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 OCTOBER 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: 4,066,160 shares of the
Company's common stock - $.10 par value - were outstanding as of December 2,
1997.
<PAGE>
UNIFLEX, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated condensed balance sheets -
October 31, 1997 (unaudited) and January 31, 1997 1
Consolidated condensed statements of income (unaudited) -
For the nine months ended October 31, 1997 and 1996 2
For the three months ended October 31, 1997 and 1996 3
Consolidated condensed statements of changes in stockholders' equity
(unaudited) for the nine months ended October 31, 1997 and 1996 4
Consolidated condensed statements of cash flows (unaudited)
for the nine months ended October 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 - 10
PART II. OTHER INFORMATION
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>
October 31, January 31,
ASSETS 1997 1997
---- ----
(Unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 386,617 $ 2,114,923
Accounts receivable 5,373,832 4,084,710
Inventories 4,642,923 3,618,893
Prepaid income taxes 266,328 279,791
Prepaid expenses and other current assets 613,467 565,263
Deferred tax asset 331,800 291,200
----------- -----------
Total Current Assets 11,614,967 10,954,780
Property and Equipment 7,095,552 6,786,936
Intangible Assets 2,346,541 220,013
Other Assets 823,287 731,590
----------- -----------
Total Assets $21,880,347 $18,693,319
============ --=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Acquisition debt - current portion $ 600,000 $ -
Current maturities of long-term debt 164,000 171,000
Accounts payable 1,604,322 1,351,060
Accrued liabilities 1,474,781 998,888
----------- -----------
Total Current Liabilities 3,843,103 2,520,948
Acquisition debt 390,000 -
Long-Term Debt 3,279,786 1,493,131
Deferred Compensation and Postretirement Medical Benefits 1,326,477 1,329,237
Deferred rent 144,996 141,246
----------- -----------
Total Liabilities 8,984,362 5,484,562
----------- -----------
Minority Interest 238,953 262,500
----------- -----------
Stockholders' Equity
Common stock - par value $.10 per share
10,000,000 shares authorized, 4,066,160 shares
issued and outstanding 406,616 428,966
Additional paid-in capital 847,175 2,448,379
Retained earnings 11,409,294 10,096,340
----------- -----------
12,663,085 12,973,685
Less note receivable - stock purchase (6,053) (27,428)
----------- -----------
Total Stockholders' Equity 12,657,032 12,946,257
----------- -----------
Total Liabilities and Stockholders' Equity $21,880,347 $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>
Nine Months Ended
October 31,
-----------
1997 1996
---- ----
<S> <C> <C>
Net sales $ 29,269,865 $ 26,536,297
Cost of sales 18,510,724 16,400,294
--------------- ----------------
Gross profit 10,759,141 10,136,003
--------------- ----------------
Shipping and selling expenses 5,450,857 4,939,812
General and administrative expenses 2,759,336 2,344,720
--------------- ----------------
8,210,193 7,284,532
--------------- ----------------
Income before other expenses 2,548,948 2,851,471
--------------- ----------------
Interest expense - net 336,429 178,312
Other expenses 73,612 -
--------------- ----------------
410,041 178,312
--------------- ----------------
Minority interest in income of consolidated subsidiary (38,953) -
--------------- ----------------
Income before provision for income taxes 2,099,954 2,673,159
--------------- ----------------
Provision for income taxes:
Current 889,700 1,162,800
Deferred (102,700) (102,800)
--------------- ----------------
787,000 1,060,000
--------------- ----------------
Net income $ 1,312,954 $ 1,613,159
=============== ================
Earnings per share $ .30 $ .36
=============== ================
Weighted average number of common shares and
common share equivalents outstanding 4,378,249 4,475,648
================= ================
</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
October 31,
-----------
1997 1996
---- ----
<S> <C> <C>
Net sales $ 10,526,968 $ 9,339,319
Cost of sales 6,519,956 5,650,624
--------------- ----------------
Gross profit 4,007,012 3,688,695
--------------- ----------------
Shipping and selling expenses 1,893,916 1,632,767
General and administrative expenses 895,463 794,136
--------------- ----------------
2,789,379 2,426,903
--------------- ----------------
Income before other expenses 1,217,633 1,261,792
--------------- ----------------
Interest expense - net 129,385 48,195
Other expenses 5,000 -
--------------- ----------------
134,385 48,195
--------------- ----------------
Minority interest in income of consolidated subsidiary (38,953) -
--------------- ----------------
Income before provision for income taxes 1,044,295 1,213,597
--------------- ----------------
Provision for income taxes:
Current 384,100 514,500
Deferred 8,500 (39,000)
--------------- ----------------
392,600 475,500
--------------- ----------------
Net income $ 651,695 $ 738,097
=============== ================
Earnings per share $ .16 $ .16
=============== ================
Weighted average number of common shares and
common share equivalents outstanding 4,195,374 4,509,817
=============== ================
</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 NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Retained Earnings
Common Stock Additional and
---------------------- Paid-In Members' Note Receivable
