SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-K/A
(AMENDMENT NO. 2)
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended JANUARY 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________to _____________________
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 identification no.)
incorporation or organization)
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
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 14, 1999, the aggregate market value of the Registrant's
outstanding voting Common Stock held by non-affiliates of the Registrant was
approximately $15,981,742. For purposes of this calculation, shares owned by
officers, directors and 10% stockholders known to the Registrant have been
excluded. Such exclusion is not intended, nor shall it be deemed, to be an
admission that such persons are affiliates of the Registrant.
As of April 14, 1999, there were 4,300,352 shares outstanding of the
Registrant's Common Stock, $.10 par value.
<PAGE>
Explanatory Note
This Amendment No. 2 (this "Amendment") to the Registrant's Annual
Report on Form 10-K filed with the Securities and Exchange Commission on April
20, 1999 is being filed in order to amend Item 14 of Part IV. The purpose of
this Amendment is to revise Notes 11 and 12 of the Notes to Consolidated
Financial Statements. Except as specifically identified above, the disclosures
set forth herein do not differ from those in the prior filing.
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,
1999 and 1998 F-2
Statements of Income for the
years ended January 31, 1999,
1998 and 1997 F-3
Statements of Changes in
Stockholders' Equity for the years
ended January 31, 1999, 1998
and 1997 F-4
Statements of Cash Flows for the
years ended January 31, 1999,
1998 and 1997 F-5
Notes to Financial Statements F-7
(2) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II Valuation and Qualifying Accounts
and Reserves F-22
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.
-2-
<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.
(b) REPORTS ON FORM 8-K.
Current report on Form 8-K dated November 17, 1998.
(c) EXHIBITS
NO. DESCRIPTION REFERENCE
2. Agreement and Plan of Merger and Recapitalization
between the Registrant and Uniflex Acquisition Corp.
dated March 5, 1999. (1a)
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)
-3-
<PAGE>
(h) Deferred Compensation and Consulting and Non-Competition
Agreements of Manfred M. Heuman dated as of April 28, 1991 (4)
(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
-4-
<PAGE>
Registrant, Merrick Packaging Specialists, Inc., Jeffrey Gold,
Lawrence Gold and Steven Braverman (10)
23.1 Consent of Patrusky Mintz & Semel.
24. Power of Attorney (included on the signature page to this Report). (11)
27. Financial Data Schedule. (11)
- -------------------------
(1a) Incorporated by reference to the Registrant's Current Report on Form
8-K dated March 8, 1999.
(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.
(11) Previously filed with this Report.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to the
Annual Report on Form 10-K to be signed on its behalf by the undersigned
thereunto duly authorized on the 14th day of May, 1999.
UNIFLEX, INC.
(Registrant)
By: /s/ Robert K. Semel
-----------------------------------------
Robert K. Semel, President
and Chief Operating Officer
-6-
<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, 1999 and 1998 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years ended January 31, 1999, 1998 and 1997. 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 1999 and 1998 and the results of their operations
and their cash flows for the years ended January 31, 1999, 1998 and 1997, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on 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 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/PATRUSKY, MINTZ & SEMEL
- --------------------------
PATRUSKY, MINTZ & SEMEL
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 5, 1999
F-1
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1999 AND 1998
ASSETS 1999 1998
---------- -----------
Current assets
Cash and cash equivalents (Note 1) $ 2,511,131 $ 1,676,749
Accounts receivable (net of allowances
of $121,131 in 1999 and $121,366 in 1998) 4,520,477 4,577,324
Inventories (Notes 1 and 4) 4,377,304 4,555,298
