<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 March 31, 2000
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 19, 2000, the number of shares outstanding of each class of
common stock was:
Common Stock, $.01 par value: 13,938,326 shares
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
December 31, 1999 and March 31, 2000....................................................... 3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1999 and 2000......................................... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 2000......................................... 5
Notes to Condensed Consolidated Financial Statements - March 31, 2000........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................19
Item 2. Sale of Unregistered Securities..............................................................19
Item 3. Defaults Upon Senior Securities..............................................................19
Item 4. Submission of Matters to a Vote of Security Holders..........................................19
Item 5. Other Information............................................................................19
Item 6. Exhibits and Reports on Form 8-K.............................................................19
SIGNATURES.............................................................................................20
</TABLE>
2
<PAGE> 3
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
-------- --------
(NOTE 1) (UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................... $ 4,068 $ 3,347
Accounts receivable - trade, net of allowance of $378 in
1999 and $365 in 2000 ............................................. 7,273 6,090
Accounts receivable - other ......................................... 478 725
Notes receivable .................................................... 762 769
Inventories ......................................................... 15,521 20,429
Income and value added taxes receivable ............................. 1,478 1,755
Prepaid expenses .................................................... 1,011 791
-------- --------
Total current assets .......................................... 30,591 33,906
Property, plant and equipment, net ..................................... 41,387 42,114
Deferred income taxes .................................................. 2,788 2,788
Goodwill, net .......................................................... 2,958 2,938
Identifiable intangible assets ......................................... 166 143
Due from related parties ............................................... 1,602 1,599
Notes receivable, less current portion ................................. 1,060 982
Other assets ........................................................... 1,800 1,813
-------- --------
Total assets .................................................. $ 82,352 $ 86,283
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ............................................... $ 21,551 $ 22,643
Current portion of long-term debt ................................... 898 717
Accounts payable - trade ............................................ 3,209 2,898
Accrued liabilities ................................................. 4,359 4,630
Income taxes payable ................................................ 104 --
Deferred income taxes ............................................... 5,333 5,305
-------- --------
Total current liabilities ..................................... 35,454 36,193
Long-term debt, less current portion ................................... 6,207 9,384
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 13,938,326 in
1999 and in 2000 ................................................ 139 139
Additional paid-in capital .......................................... 63,766 63,766
Accumulated deficit ................................................. (23,214) (23,199)
-------- --------
Total shareholders' equity .................................... 40,691 40,706
-------- --------
Total liabilities and shareholders' equity .................... $ 82,352 $ 86,283
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 2000
----------- -----------
(IN THOUSANDS, EXCEPT
FOR
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales ........................................ $ 16,253 $ 14,457
Cost of products sold ............................ 11,634 10,769
----------- -----------
Gross profit ..................................... 4,619 3,688
Selling, general and administrative expenses ..... 3,553 3,008
----------- -----------
Income from operations ........................... 1,066 680
Other income (expense):
Interest expense .............................. (848) (775)
Interest income ............................... 22 113
Foreign currency translation gain (loss) ...... (311) 126
----------- -----------
(1,137) (536)
----------- -----------
Income (loss) before disposal of certain
operations and income taxes ................... (71) 144
Operating results of certain operations
disposed of during 1999:
Net sales ................................ 4,077 --
Costs and expenses ....................... (4,374) --
----------- -----------
Operating loss ........................... (297) --
----------- -----------
Income (loss) before income taxes ................ (368) 144
Income tax expense ............................... 863 129
----------- -----------
Net income (loss) ................................ $ (1,231) $ 15
=========== ===========
Basic and diluted earnings (loss) per share ...... $ (0.10) $ 0.00
----------- -----------
</TABLE>
See accompanying notes.
4
<PAGE> 5
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 2000
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ......................................................... $ (1,231) $ 15
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation .......................................................... 740 652
Amortization of intangible assets ..................................... 160 43
Deferred income taxes ................................................. 1,048 (28)
Cash provided by (used in) operating working capital:
Receivables ....................................................... (1,172) 652
Inventories ....................................................... (4,005) (4,908)
Prepaid expenses .................................................. 336 220
Accounts payable and accrued expenses ............................. (10) (144)
----------- -----------
Net cash used in operating activities ..................................... (4,134) (3,498)
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................ (928) (1,379)
Decrease (increase) in amounts due from related parties ................... (8) 3
Decrease (increase) in other assets ....................................... (67) 65
----------- -----------
Net cash used in investing activities ..................................... (1,003) (1,311)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock ................................ 5,000 --
Increase in short-term debt ............................................... 4,207 1,092
Proceeds from long-term debt .............................................. 55 3,198
Payments of long-term debt ................................................ (124) (202)
----------- -----------
Net cash provided by financing activities ................................. 9,138 4,088
----------- -----------
Net increase (decrease) in cash and cash equivalents ...................... 4,001 (721)
Cash and cash equivalents at beginning of period .......................... 4,247 4,068
----------- -----------
Cash and cash equivalents at end of period ................................ $ 8,248 $ 3,347
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
THE UNIMARK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The Company is a producer and marketer of
Sunfresh(R) brand citrus and tropical fruit products.
