SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-K
(MARK ONE)
/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, 1997
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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.
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(Exact name of Registrant as specified in its charter)
Delaware 11-2008652
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
383 West John Street, Hicksville, New York 11802
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(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. /X/
As of April 7, 1997, the aggregate market value of the Registrant's
outstanding voting Common Stock held by non-affiliates of the Registrant was
$18,304,588.
As of April 7, 1997, there were 4,293,860 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 June 2,
1997 pursuant to Regulation 14A.
<PAGE>
PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS. Uniflex, Inc. (a Delaware
corporation organized in 1973) is the successor by merger to the business and
assets of Uniflex, Inc. (a New York corporation organized in 1963). Uniflex,
Inc., its predecessor and subsidiaries are hereinafter collectively referred to
as the Registrant. The Registrant designs, manufactures and markets a broad line
of customized plastic packaging for sales and advertising promotions, clear bags
for apparel and soft goods manufacturers and specialized, recyclable bags and
other products for use in hospitals, medical laboratories and emergency care
centers and has been so engaged for more than the past five years.
In February 1997, the Registrant acquired substantially all of the
assets and assumed certain of the liabilities of Merrick Packaging Specialists,
Inc. a New York corporation ("Merrick") engaged in the distribution of high
quality paper, paper laminate and plastic shopping bags and boxes for the retail
industry.
In February 1997, the Registrant formed Uniflex, UK, Ltd., a
wholly-owned subsidiary of the Registrant to market and distribute the
Registrant's products in the United Kingdom.
In January 1996, the Registrant formed Uniflex Southeast L.L.C., a
Delaware limited liability company ("Southeast") to market and distribute health
and safety products and services primarily to the dental industry. Uniflex
Southeast, Inc., a Delaware corporation and wholly-owned subsidiary of the
Registrant, is the Manager of Southeast and owns 80% of its equity. In March
1996, Southeast commenced operations in Roswell, Georgia.
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In January 1995, the Registrant formed Uniflex Southwest L.L.C., a
Delaware limited liability company ("Southwest"). Southwest produces and markets
jumbo flexible loop handle bags, double drawstring bags and reclosable,
resealable, Trac-Loc bags. These products are sold to retailers, cosmetic firms,
food packing companies and medical/healthcare supply firms. The Registrant is
the Manager of Southwest and owns 80% of its equity. In April 1995, Southwest
commenced operations in Albuquerque, New Mexico.
In July 1993, the Registrant acquired certain of the assets of Haran
Packaging Co., Inc., a New York corporation engaged in the business of
manufacturing, distributing and selling packaging materials ("Haran").
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Not applicable.
(c) (1) NARRATIVE DESCRIPTION OF BUSINESS. The information specified in
paragraphs (i)-(xiii) below is included in accordance with Item 101(c)(1) of
Regulation S-K.
(i) The Registrant's principal product is a flexible plastic bag with
an attached plastic handle or other closure or carrying device, known as a
"specialty bag." The bag is made of polyethylene and comes in various sizes. The
bag is printed from artwork (e.g., the user's product and logo) prepared either
by the Registrant's in-house art and production department or supplied to the
Registrant by the user or its advertising agency. Injection molded rigid
polyethylene handles, in various sizes and shapes, with reusable snap-closures,
are affixed to the bags by a heat-sealing process. Other specialty bags produced
and marketed by the Registrant include die-cut bags, drawstring bags, patch bags
and litter bags. The Registrant's specialty bags are used primarily for
promotional purposes including, for example, at trade shows and
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exhibitions. The Registrant's specialty bags are sold and marketed
primarily to a network of promotional products distributors.
The Registrant manufactures a line of specialized bags used in various
segments of the healthcare industry including hospitals, clinical laboratories
and radiology departments. For this industry the Registrant manufactures a clear
bag used as a secondary container for the safe transport of clinical laboratory
specimens, under the trademark "Speci-Gard(R)." The Registrant markets this
product primarily to healthcare and laboratory supply companies. The Registrant
believes that the bag meets or exceeds applicable OSHA standards. The bag is a
liquid-tight, disposable specimen transport bag with a patented one step sealing
system that is approved as a secondary container for specimen transport. The
Registrant manufactures and markets a clear, radiolucent, disposable, protective
cover for X-Ray cassettes under the trademark "Protex-Ray(TM)" to the healthcare
market.
The Registrant manufactures and markets a variety of conventional
polyethylene bags without carrying attachments, many of which are also printed
from artwork, for use in packaging principally by various apparel and soft goods
manufacturers. The Registrant manufactures and markets flexible plastic
envelopes with pressure sensitive adhesive closures for use in the air courier
industry as a document handling pouch. The Registrant also sells molded plastic
handles for plastic bags to other manufacturers.
The Registrant manufactures and markets a highly tamper-evident cash
handling bag under the trademarks "Ultravault(TM) and Univault(TM)." The
disposable bags are constructed of high strength polymer film, provide thermal
protection from tampering, and are constructed with the Registrant's patented
one step Press and Close(R) sealing system. The Registrant markets the
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products to cash intensive businesses including financial institutions, retail
establishments and fast food chains, for the safe transport of cash and other
valuables.
The Registrant, through Southwest, produces and markets a soft loop
handle bag with applications ranging from retail shopping bags to functional
"pick it yourself" produce bags. Other products include a double drawstring bag,
which is marketed primarily to cosmetic related firms and a reclosable,
resealable, Trac-Loc bag, which is marketed to healthcare and laboratory supply
companies, food packaging firms and promotional products distributors.
The Registrant, through Southeast, produces and markets infection
control products for the dental industry, including a transport bag for dental
impressions, antimicrobial soaps, and disinfectants.
The Registrant, through Merrick, distributes high quality paper, paper
laminate and plastic shopping bags and boxes for the retail industry.
The Registrant continues to market its Ultravault(TM) "tamper evident"
security bags which provide the user with visual evidence of tampering with the
bag's contents. The Ultravault(TM) bags are being introduced into markets, such
as banks, retailers, casino operators, stockbrokers and courier firms, which
have security concerns for cash and other valuables.
The following table sets forth the amount and percentage of sales
contributed by each class of similar products for the last three fiscal years
which contributed fifteen percent or more of total sales in any of such fiscal
years.
