UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 000-24124
FRESH AMERICA CORP.
(Exact name of registrant as specified in its charter)
Texas 76-0281274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE LINCOLN CENTRE, 5400 LBJ FREEWAY, SUITE 1025, DALLAS, TX 75240
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (972) 774-0575
-------------------
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 [ ]
At November 8, 1996, the Registrant had 3,697,677 shares of its Common Stock
outstanding. Total number of pages in this report, including the cover page is
24. Exhibit index on page 14.
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
JANUARY 5, Sept. 27,
1996 1996
------- -------
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 1,851 $ 2,063
Receivables:
Trade accounts receivable ......................... 19,675 18,761
Other ............................................. 67 318
------- -------
Total receivables .............................. 19,742 19,079
------- -------
Inventories:
Produce .......................................... 1,746 2,404
Supplies ......................................... 212 209
------- -------
Total inventories .............................. 1,958 2,613
------- -------
Prepaid expenses ................................... 664 488
------- -------
Total current assets ........................... 24,215 24,243
------- -------
Property, plant and equipment, net .................... 4,795 5,577
Notes receivable from shareholders .................... 125 135
Other assets .......................................... 697 638
------- -------
$29,832 $30,593
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable ...................................... $ 1,000 $ --
Current portion of long-term debt and capital leases 91 119
Accounts payable ................................... 10,573 9,327
Accrued salaries and wages ......................... 395 248
Other accrued expenses ............................. 542 748
Taxes payable ...................................... 124 100
------- -------
Total current liabilities ...................... 12,725 10,542
------- -------
Long-term debt and capital leases, less current portion 610 543
Shareholders' equity:
Common stock $.01 par value. Authorized 10,000,000
shares; issued 3,518,585 and 3,697,677 shares,
respectively .................................... 35 37
Additional paid-in capital ......................... 13,983 14,427
Retained earnings .................................. 2,479 5,044
------- -------
Total shareholders' equity ..................... 16,497 19,508
Commitments and contingencies
------- -------
$29,832 $30,593
======= =======
The notes to consolidated financial statements are an integral part of
these statements.
2
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
QUARTER ENDED
---------------------
SEPT. 29, Sept. 27,
1995 1996
--------- --------
Net sales .................................... $ 28,256 $ 59,726
Cost of goods sold, excluding depreciation and
amortization ............................... 22,983 54,427
-------- --------
Gross profit ........................... 5,273 5,299
-------- --------
Selling, general and administrative expenses:
Salaries and related costs ................ 3,487 2,332
Rent, maintenance and related costs ....... 442 883
Insurance expense ......................... 310 186
Automobile, travel and related costs ...... 236 123
Communication expense ..................... 137 117
Depreciation and amortization ............. 145 327
Other ..................................... 163 180
-------- --------
4,920 4,148
-------- --------
Operating income ....................... 353 1,151
Other income (expense):
Interest expense .......................... (8) (20)
Interest income ........................... 116 73
Other, net ................................ 38 107
-------- --------
146 160
-------- --------
Income before tax expense .................... 499 1,311
Tax expense .................................. 175 500
-------- --------
Net income ............................. $ 324 $ 811
======== ========
Earnings per share ........................... $ 0.09 $ 0.21
======== ========
Weighted average number of shares ............ 3,719 3,937
======== ========
The notes to consolidated financial statements are an integral part of these
statements.
3
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
NINE MONTHS ENDED
-----------------------
SEPT. 29, Sept. 27,
1995 1996
-------- ---------
Net sales .................................... $ 85,917 $ 170,642
Cost of goods sold, excluding depreciation and
amortization ............................... 70,020 154,780
-------- ---------
Gross profit ........................... 15,897 15,862
-------- ---------
Selling, general and administrative expenses:
Salaries and related costs ................ 10,249 6,865
Rent, maintenance and related costs ....... 1,194 2,482
Insurance expense ......................... 956 563
Automobile, travel and related costs ...... 618 382
Communication expense ..................... 388 392
Depreciation and amortization ............. 496 931
Other ..................................... 453 541
-------- ---------
14,354 12,156
-------- ---------
Operating income ....................... 1,543 3,706
2,555
Other income (expense):
Interest expense .......................... (27) (65)
Interest income ........................... 368 162
Other, net ................................ 62 222
-------- ---------
403 319
-------- ---------
Income before tax expense .................... 1,946 4,025
Tax expense .................................. 650 1,460
-------- ---------
Net income ............................. $ 1,296 $ 2,565
======== =========
Earnings per share ........................... $ 0.35 $ 0.65
======== =========
Weighted average number of shares ............ 3,719 3,918
======== =========
The notes to consolidated financial statements are an integral part of these
statements.
4
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Retained Total
Additional Earnings Shareholders'
Common Paid-in (Accumulated Equity
Stock Capital Deficit) (Deficit)
-------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balances at January 2, 1994 .......... $ 11 $ 184 $ (1,894) $ (1,699)
Issuance of 15,000 shares of
Series B preferred stock .......... -- (90) -- (90)
Conversion of Series A and
Series B preferred stock .......... 11 3,989 -- 4,000
Exercise of employee stock options ... -- 10 -- 10
Dividends on preferred stock ......... -- (112) -- (112)
Issuance of 1,250,000 shares of
common stock, net of offering costs 13 10,000 -- 10,013
Net income ........................... -- -- 2,073 2,073
-------- ----------- ------------ -----------
Balances at January 1, 1995 .......... 35 13,981 179 14,195
Exercise of employee stock options ... -- 2 -- 2
Net income ........................... -- -- 2,300 2,300
-------- ----------- ------------ -----------
Balances at January 5, 1996 .......... 35 13,983 2,479 16,497
Exercise of employee stock options ... 2 444 -- 446
Net income ........................... -- -- 2,565 2,565
-------- ----------- ------------ -----------
Balances at September 27, 1996 ....... $ 37 $ 14,427 $ 5,044 $ 19,508
======== =========== ============ ===========
</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.
