<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
(MARK ONE) FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JANUARY 31, 1996
----------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from -------------------------- to -------------------
Commission file number 1-6339
UNIFLEX, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 11-2008652
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
383 West John Street, Hicksville, New York 11802
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 932-2000
Securities registered pursuant to Section 12(b) of the Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
------------------- -------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of April 8, 1996, the aggregate market value of the Registrant's
outstanding voting Common Stock held by non-affiliates of the Registrant was
$11,557,908.
As of April 8, 1996, there were 2,756,382 shares outstanding of the
Registrant's Common Stock, $.10 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference to a
definitive proxy statement to be filed by the Registrant not later than May 30,
1996 pursuant to Regulation 14A.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
Since June 8, 1994, the Registrant's Common Stock, $.10 par
value, has traded on the American Stock Exchange (the "AMEX") under the symbol
"UFX". From August 5, 1993 to June 8, 1994, the Registrant's Common Stock, $.10
par value, was traded on the Nasdaq National Market. Prior thereto, the
Registrant's Common Stock traded on the Nasdaq Stock Market.
The following table sets forth high and low bid prices for the
Company's Common Stock on Nasdaq and the high and low closing sales prices of
the Common Stock on the AMEX for the periods indicated. With respect to Nasdaq
prices, the prices reported reflect inter-dealer quotations and may not
represent actual transactions and do not include retail mark-ups, mark-downs or
commissions.
HIGH LOW
---- ---
Year Ended
January 31, 1996
First Quarter 7-1/2 5-3/4
Second Quarter 9-3/4 5-5/8
Third Quarter 8-3/4 7
Fourth Quarter 10-1/2 7
HIGH LOW
---- ---
Year Ended
January 31, 1995
First Quarter 5-3/4 4-3/4
Second Quarter (through June 8, 1994) 5-3/4 4-3/8
(June 8 - August 31) 6-1/4 5-1/4
Third Quarter 6 4-5/8
Fourth Quarter 7 4-5/8
(b) Holders.
TITLE OF CLASS Approximate Number of Record Holders
(as of April 8, 1996
------------------------------------
Common Stock, Par Value $.10 Per Share 288
-2-
<PAGE>
(c) Dividends.
The Registrant has not declared any cash dividends on its
Common Stock during the two most recent fiscal years.
Payment of cash dividends is within the discretion of the
Registrant's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition of the
Registrant. In addition, the Registrant's revolving credit facility restricts
the payment of cash dividends in any fiscal year to 10% of the Registrant's
consolidated pretax profit.
-3-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
For the Years Ended January 31,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED INCOME
STATEMENT DATA:
Net Sales $31,510,000 $30,133,000 $25,660,000 $22,591,000 $20,574,000
Gross Profit $11,882,000 $11,830,000 $10,159,000 $ 9,058,000 $ 7,717,000
Before Depre-
ciation
Net Income $ 1,459,000 $ 1,166,000 $ 941,000 $ 654,000 $ 95,000
Earnings $ .53 $ .43 $ .35 $ .25 $ .04
Per Share: Note(1)
SELECTED BALANCE
SHEET DATA:
Working Capital $ 6,699,000 $ 5,822,000 $ 5,136,000 $ 3,510,000 $ 1,506,000
Total Assets $16,283,000 $15,318,000 $13,394,000 $12,014,000 $11,213,000
Long-Term Debt(2) $ 2,170,000 $ 3,847,000 $ 3,968,000 $ 3,869,000 $ 2,922,000
Stockholders' Equity $10,245,000 $ 7,285,000 $ 6,186,000 $ 4,961,000 $ 4,254,000
</TABLE>
- ------------------
(1) Computation of earnings per share is based on the weighted average
number of shares actually outstanding plus the shares that would be
outstanding assuming the exercise of dilutive stock options, all of
which are considered to be common stock equivalents. Common stock
equivalents were calculated by the use of the treasury stock method.
(2) Exclusive of current portion of long-term debt.
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
Fiscal year ended January 31, 1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $7,960,409 $7,567,787 $8,754,093 $7,227,674
Gross Profit 2,933,740 2,490,956 3,319,257 2,443,058
Net income $ 374,629 $ 221,439 $ 600,778 $ 261,735
Net income per share $ 0.14 $ 0.08 $ 0.22 $ 0.09
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
Fiscal year ended January 31, 1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $6,922,139 $7,105,050 $8,042,563 $8,063,315
Gross Profit 2,577,173 2,473,893 3,368,337 2,731,734
Net income $ 313,596 $ 137,234 $ 464,572 $ 250,538
Net income per share $ 0.12 $ 0.05 $ 0.17 $ 0.09
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
Fiscal year ended January 31, 1994 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $6,370,124 $6,190,075 $6,932,166 $6,167,635
Gross Profit 2,353,564 2,368,130 2,610,739 2,137,058
Income before cumulative effect of
change in accounting principle 327,142 244,103 253,064 153,965
Net income $ 290,247 244,103 $ 253,064 $ 153,965
Net income per share before cumulative
effect of change in accounting principle $ 0.12 $ 0.08 $ 0.10 $ 0.06
Net income per share $ 0.11 $ 0.08 $ 0.10 $ 0.06
</TABLE>
-4-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
SUMMARY:
The following table, which should be read together with the
Financial Statements and Notes to Financial Statements appearing elsewhere in
this Report, sets forth for the periods indicated (i) percentages which certain
items reflected in the financial data bear to net sales of the Registrant and
(ii) the percentage increase (decrease) of such items as compared to the
indicated prior period:
<TABLE>
<CAPTION>
Relationship To Total Revenues For the Period to Period Increase
Years Ended January 31, (Decrease) Years Ended
--------------------------------------- ---------------------------
1996 1995 1994 1995-1996 1994-1995
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 4.6% 17.4%
Cost of Sales Before
Depreciation 62.2 60.7 60.4 7.2 18.0
Gross Profit Before
Depreciation 37.8 39.3 39.6 .4 16.5
Depreciation 2.2 2.3 2.7 2.3 (1.5)
Gross Profit 35.6 37.0 36.9 .3 17.8
Operating Expenses:
Shipping, Selling, General
and Administrative Expenses
Before Depreciation 26.4 28.8 28.0 (3.9) 20.7
Compensation - Stock Options -- -- .3 -- (100.0)
Interest 1.3 1.3 1.5 .8 9.2
Gain on Sale of Equipment -- (.3) -- (100.0) 100.0
Deferred Compensation and
Postretirement Benefits -- .3 .7 (100.0) (51.3)
Depreciation and Amortization .5 .4 .5 4.4 14.6
Total 28.2 30.5 31.0 (3.7) 15.8
Income Before
Provision For
Income Taxes 7.4 6.5 5.9 19.2 27.9
Provision For
Income Taxes 2.8 2.6 2.1 10.4 43.6
Cumulative Effect on Prior
Years of Adopting SFAS 106 -- -- .1 -- (100.0)
Net Income 4.6% 3.9% 3.7% 25.1% 23.9%
</TABLE>
-5-
<PAGE>
RESULTS OF OPERATIONS:
SALES:
Sales for the years ended January 31, 1996, January 31, 1995
and January 31, 1994, were $31,510,000, $30,133,000 and $25,660,000
respectively. Sales for the year ended January 31, 1996 increased $1,377,000, or
4.6%, compared to the prior year, due primarily to an increase in the prices the
Registrant charged for its products. These results were achieved without the
contribution of sales from the Registrant's Hantico subsidiary which was sold in
January 1995 and which contributed approximately $1,500,000 to sales during the
fiscal year ended January 31, 1995. Sales for the year ended January 31, 1995,
increased $4,473,000, or 17.4%, compared to the prior year, as a result of
increased sales in all divisions, primarily the Medical Packaging and Haran
Divisions. The Registrant's Medical Packaging Division experienced strong demand
for Speci-GardTM bags which were introduced during the fiscal year ended Janury
31, 1995. The Speci-GardTM bag is designed to protect healthcare workers from
possible exposure to infectious diseases, including HIV.
