U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 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 September 30, 2000, 13,776 shares of Common Stock Mimbres Valley
Farmers Association, Inc. ("Farmers" or the "Company") were outstanding.
Transitional small business disclosure format: Yes No X
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
September 30, 2000 and June 30, 2000
ASSETS
UNAUDITED AUDITED
CURRENT ASSETS: SEPTEMBER 2000 JUNE 2000
=============== ===========
<S> <C> <C>
Cash and equivalents $ 168,838 $ 256,690
Accounts receivable, net of allowance for
doubtful accounts of $4,000 and $4,000
Trade 64,383 74,115
Related parties 1,380 5,952
Other 8,524 7,246
Inventories 1,039,724 1,081,049
Prepaid expenses 49,294 76,945
Note receivable supplier - 8,032
--------------- -----------
Total current assets 1,332,143 1,510,029
--------------- -----------
PROPERTY AND
EQUIPMENT, net 1,233,657 1,271,632
--------------- -----------
OTHER NON-CURRENT ASSETS:
Note receivable, net of current portion 27,117 27,117
Investments in supplier 10,500 10,500
Other Assets 20,316 20,316
Deferred income tax asset 631 631
--------------- -----------
Other non-current assets, net 58,564 58,564
--------------- -----------
Total assets $ 2,624,364 $ 2,840,225
=============== ===========
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MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEETS
September 30, 2000 and June 30, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
UNAUDITED AUDITED
CURRENT LIABILITIES: SEPTEMBER 2000 JUNE 2000
=============== ===========
<S> <C> <C>
Accounts payable $ 839,575 $ 970,877
Current portion of long-term
debt and capital leases 1,338,270 1,356,190
Accrued expenses payable 183,943 159,818
--------------- -----------
Total current liabilities 2,361,788 2,486,885
--------------- -----------
NON-CURRENT LIABILITIES:
Long-term debt and capital leases,
less current portion 829 3,315
--------------- -----------
Total non-current liabilities 829 3,315
--------------- -----------
Total liabilities 2,362,617 2,490,200
--------------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $25 par value;
20,000 authorized: 13,910 issued
and 13,776 outstanding 347,750 347,750
Retained earnings (deficit) (82,653) 5,625
Less: 134 shares of treasury stock (3,350) (3,350)
--------------- -----------
Total shareholders' equity 261,747 350,025
--------------- -----------
Total liabilities and shareholders' equity
$ 2,624,364 $2,840,225
=============== ===========
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MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For the Three Months Ended September 30, 2000 and September 30, 1999
UNAUDITED
Three Months Ended Three Months Ended
SEPTEMBER 2000 SEPTEMBER 1999
<S> <C> <C>
NET SALES AND GROSS REVENUE $ 3,150,717 $ 3,257,451
COST OF SALES 2,507,849 2,601,896
-------------------- --------------------
Gross profit 642,868 655,555
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 664,593 693,223
-------------------- --------------------
OPERATING LOSS (21,725) (37,668)
OTHER INCOME (EXPENSE):
Other income, net 55,971 58,734
Interest expense (32,924) (34,312)
-------------------- --------------------
Income (loss) before
income tax benefit 1,322 (13,246)
INCOME TAX BENEFIT (EXPENSE) - -
-------------------- --------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 1,322 (13,246)
DISCONTINUED OPERATIONS
Income (loss) from operations of discontinued
Hardware and Clothing segment (less
Applicable income taxes of $-0-) (89,601) (129,311)
-------------------- --------------------
NET LOSS (88,279) (142,557)
RETAINED EARNINGS (DEFICIT):
Beginning of the period 5,626 586,616
-------------------- --------------------
End of the period $ (82,653) $ 444,059
==================== ====================
Earnings per share
Income (loss) from
continuing operations $ 0.10 $ (0.96)
(Loss) from discontinued operations (6.50) (9.39)
-------------------- --------------------
Net loss per common share $ (6.41) $ (10.35)
==================== ====================
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MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended September 30, 2000 and September 30, 1999
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30,1999
==================== ====================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (88,279) $ (142,557)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 68,062 68,169
Provision for uncollectible receivables (4,000)
Changes in assets and liabilities:
Accounts receivable 13,026 67,022
Inventories 41,325 (122,832)
Prepaid expenses 27,651 27,038
Prepaid income taxes - -
Accounts payable (131,302) 212,783
Accrued expenses 16,153 13,324
-------------------- --------------------
Net cash provided (used)
by operating activities
(53,364) 118,947
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (30,087) (11,252)
Decrease in notes receivable 8,032 -
-------------------- --------------------
Net cash used by
investing activities
(22,055) (11,252)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt
and capital leases (12,433) (23,180)
-------------------- --------------------
Net cash used by
financing activities
(12,433) (23,180)
-------------------- --------------------
INCREASE (DECREASE) IN CASH (87,852) 84,515
Cash at beginning of period 256,690 430,619
-------------------- --------------------
Cash at end of period $ 168,838 $ 515,134
==================== ====================
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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 September 30, 2000 and June 30, 2000 and the results
of operations and cash flows for the three-month periods ending September 30,
2000 and September 30, 1999.
