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, 1999
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: 4,300,352 shares of the
Company's common stock - $.10 par value - were outstanding as of June 3, 1999.
<PAGE>
UNIFLEX, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated condensed balance sheets -
April 30, 1999 (unaudited) and January 31, 1999 1
Consolidated condensed statements of income (unaudited) -
For the three months ended April 30, 1999 and 1998 2
Consolidated condensed statements of changes in stockholders' equity
(unaudited) for the three months ended April 30, 1999 and 1998 3
Consolidated condensed statements of cash flows (unaudited)
for the three months ended April 30, 1999 and 1998 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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
ASSETS 1999 1999
---- ----
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 2,024,159 $ 2,511,131
Accounts receivable 4,225,027 4,520,477
Inventories 4,544,982 4,377,304
Prepaid expenses and other current assets 497,868 788,387
Deferred tax asset 270,500 274,300
----------- -----------
Total Current Assets 11,562,536 12,471,599
Property and Equipment 7,526,983 7,316,029
Intangible Assets 3,240,678 2,879,684
Other Assets 893,594 880,683
----------- -----------
Total Assets $23,223,791 $23,547,995
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 758,650 $ 1,174,100
Accounts payable 993,304 1,440,760
Accrued liabilities 1,261,752 1,187,621
----------- -----------
Total Current Liabilities 3,013,706 3,802,481
Long-Term Debt 2,175,269 2,293,130
Deferred Compensation and Postretirement Medical Benefits 1,551,898 1,512,504
Deferred rent 130,000 133,750
----------- -----------
Total Liabilities 6,870,873 7,741,865
----------- -----------
Stockholders' Equity
Common stock - par value $.10 per share
10,000,000 shares authorized, 4,300,352 shares
issued and outstanding 430,036 430,036
Additional paid-in capital 1,689,549 1,689,549
Retained earnings 14,233,333 13,686,545
----------- -----------
Total Stockholders' Equity 16,352,918 15,806,130
----------- -----------
Total Liabilities and Stockholders' Equity $23,223,791 $23,547,995
=========== ===========
</TABLE>
The consolidated condensed balance sheet at January 31, 1999 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,
---------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 9,666,150 $ 9,754,877
Cost of sales 6,093,106 6,098,392
----------- ------------
Gross profit 3,573,044 3,656,485
Shipping and selling expenses 1,808,686 1,857,176
General and administrative expenses 810,915 868,355
----------- ------------
2,619,601 2,725,531
----------- ------------
Income before other expenses 953,443 930,954
Interest expense - net 81,855 124,243
----------- ------------
Income before provision for income taxes 871,588 806,711
Provision for income taxes:
Current 320,300 321,100
Deferred 4,500 (6,100)
----------- ------------
324,800 315,000
----------- ------------
Net income $ 546,788 $ 491,711
=========== ============
Basic net income per share $ .13 $ .12
============ =============
Diluted net income per share $ .13 $ .12
=========== =============
Average shares outstanding 4,300,352 4,116,329
Dilutive effect of stock options 34,668 109,356
----------- ------------
Average shares outstanding assuming
dilutive effect of stock options 4,335,020 4,225,685
=========== ============
</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, 1999 AND 1998
(UNAUDITED)
COMMON STOCK
------------
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ --------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1998 4,066,152 $ 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 4,131,152 $ 413,116 $ 1,186,975 $12,069,976 $13,670,067
=========== =========== =========== =========== ===========
Balance at February 1, 1999 4,300,352 $ 430,036 $ 1,689,549 $13,686,545 $15,806,130
Net income -- -- -- 546,788 546,788
----------- ----------- ----------- ----------- -----------
Balance at April 1, 1999 4,300,352 $ 430,036 $ 1,689,549 $14,233,333 $16,352,918
=========== =========== =========== =========== ===========
</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,
1999 1998
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 865,112 $ 1,166,089
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (424,710) (251,206)
Purchase of intangible assets (394,063) (26,250)
----------- -----------
Net cash used in investing activities (818,773) (277,456)
----------- -----------
Cash flows from financing activities:
Payment of long-term debt (533,311) (2,915,777)
Proceeds from long-term debt -- 2,040,000
Distribution to minority interest -- (76,499)
Proceeds from exercise of stock options -- 21,300
----------- -----------
Net cash used in financing activities (533,311) (930,976)
----------- -----------
Net decrease in cash (486,972) (42,343)
Cash - beginning of period 2,511,131 1,676,749
----------- -----------
Cash - end of period $ 2,024,159 $ 1,634,406
=========== ===========
</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, 1999 and the results of operations and
cash flows for the three months ended April 30, 1999 and 1998, 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, 1999.
The results of operations for the three months ended April 30, 1999 are not
necessarily indicative of the operating results for the full year.
