ANNUAL REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
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 (l) 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. [X]
Issuer's revenues for its most recent fiscal year. $13,154,602.00
There is no established public trading market for the issuer's common
stock, no public quotation 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, 2000.
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 retailer serving the market area of Deming and surrounding
areas in southwestern New Mexico. The Company currently operates a supermarket,
feed and farm supply store and a convenience store with gasoline pumps. The
Company also 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 14,400) is the county seat and largest municipality
in Luna County, which has a population of approximately 24,000. Because all
parts of the County are distant from the closest population centers in
surrounding counties (Las Cruces, population 76,102, in Dona Ana County, New
Mexico, and Silver City, New Mexico, population 12,064, 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 at 501 North Gold in Deming. The convenience store location
includes underground storage tanks and pumps for retail sales of gasoline.
Until September 15, 2000, the Company operated a 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.
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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 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 vacated the premises it formerly used for its
hardware store and has not paid rent to the landlord since October, 1998. The
landlord has brought legal action to collect for certain amounts consisting of
unpaid property taxes, insurance, accrued interest and possible punitive
damages, in the amount of $300,000. The Company accrued rental payments and
property taxes and continued to maintain insurance on the building through the
date it was sold by the owner in the fall of 1999. The Company believes that it
will settle the matter for an amount not greater than has already been accrued
in the accounts payable and accrued expenses for rent and property taxes, which
totals $137,000. For more information, see Item 6, "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
During the past fiscal year, the Company closed its laundromat and clothing
store and on September 15, 2000, closed its hardware store, because historically
each of these had operated at a loss and it did not appear that they could be
restored to profitable operations on a consistent basis.
As of the end of the fiscal year, the Company was in violation of certain
financial maintenance covenants in its mortgage loan agreement held by First
City Service, Inc. The Company has not defaulted on any payments. The holder
of the mortgage note has not declared a default nor initiated any foreclosure
proceedings; however, the holder has indicated that it will not under present
circumstances renew the mortgage note when it matures on January 24, 2001. The
Company is currently negotiating for alternate financing with a different
lender, although there can be no assurance that it will obtain such financing or
that any such financing offered will be on terms satisfactory to the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 6 below.
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, such as the
Big K K-mart in Deming and the Wal-Mart stores in both Las Cruces and Silver
City, New Mexico. 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."
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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. Accordingly, the Company has occasionally had problems
maintaining its inventories at desired levels. Retail grocers such as the
Company are not dependent on any single customer or a small number of customers
and the retail grocery business is not seasonal in nature. The Company has no
material backlog orders.
Personnel
At June 30, 2000, the Company had 114 employees, of which 41 were part time
employees. The Company has experienced a net decrease in 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 anticipates additional reductions in
employment in the coming fiscal year. None of the company's employees are
represented by unions. On September 15, 2000, following the closing of the
hardware store, the Company had 103 employees.
Trademarks
The Company is a member of the International Grocers Alliance ("IGA"), a
trade group for joint marketing in the supermarket industry. Because of its
membership in IGA7, 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.
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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 principal balance of $1,350,285.99 (as of
June 30, 2000) 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 7 to the "Notes to 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) have
been discontinued as discussed below. 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. As of July 2, 2000,
an additional 1,200 square feet of mall space was leased for
$550.00/month to "All About U" beauty salon. The lease has an initial
term of 24 months, renewable by the tenant for an additional 24 months
at a rental adjusted in accordance with the Consumer Price Index.
Also, 1,000 square feet was leased to a local bank through July 31,
2000, at $1,100 per month. As of August 1, 2000, Mimbres Valley
Abstract & Title Company, Deming, New Mexico began leasing the area.
The lease is for five years, with an option on the part of the tenant
to extend the term for an additional five years at $1,320/month.
(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, totaling 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.
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(4) 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.
(5) The Company leases an approximately 8,000 square-foot warehouse on
West Railroad 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 feed
products. The rental amount is $3,781.75 per year.
