<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:
October 30, 1996 0-21486
HARRY'S FARMERS MARKET, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Georgia 58-2037452
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1180 Upper Hembree Road, Roswell, Georgia 30076
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (770) 667-8878
-----------------------------
N/A
- --------------------------------------------------------------------------------
(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 issuer's classes of
common stock, as of the latest practicable date:
Class A Common 4,117,873
- ------------------------------- ---------------------------------
Class Outstanding at December 5, 1996
Class B Common 2,050,701
- ------------------------------- ---------------------------------
Class Outstanding at December 5, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Amounts in thousands (Unaudited)
October 30, January 31,
1996 1996
------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 886 $ 1,042
Accounts receivable, net of allowance 253 132
Inventories 8,847 7,894
Other receivables 1,214 174
Prepaid expenses 658 829
------------- ------------
Total current assets 11,858 10,071
PROPERTY AND EQUIPMENT
Buildings 34,502 34,329
Equipment 23,422 22,561
Vehicles 92 560
Construction in progress - 24
------------- ------------
58,016 57,474
Accumulated depreciation (19,452) (16,615)
------------- ------------
38,564 40,859
Land 8,030 8,521
------------- ------------
46,594 49,380
OTHER ASSETS
Property held for sale 1,903 6,198
Deposits on equipment 522 454
Loan costs 301 326
Other 304 331
------------- ------------
3,030 7,309
------------- ------------
Total assets $61,482 $66,760
============= ============
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Amounts in thousands (Unaudited)
October 30, January 31,
1996 1996
------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of notes payable $ 910 $ 3,792
Accounts payable-trade 5,438 4,701
Accrued insurance 67 156
Accrued payroll and payroll taxes payable 550 612
Sales taxes payable 107 238
Other accrued liabilities 310 682
------------- ------------
Total current liabilities 7,382 10,181
NOTES PAYABLE, net of current maturities 25,640 28,789
REDEEMABLE PREFERRED STOCK 10,295 10,124
STOCKHOLDERS' EQUITY
Common Stock - Class A 34,623 34,578
Common Stock - Class B 3,936 3,976
Additional Paid-in Capital 692 372
Accumulated deficit (21,086) (21,260)
------------- ------------
Total stockholders' equity 18,165 17,666
------------- ------------
Total liabilities and stockholders'
equity $61,482 $66,760
============= ============
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended,
----------------------------------------------------------
October 30, 1996 November 1, 1995
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 33,844 100.0% $ 36,697 100.0%
Cost of goods sold 24,932 73.7% 28,053 76.4%
----------------------- -----------------------
Gross profit 8,912 26.3% 8,644 23.6%
Operating expenses
Direct store expenses 5,082 15.0% 6,141 16.7%
Selling, general & administrative 2,548 7.5% 3,429 9.3%
Depreciation and amortization 874 2.6% 1,066 2.9%
Preopening amortization - 0.0% 231 0.6%
Provision for store closing - 0.0% 4,430 12.1%
----------------------- -----------------------
Total operating expenses 8,504 25.1% 15,297 41.7%
Operating income (loss) 408 1.2% (6,653) -18.1%
Interest expense 610 1.8% 856 2.3%
Other income (241) -0.7% (184) -0.5%
----------------------- -----------------------
Pretax income (loss) 39 0.1% (7,325) -20.0%
Income taxes - 0.0% - 0.0%
----------------------- -----------------------
Net income (loss) 39 0.1% (7,325) -20.0%
Provision for accretion of warrants (57) -0.2% (57) -0.2%
----------------------- -----------------------
Net income (loss) applicable to common shareholders $ (18) -0.1% $ (7,382) -20.1%
======================= =======================
Net loss per common share and common equivalent share:
Primary $ 0.00 $ (1.20)
======================= =======================
Shares used in computing earnings per common share
and common equivalent share:
Primary 6,228 6,165
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Amounts in thousands, except per share data
<TABLE>
<CAPTION>
For the Thirty-nine Weeks Ended,
-----------------------------------------------------------------------
October 30, 1996 November 1, 1995
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 105,583 100.0% $ 112,553 100.0%
Cost of goods sold 77,671 73.6% 85,260 75.8%
------------------------- -----------------------------
Gross profit 27,912 26.4% 27,293 24.2%
Operating expenses
Direct store expenses 16,261 15.4% 17,970 16.0%
Selling, general & administrative 8,023 7.6% 9,132 8.1%
