<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UNIVERSAL MFG. CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
TO THE SHAREHOLDERS OF UNIVERSAL MFG. CO.:
Notice is hereby given that the Annual Meeting of the Shareholders of UNIVERSAL
MFG. CO. will be held at The Sheraton Hotel (formerly the Westin Aquila Hotel),
1615 Howard Street, Omaha, Nebraska, on November 16, 1999 at 10:00 a.m. for the
election of members of the Board of Directors for the ensuing year, for a vote
on an Independent Shareholder proposal to limit director compensation and for
the transaction of such other business as may properly come before the meeting.
The date of record for voting at this 1999 Annual Meeting was the close of
business on September 8, 1999. Only holders of common stock as of this record
date are entitled to Notice of and to vote at the aforesaid meeting or any
adjournment thereof.
It is hoped that as many Shareholders as possible will attend in person but if
it will be impossible for you to do so, we request that you sign and return the
enclosed Proxy in the envelope provided. Returning the Proxy does not prevent a
Shareholder from attending the meeting and voting in person.
Enclosed with this Notice is the 1999 Annual Report of the Company.
By order of the Board of Directors.
Donald D. Heupel, President
T. Warren Thompson, Secretary
<PAGE>
To Be Held November 16, 1999
The enclosed proxy is solicited by the Board of Directors of Universal
Mfg. Co. for use at the Annual Meeting of Shareholders of the Company to be held
on November 16, 1999, and at any adjournment thereof. Such meeting is to be held
at The Sheraton Hotel (formerly the Westin Aquila Hotel), 1615 Howard Street,
Omaha, Nebraska, and will commence at 10:00 o'clock a.m. Such solicitation is
being made by mail and the Company may also use its officers, directors and
regular employees to solicit proxies from shareholders either in person or by
telephone, telegraph or letter without extra compensation.
Any proxy given pursuant to such solicitation may be revoked by the
shareholder at any time prior to the voting of the proxy. Any revocation of a
proxy may be in writing delivered to the Company or by oral statement of any
shareholder in attendance at the Annual Meeting.
This solicitation is being made by the Company. The entire cost of such
solicitation, which represents the amount normally expended for a solicitation
relating to an uncontested election of directors, plus the amounts related to
the opposition of a shareholder proposal, will be borne by the Company. Such
cost will include the cost of supplying necessary additional copies of the
solicitation material and the annual report to shareholders, for beneficial
owners of shares held of record by brokers, dealers, banks and voting trustees
and their nominees and, upon request, the reasonable expenses of such
recordholders for completing the mailing of such material and report to such
beneficial owners.
Only shareholders of record of the Company's 816,000 shares of Common
Stock outstanding as of the close of business on September 8, 1999, will be
entitled to vote. Each share of Common Stock is entitled to one vote on any
matter which may properly come before the meeting. This proxy statement and the
enclosed form of proxy are being mailed to shareholders on or about October 7,
1999. The 1999 annual report of the Company to its shareholders is being mailed
to shareholders with this proxy statement.
October 7, 1999.
1
<PAGE>
PROPOSALS TO BE VOTED UPON
PROPOSAL 1: ELECTION OF DIRECTORS
The first proposal for the 1999 Annual Meeting is the election of four
directors to hold office until the 2001 Annual Meeting of Shareholders or until
a successor is duly elected and qualified. The following current directors have
been nominated: Richard R. Agee, Richard E. McFayden, Helen Ann McHugh and
Thomas W. Rasmussen. Detailed information on each nominee is provided in the
Current Directors and Nominees section.
As indicated in the proxy, where no direction is given, the proxies
solicited by the Board of Directors will be voted in favor of the election of
the nominees listed in this proxy statement. If any such nominees shall withdraw
or otherwise become unavailable, which is not expected, the proxies will be
voted for a substitute nominee who will be designated by the Board of Directors.
Shareholders who neither submit a proxy nor attend the meeting, along with
broker non-votes, will not be counted as either a vote for or against the
election of a director. Directors will be elected upon receiving a majority of
the votes cast in person or by proxy at the annual meeting, provided a quorum is
present.
Shareholders have cumulative voting rights. Each shareholder of record
is entitled to as many votes as the total number of shares of Common Stock held
of record by such shareholder multiplied by the number of directors to be
elected by the shareholders. These votes may be divided among the total number
of directors to be elected or distributed among any lesser number in such
proportion as the shareholder may desire. Unless otherwise instructed, the proxy
holders will vote the proxies received by them equally for each nominee shown in
this proxy statement, reserving the right, however, to cumulate their votes and
distribute them among the nominees in their discretion. By marking the
appropriate box on the form of proxy, a shareholder may withhold authority to
vote for all of the nominees listed below or, by inserting individual names in
the blank space provided, may withhold the authority to vote for any one or more
of such nominees. Neither shares nor proxies may be voted for a greater number
of persons than the number of nominees shown below.
Management recommends a vote FOR the election of the nominated
directors.
PROPOSAL 2: DIRECTOR COMPENSATION LIMITATION
Mr. Robert W. Morrow, of Lincoln, Nebraska, submitted a shareholder
proposal to Management to be presented at the 1999 Annual Meeting which proposes
a cut to the base directors' fees to Eight Thousand and 00/100 Dollar ($8,000)
per director per year for the next two years. Detailed information on Mr.
Morrow's proposal is provided in the Shareholder Proposal section.
The affirmative vote of a majority of shares present in person or by
proxy is required for the approval of this proposal. Shareholders who neither
submit a proxy nor attend the meeting, along with broker non-votes, will not be
counted as either a vote for or against the shareholder proposal.
2
<PAGE>
As indicated in the proxy, in the absence of instructions to the contrary, the
proxies solicited by Management will be voted against the shareholder proposal
presented by Mr. Morrow at the 1999 Annual Meeting.
Management recommends a vote AGAINST the imposition of the proposed
limitation on director compensation.
The Trust Department of the First National Bank of Omaha will tally all
votes cast in person or by proxy for the election of directors and with respect
to the shareholder proposal.
ELECTION OF DIRECTORS
Four directors are to be elected at this Annual Meeting to hold office
until the 2001 Annual Meeting of Shareholders or until a successor is duly
elected and qualified. The Articles of Incorporation of the Company provide for
classification of directors into two classes to be elected in alternate years
for two-year terms. The Company's current Bylaws provide for seven directors,
with four to be elected in 1999 and three to be elected in 2000.
All of the nominees are presently directors of the Company and have
been previously elected by the shareholders with the exception of Richard R.
Agee, who was selected by the remaining directors to fill a vacancy on the Board
of Directors in July 1998. Mr. Agee is a third generation director who has
extensive education in the automobile industry. Mr. Agee has seventeen years
experience in the automobile industry as the Owner and General Manager of Agee's
Automotive Repair & Parking. In 1987, he was a national finalist in the ASE/NAPA
Technician of the Year competition. Currently, Mr. Agee is involved in various
professional organizations relating to the automobile industry including the
NAPA AutoCare Center of which he has presided as the Local Group President since
1993.
Management recommends a vote FOR the election of the nominated
directors.