The UniMark Group, Inc. ("UniMark" or the "Company") conducts
substantially all of its operations through its wholly-owned operating
subsidiaries: UniMark Foods, Inc. ("UniMark Foods"), UniMark International,
Inc. ("UniMark International"), Industrias Citricolas de Montemorelos, S.A. de
C.V. ("ICMOSA"), AgroMark, S.A. de C.V. ("AgroMark"), Flavorfresh Limited
("Flavorfresh", formerly UniMark Foods Europe Limited) and Grupo Industrial
Santa Engracia, S.A. de C.V. ("GISE").
Going Concern Considerations: As of March 31, 2000 the Company has
several projects and commitments requiring substantial capital. The Company's
cash requirements for 2000 and beyond will depend primarily upon the level of
sales and gross margins, expenditures for capital equipment and improvements,
investments in agricultural projects, the timing of inventory purchases,
increased acceptance of recently introduced products and necessary reductions
of debt. The Company has, in recent years, relied upon sales of its common
stock to its principal shareholder and bank financing to finance its working
capital and certain of its capital expenditure needs. Although the Company is
exploring various financing options, possibly including a sale or other
independent financing of one of its lines of business, and believes sufficient
capital will ultimately be available, there can be no assurances that adequate
financing or capital can be obtained on acceptable terms or at all. The
inability to obtain sufficient debt or equity capital for these projects and
commitments and for working capital requirements could have a material adverse
effect on the Company and its projects including the realization of the amounts
capitalized, deferred costs and deposits related to these projects and
commitments.
The Company's revolving credit facilities were scheduled to mature on
March 31, 2000, but in a commitment letter dated April 13, 2000, the lender has
agreed to extend the maturity to January 1, 2001. In addition, the primary
lender has agreed to make certain modifications and amendments to the
agreements covenants and conditions. The amendment to the covenants will
eliminate the fixed charge and interest coverage ratios, increase the tangible
net worth covenant and modify the current ratio and total liabilities to
tangible net worth ratio to reduce required levels. The amendment also requires
the Company to obtain at least $2.5 million in new equity by July 1, 2000,
increases the interest rates associated with the outstanding borrowings
effective June 1, 2000 and slightly modifies the borrowing base formulas.
Although the Company's revolving credit facilities are being extended until
January 1, 2001, no assurances can be given that the lender will continue to
renew such loan facilities and, perhaps the Company's ability to continue as a
going concern.
The Company obtains a substantial amount of its raw materials from
third-party suppliers throughout various growing regions in Mexico and Texas. 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 material or otherwise adversely affect
the Company's operations. Competitors may be affected differently 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 adversely affected.
Interim Financial Statements: The condensed consolidated financial
statements at March 31, 2000, 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
6
<PAGE> 7
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 for the year
ended December 31, 1999 filed with the Securities and Exchange Commission. The
results of operations for the three months ended March 31, 2000 are not
necessarily indicative of future financial results.
Year End Balance Sheet: The condensed consolidated balance sheet at
December 31, 1999 has been derived from the audited consolidated 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.
Reclassifications: In prior periods, the Company classified freight
expense and discounts and allowances associated with customer invoicing as
operating expenses. In connection with the Company's further automation of its
order entry and pricing systems to customers and in improving changes in
controls over these costs, these expenses are now being classified differently
in the financial statements. Discounts and allowances are now classified as a
reduction in net sales and freight expense as a charge to cost of products
sold. All prior and current year operating results have been reclassified to
conform to the new presentation.
As discussed in Note 2 below, the Company disposed of several operations
in 1999. The condensed consolidated statements of operations have been
reclassified for all periods presented to disclose separately the operating
results of the disposed operations.
NOTE 2 - DISPOSAL OF CERTAIN OPERATIONS
In September 1999, the Board of Directors of the Company approved a
strategic plan for its packaged fruit segment designed to maximize shareholder
value by leveraging the Company's manufacturing facilities in Mexico with its
Sunfresh(R) brand and distribution network in the United States. Two of the
Company's subsidiaries, Les Produits Deli-Bon Inc. ("Deli-Bon") and Simply
Fresh Fruit, Inc. ("Simply Fresh") primarily sold private label fruit salads to
the food service industry and non-branded fresh cut fruit. Because the Company
believed that these lines of business offered less attractive growth
opportunities and lower operating margins than its Sunfresh(R) brand product
lines and did not further the Company's strategic objectives, the decision was
reached to divest these subsidiaries.
During October 1999, the Company completed the sale of its Canadian
subsidiary, Deli-Bon, in a transaction valued at approximately $1.4 million,
and sold substantially all the assets of its California based subsidiary,
Simply Fresh, in a transaction valued at approximately $3.6 million. Both
transactions included cash payments at closing and short and long-term secured
notes. In addition, the Simply Fresh sale included the forgiveness of the
remaining payments under a certain covenant-not-to-compete and the return to
the Company of 68,182 shares of UniMark common stock owned by the principal
buyer.
