<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED 04-30-95 Commission File Number 0-2865
------
UNIVERSAL MFG. CO.
--------- ---- ---
(Exact name of Registrant as specified in its Charter)
NEBRASKA 42 0733240
-------- -- -------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 DIAGONAL ST., P. O. BOX 190, ALGONA, IOWA 50511
--- -------- ---- -- -- --- ---- ------- ---- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515)-295-3557
--------------
NOT APPLICABLE
- - -------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report.
"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
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days."
YES X NO
-- -- -----
"Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date"
Number of shares outstanding as of 04-30-1995 816,000
-------
Common
Transitional Small Business Disclosed Format (Check One):
YES NO X
----- -- --
1
<PAGE>
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
FORM 10-QSB
INDEX
PART I FINANCIAL INFORMATION PAGES
-----
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - April 30, 1995
(unaudited) and July 31, 1994 3
Consolidated Statements of Income and Retained
Earnings - Nine Months Ended April 30, 1995
and 1994 (unaudited) 4
Consolidated Statements of Income and Retained
Earnings - Three Months Ended April 30, 1995
and 1994 (unaudited) 5
Consolidated Statements of Cash Flows -
Nine Months Ended April 30, 1995
and 1994 (unaudited) 6
Consolidated Statements of Cash Flows -
Three Months Ended April 30, 1995
and 1994 (unaudited) 7
Notes to Consolidated Financial Statements 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
1995 July 31,
(Unaudited) 1994
-------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $266,246 $644,122
Short-term investments
(at amortized cost which approximates market) $66,626 64,400
Accounts receivable - trade (net) $1,154,857 1,550,465
Inventories $2,784,665 2,320,633
Income taxes recoverable $42,664 -
Prepaid expenses $8,756 84,387
-------------- -----------
Total current assets 4,323,814 4,664,007
-------------- -----------
OTHER ASSET - Deferred income taxes 19,743 19,743
-------------- -----------
LEASE RECEIVABLE 38,520 44,712
-------------- -----------
PROPERTY - At cost
Land 167,429 167,429
Buildings 1,075,550 1,080,936
Machinery and equipment 767,259 646,069
Furniture and fixtures 178,327 126,927
Trucks and automobiles 656,498 588,915
-------------- -----------
Total property 2,845,063 2,610,276
Less accumulated depreciation 1,831,908 1,794,764
-------------- -----------
Property - net 1,013,155 815,512
-------------- -----------
TOTAL $5,395,232 $5,543,974
-------------- -----------
-------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $814,684 $1,383,558
Dividends payable $163,200 122,400
Notes payable $250,000 -
Payroll taxes $10,651 11,988
Accrued compensation $86,663 120,627
Accrued other expenses $146,783 20,400
Income taxes payable - 143,848
-------------- -----------
Total current liabilities 1,471,981 1,802,821
-------------- -----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value,
authorized, 2,000,000 shares,
issued and outstanding, 816,000 shares 816,000 816,000
Additional paid-in capital 17,862 17,862
Retained earnings 3,089,389 2,907,291
-------------- -----------
Total stockholders' equity 3,923,251 3,741,153
-------------- -----------
TOTAL $5,395,232 $5,543,974
-------------- -----------
-------------- -----------
</TABLE>
3
<PAGE>
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
April 30, April 30,
1995 1994
-------------- -----------
<S> <C> <C>
NET SALES $10,669,703 $9,456,491
COST OF GOODS SOLD 8,182,805 7,347,737
-------------- -----------
GROSS PROFIT 2,486,898 2,108,754
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,430,774 1,445,516
-------------- -----------
INCOME FROM OPERATIONS 1,056,124 663,238
-------------- -----------
OTHER INCOME:
Interest 25,746 26,945
Other Income 19,275 38,723
-------------- -----------
Total other income 45,021 65,668
-------------- -----------
INCOME BEFORE INCOME TAXES 1,101,145 728,906
INCOME TAXES 429,447 296,575
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN -------------- -----------
ACCOUNTING PRINCIPLES 671,698 432,331
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
SFAS #109 - (29,196)
CORES - 313,257
-------------- -----------
NET INCOME 671,698 716,392
RETAINED EARNINGS, Beginning of period 2,907,291 2,632,198
DIVIDENDS (489,600) (367,200)
-------------- -----------
RETAINED EARNINGS, End of period $3,089,389 $2,981,390
-------------- -----------
-------------- -----------
EARNINGS PER COMMON SHARE:
Income before cumulative effect of changes
in accounting principles $0.82 $0.53
Cumulative effects of changes in accounting principles - $0.35
-------------- -----------
Earnings per common share $0.82 $0.88
-------------- -----------
-------------- -----------
</TABLE>
4
<PAGE>
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