3
<PAGE>
CURRENT DIRECTORS AND NOMINEES
The following table contains certain information with respect to the
persons currently serving as directors including those persons nominated for
election at the 1999 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
Nominees: Year First
Became Term
Name and Principal Occupation Age Director Expires
- ----------------------------- --- -------- -------
<S> <C> <C> <C>
RICHARD R. AGEE 47 1998 1999
Owner & General Manager,
Agee's Automotive Repair & Parking
Lincoln, Nebraska
RICHARD E. McFAYDEN 47 1984 1999
Partner, Perrigrine Partners, a Real
Estate Investment Partnership
Professor of Business and Associate Director of
Student Services, Buena Vista University
Omaha, Nebraska
HELEN ANN McHUGH 46 1997 1999
Account Executive, SFI, LLC
Santa Fe Springs, California
THOMAS W. RASMUSSEN 37 1997 1999
Field Service Engineer
MSX International
Denver, Colorado
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Other Directors:
Year First
Became Term
Name and Principal Occupation Age Director Expires
- ----------------------------- --- ---------- -------
<S> <C> <C> <C>
DONALD D. HEUPEL 52 1985 2000
President of the Company
Algona, Iowa
HARRY W. MEGINNIS 72 1966 2000
Retired
Palm City, Florida
T. WARREN THOMPSON 69 1969 2000
Secretary of the Company
Commercial Real Estate Broker
Wahoo, Nebraska
</TABLE>
All directors and nominees for director have been in their respective
occupations for more than the past five years with two exceptions. Before
assuming his current position with MSX International, Mr. Rasmussen worked for
Piper Jaffray from 1992 to 1997, for Arcadia Financial, Ltd. from 1997 to 1998
and Jeff Sacks Automotive Management Group from 1998 to July 12, 1999. In
November 1998, SFI, LLC acquired Ms. McHugh's former employer, Caltar, Inc., and
retained Ms. McHugh as Account Executive. Ms. McHugh and Mr. Rasmussen are
cousins and through marriage, Mr. Thompson is the uncle of Mr. McFayden.
There is no standing compensation committee of the Board of Directors.
The Board of Directors acts as a whole as the Company's Audit Committee. As an
Audit Committee, the Board of Directors reviews financial reporting and
accounting matters, including the retaining of certified public accountants. The
Board of Directors generally meets once each quarter. It held five regularly
scheduled meetings during the fiscal year ended July 31, 1999, with each such
meeting being a meeting of the Audit Committee, as well. In addition, the Board
of Directors held eight special meetings via telephone conference throughout the
year.
Pursuant to a resolution adopted at the Company's quarterly meeting
held July 21, 1998, the Board of Directors established a standing nominating
committee to be elected from its members. The nominating committee consists of
Mr. McFayden, who is Chairman, Ms. McHugh and Mr. Rasmussen. Nominations for the
1999 election had to be received no earlier than February 1, 1999 and no later
than June 1, 1999. The nominating committee did not receive any nominee
submissions for the 1999 election. Nominations for election to the Board of
Directors to be considered at the 2000 Annual Meeting must be submitted in
writing to the committee no earlier than February 1, 2000 and no later than June
1, 2000.
5
<PAGE>
At the Company's quarterly meeting held April 20, 1999, the Board of
Directors established a personnel committee to evaluate the organizational
structure and personnel needs of the Company's divisions and to recruit and hire
qualified individuals to complete the Company's management team. The Board of
Directors appointed Mr. Rasmussen, who is Chairman, Mr. Agee, Mr. McFayden and
Mr. Heupel to the personnel committee.
MANAGEMENT
Executive officers of the Company, and other significant employees of
the Company, are listed below:
<TABLE>
<CAPTION>
Name and Age Current Position and Business History
- ----------------------------------------------------------- --------------------------------------------------------
<S> <C>
Donald D. Heupel (52) . . . . . . . . . . . . President of the Company for more than the past five
years.
Harold J. Pursley (55) . . . . . . . . . . Vice President of the Company since July 21, 1998;
Treasurer of the Company since November 18, 1997. (1)
T. Warren Thompson (69) . . . . . . . . . . Secretary of the Company for more than the past five
years; Treasurer of the Company until October 31, 1995
Steve Nelson (43) . . . . . . . . . . . Director of Distribution Operations, Universal
Distribution LLC(2) since July 12, 1999.(3)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Board elected Mr. Pursley Treasurer of the Company at its 1997 Annual
Meeting. The Board then appointed Mr. Pursley Vice-President at its
quarterly meeting held on July 21, 1998.
(2) The Company formed Universal Distribution LLC to run its distribution
operations on June 17, 1999. Detailed information regarding Universal
Distribution LLC is provided in the Certain Transactions section.
(3) The personnel committee selected Steve Nelson to fulfill the position of
Director of Distribution Operations and Mr. Nelson assumed this position on
July 12, 1999.
With the growth in its distributions operations, the Board determined
that it needed a distribution expert to round out its management team. The
Company hired Mr. Steve Nelson as Director, Distribution Operations in June
1999. Prior to coming to the Company, Mr. Nelson worked for John Deere and
Toyota Motor Sales, USA. His most recent position was with Mazda, North America.
6
<PAGE>
COMPENSATION OF PRESIDENT AND DIRECTORS
The following table sets forth all compensation paid or payable by the
Company during the past fiscal year to the President of the Company, Mr. Donald
D. Heupel:
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR(1) SALARY COMPENSATION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donald D. Heupel, 1999 $41,000(2) $39,777.20(3)
President of the Company
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For fiscal year ended July 31, 1999.
(2) Mr. Donald Heupel was compensated in fiscal 1999 partly by fixed
salary and partly by commission expressed as a percentage of
before-tax profits. Mr. Heupel's fixed salary for fiscal 1999 was
$41,000. At its April 20, 1999 quarterly meeting, the Board increased
Mr. Heupel's base salary from $3300 per month to $3800 per month
effective May 1, 1999. His commission percentage was one and one-half
percent. The Board of Directors has established a minimum monthly
commission to be paid to Mr. Heupel of $1500. The total commission
compensation paid to Mr. Heupel for fiscal 1999 was $22,416.65.
(3) Mr. Heupel was paid $16,500 in director fees. The amount listed as
other compensation also includes an annual contribution of $1,597.41
made by the Company to Mr. Heupel's 401(k) account.
Until May 1, 1999, all directors of the Company were paid $1,500 per
month. The Board voluntarily reduced directors' fees from $1,500 to $1,000 per
month at its quarterly meeting held April 20, 1999 effective May 1, 1999. In
addition, Mr. Thompson was paid $3,100 during the last fiscal year for services
rendered in his capacity as Secretary of the Company. Finally, the Company
adopted a 401(k) plan (the "Plan") for its supervisory, clerical and sales
employees, effective January 1, 1997. Mr. Heupel and Mr. Pursley currently
participate in the Plan.
7
<PAGE>
OWNERSHIP OF VOTING SECURITIES
BY DIRECTORS AND NOMINEES
The following table sets forth the share ownership for each of the
directors and nominees for director as of September 8, 1999:
<TABLE>
<CAPTION>
Name and Address Amount and
Of Nature of Beneficial Percent
Title of Class Beneficial Owner Ownership Of Class
------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Richard R. Agee 300 0 .04%
5300 Bridle Lane
Lincoln, NE 68516
Common Stock Donald D. Heupel 500(1) 0.06%
219 South Avenue
Algona, IA 50511
Common Stock Richard E. McFayden 20,690 2.53%
672 Fairwood Lane
Omaha, NE 68132
Common Stock Helen Ann McHugh 2,555 0.31%
546 N. Marengo Ave.
Pasadena, CA 91101
Common Stock Harry W. Meginnis 2,700 0.33%
12776 Mariner Court
Palm City, FL 34990
Common Stock Thomas W. Rasmussen 97,436(2) 11.94%(3)
P.O. Box 61428
Denver, CO 80206
Common Stock T. Warren Thompson 2600(4) 0.32%
1600 N. Chestnut
Wahoo, NE 68066
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 500 shares owned by him and his wife as joint tenants with
respect to which Mr. Heupel may be regarded as having shared voting
power and shared investment power.