Depreciation and amortization 2,566 2.4% 2,973 2.6%
Preopening amortization - 0.0% 428 0.4%
Provision for store closing - 0.0% 4,430 3.9%
------------------------- -----------------------------
Total operating expenses 26,850 25.4% 34,933 31.0%
Operating income (loss) 1,062 1.0% (7,640) -6.8%
Interest expense 2,000 1.9% 2,289 2.0%
Other income (1,112) -1.1% (697) -0.6%
------------------------- -----------------------------
Pretax income (loss) 174 0.2% (9,232) -8.2%
Income taxes - 0.0% - 0.0%
------------------------- -----------------------------
Net income (loss) 174 0.2% (9,232) -8.2%
Provision for accretion of warrants (171) -0.2% (171) -0.2%
------------------------- -----------------------------
Net income (loss) applicable to common shareholders $ 3 0.0% $ (9,403) -8.4%
========================= =============================
Earnings (loss) per common share and
common equivalent share:
Primary $ 0.00 $ (1.53)
========================= =============================
Shares used in computing earnings per common share
outstanding and common equivalent share:
Primary 6,211 6,164
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
Harry's Farmers Market, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands For the Thirty-nine Weeks Ended,
---------------------------------------------------------
October 30, 1996 November 1, 1995
---------------------------------------------------------
Changes in Cash
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 174 $ (9,232)
Adjustments to reconcile net earnings (loss)
to cash provided by operations:
Depreciation and amortization 3,642 4,439
Adjustment for property held for sale/store closing 0 4,430
Gain on sale of equipment (456) (36)
Decrease (increase) in accounts receivable (121) 47
Decrease (increase) in other receivables (808) 6
Increase in pre-opening expenses - (380)
Increase in inventories (953) (594)
Decrease in prepaid and deferred expenses 19 824
Increase in accounts payable 737 1,079
Decrease in accrued liabilities (654) (841)
------------- ----------------
Net cash provided (used) by operating activities 1,580 (258)
Cash flows from investing activities:
Capital expenditures, including capitalized interest (1,292) (5,739)
Proceeds from sale of property and equipment 5,195 -
Decrease (increase) in notes receivable (44) 0
------------- ----------------
Net cash provided (used) by investing activities 3,859 (5,739)
Cash flows from financing activities:
Proceeds from long-term debt, net of costs 47 1,586
Line of credit 510 2,500
Principal payments on long-term obligations (6,157) 14
Proceeds from employee stock purchase 5 (356)
------------- ----------------
Net cash provided (used) by financing activities (5,595) 3,744
------------- ----------------
Net decrease in cash (156) (2,253)
Cash at beginning of period 1,042 2,297
------------- ----------------
Cash at end of period $ 886 $ 44
============= ================
</TABLE>
See accompanying notes to financial statements
-6-
<PAGE>
HARRY'S FARMERS MARKET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
October 30, 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 October 30, 1996 and the results of operations and cash flows for the
thirteen and thirty-nine 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 stock
and common stock equivalents outstanding during the fiscal quarter ended October
30, 1996 and shares of common stock and common stock equivalents outstanding
during the fiscal quarter ended November 1, 1995.
NOTE D - RECLASSIFICATION:
- --------------------------
Certain items have been reclassified in the presentation of the first thirty-
nine weeks of fiscal 1996 to conform with the presentation in the current
period.
NOTE E - STOCK OPTIONS
- ----------------------
During the fiscal quarter ended October 30, 1996, the following changes occurred
in outstanding stock options:
<TABLE>
<CAPTION>
Exercise
Shares Price
------ --------
<S> <C> <C>
Options outstanding, July 31, 1996 308,825 $6.00
Options granted 90,000 $3.00
Options canceled (11,325) $6.00
Options exercised - -
------ --------
Options outstanding, October 30, 1996 387,500 $3.00 - $6.00
</TABLE>
-7-
<PAGE>
NOTE F-INSURANCE ADJUSTMENT
- ---------------------------
During the fiscal quarter ended October 30, 1996, the Company's workers'
compensation expense was reduced by approximately $800,000 as a result of its
insurance carrier's audit of the Company's workers' compensation plan for the
plan year ended July 2, 1996. The reduction resulted from lower payrolls and
better than expected experience in workers' compensation claims during the plan
year. The adjustment was allocated to the Company's functional areas with human
resource costs. The adjustment is included in other receivables at October 30,
1996.
