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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 March 31, 1997
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
BARTONVILLE, TEXAS 76226
(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 May 13, 1997, the number of shares outstanding of each class of
common stock was:
Common Stock, $.01 par value: 8,583,833 shares
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INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
December 31, 1996 and March 31, 1997 ........................................... 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1996 and 1997.............................. 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996 and 1997.............................. 5
Notes to Condensed Consolidated Financial Statements - March 31, 1997............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................................. 12
SIGNATURES.................................................................................. 12
</TABLE>
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THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(NOTE 2) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $4,268 $3,795
Accounts receivable -- trade, net of allowance of $142 in
1996 and $211 in 1997 . . . . . . . . . . . . . . . . . . 9,244 10,881
Accounts receivable -- other . . . . . . . . . . . . . . . 703 519
Receivable from related parties . . . . . . . . . . . . . . 687 736
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 19,411 25,608
Income and value added taxes receivable . . . . . . . . . . 1,418 2,391
Deferred income taxes . . . . . . . . . . . . . . . . . . . 196 196
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 771 799
------- -------
Total current assets 36,698 44,925
Property, plant and equipment, net of accumulated depreciation
of $2,712 in 1996 and $3,309 in 1997 . . . . . . . . . . . 29,177 30,239
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 373 373
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . 6,787 6,742
Identifiable intangible assets . . . . . . . . . . . . . . . 2,320 2,245
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,328 2,126
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . $76,683 $86,650
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings . . . . . . . . . . . . . . . . . . . $12,604 $16,421
Current portion of long-term debt . . . . . . . . . . . . . 1,114 992
Accounts payable . . . . . . . . . . . . . . . . . . . . . 4,572 6,088
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 2,108 2,553
Deferred income taxes . . . . . . . . . . . . . . . . . . . 3,915 4,232
------- -------
Total current liabilities . . . . . . . . . . . . . . . 24,313 30,286
Long-term debt, less current portion . . . . . . . . . . . . 4,332 8,888
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 238 238
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 8,561,333 in
1996 and 8,583,833 In 1997 . . . . . . . . . . . . . . . 86 86
Additional paid-in capital . . . . . . . . . . . . . . . . 45,287 45,366
Retained earnings . . . . . . . . . . . . . . . . . . . . . 2,427 1,786
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . 47,800 47,238
------- -------
Total liabilities and shareholders' equity . . . . . . . $76,683 $86,650
======= =======
</TABLE>
See accompanying notes.
3
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THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1997
---- ----
(IN THOUSANDS, EXCEPT FOR
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $11,278 $17,275
Cost of products sold . . . . . . . . . . . . . . 7,197 11,855
------- -------
4,081 5,420
Selling, general and administrative expenses . . 2,739 5,822
------- -------
Income (loss) from operations . . . . . . . . . . 1,342 (402)
Other income (expense):
Interest expense . . . . . . . . . . . . . . . (104) (543)
Interest income . . . . . . . . . . . . . . . . 184 102
Foreign currency transaction gain (loss) . . . (51) 209
Other . . . . . . . . . . . . . . . . . . . . . 3 4
------- -------
32 (228)
------- -------
Income (loss) before income taxes . . . . . . . . 1,374 (630)
Income tax expense . . . . . . . . . . . . . . . 458 11
------- -------
Net income (loss) . . . . . . . . . . . . . . . $ 916 $ (641)
======= =======
Net income (loss) per share:
Primary . . . . . . . . . . . . . . . . . . . . $ 0.14 $ (0.07)
======= =======
Fully diluted . . . . . . . . . . . . . . . . . $ 0.14 $ (0.07)
======= =======
</TABLE>
See accompanying notes.
