U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
( ) TRANSITION REPORT UNDER Section 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ____________________________ to
_____________________________
Commission file number 0-13963
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
(Name of small business issuer in its charter)
NEW MEXICO 85-0054230
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
811 South Platinum, Deming, New Mexico 88030
(Address of principal executive offices) (Zip code)
Issuer's telephone number (505) 546-2769
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock
($25 par value)
Name of each exchange on which registered: None
Check whether the issuer(1)filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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. . . .
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for the most recent fiscal year are: $
13,186,921.00
There is no established public trading market for the
issuer's common stock, no public quotations for the stock, and no
verifiable record of any common stock prices.
The number of shares outstanding of the issuer's common
stock, as of September 28, 1999, is 13,776.
<PAGE>
PART I
This Form 10-KSB contains certain forward-looking statements.
For this purpose any statements contained in this Form 10-KSB 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.
ITEM 1. BUSINESS.
General
Mimbres Valley Farmers Association, Inc. ("the Company" or
"Farmers") is a New Mexico corporation founded in 1913. The Company
is a food, dry goods, feed and farm supplies, and hardware retailer
serving the market area of Deming and surrounding areas in
southwestern New Mexico, The Company currently operates a
supermarket, hardware store, feed and farm supply store, clothing
store, and a convenience store with gasoline pumps. The Company
also operates a self-service laundry and leases to unrelated parties
certain retail space which the Company owns. The revenue the Company
derives from the non-retail business activities is less than one
percent of the Company's total revenue. See Item 2 "Properties" for
additional information on the Company's leasing activities.
All of the Company's operations and assets are in or around
Deming, New Mexico, which is primarily a farming community in the
southwestern part of the state. Deming (population 13,000) is the
county seat and largest municipality in Luna County, which has a
population of approximately 22,000. Because all parts of the County
are distant from the closest population centers in surrounding
counties (Las Cruces, population 62,000, in Dona Ana County, New
Mexico, and Silver City, New Mexico, population 11,000, in Grant
County, New Mexico, are 62 and 55 miles, respectively, from Deming),
the residents of Luna County do most of their day-to-day shopping in
Deming.
The Company conducts its grocery business at two locations:
the main 40,000 square foot supermarket at 811 South Platinum in
Deming, and a convenience store with a laundromat (together totaling
approximately 7,000 square feet) at 501 North Gold in Deming. The
convenience store location includes underground storage tanks and
pumps for retail sales of gasoline. The Company currently operates
its hardware store in a 7,100 square-foot location adjacent to the
main supermarket.
All of the Company's other retail operations are located near
the main supermarket, either in the Company's strip mall that the
supermarket occupies in part, or, in the case of the feed and farm
supply store, immediately across the street.
Products
The Company's supermarket offers a large selection of food
items, including dry groceries, fresh meat, dairy products, produce,
frozen foods, deli products and baked goods, as well as many
non-food items such as cigarettes, soaps, paper products, and health
and beauty care items. The Company's hardware store offers a wide
selection of merchandise, including nationally and regionally
advertised brands. The clothing store offers clothes for all ages.
It also has crafts, fabric, housewares, and a picture frame shop.
The Company's merchandising strategy is to offer a broad selection
of quality products at competitive prices with an emphasis on
superior customer service, quality and one-stop shopping
convenience, particularly for the local farming community.
Recent Developments
In April, 1998, the Company relocated the hardware store from
the building it leased from K-Mart Corporation located at 2300
Highway 70/80 (the K-Mart Building") back to its original location
adjacent to the supermarket. The hardware store at the K-Mart
Building failed to make an operating profit despite adjustments to
inventory, personnel costs, and, other factors. The Company has only
recently completed the liquidation of the additional inventory from
the hardware store. While the costs associated with the move of
the store contributed to the Company's losses in the last two fiscal
years, Management believes the Company has and will continue to
experience operating savings from the relocation and substantial
reduction in the size of the hardware store, including principally
the associated lower personnel costs, occupancy expenses, and costs
associated with the reduction in its inventory. For more
information, see Item 6, "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
None of the Company's other retail operations has experienced
any significant changes in the past fiscal year.
Competition
The Company's grocery and retail business is highly
competitive, and characterized by low profit margins. The Company's
supermarket is in direct competition with a supermarket owned and
operated by Furr's, a regional supermarket chain, and Peppers
supermarket, an independent supermarket ("Peppers"). The Company's
competitors also include drug stores, convenience stores, discount
hardware stores and large chain discount retailers. Some of these
competitors have substantially greater resources than the Company.
Management believes that increased competition is one of the
principal factors contributing to the decrease in revenues and
losses experienced by the Company over the past two years. For more
information, see Item 6 "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
Suppliers
The Company obtains substantially all of its grocery supplies
from Fleming Foods, a wholesaler based in Oklahoma City which
maintains a warehouse in Lubbock, Texas. The Company believes its
current relationship with Fleming Foods is satisfactory. The
Company is not dependent on this relationship because groceries and
general merchandise are generally available from many sources at
comparable prices and other terms.
In the retail sales business in which the Company competes,
inventory turnover is rapid and inventories must be maintained at
high levels. However, neither the Company nor other businesses in
the retail food industry have had problems maintaining the
inventories at desired levels. Businesses like the Company are not
dependent on any single customer or a small number of customers.
The retail grocery business is not seasonal in nature; however, the
Company's December sales are typically 1% to 2% higher than sales
for other months. The Company has no material backlog orders.
Personnel
At June 30, 1999, the Company had 117 employees, of which 51
were part time employees. The Company has experienced a net
decrease of 124 employees since the 1996 fiscal year principally
because of the decrease in staffing associated with the much smaller
hardware store and a general decrease in employment at other
Company locations. The Company does not anticipate additional
reductions in employment in the coming fiscal year. None of the
Company's employees are represented by unions.
Trademarks
The Company is one of seven owners of the International
Grocers Alliance ("IGA"), a trade group for joint marketing in the
supermarket industry. Because of its ownership interest in IGA(R)
the Company sells groceries under the IGA trademark.
