<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 10-31-96 Commission File Number 0-2865
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
--- -------- ---- -- -- --- ---- ------- ---- -----
(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 10-31-1996 816,000
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Common
Transitional Small Business Disclosed Format (Check One):
YES _____ NO __X__
1
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UNIVERSAL MFG. CO.
FORM 10-QSB
INDEX
Part I Financial Information Pages
Item 1. Financial Statements:
Balance Sheets - October 31, 1996
(unaudited) and July 31, 1996 3
Statements of Income and Retained
Earnings - Three Months Ended October 31, 1996
and 1995 (unaudited) 4
Statements of Cash Flows -
Three Months Ended October 31, 1996 and
1995 (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
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 9
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
October 31,
1996 July 31,
(Unaudited) 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,556,815 $934,072
Accounts receivable 1,616,858 1,654,992
Inventories 2,259,133 2,479,713
Prepaid expenses 127,705 50,282
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Total current assets 5,560,511 5,119,059
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Deferred Income Taxes 42,329 42,329
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Lease Receivable 23,245 26,073
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PROPERTY - At cost
Land 120,499 120,499
Buildings 1,100,427 1,099,594
Machinery and equipment 913,218 899,997
Furniture and fixtures 206,520 209,947
Trucks and automobiles 720,632 699,240
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Total property 3,061,296 3,029,277
Less accumulated depreciation (2,030,137) (1,985,412)
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Property - net 1,031,159 1,043,865
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$6,657,244 $6,231,326
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,372,986 $1,507,944
Dividends payable 204,000 204,000
Payroll taxes 19,662 10,539
Income taxes payable 307,464 56,790
Accrued compensation 99,635 90,046
Accrued local taxes 10,660 13,984
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Total current liabilities 2,014,407 1,883,303
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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 3,808,975 3,514,161
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Total stockholders' equity 4,642,837 4,348,023
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$6,657,244 $6,231,326
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3
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UNIVERSAL MFG. CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
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October 31, October 31,
1996 1995
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NET SALES $4,854,133 $4,428,765
COST OF GOODS SOLD 3,559,425 3,419,194
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GROSS PROFIT 1,294,708 1,009,571
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 495,813 480,745
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INCOME FROM OPERATIONS 798,895 528,826
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OTHER INCOME:
Interest 15,087 9,413
Other 3,745 2,964
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Total other income 18,832 12,377
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INCOME BEFORE INCOME TAXES 817,727 541,203
INCOME TAXES 318,913 211,069
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NET INCOME 498,814 330,134
RETAINED EARNINGS, BEGINNING OF PERIOD 3,514,161 3,073,307
LESS CASH DIVIDENDS (204,000) (163,200)
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RETAINED EARNINGS, END OF PERIOD $3,808,975 $3,240,241
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EARNINGS PER COMMON SHARE $0.61 $0.40
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4
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UNIVERSAL MFG. CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
-----------------------------
October 31, October 31,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $498,814 $330,134
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 48,152 48,120
(Gain)/loss on sale of property (700) 81
Changes in operating assets and liabilities:
Accounts receivable 40,962 3,976
Inventories 220,580 119,825
Prepaid expenses (77,423) (2,664)
Income taxes recoverable - 109,646
Accounts payable (134,958) 97,055
Payroll taxes 9,123 (773)
Accrued compensation 9,589 7,102
Accrued local taxes (3,324) (7,276)
Income taxes payable 250,674 101,424
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Net cash flows from operating activities 861,489 806,650
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 700 269
Purchases of property (35,446) (41,067)
Proceeds from maturities of investments - 67,597
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Net cash flows from investing activities (34,746) 26,799
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (204,000) (163,200)
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Net cash flows from financing activities (204,000) (163,200)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 622,743 670,249
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 934,072 210,467
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,556,815 $880,716
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $68,240 $0
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5
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UNIVERSAL MFG. CO.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS
ENDED OCTOBER 31, 1996
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - 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.
USE OF ESTIMATES - In preparing financial statements in
conformity with generally accepted accounting principles,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
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.
6
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
FINANCIAL INSTRUMENTS - Cash and cash equivalents, accounts
receivable and accounts payable are short term in nature and the
values at which they are recorded are considered to be reasonable
estimates of their fair values.
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, 1996, and the results of operations and cash flows for the
three month periods ended October 31, 1996 and 1995. The results
of operations for the periods ended October 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, 1996.
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 $47,903
and the unearned income is $24,658 at October 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 October 31,
1996 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, 1997 were 10% higher than for the
first quarter a year ago. The sales increase was led by
engine assembly sales increase of $265,579. Other product
lines with significant sales increases were electric fuel
pumps and torque converters.
Earnings from operations increased 51% due to increased sales
and improved gross margin. Manufacturing costs as well as
sales expense, general expense, an administrative expenses
were held relatively constant while sales increased.
The higher cash balance for October 31, 1996, compared to July
31, 1996, is because first quarter, 1997 estimated income
taxes are due November 15, 1996. Fourth quarter 1996 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, 1996 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,
1996, the following individuals were elected to serve a two
year term; Donald D. Heupel, Harry W. Meginnis, T. Warren
Thompson. 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:
Abstentions
Votes Votes Against and Broker
For or Withheld Non-Votes
Donald D. Heupel 809,247 200 -
Harry W. Meginnis 658,643 200 -
T. Warren Thompson 806,757 200 -
Directors whose term of office continues after the 1996
meeting until the 1997 Annual Meeting of Shareholders include
Anthony H. Kelly, Richard E. McFayden, John R. McHugh, Richard W.
Agee.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II CONTINUED
Item 5. OTHER INFORMATION:
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 11/20/96 /s/ Gary L. Christiansen
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Gary L. Christiansen, Vice President/Treasurer
Date 11/20/96 /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-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 21,347
<SECURITIES> 1,535,468
<RECEIVABLES> 1,616,858
<ALLOWANCES> 0
<INVENTORY> 2,259,133
<CURRENT-ASSETS> 5,560,511
<PP&E> 3,061,296
<DEPRECIATION> 2,030,137
<TOTAL-ASSETS> 6,657,244
<CURRENT-LIABILITIES> 2,014,407
<BONDS> 0
816,000
0
<COMMON> 0
<OTHER-SE> 3,826,837
<TOTAL-LIABILITY-AND-EQUITY> 6,657,244
<SALES> 4,854,133
<TOTAL-REVENUES> 4,872,965
<CGS> 3,559,425
<TOTAL-COSTS> 4,055,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 817,727
<INCOME-TAX> 318,913
<INCOME-CONTINUING> 498,814
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 498,814
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