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<PAGE>
<TABLE>
<CAPTION>
Fiscal Years ended January 31,
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1997 1996 1995
---- ---- ----
$ in thousands
<S> <C> <C> <C>
Plastic Specialty Bags (including
handle, drawstring, cut-out and litter $17,404 $17,931 $16,937
bags)........................................... 50% 57% 60%
</TABLE>
The Registrant distributes approximately 43% of its products to
advertising specialty distributors as part of its bag advertising program. The
Registrant distributes approximately 24% of its products, including
Speci-Gard(TM) and other hospital related products, to hospital supply houses,
laboratories, nursing homes and directly to certain hospitals. The Registrant
also sells its products to various distributors for resale. Less than 10% of the
Registrant's sales are directly with major retailers, chain stores, industrial
concerns and other large end-users. The Registrant's products are sold through
eighteen salespeople which include thirteen salespeople and five of the
Registrant's officers. During the fiscal year ended January 31, 1997, the
Registrant's sales staff accounted for approximately ninety-eight percent (98%)
of sales while approximately two percent (2%) of sales were made through
manufacturer's representatives.
The Registrant's sales office, including its showroom, is located at
its principal executive offices in Hicksville, New York (see Item 2 below).
During the fiscal year ended January 31, 1997, the Registrant incurred
advertising expenditures of approximately $482,000. The Registrant mails a
complete catalogue of its merchandise, updated annually. For the year ended
January 31, 1997, the Registrant mailed approximately 95,000 catalogues. This
program develops substantial leads for the Registrant. In addition, the
Registrant receives unsolicited inquiries, referrals and leads from existing
customers, which are actively pursued by the
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Registrant's salespersons. The Registrant also displays its merchandise at
various trade shows, such as premium shows and soft-goods shows. Additionally,
the Registrant mails a catalogue designed specifically for hospital supply
houses and hospitals to promote its Speci-Gard(TM) products and other hospital
products.
(ii) Not applicable.
(iii) The raw materials essential to the business of the
Registrant (primarily polyethylene plastic) are readily available. The
Registrant's products are manufactured principally at the plant it leases in
Westbury, New York (see Item 2 below). The Registrant owns the molds used in
producing its handles, and, in addition, owns seven (7) injection molding
machines which produce all of its requirements for such plastic handles.
(iv) The Registrant has registered trademarks protecting its
logo and the names "Uniflex(TM)", "Texture-Flex(TM)", "Jet Pouch(TM)",
"Tri-Flex(TM)", "Speci-Gard(TM)", "Hand-L-Bag(TM), Protex-Ray(TM),
"Slip-Free(TM)", "Press and Close(TM)", "Special Air Tuff(TM)", "Uni- Box(TM)",
"Micro-Tex(TM)", "Opti-Pouch(TM)", "UF(TM)", "Econovault(TM)", "Univault(TM)",
"Ultravault(TM)", "Univault and Logo Design(TM)", "Bagvertising(TM)", "UF
Line(TM)" and "The Bagvertising Company(TM)." The name "Uniflex(TM)" and the
Uniflex logo trademark are also registered with the U.S. Patent and Trademark
Office. The Registrant markets certain of its products utilizing its trademarks.
The Registrant believes that the loss of one or more of its trademarks would not
materially adversely affect its business.
(v) The Registrant's business is not affected by seasonal
trends, however, approximately fifty percent to fifty-five percent of sales are
traditionally made during the second
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half of the fiscal year. This is due to slightly higher demand during the late
summer and fall seasons. The Registrant expects that approximately 70% of sales
at its Merrick Division will be made during the second half of the fiscal year.
(vi) The Registrant's inventory consists primarily of raw
materials. The Registrant maintains sufficient material on hand to expedite
orders and properly service its customers.
(vii) The Registrant has approximately 8,700 customers, none
of which accounted for more than ten percent (10%) of sales during the fiscal
year ended January 31, 1997.
(viii) As of January 31, 1997, the Registrant had a $5,315,000
backlog of firm orders, all of which the Registrant expects to fill. As of
January 31, 1996, the Registrant had a $5,108,000 backlog of firm orders,
substantially all of which have been filled.
(ix) Not applicable.
(x) The plastic bag industry is highly competitive and is
comprised of many concerns making products similar to those of the Registrant. A
number of these concerns are larger than the Registrant in terms of total
assets, personnel, sales and financial resources. The Registrant believes that
competition in the industry is based upon price, service and quality of product.
(xi) The Registrant did not expend material amounts on
Registrant sponsored research and development during the last three fiscal
years.
(xii) In addition to the disposal of waste solvents through an
authorized waste disposer, the Registrant monitors its approaches to the
disposal of waste solvents in order to comply with the Federal Clean Air Act,
the provisions of which restrict the emission of V.O.C. (Volatile Organic
Compounds).
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<PAGE>
The Registrant, with the assistance of independent consultants,
constantly monitors compliance with Federal, state and local environmental
provisions. During fiscal 1997, the Registrant spent approximately $14,000 on
such compliance and estimates that $25,000 will be expended in the current
fiscal year. The Registrant believes that such capital expenditures are not
material to the operations of the Registrant.
(xiii) The Registrant has approximately 390 employees,
including thirteen salespersons and fourteen officers. The Registrant's factory
personnel are employed under contracts with Amalgamated Union Local 5 expiring
on January 31, 1998.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES. Not applicable.
Item 2. PROPERTIES.
The Registrant owns a 44,255 square foot building at 383 West
John Street, Hicksville, New York 11802, which serves as the Registrant's
principal executive offices. The Registrant uses approximately 9,900 square feet
at this property for executive offices, sales, accounting, computers and
showroom space. Approximately 34,400 square feet is used as warehouse space. The
property is encumbered by a mortgage in the principal amount outstanding at
January 31, 1997 of $1,436,137.
The Registrant leases a building at 474 Grand Boulevard, Westbury, New
York 11590, containing approximately 72,000 square feet of space, of which
approximately 14,000 square feet are used for warehousing, approximately 42,000
square feet for manufacturing, approximately 10,000 square feet for shipping and
receiving and approximately 6,000 square feet for executive
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and clerical offices. The expiration date of the Registrant's lease is April 30,
2003. During the fiscal year ended January 31, 1997, the Registrant paid
approximately $146,250 for the base annual rental of said premises. In addition,
the Registrant pays the cost of real estate taxes, insurance and other expenses
of maintaining the building, which expenses amounted to approximately $310,000
during the fiscal year ended January 31, 1997.
Southwest leases a building at 2512 Madison N.E., Albuquerque, New
Mexico, containing approximately 10,000 square feet of space, of which
approximately 700 square feet is for office space and the balance of
approximately 9,300 square feet is for manufacturing. The expiration date of
Southwest's lease is March 31, 2000 with a base rent of $3,552.37 monthly,
including taxes and insurance.
