<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 04-30-96 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
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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 04-30-1996 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.
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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 - April 30, 1996
(unaudited) and July 31, 1995 3
Statements of Income and Retained Earnings -
Nine Months Ended April 30, 1996
and 1996 (unaudited) 4
Statements of Income and Retained Earnings -
Three Months Ended April 30, 1996
and 1995 (unaudited) 5
Statements of Cash Flows -
Nine Months Ended April 30, 1996
and 1995 (unaudited) 6
Statements of Cash Flows -
Three Months Ended April 30, 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 11
2
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ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
1996 July 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,033,483 $210,467
Short-term investments (at fair value) - 67,597
Accounts receivable 1,306,617 1,419,177
Inventories 2,552,844 2,523,983
Income taxes recoverable - 109,646
Prepaid expenses 12,861 37,976
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Total current assets 4,905,805 4,368,846
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Deferred Income Taxes 42,329 42,329
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Lease Receivable 28,785 36,249
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PROPERTY - At cost
Land 167,429 167,429
Buildings 1,097,813 1,075,550
Machinery and equipment 854,553 766,010
Furniture and fixtures 209,947 196,896
Trucks and automobiles 679,837 654,321
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Total property 3,009,579 2,860,206
Less accumulated depreciation (1,947,692) (1,854,211)
----------- ----------
Property - net 1,061,887 1,005,995
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$6,038,806 $5,453,419
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,394,536 $1,265,713
Dividends payable 163,200 163,200
Payroll taxes 26,959 9,312
Accrued compensation 73,341 88,335
Accrued other expenses 128,956 19,690
Income taxes payable 4,442 -
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Total current liabilities 1,791,434 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 3,413,510 3,073,307
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Total stockholders' equity 4,247,372 3,907,169
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$6,038,806 $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>
Nine Months Ended
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April 30, April 30,
1996 1995
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<S> <C> <C>
NET SALES $12,900,800 $10,669,703
COST OF GOODS SOLD 10,086,717 8,182,805
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GROSS PROFIT 2,814,083 2,486,898
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,483,394 1,430,774
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INCOME FROM OPERATIONS 1,330,689 1,056,124
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OTHER INCOME:
Interest 31,294 25,746
Other 10,684 19,275
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Total other income 41,978 45,021
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INCOME BEFORE INCOME TAXES 1,372,667 1,101,145
INCOME TAXES 542,864 429,447
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NET INCOME 829,803 671,698
RETAINED EARNINGS, BEGINNING OF PERIOD 3,073,307 2,907,291
LESS CASH DIVIDENDS (489,600) (489,600)
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RETAINED EARNINGS, END OF PERIOD $3,413,510 $3,089,389
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EARNINGS PER COMMON SHARE $1.02 $0.82
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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
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April 30, April 30,
1996 1995
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<S> <C> <C>
NET SALES $4,546,240 $3,569,710
COST OF GOODS SOLD 3,504,152 2,794,249
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GROSS PROFIT 1,042,088 775,461
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 520,151 506,095
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INCOME FROM OPERATIONS 521,937 269,366
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OTHER INCOME:
Interest 10,124 7,027
Other 3,046 15,606
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Total other income 13,170 22,633
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INCOME BEFORE INCOME TAXES 535,107 291,999
INCOME TAXES 216,216 113,880
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NET INCOME 318,891 178,119
RETAINED EARNINGS, BEGINNING OF QUARTER 3,257,819 3,074,470
LESS CASH DIVIDENDS (163,200) (163,200)
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RETAINED EARNINGS, END OF QUARTER $3,413,510 $3,089,389
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EARNINGS PER COMMON SHARE: $0.39 $0.22
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</TABLE>
5
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UNIVERSAL MFG. CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
April 30, April 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $829,803 $671,698
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 141,993 104,134
Gain on sale of property (1,547) (13,275)
Changes in operating assets and liabilities:
Accounts receivable 112,560 395,608
Inventories (28,861) (464,032)
Prepaid expenses 25,115 75,631
Income taxes recoverable 109,646 (42,664)
Lease receivable 7,464 6,192
Accounts payable 128,823 (568,874)
Dividends payable - 40,800
Payroll taxes 17,647 (1,337)
Accrued compensation (14,994) (33,964)
Accrued other expenses 109,266 126,383
Income taxes payable 4,442 (143,848)
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Net cash flows from operating activities 1,441,357 152,452