Shares Amount Capital Capital Stock Purchase Total
------ ------ ------- ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at February 1, 1996 2,666,384 $ 266,638 $ 1,854,722 $ 8,179,405 $(55,928) $10,244,837
Exercise of stock options 173,300 17,330 188,313 - - 205,643
Tax benefit from exercise of stock options - - 399,402 - - 399,402
Issuance of common stock to effect a
3 for 2 stock split (Note 5) 1,404,841 140,484 (140,484) - - -
Amortization of note receivable - - - - 21,375 21,375
Net income - - - 1,613,159 - 1,613,159
---------- --------- ----------- ----------- -------- -----------
Balance at October 31, 1996 4,244,525 $ 424,452 $ 2,301,953 $ 9,792,564 $(34,553) $12,484,416
========== ========= =========== =========== ======== ===========
Balance at February 1, 1997 4,289,668 $ 428,966 $ 2,448,379 $10,096,340 $(27,428) $12,946,257
Exercise of stock options 191,755 19,176 67,953 - - 87,129
Tax benefit from exercise of stock options - - 400,000 - - 400,000
Shares repurchased and retired (415,263) (41,526) (2,069,157) - - (2,110,683)
Amortization of note receivable - - - - 21,375 21,375
Net income - - - 1,312,954 - 1,312,954
---------- --------- ----------- ----------- -------- -----------
Balance at October 31, 1997 4,066,160 $ 406,616 $ 847,175 $11,409,294 $ (6,053) $12,657,032
========== ========= =========== ============ ======== ===========
</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>
Nine Months Ended
October 31,
-----------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 803,251 $2,644,902
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (757,473) (858,477)
Purchase of intangible assets (36,319) (67,673)
Acquisition of net assets of Merrick
Packaging Specialists, Inc. - (net of
cash acquired) (664,949) -
----------- ----------
Net cash used in investing activities (1,458,741) (926,150)
----------- ----------
Cash flows from financing activities:
Proceeds from loan payable - bank 1,912,000 -
Payment for retirement of common stock (2,110,683) -
Proceeds from issuance of common stock 87,129 205,643
Payment of long-term debt (124,845) (714,725)
Payment of acquisition debt (836,417) -
----------- ----------
Net cash used in financing activities (1,072,816) (509,082)
----------- ----------
Net (decrease) increase in cash (1,728,306) 1,209,670
Cash and cash equivalents - beginning of period 2,114,923 1,196,593
----------- ----------
Cash and cash equivalents - end of period $ 386,617 $2,406,263
=========== ==========
</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 October 31, 1997 and the results of operations and
cash flows for the nine months ended October 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 nine months ended October 31, 1997 are not
necessarily indicative of the operating results for the full year.
NOTE 2. INVENTORIES:
A summary of inventory follows:
October 31, January 31,
1997 1997
---- ----
(Unaudited)
Raw materials and supplies $3,212,587 $2,255,078
Work in process 155,030 147,343
Finished products 1,275,306 1,216,472
---------- ----------
$4,642,923 $3,618,893
========== ==========
NOTE 3. REPURCHASE AND RETIREMENT OF COMMON STOCK AND STOCK OPTIONS:
During the nine months ended October 31, 1997, the Company in private
transactions, repurchased and retired 397,508 shares of its common stock for a
purchase price of $2,034,455. 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 $2,110,683 was partially financed by bank
borrowings of $1,912,000 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
May 1, 2000, 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 October 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, $600,000 was paid August 1, 1997, and the balance is payable in
promissory notes as follows:
Due Date Amount Interest Rate
-------- ------ -------------
August 1, 1998 $600,000 7.5% per annum
March 1, 1999 390,000 7.5% per annum
--------
$990,000
========
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 $72,700 and $-0-, for the nine months
ended October 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 October 31, 1997 were
$10,527,000, compared to $9,339,000 for the same quarter in the prior fiscal
year, an increase of $1,188,000, or 12.7%.
Net sales for the nine months ended October 31, 1997 were
$29,270,000, compared to $26,536,000 for the same period in the prior fiscal
year, an increase of $2,734,000, or 10.3%.
The increases in net sales for the quarter and nine months
ended October 31, 1997, compared to the same periods in the prior fiscal year
were 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 October 31, 1997, compared to
the immediately preceding quarter ended July 31, 1997, increased $1,041,000, or
10.9%.
The Registrant's backlog at October 31, 1997 was $4,975,000,
compared to $5,301,000 at October 31, 1996, a decrease of $326,000, or 6.2%.
This decrease was attributable to shorter turn-around times resulting from
manufacturing efficiencies.
COSTS OF SALES AND EXPENSES:
Cost of sales for the quarter ended October 31, 1997, compared
to the quarter ended October 31, 1996, increased $870,000, or 15.4%, to
$6,520,000 from $5,650,000. Cost of sales as a percentage of net sales for the
quarter ended October 31, 1997, compared to the same quarter in the prior fiscal
year, increased to 61.9% from 60.5%. This percentage increase was attributable
to an increase in raw material costs for the Registrant's products and a change
in the product mix.