Governmental Regulation
The Company is subject to a variety of governmental
authorities, including federal, state and local agencies which
regulate the distribution and sale of milk and other agricultural
products, as well as other food and drug items. The Company is also
subject to regulation on labor, health, safety and environmental
matters. Management believes the Company is in material compliance
with all applicable regulations. Except as provided below, the
Company anticipates that its compliance with federal, state and
local laws will not have a significant effect on the Company's
capital expenditures, earnings, or competitive practices.
For a discussion of possible future liability associated with
remediation of leakage from an underground storage tank, see Item
3, "Legal Proceedings" and Item 6, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
ITEM 2. PROPERTIES.
The Company owns or leases the following properties:
(1) The Company owns a strip shopping mall totaling
approximately 73,244 square feet of retail space,
located at 811 South Platinum Street, Deming, New
Mexico. The Company owns the real property and the
improvements on the real property in fee simple
subject to a mortgage loan with an outstanding
principle balance of $1,418,871.69 (as of June 30,
1999) and which matures on January 24, 2001. These
real property and improvements along with certain
other Company assets, secures the Company's
obligations to Wells Fargo Bank (formerly Norwest
Bank). See Note 6 to the Notes of "Financial
Statements", Item 7. The strip mall property is the
site of the Company's corporate offices, principal
supermarket (approximately 40,000 square feet), its
clothing and general merchandise store (approximately
11,000 square feet) and its hardware store
(approximately 7,100 square feet). Three other areas
in the mall are leased to separate tenants for retail
purposes: Family Dollar New Mexico, Inc. leases
approximately 8,050 feet for a rental amount of
$2,666.67/month. This lease expires on December 31,
2001 and is renewable by the tenant for three (3)
additional five-year terms. A sole proprietorship
d/b/a Video Mania leases approximately 1,200 square
feet for a rental amount of $550.00/month. This
lease expires on July 2, 2002. Jeff and Yvette
Lilley, d/b/a Radio Shack lease approximately 2,400
square feet for a rental amount of $1,000.00/month.
This lease expires July 28, 2002. First New Mexico
National Bank, Deming, New Mexico leases
approximately 1,000 square feet on a month to month
basis for an amount of $1,500.00/month. The original
lease with First National Bank expired in 1994, and
the tenant has continued to lease the property since
then on a month to month basis.
(2) The feed and farm supply store, is located in an
approximately 2,500 square-foot building across the
street from the shopping mall, at 921 South Diamond
Street. The Company owns this real property and
improvements in fee simple, free and clear of any
mortgages, liens or other encumbrances.
(3) The Company's convenience store with an attached
laundromat, totaling together approximately 7,000
square feet is located at 501 North Gold Street,
Deming, New Mexico. The Company owns this real
property and improvements in fee simple, free and
clear of any mortgages, liens or other encumbrances.
(4) The Company has vacated the premises of the K-Mart
Building located at Highway 70-80 East in Deming,
consisting of approximately 40,000 square feet and
totaling 13.76 acres, including parking areas and
associated grounds, and has notified the landlord
that the Company has discontinued the lease. The
rental rate for this lease of approximately $9,100
per month, and the initial term expires in 2002 and
the Company has an option to renew the initial term
for a total of 25 additional years. See Item 6,
"Managements Discussion and Analysis of Financial
Conditions and Results of Operations" for a more
detailed discussion.
(5) The Company owns a five-acre parcel of undeveloped
land within the Deming city limits, adjoining the
Columbus highway (State Route 11) in fee simple, free
and clear of any mortgages liens or other
encumbrances. The Company intends to retain
ownership of this parcel as a possible site for
business expansion.
(6) The Company leases approximately 8,000 square-foot
warehouse on West Rancho Avenue in Deming from the
Union Pacific Railroad on a year-to-year basis. The
Company uses the warehouse, which is served by a
railroad spur primarily for the receipt and storage
of bulk annual feed products. The rental amount is $
3639.47per year.
(7) The Company leases a 2,700 square-foot parcel of land
from the city of Deming. This property is now the
westside of the Company's main parking lot. This is
a 20-year lease at a rental rate of $25 per month
expires on 2019 and the Company has a one time 20
year renewal option.
The Company does not have any present renovation plans for
any of the properties, all of which are in satisfactory
condition.
ITEM 3. LEGAL PROCEEDINGS.
In addition to legal proceedings involving account
collections and other matters in the ordinary course of business,
during the course of the 1999 fiscal year the Company was involved
in the following legal matters.
Underground Storage Tank
The Company has sold gasoline to the public at its
convenience store for many years. The gasoline is dispensed from
underground storage tanks, which the Company previously leased from
a petroleum wholesaler. During the 1996 fiscal year, the leased
tanks were removed and replaced with tanks that the Company owns, at
which time it was determined that there had been some leakage from
one of the leased tanks. Examination of the tank revealed a hole
towards the top which presumably would have leaked only when the
tank was full or nearly full. Based on this information, the
Company believed that the amount of leakage and the corresponding
contamination may have been minimal. Nevertheless, the New Mexico
Environment Department has instituted a remedial action against the
owner of the tank. It is unclear whether further investigation
under this pending remedial action will reveal significant
contamination, and also unclear how extensive or costly remedial
measures imposed by the Environment Department may be. The Company
has taken all necessary efforts to contract the Department to
determine the status of their investigation but have not been given
any new information. Remediation expenses for leaking underground
storage tanks may be significant, particularly if contamination of
underground water is threatened.
