UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended June 30, 1997
Commission File Number 0-13963
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
NEW MEXICO 85-0054230
(State of incorporation) (I.R.S. Employer I.D. No.)
811 South Platinum, Deming, New Mexico 88030
(505) 546-2769
<PAGE>
This amendment to the Form 10-KSB of Mimbres Valley Farmers Association,
Inc. ("Farmers" or the "Company")for the year ended June 30, 1997 has been
filed to (i) present the required Financial Statements in Item 7 of Form
10-KSB instead of as an exhibit to Form 10-KSB, and (ii) present the signed
Report of Independent Accountants.
THE INFORMATION CONTAINED IN THIS ITEM 7 TO FORM 10-KSB/A AMENDS,
MODIFIES AND SUPERSEDES IN ITS ENTIRETY THE INFORMATION CONTAINED IN
ITEM 7 TO
THE COMPANY'S FORM 10-KSB DATED OCTOBER 9, 1997.
Item 7.MIMBRES VALLEY FARMERS ASSOCIATION, INC.d.b.a. FARMERS, INC.
FINANCIAL
STATEMENTS AS OF JUNE 30, 1997 AND 1996 TOGETHER WITH REPORT OF
INDEPENDENT
PUBLIC ACCOUNTANTS
Report of Independent Public Accountants
To the Shareholders and Board of Directors of
Mimbres Valley Farmers Association, Inc.
d.b.a. Farmers, Inc.:
We have audited the accompanying balance sheet of Mimbres Valley Farmers
Association, Inc. d.b.a. Farmers, Inc. (a New Mexico corporation) as of June
30, 1997, and the related statements of operations, shareholders' equity and
cash flows for each of the two years in the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mimbres Valley Farmers
Association, Inc. d.b.a. Farmers, Inc. as of June 30, 1997, and the results of
its operations and its cash flows for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, Mimbres Valley Farmers
Association, Inc. d.b.a. Farmers, Inc. changed its method of reporting cash
flows from operating activities from the direct method to the indirect method
during 1996.
/s/ Arthur Andersen, LLP
Albuquerque, New Mexico
September 22, 1997
<PAGE>
<TABLE>
<CAPTION>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEET
AS OF JUNE 30 1997
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 414,538
Accounts receivable net of
allowance for doubtful accounts of $36168:
Trade 258,841
Related parties 14,531
Inventories 1,871,922
Prepaid expenses 97,659
Income taxes receivable 23,950
Deferred income taxes 454,449
----------
Total current assets 3,135,890
----------
PROPERTY AND EQUIPMENT net 2,040,264
----------
OTHER NON-CURRENT ASSETS:
Notes receivable - supplier 59,667
Investments in supplier 71,629
----------
Other non-current assets net 131,296
----------
Total assets $ 5,307,450
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,205,396
Current portion of long-term debt and
capital leases 249,509
Accrued expenses 219,070
----------
Total current liabilities 1,673,975
----------
NON-CURRENT LIABILITIES:
Deferred income taxes 224,814
Long-term debt and capital leases
less current portion 1,663,863
----------
Total non-current liabilities 1,888,677
----------
Total liabilities 3,562,652
----------
SHAREHOLDERS' EQUITY:
Common stock: $25 par value;
500,000 authorized; 13,910 issued
and 13,776 outstanding 347,750
Retained earnings 1,400,398
Less: 134 shares of treasury stock (3,350)
----------
Total shareholders' equity 1,744,798
----------
Total liabilities and shareholders'
equity $ 5,307,450
==========
<FN1>
<FN1> The accompanying notes to financial statements are an integral part of
this balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMER'S, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
------------ ------------
<S> <C> <C>
NET SALES AND GROSS REVENUE $ 19,103,199 $ 21,949,927
COST OF SALES 15,323,385
17,743,893 ------------
- ------------
Gross profit 3,779,814 4,206,034
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,686,171 4,624,030
------------ ------------
OPERATING LOSS (906,357) (417,996)
OTHER INCOME (EXPENSE):
Other income 211,885 269,916
Interest expense (215,976) (171,229)
------------ ------------
Loss before income tax
benefit (910,448) (319,309)
INCOME TAX BENEFIT (342,098) (121,631)
------------ ------------
Net loss $ (568,350) $ (197,678)
============= ============
Net loss per common share $ (41.26) $ (14.35)
============= ============
<FN1>
<FN1> The accompanying notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
Total
Common Retained Treasury Shareholders'
Stock Earnings Stock Equity
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE,
JUNE 30, 1995 $ 347,750 $ 2,166,426 $ (3,350) $ 2,510,826
Net loss - (197,678) - (197,678)
---------- ---------- ----------- -----------
BALANCE,
JUNE 30, 1996 347,750 1,968,748 (3,350) 2,313,148
Net loss - (568,350) - (568,350)
---------- ---------- ----------- -----------
BALANCE,
JUNE 30, 1997 $ 347,750 $ 1,400,398 $ (3,350) $
1,744,798 ========== =========== =========== ===========
<FN1>
<FN1> The accompanying notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($568,350) ($197,678) Adjustments to reconcile
net
loss to net cash provided
(used) for operating activities -