In connection with the acquisition of Merrick, as of February 1, 1997
the Registrant assumed Merrick's lease for a building at 70 Austin Boulevard,
Commack, New York, containing approximately 18,000 square feet of warehouse
space and 2,000 square feet of office space. The expiration date of the lease is
July 31, 1998. The rent for the premises, inclusive of real estate taxes, is
$7,627 per month until July 31, 1997 and $7,794 per month thereafter until the
end of the term of the lease. The Registrant has tentatively agreed to sublease
the entire premises to a third party.
Item 3. LEGAL PROCEEDINGS.
The Registrant is not a party to any material legal proceedings.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity
AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
The Registrant's Common Stock, $.10 par value, trades on the American
Stock Exchange (the "AMEX") under the symbol "UFX".
The following table sets forth the high and low closing sales prices of
the Common Stock on the AMEX for the periods indicated.
HIGH(1) LOW(1)
Year Ended
January 31, 1997
First Quarter 7 5
Second Quarter 6 5
Third Quarter 9-13/16 5-1/4
Fourth Quarter 9-15/16 7-1/8
Year Ended
January 31, 1996
First Quarter 5 3-7/8
Second Quarter 6-1/2 3-3/4
Third Quarter 5-7/8 4-11/16
Fourth Quarter 7 4-11/16
(1) The Registrant declared a 50% stock dividend effective October 15, 1996
to holders of record as of September 26, 1996. The high and low sales
prices have been adjusted to reflect such dividend.
(b) Holders.
Approximate Number of Record Holders (as
Title Of Class of April 7, 1997
-------------- ----------------------------------------
Common Stock, Par Value $.10 Per Share 288
The Registrant believes that there are in excess of 967 beneficial
holders of the Common Stock.
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(c) Dividends.
The Registrant has not declared any cash dividends on its Common Stock
during the two most recent fiscal years. The Registrant declared a 50% stock
dividend effective October 15, 1996 to holders of record as of September 26,
1996.
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 limits the payment of cash
dividends in any fiscal year to 10% of the Registrant's consolidated pretax
profit.
Item 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
For the Years Ended January 31,
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
SELECTED INCOME
STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net Sales $34,466,000 $31,510,000 $30,133,000 $25,660,000 $22,591,000
Gross Profit $13,087,000 $11,187,000 $11,151,000 $ 9,469,000 $ 8,320,000
Net Income $ 1,917,000 $ 1,459,000 $ 1,166,000 $ 941,000 $ 654,000
Earnings $ .43 $ .35 $ .29 $ .23 $ .17
Per Share: Note(1)(2)
SELECTED BALANCE
SHEET DATA:
Working Capital $ 8,434,000 $ 6,699,000 $ 5,822,000 $ 5,136,000 $ 3,510,000
Total Assets $18,693,000 $16,283,000 $15,318,000 $13,394,000 $12,014,000
Long-Term Debt(3) $ 1,493,000 $ 2,170,000 $ 3,847,000 $ 3,968,000 $ 3,869,000
Stockholders' Equity $12,946,000 $10,245,000 $ 7,285,000 $ 6,186,000 $ 4,961,000
</TABLE>
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(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) The Registrant declared a 50% stock dividend effective October 15, 1996
to holders of record as of September 26, 1996. Earnings per share have
been adjusted to reflect this dividend.
(3) Exclusive of current portion of long-term debt.
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<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
Fiscal year ended January 31, 1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $8,554,965 $8,642,013 $9,339,319 $7,929,965
Gross Profit $3,232,393 $3,214,915 $3,688,695 $2,951,286
Net income $ 522,572 $ 352,490 $ 738,097 $ 303,779
Net income per share(1) $ 0.12 $ 0.08 $ 0.16 $ 0.07
</TABLE>
<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(1) $ 0.09 $ 0.05 $ 0.15 $ 0.06
</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(1) $ 0.08 $ 0.04 $ 0.11 $ 0.06
</TABLE>
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(1) The Registrant declared a 50% stock dividend effective October 15, 1996
to holders of record as of September 26, 1996. Net income per share has
been adjusted to reflect this dividend.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward- looking statements. Factors that may cause such
differences include, but are not limited to, the Company's expansion into new
markets, competition, technological advances and availability of managerial
personnel.
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:
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<TABLE>
<CAPTION>
Relationship To Total Revenues For the Period to Period Increase
Years Ended January 31, (Decrease) Years Ended
-------------------------------------- -------------------------
1997 1996 1995 1996-1997 1995-1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 9.4% 4.6%
Cost of Sales 62.0 64.4 63.0 5.2 7.5
Gross Profit 38.0 35.6 37.0 17.0 .3
Operating Expenses:
Shipping, Selling, General
and Administrative Expenses 28.2 26.9 29.5 14.7 (4.9)
Interest .6 1.3 1.3 (47.9) (100.0)
Gain on Sale of Equipment -- -- (.3) -- (100.0)
Total 28.8 28.2 30.5 11.8 (3.7)
Income Before
Provision For
Income Taxes 9.2 7.4 6.5 36.8 19.2
Provision For
Income Taxes 3.6 2.8 2.6 45.9 10.4
Net Income 5.6% 4.6% 3.9% 31.4% 25.1%
</TABLE>
RESULTS OF OPERATIONS:
SALES:
Sales for the years ended January 31, 1997, January 31, 1996
and January 31, 1995, were $34,466,000, $31,510,000 and $30,133,000
respectively. Sales for the year ended January 31, 1997 increased $2,956,000 or
9.4%, compared to the prior year as a result of increased sales in all
divisions, primarily from the Medical Packaging Division. 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.
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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 24% of the Registrant's total sales, or approximately
$8,133,000, for the fiscal year ended January 31, 1997. The Medical Packaging
Division accounted for 23% of the Registrant's total sales, or approximately
$7,261,000, for the fiscal year ended January 31, 1996.
COST AND EXPENSES:
JANUARY 31, 1997
Cost of sales, as a percentage of sales, decreased to 62.0% for the
year ended January 31, 1997, compared to 64.4% for the year ended January 31,
1996. This decrease was primarily due to the Registrant's continued emphasis on
purchasing, manufacturing and systems controls. During fiscal 1997, the prices
of raw material increased but began to stabilize during the fourth quarter.