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THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 916 $ (641)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 238 778
Deferred income taxes . . . . . . . . . . . . . . . . . . . 531 317
Changes in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . (2,881) (2,475)
Inventories . . . . . . . . . . . . . . . . . . . . . . . (1,180) (6,197)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 79 (28)
Payables and accrued expenses . . . . . . . . . . . . . . (320) 1,961
------- -------
Net cash used in operating activities . . . . . . . . . . . . (2,617) (6,285)
INVESTING ACTIVITIES
Acquisition of Deli-Bon shares . . . . . . . . . . . . . . . (1,050) --
Purchases of property, plant and equipment . . . . . . . . . (1,884) (1,659)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (104) (859)
------- -------
Net cash used in investing activities . . . . . . . . . . . . (3,038) (2,518)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock . . . . . . . . . 504 79
Net increase in short-term borrowings . . . . . . . . . . . . 714 7,817
Proceeds from long-term debt . . . . . . . . . . . . . . . . -- 1,291
Payments of long-term debt . . . . . . . . . . . . . . . . . (146) (857)
------- -------
Net cash provided by financing activities . . . . . . . . . . 1,072 8,330
------- -------
Net decrease in cash and cash equivalents . . . . . . . . . . (4,583) (473)
Cash and cash equivalents at beginning of period . . . . . . 6,286 4,268
------- -------
Cash and cash equivalents at end of period . . . . . . . . . $ 1,703 $ 3,795
======= =======
</TABLE>
See accompanying notes.
5
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THE UNIMARK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements at March 31, 1997, and for the
three month period then ended 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-K incorporated herein by reference. The
results of operations for the three months ended March 31, 1997 and for the
year ended December 31, 1996 are not necessarily indicative of future financial
results.
NOTE 2 - YEAR END FINANCIAL STATEMENT
The condensed consolidated balance sheet at December 31, 1996 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.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in an
increase in primary earnings per share for the first quarter ended March 31,
1996 of $.01 and to have no effect on primary earnings per share for the first
quarter ended March 31, 1997. The Company has not yet determined what the
impact of Statement No. 128 will be on the calculation of fully diluted
earnings per share.
NOTE 4 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
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(IN THOUSANDS)
<S> <C> <C>
Finished goods:
Cut fruits . . . . . . . . . . . . . . $10,536 $12,391
Juice and oils . . . . . . . . . . . . 1,796 3,612
------- -------
12,332 16,003
Advances to suppliers and orchards . . . . 4,134 5,625
Raw materials and supplies . . . . . . . . 2,945 3,980
------- -------
$19,411 $25,608
======= =======
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this Quarterly Report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties. Actual consolidated results of
the UniMark Group, Inc. ("UniMark" or the "Company") could differ significantly
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
Statements contained in this report 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. A number of important factors
could cause the Company's actual results for 1997 and beyond to differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, the Company. These factors include, without limitation: growth
and integration of new businesses; uncertainty of new product development and
market acceptance of new products; dependence upon availability and price of
fresh fruit; competition; dependence upon significant customers; seasonality
and quarterly fluctuations; risk related to product liability and recall;
limited intellectual property protection; government regulation; dependence on
key management; economic, political and social conditions in Mexico; exchange
rate fluctuations and inflation; and labor relations and costs. These factors
are listed under "Risk Factors" in the Company's Registration Statement on Form
S-1, Registration No. 333-3539, as filed with the Securities and Exchange
Commission on June 14, 1996.
CONVERSION TO U.S. GAAP
The Company conducts substantially all of its operations through its wholly
owned operating subsidiaries: UniMark Foods, Inc., UniMark International, Inc.,
Industrias Citricolas de Montemorelos, S.A. de C.V. ("ICMOSA"), Grupo
Industrial Santa Engracia, S.A. de C.V. ("GISE"), Agromark, S.A. de C.V.
("Agromark"), Simply Fresh Fruit, Inc. ("Simply Fresh") and Les Produits
Deli-Bon, Inc. ("Deli-Bon"). ICMOSA is a Mexican corporation with its
headquarters located in Montemorelos, Nuevo Leon, Mexico, whose principal
activities consist of operating seven citrus processing plants and various
citrus groves throughout Mexico. GISE is a Mexican corporation with its
headquarters located in Victoria, Tamaulipas, Mexico, whose principal
activities consist of operating three citrus juice and oil processing plants.
Agromark is a Mexican corporate entity under which the Company's agricultural
projects are reported. ICMOSA, GISE and Agromark maintain their accounting
records in Mexican pesos and in accordance with Mexican generally accepted
accounting principles and are subject to Mexican income tax laws. ICMOSA's,
GISE's and Agromark's financial statements have been converted to United States
generally accepted accounting principles ("U.S. GAAP") and U.S. dollars.
