-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KVQIzCX6z4WySkk3E3oD81TkKBiHqchWLyrdVZo0ba/6Ow+ENDdqpNmN0+brEyrh 9+PH2TIB/0I9l89vxATYzQ== 0000950170-97-000590.txt : 19970515 0000950170-97-000590.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950170-97-000590 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARGO NURSERY FARMS INC CENTRAL INDEX KEY: 0000808493 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 592142653 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15336 FILM NUMBER: 97605522 BUSINESS ADDRESS: STREET 1: ROAD 690 KILOMETER 5 8 CITY: VEGA ALTA STATE: PR ZIP: 00692 BUSINESS PHONE: 8098832570 MAIL ADDRESS: STREET 2: ROAD 690 KILOMETER 5 8 CITY: VEGA ALTA STATE: PR ZIP: 00692 10-Q 1 ================================================================================ 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:__ ================================================================================ 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 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 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 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
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 --------- ------ ---------- ----------- -------- ------------ ---------- 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 ========= ====== ========== =========== ======== ======= ==========
See accompanying notes to consolidated financial statements. 6 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 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 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 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 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 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 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 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 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 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 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 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 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule (for SEC use only). 19 EX-27 2 ART. 5 FOR 1ST QUARTER 10-Q
5 1 3-MOS DEC-31-1996 MAR-31-1997 935,518 0 1,284,271 (82,000) 2,912,649 5,738,042 5,468,599 (1,682,307) 10,245,324 1,506,640 427,078 0 0 1,915 8,309,691 10,245,324 1,860,310 1,880,838 1,255,938 1,821,310 0 0 19,272 40,256 0 0 0 0 0 40,256 0.02 0.02
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