Certain anticipated raw material price increases have been reflected in the
prices of products in the Registrant's new catalogs. As a result of the decrease
in cost of sales, as a percentage of sales, gross profit for the year ended
January 31, 1997, as compared to the year ended January 31, 1996, increased to
38.0% from 35.6%. Shipping, selling, general and administrative expenses for the
year ended January 31, 1997, increased approximately $1,246,000, or 14.7%,
compared to the year ended January 31, 1996. This increase was due primarily to
increases in commissions, selling, advertising, promotion and freight out. These
increases were primarily attributable to increased net sales. Interest expense
for the year ended January 31, 1997, decreased approximately $198,000, or 48%,
as compared to the year ended January 31, 1996. On February 13, 1996, the
Registrant repaid in full its working capital debt under its credit facility
thereby reducing its
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interest expense. Throughout substantially the entire fiscal year, excess cash
was invested in short term financial instruments helping to offset mortgage
interest costs and other interest expense.
JANUARY 31, 1996
Cost of sales, as a percentage of sales, increased to 64.4% 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 $435,000, or 4.9%, 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 $316,000 to $413,000, or 31%, due to a gain or
sale of equipment and inventory of $94,000 reported for the fiscal year ended
January 31, 1995.
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.
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INCOME BEFORE PROVISION FOR INCOME TAXES:
Income before provision for income taxes for the year ended January 31,
1997, increased approximately $852,000, or 37%, to approximately $3,169,000
compared to approximately $2,317,000 for year ended January 31, 1996. This
increase was primarily attributable to increased sales, efficient purchasing of
raw materials and continued improvements in manufacturing operations.
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 the 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.
PROVISION FOR INCOME TAXES:
Provision for income taxes for the year ended January 31, 1997, was
$1,252,000 compared to $858,000 for the prior year primarily due to the increase
of $852,000 in income before 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.
-18-
<PAGE>
LIQUIDITY AND CAPITAL COMMITMENTS:
Working capital for the fiscal year ended January 31, 1997, increased
to $8,434,000 from $6,699,000 for the year ended January 31, 1996. This increase
of $1,735,000, or 25.9%, was directly attributable to operating activities
during fiscal 1997. This increase resulted in a working capital ratio of 4.4 to
1 as January 31, 1997.
On April 24, 1995, the Registrant entered into a revolving credit
facility establishing a three-year $3,500,000 line of credit. 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 1-1/2% per
annum in excess of LIBOR (London Interbank Offered Rate). As of January 31,
1997, the Registrant had no indebtedness outstanding under the credit facility.
During the course of the fiscal year ended January 31, 1996, the Registrant
periodically reduced its debt and on February 13, 1996 repaid in full 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 $550,000 for capital improvements in fiscal 1998.
-19-
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data are included under Item
14 of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
On April 9, 1996, the Audit Committee of the Board of Directors of the
Registrant dismissed Miller, Ellin & Co. ("Miller Ellin") as independent
accountants to the Registrant and appointed Patrusky Mintz & Semel as the new
independent accountants to the Registrant. Miller Ellin's accountant's report on
the financial statements of the Registrant for the fiscal years ended January
31, 1994 and 1995 did not contain an adverse opinion or a disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope, or accounting
principles. There were no other reportable events or disagreements with Miller
Ellin to report in response to Item 304(a) of Regulation S-K, ss. 229.304(a).
-20-
<PAGE>
PART III
The information required by Items 10, 11, 12 and 13 of this Part III is
incorporated by reference from the Registrant's definitive proxy statement to be
filed not later than June 2, 1996 pursuant to Regulation 14A.
-21-
<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,
1997 and 1996 F-3
Statements of Income for the
years ended January 31, 1997,
1996 and 1995 F-4
Statements of Changes in
Stockholders'Equity for the years
ended January 31, 1997, 1996
and 1995 F-5
Statements of Cash Flows for the
years ended January 31, 1997,
1996 and 1995 F-6
Notes to Financial Statements F-7
(2) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II Valuation and Qualifying Accounts
and Reserves F-20
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.
-22-
<PAGE>
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 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
<TABLE>
<CAPTION>
NO. REFERENCE
<S> <C> <C>
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)
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
NO. REFERENCE
<S> <C> <C>
(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)
(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 Bank, N.A. (8)
(u) Employment Agreement of Herbert Barry dated as of February 1, 1996 (9)
(v) Second Amended and Restated Employment of Robert K. Semel dated as of
February 1, 1996 (9)
(w) Employment Agreement of Martin Brownstein dated as of February 1, 1996 (9)
(x) Asset Purchase Agreement dated as of February 1, 1997, by and among the Registrant,
Merrick Packaging Specialists, Inc., Jeffrey Gold, Lawrence Gold and Steven
Braverman (10)
</TABLE>
-24-
<PAGE>
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.
- -------------------------
(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.
(9) Incorporated by reference to the Registrant's Annual Report Form 10-K
for its fiscal year ended January 31, 1996.
(10) Incorporated by reference to the Registrant's Current Report on Form
8-K dated February 5, 1997.
-25-
<PAGE>
POWER OF ATTORNEY
Uniflex, Inc. and each of the undersigned do hereby appoint Herbert
Barry and Robert K. Semel, and each of them severally, its or his true and
lawful attorneys to execute on behalf of Uniflex, Inc. and the undersigned any
and all amendments to this Report and to file same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission. Each of such attorneys shall have the power to act hereunder with or
without the other.
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 22nd day of
April, 1997.
UNIFLEX, INC.
(Registrant)
By:/S/ Herbert Barry
-----------------
Herbert Barry, Chairman
of the Board and Chief Executive Officer
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>
/S/ WARNER J. HEUMAN Director April 22, 1997
- ----------------------
Warner J. Heuman
/S/ HERBERT BARRY Chairman of the Board, Chief Executive April 22, 1997
- ---------------------
Herbert Barry Officer and Director
/S/ ERICH VETTER Director April 22, 1997
- ---------------------
Erich Vetter
/S/ ROBERT K. SEMEL President, Secretary and Director April 22, 1997
- ---------------------
Robert K. Semel
/S/ KURT VETTER First Vice President-Engineering and April 22, 1997
- ---------------------
Kurt Vetter Director
/S/ ROBERT GUGLIOTTA Vice President-Finance, Treasurer and April 22, 1997
- ---------------------
Robert Gugliotta Controller
/S/ MARTIN BROWNSTEIN Senior Vice President and Director April 22, 1997
- ---------------------
Martin Brownstein
/S/ MARTIN GELERMAN Director April 22, 1997
- ---------------------
Martin Gelerman
/S/ STEVEN WOLOSKY Director April 22, 1997
- ---------------------
Steven Wolosky
</TABLE>
-26-
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
We have audited the accompanying consolidated balance sheets of Uniflex, Inc.