Deli-Bon maintains its accounting records in Canadian dollars and in accordance
with Canadian generally accepted accounting principles and is subject to
Canadian income tax laws.
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.
7
<PAGE> 8
RESULTS OF OPERATIONS
The following table sets forth certain consolidated financial data expressed
as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of products sold . . . . . . . . . . . . . 63.8 68.6
------ ------
Gross profit . . . . . . . . . . . . . . . . . 36.2 31.4
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . 24.3 33.7
------ ------
Income (loss) from operations . . . . . . . . . 11.9 (2.3)
Other income (expense):
Interest expense . . . . . . . . . . . . . (0.9) (3.1)
Interest income . . . . . . . . . . . . . . 1.6 0.6
Other . . . . . . . . . . . . . . . . . . (0.4) 1.2
------ ------
Income (loss) before income taxes . . . . . . . 12.2 (3.6)
Income tax expense . . . . . . . . . . . . . . 4.1 0.1
------ ------
Net income (loss) . . . . . . . . . . . . . . 8.1% (3.7)%
====== ======
</TABLE>
Three Months Ended March 31, 1996 and 1997
Net sales increased 53.1% from $11.3 million in 1996 to $17.3 million in
1997. This increase was primarily due to increases in foodservice sales, growth
in retail sales and citrus juice and oil sales. Foodservice sales increased
from $684,000 in 1996 to $5.7 million in 1997. This increase was primarily a
result of the acquisition of Simply Fresh and the addition of new customers.
Also, effective March 31, 1996, the Company acquired GISE, a citrus juice and
oil processor in Mexico. Citrus juice and oil sales totaled $1.3 million in
1997. Retail sales increased 78% from $3.7 million in 1996 to $6.6 million in
1997 and warehouse club sales increased 47% from $1.7 million in 1996 to $2.5
million in 1997 primarily as a result of increased distribution and demand for
the Company's chilled fruit product line.
The increase in net sales was adversely impacted by a decline in sales of the
Company's specialty food ingredient products in the Japanese market. Sales to
Japan decreased from $4.6 million in 1996 to $0.9 million in 1997 primarily as
a result of decreased demand in Japan for the Company's specialty food
ingredient products. The Company believes that this decrease in demand is due
to a decline in sales of the Japanese products containing the Company's
specialty food ingredients and resulting higher than anticipated inventory
levels of the Company's specialty food ingredients held by distributors in
Japan. Although the Company anticipates a decline in comparative sales of its
specialty food ingredient products to Japan during the second quarter of 1997,
the Company anticipates an increase in comparative quarterly sales during the
remainder of 1997. In addition, the Company believes there are significant
opportunities in the Japanese market for frozen citrus and tropical fruit
products because such products do not contain additives or preservatives, an
important feature for entry into the Japanese market.
Gross profit as a percentage of net sales decreased from 36.2% in 1996 to
31.4% in 1997. Gross profit on cut fruit sales decreased from 36.2% in 1996 to
31.8% in 1997 while gross profit on citrus juice and oil sales was 26.1% in
1997. The decline in gross profit on cut fruit sales resulted primarily from
increased processing costs due to, among other things, lower than anticipated
production volume resulting from the decline in Japanese sales, increased raw
materials costs and operational inefficiencies associated with the continuing
integration of the Company's new facilities into its existing operations.
Although the loss of Japanese production volume adversely impacted the
Company's first quarter 1997 operating results, the Company is taking
affirmative steps to replace the lost production volume. In addition, the
Company
8
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believes that the integration of its newly acquired United States production
facilities with its existing operations will be completed in 1997.
Gross profit on citrus juice and oil sales in 1997 were adversely affected by
lower than expected market prices and increased costs of inventories. Frozen
concentrate orange juice futures prices have remained depressed as a result of
favorable production forecasts from Brazil and Florida. In addition, the
Company experienced increased fruit prices and reduced production yields as a
result of the drought in northern Mexico in the summer of 1996. While the
Company's increased costs of inventories adversely impacted operations in the
first quarter of 1997, citrus juice and oil operating profits are anticipated
to improve over the remainder of 1997 because of improved raw material costs.
