SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13, OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
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
incorporation or organization) identification no.)
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
Indicate by check mark whether the registrant (1) has filed all report required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,025,864 shares of the
Company's common stock - $.10 par value - were outstanding as of August 9, 1997.
<PAGE>
UNIFLEX, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated condensed balance sheets -
July 31, 1997 (unaudited) and January 31, 1997 1
Consolidated condensed statements of income (unaudited) -
For the six months ended July 31, 1997 and 1996 2
For the three months ended July 31, 1997 and 1996 3
Consolidated condensed statements of changes in stockholders' equity
(unaudited) for the six months ended July 31, 1997 and 1996 4
Consolidated condensed statements of cash flows (unaudited)
for the six months ended July 31, 1997 and 1996 5
Notes to consolidated condensed financial statements (unaudited) 6 - 7
Item 2. Management's discussion and analysis of financial
condition and results of operations 8 - 9
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders 10
Item 6. Exhibits and reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
ASSETS 1997 1997
---- ----
(Unaudited)
Current Assets
Cash and cash equivalents $ 429,275 $ 2,114,923
Accounts receivable 4,738,710 4,084,710
Inventories 5,074,787 3,618,893
Prepaid income taxes 328,428 279,791
Prepaid expenses and other current assets 392,991 565,263
Deferred tax asset 374,700 291,200
----------- -----------
Total Current Assets 11,338,891 10,954,780
Property and Equipment 7,108,029 6,786,936
Intangible Assets 2,354,937 220,013
Other Assets 771,248 731,590
----------- -----------
Total Assets $21,573,105 $18,693,319
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Loan payable - bank $ 1,812,000 $ -
Acquisition debt - current portion 600,000 -
Current maturities of long-term debt 167,000 171,000
Accounts payable 1,799,321 1,351,060
Accrued liabilities 1,431,106 998,888
----------- ---------
Total Current Liabilities 5,809,427 2,520,948
Acquisition debt 990,000 -
Long-Term Debt 1,415,096 1,493,131
Deferred Compensation and Postretirement Medical Benefits 1,293,151 1,329,237
Deferred rent 144,996 141,246
----------- ---------
Total Liabilities 9,652,670 5,484,562
----------- ---------
Minority Interest 192,500 262,500
----------- ---------
Stockholders' Equity
Common stock - par value $.10 per share
10,000,000 shares authorized, 3,926,864 shares
issued and outstanding 392,686 428,966
Additional paid-in capital 590,828 2,448,379
Retained earnings 10,757,599 10,096,340
----------- ----------
11,741,113 12,973,685
Less note receivable - stock purchase (13,178) (27,428)
----------- ----------
Total Stockholders' Equity 11,727,935 12,946,257
----------- ------------
Total Liabilities and Stockholders' Equity $21,573,105 $ 18,693,319
=========== ============
</TABLE>
The consolidated condensed balance sheet at January 31, 1997 has been derived
from the audited financial statements at that date. The accompanying notes are
an integral part of these consolidated condensed financial statements.
1
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
--------
1997 1996
---- ----
<S> <C> <C>
Net sales $ 18,742,897 $ 17,196,978
Cost of sales 11,990,768 10,749,670
------------- --------------
Gross profit 6,752,129 6,447,308
------------- --------------
Shipping and selling expenses 3,556,941 3,307,045
General and administrative expenses 1,863,873 1,550,584
------------ --------------
5,420,814 4,857,629
------------ --------------
Income before other expenses 1,331,315 1,589,679
------------ --------------
Interest expense - net 207,044 130,117
Other expenses 68,612 -
----------- --------------
275,656 130,117
---------- --------------
Income before provision for income taxes 1,055,659 1,459,562
------------ --------------
Provision for income taxes:
Current 505,600 648,300
Deferred (111,200) (63,800)
------------ --------------
394,400 584,500
------------ --------------
Net income $ 661,259 $ 875,062
============= ==============
Earnings per share $ .15 $ .20
============= ==============
Weighted average number of common shares and
common share equivalents outstanding 4,495,063 4,451,501
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
2
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
--------
1997 1996
---- ----
<S> <C> <C>
Net sales $ 9,485,563 $ 8,642,013
Cost of sales 6,066,092 5,427,098
--------------- ----------------
Gross profit 3,419,471 3,214,915
--------------- ----------------
Shipping and selling expenses 1,765,780 1,748,540
General and administrative expenses 946,758 814,571
--------------- ----------------
2,712,538 2,563,111
