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, 2000.
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 March 31, 2000, 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.
MARCH 31, 2000 AND JUNE 30, 1999
<CAPTION>
ASSETS
MARCH 2000 JUNE 1999
CURRENT ASSETS: (UNAUDITED) (AUDITED)
<S> <C> <C>
Cash and equivalents $
237,142 $ 430,619
Accounts receivable, net of allowance for doubtful accounts
of $4,000 and $25,000
Trade 70,217
186,632
Related parties
5,463 6,097
Inventories
1,089,832 1,065,245
Prepaid expenses
73,350 93,078
Note receivable supplier
27,117 36,156
Deferred income tax asset
203,301 203,301
Total current assets
1,706,422 2,021,128
PROPERTY AND EQUIPMENT, net
1,312,658 1 ,396,319
OTHER NON-CURRENT ASSETS:
Investments in supplier
10,500 10,500
Other Assets 14,815
14,816
Other non-current assets, net
25,315 25,316
Total assets $
3,044,395 $3,442,763
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
MARCH 31, 2000 AND JUNE 30, 1999
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 2000 JUNE 1999
CURRENT LIABILITIES:
(UNAUDITED (AUDITED)
<S> <C> <C>
Accounts payable $
891,261 $ 699,751
Current portion of long-term debt and capital leases
85,673 91,743
Accrued expenses payable
135,310 160,565
Total current liabilities
1,112,244 952,059
NON-CURRENT LIABILITIES:
Deferred income taxes
202,670 202,670
Long-term debt and capital leases, less current portion
1,291,230 1,357,018
Total non-current liabilities
1,493,900 1,559,688
Total liabilities
2,606,144 2,511,747
SHAREHOLDERS' EQUITY:
Common stock, $25 par value: 500,000 authorized;
13,910 issued and 13,776 outstanding
347,750 347,750
Retained earnings
93,851 586,616
Less: 134 shares of treasury stock
(3,350) (3,350)
Total shareholders' equity
438,251 931,016
Total liabilities and shareholder's equity $
3,044,395 $ 3,442,763
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
<CAPTION>
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 2000 MARCH 1999
<S> <C> <C>
NET SALES AND GROSS REVENUE $ 9,970,459
$ 9,972,530
COST OF SALES 8,126,208 7,872,992
Gross profit 1,844,251
2,099,538
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,387,638 2,331,399
OPERATING LOSS (543,387) (231,861)
OTHER INCOME (EXPENSE):
Other income, net 150,437
203,269
Interest expense (99,815)
(110,813)
Loss before income tax benefit (492,765)
(139,405)
INCOME TAX BENEFIT (EXPENSE) -
Net (loss) income $
(492,765) $ (139,405)
RETAINED EARNINGS:
Beginning of the period 586,616
1,043,052
End of the period $
93,851 $ 903,647
Net loss per common share $
(35.77) $ (10.12)
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
<CAPTION>
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
UNAUDITED
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 2000 MARCH 31,
1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (492,765) $
(139,405)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 204,293
213,053
Changes in assets and liabilities:
Accounts receivable 126,087
17,389
Inventories (24,587)
132,374
Prepaid expenses 19,726
(25,943)
Accounts payable 191,513
22,070
Accrued expenses (25,255)
(20,949)
Net cash provided (used) by operating activities
( 988) 198,589
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (120,630)
(33,026)
Decrease in investment in supplier
0
15,600
Net cash used by investing activities
(120,630) (17,426)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and capital leases
(71,859) (70,903)
Net cash used by financing activities
(71,859) (70,903)
INCREASE (DECREASE) IN CASH (193,477)
110,260
Cash at beginning of period
430,619 392,092
Cash at end of period $
237,142 $ 502,352
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
D.B.A. FARMERS, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 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, 2000 and
June 30, 1999 and the results of operations and cash flows for the
nine-month periods ending March 31, 2000 and March 31, 1999.