Selling, general and administrative expenses ("SG&A") as a percentage of net
sales increased from 24.3% in 1996 to 33.7% in 1997. This increase is primarily
the result of lower than anticipated sales to Japan, limited orange juice sales
and increased general and administrative expenses associated with recent
acquisitions.
Sales of the Company's specialty food ingredient products are facilitated
through independent Japanese trading companies primarily on an FOB ICMOSA plant
basis. Therefore, the Company does not typically incur delivery costs and
sales commissions with respect to these sales. Consequently, the decrease in
sales to Japan adversely impacted SG&A as a percentage of sales during the
first quarter of 1997. Further, SG&A as a percentage of sales was adversely
impacted by limited sales of orange juice during the first quarter of 1997.
Although no assurances can be given, the Company anticipates that improvements
in sales of orange juice during the remainder of 1997 should positively impact
SG&A as a percentage of sales. Also, SG&A as a percentage of sales was
adversely impacted by increases in general and administrative costs associated
with the Company's recent acquisitions. Presently, the Company is consolidating
and integrating administrative and accounting functions associated with its
recent United States acquisitions. Although no assurances can be given, this
restructuring is expected to positively impact SG&A in the second half of 1997.
Interest expense increased from 0.9% of net sales in 1996 to 3.1% in 1997.
Actual interest expense increased from $104,000 in 1996 to $543,000 in 1997.
This increase was primarily the result of increased levels of debt necessary
to support increased levels of inventory and trade receivables associated with
the increase in sales volume and distribution centers.
Interest income of $184,000 was earned in 1996 and $102,000 in 1997 primarily
from the temporary cash investment of excess cash balances.
A foreign currency transaction net loss of $51,000 in 1996 and a net gain of
$209,000 in 1997 resulted primarily from the conversion of Company's foreign
subsidiaries' financial statements to U.S. GAAP.
As a result of the foregoing, the Company reported a net loss of $641,000 in
1997 while reporting net income of $916,000 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 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
losses do not affect employee profit sharing. Statutory employee profit sharing
expense is reflected in the Company's cost of goods sold and selling, general
and administrative expenses, depending upon the function of the employees to
whom profit sharing payments are made. The Company's net income on a
consolidated basis as shown in the Consolidated
9
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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
The Company procures and processes substantially all of its products in
Mexico, through its wholly owned subsidiaries ICMOSA and GISE, for export to
the United States, Canada, Europe and Japan. Generally, the cost of citrus
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 raw material expenses to be
materially affected by changes in the valuation of the 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.
The Company's consolidated results of operations are affected by changes in
the valuation of the Mexican peso to the extent that ICMOSA or GISE 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.
The Company'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
Demand for UniMark's citrus and tropical fruit products is strongest during
the fall, winter and spring when seasonal fresh products such as mangos,
peaches, plums, and nectarines 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.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, cash and cash equivalents totaled $3.8 million, a decrease
of $0.5 million from year end 1996. During 1997, operating activities utilized
cash of $6.3 million primarily to finance a $6.2 million increase in
inventories and to finance a $1.6 million increase in trade accounts
receivable. The increase in inventories is the result of seasonal citrus
processing in Mexico and lower than expected juice sales. Trade receivables
have increased largely a result of the increased cut fruit sales volume in
1997.
During 1997, UniMark utilized cash of $2.5 million in investing activities.
Of this amount, $1.7 million was expended on property, plant and equipment In
March, 1997, the Company purchased a warehouse and distribution facility
located in McAllen, Texas for a total cash consideration of approximately $1.2
million. In connection therewith, the Company entered into a construction loan
agreement with Texas State Bank for approximately $2.1 million collateralized
by the property and improvements and guaranteed by the Company. The Company
plans on expending approximately $1.6 million on capital improvements to the
property with operations to commence from the property in July, 1997.
The Company's financing activities provided net cash of $7.8 million from
additional short-term borrowings and $1.3 million from borrowings under the
warehouse construction loan, while cash was utilized to make regularly
scheduled payments of long-term debt of $857,000 in 1997.