Depreciation and amortization 307,998 213,584
Provision for uncollectible
accounts receivable 50,168 19,652
Changes in assets and
liabilities:
Accounts receivable, net 183,095 (252,479)
Inventories 991,396 (574,546)
Prepaid expenses 8,710 (39,394)
Income taxes receivable 227,170 (251,120)
Deferred income taxes (267,172) (67,119)
Notes receivable - supplier - 45,063
Accounts payable (353,453) 798,017
Accrued expenses (111,263) 150,341
Income taxes payable - (119,769)
---------- ----------
Net cash provided (used)
for operating activities 468,299 (275,448)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment (74,526) (813,431) Proceeds from sale of
property
and equipment 46,470 -
(Increase) decrease in investments
in supplier (3,578) 21,169
---------- ----------
Net cash used for investing
activities (31,634) (792,262)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt
and capital leases 305,649 2,567,925
Repayments of long-term debt
and capital leases (620,939) (1,370,922)
---------- ----------
Net cash (used) provided
by financing activities (315,290) 1,197,003
---------- ----------
NET INCREASE IN CASH 121,375 129,293
CASH at beginning of year 293,163 163,870
---------- ----------
CASH at end of year $ 414,538 $ 293,163
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid for interest $ 208,522 $ 165,157
========== ==========
Cash paid for income taxes,
net of refunds received $ (300,777) $ 189,600
========== ==========
<FN1>
<FN1> The accompanying notes to financial statements are an integral part of
these statements.
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Mimbres Valley Farmers Association, Inc. d.b.a. Farmers, Inc. ("Farmers" or
the "Company"), a New Mexico corporation, currently operates two retail food
stores, a hardware store, a clothing and craft store and a feed store. The
Company also leases certain retail space to unrelated parties and operates a
self-service laundry. All operations are located in Deming, New Mexico
("Deming"). The economy of Deming is dependent mainly on agriculture and
related agri-business.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company grants credit to customers, substantially all of whom are
residents of Luna County, New Mexico. Management of the Company has
established an allowance for doubtful accounts to cover possible losses
inherent in the accounts receivable portfolio. Ultimate losses may vary from
the current estimates.
Inventories
Inventories, which represent merchandise available for sale, are stated at the
lower of cost or market, determined on a first-in, first-out (FIFO) basis.
Property and Equipment
Property and equipment are stated at cost, including capitalized interest and
labor incurred to construct major additions, and are depreciated on a
straight-line basis over the estimated useful lives of the respective assets.
<PAGE>
Capital leases are amortized using the straight-line method over the shorter
of the estimated useful life of the property or the lease term. The estimated
useful lives for property and equipment are as follows:
Buildings - 30 years
Furniture, fixtures and equipment - 3 to 10 years
Leasehold improvements - 5 years
Gains and losses upon retirement or disposal of property and equipment are
recognized as incurred. Additions and major improvements are capitalized, and
repairs and maintenance, and minor improvements are expensed as incurred.
Income Taxes
The Company records deferred income taxes to reflect the tax consequences on
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts.
Advertising
The Company expenses costs of advertising as incurred. For the years ended
June 30, 1997 and 1996, advertising expense was $253,278 and $267,652,
respectively.
Net Loss per Common Share
Net loss per share is computed by dividing the net loss by the number of
shares of common stock outstanding during the period.
Change in Reporting
The Company changed its method of reporting cash flows from operating
activities from the direct method to the indirect method during 1996.
Reclassification
Certain prior year balances have been reclassified to conform with the 1997
financial statement presentation.
2. PROPERTY AND EQUIPMENT:
Property and equipment as of June 30, 1997 consist of the following:
Furniture, fixtures and equipment $2,806,693
Buildings 2,354,121
Land 80,203
Leasehold improvements 61,961
----------
5,302,978
Less: Accumulated depreciation
and amortization (3,262,714)
-----------
$2,040,264
===========
<PAGE>
3. NOTES RECEIVABLE - SUPPLIER:
The notes receivable - supplier at June 30, 1997, are unsecured and have
maturities which range from December 1998 to 2000, with interest rates ranging
from 6.5% to 8.2%.
4. INVESTMENTS IN SUPPLIER:
Investments in supplier, at cost, as of June 30, 1997 consist of the
following:
693 shares of Class B non-voting stock $ 70,610
10 shares of Class A non-voting stock 1,019
---------
$ 71,629
=========
The Class A and B stock of the supplier were received as patronage dividends.
