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 APRIL 30, 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 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: 4,177,810 shares of the
Company's common stock - $.10 par value - as of May 20, 1998.
<PAGE>
UNIFLEX, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated condensed balance sheets -
April 30, 1998 (unaudited) and January 31, 1998 1
Consolidated condensed statements of income (unaudited) -
For the three months ended April 30, 1998 and 1997 2
Consolidated condensed statements of changes in stockholders' equity
(unaudited) for the three months ended April 30, 1998 and 1997 3
Consolidated condensed statements of cash flows (unaudited)
for the three months ended April 30, 1998 and 1997 4
Notes to consolidated condensed financial statements (unaudited) 5 - 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 7 - 8
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
SIGNATURES 10
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, January 31,
ASSETS 1998 1998
---- ----
(unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents $1,634,406 $1,676,749
Accounts receivable 4,682,398 4,577,324
Inventories 4,370,794 4,555,298
Prepaid income taxes 13,900 128,509
Prepaid expenses and other current assets 701,835 653,978
Deferred tax asset 280,200 310,400
----------- -----------
Total Current Assets 11,683,533 11,902,258
Property and Equipment 7,081,898 7,028,692
Intangible Assets 2,907,097 2,328,079
Other Assets 971,831 925,681
----------- -----------
Total Assets $22,644,359 $22,184,710
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $1,662,000 $1,023,000
Accounts payable 1,534,580 1,576,683
Accrued liabilities 1,290,912 998,238
---------- -----------
Total Current Liabilities 4,487,492 3,597,921
Long-Term Debt 2,940,816 3,955,593
Deferred Compensation and Postretirement Medical Benefits 1,400,984 1,363,252
Deferred Rent 145,000 145,000
----------- -----------
Total Liabilities 8,974,292 9,061,766
----------- -----------
Minority Interest - 290,888
----------- -----------
Stockholders' Equity
Common stock - par value $.10 per share
10,000,000 shares authorized, 4,131,160 shares
issued and outstanding 413,116 406,616
Additional paid-in capital 1,186,975 847,175
Retained earnings 12,069,976 11,578,265
---------- ----------
Total Stockholders' Equity 13,670,067 12,832,056
---------- ----------
Total Liabilities and Stockholders' Equity $22,644,359 $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>
Three Months Ended
April 30,
---------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $9,754,877 $9,257,334
Cost of sales 6,098,392 5,924,676
----------- -----------
Gross profit 3,656,485 3,332,658
----------- -----------
Shipping and selling expenses 1,857,176 1,791,161
General and administrative expenses 868,355 917,115
---------- ----------
2,725,531 2,708,276
----------- -----------
Income before other expenses 930,954 624,382
----------- -----------
Interest expense - net 124,243 113,964
----------- -----------
Income before provision for income taxes 806,711 510,418
----------- -----------
Provision for income taxes:
Current 321,100 313,700
Deferred (6,100) (108,600)
---------- -----------
315,000 205,100
---------- ------------
Net income $ 491,711 $ 305,318
========== ===========
Basic net income per share $ .12 $ .07
========== ===========
Diluted net income per share $ .12 $ .07
========== ===========
Average shares outstanding 4,116,329 4,292,641
Dilutive effect of stock options 109,356 241,887
----------- -----------
Average shares outstanding assuming dilutive effect of
stock options 4,225,685 4,534,528
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-2-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-In Retained Note 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 7,800 780 3,484 -- -- 4,264
Tax benefit from exercise of stock
options -- -- 21,000 -- -- 21,000
Shares repurchased and retired (3,600) (360) (23,490) -- -- (23,850)
Amortization of note receivable -- -- -- -- 7,125 7,125
Net income -- -- -- 305,318 -- 305,318
---------- -------- ---------- ----------- ---------- -----------
Balance at April 30, 1997 4,293,868 $429,386 $2,449,373 $10,401,658 $(20,303) $13,260,114
========== ======== ========== =========== ======== ===========
Balance at February 1, 1998 4,066,160 $406,616 $847,175 $11,578,265 $ -- $12,832,056
Exercise of stock options 15,000 1,500 19,800 -- -- 21,300
Tax benefit from exercise of stock
options -- -- 25,000 -- -- 25,000
Shares issued - acquisition 50,000 5,000 295,000 -- -- 300,000
Net income -- - -- 491,711 -- 491,711
-------- -------- -------- --------- -------- ----------
Balance at April 30, 1998 4,131,160 $413,116 $1,186,975 $12,069,976 $ -- $13,670,067
========= ======== ========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-3-
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
Three Months Ended
April 30,
----------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net cash provided by operating activities $1,166,089 $318,846
---------- --------
Cash flows from investing activities:
Purchase of property and equipment (251,206) (302,706)
Purchase of intangible assets (26,250) (26,276)
Acquisition of net assets of Merrick Packaging Specialists, Inc. -
(net of cash acquired) - (664,949)
--------- --------
Net cash used in investing activities (277,456) (993,931)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt 2,040,000 --
Distribution to minority interest (76,499) --
Proceeds from exercise of stock options 21,300 4,264
Payment for retirement of common stock -- (23,850)
Payment of long-term debt (2,915,777) (40,820)
---------- -------
Net cash used in financing activities (930,976) (60,406)
-------- -------
Net decrease in cash (42,343) (735,491)
Cash - beginning of period 1,676,749 2,114,923
--------- ---------
Cash - end of period $1,634,406 $1,379,432
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-4-
<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 April 30, 1998 and the results of operations and
cash flows for the three months ended April 30, 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 Company's annual report on Form 10-K for the year
ended January 31, 1998.
