U.S.SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1998.
Commission File Number 0-13963
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
NEW MEXICO 85-0054230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
811 South Platinum, Deming, New Mexico 88030
(505) 546-2769
Check whether the issuer (1) filed all reports required to be filed by
Section or 15(d) of the Exchange Act during the past 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
As of November 14, 1998, 13,776 shares of Common Stock of Mimbres Valley
Farmers Association, Inc. ("Farmers" or the "Company") were outstanding.
Transitional small business disclosure format: Yes No X
<PAGE>PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
September 30, 1998 and June 30, 1998
<CAPTION>
ASSETS
SEPT 1988 JUNE 1998
CURRENT ASSETS: Unaudited Audited
<S> <C> <C>
Cash and equivalents $ 341,261 $ 392,092
Accounts receivable, net of
allowance for doubtful
accounts of $25,000
Trade 81,189 127,699
Related parties 1,280 4,651
Inventories 1,126,522 1,232,669
Prepaid expenses 34,517 61,074
Note receivable--supplier 11,741 11,741
Deferred income tax asset 240,100 240,100
Total current assets 1,836,610 2,070,026
PROPERTY AND
EQUIPMENT, net 1,698,282 1,746,749
OTHER NON-CURRENT
ASSETS:
Note receivable-supplier 47,926 47,926
Investments in supplier 78,400 78,400
Other Assets 37,016 37,016
Other non-current assets, net 163,342 163,342
Total assets $ 3,698,234 $3,980,117
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
September 30, 1998 and June 30, 1998
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPT 1988 JUNE 1998
Unaudited Audited
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable 481,213 503,988
Current portion of long-term
debt and capital leases 141,954 141,954
Accrued expenses payable 150,147 163,915
Total current liabilities 773,314 809,857
NON-CURRENT LIABILITIES:
Deferred income taxes 239, 469 239,469
Long-term debt and capital
leases, less current portion 1,511,104 1,543,339
Total non-current liabilities 1,750,573 1,782,808
Total liabilities 2,523,887 2,592,665
SHAREHOLDERS' EQUITY:
Common stock, $25 par value:
500,000 authorized; 13,910 issued
and 13,776 outstanding 347,750 347,750
Retained earnings 829,947 1,043,052
Less: 134 shares of treasury stock (3,350) (3,350)
Total shareholder's equity 1,174,347 1,387,452
Total liabilities and
shareholder's equity 3,698,234 3,980,117
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the Three Months Ended September 30, 1998 and September 30, 1997
UNAUDITED
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
<S> <C> <C>
NET SALES AND
GROSS REVENUE 3,463,358 4,207,428
COST OF SALES 2,882,822 3,208,257
Gross profit 580,536 999,171
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 818,419 993,649
OPERATING LOSS (237,883) 5,522
OTHER INCOME (EXPENSE):
Other income, net 59,128 109,105
Interest expense (34,350) (61,528)
Loss before income tax benefit (213,105) 53,099
INCOME TAX BENEFIT
(EXPENSE) - (18,054)
Net (loss) income (213,105) 35,045
RETAINED EARNINGS:
Beginning of the period 1,043,052 1,400,398
End of the period 829,947 1,435,443
Net (loss) earnings per
common share (15) 3
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended September 30, 1998 and 1997
UNAUDITED
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVIES:
Net loss (213,105) 35,046
Adjustments to reconcile
net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 67,894 75,736
Changes in assets and liabilities:
Accounts receivable, net 49,881 75,618
Inventories 106,147 (70,589)
Prepaid expenses 26,557 36,618
Income tax payable - 18,054
Accounts payable (22,775) (224,418)
Accrued expenses (13,768) (93,653)
Net cash provided (used) by
operating activities 831 (147,588)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Additions to property and
equipment, net (19,427) (7,672)
Decrease in investment
in supplier - 3,583
Net cash used by
investing activities (19,427) (4,089)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Repayment of long-term debt
and capital leases (32,235) (34,115)
Net cash used by financing
activities (32,235) (34,115)
INCREASE (DECREASE)
IN CASH (50,831) (185,792)
Cash at beginning of period 392,092 405,576
Cash at end of period 341,261 219,784
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
Notes to Financial Statements
UNAUDITED
1. Basis of Presentation
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of Farmers as of September 30, 1998 and June 30, 1998 and the results
of operations and cash flows for the three-month periods ending September 30,
1998 and September 30, 1997.
The accounting policies followed by Farmers are set forth in Note 1 to
the financial statements in the 1998 Farmers Annual Report filed on Form
10-KSB.
The results of operations for the three-month period ended September 30,
1998 is not necessarily indicative of the results to be expected for the full
year.
Net loss per share for the Quarter ended September 30, 1998 was ($15).
