<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended July 31, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_______________________to_______________________
Commission file number 0-2865
UNIVERSAL MFG. CO.
(Name of small business issuer in its charter)
NEBRASKA 42-0733240
------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
405 DIAGONAL STREET, ALGONA, IOWA 50511
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 515/295-3557
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK ($1.00 PAR VALUE)
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 __
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $21,631,919
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange
Act).
Common Stock ($1.00 par value): $3,709,819.60 for October 20, 2000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Common Stock ($1.00 par value) - 816,000 shares as of October 20, 2000.
This document consists of 115 pages.
See Page 23 for Exhibit Index
Page 1 of 115 Pages
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of shareholders
to be held November 28, 2000, are incorporated by reference in Part III.
Transitional Small Business Disclosure Format (check one): Yes __; No _X_
Page 2 of 115 Pages
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT. The Company is a Nebraska corporation which
became incorporated on December 12, 1945. During the fiscal year ended July 31,
1993, the Company phased out remanufacturing of engines and increased its
remanufacturing and sale of component automotive parts to other Ford Authorized
Remanufacturers. The Company continues to market and distribute remanufactured
engines. The Company's source for such remanufactured engines is other Ford
Authorized Remanufacturers. The Company also distributes Ford branded parts and
products to Ford dealers, including, without limitation, remanufactured diesel
parts, transmissions and Ford branded car care products.
In June of 1999, 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 due to the substantial
growth in its distribution operations. The Company filed Articles of
Organization for "Universal Distribution LLC" on June 17, 1999 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.
Effective September 29, 2000, the Company finalized its negotiations
with Rainbo Oil Company of Dubuque, Iowa, to acquire their parts distribution
operations. The Company and Rainbo Oil Company formed Rainbo Company LLC, a
Nebraska limited liability company on September 21, 2000. Universal Distribution
LLC owns a fifty percent (50%) membership interest in Rainbo Company LLC and
Rainbo Oil Company owns the remaining fifty percent (50%) membership interest.
In order to capitalize Rainbo Company LLC, Universal Distribution and
Rainbo Oil Company each made initial $100,000 capital contributions. In
addition, both Universal Distribution LLC and Rainbo Oil Company loaned Rainbo
Company LLC $400,000 pursuant to Promissory Notes dated September 29, 2000. Each
Promissory Note is due and payable in full on October 1, 2005. The principal
balance of each Promissory Note accrues interest until maturity at an annual
rate of 9% and Rainbo Company LLC must pay each lender annual interest payments
commencing October 1, 2001.
The Company is the manager of Rainbo Company LLC and has entered into a
management agreement pursuant to which Rainbo Company LLC compensates the
Company for its management services.
On September 29, 2000, Rainbo Oil Company sold its parts distribution
operations to Rainbo Company LLC d/b/a Value Independent Parts (the "VIP
Division"). The acquisition of the VIP Division will add additional markets and
product lines to the Company's distribution operations including, without
limitation AC Delco, a division of General Motors and Motorcraft lines. The
purchase price for the VIP Division was approximately $5,114,714.07. The amount
and form of consideration paid were determined through arm's length
negotiations.
Financing for the transaction was provided by Firstar Bank, N.A.
("Firstar"). The Company and Rainbo Company LLC each entered into Revolving
Credit Agreements with Firstar dated September 26, 2000. The Company's Revolving
Credit Agreement allows the Company to borrow up to $3,000,000. Rainbo Company
LLC's Revolving Credit Agreement allows Rainbo Company LLC to borrow up to
$2,000,000. In order to finance the purchase price for the VIP Division, Rainbo
Company LLC made an initial draw on its line of credit for approximately
$1,800,000 and Universal Mfg. made an initial draw on its line of credit for the
balance of the purchase price less adjustments and offsets.
The collateralized obligations of the Company and Rainbo Company LLC to
Firstar under the respective Revolving Credit Agreements were evidenced by
promissory notes payable to Firstar. Each promissory note is due and payable in
full on September 30, 2001 unless extended by Firstar. The principal balance of
each promissory note accrues interest until maturity at a variable rate equal to
the prime rate announced by Firstar less 1%. The prime rate announced by Firstar
as of September 29, 2000 was 9.5% and therefore, each promissory note will
initially accrue interest an annual rate of 8.5%.
Page 3 of 115 Pages
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Each party guaranteed the obligations of the other party to Firstar and
Universal Distribution LLC guaranteed the obligations of both Rainbo Company LLC
and the Company to Firstar.
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 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. As a result of the Ford requirements, the Company also expanded its
warehouse in Peoria, Illinois to include an additional 9,000 square feet. The
cost of this expansion was approximately $360,000. Effective as of October 1,
2000, the Company is also leasing a new building in Omaha, Nebraska . The
operating lease provides for monthly base rent payments of $8,750.00, plus an
allocation of lessor operating expenses, currently $1,075. The new Omaha
warehouse is approximately 30,000 square feet and the term of the lease is
five (5) years.
(b) BUSINESS OF ISSUER. The Company is engaged in the business of
selling on a wholesale basis remanufactured automotive parts for Ford, Lincoln
and Mercury automobiles and trucks. It is a franchised remanufacturer for Ford
Motor Company. Used automotive parts are the basic raw materials. The principal
markets for the Company's products are automotive dealers, parts jobber supply
houses and other Ford Authorized Remanufacturers. The Company has refocused its
distribution efforts from parts jobber supply houses to independent warehouse
distributors and warehouses. In addition to its remanufacturing activities, the
Company also sells, under a warehouse distributorship agreement with Ford Motor
Company, clutches, pressure plates, torque converters, transmissions, engine
assemblies, remanufactured diesel parts, power steering pumps, steering gears,
starters, alternators, ABS modules and Ford branded car care products.
