<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 10-31-95 Commission File Number 0-2865
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UNIVERSAL MFG. CO.
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(Exact name of Registrant as specified in its Charter)
NEBRASKA 42 0733240
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Diagonal St., P. O. Box 190, Algona, Iowa 50511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515)-295-3557
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NOT APPLICABLE
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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
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"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 10-31-1995 816,000
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Common
Transitional Small Business Disclosed Format (Check One):
YES NO X
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1
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UNIVERSAL MFG. CO.
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FORM 10-QSB
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INDEX
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Part I Financial Information Pages
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Item 1. Financial Statements:
Balance Sheets - October 31, 1995
(unaudited) and July 31, 1995 3
Statements of Income and Retained
Earnings - Three Months Ended October 31, 1995
and 1994 (unaudited) 4
Statements of Cash Flows -
Three Months Ended October 31, 1995 and
1994 (unaudited) 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II Other Information
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Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security
Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
2
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ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
1995 July 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $880,716 $210,467
Short-term investments
(at amortized cost which approximates market) - 67,597
Accounts receivable - trade (net) 1,415,201 1,419,177
Inventories 2,404,158 2,523,983
Income taxes recoverable - 109,646
Prepaid expenses 40,640 37,976
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Total current assets 4,740,715 4,368,846
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OTHER ASSET - Deferred income taxes 42,329 42,329
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LEASE RECEIVABLE 33,871 36,249
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PROPERTY - At cost
Land 167,429 167,429
Buildings 1,075,550 1,075,550
Machinery and equipment 782,032 766,010
Furniture and fixtures 196,846 196,896
Trucks and automobiles 667,753 654,321
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Total property 2,889,610 2,860,206
Less accumulated depreciation (1,888,640) (1,854,211)
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Property - net 1,000,970 1,005,995
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TOTAL $5,817,885 $5,453,419
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,362,768 $1,265,713
Dividends payable 163,200 163,200
Payroll taxes 8,539 9,312
Accrued compensation 95,437 88,335
Accrued local taxes 12,414 19,690
Income taxes payable 101,424 -
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Total current liabilities 1,743,782 1,546,250
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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 3,240,241 3,073,307
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Total stockholders' equity 4,074,103 3,907,169
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TOTAL $5,817,885 $5,453,419
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</TABLE>
3
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UNIVERSAL MFG. CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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October 31, October 31,
1995 1994
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<S> <C> <C>
NET SALES $4,428,765 $3,657,762
COST OF GOODS SOLD 3,419,194 2,758,541
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GROSS PROFIT 1,009,571 899,221
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 480,745 454,089
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INCOME FROM OPERATIONS 528,826 445,132
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OTHER INCOME:
Interest 9,413 9,155
Other Income 2,964 4,010
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Total other income 12,377 13,165
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INCOME BEFORE INCOME TAXES 541,203 458,297
INCOME TAXES 211,069 178,736
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NET INCOME 330,134 279,561
RETAINED EARNINGS, Beginning of period 3,073,307 2,907,291
DIVIDENDS (163,200) -
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RETAINED EARNINGS, End of period $3,240,241 $3,186,852
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EARNINGS PER COMMON SHARE:
Earnings per common share $0.40 $0.34
============== ===========
</TABLE>
4
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UNIVERSAL MFG. CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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October 31, October 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $330,134 $279,561
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 48,120 35,009
Gain on sale of property 81 -
Changes in operating assets and liabilities:
Accounts receivable - trade 3,976 416,471
Inventories 119,825 (190,224)
Prepaid expenses (2,664) (14,022)
Income taxes recoverable 109,646 -
Accounts payable 97,055 (294,276)
Payroll taxes (773) 11,343
Accrued compensation 7,102 (15,319)
Accrued local taxes (7,276) 20,189
Income taxes payable 101,424 63,736
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Net cash flows from operating activities 806,650 312,468
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 269 -
Purchases of property (41,067) (30,273)
Proceeds from maturities of investments 67,597 -
Purchases of investments - (786)
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Net cash flows from investing activities 26,799 (31,059)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (163,200) (122,400)
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Net cash flows from financing activities (163,200) (122,400)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 670,249 159,009
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 210,467 644,122
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $880,716 $803,131
============== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $0 $0
============== ===========
</TABLE>
5
<PAGE>
UNIVERSAL MFG. CO.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS
ENDED OCTOBER 31, 1995
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEGMENT INFORMATION - The Company is engaged in the business of
remanufacturing and selling on a wholesale basis remanufactured
engines and other remanufactured automobile parts for Ford,
Lincoln and Mercury automobiles and trucks. The Company is a
franchised remanufacturer for Ford Motor Company with a defined
sales territory. The Company purchases the majority of its new
raw materials from Ford Motor Company. Remanufactured engines
for Non-ford vehicles are also marketed on a limited basis.