NOTE 2. INVENTORIES:
A summary of inventory follows:
<TABLE>
<CAPTION>
April 30, January 31,
1999 1999
---- ----
(Unaudited)
<S> <C> <C>
Raw materials and supplies $2,267,467 $1,754,787
Work in process 120,138 317,076
Finished products 2,157,377 2,305,441
---------- ----------
$4,544,982 $4,377,304
========== ==========
</TABLE>
NOTE 3. PENDING MERGER AND RECAPITALIZATION:
On March 8, 1999, the Company announced that Uniflex and an acquisition entity,
Uniflex Acquisition Corp. ("UAC") formed by RFE Investment Partners have signed
an Agreement and Plan of Merger and Recapitalization providing for the
acquisition by UAC of all of the outstanding shares of common stock and all of
the outstanding stock options of Uniflex (exclusive of the shares of common
stock to be retained as described below). However, there can be no assurance
that the transaction will ultimately be consummated.
The transaction is subject to certain conditions, including the successful
completion of the necessary financing and obtaining the necessary regulatory and
corporate approvals, including the approval of the shareholders of Uniflex. It
is expected that the transaction will be consummated on or shortly after June
30, 1999.
5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. PENDING MERGER AND RECAPITALIZATION (CONT'D.):
The Merger Agreement provides for a statutory merger of Uniflex with UAC
pursuant to which the holders of Uniflex's issued and outstanding common stock
(exclusive of the shares of common stock to be retained as described below) will
be entitled to receive $7.57 per share of common stock and the holders of
options to purchase Uniflex common stock will be entitled to receive the excess,
if any, of $7.57 per share over the exercise price per share of their options.
Upon consummation of the merger, (i) CMCO, Inc. and its affiliates that
currently own 300,158 shares of common stock of Uniflex will retain all of their
shares of common stock of Uniflex and (ii) certain officers, directors and
employees of Uniflex will retain no less than 322,000 shares of common stock of
Uniflex owned by them. Further, Sterling/Carl Marks Capital, Inc. will purchase
99,075 shares of Uniflex common stock at $7.57 per share immediately prior to
the effective time. The transaction is expected to be treated as a
recapitalization for financial reporting purposes.
NOTE 4. 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 agreed to 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.
In the event of a change in control of the Company, this debt becomes due on a
demand basis. In anticipation of the transaction described in Note 3, this debt
has been classified as a current liability.
6
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5. MORTGAGE REFINANCING:
On February 4, 1998, the Company closed on a mortgage loan (the "Mortgage
Loan"). 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 175 basis points
The Mortgage Loan agreement contains various covenants and restrictions relating
to net worth, financial ratios and rentals of the mortgaged property.
7
<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, 1999 as compared to the quarter ended
April 30, 1998 decreased $89,000 or .9% to $9,666,000 from $9,755,000. The
change was not significant.
Net sales for the quarter ended April 30, 1999 as compared to the immediately
preceding quarter ended January 31, 1999 increased $219,000 or 2.3% to
$9,666,000 from $9,447,000. This increase was due primarily to increased sales
in the Advertising Specialty Division.
The Company's backlog at April 30, 1999 was $6,204,000 compared to $5,434,000 at
April 30, 1998, an increase of $770,000, or 14.2%.
COST OF SALES AND EXPENSES:
Cost of sales for the quarter ended April 30, 1999, as compared to the quarter
ended April 30, 1998 decreased $5,000 to $6,093,000 from $6,098,000. Cost of
sales as a percentage of net sales for the quarter ended April 30, 1999, as
compared to the same quarter in the prior fiscal year, increased to 63.0% from
62.5%. The change was not significant. The gross profit decreased to $3,573,000
or 37.0% for the quarter ended April 30, 1999 from $3,657,000, or 36.4% for the
quarter ended April 30, 1998.
Cost of sales for the quarter ended April 30, 1999, as compared to the quarter
ended January 31, 1999, increased $81,000, or 1.4% to $6,093,000 from
$6,012,000. As a percentage of net sales, cost of sales decreased to 63.0% for
the quarter ended April 30, 1999 from 63.6% for the quarter ended January 31,
1999. The decrease was not significant. As a result of such decrease, gross
profit increased to $3,573,000 or 37.0% for the quarter ended April 30, 1999
from $3,435,000, or 36.4% for the quarter ended January 31, 1999.
Shipping and selling and general and administrative expenses for the quarter
ended April 30, 1999, as compared to the quarter ended April 30, 1998, decreased
$106,000 or 3.9% to $2,620,000 from $2,726,000. This decrease is attributable to
a relationship between variable costs and net sales and management's ability to
control its selling, general and administrative costs.
Shipping and selling and general and administrative expenses for the quarter
ended April 30, 1999, as compared to the quarter ended January 31, 1999
increased $132,000, or 5.3%, to $2,620,000 from $2,488,000. This increase was
attributable to increased sales and various other expense increases.