The Company purchases approximately 55% of its new (i.e., non-used) raw
materials and all of its car care products from Ford Motor Company. Used parts
to be remanufactured are obtained in exchange with dealers, parts jobber supply
houses and other Ford Authorized Remanufacturers, or are purchased from salvage
dealers and other used parts suppliers. Approximately 75% of such used raw
materials are obtained by such exchange with the remaining 25% being purchased.
The Company purchases approximately 100% of its completed engine assemblies from
Ford Motor Company who purchase such engine assemblies from various suppliers
throughout the country.
As an authorized distributor of remanufactured products, the Company's
competitive position is strongly related to that of Ford Motor Company. As of
April 1, 1995, the Company entered into an Authorized Remanufactured Product
Distributor Agreement with Ford Motor Company. A copy of such agreement is
attached as Exhibit 10(ii) to the Form 10-KSB for the fiscal year ended July 31,
1995. Among other things, the agreement provides that a Ford dealer may purchase
products from any Ford authorized remanufacturer and the agreement changed the
designation of the Company's status with respect to Ford Motor Company from
remanufacturer to distributor, with remanufacturing activities to be governed by
a specific annexed agreement (a copy of which is attached as part of Exhibit
10(ii) to the Form 10-KSB for the fiscal year ended July 31, 1995). The
Company's agreement with Ford Motor Company requires it to observe
specifications for remanufacturing which are provided by the engineering
department of Ford Motor Company. Under the arrangement Ford Motor Company is
permitted to inspect for quality control purposes the plant and products of the
Company. The Company attempts to maintain a rigid program of quality control to
assure conformance with the specifications of Ford Motor Company. The Company's
agreement with Ford Motor Company to operate as an authorized distributor of
remanufactured products may be cancelled by either party upon thirty days'
notice by the Company or upon five days' notice by Ford Motor Company upon the
occurrence of certain events described in the agreement.
Effective October 1, 1998, the Company signed a new sales agreement
with the Ford Customer Service Division of the Ford Motor Company. This sales
agreement establishes the Company as a Ford Authorized Distributor and requires
the Company to distribute remanufactured products, Motorcraft branded products
and certain other Ford branded products to Ford Motor Company and
Lincoln-Mercury dealerships in territories near the Company's distribution
centers according to prescribed distribution standards.
At the present time, distribution activity represents approximately 75%
of the Company's total sales. Because of Ford Motor Company's deauthorization
actions, present and anticipated, the Company's distribution activities are
expected to constitute a higher percentage of overall sales.
Page 4 of 115 Pages
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While it is currently anticipated that total sales volume will increase
as a result of Ford Motor Company's recent actions, increased competition and
the reduced margins established by Ford Motor Company could adversely affect
future earnings. The Company is in the process of implementing a strategic plan
for alternative manufacturing and remanufacturing activities in order to utilize
its existing plant and attain other opportunities for profitable operation.
The Company carries a substantial inventory of both raw materials and
finished parts. Relatively large stocks of raw material parts are required
because the Company remanufactures parts which may be as much as 30 years old.
The Company's business also requires that a range of finished engines and other
parts be maintained at each of its three warehouse facilities in order to serve
customers promptly. Each customer is entitled to return purchased items so long
as the dollar amount on return items does not exceed 5% of the customer's total
annual purchases. All sales are on an account receivable basis with payment due
by the 10th day of the following month.
The Company faces a wide range of competitors selling both new and used
engines and parts, including franchises of the other large automotive companies
and numerous independent suppliers. Competition is based upon price, service,
warranty terms and product performance.
The Company has filed a registration with the United States Patent &
Trademark Office seeking registration for the following mark as a trademark and
service mark: "Universal Remanufacturing Specialists" and design.
Under the 1979 amendments to the Clean Air Act, standards have been and
are being formulated which apply to automotive engines as newly manufactured.
Such regulatory standards have affected and will continue to affect the
Company's business by changing the design of the products which the Company
remanufactures. Refer to Item 3--Legal Proceedings for information with respect
to the implementation of certain remedial projects which include the separation,
removal and transportation of hazardous wastes related primarily to residues
from cleaning operations in response to a complaint against the Company filed by
the EPA.
As of July 31, 1999, the Company had 68 employees, all which were
full-time employees. In May of 1993 the Company entered into a three year
agreement with the United Auto Workers Union ("UAW"), which represents the
Company's production employees. Effective May 5, 1996, the Company entered into
a new three year agreement with the UAW. The agreement calls for 2.6% hourly
wage increases of $.25, $.27 and $.29 on May 5 of each year of the agreement. By
mutual consent, the agreement has been extended for one year with no changes and
therefore, expires on May 5, 2001.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate home offices are located at 405 Diagonal
Street, Algona, Iowa 50511, phone number (515) 295-3557. This property also is
the location of the Company's manufacturing plant. The property consists of
approximately 87,000 square feet. The location and general description of the
principal plants and warehouses of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION GENERAL DESCRIPTION OWNED OR LEASED SQUARE FOOTAGE
-------- ------------------- --------------- --------------
<S> <C> <C> <C>
Algona, Iowa Manufacturing Plant Owned 87,000
Des Moines, Iowa Warehouse Leased 15,000
Peoria, Illinois Warehouse Owned 19,000
Omaha, Nebraska Warehouse Owned 14,000
Omaha, Nebraska Warehouse Leased 30,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
On February 25, 1991, the Company was served with a complaint,
compliance order and notice of opportunity for hearing from the United States
Environmental Protection Agency ("EPA") Region VII, Kansas City, Kansas. The
complaint contained eight counts of alleged violations of the Resource
Conservation and Recovery Act of 1976 and the Hazardous Waste Amendments of 1984
and sought to impose civil penalties against the Company totaling $511,535.
On May 6, 1994, the Company entered into a Consent Agreement and
Consent Order (the "Agreement") with the EPA. The Agreement settled all issues
arising under the 1991 complaint. The Company approved the Agreement without
admitting the allegations of the complaint and solely to avoid further costs of
litigation.