6) 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, expiring in 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 2000 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 ("NMED")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 NMED may be. The Company
has taken all necessary efforts to contact NMED to determine the status of its
investigation but has not been given any new information recently. Remediation
expenses for leaking underground storage tanks may be significant, particularly
if contamination of underground water is threatened.
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Although NMED 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 NMED
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.
Vacated Hardware Store Premises
As discussed above in "Recent Developments", the Company has been sued by
its former landlord at the hardware store premises. Settlement negotiations are
in process, and Management believes the matter will be settled for an amount no
greater than the Company has presently reserved for this potential liability.
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, 2000.
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 quotation 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 20, 2000, there were 846 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, 1998 or 1999 fiscal years, each of
which ended with an operating loss. In light of the operating loss for the 2000
fiscal year, the Board does not expect to declare a dividend this year.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
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 $931,016 at June 30, 1999 to
$350,025 at June 30, 2000, management is evaluating monthly the profitability of
each department. The Company is currently in default on several of its
financial maintenance covenants under its mortgage loan agreement with First
City Service, Inc. The loan matures January 24, 2001, and the holder of the note
has indicated it will not be renewed, but instead must be paid at that time.
The Company is attempting to negotiate alternative long-term financing. In the
absence of such alternative financing, the Company will be forced to evaluate
other alternatives, such as court-supervised arrangements with its creditors, or
bankruptcy.
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. The Company has reduced operating costs by eliminating unprofitable
business lines and locations, and plans to continue the reduction of operating
costs associated with its continuing enterprises.
In February, 2000, the Company discontinued bulk sales of molasses for
cattle feed and disposed of all related equipment. On May 19, 2000, the Company
discontinued the operation of its clothing store, "Clothing & More" and has
virtually completed the process of liquidating furniture, fixtures, supplies and
equipment associated with that operation. The Company has had some inquiries
from prospective tenants for this space and is engaged in discussions at the
present time concerning possible leases. Management has also in the current
fiscal year discontinued the sales of gasoline at the feed store until a more
profitable agreement with the jobber can be reached. There can be no assurance
that a more profitable arrangement will be achieved, and therefore no assurance
that the Company will ever resume gasoline sales at the feed store.
As is the case 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.
In the absence of negotiation of 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 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.
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Significant sales personnel reduction occurred over the last year and
Management anticipates the need for further reductions from the current level
of 103 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, 2000 ("Fiscal 2000") were
$13,154,602.00 compared to $13,186,921.00 for the fiscal year ended June 30,
1999 ("Fiscal 1999"). Comparing results in Fiscal 2000 to Fiscal 1999: Grocery
sales decreased $791,693 (7.2%), while Hardware sales were essentially
unchanged, although Management determined to discontinue the hardware operations
of the Company after the end of the fiscal year, due to operating losses of
$120,129 and $496,538 during the fiscal years ended June 30, 2000 and 1999.
Clothing & More sales increased $47,635 (18%), but this was as a result of the
complete liquidation of its inventory connected with the closing down of the
operation in May of 2000. Feed Store sales increased less than one percent.
However, Convenience Store sales increased $572,654 (42%), principally as a
result of a change in store hours to 24 hours a day in the fourth fiscal quarter
of Fiscal 1999, and the nationwide rise in gasoline prices.
The Fiscal 2000 decrease in Grocery revenues is largely due to increased
local competition, regional competition from two Super Wal-Mart7 stores and a
Big K7 super market, and a depressed County economy. Luna County has
experienced a 30% unemployment rate in Fiscal 2000.
The Company's total current assets at June 30, 2000 decreased to $1,510,029
from $2,021,128 at June 30,1999, as a result of the loss from operations and the
expiration of a deferred income tax asset. Current liabilities increased from
$952,059 to $2,486,885, principally as a result of the reclassification of the
Company mortgage debt from long-term liability to short-term liability. See note
7 of Notes to Financial Statements elsewhere herein. Accounts Payable increased
from $699,751 to $970,877 during the same period, reflecting the Company's
deteriorating cash position. However, the majority of suppliers are currently
being paid within 60 days of invoice date.