These transactions resulted in the Company recording losses of
approximately $1.5 million in 1999. The results of operations for both Deli-Bon
and Simply Fresh for the three months ended March 31, 1999 have been
reclassified from sales and expenses and included in the condensed consolidated
statements of operations as "Operating results of certain businesses disposed
of during 1999". Additionally, the reportable segment information for packaged
fruit in Note 8 has been restated to reflect the above reclassifications.
NOTE 3 - LIQUIDITY AND CAPITAL RESOURCES
The Company has existing loan agreements with Cooperative Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term
dollar denominated debt of up to $15.9 million at
7
<PAGE> 8
March 31, 2000. These agreements are as follows: (i) a revolving credit
agreement to provide up to $8.0 million of committed funds collateralized by
finished goods inventories in the U.S. and accounts receivable from U.S.
customers and (ii) revolving credit agreements to provide discretionary
uncommitted lines up to $7.9 million collateralized by finished goods
inventories in Mexico and accounts receivable from export sales by the
Company's Mexican subsidiaries. At March 31, 2000 the Company had outstanding
loan balances under the revolving credit agreements of $13.5 million.
These agreements are cross-collateralized and guaranteed by the Company
and its subsidiaries and require the Company to maintain certain consolidated
financial performance levels relative to tangible net worth, working capital
and total debt. In addition, the agreements contain restrictions on the
issuance of additional shares of stock and the payment of dividends, among
other things, without prior written consent of the bank.
As of December 31, 1999, the Company was not in compliance with certain
covenants of its loan agreements with its primary lender including covenants
that restrict transactions with affiliates and consolidated financial
performance ratios to working capital, total debt and debt service and,
accordingly, was in default of these agreements. The Company has received
waivers of these defaults and any additional defaults that may exist at March
31, 2000 from the primary lender. In addition, the primary lender has committed
to extend the maturity date of the agreements to January 1, 2001 and make
certain modifications and amendments to the agreements covenants and
conditions. The amendment to the covenants will eliminate the fixed charge and
interest coverage ratios, increase the tangible net worth covenant and modify
the current ratio and total liabilities to tangible net worth ratio to reduce
required levels. The amendment also requires the Company to obtain at least
$2.5 million in new equity by July 1, 2000, increases the interest rates
associated with the outstanding borrowings effective June 1, 2000 and slightly
modifies the borrowing base formulas.
In recent years, the Company has relied upon bank financing, principally
short-term, to finance its working capital and certain expenditure needs.
Although these revolving credit facilities with Rabobank Nederland are being
extended until January 1, 2001, no assurances can be given that Rabobank
Nederland will continue to renew such loan facilities or that such loans will
not be called in the event of default due to noncompliance with the loan
covenants during the year 2000. Presently, the Company is in discussions with
other financial institutions to replace existing working capital facilities and
to establish a permanent long-term debt facility. Although no assurances can be
given, the Company believes it will be able to obtain such working capital and
long-term debt facilities on terms acceptable to the Company. The failure to
obtain such facilities could have a material adverse effect on the Company and
its ability to continue as a going concern.
The Company's cash requirements for the remainder of 2000 and beyond will
depend primarily upon the level of sales and gross margins, expenditures and
capital equipment and improvements, investments in agricultural projects, the
timing of inventory purchases, increased acceptance of recently introduced
products and necessary reductions of debt. Presently, the Company is in
discussions with other financial institutions regarding further extending or
replacing it existing debt facilities. Although no assurances can be given, the
Company believes it will be able to obtain such debt facilities on terms
acceptable to the Company. The failure to obtain such debt facilities could
have a material adverse effect on the Company. UniMark believes that
anticipated revenue from operations, the Commitment described below and
existing and future debt facilities will be adequate for its working capital
requirements for at least the next twelve months.
On February 21, 2000, the Company entered into a $5.1 million (48,000,000
Mexican pesos) nine year term financing agreement (the "Agreement") with Fondo
de Captialization e Inversion del Sector Rural ("FOCIR"), a public Trust of the
Mexican Federal Government that invests in agricultural projects with long-term
viability. Under the terms of the Agreement, FOCIR will provide up to $5.1
million to fund additional Lemon Project costs, which will include land
preparation, planting, equipment, irrigation systems and grove maintenance.
This financing represents the purchase of an equity interest in GISE of
8
<PAGE> 9
approximately 17.6%. Amounts advanced under this Agreement will be classified
outside equity due to mandatory redemption provisions. As of March 31, 2000,
advances under the Agreement were $3.2 million (30,000,000 Mexican pesos).
The terms of the Agreement provide for the calculation and accrual of
annual accretion using one of two alternative methods. The first method
determines accretion by multiplying the year's Mexican inflation index rate
plus 4.2% by the FOCIR balance. The second method determines annual accretion
by multiplying GISE's shareholders equity, using Mexican generally accepted
accounting principles, at the end of the year by a factor of 1.036 and then
multiplying by the FOCIR equity interest percent. The calculation that results
in the greater amount will be the annual accretion amount. Accretion
accumulates annually over the nine-year period of the Agreement and is paid
only upon expiration or early termination of the Agreement. As of March 31,
2000, accretion accrued under the Agreement amounted to $36,000. The Agreement
also contains, among other things, certain provisions relating to GISE's future
financial performance, the establishment of an irrevocable trust guaranteeing
the FOCIR loan, which includes transferring to the trust GISE common shares
that represent 33.4% of GISE's outstanding shares and the governance of GISE.