Prepaid income taxes 9,525 128,509
Prepaid expenses and other current assets 778,862 653,978
Deferred tax asset (Notes 1 and 8) 274,300 310,400
----------- -----------
Total current assets 12,471,599 11,902,258
Property and equipment (Notes 1, 5 and 6) 7,316,029 7,028,692
Intangible assets (Note 1) 2,879,684 2,328,079
Other assets (Note 8) 880,683 925,681
----------- -----------
Total assets $23,547,995 $22,184,710
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt (Note 6) $ 1,174,100 $ 1,023,000
Accounts payable 1,440,760 1,576,683
Accrued liabilities (Note 7) 1,187,621 998,238
----------- -----------
Total current liabilities 3,802,481 3,597,921
----------- -----------
Long-term debt (Note 6) 2,293,130 3,955,593
Deferred rent (Note 1) 133,750 145,000
Deferred compensation and postretirement
benefits (Note 14) 1,512,504 1,363,252
----------- -----------
Total liabilities 7,741,865 9,061,766
----------- -----------
Commitments and contingencies (Note 16)
Minority interest (Notes 2 and 11) -- 290,888
----------- -----------
Stockholders' Equity (Notes 3, 9 and 12)
Common stock - par value $.10 per share
10,000,000 shares authorized; issued and
outstanding 4,300,352 in 1999 and
4,066,152 in 1998 430,036 406,616
Additional paid-in capital 1,689,549 847,175
Retained earnings and members' capital 13,686,545 11,578,265
----------- -----------
Total stockholders' equity 15,806,130 12,832,056
----------- -----------
Total liabilities and stockholders' equity $23,547,995 $22,184,710
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------
<S> <C> <C> <C>
Net sales $ 39,721,744 $ 37,998,816 $ 34,466,262
Cost of sales 25,215,265 24,390,224 21,378,973
------------------ ------------------ ------------------
Gross profit 14,506,479 13,608,592 13,087,289
Shipping, selling, general and
administrative expenses 10,778,271 10,618,337 9,702,838
------------------ ------------------ -----------------
Income before other expenses 3,728,208 2,990,255 3,384,451
----------------- ------------------ -----------------
Interest - net 415,528 443,830 215,313
Loss on disposal of assets - 73,612 -
---------------- ---------------- ----------------
415,528 517,442 215,313
---------------- ---------------- ----------------
Minority interest in income of
consolidated subsidiary - (76,499) -
---------------- ---------------- ----------------
Income before provision for income
taxes 3,312,680 2,396,314 3,169,138
Provision for income taxes
(Notes 1 and 8) 1,204,400 900,000 1,252,200
----------------- ----------------- -----------------
Net income $ 2,108,280 $ 1,496,314 $ 1,916,938
================= ================= =================
Basic net income per share $ .50 $ .36 $ .46
================= ================= ================
Diluted net income per share $ .50 $ .35 $ .43
================= ================= ================
Average shares outstanding 4,177,102 4,161,289 4,193,687
Dilutive effect of stock options 42,993 162,532 279,215
----------------- ----------------- ----------------
Average shares outstanding
assuming dilution 4,220,095 4,323,821 4,472,902
================== ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------
AMOUNT SHARES
------ ------
<S> <C> <C>
Balance at January 31, 1996 $ 266,638 2,666,384
Exercise of stock options (Note 12) 21,555 215,545
Tax benefit from exercise of stock
options (Note 12) - -
Issuance of common stock to effect a
3 for 2 stock split (Note 3) 140,484 1,404,841
Issuance of common stock as
compensation 289 2,890
Amortization of note receivable (Note 10) - -
Net income - -
---------------- -----------------
Balance at January 31, 1997 428,966 4,289,660
Exercise of stock options (Note 12) 19,176 191,755
Tax benefit from exercise of stock
options (Note 12) - -
Shares repurchased and retired (Note 9) (41,526) (415,263)
Amortization of note receivable (Note 10) - -
Capital transferred to minority interest
(Note 11) - -
Net income - -
---------------- -----------------
Balance at January 31, 1998 406,616 4,066,152
Exercise of stock options (Note 12) 18,420 184,200
Tax benefit from exercise of stock
options (Note 12) - -
Shares issued - acquisition (Note 2) 5,000 50,000
Net income - -
---------------- -----------------
Balance at January 31, 1999 $ 430,036 4,300,352
================ =================
</TABLE>