Page 5 of 115 Pages
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The Agreement imposed an immediate civil penalty of $32,955 which has
been paid by the Company. It also imposed an additional penalty of $176,374,
which has been deferred by the EPA pending the Company's performance and EPA's
approval of a Supplemental Environmental Project (the "Project") relating to the
removal of sludge from, and cleaning of, four wastewater collection pits at the
Company's manufacturing facility in Algona, Iowa. The terms of the Agreement
called for the entire deferred penalty to be offset and permanently waived upon
certain conditions, including completion of the Project to the satisfaction of
the EPA and that actual costs of the Project exceed or equal the $149,725
estimate of the Company's engineering firm. In the event that the Company's
actual costs for the Project are less than $149,725, the Company will be
required to pay an additional penalty equal to 62% of the difference between
$149,725, and the amount expended on the Project.
During July and August of 1994 the Company undertook the Project and
incurred costs of $91,076, or $58,649 less than the engineer's estimate,
potentially subjecting the Company to a deferred penalty of $36,362. After the
sludge was removed, however, additional contamination was found in the largest
of the wastewater collection pits. On June 10, 1998, the Company received notice
from the EPA authorizing submission of a detailed technical proposal for an
additional Project to ascertain information concerning environmental conditions
at the Company's Plant. The EPA notice stated that if approved, the cost of the
additional Project work could be used to offset the remaining approximately
$37,000 in deferred penalties owed by the Company to EPA under the Agreement. On
August 6, 1998, the Company's consultant submitted a proposed Project plan to
the EPA detailing soil sampling work and groundwater studies to be conducted
over a 48-week period at an estimated cost of $62,000, yielding an anticipated
$38,840 in after tax costs to the Company for offset against the remaining
deferred penalty.
The EPA approved the consultant's proposal on September 11, 1998, and
the work was completed in November of 1999 within budget. The consultant's
report to EPA disclosed chlorinated solvent contamination in the soil and
groundwater only in the immediate area of "Pit D." The consultant recommended
conversion of "Pit D" to a groundwater sump for removal and treatment of
contaminated groundwater and continued monitoring of groundwater on the
Company's property to detect any migration of the contamination. The consultant
recommended against removal of contaminated soils due to cost and access
problems. To date the EPA has not responded to the consultant's recommendations,
and the Company has no information concerning the cost or extent of any further
work that EPA may require.
The Agreement also required the Company to proceed with preparation and
implementation of a closure plan for certain solid waste treatment and storage
facilities at its manufacturing facility in Algona, Iowa. This closure was
completed by the Company under EPA supervision in February of 1995 at a cost of
approximately $20,000. On July 25, 1995, the EPA determined that the closure met
all regulatory requirements and released $64,796 in deposits which the Company
previously was required to maintain for the costs of closure and for liability
assurance purposes under the EPA regulations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No response required.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 20, 2000, there were 199 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>
October 22, 1999 $.15 September 22, 1998 $.20
January 18, 2000 .15 January 19, 1999 .15
April 18, 2000 .15 April 20, 1999 .15
July 18, 2000 .15 July 20, 1999 .15
-------------------------------------------------------------------
2000 TOTAL $.60 1999 TOTAL $.65
</TABLE>
Page 6 of 115 Pages
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In order for the Company to service the debt incurred in connection
with the acquisition of the Value Independent Parts division, there can be no
assurance that the Company will continue to pay dividends of equal value or that
the Company will pay any dividends on its common stock during the foreseeable
future. Dividends of the Company are payable at the discretion of the Company's
Board of Directors, subject to the provisions of the Nebraska Business
Corporation Act and will be dependent on earnings of the Company and its
subsidiaries, its financial requirements and other factors.
The high and low bid and asked prices for the Company's common stock
during the last two fiscal years are shown in the following table:
<TABLE>
<CAPTION>
HIGH LOW
------------------------------------------------------------------
CALENDAR QUARTERS BID ASKED BID ASKED
<S> <C> <C> <C> <C>
3rd Quarter 1998 10.50 11.125 9 9.75
4th Quarter 1998 10.50 11.25 9.25 9.75
1st Quarter 1999 9.75 10.125 6.375 8
2nd Quarter 1999 6.75 8.50 4.4375 4.625
3rd Quarter 1999 6 6.75 5 5.625
4th Quarter 1999 6 6.625 5.3758 5.75
1st Quarter 2000 7.125 7.50 5.50 5.75
2nd Quarter 2000 7.125 7.50 6.25 6.50
</TABLE>
Information concerning stock prices for fiscal year 2000 and 1999 has
been obtained from The NASDAQ Stock Market, Inc. and from Kirkpatrick, Pettis,
Smith, Polian, Inc. which acts as a market maker in the Company's stock. The
above quotations may reflect inter-dealer prices and may not reflect retail
mark-up, mark-down or commission or necessarily represent actual transactions.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
In fiscal 2000, Company sales increased 11% due to increases in sales
of remanufactured engine assemblies and Motorcraft branded products. In fiscal
1999, 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.
Remanufactured engine unit sales in fiscal year 2000 were 3782, which
represents an increase of 690 units. Engine sales in fiscal 1999 were 3092.
Transmission unit sales decreased by 671 in fiscal year 2000 to 4229 units.
Transmission sales in fiscal 1999 were 4900, an increase of 781 over the
previous year.
Motorcraft branded parts sales in fiscal 2000 were $2,820,000, compared
to $896,000 the previous year. Fiscal 1999 was the first year of sales of
Motorcraft branded parts. Unit sales were 460,683 compared to 136,805 units the
previous year.
Sales of Ford distribution products in fiscal 2000 were $18,511,506
compared to $10,605,806 in fiscal 1999. This increase was due to sales growth of
Motorcraft branded products and more product lines being included in the
distribution program. Sales to other Ford Authorized Remanufacturers decreased
to $1,317,983 in fiscal 2000 from $2,539,721 in fiscal 1999. 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.