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 distributed 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, 2000 and
1999, 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 four segments,
Grocery, MiniMart, Hardware and Feed. The following represents
selected consolidated financial information for the Company's
segments for the nine months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
March 31, 2000
Segment data Hardware Grocery Feed MiniMart Other
Total
<S> <C> <C> <C> <C> <C> <C>
Net sales 227,834 7,605,779 443,827
1,431,082 261,937 9,970,459
Income (loss)
from operations (81,365) (325,309) (96,816)
1,820 8,905 (492,765)
Depreciation 54,906 111,659 7,348
27,968 2,412 204,293
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999
Segment data Hardware Grocery Feed MiniMart Other
Total
<S> <C> <C> <C> <C> <C> <C>
Net sales 281,785 8,177,286 357,243 965,298
190,918 9,972,530
Income (loss)
from operations (334,269) 42,705 (83,274) 246,527
(11,094) (139,405)
Depreciation 79,055 41,364 5,140
14,646 72,848 213,053
</TABLE>
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 AND CHANGES IN FINANCIAL CONDITION
The financial condition of the Company continues to weaken.
The Company experienced an operating loss of $492,765 for the first
three quarters of the 2000 fiscal year ("Fiscal 2000"), compared to
an operating loss of $139,405 for the same nine-month period of the
1999 fiscal year ("Fiscal 1999"). Approximately $300,000 of this
loss is due to inventory write downs occurring after the April 2000
physical inventory count. The Company's operating loss in March was
$17,725 excluding the effects of inventory write downs. Management
elected to recognize the full inventory write down in March so the
last quarter of Fiscal 2000 could more realistically reflect current
operating performance. Since the end of the third quarter of Fiscal
2000, the Company has experienced a change in Management with the
resignation of Dean Stovall as Chief Executive Officer and General
Manager. See Item 5, Other. Interim Management is currently
consolidating certain of the Company's unprofitable operations which
Management expects will have the effect of operating at breakeven or
realizing a small profit in the next quarter.
Shareholder equity decreased approximately $492,765 during
the first three quarters of Fiscal 2000 to a critical level of
$438,251 at March 31, 2000 from approximately $931,000 at June 30,
1999. Cash decreased by $193,477 for the nine months ended March
31, 2000, compared to an increase of $110,260 for the same period in
the prior fiscal year. Receivables decreased $116,415 during this
same nine-month period. Accounts payable increased $191,510 to
$891,261 at March 31, 2000 from $699,751 at June 30, 1999. The
changes in cash, receivables and accounts payable account for the
$492,765 decrease in owner equity. Management has elected to sell a
five-acre tract of land in order to generate approximately $125,000
to $150,000 additional cash based on an independent appraisal of the
tract completed in March 2000.
While the Company has made its debt payments timely to date,
the Company's bank loan will mature January 2001. Management
expects it will be difficult to renew this loan based on the current
conditions at the Company. Management will contact Wamco XXVIII Ltd
who purchased note from Wells Fargo Bank concerning possibility of
refinancing the note with them. Also, currently Management is
consolidating the Company's checking accounts and plans to move them
to First Savings Bank in New Mexico. Management has discussed the
possibility of refinancing the note with First Savings Bank and has
received a tentative positive response; however, due to the changes
in Management, this has not been completed. Partially in
anticipation of discussions regarding refinancing, Management is
focusing on returning the Company to profitability over the next six
months. Management increased pricing five percent across the board
on its food items effective April 24, 2000, so this increase has only
recently been reflected in the financial condition of the Company.
Shrink control continues to be a major concern and focus of
Management. Management continues to seek and employee
to be responsible for monitoring and controlling
shrinkage. The current General Manager is
looking for an individual to perform these functions. Currently, it
appears that shrink is costing the Company $40,000 per month above
normal expectations.
RESULTS OF OPERATIONS
Total sales for the first three quarters of Fiscal 2000
increased approximately $2,000 over the same period for Fiscal 1999.
Segment reporting shows hardware sales decreased $53,951during the
nine months ended March 31, 2000 compared to the same period of 1999
principally because the Company was liquidating hardware inventory
in March of 1999. Therefore, the number was inflated for the nine
months ended March 31,1999. Hardware sales for the month of March
2000 are double what they were in July 1999. Sales are currently
averaging $40,000 per month. It is expected that results from
hardware operations during April 2000 were at close to breakeven
before the allocation of general and administrative costs.