<TABLE>
<CAPTION>
RETAINED EARNINGS
ADDITIONAL AND NOTE RECEIVABLE -
PAID-IN CAPITAL MEMBERS CAPITAL STOCK PURCHASE TOTAL
--------------- --------------- -------------- -----
<S> <C> <C> <C> <C>
Balance at January 31, 1996 $ 1,854,723 $ 8,179,402 $ (55,928) $ 10,244,835
Exercise of stock options (Note 12) 213,097 - - 234,652
Tax benefit from exercise of stock
options (Note 12) 499,402 - - 499,402
Issuance of common stock to effect a
3 for 2 stock split (Note 3) (140,484) - - -
Issuance of common stock as
compensation 21,641 - - 21,930
Amortization of note receivable (Note 10) - - 28,500 28,500
Net income - 1,916,938 - 1,916,938
---------------- ----------------- ---------------- --------------
Balance at January 31, 1997 2,448,379 10,096,340 (27,428) 12,946,257
Exercise of stock options (Note 12) 67,953 - - 87,129
Tax benefit from exercise of stock
options (Note 12) 400,000 - - 400,000
Shares repurchased and retired (Note 9) (2,069,157) - - (2,110,683)
Amortization of note receivable (Note 10) - - 27,428 27,428
Capital transferred to minority interest
(Note 11) - (14,389) - (14,389)
Net income - 1,496,314 - 1,496,314
---------------- ----------------- ---------------- ---------------
Balance at January 31, 1998 847,175 11,578,265 - 12,832,056
Exercise of stock options (Note 12) 231,374 - - 249,794
Tax benefit from exercise of stock
options (Note 12) 316,000 - - 316,000
Shares issued - acquisition (Note 2) 295,000 - - 300,000
Net income - 2,108,280 - 2,108,280
---------------- ----------------- ---------------- ---------------
Balance at January 31, 1999 $ 1,689,549 $ 13,686,545 $ - $ 15,806,130
================= ================== ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 2,108,280 $ 1,496,314 $ 1,916,938
Adjustments to reconcile net income to
net cash provided by operating
activities:
Deferred compensation, postretirement
medical benefits and related
interest 149,252 34,015 114,113
Depreciation and amortization 964,839 964,170 915,888
Equity issued as compensation - - 21,930
Amortization of note receivable - 27,428 28,500
Deferred rent (11,250) 3,754 18,750
Deferred income taxes 92,400 (126,600) (82,300)
Changes in assets and liabilities:
Accounts receivable 56,847 (90,644) (719,721)
Inventories 177,994 (544,266) (918,945)
Prepaid expenses and other current
assets (124,884) (70,776) 41,680
Other assets (11,302) (79,846) (8,792)
Accounts payable (135,923) (531,284) 116,573
Accrued liabilities 136,774 (10,290) 46,870
Prepaid income taxes and income taxes
payable 487,593 551,282 1,118,221
Minority interest - 76,499 -
---------------- ---------------- ----------------
Net cash provided by operating
activities 3,890,620 1,699,756 2,609,705
---------------- ----------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment (1,113,969) (903,475) (1,098,318)
Purchase of minority interest (100,000) - -
Acquisition of net assets of Merrick
Packaging Specialists, Inc., - net
of cash acquired - (664,949) -
Purchase of intangible assets (104,201) (41,497) (76,059)
---------------- ---------------- ----------------
Net cash used in investing
activities (1,318,170) (1,609,921) (1,174,377)
----------------- ------------------ ------------------
</TABLE>
F-5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------
Cash flows from financing activities:
<S> <C> <C> <C>
Proceeds of long-term debt $ 2,040,000 $ 2,912,000 $ -
Payment of long-term debt (3,951,363) (1,416,455) (751,650)
Payment for retirement of common
stock - (2,110,683) -
Proceeds from exercise of stock
options 249,794 87,129 234,652
Distribution to minority interest (76,499) - -
---------------- ---------------- ------------
Net cash used in financing
activities (1,738,068) (528,009) (516,998)
------------------ ----------------- -------------
Net increase (decrease) in cash and cash
equivalents 834,382 (438,174) 918,330
Cash and cash equivalents - beginning of
year 1,676,749 2,114,923 1,196,593
----------------- ----------------- -------------
Cash and cash equivalents - end of
year $ 2,511,131 $ 1,676,749 $ 2,114,923
================= ================= =============
</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, 1999
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, hospital supply houses, manufacturers 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.