5
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPT. 29, Sept. 27,
1995 1996
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................... $ 1,296 $ 2,565
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................. 495 931
Loss on disposal of equipment ................................. - 4
Change in assets and liabilities:
Decrease in accounts receivable ............................ 1,792 663
Increase in inventories .................................... (169) (655)
Increase in prepaid expenses ............................... (406) (109)
Decrease in other assets ................................... 38 25
Decrease in accounts payable ............................... (4,016) (1,246)
Increase (decrease) in accrued expenses and
other current liabilities ............................... (132) 34
-------- -------
Total adjustments .................................. (2,398) (353)
-------- -------
Net cash provided by (used in) operating activities (1,102) 2,212
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment, net ..................... (145) (1,414)
Cost of acquisition, exclusive of cash acquired ..................... (498) --
Proceeds from sale of equipment ..................................... -- 6
-------- -------
Net cash used in investing activities .............. (643) (1,408)
-------- -------
Cash flows from financing activities:
Payments of notes payable, net of proceeds .......................... -- (1,000)
Payments of long-term debt and capital leases ....................... (488) (38)
Net proceeds from exercise of employee stock options ................ -- 446
-------- -------
Net cash used in financing activities .............. (488) (592)
-------- -------
Net increase (decrease) in cash and cash equivalents (2,233) 212
Cash and cash equivalents at beginning of period ....................... 11,541 1,851
-------- -------
Cash and cash equivalents at end of period ............................. $ 9,308 $ 2,063
======== =======
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................. $ 18 $ 31
Cash paid for income taxes .......................................... $ 642 $ 1,532
</TABLE>
The notes to consolidated financial statements are an integral part of these
statements.
6
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 27, 1996
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Fresh America Corp. was incorporated in Texas in May 1989. Prior to
November 1995, Fresh America Corp. was a licensee under contract with Sam's Club
("Sam's"), a division of WalMart Stores, Inc., to operate fresh produce
departments in certain Sam's clubs. Under the terms of a five-year distribution
agreement (the "Agreement") with Sam's, Fresh America Corp. discontinued the
operation of fresh produce departments in certain Sam's clubs and became a
distributor of fresh produce and related products primarily to Sam's (see Note
2).
UNAUDITED INTERIM FINANCIAL INFORMATION - The consolidated balance sheet
as of September 27, 1996 and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the quarter and nine month
periods ended September 29, 1995 and September 27, 1996 and related notes have
been prepared by the Company and are unaudited. In the opinion of the Company,
the interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of the results of
the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the interim financial
information. The interim financial information should be read in conjunction
with the Company's audited consolidated financial statements. The results for
the quarter and nine months ended September 27, 1996 may not be indicative of
operating results for the full year. During the quarter ended March 31, 1995,
the Company converted its accounting period to end on Friday. Previously, the
Company's accounting periods ended on Sunday. Consequently, the nine month
periods ended September 29, 1995 and September 27, 1996 consist of 38 weeks and
five days, and 38 weeks, respectively. The quarters ended September 29, 1995 and
September 27, 1996 both consist of 13 weeks.
The following are the significant accounting policies followed by the
Company in the preparation of the consolidated financial statements.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Fresh America Corp. and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
FISCAL YEAR - The Company's fiscal year is a 52 week or 53 week period
ending on the first Friday in January.
7
<PAGE>
NOTE 2. AGREEMENT WITH SAM'S CLUB.
In August 1995, the Company entered into a five-year distribution
Agreement with Sam's Club. The Agreement, which began on December 1, 1995,
replaced the Company's pre-existing license agreement with Sam's Club which
expired on November 30, 1995. Under terms of the Agreement, the Company expanded
its distribution arrangement with Sam's into specified exclusive new territories
approximately doubling the number of Sam's clubs serviced by Fresh America. As a
result of this expansion, the Company commenced operations from two new
distribution centers in Chicago, Illinois and Cincinnati, Ohio on January 2,
1996. The Company and Sam's mutually agreed to begin the transition to the
Agreement during November 1995. Expansion under the Agreement was effected on
January 2, 1996. The number of Sam's clubs served by the Company increased from
190 clubs before expansion to 369 clubs as of January 5, 1996.
The Agreement gives Sam's ownership of the product as it enters the clubs
and complete operational authority within the produce departments of each club.
Accordingly, Sam's assumed all costs and liabilities related to the operation of
the departments, including all in-club personnel costs, merchandising and sales
costs, customer returns and credits, and product shrink. Under the Agreement,
the Company invoices Sam's for product delivered to the clubs in accordance with
purchase orders issued by Sam's. The Agreement also provides Sam's the option to
reduce the number of clubs within the Company's exclusive territory by
approximately 10 percent per year under certain circumstances and to discontinue
service for clubs in which Sam's elects not to offer produce, if any.
NOTE 3. EXERCISE OF COMMON STOCK WARRANTS.
On April 2, 1996, the Company issued 90,134 shares of common stock in exchange
for all of its 143,656 outstanding warrants, which had an exercise price of
$4.89 per share. The earnings per share computation for the nine months ended
September 27, 1996 assumes this transaction occurred at the beginning of the
period.
NOTE 4. SUBSEQUENT EVENTS.
On November 5, 1996, a wholly-owned subsidiary of the Company acquired the
business and net assets of Produce Plus, Inc., a Houston-based specialty food
distribution company with annual revenues of approximately $13 million.
Consideration at closing consisting of cash, stock and assumption of operating
liabilities totaled approximately $1.8 million. In addition, the Company issued
a convertible promissory note in a principal amount up to $600,000. The
principal of such note will be dependent on future pre-tax earnings of the newly
acquired business, subject to certain adjustments, and a portion of the
principal may be converted into common stock of the Company. The transaction
will be accounted for as a purchase, and accordingly, revenues and results of
operations will be included in the Company's consolidated results of operations
from November 5, 1996.
In addition, the Company invested $250,000 on November 6, 1996 for a 25%
ownership interest in Henri Morris & Associates, a software development company
offering specialty software to the
8
<PAGE>
produce and grocery distribution industry.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the consolidated statements of operations as a percentage of net sales.