The Registrant's continued efforts to market the Medical Packaging
Division's products to the healthcare industry resulted in the Medical Packing
Division accounting for 23% of the Registrant's total sales, or $7,261,000, for
the fiscal year ended January 31, 1996. The Medical Packaging Division accounted
for 20% of the Registrant's total sales, or $6,087,000, for the fiscal year
ended January 31, 1995. During the year ended January 31, 1995, the Registrant
also began shipping its Ultravault(TM) tamper evident security bag, which
provides the user with visual evidence of tampering with the bag's contents.
COST AND EXPENSES:
JANUARY 31, 1996
-6-
<PAGE>
Cost of sales before depreciation, as a percentage of sales,
increased to 62.2% for the year ended January 31, 1996, compared to 60.7% for
the prior year. This increase was due primarily to continued increases in the
cost of raw materials, some of which could not immediately be reflected in
increased product prices. Raw material prices during the year ended January 31,
1996 stabilized by the Registrant's fiscal third quarter ended October 31, 1995.
The Registrant's Central Purchasing Department, however, continued to enable the
Registrant to efficiently manage the flow of raw materials and long-range
purchasing commitments enabled the Registrant to anticipate certain increases.
Shipping, selling, general and administrative expenses for the
year ended January 31, 1996, decreased approximately $350,000, or 3.9%, compared
to the prior year. This decrease was due primarily to decreases in insurance,
freight out and environmental expenses. For the year ended January 31, 1996,
other expenses increased from $401,000 to $413,000, or 3%, a nominal increase.
Interest expense for the year ended January 31, 1996 increased
$3,000, or less than 1%, compared to the year ended January 31, 1995. This
increase was attributable to a nominal increase in borrowings at the start of
the Registrant's 1996 fiscal year due to the start up of Southwest.
JANUARY 31, 1995
Cost of sales before depreciation, as a percentage of sales,
increased to 60.7% for the year ended January 31, 1995, compared to 60.4% for
the prior year. This nominal increase was due to large increases in the cost of
raw materials, some of which could not immediately be reflected in increased
product prices until the Registrant's new catalog was prepared and mailed. Raw
material prices during the year ended January 31, 1995 increased approximately
50%
-7-
<PAGE>
compared to the prior fiscal year. The Registrant's Central Purchasing
Department, however, enabled the Registrant to efficiently manage the flow of
raw materials and long-range purchasing commitments enabled the Registrant to
anticipate certain increases. In addition, prompt payment by the Registrant, for
raw materials, at a discount, aided in moderating the effect of these increases.
Shipping, selling, general and administrative expenses for the
year ended January 31, 1995, increased approximately $1,504,000, or 20.6%,
compared to the prior year. This increase was due to increases in commissions
and selling expenses directly related to the increase in sales. For the year
ended January 31, 1995, other expenses decreased from $648,000 to $401,000, or
38%, as a direct result of the gain from the sale of the Registrant's Hantico
Division and a reduction in deferred compensation expense as a result of changes
in actuarial assumptions.
Interest expense for the year ended January 31, 1995 increased
$35,000, or 9.2%, compared to the year ended January 31, 1994. This increase was
attributable to increases in the interest rate charged by the Registrant's
lender and a nominal increase in borrowings.
INCOME BEFORE PROVISION FOR INCOME TAXES:
Income before provision for income taxes for the year ended
January 31, 1996, increased approximately $374,000, or 19.2%, to approximately
$2,317,000 compared to approximately $1,943,000 for year ended January 31, 1995.
This increase was primarily attributable to increased sales, continued
improvements in manufacturing operations and a reduction in shipping, selling,
general and administrative expenses. Income before provision for income taxes
for the year ended January 31, 1996 would have been $150,000 greater without the
start up costs associated with Southwest.
Income before provision for income taxes for the year ended
January 31, 1995, increased approximately $424,000, or 28%, to approximately
$1,943,000 compared to
-8-
<PAGE>
approximately $1,519,000 for the year ended January 31, 1994. This increase was
primarily attributable to the 17.4% increase in sales without a corresponding
increase in operating expenses.
PROVISION FOR INCOME TAXES:
Provision for income taxes for the year ended January 31,
1996, was $858,000 compared to $777,000 for the prior year primarily due to the
increase of $374,000 in income before provision for income taxes.
Provision for income taxes for the year ended January 31,
1995, was $777,000 compared to $541,000 for the prior year. Utilizing standard
federal and state tax rates, $183,000 of the increase was directly attributable
to the increase of $424,000 in income before provision for income taxes. In
addition, during the year ended January 31, 1994, the Registrant recognized an
$84,000 credit to the provision for income taxes as a result of a decrease in
the valuation allowance against its deferred tax assets.
LIQUIDITY AND CAPITAL COMMITMENTS:
Working capital for the fiscal year ended January 31, 1996,
increased to $6,699,000 from $5,822,000 for the year ended January 31, 1995.
This increase of $877,000, or 15.1%, was directly attributable to operating
activities during fiscal 1996. This increase resulted in a working capital ratio
of 3.9 to 1 as January 31, 1996.
On April 24, 1995, the Registrant entered into a new revolving credit
facility establishing a three-year $3,500,000 facility. Proceeds of the credit
facility were used for the repayment of indebtedness, permitted acquisitions and
working capital. The credit agreement contains financial covenants relating to,
among other things, capital expenditures, minimum debt service coverage, minimum
working capital, minimum tangible net worth, the ratio of current assets to
current liabilities and the ratio of total liabilities to tangible net worth.