("Uniflex"), its wholly owned subsidiaries, Uniflex Southwest L.L.C.,
("Southwest"), Uniflex Southeast, Inc., ("Southeast"), and Hantico, Inc.
(inactive). 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 Company's 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, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
INTANGIBLE ASSETS:
Goodwill and other intangible assets are stated on the basis of cost and are
amortized principally on a straight-line basis, over the estimated periods of
future benefit (not exceeding 40 years). Goodwill and other intangible assets
are periodically reviewed for impairment based on an assessment of future
operations to ensure they are appropriately valued. At January 31, 1999, the net
book value of goodwill and other intangible assets was $2,696,031 and $183,653,
respectively. Accumulated amortization was approximately $268,000 and $339,000
on January 31, 1999 and 1998, 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 amount 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.
NET INCOME PER SHARE:
Basic net income per share is computed by dividing net income by the weighted
average number of shares outstanding. Diluted net income per share includes the
dilutive effect of stock options.
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
years ended January 31, 1999, 1998 and 1997 were approximately $459,000,
$434,000 and $482,000, respectively.
F-8
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'):
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.
RECLASSIFICATION OF PRIOR YEAR'S BALANCES:
Certain amounts in the prior year's consolidated financial statements were
reclassified to conform with the current year's presentation.
NEW ACCOUNTING STANDARDS:
The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS
No. 128"), "Earnings per Share," in the year ended January 31, 1998. In
accordance with SFAS No. 128, the Company has presented both basic net income
per share and diluted net income per share in the consolidated financial
statements.
NOTE 2. ACQUISITIONS:
MINORITY INTEREST IN UNIFLEX SOUTHWEST, L.L.C.:
Effective February 1, 1998, Uniflex purchased the minority interest in Uniflex
Southwest, L.L.C. for $800,000. 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 (A)
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 for $585,611 has
been assigned to goodwill and is being amortized over 40 years.
(A) 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 17, this
debt has been classified as a current liability (Note 6).
F-9
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 2. ACQUISITIONS (CONT'D.):
MERRICK PACKAGING SPECIALISTS, INC.:
On February 5, 1997, the Company purchased substantially all of the assets and
assumed certain liabilities of Merrick Packaging Specialists, Inc. ("Merrick").
Merrick 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 was not material. The acquisition has been accounted
for as a purchase, and accordingly, its results have been 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, $600,000 was paid August 1, 1998, and the
balance is payable March 1, 1999 (Note 6).
NOTE 3. 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 stockholders 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 4. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Raw materials and supplies $ 1,754,787 $ 2,928,334
Work-in-process 317,076 133,008
Finished goods 2,305,441 1,493,956
----------------- ------------------
$ 4,377,304 $ 4,555,298
================= ==================
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Land $ 860,000 $ 860,000
Building and improvements 2,749,081 2,759,080
Machinery and equipment 11,505,623 10,616,307
Leasehold improvements 665,501 645,516
Plates and engravings 716,170 598,348
Furniture and fixtures 640,695 622,164
Delivery equipment - 34,462
----------------- ----------------
17,137,070 16,135,877
Less accumulated depreciation and amortization 9,821,041 9,107,185
----------------- ------------------
$ 7,316,029 $ 7,028,692
================= ==================
</TABLE>
F-10
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 5. PROPERTY AND EQUIPMENT (CONT'D.):
Depreciation and amortization expense, for the assets above, charged to
operations for the years ended January 31, 1999, 1998 and 1997 amounted to
$826,632, $836,719 and $833,438, respectively.