--------------- ----------------
Income before other expenses 706,933 651,804
--------------- ----------------
Interest expense - net 93,080 63,814
Other expenses 68,612 -
--------------- ----------------
161,692 63,814
--------------- ----------------
Income before provision for income taxes 545,241 587,990
--------------- ----------------
Provision for income taxes:
Current 191,900 257,800
Deferred (2,600) (22,300)
--------------- ----------------
189,300 235,500
--------------- ----------------
Net income $ 355,941 $ 352,490
=============== ================
Earnings per share $ .08 $ .08
=============== ================
Weighted average number of common shares and
common share equivalents outstanding 4,462,149 4,490,184
=============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-In
Shares Amount Capital
------ ------ -------
<S> <C> <C> <C>
Balance at February 1, 1996 $3,999,576 $ 266,638 $ 1,854,722
Exercise of stock options 214,800 14,320 158,385
Tax benefit from exercise of stock options - - 372,000
Members' capital contribution - - -
Amortization of note receivable - - -
Net income - - -
---------- ---------- -----------
Balance at July 31, 1996 $4,214,376 $ 280,958 $ 2,385,107
========== ========== ===========
Balance at February 1, 1997 4,289,668 $ 428,966 $ 2,448,379
Exercise of stock options 38,455 3,846 14,479
Tax benefit from exercise of stock options - - 88,000
Shares repurchased and retired (401,259) (40,126) (1,960,030)
Amortization of note receivable - - -
Net income - - -
---------- ---------- -----------
Balance at July 31, 1997 $3,926,864 $ 392,686 $ 590,828
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Retained Earnings
and
Members' Note Receivable
Capital Stock Purchase Total
------- -------------- -----
<S> <C> <C> <C> <C>
Balance at February 1, 1996 $ 8,179,405 $(55,928) $10,244,837
Exercise of stock options - - 172,705
Tax benefit from exercise of stock options - - 372,000
Members' capital contribution 70,000 70,000
Amortization of note receivable - 14,250 14,250
Net income 875,062 - 875,062
----------- -------- -----------
Balance at July 31, 1996 $ 9,124,467 $(41,678) $11,748,854
=========== ======== ===========
Balance at February 1, 1997 $10,096,340 $(27,428) $12,946,257
Exercise of stock options - - 18,325
Tax benefit from exercise of stock options - - 88,000
Shares repurchased and retired - - (2,000,156)
Amortization of note receivable - 14,250 14,250
Net income 661,259 - 661,259
----------- -------- -----------
Balance at July 31, 1997 $10,757,599 $(13,178) $11,727,935
=========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Six Months Ended
July 31,
--------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 41,588 $ 1,479,825
--------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (552,939) (436,956)
Purchase of intangible assets (21,065) (66,797)
Acquisition of net assets of Merrick
Packaging Specialists, Inc. - (net of
cash acquired) (664,949) -
--------------- ----------------
Net cash used in investing activities (1,238,953) (503,753)
--------------- ----------------
Cash flows from financing activities:
Proceeds from loan payable - bank 1,812,000 -
Payment for retirement of common stock (2,000,156) -
Proceeds from exercise of stock options 18,325 172,705
Payment of long-term debt (82,035) (675,780)
Payment of acquisition debt (236,417) -
--------------- ----------------
Net cash used in financing activities (488,283) (503,075)
--------------- ----------------
Net (decrease) increase in cash (1,685,648) 472,997
Cash - beginning of period 2,114,923 1,196,593
--------------- ----------------
Cash - end of period $ 429,275 $ 1,669,590
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
In the opinion of the management of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the financial
position of the Company as of July 31, 1997 and the results of operations and
cash flows for the six months ended July 31, 1997 and 1996, and have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended January 31, 1997.
The results of operations for the six months ended July 31, 1997 are not
necessarily indicative of the operating results for the full year.
NOTE 2. INVENTORIES:
A summary of inventory follows:
July 31, January 31,
1997 1997
---- ----
(Unaudited)
Raw materials and supplies $3,137,793 $2,255,078
Work in process 135,669 147,343
Finished products 1,801,325 1,216,472
---------- ----------
$5,074,787 $3,618,893
========== ==========
NOTE 3. REPURCHASE AND RETIREMENT OF COMMON STOCK AND STOCK OPTIONS:
During the six months ended July 31, 1997, the Company in private transactions,
repurchased and retired 383,504 shares of its common stock for a purchase price
of $1,923,928. In addition, the Company repurchased options to purchase 17,755
shares of its common stock (exercisable at a price of $.69 per share) for a
purchase price of $76,228.
