SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13, OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
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 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,178,260 shares of the
Registrant's common stock - $.10 par value - were outstanding as of August 25,
1998
<PAGE>
UNIFLEX, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated condensed balance sheets -
July 31, 1998 (unaudited) and January 31, 1998 1
Consolidated condensed statements of income (unaudited) -
For the six months ended July 31, 1998 and 1997 2
For the three months ended July 31, 1998 and 1997 3
Consolidated condensed statements of changes in stockholders' equity
(unaudited) for the six months ended July 31, 1998 and 1997 4
Consolidated condensed statements of cash flows (unaudited)
for the six months ended July 31, 1998 and 1997 5
Notes to consolidated condensed financial statements (unaudited) 6 - 7
Item 2. Management's discussion and analysis of financial
condition and results of operations 8 - 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and reports on Form 8-K 10
SIGNATURES 11
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
ASSETS 1998 1998
---- ----
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,096,412 $ 1,676,749
Accounts receivable 4,804,257 4,577,324
Inventories 4,285,043 4,555,298
Prepaid income taxes 144,420 128,509
Prepaid expenses and other current assets 599,832 653,978
Deferred tax asset 301,200 310,400
----------- -----------
Total Current Assets 11,231,164 11,902,258
Property and Equipment 7,037,277 7,028,692
Intangible Assets 2,927,561 2,328,079
Other Assets 934,331 925,681
----------- -----------
Total Assets $22,130,333 $22,184,710
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 964,000 $ 1,023,000
Accounts payable 1,458,132 1,576,683
Accrued liabilities 1,086,136 998,238
----------- -----------
Total Current Liabilities 3,508,268 3,597,921
Long-Term Debt 2,781,150 3,955,593
Deferred Compensation and Postretirement Medical Benefits 1,437,079 1,363,252
Deferred rent 141,250 145,000
----------- -----------
Total Liabilities 7,867,747 9,061,766
----------- -----------
Minority Interest -- 290,888
----------- -----------
Stockholders' Equity
Common stock - par value $.10 per share
10,000,000 shares authorized, 4,178,260 shares
issued and outstanding 417,826 406,616
Additional paid-in capital 1,350,034 847,175
Retained earnings 12,494,726 11,578,265
----------- -----------
Total Stockholders' Equity 14,262,586 12,832,056
----------- -----------
Total Liabilities and Stockholders' Equity $22,130,333 $22,184,710
=========== ===========
</TABLE>
The consolidated condensed balance sheet at January 31, 1998 has been derived
from the audited financial statements at that date. The accompanying notes are
an integral part of these consolidated condensed financial statements.
-1-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
--------
1998 1997
---- ----
<S> <C> <C>
Net sales $ 19,511,427 $ 18,742,897
Cost of sales 12,428,762 11,990,768
------------ ------------
Gross profit 7,082,665 6,752,129
------------ ------------
Shipping and selling expenses 3,599,575 3,556,941
General and administrative expenses 1,801,014 1,863,873
------------ ------------
5,400,589 5,420,814
------------ ------------
Income before other expenses 1,682,076 1,331,315
------------ ------------
Interest expense - net 235,715 207,044
Other expenses -- 68,612
------------ ------------
235,715 275,656
------------ ------------
Income before provision for income taxes 1,446,361 1,055,659
------------ ------------
Provision for income taxes:
Current 519,500 505,600
Deferred 10,400 (111,200)
------------ ------------
529,900 394,400
------------ ------------
Net income $ 916,461 $ 661,259
============ ============
Basic net income per share $ .22 $ .16
============ ============
Diluted net income per share $ .22 $ .15
============ ============
Average shares outstanding 4,145,692 4,265,046
Dilutive effect of stock options 96,169 230,017
------------ ------------
Average shares outstanding assuming
dilutive effect of stock options 4,241,861 4,495,063
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-2-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
--------
1998 1997
---- ----
<S> <C> <C>
Net sales $ 9,756,550 $ 9,485,563
Cost of sales 6,330,370 6,066,092
----------- -----------
Gross profit 3,426,180 3,419,471
----------- -----------
Shipping and selling expenses 1,742,399 1,765,780
General and administrative expenses 932,659 946,758
----------- -----------
2,675,058 2,712,538
----------- -----------
Income before other expenses 751,122 706,933
----------- -----------
Interest expense - net 111,472 93,080
Other expenses -- 68,612