Borrowings under the credit facility will bear interest, at the Registrant's
option, either at the bank's prime rate or at a rate
-9-
<PAGE>
1-1/2% per annum in excess of LIBOR (London Interbank Offered Rate). During the
course of the fiscal year ended January 31, 1996, the Registrant periodically
reduced its debt and on February 13, 1996 repaid its indebtedness under the
credit facility. The Registrant has unused lines of credit under its revolving
credit facility of $3,500,000. The Registrant believes that it has sufficient
working capital and unused lines of credit to meet its expected liquidity and
capital resource requirements for the foreseeable future and to fund potential
acquisitions. The Registrant currently has budgeted $500,000 for capital
improvements in fiscal 1996.
In December 1990, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" ("SFAS 106"). SFAS
106 requires that a company recognize costs currently that will be incurred in
the future relating to medical and other benefits to be provided after
retirement. SFAS 106 was implemented for the Registrant's fiscal year ending
January 31, 1994, and in the opinion of management, the adoption of SFAS 106 was
not material to the financial condition of the Registrant.
In February 1992, FASB issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Companies are required to adopt SFAS 109 for years beginning after December 15,
1992. SFAS 109 requires that deferred income taxes be recorded using the
liability method and restricts the conditions under which a deferred asset may
be recorded. The Registrant is given the choice of reflecting the adoption of
SFAS 109 in the year of change or restating any number of prior years. The
Registrant adopted SFAS 109 as of February 1, 1993, and, in the opinion of
management, its adoption had no material effect on the financial condition of
the Registrant.
-10-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements of Uniflex, Inc., otherwise includable under
Item 8, are included in this Item 14:
INDEX PAGE
Reports of Independent Auditors F-1
Balance Sheets at January 31,
1996 and 1995 F-3
Statements of Income for the
years ended January 31, 1996,
1995 and 1994 F-4
Statements of Cash Flows for the
years ended January 31, 1996,
1995 and 1994 F-5
Statements of Changes in
Stockholders' Equity for the years
ended January 31, 1996, 1995 and 1994 F-6
Notes to Financial Statements F-7
(2) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II Valuation and Qualifying Accounts
and Reserves F-21
Other schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the financial statements or notes thereto.
Separate financial statements and supplemental schedules of
the Registrant are omitted since the Registrant is primarily an operating
company and its subsidiaries, included in the financial statements being filed,
do not have a minority equity interest or indebtedness to any
-11-
<PAGE>
person other than the Registrant in an amount which exceeds five percent of the
total assets as shown by the financial statements as filed herein.
(3) EXHIBITS
NO. REFERENCE
- --- ---------
3. (a) Articles of Incorporation (as filed with the Secretary
of State of Delaware on April 16, 1973) and By-laws (1)
(b) Certificate of Amendment of Certificate of Incorporation
as filed with the Secretary of State of the State of
Delaware on June 29, 1987 (2)
(c) Amended and Restated By-Laws adopted on June 29, 1989 (3)
4. See Articles of Incorporation included herein as Exhibit 3 (1)
10.(a) Stock Option Agreement of Warner J. Heuman dated
February 1, 1987 (2)
(b) Stock Option Agreement of Manfred M. Heuman dated
February 1, 1987 (2)
(c) Stock Option Agreement of Erich Vetter dated February 1, 1987 (2)
(d) Lease dated August 12, 1977 between the Registrant, as
Tenant, and Harold R. Abrams, Rosalie Abrams Katz, Ira
Parris and Annette Parris, as Landlord, for the
Registrant's manufacturing facility in Westbury, New
York (1)
(e) Registrant's Profit Sharing Plan and Trust dated January
22, 1976, as amended (1)
(f) Stock Option Agreement of Robert K. Semel dated
December 21, 1990 (4)
(g) Deferred Compensation and Consulting and Non-Competition
Agreements of Erich Vetter dated as of April 28, 1991 (4)
(h) Deferred Compensation and Consulting and Non-Competition
Agreements of Manfred M. Heuman dated as of April 28,
1991 (4)
(i) Deferred Compensation and Consulting and Non-Competition
Agreements of Warner J. Heuman dated as of April 28,
1991 (4)
(j) Amended Stock Option Agreement of Erich Vetter dated
August 29, 1990 (4)
(k) Amended Stock Option Agreement of Manfred M. Heuman dated
August 29, 1990 (4)
(l) Amended Stock Option Agreement of Warner J. Heuman dated
August 29, 1990 (4)
-12-
<PAGE>
(m) Profit Sharing 401(k) Plan of the Registrant (5)
(n) Lease Extension and Modification Agreement dated
December 5, 1992 between the Registrant, as Tenant, and
Ira Parris, Annette Parris, Rosalie Abrams Katz, and
David S. Rhine and Howard M. Abrams, Trustees of Trust B
under the Last Will and Testament of Samuel Abrams, as
Landlord, for the Registrant's manufacturing facility in
Westbury, New York (6)
(o) Asset Purchase Agreement dated as of July 1, 1993, by
and among the Registrant, Haran Packaging Co., Inc. and
Neil Sklar (7)
(p) Credit Agreement dated as of April 24, 1995 between the
Registrant and The Chase Manhattan Bank, N.A. (8)
(r) Promissory Note in the maximum principal amount of
$3,500,000 between the Registrant and The Chase
Manhattan Bank, N.A. (8)
(s) Guaranty of Uniflex Southwest L.L.C. in favor of The
Chase Manhattan Bank, N.A. (8)
(t) Guaranty of Hantico, Inc. in favor of The Chase Manhattan
B0nk, N.A. (8)
(u) Employment Agreement of Herbert Barry dated as of
February 1, 1996
(v) Second Amended and Restated Employment of Robert K. Semel
dated as of February 1, 1996
(w) Employment Agreement of Martin Brownstein dated as of
February 1, 1996
23.1 Consent of Patrusky Mintz & Semel to the incorporation by
reference to the Registrant's Registration Statement on Form
S-8 of the independent auditors' report included herein.
23.2 Consent of Miller, Ellin & Company to the Incorporation by
reference to the Registrant's Registration Statement on Form
S-8 of the independent auditors' report herein.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K
None.
-13-
<PAGE>
- -------------------------
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1981.
(2) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1987.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1988.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1991.
(5) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1992.
(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1993.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1994.
(8) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1995.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized on the 12th day of
September, 1996.
UNIFLEX, INC.