The aggregate purchase price of $2,000,156 was partially financed by bank
borrowings of $1,812,000 against the Company's existing line of credit with its
lending bank. The line of credit allows 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 any balance outstanding is payable in full. The
credit facility is unsecured.
The credit facility is 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, acquisitions, earnings and continuity of management.
As of July 31, 1996, there were no outstanding borrowings against the line of
credit.
6
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. ACQUISITION
On February 5, 1997, the Company purchased substantially all of the assets and
assumed certain liabilities of Merrick Packaging Specialists, Inc. ("Merrick").
Merrick Packaging Specialists, Inc. is a distributor of high quality paper,
paper laminate and plastic shopping bags and boxes for the retail industry. For
the fiscal years ended December 31, 1996 and 1995, Merrick reported unaudited
revenues of approximately $3,600,000 and $3,600,000, respectively. Net income
for the fiscal years ended December 31, 1996 and 1995 were not material. The
acquisition has been accounted for as a purchase, and accordingly, its results
will be included in the Company's results of operations from the effective date
of the acquisition, February 1, 1997. The excess of acquisition cost over the
fair value of Merrick's net tangible assets approximates $2,264,000 and has been
allocated to intangible assets and is being amortized over periods ranging from
fifteen to forty years. Of the purchase price of $2,370,000, $780,000 was paid
at closing and the balance is payable in promissory notes as follows:
DUE DATE AMOUNT INTEREST RATE
August 1, 1997 $ 600,000 6% per annum
August 1, 1998 600,000 7.5% per annum
March 1, 1999 390,000 7.5% per annum
---------------
$ 1,590,000
In addition, loans payable of $236,417 were assumed from Merrick in the
transaction. These loans were paid in May of 1997.
Interest expense charged to operations was $55,125 and $-0-, for the six months
ended July 31, 1997 and 1996, respectively.
NOTE 5. STOCK DIVIDEND:
On October 15, 1996, the Company effected a three for two stock split recorded
in the form of a stock dividend payable to shareholders of record at September
25, 1996. As a result, common stock was increased by $140,484 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 dividend.
NOTE 6. EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128
simplifies the standards for computing earnings per share previously found in
APB Opinion No. 15, Earnings Per Share and is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier adoption is not permitted. The Company does not expect the adoption of
SFAS No. 128 to have a significant impact to its reported results.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
Net Sales:
Net sales for the quarter ended July 31, 1997 were $9,486,000, as
compared to $8,642,000 for the quarter ended July 31, 1996, an increase of
$844,000, or 9.8%.
Net sales for the six months ended July 31, 1997 were $18,743,000, as
compared to $17,197,000 for the six months ended July 31, 1996, an increase of
$1,546,000, or 8.9%.
The increase in net sales for the six months ended July 31, 1997 over
the same period in the prior year was primarily attributable to sales resulting
from the acquisition of Merrick Packaging Specialists in February 1997 and
increased sales in the Registrant's Cycle Plastics and Advertising Specialty
Institute divisions.
Net sales for the quarter ended July 31, 1997, as compared to the
immediately preceding quarter ended April 30, 1997, increased $229,000, or 2.5%.
The Registrant's backlog at July 31, 1997 was $5,272,000, compared to
$5,095,000 at July 31, 1996, an increase of $177,000, or 3.5%.
Costs of Sales and Expenses:
Cost of sales for the quarter ended July 31, 1997, as compared to the
quarter ended July 31, 1996, increased $639,000 or 11.8%, to $6,066,000 from
$5,427,000. Cost of sales as a percentage of net sales, for the quarter ended
July 31, 1997, as compared to the same quarter in the prior year, increased to
64.0% from 62.8%. This increase was attributable to an increase in raw material
costs for the Registrant's products.
Cost of sales for the six months ended July 31, 1997, as compared to
the six months ended July 31, 1996, increased $1,241,000 or 11.5%. Cost of sales
as a percentage of net sales, for the six months ended July 31, 1997, as
compared to the same period in the prior year, increased to 63.9% from 62.5%.
Shipping, selling, general and administrative expenses for the quarter
ended July 31, 1997, as compared to the quarter ended July 31, 1996, increased
$149,000, or 5.8%, from $2,563,000 to $2,712,000. This increase was primarily
attributable to expenses resulting from increased net sales.
