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 March 31, 1999.
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 May 17, 1999, 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
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
BALANCE SHEETS
MARCH 31, 1999 AND JUNE 30, 1998
<TABLE>
ASSETS
<CAPTION>
UNAUDITED AUDITED
MARCH 31, 1998 JUNE 30, 1998
CURRENT ASSETS:
<S> <C> <C>
Cash and equivalents $
502,352 $ 392,092
Accounts receivable, net of allowance for doubtful accounts
of $16,612 and $25,000
Trade 114,961
127,699
Related parties
4,651
Inventories
1,100,295 1,232,669
Prepaid expenses
87,017 61,074
Note receivable supplier
11,742 11,741
Deferred income tax asset
240,100 240,100
Total current assets
2,056,467 2,070,026
PROPERTY AND EQUIPMENT, net
1,566,722 1 ,746,749
OTHER NON-CURRENT ASSETS:
Note receivable-supplier
47,925 47,926
Investments in supplier
62,800 78,400
Other Assets 37,016
37,016
Other non-current assets, net
147,741 163,342
Total assets $
3,770,930 $3,980,117
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
BALANCE SHEETS
MARCH 31, 1999 AND JUNE 30, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAUDITED AUDITED
MAR.31 1998 JUNE
30, 1998
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $
526,058 $ 503,988
Current portion of long-term debt and capital leases
141,954 141,954
Accrued expenses payable
142,966 163,915
Total current liabilities
810,978 809,857
NON-CURRENT LIABILITIES:
Deferred income taxes
239, 469 239,469
Long-term debt and capital leases, less current portion
1,472,436 1,543,339
Total non-current liabilities
1,711,905 1,782,808
Total liabilities
2,522,883 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
903,647 1,043,052
Less: 134 shares of treasury stock
(3,350) (3,350)
Total shareholder's equity
1,248,047 1,387,452
Total liabilities and shareholder's equity $
3,770,930 $ 3,980,117
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
UNAUDITED
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<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C>
NET SALES AND GROSS REVENUE $ 9,972,530
$ 12,016,177
COST OF SALES 7,872,992 9,821,518
Gross profit 2,099,538
2,194,659
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE 2,331,399 2,825,137
OPERATING LOSS (231,861) (630,478)
OTHER INCOME (EXPENSE):
Other income, net 203,269
309,775
Interest expense (110,813)
(152,782)
Loss before income tax benefit (139,405)
(473,485)
INCOME TAX BENEFIT (EXPENSE)
- - - -
Net loss $
(139,405)
$
(473,485)
RETAINED EARNINGS:
Beginning of the period 1,043,052
1,400,398
End of the period $
903,647 $ 926,913
Net (loss) earnings per common share $
(10.12) $ (34.37)
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDING MARCH 31, 1999 AND MARCH 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 1999 MARCH 31,
1998
<S> <S> <S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (139,405) $
(473,485)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 213,053
226,806
Changes in assets and liabilities:
Accounts receivable, net 17,389
113,565
Inventories 132,374 601,246
Prepaid expenses (25,943)
(12,382)
Prepaid income taxes
- - - 334,344
Accounts payable 22,070
(542,703)
Accrued expenses (20,949)
(100,952)
Net cash provided by operating
activities 198,589
146,439
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (33,026)
(41,550)
(Increase) Decrease in investment in supplier
15,600 (5,771)
Net cash used by investing activities
(17,426) (47,321)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt and capital leases
- - - 180,097
Repayment of long-term debt and capital leases
(70,903) (398,053)
Net cash used by financing activities
(70,903) (217,956)
INCREASE (DECREASE) IN CASH 110,260
(118,838)
Cash at beginning of period
392,092 414,538
Cash at end of period $
502,352 $ 295,700
</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 March 31, 1999 and
June 30, 1998 and the results of operations and cash flows for the
nine-month periods ending March 31, 1999 and March 31, 1998.
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, except for the following:
Comprehensive Income In the fiscal year 1999, the Company
adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires companies to report all changes in equity during a period,
except those resulting from investment by owners and distribution to
owners, in a financial statement for the period in which they are
recognized. Comprehensive income is the total of net income and all
other nonowner changes in equity (or other comprehensive income)
such as unrealized gains/losses on securities available-for-sale,
foreign currency translation adjustments and minimum pension
liability adjustments. Comprehensive and other comprehensive income
must be reported on the face of the annual financial statements, or
in the case of interim reporting, in the footnotes to the financial
statements. For 1999 and for the quarters ended March 31, 1999 and
1998, the Company's operations did not give rise to items includable
in comprehensive income which were not already included in net
income (loss). Therefore, the Company's comprehensive income (loss)
is the same as its net income (loss) for all periods presented.