None of the stock shown as investments in supplier is readily marketable.
5. LONG-TERM DEBT AND CAPITAL LEASES:
Long-term debt and capital leases as of June 30, 1997 consist of the
following:
Fixed rate note payable to Norwest Bank
("Bank"), due in monthly installments of
$16,788 with a balloon payment of $1,314,459
due on January 24, 2001. Interest at the
rate of 9.50%, and secured by real estate
mortgages. $1,535,982
Variable rate notes payable to Bank, due
in monthly installments ranging from $975
to $1,675. Interest at Bank prime rate
plus 1% to .75% (9.50% and 9.25% at June
30, 1997), secured by real estate mortgages,
inventory, and accounts receivable. 174,678
Capital leases, net 111,748
Notes payable to Supplier, due in monthly
installments ranging from $272 to $2,322.
Interest rates ranging from 9.25% to 10.50%,
secured by equipment and notes receivable
- supplier. 90,964
----------
1,913,372
Less: Current portion 249,509
----------
$1,663,863
==========
Future maturities of long-term debt and capital leases as of June 30,
1997 are as follows:
1998 $ 249,509
1999 139,091
2000 141,755
2001 1,383,017
-----------
Total $1,913,372
==========
<PAGE>
Certain of the notes payable to a Bank require the Company to comply with debt
covenants at June 30, 1997 including, but not limited to: (a) Minimum working
capital balance of $1.2 million or greater, (b) total liabilities to net worth
of 1.15 to 1 or lower, (c) $100,000 additional principal reduction beyond
scheduled payments for fiscal year 1997 and (d) profitable operations by
December 31,1996. The Company is not in compliance with several of its debt
covenants at June 30, 1997. Consistent with the prior year, the Company has
obtained a waiver from the Bank for all exceptions to its debt covenants
through September 22, 1997. Management believes the Bank will forbear
acceleration of the collection of these notes, and accordingly, the notes have
not been classified as current liabilities in the accompanying balance sheet.
Property and equipment, net financed under capital leases was $113,551 as of
June 30, 1997.
6. OPERATING LEASES:
Future minimum rental payments under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of June 30,
1997, are as follows:
1998 $110,000
1999 110,000
2000 110,000
2001 110,000
2002 82,503
--------
Total future minimum rental payments $522,503
========
7. OTHER INCOME:
Other income as of June 30, consists of the following:
1997 1996
-------- -------
Rental of retail space $47,932 $115,004
Check cashing fees 32,419 51,159
Western union commissions 31,586 28,999
Other 99,948 74,754
-------- -------
Total other income $211,885 $269,916
======== ========
8. RENTAL INCOME:
The Company leases retail space to customers with terms generally ranging from
2 to 10 years. The leases generally contain provisions for renewal options of
5 to 10 years.
<PAGE>
The future minimum rental payments on operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of June 30,
1997, are as follows:
1998 $ 52,472
1999 51,939
2000 42,872
2001 26,872
2002 10,872
Thereafter 28,992
--------
Total future minimum rental payments $214,019
========
9. TENDER OFFER:
During the fiscal year ended June 30, 1996, the Company was involved with
legal proceedings concerning a tender offer for all the outstanding shares of
Farmers common stock. During the fiscal year ended June 30, 1997, the Company
and the participants of the tender offer entered into a settlement agreement,
in which the tender offer was withdrawn.
10. LITIGATION:
The Company is engaged in various legal proceedings, including an action
involving an environmental claim, all of which are incidental to its normal
business activities. In the opinion of the Company, none of such proceedings
are material in relation to the Company's financial position or operations.
11. SUPPLIER BANKRUPTCY:
During the fiscal year ended June 30, 1996, the franchisor of the supplier of
the Company's craft store filed for bankruptcy reorganization under Chapter 11
of the Federal Bankruptcy Code. Sales of inventory for this franchise
represented approximately 3% of the Company's revenue for fiscal year 1996.
The Company contracted with various other suppliers to ensure a continued
supply of inventory for the craft store. Management has elected not to
operate the clothing and craft store as a franchise outlet and believes that
the operations of the clothing and craft store will not be significantly
impacted. During the fiscal year ended June 30, 1997, the Company moved the
clothing business into the craft store and combined their retail operations.
12. MAJOR SUPPLIERS:
A substantial portion of the inventory of the Company is purchased from a
limited number of suppliers. During the years ended June 30, 1997 and 1996,
two such suppliers accounted for 74% and 64% of inventory purchases,
respectively. In addition, a certain related party of the Company is a
guarantor for amounts outstanding to certain major suppliers.