On April 17, 2000, the Company entered into a Stand-by Funding Commitment
(the "Commitment") with an affiliate of its largest shareholder (the
"Affiliate") to sell, at the Company's option, on or before July 1, 2000, a $2.5
million 12% Convertible Subordinated Debenture (the "Debenture") subject to
certain terms and conditions. The Affiliate, upon purchase, has the option at
anytime during the five-year period to convert the Debenture into Company common
stock at 75% of the average closing prices for the Company's common stock over
the thirty-day period prior to exercise. The Commitment will terminate upon
completion of specified future transactions by the Company.
NOTE 4 - RELATED PARTY TRANSACTIONS
Effective January 1, 1995, the Company 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, the Company is obligated to pay IHMSA
an operating fee sufficient to cover the interest payments on IHMSA's $3.4
million of outstanding debt. The Company is responsible for all raw material
and operating costs and the sale of the finished goods produced at the IHMSA
plant. The Vaquero family owns collectively an approximate 24% interest in
IHMSA. Certain members of the Vaquero family are officers, shareholders and
directors of the Company. Under the agreement, which has been extended to
January 1, 2001, the Company has the option to buy the IHMSA facility for $4.5
million.
The Company has elected to advance funds to IHMSA to retire certain of
its outstanding debt since, under the terms of the operating agreement, the
Company would benefit from the IHMSA debt reduction. At March 31, 2000 amounts
due from IHMSA of $1,599,000 includes $1,481,000 that was a cash advance used
to reduce IHMSA's outstanding debt. This amount will be applied to the purchase
price when the Company purchases the facility pursuant to its purchase option,
which is expected to occur during 2000.
Effective July 1, 1995, the Company entered into a ten-year operating
agreement with Empacadora de Naranjas Aztec, S.A. de C.V. ("Azteca"), to
operate a processing plant in Montemorelos, Nuevo Leon, Mexico. The operating
agreement provides for payments in the amount of (i) interest on existing debt
of approximately $220,000 with credit institutions, (ii) asset tax, and (iii)
annual property tax. Prior to this time, Azteca "co-packed" chilled grapefruit
sections and mango slices for the Company. The Vaquero family owns collectively
an approximate 14.3% interest in Azteca. During the term of the operating
agreement, the Company has the right of first refusal to buy the Azteca
facility at its then fair market value.
In November 1995, the Company entered into a lease agreement with Loma
Bonita Partners, a Texas general partnership, for approximately 260 hectares
(642 acres) of land in Loma Bonita, Oaxaca, Mexico
9
<PAGE> 10
for the development of citrus groves. The lease commenced in December 1995 and
expires after ten years. Loma Bonita Partners is 50% owned by an officer, who
is also a director and shareholder of the Company. The Company believes that
said lease agreement is on terms no less favorable to the Company than would be
available from unrelated third parties.
The Company operates a 144 acre grapefruit grove located close to the
ICMOSA plant in Montemorelos pursuant to a ten-year operating agreement that
expires in 2000. Per the agreement, the Company operates the grove and
purchases all the grapefruit produced at a formula price tied to purchases from
unrelated third parties. The grove is owned by a partnership that consists
primarily of shareholders of Azteca. The Vaquero family owns a 14.3% interest
in this partnership. The Company believes that said arrangement is on terms no
less favorable to the Company than would be available from unrelated third
parties.
NOTE 5 - CAPITAL STOCK
On March 29, 1999, the Company sold 2,000,000 newly issued shares of
common stock at a purchase price of $2.50 per share, for an aggregate purchase
price of $5,000,000 to M & M Nominee L.L.C. ("M & M"). In connection with the
transaction, M & M surrendered options to acquire an additional 2,000,000
shares of common stock at a purchase price of $4.5375 per share issued to them
in July 1998.
NOTE 6 - NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 2000
------------- ------------
(IN THOUSANDS, EXCEPT
FOR
PER SHARE AMOUNTS)
<S> <C> <C>
NUMERATOR
Net income (loss) .................................... $ (1,231) $ 15
DENOMINATOR
Denominator for basic and diluted earnings per share -
weighted average shares outstanding ................ 12,005 13,938
========== ==========
Basic and diluted earnings (loss) per share .......... $ (0.10) $ 0.00
========== ==========
</TABLE>
The Company had options and warrants outstanding of 447,000 at March 31,
1999 and had options outstanding of 528,000 at March 31, 2000 that were not
included in their respective periods per share calculations because their
effect would have been anti-dilutive.
Loss per basic and diluted share for the three months ended March 31,
1999, calculated as if the Deli-Bon and Simply Fresh dispositions had occurred
on January 1, 1999, would have been $(0.08).