Quarter Ended Nine Months Ended
----------------- -----------------
Sept. 29, Sept. 27, Sept. 29, Sept. 27,
1995 1996 1995 1996
-------- -------- --------- -------
Net Sales ....................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .............. 81.3 91.1 81.5 90.7
-------- -------- --------- -------
Gross Profit .................... 18.7 8.9 18.5 9.3
Selling, general and
administrative expenses ....... 17.4 7.0 16.7 7.1
-------- -------- --------- -------
Operating income ................ 1.3 1.9 1.8 2.2
Other income (expense) .......... 0.5 .3 0.5 .2
-------- -------- --------- -------
Income before income tax expense 1.8 2.2 2.3 2.4
Tax expense ..................... 0.7 0.8 0.8 .9
-------- -------- --------- -------
Net income ...................... 1.1% 1.4% 1.5% 1.5%
======== ======== ========= =======
GENERAL
Fresh America Corp. is an integrated food distribution management company,
which, through November 1995, primarily operated fresh produce departments in
Sam's Club membership warehouse clubs under a license agreement with Sam's Club,
a division of Wal-Mart Stores, Inc. Effective November 1995, the Company
commenced operations under its new five-year distribution Agreement (the
"Agreement") with Sam's Club. The Agreement replaced the Company's pre-existing
license agreement which was scheduled to expire on November 30, 1995. Under the
Agreement, the Company's distribution arrangement with Sam's has expanded into
the midwestern, central and southern Florida regions of the United States where
the Company has exclusive new territories. The addition of these new territories
increased the number of clubs served by the Company from 190 immediately prior
to the expansion to 374 clubs as of September 27, 1996. Of the additional 184
clubs, 26 clubs were added in early November 1995, 153 clubs were added on
January 2, 1996, and five were added subsequent to January 2, 1996.
Under the Agreement, Sam's Club takes ownership of the product as it enters
the clubs and resells the product to Sam's Club members. Fresh America invoices
Sam's Club for product delivered to the clubs in accordance with purchase orders
issued by Sam's Club. Further, Sam's has
9
<PAGE>
complete operational authority within the produce departments of each club.
Accordingly, Sam's has assumed all costs and liabilities related to the
operation of the departments, including all in-club personnel costs,
merchandising and sales costs, customer returns and credits, and product shrink.
Under the prior license agreement, Fresh America was responsible for such costs
and maintained ownership of the product until it was sold directly to Sam's Club
members. Therefore, the Company's revenue and cost structure under the Agreement
is not comparable with periods prior to November 1995.
Prior to fiscal 1995, the Company's fiscal year was a 52 or 53 week period
ending on the first Sunday in January. Commencing with fiscal 1995, the
Company's fiscal year is a 52 week or 53 week period ending on the first Friday
in January. Consequently, the nine month periods ended September 29, 1995 and
September 27, 1996 consist of 38 weeks and five days, and 38 weeks,
respectively. The quarters ended September 29, 1995 and September 27, 1996 both
consist of 13 weeks.
AS DISCUSSED ABOVE, THE AGREEMENT RESULTS IN A REVISED REVENUE AND COST
STRUCTURE FOR THE COMPANY WHICH IS NOT DIRECTLY COMPARABLE WITH PERIODS PRIOR TO
NOVEMBER 1995. THE FOLLOWING DISCUSSION IDENTIFIES THE MAJOR CATEGORIES OF COSTS
WHICH ARE AFFECTED BY THE TRANSITION TO THE AGREEMENT. HOWEVER, TO PROPERLY
UNDERSTAND AND EVALUATE THE IMPACT OF THE AGREEMENT, AN UNDERSTANDING OF THE
TERMS OF THE AGREEMENT AND THE PRIOR LICENSE AGREEMENT IS ESSENTIAL (SEE
"GENERAL" ABOVE AND "ITEM 1 - BUSINESS" OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K WHICH IS INCORPORATED HEREIN BY REFERENCE).
COMPARISON OF QUARTER ENDED SEPTEMBER 27, 1996 TO QUARTER ENDED SEPTEMBER 29,
1995
NET SALES. Net sales increased $31.4 million, or 111.4%, from $28.3 million
in the third quarter of 1995 to $59.7 million in the third quarter of 1996. The
increase in net sales was the result of several factors, including (a) the
expansion of the Company's operating territory under the Agreement and the
resulting addition of 184 Sam's clubs within the Company's operating territory
subsequent to the second quarter of 1995, (b) the acquisition of Lone Star
Produce and other new business opportunities. These increases were partially
offset by the revised revenue structure under the Agreement.
Under the Agreement the Company has become a wholesale distributor whereas
under the previous license agreement with Sam's Club, the Company was selling at
retail to the Sam's Club members. As a consequence, the 96.8% increase in the
number of Sam's clubs serviced by the Company in the third quarter of 1996 as
compared to the third quarter of 1995 coupled with a slight increase in average
revenue per club per week from approximately $10,977 in the third quarter of
1995 to approximately $11,096 in the third quarter of 1996 were the primary
factors in the aforementioned increase in revenues. The acquisition of Lone Star
Produce in September 1995, and primarily additional business opportunities with
Alliant Foodservice and Dole Fresh Vegetables, Inc., increased revenues by
approximately $5.0 million from the third quarter of 1995 to the third quarter
of 1996.
10
<PAGE>
COST OF GOODS SOLD. Cost of goods sold increased by $31.4 million, or 136.8%,
from $23.0 million in the third quarter of 1995 to $54.4 million in the third
quarter of 1996, primarily reflecting the increase in net sales and the change
in the Company's cost structure under the Agreement. As a percentage of net
sales, cost of goods sold increased from 81.3% to 91.1%.
As mentioned above, under the Agreement, Sam's Club takes ownership of the
product as it enters the clubs and resells the product to Sam's Club members.
Accordingly, Sam's Club has assumed all costs and liabilities related to the
operation of the departments, including all in-club personnel costs,
merchandising and sales costs, customer returns and credits, and product shrink.