Grocery is the only other segment to show a decline in sales
decreasing $571,507 during the nine months ended March 31, 2000 from
the same period of 1999. Approximately $300,000 of this decrease is
attributable to the inventory write down. Management increased
grocery prices by five percent in the month of March, which, if item
sales volume remain constant, should improve the Company's gross
profits by approximately $35,000 per month. Management attributes
the decrease in grocery sales to poor local economic conditions in
1999 and 2000 evidenced by a 30 percent unemployment rate in the
Company's Deming, New Mexico trade area, as well as the increased
competition caused by the Deming K-Mart's expansion into grocery sales.
Feed store sales increased $86,584 during the nine months
ended March 31, 2000 over the same period of 1999, but the feed
store incurred a $96,816 loss during this period. These losses are
due to the sale of damaged products below cost. A large amount of
inventory was infected with weevils in the third quarter and the
Company was forced to sell much of the inventory at substantially
reduced prices. The new Manager of the feed store has better
quality controls in place, and Management believes the feed store
should return to breakeven or to profitability in the last quarter
of 2000.
Mini Mart sales increased $465,784 during the nine months
ended March 31, 2000 over the comparable period of 1999. While
profits decreased $244,707, this is due to an increased allocation
of administrative costs to Mini Mart operations.
Sales and net profits from the Other segment, which includes
the clothing store and administrative reserves, improved $71,019 and
$20,000, respectively, during the nine months ended March 31, 2000
from the comparable period of 1999.
Management's goals, which were summarized in last quarter's
Report on Form 10-QSB, are being reviewed monthly by the Company's
Board of Directors. Departments are being evaluated as to their
future viability. With the latest physical inventory of April 8,
2000, Management now believes the Company has an accurate inventory.
The current challenge is to control shrink and other costs and
maintain or increase sales volumes sufficiently to return to
profitability the Grocery segment and and the Company's other segments. This
should enable the Company to raise enough cash to keep payables
current for the next six months and to renew the Company's Bank loan
in January 2001. During the remaining months of 2000, the Company
should start showing a profit due to higher seasonal sales.
Management has made an offer to K-Mart to settle the
Company's lawsuit with K-Mart. While Management has attempted to
elicit a response to its settlement offer, K-Mart has not responded
to date.
PART II
ITEM 5. OTHER.
On May 13, 2000, Dean Stovall resigned as Chief Executive
Officer and General Manager of Mimbres Valley Farmers Association,
Inc. The resignation of Dean Stovall was 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 is in the process of searching for
candidates to replace the position of Chief Executive Officer and
General Manager of Mimbres Valley Farmers Association, Inc. In the
interim, Mr. Shelby Phillips 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: May 24, 2000.
MIMBRES VALLEY FARMERS
ASSOCIATION, INC.
By /s/ Shelby Phillips
Shelby Phillips
Acting General Manager
(Authorized Representative)
By /s/ Kim Harrington
Kim Harrington
Chief Financial Officer and
Controller
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
3(i) Articles of Incorporation (aa)
3(ii) Bylaws (aa)
27 Financial Data Schedule *
(aa) Incorporated by reference to the Company's Registration
Statement on Form S-1.
* Filed Herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31,2000 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 237142
<SECURITIES> 0
<RECEIVABLES> 79680
<ALLOWANCES> 4000
<INVENTORY> 1089832
<CURRENT-ASSETS> 1706422
<PP&E> 1312658
<DEPRECIATION> 204293
<TOTAL-ASSETS> 3044395
<CURRENT-LIABILITIES> 1112244
<BONDS> 1291230
0
0
<COMMON> 347750
<OTHER-SE> 93851
<TOTAL-LIABILITY-AND-EQUITY> 3044395
<SALES> 9970459
<TOTAL-REVENUES> 10120896
<CGS> 8126208
<TOTAL-COSTS> 10513846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99815
<INCOME-PRETAX> (492765)
<INCOME-TAX> 0
<INCOME-CONTINUING> (492765)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (492765)
<EPS-BASIC> (35.77)
<EPS-DILUTED> (35.77)
</TABLE>
