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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-15336
MARGO NURSERY FARMS, INC.
A Florida Corporation - I.R.S. No. 59-2807561
Address of Principal Executive Offices:
Road 690, Kilometer 5.8
Vega Alta, Puerto Rico 00692
Registrant's Telephone Number:
(787) 883-2570
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
the past 90 days.
YES [X] NO [ ]
The registrant had 1,895,322 shares of common stock, $.001 par value,
outstanding as of May 6, 1997.
Total Pages in Report:__
Exhibit Index:__
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<PAGE>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE FIRST QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PART I
------
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Shareholders'
Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 11
PART II
-------
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN SECURITIES 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE 17
OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES
----------
2
<PAGE>
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be",
"will allow", "intends to", "will likely result", "are expected to", "will
continue", "is anticipated", "believes", "estimate", "project", or similar
expressions are intended to identify "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and to
advise readers that various factors, including regional and national economic
conditions, natural disasters, competitive and regulatory factors and
legislative changes, could affect the Company's financial performance and could
cause the Company's actual results for future periods to differ materially from
those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
3
<PAGE>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996
ASSETS MARCH 31, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
----------- -----------
Current assets:
Cash and equivalents $ 935,518 $ 946,490
Short term investments 500,000 1,004,000
Accounts receivable, net 1,202,271 1,007,947
Inventories 2,912,649 2,737,109
Prepaid expenses and other current assets 187,604 116,036
----------- -----------
Total current assets 5,738,042 5,811,582
Property and equipment, net 3,786,292 3,864,646
Due from shareholder 273,652 273,652
Notes receivable 379,182 379,182
Other assets 68,156 67,149
----------- -----------
Total assets $10,245,324 $10,396,211
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 78,314 $ 118,085
Notes payable 500,000 500,000
Accounts payable 511,152 630,572
Accrued expenses 417,174 425,634
Due to shareholder - 23,492
----------- -----------
Total current liabilities 1,506,640 1,697,783
Long-term debt 427,078 427,078
----------- -----------
Total liabilities 1,933,718 2,124,861
----------- -----------
Commitments and contingencies - -
Shareholders' equity:
Common stock, $.001 par value; 10,000,000
shares authorized; 1,915,122 shares issued,
and 1,895,322 shares outstanding 1,915 1,915
Additional paid-in capital 4,637,706 4,637,706
Retained earnings 3,720,773 3,689,681
Treasury stock, 19,800 common shares, at cost (48,788) (48,788)
Foreign currency translation loss - (9,164)
----------- -----------
Total shareholders' equity 8,311,606 8,271,350
----------- -----------
Total liabilities and shareholders' equity $10,245,324 $10,396,211
=========== ===========
See accompanying notes to consolidated financial statements.
4
<PAGE>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
Net sales $ 1,860,310 $ 1,396,126
Cost of sales 1,255,938 819,826
----------- -----------
Gross profit 604,372 576,300
Selling, general and administrative expenses 565,372 501,550
----------- -----------
Income from operations 39,000 74,750
----------- -----------
Other income (expense):
Interest income 19,288 100,672
Interest expense (19,272) (97,218)
Litigation expenses -- (30,000)
Miscellaneous income 1,240 6,455
----------- -----------
1,256 (20,091)
----------- -----------
Income before provision for income tax 40,256 54,659
Provision for income tax -- --
----------- -----------
Net income $ 40,256 $ 54,659
=========== ===========
Net income per common share $ 0.02 $ 0.03
=========== ===========
Weighted average number of common shares 1,895,322 1,895,322
=========== ===========
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months ended March 31, 1997
(Unaudited)
COMMON COMMON ADDITIONAL CUMULATIVE
STOCK STOCK PAID-IN RETAINED TREASURY TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS STOCK ADJUSTMENT TOTAL
--------- ------ ---------- ----------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1,895,322 $1,915 $4,637,706 $ 3,689,681 ($48,788) ($9,164) $8,271,350
Realization of cumulative
translation adjustment -- -- -- (9,164) -- 9,164 --
Net income -- -- -- 40,256 -- -- 40,256
--------- ------ ---------- ----------- -------- ------- ----------
Balance at March 31, 1997 1,895,322 $1,915 $4,637,706 $ 3,720,773 ($48,788) $ -- $8,311,606
========= ====== ========== =========== ======== ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 40,256 $ 54,659
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 121,926 106,116
Decrease in inventory valuation reserve 25,000 --
Changes in assets and liabilities affecting
cash flows from operating activities:
Accounts receivable (194,324) (21,724)
Inventories (200,540) (207,553)
Prepaid expenses and other current assets (71,568) 22,802
Increase in amount due to shareholder -- (27,667)
Other assets (1,007) (46,408)
Accounts payable (119,420) (29,612)
Accrued expenses (8,460) 15,850
Income tax payable (23,492) --
--------- ---------
Net cash used in operating activities (431,629) (133,537)
--------- ---------
Cash flows from investing activities:
Decrease in short term investments 504,000 --
Increase in restricted cash -- (92,303)
Additions to property, plant and equipment (43,572) (118,870)
Increase in notes receivable -- (370)
--------- ---------
Net cash provided by (used in) investing
activities 460,428 (211,543)
--------- ---------
Cash flows used in financing activities:
Repayment of long-term debt (39,771) (27,152)
--------- ---------
Net decrease in cash (10,972) (372,232)
Cash and equivalents at beginning of year 946,490 785,490
--------- ---------
Cash and equivalents at end of period $ 935,518 $ 413,258
========= =========
See accompanying notes to consolidated financial statements.