(2) According to a Schedule 13D Amendment filed with the SEC on September
15, 1999, Mr. Rasmussen disclosed that he had sole voting power over
100 shares; shared voting power over 97,336 shares, which includes
44,136 shares held by his mother Patricia Ann Rasumssen and 53,200
shares held by him as trustee of a trust of which he is one of four
beneficiaries and sole dispositive power over 53,300 shares, including
the 100 shares held by him directly and 53,200 shares held by him as
trustee of the aforementioned trust. In the Schedule 13D,
Mr. Rasmussen disclaimed beneficial ownership of any securities held
by or for the benefit of his mother, Patricia Ann Rasmussen.
(3) This 11.94% includes the 5.41% owned by Patricia Ann Rasmussen.
See note 2 above for further discussion.
(4) Includes 2400 shares owned by Mr. Thompson's daughter, Katharyn Mary
Thompson Wyckoff, to which Mr. Thompson may be regarded as having
shared voting and investment power.
8
<PAGE>
In addition to the shared voting power and shared investment power
indicated in the above footnotes, spouses of the persons listed may be regarded
as having beneficial ownership and shared voting power and shared investment
power with respect to the shares shown.
The following table sets forth certain information as to the shares of
Common Stock beneficially owned by all officers and directors of the Company as
a group as of September 8, 1999:
<TABLE>
<CAPTION>
Amount and Nature of
Title of Class Beneficial Ownership Percent of Class
-------------- -------------------- ----------------
<S> <C> <S>
Common Stock 126,781(1) 15.54%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 100,236 shares with respect to which members of the group may
be regarded as having shared voting power and/or shared investment
power.
CERTAIN TRANSACTIONS
Due to growth in its distribution operations, the Board authorized the
organization of Universal Distribution LLC to effect the separation of the
manufacturing and distribution operations of the Company. On June 17, 1999, the
Company filed Articles of Organization for "Universal Distribution LLC" and the
Nebraska Secretary of State's Office issued a Certificate of Organization. The
Company owns a ninety-nine percent (99%) membership interest in Universal
Distribution LLC and Mr. Heupel owns the remaining one percent (1%) membership
interest. The Company is also the manager of Universal Distribution LLC. Profits
and losses from Universal Distribution LLC are allocated to the members based on
their capital accounts and thus, the Company will receive ninety-nine percent
(99%) and Mr. Heupel will receive one percent (1%) of the profits and losses.
INDEBTEDNESS OF MANAGEMENT
The Company loaned Mr. Heupel the principal sum of Twenty Seven Thousand
Ninety-Five and 66/100 Dollars ($27,095.66) pursuant to a Loan Agreement and
Promissory Note dated July 31, 1999. The loan enabled Mr. Heupel to satisfy the
supplemental capital call made by the Company as the controlling member of
Universal Distribution LLC. The Promissory Note is payable in five equal annual
installments and the unpaid principal balance accrues interest until maturity at
an annual rate of 5.82%. Thereafter, the unpaid principal and interest due on
the Promissory Note will bear interest until paid at the rate of 8% per annum.
The Loan Agreement further obligates the Company to loan Mr. Heupel additional
funds to satisfy future capital calls on substantially the same terms and
conditions as the July 31, 1999 Promissory Note.
9
<PAGE>
SHAREHOLDER PROPOSAL: DIRECTOR COMPENSATION LIMITATION
Mr. Robert W. Morrow, of Lincoln, Nebraska, has informed the Company
that he intends to present the following proposal at the 1999 Annual Meeting:
"Proposal to cut the base directors' fee to $8,000 per director per
year for the next two years."
STATEMENT OF MR. MORROW AS THE PROPONENT
Last year I wrote my proposal to limit the directors' fees to 10% of
the previous years dividend. The board stated in their argument against my
proposal that the proposal would place the directors in a conflicting
position: I agree.
I hope the directors will agree with me that Universal Manufacturing
has fallen on hard times the past two years. The dividend currently stands at
$.60 per year, down from $1.00 paid two years ago. The stock price has also
fallen to near its lowest level in the past 20 years.
Directors' fees of $8,000 per director per year is still extremely
high compensation for non-employee directors of a company this size, and a
two year lid on the directors' base compensation may motivate the directors
to come up with some new ideas to help our company grow.
MANAGEMENT'S STATEMENT IN OPPOSITION TO THE PROPOSAL
The current Board of Directors has a majority of persons who have
full-time occupations independent of their obligations as directors of the
Company. The experience and varied perspectives such individuals bring to the
Board are critical in making informed and reasoned policy decisions on the
complex issues with which the Board must deal. It is in the Company's and the
shareholders' best interest to retain such qualified individuals to serve on
the Board.
The average director spends 8-12 hours per month on Company matters
(the hours vary depending on the number of committees on which a director
serves) and travels to Nebraska and Iowa for the Company's quarterly meetings
four times a year. Because the time each director spends on Company matters
and travel is time away from that director's principal occupation or
business, payment of adequate compensation is essential to attract and retain
qualified individuals willing to make the necessary time commitment to the
Company.
In order to adapt to recent business decisions by Ford Motor Company
which have challenged the Company, the Board has spent a significant amount
of time formulating and implementing strategic plans to increase the
profitability of the Company's current operations and to attain other
opportunities for profit. In addition to the quarterly meetings, during the
past year the Board of Directors held multiple telephone conferences to
discuss and implement ideas to help our Company grow. Our directors made
further time commitments pursuing such opportunities outside of directors'
meetings which required even more time away from their
10
<PAGE>
principal occupations.
The results of the last few months of the fiscal year ended July 31,
1999 indicate improved performance. The efforts of Management and the Board
of Directors are beginning to produce the desired results.
The Board of Directors voluntarily reduced directors' fees from
$18,000 to $12,000 effective May 1, 1999. The Board's decision to reduce
directors' compensation occurred before Mr. Morrow submitted his proposal.
Management believes that an additional reduction of director
compensation would impair the Company's ability to attract, motivate and
retain highly qualified individuals for the director positions. Compensation
policies which attract and retain qualified directors are in the best
interest of the shareholders, especially when the Company is engaged in
restructuring its operations to meet changed circumstances. Only by
attracting directors willing to devote substantial time and attention to
Company matters can the Company expect to achieve its performance goals.
Unlike many public companies, the Company has only two operating
officers. The Company's ability to maintain such efficient management results
directly from the active role the Board takes in the management of the
Company. The Board's hard work enables the Company to achieve significant
savings in executive compensation.
Management believes that the current compensation structure for the
Company's directors, as voluntarily reduced by the Board of Directors, is
well within the range for comparable companies and that it is fair and
appropriate in light of the obligations and responsibilities of corporate
directors.
Management recommends a vote AGAINST the imposition of a limitation
on director compensation as set forth in the proponent's proposal.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than ten-percent
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the
Company believes that during the last fiscal year its officers, directors and
greater than ten-percent beneficial owners complied with applicable Section
16(a) filing requirements.