Although the New Mexico Environment Department is currently
not requiring any action from the Company, the Company could have
liability based on its status as an "operator" under the New Mexico
Underground Storage Tank regulations (the "Regulations"). If the
New Mexico Environment Department assesses liability against the
Company, the Company will vigorously pursue a claim for indemnity
against the owner of the tank. If the Company is determined to be
in compliance with the Regulations, it will also qualify for
reimbursement from a "corrective action fund" established under the
State Groundwater Protection Act, which would potentially pay for
all but $10,000 of the Company's remediation expenses. The Company
has not, however, sought or received a determination that it
qualifies for reimbursement from the fund at this time. In
addition, the state has no obligation to reimburse parties if claims
exceed the amount available in the fund, and in the past claims have
exceeded the fund balance. Currently, however, the fund has a
surplus, and because the fund is constantly replenished by a fee on
petroleum products, the likely result of a deficiency in the fund
should be a delay in payment, rather than an outright denial of
payment based on insufficient monies.
Triad Financial Systems Corporation vs. Mimbres Valley Farmers
Association, Inc.
The Company's hardware store leased computer equipment from
Triad Financial Systems Corporation ("Triad") for the operation of
cash registers and inventory control systems. Upon the closing of
the K-mart hardware store location by the Company this equipment was
no longer needed. The Company attempted to return the equipment to
Triad and settle all remaining amounts due to Triad.
Triad, however, filed suit in Alameda County, California on
February 5, 1999 against the Company alleging a breach of the lease
and claiming damages of $107,294.38. The lawsuit was settled on
April 29, 1999 for a payment of $25,000 by the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the security holders of
the Company during the fourth quarter of the fiscal year ended June
30, 1999.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
There is no established public trading market for the
Company's common stock, and no public quotations for the stock.
Accordingly, there is no verifiable record maintained of any stock
prices. Sales of the Company's common stock, as indicated by
changes in ownership on the Company's registration book, are
infrequent. Price has been established historically by private party
negotiations. Since the Company has no systematic or reliable
method of determining share prices, the Company does not disseminate
any specific information regarding price. The Company does not know
the most recent sales price of its stock.
As of September 2, 1999, there were 841 holders of record of
the common stock of the Company. The Company's common stock is the
only authorized class of equity of the Company. The Company has not
issued any stock in the last three years.
No dividend was declared for the 1997 or 1998 fiscal years.
which both ended with an operating loss. In light of the operating
loss for the 1999 fiscal year the Board does not expect to approve a
dividend this year.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Plan of Operation
The overall future financial health of the Company will
depend upon increasing revenues and reducing expenses for the next
several years. The Company cannot continue to absorb the losses it
has experienced in the last three years. With shareholder equity
dropping from $1,387,452 at June 30, 1998 to $931,016 at June 30,
1999, management is evaluating monthly the profitability of each
department.
Retail sales have risen and fallen for the Company over the
last five years due to significant internal changes and increased
competition. Management believes the Company has a quality grocery
store providing competitive products and services at competitive
prices in the Company's market area. The Company's feed store and
convenience store are also sales leaders in the Deming market area.
Management intends to focus its attention on increasing Feed and
Grocery sales at a normal, consistent annual growth rate of 7%.
Management believes its goal of consistent 7% growth in
annual Feed and Grocery sales can be accomplished without increasing
operating costs. If the Company can achieve Management's goals,
annual operating losses would be reduced by approximately $150,000
in the fiscal year ending June 30, 2000 ("Fiscal 2000").
The Company's sales of Clothing & More products has suffered
from a history of name and product changes. Management's goal is to
gain recognition in the Deming market area for the Company's
Clothing department as a quality clothing store. Management
believes that recent inventory expansion in the Clothing & More
categories should help establish the Company as a viable market
competitor. Management has a goal of increasing sales during Fiscal
2000 in the other two major categories, Hardware and Clothing by
200% and 300%, respectively, which would result in break-even
results in these two categories and improve profitability by
approximately $156,000 during Fiscal 2000. If the goals are not
met, Management will re-evaluate the Company's Hardware and Clothing
operations.
The Company has focused strongly on controlling expenses for
the last two years. The largest expense savings move has been the
closure of Farmer's True Value(R) Hardware store at the old K-Mart
location and the relocation of the store to the Company's strip
mall. While this move has been very costly in personnel time,
inventory liquidation expense, labor costs, and equipment expense,
Management believes it will ultimately result in significant savings
and profit improvement. Most of the expenses incurred by the Company
as a result of the hardware store relocation (approximately $290,155
in Fiscal 1999 which consists of $39,240 for physical labor costs from April
1998 to October 1998, $17,500 for management and office personnel
costs, $1,400 for employment of a security officer for seven months at
$200/month, and $232,015 in losses from inventoy liquidation)
should not recur in the future with the exception of
a $110,000 per year in rental expenses payable to K-Mart on the
vacated building. Management will continue to work to eliminate
this rent expense, which would save the Company $110,000 per year.
As with any grocery store, theft, damaged goods, and spoilage
are a large expense item. Management is focused on decreasing these
losses, and believes the Company can achieve significant additional
savings in this area also.
The Company has applied to the State of New Mexico for gas
tax refunds totaling approximately $92,000. This money is owed from
overpayment of taxes for 18 months and is expected to be received by
October 1, 1999. The Company is exploring the possibility of
refinancing long term debt or selling certain non-core fixed assets
to improve cash flow or raise operating funds. The Company
currently has over $100,000 in available working capital that can be
used for operating needs or repairs. Management believes the
Company can fund its operations and service its debt for Fiscal 2000
out of cash flow from operations. The Company has no major planned
capital expenditures, and Management does not intend to incur any
additional debt or to expand store lines except possibly through
third party space leases or consignment sales. Management will
continue to attempt to improve products and services while reducing
risks and interest expenses.
A new parking lot has just been completed that the Company
anticipates will increase customer traffic and sales. Significant
sales personnel reduction occurred over the last year and Management
does not anticipate any further significant reduction from the
current level of 115-120 employees.
Future results from operations may differ materially from the
opinions expressed by Management.
Comparative Financial Condition and Results of Operations
Retail sales for the fiscal year ended June 30, 1999 ("Fiscal
1999") were $13,186,921 compared to $15,521,847 for the fiscal year
ended June 30, 1998 ("Fiscal 1998"). The principal reason for the
sales decrease is the relocation of the Company's hardware store
from a 40,000 square-foot facility to a 7,000 square-foot facility.