Segment Information - Effective December 31, 1998, the Company
adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." Reportable operating segments are
determined based on the Company's management approach. As defined
by SFAS No. 131, the management approach is based on the way that
management organizes the segments of a company for making operating
decisions and assessing performance. While the Company's results of
operations are primarily reviewed on a consolidated basis,
management has organized the Company into three segments, Grocery,
Hardware and Feed. The following represents selected consolidated
financial information for the Company's segments for the nine months
ended March 31, 1999 and 1998:
March 31, 1999
Segment data Hardware Grocery Feed Other Total
Net sales 281,785 9,142,584 357,243
190,918 9,972,530
Income (loss) (334,269) 289,233 (83,274)
(11,095) (139,405)
from operations
Depreciation 79,055 59,888 5,140 68,970 213,053
March 31, 1998
Segment data Hardware Grocery Feed Other Total
Net sales 1,246,810 9,813,238 529,086
427,043 12,016,177
<PAGE>
Income (loss) (473,443) 2,282 (7,851)
5,527 (473,485)
from operations
Depreciation 82,225 55,882 5,325 83,374 226,806
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 Company's principal supplier transferred its
warehouse/distribution center from El Paso to Lubbock, Texas in
August 1998. Due to problems related to the change in the
supplier's distribution centers, the Company experienced shortages
of numerous inventory products during the first and second quarters
of this fiscal year (Fiscal 1999). The Company worked with the
supplier to solve the problems related to the new distribution
center during the second quarter ended December 31, 1998. During
the second quarter, the Company was able to rebuild its inventory to
normal levels, and the Company experienced no distribution or
inventory problems during its third quarter ended March 31, 1999.
Working capital ratios were 2.53 at March 31, 1999 and 2.55
at June 30, 1998.
The Company's management continues to evaluate its working
capital and capital improvement needs and continues to discuss the
options of refinancing its long term debt and borrowing money for
capital equipment replacement and repair. Management does not
currently expect changes in the Company's overall debt in the short
term and believes that the Company will be able to satisfy its
short-term cash requirements from funds generated from its daily
operations.
The Company is continuing to review inventory products and
categories at all of its stores in an effort to improve product
margins and movement.
RESULTS OF OPERATIONS
The Company's total sales for the third quarter of
$3,102,975 decreased approximately $269,181 compared to the
Company's previous quarter's total sales of $3,372,156. Year to
date sales (3/31/99) compared to the same period in fiscal year 1998
were down approximately 17% ($9,972,530 compared to $12,016,177).
The decrease was primarily due to the relocation and downsizing of
the Company's Hardware Store in the fourth quarter of the 1998
fiscal year. Other factors contributing to the decline in sales
were warehouse/distribution problems related to the relocation of
the warehouse/distribution center and a decrease in the Company's
Feed Store sales due to an overall decline in the regional livestock
market and improved range feeding 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 the Company's trade area. While some amount of
decline in the third quarter sales may have been caused by increased
competition within the Company's trade area.,
<PAGE>
management does not expect the new supercenter store to have a
material continuing affect on the Company's sales.
Gross margins declined to 21% in the current quarter
compared to 26% for the previous quarter. The decrease was due
primarily to the sale of obsolete inventory in the previous
quarters. A 21% gross margin is industry compatible. The Company's
net loss declined from $473,485.00 in the nine months period ended
March 31, 1998 to $139,405 in the comparable period of the current
fiscal year. The decrease was primarily due to a reduction in
operating expenses associated with moving the Company's hardware
store from its previous K-Mart location to a location adjacent to
the Company's IGA Supermarket which included decreased operating
expenses from the consolidation of the two stores and savings
associated with staff reductions from October to December of 1998 .
The Company is continuing to monitor its hardware store
operations at its new location adjacent to the Company's IGA
Supermarket. The Company had a lease to pay $9,000 per month for
the lease of the vacated space in the K-Mart building through
11/30/02.
Other income and expenses remained essentially the same
between the comparable periods.
Future results from operations may differ from the opinions
expressed by Management in the above Management Discussion and
Analysis.
YEAR 2000 READINESS DISCLOSURE
The Company has conducted a review of its computer systems
to identify the systems that could be affected by the year 2000
problem. The year 2000 problem is the effect of computer programs
using two digits (rather than four) to define the applicable year.