11
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth the names and certain information
with respect to each person who, as of September 8, 1999, was known by the
Company to be the beneficial owner of more than five percent (5%)
of the Company's Common Stock:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
Of of Beneficial Of
Title of Class Beneficial Owner Ownership Class
-------------- ---------------- --------------- -------
<S> <C> <C> <C>
Common Stock Eloise Rogers Agee 75,592(1) 9.26%
2541 Woodleigh Lane
Lincoln, NE 68502
Common Stock Mary McFayden Donahue 46,258 5.67%
1301 South 80th Street
Omaha, NE 68124
Common Stock Patricia Ann Rasmussen 44,136(2) 5.41%
93 Palma Drive
Rancho Mirage, CA 92270
Common Stock Thomas Rasmussen 97,436(3) 11.94%(4)
P.O. Box 61428
Denver, Colorado 80206
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes four shares owned by her husband, Richard W. Agee, with
respect to which Mrs. Agee may be regarded as having shared voting
power and shared investment power.
(2) According to a Schedule 13D amendment filed with the SEC on September
15, 1999, Mrs. Rasmussen disclosed that with respect to these 44,136
shares she has shared voting power with her son, Thomas W. Rasmussen
and shared dispositive power with her daughter.
(3) According to a Schedule 13D Amendment filed with the SEC on September
15, 1999, Mr. Rasmussen disclosed that he had sole voting power over
100 shares; shared voting power over 97,336 shares, which includes
44,136 shares held by his mother Patricia Ann Rasumssen (who is listed
above) and 53,200 shares held by him as trustee of a trust of which he
is one of four beneficiaries and sole dispositive power over 53,300
shares, including the 100 shares held by him directly and 53,200
shares held by him as trustee of the aforementioned trust. In the
Schedule 13D, Mr. Rasmussen disclaimed beneficial ownership of any
securities held by or for the benefit of his mother, Patricia Ann
Rasmussen.
(4) This 11.94% includes the 5.41% beneficially owned by Patricia
Ann Rasmussen. See note 4 above for further discussion.
In addition to the persons listed above, any spouses of the persons
listed may be regarded as having beneficial ownership and shared voting power
and shared investment power with respect to the shares shown.
12
<PAGE>
FINANCIAL STATEMENTS
The Company's annual report for the fiscal year ended July 31, 1999,
including financial statements, has accompanied or preceded the mailing of
this proxy statement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH SHAREHOLDER
SOLICITED A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO, FOR THE FISCAL YEAR ENDED JULY 31, 1999. A WRITTEN REQUEST
FOR SUCH REPORT SHOULD BE DIRECTED TO DONALD D. HEUPEL, PRESIDENT, UNIVERSAL
MFG. CO., 405 DIAGONAL STREET, ALGONA, IOWA 50511.
AUDIT MATTERS
The Board of Directors of the Company at its meeting of July 20,
1999, selected the accounting firm of Deloitte & Touche LLP, independent
certified public accountants, to conduct the audit examination of the Company
and its subsidiary for the fiscal year ending July 31, 2000, and to prepare
the Company's corporate income tax returns for the same fiscal year.
Representatives of the firm of Deloitte & Touche LLP are expected to
be present at the Annual Meeting of Shareholders. Such representations will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions from
shareholders.
SHAREHOLDERS' PROPOSALS
In order for any proposal of shareholders to be presented as an item
of business at the 2000 Annual Meeting of Shareholders of the Company, the
proposal must be received at the Company's principal executive offices no
later than May 26, 2000.
OTHER MATTERS
The Board of Directors knows of no other matter to be acted upon at
the meeting. However, if any other matter is lawfully brought before the
meeting, the shares covered by the proxy in the accompanying form will be
voted on such matter in accordance with the best judgment of the persons
acting under such proxy.
By Order of the Board of Directors
Donald D. Heupel
President
October 7, 1999
13
<PAGE>
President's Message
PRESIDENT'S MESSAGE TO OUR STOCKHOLDERS
The fiscal year ended July 31, 1999, was another year of record sales for
Universal Mfg. Co. Earnings, however, did not match the previous few years.
Total sales were $19,511,446, which is slightly less than a 1% increase from
the year before. Sales of remanufactured transmission and engine assemblies
increased. Also, sales of a new line this year, Motorcraft branded products,
added to the sales total. Sales increases of these products offset the
decreases in sales of several other parts lines such as brake shoes, water
pumps, starters, and alternators.
Earnings per share of outstanding common stock for the fiscal year ended July
31, 1999, was $.57. This compares with $1.34 earned in 1998, and $1.41 in
1997. Earnings were reduced due to the lower margins of the Ford Motor
Company (Ford) distribution program, and to the higher sales and distribution
costs incurred to meet Ford distribution standards.
In October 1998, Universal Mfg. Co. signed a new Sales Agreement with the
Ford Motor Company, which establishes the Company as a Ford Authorized
Distributor (FAD). As a FAD, we distribute Ford branded remanufactured
products and Motorcraft branded products to Ford and Lincoln-Mercury dealers.
We have exclusive distribution rights for remanufactured power-train
components such as engines and transmissions, but compete with other FADs for
the distribution of remanufactured small parts and Motorcraft parts.
In order to meet the service requirements and to be competitive, the Company
has made a significant investment in distribution capability. To service Des
Moines, Iowa, and the surrounding territory, we moved into a larger warehouse
facility. In Peoria, Illinois, we constructed an addition to our warehouse
which nearly doubled its size. We have also added to our truck fleet and to
our warehouse staff at all locations and we now provide daily delivery
service to about a third of our Ford dealer customers.
Sales of Motorcraft products began in November 1998 and accounted for 5% of
the Company's total sales for the 1999 fiscal year. However, at the end of
the fiscal year, the rate of Motorcraft sales equaled 10% of Company's total
sales. Additional growth of this line and the distribution of other product
lines is planned to increase sales volume and thereby improve earnings.
Late in the fiscal year, the Company separated its manufacturing and
distribution functions by establishing Universal Distribution LLC. The
Company anticipates that distribution of products provided by outside vendors
will continue to increase and comprise a significant part of the Company's
business. We believe that the establishment of Universal Distribution LLC
will further facilitate the growth of the Company's current distribution
business. Based on current and anticipated future growth of the Company's
distribution operations, we added Steve Nelson as Director of Distribution
Operations in July 1999.
1
<PAGE>
As part of the Ford strategy to improve distribution by the establishment of
FADs, Ford deauthorized several product lines which Universal Mfg. Co. has
historically remanufactured, and the Company anticipates that Ford will
deauthorize additional lines. As a result, sales of products produced at our
manufacturing facility have been reduced, as has been sales to other Ford
Authorized Remanufacturers. In response to this reduction, we are working
with several original equipment manufacturers to develop strategies for
supplying products for their remanufacturing programs. In addition, we have
all-make capability of several product lines for sale into the independent
aftermarket, and have formed agreements with manufacturer's representatives
to market these products. We have completed the cataloging of these lines,
and are making the catalogs available on a national electronic catalog
system. In addition, we have retained a market development firm to assist in
the marketing of these products.
In April 1999, QS-9000/ISO-9002 certification was achieved. This quality
rating is very important as we introduce our products to new markets, as it
immediately identifies our quality capabilities. Also in fiscal 1999, we
established a website (www.remanufacturedparts.com). This website introduces
the Company, its products, and its capabilities, and will be used for special
promotions.
Ford's deauthorization actions resulted in increased total sales volume;
however, increased competition and the reduced margins established by Ford
reduced the Company's earnings for fiscal year 1999 (as expected and reported
in a national press release and Form 8-K on October 20, 1998). The Company's
management team and Board of Directors has been hard at work this past year
formulating and implementing strategic plans for alternative manufacturing
and remanufacturing activities in order to utilize its existing plant and
attain other opportunities for profitable operation.