7
<PAGE>
MARGO NURSERY FARMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
These interim consolidated financial statements include the financial statements
of Margo Nursery Farms, Inc. and its wholly owned subsidiaries, Margo
Landscaping and Design, Inc. ("Margo Landscaping") Rain Forest Products Group,
Inc. (Rain Forest), and Margo Bay Farms, Inc. ("Bay Farms").
These interim consolidated financial statements are unaudited, but include all
adjustments that, in the opinion of management, are necessary for a fair
statement of the Company's financial position, results of operations and cash
flows for the periods covered. These statements have been prepared in accordance
with the United States Securities and Exchange Commission's instructions to Form
10-Q, and therefore, do not include all information and footnotes necessary for
a complete presentation of financial statements in conformity with generally
accepted accounting principles.
The preparation of interim financial statements relies on estimates. Therefore,
the results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the operating results to be expected for the year
ending December 31, 1997. These statements should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included in
the Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
NOTE 2 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS - INVENTORY VALUATION ALLOWANCE
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.
The inventory valuation allowance is an estimate which is established through
charges to cost of goods sold. Management's judgement in determining the
adequacy of the allowance is based on several factors which include, but are not
limited to, costs of specific inventory items, sales histories of these items
and management's judgement with respect to future marketability of the
inventory. Based on the above, it is possible that the Company's estimate of the
inventory valuation allowance could change in the near term. The valuation
allowance at March 31, 1997 and December 31, 1996 was $395,000 and $420,000,
respectively.
8
<PAGE>
NOTE 3 - NOTES RECEIVABLE
At December 31, 1993, the Company had a note receivable with an outstanding
principal balance of $996,962, from the sale of Cariplant S.A. (a former
Dominican Republic subsidiary) to Altec International, C. por A. ("Altec"),
another Dominican Republic company. The note was originally due in 180 equal
monthly installments of $9,638, including interest at 8%, through April 2008.
The note is collateralized by the common stock and personal guarantee of the
major shareholder of Cariplant.
From the inception of the note in March 1993, the Company received several
payments. However, Altec has been unable to comply with the terms of the note.
Due to the unfavorable collection experience as well as the difficulties of
operating in the Dominican Republic, in 1994 Company management wrote down the
carrying amount of the note to $316,000, representing the estimated value of
Cariplant's land and related improvements, including buildings, shadehouses, and
fixed and installed equipment. The write-down, amounting to $680,962 was
included as an other expense in the consolidated statements of operations for
the year ended December 31, 1994.
On February 12, 1997, the Company obtained a second mortgage on Cariplant's
property and equipment and entered into an agreement with Altec to modify the
repayment terms of the unpaid principal balance of $996,962, with payments
commencing in the year 2000.
At March 31, 1997 and December 31, 1996, notes receivable included the
following:
DESCRIPTION AMOUNT
----------- ------
Note receivable from Altec $301,621
10% note, due October 1996,
collateralized by real property 26,331
8% notes, due on demand, personally
guaranteed by various Company personnel
(no collections are expected in 1997) 51,230
--------
$379,182
========
9
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT
At March 31, 1997 and December 31, 1996 property and equipment consisted of the
following:
DESCRIPTION 1997 1996
---------------------------------- ---------- ----------
Land and land improvements $ 859,380 $ 859,380
Buildings 448,968 448,968
Equipment and fixtures 1,474,813 1,445,545
Transportation equipment 743,135 728,831
Stock Plants 97,277 97,277
Leasehold improvements 1,845,026 1,845,026
---------- ----------
5,468,599 5,425,027
Less accumulated depreciation and
amortization (1,682,307) (1,560,381)
---------- ----------
$3,786,292 $3,864,646
========== ==========
NOTE 5 - NET INCOME PER COMMON SHARE
Net income per share of common stock is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
relevant periods.