-8-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
Thirteen Weeks Ended October 30, 1996 compared to Thirteen Weeks Ended
November 1, 1995.
Net sales for the thirteen weeks ended October 30, 1996 (the "1997 Third
Quarter") were approximately $33.8 million, compared to approximately $36.7
million for the thirteen weeks ended November 1, 1995 (the "1996 Third
Quarter"). This decrease is primarily a result of the inclusion of
approximately $3.8 million from the Clayton County megastore in the 1996 Third
Quarter sales, which store was closed in November 1995. However, included in
the 1997 Third Quarter sales was approximately $0.6 million of sales directly
related to the 1996 Olympic and Paralympic Games in the Atlanta area. Comparable
store sales increased 1.3% for the 1997 Third Quarter as compared to the 1996
Third Quarter. The increase is primarily due to the Company's improved marketing
and merchandising efforts.
Gross profit as a percentage of net sales increased in the 1997 Third
Quarter to approximately $8.9 million or 26.3% of net sales compared to
approximately $8.6 million or 23.6% of net sales in the 1996 Third Quarter. The
1996 Third Quarter gross profit reflects above normal waste and promotional
pricing associated with the since closed Clayton County megastore. Additional
reasons for the increase in gross profit as a percentage of net sales from the
1996 Third Quarter to the 1997 Third Quarter include: (i) the recognition of a
$0.5 million receivable resulting from an adjustment to workers' compensation
expense (the "Workers' Compensation Adjustment"), which adjustment is a result
of the Company's better than expected claims experience in workers'
compensation; and (ii) the Company's on-going improvements in operational
efficiencies at all levels,
-9-
<PAGE>
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 approximately $5.1 million or 15.0% of
net sales in the 1997 Third Quarter compared to approximately $6.1 million or
16.7% of net sales in the 1996 Third Quarter. The direct store expenses during
the 1996 Third Quarter consisted of higher expenses primarily related to labor
costs for the Clayton County megastore. Additionally, the 1997 Third Quarter
includes approximately $0.2 million credit arising from the Workers'
Compensation Adjustment.
Selling, general and administrative expenses decreased to approximately
$2.5 million or 7.5% of net sales in the 1997 Third Quarter compared with
approximately $3.4 million or 9.3% of net sales in the 1996 Third Quarter. The
1996 Third Quarter selling, general and administrative expenses consisted of (i)
higher expenses related to the Clayton County megastore and (ii) higher
corporate management costs. While the Company experienced an increase in
advertising expenses during the 1997 Third Quarter, it was offset by a decrease
in consulting and professional fees and executive and administrative labor costs
as compared to the 1996 Third Quarter. The 1997 Third Quarter selling, general
and administrative expenses also contains an adjustment of approximately $0.1
million related to the Workers' Compensation Adjustment.
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 approximately
$0.9 million or 2.6% of net sales in the 1997 Third Quarter from approximately
$1.1 million or 2.9% of net sales in the 1996 Third Quarter. The decline in
depreciation and amortization expense is primarily the result of approximately
$0.1 million or 0.2% of depreciation on certain assets that have since been
taken out of service as a result of 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 Third Quarter. The 1996 Third Quarter
also included
-10-
<PAGE>
approximately $0.2 million or 0.6% of pre-opening expenses relating to the
opening of the Clayton County megastore, which opened during such quarter.
During the 1997 Third Quarter the Company had an operating profit of
approximately $0.4 million or 1.2% of net sales as compared to an operating loss
in the 1996 Third Quarter of approximately $6.7 million or (18.1)% of net sales
which is primarily attributable to the inclusion of approximately $4.4 million
or 12.1% as a provision for the Clayton County store closing, as well as the
reasons set forth above.