The results of the last few months of the fiscal year ended July 31, 1999
indicate improved performance. We believe that the efforts of Management and
the Board of Directors are beginning to produce results.
We continue to be optimistic about the future of the Company. We anticipate
continued growth in Ford distribution programs, as new product lines are
added, as well as distribution to other markets. Product development efforts
and continued quality improvement in manufacturing will help insure the
success of the current marketing efforts for products we remanufacture.
Management is grateful to employees, customers, suppliers, and shareholders
for their continued contribution to the Company. On a separate sheet you will
find an invitation to our Annual Meeting, which we encourage you to attend.
Donald D. Heupel
President
2
<PAGE>
ADDITIONAL INFORMATION PROVIDED BY THE COMPANY
THE COMPANY'S BUSINESS
The Company is engaged in the remanufacture and distribution of automotive
engines and automotive parts. The amounts of net sales, net income, and total
assets attributable to this business for each of the last five fiscal years
are shown under the heading "Selected Financial Data".
The following table shows the percentage of total sales over the last three
fiscal years for engines, parts, and Motorcraft branded products:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Automobile and Truck Engines 33% 27% 28%
Automobile and Truck Parts 62% 73% 72%
Motorcraft Branded Parts 5% 0% 0%
</TABLE>
The principle markets for the Company's products are automotive dealers,
automotive distributors, and automotive parts distributors in the Midwest and
automotive remanufacturers nationwide. The Company has no export sales
business.
The following table shows the percentage of total sales by type of product
and by customer:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Ford Authorized Remanufactured to Dealers 32% 48% 51%
Distribution Program to Dealers 54% 35% 32%
Parts to Other Ford Remanufacturers 13% 16% 15%
Miscellaneous Sales 1% 1% 2%
</TABLE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For Fiscal Years Ended July 31
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Sales $19,511,446 $19,372,976 $19,089,166 $17,678,542 $14,762,085
Income Before Taxes 635,054 1,769,874 1,971,377 1,888,950 1,319,902
Income Taxes 167,316 680,221 818,450 754,491 501,086
Net Income 467,738 1,089,653 1,152,927 1,134,159 818,816
Net Income Per Share
of Outstanding
Common Stock .57 1.34 1.41 1.39 1.00
Cash Dividends Per
Share Declared .65 .90 1.00 .85 .80
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Assets $ 8,540,344 $ 7,530,045 $ 6,443,524 $ 6,231,331 $ 5,453,419
</TABLE>
3
<PAGE>
THE COMPANY'S STOCK
The Company's stock is traded in the over-the-counter market and is listed on
the NASDAQ Small-Cap Market under the trading symbol UFMG. As of September 8,
1999, there were 214 holders of record of the Company's common stock. The
following table lists the dividend declarations on the Company's stock during
the last two fiscal years:
<TABLE>
<CAPTION>
Amount Amount
Date Per Share Date Per Share
<S> <C> <C> <C>
September 22, 1998 $.20 October 29, 1997 $.25
January 19, 1999 .15 January 20, 1998 .25
April 20, 1999 .15 April 21, 1998 .20
July 20, 1999 .15 July 21, 1998 .20
---- ----
---- ----
1999 Total $.65 1998 Total $.90
</TABLE>
The high and low bid and asked prices for the Company's common stock during
the last two fiscal years are shown in the table below:
<TABLE>
<CAPTION>
HIGH LOW
Calendar Quarters Bid Asked Bid Asked
<S> <C> <C> <C> <C>
3rd Quarter 1997 $16 $17 1/2 $16 $17 1/2
4th Quarter 1997 17 17 1/2 15 16
1st Quarter 1998 15 3/8 16 1/4 13 3/4 15 1/2
2nd Quarter 1998 15 1/4 15 3/4 10 11
3rd Quarter 1998 10 1/2 11 1/8 9 9 3/4
4th Quarter 1998 10 1/2 11 1/4 9 1/4 9 3/4
1st Quarter 1999 9 3/4 10 1/8 6 3/8 8
2nd Quarter 1999 6 3/4 8 1/2 4 7/16 4 5/8
</TABLE>
Information concerning stock prices has been obtained from The NASDAQ Stock
Market, Inc. The above quotations may reflect inter-dealer prices and may not
reflect retail mark-up, mark-down or commission or necessarily represent
actual transactions.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
In fiscal 1999, Company sales increased .7%, as increases in sales of
remanufactured transmission assemblies, remanufactured engine assemblies, and
Motorcraft branded products offset the decrease in sales of remanufactured
small parts. In fiscal 1998, Company sales increased 1.5% due to continued
increases in sales to other Ford Authorized Remanufacturers and sales of Ford
Remanufactured distribution products.
Remanufactured engine unit sales in fiscal year 1999 were 3092, which
represents an increase of 115 units. Engine sales in fiscal 1998 were 2977.
Transmission unit sales increased by 791 in fiscal year 1999 to 4900 units.
Transmission sales in fiscal 1998 were 4109, an increase of 326 over the
previous year.
Fiscal 1999 was the first year of sales of Motorcraft branded parts. Sales
totaled $896,075, with unit sales of 139,805.
Sales of Ford distribution products in fiscal 1999 were $10,605,806 compared
to $6,770,540 in fiscal 1998. This increase was due to more product lines
being included in the distribution program. Sales to other Ford Authorized
Remanufacturers decreased to $2,539,721 in fiscal 1999 from $3,057,983 in
fiscal 1998. This decrease is due to the deauthorization of some product
lines.
In March 1999, prices were reviewed, resulting in no significant price
changes. In March 1998, prices were reviewed, but again net price changes
were not significant. In February 1997, prices were reviewed and selectively
increased about 2.5%.
A three year agreement between the Company and the United Auto Workers, which
represents the production employees, expired in May 1999. However, by mutual
consent the agreement was extended one year with no changes.
Interest income for fiscal 1999 was $71,787; in fiscal 1998 it was $43,213;
and in fiscal 1997 it was $49,109. Investment amounts were generally higher
during fiscal 1999 than during fiscal 1998, and available investment rates
were approximately the same. Investment amounts were slightly lower during
fiscal 1998 than during fiscal 1997, and again available rates were
approximately the same.
The following table shows the comparison for the last five fiscal years of
gross profit and selling, general, and administrative expenses as a
percentage of net sales. The reduced gross margin is the result of the sales
mix changing to more Ford Remanufactured distribution products. The increased
selling, general, and administrative expenses were due to the higher costs of
meeting the standards of the Ford distribution program.
5
<PAGE>
<TABLE>
<CAPTION>
Gross Profit Selling, General, and
As Percentage Administrative Expenses as
Fiscal Year Of Net Sales Percentage of Net Sales
<S> <C> <C>
1995 21.4% 12.8%
1996 21.7% 11.4%
1997 20.8% 10.8%
1998 19.8% 11.0%
1999 15.8% 13.7%
</TABLE>
Earnings per share of common stock decreased $.77 due to a lower gross margin
and increased selling expenses. Earnings per share of common stock decreased
$.07 in fiscal 1998 also due to lower gross margin and increased selling,
general, and administrative expenses . Earnings per share of common stock
increased $.02 in fiscal 1997 due to increased sales volume.
In order to accommodate the increased inventories necessary to comply with
the requirements of Ford, the Company sold the warehouse it owned in Des
Moines, Iowa in April 1999. The sale of the Des Moines warehouse resulted in
a significant gain for the Company which amounted to $177,507. The Company is
now leasing a larger warehouse in Des Moines.