April 30, April 30,
1995 1994
-------------- -----------
<S> <C> <C>
NET SALES $3,569,710 $3,251,159
COST OF GOODS SOLD 2,794,249 2,519,320
-------------- -----------
GROSS PROFIT 775,461 731,839
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 506,095 496,829
-------------- -----------
INCOME FROM OPERATIONS 269,366 235,010
-------------- -----------
OTHER INCOME:
Interest 7,027 9,001
Other Income/(Loss) 15,606 12,713
-------------- -----------
Total other income 22,633 21,714
-------------- -----------
INCOME BEFORE INCOME TAXES 291,999 256,724
INCOME TAXES 113,880 101,038
-------------- -----------
NET INCOME 178,119 155,686
RETAINED EARNINGS, BEGINNING OF QUARTER 3,074,470 2,948,104
DIVIDENDS PAID (163,200) (122,400)
-------------- -----------
RETAINED EARNINGS, END OF QUARTER $3,089,389 $2,981,390
-------------- -----------
-------------- -----------
EARNINGS PER COMMON SHARE:
Earnings per common share $0.22 $0.19
-------------- -----------
-------------- -----------
</TABLE>
5
<PAGE>
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
April 30, April 30,
1995 1994
-------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $671,698 $716,392
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 104,134 109,968
Cumulative effect of changes in accounting principles - (284,061)
Deferred income taxes - 2,500
Gain on sale of property (13,275) (29,587)
Changes in operating assets and liabilities:
Accounts receivable - trade 395,608 (26,714)
Inventories (464,032) (44,086)
Prepaid expenses 75,631 (26,106)
Lease receivable 6,192 -
Income taxes recoverable (42,664) 4,370
Accounts payable (568,874) (218,024)
Dividends payable 40,800 -
Payroll taxes (1,337) (1,053)
Accrued compensation (33,964) (7,950)
Accrued other expenses 126,383 149,230
Income taxes payable (143,848) 55,300
-------------- -----------
Net cash flows from operating activities 152,452 400,179
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 23,940 40,984
Purchases of property (312,442) (178,495)
Proceeds from maturities of investments - 204,554
Purchases of investments (2,226) -
-------------- -----------
Net cash flows from investing activities (290,728) 67,043
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (489,600) (367,200)
Proceeds from short term borrowing 250,000 -
-------------- -----------
Net cash flows from financing activities (239,600) (367,200)
-------------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (377,876) 100,022
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 644,122 471,194
-------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $266,246 $571,216
-------------- -----------
-------------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $615,959 $236,441
-------------- -----------
-------------- -----------
</TABLE>
6
<PAGE>
UNIVERSAL MFG., CO. AND WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
April 30, April 30,
1995 1994
-------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $178,119 $155,686
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 39,644 43,103
Deferred income taxes - 1,500
Gain on sale of property (13,275) (9,668)
Changes in operating assets and liabilities:
Accounts receivable - trade (126,590) (172,403)
Inventories 239,544 16,188
Prepaid expenses 24,877 (26,569)
Income taxes recoverable 2,167 -
Lease receivable (39,731) -
Accounts payable (60,068) (50,496)
Dividends payable (40,800) -
Payroll taxes (25,561) (2,781)
Accrued compensation 9,237 21,673
Accrued other expenses 9,266 93,940
Income taxes payable - (24,279)
-------------- -----------
Net cash flows from operating activities 196,829 45,894
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 23,940 21,514
Purchases of property (125,885) (138,135)
Proceeds from maturities of investments - -
Purchases of investments (827) -
-------------- -----------
Net cash flows from investing activities (102,772) (116,621)
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (163,200) (122,400)
Proceeds from short term borrowing 100,000
-------------- -----------
Net cash flows from financing activities (63,200) (122,400)
-------------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 30,857 (193,127)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 235,389 764,343
-------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $266,246 $571,216
-------------- -----------
-------------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes 153,611 $123,816
-------------- -----------
-------------- -----------
</TABLE>
7
<PAGE>
UNIVERSAL MFG. CO. AND WHOLLY-OWNED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS
ENDED APRIL 30, 1995
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION AND PRESENTATION - The consolidated financial
statements include the accounts of Universal Mfg. Co., (the Company) and
Allied Sales Co., a wholly-owned subsidiary. All material intercompany
balances, transactions and profits have been eliminated.