A three year agreement between the Company and the United Auto Workers,
which represents the production employees, expired in May 1999. However, in May
1999 and again in May 2000, the agreement was extended an additional year by
mutual consent of the parties with no changes.
Interest income for fiscal 2000 was $35,778; in fiscal 1999 was
$71,787; and in fiscal 1998 it was $43,213. Investment amounts were generally
lower during fiscal 2000 than during fiscal 1999, and available interest rates
were approximately the same. Investment amounts were generally higher during
fiscal 1999 than during fiscal 1988, and available investment rates were
approximately the same.
Page 7 of 115 Pages
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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 the last two fiscal years is the result
of the sales mix changing to more Ford Remanufactured distribution products. The
increased selling, general and administrative expenses were due to higher
distribution costs incurred to meet the standards of the Ford distribution
program.
<TABLE>
<CAPTION>
GROSS PROFIT SELLING, GENERAL, AND
AS PERCENTAGE ADMINISTRATIVE EXPENSES AS
FISCAL YEAR OF NET SALES PERCENTAGE OF NET SALES
--------------------------------------------------------------
<S> <C> <C>
1996 21.7% 11.4%
1997 20.8% 10.8%
1998 19.8% 11.0%
1999 15.8% 13.7%
2000 17.3% 14.3%
</TABLE>
Earnings per share of common stock decreased $.02 due to a higher tax
deferral last fiscal year and to increased selling expenses. Earnings per share
of common stock decreased $.77 in fiscal 1999 also due to a lower gross margin
and increased selling expenses. Earnings per share of common stock decreased
$.07 in fiscal 1998 due to lower gross margin and increased selling, general and
administrative expenses, including, without limitation, the increased cost of
gasoline during fiscal year 2000.
The ratio of current assets to current liabilities of 1.68 to 1 is
lower than the ratio of 1.86 a year ago. However, most of the difference is
attributable to the deferred purchase terms of higher inventories of Ford
distribution and Motorcraft branded products, so reasonable liquidity continues
to be maintained. Inventories in fiscal 2000 were higher than in fiscal 1999.
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>
2000 $ 336,756
1999 $ 424,188
1998 $ 1,234,007
</TABLE>
It is anticipated that certain capital expenditures and acquisitions
will be made to increase the current level of business and service. Expansion of
distribution programs will require investment in additional inventories.
Management believes that some debt will be required to finance additional
inventories, future capital needs, and business acquisitions.
The process of incorporating the changes 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 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, and 2000. The total
expenditures exceeded the accrual amount.
The Company had no bank borrowings during the fiscal year ended July
31, 2000; however, the Company borrowed approximately $5,000,000 from Firstar
Bank, N.A. as more fully described below in order to finance the acquisition of
Rainbo Oil Company's parts distribution operations.
Page 8 of 115 Pages
<PAGE>
The Company experienced no year 2000 ("Y2K") problems on or after
January 1, 2000 and does not anticipate any future material problems related to
Y2K. 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; however, the Company did not incur significant identifiable
costs as a result of the upgrade of its internal system to year 2000 compliance.
The Company did not incur any other significant costs related to Y2K.
ITEM 7. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF JULY 31, 2000 AND 1999 AND CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED JULY 31, 2000 AND INDEPENDENT AUDITORS' REPORT
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, 2000 and 1999 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, 2000. 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 auditing standards generally
accepted in the United States of America. 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,
2000 and 1999 and the results of its operations and its cash flows for each of
the three years in the period ended July 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
/s/Deloitte & Touche, LLP
September 8, 2000
Page 9 of 115 Pages
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JULY 31, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 336,756 $ 424,188
Accounts receivable 3,442,410 2,559,918
Inventories 4,310,809 3,620,018
Prepaid expenses 14,658 12,027
Deferred income taxes 306,875 277,505
------------ ------------
Total current assets 8,411,508 6,893,656
------------ ------------
PROPERTY:
Land 120,499 120,499
Buildings 1,746,702 1,352,776
Machinery and equipment 1,040,931 1,038,810
Furniture and fixtures 308,916 304,083
Trucks and automobiles 775,065 755,590
Construction in progress 341,155
------------ ------------
Total property 3,992,113 3,912,913
Less accumulated depreciation (2,453,021) (2,266,225)
------------ ------------
Property - net 1,539,092 1,646,688
------------ ------------
$ 9,950,600 $ 8,540,344
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,661,174 $ 3,089,945
Accrued payroll taxes 23,471 41,195
Accrued compensation 137,058 59,443
Accrued local taxes 26,684 18,625
Income taxes payable 33,647 226,989
Dividends payable 122,400 122,400
------------ ------------
Total current liabilities 5,004,434 3,558,597
------------ ------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 7,591 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 4,104,713 4,143,684
------------ ------------
Total stockholders' equity 4,938,575 4,977,546
------------ ------------
$ 9,950,600 $ 8,540,344
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 10 of 115 Pages
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE YEARS ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
NET SALES $ 21,631,919 $ 19,511,446 $ 19,372,976
COST OF GOODS SOLD 17,879,543 16,438,008 15,532,466
------------ ------------ ------------
GROSS PROFIT 3,752,376 3,073,438 3,840,510
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,100,893 2,666,512 2,132,669
------------ ------------ ------------
INCOME FROM OPERATIONS 651,483 406,926 1,707,841
OTHER INCOME (EXPENSE):
Interest and other income 34,856 71,794 57,444
Gain on sales of property 159,535 4,589
------------ ------------ ------------
Total other income (expense) 34,856 231,329 62,033
------------ ----------- ------------
INCOME BEFORE MINORITY INTEREST AND INCOME TAXES 686,339 638,255 1,769,874
MINORITY INTEREST 5,606 3,201
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 680,733 635,054 1,769,874
INCOME TAXES 230,104 167,316 680,221
------------ ------------ ------------