Earnings per share for the Quarter ended September 30, 1997 were $3. Earnings
(loss) per share is calculated by dividing the net income (loss) by the number
of shares outstanding of 13,776 in 1997 and 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10-QSB contains certain forward-looking statements. For this
purpose any statements contained in this Form 10-QSB that are not statements
of historical fact may be deemed to be forward looking statements. Without
limiting the foregoing, words like "may", "will", "expect", "believe",
"anticipate", "estimate" or "continue" or comparable terminology are intended
to identify forward looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors.
Financial Condition
The major supplier for Farmers IGA Supermarket transferred its warehouse
distribution center from El Paso to Lubbock, Texas in August 1998. Due to
problems related to the change in distribution centers, Farmers IGA
Supermarket experienced shortages of numerous inventory products. The
supplier assures Farmers that problems related to the new distribution center
will be corrected in the second quarter of the current fiscal year. Farmers
has been unable to determine the effect of inventory shortages on the first
quarter sales or inventory levels.
Working capital ratios were 2.37 at September 30, 1998 and 2.55 at June
30, 1998.
The Company is exploring the possibility of refinancing its long-term
debt in an effort to reduce its interest expense. The Company does not expect
changes in its overall debt and believes that short-term cash requirements
will be met from funds generated from its daily operations.
The Company is continuing to review inventory products and categories at
all stores to improve product margins and movement.
Results of Operations
The Company's total sales for the first quarter of $3,463,358 were
consistent with the previous quarter's total sales of $3,505,670. First
quarter sales for fiscal year 1999 compared to the same quarter in fiscal year
1998 were down approximately 17% ($3,463,358 compared to $4,207,428). The
decrease was primarily due to the relocation and downsizing of the Hardware
Store in the fourth quarter of the 1998 fiscal year. Other factors
contributing to the decline in sales were warehouse distribution problems at
Farmers IGA Supermarket and a decrease in the Feed Store sales due to an
overall decline in the regional livestock market and improved range conditions
in 1998.
In the first quarter of the current fiscal year, a national chain
discount supercenter store opened in Silver City, New Mexico. Silver City is
in Farmers' trade area. Some amount of the decline in the first quarter sales
may have been caused by increased competition within Farmers trade area.
Management does not expect the new supercenter store to have a continuing
affect on sales in its IGA Supermarket or Hardware Store.
Gross margins decreased to 16.7% in the current quarter compared to 20.5%
for the year ended June 30, 1998. The decrease was due primarily to increased
price competition and discounting of excess and obsolete hardware inventory.
The Company is continuing to monitor its hardware store operations at its
new location adjacent to the IGA Supermarket. Although operating expenses
have decreased significantly, the hardware store has yet to make an operating
profit at its new location. Moving costs, such as removal of fixtures from
the 2300 Highway 70/80 location, and rent on the building at the Highway 70/80
location were incurred in the current quarter. Farmers has been unable to
lease the Highway 70/80 location building and may have to substantially
discount the lease to encourage potential renters.
Other income and expense is consistent with the previous quarter.
Future results from operations may differ from the opinions expressed by
Management in the above Management Discussion and Analysis.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See the Index to Exhibits which is incorporated herein by reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 14, 1998.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By_/s/ Garry S. Carter________
Garry S. Carter
Chief Executive Officer and
General Manager
(Authorized Representative)
By_/s/ C. Diane Carter_____________
C. Diane Carter
Chief Financial Officer and
Controller
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
3(i) Articles of Incorporation (aa)
3(ii) Bylaws (aa)
27 Financial Data Schedule *
(aa) Incorporated by reference to the Company's
Registration Statement on Form S-1.
* Filed Herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SEPTEMBER 30, 1998 UNAUDITED FINANCIAL STATEMENTS
INCLUDED AS ITEM 1 TO FORM 10-QSB TO WHICH THIS SCHEDULE IS
ATTACHED. THIS SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THESE FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 341,261
<SECURITIES> 0
<RECEIVABLES> 155,395
<ALLOWANCES> 25,000
<INVENTORY> 1,126,522
<CURRENT-ASSETS> 1,836,610
<PP&E> 1,766,176
<DEPRECIATION> 67,894
<TOTAL-ASSETS> 3,698,234
<CURRENT-LIABILITIES> 773,314
<BONDS> 1,511,104
0
0
<COMMON> 347,750
<OTHER-SE> 829,947
<TOTAL-LIABILITY-AND-EQUITY> 3,698,234
<SALES> 3,463,358
<TOTAL-REVENUES> 3,522,486
<CGS> 2,882,822
<TOTAL-COSTS> 3,701,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,350
<INCOME-PRETAX> (213,105)
<INCOME-TAX> 0
<INCOME-CONTINUING> (213,105)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (213,105)
<EPS-PRIMARY> (15)
<EPS-DILUTED> (15)
</TABLE>