The accounting policies followed by Farmers are set forth in Note 1 to the
financial statements in the 1999 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 2000 and for the quarters ended
September 30, 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 three months ended September 30, 2000 and 1999:
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September 30, 2000
Segment data Hardware Grocery Feed Mini Mart Other Total
--------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales 72,976 2,472,785 95,727 563,835 35,311 3,240,634
Income (loss)
from operations (72,667) 50,467 (33,535) (3,513) (29,031) (88,279)
Depreciation 18,486 37,340 1,621 10,293 322 68,062
September 30, 1999
Segment data Hardware Grocery Feed Mini Mart Other Total
--------- ---------- -------- ---------- -------- ----------
Net sales 57,513 2,679,052 105,935 461,790 70,704 3,374,994
Income (loss)
from operations (92,721) (125,799) (11,052) 74,679 12,336 (142,557)
Depreciation 25,473 29,560 2,333 7,955 3,148 68,469
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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 Company continued to experience significant operating losses for the
first quarter of fiscal year 2001, as it has for the past several years,
although the rate and amounts of loss are decreasing. Current management has
only been in position since the end of the third quarter of fiscal 2000.
The primary goal of current management is to return to profitability and
increase cash flow before the end of fiscal year 2001. To this end, management
has taken important steps to eliminate unprofitable segments of the Company's
business and to enhance the profitability of the remaining segments. An
approximately one per cent improvement in the cost of goods sold has been
achieved since June 2000.
In February 2000, the Company discontinued sales of molasses for cattle
feed and disposed of the related tanks, trailers, and pumps in June 2000.
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On May 19, 2000, the Company discontinued operations at its clothing and
crafts store and liquidated all inventory, fixtures and supplies. There have
been some inquiries as to the possibility of leasing all or part of the
premises.
The Company has discontinued gasoline sales at its feed store due to an
unprofitable sales agreement. The gasoline distributor has indicated that he
will propose a new, more profitable agreement, but has not done so to date.
On July 2, 2000, a 1,200 square foot area was leased to "All about U" for a
two year period with an additional two year lease at the end of that time with
the rent being increased in accordance with the CPI.
On September 19, 2000, the Company's hardware store was closed. At this
time negotiations are ongoing with several potential buyers for a sale of all
inventory. If this fails a list is being kept of potential buyers who are
interested in a partial purchase of inventory, fixtures, and supplies.
The adjustments to the year to date operations of the Company and other
accounting entries resulting from this closure will not be fully reflected until
the second fiscal quarter ending December 31, 2000.
In September 1999, the Company had 123 employees. Due to closing of
operations and eliminating positions the number has been reduced to the current
104 employees. There is the possibility that there may be further significant
reductions in the number of employees in the future.
The Company has accrued rental payments and property taxes in the amount of
$137,000 on the old K-mart building, which was rented by Farmers as a location
for an expanded hardware store until April, 1998. At that time Farmers vacated
the building and didn't pay rent for fourteen months at which time the building
was sold to the city of Deming. Legal action has been brought to collect past
rent plus fees for a total of $300,000. Current management believes the amount
owed should not be more than already accrued in accounts payable.