NET INCOME 450,629 467,738 1,089,653
RETAINED EARNINGS, BEGINNING OF YEAR 4,143,684 4,206,346 3,851,093
LESS CASH DIVIDENDS - ($.60, $.65, and $.90 per
share in 2000, 1999, and 1998, respectively) 489,600 530,400 734,400
------------ ------------ ------------
RETAINED EARNINGS, END OF YEAR $ 4,104,713 $ 4,143,684 $ 4,206,346
============ ============ ============
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.55 $ 0.57 $ 1.34
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
Page 11 of 115 Pages
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 450,629 $ 467,738 $ 1,089,653
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation 196,921 236,296 196,186
Deferred income taxes (29,370) (253,317) 20,020
Gain on sales of property (159,535) (4,589)
Minority interest in subsidiary 3,390 3,201
Changes in:
Accounts receivable (882,492) (418,819) (256,182)
Inventories (690,791) (1,008,057) (199,249)
Income taxes receivable 23,545 (365)
Prepaid expenses (2,631) 7,771 51,131
Accounts payable 1,571,229 890,201 780,019
Accrued payroll taxes (17,724) 13,367 2,884
Accrued compensation 77,615 (22,052) (6,136)
Accrued local taxes 8,059 1,055 (4,699)
Income taxes payable (193,342) 226,989 --
------------ ------------ ------------
Net cash flows from operating activities 491,493 8,383 1,668,673
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property 203,116 19,050
Purchases of property (89,325) (451,118) (559,905)
------------ ------------ ------------
Net cash flows from investing activities (89,325) (248,002) (540,855)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (489,600) (571,200) (775,200)
Proceeds from issuance of minority interest
in subsidiary 1,000
------------ ------------ ------------
Net cash flows from financing activities (489,600) (570,200) (775,200)
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (87,432) (809,819) 352,618
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 424,188 1,234,007 881,389
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 336,756 $ 424,188 $ 1,234,007
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for income taxes $ 452,854 $ 170,099 $ 662,445
============ ============ ============
</TABLE>
See notes to financial statements.
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
As discussed in Note 3, during 1999 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.
Page 12 of 115 Pages
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JULY 31, 2000
--------------------------------------------------------------------------------
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 Motor Company (Ford)
vehicles. Remanufactured engines for non-Ford vehicles are also marketed on a
limited basis. During the year ended July 31, 1999 and continuing throughout the
year ended July 31, 2000, 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 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 other automotive parts
distributors located throughout the United States.
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 debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES - Inventories are stated at the lower of last-in, first-out
(LIFO) cost 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.
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
Page 13 of 115 Pages
<PAGE>
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).
DERIVATIVE INSTRUMENTS - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement, as amended, was adopted by the Company as of August 1, 2000 with no
material impact on its financial position or results of operations.
NEWLY-ISSUED STAFF ACCOUNTING BULLETIN - In December 1999, the
Securities and Exchange Commission released Staff Accounting Bulletin No. 101
(SAB No. 101), "Revenue Recognition in Financial Statements," which provides
additional guidance on revenue recognition criteria and related disclosure
requirements. Implementation of SAB No. 101 is required no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999, but is
effective retroactively to the beginning of that fiscal year. The Company does
not believe implementation of SAB No. 101 will have a material impact on its
financial position or results of operations.
2. INVENTORIES
The major classes of inventory are as follows as of July 31:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Product cores $ 1,791,674 $ 2,286,891
Raw materials 332,143 315,861
Finished engines 342,797 287,779
Finished small parts 2,409,929 1,351,866
------------ ------------
4,876,543 4,242,397
Obsolescence reserve (565,734) (622,379)
------------ ------------
$ 4,310,809 $ 3,620,018
============ ============
</TABLE>
If inventories were valued at the lower of first-in, first-out (FIFO) cost or
market, inventories would have been $7,473,519 and $6,601,714 at July 31, 2000
and 1999, 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 receivable in annual installments of $6,401,
including interest at 5.82%, through August 1, 2004. The balance of the note as
of July 31, 2000, $27,096, has been netted against minority interest in the
accompanying consolidated balance sheet.
Page 14 of 115 Pages
<PAGE>
4. INCOME TAXES
The provision for income taxes consists of the following for the years
ended July 31:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Current income taxes $ 259,474 $ 420,633 $ 660,201
Deferred income taxes (29,370) (253,317) 20,020
------------ ------------ ------------
Income tax provision $ 230,104 $ 167,316 $ 680,221
============ ============ ============
</TABLE>
Deferred tax assets are comprised of the following at July 31:
2000 1999
Inventory obsolescence reserve $ 226,294 $ 248,951
Depreciation (18,288) (24,384)
Uniform inventory capitalization 29,193 26,299
Vacation pay accruals 36,557 16,956
Other 33,119 9,683
------------ ------------
Deferred income taxes $ 306,875 $ 277,505
============ ============
A reconciliation between statutory and effective tax rates is as
follows for the years ended July 31:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Income before income taxes $ 680,733 $ 635,054 $ 1,769,874
Statutory rate 34% 34% 34%
------------ ------------ ------------
Income taxes at statutory rates 231,449 215,918 601,757
Tax effect of:
State taxes 40,954 48,899 130,074
State tax refunds - prior years (27,059) (50,000)
Other (15,240) (47,501) (51,610)
------------ ------------ ------------
Total income taxes $ 230,104 $ 167,316 $ 680,221
============ ============ ============
</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 Company's
discretion. Total expenses under the plan were $17,890, $29,498, and $42,790 for
the years ended July 31, 2000, 1999, and 1998, respectively.
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.
Page 15 of 115 Pages
<PAGE>
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 $149,725 liability.