(Registrant)
By:/S/ Herbert Barry
-----------------
Herbert Barry, Chairman
of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Director September 12, 1996
- -----------------
Warner J. Heuman
/S/ HERBERT BARRY Chairman of the Board and September 12, 1996
- -----------------
Herbert Barry Director
* Director September 12, 1996
- -----------------
Erich Vetter
/S/ ROBERT K. SEMEL President, Secretary and Director September 12, 1996
- -------------------
Robert K. Semel
* First Vice President-Engineering September 12, 1996
- -----------------
Kurt Vetter and Director
* Director September 12, 1996
- -----------------
Manfred M. Heuman
/S. ROBERT GUGLIOTTA Vice President-Finance, Treasurer September 12, 1996
- --------------------
Robert Gugliotta and Controller
* Senior Vice President and Director September 12, 1996
- -----------------
Martin Brownstein
* Director September 12, 1996
- -----------------
Martin Gelerman
/S/ STEVEN WOLOSKY Director September 12, 1996
- -----------------
Steven Wolosky
</TABLE>
-15-
<PAGE>
*By:/S/ HERBERT BARRY
-----------------
Herbert Barry
Attorney-in-Fact
-16-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
JANUARY 31, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
We have audited the accompanying consolidated balance sheet of Uniflex, Inc. and
Subsidiaries as of January 31, 1996 and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniflex, Inc. and
Subsidiaries as of January 31, 1996, and the results of their operations and
their cash flows for the year ended January 31, 1996, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in Item
14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
PATRUSKY, MINTZ & SEMEL
CERTIFIED PUBLIC ACCOUNTS
New York, New York
April 12, 1996
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
HICKSVILLE, N.Y.
We have audited the accompanying consolidated balance sheets of Uniflex, Inc.
and Subsidiaries as of January 31, 1995, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for each of the two
years in the period ended January 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniflex, Inc. and
Subsidiaries as of January 31, 1995, and the results of their operations and
their cash flows for each of the two years in the period ended January 31, 1995,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in Item
14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ MILLER, ELLIN & COMPANY
---------------------------
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 21, 1995
F-2
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------ ---- ----
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 1,196,593 $ 527,725
Accounts receivable (net of
allowances of $174,500 in 1996
and $184,327 in 1995) 3,364,989 4,187,963
Inventory (Notes 1 and 3) 2,699,948 3,081,291
Refundable and prepaid income taxes 898,610 --
Prepaid expenses and other current
assets 606,943 710,227
Deferred tax asset (Notes 1 and 7) 269,900 301,000
------------ ------------
Total current assets 9,036,983 8,808,206
PROPERTY AND EQUIPMENT(Notes 1,4 and 5) 6,427,427 5,641,333
INTANGIBLE ASSETS (Notes 1 and 2) 156,404 138,588
OTHER ASSETS 661,798 730,330
------------ ------------
Total assets $ 16,282,612 $ 15,318,457
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt (Note 5) $ 151,646 $ 110,940
Accounts payable 1,234,487 1,658,650
Acquisition note payable (Note 2) -- 60,000
Accrued liabilities (Note 6) 952,018 865,290
Income taxes payable -- 291,155
------------ ------------
Total current liabilities 2,338,151 2,986,035
------------ ------------
LONG-TERM DEBT (Note 5) 2,169,506 3,847,077
------------ ------------
DEFERRED RENT (Note 1) 122,496 88,746
------------ ------------
DEFERRED COMPENSATION AND POSTRETIREMENT
BENEFITS (Note 13) 1,215,124 1,111,478
------------ ------------
COMMITMENTS (Note 14)
MINORITY INTEREST (Note 9) 192,500 --
------------ ------------
STOCKHOLDERS' EQUITY (Notes 8, 9 and 10)
Common stock - par value $.10 per share
10,000,000 shares authorized; issued and
outstanding 2,666,384 in 1996 and
2,240,334 in 1995 266,638 224,033
Additional paid-in capital 1,854,723 424,695
Retained earnings 8,179,402 6,720,821
------------ ------------
10,300,763 7,369,549
Less Note receivable - stock
purchase (Note 8) (55,928) (84,428)
------------ ------------
10,244,835 7,285,121
Total liabilities and stockholders'
equity $ 16,282,612 $ 15,318,457
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Net sales $ 31,509,963 $ 30,133,067 $ 25,660,000
Cost of sales 20,322,952 18,981,930 16,190,509
------------ ------------ ------------
Gross profit 11,187,011 11,151,137 9,469,491
Shipping, selling, general
and administrative expenses 8,457,319 8,807,390 7,302,487
------------ ------------ ------------
Income before other expenses 2,729,692 2,343,747 2,167,004
------------ ------------ ------------
Other (income) expenses:
Deferred compensation and
postretirement benefits -- 84,931 174,322
Compensation - stock options -- -- 98,000
Interest - net (Note 12) 413,111 410,016 375,408
Gain on sale of equipment
and inventory (Note 2) -- (94,140) --
------------ ------------ ------------
413,111 400,807 647,730
------------ ------------ ------------
Income before provision
for income taxes and
2cumulative effect of a change
in accounting principle 2,316,581 1,942,940 1,519,274
Provision for income taxes
(Notes 1 and 7) 858,000 777,000 541,000
------------ ------------ ------------
Income before cumulative
effect of change in
accounting principle 1,458,581 1,165,940 978,274
Cumulative effect on prior
years of adopting SFAS 106-
net of tax benefit of $26,000 -- -- (36,895)
------------ ------------ ------------
Net income $ 1,458,581 $ 1,165,940 $ 941,379
============ ============ ============
Earnings per common share and
common share equivalents:
Income before cumulative
effect of a change in
accounting principle $ .53 $ .43 $ .36
Cumulative effect on prior
years of adopting SFAS 106-
net of tax benefit -- -- (.01)
------------ ------------ ------------
Net income $ .53 $ .43 $ .35
============ ============ ============
Proforma amounts assuming
SFAS 106 is applied
retroactively:
Net income $ -- $ -- $ 978,274
============ ============ ============
Earnings per common share
and common share equivalents $ -- $ -- $ .36
============ ============ ============
Weighted average number of
common shares and common
share equivalents outstanding 2,745,868 2,719,114 2,695,154
============ ============ ============
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,458,581 $ 1,165,940 $ 941,379
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Cumulative effect on prior
years of adopting SFAS 106 -- -- 36,895
Gain on sale of equipment
and inventory -- (94,140) --
Deferred compensation,
postretirement medical
benefits and
related interest 103,646 179,777 255,903
Depreciation and amorti-
zation 852,956 816,911 812,708
Equity issued as
compensation 17,815 50,250 4,950
Compensation - stock options -- -- 98,000
Amortization of note
receivable 28,500 28,500 28,500
Deferred rent 33,750 47,499 41,247
Deferred income taxes (85,260) (190,000) (258,000)
Changes in assets and
liabilities net of effects
of acquisition of assets
of subsidiary:
Accounts receivable 822,974 (993,809) (555,131)
Inventory 381,343 (596,366) 85,241
Prepaid expenses and
other current assets 103,284 (145,572) (219,258)
Other assets 81,748 (300,093) (70,484)
Accounts payable (424,163) 476,987 205,940
Accrued liabilities 86,726 146,485 (225,839)
Income taxes - receivable
and prepaid 3,235 167,858 (179,702)
----------- ----------- -----------
Net cash provided by
operating activities 3,465,135 760,227 1,002,349
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and
equipment (1,109,829) (910,367) (473,443)
Proceeds from sale of
equipment and inventory -- 255,900 --
Acquisition of assets from
Haran Packaging, Inc. -- -- (78,000)
Purchase of intangible
assets (83,077) (24,083) --
----------- ----------- -----------
Net cash used in
investing activities (1,192,906) (678,550) (551,443)
----------- ----------- -----------
</TABLE>
F-5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D.)
