
---------------------------------------
<S> <C> <C> <C> <C>
Net sales $71,738 100.0% $75,856 100.0%
Cost of goods sold 52,739 73.5% 57,207 75.4%
----------------- -----------------
Gross profit 18,999 26.5% 18,649 24.6%
Operating expenses
Direct store expenses 11,178 15.6% 11,828 15.6%
Selling, general & administrative 5,473 7.6% 5,703 7.5%
Depreciation and amortization 1,693 2.4% 1,908 2.5%
Preopening Amortization - 0.0% 196 0.3%
----------------- -----------------
Total operating expenses 18,344 25.6% 19,635 25.9%
Operating income (loss) 655 0.9% (986) -1.3%
Interest expense 1,390 1.9% 1,433 1.9%
Other income (870) -1.2% (513) -0.7%
----------------- -----------------
Pretax income (loss) 135 0.2% (1,906) -2.5%
Income taxes - 0.0% - 0.0%
----------------- -----------------
Net income (loss) 135 0.2% (1,906) -2.5%
Provision for accretion of warrants (114) -0.2% (114) -0.2%
----------------- -----------------
Net income (loss) applicable to
common shareholders $ 21 0.0% $(2,020) -2.7%
================= =================
Earnings per common and
common equivalent share:
Primary $ 0.00 $ (0.33)
================= =================
Shares used in computing earnings per
common and common equivalent share:
Primary 6,187 6,164
</TABLE>
-5-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands For the Twenty-six Weeks Ended,
------------------------------------------
July 31, 1996 August 2, 1995
------------------------------------------
<S> <C> <C>
Changes in cash
Cash flows from operating activities:
Net gain (loss) $ 135 $(1,906)
Adjustments to reconcile net loss
to cash provided by operations:
Depreciation and amortization 2,415 2,847
Gain on sale of equipment (439) (15)
Decrease (increase) in accounts receivable (590) 66
Decrease (increase) in other receivables (51) 5
Increase in pre-opening expenses - (416)
Increase in inventories (1,118) (1,865)
Decrease in prepaid and deferred expenses 91 781
Increase in other assets (103) 0
Increase in accounts payable 1,090 1,274
Increase in accrued liabilities 227 129
---------- -----------
Net cash provided by operating activities 1,657 900
Cash flows from investing activities:
Capital expenditures, including capitalized interest (1,036) (3,725)
Proceeds from sale of property and equipment 5,195 -
Decrease (increase) in notes receivable (30) -
---------- ------------
Net cash provided (used) by investing activities 4,129 (3,725)
Cash flows from financing activities:
Proceeds from long-term debt, net of costs - 164
Line of credit 210 650
Principal payments on long-term obligations (5,932) (226)
Proceeds from employee stock purchase 5 -
---------- ------------
Net cash provided (used) by financing activities (5,717) 588
---------- -----------
Net increase (decrease) in cash 69 (2,237)
Cash at beginning of period 1,042 2,297
---------- ------------
Cash at end of period $ 1,111 $ 60
========== ============
</TABLE>
-6-
<PAGE>
HARRY'S FARMERS MARKET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
NOTE A - BASIS OF PRESENTATION:
- -------------------------------
The interim financial statements included herein have been prepared by the
Company without audit. These statements reflect all adjustments which are, in
the opinion of management, necessary to present fairly the financial position as
of July 31, 1996 and the results of operations and cash flows for the thirteen
and twenty-six weeks then ended. All such adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the Financial Statements and notes for
the fiscal year ended January 31, 1996 ("fiscal 1996") included in the Company's
Annual Report on Form 10-K, as amended.
NOTE B - INVENTORIES:
- --------------------
Inventories consist primarily of grocery items and are stated at the lower of
cost or market. Cost is determined under the first-in, first-out (FIFO)
valuation method.
NOTE C - EARNINGS PER SHARE:
- ----------------------------
Earnings per share for the periods presented are based on shares of common and
common stock equivalents outstanding during the fiscal quarter ended July 31,
1996 and shares of common and common stock equivalents outstanding during the
fiscal quarter ended August 2, 1995.
NOTE D - RECLASSIFICATION:
- --------------------------
Certain items have been reclassified in the presentation of the first twenty-six
weeks of fiscal 1996 to conform with the presentation in the current period.