SEGMENT INFORMATION - The Company is engaged in the business of
remanufacturing and selling on a wholesale basis remanufactured automobile
parts for Ford, Lincoln and Mercury automobiles and trucks. It is a
franchised remanufacturer for Ford Motor Company with a defined sales
territory. The principal markets for the Company's products are automotive
dealers and jobber supply houses. The Company has no separate segments,
foreign operations or export sales.
INVENTORIES - Inventories are stated at the lower of cost (last-in
first-out (LIFO) method) or market.
DEPRECIATION, MAINTENANCE, AND REPAIRS - Property is depreciated generally
as follows:
ASSETS DEPRECIATION METHOD LIVES
------ ------------------- -----
Buildings Straight-line and
declining balance 10 - 20 years
Machinery and
equipment Declining-balance 7 - 10 years
Furniture and
fixtures Declining-balance 5 - 7 years
Trucks and
automobiles Declining-balance 3 - 5 years
Maintenance and repairs are charged to operations as incurred. Renewals and
betterments are capitalized and depreciated over their estimated useful
service lives. The applicable property accounts are relieved of the cost
and related accumulated depreciation upon disposition. Gains or losses are
recognized at the time of disposal.
REVENUE RECOGNITION - Sales and related cost of sales are recognized
primarily upon shipment of products.
CASH EQUIVALENTS - For the purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
EARNINGS PER SHARE - Earning per share have been computed on the weighted
average number of shares outstanding (816,000 shares).
COMPANY REPRESENTATION - In the opinion of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of April 30, 1995, and the results of operations
and cash flows for the three month and nine month periods ended April 30,
1995 and 1994. The results of operations for the periods ended April 30,
1995 and 1994 are not necessarily indicative of the results to be expected
for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. The Company suggests that these condensed
financial statements be read in conjunction with the financial statements
and notes included in the Company's Form 10-KSB for the fiscal year ended
July 31, 1994.
2. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR INCOME TAXES - Effective August 1, 1993, the Company adopted
Statement of Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes". This statement supersedes both Accounting Principles Board
Opinion No. 11 and SFAS 96, the previous authoritative literature on
income tax accounting. The cumulative effect of adopting SFAS 109 on the
Company's consolidated financial statements was to decrease net income by
$29,196 ($.04 per share) for the year ended July 31, 1994.
PRODUCT CORES - The Company changed its method of accounting for product
cores by the establishment of small parts core inventories and the
elimination of customer core deposit reserve accounts. These changes will
conform the accounting for product cores to the method used for all other
classes of inventory, and will provide for a better match of revenues and
costs related to small parts sales, which are expected to become more
significant as a result of increased sales to other remanufacturers and
distribution program sales. The cumulative effect of the accounting change
on the Company's consolidated financial statements was to increase net
income by $313,257 ($.39 per share) for the year ended July 31, 1994.
3. LEASE RECEIVABLE
On May 26, 1993, the Company entered into a lease agreement with another
manufacturer to lease equipment at 8% interest for a sixty-month period.
The total minimum payments are $88,962 and the unearned income is $50,442
at April 30, 1995. These amounts are shown on a net basis for financial
statement purposes.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
4. EPA PROJECT COSTS
In February, 1991, the Company was served with a complaint from the United
States Environmental Protection Agency (EPA) which contained eight counts
of alleged violations of the Resource Conservation and Recovery Act of 1976
and the Hazardous Solid Waste Amendments of 1984. The complaint alleges,
among other things, that the Company has failed to adequately test and
properly transport certain residue of hazardous wastes which it was
treating at its facility. The Company entered into a Consent Agreement and
Consent Order with the EPA, dated May 6, 1994, which provides for
settlement of this complaint. This settlement calls for payment of a civil
penalty of $32,955, and for the completion of certain remedial projects,
estimated to cost approximately $149,725. These amounts were recorded in
the consolidated financial statements as of July 31, 1994.