Under the prior license agreement, Fresh America was responsible for such costs
and maintained ownership of the product until it was sold directly to Sam's Club
members. The elimination of these costs and related risks to Fresh America is
the principal factor explaining the Company's lower gross profit margins under
the Agreement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased by $800,000 or 15.7%, from $4.9
million in the third quarter of 1995 to $4.1 million in the third quarter of
1996. As a percentage of net sales, SG&A expenses decreased from 17.4% to 7.0%.
The major decline in SG&A expenses was attributable to salaries and related
costs, which decreased $1.2 million, or 33.1%, from $3.5 million in the third
quarter of 1995 to $2.3 million in the third quarter of 1996. The decrease in
salaries and related costs was directly related to the reduction in labor at the
club and club management levels attributable to the Agreement. Under the
Agreement, the Company no longer operates the produce departments in the Sam's
Clubs and the Company reduced personnel associated with these operations in the
fourth quarter of 1995. Offsetting these reductions in SG&A expense was an
increase in rent, maintenance and related costs which increased $441,000, or
99.8%, from $442,000 in the third quarter of 1995 to $883,000 in the third
quarter of 1996. This increase is primarily attributable to the addition of two
new distribution centers in Chicago and Cincinnati which are operating out of
leased facilities.
OPERATING INCOME. As a result of the foregoing factors, operating income
increased by $798,000 from $353,000 in the third quarter of 1995 to $1.2 million
in the third quarter of 1996. As a percentage of net sales, operating income
increased from 1.3% in the third quarter of 1995 to 1.9% in the third quarter of
1996.
INTEREST INCOME (EXPENSE). Interest income decreased $43,000 in the second
quarter of 1996 primarily as a result of the Company funding the increase in
accounts receivable from Sam's under the Agreement with excess cash which was
previously invested in short term marketable securities. Interest expense
increased $12,000 primarily as a result of the debt issued in the acquisition of
Lone Star Produce.
NET INCOME. As a result of the foregoing factors, net income increased by
$487,000 from $324,000 in the third quarter of 1995 to $811,000 in the third
quarter of 1996. As a percentage of net sales, net income increased from 1.1% in
the third quarter of 1995 to 1.4% in the third quarter of 1996.
11
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 27, 1996 TO NINE MONTHS ENDED
SEPTEMBER 29, 1995
As stated above, the nine month period ended September 27, 1996 consisted of
266 days whereas the nine month period ended September 29, 1995 consisted of 271
days, a difference of five days or an approximate 1.9% decrease in the number of
operating days. This occurrence affects the analysis of most operating revenue
and expense categories in the following discussion.
NET SALES. Net sales increased $84.7 million, or 98.6%, from $85.9 million in
the first nine months of 1995 to $170.6 million in the first nine months of
1996. The increase in net sales was the result of several factors, including (a)
the expansion of the Company's operating territory under the Agreement and the
resulting addition of 184 Sam's clubs within the Company's operating territory
subsequent to the first nine months of 1995, and (b) the acquisition of Lone
Star Produce and other new business opportunities. These increases were
partially offset by the revised revenue structure under the Agreement and the
decrease in the number of operating days.
Under the Agreement, the Company has become a wholesale distributor whereas
under the previous agreement with Sam's Club, the Company was selling at retail
to the Sam's Club members. As a consequence, the 96.8% increase in the number of
Sam's clubs serviced by the Company in the first nine months of 1996 as compared
to the first nine months of 1995 was the primary contributor to the increase in
revenues. The acquisition of Lone Star Produce in September 1995, and primarily
additional business opportunities with Alliant Foodservice and Dole Fresh
Vegetables, increased revenues by approximately $12.7 million from the first
nine months of 1995 compared to the first nine months of 1996. Partially
offsetting these increases was an approximate 3.6% reduction in average revenue
per club per week from approximately $11,525 in the first nine months of 1995 to
approximately $11,104 in the first nine months of 1996. Finally, a decrease in
net sales of approximately $1.5 million was attributable to the five less days
of operation in the quarter ended March 6, 1996.
COST OF GOODS SOLD. Cost of goods sold increased by $84.8 million, or 121.1%,
from $70 million in the first nine months of 1995 to $154.8 million in the first
nine months of 1996, primarily reflecting the increase in net sales and the
change in the Company's cost structure under the Agreement. As a percentage of
net sales, cost of goods sold increased from 81.5% to 90.7%.
As mentioned above, under the Agreement, Sam's Club takes ownership of the
product as it enters the clubs and resells the product to Sam's Club members.
Accordingly, Sam's Club has assumed all costs and liabilities related to the
operation of the departments, including all in-club personnel costs,
merchandising and sales costs, customer returns and credits, and product shrink.
Under the prior license agreement, Fresh America was responsible for such costs
and maintained ownership of the product until it was sold directly to Sam's Club
members. The elimination of these costs and related risks to Fresh America is
the principal factor explaining the Company's lower gross profit margins under
the Agreement.
12
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses decreased by $2.2 million or 15.3%, from $14.3
million in the first nine months of 1995 to $12.2 million in the first nine
months of 1996. As a percentage of net sales, SG&A expenses decreased from 16.7%
to 7.1%. The major decline in SG&A expenses was attributable to salaries and
related costs, which decreased $3.4 million, or 33.0%, from $10.2 million in the
first nine months of 1995 to $6.9 million in the first nine months of 1996. The
decrease in salaries and related costs was directly related to the reduction in
labor at the club and club management levels attributable to the Agreement.
Under the Agreement, the Company no longer operates the produce departments in
the Sam's Clubs and the Company reduced personnel associated with these
operations in the fourth quarter of 1995. Offsetting these reductions in SG&A
expense was an increase in rent, maintenance and related costs which increased
$1.3 million, or 107.9%, from $1.2 million in the first nine months of 1995 to
$2.5 million in the first nine months of 1996. This increase is primarily
attributable to the addition of two new distribution centers in Chicago and
Cincinnati which are operating out of leased facilities.