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 2,874 23,940
Purchases of property (199,212) (312,442)
Proceeds from maturities of investments 67,597 -
Purchases of investments - (2,226)
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Net cash flows from investing activities (128,741) (290,728)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (489,600) (489,600)
Proceeds from short term borrowing - 250,000
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Net cash flows from financing activities (489,600) (239,600)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 823,016 (377,876)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 210,467 644,122
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,033,483 $266,246
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $428,776 $615,959
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</TABLE>
6
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UNIVERSAL MFG., CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
April 30, April 30,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $318,891 $178,119
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 31,244 39,644
Gain on sale of property - (13,275)
Changes in operating assets and liabilities:
Accounts receivable (4,496) (126,590)
Inventories (167,517) 239,544
Prepaid expenses 12,177 24,877
Income taxes recoverable 14,416 2,167
Lease receivable 2,599 (39,731)
Accounts payable 194,494 (60,068)
Dividends payable - (40,800)
Payroll taxes (8,466) (25,561)
Accrued compensation 10,604 9,237
Accrued other expenses 38,457 9,266
Income taxes payable 4,442 -
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Net cash flows from operating activities 446,845 196,829
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property - 23,940
Purchases of property (46,163) (125,885)
Purchases of investments - (827)
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Net cash flows from investing activities (46,163) (102,772)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (163,200) (163,200)
Proceeds from short term borrowing - 100,000
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Net cash flows from financing activities (163,200) (63,200)
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INCREASE IN CASH AND CASH EQUIVALENTS 237,482 30,857
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 796,001 235,389
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,033,483 $266,246
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $197,357 $153,611
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</TABLE>
7
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UNIVERSAL MFG. CO.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS
ENDED APRIL 30, 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
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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.
8
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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 April 30, 1996, and the results of operations and cash flows
for the nine month periods ended April 30, 1996 and 1995. The results of
operations for the periods ended April 30, 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 $61,589 and the unearned income is
$32,804 at April 30, 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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales for the third quarter, 1996 were 27% higher than for the third
quarter a year ago. The sales increase was led by sales of
transmission assemblies and electric fuel pumps. Transmission unit
sales were 923 units this year compared to 709 units the third quarter
last year. Electric fuel pump unit sales increased to 3734 units from
1480 units sold the third quarter last year.
The 77% increase in income from operations was due to increased sales
and to successful production cost cutting efforts.
Cash and cash equivalents were about $800,000 higher than at the
beginning of the fiscal year. This increase is due to increased
earnings, reduced income tax payments due to credits from prior years,
and investment in inventories a year ago. Inventories, accounts
receivable, and accounts payable remained within normal business
fluctuations.
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.
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Item 3. DEFAULTS UPON SENIOR SECURITIES: NONE.
------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE.
------
Item 5. OTHER INFORMATION:
On April 29, 1996, the production employees ratified a new three year
collective bargaining agreement. This agreement was subsequently
signed, and went into effect May 5, 1996. This agreement provides for
wage increases of 2.5%, 2.6% and 2.7% respectively at the beginning of
each year of the agreement. Other changes were not significant.
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.
10
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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 6-3-96 /s/ Gary L. Christiansen
--------- -------------------------------------------------------
Gary L. Christiansen, Vice President/Treasurer
Date 6-3-96 /s/ Donald D. Heupel
--------- -------------------------------------------------------
Donald D. Heupel, President and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 24,752
<SECURITIES> 1,008,732
<RECEIVABLES> 1,306,617
<ALLOWANCES> 0
<INVENTORY> 2,552,844
<CURRENT-ASSETS> 4,905,805
<PP&E> 3,009,579
<DEPRECIATION> 1,947,692
<TOTAL-ASSETS> 6,038,806
<CURRENT-LIABILITIES> 1,791,434
<BONDS> 0
0
0
<COMMON> 816,000
<OTHER-SE> 3,431,372
<TOTAL-LIABILITY-AND-EQUITY> 6,038,806
<SALES> 12,900,800
<TOTAL-REVENUES> 12,942,778
<CGS> 10,086,717
<TOTAL-COSTS> 11,570,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,372,667
<INCOME-TAX> 542,864
<INCOME-CONTINUING> 829,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 829,803
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0.00
</TABLE>