NOTE E - LOAN AGREEMENTS
- ------------------------
During fiscal quarter ended July 31, 1996, the Company restructured its senior
credit facility. The restructuring eliminated certain financial and other loan
covenant violations of the senior credit facility at year end. In addition, the
restructuring extended until maturity, or extension thereof, the lenders
agreement to forebear the declaration of a cross default as a result of the
breach of the covenant under the Mortgage Loan. The restructuring of the senior
credit facility will allow the Company to borrow an additional $1.0 million for
general corporate purposes, including the repayment of indebtedness.
In connection with the foregoing restructuring, the Company has amended certain
warrants held by the lenders by lowering the exercise price from $10.00 per
share to $3.00 per share on 240,000 outstanding warrants. The Company also
issued the lenders additional warrants to purchase 120,000 shares of Class A
common stock at an exercise price of $6.00 per share.
-7-
<PAGE>
NOTE F - STOCK OPTIONS
- ----------------------
During the fiscal quarter ended July 31, 1996, the following changes occurred in
outstanding stock options:
<TABLE>
<CAPTION>
Exercise
Shares Price
-------- --------
<S> <C> <C>
Options outstanding, May 1, 1996 352,300 $6.00
Options granted - -
Options cancelled (43,475) $6.00
Options exercised - -
------- --------
Options outstanding, July 31, 1996 308,825 $6.00
</TABLE>
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Thirteen Weeks Ended July 31, 1996 compared to Thirteen Weeks Ended August 2,
1995.
Net sales for the thirteen weeks ended July 31, 1996 (the "1997 Second
Quarter") were $38.2 million, compared to $40.9 million for the thirteen weeks
ended August 2, 1995 (the "1996 Second Quarter"). This decrease is primarily a
result of the inclusion of $4.5 million from the Clayton County megastore in the
1996 Second Quarter sales, which store was closed in November 1995. However,
included in the 1997 Second Quarter sales was $0.7 million of sales directly
related to the 1996 Olympic Games in the Atlanta area. Comparable store sales
increased 2.8% for the 1997 Second Quarter as compared to the 1996 Second
Quarter. The increase is primarily due to the Company's improved marketing and
merchandising efforts.
Gross profit as a percentage of net sales in the 1997 Second Quarter
increased to $10.1 million or 26.3% of net sales compared to $10.0 million or
24.4% of net sales in the 1996 Second Quarter. The 1996 Second Quarter gross
profit reflects above normal waste and promotional pricing associated with the
opening of the Clayton County megastore. Additional reasons for the increase in
gross profit as a percentage of net sales from the 1996 Second Quarter to the
1997 Second Quarter include the Company's on-going improvements in operational
efficiencies at all levels, including new merchandising initiatives, better
operational performance at the store level, higher employee morale and a more
cohesive management team.
Direct store expenses decreased to $5.8 million or 15.2% of net sales
in the 1997 Second Quarter compared to $6.6 million or 16.1% of net sales in the
1996 Second Quarter. The direct store expenses during the 1996 Second Quarter
consisted of higher expenses primarily related to labor costs for the opening of
the Clayton County megastore. Selling, general and administrative expenses
remained relatively unchanged at $2.8 million during the 1997 Second Quarter
compared with $2.8 million during the 1996 Second Quarter. While the Company
experienced an increase in advertising expenses, bank charges, employee hiring
expenses and professional fees, there was a comparable offset in selling,
general and administrative expenses as a result of a decrease in labor costs,
consulting fees and insurance premiums. However, as a result of the decrease in
1997 Second Quarter sales as compared to 1996 Second Quarter sales, due to the
reasons set forth above, selling, general and administrative expenses as a
percentage of net sales increased to 7.2% compared with 7.0% in the 1996 Second
Quarter.
-9-
<PAGE>
Depreciation and amortization, which includes depreciation and
amortization for the stores and the corporate facilities, but excludes the
manufacturing facilities (which are included in cost of goods sold), declined to
$0.9 million or 2.3% of net sales in the 1997 Second Quarter from $1.2 million
or 3.0% of net sales in the 1996 Second Quarter. The decline in depreciation and
amortization expense is the result of the inclusion in the 1996 Second Quarter
of $0.2 million or 0.5% of pre-opening expenses relating to the opening of the
Clayton County megastore and $0.1 million or 0.2% of depreciation on certain
assets that have since been taken out of service from the closing of the Clayton
County megastore. In addition, the decline is the result of certain other assets
becoming fully depreciated prior to and during the 1997 Second Quarter.
During the 1997 Second Quarter the Company had an operating profit of
$0.6 million or 1.6% of net sales as compared to an operating loss in the 1996
Second Quarter of $0.7 million or (1.6)% of net sales, due to the reasons set
forth above.