Shipping, selling, general and administrative expenses for the six
months ended July 31, 1997, as compared to the same period in the prior year,
increased $563,000, or 11.6%, from $4,858,000 to $5,421,000. This increase was
primarily attributable to increased expenses due to increased sales.
8
<PAGE>
Interest Expense:
Interest expense for the quarter ended July 31, 1997, as compared to
the quarter ended July 31, 1996, increased $29,000, or 45.3%, to $93,000 from
$64,000. Interest expense for the six months ended July 31, 1997, as compared to
the six months ended July 31, 1996, increased $77,000, or 59.2%, to $207,000
from $130,000. These increases were attributable to increased borrowings needed
for the acquisition of the net assets of Merrick Packaging Specialists.
Net Income:
Net income for the quarter ended July 31, 1997 was $356,000, or $.08
per share, as compared to $352,000, or $.08 per share, for the quarter ended
July 31, 1996.
Net income for the six months ended July 31, 1997 was $661,000, or $.15
per share, as compared to $875,000, or $.20 per share, for the six months ended
July 31, 1996. The reduction in net income per share was primarily related to
start-up costs relating to the Merrick Packaging Specialists acquisition, the
seasonal nature of Merrick Packaging Specialists and increased raw materials
costs.
Working Capital and Liquidity:
Working capital decreased to $ 5,529,000 at July 31, 1997 from
$7,078,000 at April 30, 1997, a decrease of $1,549,000, or 21.9%. Working
capital decreased to $5,529,000 at July 31, 1997 from $7,449,000, at July 31,
1996, a decrease of $1,920,000, or 25.8%. The Registrant's working capital ratio
was 2 to 1 at July 31, 1997. The decrease in the Registrant's working capital at
July 31, 1997 is directly attributable to the Registrant's repurchases of its
common stock and options. In July 1997, the Registrant, in private transactions,
repurchased and retired 383,504 shares of its common stock for a purchase price
of $1,923,928. In addition, the Registrant repurchased options to purchase
17,755 shares of its common stock (exercisable at a price of $.69 per share) for
a purchase price of $76,228. The aggregate purchase price of $2,000,156 was
partially financed by bank borrowings of $1,812,000 against the Registrant's
existing line of credit with its lending bank. The line of credit allows for the
Registrant 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 any balance
outstanding is payable in full. As of July 31, 1996, there were no outstanding
borrowings against the line of credit.
The Registrant believes it has sufficient working capital and unused
lines of credit to meet its expected liquidity and capital reserve requirements
for the foreseeable future.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Company's Annual Meeting of Stockholders was held on June 20,
1997 (the "Annual Meeting").
(b) Election of Directors.
Number of Number of
Votes Votes
Cast For Cast Against
-------- ------------
Herbert Barry 3,458,781 1,600
Warner J. Heuman 3,458,781 1,600
Martin Gelerman 3,458,781 1,600
The following directors' terms of office continued after the Annual
Meeting: Erich Vetter, Robert K. Semel, Kurt Vetter, Martin Brownstein and
Steven Wolosky.
10
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27; Financial Data Schedule
(b) Report on Form 8-K - The Registrant filed a Form 8-K dated
July 16, 1997 reporting an Item 5 event.
11
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
UNIFLEX, INC.
(Registrant)
/s/ Herbert Barry
-------------------------------------
Herbert Barry (Chairman Of The Board)
/s/ Robert Gugliotta
-------------------------------------
Robert Gugliotta (VP Finance)
Date: September 12, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended July 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 429,275
<SECURITIES> 0
<RECEIVABLES> 4,918,856
<ALLOWANCES> 180,146
<INVENTORY> 5,074,787
<CURRENT-ASSETS> 11,338,891
<PP&E> 7,108,029
<DEPRECIATION> 8,936,697
<TOTAL-ASSETS> 21,573,105
<CURRENT-LIABILITIES> 5,809,427
<BONDS> 0
0
0
<COMMON> 392,686
<OTHER-SE> 11,335,249
<TOTAL-LIABILITY-AND-EQUITY> 21,573,105
<SALES> 18,742,897
<TOTAL-REVENUES> 18,742,897
<CGS> 11,990,768
<TOTAL-COSTS> 17,411,582
<OTHER-EXPENSES> 275,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 207,044
<INCOME-PRETAX> 1,055,659
<INCOME-TAX> 394,400
<INCOME-CONTINUING> 661,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 661,259
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