The ratio of current assets to current liabilities of 1.86 to 1 is lower than
the ratio of 2.5 a year ago. However, most of the difference is attributable
to the deferred purchase terms of Ford distribution products, so reasonable
liquidity continues to be maintained. Inventories in fiscal 1999 were higher
than in fiscal 1998. Our total cash and short-term investments at fiscal
year-end for the past three years were:
<TABLE>
<CAPTION>
Total of Cash and
Fiscal Year Short Term Investments
<S> <C>
1999 $ 424,188
1998 $ 1,234,007
1997 $ 881,389
</TABLE>
It is anticipated that certain capital expenditures will be required to
increase the current level of business and service. Continued growth in
distribution programs will require investment in additional inventories.
Management believes that some debt may be required to make the transition to
higher levels of inventory and to finance future capital needs.
The process of incorporating the change in Ford's distribution program
continues, as more products which were remanufactured are deauthorized, and as
more product lines are made available for distribution. The Company is
uncertain which products will be included in future remanufacturing
activities, and what distribution opportunities will be available in the
future.
In connection with the complaint filed by the Environmental Protection Agency
(EPA) described in Note 6 of the Notes to Consolidated Financial Statements,
the Company accrued an expense of $149,725 in fiscal 1994 to account for
clean
6
<PAGE>
up costs or additional penalty as provided in the settlement agreement with
the Environmental Protection Agency (EPA). Portions of this amount were
expended in each of fiscal 1994, 1995, and 1999.
The Company had no bank borrowings during the fiscal year ended July 31, 1999.
UNIVERSAL DISTRIBUTION LLC
Due to the substantial growth in its distribution operations, the Board of
Directors authorized the organization of a separate limited liability company
to effect the separation of the manufacturing and distribution operations of
the Company. On June 17, 1999, the Company filed Articles of Organization for
"Universal Distribution LLC" and the Nebraska Secretary of State's Office
issued a Certificate of Organization. The Company owns a ninety-nine percent
(99%) membership interest in Universal Distribution LLC and Mr. Donald D.
Heupel owns the remaining one percent (1%) membership interest. The Company
is also the manager of Universal Distribution LLC. Profits and losses from
Universal Distribution LLC are allocated to the members based on their
capital accounts and thus, the Company will receive ninety-nine percent (99%)
and Mr. Heupel will receive one percent (1%) of the profits and losses.
In order to capitalize Universal Distribution LLC and to enable the newly
organized entity to commence distribution operations, Universal Mfg. Co. made
an initial capital contribution of $99,000 and transferred approximately
$2,709,566.00 worth of cash and inventory to Universal Distribution LLC.
Title to all other assets, including, without limitation, all land,
buildings, machinery and equipment remains with Universal Mfg. Co. In
exchange for his one percent (1%) membership interest, Mr. Heupel made an
initial capital contribution of $1,000 and contributed an additional
$27,095.66.
The Company loaned Mr. Heupel the principal sum of $27,095.66 pursuant to a
Loan Agreement and Promissory Note dated July 31, 1999. The loan enabled Mr.
Heupel to satisfy the supplemental capital call made by the Company as the
controlling member of Universal Distribution LLC. The Promissory Note is
payable in five equal annual installments and the unpaid principal balance
accrues interest until maturity at an annual rate of 5.82%. Thereafter, any
unpaid principal and interest due on the Promissory Note will bear interest
until paid at the rate of 8% per annum. The Loan Agreement further obligates
the Company to loan Mr. Heupel additional funds to satisfy future capital
calls on substantially the same terms and conditions.
YEAR 2000 DISCLOSURE
Computer programs written over the past twenty-five years with a 2-digit
standard, rather than 4-digits, have caused the year 2000 predicament we are
in today. "Year fields" are assigned 2-digits instead of 4-digits in computer
software programs throughout the world. The 2-digit year standard was
employed to save expensive storage space and reduce keystrokes. The use of
2-digit years is widespread, including software programs, data files,
electronic interchange systems and micro code embedded in purchased hardware
and equipment. Like all businesses, the Company is faced with the challenges
of modifying its software, hardware, firmware, and
7
<PAGE>
equipment to make it correctly store, sort, calculate, and process date data
before, during, and after January 1, 2000.
In fiscal year 1998, through routine upgrades, the Company made the computer
software programs and equipment utilized at the Company's facilities year
2000 compliant. These upgrades include, but are not limited to, the
manufacturing, financial and accounting, invoicing, production, sales, and
warehouse management systems. The Company has not incurred significant
identifiable costs as a result of the upgrade of its internal system to year
2000 compliance.
The Company has investigated the year 2000 status of the Company's
non-information/technology systems ("Non-IT Systems") which includes phones,
voice mail, heating/air conditioning, electricity, security systems, and lift
trucks. Letters and communications received from the manufacturers or
suppliers for the Company's Non-IT Systems indicate that the Company's Non-IT
Systems are currently year 2000 compliant. The Company will continue to
investigate to confirm that all Non-IT Systems are in fact year 2000
compliant.
In addition to reviewing its internal systems, the Company initiated formal
communications with its mission-critical outside vendors, distributors,
suppliers, customers, and freight carriers (collectively "Suppliers") to
determine whether they are year 2000 compliant and to attempt to identify any
potential issues for the Company. The Company has received responses from
almost all of its mission-critical Suppliers indicating that the year 2000
should not interrupt the flow of goods or services to the Company. The
interdependent relationship between the Company and these Suppliers makes the
Company vulnerable to the Suppliers' failure to remediate their own year 2000
issues. If these Suppliers do not achieve year 2000 compliance before the end
of 1999, the Company may experience a variety of problems which may have a
material adverse effect on the Company.
To the extent the Company's vendors are not year 2000 compliant, such vendors
may fail to deliver ordered materials and products to the Company and may
fail to bill the Company properly and promptly. Consequently, the Company may
not have the correct inventory to send to its customers and may experience a
shortage of inventory. Any disruption in manufacturing services provided by
the Company as a result of year 2000 noncompliance could materially adversely
affect the Company's business, financial condition, and results from
operations.
Management is committed to devoting the appropriate resources to ensure a
timely year 2000 solution and will continue to test current and new versions
of the Company's computer software and equipment, and will work with
necessary third parties.
FORWARD LOOKING STATEMENT SAFE HARBOR
Statements that are not historical facts, including without limitation,
statements about our confidence, strategies, expectations and beliefs,
technologies and opportunities, industry and market segment growth, demand
and acceptance of new and existing products, and return on investments in
products and markets are forward looking statements that involve risks and
uncertainties, including, without limitation, the affect of general economic
and market conditions,
8
<PAGE>
customer requirements for our products, the continuing strength of the
automotive industry, competitive pricing, maintenance of our current
momentum, weather conditions and other factors.
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Universal Mfg. Co.:
We have audited the accompanying consolidated balance sheets of Universal
Mfg. Co. and subsidiary (Company) as of July 31, 1999 and 1998 and the
related consolidated statements of income and retained earnings and of cash
flows for each of the three years in the period ended July 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of July 31, 1999
and 1998 and the results of its operations and its cash flows for each of the
three years in the period ended July 31, 1999 in conformity with generally
accepted accounting principles.
