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HARRY'S FARMERS MARKET REPORTS FIRST QUARTER EARNINGS AND SUCCESSFUL INITIAL PUBLIC OFFERING

 ATLANTA, June 3 /PRNewswire/ -- Harry's Farmers Market, Inc. (NASDAQ-NMS: HARY) announced today its earnings for the fiscal 1994 first quarter.
 Revenues for the first quarter ended April 28 were $23.7 million compared with $23.8 million for the same period of the prior year. Revenues were impacted by two unusual events: (1) a blizzard which forced closure of its stores for two days (Saturday and Sunday) and (2) a change in the corporation's fiscal year end which shortened the first quarter by four days. The new fiscal year ends the Wednesday closest to Jan. 31. The combined effect of these events resulted in first quarter encompassing 11 selling weekends compared with 13 selling weekends for the same period of the prior year. The company estimates that comparable store sales, excluding these two unusual events, would have increased by over 7 percent from fiscal 1993 first quarter.
 The gross margin for fiscal 1994 first quarter increased 0.5 percent to 26.9 percent from 26.4 percent in fiscal 1993 first quarter. This improvement was primarily due to lower distribution costs and improvement in procurement strategies. Gross margin improvement would have been even stronger if it were not for higher than normal markdowns on perishable products necessitated by the business interruption due to the blizzard.
 Total operating expenses as a percent of sales for fiscal 1994 first quarter increased 0.3 percent to 25.7 percent of net sales from 25.4 percent in fiscal 1993 first quarter. The operating expenses in fiscal 1993 first quarter include amortization of pre-opening expenses (related to the Gwinnett store) of $766,000, or 3.2 percent of sales. The increase in operating expenses was primarily due to higher personnel costs in preparation for expansion and expenses involved with moving the bakery manufacturing facility.
 During the first fiscal quarter, the company was converted from a partnership to a corporation. To present comparative quarterly information, pro forma adjustments have been made to the historical information for the quarter to reverse the effect of a charge of $643,000 which was recorded upon conversion in accordance with SFAS 109 for the deferred tax liability related to temporary differences at the date of incorporation, and to adjust income tax expense for the quarter to an effective rate of 38.5 percent.
 Pro forma net income for fiscal 1994 first quarter was $40,000 compared with pro forma net income of $450,000 for the same period of the prior year. Included in the prior year's first quarter net income was $461,000 of net consulting income.
 Commenting on the results, Harry Blazer, president and CEO, said: "Our results were on target with expectations despite the blizzard, and we are encouraged by the fact that we experienced margin improvement over the course of the quarter and closed on a strong note. During the first quarter we successfully moved our entire bakery manufacturing operation into a newly purchased 151,000-square-foot production facility located two miles from the Alpharetta store. The bakery is now occupying over 50,000 square feet, a five-fold increase from the old facility. We are currently achieving operating efficiencies due to the improved work flow design and new, more automated equipment associated with the lapGJI facility. These manufacturing efficiencies along with continual improvement in distribution costs should keep gross margin improvement on track by lowering the cost of goods. Operating expenses during April showed improvement over the two prior months of the quarter. We expect this trend to continue."
 Subsequent to the end of the first quarter, the company completed its initial public offering for 1,964,000 shares at $17.00 per share. These shares are now trading on NASDAQ-NMS under the symbol HARY. The company raised approximately $31 million in the offering, net of underwriting discounts and commission and other related offering expenses. Approximately $17 million of this amount was used to repay debt, with the remaining being temporarily invested for use in future expansion.
 Additionally, subsequent to the end of the first quarter, the company purchased its third megastore site. This store, located in Cobb County, Ga., will be approximately 90,000 square feet with an anticipated September 1993 opening. The previously announced "Harry's in a Hurry" prototype store, a 3,700-square-foot fresh food specialty store, is expected to open on June 28.
 HARRY'S FARMERS MARKET, INC. AND SUBSIDIARY
 Consolidated Statement of Earnings
 (000)
 For the quarter ended 4/28/93 Pct. 5/3/92 Pct.
 Net sales $23,707 100.0 $23,807 100.0
 Cost of goods sold 17,325 73.1 17,532 73.6
 Gross profit 6,382 26.9 6,275
 Operating expenses
 Direct store expenses 4,056 17.1 3,667 15.4
 Selling, gen. and admin. exps. 1,486 6.3 1,177 4.9
 Deprec. and other amort. 539 2.3 431 1.8
 Amort. of pre-opening exps. --- --- 766 3.2
 Total operating expenses 6,081 25.7 6,041 25.4
 Operating profit 301 1.3 234 1.0
 Other income (expense)
 Interest expense (302) (1.3) (295) (1.2)
 Consulting fees --- --- 750 3.2
 Other income 66 0.3 42 0.2
 Total other income (expense) (236) (1.0) 497 2.1
 Earnings before income taxes 65 0.3 731 3.1
 Income taxes (a)
 Deferred 643 2.7 --- ---
 Current 92 0.4 --- ---
 Historical earnings before pro
 forma adjustments (670) (2.83) 731 3.1
 Pro forma income tax
 adjustments (a) 710 2.99 (281) (1.2)
 Pro forma net earnings $ 40 0.17 $ 450 1.9
 Pro forma net earnings per share $0.01 $0.11
 (a) The entity was converted from a partnership to a corporation during the quarter ended April 28. In accordance with SFAS 109, a charge of $643,000 was recorded upon conversion for the deferred tax liability related to temporary differences existing at the date of incorporation. The prior year comparative quarterly data includes a pro forma tax provision, as described above, that includes a deferred tax component. To present comparative quarterly information, a pro forma adjustment has been made to reverse the effect of recording the cumulative deferred taxes upon incorporation. The historical information for the quarter ended April 28 also includes an income tax provision for earnings from the date of incorporation to April 2. A pro forma adjustment has been made to adjust income tax expense for the quarter to an effective rate of 38.5 percent.
 -0- 6/3/93
 /CONTACT: David A. Pattillo, executive vice president and chief financial officer of Harry's Farmers Market, 404-664-6300/
 (HARY)


CO: Harry's Farmers Market, Inc. ST: Georgia IN: REA SU: ERN

RA-BN -- AT006 -- 4846 06/03/93 09:52 EDT
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Date:Jun 3, 1993
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