and Subsidiaries as of January 31, 1997 and 1996 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years 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 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, 1997 and 1996, and the results of their
operations and their cash flows for the years ended January 31, 1997 and 1996,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion the basic
consolidated financial statements taken as a whole. The schedule listed in Item
14(1) (2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has 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/PATRUSKY, MINTZ & SEMEL
- --------------------------
PATRUSKY, MINTZ & SEMEL
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 21, 1997
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
We have audited the accompanying consolidated statements of income, changes in
stockholders' equity and cash flows of Uniflex, Inc. and Subsidiaries for the
year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and preform 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 results of operations and cash flows of
Uniflex, Inc. and Subsidiaries for the year ended January 31, 1995, 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 schedule listed in Item
14(2) is presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion,
fairly states, 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, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (Note 1) $ 2,114,923 $ 1,196,593
Accounts receivable (net of allowances
of $160,061 in 1997 and $174,500 in 1996) 4,084,710 3,364,989
Inventories (Notes 1 and 3) 3,618,893 2,699,948
Refundable and prepaid income taxes 279,791 898,610
Prepaid expenses and other current assets 565,263 606,943
Deferred tax asset (Notes 1 and 7) 291,200 269,900
------------ ------------
Total Current Assets 10,954,780 9,036,983
Property and Equipment (Notes 1, 4 and 5) 6,786,936 6,427,427
Intangible Assets (Note 1) 220,013 156,404
Other Assets 731,590 661,798
------------ ------------
Total Assets $ 18,693,319 $ 16,282,612
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt (Note 5) $ 171,000 $ 151,646
Accounts payable 1,351,060 1,234,487
Accrued liabilities (Note 6) 998,888 952,018
------------ ------------
Total Current Liabilities 2,520,948 2,338,151
------------ ------------
Long-Term Debt (Note 5) 1,493,131 2,169,506
------------ ------------
Deferred Rent (Note 1) 141,246 122,496
------------ ------------
Deferred Compensation and Postretirement
Benefits (Note 12) 1,329,237 1,215,124
------------ ------------
Commitments and Contingencies (Note 14)
Minority Interest (Note 9) 262,500 192,500
------------ ------------
Stockholders' Equity (Notes 2, 8, 9 and 10)
Common stock - par value $.10 per share
10,000,000 shares authorized; issued and
outstanding 4,289,668 in 1997 and
3,999,576 in 1996 428,966 266,638
Additional paid-in capital 2,448,379 1,854,723
Retained earnings and members' capital 10,096,340 8,179,402
------------ ------------
12,973,685 10,300,763
Less note receivable - stock purchase (Note 8) (27,428) (55,928)
------------ ------------
12,946,257 10,244,835
------------ ------------
Total Liabilities and Stockholders' Equity $ 18,693,319 $ 16,282,612
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales $ 34,466,262 $ 31,509,963 $ 30,133,067
Cost of sales 21,378,973 20,322,952 18,981,930
------------ ------------ ------------
Gross profit 13,087,289 11,187,011 11,151,137
Shipping, selling, general and
administrative expenses 9,702,838 8,457,319 8,892,321
------------ ------------ ------------
Income before other (income) expenses 3,384,451 2,729,692 2,258,816
------------ ------------ ------------
Other (income) expenses:
Interest - net 215,313 413,111 410,016
Gain on sale of equipment and
inventory -- -- (94,140)
------------ ------------ ------------
215,313 413,111 315,876
------------ ------------ ------------
Income before provision for income
taxes 3,169,138 2,316,581 1,942,940
Provision for income taxes
(Notes 1 and 7) 1,252,200 858,000 777,000
------------ ------------ ------------
Net income $ 1,916,938 $ 1,458,581 $ 1,165,940
============ ============ ============
Earnings per common share and
common share equivalents (Notes 1 and 2) $ .43 $ .35 $ .29
============ ============ ============
Weighted average number of common
shares and common shares equivalents
outstanding (Notes 1 and 2) 4,480,414 4,118,802 4,078,671
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional Retained Earnings
------------ ---------- and Note Receivable
Amount Shares Paid-in Capital Members Capital Stock Purchase Total
------ ------ --------------- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
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 10) 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
Exercise of stock options (Note 10) 21,555 215,545 213,097 -- -- 234,652
Tax benefit from exercise of stock
options (Note 10) -- -- 499,402 -- -- 499,402
Issuance of common stock to effect a
3 for 2 stock split (Note 2) 140,484 1,404,841 (140,484) -- -- --
Issuance of common stock as
compensation 289 2,898 21,641 -- -- 21,930
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 1,916,938 -- 1,916,938
---------- ---------- ----------- ------------ ------------ ------------
Balance at January 31, 1997 $ 428,966 4,289,668 $ 2,448,379 $ 10,096,340 $ (27,428) $ 12,946,257
========== ========== =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,916,938 $ 1,458,581 $ 1,165,940
Adjustments to reconcile net income to
net cash provided by operating
activities:
Gain on sale of equipment and
inventory -- -- (94,140)
Deferred compensation, postretirement
medical benefits and related
interest 114,113 103,646 179,777
Depreciation and amortization 915,888 852,956 816,911
Equity issued as compensation 21,930 17,815 50,250
Amortization of note receivable 28,500 28,500 28,500
Deferred rent 18,750 33,750 47,499
Deferred income taxes (82,300) (85,260) (190,000)
Changes in assets and liabilities:
Accounts receivable (719,721) 822,974 (993,809)
Inventories (918,945) 381,343 (596,366)
Prepaid expenses and other current
assets 41,680 103,284 (145,572)
Other assets (8,792) 81,748 (300,093)
Accounts payable 116,573 (424,163) 476,987
Accrued liabilities 46,870 86,726 146,485
Income taxes - receivable and
prepaid 1,118,221 3,235 167,858
----------- ----------- -----------
Net cash provided by operating
activities 2,609,705 3,465,135 760,227
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (1,098,318) (1,109,829) (910,367)
Proceeds from sale of equipment and
inventory -- -- 255,900
Purchase of intangible assets (76,059) (83,077) (24,083)
----------- ----------- -----------
Net cash used in investing
activities (1,174,377) (1,192,906) (678,550)
----------- ----------- -----------
</TABLE>
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D.)