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<PAGE> 11
The Company received cash proceeds of $1.0 million from additional unsecured
short-term borrowings from Bancrecer in Mexico. In connection therewith, the
Company renegotiated the renewal term of its outstanding $4.0 million of
unsecured debt with Bancrecer from three months to eighteen months.
In February, 1997, the Company entered into a revolving credit agreement with
Rabobank Nederland to provide up to $8.5 million in short-term financing
collateralized by U.S. finished goods inventories and U.S. accounts receivable.
The agreement is guaranteed by the Company and its U.S. subsidiaries and
requires the Company to maintain certain financial performance levels relative
to tangible net worth, working capital and total debt. In addition, the
agreement contains restrictions on the issuance of additional shares of stock
and the payment of dividends, among other things, without the prior written
consent of the bank. At March 31, 1997, the Company had an outstanding loan
balance of $4.8 million under this agreement.
In April, 1997, the Company entered into two additional revolving credit
agreements with Rabobank Nederland to provide up to an aggregate amount of
$15.0 million in short-term financing collateralized by Mexico finished goods
inventories and Mexico accounts receivable. The agreement is guaranteed by the
Company and its Mexico subsidiaries and requires the Company to maintain
certain financial performance levels relative to tangible net worth, working
capital and total debt. In addition, the agreement contains restrictions on
the issuance of additional shares of stock and the payment of dividends, among
other things, without the prior written consent of the bank. At March 31,
1997, the Company had outstanding loan balances aggregating $11.3 million
under these agreements.
In October, 1996, GISE and The Coca-Cola Export Corporation ("Coca-Cola"), an
affiliate of The Coca-Cola Company, entered into a ten year Supply Contract,
with a ten year renewal option, for the production of Italian lemons. Pursuant
to the terms of this Supply Contract, GISE will plant and grow approximately
12,000 acres of Italian lemons for sale to Coca-Cola at pre-determined prices.
The Supply Contract requires Coca-Cola to provide, free of charge, 750,000
lemon trees, enough to plant approximately 7,200 acres. In addition, the
Supply Contract requires Coca-Cola to purchase all the production from the
project. The planting program began in November, 1996 and is scheduled to be
completed in February, 2000 with harvesting of the first crops to begin in late
1998. The Company estimates that this project will require capital
expenditures of $4.7 million in 1997. The total capital requirements for the
project is estimated to be approximately $27.0 million over the next four
years. Presently, the Company is exploring various financing alternatives for
this project. There can be no assurances that financing for this project can be
obtained on acceptable terms, or at all. Although UniMark believes that it
could finance the project with anticipated cash flow from operations, the
inability to internally finance the project or to obtain third party financing
for the project could have a material adverse effect on the Company.
The Company's future cash requirements for 1997 and beyond will depend
primarily upon the level of sales, expenditures for capital equipment and
improvements, investments in agricultural projects, the timing of inventory
purchases and new product introductions. UniMark 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.
11
<PAGE> 12
EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
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: May 13, 1997 /s/ Jorn Budde
----------------- ----------------------------------------
Jorn Budde, President
(Principal Executive Officer)
Date: May 13, 1997 /s/ Keith Ford
------------------ ----------------------------------------
Keith Ford, Vice President
(Principal Accounting Officer)
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,795
<SECURITIES> 0
<RECEIVABLES> 11,092
<ALLOWANCES> 211
<INVENTORY> 25,608
<CURRENT-ASSETS> 44,925
<PP&E> 33,548
<DEPRECIATION> 3,309
<TOTAL-ASSETS> 86,650
<CURRENT-LIABILITIES> 30,286
<BONDS> 8,888
86
0
<COMMON> 0
<OTHER-SE> 47,152
<TOTAL-LIABILITY-AND-EQUITY> 86,650
<SALES> 17,275
<TOTAL-REVENUES> 17,275
<CGS> 11,855
<TOTAL-COSTS> 11,855
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 543
<INCOME-PRETAX> (630)
<INCOME-TAX> 11
<INCOME-CONTINUING> (641)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (641)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