As of July 31, 2000, all clean up activities have been completed and
the Company is unaware of any further EPA requirements related to this matter.
7. CREDIT ARRANGEMENTS
The Company has a $1,000,000 line of credit with a local bank. Advances
under this line of credit bear interest at an annual rate of 9%. The line of
credit expires on November 1, 2000. At July 31, 2000, there were no outstanding
borrowings under this facility.
8. OPERATING LEASES
During 1999, the Company began leasing a warehouse and certain vehicles
under noncancellable operating leases. The warehouse 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. The vehicle leases provide
for monthly payments ranging from $880 to $913 through April 2002. Rent expense
was $112,705 and $67,968 for the years ended July 31, 2000 and 1999,
respectively.
Future minimum lease payments under noncancellable operating leases are
as follows as of July 31, 2000:
<TABLE>
<CAPTION>
Year ending July 31:
<S> <C>
2001 $ 112,705
2002 48,256
------------
$ 160,961
============
</TABLE>
Additionally, subsequent to July 31, 2000, the Company entered into a
new warehouse lease which requires base rental payments of $8,750 through
September 30, 2003, increasing to $10,000 per month through September 30, 2005.
The Company is also required to pay an allocation of lessor operating expenses,
currently $1,075 per month, throughout the term of the lease.
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 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 and other automotive parts distributors located throughout
the United States.
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 years ended July 31, 2000 and
1999, is presented below. Information regarding the distribution segment is from
June 30, 1999 forward.
Page 16 of 115 Pages
<PAGE>
<TABLE>
<CAPTION>
2000
------------------------------------------------
MANUFACTURING DISTRIBUTION TOTAL
<S> <C> <C> <C>
Revenues $2,033,346 $19,598,573 $21,631,919
Interest income 14,005 21,773 35,778
Depreciation expense 196,921 196,921
Income tax expense 40,610 189,494 230,104
Net income 79,529 371,100 450,629
Total assets 2,392,369 7,558,231 9,950,600
Purchases of property 89,325 89,325
<CAPTION>
1999
------------------------------------------------
MANUFACTURING DISTRIBUTION TOTAL
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>
10. SUBSEQUENT EVENT
Effective August 31, 2000, the Company signed an agreement to form a
limited liability company (Formation Agreement) with Rainbo Oil Company (Rainbo)
and Paul Fahey, president and majority shareholder of Rainbo. The Formation
Agreement establishes the parties interest to organize a limited liability
company to be known as Rainbo Company LLC d/b/a/ Value Independent Parts (VIP).
The Company is to be formed for the purpose of purchasing and operating the
automobile parts distribution division of Rainbo. The Formation Agreement
contains a number of conditions to closing, including the successful
negotiation, execution and closing of an asset purchase agreement for the VIP
division and obtaining related financing.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No response required.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following information set forth in the Company's proxy statement
for its annual meeting of shareholders to be held November 28, 2000, is
incorporated by reference:
"Election of Directors" - Pages 2, 3 and 4.
"Management" - Page 5.
"Section 16(a) Beneficial Ownership Reporting
Compliance" - Pages 8-9 .
ITEM 10. EXECUTIVE COMPENSATION
The following information set forth in the Company's proxy statement
for its annual meeting of shareholders to be held November 28, 2000, is
incorporated by reference:
"Compensation of President and Directors" - Page 6.
Page 17 of 115 Pages
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information set forth in the Company's proxy statement
for its annual meeting of shareholders to be held November 28, 2000, is
incorporated by reference:
"Ownership of Voting Securities by Directors and Nominees" - Pages
7 and 8.
"Principal Holders of Voting Securities" - Page 9.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information set forth in the Company's proxy statement
for its annual meeting of shareholders to be held November 28, 2000, is
incorporated by reference:
"Certain Transactions" - Page 8
"Indebtedness of Management" - Page 8.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession.
(i) Agreement to Form Limited Liability Company
dated August 31, 2000 by and between
Universal Mfg. Co., Universal Distribution
LLC, Rainbo Oil Company and Paul Fahey. See
pages 25-32.
The following is a list of omitted exhibits,
schedules and other attachments which the
Registrant agrees to furnish supplementally
to the Commission upon request:
Exhibits to Agreement to Form
Limited Liability Company:
A Articles of Organization
for Rainbo Company LLC
B Operating Agreement for
Rainbo Company LLC
C Promissory Note payable to
Universal Distribution LLC
D Promissory Note payable to
Rainbo Oil Company
E Asset Purchase Agreement
F Management Agreement
Schedules to Agreement to Form
Limited Liability Company:
3.1(i) Lease Agreements
3.1(k) Key Employees
4.1 Articles and Bylaws of
Rainbo Oil Company
(ii) Asset Purchase Agreement, dated as of
September 29, 2000 by and between Rainbo
Company LLC and Rainbo Oil Company. See
pages 33-50.
The following is a list of omitted exhibits,
schedules and other attachments which the
Registrant agrees to furnish supplementally
to the Commission upon request:
Exhibits to Asset Purchase Agreement:
1.3 Bill of Sale
2.1 Assumption Agreement
3.4 Tax Allocation
8.3 Noncompetition Agreement
9.2 Buyer's Closing Certificate
9.3 Buyer's Certified Resolutions
9.6(a) Assignment and Assumption
Agreement
10.2 Seller's Closing Certificate
10.3 Seller's Certified Resolutions
Page 18 of 115 Pages
<PAGE>
Schedules to Asset Purchase Agreement:
1.1 Equipment
2.1 Assumed Liabilities
5.4 Undisclosed Liabilities
5.5 Absence of Material Changes
5.7 Litigation and Claims
5.9 Inventory
5.10 Customers
5.11 Suppliers, Dealers and
Distributors
5.14 Insurance
5.15 Employees
5.16 Benefit Plans
5.17 Material Contracts
5.18 Owned Property
5.19 Intellectual Property
8.6 Key Employees
10.8 Lease Agreements
10.11(f) Assignment of Intellectual
Property
(3)(i) Articles of Incorporation. The Articles of
Incorporation of the Company are incorporated by
reference to the Company's Annual Report on Form 10-K
for the fiscal year ended July 31, 1980, Page 26, to
the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1986, Pages 15 to 16 and
to the Company's Annual Report for the fiscal year
ended July 31, 1987, Pages 15 to 16.