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from minority contribution $ -- $ 27,500 $ --
Proceeds of long-term debt -- 7,500 50,000
Payment of long-term debt (751,650) (1,900,181) (110,940)
Payment for retirement of common
stock -- -- (145,208)
Proceeds from exercise of stock
options 234,652 261,820 --
Payment of notes payable -- -- (40,000)
----------- ----------- -----------
Net cash used in financing
activities (516,998) (1,603,361) (246,148)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 918,330 668,868 (164,471)
Cash and cash equivalents - beginning of
year 1,196,593 527,725 692,196
----------- ----------- -----------
Cash and cash equivalents - end of
year $ 2,114,923 $ 1,196,593 $ 527,725
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS AND CONCENTRATION OF CREDIT RISK:
Uniflex, Inc. and Subsidiaries (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
retailers located throughout the United States. The Company extends credit to
its customers and historically has not experienced significant losses related to
receivables and individual customers or groups of customers in any particular
industry or geographic area.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Uniflex, Inc. and
its wholly-owned subsidiary Hantico, Inc. (inactive), and 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 material 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.
FINANCIAL INSTRUMENTS:
The Companies' financial instruments include cash and cash equivalents and trade
receivables and payables for which carrying amounts approximate fair value.
Management estimates that the carrying amount of its long-term debt also
approximates fair value.
INVENTORIES:
Inventories are 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
JANUARY 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
INTANGIBLE ASSETS:
Intangible assets consist primarily of patent costs, organization costs, a
covenant not to compete, deferred loan acquisition costs, a customer list and
training materials. The values are being amortized, on a straight-line basis
over the period of expected benefit ranging from four to five years. Accumulated
amortization was $243,323 and $160,872 at January 31, 1997 and 1996,
respectively.
LONG-LIVED ASSETS:
It is the Company's policy to evaluate and recognize an impairment to its
long-lived assets if it is probable that the recorded amounts are in excess of
anticipated undiscounted future cash flows.
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:
Deferred income taxes reflect temporary differences in reporting assets and
liabilities for income tax and financial accounting purposes. The principal
sources of temporary differences are different methods used for depreciation
provisions, deferred compensation and New York State investment tax credits.
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 4,480,414, 4,118,802 and 4,078,671 in 1997, 1996 and 1995,
respectively, after giving effect to a stock split (Note 2).
REVENUE RECOGNITION:
Revenue is recognized when orders are shipped.
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, 1997, 1996 and 1995 were approximately $482,000, $294,000
and $357,000, respectively.
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
JANUARY 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
RECLASSIFICATION OF PRIOR YEAR'S BALANCES:
Certain amounts in the prior year's financial statements were reclassified to
conform with the current year's presentation.
NOTE 2. 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 3. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw materials and supplies $2,255,078 $1,755,374
Work-in-process 147,343 227,715
Finished goods 1,216,472 716,859
---------- ----------
$3,618,893 $2,699,948
========== ==========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated Useful
1997 1996 LIFE IN YEARS
---- ---- -------------
<S> <C> <C> <C>
Land $ 860,000 $ 860,000
Building and improvements 2,743,941 2,743,024 31.5
Machinery and equipment 9,751,492 8,466,354 10
Leasehold improvements 614,993 594,672 7 - 10
Plates and engravings 692,964 549,159 5
Furniture and fixtures 618,935 575,378 5 - 10
Delivery equipment 34,462 34,462 4
Machinery under construction -- 300,787
----------- -----------
15,316,787 14,123,836
Less accumulated depreciation and
amortization 8,529,851 7,696,409
----------- -----------
$ 6,786,936 $ 6,427,427
=========== ===========
</TABLE>
Depreciation and amortization expense charged to operations for the years ended
January 31, 1997, 1996 and 1995 amounted to $833,438, $770,930 and $753,167,
respectively.
F-9
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 4. PROPERTY AND EQUIPMENT (CONT'D.):
Assets held under capitalized leases, included above, are as follows
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Machinery and equipment $163,683 $ 69,054
Furniture and fixtures 126,762 126,762
-------- --------
290,445 195,816
Less accumulated depreciation 48,558 13,243
-------- --------
$241,887 $182,573
======== ========
</TABLE>
NOTE 5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Bank loan (A) $ -- $ 600,000
Mortgage payable - bank - payable in
monthly installments of $9,245 plus
interest at prime plus 1/4% to 2009 -
secured by land, building and improvements 1,436,137 1,547,077
Note payable - minority interest - payable
on January 1, 2000 with interest at 7% per annum -
unsecured 7,500 7,500
Capital lease obligations (Note 14) 220,494 166,575
---------- ----------
1,664,131 2,321,152
Less current maturities 171,000 151,646
---------- ----------
$1,493,131 $2,169,506
========== ==========
</TABLE>
Interest expense charged to operations for the years ended January 31, 1997,
1996 and 1995 amounted to $157,416, $323,963 and $314,528, respectively.
F-10
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 5. LONG-TERM DEBT (CONT'D.):
Following are the maturities of long-term debt as of January 31, 1997 and for
each of the next five years and in the aggregate:
<TABLE>
<CAPTION>
Mortgage Note Capital Lease
Payable Payable Obligations Total
------- ------- ----------- -----
<S> <C> <C> <C> <C>
1997 $ 110,940 $ -- $ 60,060 $ 171,000
1998 110,940 -- 50,913 161,853
1999 110,940 7,500 54,664 173,104
2000 110,940 -- 32,039 142,979
2001 110,940 -- 22,818 133,758
Thereafter 881,437 -- -- 881,437
---------- ---------- ---------- ----------
$1,436,137 $ 7,500 $ 220,494 $1,664,131
========== ========== ========== ==========
</TABLE>
(A) The Company has 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 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 January 31, 1997, there were no outstanding borrowings against this line
of credit.