Comparing results in Fiscal 1999 to Fiscal 1998: Grocery sales
decreased $845,077 (8%), Hardware sales decreased $1,099,637 (76%),
Clothing & More sales decreased $159,017 (38%), Feed Store sales
decreased $195,318 (28%), and Convenience Store sales decreased
$35,877 (3%).
The significant decrease in Hardware revenues was
anticipated by management due to relocating the hardware
store because operating the larger hardware store was
resulting in annual losses of more than $300,000. Moving
the store from rented property (with monthly rental
expenses of approximately $9,200) into unoccupied property
owned by the Company will eventually result in substantial
annual rent savings. The Company continues to accrue the
monthly rental cost of the old K-Mart store because this
lease does not terminate until November 30, 2002. This
lease expense will end upon the sale or releasing of the
building if either occurs prior to November 30, 2002.
Management has received reports that the building is under
contract for sale to Luna County. While the County has
indicated it would like to close the sale in 1999, it has
no obligation to purchase the property until and unless it
receives a funding grant from the State of New Mexico.
The Fiscal 1999 decrease in Grocery revenues is
largely due to increased local competition, regional
competition from two Super Wal-Mart stores, and a depressed
County economy. Luna County has experienced a 30%
unemployment rate in Fiscal 1999.
The Feed store revenue decrease is principally a
result of improved moisture conditions in Fiscal 1999 over
Fiscal 1998. Fiscal 1998 was a drought year; therefore,
ranchers had to purchase supplemental feed, while
precipitation during Fiscal 1999 was significantly greater.
Farmer's Mini Mart convenience store experienced a
small drop in revenue over the previous fiscal year, but
this sales decline was reversed during the last quarter of
Fiscal 1999. The convenience store increased its hours of
operation to 24-hour service during the fourth quarter of
Fiscal 1999, and management believes the 15% increase in
fourth quarter revenues at the convenience store should
continue throughout Fiscal 2000.
The Company's total current assets at June 30, 1999
did not change much from total current assets at June 30,
1999, but current liabilities increased $142,202 and
Accounts Payables increased $195,763 during the same
period. Although Accounts Payable increased in Fiscal
1999, the Company is much more current in its Accounts
Payable than it was during Fiscal 1998. Suppliers are all
being paid within 45 days of invoice date.
Year 2000
The Company has conducted a review of its computers
systems to identify the systems that could be affected by
the year 2000 (Y2K) 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 which should not
require expenditures of more than $10,000, the Year 2000
problem will not pose a significant operational problem for
the Company's information systems as so modified and
converted. However, if such actions are not timely
completed, the arrival of the year 2000 may have a material
impact on the Company's ability to accurately process data.
These modifications and replacements are in the process of
being completed at this time. Management does not believe
that making these changes will have a significant effect on
the Company's capital expenditures.
Furthermore, Management is currently compiling a
file which will contain written statements from all the
Company's major suppliers and vendors. These statements
will contain information as to what each supplier has
accomplished to ensure that their respective companies are
Year 2000 compliant. The Company has already received oral
representations from Fleming Foods, its principle supplier
that it is Year 2000 compliant. If the Company receives
any statements that lead Management to believe that the
supplier or vendor is not Year 2000 compliant, the Company
will make every effort to engage a substitute supplier or
vendor that is compliant.
It is estimated that all Year 2000 updates will be
fully completed by the middle of the month of November.
Upon completion of these updates, the Year 2000 issue
should pose no significant operational problem for the
Company's information or data processing systems.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements of the Company are included
(with in index listing all the statements) in a separate
financial section at the end of this Annual Report Form
10-KSB.
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR TERM
SINCE EXPIRES
<S> <C> <C> <C> <C>
Jim T. Hyatt 46 Director 1993 2001
William R.
Johnson, III 48 Director 1993 2001
Shelby Phillips, III 57 Director 1999 2001
Gary Shiflett 39 Director 1997 2001
Leone Anderson 66 Director 1997 2000
James E. Keeler 65 Chairman of 1968 2000
the Board
and President
Douglas Tharp 78 Director 1973 2000
</TABLE>
Jim T. Hyatt has been a director of the Company
since 1993. His occupation for the last five years has been
ranching. He is a partner in Hyatt & Hyatt, a general
partnership, and president of Quartzite, Inc. Both Hyatt &
Hyatt and Quartzite, Inc. are ranching businesses.
William R. Johnson, III, has been a director of the
Company since 1993, and has been Treasurer of the Company
since October, 1996. His occupation for last five years
has been farming and ranching. He is a partner in W. R.
Johnson and Sons, a general partnership in the business of
farming and ranching, and a director of Carzalia Valley
Gin, Inc., a corporation involved in processing of
agricultural products.
Gary Shiflett has been a director of the Company
since February 28,1997. His occupation for last five years
has been farming.
Leone Anderson has been a director of the Company
since September 23, 1997. She is a retired school teacher
whose family has been active in farming in Luna County.
James E. Keeler has been a director of the Company
since 1968, and President of the Company since 1993. He is
Chairman of the Board of Directors. His occupation for the
last five years has been farming and the operation of a
produce business.
Douglas Tharp has been a director of the Company
since 1973 and Vice-President since 1993. Mr. Tharp has
been employed for the past five years as manager of a
cotton warehouse in Deming, and as the owner and operator
of Deming Auction Service.
Shelby Phillips, III has been a director of the
Company since February 1999 and Secretary since that time.
Mr. Phillips has been the President of Adobe Developers,
Inc., a real estate development business and owner of
Casa Blanca Cow Camp, a business specializing in outdoor
ranch cookouts. His principal occupation for the last five
years has been farming and ranching.
The executive officers of the Company who are not
also directors of the Company are as follows.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Dean Stovall 53 Chief
Executive
Officer,
General Manager
Kim Harrington 33 Principal
Accounting
Officer
</TABLE>
Dean Stovall, age 53, has been the Company's General
Manager and Chief Executive Officer since February 15,
1999. Mr. Stovall served as President of Norwest Bank,
Deming, New Mexico, for the twelve years preceding the
commencement of his employment with the Company.