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from minority
contribution $ 27,500 $ -- $ --
Proceeds of long-term debt 7,500 50,000 400,000
Payment of long-term debt (1,900,181) (110,940) (360,939)
Payment for retirement of
common stock -- (145,208) --
Proceeds from exercise of
stock options 261,820 -- 29,250
Payment of notes payable -- (40,000) (150,000)
----------- ----------- -----------
Net cash used in
financing activities (1,603,361) (246,148) (81,689)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 668,868 (164,471) 369,217
Cash and cash equivalents -
beginning of year 527,725 692,196 322,979
----------- ----------- -----------
2
Cash and cash equivalents -
end of year $ 1,196,593 $ 527,725 $ 692,196
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5 (Cont'd)
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Retained Note Receivable
Amount Shares Capital Earnings Stock Purchase Total
------ ------ ------- -------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1993 $ 111,134 $ 1,111,342 $ 377,327 $ 4,613,502 $ (141,428) $ 4,960,535
Issuance of common stock as
partial payment for covenant
not to compete (Note 2) 1,250 12,500 89,375 -- -- 90,625
Exercise of stock options (Note 9) 900 9,000 28,350 -- -- 29,250
Tax benefit from exercise of
stock options (Note 10) -- -- 32,400 -- -- 32,400
Compensation recognized upon
reissuance of stock options
with an exercise price less
than market (Note 10) -- -- 98,000 -- -- 98,000
Two for one stock split (Note 8) 113,284 1,132,842 (113,284) -- -- --
Issuance of common stock as
compensation 90 900 4,860 -- -- 4,950
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 941,379 -- 941,379
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1994 226,658 2,266,584 517,028 5,554,881 (112,928) 6,185,639
Retirement of common stock (3,630) (36,300) (141,578) -- -- (145,208
Issuance of common stock as
compensation 1,005 10,050 49,245 -- -- 50,250
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 1,165,940 -- 1,165,940
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1995 224,033 2,240,334 424,695 6,720,821 (84,428) 7,285,121
Exercise of stock options (Note 9) 42,400 424,000 219,420 -- -- 261,820
Tax benefit from exercise of stock
options (Note 10) -- -- 1,193,000 -- -- 1,193,000
Issuance of common stock as
compensation 205 2,050 17,608 -- -- 17,813
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 1,458,581 -- 1,458,581
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1996 $ 266,638 $ 2,666,384 $ 1,854,723 $ 8,179,402 $ (55,928) $10,244,835
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS AND CONCENTRATION OF CREDIT RISK:
Uniflex, Inc. (the "Company") designs, manufactures and sells a variety of
plastic bags, used in packaging, promotion and retailing, primarily to
advertising specialty distributors, hospitals or hospital supply houses and
major retailers. One of its subsidiaries (which was disposed of as discussed in
Note 2) also produced buttons, button products, badges, ribbons, mirrors and
magnets for the advertising specialty marketplace, which did not constitute a
reportable business segment. The Company extends credit to its customers and
historically has not experienced significant losses related to receivables from
individual customers or groups of customers in any particular industry or
geographic area.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary Hantico, Inc. (currently inactive - Note 2)
organized in December 1992, an 80% interest in Uniflex Southwest L.L.C.,
organized in January 1995, and an 80% interest in Uniflex Southeast L.L.C.,
organized in January 1996 and inactive until March 1996. All intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
The Company considers cash and cash equivalents to include highly liquid debt
instruments purchased with a maturity of three months or less. At times, such
investments may be in excess of federal insurance limits.
INVENTORY:
Inventory is valued at the lower of cost or market. Cost is determined by the
first-in, first-out method.
PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost. Depreciation and amortization is
provided on the straight-line method over the estimated useful lives of the
assets or, in the case of leasehold improvements, over the life of the lease, if
shorter.
The Company constructs certain machinery and equipment for its own use. When
completed, the material, labor and other costs related to construction are
capitalized and depreciated over the estimated useful life of the asset.
F-7
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
INTANGIBLE ASSETS:
Intangible assets consist primarily of patent costs, a covenant not to compete,
deferred loan acquisition costs, and a customer list. The values are being
amortized, on a straight-line basis over the period of expected benefit ranging
from four to five years. Accumulated amortization at January 31, 1996 and 1995
was $160,872 and $95,610, respectively.
DEFERRED RENT:
Deferred rent payable represents the excess of recognized rent expense over
scheduled lease payments, which will be credited to future operations.
DEFERRED INCOME TAXES:
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," which
requires the use of the liability method of accounting for income taxes. The
liability method measures deferred income taxes by applying enacted statutory
rates in effect at the balance sheet date to the differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws as they occur. The Company's adoption of SFAS 109 had no
material effect on the consolidated financial statements.
EARNINGS PER SHARE:
Computation of earnings per share is based on the weighted average number of
shares actually outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options, all of which are considered to be common
stock equivalents. Common stock equivalents were calculated by use of the
treasury stock method. The number of shares used in the computations of earnings
per share were 2,745,868; 2,719,114; and 2,695,154 in 1996, 1995 and 1994,
respectively, after giving effect to stock splits (Note 8).
REVENUE RECOGNITION:
Revenue is recognized when orders are shipped.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those estimates.
F-8
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
ADVERTISING COSTS:
Advertising costs are charged to operations as incurred. Catalog costs are
accounted for as a prepaid expense and are amortized over a twelve month period.
Advertising expenses inclusive of catalog costs charged to operations for the
year ended January 31, 1996, 1995 and 1994 were approximately $294,000, $357,000
and $315,000, respectively.
NOTE 2. ACQUISITIONS/DISPOSALS:
Effective December 11, 1992, the Company's wholly-owned subsidiary, Hantico,
Inc., purchased the inventory, fixed assets and accounts receivable of Hand Tip
and Novelty Co., Inc. for $301,155 of which $199,155 was paid in cash and the
balance of $102,000 was evidenced by a note payable without interest. The note
was paid in June 1993.
On January 12, 1995, Hantico, Inc. sold its existing inventory, machinery,
equipment, furniture and its customer lists, trademarks and tradenames for a
purchase price of $221,000, resulting in a gain of $59,240.
