<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
MARK (ONE)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
[ ] Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
----------------- --------------------
Commission file number 0-26096
THE UNIMARK GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2436543
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
UNIMARK HOUSE
124 MCMAKIN ROAD
LEWISVILLE, TEXAS 75067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 491-2992
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- -----
As of August 9, 1996, the number of shares outstanding of each class of common
stock was:
Common Stock, $.01 par value: 8,558,333 shares
<PAGE> 2
INDEX
THE UNIMARK GROUP, INC.
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1995 and
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the Three Months and Six Months Ended
June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1995
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements - June 30, 1996 . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
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THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, JUNE 30,
1995 1996
--------------- ---------------
(Note 2) (UNAUDITED)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,286 $ 16,367
Accounts receivable, net of allowance of $70 in
1995 and $118 in 1996 4,484 8,488
Receivable from related parties 90 1,925
Inventories 6,182 15,153
Taxes receivable 824 1,283
Deferred income taxes 81 402
Prepaid expenses 300 606
--------- ---------
Total current assets 18,247 44,224
Property, plant and equipment, net of accumulated
depreciation of $1,449 in 1995 and $1,986 in 1996 7,689 21,131
Deferred income taxes 338 1,412
Goodwill - 6,837
Other assets 224 2,107
--------- ---------
$ 26,498 $ 75,711
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 3,545 6,184
Current portion of long-term debt 183 771
Accounts payable 4,356 7,086
Accrued expenses 943 2,295
Income taxes payable 13 -
Deferred income taxes 1,726 4,116
--------- ---------
Total current liabilities 10,766 20,452
Long-term debt, less current portion 699 4,268
Deferred income taxes 55 1,520
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 5,918,050 in
1995 and 8,558,333 in 1996 59 86
Additional paid-in capital 13,035 45,359
Retained earnings 1,884 4,026
--------- ---------
14,978 49,471
--------- ---------
$ 26,498 $ 75,711
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1996 1995 1996
--------- --------- ---------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 9,125 $ 18,673 $ 17,608 $ 29,951
Cost of products sold 6,285 12,324 12,212 19,521
--------- --------- ---------- ---------
2,840 6,349 5,396 10,430
Selling, general and administrative expenses 2,201 4,643 3,978 7,382
--------- --------- ---------- ---------
Income from operations 639 1,706 1,418 3,048
Other income (expense):
Interest expense (56) (551) (178) (655)
Interest income 88 114 182 298
Foreign currency transaction gain (loss) 142 (70) 19 (121)
Other - (10) 4 (7)
--------- --------- ---------- ---------
174 (517) 27 (485)
--------- --------- ---------- ---------
Income before income taxes 813 1,189 1,445 2,563
Income tax expense (benefit) 263 (37) 98 421
--------- --------- ---------- ---------
Net income $ 550 $ 1,226 $ 1,347 $ 2,142
========= ========= ========== =========
Earnings per share:
Primary $ 0.11 $ 0.17 $ 0.27 $ 0.32
========= ========= ========== =========
Fully diluted $ 0.10 $ 0.17 $ 0.25 $ 0.32
========= ========= ========== =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1996
-------- --------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,347 $ 2,142
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 209 669
Deferred income taxes 37 646
Changes in operating assets and liabilities:
Receivables (2,531) (3,355)
Inventories (165) (4,669)
Prepaid expenses (92) (187)
Accounts payable and accrued expenses 3,224 438
Income taxes payable (79) (195)
-------- --------
Net cash provided by (used in) operating activities 1,950 (4,511)
INVESTING ACTIVITIES
Acquisition of Deli-Bon, GISE and Simply Fresh shares - (2,900)
Purchases of property, plant and equipment (1,083) (4,494)
Other (39) (357)
-------- --------
Net cash used in investing activities (1,122) (7,751)
FINANCING ACTIVITIES
Net proceeds from sale of common stock 588 22,901
Net decrease in short-term borrowings (840) (402)
Payments of long-term debt (273) (156)
-------- --------
Net cash provided by (used in) financing activities (525) 22,343
-------- --------
Net increase in cash and cash equivalents 303 10,081
Cash and cash equivalents at beginning of period 803 6,286
-------- --------
Cash and cash equivalents at end of period $ 1,106 $ 16,367
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE UNIMARK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements at June 30, 1996, and for the
three and six month periods ended June 30, 1995 and 1996 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim period. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contained in the Company's annual report on Form 10-KSB
incorporated by reference. The results of operations for the six months ended
June 30, 1996 are not necessarily indicative of future financial results.