INTEREST EXPENSE:
Interest expense for the quarter ended April 30, 1999, as compared to the
quarter ended April 30, 1998, decreased $42,000, or 33.9%, to $82,000 from
$124,000. This decrease was primarily attributable to the fact that the Company
paid in full the debt related to the acquisition of certain assets of Merrick
Packaging Specialists Inc. Throughout the quarter ended April 30, 1999, excess
cash was invested in short term financial instruments helping to offset interest
costs.
Interest expense for the quarter ended April 30, 1999 as compared to the
quarter ended January 31, 1999 decreased $2,000, or 2.4%, to $82,000 from
$84,000. The change was not significant.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
NET INCOME:
Net income for the quarter ended April 30, 1999 was $547,000, or $.13 per share
fully diluted, as compared to $492,000, or $.12 per share fully diluted, for the
quarter ended April 30, 1998.
Net income for the quarter ended April 30, 1999 was $547,000, or $.13 per share
fully diluted, as compared to $518,000, or $.12 per share fully diluted, for the
quarter ended January 31, 1999.
WORKING CAPITAL AND LIQUIDITY:
Working capital increased to $8,549,000 at April 30, 1999, from $7,197,000 at
April 30, 1998, an increase of $1,352,000, or 18.8%, resulting in a working
capital ratio of approximately 3.8 to 1. This increase was due primarily to the
fact that the Company paid in full the debt related to the acquisition of
certain assets of Merrick Packaging Specialists Inc., thereby reducing the
current portion of long term debt.
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 outstanding balance is payable in full.
Currently the Company has not had to borrow against its available line of
credit.
The Registrant believes it has sufficient working capital and unused lines of
credit to meet its expected liquidity and capital expenditure requirements for
the foreseeable 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 Company'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 Company 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 Company does
not believe that the costs of remedial actions will have a material adverse
effect on the Company'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.
RECENT EVENT:
On March 8, 1999, the Company announced that Uniflex and an acquisition entity,
Uniflex Acquisition Corp. ("UAC"), formed by RFE Investment Partners, have
signed an Agreement and Plan of Merger and Recapitalization. The plan provides
for the acquisition by UAC of all of the outstanding shares of common stock and
all the outstanding stock options of Uniflex (exclusive of the shares of common
stock to be retained as described below). However, there can be no assurance
that the transaction will ultimately be consummated.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
RECENT EVENT (CONT'D.):
The transaction is subject to certain conditions, including the successful
completion of the necessary financing and obtaining the necessary regulatory and
corporate approvals, including the approval of the shareholders of Uniflex. It
is expected that the transaction will be consummated on or shortly aftger June
30, 1999.
The Merger Agreement provides for a statutory merger of Uniflex with UAC
pursuant to which the holders of Uniflex's issued and outstanding common stock
(exclusive of the shares of common stock to be retained as described below) will
be entitled to receive $7.57 per share of common stock and the holders of
options to purchase Uniflex common stock will be entitled to receive the excess,
if any, of $7.57 per share over the exercise price per share of their options.
Upon consummation of the merger, (i) CMCO, Inc. and its affiliates that
currently own 300,158 shares of common stock of Uniflex will retain all of their
shares of common stock of Uniflex and (ii) certain officers, directors and
employees of Uniflex will retain no less than 322,000 shares of common stock of
Uniflex owned by them. Further, Sterling/Carl Marks Capital, Inc. will purchase
from Uniflex immediately prior to the effective time, 99,075 shares of Uniflex
common stock at $7.57 per share.
10
<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:
Current Report on Form 8-K dated March 5, 1999, filed on March 8,
1999, reporting Item 5, Other Events and Item 7, Financial
Statements, Pro Forma Financial Information and Exhibits.
<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 by the
undersigned thereunto duly authorized.
UNIFLEX, INC.
(Registrant)
/s/ Herbert Barry
-------------------------------------
Herbert Barry (Chairman Of The Board)
/s/ Thomas McPartland
-------------------------------------
Thomas McPartland (Acting Controller)
Date: June 11, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR YEAR ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1999
<CASH> 2,024,159
<SECURITIES> 0
<RECEIVABLES> 4,315,276
<ALLOWANCES> 90,249
<INVENTORY> 4,544,982
<CURRENT-ASSETS> 11,562,536
<PP&E> 17,561,780
<DEPRECIATION> 10,034,797
<TOTAL-ASSETS> 23,223,791
<CURRENT-LIABILITIES> 3,013,706
<BONDS> 0
0
0
<COMMON> 430,036
<OTHER-SE> 15,922,882
<TOTAL-LIABILITY-AND-EQUITY> 23,223,791
<SALES> 9,666,150
<TOTAL-REVENUES> 9,666,150
<CGS> 6,093,106
<TOTAL-COSTS> 8,712,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,855
<INCOME-PRETAX> 871,588
<INCOME-TAX> 324,800
<INCOME-CONTINUING> 546,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,788
<EPS-BASIC> .13
<EPS-DILUTED> .13
</TABLE>