On July 16, 1993, the Company purchased the customer list and certain machinery
and equipment of Haran Packaging, Inc. for $158,000. The Company paid $33,000
cash and issued notes, bearing interest at the rate of 4% per annum, for the
remaining balance of $125,000. The notes were paid in full as of January 31,
1996.
Concurrently, the stockholder of Haran Packaging, Inc. entered into a $158,625
four year covenant not to compete agreement with the Company. The Company paid
$45,000 in cash, issued a note payable for $23,000 and issued 12,500 shares of
restricted common stock at fair market value for the balance. The note and
interest, payable at 4% per annum, were paid December 31, 1993.
The customer list and covenant not to compete are being amortized on a
straight-line basis over two and four years, respectively. Amortization expense
for the years ended January 31, 1996, 1995 and 1994 approximated $52,000,
$63,000 and $31,000, respectively.
NOTE 3. INVENTORY:
A summary of inventory follows:
January 31,
1996 1995
---- ----
Raw materials and supplies $ 1,755,374 $ 2,101,460
Work-in-process 227,715 356,888
Finished products 716,859 622,943
----------- -----------
Total $ 2,699,948 $ 3,081,291
=========== ===========
F-9
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
January 31, Estimated Useful
1996 1995 LIFE IN YEARS
---- ---- ---------------
Land $ 860,000 $ 860,000 -
Building and
improvements 2,743,024 2,728,447 31.5
Machinery and equipment 8,466,354 7,453,336 10
Leasehold improvements 594,672 413,509 Various
Plates and engravings 549,159 645,567 5
Furniture and fixtures 575,378 405,216 5-10
Delivery equipment 34,462 34,012 4
Machinery under
construction 300,787 235,307 -
----------- -----------
14,123,836 12,775,394
Less accumulated
depreciation and
amortization 7,696,409 7,134,061
----------- -----------
Total $ 6,427,427 $ 5,641,333
=========== ===========
Included in the above is property and equipment under capital leases as follows:
January 31,
1996 1995
---- ----
Machinery and Equipment $ 69,054 -
Furniture and Fixtures 126,762 $ -
-------- ------
195,816 -
Accumulated depreciation 13,243
$182,573 $ -
======== ======
Depreciation and amortization expense charged to operations for the years ended
January 31, 1996, 1995 and 1994 amounted to $770,930, $753,167, and $764,139,
respectively.
NOTE 5. LONG-TERM DEBT:
Long-term debt consists of the following:
January 31,
1996 1995
---- ----
Bank loan (A) $ 600,000 $ -
Revolving credit agreement (B) - 2,300,000
Mortgage payable - bank - payable in
monthly installments of $9,245 plus
interest at prime plus 1/4% to 2009 -
secured by land, building and certain
improvements (C) 1,547,077 1,658,017
Capital lease obligations (Note 14) 166,575 -
---------- ---------
Sub Total 2,313,652 3,958,017
F-10
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LONG-TERM DEBT (CONT'D.):
January 31,
1996 1995
---- ----
Balance Forward $2,313,652 $3,958,017
Note payable - minority interest -
payable on January 1, 2000 with
interest at 7% per annum - unsecured 7,500 -
---------- ----------
2,321,152 3,958,017
Less current maturities 151,646 110,940
---------- ----------
Total $2,169,506 $3,847,077
========== ==========
Interest expense charged to operations for the years ended January 31, 1996,
1995 and 1994 amounted to $323,963, $314,528 and $296,511, respectively.
Following are the maturities of long-term debt as of January 31, 1996 and for
each of the next five years and in the aggregate:
1997 $ 151,646
1998 155,592
1999 744,934
2000 154,353
2001 122,249
Thereafter 992,378
----------
$2,321,152
(A) On April 24, 1995, the Company entered into a credit agreement with its
lending bank. The agreement provides for the Company to borrow up to $3,500,000,
payable interest only at the prime rate or LIBOR plus 1- 1/2% through April 24,
1998, at which time the balance outstanding is payable in full. The loan is
unsecured.
The loan is also subject to a 1/4% commitment fee on the average unused loan
portion. The agreement contains covenants and restrictions relating to net
worth, working capital, indebtedness, financial ratios, dividends, capital
expenditures, investments, acquisition, earnings and continuity of management.
The loan was paid in full as of February 13, 1996.
(B) On January 21, 1994, the Company entered into a revolving credit agreement
with its lending bank. The agreement provided for the Company to borrow up to
$2,750,000 payable interest only at the prime rate until January 1997. Quarterly
installments of $125,000 became due commencing May 1, 1997 with one installment
of the unpaid balance due on January 21, 2000.
F-11
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LONG-TERM DEBT (CONT'D.):
On February 14 1995, the revolving credit agreement with the bank was amended
providing for the Company to borrow an additional $600,000. In April 1995, the
balance was paid with the proceeds of the bank loan described in (A) above.
The loan was collateralized by all machinery and equipment, fixtures and the
cash in the account of that lending institution. The loan was also subject to a
1/4% commitment fee on the average unused loan portion. The agreement contained
covenants and restrictions relating to net worth, working capital, indebtedness,
financial ratios, dividends, capital expenditures, investments, acquisitions,
earnings and continuity of management.
(C) Effective April 1, 1994, the interest rate on the mortgage payable was
reduced from prime plus 3/4% to prime plus 1/4%. The mortgage contains certain
covenants regarding net worth and debt service.
There were no short-term borrowings outstanding as of January 31, 1996, 1995 and
1994.
NOTE 6. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
January 31,
1996 1995
Accrued commissions $ 365,711 $ 289,625
Accrued payroll 370,985 312,689
Accrued vacation 164,400 203,147
Accrued interest 7,664 11,115
Other 43,258 48,714
----------- -----------
Total $ 952,018 $ 865,290
=========== ===========
F-12
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
January 31,
------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 859,000 $ 827,000 $ 673,000
State 84,000 140,000 126,000
--------- --------- ---------
943,000 967,000 799,000
--------- --------- ---------
Deferred:
Federal (69,000) (163,000) (155,000)
State (16,000) (45,000) (19,000)
Change in state tax
law -- (61,000) --
--------- --------- ---------
(85,000) (269,000) (174,000)
--------- --------- ---------
Change in valuation
allowance -- 79,000 (84,000)
--------- --------- ---------
(85,000) (190,000) (258,000)
--------- --------- ---------
Total $ 858,000 $ 777,000 $ 541,000
========= ========= =========
January 31,
------------------------------------------------
1996 1995 1994
--------- --------- ---------
At Federal statutory
rates $ 788,000 $ 660,000 $ 516,000
Effect of:
Permanent differences 22,000 12,000 12,000
Prior years' assessments
and over/underaccruals (25,000) 38,000 23,000
State income taxes, net
of federal benefit 92,000 72,000 107,000
State investment tax
credits, net of federal
benefit (19,000) (23,000) (33,000)
Change in state tax law -- (61,000) --
Change in valuation
allowance -- 79,000 (84,000)
--------- --------- ---------
Total $ 858,000 $ 777,000 $ 541,000
========= ========= =========
</TABLE>
At January 31, 1996, the Company has available for state income tax purposes
unused investment tax credits of approximately $331,000 expiring through the
year 2006.