NOTE 2 - YEAR END FINANCIAL STATEMENT
The condensed consolidated balance sheet at December 31, 1995 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
NOTE 3 - EARNINGS PER SHARE
Earnings per share was calculated based on the weighted average number of
common and common equivalent shares outstanding. The modified treasury stock
method was utilized to measure the dilutive effect of options and warrants in
1995.
NOTE 4 - RELATED PARTY TRANSACTIONS
Effective January 1, 1995, UniMark entered into a five year operating agreement
with Industrias Horticolas de Montemorelos, S.A. de C.V. ("IHMSA") to operate a
freezing plant located in Montemorelos, Nuevo Leon, Mexico. Pursuant to the
terms of the operating agreement, UniMark is obligated to pay IHMSA an
operating fee sufficient to cover the interest payments on IHMSA's existing
outstanding debt (approximately $4.6 million). Interest rates available on the
renewal of the portion of IHMSA's debt which recently became due have increased
significantly due in large part to economic conditions in Mexico. Since, under
the terms of the operating agreement, the Company would incur any increase in
the interest payments, the Company elected to advance funds to IHMSA to retire
the portion of the debt that recently became due instead of renew it. At June
30, 1996, advances to IHMSA of $1.8 million are included in the balance
receivable from related parties. IHMSA is presently working to secure
acceptable long-term financing. It is anticipated that IHMSA will refinance
the debt and repay the balance owed to UniMark before the end of the year.
NOTE 5 - ACQUISITIONS
On January 3, 1996, the Company acquired, in a purchase transaction, all the
outstanding shares of capital stock of Les Produits Deli-Bon Inc. ("Deli-Bon"),
a Quebec corporation that principally processes and sells fruit salads to the
food service industry in Canada. Total consideration given for the purchase of
the shares included approximately (i) $787,000 in cash, (ii) a $49,000
six-month promissory note and (iii) 28,510 shares of common stock. The
Company's condensed consolidated statement of income for the three and six
months ended June 30, 1996 include the results of operations of Deli-Bon since
the date of acquisition.
6
<PAGE> 7
On May 9, 1996, the Company acquired all the outstanding shares of capital
stock of Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE"), in exchange
for 782,614 shares of UniMark common stock in a purchase transaction. In
addition, UniMark agreed to pay up to an additional $8 million during the next
four years if GISE achieves certain financial operating targets. GISE operates
two juice plants in the heart of major citrus growing regions in Mexico. The
Company's condensed consolidated statements of income for the three and six
months ended June 30, 1996 include the results of operations of GISE since
April 1, 1996, the effective date of the acquisition.
Also on May 9, 1996, the Company acquired all the outstanding shares of capital
stock of Simply Fresh Fruit, Inc. ("Simply Fresh"), in exchange for (i)
$2,500,000 cash, (ii) 90,909 shares of UniMark common stock and (iii) five-year
covenants not to compete totaling $1,000,000 in a purchase transaction. Simply
Fresh is a fruit processing and distribution company located in Los Angeles,
California. The Company's condensed consolidated statements of income for the
three and six months ended June 30, 1996 include the results of operations of
Simply Fresh since April 1, 1996, the effective date of the acquisition.
NOTE 6 - SHORT-TERM BORROWINGS
In May, 1996 the Company obtained a 90-day $3,000,000 loan from a bank in
Mexico at an annual interest rate of 11.37%. Of this amount, $2,500,000 was
utilized in the Simply Fresh acquisition and the remaining amount was used for
working capital and general corporate purposes. The Company repaid the loan
with the net proceeds from the sale of common stock described below.
NOTE 7 - SECONDARY PUBLIC OFFERING
On June 14, 1996, the Company completed its second public offering whereby it
sold 1,677,000 shares of its common stock at $14.50 per share with net proceeds
to the Company of approximately $22.3 million. The Company intends to use the
net proceeds of the offering for capital expenditures, agricultural
development, repayment of indebtedness, acquisition of a juice plant, working
capital and other general corporate purposes, which may include further
acquisitions.
NOTE 8 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
-------- ---------
<S> <C> <C>
Finished goods $ 4,594 $ 10,469
Raw materials and supplies 1,588 4,684
-------- ---------
Total $ 6,182 $ 15,153
======== =========
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed herein.