Interest expense decreased to approximately $0.6 million or 1.8% of net
sales in the 1997 Third Quarter compared to approximately $0.9 million or 2.3%
of net sales in the 1996 Third 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 remained relatively unchanged at approximately $0.2 million
during the 1997 Third Quarter, compared with approximately $0.2 million during
the 1996 Third Quarter. However, as a result of the decrease in 1997 Third
Quarter sales as compared to 1996 Third Quarter sales, due to reasons set forth
above, other income as a percentage of net sales increased to 0.7% compared to
0.5% in the 1996 Third Quarter.
As a result of the above, the Company's operations incurred a net loss for
the 1997 Third Quarter of approximately $18,000 or approximately $.00 per
common share and common equivalent share, primary, compared with a net loss of
approximately $7.4 million or (approximately $1.20) per common share and common
equivalent share, primary, during the 1996 Third Quarter.
Thirty-Nine Weeks Ended October 30, 1996 compared to Thirty-Nine Weeks Ended
November 1, 1995.
Net sales for the first thirty-nine weeks ended October 30, 1996 (the "1997
Period") decreased to approximately $105.6 million from approximately $112.6
million for
-11-
<PAGE>
the thirty-nine weeks ended November 1, 1995 (the "1996 Period"). This decrease
is primarily the result of the inclusion in the 1996 Period of approximately
$8.3 million of revenues associated with the opening of the Clayton County
megastore in May 1995, which store was closed in November 1995. However, the
1997 Period included approximately $1.2 million of business related to the 1996
Olympic and Paralympic Games in the Atlanta area. On a comparable store basis,
sales increased 0.1%. This increase is comprised of a 2.8% comparable store
sales increase during the second quarter of fiscal 1997 as a result of improved
marketing and merchandising efforts and a 1.3% comparable store sales increase
during the Third Quarter of fiscal 1997, which was partially offset by 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.
Gross profit, as a percentage of net sales, for the 1997 Period improved to
approximately $27.9 million or 26.4% from approximately $27.3 million or 24.2%
in the 1996 Period. This increase resulted from improvements in manufacturing
efficiencies, reduced retail waste of manufactured products and new
merchandising initiatives, all combined with better operational performance. In
addition, while gross profit during the 1996 Period was adversely affected due
to above normal waste and promotional pricing associated with the opening of the
Clayton County megastore, gross profit during the 1997 Period includes
approximately $0.5 million as a result of the Workers' Compensation Adjustment.
Direct store expenses for the 1997 Period decreased to approximately $16.3
million or 15.4% from approximately $18.0 million or 16.0% for the 1996 Period.
During the 1996 Period, as a result of opening the Clayton County megastore, the
Company experienced higher labor expenses. During the 1997 Period, direct store
expenses were reduced approximately $0.2 million as a result of the Workers'
Compensation Adjustment.
Selling, general and administrative expense for the 1997 Period decreased
to approximately $8.0 million or 7.6% from approximately $9.1 million or 8.1% in
the 1996
-12-
<PAGE>
Period which is primarily attributable to lower labor costs. In addition,
selling, general and administration expense for the 1997 Period contains an
adjustment of approximately $0.1 million due to the Workers' Compensation
Adjustment.
Depreciation and amortization declined to approximately $2.6 million or
2.4% from approximately $3.0 million or 2.6% in the 1997 Period. 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
1996 Period also included approximately $0.4 million or 0.4% of pre-opening
expenses for the Clayton County megastore.
Due to the reasons set forth above, during the 1997 Period the Company had
an operating profit of approximately $1.1 million or 1.0% of net sales as
compared to an operating loss in the 1996 Period of approximately $7.6 million
or (6.8)%.
Interest expense decreased to approximately $2.0 million or 1.9% of net
sales in the 1997 Period from approximately $2.3 million or 2.0% of net sales in
the 1996 Period. This decrease is primarily 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.
Other income in the 1997 Period increased to approximately $1.1 million or
1.1% compared to approximately $0.7 million or 0.6% of net sales in the 1996
Period. 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 1997 Period
generated a net profit of approximately $3,000 or approximately $.00 per
common share and common equivalent share, primary, compared with a net loss of
approximately $9.4 million, which includes a provision of approximately $4.4
million (or 3.9%) for closing the Clayton County megastore, or ($1.53) per
common share and common equivalent share, primary, for the 1996 Period.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the 1997 Period, the Company's operating activities provided
approximately $1.6 million in cash and the Company invested approximately $1.3
million in capital expenditures which was offset by approximately $5.2 million
in gross proceeds from the sale of nonproducing property and equipment. The
Company also borrowed $0.5 million on its line of credit and paid off
approximately $6.1 million on its long term obligations. As a result, net cash
during the 1997 Period decreased by approximately $0.2 million resulting in a
quarter-end cash balance of approximately $0.9 million. At October 30, 1996,
the Company had available approximately $0.5 million in additional borrowing
capacity under its credit facilities.