The net current and non-current components of deferred income taxes recognized
in the balance sheet are as follows:
January 31,
1996 1995
---- ----
Net current assets $ 269,900 $ 301,000
Net non-current assets 186,400 70,040
Net non-current liabilities - -
----------- -----------
Total $ 456,300 $ 371,040
=========== ===========
F-13
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES (CONT'D.):
The components of the net deferred tax asset are as follows:
January 31,
1996 1995
---- ----
Deferred tax assets:
Accounts receivable allowances $ 74,000 $ 78,000
Inventory - uniform
capitalization 59,000 66,000
Vacation pay accrual 69,000 85,000
Deferred rent 52,000 37,000
Stock option compensation 41,000 41,000
Deferred compensation and
post-retirement medial
benefits 510,000 474,000
Investment tax credit
carryforwards 381,000 417,000
----------- -----------
1,186,000 1,198,000
Valuation allowance (189,000) (203,000)
----------- -----------
997,000 995,000
Deferred tax liability:
Depreciation 540,700 623,960
----------- -----------
Net deferred tax asset $ 456,300 $ 371,040
=========== ===========
NOTE 8. CAPITAL STOCK:
On October 30, 1992, and again on December 17, 1993, the Company effected a
two-for-one stock split recorded in the form of a stock dividend. As a result,
common stock was increased by $55,442 and $113,284 in the years ended January
31, 1993 and 1994, respectively, and additional paid-in capital was decreased by
the same amount. All references in the accompanying financial statements to the
number of common shares and per share amounts have been restated to reflect the
stock dividends.
On December 21, 1990, the Company entered into an agreement whereby it issued
180,000 shares of common stock to an officer of the Company for consideration of
$1.13 per share ($202,500). Payment for the stock consisted of $4,500 in cash
and the issuance of a note in the amount of $198,000 payable in seven equal
annual principal installments (plus interest at 8.66 percent) commencing
February 1991. Each annual installment, including interest, is to be forgiven by
the Company as additional compensation provided that the officer fulfills the
terms of his employment agreement through January 1997. The transaction has been
recorded as a sale of stock with the note receivable reflected as a reduction of
stockholders' equity. For each of the years ended January 31, 1996, 1995 and
1994, approximately $28,000, net of interest, was charged to compensation
expense to reflect the forgiveness of the annual installments.
F-14
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. MINORITY INTEREST:
In January 1995 the Company acquired an 80% interest in Uniflex Southwest,
L.L.C. ("Southwest") for $600,000 in cash. Additionally, a minority member
purchased a 20% interest in Southwest for $27,500 in cash, and equipment having
a fair market value of $165,000.
From inception to January 31, 1996 Southwest reported a net loss of $150,381.
Under the terms of the operating agreement of Southwest all losses are allocated
to Uniflex, Inc. until Southwest has net income for two consecutive fiscal
quarters. All net income reported by Southwest will be allocated to Uniflex,
Inc. until the cumulative net income allocated to Uniflex, Inc. equals the
cumulative net losses previously allocated to Uniflex, Inc. Afterwards, net
income and losses will be allocated 45% to Uniflex, Inc. and 55% to the minority
member. The minority member shall contribute 60% of its allocated net income to
Southwest, receiving an additional 1% ownership for each $7,500 it contributes.
When the minority member's ownership interest reaches 49%, net income losses and
will be allocated in relation to the members' ownership interest in Southwest.
NOTE 10. STOCK OPTIONS:
The Company adopted the 1993 Stock Option Plan (the Plan), which provides for
the granting of options to purchase up to 240,000 shares of the Company's common
stock to employees of the Company. A registration statement relating to the
issuance of common stock upon the exercise of options granted under the Plan was
filed by the Company with the Securities and Exchange Commission in October
1993. The exercise price for non-qualified options can be no less than 75% of
the fair market value of the Company's common stock at the date of grant. The
exercise price for incentive stock options can be no less than the fair market
value of the Company's common stock at the date of grant with the exception of
an employee who, prior to the granting of the option, owns stock representing
more than 10% of the voting rights for which the exercise price can be no less
than 110% of the fair market value of the Company's common stock at the date of
grant. The Plan is administered by the Stock Option Committee of the Board of
Directors. The Committee determines when the options are exercisable and the
term of the option, up to ten years. Options to purchase 66,800 shares have been
granted under the Plan at prices ranging from $2.13 to $7.25.
The Company has granted a third party the option to purchase 120,000 shares of
the Company's common stock at a price of $1.63 per share. The options are
exercisable up to 24,000 shares per year for five years, commencing on September
1, 1992. Each option expires five years from the commencement date with the last
option expiring on August 31, 2000. Options to purchase 18,000 shares at $1.63
per share were exercised October 25, 1993.
F-15
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK OPTIONS (CONT'D.):
Pursuant to separate stock option agreements, the Company has granted to
eighteen employees options to purchase a total of 748,000 shares of the
Company's common stock at prices ranging from $.50 to $1.38 per share. Such
options expire at various dates from August 31, 1995 to June 30, 1999. On May
31, 1993, the Company renewed options to purchase 40,000 shares at $.84 per
share and 16,000 shares at $.75 per share. The options were renewed at the
original option price. On May 31, 1993, the market value of the Company's common
stock was $2.56 per share. As a result, the Company recognized a non-cash charge
of $98,000 as compensation expense. Options to purchase 156,000 shares at $.595
per share were exercised August 15, 1995. Options to purchase 108,000 shares at
$.75 per share were exercised January 16, 1996. Options to purchase 160,000
shares at $.5625 per share were exercised January 30, 1996.
Option activity for the years ended January 31, 1996, 1995 and 1994, was as
follows:
1996 1995 1994
---- ---- ----
Outstanding - beginning of
year (exercisable at a
price of $.50 to $4.88
per share) 913,000 911,400 868,000
Granted 3,200 2,200 61,400
Forfeited (1,800) -- --
Exercised (424,000) -- (18,000)
-------- -------- --------
Outstanding - end of year
(exercisable at a price of
$.50 to $5.38 per share) 491,000 913,600 911,400
======== ======== ========
Exercisable - end of year 411,800 826,600 713,400
======== ======== ========
In October 1995 Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock Based Compensation" was issued. As of the date of this
report the Company has not made a decision regarding the adoption of the
statement or the continuation of accounting for stock options in accordance with
APB Opinion No. 25.