Year 2000
The Company conducted a review of its computers systems to identify the
systems that could be affected by the year 2000 (Y2K) problem. The Company
then, with the aid of computer professionals, made modifications to its existing
software and conversion to new software and replaced some equipment which was
not Y2K compliant. Thus far, the arrival of the year 2000 has not had any
impact on the Company's ability to accurately process data, and the changes made
to assure Y2K compliance have not had a significant effect on the Company's
capital expenditures.
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Furthermore, the Company has experienced no problems because of any failure
of the Company's major suppliers and vendors to become Y2K compliant as well.
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:
DIRECTOR TERM
NAME AGE POSITION SINCE EXPIRES
-------------------- ---- ----------------- -------- -------
Jim T. Hyatt 47 Director 1993 2001
William R.
Johnson, III 49 Director and Vice
President 1993 2001
Shelby Phillips, III 58 Chairman
Of The Board,
Chief Executive
Officer and
General Manager 1999 2001
Gary Shiflett 40 Director 1997 2001*
Leone Anderson 67 Director and
Secretary-
Treasurer 1997 2001
James E. Keeler 66 Director 1968 2001
Douglas Tharp 79 Director 1973 2001
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*Gary Shiflett was a director of the Company from February 28, 1997 until
September 10, 2000, when he resigned. His occupation for last five years has
been farming.
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
Vice President since earlier in the year 2000. 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.
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. 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. 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 Chairman of the Board, Chief Executive Officer and General Manager since
May, 2000. Mr. Philips is 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 only executive officer of the Company who is not also a director of the
Company is Janet Robinson, who was promoted to Principal Accounting Officer on
May 22, 2000. She has been employed by the Company since April 27, 1999 and has
27 years of accounting experience.
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 no late initial reports of ownership. There were no reportable
transactions to report on Form 4 or 5.
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ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth compensation paid during each of the last
three fiscal years to each of the Company's present General Manager and Chief
Executive Officer Shelby Phillips, III, Dean Stovall, the Company's former
General Manager and Chief Executive Officer, and Mr. Gary S. Carter, Mr.
Stovall's predecessor in the same office. These gentlemen are the Company's
only "highly compensated executive officers" for the period in question as that
term is used in Item 402 (a) of Regulation S-B under the Securities Exchange Act
of 1934. Mr. Carter resigned as General Manager and Chief Executive Officer of
the Company on December 31, 1998. Mr. Stovall resigned as General Manager and
Chief Executive Officer of the Company on May 12, 2000. Mr. Phillips assumed
that role on May 21, 2000. 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.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL FISCAL OTHER ANNUAL
POSITION YEAR SALARY BONUS COMPENSATION*
--------------------------- ------ ------- ----- -------------
Shelby Phillips, III, 2000 $ 7,206 n.a. n.a.
General Manager and 1999 n.a. n.a. n.a.
Chief Executive Officer 1998 n.a. n.a. n.a.
Dean Stovall, 2000 $22,162.25 n.a. n.a.
Former General Manager 1999 $55,000 n.a. n.a
and Chief Executive Officer 1998 n.a. n.a. n.a.
Gary S. Carter, 1999 n.a. n.a. n.a.
Former General Manager 1998 $60,000 n.a. n.a.
and Chief Executive Officer 1997 $18,461 n.a. n.a.