Interest expense decreased to $0.7 million or 1.7% of net sales in the
1997 Second Quarter compared to $0.8 million or 1.8% of net sales in the 1996
Second Quarter. This decrease primarily is the result of applying the net
proceeds from the real estate sales of (i) the Clayton County megastore, (ii)
one outparcel at the Gwinnett megastore and (iii) the Nashville, Tennessee
undeveloped property in order to reduce the Company's long term obligations,
which in turn has reduced interest expense.
Other income increased to $0.4 million or 1.1% of net sales during the
1997 Second Quarter, from $0.3 million or 0.6% of net sales in the 1996 Second
Quarter. This increase is primarily due to a gain realized on the sale of the
Nashville Property.
As a result of the above, the Company's operations incurred a net
profit for the 1997 Second Quarter of $0.3 million or $.05 per common and common
equivalent share, primary, compared with a net loss of $1.18 million or ($.19)
per common and common equivalent share, primary, during the 1996 Second Quarter.
Twenty-Six Weeks Ended July 31, 1996 compared to Twenty-Six Weeks Ended August
2, 1995.
Net sales for the first twenty-six weeks of fiscal 1997 decreased to
$71.7 million from $75.9 million for the first twenty-six weeks of fiscal 1996.
This decrease is primarily the result of the inclusion in the first half of
fiscal 1996 of $4.5 million of revenues associated with the opening of the
Clayton County megastore in May 1995, which store was closed in November 1995.
-10-
<PAGE>
However, the first half of fiscal 1997 included $0.7 million of business related
to the 1996 Olympic Games in the Atlanta area. On a comparable store basis,
sales decreased 0.4%. This decrease comprises a 3.9% comparable store sales
decline during the first quarter of fiscal 1997 due to extreme weather
conditions and growing competition in the Atlanta area, which was partially
offset by a 2.8% comparable store sales increase during the second quarter of
fiscal 1997 as a result of improved marketing and merchandising efforts.
Gross profit, as a percentage of net sales, for the first half of
fiscal 1997 improved to $19.0 million or 26.5% from $18.7 million or 24.6% in
the first half of fiscal 1996. This increase resulted from improvements in
manufacturing efficiencies, reduced retail waste of manufactured products and
new merchandising initiatives combined with better operational performance.
Gross profit during the first half of fiscal 1996 was also adversely affected
due to above normal waste and promotional pricing associated with the opening of
the Clayton County megastore.
Direct store expenses for the first twenty-six weeks of fiscal 1997
decreased to $11.2 million from $11.8 million for the first twenty-six weeks of
fiscal 1996. During the first half of fiscal 1996 labor expenses were higher as
a result of opening the Clayton County megastore. As a percentage of net sales,
direct store expenses remained relatively unchanged at 15.6% for both the first
half of fiscal 1997 and the first half of fiscal 1996. Selling, general and
administrative expense for the first half of fiscal 1997 decreased to $5.5
million from $5.7 million in the first half of fiscal 1996 which is primarily
attributable to lower labor costs. However, due to the sales decrease in the
first half of fiscal 1997 as compared to the first half of fiscal 1996, selling,
general and administrative expense as a percentage of net sales increased
slightly to 7.6% in the first half of fiscal 1997 from 7.5% in the same period
of the previous year.
Depreciation and amortization declined to $1.7 million or 2.4% from
$2.1 million or 2.8% in the first twenty-six weeks of fiscal 1996. This
reduction resulted from the physical transfer and reclassification of assets and
depreciation expense from stores to property held for sale and from certain
other assets becoming fully depreciated prior to or during fiscal 1997. The
first half of fiscal 1996 also included $0.2 million or 0.3% of pre-opening
expenses for the Clayton County megastore.
Due to the reasons set forth above, during the first twenty-six weeks
of fiscal 1997 the Company had an operating profit of $0.7 million or 0.9% of
net sales as compared to an operating loss in the first twenty-six weeks of
fiscal 1996 of $1.0 million or (1.3)%.
-11-
<PAGE>
Interest expense decreased to $1.39 million in the first twenty-six
weeks of fiscal 1997 from $1.43 million in the first twenty-six weeks of fiscal
1996. This decrease is attributable to the reduction in long term obligations
from the sale of (i) the Clayton County megastore, (ii) one outparcel at the
Gwinnett megastore and (iii) the sale of the Nashville Property. However, due to
the decrease in the first half of fiscal 1997 sales as compared to the first
half of fiscal 1996, interest expense as a percentage of net sales remained
relatively unchanged at 1.9%.