NOTE 11. PROFIT SHARING PLAN:
The Company maintains a profit sharing plan which covers all full time,
non-union employees. Contributions to the plan are made at the discretion of the
Board of Directors, but may not exceed 15% of participant's compensation.
Amounts charged to operations were $200,000, $200,000 and $200,000 for the years
ended January 31, 1996, 1995 and 1994, respectively.
F-16
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INTEREST EXPENSE
Interest expense consists of the following:
Years Ended January 31,
--------------------------------------
1996 1995 1994
---- ---- ----
Interest costs $ 443,901 $ 418,923 $ 387,691
Interest income (30,790) (8,907) (12,283)
--------- --------- ---------
Total $ 413,111 $ 410,016 $ 375,408
========= ========= =========
NOTE 13. DEFERRED COMPENSATION PLANS AND POSTRETIREMENT MEDICAL
BENEFITS
DEFERRED COMPENSATION PLAN:
On August 31, 1990, the Company entered into deferred compensation agreements
with three key employees who retired on various dates through December 31, 1994.
These agreements provide for annual payments of $100,000 to each employee for
life and $75,000 annually to their beneficiary or estate for three years after
death, with payments to commence seven years after retirement. Each employee
simultaneously entered into seven year consulting and non-competition agreements
which will commence upon retirement and which will pay the employees annual
payments of $75,000 for non-competition and $25,000 for consulting. In the event
of the death of any of the employees after retirement but prior to the
commencement of the deferred compensation agreement, the Company's obligation to
make future payments under these agreements will terminate.
The present value of the deferred compensation agreements, calculated as of the
employees' retirement dates and based upon their respective life expectancies
totals approximately $960,000. For each employee, the Company is recording as
deferred expense an amount equal to an annuity deposit necessary to yield the
present values of the deferred compensation agreements as of the retirement
dates. Additionally, monthly charges of interest expense are being recorded such
that the deferred compensation payable will increase to the necessary level to
meet expected future payments.
The total deferred compensation charged to operations relating to the years
ended January 31, 1996, 1995 and 1994 approximated $-0-, $70,000, and $163,000,
respectively. Related interest expense charged to operations for the years ended
January 31, 1996, 1995 and 1994 approximated $110,000, $90,000 and $80,000,
respectively.
Deferred compensation payable at January 31, 1996 and 1995 was $1,086,463 and
$976,872, respectively.
F-17
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. DEFERRED COMPENSATION PLANS AND POSTRETIREMENT
MEDICAL BENEFITS (CONT'D)
POSTRETIREMENT MEDICAL BENEFITS:
The deferred compensation agreements require the Company to pay a portion of
each employee's health insurance premiums from the date of retirement to death.
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), Employer's Accounting for
Postretirement Benefits Other Than Pension," which requires the Company to
recognize the cost of providing postretirement benefits over the employees'
service periods.
The net periodic postretirement benefit cost for the years ended January 31,
1996, 1995 and 1994 was approximately $-0-, $22,000 and $22,000, respectively.
Related interest expense charged to operations for the years ended January 31,
1996, 1995 and 1994 was approximately $10,000, $11,000 and $11,000,
respectively.
The recorded liabilities for these postretirement benefits, none of which have
been funded, are as follows:
Years Ended January 31,
-----------------------
1996 1995
---- ----
Retirees $128,661 $134,606
Active participant - -
-------- --------
Actual postretirement
benefits $128,661 $134,606
======== ========
The weighted average discount rate used in determining the liability was 7.5%.
There is no annual increase in health costs since the participants will be
responsible for any additional payments.
The effect of adopting SFAS No. 106 on income before provision for income taxes
for the year ended January 31, 1994 was a decrease of $62,895.
Effective February 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112, "Employer's
Accounting For Postemployment Benefits". The Company's adoption of SFAS
No. 112 had no effect on the consolidated financial statements.
F-18
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. COMMITMENTS
OPERATING LEASE COMMITMENTS:
The Company has the following lease commitments:
Premises Expiration Date Base Rental And Expenses
- -------- --------------- ------------------------
Plant, Westbury, NY April 30, 2003 Graduated from $91,000 to
$205,000 per annum plus
real estate taxes
Plant, Albuquerque, NM March 31, 2000 $37,500 per annum plus
real estate taxes
Future minimum lease payments are as follows:
Years Ending January 31,
------------------------
1997 $ 183,750
1998 198,750
1999 213,750
2000 225,000
2001 200,000
Thereafter 453,750
---------
Total $1,475,000
==========
Base rent and other occupancy costs charged to operations for the years ended
January 31, 1996, 1995 and 1994 amounted to approximately $389,000, $367,000 and
$324,000 respectively, including real estate taxes of $185,000, $201,000 and
$122,000, respectively.
CAPITAL LEASES:
The Company leases certain equipment under capital leases expiring through
September, 2000. Interest is imputed at rates ranging from 9% to 10%.
Future minimum lease payments under capital leases as of January 31, 1996 for
each of the next five years are as follows:
Years ending January 31,
1997 $ 54,652
1998 54,652
1999 40,218
2000 38,906
2001 11,739
-------
Total minimum lease payments $200,167
Less amounts representing interest 33,592
--------
Present value of net
minimum lease payments (Note 5) $166,575
========
F-19
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended January 31,
-------------------------------
1996 1995 1994
---- ---- ----
Interest paid $327,049 $312,135 $316,337
======= ======= =======
Income taxes paid 934,000 631,500 981,225
======= ======= =======
NONCASH TRANSACTIONS FROM INVESTING AND FINANCING ACTIVITIES:
Year Ended January 31, 1996:
During the year, the Company incurred $195,816 of capital lease obligations in
connection with the acquisition of certain equipment.
In March 1995, a minority member of Uniflex Southwest, LLC contributed equipment
with a fair market value of $165,000 as capital.
Year Ended January 31, 1994
In July 1993, the Company issued notes payable of $125,000 to purchase certain
assets from Haran Packaging, Inc. (See Note 2).
In July 1993, the Company issued a note payable for $23,000 and common
stock with a market value of $90,625 for a covenant not to compete. (See
Note 2).
F-20
<PAGE>
SCHEDULE II
UNIFLEX, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
DESCRIPTION
Allowance for doubtful accounts.
Balance At Balance
Beginning Charged At
Of To End Of
Year Expense Deductions (1) Year
---- ------- -------------- ----
January 31,
1996 $184,327 $ 75,284 $ 85,111 $174,500
======== ======== ======== ========
January 31,
1995 $134,703 $ 74,400 $ 24,776 $184,327
======== ======== ======== ========
January 31,
1994 $153,782 $ 43,907 $ 62,986 $134,703
======== ======== ======== ========
(1) Write-off of uncollectible accounts.
F-21