--------------
* 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 2000 fiscal year the board of directors held twelve
regular meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
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The following table sets forth information, as of September 28, 2000,
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>
PER CENT OF ISSUED AND
NAME AND ADDRESS AMOUNT AND NATURE OF OUTSTANDING COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) STOCK BENEFICIALLY HELD
------------------------------------- -------------------------- ------------------------
<S> <C> <C>
Leone Anderson
P.O. Box 175
Deming, N.M. 88030 11 shares (3) *
Jim T. Hyatt
11850 Uvas Valley Rd. N.E.
Deming, N.M. 88031 28 shares *
286 shares (4) 2.08%
William R. Johnson, III
P.O. Box 468
Columbus, N.M. 88029 55.5 shares *
James E. Keeler
125 Solana Rd. S.W.
Deming, N.M. 88030 240 shares 1.74%
Gary Shiflett (5)
H.C. 66, Box 32B
Deming, N.M. 88030 4 shares *
Shelby Phillips, III
P.O. Box 2089
Deming, N.M. 88031 332 shares 2.40%
15 shares (6) *
Douglas Tharp
1615 Solana Road S.W.
Deming, N.M. 88030 240 shares(6) 1.74%
Janet Robinson (7)
P.O. Box 2247
Deming, N.M. 88031 0 shares *
All directors and executive officers 1207.5 shares
<FN>
---------------
*Less than one percent
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(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. Shiflett resigned as a director of the Company effective September 10,
2000.
(6) Mr. Tharp and Mr. Phillips have joint voting and investment power over the
shares with their spouses.
(7) Janet Robinson is the principal accounting officer of the Company.
</TABLE>
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's 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).
27.1 Financial Data Schedule
14
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Board of Directors and Shareholders
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, 2000, and the
related statements of operations, shareholders' equity, and cash flows for the
years ended June 30, 2000, and 1999. These financial 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 have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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 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, 2000, and the results
of its operations and its cash flows for the years ended June 30, 2000 and 1999,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The conditions described in Note 16
of the financial statements raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Jones & Company
El Paso, TX
September 22, 2000
15
<PAGE>
JUNE 30, 2000
-------------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 256,690
Accounts receivable, net of allowance for doubtful
accounts of $4,000
Trade 74,115
Related parties 5,952
Other 7,246
Inventories 1,081,049
Prepaid expenses 76,945
Note receivable 8,032
----------
Total current assets 1,510,029
----------
PROPERTY AND EQUIPMENT, net 1,271,632
----------
OTHER NON-CURRENT ASSETS:
Note receivable, net of current portion 27,117
Investments in supplier 10,500
Other assets 20,316
Deferred income tax asset, net 631
----------
Other non-current assets, net 58,564
----------
Total assets $2,840,225
==========
The accompanying notes to financial statements are an integral part of this
balance sheet.
16
<PAGE>
JUNE 30, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 970,877
Current portion of long-term debt and capital leases 1,356,190
Accrued expenses 159,818
-----------
Total current liabilities 2,486,885
-----------
NON-CURRENT LIABILITIES:
Long-term debt and capital leases, less current portion 3,315
-----------
Total non-current liabilities 3,315
-----------
Total liabilities 2,490,200
-----------
SHAREHOLDERS' EQUITY:
Common stock, $25 par value; 20,000 authorized;
13,910 issued and 13,776 outstanding 347,750
Retained earnings 5,625
Less: 134 shares of treasury stock (3,350)
-----------
Total shareholders' equity 350,025
-----------
Total liabilities and shareholders' equity $2,840,225
===========
The accompanying notes to financial statements are an integral part of this
balance sheet.
17
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
---------------
2000 1999
------------ ------------
<S> <C> <C>
NET SALES AND GROSS REVENUE FROM CONTINUING OPERATIONS $12,827,990 $12,861,564
COST OF SALES 10,538,648 10,229,388
------------ ------------
Gross profit 2,289,342 2,632,176
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,808,310 2,755,126
------------ ------------
OPERATING LOSS (518,968) (122,950)
OTHER INCOME (EXPENSE):
Other income, net 177,811 290,615
Interest expense (135,654) (144,389)
------------ ------------
Income (loss) before income tax benefit (476,811) 23,276
INCOME TAX BENEFIT - -
------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (476,811) 23,276
DISCONTINUED OPERATIONS
Income (loss) from operations of discontinued
Hardware segment (less applicable income taxes of $-0-) (104,180) (479,712)
------------ ------------
Net loss $ (580,991) $ (456,436)
============ ============
Earnings per share
Income (loss) from continuing operations $ (34.61) $ 1.69
(Loss) from discontinued operations (7.56) (34.82)
------------ ------------
Net loss per common share $ (42.17) $ (33.13)
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
18
<PAGE>
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
--------------
Total
Common Retained Treasury Shareholders'
Stock Earnings Stock Equity
-------- ----------- ---------- ---------------
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
Net loss - (580,991) - (580,991)
---------------------- -------- ----------- ---------- ---------------
BALANCE, JUNE 30, 2000 $347,750 $ 5,625 $ (3,350) $ 350,025
======== =========== ========== ===============
The accompanying notes to financial statements are an integral part of these
statements.