Any of the Company's programs that utilize date sensitive software
could recognize the year "00" as "1900" rather than the year 2000.
This could result in a major computer system failure or malfunction.
The Company presently believes that, with modifications to
existing software and conversion to new software and replacement of
the equipment described below, the Year 2000 problem will not pose a
significant operational problem for the Company's information
systems as so modified and converted. The Company has replaced its
office and accounting systems with new personal computers and with
new software that is warranted to be Year 2000 compliant. During
the second and third quarter, the Company is working with its cash
register supplier to ensure the Company's cash registers are Year
2000 compliant. The process of upgrading the Company's cash
registers to make them Year 2000 compliant is scheduled to be
completed by September 30, 1999. The cash register Year 2000
compliance is the last modification and conversion referenced above
in need of completion.
The Company's principal supplier has represented to the
Company that it is Year 2000 compliant with respect to its dealings
with the Company. The Company is continually working with its
principal supplier and other suppliers to ensure they remain Year
2000 compliant. In a worst case scenario, if the supplier is not
Year 2000 compliant and is unable to supply the Company due to Year
2000 problems, the Company can obtain its grocery supplies from
numerous other suppliers without suffering material impact on the
Company's profit margins.
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
On October 29, 1998, the Company held its annual meeting in
Deming, New Mexico. At this meeting 5,745 shares were in attendance
either in person or by proxy. The following individuals were
reelected as directors of the Company for three year terms expiring
at the annual meeting in 2001 or until their successors are elected
and qualified, by acclamation of the holders of the 5,745 shares in
attendance at the meeting:
Jim T. Hyatt
William R. Johnson, III
Judy Phillips
Gary Shiflett
The following directors continue to serve as directors of
the Company for the remainder of their terms expiring at the
Company's annual meeting in 2000.
Leone Anderson
James E. Keeler
Douglas Tharp
The Company's shareholders also ratified the appointment of
Torres, Jones & Company, a professional corporation, as the
independent auditors of the Company at the annual meeting by
acclamation of the holders of the 5,745 shares in attendance at the
meeting.
At the February 1999 Board of Directors meeting, Shelby
Phillips was appointed by the Board of Directors as the replacement
for Judy Phillips who resigned in February of 1999 for health reasons.
ITEM 5. OTHER
The Company has hired Dean Stovall, age 53, effective
February 15, 1999, as the Company's General Manager and Chief
Executive Officer. Mr. Stovall served as President of Norwest Bank,
Deming, New Mexico for the twelve years preceding the commencement
of his employment with the Company. The Company has also hired Kim
Harrington, age 33, effective March 15, 1999 as the Company's
Principal Accounting Officer. Prior to her working for the Company,
Ms. Harrington worked for Norwest Bank, Deming, New Mexico for the
past seven years.
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
None
<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: May 17, 1999.
MIMBRES VALLEY
FARMERS
ASSOCIATION, INC.
By /S/DEAN STOVALL
Dean Stovall
General Manager and Chief Executive
Officer
(Authorized Representative)
<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
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE>5
<LEGEND>
EXHIBIT 27: FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE MARCH 31, 1999 UNAUDITED FINANCIAL STATEMENTS
INCLUDED AS ITEM 1 TO FORM 10-QSB TO WHICH THIS SCHEDULE IS
ATTACHED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
PERIOD TYPE NINE MONTHS
FISCAL YEAR END JUNE 30, 1999
PERIOD END MARCH 31, 1999
CASH $502,352
SECURITIES 0
RECEIVABLES $191,240
ALLOWANCE $16,612
INVENTORY $1,100,295
CURRENT ASSETS $2,056,467
PP&E $1,566,722
DEPRECIATION $139,625
TOTAL ASSETS $3,770,930
CURRENT LIABILITIES $810,978
LONG TERM DEBT $1,472,436
PREFERRED MANDATORY 0
PREFERRED 0
COMMON $347,750
OTHER-SE $900,297
TOTAL LIABILITY AND EQUITY $3,770,930
SALES $9,972,530
TOTAL REVENUES $10,175,799
CGS $7,872,992
TOTAL COSTS $10,204,391
OTHER EXPENSE 0
LOSS PROVISION 0
INTEREST EXPENSE $110,813
INCOME PRE TAX ($139,405)
INCOME TAX 0
INCOME CONTINUING ($139,405)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME ($139,405)
EPS PRIMARY (10)
EPS DILUTED (10)
</TABLE>