Inventory shrinkage and pricing of product appear to be a continuing
problem with Farmers IGA, feed, and mini-mart stores. To combat these factors
current management has promoted a person from within to serve as inventory
control person. This person is in charge of seeing that the proper margins are
applied to all products, outdated or obsolescent items are removed in a timely
manner and returned for either a full or partial refund, and outdated items and
shrink due to spoilage are documented, to enable Farmers to maintain a more
accurate inventory. In addition to the inventory control person Farmers has
updated the security system by replacing cameras in the grocery store,
installing cameras in the service desk area, and recording events on tape.
Visible security personnel are in the store in the evenings and patrol the
mini-mart, bean warehouse, feed store, and mall until six AM. Unmarked shoppers
are in the stores twenty hours a week.
As previously reported, the Company's mortgage loan, now held by WAMCO
XVIII, matures on January 24, 2001. The holder has indicated it will not
refinance or extend the note, as it is an investment group that buys discounted
notes. Management is currently negotiating with another investment group and
several banks in Deming and Las Cruces for an alternate source of financing. At
this time no commitment has been made by any group. Since Deming has been
declared a federal Empowerment Zone, the Company is eligible for extra
consideration on federally guaranteed loans. To this end the Company is working
with the United States Department of Agriculture (the "USDA") to obtain a
business and industry guaranteed loan. Application has been sent to USDA for
preliminary approval.
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Even with an acceptable alternative source of long-term financing as
described above, management is not certain whether the Company can fund its
operations and service its debt for fiscal year 2001 out of cash flow from
operations. At the present rate of operating losses, the Company only has
enough surplus to support an additional three fiscal quarters before its surplus
will be exhausted. Certainly the Company does not presently have enough cash to
pay off the mortgage loan in full at maturity. As reported previously, the
status of the Company as a going concern is in doubt and in the absence of
alternative financing, the Company will be forced to evaluate other
alternatives, including an arrangement with creditors or bankruptcy.
RESULTS OF OPERATIONS
Total sales for the first quarter of fiscal 2001 decreased approximately
$100,000 from the same period for fiscal 2000, but cost of goods sold reflected
a similar decrease. Segment reporting shows hardware sales increased a little
over $15,000 during the three months ended September 30, 2000, compared to the
same period of 2000, principally because the Company was liquidating hardware
inventory throughout the period. Therefore, the number was inflated for the
three months ended September 30, 2000.
The operating loss from the discontinued hardware and clothing segment of
the Company's business decreased from $129,311 for the three months ended
September 30, 1999 to $89,601 for the same period in 2000. Continuing
operations for the first quarter of fiscal 2001 resulted in a gain of $1,322,
compared to an operating loss of $13,246 for the same period last fiscal year.
Grocery sales showed a 7.8% decline in sales for the period as against the
same period of 1999. Management continues to attribute 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. However, the profitability of the grocery operation has improved
significantly, from an operating loss of $125,799 in the first quarter of fiscal
2000 to a gain of $50,467 in the current period.
Feed store sales decreased $10,208, or 9.6%, during the three months ended
September 30, 2000 over the same period of 1999, and the operating losses
associated therewith increased from $11,052 in the first fiscal quarter of
fiscal 2000 to $33,535 in the current period.
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Mini Mart sales increased $102,045 during the three months ended September
30, 2000 over the comparable period of 1999. While profits decreased from
$74,679 to a slight operating loss of $3,513, this is mainly due to an increased
allocation of administrative costs to Mini Mart operations.
Sales and net profits from the Other segment, which included the now-closed
clothing store in the prior period and administrative reserves, decreased
$35,393 and $41,367, respectively, during the three months ended September 30,
2000, from the comparable period of 1999.
PART II
ITEM 5. OTHER.
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.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 13, 2000.
MIMBRES VALLEY FARMERS
ASSOCIATION, INC.
By:
-------------------------------
Shelby Phillips
Chief Executive Officer
and General Manager
(Authorized Representative)
By:
-------------------------------
Janet Robinson
Chief Accounting Officer
(Principal Financial Officer)
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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
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