NOTE 6 - SUPPLEMENTAL DISCLOSURES FOR THE CONSOLIDATED STATEMENTS
OF CASH FLOWS
a) NON-CASH INVESTING AND FINANCING ACTIVITIES
During the three months ended March 31, 1996, the Company acquired a
residence (previously leased by the Company) from a partnership, whose
partners included among others, the Company's major shareholders. The
purchase price of the residence, based on an appraisal prepared by an
independent certified real estate appraiser, amounted to $220,800. Regarding
the acquisition, the Company assumed a commercial loan amounting to $87,789,
owed by the partnership, recorded an account payable to the Company's major
shareholders amounting to $66,506, and applied $57,562 and $8,943 to the
principal and interest, respectively, of a note receivable owed by a
consultant to the Company (who was also a shareholder in the partnership).
b) OTHER CASH FLOW TRANSACTIONS
Other cash flow transactions for the three months ended March 31, 1997 and
1996, include interest payments amounting to approximately $17,000 and
$19,000, respectively. Income tax payments for the three months ended March
31, 1997 amounted to approximately $23,500.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Margo Nursery Farms, Inc. and its subsidiaries, (collectively, the "Company")
are primarily engaged in the business of growing, distributing and installing
tropical plants and trees. The Company is also engaged in the manufacturing and
distribution of its own line ("Rain Forest") of planting media and aggregates,
sales of lawn and garden products and also provides landscaping design and
installation services.
PRINCIPAL OPERATIONS:
The Company's business is currently conducted at three locations, two in Puerto
Rico and another in South Florida. These operations are described below:
PUERTO RICO OPERATIONS
The Company's principal operation in Puerto Rico is conducted at a 117 acre
nursery farm in Vega Alta, Puerto Rico, approximately 25 miles west of San Juan.
This farm is leased from Michael J. Spector and Margaret D. Spector, who are
directors, officers and principal shareholders of the Company.
On October 31, 1996, the Company entered into an agreement with Cali Orchids,
Inc. ("Cali"), a Puerto Rico based grower of orchids, bromeliads, anthuriums,
poincettas and ornamental foliage, to purchase certain assets of Cali, including
its live goods inventory and inventory of pots, peat, soil, chemical and
fertilizers. The purchase price was approximately $190,000 and the transaction
was closed on January 1, 1997. The agreement also provided for the leasing of
Cali's facilities (13 acres) and equipment for a five year term (subject to two
additional five year renewals) and the hiring of Cali's President as a general
manager for the Company's new operation, which operates under the tradename of
Margo Flora.
The Company's operations in Puerto Rico include Margo Nursery Farms, Inc. (a
Florida corporation), Margo Landscaping and Design, Inc., and Rain Forest
Products Group, Inc. (both Puerto Rico corporations).
Margo Nursery Farms, Inc., which operates under the trade name of Margo Farms
del Caribe, is engaged in the production and distribution of tropical and
flowering plants. Its products are primarily utilized for the interior and
exterior landscaping of office buildings, shopping malls, hotels and other
commercial sites, as well as private residences. The Company produces various
types of palms, flowering and ornamental plants, trees, shrubs, bedding plants
and ground covers. Its customers include wholesalers, retailers, chain stores
and landscapers primarily
11
<PAGE>
located in Puerto Rico and the Caribbean. As a bona fide agricultural
enterprise, the Company enjoys a 90% tax exemption under Puerto Rico law from
income derived from its nursery business in Puerto Rico. The Company also
receives a credit under Section 936 of the Internal Revenue Code against a
portion of federal income taxes payable from its operations in Puerto Rico.
Margo Landscaping and Design, Inc. ("Margo Landscaping"), provides landscaping
services to customers in Puerto Rico and the Caribbean, including landscape
design and landscaping. Margo Landscaping is also engaged in sales of lawn and
garden products, including plastic and terracotta pottery, planting media (soil,
peat moss, etc.) and mulch. Margo Landscaping is a wholesaler for Monsanto
Corporation's Solaris Group which includes the Ortho, Roundup and Greensweep
product lines (chemicals and pesticides). It is also the exclusive distributor
of Sunniland Corporation's fertilizer and pesticide products for Puerto Rico and
the Caribbean.
Rain Forest Products Group, Inc. ("Rain Forest") commenced operations in April
1996. It is engaged in the manufacturing of potting soils, mulch, professional
growing mixes, river rock and gravels. Rain Forest's products are marketed by
Margo Landscaping. The Company has requested a tax exemption grant from the
Government of Puerto Rico for the operations of Rain Forest.