OPERATING INCOME. As a result of the foregoing factors, operating income
increased by $2.2 million, from $1.5 million in the first nine months of 1995 to
$3.7 million in the first nine months of 1996. As a percentage of net sales,
operating income increased from 1.8% in the first nine months of 1995 to 2.2% in
the first nine months of 1996.
INTEREST INCOME (EXPENSE). Interest income decreased $206,000 in the first
nine months of 1996 as a result of the Company funding the increase in accounts
receivable from Sam's under the Agreement with excess cash which was previously
invested in short term marketable securities. Interest expense increased $38,000
primarily as a result of the debt issued in the acquisition of Lone Star
Produce.
INCOME TAX EXPENSE. In each of the first nine months of 1995 and 1996, the
provisions for income taxes reflect the full utilization of $193,000 of the
Company's available net operating loss carryforward. At the end of fiscal 1995,
the Company had $0.8 million of net operating loss carryforwards available to
reduce future income taxes. However, because an "ownership change" occurred for
federal income tax purposes in 1992, the Company may use no more than $193,000
of its net operating loss carryforwards during fiscal 1996 and each year in the
future until fully utilized.
NET INCOME. As a result of the foregoing factors, net income increased by
$1.3 million from $1.3 million in the first nine months of 1995 to $2.6 million
in the first nine months of 1996.
QUARTERLY RESULTS AND SEASONALITY
The Company's business is seasonal, with its greatest quarterly sales volume
occurring in the fourth quarter. A substantial portion of the Company's produce
sales consists of staple items such as apples, oranges, grapefruit, potatoes and
onions, which are strongest during the fall, winter and spring. The supply and
quality of these items declines during the summer, although lost sales are
replaced to some extent by more seasonal products such as peaches, plums,
nectarines, strawberries and melons. Sales of refrigerated, pre-packed products,
such as vegetable trays, are strongest during
13
<PAGE>
the fourth quarter holiday season. Because the Company's results of operations
depend significantly on sales generated during the fourth quarter, any adverse
development affecting the Company's operations during this period, such as the
unavailability of high quality produce, harsh weather conditions, or product
costs, could have a disproportionate impact on the Company's results of
operations for the full year. Under the Agreement, management believes the
Company's quarterly net sales will continue to be impacted by a similar pattern
of seasonality.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $2.2 million for the nine months
ended September 27, 1996. At September 27, 1996, the Company had working capital
of $13.7 million and a current ratio of 2.3:1. The Company has a $5.0 million
bank revolving line of credit, under which the maximum level of borrowing was
$1,000,000 during the nine months ended September 27, 1996. The line of credit
expires on June 1, 1998. Management believes that the Company's current
financial position is sufficient to meet its operating needs and to finance
currently anticipated capital expenditures.
INFLATION
Although the Company cannot determine the precise effects of inflation,
management does not believe inflation has had a material effect on the Company's
sales or results of operations. However, independent of normal inflationary
pressures, the Company's produce products are subject to fluctuating product
costs as discussed in "Quarterly Results and Seasonality" on the preceding page.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits.
Exhibit 10.1 - 1996 Stock Option and Award Plan.
Exhibit 11.1 - Computation of Earnings Per Common Share.
Exhibit 99.1 - Item 1 of Annual Report on Form 10-K for fiscal year 1995.
(Incorporated by reference.)
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FRESH AMERICA CORP.
(Registrant)
/s/ Robert C. Kiehnle
Date: November 11, 1996
Robert C. Kiehnle
Executive Vice President,
Chief Financial Officer and
Assistant Secretary
15
EXHIBIT 10.1
FRESH AMERICA CORP.
1996 STOCK OPTION AND AWARD PLAN
1. PURPOSE OF THE PLAN. This Plan shall be known as the Fresh America
Corp. 1996 Stock Option and Award Plan. The purpose of the Plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide incentives to such personnel to promote the
success of the business of Fresh America Corp. and its subsidiaries.
Certain options granted under this Plan are intended to qualify as
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended from time to time, while certain other options granted under
the Plan will constitute nonqualified options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Common Stock" means the Common Stock, $.01 par value per
share, of the Corporation. Except as otherwise provided herein, all Common Stock
issued pursuant to the Plan shall have the same rights as all other issued and
outstanding shares of Common Stock, including but not limited to voting rights,
the right to dividends, if declared and paid, and the right to pro rata
distributions of the Corporation's assets in the event of liquidation.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "Committee" means the committee described in Section 19 that
administers the Plan.
(e) "Corporation" means Fresh America Corp., a Texas corporation.
(f) "Date of Grant" means the date on which an Option is granted
or Restricted Stock is awarded pursuant to this Plan or, if the Board or the
Committee so determines, the date specified by the Board or the Committee as the
date the award is to be effective.
(g) "Employee" means any officer or other key employee of the
Corporation or one of its Subsidiaries (including any director who is also an
officer or key employee of the Corporation or one of its Subsidiaries).
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means the closing sale price (or average
of the quoted closing bid and asked prices if there is no closing sale price
reported) of the Common Stock on the trading day immediately prior to the date
specified as reported by The Nasdaq Stock Market or by the principal national
stock exchange on which the Common Stock is then listed. If there is
1
<PAGE>
no reported price information for the Common Stock, the Fair Market Value will
be determined by the Board or the Committee, in its sole discretion. In making
such determination, the Board or the Committee may, but shall not be obligated
to, commission and rely upon an independent appraisal of the Common Stock.
(j) "Non-Employee Director" means an individual who is a
"non-employee director" as defined in Rule 16b-3 under the Exchange Act and also
an "outside director" within the meaning of Treasury Regulation ss.
1.162-27(e)(3).
(k) "Nonqualified Option" means any Option that is not a
Qualified Option.
(l) "Option" means a stock option granted pursuant to Section 6
of this Plan.
(m) "Optionee" means any Employee or director who receives an
Option.
(n) "Participant" means an Employee or director who receives an
Option or Restricted Stock pursuant to this Plan.
(o) "Plan" means the Fresh America Corp. 1996 Stock Option and
Award Plan, as amended from time to time.