Kim Harrington, age 33, has been the Company's
Principal Accounting Officer since March 15, 1999. Prior
to working for the Company, Ms. Harrington worked for
Norwest Bank, Deming, New Mexico for the past seven years.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of
1934 requires the Company's directors and executive
officers, and persons who beneficially own more than 10% of
the Company's stock, to file initial reports of ownership
and reports of changes in ownership with the Securities and
Exchange Commission. Executive officers, directors and
greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based on a review of the copies of these reports
furnished to the Company, there were two late initial
reports of ownership. Dean Stovall and Kim Harrington each
failed to file their initial reports of ownership on Form
3s after they became an executive officer of the Company.
Each of these individuals has filed their initial reports
of ownership on Form 5s reporting their respective holdings
at the time they joined the Company. There were no
reportable transactions to report on the Form 5s.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth compensation paid
during each of the last three fiscal years to both Dean
Stovall, the Company's General Manager and Chief Executive
Officer and Gary S. Carter, the Company's former General
Manager and Chief Executive Officer, the Company's only two
"highly compensated executive officers" as that term is
used in Item 402(a) of Regulation S-B under the Securities
Exchange Act of 1934. Mr. Stovall has served as General
Manager and Chief Executive Officer of the Company since
February 15, 1999. No other officer or employee received
total compensation (i.e. salary and bonus) in excess of
$100,000 in any of the Company's past three fiscal years.
The following tables include all compensation paid to Mr.
Stovall and Mr. Carter during the time indicated.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
NAME AND PRINCIPLE FISCAL YEAR SALARY BONUS OTHER ANNUAL
POSITION COMPENSATION*
<S> <C> <C> <C> <C>
1999 $55,000 n.a. n.a.
Dean Stovall 1998 n.a. n.a. n.a.
General Manager 1997 n.a. n.a. n.a
and Chief Executive Officer
Gary S. Carter 1999 n.a. n.a. n.a.
Former General Manager 1997 $18,461 n.a. n.a.
and Chief Executive Officer 1998 $60,000 n.a. n.a.
</TABLE>
* The Company has no bonus, stock option, stock bonus,
stock appreciation rights or long term incentive plans or
agreements, or equity based or incentive option plans or
agreements.
Compensation of Directors
Directors of the Company receive the sum of $100 per
month, and no other compensation. During the 1999 fiscal
year the board of directors held twelve regular meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
0WNERS AND MANAGEMENT.
The following table sets forth information, as of
September 28, 1999, concerning the Common Stock
beneficially owned by each Director, nominee for Director
of the Company, and each Executive Officer of the Company.
There is no person or group (as the term is used in Section
13(d)(3) of the Securities Exchange Act) who is known to
the Company to be the beneficial owner of more than five
percent of the Company's common stock ($25 par value),
which is the only class of the Company's voting securities.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF ISSUED
BENEFICIAL OWNER BENEFICIAL OUTSTANDING COMMON
OWNERSHIP(1)(2) STOCK BENEFICIALLY
HELD
<S> <C> <C>
Leone Anderson 11 shares(3) *
P.O. Box 175
Deming, N.M. 88030
Jim T. Hyatt 28 shares *
11850 Uvas Valley Rd. N.E. 286 shares(4) 2.08%
Deming, N.M. 88031
William R. Johnson, III 55.5 shares *
P.O. Box 468
Columbus, N.M. 88029
James E. Keeler 240 shares 1.74%
125 Solana Rd. S.W.
Deming, N.M. 88030
Gary Shiflett 4 shares *
H.C. 66, Box 32B
Deming, N.M. 88030
Shelby Phillips, III 92 shares *
P.O. Box 468 15 shares (5) *
Columbus, N.M. 88029
Douglas Tharp 240 shares(5) 1.74%
1615 Solana Road S.W.
Deming, N.M. 88030
Dean Stovall 0 shares *
Kim Harrington(6) 0 shares *
All directors and executive officers 971.5 shares
</TABLE>
*Less than one percent
(1) There are no shares with respect to which any person
listed on this table has the right to acquire
beneficial ownership as specified in Rules
13d-3(d)(1) of the Securities Exchange Act of 1934.
(2) Unless otherwise indicated, each person listed has
sole voting and investment power over all shares.
(3) Ms. Anderson has joint voting and investment power
over these shares with her daughter.
(4) Mr. Hyatt holds these shares with shared voting and
investment power which arises through interests in
partnership and corporation that are owners of record.
(5) Mr. Tharp and Mr. Phillips have joint voting and
investment power over the shares with their spouses.
(6) Kim Harrington is the principal accounting officer
of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None of the reporting requirements of Item 404 of
Regulation S-B are applicable to this report.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
Exhibit Number
3.1 Articles of Incorporation, as amended to the date of
this report (incorporated by reference to
the Company Registration Statement filed in 1985)
3.2 Bylaws of the Company, is currently in effect
(incorporated by reference to the Company's
Registration Statement filed in 1985)
4.1 Specimen certificate representing the Company's
Common Stock (incorporated by reference
to the Company's Registration Statement filed in 1985).
10.1 Assignment and Assumption of Lease with K-Mart
Corporation dated December 1994 (incorporated by
reference to the Company's 10KSB for Fiscal Year
1998 filed in 1998).
27.1 Financial Data Schedule
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors Report
Balance Sheets
Statement Of Operations
Statement of Stockholders Equity
Statement of Cash Flow
Notes to Financial Statements
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders
Mimbres Valley Farmers Association, Inc.
d.b.a. Farmers, Inc.
We have audited the balance sheet of Mimbres Valley Farmers
Association, Inc., d.b.a. Farmers, Inc. (a New Mexico
corporation), as of June 30, 1999, and the related
statements of operations, shareholders' equity, and cash
flows for the years ended June 30, 1999 and 1998. These
financials statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and preform 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 audit provides a reasonable basis for
our opinion.