19
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
---------------
2000 1999
------------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (580,991) $(456,436)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 208,835 277,397
Note payable adjustment (18,325) -
Provision for uncollectible accounts receivable - (21,000)
(Gain) loss on sale of equipment 32,484 65,610
Changes in assets and liabilities:
Accounts receivable, net 107,780 (36,880)
Other accounts receivable (2,364) (2,497)
Inventories (15,804) 167,424
Prepaid expenses 16,133 (32,004)
Other assets (5,500) 22,200
Accounts payable 271,126 195,763
Accrued expenses (747) (3,349)
------------------ ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12,627 176,228
------------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 2,000 18,107
Collections of notes receivable 9,039 23,511
Additions to property and equipment (126,664) (50,570)
Increase in investment in supplier - (10,500)
------------------ ----------
NET CASH USED BY INVESTING ACTIVITIES (115,625) (19,452)
------------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and capital leases (70,931) (118,249)
------------------ ----------
NET CASH USED BY FINANCING ACTIVITIES (70,931) (118,249)
------------------ ----------
INCREASE (DECREASE) IN CASH (173,929) 38,527
CASH at beginning of year 430,619 392,092
------------------ ----------
CASH at end of year $ 256,690 $ 430,619
================== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
20
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
-----------------
2000 1999
-------------------- ------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest $ 135,880 $ 151,814
==================== ==================
Cash paid for income taxes, net of refunds received $ - $ -
==================== ==================
NONCASH INVESTING AND FINANCING ACTIVITY - Note
receivable-vendor applied to note payable to supplier $ - $ 118,283
==================== ==================
NONCASH OPERATING AND FINANCING ACTIVITY - Other
asset applied to note payable $ - $ 22,200
==================== ==================
Sale of framing equipment and increase in notes receivable $ 8,032 $ -
==================== ==================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
21
<PAGE>
June 30, 2000 and 1999
----------------------
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, and a feed store. The Company also leases
certain retail space to unrelated parties and operated a self-service
laundry. During the current fiscal year the Company closed its clothing and
craft store, and laundry facilities. 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.
Fair Value of Financial Instruments
---------------------------------------
The Company's financial instruments include cash and cash equivalents,
notes receivable, investments, notes payable and capital lease obligations.
The carrying amount of these financial instruments have been estimated by
management to approximate fair value.
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
from 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:
22
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------------------------
Property and Equipment (Continued)
-------------------------------------
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, 2000 and 1999, advertising expense was $127,006 and $112,182
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 2000
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 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. Therefore, the Company's comprehensive
income is the same as its net income for the years presented.
23
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 3 - PROPERTY AND EQUIPMENT
------------------------------------
Property and equipment as of June 30, 2000, consist of the following:
Furniture, fixtures and equipment $ 2,240,840
Buildings 2,342,873
Land 80,203
------------
4,663,916
Less: Accumulated depreciation and amortization (3,392,284)
------------
$ 1,271,632
============
Depreciation expense for the fiscal years ended June 30, 2000 and 1999, was
$208,835 and $277,397, respectively.