(p) "Qualified Option" means any Option that is intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
(q) "Restricted Stock" means Common Stock awarded to an Employee
or director pursuant to Section 7 of this Plan.
(r) "Rule 16b-3" means Rule 16b-3 of the rules and regulations
under the Exchange Act, as Rule 16b-3 may be amended from time to time, and any
successor provisions to Rule 16b-3 under the Exchange Act.
(s) "Subsidiary" means any now existing or hereinafter organized
or acquired company of which more than fifty percent (50%) of the issued and
outstanding voting stock is owned or controlled directly or indirectly by the
Corporation or through one or more Subsidiaries of the Corporation.
3. TERM OF PLAN. The Plan has been adopted by the Board effective as of
July 12, 1996. To permit the granting of Qualified Options under the Code, and
to qualify awards of Options or Restricted Stock hereunder as "performance
based" under Section 162(m) of the Code, the Plan will be submitted for approval
by the shareholders of the Corporation by the affirmative votes of the holders
of a majority of the shares of Common Stock then issued and outstanding, for
approval no later than the next annual meeting of shareholders. If the Plan is
not so approved by the shareholders of the Corporation, then any Options
previously granted under the Plan will be Nonqualified Options, regardless of
whether the option agreements relating
2
<PAGE>
thereto purport to grant Qualified Options. The Plan shall continue in effect
until terminated pursuant to Section 19(a).
4. SHARES SUBJECT TO THE PLAN. Except as otherwise provided in Section
18 hereof, the aggregate number of shares of Common Stock issuable upon the
exercise of Options or upon the grant of Restricted Stock pursuant to this Plan
shall be 150,000 shares. Such shares may either be authorized but unissued
shares or treasury shares. The Corporation shall, during the term of this Plan,
reserve and keep available a number of shares of Common Stock sufficient to
satisfy the requirements of the Plan. If an Option should expire or become
unexercisable for any reason without having been exercised in full, or
Restricted Stock should fail to vest and be forfeited in whole or in part for
any reason, then the shares that were subject thereto shall, unless the Plan has
terminated, be available for the grant of additional Options or Restricted Stock
under this Plan, subject to the limitations set forth above.
5. ELIGIBILITY. Qualified Options may be granted under Section 6 of the
Plan to such Employees of the Corporation or its Subsidiaries as may be
determined by the Board or the Committee. Nonqualified Options may be granted
under Section 6 of the Plan to such Employees and directors of the Corporation
or its Subsidiaries as may be determined by the Board or the Committee.
Restricted Stock may be granted under Section 7 of the Plan to such Employees
and directors of the Corporation or its Subsidiaries as may be determined by the
Board or the Committee. Subject to the limitations and qualifications set forth
in this Plan, the Board or the Committee shall also determine the number of
Options or shares of Restricted Stock to be granted, the number of shares
subject to each Option or Restricted Stock grant, the exercise price or prices
of each Option, the vesting and exercise period of each Option and the vesting
and/or forfeiture provisions relating to Restricted Stock, whether an Option may
be exercised as to less than all of the Common Stock subject thereto, and such
other terms and conditions of each Option or grant of Restricted Stock, if any,
as are consistent with the provisions of this Plan. In connection with the
granting of Qualified Options, the aggregate Fair Market Value (determined at
the Date of Grant of a Qualified Option) of the shares with respect to which
Qualified Options are exercisable for the first time by an Optionee during any
calendar year (under all such plans of the Optionee's employer corporation and
its parent and subsidiary corporations as defined in Section 424(e) and (f) of
the Code, or a corporation or a parent or subsidiary corporation of such
corporation issuing or assuming an Option in a transaction to which Section
424(a) of the Code applies (collectively, such corporations described in this
sentence are hereinafter referred to as "Related Corporations")) shall not
exceed $100,000 or such other amount as from time to time provided in Section
422(d) of the Code or any successor provision.
6. GRANT OF OPTIONS. Except as provided in Section 19(c), the Board or
the Committee shall determine the number of shares of Common Stock to be offered
from time to time pursuant to Options granted hereunder and shall grant Options
under the Plan. The grant of Options shall be evidenced by Option agreements
containing such terms and provisions as are approved by the Board or the
Committee and executed on behalf of the Corporation by an appropriate officer.
In connection with the granting of any Options under the Plan, the aggregate
number of shares of Common Stock issuable to any single Participant shall not
exceed the number of shares subject to the Plan referred to in Section 4.
3
<PAGE>
Unless the Board or the Committee determines otherwise with
respect to a particular year, each Non-Employee Director will automatically be
granted a Nonqualified Option to purchase 5,000 shares of Common Stock (subject
to adjustment pursuant to Section 18 hereof), at an exercise price equal to the
Fair Market Value of the Common Stock on the Date of Grant, on August 8 of each
year.
7. RESTRICTED STOCK. Except as provided in Section 19(d), the Board or
the Committee shall determine the number of shares of Common Stock to be granted
as Restricted Stock from time to time under the Plan. The grant of Restricted
Stock shall be evidenced by Restricted Stock agreements containing such terms
and provisions as are approved by the Board or the Committee and executed on
behalf of the Corporation by an appropriate officer.
8. TIME OF GRANT OF OPTIONS. The date of grant of an Option or
Restricted Stock under the Plan shall be the date on which the Board or the
Committee awards the Option or Restricted Stock or, if the Board or the
Committee so determines, the date specified by the Board or the Committee as the
date the award is to be effective. Notice of the grant shall be given to each
Participant to whom an Option or Restricted Stock is granted promptly after the
date of such grant.
9. PRICE. The exercise price for each share of Common Stock subject to
an Option (the "Exercise Price") granted pursuant to Section 6 of the Plan shall
be determined by the Board or the Committee at the Date of Grant; provided,
however, that (a) the Exercise Price for any Option shall not be less than 100%
of the Fair Market Value of the Common Stock at the Date of Grant, and (b) if
the Optionee owns on the Date of Grant more than 10 percent of the total
combined voting power of all classes of stock of the Corporation or its parent
or any of its subsidiaries, as more fully described in Section 422(b)(6) of the
Code or any successor provision (such shareholder is referred to herein as a
"10-Percent Shareholder"), the Exercise Price for any Qualified Option granted
to such Optionee shall not be less than 110% of the Fair Market Value of the
Common Stock at the Date of Grant. The Board or the Committee in its discretion
may award shares of Restricted Stock under Section 7 of the Plan to Participants
without requiring the payment of cash consideration for such shares.