Statements contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that are not historical facts are
forward-looking statements that are subject to the safe harbor created by the
Private Securities Litigation Reform Act of 1995.
CONVERSION TO U.S. GAAP
The Company conducts substantially all of its operations through its
wholly-owned operating subsidiaries: UniMark Foods, Inc. ("UniMark Foods"),
UniMark International, Inc. ("UniMark International"), Simply Fresh Fruit, Inc.
("Simply Fresh"), Industrias Citricolas de Montemorelos, S.A. de C.V.
("ICMOSA"), Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE") and Les
Produits Deli-Bon, Inc. ("Deli-Bon"). UniMark Foods, UniMark International and
Simply Fresh are U.S. corporations.
ICMOSA is a Mexican corporation with its headquarters located in Montemorelos,
Nuevo Leon, Mexico, whose principal activities consist of operating six citrus
processing plants and various citrus groves throughout Mexico. GISE is a
Mexican corporation with its headquarters located in Ciudad Victoria,
Tamaulipas, Mexico, whose principal activities consist of producing citrus
concentrates, oils and juices. ICMOSA and GISE maintain their accounting
records in Mexican pesos and in accordance with Mexican generally accepted
accounting principles ("Mexican GAAP") and are subject to Mexican income tax
laws. ICMOSA's and GISE's financial statements have been converted to United
States generally accepted accounting principles ("U.S. GAAP") and United States
dollars.
Deli-Bon is a Canadian corporation with its headquarters located in Quebec
City, Quebec, whose principal activities consist of operating a fruit
processing and distribution facility. Deli-Bon maintains its accounting
records in Canadian dollars and in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") and is subject to Canadian income tax
laws. Deli-Bon's financial statements have been converted to U.S. GAAP and
U.S. dollars.
Unless otherwise indicated, all dollar amounts included herein are set forth in
U.S. dollars in accordance with U.S. GAAP. The functional currency of UniMark
and its subsidiaries is the U.S. dollar. This discussion does not include the
results of operations of Deli-Bon prior to its acquisition date (January 3,
1996) or the results of operations of GISE and Simply Fresh prior to the
effective date (April 1, 1996) of their acquisition.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated financial data expressed as
a percentage of net sales for the three and six month periods ended June 30,
1995 and 1996.
8
<PAGE> 9
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 68.9 66.0 69.4 65.2
----- ----- ----- -----
Gross profit 31.1 34.0 30.6 34.8
Selling, general and administrative expenses 24.1 24.9 22.6 24.6
----- ----- ----- -----
Income from operations 7.0 9.1 8.0 10.2
Other income (expense):
Interest expense (0.6) (2.9) (1.0) (2.2)
Interest income 1.0 0.6 1.0 1.0
Foreign currency transaction gain (loss) 1.5 (0.4) 0.1 (0.4)
----- ----- ----- -----
1.9 (2.7) 0.1 (1.6)
----- ----- ----- -----
Income before income taxes 8.9 6.4 8.1 8.6
Income tax expense (benefit) 2.9 (0.2) 0.5 1.4
----- ----- ----- -----
Net income 6.0% 6.6% 7.6% 7.2%
===== ===== ===== =====
</TABLE>
Three Months Ended June 30, 1995 and 1996
Net sales increased $9.5 million, or 104%, from $9.1 million in 1995 to $18.6
million in 1996. This increase was due primarily to the Company's recent
acquisitions and continued growth and expansion of existing product lines.
Gross profit as a percentage of net sales increased from 31.1% in 1995 to 34.0%
in 1996. This increase resulted primarily from favorable raw materials costs
and greater operational efficiencies.
Selling, general and administrative expenses ("SG&A") as a percentage of net
sales increased from 24.1% in 1995 to 24.9% in 1996. This increase resulted
primarily from the operation of additional processing and distribution
facilities as a result of the recent acquisitions.
Interest expense increased from 0.6% of net sales in 1995 to 2.9% of net sales
in 1996 as a result of increased levels of debt primarily associated with the
recent acquisitions. Actual interest expense was $56,000 in 1995 and $551,000
in 1996.
Interest income of $88,000 in 1995 and $114,000 in 1996 was earned from the
temporary investment of excess cash funds.
Foreign currency transaction gains and losses result primarily from the
translation of net monetary assets or net monetary liabilities denominated in
Mexican pesos into U.S. dollars. This translation resulted in a net gain of
$142,000 in 1995 and a net loss of $70,000 in 1996.