NOTE 6. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accrued commissions $333,492 $365,711
Accrued payroll and bonuses 392,864 370,985
Accrued vacation 212,158 164,400
Other 60,374 50,922
-------- --------
$998,888 $952,018
======== ========
</TABLE>
F-11
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 7. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
For the Years Ended January 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal $ 1,185,800 $ 859,000 $ 827,000
State 148,700 84,000 140,000
----------- ----------- -----------
1,334,500 943,000 967,000
----------- ----------- -----------
Deferred:
Federal (34,300) (69,000) (163,000)
State (22,000) (16,000) (45,000)
Change in state tax law -- -- (61,000)
----------- ----------- -----------
(56,300) (85,000) (269,000)
Change in valuation allowance (26,000) -- 79,000
----------- ----------- -----------
(82,300) (85,000) (190,000)
----------- ----------- -----------
Total $ 1,252,200 $ 858,000 $ 777,000
=========== =========== ===========
At Federal statutory rates $ 1,077,500 $ 788,000 $ 660,000
Effect of:
Permanent differences 12,600 22,000 12,000
Over/under accruals 54,500 (25,000) 38,000
State income taxes, net of federal
benefits 98,600 64,000 72,000
State investment tax credits, net of
federal benefit (15,000) (19,000) (23,000)
Change in state tax law -- -- (61,000)
Change in valuation allowance (26,000) -- 79,000
Other 50,000 28,000 --
----------- ----------- -----------
Total $ 1,252,200 $ 858,000 $ 777,000
=========== =========== ===========
</TABLE>
At January 31, 1997, the Company has available for state income tax purposes
unused investment tax credits of approximately $345,000 expiring through the
year 2007.
The net current and non-current components of deferred income taxes recognized
in the balance sheet are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net current assets $291,200 $269,900
Net non-current assets 247,400 186,400
-------- --------
$538,600 $456,300
======== ========
</TABLE>
F-12
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 7. INCOME TAXES (CONT'D.):
The Components of the net deferred tax asset are as follows:
January 31,
---------------------
1997 1996
---- ----
Deferred tax assets
Accounts receivable allowances $ 67,200 $ 74,000
Inventory - uniform capitalization 58,800 59,000
Vacation pay accrual 89,000 69,000
Deferred rent 59,200 52,000
Stock option compensation 41,200 41,000
Deferred compensation and post-retirement
medical benefits 558,200 510,000
Investment tax credit carryforwards 345,000 381,000
----------- -----------
1,218,600 1,186,000
Valuation allowance (113,000) (189,000)
----------- -----------
1,105,600 997,000
Deferred tax liability:
Depreciation 567,000 540,700
----------- -----------
Net deferred tax asset $ 538,600 $ 456,300
=========== ===========
The Company's U.S. income tax returns for the years ended January 31, 1996, 1995
and 1994 are presently under examination by the Internal Revenue Service.
Management believes that any assessment that may result will not be material to
the financial statements.
NOTE 8. COMMON STOCK:
On December 21, 1990, the Company entered into an agreement whereby it issued
270,000 shares of common stock to an officer of the Company for consideration of
$.75 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%) 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, 1997, 1996 and
1995, $28,500, net of interest, was charged to compensation expense to reflect
the forgiveness of the annual installments.
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.
F-13
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 9. MINORITY INTEREST (CONT'D.):
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 then 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 and losses
will be allocated in relation to the members' ownership interest in Southwest.
In March 1996 the Company acquired an 80% interest in Uniflex Southeast, L.L.C.
("Southeast"). An initial capital contribution of $50,000 was made along with
additional advances of approximately $308,000 through January 31, 1997.
Under the terms of the operating agreement all losses are allocated to Uniflex,
Inc. until Southeast has net income for two consecutive fiscal quarters. All net
income reported by Southeast will then 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 will be
allocated 50% to Uniflex, Inc. and 50% to the minority members. The minority
members have the right to purchase additional ownership at $7,500 for each
additional percentage point. However, the ownership percentage of Uniflex, Inc.
may not decrease below 32%. If at any time, the minority members' ownership
percentage exceeds 50% profits will be allocated in proportion to ownership
percentages.
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 360,000 shares of the Company's common
stock to employees of the Company. 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. To
date, options to purchase 166,500 shares have been granted under the Plan at
prices ranging from $1.42 to $7.33. During the year ended January 31, 1997
options to purchase 46,500 shares were granted.
The Company has granted a third party the option to purchase 180,000 shares of
the Company's common stock at a price of $1.08 per share. The options are
exercisable up to 36,000 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.
F-14
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
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 1,122,000 shares of the
Company's common stock at prices ranging from $.33 to $.92 per share. Such
options expire at various dates through June 30, 1999. On May 31, 1993, the
Company renewed options to purchase 60,000 shares at $.56 per share and 24,000
shares at $.50 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 $1.71 per
share. As a result, the Company recognized a non-cash charge of $98,000 as
compensation expense.
The following table provides information regarding stock option activity for the
years ended January 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Exercise Price Per Share
------------------------
Number of Shares Range Weighted Average
---------------- ----- ----------------
<S> <C> <C> <C>
Balance January 31, 1994
(1,070,100 exercisable) 1,367,100 $ .33 - 3.25 $ .65
Granted 3,300 3.25 3.25
------------
Balance January 31, 1995
(1,239,000 exercisable) 1,370,400 .33 - 3.92 .67
Granted 4,800 3.33 - 3.92 3.22
Exercised (636,000) .33 - .38 .42
Forfeited (2,700) .50 .85
------------
Balance January 31, 1996
(617,700 exercisable) 736,500 .38 - 3.58 .90
Granted 46,500 5.50 - 7.33 6.10
Exercised (287,195) 4.69 - 5.38 .93
------------
Balance January 31, 1997
(456,505 exercisable) 495,805 .38 - 7.33 1.43
============
</TABLE>
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Statement defines a fair value
based method of accounting for an employee stock option or similar equity
instrument. As permitted by the Statement, the Company has elected to continue
to measure cost for its stock-based compensation plans using the intrinsic value
based method of accounting prescribed by APB Opinion No. 25. "Accounting for
Stock Issued to Employees." The effect of determining compensation cost for
stock options granted for the years ended January 31, 1997, 1996 and 1995, based
upon the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123 would not have been material to the financial statements.
This effect may not be representative of the pro forma effect on net income to
future years because it does not take into consideration pro forma compensation
expense related to grants made prior to February 1, 1994.
The status of all options outstanding at January 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
Range of Weighted Average Weighted Average
Exercise Prices Shares Remaining Contractual Life Exercise Price
- --------------- ------ -------------------------- --------------
<S> <C> <C> <C>
$.38 to $.92 313,855 1.64 $ .57
$1.09 to $3.92 133,650 3.41 1.78
$4.83 to $7.33 48,300 4.18 6.06
---------- -------- --------
Total 495,805 2.37 $ 1.43
========== ======== ========
</TABLE>
F-15
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
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 participants' compensation.
Amounts charged to operations were $200,000, $200,000 and $200,000 for the years
ended January 31, 1997, 1996 and 1995, respectively.