The results of operations for the three months ended April 30, 1998 are not
necessarily indicative of the operating results for the full year.
NOTE 2. INVENTORIES:
A summary of inventory follows:
April 30, January 31,
1998 1998
------------ -----------
(Unaudited)
Raw materials and supplies $1,972,419 $2,928,334
Work in process 266,552 133,008
Finished products 2,131,823 1,493,956
--------- ---------
$4,370,794 $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. Upon consummation of the
agreement, Uniflex will pay $800,000 to acquire the minority interest effective
February 1, 1998. The purchase price is payable as follows:
Cash at closing $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 without the consent of the Company.
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 will be amortized over 40 years.
-5-
<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 $7,000 for the three months ended
April 30, 1998.
NOTE 4. MORTGAGE REFINANCING:
On February 4, 1998, the Company closed on a mortgage loan (the "Mortgage Loan")
which replaced the Company'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 Company's
property at 383 West John Street, Hicksville, New York, and is guaranteed by the
Company'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
Company'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.
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 Company does not expect the adoption of SFAS No. 128 to have a significant
impact to its reported results.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
NET SALES:
Net sales for the quarter ended April 30, 1998, as compared to the quarter
ended April 30, 1997, increased $498,000, or 5.4%, to $9,755,000 from,
$9,257,000. The increase in net sales was due to the increase in sales of paper
and paper laminate products and an increase in the sale of tamper evident
security bags.
Net sales for the quarter ended April 30, 1998, as compared to the quarter
ended January 31, 1998, increased $1,026,000, or 11.8%, to $9,755,000 from
$8,729,000. The increase in net sales was attributable to the increase in sales
of paper and paper laminate products and an increase in the sale of tamper
evident security bags.
COST OF SALES AND EXPENSES:
Cost of sales for the quarter ended April 30, 1998, as compared to the
quarter ended April 30, 1997, increased $173,000, or 2.9%, to $6,098,000 from
$5,925,000. As a percentage of net sales, cost of sales decreased to 62.5% for
the quarter ended April 30, 1998, from 64.0% for the quarter ended April 30,
1997. As a result of such decrease, gross profit increased to $3,657,000, or
37.5%, for the quarter ended April 30, 1998 from $3,332,000, or 36.0%, for the
quarter ended April 30, 1997. The decrease in the cost of sales was primarily
attributable to stabilization of raw material costs and continued manufacturing
efficiencies.
Cost of sales for the quarter ended April 30, 1998, as compared to the
quarter ended January 31, 1998, increased $219,000, or 3.7%, to $6,098,000 from
$5,879,000. As a percentage of net sales, cost of sales decreased to 62.5% for
the quarter ended April 30, 1998 from 67.4% for the quarter ended January 31,
1998. As a result of such decrease, gross profit increased to $3,657,000, or
37.5%. for the quarter ended April 30, 1998 from $2,850,000, or 32.6%, for the
quarter ended January 31, 1998. This decrease in the cost of sales was primarily
attributable to stabilization of raw material costs.
Shipping and selling and general and administrative expenses for the quarter
ended April 30, 1998, as compared to the quarter ended April 30, 1997, increased
$17,000, or 0.6%, from $2,708,000 to $2,725,000. This increase was primarily
attributable to increased net sales.
Shipping and selling and general and administrative expenses for the quarter
ended April 30, 1998, as compared to the quarter ended January 31, 1998,
increased $316,000, or 13.1%, from $2,409,000 to $2,725,000. This increase was
primarily attributable to increased net sales.
INTEREST EXPENSE:
Interest expenses for the quarter ended April 30, 1998, as compared to the
quarter ended April 30, 1997, increased $11,000, or 9.6%, to $125,000 from
$114,000. Interest expenses for the quarter ended April 30, 1998, as compared to
the quarter ended January 31, 1998, increased $17,000, or 15.7%, from $108,000
to $125,000. These increases were attributable to increased borrowings resulting
from the acquisition of certain assets of Merrick Packaging Specialists Inc.
Additional borrowings were needed to repurchase some of the outstanding shares
of the Registrant's common stock.
WORKING CAPITAL AND LIQUIDITY:
Working capital increased to $7,197,000 at April 30, 1998, from $7,078,000 at
April 30, 1997, an increase of $119,000, or 1.7%, resulting in a working capital
ratio of approximately 2.6 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.
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 increases in raw
-7-
<PAGE>
materials and production costs. Although the Company 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.
-8-
<PAGE>
PART II - OTHER INFORMATION
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 April 30, 1998.
-9-
<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: 6/11/98
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended April 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1998
<CASH> 1,634,406
<SECURITIES> 0
<RECEIVABLES> 4,808,369
<ALLOWANCES> 125,971
<INVENTORY> 4,370,794
<CURRENT-ASSETS> 11,683,533
<PP&E> 16,353,021
<DEPRECIATION> 9,271,123
<TOTAL-ASSETS> 22,644,359
<CURRENT-LIABILITIES> 4,487,492
<BONDS> 0
0
0
<COMMON> 413,116
<OTHER-SE> 13,256,951
<TOTAL-LIABILITY-AND-EQUITY> 22,644,359
<SALES> 9,754,877
<TOTAL-REVENUES> 9,754,877
<CGS> 6,098,392
<TOTAL-COSTS> 6,098,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,243
<INCOME-PRETAX> 806,711
<INCOME-TAX> 315,000
<INCOME-CONTINUING> 491,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 491,711
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