(ii) Bylaws. The Bylaws of the Company are incorporated by
reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended July 31, 1993, Pages
12-24.
(4) Instruments defining the rights of security holders,
including indentures. None required.
(9) Voting trust agreement. None required.
(10) Material contracts.
(i) The Company's Rent Agreement with Dealers
Manufacturing Co., dated May 26, 1993, is
incorporated by reference to the Company's
Annual Report on Form 10-KSB for the fiscal
year ended July 31, 1993, Pages 25-29.
(ii) Effective October 1, 1998, the Company
entered into a Ford Authorized Distributor
Sales Agreement and Battery Distributor
Addendum is incorporated by reference to the
Company's Annual Report on Form 10-KSB for
the fiscal year ended July 31, 1999, Pages
12-37.
(iii) Management Agreement between the Company and
Rainbo Company LLC dated September 29, 2000
a copy of which is attached hereto. See
pages 51-52.
(iv) Revolving Credit Agreement dated September
26, 2000 between the Company and Firstar
Bank, N.A. a copy of which is attached
hereto. See pages 53-60. The following is a
list of omitted exhibits, schedules and
other attachments which the Registrant
agrees to furnish supplementally to the
Commission upon request:
Schedule 2.5 Environmental Matters
Schedule 2.7 Restrictions on
Indebtedness
Schedule 2.8 Restriction on Liens
Schedule 2.9 Restrictions on
Indebtedness
Page 19 of 115 Pages
(v) Revolving Credit Note dated September 26,
2000 payable by the Company to Firstar Bank,
N.A. a copy of which is attached hereto. See
pages 61-63.
(vi) Revolving Credit Agreement dated September
26, 2000 between the Rainbo Company LLC and
Firstar Bank, N.A. a copy of which is
attached hereto. See pages 64 - 72.
The following is a list of omitted exhibits,
schedules and other attachments which the
Registrant agrees to furnish supplementally
to the Commission upon request:
Schedule 2.5 Environmental Matters
Schedule 2.7 Restrictions on
Indebtedness
Schedule 2.8 Restriction on Liens
Schedule 2.9 Restrictions on
Indebtedness
(vii) Revolving Credit Note dated September 26,
2000 payable by the Company to Firstar Bank,
N.A. a copy of which is attached hereto. See
pages 73-75.
(viii) Business Security Agreement dated September
26, 2000 between the Company and Firstar
Bank, N.A. a copy of which is attached
hereto. See pages 76-80.
The following is a list of omitted exhibits,
schedules and other attachments which the
Registrant agrees to furnish supplementally
to the Commission upon request:
Schedule A Chief Executive Office
and Collateral Locations
List
Schedule 2.3 Ownership of Collateral
Schedule 2.9 Environmental Matters
(ix) Business Security Agreement dated September
26, 2000 between the Rainbo Company LLC and
Firstar Bank, N.A. a copy of which is
attached hereto. See pages 81-85.
The following is a list of omitted exhibits,
schedules and other attachments which the
Registrant agrees to furnish supplementally
to the Commission upon request:
Schedule A Chief Executive Office
and Collateral Locations
List
Schedule 2.3 Ownership of Collateral
Schedule 2.9 Environmental Matters
(x) Business Security Agreement dated September
26, 2000 between Universal Distribitution
LLC and Firstar Bank, N.A. a copy of which
is attached hereto. See pages 86-90.
(xi) Continuing Guaranty (Unlimited) dated
September 26, 2000 by the Company to Firstar
Bank, N.A. for the obligations of Rainbo
Company LLC to Firstar Bank, N.A. a copy of
which is attached hereto. See pages 91-93.
(xii) Continuing Guaranty (Unlimited) dated
September 26, 2000 by the Universal
Distribution LLC to Firstar Bank, N.A. for
the obligations of Rainbo Company LLC to
Firstar Bank, N.A. a copy of which is
attached hereto. See pages 94-96.
Page 20 of 115 Pages
<PAGE>
(xiii) Continuing Guaranty (Unlimited) dated
September 26, 2000 by Universal Distribution
LLC to Firstar Bank, N.A. for the
obligations of the Company to Firstar Bank,
N.A. a copy of which is attached hereto. See
pages 97-99.
(xiv) Continuing Guaranty (Unlimited) dated
September 26, 2000 by Rainbo Company LLC to
Firstar Bank, N.A. for the obligations of
the Company to Firstar Bank, N.A. a copy of
which is attached hereto. See pages 100-102.
(xv) Limited Guaranty dated September 29, 2000 by
the Company to Rainbo Oil Company for the
obligations of Rainbo Company LLC to Rainbo
Oil Company a copy of which is attached
hereto. See pages 103-104.
(xvi) Debt and Security Interest Subordination
Agreement dated September 26, 2000 between
Universal Distribution LLC and Firstar Bank,
N.A. subordinating obligations owed by
Rainbo Company LLC to Universal Distribution
LLC a copy of which is attached hereto. See
pages 105-108.
(11) Statement re: computation of per share earnings. None
required.
(13) Annual or quarterly reports, Form 10-Q. None
required.
(16) Letter on change in certifying accountant. None
required.
(18) Letter on change in accounting principles. None
required.
(21) Subsidiaries of the registrant. See page 109.
(22) Published report regarding matters submitted to vote.
None required.
(23) Consent of experts and counsel. None required.
(24) Power of attorney. None required.
(27) Financial Data Schedule. See pages 110-113.