10
<PAGE> 11
NOTE 7 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods:
Cut fruits .............. $ 6,750 $ 8,690
Juice and oils .......... 2,814 5,876
------------ ------------
9,564 14,566
Pineapple orchards .......... 1,717 1,753
Raw materials and supplies .. 2,995 2,823
Advances to suppliers ....... 1,245 1,287
------------ ------------
Total ............ $ 15,521 $ 20,429
============ ============
</TABLE>
NOTE 8 - SEGMENT INFORMATION
The Company has two reportable segments: packaged fruit and juice and
oil.
<TABLE>
<CAPTION>
PACKAGED JUICE
FRUIT & OIL TOTAL
------------ ----------- -----------
<S> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Revenues from external customers........... $11,562 $ 2,895 $ 14,457
Inter-segment revenues..................... 56 -- 56
Segment profit (loss)...................... 718 (199) 519
THREE MONTHS ENDED MARCH 31, 1999
Revenues from external customers........... $ 14,137 $ 2,116 $ 16,253
Inter-segment revenues..................... 145 -- 145
Segment profit (loss) ..................... 542 (170) 372
</TABLE>
The following are reconciliations of reportable segment profit or loss to
the Company's consolidated totals.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 2000
---------- ----------
<S> <C> <C>
Total profit for reportable segments .................. $ 372 $ 519
Amortization of subsidiary acquisition costs
recognized in consolidation ......................... (70) (70)
Unallocated corporate general and administrative
expenses ............................................ (373) (305)
---------- ----------
Income (loss) before disposal of certain operations
and income taxes.................................... (71) 144
Operating loss of certain operations disposed of
in 1999 ............................................ (297) --
========== ==========
Income (loss) before income taxes ................... $ (368) $ 144
========== ==========
</TABLE>
11
<PAGE> 12
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. 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 2000 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: dependence upon
availability and price of fresh fruit; competition; dependence upon significant
customers; uncertainty of new product development and market acceptance of new
products; 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 prospectus dated June 14, 1996.
CONVERSION TO U.S. GAAP
The Company conducts substantially all of its operations through its
wholly owned operating subsidiaries. ICMOSA is a Mexican corporation with its
headquarters located in Montemorelos, Nuevo Leon, Mexico, whose principal
activities consist of operating 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, as well as managing the
Company's Lemon Project. ICMOSA and GISE 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 and GISE's
financial statements have been converted to United States generally accepted
accounting principles ("U.S. GAAP") and U.S. dollars. Flavorfresh Limited
maintains its accounting records in British pounds sterling and in accordance
with United Kingdom generally accepted accounting principles and is subject to
United Kingdom income tax laws.
Unless otherwise indicated, all dollar amounts included herein are set
forth in U.S. dollars. The functional currency of UniMark and its subsidiaries
is the U.S. dollar.
RESULTS OF OPERATIONS
The following table sets forth certain condensed consolidated financial
data, after reflecting 1) disposition of certain operations disposed of during
1999 and 2) the reclassifications of customer discounts and allowances and
freight expenses (which are more fully discussed in Notes 1 and 2 to the
condensed consolidated financial statements), expressed as a percentage of net
sales for the periods indicated:
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 2000
------- -------
<S> <C> <C>
Net sales ............................................. 100.0% 100.0%
Cost of products sold ................................. 71.6 74.5
------- -------
Gross profit .......................................... 28.4 25.5
Selling, general and administrative expenses .......... 21.9 20.8
------- -------
Income from operations ................................ 6.5 4.7
Other income (expense):
Interest expense .................................. (5.2) (5.4)
Interest income ................................... 0.1 0.8
Foreign currency translation gain (loss) .......... (1.9) 0.9
------- -------
Income (loss) before disposal of certain operations and
income taxes ...................................... (0.5) 1.0
Operating loss of certain operations disposed of
during 1999 ....................................... (1.8) --
------- -------
Income (loss) before income taxes ..................... (2.3) 1.0
Income tax expense .................................... 5.3 .9
------- -------
Net income (loss) ..................................... (7.6) 0.1
======= =======
</TABLE>
Three Months Ended March 31, 2000 and 1999
Net sales consist of packaged fruit and citrus juice and oil. Packaged
fruit sales decreased $2.5 million from $14.1 million in 1999 to $11.6 million
in 2000, or 17.7%. This sales decrease was primarily caused by a 59.2% decrease
in food service sales from $1.9 million in 1999 to $0.8 million in 2000, a
decrease in retail sales of 9.2% from $7.2 million in 1999 to $ 6.6 million in
2000 and a decrease in sales to Japan of 20.8% from $2.8 million in 1999 to
$2.2 million in 2000. Food service and retail sales decreases were impacted by
reduced product lines and product offerings as part of the Company's previously
disclosed cost cutting efforts, which were made in the second half of 1999. The
decrease in sales to Japan was caused by reduced demand for these products in
the first quarter of 2000.
Citrus juice and oil sales increased 35.2% from $2.2 million in 1999 to
$2.8 million in 2000. This increase resulted primarily from a slight
improvement in the market prices of frozen concentrate orange juice in the 2000
period compared to the 1999 period, as well as an increase in the availability
of raw materials.