NOTE 4 - NOTES RECEIVABLE
-------------------------
The notes receivable at June 30, 2000, are unsecured and have maturities
which range from December 2000 to December 2002, with interest rates
ranging from 7.42% to 10.0%.
NOTE 5 - INVESTMENT IN SUPPLIER
-------------------------------
Investment in supplier, at cost, as of June 30, 2000 consists of the
following:
Preferred shares - Do it Best Corp. $ 10,5000
==========
The preferred shares of Do it Best Corp were received as patronage
dividends. None of the stock shown as investment in supplier is readily
marketable.
NOTE 6 - DISCONTINUED OPERATIONS
--------------------------------
On July 25, 2000, the Company's board of directors voted to discontinue
operations of its Hardware segment. The closing of the Hardware store
occurred on September 15, 2000. Accordingly, the results of the Hardware
segment as of June 30, 2000, have been reported separately as discontinued
operations in the accompanying statements of operations. Net sales for the
Hardware segment for the years ended June 30, 2000 and 1999, were
approximately $326,612 and $325,357.
Results of operations of the Hardware segment in the year ending June 30,
2001, including losses, if any, due to discontinuation, cannot be
reasonably estimated.
24
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 7 - LONG-TERM DEBT AND CAPITAL LEASES
------------------------------------------
Long-term debt and capital leases as of June 30, 2000, consist of the
following:
<TABLE>
<CAPTION>
<S> <C>
Fixed rate note payable to First City Service, Inc., as of June 30, 2000,
And note payable to Norwest Bank ("Bank") as of June 30, 1999, 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. The note was acquired
by First City Service, Inc., on February 25, 2000. $1,350,286
Capital leases, net 9,219
----------
1,359,505
Less current portion 1,356,190
----------
$ 3,315
==========
</TABLE>
Future maturities of long-term debt and capital leases as of June 30, 2000,
are as follows:
2001 $1,356,190
2002 3,315
----------
$1,359,505
==========
The note payable to First City Service, Inc., requires the Company to
comply with debt covenants at June 30, 2000, including, but not limited to:
(a) Minimum working capital balance of $1.2 million or greater, (b) total
liabilities to net worth ratio of 1.15 to 1 or lower, (c) $100,000
additional principal reduction beyond scheduled payments for fiscal year
1999 and 2000, and (d) profitable operations. The Company is not in
compliance with several of its debt covenants at June 30, 2000. For fiscal
year ended June 30, 1999, the Company obtained a waiver from the Bank for
all exceptions to its debt covenants effective through October 1, 1999. For
fiscal year ended June 30, 2000, no waiver was requested since the note
payable is due by January 24, 2001. Accordingly, the note has been
classified as a current liability in the accompanying balance sheet, for
the year ended June 30, 2000. Property and equipment, net, financed under
capital leases was $8,581 as of June 30, 2000.
25
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 8 - OTHER INCOME (EXPENSE)
-------------------------------
Other income (expense) as of June 30, 2000 and 1999 consists of the
following:
2000 1999
-------- --------
Retail space - Rental $ 83,013 $ 85,505
Check cashing fees 8,681 12,252
Western Union commissions 27,523 37,389
Other, net 58,594 155,469
-------- --------
$177,811 $290,615
======== ========
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, 2000, are as follows:
2001 $50,600
2002 18,600
2003 -
-------
Total future minimum rental payments $69,200
=======
NOTE 10 - LITIGATION
--------------------
The Company vacated the premises it formerly used for its hardware store
and has not paid rent to the landlord since October, 1998. The landlord has
threatened legal action to collect for certain amounts consisting of unpaid
rent, property taxes, insurance, accrued interest and possible punitive
damages, in the amount of $300,000. The Company accrued rental payments and
property taxes and continued to maintain insurance on the building through
the date it was sold by the owner, in the fall, 1999. The Company believes
that it will settle the matter for an amount not greater than has already
been accrued in the accounts payable and accrued expense for rent and
property taxes, which totals $137,000.
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, 2000 and 1999,
two such suppliers accounted for 66% and 67% of inventory purchases,
respectively.