In our opinion, the 1999 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, 1999, and the
results of its operations and its cash flows for the years
ended June 30, 1999 and 1998, in conformity with generally
accepted accounting principles.
/s/Jones & Company
JONES & COMPANY
A Professional Corporation
6040 Surety Drive
El Paso, TX 79905
September 27, 1999
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
BALANCE SHEET
June 30, 1999
<CAPTION>
ASSETS
CURRENT ASSETS: 1999
<S> <C>
Cash and equivalents $ 430,619
Accounts receivable, net of allowance for doubtful accounts
of $4,000 and $25,000
Trade 181,895
Related parties 6,097
Other 4,737
Inventories 1,065,245
Prepaid expenses 93,078
Note receivable--supplier 36,156
Income taxes receivable -
Deferred income tax asset
203,301
Total current assets 2
,021,128
PROPERTY AND EQUIPMENT, net
1,396,319
OTHER NON-CURRENT ASSETS:
Note receivable-supplier -
Investments in supplier 10,500
Other Assets
14,816
Other non-current assets, net 25,316
Total assets $ 3,442,763
The accompanying notes to financial statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
BALANCE SHEET
JUNE 30, 1999 <CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
1999
<S>
<C>
Accounts payable $
699,751
Current portion of long-term debt and capital leases
91,743
Accrued expenses payable
160,565
Total current liabilities
952,059
NON-CURRENT LIABILITIES:
Deferred income taxes
202,670
Long-term debt and capital leases, less current portion
1,357,018
Total non-current liabilities
1,559,688
Total liabilities
2,511,747
SHAREHOLDERS' EQUITY
Common stock, $25 par value, 500,000 authorized:
13,910 issued and 13,776 outstanding
347,750
Retained earnings
586,616
Less: 134 shares of treasury stock
(3,350)
Total shareholders' equity
931,016
Total liabilities and shareholders' equity $
3,442,763
The accompanying notes to financial statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
STATEMENTS OF OPERATIONS
For the Years Ending June 30. 1999 and 1998
<CAPTION>
1999 1998
<S> <C> <C>
NET SALES AND GROSS REVENUE $13,186,921 $ 15,521,847
COST OF SALES 10,630,345 12,336,511
GROSS PROFIT 2,556,576 3,185,336
SELLING, GENERAL AND ADMINISTRATIVE 3,156,718 3,579,593
EXPENSES
OPERATING LOSS (600,142) (412,257)
OTHER INCOME (EXPENSE):
Other income 290,615 180,633
Interest expense (146,909) (207,112)
Loss before income tax benefit (456,436) (438,736)
INCOME TAX BENEFIT - (81,390)
Net loss (456,436) (357,346)
Net loss per common share (33.13) (25.94)
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended June 30,1999 and 1998
<CAPTION>
Common Stock Retained Treasury Total
Earnings Stock Shareholders
Equity
<S> <C> <C> <C> <C>
BALANCE, JUNE 30,1997 $ 347,750 $ 1,400,398 $(3,350) $1,744,798
Net loss (357,346) (357,346)
BALANCE, JUNE 30,1998 347,750 1,043,052 (3,350) 1,387,452
Net loss - (456,436) - (456,436)
BALANCE, JUNE 30,1999 $ 347,750 $586,616 $ (3,350) $ 931,016
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A FARMERS, INC.
STATEMENT OF CASH FLOWS
For the Years Ended June 30.1999 and 1998
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
1999
1998
<S>
<C>
<C>
Net loss $
(456,436)
$(357,346)
Adjustments to reconcile net loss to not cash provided
(used) for operating activities;
Depreciation and amortization
277,397
284,257
Obsolete equipment expense
- - 52,846
Provision for uncollectible accounts receivable
(21,000)
16,424
(Gain) loss sale of equipment
65,610
-
Changes in assets and liabilities:
Accounts receivable, net
(36,880)
124,598
Other accounts receivable
(2,497)
-
Inventories
167,424
639,253
Prepaid expenses
(32,004)
36,585
Deterred income taxes, net
- - 252,954
Other assets
22,200
(37,016)
Accounts payable
195,763
(701,408)
Accrued expenses
(3,349) (55,155)
Net cash provided for operating activities
176,228 255,992
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment
18,107
22,970
Collections of notes receivable
23,511
-
Additions to property and equipment
(50,570)
(66,558)
Increase in investment in supplier
(10,500) (6,771)
Net cash used for investing activities
(19,452) (50,359)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on short-term debt
-
180,097
Repayment of long term debt and capital leases
(118,249) (408,176)
Net cash used for financing activities
(118,249) (228,079)
INCREASE (DECREASE) IN CASH
38,527 (22,446)
CASH at beginning of year
392,092 414,538
CASH at end of year
430,619 392,092
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest $
151,814$
207,112
Cash paid for income taxes, net of refunds received $
- $
(334,345)
NONCASH INVESTING AND FINANCING ACTIVITY Note
receivable-vendor applied to note payable to supplier $
118,283$
-
NONCASH OPERATING AND FINANCING ACTIVITY - other assets
applied to note payable $
22,200 $
-
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, 1999 AND 1998
NOTE 1 - 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 crafts 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
form 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.
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, 1999 and 1998, advertising
expenses was $110,566 and $133,672 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.
Reclassification
Certain prior year balances have been reclassified to conform to the 1999
financial statement presentation.
NOTE 2 - COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130 Reporting Comprehensive
Income, (SFAS 130), requires that total comprehensive income be reported in
the financial statements. For 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. Therefore, the Company's comprehensive
income is the same as its net income for the years presented.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 1999 and 1998, consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C><C>
Furniture, fixtures and equipment$2,312,116$2,685,171
Buildings2,350,0702,417,468
Land 80,203 80,203
4,742,3895,182,842
Less: Accumulated depreciation and amortization(3,346,070)
(3,436,093)
$1,396,319$1,746,749
Depreciation expense for the fiscal years ended June 30, 1999 and 1998, was
$277,397 and $284,257 respectively.