NOTE 12. DEFERRED COMPENSATION AND POSTRETIREMENT MEDICAL BENEFITS:
DEFERRED COMPENSATION:
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 noncompetition agreements
which commenced upon retirement and which pays the employees annual payments of
$75,000 for noncompetition 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,
approximates $840,000. 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, 1997, 1996 and 1995 approximated $-0-, $-0- and $70,000
respectively. Related interest expense charged to operations for the years ended
January 31, 1997, 1996 and 1995 approximated $124,000, $110,000 and $90,000,
respectively.
Deferred compensation payable at January 31, 1997 and 1996 was $1,206,978 and
$1,086,463, respectively.
POSTRETIREMENT MEDICAL BENEFITS:
In addition, 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 Standard 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,
1997, 1996 and 1995 was $-0-, $-0-, and $22,000, respectively. Related interest
expense charged to operations for the years ended January 31, 1997, 1996 and
1995 approximated $9,000, $10,000 and $11,000, respectively.
The recorded liabilities for these postretirement benefits, none of which have
been funded amounted to $122,259 and $128,661 at January 31, 1997 and 1996,
respectively. All participants were retired at January 31, 1997 and 1996,
respectively.
F-16
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 12. DEFERRED COMPENSATION AND POSTRETIREMENT MEDICAL BENEFITS (CONT'D.):
POSTRETIREMENT MEDICAL BENEFITS (CONT'D.):
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.
NOTE 13. SUPPLEMENTARY CASH FLOW INFORMATION:
CASH TRANSACTIONS:
Cash paid and received during the years ended January 31,
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest $ 165,121 $ 327,049 $ 312,135
================ ================ ================
Income taxes paid $ 650,000 $ 934,000 $ 631,500
================ ================ ================
Income tax refunds received $ 435,000 $ - $ -
================ ================ =========
</TABLE>
NON-CASH TRANSACTIONS:
Year ended January 31, 1997:
The Company incurred capital lease obligations of $94,629 in connection with the
acquisition of certain equipment.
Intangible assets valued at $70,000 were recorded as a contribution to capital
from minority members.
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.
NOTE 14. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASE COMMITMENTS:
The Company has the following lease commitments:
<TABLE>
<CAPTION>
PREMISES EXPIRATION DATE BASE RENTAL AND EXPENSES
<S> <C> <C>
Plant, Westbury, NY April 30, 2003 Graduated from $91,000 and
$205,000 per annum plus
real estate taxes
Plant, Albuquerque, NM March 31, 2000 $37,500 per annum plus
real estate taxes
</TABLE>
F-17
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 14. COMMITMENTS (CONT'D.):
Future minimum lease payments are as follows:
YEARS ENDING JANUARY 31,
1998 $ 212,900
1999 213,800
2000 225,000
2001 200,000
2002 198,700
Thereafter 255,000
---------------
$ 1,305,400
Base rent and other occupancy costs charged to operations for the years ended
January 31, 1997, 1996 and 1995 amounted to approximately $418,000, $389,000 and
$367,000, respectively, including real estate taxes of $194,000, $185,000 and
$201,000, respectively.
CAPITAL LEASES:
The Company leases certain equipment under capital leases expiring through
January 2002. Interest is imputed at rates ranging from 9% to 10%.
Future minimum lease payments under capital leases as of January 31, 1997 for
each of the next five years and in the aggregate are as follows:
YEARS ENDING JANUARY 31,
1998 $ 78,948
1999 65,828
2000 63,204
2001 36,036
2002 24,300
---------------
Total minimum lease payments 268,316
Less amounts representing interest 47,822
Present value of net minimum lease payment (Note 5) $ 220,494
===============
LEGAL MATTERS:
The Company is party to litigation arising in the ordinary course of business,
Management does not believe the results of such litigation, even if the outcome
is unfavorable to the Company, would have a material adverse effect on its
consolidated financial position or results of operations.
F-18
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 15. SUBSEQUENT EVENT:
On February 5, 1997 the Company purchased substantially all of the assets and
assumed certain liabilities of Merrick Packaging Specialists, Inc. Merrick
Packaging Specialists, Inc. is a distributor of high quality paper, paper
laminate and plastic shopping bags and boxes for the retail industry. The
purchase price of $2,370,000 is payable $600,000 in cash and the balance in
promissory notes. For the fiscal years ended December 31, 1996, 1995 and 1994,
Merrick reported unaudited revenues of approximately $3,600,000, $3,600,000 and
$3,700,000. Net income for the fiscal years ended December 31, 1996, 1995 and
1994 were not material. The acquisition will be 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 will be
allocated to intangible assets and will be amortized over periods ranging from
fifteen to forty years.
F-19
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
DESCRIPTION
Allowance for doubtful accounts
<TABLE>
<CAPTION>
Balance at
Beginning Charged to Balance at
of Year to Expenses Deductions (1) end of Year
------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
January 31, 1997 $ 174,500 $ 61,178 $ 75,617 $ 160,061
=============== ============== ============== ===============
January 31, 1996 $ 184,327 $ 75,284 $ 85,111 $ 174,500
=============== ============== ============== ===============
January 31, 1995 $ 134,703 $ 74,400 $ 24,776 $ 184,327
=============== ============== ============== ===============
</TABLE>
(1) Write-off of uncollectible accounts.
F-20
Exhibit 23.1
PATRUSKY, MINTZ & SEMEL
Certified Public Accountants
22 Cortlandt Street
New York, New York 10007
(212) 732-2600
TELEX 6971510
FAX (212) 374-1967
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (No. 33-70754) on Form S-8 of our report dated March 21, 1997 of
Uniflex, Inc. and Subsidiaries for the years ended January 31, 1997 and 1996 and
to the reference to our firm under the caption "Experts" in the Prospectus.
/s/ PATRUSKY, MINTZ & SEMEL
---------------------------
Patrusky, Mintz & Semel
New York, New York
April 17, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (No. 33-70754) on Form S-8 of our report dated March 21, 1995 of
Uniflex, Inc. and Subsidiary for the year ended January 31, 1995 and to the
reference to our firm under the caption "Experts" in the Prospectus.
/s/ MILLER, ELLIN & COMPANY
---------------------------
Miller, Ellin & Company
New York, New York
April 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-K for year ended January 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> $ 2,114,923
<SECURITIES> 0
<RECEIVABLES> 4,084,710
<ALLOWANCES> 160,061
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0
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