5. NOTE PAYABLE
To maintain the needed cash flow to meet current obligations, the Company
obtained a $150,000 short term note on January 11, 1995 from a local
financial institution. The January 11, 1995 note was paid off along with
accrued interest. On February 21, 1995 a new short term note was obtained
for $350,000 to further maintain cash flow to meet current obligations. On
April 26, 1995, the Company made a $100,000 payment on the above mentioned
note leaving a balance outstanding of $250,000 on April 30, 1995. The term
of the note is one year at an interest rate of 9.25% payable at the end of
the term period. Interest is calculated daily on the unpaid note balance
amount.
6. RECLASSIFICATIONS
Certain amounts at July 31, 1994 have been reclassified to be consistent
with April 30, 1995 presentation.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales for the third quarter, 1995, were 10% higher than for the third quarter a
year ago. This sales increase continues to be led by sales increases of
transmission assemblies.
Earnings from operations increased 14% due to increased sales volume.
Cash and cash equivalents increased slightly during the last quarter.
Inventories decreased by $240,000, but this was offset by decreases in accounts
receivable, accounts payable, and purchases of machinery, equipment, and
vehicles.
Short term borrowing was increased by $100,000 during the quarter for capital
acquisitions, dividend payments, and income taxes.
On April 1, 1995, Universal Mfg. Co. signed a new Sales Agreement
with Ford Motor Company, which establishes the working relationship
between the two companies. This agreement, which was referred to
in a previous 10-K and 10-QSB, is terminable upon 30 days notice
by either party.
PART II
ITEM 1. LEGAL PROCEEDINGS:
With respect to the Supplemental Environmental Project (the "SEP")
being performed by the Company pursuant to the May 6, 1994 Consent
Agreement with the United States Environmental Protection Agency
("EPA"), the Company has learned that the final cost of the work
performed during July and August of 1994 was $91,076. No further
direction has been received from the EPA regarding any testing or
clean-up that may be required for contamination found in the large pit
after the sludge was removed. No estimate of these costs can be made
at this time. If the EPA determines that no further work is required
under the SEP, the Company will owe a deferred penalty of
approximately $37,000 under the terms of the Consent Agreement with
the EPA.
The Company completed closure of certain solid waste treatment and
storage facilities at its manufacturing facility in Algona, Iowa, on
February 20 and 21, 1995, under supervision of the EPA. While the
final cost information of this work is not yet available, it is
anticipated that such cost will be substantially less than the $64,796
set aside for this purpose in an escrow account as required by EPA
regulation.
Please refer to the Part I, Item 3 of the Form 10-KSB report for the
Company's fiscal year ended July 31, 1994 for further discussion of
this matter.
ITEM 2. CHANGES IN SECURITIES: NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES: NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE.
ITEM 5. OTHER INFORMATION: NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: NONE
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during
the quarter for which this report is filed.
11
<PAGE>
SIGNATURES:
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.
UNIVERSAL MFG. CO
Date 6/9/95 /s/ GARY L. CHRISTIANSEN
--------- ---------------------------------------------------------------
GARY L. CHRISTIANSEN, VICE PRESIDENT/CONTROLLER
Date 6/9/95 /s/ DONALD D. HEUPEL
--------- ---------------------------------------------------------------
DONALD D. HEUPEL, PRESIDENT AND CHIEF FINANCIAL OFFICER
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<CASH> 266,246
<SECURITIES> 2,226
<RECEIVABLES> 395,608
<ALLOWANCES> 0
<INVENTORY> (464,032)
<CURRENT-ASSETS> (340,193)
<PP&E> 234,787
<DEPRECIATION> 104,134
<TOTAL-ASSETS> (148,742)
<CURRENT-LIABILITIES> (330,840)
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 182,098
<SALES> 10,669,703
<TOTAL-REVENUES> 10,714,724
<CGS> 8,182,805
<TOTAL-COSTS> 9,613,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,101,145
<INCOME-TAX> 427,447
<INCOME-CONTINUING> 671,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 671,698
<EPS-PRIMARY> .82
<EPS-DILUTED> 0
</TABLE>