Income taxes. In Mexico, income tax expense was $224,000 in 1995 and $20,000
in 1996 as a result of a change in tax status of ICMOSA's agricultural
operations. Pursuant to a provision in Mexico's income tax laws, ICMOSA has
transferred its fruit growing operations into a new Mexican corporation,
AgroMark, S.A. de C.V. ("AgroMark"), effective June 30, 1996 in order to
eliminate paying Mexican income taxes on the profits from these operations at a
rate of 34%. Instead, AgroMark will only be taxed on subsequent distributions
at a rate of 17%. In addition, AgroMark's profits will not be subject to the
Mexican 10% statutory employee profit sharing provisions since AgroMark will
not have any employees but instead will contract all services from ICMOSA.
AgroMark is a wholly owned subsidiary of the UniMark Group, Inc. This change
in tax status resulted in a deferred tax benefit of approximately $612,000 and
a reduction of administrative expenses of
9
<PAGE> 10
approximately $180,000. U.S. income tax expense was $39,000 in 1995 and a
benefit of $63,000 in 1996. Canadian income tax expense was $6,000 in 1996.
Net income, as a result of the foregoing, increased 123% from $550,000 in 1995
to $1,226,000 in 1996.
Six Months Ended June 30, 1995 and 1996
Net sales increased $12.3 million, or 70%, from $17.6 million in 1995 to $29.9
million in 1996. This increase was due primarily to the Company's recent
acquisitions and continued growth and expansion of existing product lines.
Gross profit as a percentage of net sales increased from 30.6% in 1995 to 34.8%
in 1996. This increase resulted primarily from favorable raw materials costs
and greater operational efficiencies.
Selling, general and administrative expenses ("SG&A") as a percentage of net
sales increased from 22.6% in 1995 to 24.6% in 1996. This increase resulted
primarily from the operation of additional processing and distribution
facilities as a result of the recent acquisitions.
Interest expense increased from 1.0% of net sales in 1995 to 2.2% of net sales
in 1996 as a result of increased levels of debt primarily associated with the
recent acquisitions. Actual interest expense was $178,000 in 1995 and $655,000
in 1996.
Interest income of $182,000 in 1995 and $298,000 in 1996 was earned from the
temporary investment of excess cash funds.
Foreign currency transaction gains and losses result primarily from the
translation of net monetary assets or net monetary liabilities denominated in
Mexican pesos into U.S. dollars. This translation resulted in a net gain of
$19,000 in 1995 and a net loss of $121,000 in 1996.
Income taxes. In Mexico, an income tax benefit of $26,000 was recognized in
1995 while income tax expense of $584,000 was recognized in 1996. Pursuant to a
provision in Mexico's income tax laws, ICMOSA has transferred its fruit growing
operations into a new Mexican corporation, AgroMark, S.A. de C.V., effective
June 30, 1996 in order to eliminate paying Mexican income tax on the profits
from these operations at a rate of 34%. Instead, AgroMark will only be taxed
on subsequent distributions at a rate of 17%. In addition, AgroMark's profits
will not be subject to the Mexican 10% statutory employee profit sharing
provisions since AgroMark will not have any employees but instead will contract
all services from ICMOSA. AgroMark is a wholly owned subsidiary of the
UniMark Group, Inc. This change in tax status resulted in a deferred tax
benefit of approximately $612,000 and a reduction of administrative expenses of
approximately $180,000. U.S. income tax expense was $124,000 in 1995 and a
benefit of $151,000 in 1996. A Canadian income tax benefit of $12,000 was
recognized in 1996. These income tax benefits resulted primarily from the
recognition of future benefits of tax losses generated.
Net income, as a result of the foregoing, increased 59% from $1,347,000 in 1995
to $2,142,000 in 1996.
STATUTORY EMPLOYEE PROFIT SHARING
All Mexican companies are required to pay their employees, in addition to their
agreed compensation benefits, profit sharing in an aggregate amount equal to
10% of net income, calculated for employee profit sharing purposes, of the
individual corporation employing such employees. All of UniMark's
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<PAGE> 11
Mexican employees are employed by its subsidiaries, each of which pays profit
sharing in accordance with its respective net income for profit sharing
purposes. Tax loss carryforwards do not affect employee profit sharing.
Statutory employee profit sharing expense is reflected in the Company's
selling, general and administrative expenses. The Company's net income on a
consolidated basis as shown in the condensed consolidated financial statements
is not a meaningful indication of net income of the Company's subsidiaries for
profit sharing purposes or of the amount of employee profit sharing.