Assets held under capitalized leases, included above, are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Machinery and equipment $ 163,683 $ 163,683
Furniture and fixtures 126,762 126,762
--------------- ----------------
290,445 290,445
Less accumulated depreciation 97,182 72,870
--------------- ----------------
$ 193,263 $ 217,575
=============== ================
NOTE 6. LONG-TERM DEBT:
Long-term debt consists of the following:
1999 1998
--------------- ----------------
Bank loan (A) $ - $ 1,500,000
Term note payable - bank (B) 738,095 1,000,000
Mortgage payable - bank (C) 1,915,326 1,325,197
Acquisition debt - notes payable, due March 1, 1999 with
interest at 7.5% per annum (Note 2) 390,000 990,000
Notes payable - former minority interest holder (Notes 2 and 17) 308,334 -
Capital lease obligations (Note 16) 115,475 163,396
--------------- ----------------
3,467,230 4,978,593
Less current maturities 1,174,100 1,023,000
--------------- ----------------
$ 2,293,130 $ 3,955,593
=============== ================
</TABLE>
Interest expense on long-term debt, charged to operations for the years ended
January 31, 1999, 1998 and 1997 amounted to $329,716, $320,046 and $157,416,
respectively.
F-11
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 6. LONG-TERM DEBT (CONT'D):
Following are the maturities of long-term debt as of January 31, 1999, and for
each of the next five years and in the aggregate:
2000 $ 1,174,100
2001 456,554
2002 325,277
2003 140,005
2004 136,008
Thereafter 1,235,286
-----------------
$ 3,467,230
=================
(A) The Company has a credit agreement with its lending bank. The credit
agreement provides for borrowings of up to $3,500,000, payable interest only at
the prime rate or LIBOR plus 150 basis points through May l, 2000, at which time
any balance outstanding is payable in full. The credit agreement is unsecured.
As of February 17, 1998 the outstanding principal balance of the credit
agreement had been paid in full, partially with the proceeds of the term note
payable and the balance from the Company's working capital.
The credit agreement is subject to a 1/4% commitment fee on the average unused
loan portion. The credit agreement contains covenants and restrictions relating
to net worth, working capital, indebtedness, financial ratios, dividends,
capital expenditures, investments, acquisitions, earnings and continuity of
management.
(B) In January 1998, the Company obtained $1,000,000 under a term note payable
to its lending bank. The term note is payable in 42 monthly installments of
$23,800 plus interest at the prime rate or LIBOR plus 150 basis points
commencing March 1998. The term note is unsecured and is subject to the same
covenants and conditions as the credit agreement (See "A" above).
(C) On February 4, 1998, the Company obtained a 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 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.
F-12
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 7. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
1999 1998
---------- ----------
Accrued commissions $ 236,806 $ 321,908
Accrued payroll and bonuses 596,634 320,425
Accrued vacation 155,800 198,900
Other 198,381 157,005
---------- ----------
$1,187,621 $ 998,238
========== ==========
NOTE 8. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
Current
<S> <C> <C> <C>
Federal $ 1,020,600 $ 957,000 $ 1,185,800
State 91,400 69,600 148,700
----------- ----------- -----------
1,112,000 1,026,600 1,334,500
----------- ----------- -----------
Deferred:
Federal 57,800 (20,700) (34,300)
State 46,600 (9,900) (22,000)
----------- ----------- -----------
104,400 (30,600) (56,300)
Change in valuation allowance (12,000) (96,000) (26,000)
----------- ----------- -----------
92,400 (126,600) (82,300)
----------- ----------- -----------
Total $ 1,204,400 $ 900,000 $ 1,252,200
=========== =========== ===========
At Federal statutory rates $ 1,126,300 $ 815,000 $ 1,077,500
Effect of:
Permanent differences 6,000 1,300 12,600
Over/under accruals and other 24,100 133,800 104,500
State income taxes, net of federal
benefits 135,000 104,100 98,600
State investment tax credits, net of
federal benefit (75,000) (58,200) (15,000)
Change in valuation allowance (12,000) (96,000) (26,000)
----------- ----------- -----------
Total $ 1,204,400 $ 900,000 $ 1,252,200
=========== =========== ===========
</TABLE>
At January 31, 1999, the Company has available for state income tax purposes
unused investment tax credits of approximately $316,000 expiring through the
year 2009.