SOUTH FLORIDA OPERATIONS
The South Florida operation is conducted through Margo Bay Farms, Inc.("Bay
Farms") at a 71 acre nursery farm located approximately 20 miles south of Miami,
Florida. In August 1992, substantially all of the Company's facilities in South
Florida were destroyed by Hurricane Andrew. During 1993 and 1994, the Company
rebuilt a portion of its facilities. Approximately 20 acres are currently in
production. Bay Farms resumed sales during 1994. However, due to the significant
competition in South Florida, it has not been able to achieve adequate sales
levels and profitability through December 31, 1996. See "FUTURE OPERATIONS"
herein.
EUROPEAN OPERATIONS
In 1991, the Company formed Margo Imports, B.V., a Netherlands corporation, to
market the Company's products in Europe. In March 1993, the Company discontinued
the operations of Margo Imports in connection with the sale of Cariplant, S.A.,
a former subsidiary, but kept Margo Imports active for possible future sales to
Europe. Effective January 1, 1997, the Company closed Margo Imports.
12
<PAGE>
FUTURE OPERATIONS:
The Company will continue to concentrate its economic and managerial resources
in expanding its operations in Puerto Rico. The Company's Board of Directors
believes that these operations present attractive opportunities for the future.
The Board believes that the Company should continue to capitalize its advantage
as one of the largest, full service nurseries in the region.
The Company has a history of good margins in Puerto Rico because of the variety
and quality of its inventory. The Company believes that it can continue to
increase its sales and margins by investing in more sophisticated facilities and
by controlling the size and variety of its inventory.
Effective January 1, 1997, the Company leased a 13 acre facility in the town of
Barranquitas, Puerto Rico, which includes approximately 110,000 square feet of
enclosed bench space for production of orchids, bromeliads, anthuriums,
poincettas and other ornamental and flowering plants. The Company believes that
the lease of this additional space will allow it to supply its customers with a
more complete product mix, thus increasing the Company's sales.
At March 31, 1997, Margo Landscaping had sufficient landscaping projects in the
pipeline to maintain operations through early 1998. Among the landscaping
projects that were in process is a contract with a local construction company to
landscape a new U.S. Coast Guard Housing Project located in Bayamon, Puerto Rico
for approximately $645,000. During 1997, Margo Landscaping will also be engaged
in the landscaping of a new cross taxiway at Luis Munoz Marin International
Airport in San Juan, for approximately $300,000.
During the remainder of 1997, Margo Landscaping's division of lawn and garden
products will continue representing an increasing proportion of the Company's
overall sales. The distribution of the Solaris product line (a Puerto Rico
division of the Monsanto Company), Sunniland Corporation's fertilizer and
pesticides products, together with Italian terracotta and plastic pottery, and
all planting media related products (bagged potting soil, peat moss, cypress
mulch, etc) should continue to provide increased sales. During late 1996 and
early 1997, the Company became a distributor of additional product lines which
will complement its lawn and garden products in order to provide a more complete
mix of products to mass merchandisers, retail chains, garden centers,
supermarkets and landscapers. During 1997, the Company plans to focus on the
"outdoor living" concept, which includes patio furniture, water fountains, etc.
Rain Forest is presently engaged in the manufacturing and distribution of
potting soils, professional growing mixes, peat moss, mulch and aggregates under
its trade name of Rain Forest, throughout Puerto Rico and the Caribbean. These
products should also provide the Company with increased sales during 1997.
13
<PAGE>
The Company's South Florida operations through Bay Farms have continued to incur
operating losses since resuming sales in 1994. It has not been able to obtain
adequate sales levels sufficient to make the operation feasible due to the
strong competition in South Florida. Based on the foregoing, the Company has
determined to review the continued viability of this operation with the goal of
making a final determination during 1997 whether this operation should be closed
and the related assets disposed of.
14
<PAGE>
RESULTS OF OPERATIONS FOR THE FIRST QUARTERS OF 1997 AND 1996
During the first three months of 1997, the Company had net income of
approximately $40,000, or $.02 per share, compared to $55,000 for the same
period in 1996, or $.03 per share.
The decrease in net income for the three months ended March 31, 1997, when
compared to the same period in 1996, is principally due to a sharp decrease in
gross profit, as discussed below.
SALES
The Company's consolidated net sales for the first three months of 1997 were
approximately $1,860,000, compared to $1,396,000 for the same period in 1996, or
an increase of approximately 33%. From an overall standpoint, during the first
three months of 1997, sales increased in all lines of business when compared to
the same period in 1996. However, the most significant change was sales of
landscaping services, which increased by 233% ($506,000 in 1997 vs.