EXCHANGE RATE FLUCTUATIONS
UniMark procures and hand processes substantially all of its products in Mexico
through its wholly owned subsidiary, ICMOSA, for export to the United States,
Canada and Japan. Generally, the cost of fruit procured in Mexico reflects the
spot market price for citrus in the United States. All of UniMark's sales are
denominated in U.S. dollars. As such, UniMark does not anticipate sales
revenues and fruit costs to be materially affected by changes in the valuation
of the Mexican peso. Labor and certain other production costs are peso
denominated. Consequently, these costs are impacted by fluctuations in the
value of the peso relative to the U.S. dollar. Presently, the Company does not
engage in any hedging transactions.
UniMark's consolidated results of operations are affected by changes in the
valuation of the Mexican peso to the extent that ICMOSA has peso denominated
net monetary assets or net monetary liabilities. In periods where the peso has
been devalued in relation to the U.S. dollar, a gain will be recognized to the
extent there are peso denominated net monetary liabilities while a loss will be
recognized to the extent there are peso denominated net monetary assets. In
periods where the peso has gained value, the converse would be recognized.
UniMark's consolidated results of operations are also subject to fluctuations
in the value of the peso as they affect the translation to U.S. dollars of
ICMOSA's net deferred tax assets or net deferred tax liabilities. Since these
assets and liabilities are peso denominated, a falling peso results in a
transaction loss to the extent there are net deferred tax assets or a
transaction gain to the extent there are net deferred tax liabilities.
SEASONALITY
A substantial portion of UniMark's exports to Japan is processed and shipped
during the first and fourth quarter each year. In addition, the demand for
UniMark's chilled citrus and tropical fruit products is strongest during the
fall, winter and spring when seasonal fresh products such as mangoes, peaches,
plums, nectarines and others are not readily available for sales in
supermarkets in North America. Management believes UniMark's quarterly net
sales will continue to be impacted by this pattern of seasonality.
DEPENDENCE UPON AVAILABILITY AND PRICE OF FRESH FRUIT
The Company obtains a substantial amount of its raw materials from third-party
suppliers throughout various growing regions in Mexico, Texas and California.
A crop reduction or failure in any of these fruit growing regions resulting
from factors such as weather, pestilence, disease or other natural disasters,
could increase the cost of the Company's raw materials or otherwise adversely
affect the Company's operations. Competitors may be affected differently
depending upon their ability to obtain adequate supplies from sources in other
geographic areas. If the Company is unable to pass along the increased raw
materials cost, the financial condition and results of operations of the
Company could be materially and adversely affected.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, cash and temporary cash investments totaled $16.4 million, an
increase of $10.1 million from year end 1995. Operating activities utilized
cash of $4.5 million during the six month period ended June 30, 1996 primarily
resulting from an increase in related party receivables and an increase in
inventory levels resulting primarily from the acquisition of GISE and
processing of seasonal fruits.
During the six month period ended June 30, 1996, the Company utilized cash of
$7.8 million in investing activities. Of this amount, $4.5 million was
expended on capital equipment and improvements to plant facilities and
approximately $2.9 million was utilized in the acquisitions of Deli-Bon, GISE
and Simply Fresh.
Net cash generated by financing activities was $22.3 million for the six month
period ended June 30, 1996. Included in financing activities were net proceeds
from the issuance of common stock, changes in short-term borrowings and
payments of long-term debt.
During the six month period ended June 30, 1996, the Company issued (i) 28,510
shares of common stock in conjunction with the acquisition of Deli-Bon; (ii)
33,750 shares of common stock upon the exercise of certain underwriters'
warrants, and (iii) 27,500 shares of common stock on the exercise of employee
and director stock options. Net proceeds to UniMark on the issuance of these
89,760 shares of common stock was approximately $588,000.
On January 3, 1996, the Company acquired, in a purchase transaction, all the
outstanding shares of capital stock of Les Produits Deli-Bon Inc. ("Deli-Bon"),
a Quebec corporation that principally processes and sells fruit salads to the
food service industry in Canada. Total consideration given for the purchase of
the shares included approximately (i) $787,000 in cash, (ii) a $49,000
six-month promissory note and (iii) 28,510 shares of common stock.