F-13
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 8. INCOME TAXES (CONT'D):
The net current and non-current components of deferred income taxes recognized
in the balance sheet are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Net current assets $ 274,300 $ 310,400
Net non-current assets 298,500 354,800
--------------- ----------------
$ 572,800 $ 665,200
=============== ================
</TABLE>
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
Deferred tax assets:
<S> <C> <C>
Accounts receivable allowances $ 50,800 $ 50,800
Inventory - uniform capitalization 86,900 58,800
Vacation pay accrual 65,500 83,000
Deferred rent 56,300 60,900
Stock option compensation - 41,200
Deferred compensation and post-retirement
medical benefits 635,500 572,500
Investment tax credit carryforwards 317,000 350,000
--------------- ----------------
1,212,000 1,217,200
Valuation allowance (5,000) (17,000)
--------------- ----------------
1,207,000 1,200,200
Deferred tax liability:
Depreciation 634,200 535,000
--------------- ----------------
Net deferred tax assets $ 572,800 $ 665,200
=============== ================
</TABLE>
NOTE 9. REPURCHASE AND RETIREMENT OF COMMON STOCK AND STOCK OPTIONS:
During the year ended January 31, 1998, 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 purchase price of the stock and options
represented a 17% discount from market prices at the time of purchase.
The aggregate purchase price of $2,110,683 was partially financed by bank
borrowings of $1,912,000 against the Company's credit agreement.
F-14
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 10. NOTE RECEIVABLE - STOCK PURCHASE:
In 1990, an officer of the Company, purchased common stock in exchange for cash
and a note payable bearing interest at 8.66% per annum. In accordance with the
agreement, since the officer has fulfilled the terms of his employment contract,
the seven annual installments required by the note have been forgiven annually
by the Company as additional compensation to the officer. At January 31, 1999,
note receivable balance was $-0-.
NOTE 11. MINORITY INTEREST:
In January 1995, Uniflex 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 value
of $165,000.
Effective February 1, 1998, the Company purchased the minority interest in
Southwest (Note 2).
In March 1996, Uniflex Southeast, Inc. ( a wholly owned subsidiary of Uniflex,
Inc.) acquired an 80% interest in Uniflex Southeast, L.L.C. Uniflex provided an
initial capital contribution of $50,000 along with additional advances of
approximately $330,000 through January 31, 1998. Intangible assets valued at
$70,000 were used by a minority member to purchase a 20% interest in Uniflex
Southeast, L.L.C. Uniflex Southeast, L.L.C. ceased operations in July 1997.
In connection with the cessation of operations of Southeast, intangible assets
of approximately $74,000 were recognized as impaired and written-off as
worthless. Such loss is included in the statement of operations for the year
ended January 31, 1998 under the Caption "Loss on disposal of assets."
NOTE 12. 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 (the "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 204,500 shares have been
granted under the Plan at prices ranging from $1.42 to $9.75. During the year
ended January 31, 1999, options to purchase 9,000 shares were granted. Options
to purchase 88,700 shares remain unexercised at January 31, 1999.
The Company had granted a third party options to purchase 180,000 shares of the
Company's common stock at a price of $1.08 per share. The options were
exercisable with respect to a maximum of 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. As of
January 31, 1999 all of the options have been exercised.
Pursuant to separate stock option agreements, the Company has granted to
eighteen officers and directors 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 December 31, 2000. Options to
purchase 60,000 shares remain unexercised at January 31, 1999.