Des Moines, Iowa
August 27, 1999
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 424,188 $ 1,234,007
Accounts receivable 2,559,918 2,141,099
Inventories 3,620,018 2,611,961
Income taxes recoverable 23,545
Prepaid expenses 12,027 19,798
----------- -----------
Total current assets 6,616,151 6,030,410
----------- -----------
DEFERRED INCOME TAXES 277,505 24,188
----------- -----------
PROPERTY:
Land 120,499 120,499
Buildings 1,352,776 1,406,747
Machinery and equipment 1,038,810 1,013,923
Furniture and fixtures 304,083 264,924
Trucks and automobiles 755,590 870,579
Construction in progress 341,155
----------- -----------
Total property 3,912,913 3,676,672
Less accumulated depreciation (2,266,225) (2,201,225)
----------- -----------
Property - net 1,646,688 1,475,447
----------- -----------
$ 8,540,344 $ 7,530,045
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,089,945 $ 2,199,744
Dividends payable 122,400 163,200
Income taxes payable 226,989
Accrued payroll taxes 41,195 27,828
Accrued compensation 59,443 81,495
Accrued local taxes 18,625 17,570
----------- -----------
Total current liabilities 3,558,597 2,489,837
----------- -----------
MINORITY INTEREST IN SUBSIDIARY 4,201
----------- -----------
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 4,143,684 4,206,346
----------- -----------
Total stockholders' equity 4,977,546 5,040,208
----------- -----------
$ 8,540,344 $ 7,530,045
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE YEARS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
NET SALES $ 19,511,446 $ 19,372,976 $ 19,089,166
COST OF GOODS SOLD 16,438,008 15,532,466 15,111,618
------------ ------------ ------------
GROSS PROFIT 3,073,438 3,840,510 3,977,548
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,666,512 2,132,669 2,068,321
------------ ------------ ------------
INCOME FROM OPERATIONS 406,926 1,707,841 1,909,227
OTHER INCOME:
Interest income 71,787 43,213 49,109
Gain on sales of property 159,535 4,589 2,459
Other 7 14,231 10,582
------------ ------------ ------------
Total other income 231,329 62,033 62,150
------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST AND INCOME TAXES 638,255 1,769,874 1,971,377
MINORITY INTEREST 3,201
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 635,054 1,769,874 1,971,377
INCOME TAXES 167,316 680,221 818,450
------------ ------------ ------------
NET INCOME 467,738 1,089,653 1,152,927
RETAINED EARNINGS, BEGINNING OF YEAR 4,206,346 3,851,093 3,514,166
LESS CASH DIVIDENDS - ($.65, $.90, and $1.00 per share
in 1999, 1998 and 1997, respectively) 530,400 734,400 816,000
------------ ------------ ------------
RETAINED EARNINGS, END OF YEAR $ 4,143,684 $ 4,206,346 $ 3,851,093
------------ ------------ ------------
------------ ------------ ------------
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.57 $ 1.34 $ 1.41
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 467,738 $ 1,089,653 $ 1,152,927
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 236,296 196,186 190,749
Deferred income taxes (253,317) 20,020 (1,879)
Gain on sales of property (159,535) (4,589) (2,459)
Minority interest in subsidiary 3,201
Effect of changes in operating assets and liabilities:
Accounts receivable (418,819) (256,182) (229,925)
Inventories (1,008,057) (199,249) 67,001
Income taxes recoverable 23,545 (365) (23,180)
Prepaid expenses 7,771 51,131 (20,647)
Accounts payable 890,201 780,019 (88,219)
Accrued payroll taxes 13,367 2,884 14,405
Income taxes payable 226,989 - (56,790)
Accrued compensation (22,052) (6,136) (2,415)
Accrued local taxes 1,055 (4,699) 8,285
------------ ------------ ------------
Net cash flows from operating activities 8,383 1,668,673 1,007,853
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property 203,116 19,050 88,400
Purchases of property (451,118) (559,905) (332,936)
------------ ------------ ------------
Net cash flows from investing activities (248,002) (540,855) (244,536)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (571,200) (775,200) (816,000)
Proceeds from issuance of minority interest in subsidiary 1,000
------------ ------------ ------------
Net cash flows from financing activities (570,200) (775,200) (816,000)
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (809,819) 352,618 (52,683)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,234,007 881,389 934,072
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 424,188 $ 1,234,007 $ 881,389
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for income taxes $ 170,099 $ 662,445 $ 898,426
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
As discussed in Note 3, the Company advanced $27,379 to its president which,
together with $1,000 cash, were contributed to Universal Distribution LLC in
exchange for a 1% ownership.
See notes to consolidated financial statements.
4
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JULY 31, 1999
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Universal Mfg. Co. and subsidiary (Company) is
engaged in the business of remanufacturing and distributing, on a
wholesale basis, engines and other automotive parts for Ford, Lincoln and
Mercury automobiles and trucks. Remanufactured engines for non-Ford
vehicles are also marketed on a limited basis. During the year ended July
31, 1999, Ford deauthorized the remanufacturing of several automotive
parts which were being remanufactured by the Company. On October 1, 1998,
the Company signed a new sales agreement with Ford Motor Company (Ford)
authorizing the Company to be a Ford authorized distributor. The Company
purchases the majority of its new raw materials and distribution product
from Ford. The principal markets for the Company's products are automotive
dealers and jobber supply houses located in the Midwest.
PRESENTATION - The accompanying consolidated financial statements include
the accounts of Universal Mfg. Co. and its subsidiary, Universal
Distribution LLC. Universal Distribution LLC, owned 99% by Universal Mfg.
Co. and 1% by the Company's president, was established on June 30, 1999 to
operate the Company's distribution operations. The remanufacturing
operations remained within Universal Mfg. Co. All intercompany balances
and transactions have been eliminated in consolidation.
CASH EQUIVALENTS - The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
INVENTORIES - Inventories are stated at the lower of cost, determined on a
last-in, first-out (LIFO) basis or market.
PROPERTY - Property is depreciated generally using accelerated methods
over the following estimated lives:
<TABLE>
<CAPTION>
ASSETS LIVES
<S> <C>
Buildings 10-20 years
Machinery and equipment 7-10 years
Furniture and fixtures 5-7 years
Trucks and automobiles 3-5 years
</TABLE>
Maintenance and repairs are charged to operations as incurred. Renewals
and betterments are capitalized and depreciated over their estimated
useful service lives. Gains or losses are recognized at the time of
disposal.
LONG-LIVED ASSETS - The Company reviews the carrying amount of long-lived
assets for impairment when events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable.
ACCRUED WARRANTY COSTS - The Company accrues estimated future warranty
claims based on historical experience.
<PAGE>
REVENUE RECOGNITION - Revenues are recognized upon shipment of products.
INCOME TAXES - The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes". Accordingly, deferred tax assets and liabilities are
established for temporary differences between the financial reporting
bases and tax bases of the Company's assets and liabilities.
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.
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 - Earnings per share have been computed on the weighted
average number of shares outstanding during each respective year (816,000
shares).
NEWLY-ISSUED ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, effective for fiscal years beginning after June 15, 1999. The
Company has not yet determined the financial statement impact of adopting
FASB 133.
2. INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Product cores $2,286,891 $1,169,485
Raw materials 315,861 470,768
Finished engines 287,779 336,941
Finished small parts 1,351,866 634,767
---------- ----------
4,242,397 2,611,961
Obsolescence reserve (622,379)
---------- ----------
$3,620,018 $2,611,961
---------- ----------
---------- ----------
</TABLE>
If inventories were valued at the lower of cost (first-in, first-out
method) or market, inventories would have been $6,601,714 and $5,655,407
at July 31, 1999 and 1998, respectively.
3. NOTE RECEIVABLE - OFFICER
During the year ended July 31, 1999, the Company exchanged a 1% interest
in Universal Distribution LLC for a note receivable of $27,379 from its
president plus $1,000 cash. The note is payable in annual installments of
$6,401, including interest at 5.82%, through August 1, 2004. The note has
been netted against minority interest in the accompanying consolidated
balance sheet.
