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 December 31, 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 January 29, 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
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
December 31, 1998 and June 30, 1998
<CAPTION>
ASSETS
DEC 1988 JUNE 1998
CURRENT ASSETS: Unaudited Audited
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents 648,445 392,092
Accounts receivable,
net of allowance for
doubtful accounts
of $16,612 and $25,000
Trade 93,650 127,699
Related parties 1,274 4,651
Inventories 1,074,270 1,232,669
Prepaid expenses 8,221 61,074
Note receivable--supplier 11,742 11,741
Deferred income tax asset 240,100 240,100
Total current assets 2,077,702 2,070,026
PROPERTY AND
EQUIPMENT, net 1,630,233 1 ,746,749
OTHER NON-CURRENT
ASSETS:
Note receivable-supplier 47,926 47,926
Investments in supplier 79,200 78,400
Other Assets 37,016 37,016
Other non-current assets, net 164,142 163,342
Total assets 3,872,077 3,980,117
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
December 31, 1998 and June 30, 1998
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
DEC 1998 JUNE 1998
Unaudited Audited
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable 543,487 503,988
Current portion of long-term
debt and capital leases 141,954 141,954
Accrued expenses payable 162,283 163,915
Total current liabilities 847,724 809,857
NON-CURRENT LIABILITIES:
Deferred income taxes 239, 469 239,469
Long-term debt and capital
leases, less current portion 1,495,005 1,543,339
Total non-current liabilities 1,734,474 1,782,808
Total liabilities 2,582,198 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 945,479 1,043,052
Less: 134 shares
of treasury stock (3,350) (3,350)
Total shareholder's equity 1,289,879 1,387,452
Total liabilities and
shareholder's equity 3,872,077 3,980,117
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the Six Months Ended December 31, 1998 and December 31, 1997
UNAUDITED
<CAPTION>
Six Months Ended Six Months Ended
DEC 1998 DEC
1997
<S> <C> <C>
NET SALES AND
GROSS REVENUE 6,835,514 8,253,234
COST OF SALES 5,374,629 6,446,114
Gross profit 1,460,885 1,807,120
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSE 1,620,420 1,978,499
OPERATING LOSS (159,535) (171,379)
OTHER INCOME
(EXPENSE):
Other income, net 137,682 213,087
Interest expense (75,720) (111,812)
Loss before income
tax benefit (97,573)
(70,104)
INCOME TAX BENEFIT
(EXPENSE) -
23,835
Net loss (97,573)
(46,269)
RETAINED EARNINGS:
Beginning of the period 1,043,052 1,400,398
End of the period 945,479 1,354,129
Net (loss) earnings
per common share (7) (3)
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 1998 and 1997
UNAUDITED
<CAPTION>
Six Months Ended Six Months Ended
December 31, 1998 December 31, 1997
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVIES:
Net loss (97,573) (46,268)
adjustments to reconcile net
loss to net cash provided
(used) by operating activities:
Depreciation and amortization 139,265 150,902
Changes in assets and liabilities:
Accounts receivable, net 37,427 81,263
Inventories 158,399 (31,241)
Prepaid expenses 52,851 74,917
Prepaid income taxes - 326,144
Accounts payable 39,499 (500,672)
Accrued expenses (1,632) (21,109)
Net cash provided by
operating activities 328,236 33,936
CASH FLOWS FROM
INVESTING ACTIVITIES:
Additions to property and
equipment, net (22,749) (26,563)
(Increase) Decrease in
investment in supplier (800) 4,629
Net cash used by investing
activities (23,549)
(21,934)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long term debt
and capital leases -
180,097
Repayment of long-term
debt and capital leases (48,334) (357,612)
Net cash used by financing
activities (48,334)
(177,515)
INCREASE (DECREASE)
IN CASH 256,353 (165,513)
Cash at beginning of period 392,092 414,538
Cash at end of period 648,445 249,025
</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 December 31, 1998 and June 30, 1998 and the results
of operations and cash flows for the six-month periods ending December 31,
1998 and December 31, 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 six-month period ended December 31,
1998 is not necessarily indicative of the results to be expected for the full
year.