26
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 12 - INCOME TAXES
----------------------
Components of the net deferred income tax asset and liability at June 30,
2000 and 1999, are as follows:
2000 1999
---------- ----------
Deferred income tax assets:
Net operating loss carryover $ 632,101 $ 417,846
Inventory method change - 46,870
Allowance for doubtful accounts - 1,260
Other 8,451 5,442
---------- ----------
Deferred income tax asset 640,552 471,418
Valuation allowance (491,560) (268,117)
---------- ----------
Deferred income tax asset,
net of valuation allowance $ 148,992 $ 203,301
========== ==========
Deferred income tax liability related to
depreciation $(148,361) $(202,670)
========== ==========
Net deferred tax asset $ 631 $ 631
========== ==========
The deferred tax asset and liability are netted because as the depreciation
timing difference occurs the related net operating losses will be used to
offset any income tax liability in the future.
The Company had prior and current year losses for federal income tax
purposes of approximately $1,735,000, which will be carried forward
resulting in a deferred tax asset of $485,830. The Company had prior and
current year losses for state tax purposes of approximately $3,047,000,
which will be carried forward resulting in a deferred tax asset of
$146,200. Due to recent operating losses, a valuation allowance has been
recorded to adjust the federal and state deferred tax asset.
The Company is under audit by the Internal Revenue Service for fiscal year
ended June 30, 1997. It is believed that the amount deducted on prior year
tax returns for inventory change will be disallowed. For fiscal years ended
June 30, 1997 through June 30, 1999, the Company deducted $49,597 per year.
The Company believes the amount disallowed would not generate taxable
income due to operating losses in excess of the additional income for each
of the past three years.
The income tax benefit is reconciled with the expected Federal statutory
rates for the years ended June 30, 2000 and 1999, as follows:
27
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 12 - INCOME TAXES (CONTINUED)
----------------------------------
2000 1999
---------- ----------
Provision computed at Federal statutory rate $(155,236) $(133,535)
State taxes net Federal benefit (26,612) (16,692)
Valuation allowance 181,848 150,227
---------- ----------
Total $ - $ -
========== ==========
The Company has net operating loss and contributions carryover to offset
future income tax. If not used, these credits will expire as follows:
Federal
Year Ending Contributions Net Operating Loss Total
----------- -------------- ------------------- ----------
2001 $ 2,202 $ - $ 2,202
2002 5,862 - 5,862
2003 1,919 - 1,919
2004 7,292 - 7,292
2005 8,490 - 8,490
2012 - 71,485 71,485
2013 - 632,307 632,307
2019 - 464,618 464,618
2020 - 554,413 554,413
-------------- ------------------- ----------
Total $ 25,765 $ 1,722,823 $1,748,588
============== =================== ==========
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. As of June 30, 2000, these
modifications and replacements have been implemented, but the Company
continues to monitor for any further adjustments that may be necessary.
Furthermore, a file has been compiled which contains written statements
from all the Company's major suppliers and vendors. These statements
contain information as to what each supplier has accomplished to ensure
that their respective companies are Year 2000 compliant.
28
<PAGE>
June 30, 2000 and 1999
----------------------
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; Other (which includes
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, 2000 and 1999. Administrative
overhead which is not attributable to any particular segment has been
allocated based on the segments net revenues:
<TABLE>
<CAPTION>
IGA
2000 Other Grocery Mini-Mart Hardware Feed Total
<S> <C> <C> <C> <C> <C> <C> <C>
Segment data:
Net revenues 412,266 10,154,153 1,931,956 326,612 507,426 13,332,413
Income (loss) from segment 18,687 (368,309) 9,670 (120,129) (120,910) (580,991)
Depreciation 93,981 42,534 15,130 54,138 3,052 208,835
1999
Net revenues 343,727 10,945,846 1,359,302 325,357 503,304 13,477,536
Income (loss) from segment 50,196 136,006 (39,932) (496,538) (106,168) (456,436)
Depreciation 119,665 55,095 19,528 76,061 7,048 277,397
</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 sales leaders in the store's market areas. The Company's
viability as a going concern is dependent upon several factors, including
its ability to restructure fixed operating expenses in relation to the
overall decline in gross sales, improve its product profit margin and
inventory turnover and to identify unprofitable ventures while continuing
its tradition of competitive prices and quality service.