Other income in the first twenty-six weeks of fiscal 1997 increased to
$0.9 million or 1.2% compared to $0.5 million or 0.7% of net sales in the first
half of fiscal 1996. The major component of the increase is a gain realized on
the sales of the Gwinnett outparcel and the Nashville Property.
As a result of the above, the Company's operations for the first
twenty-six weeks of fiscal 1997 generated a net profit of $0.02 million or $.00
per common and common equivalent share, primary, compared with a net loss of
$2.02 million or ($.33) per common and common equivalent share, primary, for the
first twenty-six weeks of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the first twenty-six weeks of fiscal 1997, the Company's
operating activities provided $1.6 million in cash and the Company invested $1.0
million in capital expenditures which was offset by $5.2 million in gross
proceeds from the sale of nonproducing property and equipment. The Company also
borrowed $0.2 million on its line of credit and paid off $5.9 million on its
long term obligations. As a result, net cash during the first half of fiscal
1997 increased by $0.1 million resulting in a quarter-end cash balance of $1.1
million. At July 31, 1996, the Company had available $0.8 million in additional
borrowing capacity under its credit facilities.
Cash provided by investing activities in the first twenty-six weeks of
fiscal 1997 was approximately $4.1 million. Investing activities consisted
mainly of capital expenditures for property and equipment relating to stores and
manufacturing facilities. During the first twenty-six weeks of fiscal 1997, the
Company used $0.5 million for additional equipment and building improvements at
the Alpharetta megastore and bakery facility, $0.3 million to remodel a portion
of the Gwinnett megastore to include an ethnic food department and $0.2 million
for additional packaging equipment in the Company's USDA manufacturing
facilities. Total capital expenditures
-12-
<PAGE>
were $1.0 million. Proceeds from the sale of property and equipment consisted
primarily of the sale of an outparcel at the Gwinnett megastore property for
$0.7 million in gross proceeds, $4.3 million in proceeds from the sale of the
Nashville, Tennessee property and $0.2 million from the sale of other
nonproducing assets.
Cash used by financing activities in the first half of fiscal 1997 was
approximately $5.7 million. Financing activities consisted mainly of repayments
under the Company's long-term debt for real estate sold as well as payments on
the line of credit and capital leases. At the end of the first half of fiscal
1997 the Company had $0.8 million left on the credit facilities and a $1.1
million cash balance.
The Company's working capital position in the first half of fiscal
1997 was $3.3 million as compared to ($0.1) million at fiscal year ended January
31, 1996. The increase in working capital is due largely to a mortgage note
(the "Mortgage Loan") on the Company's distribution center and baking facility
being reduced by a principal payment of $0.5 million, and the due date being
extended from June 30, 1996 until December 31, 1997, and thus allowing $2.3
million to be reclassified to long term debt. Primarily as a result of these
actions, the current maturities of notes payable decreased by approximately $2.8
million. The Company is now in full compliance with all covenants, conditions
and terms of the Mortgage Loan. In addition, the Company's current assets
increased in part because its accounts receivable increased to $0.7 million as
of the first half of fiscal 1997 as compared to $0.1 million at fiscal 1996 year
end. This increase in accounts receivable, as well as an additional
approximately $0.4 million in revenues to be recognized during the next fiscal
quarter, is primarily due to business incurred directly related to the 1996
Olympic Games in the Atlanta area. The Company expects the full amount of such
Olympic related receivables to be paid during the fiscal quarter ended October
30, 1996.
To increase liquidity and concentrate on the existing stores in the
Atlanta metropolitan area, the Company decided in 1995 to sell a 17 acre tract
of land in Nashville, Tennessee (the "Nashville Property") which was originally
purchased in October 1993 to construct a megastore. The Company completed the
sale of the Nashville Property in June 1996. The net proceeds from such sale of
$4.3 million have been used to reduce the Company's long term obligations. In
addition, $0.2 million in impact fees have been recorded by the Company and are
due from the purchaser of the Nashville Property. In addition to the sale of one
outparcel of land at the Gwinnett megastore property, the Company had previously
disclosed that it anticipated a sale of a second outparcel at such location.
Such sale has been terminated and another purchaser is being sought
-13-
<PAGE>
for the property. Net proceeds from such sale are expected to be approximately
$0.4 million and would be used to further reduce the Company's long term
borrowings.