Cost of sales for the nine months ended October 31, 1997,
compared to the nine months ended October 31, 1996, increased $2,111,000, or
12.9%, to $18,511,000 from $16,400,000. Cost of sales as a percentage of net
sales for the nine months ended October 31, 1997, compared to the same period in
the prior fiscal year, increased to 63.2% from 61.8%. This percentage increase
was attributable to an increase in raw material costs for the Registrant's
products and a change in the product mix.
Shipping, selling, general and administrative expenses for the
quarter ended October 31, 1997, compared to the quarter ended October 31, 1996,
increased $362,000, or 14.9%, from $2,427,000 to $2,789,000. This increase was
primarily attributable to expenses resulting from the increase in net sales from
the Merrick Packaging Specialists acquisition.
8
<PAGE>
Shipping, selling, general and administrative expenses for the
nine months ended October 31, 1997, compared to the same period in the prior
fiscal year, increased $925,000, or 12.7%, from $7,285,000 to $8,210,000. This
increase was primarily attributable to expenses resulting from the increase in
net sales from the Merrick Packaging Specialists acquisition.
INTEREST EXPENSE:
Interest expense for the quarter ended October 31, 1997,
compared to the quarter ended October 31, 1996, increased $81,000, or 168.8%, to
$129,000 from $48,000. Interest expense for the nine months ended October 31,
1997, compared to the nine months ended October 31, 1996, increased $158,000, or
88.7%, from $178,000 to $336,000. These increases were attributable to increased
borrowings to acquire the assets of Merrick Packaging Specialists and to
repurchase outstanding shares of the Registrant's Common Stock. During the nine
months ended October 31, 1997, the Registrant, in private transactions,
repurchased and retired 397,508 shares of its Common Stock for an aggregate
purchase price of $2,034,455. In addition, the Registrant repurchased options to
purchase 17,755 shares of its Common Stock (exercisable at a price of $.69 per
share) for an aggregate purchase price of $76,228.
NET INCOME:
Net income for the quarter ended October 31, 1997 was
$652,000, or $.16 per share, compared to $738,000, or $.16 per share, for the
quarter ended October 31, 1996.
Net income for the nine months ended October 31, 1997 was
$1,313,000, or $.30 per share, compared to $1,613,000, or $.36 per share, for
the nine months ended October 31, 1996. The reduction in net income per share
was primarily related to start-up costs relating to the Merrick Packaging
Specialists acquisition and decreased gross margins due to increased raw
material costs.
WORKING CAPITAL AND LIQUIDITY:
Working capital increased to $7,772,000 at October 31, 1997
from $5,530,000 at July 31, 1997, an increase of $2,242,000, or 40.5%, primarily
as a result of the extension of the maturity date of the Registrant's line of
credit which reclassified the Registrant's outstanding term loan from a short
term liability to a long term liability. Working capital decreased to $7,772,000
at October 31, 1997 from $8,004,000 at October 31, 1996, a decrease of $232,000,
or 2.9%. The Registrant's working capital ratio was 3 to 1 at October 31, 1997.
The Registrant's line of credit allows for the Registrant to borrow up to
$3,500,000, payable interest only at the prime rate or at LIBOR plus 1 1/2%
through May 1, 2000, at which time any balance outstanding is payable in full.
At October 31, 1997 and 1996, there was $1,912,000 and $0 outstanding,
respectively, against the revolving line of credit.
9
<PAGE>
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.
When used in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the words "anticipate," "estimate" and
similar expressions are intended to identify forward-looking statements. These
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected, including reduced
sales and increases in raw materials and production costs.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27; Financial Data Schedule
(b) Report on Form 8-K - The Registration filed no reports on Form 8-K
during the quarter ended October 31, 1997
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: December 9, 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 OCTOBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 386,617
<SECURITIES> 0
<RECEIVABLES> 5,568,110
<ALLOWANCES> 194,278
<INVENTORY> 4,642,923
<CURRENT-ASSETS> 11,614,967
<PP&E> 7,095,552
<DEPRECIATION> 9,027,199
<TOTAL-ASSETS> 21,880,347
<CURRENT-LIABILITIES> 3,843,103
<BONDS> 0
0
0
<COMMON> 406,616
<OTHER-SE> 12,250,416
<TOTAL-LIABILITY-AND-EQUITY> 12,880,347
<SALES> 29,269,865
<TOTAL-REVENUES> 29,269,865
<CGS> 18,510,724
<TOTAL-COSTS> 26,720,917
<OTHER-EXPENSES> 448,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 336,429
<INCOME-PRETAX> 2,099,954
<INCOME-TAX> 787,000
<INCOME-CONTINUING> 1,312,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,312,954
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