F-15
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 12. STOCK OPTIONS (CONT'D):
The following table provides information regarding stock option activity for the
years ended January 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
EXERCISE PRICE PER SHARE
NUMBER OF SHARES RANGE WEIGHTED AVERAGE
---------------- ----- ----------------
Balance January 31, 1996
<S> <C> <C> <C>
(617,700 exercisable) 736,500 .38 - 3.58 .90
Granted 46,500 5.50 - 7.33 6.10
Exercised (287,195) .54 - 5.38 .82
---------------
Balance January 31, 1997
(456,505 exercisable) 495,805 .38 - 7.33 1.43
---------------
Granted 29,000 6.25 - 9.75 7.89
Exercised (191,755) .38 - 2.34 .45
---------------
Balance January 31, 1998
(300,550 exercisable) 333,050 .69 - 9.75 2.51
Granted 9,000 5.38 5.38
Exercised (184,200) .69 - 4.83 1.36
Forfeited (9,150) .92 - 3.58 1.78
---------------
Balance January 31, 1999
(128,700 exercisable) 148,700 .69 - 9.75 4.17
===============
</TABLE>
The Company has adopted the disclosure requirements of SFAS No. 123, "Accounting
for Stock-Based Compensation" and, as permitted under SFAS No. 123, applies
Accounting Principles Board Opinion ("APB") No. 25 and related interpretations
in accounting for its plans. Compensation expense recorded under APB No. 25 was
$-0-, $-0- and $21,930 for the years ended January 31, 1999, 1998 and 1997,
respectively.
If the Company had elected to adopt the optional recognition provisions of SFAS
No. 123 for its stock option plans, net income and earnings per share would have
been changed to the pro forma amounts indicated below:
FOR THE YEARS ENDED JANUARY 31,
1999 1998 1997
---- ---- ----
NET INCOME
As reported 2,108,280 1,496,314 1,916,938
Pro forma 2,086,494 1,416,093 1,849,403
EARNINGS PER SHARE - BASIC
As reported 0.50 0.36 0.46
Pro forma 0.50 0.34 0.44
EARNINGS PER SHARE - DILUTED
As reported 0.50 0.35 0.43
Pro forma 0.49 0.33 0.41
The fair value of stock options used to compute pro forma net income and
earnings per share disclosures is the estimated value at grant date using the
Black-Scholes option-pricing model with the following assumptions:
FOR THE YEARS ENDED JANUARY 31,
1999 1998 1997
---- ---- ----
WEIGHTED AVERAGE ASSUMPTIONS
Divided yield 0% 0% 0%
Expected volatility 38% 39% 45%
Risk-free interest rate 6.50% 6.50% 6.00%
Expected holding period
(in years) 10.00 10.00 4.35%
F-16
<PAGE>
The status of all options outstanding at January 31, 1999 is summarized as
follows:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED AVERAGE YEARS WEIGHTED AVERAGE
EXERCISE PRICES SHARES REMAINING CONTRACTUAL LIFE EXERCISE PRICE
- --------------- ------ -------------------------- --------------
<S> <C> <C> <C>
$.69 60,000 1.9 $ .69
3.92 to 5.71 37,200 6.2 5.37
6.00 to 9.75 51,500 4.7 7.35
------------ ------------ ------------
Total 148,700 4.0 $ 4.17
============ ============ ============
</TABLE>
F-17
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 13. 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, for the years ended January 31,
1999, 1998 and 1997, respectively.
NOTE 14. DEFERRED COMPENSATION AND POSTRETIREMENT MEDICAL BENEFITS:
DEFERRED COMPENSATION:
On August 31, 1990, the Company entered into deferred compensation agreements
(the "Deferred Compensation Agreements") with three key employees (the
"Employees") who retired on various dates through December 31, 1994. The
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 in consideration of the noncompetition agreement and $25,000 in
consideration of the consulting agreement. 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 was $-0- for each of the
years ended January 31, 1999, 1998 and 1997, respectively. Related interest
expense charged to operations for the years ended January 31, 1999, 1998 and
1997 approximated $165,000, $141,000 and $124,000, respectively.
Deferred compensation payable at January 31, 1999 and 1998 was $1,405,276 and
$1,248,483, 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 "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 was $-0- for each of the years
ended January 31, 1999, 1998 and 1997, respectively. Related interest expense
charged to operations for the years ended January 31, 1999, 1998 and 1997
approximated $8,000, $9,000 and $9,000, respectively.