----------- -----------
111,472 161,692
----------- -----------
Income before provision for income taxes 639,650 545,241
----------- -----------
Provision for income taxes:
Current 198,400 191,900
Deferred 16,500 (2,600)
----------- -----------
214,900 189,300
----------- -----------
Net income $ 424,750 $ 355,941
=========== ===========
Basic net income per share $ .10 $ .08
=========== ===========
Diluted net income per share $ .10 $ .08
=========== ===========
Average shares outstanding 4,174,098 4,238,351
Dilutive effect of stock options 84,316 223,798
----------- -----------
Average shares outstanding assuming
dilutive effect of stock options 4,258,414 4,462,149
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-3-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Note
------------ Paid-In Retained Receivable
Shares Amount Capital Earnings Stock Purchase Total
------ ------ ------- -------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
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 38,455 3,846 14,479 -- -- 18,325
Tax benefit from exercise of
stock options -- -- 88,000 -- -- 88,000
Members' capital contribution (401,259) (40,126) (1,960,030) -- -- (2,000,156)
Amortization of note receivable -- -- -- -- 14,250 14,250
Net income -- -- -- 661,259 -- 661,259
------------ ------------ ------------ ------------ -------- ------------
Balance at July 31, 1997 3,926,864 $ 392,686 $ 590,828 $ 10,757,599 $(13,178) $ 11,727,935
============ ============ ============ ============ ======== ============
Balance at February 1, 1998 4,066,160 $ 406,616 $ 847,175 $ 11,578,265 $- $ 12,832,056
Exercise of stock options 62,100 6,210 129,859 -- -- 136,069
Tax benefit from exercise of
stock options -- -- 78,000 -- -- 78,000
Shares issued - acquisition 50,000 5,000 295,000 -- -- 300,000
Net income -- -- -- 916,461 -- 916,461
------------ ------------ ------------ ------------ -------- ------------
Balance at July 31, 1998 4,178,260 $ 417,826 $ 1,350,034 $ 12,494,726 $- $ 14,262,586
============ ============ ============ ============ ======== ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-4-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Six Months Ended
July 31,
--------
1998 1997
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 1,585,272 $ 41,588
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (409,720) (552,939)
Purchase of intangible assets (82,016) (21,065)
Acquisition of net assets of Merrick
Packaging Specialists, Inc. - (net of
cash acquired) -- (664,949)
----------- -----------
Net cash used in investing activities (491,736) (1,238,953)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 2,040,000 --
Payment of long-term debt (3,773,443) (318,452)
Proceeds from exercise of stock options 136,069 18,325
Distribution to minority interest (76,499) --
Proceeds from loan payable-bank -- 1,812,000
Payment for retirement of common stock -- (2,000,156)
----------- -----------
Net cash used in financing activities (1,673,873) (488,283)
----------- -----------
Net decrease in cash (580,337) (1,685,648)
Cash - beginning of period 1,676,749 2,114,923
----------- -----------
Cash - end of period $ 1,096,412 $ 429,275
=========== ===========
</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 Registrant, 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 Registrant as of July 31, 1998 and the results of operations and
cash flows for the six months and three months ended July 31, 1998 and 1997, 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 Registrant's annual report on Form 10-K for the
year ended January 31, 1998.
The results of operations for the six months and three months ended July 31,
1998 are not necessarily indicative of the operating results for the full year.
NOTE 2. INVENTORIES:
A summary of inventory follows:
July 31, January 31,
1998 1998
---- ----
(Unaudited)
Raw materials and supplies $2,549,407 $2,928,334
Work in process 223,081 133,008
Finished products 1,512,555 1,493,956
---------- ----------
$4,285,043 $4,555,298
========== ==========
NOTE 3. PURCHASE OF MINORITY MEMBER'S INTEREST:
On March 11, 1998, Uniflex, Inc. ("Uniflex") announced an agreement to purchase
the minority interest in Uniflex Southwest, L.L.C. Under the agreement,
consummated June 9, 1998, Uniflex will pay $800,000 to acquire the minority
interest effective February 1, 1998. The purchase price is payable as follows:
Cash at closing (paid June 10, 1998) $ 100,000
Notes payable in 48 monthly installments of
$8,333, plus interest at 7% per annum commencing
April 1, 1998 400,000
Issuance of 50,000 shares of common stock 300,000
$ 800,000
As part of the agreement, the seller may not sell, assign or transfer the common
stock until February 1, 2001.