As a result of the foregoing, net sales decreased 11.1% from $16.3
million in 1999 to $14.5 million in 2000 due to reduced sales in packaged fruit
which was partially offset by the increase in citrus juice and oil sales.
Gross profit, as a percentage, for packaged fruit sales increased from
28.7% in 1999 to 30.2% in 2000. This increase was primarily the result of
favorable raw material costs, elimination of lower margin products and improved
controls over allowances and discounts given to customers.
Citrus juice and oil gross profit decreased from 26.5% in 1999 to 6.7%
in 2000. This decrease was caused by increased production costs at GISE's three
processing plants and increased prices in raw material costs.
Gross profit, overall, as a percentage, decreased as a percent of net
sales from 28.4% in 1999 to 25.5% in 2000 due to the increase in packaged fruit
gross profit being offset by the significant reduction in juice and oil gross
profit.
13
<PAGE> 14
Selling, general and administrative expenses decreased from $3.6 million
in 1999 to $3.0 million in 2000, or 15.3%. This decrease was due to improved
controls over expenses, reduced spending levels and reductions in selling
expenses associated with the decrease in packaged fruit net sales.
Interest expense decreased in 2000 by $73,000 from the 1999 period. This
decrease in interest expense was due to a $1.6 million reduction in debt at
March 31, 2000 as compared to March 31, 1999.
Interest income increased by $0.1 million in 2000 as compared to 1999 and
was primarily from the temporary cash investment of excess cash balances.
Foreign currency translation gain (loss) increased from a net loss of
$0.3 million in 1999 to a net gain of $0.1 million in 2000. This increase was
due to translation gains on local currency denominated net monetary liabilities
in Mexico.
Operating results of certain operations disposed of during 1999 present
separately the operating results applicable to those operations disposed of in
1999.
Income tax expense of $129,000 was recorded in 2000 on income before
income taxes of $144,000. This tax expense is greater than the expected taxes
at statutory rates due primarily to differences between book income or loss
reported in Mexico (as stated in U.S. dollars and U.S. generally accepted
accounting principles) and Mexican taxable income, or loss, calculated in
Mexican pesos according to Mexican income tax laws. In addition, the Company
has provided a valuation allowance for net operating losses generated in the
U.S., and accordingly, no income tax benefits from U.S. operating losses are
recognized.
As a result of the foregoing, the Company reported a net loss of
$1,231,000 in 1999 and net income of $15,000 in 2000.
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.
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 (loss) 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
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 have
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
14
<PAGE> 15
loss to the extent there are net deferred tax assets or a transaction gain to
the extent there are net deferred tax liabilities.
MARKET RISK FACTORS
A significant portion of the Company's operations consists of processing
and sales activities in foreign jurisdictions. The Company processes its
products in Mexico and sells the products in that market as well as the United
States, European and Japanese markets. As a result, the Company's financial
results could be significantly affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in the foreign markets in
which the Company distributes its products. The Company's operating results are
exposed to changes in exchange rates between the U.S. dollar and the Mexican
peso, the British pound sterling and the Japanese yen.
When the U.S. dollar strengthens against these foreign currencies, the
value of nonfunctional currency sales decreases. When the U.S. dollar weakens,
the functional currency amount of sales increases. Overall, the Company is a
net payer of currencies other than the U.S. dollar and, as such, benefits from
a stronger dollar.
The Company procures and processes substantially all of its products in
Mexico for export to the United States, Europe and Japan. The cost of citrus
procured in Mexico generally reflects the spot market price for citrus in the
United States and all of UniMark's export sales from Mexico 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
Mexican peso. Labor and certain other processing costs are Mexican peso
denominated and, consequently, these costs are impacted by fluctuations in the
value of the Mexican peso relative to the U.S. dollar.
The Company's juice and oil segment primarily produces and sells frozen
concentrate orange juice. The price the Company is able to sell this product
for is generally determined by reference to the commodity futures market price,
over which the Company has no control.
The Company's interest expense is most sensitive to changes in the
general level of U.S. interest rates and London interbank offered rates
("LIBOR"). In this regard, changes in these interest rates affect the interest
paid on the Company's debt.
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 and Texas. 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 adversely affected.
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 sale in
supermarkets in North America. In addition, a substantial portion of UniMark's
exports to Japan are processed and shipped during the first and fourth quarter
each year. Management believes UniMark's quarterly net sales will continue to
be impacted by this pattern of seasonality.
15
<PAGE> 16
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plan
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date change. The Company
is not aware of any material problems resulting from Year 2000 issues, either
with its products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, cash and cash equivalents totaled $3.3 million, a
decrease of $0.7 million from year-end 1999. During 2000, operating activities
utilized cash of $3.5 million primarily due to seasonal increases in juice and
oil inventories of $3.1 million and packaged fruit inventories of $1.0 million.
The Company has existing loan agreements with Cooperative Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term
dollar denominated debt of up to $15.9 million at March 31, 2000. These
agreements are as follows: (i) a revolving credit agreement to provide up to
$8.0 million of committed funds collateralized by finished goods inventories in
the U.S. and accounts receivable from U.S. customers and (ii) revolving credit
agreements to provide discretionary uncommitted lines up to $7.9 million
collateralized by finished goods inventories in Mexico and accounts receivable
from export sales by the Company's Mexican subsidiaries. At March 31, 2000, the
Company had outstanding loan balances under the revolving credit agreements of
$13.5 million.
