<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 01-31-96 Commission File Number 0-2865
UNIVERSAL MFG. CO.
(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
--- -------- ---- -- -- -------- ------- ---- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515)-295-3557
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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 01-31-1996 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.
FORM 10-QSB
INDEX
Part I Financial Information Pages
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Item 1. Financial Statements:
Balance Sheets - January 31, 1996
(unaudited) and July 31, 1995 3
Statements of Income and Retained Earnings -
Six Months Ended January 31, 1996
and 1995 (unaudited) 4
Statements of Income and Retained Earnings -
Three Months Ended January 31, 1996
and 1995 (unaudited) 5
Statements of Cash Flows -
Six Months Ended January 31, 1996
and 1995 (unaudited) 6
Statements of Cash Flows -
Three Months Ended January 31, 1996
and 1995 (unaudited) 7
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II Other Information
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Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security
Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
1996 July 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $796,001 $210,467
Short-term investments (at fair value) - 67,597
Accounts receivable 1,302,121 1,419,177
Inventories 2,385,327 2,523,983
Income taxes recoverable 14,416 109,646
Prepaid expenses 25,038 37,976
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Total current assets 4,522,903 4,368,846
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Deferred Income Taxes 42,329 42,329
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Lease Receivable 31,384 36,249
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PROPERTY - At cost
Land 167,429 167,429
Buildings 1,086,931 1,075,550
Machinery and equipment 814,626 766,010
Furniture and fixtures 196,847 196,896
Trucks and automobiles 679,838 654,321
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Total property 2,945,671 2,860,206
Less accumulated depreciation (1,898,703) (1,854,211)
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Property - net 1,046,968 1,005,995
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$5,643,584 $5,453,419
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------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,200,042 $1,265,713
Dividends payable 163,200 163,200
Payroll taxes 35,425 9,312
Accrued compensation 62,737 88,335
Accrued other expenses 90,499 19,690
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Total current liabilities 1,551,903 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 3,257,819 3,073,307
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Total stockholders' equity 4,091,681 3,907,169
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$5,643,584 $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>
Six Months Ended
---------------------------------------------
January 31, January 31,
1996 1995
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<S> <C> <C>
NET SALES $8,354,560 $7,099,993
COST OF GOODS SOLD 6,582,565 5,388,556
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GROSS PROFIT 1,771,995 1,711,437
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 963,243 924,679
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INCOME FROM OPERATIONS 808,752 786,758
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OTHER INCOME:
Interest 21,170 18,719
Other income 7,638 3,669
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Total other income 28,808 22,388
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INCOME BEFORE INCOME TAXES 837,560 809,146
INCOME TAXES 326,648 315,567
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NET INCOME 510,912 493,579
RETAINED EARNINGS, Beginning of period 3,073,307 2,907,291
DIVIDENDS (326,400) (326,400)
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RETAINED EARNINGS, End of period $3,257,819 $3,074,470
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EARNINGS PER COMMON SHARE:
Earnings per common share $0.63 $0.60
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</TABLE>
4
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UNIVERSAL MFG. CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
January 31, January 31,
1996 1995
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<S> <C> <C>
NET SALES $3,925,795 $3,442,231
COST OF GOODS SOLD 3,163,371 2,630,015
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GROSS PROFIT 762,424 812,216
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 482,498 470,590
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INCOME FROM OPERATIONS 279,926 341,626
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OTHER INCOME:
Interest 11,757 9,564
Other income/(loss) 4,674 (341)
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Total other income 16,431 9,223
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INCOME BEFORE INCOME TAXES 296,357 350,849
INCOME TAXES 115,579 136,831
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NET INCOME 180,778 214,018
RETAINED EARNINGS, BEGINNING OF QUARTER 3,240,241 3,186,852
DIVIDENDS PAID (163,200) (326,400)
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RETAINED EARNINGS, END OF QUARTER $3,257,819 $3,074,470
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EARNINGS PER COMMON SHARE:
Earnings per common share $0.22 $0.26
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</TABLE>
5
<PAGE>
UNIVERSAL MFG. CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------------
January 31, January 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $510,912 $493,579