During fiscal quarter ended July 31, 1996, the Company restructured
its senior credit facility. The restructuring eliminated certain financial and
other loan covenant violations of the senior credit facility at year end. In
addition, the restructuring extended until maturity, or extension thereof, the
lenders agreement to forebear the declaration of a cross default as a result of
the breach of the covenant under the Mortgage Loan. The restructuring of the
senior credit facility will allow the Company to borrow an additional $1.0
million for general corporate purposes, including the repayment of indebtedness.
In connection with the foregoing restructuring, the Company has
amended certain warrants held by the lenders by lowering the exercise price from
$10.00 per share to $3.00 per share on 240,000 outstanding warrants. The
Company also issued the lenders additional warrants to purchase 120,000 shares
of Class A common stock at an exercise price of $6.00 per share.
The Company's ability to fund its working capital and capital
expenditure requirements, make interest payments and meet its other cash
requirements depends, among other things, on internally generated funds and
the continued availability of and compliance with its credit facilities.
Management believes that internally generated funds and its available credit
facilities, as restructured, will provide the Company with sufficient sources of
funds to satisfy its anticipated cash requirements through the fiscal year
ending January 29, 1997. However, if there is a significant reduction of
internally generated funds, the Company may require funds from outside financing
sources. In such event, there can be no assurance that the Company would be
able to obtain such funding as and when required or on acceptable terms.
-14-
<PAGE>
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995.
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, such as statements relating to financial results, plans for future
business development activities, capital spending or financing sources, capital
structure and the effects of regulation and competition, and are thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements.
Potential risks and uncertainties include, but are not limited to,
economic conditions, weather, competition and other uncertainties detailed
from time to time in the Company's Securities and Exchange Commission filings.
-15-
<PAGE>
PART II - OTHER INFORMATION
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
A. At the Company's Annual Meeting of Shareholders, on June 19, 1996,
the shareholders acted upon the following matters:
(i) The shareholders elected the following individuals, which
constitute the entire Board of Directors, as directors of
the Company for a term of one year, with votes cast as set
forth below:
<TABLE>
<CAPTION>
Votes For: Votes Against:
---------- --------------
<S> <C> <C>
Harry A. Blazer 23,689,049 50,842
Terry L. Ransom 23,693,575 46,316
Robert C. Glustrom 23,695,399 44,492
John D. Branch 23,695,749 44,142
</TABLE>
(ii) The shareholders approved the adoption of the Company's 1996
Director Stock Option Plan and the reservation of an aggregate
of 200,000 shares of Class A Common Stock for issuance
thereunder. The votes cast for such proposal were as follows:
21,527,510 shares for; 129,734 shares against; 26,352 shares
abstained; and 2,056,295 broker non-votes.
(iii) The shareholders approved the adoption of the Company's 1996
Employee Stock Purchase Plan and the reservation of an
aggregate of 300,000 shares of Class A Common Stock for
issuance thereunder. The votes cast for such proposal were as
follows: 21,599,824 shares for; 66,369 shares against; 17,403
shares abstained; and 2,056,295 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
A. No exhibits are filed with this report.
B. No reports on Form 8-K were filed during the quarter ended
July 31, 1996.
-17-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this quarterly report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized.
HARRY'S FARMERS MARKET, INC.
Dated: September 13, 1996 By: /s/ Harry A. Blazer
------------------- -----------------------------
HARRY A. BLAZER
Chairman, President and Chief Executive
Officer
(principal executive officer)
Dated: September 13, 1996 By: /s/ Harold C. Weissman
------------------- -----------------------------
HAROLD C. WEISSMAN
Chief Financial Officer
(principal financial and accounting
officer)
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10Q for quarterly period ended July 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,111
<SECURITIES> 0
<RECEIVABLES> 740
<ALLOWANCES> 18
<INVENTORY> 9,012
<CURRENT-ASSETS> 12,040
<PP&E> 65,878
<DEPRECIATION> 18,420<F3>
<TOTAL-ASSETS> 62,495<F4>
<CURRENT-LIABILITIES> 8,693
<BONDS> 25,873
<COMMON> 38,559
10,238
0
<OTHER-SE> (20,868)
<TOTAL-LIABILITY-AND-EQUITY> 62,495
<SALES> 71,738
<TOTAL-REVENUES> 71,738
<CGS> 52,739
<TOTAL-COSTS> 18,344
<OTHER-EXPENSES> 520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,390<F1>
<INCOME-PRETAX> 135
<INCOME-TAX> 0
<INCOME-CONTINUING> 21<F2>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21<F2>
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1> Included in other expense
<F2> Income, net of accretion of warrants
<F3> Includes amortization
<F4> Short term portion included in current liabilities
</FN>
</TABLE>