These agreements are cross-collateralized and guaranteed by the Company
and its subsidiaries and require the Company to maintain certain consolidated
financial performance levels relative to tangible net worth, working capital
and total debt. In addition, the agreements contain 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.
As of December 31, 1999, the Company was not in compliance with certain
covenants of its loan agreements with its primary lender including covenants
that restrict transactions with affiliates and consolidated financial
performance ratios relative to working capital, total debt and debt service
and, accordingly, was in default of these agreements. The Company has received
waivers of these defaults and any additional defaults that may exist at March
31, 2000 from the primary lender. In addition, the primary lender has committed
to extend the maturity date of the agreements to January 1, 2001 and make
certain modifications and amendments to the agreements covenants and
conditions. The amendment to the covenants will eliminate the fixed charge and
interest coverage ratios, increase the tangible net worth covenant and modify
the current ratio and total liabilities to tangible net worth ratio to reduce
required levels. The amendment also requires the Company to obtain at least
$2.5 million in new equity by July 1, 2000, increases the interest rates
associated with the outstanding borrowings effective June 1, 2000 and slightly
modifies the borrowing base formulas.
In recent years, the Company has relied upon bank financing, principally
short term, to finance its working capital and certain of its capital
expenditure needs. Although these revolving credit facilities with Rabobank
Nederland are being extended until January 1, 2001, no assurances can be given
that
16
<PAGE> 17
Rabobank Nederland will continue to renew such loan facilities or that such
loans will not be called in the event of default due to noncompliance with the
loan covenants during the year 2000. Presently, the Company is in discussions
with other financial institutions to replace existing working capital
facilities and to establish a permanent long-term debt facility. Although no
assurances can be given, the Company believes it will be able to obtain such
working capital and long-term debt facilities on terms acceptable to the
Company. The failure to obtain such facilities could have a material adverse
effect on the Company and its ability to continue as a going concern.
In December, 1996, the Company entered into a deposit, operation and
stock purchase agreement with the owners of Frutalamo, S.A. de C.V.
("Frutalamo") for the operation of the Frutalamo juice processing plant.
Pursuant to the terms of the agreement, the Company has paid a non-refundable
deposit of $1.9 million for the right to purchase all the issued and
outstanding shares of stock of Frutalamo from its existing shareholders. The
agreement also required the Company to pay a contractual penalty of $1.0
million to the owners of Frutalamo in the event a purchase of the shares is not
completed. The Company has subsequently entered into a letter of intent to
purchase the shares, which applies the previous deposits paid to Frutalamo as
the down payment and waives the contractual penalty of $1.0 million.
In April, 1998, GISE and The Coca-Cola Export Corporation ("Coca-Cola"),
an affiliate of The Coca-Cola Company, entered into a new twenty year Supply
Contract (the "Lemon Project"), with a ten year renewal option, for the
production of Italian lemons. Pursuant to the terms of the Supply Contract,
GISE will plant and grow 3,500 hectares (approximately 8,650 acres) of Italian
lemons within the next three years for sale to Coca-Cola at pre-determined
prices. The Supply Contract requires Coca-Cola to provide, free of charge, up
to 875,000 lemon trees, enough to plant approximately 2,800 hectares. In
addition, the Supply Contract requires Coca-Cola to purchase all the production
from the project. The planting program began in November 1996 and harvesting of
the first crops is projected to begin in late 2000 with full production
scheduled for 2013. The status of the Lemon Project as of March 31, 2000 is as
follows:
<TABLE>
<CAPTION>
Hectares Acres
-------- -----
<S> <C> <C>
Land -
Acquired 3,074 7,592
Unpurchased or subcontracted 468 1,156
Preparation and Planting -
Prepared and planted 2,380 5,878
Prepared but not planted 435 1,074
Acquired land to be prepared and planted 259 640
Expenditures -
Total projected expenditures $18.5 million
Incurred since inception 11.5 million
Projected for year 2000 and beyond 7.0 million
</TABLE>
Effective January 1, 1995, the Company 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, the Company is obligated to pay IHMSA
an operating fee sufficient to cover the interest payments on IHMSA's existing
outstanding debt. During the term of the operating agreement, which has been
extended to January 1, 2001, the Company has the option to buy the IHMSA
facility for $4.5 million. Since, under the terms of the operating agreement,
the Company would benefit from the reduction of IHMSA's debt, the Company
elected to advance funds to IHMSA to retire certain of its outstanding debt. At
March 31, 2000 amounts due from IHMSA of $1,599,000 includes $1,481,000 that
was a cash advance used to reduce IHMSA's outstanding debt. This amount will be
applied to the purchase price when the Company elects to purchase the facility
pursuant to its purchase option, which is expected to occur during 2000. The
failure or inability of the Company to exercise its purchase option could have
a material adverse affect on the Company.