The minority interest acquired consists of net assets with a book value of
$214,389. The excess of purchase price over assets acquired of $585,611 has been
assigned to goodwill and is being amortized over 40 years.
-6-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. PURCHASE OF MINORITY MEMBER'S INTEREST (CONTINUED):
Interest expense charged to operations was $16,000 for the six months ended July
31, 1998.
NOTE 4. MORTGAGE REFINANCING:
On February 4, 1998, the Registrant closed on a mortgage loan (the "Mortgage
Loan") which replaced the Registrant's existing mortgage. Proceeds from the
Mortgage Loan were $2,040,000, of which $1,335,842 was used to pay off the then
existing mortgage. The Mortgage Loan is secured by a first mortgage lien on the
Registrant's property at 383 West John Street, Hicksville, New York, and is
guaranteed by the Registrant's subsidiaries. The Mortgage Loan is payable in
monthly installments of $11,334 per month commencing March 4, 1998. Interest is
fixed at 7.56% per annum until February 4, 2008 at which time the rate becomes
adjustable at the Registrant's option to one of the following rates:
1) Variable at the lenders prime rate 2) Fixed at the lenders
fixed rate 3) Variable at LIBOR plus 1.75%
The Mortgage Loan agreement contains various covenants and restrictions relating
to net worth, financial ratios and rentals of the mortgaged property.
Interest expense charged to operations was $77,000 and $61,000 for the six
months ended July 31, 1998 and 1997, respectively.
NOTE 5. 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.
The Registrant does not expect the adoption of SFAS No. 128 to have a
significant impact on its reported results.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
NET SALES:
Net sales for the quarter ended July 31, 1998, as compared to the quarter ended
July 31, 1997, increased $271,000 or 2.9%, to $9,757,000 from $9,486,000. The
increase in net sales was due to increased sales in the Registrant's Cycle
Division, as well as in tamper-evident security bags, and paper and paper
laminate products.
Net sales for the six months ended July 31, 1998, as compared to the six months
ended July 31, 1997, increased $768,000 or 4.1% to $19,511,000 from $18,743,000.
The increase in net sales was due to increased sales of tamper-evident security
bags, paper and paper laminate products and an increase in sales in the
Registrant's Cycle Division.
Net sales for the quarter ended July 31, 1998, as compared to the immediately
preceding quarter ended April 30, 1998 were comparable.
COST OF SALES AND EXPENSES:
Cost of sales for the quarter ended July 31, 1998, as compared to the quarter
ended July 31, 1997, increased $264,000, or 4.4% to $6,330,000 from $6,066,000.
Cost of sales as a percentage of net sales for the quarter ended July 31, 1998,
as compared to the same quarter in the prior year, increased to 64.9% from
63.9%. This increase was primarily attributable to a change in the Registrant's
product mix.
Cost of sales for the six months ended July 31, 1998, as compared to the six
months ended July 31, 1997, increased $438,000, or 3.7% to $12,429,000 from
$11,991,000. Cost of sales as a percentage of net sales, for the six months
ended July 31, 1998, as compared to the same period in the prior year, decreased
to 63.7% from 64.0%. As a result, gross profit for the six months ended July 31,
1998 as compared to the six months ended July 31, 1997, increased to $7,083,000
from $6,752,000 or 36.3% from 36.0%. This decrease in cost of sales was
primarily attributable to stabilization of prices for raw materials.
Shipping, selling, general and administrative expenses for the quarter ended
July 31, 1998, as compared to the quarter ended July 31, 1997, decreased $37,000
or 1.4% from $2,712,000 to $2,675,000. Shipping, selling, general and
administrative expenses for the six months ended July 31, 1998, as compared to
the six months ended July 31, 1997, decreased $20,000 or .4% from $5,421,000 to
$5,401,000. These decreases were primarily attributable to the Registrant's
further integration of the Merrick Division into the Registrant's consolidated
operations which has reduced certain expenses.
Interest expense for the quarter ended July 31, 1998, as compared to the quarter
ended July 31, 1997, increased $18,000 or 19.8% to $111,000 from $93,000.