Net loss per share for the Quarter ended December 31, 1998 was $7. Net
loss per share for the Quarter ended December 31, 1997 was $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 during the
first and second quarters. Farmers worked with the supplier to solve the
problems related to the new distribution center during the second quarter of
the current fiscal year. During the second quarter, the Company has been
able to rebuild its inventory to normal levels.
Working capital ratios were 2.45 at December 31, 1998 and 2.55 at June
30, 1998.
The Company is continuing to explore 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 second quarter of $3,372,156 were
consistent with the previous quarter's total sales of $3,463,358. Second
quarter total sales for fiscal year 1999 compared to the same period in
fiscal
year 1998 were down approximately 17% ($6,835,514 compared to $8,253,324).
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 second quarter
sales may have been caused by increased competition within Farmers trade
area. Management does not expect the new supercenter store to have a
material
continuing affect on sales in its IGA Supermarket or Hardware Store.
Gross margins increased to 26.1% in the current quarter compared to
16.8%
for the previous quarter. The increase was due primarily to the
stability in the total amount of obsolete inventory, the improvement in the
pricing of new inventory in the Hardware Store, and the resolution of the
distribution problem with the Company's major supplier.
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. Farmers has been unable to lease the Highway
70/80 location building and may have to substantially discount the lease to
encourage potential renters. There is a party interested in possibly taking
this site over from Farmers, but nothing definitive has been obtained from
the
third party at this time.
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.
Year 2000 Readiness Disclosure
The Company has conducted a review of its computers 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 utilizes
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 some equipment,
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 PCs
and with new software that are warranted to be Year 2000 compliant. During
the second and third quarter, the Company is working with NCR 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 should be
completed during the third quarter.
The Company's main supplier, Fleming Foods, 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 Fleming Foods to ensure
they
remain Year 2000 compliant. In a worst case scenario, if Fleming Foods is
not
Year 2000 compliant and is unable supply the Company due to Year 2000
problems, the Company can obtain its grocery supplies from numerous other
suppliers without suffering a material impact on the Company's profit margins.
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 re-elected 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 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 annual meeting in 2000:
Leone Anderson
James E. Keeler
Douglas Tharp
The Shareholders also ratified the appointment of Torres Jones & Company
as the independent auditors of the Company at the annual meeting by
acclamation of the 5,745 shares in attendance at the meeting.
ITEM 5. OTHER
On December 31, 1998, Garry S. Carter resigned as Chief Executive
Officer
and General Manager of Mimbres Valley Farmers Association, Inc.
On December 31, 1998, Diane C. Carter resigned as Chief Financial
Officer
and Controller of Mimbres Valley Farmers Association, Inc.
The resignations of Garry and Diane Carter were due to personal reasons
and were not the result of any disagreement with the Company on any matter
relating to the Company's operations, policies or practices. The Company has
hired Dean Stovall effective February 15, 1999, as the Company's General
Manager and Chief Executive Officer. Mr. Stovall was previously the
President of the Norwest Bank in Deming, New Mexico. The Company is in the
process of interviewing candidates to replace the position of Principal
Accounting Officer of Mimbres Valley Farmers Association, Inc. In the
interim, Mr. Wallace Burke has been acting as the Interim General
Manager of the Company.
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: February 15, 1999.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By /s/ Wallace Burke
Wallace Burke
Acting General Manager
(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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE DECEMBER 31, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 648,445
<SECURITIES> 0
<RECEIVABLES> 169,930
<ALLOWANCES> 16,612
<INVENTORY> 1,074,270
<CURRENT-ASSETS> 2,077,702
<PP&E> 1,630,233
<DEPRECIATION> 139,265
<TOTAL-ASSETS> 3,872,077
<CURRENT-LIABILITIES> 847,724
<BONDS> 1,495,005
0
0
<COMMON> 347,750
<OTHER-SE> 945,479
<TOTAL-LIABILITY-AND-EQUITY> 3,872,077
<SALES> 6,835,514
<TOTAL-REVENUES> 6,973,196
<CGS> 5,374,629
<TOTAL-COSTS> 6,995,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,720
<INCOME-PRETAX> (97,573)
<INCOME-TAX> 0
<INCOME-CONTINUING> (97,573)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97,753)
<EPS-PRIMARY> (7)
<EPS-DILUTED> (7)
</TABLE>