(99) Additional Exhibits.
(i) Universal Mfg. Co. Form 8-K filed September
7, 2000 and incorporated by reference.
(ii) Universal Mfg. Co. Form 8-K filed October
12, 2000 and incorporated by reference.
(iii) Universal Mfg. Co. national press release
issued October 17, 2000 describing the
creation of Rainbo Company LLC and the
Company's partnership with Rainbo Oil
Company a copy of which is attached hereto.
See pages 114-115.
(b) Form 8-Ks filed during the fiscal year ended July 31, 1999.
(1) The Company filed a current report on Form 8-K on
September 7, 2000 reporting the execution of an
Agreement to Form Limited Liability Company between
the Company, Universal Distribution LLC, Rainbo Oil
Company and Paul Fahey.
(2) The Company filed a current report on Form 8-K on
October 12, 2000 reporting the formation of Rainbo
Company LLC and the Company's partnership with Rainbo
Oil Company to form the new entity and the purchase
by Rainbo Company LLC of Rainbo Oil Company's auto
parts distribution division.
Page 21 of 115 Pages
<PAGE>
SIGNATURES
In accordance with Section 13 of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNIVERSAL MFG. CO.
By: /s/ Donald D. Heupel By: /s/ T. Warren Thompson
--------------------------------------- --------------------------
Donald D. Heupel, President, Chief T. Warren Thompson,
Executive Officer, Chief Financial Secretary and Director
Officer and Director
Date: October 27, 2000 Date: October 27, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant in the capacities and on the
dates indicated.
By: Date: October 27, 2000
------------------------------------
Richard R. Agee/Director
By: Date: October 27, 2000
------------------------------------
Richard E. McFayden/Director
By: Date: October 27, 2000
------------------------------------
Helen Ann McHugh/Director
By: Date: October 27, 2000
------------------------------------
Daniel H. Meginnis/Director
By: Date: October 27, 2000
------------------------------------
Thomas W. Rasmussen/Director
Page 22 of 115 Pages
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Page
No. Description Method of Filing Location
------- ----------- ---------------- ------------
<S> <C> <C> <C>
(2)(i) Agreement to Form Filed herewith. 25-32
Limited Liability
Company dated August
31, 2000.
(2)(ii) Asset Purchase Filed herewith. 32-50
Agreement dated
September 29, 2000.
3(i) Articles of
Incorporation Incorporated by reference to the Company's --
Annual Report on Form 10-K for the fiscal
year ended July 31, 1980, Page 26, to the
Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1986, Pages
15-16 and to the Company's Annual Report
for the fiscal year ended July 31, 1987,
Pages 15-16.
3(ii) Bylaws Incorporated by reference to the Company's --
Annual Report on Form 10-KSB for the
fiscal year ended July 31, 1993, Pages
12-24.
10(i) The Company's Rent Incorporated by reference to the Company's --
Agreement with Dealers Annual Report on Form 10-KSB for the
Manufacturing Co., fiscal year ended July 31, 1993, Pages
dated May 26, 1993 25-29.
10(ii) Ford Authorized Incorporated by reference to the Company's --
Distributor Agreement Annual Report on Form 10-KSB for the
effective October 1, fiscal year ended July 31, 1999, Pages ____
1998
10(iii) Management Agreement Filed herewith. 51-52
dated September 29,
2000.
10(iv) Revolving Credit Filed herewith. 53-60
Agreement dated
September 26, 2000
(Universal Mfg. Co.)
10(v) Revolving Credit Note Filed herewith. 61-63
dated September 26,
2000 (Universal Mfg.
Co.)
10(vi) Revolving Credit Filed herewith. 64-72
Agreement dated
September 26, 2000
(Rainbo Company LLC)
10(vii) Revolving Credit Note Filed herewith. 73-75
dated September 26,
2000 (Rainbo Company
LLC)
10(viii) Business Security Filed herewith. 76-80
Agreement dated
September 26, 2000
(Universal Mfg. Co.)
10(ix) Business Security Filed herewith. 81-85
Agreement dated
September 26, 2000
(Rainbo Company LLC)
Page 23 of 115 Pages
<PAGE>
<CAPTION>
Sequentially
Numbered
Exhibit Page
No. Description Method of Filing Location
------- ----------- ---------------- ------------
<S> <C> <C> <C>
10(x) Business Security Filed herewith. 86-90
Agreement dated
September 26, 2000
(Universal Distribution
LLC)
10(xi) Continuing Guaranty Filed herewith 91-93
(Unlimited) for Rainbo
Company LLC dated
September 26, 2000.
(Universal Mfg. Co.)
10(xii) Continuing Guaranty Filed herewith 94-96
(Unlimited) for Rainbo
Company LLC dated
September 26, 2000.
(Universal Distribution
LLC)
10(xiii) Continuing Guaranty Filed herewith 97-99
(Unlimited) for
Universal Mfg. Co.
dated September 26,
2000. (Universal
Distribution LLC)
10(xiv) Continuing Guaranty Filed herewith 100-102
(Unlimited) for
Universal Mfg. Co.
dated September 26,
2000. (Rainbo Company
LLC)
10(xv) Limited Guaranty by the Filed herewith. 103-104
Company dated September
29, 2000.
10(xvi) Debt and Security Filed herewith. 105-108
Interest Subordination
Agreement dated
September 26, 2000.
(Universal Distribution
LLC)
21 Subsidiaries of Filed herewith 109
Registrant
27 Financial Data Schedule Filed herewith. 110-113
99(i) Form 8-K filed Incorporated by reference to the Form 8-K --
September 7, 2000. filed September 7, 2000.
99(ii) Form 8-K filed October Incorporated by reference to the Form 8-K --
12, 2000. filed October 12, 2000.
99(iii) Press Release issued Filed herewith. 114-115
October 17, 2000.
</TABLE>
Page 24 of 115 Pages