Management of the Company is expecting a return to profitability and
positive cash flows from operations by the end of fiscal year 2001. They
attribute this to the following factors:
The Company is reviewing the possibility of refinancing its debt and
obtaining additional funding to enable it to settle the K-Mart lease,
assist in acquiring grocery coolers, expanding the grocery products and
assist in operational cash flows in an effort to reduce its interest
expense and improve the Company's liquidity by reducing its annual debt
service requirements by expanding the maturity of the Company's mortgage
debt.
29
<PAGE>
June 30, 2000 and 1999
----------------------
NOTE 15 - MANAGEMENT'S PLANS FOR FUTURE OPERATIONS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------
The Company has successfully implemented a general ledger system during the
third quarter of fiscal year 2000. It provides more timely and accurate
information resulting in continuous review of operating expenses by
department.
The Company is working with store managers to control cost of goods sold to
enable each department to become more profitable. The Company is looking
into converting the unprofitable departments into lease locations, and
bringing in new tenants for the vacant mall spaces to reduce overall
operating costs.
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 $60,000 for the first six months in the
current fiscal year and $110,000 in the prior year for rent payable to
K-Mart on the building that was vacated. Management is working on
eliminating this rent expense.
Significant personnel reduction has occurred over the last year, and
management anticipates further reduction from the current level of 114
employees during the current fiscal year ending June 30, 2001.
Future results from operations may differ materially from the opinions
expressed by Management.
NOTE 16 - GOING CONCERN
-----------------------
The Company's financial statements have been prepared in conformity with
principles of accounting applicable to a going concern. These principles
contemplate the realization of assets and liquidation of liabilities in the
normal course of business. During the past few years, the Company has
sustained substantial net losses. These losses have caused the Company to
be in violation of its credit agreement with its bank, due to the Company's
inability to meet certain financial ratio and payment covenants. In
addition, the Company's $1.35 million note payable matures in January,
2001. At present, it is unclear whether First City Service, Inc. will renew
or extend the note. Although all monthly principal and interest payments
have been made, provisions of the credit agreement state that in event of
default, or events that might lead to default, the lender has the option to
make all notes and loans due and owing immediately. As of the date of this
report no action has been taken by First City Service, Inc. in this regard.
The Company has entered into negotiations with a new lender toward
restructuring the obligations. Additionally, management has instituted
measures to mitigate future losses by closing down unprofitable segments
and adding more profitable grocery products, and by attracting new tenants
for the vacant mall spaces.
30
<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: October 12, 2000.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By: /s/ Shelby Phillips, III
Shelby Phillips, III, Chief Executive Officer
By: /s/ Janet Robinson
Janet Robinson, Principal
Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and dates indicated.
DATE
/s/ V. Leone Anderson October 12, 2000
V. Leone Anderson, Director
/s/ Jim T. Hyatt October 12, 2000
Jim T. Hyatt, Director
/s/ William R. Johnson, III October 12, 2000
William R. Johnson, III, Director
/s/ James E. Keeler October 12, 2000
James E. Keeler, Director
/s/ Shelby Phillips, III October 12, 2000
Shelby Phillips, III, Director
/s/ Douglas Tharp October 12, 2000
Douglas Tharp, Director
31
<PAGE>
EXHIBIT INDEX
Exhibit Nature of Exhibit Page Number
3.1 Articles of Incorporation Incorporated by reference
3.2 Bylaws Incorporated by reference
4.1 Specimen of Stock Certificate Incorporated by reference
27.1 Financial Data Schedule Filed Herewith
32
<PAGE>