17
<PAGE> 18
The Company's cash requirements for the remainder of 2000 and beyond will
depend primarily upon the level of sales and gross margins, expenditures for
capital equipment and improvements, investments in agricultural projects, the
timing of inventory purchases, increased acceptance of recently introduced
products and necessary reductions of debt. Presently, the Company is in
discussions with other financial institutions regarding further extending or
replacing its existing debt facilities. Although no assurances can be given,
the Company believes it will be able to obtain such debt facilities on terms
acceptable to the Company. The failure to obtain such debt facilities could
have a material adverse effect on the Company. UniMark believes that
anticipated revenue from operations, the Commitment described below and
existing and future debt facilities will be adequate for its working capital
requirements for at least the next twelve months.
On February 21, 2000, the Company entered into a $5.1 million (48,000,000
Mexican pesos) nine year term financing agreement (the "Agreement") with Fondo
de Capitalizacion e Inversion del Sector Rural ("FOCIR"), a public Trust of the
Mexican Federal Government that invests in agricultural projects with long-term
viability. Under the terms of the Agreement, FOCIR will provide up to $5.1
million to fund additional Lemon Project costs, which will include land
preparation, planting, equipment, irrigation systems and grove maintenance.
This financing represents the purchase of an equity interest in GISE of
approximately 17.6%. Amounts advanced under this Agreement will be classified
outside equity due to mandatory redemption provisions. As of March 31, 2000,
advances under the Agreement were $3.2 million (30,000,000 Mexican pesos).
The terms of the Agreement provide for the calculation and accrual of
annual accretion using one of two alternative methods. The first method
determines accretion by multiplying the year's Mexican inflation index rate
plus 4.2% by the FOCIR balance. The second method determines annual accretion
by multiplying GISE's shareholders equity, using Mexican generally accepted
accounting principles, at the end of the year by a factor of 1.036 and then
multiplying by the FOCIR equity interest percent. The calculation that results
in the greater amount will be the annual accretion amount. Accretion
accumulates annually over the nine-year period of the Agreement and is paid
only upon expiration or early termination of the Agreement. As of March 31,
2000, accretion accrued under the Agreement amounted to $36,000. The Agreement
also contains, among other things, certain provisions relating to GISE's future
financial performance, the establishment of an irrevocable trust guaranteeing
the FOCIR loan, which includes transferring to the trust GISE common shares
that represent 33.4% of GISE's outstanding shares and the governance of GISE.
On April 17, 2000, the Company entered into a Stand-by Funding Commitment
(the "Commitment") with an affiliate of its largest shareholder (the
"Affiliate") to sell, at the Company's option, on or before July 1, 2000, a
$2.5 million 12% Convertible Subordinated Debenture (the "Debenture") subject
to certain terms and conditions. The Affiliate, upon purchase, has the option
at anytime during the a five year period to convert the Debenture into Company
common stock at 75% of the average closing prices for the Company's common
stock over a thirty-day period prior to exercise. The Commitment will terminate
upon completion of specified future financial transactions by the Company.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal actions arising in the ordinary course of
business. Management does not believe that the outcome of any such legal action
would have a material adverse effect on the Company's financial position or
results of operations.
ITEM 2. SALE OF UNREGISTERED SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
21 Subsidiaries of the Registrant
27 Financial Data Schedule
B. Reports on Form 8-K
None
19
<PAGE> 20
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 19, 2000 /s/ Soren Bjorn
---------------------------
Soren Bjorn, President
(Principal Executive Officer)
Date: May 19, 2000 /s/ Charles A. Horne
---------------------------
Charles A. Horne, Chief Financial Officer
(Principal Accounting Officer)
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE UNIMARK GROUP, INC.
1. UniMark Foods, Inc., a Texas Corporation
2. UniMark International, Inc., a Texas Corporation
3. Industrias Citricolas de Montemorelos, S.A. de C.V., a company
organized under the Laws of Mexico
4. Grupo Industrial Santa Engracia, S.A. de C.V., a company organized
under the laws of Mexico
5. Simply Fresh Fruit, Inc. a California corporation
6. Agromark, S.A. de C.V., a corporation organized under the laws of
Mexico
7. Gisalamo, S.A. de C.V., a company organized under the laws of Mexico
8. Flavorfresh Limited (formerly UniMark Foods Europe Limited), a company
organized under the laws of the United Kingdom
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,347
<SECURITIES> 0
<RECEIVABLES> 6,455
<ALLOWANCES> 365
<INVENTORY> 20,429
<CURRENT-ASSETS> 33,906
<PP&E> 52,139
<DEPRECIATION> 10,025
<TOTAL-ASSETS> 86,283
<CURRENT-LIABILITIES> 36,193
<BONDS> 9,384
0
0
<COMMON> 139
<OTHER-SE> 40,567
<TOTAL-LIABILITY-AND-EQUITY> 86,283
<SALES> 14,457
<TOTAL-REVENUES> 14,457
<CGS> 10,769
<TOTAL-COSTS> 10,769
<OTHER-EXPENSES> 3,008
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 775
<INCOME-PRETAX> 144
<INCOME-TAX> 129
<INCOME-CONTINUING> 15
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