<PAGE>
13. MANAGEMENT'S PLANS FOR FUTURE OPERATIONS (UNAUDITED):
The Company incurred operating losses, deterioration of working capital and
violated its debt covenants in the preceding year. The Company's viability as
a going concern is dependent upon several factors, including the its ability
to restructure fixed operating expenses in relation to the overall decline in
gross sales and to identify unprofitable products, services or locations and
the management fortitude to discontinue such unprofitable ventures while
continuing its tradition of competitive prices and quality service.
Management of the Company is expecting a return to profitability and positive
cash flows from operations as soon as the second quarter of fiscal year 1998.
They attribute this to the following factors:
The Company expects to carry back fiscal year 1997 losses to prior years
resulting in refunds of previous income taxes paid amounting to approximately
$250,000.
In fiscal year 1997, the Company discontinued its furniture business, Radio
Shack store, garage and service center and its bean cleaning operations.
Also, the Company terminated the Ben Franklin franchise and combined its
clothing store with the crafts store and combined the appliance store with the
hardware store. Savings associated with these activities should contribute to
improved operating income in the 1998 fiscal year.
Certain costs incurred in fiscal year 1997 for legal and accounting relating
to the Tender Offer are not expected to occur in fiscal year 1998.
The Company implemented a purchase order system in mid 1997 fiscal year, and
savings will accrue throughout the entire 1998 fiscal year.
The Company implemented strict credit standards and aggressive collection
efforts that should reduce credit losses in fiscal year 1998.
The Company is reviewing all its product lines in regards to gross margin and
inventory turnover to insure profitability.
The Company in progress of installing a new computer system to ultimately
interface all its stores and departments to provide timely and accurate
information while reducing operating expenses.
The Company is monitoring the operating results of its hardware store at its
new location. Although sales are up significantly, operating costs have
increased significantly more. The new location has yet to make an operating
profit despite adjustments to inventory, staffing levels and other factors.
If results do not improve in response to recent operating changes, the Company
may have to decide whether or not to return the store to its original location
adjacent to the supermarket and hope it would return to its original profitabili
ty. Such a move could potentially involve certain risks. Farmers would
continue to be obligated under its lease on the building until the year 2002.
Also, there are certain costs associated with the move, such as loss of
business and loss of potential rent of the now vacant space.
<PAGE>
Certain savings in fiscal year 1997, such as a decrease in interest expenses,
reduction in payroll expense and advertising were only partially realized in
fiscal year 1997 and should have positive affect on 1998 fiscal year.
The Company has rented all available owned rental space in the mall resulting
in additional cash flow and additional customer traffic in fiscal year 1998.
In fiscal year 1997, the Company has reduced it monthly debt service by
approximately $7,000. The Company is considering a working capital bank loan
for $300,000 to be repaid by its tax refund.
14. INCOME TAXES:
Components of the net deferred income tax liability at June 30, 1997, are as
follows:
Deferred income tax assets:
Net operating loss carryback and carryover $ 385,203
Inventory method change 92,995
Inventory capitalization 26,265
Allowance for doubtful accounts 13,563
Other 9,155
------------
Deferred income tax asset 527,181
Valuation allowance (72,732)
------------
Deferred income tax asset,
net of valuation allowance $ 454,449
=============
Deferred income tax liability related
to depreciation $ (224,814)
The Company had a current year loss for federal tax purposes of approximately
$991,000; approximately $919,000 of this amount will be carried back to the
fiscal years ended June 30, 1993 and 1994. The remaining losses will be
carried forward resulting in a deferred tax asset of $24,308. The Company had
prior and current year losses for state tax purposes of approximately
$1,384,000, which will be carried forward resulting in a deferred tax asset of
$48,424. Due to recent operating losses and deterioration of working capital,
the entire federal and state deferred tax asset balance of $72,732 which
relates to operating losses to be carried forward has been reserved for
through a valuation allowance.
The income tax benefit consists of the following for the fiscal years ended
June 30:
1997 1996
------------ ------------
Deferred income tax benefits:
Federal $ (310,169) $ (110,279)
State (31,929) (11,352)
------------ ------------
Total $ (342,098) $ (121,631)
============ ============
<PAGE>
The income tax benefit is reconciled with the expected Federal statutory rates
for the years ended June 30, as follows:
1997 1996
------------ ------------
Provision computed at Federal
statutory rate $ (309,552) $ (108,565)
State taxes net Federal benefit (21,031) (7,376)
Non-deductible meals and
entertainment 2,040 1,194
Recovery of previously paid taxes (74,926) -
Valuation allowance 72,732 -
Other (11,361) (6,884)
------------ ------------
Total $ (342,098) $ (121,631)
============ ============
<PAGE>
<PAGE>SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: May 15, 1998.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By /s/ Garry S. Carter
Garry S. Carter,
Chief Executive Officer,
General Manager, and Secretary
(Duly Authorized Representative)