On May 9, 1996, the Company acquired all the outstanding shares of capital
stock of Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE"), in exchange
for 782,614 shares of UniMark common stock in a purchase transaction. In
addition, UniMark agreed to pay up to an additional $8 million during the next
four years if GISE achieves certain financial operating targets. GISE operates
two juice plants in the heart of major citrus growing regions in Mexico.
Also on May 9, 1996, the Company acquired all the outstanding shares of capital
stock of Simply Fresh Fruit, Inc. ("Simply Fresh"), in exchange for (i)
$2,500,000 cash, (ii) 90,909 shares of UniMark common stock and (iii) five-year
covenants not to compete totaling $1,000,000 in a purchase transaction. Simply
Fresh is a fruit processing and distribution company located in Los Angeles,
California.
On June 14, 1996, the Company completed its second public offering whereby it
sold 1,677,000 shares of its common stock at $14.50 per share with net proceeds
to the Company of approximately $22.3 million. The Company intends to use the
net proceeds of the offering for capital expenditures, agricultural
development, repayment of indebtedness, acquisition of a juice plant, working
capital and other general corporate purposes, which may include further
acquisitions. As of June 30, 1996, the Company had utilized $3.0 million of
these proceeds to repay indebtedness and $5.2 million to reduce borrowings
under existing working capital facilities.
Cash was used to reduce short-term borrowings by $402,000 and to make regularly
scheduled payments of long-term debt of $156,000 during the six month period
ended June 30, 1996. At June 30, 1996, the Company had approximately $2.5
million available under existing U.S. credit facilities and approximately $5.9
million available under existing Mexico credit facilities.
12
<PAGE> 13
The Company's future cash requirements for 1996 and beyond will depend
primarily upon the level of sales; expenditures for capital equipment and
improvements; the timing of inventory purchases and new product introductions
and business acquisition opportunities. The Company believes that anticipated
revenue from operations and existing capital resources will be adequate for its
working capital requirements for at least the next twelve months.
13
<PAGE> 14
EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
B. Reports on Form 8-K
None
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.
THE UNIMARK GROUP, INC.
-----------------------
Registrant
Date: August 9, 1996 /s/ Jorn Budde
-----------------------
Jorn Budde, President
(Principal Executive Officer)
Date: August 9, 1996 /s/ Keith Ford
-----------------------
Keith Ford, Vice President
(Principal Accounting Officer)
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------
<S> <C>
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
15
<PAGE> 1
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30 June 30
------------------ ------------------
1995 1996 1995 1996
---- ---- ---- ----
(In thousands, except per share)
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding $4,680 6,723 4,665 6,339
Net effect of dilutive stock options and warrants -
based on the treasury stock method using average market
price 775 381 729 387
------------------ ------------------
Total 5,455 7,104 5,395 6,726
================== ==================
Net income $ 550 $1,226 $1,347 $2,142
Add interest savings, net of Federal income tax effect,
from assumed debt repayment 25 - 99 -
------------------ ------------------
Total $ 575 $1,226 $1,446 $2,142
================== ==================
Per share amount $ .11 $ .17 $ .27 $ .32
================== ==================
Fully diluted:
Average shares outstanding 4,680 6,723 4,665 6,339
Net effect of dilutive stock options and warrants -
based on the modified treasury stock method using the
greater of average market price or ending market price 775 388 729 391
------------------ ------------------
Total 5,455 7,111 5,395 6,730
================== ==================
Net income $550 $1,226 $1,347 $2,142
Add interest savings, net of Federal income tax effect,
from assumed debt repayment 18 - 27 -
------------------ ------------------
Total $ 567 $1,226 $1,374 $2,142
================== ==================
Per share amount $ .10 $ .17 $ .25 $ .32
================== ==================
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,367
<SECURITIES> 0
<RECEIVABLES> 8,606
<ALLOWANCES> 118
<INVENTORY> 15,153
<CURRENT-ASSETS> 44,224
<PP&E> 23,117
<DEPRECIATION> 1,986
<TOTAL-ASSETS> 75,711
<CURRENT-LIABILITIES> 20,452
<BONDS> 4,268
<COMMON> 86
0
0
<OTHER-SE> 49,385
<TOTAL-LIABILITY-AND-EQUITY> 75,711
<SALES> 29,951
<TOTAL-REVENUES> 29,951
<CGS> 19,521
<TOTAL-COSTS> 19,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 655
<INCOME-PRETAX> 2,563
<INCOME-TAX> 421
<INCOME-CONTINUING> 2,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,142
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