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 110,749 64,490
Gain on sale of property (1,547) -
Changes in operating assets and liabilities:
Accounts receivable 117,056 522,198
Inventories 138,656 (703,576)
Prepaid expenses 12,938 50,754
Income taxes recoverable 95,230 (2,933)
Lease receivable 4,865 4,025
Accounts payable (65,671) (508,806)
Dividends payable - 81,600
Payroll taxes 26,113 24,224
Accrued compensation (25,598) (43,201)
Accrued other expenses 70,809 117,117
Income taxes payable - (143,848)
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Net cash flows from operating activities 994,512 (44,377)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 2,874 -
Purchases of property (153,049) (186,557)
Proceeds from maturities of investments 67,597 -
Purchases of investments - (1,399)
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Net cash flows from investing activities (82,578) (187,956)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (326,400) (326,400)
Proceeds from short term borrowing - 150,000
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Net cash flows from financing activities (326,400) (176,400)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 585,534 (408,733)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 210,467 644,122
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $796,001 $235,389
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $231,418 $462,348
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</TABLE>
6
<PAGE>
UNIVERSAL MFG., CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
January 31, January 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $180,778 $214,018
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 62,629 29,481
Gain on sale of property (1,628) -
Changes in operating assets and liabilities:
Accounts receivable 113,080 105,727
Inventories 18,831 (513,352)
Prepaid expenses 15,602 64,776
Income taxes recoverable (14,416) (2,933)
Lease receivable 4,865 4,025
Accounts payable (162,726) (115,476)
Payroll taxes 26,886 12,881
Accrued compensation (32,700) (27,882)
Accrued other expenses 78,085 (2,126)
Income taxes payable (101,424) (207,584)
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Net cash flows from operating activities 187,862 (438,445)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 2,605 -
Purchases of property (111,982) (156,284)
Purchases of investments - (613)
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Net cash flows from investing activities (109,377) (156,897)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (163,200) (204,000)
Proceeds from short term borrowing - 150,000
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Net cash flows from financing activities (163,200) (54,000)
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INCREASE IN CASH AND CASH EQUIVALENTS (84,715) (649,342)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 880,716 803,131
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $796,001 $153,789
------------------ ------------------
------------------ ------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $231,418 $462,348
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</TABLE>
7
<PAGE>
UNIVERSAL MFG. CO.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS
ENDED JANUARY 31, 1996
(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 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
------ ------------ ------ -----
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.
8
<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 January 31, 1996, and the results of operations and cash
flows for the six month periods ended January 31, 1996 and 1995. The
results of operations for the periods ended January 31, 1996 and 1995 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 lease payments are $68,433 and the unearned income is
$37,049 at January 31, 1996. 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 July 31, 1995 are $90,113.
The remaining amount of $59,612 has been recorded in the accompanying
financial statements.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales for the second quarter, 1996 were 14% higher than for the second
quarter a year ago. The sales increase was led by sales of transmission
assemblies and electric fuel pumps. Transmission unit sales were 845
units this year compared to 585 units the second quarter last year.
Electic fuel pump unit sales increased to 2212 units from 1212 units
sold the second quarter last year.
Earnings from operations were affected by inventory adjustments,
resulting in a more favorable product mix.
Cash and cash equivalents, inventories, accounts receivable, and
accounts payable remained within normal business fluctuations, resulting
in cash and cash equivalent reduction of 9.6%.
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: 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.
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
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Gary L. Christiansen, Vice President/Treasurer
Date
--------- -------------------------------------------------------
Donald D. Heupel, President and Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 19,970
<SECURITIES> 776,031
<RECEIVABLES> 1,333,505
<ALLOWANCES> 0
<INVENTORY> 2,385,327
<CURRENT-ASSETS> 4,522,903
<PP&E> 2,945,668
<DEPRECIATION> 1,898,703
<TOTAL-ASSETS> 5,643,581
<CURRENT-LIABILITIES> 1,551,903
<BONDS> 0
0
0
<COMMON> 816,000
<OTHER-SE> 3,275,678
<TOTAL-LIABILITY-AND-EQUITY> 5,643,581
<SALES> 8,354,560
<TOTAL-REVENUES> 8,383,368
<CGS> 6,582,565
<TOTAL-COSTS> 7,250,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 837,560
<INCOME-TAX> 326,648
<INCOME-CONTINUING> 510,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 510,912
<EPS-PRIMARY> .63
<EPS-DILUTED> 0
</TABLE>