</TABLE>
NOTE 4 - NOTES RECEIVABLE - SUPPLIER
The notes receivable-supplier at June 30, 1999 and 1998, are unsecured and
have maturities which range from December 1999 to 2002, with interest rates
ranging from 6.5% to 8.2%.
NOTE 5 - INVESTMENT IN SUPPLIER
Investments in supplier, at cost, as of June 30, 1999 and 1998 consist of
the following:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
Preferred shares - Do it Best Corp.$10,500$ -
693 shares of Class B non-voting stock - Cotter -
71,400
10 shares of Class A voting stock - Cotter - 6,000
20 shares of voting Common Stock - Cotter -
1,000
$10,500$78,400
</TABLE>
Farmers terminated its agreement with one of its suppliers in June 1998.
All Class A and B stock was transferred to the supplier in return for
promissory notes payable from the supplier over five years.
The Class B stock and preferred shares - Do it Best Corp of the supplier was
received as patronage dividends. None of the stock shown as investments in
supplier is readily marketable.
NOTE 6 - LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases as of June 30, 1999 and 1998, consist of
the following:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
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
9.5%, and secured by real estate mortgages.$1,418,872
$1,480,224
Variable rate note payable to Bank, due in monthly
installments of $1,675 plus interest, (9.25% and 9.5% at
June 30, 1999 and 1998), secured by real estate mortgages,
inventory, and accounts receivable.14,44234,675
Capital leases, net15,447100,923
Notes payable to supplier, due in monthly installments ranging
form $272 to $2,322. Interest rates ranging from 9.25% to 10.5%,
secured by equipment and notes receivable-supplier
-
69,471
1,448,7611,685,293
Less current portion 91,743 141,954
$1,357,018$1,543,339
</TABLE>
Future maturities of long-term debt and capital leases as of June 30, 1999,
are as follows:
<TABLE>
<S><C>
2000$91,743
200182,700
20021,274,318
$1,448,761
</TABLE>
Certain of the notes payable to Bank require the Company to comply with debt
covenants at June 30, 1999 and 1998 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 1998 and 1999,
and (d) profitable operations by December 31, 1996. The Company is not in
compliance with several of its debt covenants at June 30, 1999 and 1998.
Consistent with the prior year, the Company has obtained a waiver from the
Bank for all exceptions to its debt covenants effective through October 1,
1999. 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 $13,817 and
$44,446 as of June 30, 1999 and 1998, respectively.
NOTE 7 - OPERATING LEASES
Future minimum payments under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of June 30,
1999 are as follows:
<TABLE>
<S><C>
2000$110,000
2001110,000
2002 82,500
$302,500
</TABLE>
NOTE 8 - OTHER INCOME (EXPENSE)
Other income (expense) as of June 30, 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
Retail space - Rental$85,505$78,690
Check cashing fees12,25217,190
Western Union commissions37,38936,956
Other, net155,469100,643
Obsolete equipment expense - (52,846)
$290,615$180,633
</TABLE>
NOTE 9 - RENTAL INCOME
The Company leases retail space to customers with terms generally ranging
from 1 to 10 years. The leases generally
contain provisions for renewal options of 5 to 10 years.
The future minimum rental payments on retail rental space that have initial
or remaining non-cancelable lease terms in
excess of one year as of June 30, 1999 and 1998, are as follows:
<TABLE>
<S><C>
1999$56,200
200050,600
200150,600
200218,600
2003 -
Total future minimum rental payments$176,000
</TABLE>
NOTE 10 - LITIGATION
The Company vacated the premises it formerly used for its hardware store and
has not paid rent to the landlord since that date. The landlord has
threatened legal action to collect for certain amounts consisting of unpaid
property taxes, insurance, accrued interest and possible punitive damages.
The Company has accrued rental payments and property taxes and has continued
to maintain insurance on the building through June 30, 1999.
NOTE 11 - 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, 1999 and 1998,
two such suppliers accounted for 67% and 77% of inventory purchases,
respectively.
NOTE 12 - INCOME TAXES
Components of the net deferred income tax asset and liability at June 30,
1999 and 1998, are as follows:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
Deferred income tax assets:
Net operating loss carryover$417,846$267,619
Inventory method change46,87062,493
Inventory capitalization - 22,063
Allowance for doubtful accounts1,2607,875
Other 5,442 3,145
Deferred income tax asset471,418363,195
Valuation allowance(268,117)(123,095)
Deferred income tax asset,
net of valuation allowance$203,301$240,100
Deferred income tax liability related to
depreciation$(202,670)$(239,469)
</TABLE>
The Company had prior and current year losses for federal income tax
purposes of approximately $1,180,000, which will be carried forward
resulting in a deferred tax asset of $330,596. The Company had prior and
current year losses for state tax purposes of approximately $2,490,000,
which will be carried forward resulting in a deferred tax asset of $87,250.
Due to recent operating losses, a valuation allowance has been recorded to
adjust the federal and state deferred tax asset.
The income tax benefit consists of the following for the fiscal years ended
June 30, 1999 and 1998:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
Deferred income tax benefits:
Federal$ - $(65,994)
State - (15,396)
- $(81,390)
</TABLE>
The income tax benefit is reconciled with the expected Federal statutory
rates for the years ended June 30, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
19991998
<S> <C><C>
Provision computed at Federal statutory rate$(133,535)
$(107,772)
State taxes net Federal benefit(16,692)(15,396)
Valuation allowance150,22750,363
Other - (8,585)
Total $ - $(81,390)
</TABLE>
The Company has net operating loss and contributions carryover to offset
future income tax. If not used, these credits
will expire as follows:
<TABLE>
<CAPTION>
Federal
Year Ending Contribution
Net Operating LossTotal
<S> <C>
<C>
<C>
2001 $2,202$
- $2,202
20025,862 -
5,862
20031,919 -
1,919
20047,292 -
7,292
2012 - 71,485
71,485
2013 - 632,307
632,307
2014 - 464,618
464,618
Total$17,275 $1,168,410
$1,185,685
</TABLE>
NOTE 13 - YEAR 2000 DISCLOSURE
The Company has conducted an updated review of all computer systems, to
identify the possibility of any Year 2000
related problems. The Year 2000 terminology describes the possible effect
of the millennium date rollover on computer
processor systems and their software. These effects could cause computer
system failure or malfunction.