10. VESTING. Subject to Section 12 of this Plan, each Option and
Restricted Stock award under the Plan shall vest or be subject to forfeiture in
accordance with the provisions set forth in the applicable Option agreement or
Restricted Stock agreement. The Board or the Committee may, but shall not be
required to, permit acceleration of vesting or termination of forfeiture
provisions upon any sale of the Corporation or similar transaction. A
Participant's Option or Restricted Stock agreement may contain such additional
provisions with respect to vesting as the Board or the Committee may specify.
11. EXERCISE. A Participant may pay the Exercise Price of the shares of
Common Stock as to which an Option is being exercised by the delivery of cash,
check or, at the Corporation's option, by the delivery of shares of Common Stock
having a Fair Market Value on the date immediately preceding the exercise date
equal to the Exercise Price.
4
<PAGE>
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended, any Option granted under
the Plan may be exercised by a broker-dealer acting on behalf of an Optionee if
(a) the broker-dealer has received from the Optionee or the Corporation a fully-
and duly-endorsed agreement evidencing such Option, together with instructions
signed by the Optionee requesting the Corporation to deliver the shares of
Common Stock subject to such Option to the broker-dealer on behalf of the
Optionee and specifying the account into which such shares should be deposited,
(b) adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (c) the broker-dealer and the
Optionee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12
CFR Part 220, or any successor provision.
12. WHEN QUALIFIED OPTIONS MAY BE EXERCISED. No Qualified Option shall
be exercisable at any time after the expiration of ten (10) years from the Date
of Grant; PROVIDED, HOWEVER, that if the Optionee with respect to a Qualified
Option is a 10-Percent Shareholder on the Date of Grant of such Qualified
Option, then such Option shall not be exercisable after the expiration of five
(5) years from its Date of Grant. In addition, if an Optionee of a Qualified
Option ceases to be an employee of the Corporation or any Related Corporation
for any reason, such Optionee's vested Qualified Options shall not be
exercisable after (a) 90 days following the date such Optionee ceases to be an
employee of the Corporation or any Related Corporation, if such cessation of
service is not due to the death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, or (b) twelve months
following the date such Optionee ceases to be an employee of the Corporation or
any Related Corporation, if such cessation of service is due to the death or
permanent and total disability (as defined above) of the Optionee. Upon the
death of an Optionee, any vested Qualified Option exercisable on the date of
death may be exercised by the Optionee's estate or by a person who acquires the
right to exercise such Qualified Option by bequest or inheritance or by reason
of the death of the Optionee, provided that such exercise occurs within both the
remaining option term of the Qualified Option and twelve months after the date
of the Optionee's death. This Section 12 only provides the outer limits of
allowable exercise dates with respect to Qualified Options; the Board or the
Committee may determine that the exercise period for a Qualified Option shall
have a shorter duration than as specified above.
13. OPTION FINANCING. Upon the exercise of any Option granted under the
Plan, the Corporation may, but shall not be required to, make financing
available to the Participant for the purchase of shares of Common Stock pursuant
to such Option on such terms as the Board or the Committee may specify.
14. WITHHOLDING OF TAXES. The Board or the Committee shall make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of any taxes that the Corporation is required by any law or
regulation of any governmental authority to withhold in connection with any
Option or Restricted Stock including, but not limited to, withholding the
issuance of all or any portion of the shares of Common Stock subject to such
Option or Restricted Stock until the Participant reimburses the Corporation for
the amount it is required to withhold with respect to such taxes, canceling any
portion of such issuance in an amount
5
<PAGE>
sufficient to reimburse the Corporation for the amount it is required to
withhold or taking any other action reasonably required to satisfy the
Corporation's withholding obligation.
15. CONDITIONS UPON ISSUANCE OF SHARES. The Corporation shall not be
obligated to sell or issue any shares upon the exercise of any Option granted
under the Plan or to deliver Restricted Stock unless the issuance and delivery
of shares complies with all provisions of applicable federal and state
securities laws and the requirements of The Nasdaq Stock market or any other
stock exchange upon which shares of the Common Stock may then be listed.
As a condition to the exercise of an Option or the grant of
Restricted Stock, the Corporation may require the person exercising the Option
or receiving the grant of Restricted Stock to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of applicable federal and state securities laws.
The Corporation shall not be liable for refusing to sell or issue
any shares covered by any Option or for refusing to issue Restricted Stock if
the Corporation cannot obtain authority from the appropriate regulatory bodies
deemed by the Corporation to be necessary to sell or issue such shares in
compliance with all applicable federal and state securities laws and the
requirements of The Nasdaq Stock market or any other stock exchange upon which
shares of the Common Stock may then be listed. In addition, the Corporation
shall have no obligation to any Participant, express or implied, to list,
register or otherwise qualify the shares of Common Stock covered by any Option
or Restricted Stock.
No Participant will be, or will be deemed to be, a holder of any
Common Stock subject to an Option unless and until such Participant has
exercised his or her Option and paid the purchase price for the subject shares
of Common Stock. Each Qualified Option under this Plan shall be transferable
only by will or the laws of descent and distribution and shall be exercisable
during the Participant's lifetime only by such Participant. Each nonqualified
Option under this Plan shall be transferable only by will, the laws of descent
and distribution, pursuant to a domestic relations order issued by a court of
competent jurisdiction, or to a trust established by the Participant for estate
planning purposes.
16. RESTRICTIONS ON SHARES. Shares of Common Stock issued pursuant to
the Plan may be subject to restrictions on transfer under applicable federal and
state securities laws. The Board may impose such additional restrictions on the
ownership and transfer of shares of Common Stock issued pursuant to the Plan as
it deems desirable; any such restrictions shall be set forth in any Option
agreement entered into hereunder.