<PAGE>
4. INCOME TAXES
The provision for income taxes consists of the following for the years
ended July 31:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current income taxes $ 420,633 $660,201 $820,329
Deferred income taxes (253,317) 20,020 (1,879)
--------- -------- --------
Income tax provision $ 167,316 $680,221 $818,450
--------- -------- --------
--------- -------- --------
</TABLE>
Deferred tax assets are comprised of the following at July 31:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Inventory obsolescence $248,951
Depreciation (24,384) $(30,480)
Uniform inventory capitalization 26,299 12,867
Vacation pay accruals 16,956 11,770
EPA liability 8,010 23,885
Other 1,673 6,146
-------- --------
Deferred income taxes $277,505 $ 24,188
-------- --------
-------- --------
</TABLE>
A reconciliation between statutory and effective tax rates is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Income before income taxes $635,054 $1,769,874 $ 1,971,377
Statutory rate 34% 34% 34%
--------- ----------- ------------
Income taxes at statutory rates 215,918 601,757 670,268
Tax effect of:
State taxes 48,899 130,074 159,387
State tax refunds - prior years (50,000)
Other (47,501) (51,610) (11,205)
-------- ---------- -----------
Total income taxes $167,316 $ 680,221 $ 818,450
-------- ---------- -----------
-------- ---------- -----------
</TABLE>
5. 401(k) PLAN
The Company sponsors a 401(k) plan which covers substantially all
non-union employees. Company matching contributions are at the discretion
of management. Total expenses under the plan were $29,498, $42,790 and
$20,667 for the years ended July 31, 1999, 1998 and 1997, respectively.
<PAGE>
6. 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
alleged, among other things, that the Company 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 provided for
settlement of this complaint.
This settlement called for payment of a civil penalty of $32,955, and for
the completion of certain remedial projects, estimated to cost $149,725.
Total amounts paid through July 31, 1999 were $129,701. The remaining
amount of $20,024 is recorded as a liability in the accompanying
consolidated financial statements.
On June 10, 1998, the Company received notice from the EPA authorizing
submission of a proposal for treatment on additional contamination found
after the initial hazardous waste was removed. The EPA approved that costs
related to studies for the removal of the additional contamination could
be offset against the remaining liability, if approved. On August 6, 1998,
the Company received a proposal to study the additional contamination with
an estimated cost approximating the liabilities recorded at July 31, 1999
and 1998.
7. CREDIT ARRANGEMENTS
The Company has a $500,000 line of credit with a local bank. Advances
under this line of credit bear interest at an annual rate of 7.5%. The
line of credit expires on April 17, 2000. At July 31, 1999, there were no
outstanding borrowings under this facility.
8. OPERATING LEASES
The Company has entered into lease agreements for five trucks. Each
operating lease provides for monthly payments ranging from $880 to $913
through April 2002. The Company has also entered into a lease agreement
for a warehouse. The operating lease provides for monthly base rent
payments of $3,732, plus an allocation of lessor operating expenses,
currently $1,289 per month, through November 2001. Rent expense for the
year ended July 31, 1999 totaled $67,968.
Future minimum lease payments under noncancellable operating leases are as
follows:
Year ending July 31
<TABLE>
<CAPTION>
<S> <C>
2000 $ 112,705
2001 112,705
2002 44,738
-----------
$ 270,148
-----------
-----------
</TABLE>
9. SEGMENT INFORMATION
Beginning with the formation of Universal Distribution LLC on June 30,
1999 (see note 1), the Company has two operating segments: manufacturing
and distribution. Operating segments are
<PAGE>
determined on the basis of product and legal entity. The manufacturing
segment remanufacturers various automotive parts. The distribution segment
purchases and distributes finished engines and other automotive parts.
Both segments sell their product primarily to Ford automobile dealers
located in the Midwest.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see note 1). Allocations
of certain administrative expenses are made between segments. Selected
financial information for each segment as of and for the year ended July
31, 1999, is presented below. Information regarding the distribution
segment is from June 30, 1999 forward.
<TABLE>
<CAPTION>
Manufacturing Distribution Total
<S> <C> <C> <C>
Revenues $17,834,749 $ 1,676,697 $19,511,446
Interest income 69,118 2,669 71,787
Depreciation expense 225,694 10,602 236,296
Income tax expense 83,814 83,502 167,316
Net income 234,306 233,432 467,738
Total assets 1,120,995 7,419,349 8,540,344
Purchases of property 451,118 451,118
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
EXECUTIVE OFFICERS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
DONALD D. HEUPEL HAROLD J. PURSLEY T. WARREN THOMPSON
President Vice President & Treasurer Secretary
</TABLE>
- ------------------------------------------------------------------------------
DIRECTORS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
RICHARD R. AGEE, Owner and HELEN ANN MCHUGH,
General Manager Account Executive
Agee's Automotive Repair SFI, LLC
& Parking
Lincoln, Nebraska Sante Fe Springs, California
DONALD D. HEUPEL, President of the HARRY W. MEGINNIS, Retired
Company Algona, Iowa Palm City, Florida
RICHARD E. MCFAYDEN, Partner THOMAS W. RASMUSSEN, Field Service
Perrigrine Partners, a Real Engineer
Estate & MSX International
Investment partnership Denver, Colorado
Professor of Business and Associate
Director of Student Services, Buena
Vista University T. WARREN THOMPSON, Commercial
Real Estate Broker
Omaha, Nebraska Wahoo, Nebraska
</TABLE>
<PAGE>
UNIVERSAL MFG. CO.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON NOVEMBER 16, 1999
The undersigned hereby constitutes and appoints Harry W. Meginnis and T.
Warren Thompson, or either of them, or any substitute appointed by either of
them, the undersigned's agents, attorneys and proxies to vote the number of
shares the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of UNIVERSAL MFG. CO. to be held at The
Sheraton Hotel, formerly the Westin Aquila Hotel, 1615 Howard Street, Omaha,
Nebraska, on the 16th day of November, 1999, at 10:00 a.m., or at any
adjournment thereof.
(1) Election of Directors
/ / FOR the following nominees, for the terms of office designated in
the Company's Proxy Statement, except those listed in the blank
space below: Richard R. Agee, Richard E. McFayden, Helen Ann McHugh,
Thomas W. Rasmussen
____________________________________________________________________
/ / WITHHOLD authority to vote for the above-listed nominees.
INSTRUCTIONS: To withhold authority to vote for any specific
nominee or nominees, the name of such nominee or nominees for whom
authority is to be withheld should be printed on the blank line
provided above. To withhold authority to vote for all of the
above-listed nominees, the box next to the word "WITHHOLD" should
be marked.
(2) Independent Shareholder's Proposal as set forth in the 1999 Proxy
Statement: / / FOR / / AGAINST
(3) In their discretion on any other matters that may properly come before
the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
AS DIRECTED. IF NO DIRECTION IS INDICATED WITH RESPECT TO PROPOSAL (1), IT
WILL BE VOTED FOR SUCH PROPOSAL. IF NO DIRECTION IS INDICATED, WITH RESPECT
TO PROPOSAL (2), IT WILL BE VOTED AGAINST SUCH PROPOSAL.
DATED: _______________, 1999.
<PAGE>
_____________________________
Signature
_____________________________
Signature
(When signing as attorney,
executor, administrator,
trustee, guardian or
conservator, or officer of a
corporation, give full title. All
joint tenants must sign.)