It is the opinion of the Company that these problems can be avoided with
modifications of current software and
systems, as well as the replacement of some systems that cannot be updated.
These modifications and replacements are
in the process of being completed at this time.
Furthermore, a file is being formulated which contains written statements
from all the Company's major suppliers and
vendors. These statements will contain information as to what each supplier
has accomplished to ensure that their
respective companies are Year 2000 compliant.
It is estimated that all Year 2000 updates will be fully completed by the
middle of the month of November 1999. Upon completion of these updates the
Year 2000 issue should pose no significant operational problem for the
Company's information or data processing systems.
NOTE 14 - SEGMENT INFORMATION
Effective December 31, 1998, the Company adopted SFAS No. 131 "Disclosure
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 five segments; Administration, IGA Grocery,
Mini-Mart, Hardware and Feed. The following represents selected
consolidated financial information for the company's segments for the years
ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
IGA
1999 Administration Grocery
Mini-Mart
Hardware Feed Total
Segment data:
<S> <C>
<C>
<C>
<C>
<C>
<C>
Net Sales92,125 10,945,846
1,359,302
325,357 594,030
13,316,660
Income (loss) from operations 86,463
136,006
(39,932) (496,538)
(106,168)
(420,169)
Depreciation 119,665
55,095
19,528 76,061
7,048
277,397
</TABLE>>
<TABLE>
<CAPTION>
1998
<S> <C>
<C>
<C>
<C>
<C>
<C>
Net Sales100,690 11,678,700
1,383,415
1,417,708 701,181
15,281,694
Income (loss) from operations 89,654
226,632
(24,536) (605,162)
(26,696)
(340,108)
Depreciation 123,234
55,390
19,528 79,004
7,100
284,256
</TABLE>
NOTE 15 - MANAGEMENT'S PLANS FOR FUTURE OPERATIONS (UNAUDITED)
Retail sales have risen and fallen for the Company over the last five years
due to significant internal changes and increased competition. Management
believes the Company has a competitive grocery store providing competitive
products and service at competitive prices. It also has a feed store and
mini mart that are market leaders. Management intends to focus its
attention on increasing sales in these profit centers at a normal,
consistent growth of 7%.
Management believes this 7% growth in sales can be accomplished without
increasing operating costs and would result in an additional $150,000 of
profit improvement. The other two revenue centers are Hardware and Clothing
& More. Management's plan is to achieve break-even for these two
departments by June 30, 2000. If this plan is achieved profits would
improve by $156,000. These two sources should generate $306,000 total
earnings.
The Company has focused strongly on expense control the last two years. The
largest expense item has been the closure of Farmer's True Value Hardware
from the old K-Mart location and the moving of that department back to the
mini mall. This move has been very costly in personnel time, inventory
liquidation, labor costs, and equipment expense. Most of these costs are in
the past with the exception of a $110,000 per year rent payable to K-Mart on
the building that was vacated. Management is working on eliminating this
rent expense which will save $110,000 per year.
As with any grocery store, theft, damaged goods, and spoilage are large
expense items. Management attention is being directed to decreasing shrink
to normal levels. Management believes it can save $200,000 in this area alone.
Increased revenue netting $306,000 plus cost reductions of $310,000 would
generate $616,000 of anticipated gain in profit over the year ended June 30,
1999.
The Company is exploring the possibility of refinancing long term debt or
selling certain non-core fixed assets to improve cash flow or raise
operating funds. The Company currently has over $100,000 in a reserve fund
that can be used for operating needs or repairs. Management believes it can
service debt for the coming year from operations. The Company has no major
capital outlay projects planned for the fiscal year. In addition, a new
parking lot has just been completed that the Company anticipates will
increase customer traffic and sales.
Management does not intend to incur any additional debt or to expand store
lines except possibly through third party space leases or consignment sales.
Management is striving to reduce risk and interest expense, and by
improving product lines for Hardware and Clothing & More, it hopes to
improve sales in these categories.
Significant personnel reduction has occurred over the last year, and
management does not anticipate any significant further reduction from the
current level of 115-120 employees.
Future results from operations may differ materially from the opinions
expressed by Management.
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 28, 1999.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By: /s/ Dean Stovall
Dean Stovall, Chief Executive Officer
By: /s/ Kim Harrington
Kim Harrington, Principal
Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
reporthas been signed below by the following persons on behalf of the Company
and in the capaciites and dates indicated.
DATE
/s/ V. Leone Anderson September 28, 1999
V. Leone Anderson, Director
/s/ Jim T. Hyatt September 28, 1999
Jim T. Hyatt, Director
/s/ William R. Johnson, III September 28, 1999
William R. Johnson, III, Director
/s/ James E. Keeler September 28, 1999
V. James E. Keeler, Director
/s/ Shelby Phillips September 28, 1999
Shelby Phillips, Director
/s/ Gary Shiflett September 28, 1999
Gary Shiflett, Director
/s/ Douglas Tharp September 28, 1999
Douglas Tharp, Director
/s/ Dean Stovall September 28, 1999
Dean Stovall, Chief Executive Officer
/s/ Kim Harrington September 28, 1999
Kim Harrington, Principal Accounting Officer
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Nature of Exhibit Page
Number
<S> <C> <C>
3.1 Articles of Incorporation Incorporated by reference
3.2 Bylaws Incorporated by reference
4.1 Specimen of Stock Certificate Incorporated by reference
10.1 Lease of K-Mart building at Incorporated by reference
Highway 70-80 East
27.1 Financial Data Schedule Filed Herewith
</TABLE>