The principal markets for the Company's products are automotive
dealers and jobber supply houses. The Company has no separate
segments, major customers, foreign operations or export sales.
INVENTORIES - Inventories are stated at the lower of cost (last-
in first-out (LIFO) method) or market.
INVESTMENTS - Short-term investments are considered as either
trading securities or available for sale securities and,
accordingly, are carried at fair value in the Company's financial
statements.
DEPRECIATION, MAINTENANCE, AND REPAIRS - Property is depreciated
generally as follows:
Assets Depreciation Method Lives
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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 Statements of Cash
Flows, the Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash
equivalents.
6
<PAGE>
NOTES TO 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 financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of October
31, 1995, and the results of operations and cash flows for the
three month periods ended October 31, 1995 and 1994. The results
of operations for the periods ended October 31, 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, 1995.
2. CHANGES IN ACCOUNTING PRINCIPLES
INVESTMENTS - During the year ended July 31, 1995 the Company
adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities. The adoption of SFAS No. 115 had no
effect on the 1995 financial statements.
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 $75,276
and the unearned income is $41,405 at October 31, 1995. These
amounts are shown on a net basis for financial statement purposes.
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. Total costs paid as of October 31,
1995 are $90,113. The remaining amount of $59,612 has been
recorded in the accompanying financial statements.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales for the first quarter, 1996 were 21% higher than for the
first quarter a year ago. The sales increase was led by
transmission assembly sales increase of $506,000. Other
product lines with significant sales increases were electric
fuel pumps, air conditioner compressors, and air conditioner
compressor clutches.
Earnings from operations increased due to increased sales
volume.
The higher cash balance for October 31, 1995, compared to July
31, 1995, is because first quarter, 1996 estimated income
taxes are due November 15, 1995. Fourth quarter 1995 taxes
were paid before quarter end.
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
paid total costs of $90,113 for work performed. 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 $32,955 under the
terms of the Consent Agreement with the EPA.
Please refer to the Part I, Item 3 of the Form 10-KSB report
for the Company's fiscal year ended July 31, 1995 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:
At the Company's Annual Meeting of Shareholders on October 31,
1995, the following individuals were elected to serve a two
year term; Richard W. Agee, Anthony H. Kelly, Richard E.
McFayden, and John R. McHugh. The number of votes cast for,
against or withheld, as well as the number of abstentions and
broker-nonvotes to each person elected as director at the
annual meeting is set forth below:
<TABLE>
<CAPTION>
Abstentions
Votes Votes Against and Broker
For or Withheld Non-Votes
<S> <C> <C> <C>
Anthony H. Kelly 640,000 5,215 -
Richard E. McFayden 497,032 3,250 -
John R. McHugh 489,924 3,650 -
Richard W. Agee 487,864 5,015 -
</TABLE>
Directors whose term of office continues after the 1995
meeting until the 1996 Annual Meeting of Shareholders include
Donald D. Heupel, Harry W. Meginnis, and T. Warren Thompson.
Item 5. OTHER INFORMATION: NONE
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II CONTINUED
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.
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 11-30-95 /s/ Gary L. Christiansen
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Gary L. Christiansen, Vice President/Treasurer
Date 11-30-95 /s/ Donald D. Heupel
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Donald D. Heupel, President and Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 43,953
<SECURITIES> 836,763
<RECEIVABLES> 1,415,201
<ALLOWANCES> 0
<INVENTORY> 2,404,158
<CURRENT-ASSETS> 4,740,715
<PP&E> 2,889,610
<DEPRECIATION> 1,888,640
<TOTAL-ASSETS> 5,817,885
<CURRENT-LIABILITIES> 1,743,782
<BONDS> 0
<COMMON> 816,000
0
0
<OTHER-SE> 3,258,103
<TOTAL-LIABILITY-AND-EQUITY> 5,817,885
<SALES> 4,428,765
<TOTAL-REVENUES> 4,441,142
<CGS> 3,419,194
<TOTAL-COSTS> 3,749,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 541,203
<INCOME-TAX> 211,069
<INCOME-CONTINUING> 330,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330,134
<EPS-PRIMARY> .40
<EPS-DILUTED> 0
</TABLE>