Cash provided by investing activities in the 1997 Period was approximately
$3.9 million. Investing activities consisted of capital expenditures for
property and equipment relating to stores and manufacturing facilities. During
the 1997 Period, the Company used approximately $0.6 million for additional
equipment and building improvements at the Alpharetta megastore and bakery
facility, approximately $0.4 million to remodel a portion of the Gwinnett
megastore to include an ethnic food department and approximately $0.3 million
for additional packaging equipment in the Company's USDA manufacturing
facilities. Total capital expenditures incurred during the 1997 Period were
approximately $1.3 million. Proceeds from the sale of property and equipment
consisted primarily of the sale of an outparcel at the Gwinnett megastore
property for approximately $0.7 million in gross proceeds, approximately $4.3
million in proceeds from the sale of the Nashville, Tennessee property and
approximately $0.2 million from the sale of other nonproducing assets.
Cash used by financing activities in the 1997 Period was approximately $5.6
million. Financing activities consisted mainly of repayments under the Company's
long term debt from real estate sold, as well as regular payments on capital
leases. In addition, the Company has continued to utilize its line of credit. At
the end of the 1997 Period the Company had a cash balance of approximately $0.9
million.
-14-
<PAGE>
The Company's working capital position in the 1997 Period was increased to
approximately $4.5 million as compared to approximately ($0.1) million at fiscal
year ended January 31, 1996 ("Fiscal 1996 year End"). 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
approximately $0.5 million, and the due date being extended from June 30, 1996
until December 31, 1997, which has allowed approximately $2.3 million to be
reclassified as long term debt. Primarily as a result of these actions, the
current maturities of notes payable has decreased by approximately $2.8 million
since Fiscal 1996 Year End.
The Company is now in full compliance with all covenants, conditions and
terms of the Mortgage Loan. In addition, the Company's working capital position
was strengthened by an increase in current assets due in part to an increase in
receivables to approximately $1.5 million as of the 1997 Period as compared to
approximately $0.3 million at Fiscal 1996 Year End. The increase in other
receivables includes approximately $0.8 million as a result of the Workers'
Compensation Adjustment and approximately $0.2 million of impact fees from the
sale of the Nashville, Tennessee property. The Company expects to collect these
amounts by the end of the current fiscal year. The Company has received all
amounts for Olympic and Paralympic related business during the Third Quarter of
fiscal 1997.
The Company continues to seek a purchaser for the remaining outparcel at
the Gwinnett County megastore 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.
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
-15-
<PAGE>
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.
-16-
<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.
-17-
<PAGE>
PART II - OTHER INFORMATION
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 October
30, 1996.
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARRY'S
FARMERS MARKET INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-30-1996
<CASH> 886
<SECURITIES> 0
<RECEIVABLES> 271
<ALLOWANCES> 18
<INVENTORY> 8,847
<CURRENT-ASSETS> 11,858
<PP&E> 66,046
<DEPRECIATION> 19,452<F3>
<TOTAL-ASSETS> 61,482
<CURRENT-LIABILITIES> 7,382<F4>
<BONDS> 25,640<F4>
10,295
0
<COMMON> 38,559
<OTHER-SE> (20,394)
<TOTAL-LIABILITY-AND-EQUITY> 61,482
<SALES> 105,583
<TOTAL-REVENUES> 105,583
<CGS> 77,671
<TOTAL-COSTS> 26,850
<OTHER-EXPENSES> 888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000<F1>
<INCOME-PRETAX> 174
<INCOME-TAX> 0
<INCOME-CONTINUING> 3<F2>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3<F2>
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1>INCLUDED IN OTHER EXPENSES
<F2>INCOME, NET OF ACCRETION OF WARRANTS
<F3>INCLUDES AMORTIZATION
<F4>SHORT TERM PORTION INCLUDED IN CURRENT LIABILITIES
</FN>
</TABLE>