Interest expense for the six months ended July 31, 1998, compared to the six
months ended July 31, 1997, increased $29,000 or 13.9% to $236,000 from
$207,000.
These increases were attributable to additional outstanding borrowings related
to repurchases of certain outstanding shares of the Registrant's common stock in
July 1997.
-8-
<PAGE>
NET INCOME:
Net income for the quarter ended July 31, 1998, was $425,000 or $.10 per diluted
share, as compared to $356,000 or $.08 per diluted share, for the quarter ended
July 31, 1997.
Net income for the six months ended July 31, 1998, was $916,000, or $.22 per
diluted share, as compared to $661,000 or $.15 per diluted share. The increase
in net income per share was primarily related to increased sales and reductions
in operating expenses.
WORKING CAPITAL AND LIQUIDITY:
Working capital increased to $7,723,000 at July 31, 1998, from $7,197,000 at
April 30, 1998, or 7.3%. Working capital increased to $7,723,000 at July 31,
1998, from $5,530,000 at July 31, 1997, or 39.7%. At July 31, 1998, the
Registrant had a working capital ratio of 3.2 to 1. 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. The
Registrant does not have any commitments for significant capital expenditures
for the immediate future.
YEAR 2000 PROGRAM
Many computer systems experience difficulty processing dates beyond the year
1999 and, as such, some computer hardware and software will need to be modified
prior to the year 2000 to remain functional. The Registrant's core internal
systems that have been recently implemented are year 2000 compliant. The
remaining core internal systems are scheduled to be replaced by the third
quarter of 1999 and will be year 2000 compliant when installed. The Registrant
is also completing a preliminary assessment of year 2000 issues not related to
its core systems, including issues surrounding systems that interface with
external third parties. Based on its initial evaluation, the Registrant does not
believe that the cost of remedial actions will have a material adverse effect on
the Registrant's results of operations and financial condition. There can be no
assurance, however, that there will not be a delay in, or increased costs
associated with, the implementation of changes as the program progresses, and
failure to implement such changes could have an adverse effect on future results
of operations.
When used in this 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 within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. These statements are subject to
certain risks and uncertainties that could cause actual results to differ from
those projected, including reduced sales and increase in raw materials and
production costs. Although the Registrant believes that the assumptions
underlying the forward looking statements are reasonable, any of the assumptions
could be inaccurate, and, therefore, there can be no assurance that the
forward-looking statements included herein will prove to be accurate.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's Annual Meeting of Stockholders was held on June 23, 1998
(the "Annual Meeting").
(c) Election of Directors.
Number of Votes Number of Votes
Cast For Cast Against
-------- ------------
Robert K. Semel 3,046,713 1,500
Kurt Vetter 3,046,313 1,600
Steven Wolosky 3,046,313 1,500
The following directors' terms of office continued after the Annual Meeting:
Herbert Barry, Martin Brownstein, Warner J. Heuman and Erich Vetter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27; Financial Data Schedule
(b) Reports on Form 8-K: The Registrant filed no reports on
Form 8-K during the quarter ended July 31, 1998.
-10-
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
UNIFLEX, INC.
(Registrant)
/s/ Herbert Barry
-------------------------------------
Herbert Barry (Chairman Of The Board)
/s/ Robert Gugliotta
-------------------------------------
Robert Gugliotta (VP Finance)
Date: September 11, 1998
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Form 10-Q for the quarter ended July 31, 1998 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 1,096,412
<SECURITIES> 0
<RECEIVABLES> 4,918,578
<ALLOWANCES> 114,321
<INVENTORY> 4,285,043
<CURRENT-ASSETS> 11,231,164
<PP&E> 7,037,277
<DEPRECIATION> 9,473,858
<TOTAL-ASSETS> 22,130,333
<CURRENT-LIABILITIES> 3,508,268
<BONDS> 0
0
0
<COMMON> 417,826
<OTHER-SE> 13,844,760
<TOTAL-LIABILITY-AND-EQUITY> 22,130,333
<SALES> 19,511,427
<TOTAL-REVENUES> 19,511,427
<CGS> 12,428,762
<TOTAL-COSTS> 17,829,351
<OTHER-EXPENSES> 235,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235,715
<INCOME-PRETAX> 1,446,361
<INCOME-TAX> 529,900
<INCOME-CONTINUING> 916,461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916,461
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