17. MODIFICATION OF OPTIONS. Except as provided in Section 19(c) of this
Plan, at any time and from time to time, the Board or the Committee may execute
an instrument providing for modification, extension or renewal of any
outstanding Option, provided that no such modification, extension or renewal
shall impair the Option without the consent of the holder of the Option.
Notwithstanding the foregoing, in the event of such a modification,
substitution, extension or renewal of a Qualified Option, the Board or the
Committee may increase the exercise price of such Option if necessary to retain
the qualified status of such Option.
6
<PAGE>
18. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN. In the event that
each of the outstanding shares of Common Stock (other than shares held by
dissenting shareholders) shall be changed into or exchanged for a different
number or kind of shares of stock of the Corporation or of another corporation
(whether by reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares or otherwise), or in the event a stock split or
stock dividend occurs, then there shall be substituted for each share of Common
Stock then subject to Options or Restricted Stock awards or available for
Options or Restricted Stock awards the number and kind of shares of stock into
which each outstanding share of Common Stock (other than shares held by
dissenting shareholders) shall be so changed or exchanged, or the number of
shares of Common Stock as is equitably required in the event of a stock split or
stock dividend, together with an appropriate adjustment of the Exercise Price.
The Board may, but shall not be required to, provide additional anti-dilution
protection to a Participant under the terms of the Participant's Option or
Restricted Stock agreement.
19. ADMINISTRATION.
(a) The Plan shall be administered by the Board or by a committee
comprised solely of two or more Non-Employee Directors appointed by the Board
(the "Committee"). Options and Restricted Stock may be granted under Sections 6
and 7, respectively, only (i) by the Board as a whole, or (ii) by majority
agreement of the members of the Committee. Option agreements and Restricted
Stock agreements, in the forms as approved by the Board or the Committee, and
containing such terms and conditions consistent with the provisions of this Plan
as are determined by the Board or the Committee, may be executed on behalf of
the Corporation by the Chairman of the Board, the President or any Vice
President of the Corporation. The Board or the Committee shall have complete
authority to construe, interpret and administer the provisions of this Plan and
the provisions of the Option agreements and Restricted Stock agreements granted
hereunder; to prescribe, amend and rescind rules and regulations pertaining to
this Plan; to suspend or discontinue this Plan); and to make all other
determinations necessary or deemed advisable in the administration of the Plan.
The determinations, interpretations and constructions made by the Board or the
Committee shall be final and conclusive. No member of the Board or the Committee
shall be liable for any action taken, or failed to be taken, made in good faith
relating to the Plan or any award thereunder, and the members of the Board or
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the fullest extent permitted by law.
(b) Members of the Committee shall be specified by the Board, and
shall consist solely of Non-Employee Directors. Non-Employee Directors may not
possess an interest in any transaction for which disclosure is required under
Section 404(a) of Regulation S-K under the Exchange Act or be engaged in a
business relationship that must be disclosed under Section 404(a).
(c) Although the Board or the Committee may suspend or
discontinue the Plan at any time, all Qualified Options must be granted within
ten (10) years from the effective
7
<PAGE>
date of the Plan or the date the Plan is approved by the shareholders of the
Corporation, whichever is earlier.
20. CONTINUED EMPLOYMENT NOT PRESUMED. Nothing in this Plan or any
document describing it nor the grant of any Option or Restricted Stock shall
give any Participant the right to continue in the employment of the Corporation
or affect the right of the Corporation to terminate the employment of any such
person with or without cause.
21. LIABILITY OF THE CORPORATION. Neither the Corporation, its
directors, officers or employees or the Committee, nor any Subsidiary which is
in existence or hereafter comes into existence, shall be liable to any
Participant or other person if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that any Qualified Option
granted hereunder does not qualify for tax treatment as an incentive stock
option under Section 422 of the Code.
22. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF STATE OF TEXAS AND THE UNITED STATES, AS APPLICABLE,
WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
23. SEVERABILITY OF PROVISIONS. If any provision of this Plan is
determined to be invalid, illegal or unenforceable, such invalidity, illegality
or unenforceability shall not affect the remaining provisions of the Plan, but
such invalid, illegal or unenforceable provision shall be fully severable, and
the Plan shall be construed and enforced as if such provision had never been
inserted herein.
8
FRESH AMERICA CORP. EXHIBIT 11.1
Computation of Earnings per Common Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
------------------ ------------------
Sept. 29, Sept. 27, Sept. 29, Sept. 27,
1995 1996 1995 1996
------------------ ------- -------
<S> <C> <C> <C> <C>
Income applicable to common stock ............... $ 324 $ 811 $ 1,296 $ 2,565
======= ======= ======= =======
Computation of weighted average common shares:
Weighted average common shares outstanding .... 3,518 3,642 3,518 3,518
Options exercised ............................. -- 56 -- 89
Assumed common shares issued upon exercise
of stock options .............................. 281 363 281 313
Less shares assumed repurchased with proceeds (139) (124) (139) (92)
Assumed conversion of Common stock purchase
warrants, net new shares issued ............... 59 -- 59 90
------- ------- ------- -------
3,719 3,937 3,719 3,918
======= ======= ======= =======
Earnings per common share ....................... $ 0.09 $ 0.21 $ 0.35 $ 0.65
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> SEP-27-1996
<CASH> 2,063
<SECURITIES> 0
<RECEIVABLES> 19,079
<ALLOWANCES> 0
<INVENTORY> 2,613
<CURRENT-ASSETS> 24,243
<PP&E> 7,435
<DEPRECIATION> (1,858)
<TOTAL-ASSETS> 30,593
<CURRENT-LIABILITIES> 10,542
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 19,471
<TOTAL-LIABILITY-AND-EQUITY> 30,593
<SALES> 170,642
<TOTAL-REVENUES> 170,642
<CGS> 154,780
<TOTAL-COSTS> 12,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (65)
<INCOME-PRETAX> 4,025
<INCOME-TAX> 1,460
<INCOME-CONTINUING> 2,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,565
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