$152,000 in 1996).
GROSS PROFITS
The Company's gross profit for the first three months of 1997 was 32.5%,
compared to 41.3% for the same period in 1996, or a decrease of 8.8%.
Gross profit for the first three months of 1997 continues to reflect the trend
experienced during the latter part of 1996, regarding the storage and
maintenance costs of plant material incurred in connection with a contract with
the Commonwealth of Puerto Rico's Department of Transportation, delays in the
commencement of certain landscaping projects, as well as overproduction in the
Company's South Florida operation.
Although the Company's inventory valuation reserve decrease by $25,000 ($395,00
at March 31, 1997 vs. $420,000 at December 31, 1996), sales of plant material
with increased storage and maintenance costs for the three months ended March
31, 1997 resulted in a significant lower gross profits than comparative sales
for the same period in 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses (SG&A) were approximately $565,000
and $502,000 for the first three months of 1997 and 1996, respectively, or an
increase of 12.7%. The increase for 1997 is principally due to increases in
shipping, warehousing and repairs & maintenance expenses. Notwithstanding the
increase, SG&A as a percentage of sales decreased to 30% for the first three
months of 1997, compared to 36% for the same period in 1996.
15
<PAGE>
OTHER INCOME AND EXPENSES
Decreases in interest income, interest expense as well as litigation expenses
for the first three months of 1997 are due to the settlement of litigation with
the Company's former principal lender in May 1996. Decreases in interest income
as well as interest expense result from the application of restricted cash (in
escrow accounts at March 31, 1996) used for the payment of principal and
interest on the outstanding loans, subject of the litigation. Accordingly, other
income and expenses for the first three months of 1997 only reflect interest
income and interest expense regarding the Company's investments and debt other
than those related to the settlement of litigation.
FINANCIAL CONDITION
The Company's financial condition at March 31, 1997 remains comparable with that
of December 31, 1996. The Company's current ratio continues to be strong, with a
ratio of 3.8 to 1 at March 31, 1997, and 3.4 to 1 at December 31, 1996.
At March 31, 1996, the Company had cash of $936,000 and short term investments
of $500,000, compared to cash of $946,000 and short term investments of
$1,004,000 at December 31, 1996. The decrease in short term investments at March
31, 1997 is principally due to increases in trade accounts receivable
(principally from landscaping projects) and inventory of plant material
(primarily from an increase in the carrying costs of certain plant material for
contracts and landscape projects).
The Company's liabilities at March 31, 1997 remain comparable to those at
December 31, 1996. The Company's debt to equity ratio improved (23% in 1997 vs.
26% in 1996) principally as a result of a slight decrease in current
liabilities.
Stockholders' equity at March 31, 1997 increased due to results of operations
for the first quarter. There were no dividends declared nor issuance of capital
stock.
CURRENT LIQUIDITY AND CAPITAL RESOURCES
The Company is presently current on all its obligations. Excess funds have been
invested in short-term bank instruments. The Company believes it has adequate
resources to meet its current and anticipated liquidity and capital
requirements.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the opinion of the Company's management, the pending or threatened legal
proceedings of which management is aware will not have a material adverse effect
on the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITIES HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY).
(b) REPORTS ON FORM 8-K. The Company filed the following
Reports on Form 8-K during the quarter ended March 31,
1997:
None
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARGO NURSERY FARMS, INC.
Date: MAY 6, 1997 BY: /s/ MICHAEL J. SPECTOR,
----------- --------------------------
Michael J. Spector,
President and Chief
Executive Officer
Date: MAY 6, 1997 BY: /s/ ALFONSO ORTEGZA
----------- ---------------------------
Alfonso Ortega
Vice President, Treasurer,
Principal Financial and
Accounting Officer
18
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule (for SEC use only).
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 935,518
<SECURITIES> 0
<RECEIVABLES> 1,284,271
<ALLOWANCES> (82,000)
<INVENTORY> 2,912,649
<CURRENT-ASSETS> 5,738,042
<PP&E> 5,468,599
<DEPRECIATION> (1,682,307)
<TOTAL-ASSETS> 10,245,324
<CURRENT-LIABILITIES> 1,506,640
<BONDS> 427,078
0
0
<COMMON> 1,915
<OTHER-SE> 8,309,691
<TOTAL-LIABILITY-AND-EQUITY> 10,245,324
<SALES> 1,860,310
<TOTAL-REVENUES> 1,880,838
<CGS> 1,255,938
<TOTAL-COSTS> 1,821,310
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