F-18
<PAGE>
The recorded liabilities for these postretirement benefits, none of which have
been funded amounted to $107,228 and $114,769 at January 31, 1999 and 1998,
respectively. All participants were retired at January 31, 1999 and 1998,
respectively.
F-19
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 14. 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 15. SUPPLEMENTARY CASH FLOW INFORMATION:
CASH TRANSACTIONS:
Cash paid and received during the years ended January 31,
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Interest $ 359,834 $ 274,041 $ 165,121
================ ================ ================
Income taxes paid $ 628,261 $ 528,923 $ 650,000
================ ================ ================
Income tax refunds received $ 2,339 $ 23,653 $ 435,000
================ ================ ================
</TABLE>
NON-CASH TRANSACTIONS:
YEAR ENDED JANUARY 31, 1999:
In connection with the acquisition of the minority interest of Uniflex
Southwest, L.L.C., valued at $800,000 (Note 2), the Company incurred debt of
$400,000, issued common stock valued at $300,000 and paid $100,000 in cash.
YEAR ENDED JANUARY 31, 1998:
The Company purchased substantially all of the assets and assumed certain
liabilities of Merrick. Net assets acquired amounted to approximately
$2,370,000. Of the purchase price of $2,370,000, $780,000 was paid at closing
and acquisition debt of $1,590,000 was recorded.
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.
F-20
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 16. 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 July 31, 2005 $91,708 per annum including
real estate taxes and insurance
</TABLE>
Future minimum lease payments are as follows:
YEARS ENDING JANUARY 31,
2000 $ 279,200
2001 285,500
2002 290,500
2003 295,500
2004 143,000
Thereafter 45,900
---------------
$ 1,339,600
===============
Base rent and other occupancy costs charged to operations for the years ended
January 31, 1999, 1998 and 1997 amounted to approximately $459,000, $415,000 and
$418,000, respectively, including real estate taxes of $201,000, $115,000 and
$194,000, 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%.
F-21
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONT'D):
Future minimum lease payments under capital leases as of January 31, 1999 for
each of the next four years and in the aggregate are as follows:
YEARS ENDING JANUARY 31,
2000 $ 63,201
2001 39,275
2002 24,295
2003 4,050
---------------
Total minimum lease payments 130,821
Less amounts representing interest 15,346
---------------
Present value of net minimum lease payment (Note 6) $ 115,475
===============
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.
NOTE 17. SUBSEQUENT EVENT:
On March 8, 1999, the Company announced that Uniflex and an acquisition entity
("NEWCO") formed by RFE Investment Partners have signed an Agreement and Plan of
Merger and Recapitalization providing for the acquisition by NEWCO 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.
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 no later than July 30,
1999.
The Merger Agreement provides for a statutory merger of Uniflex with NEWCO
pursuant to which the holders of Uniflex's issued and outstanding common stock
and stock options (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
an average of $4.09 per stock option for options the exercise price of which is
less than $7.57 per share based upon 128,700 such options currently outstanding
and a weighted average exercise price there of $3.48 per share. 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. The transaction is expected to be treated as a recapitalization for
financial reporting purposes.
F-22
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
DESCRIPTION
Allowance for doubtful accounts
<TABLE>
<CAPTION>
Balance at
Beginning Charged to
Of Year To Expenses Deductions (1)
-------------- --------------- --------------
<S> <C> <C> <C>
January 31, 1999 $ 121,366 $ 85,000 $ 85,235
============== ============== ===============
January 31, 1998 $ 160,061 $ 44,081 $ 82,776
============== ============== ===============
January 31, 1997 $ 174,500 $ 61,178 $ 75,617
============== ============== ===============
</TABLE>
(1) Write-off of uncollectible accounts.
F-23
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated March 5, 1999 included in this Form 10-K, into
the Company's previously filed Registration Statements on Form S-3 (File No.
333-15027) and Form S-8 (File No. 033-70754).
/S/ Patrusky, Mintz & Semel
---------------------------
Patrusky, Mintz & Semel
New York, New York
May 14, 1999
