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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended 01-31-00 Commission File Number 0-2865
UNIVERSAL MFG, CO.
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(Exact name of Registrant as specified in its charter)
NEBRASKA 42 0733240
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
405 Diagonal Street., P. O. Box 190, Algona, Iowa 50511
(Address of principal executive office)
Registrant's telephone number, including area code (515)-295-3557
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Not Applicable
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past ninety days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of shares outstanding as of 01-31-00 816,000
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Common
Transitional Small Business Disclosed Format (Check one):
Yes No X
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1
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UNIVERSAL MFG. CO.
FORM 10-QSB
INDEX
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PAGES
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Part I FINANCIAL INFORMATION
Item 1. Financial Statements: 3
Consolidated Balance Sheets as of January 31, 2000
(unaudited) and July 31, 1999
Consolidated Statements of Income/(Loss) and Retained 4
Earnings - Three Months ended January 31, 2000
(unaudited) and January 31, 1999 (unaudited).
Consolidated Statements of Income/(Loss) and Retained 5
Earnings - Six Months ended January 31, 2000
(unaudited) and January 31, 1999 (unaudited).
Consolidated Statements of Cash Flows - Six Months ended 6
January 31, 2000 (unaudited) and January 31, 1999 (unaudited).
Notes to Consolidated Financial Statements as of and for the Six Months 7-8
ended January 31, 2000 (unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in securities 9
Item 3. Defaults upon senior securities 9
Item 4. Submission of Matters to a vote of security holders 9
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 10
Signatures 11
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2
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ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
2000 July 31,
(unaudited) 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($1,959) $424,188
Accounts receivable 1,944,708 2,559,918
Inventories 4,919,756 3,620,018
Income taxes recoverable
Prepaid expenses 13,110 12,027
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Total current assets 6,875,615 6,616,151
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Deferred Income Taxes 277,505 277,505
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PROPERTY - At cost
Land 120,499 120,499
Buildings 1,746,702 1,352,776
Machinery and equipment 1,040,931 1,038,810
Furniture and fixtures 304,083 304,083
Trucks and automobiles 774,199 755,590
Construction-in-Progress 0 341,155
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Total property 3,986,414 3,912,913
Less accumulated depreciation (2,361,603) (2,266,225)
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Property - net 1,624,811 1,646,688
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$8,777,931 $8,540,344
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,671,961 $3,089,945
Dividends payable 0 122,400
Incometax payable 19,489 226,989
Payroll taxes 29,205 41,195
Accrued compensation 37,694 59,443
Accrued local taxes 25,340 18,625
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Total current liabilities 3,783,689 3,558,597
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MINORITY INTEREST IN SUBSIDIARY 4,965 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 4,155,415 4,143,684
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Total stockholders' equity 4,989,277 4,977,546
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$8,777,931 $8,540,344
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3
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UNIVERSAL MFG. CO.
STATEMENTS OF INCOME/(LOSS) AND RETAINED EARNINGS
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<CAPTION>
Three Months Ended
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January 31, January 31,
2000 1999
(unaudited) (unaudited)
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<S> <C> <C>
NET SALES $4,954,765 $4,267,938
COST OF GOODS SOLD 4,152,827 3,721,348
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GROSS PROFIT 801,938 546,590
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 739,177 724,304
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INCOME/(LOSS) FROM OPERATIONS 62,761 (177,714)
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OTHER INCOME:
Interest 26,479 19,722
Other income 18,027 6,209
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Total other income 44,506 25,931
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INCOME/(LOSS) BEFORE MINORITY INTEREST AND INCOME TAXES 107,267 (151,783)
MINORITY INTEREST 901
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INCOME/(LOSS) BEFORE INCOME TAXES 106,366 (151,783)
INCOME TAX EXPENSE/(BENEFIT) 41,888 (60,435)
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NET INCOME/(LOSS) 64,478 (91,348)
RETAINED EARNINGS, Beginning of period 4,213,337 4,355,275
DIVIDENDS (122,400) (122,400)
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RETAINED EARNINGS, End of period $4,155,415 $4,141,527
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PER COMMON SHARE INFORMATION:
Earnings/(Loss) per common share $0.08 ($0.11)
Dividends per common share 0.15 0.15
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4
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UNIVERSAL MFG. CO.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Six Months Ended
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January 31, January 31,
2000 1999
(unaudited) (unaudited)
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<S> <C> <C>
NET SALES $10,119,413 $9,259,667
COST OF GOODS SOLD 8,301,454 7,692,184
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GROSS PROFIT 1,817,959 1,567,483
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,470,447 1,270,624
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INCOME FROM OPERATIONS 347,512 296,859
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OTHER INCOME:
Interest 52,932 45,919
Other income 24,789 17,126
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Total other income 77,721 63,045
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INCOME BEFORE MINORITY INTEREST AND INCOME TAXES 425,233 359,904
MINORITY INTEREST 2,807
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INCOME BEFORE INCOME TAXES 422,426 359,904
INCOME TAX EXPENSE/(BENEFIT) 165,895 139,123
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NET INCOME 256,531 220,781
RETAINED EARNINGS, Beginning of period 4,143,684 4,206,346
DIVIDENDS (244,800) (285,600)
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RETAINED EARNINGS, End of period $4,155,415 $4,141,527
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PER COMMON SHARE INFORMATION:
Earnings per common share $0.31 $0.27
Dividends per common share 0.30 0.35
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5
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UNIVERSAL MFG. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
Six Months Ended
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January 31, January 31,
2000 1999
(unaudited) (unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $256,531 $220,781
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 95,378 114,490
Gain on sale of property 0 3,423
Changes in operating assets and liabilities:
Accounts receivable 615,210 266,807
Inventories (1,299,738) (655,842)
Prepaid expenses (1,083) (1,557)
Income taxes payable (207,500) (30,977)
Accounts payable 582,016 679,595
Payroll taxes (11,990) 8,571
Accrued compensation (21,749) (37,733)
Accrued local taxes 6,715 1,583
Minority interest 764
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Net cash flows from operating activities 14,554 569,141
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (73,501) (96,468)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (367,200) (326,400)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (426,147) 146,273
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 424,188 1,234,007
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ($1,959) $1,380,280
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $235,978 $170,100
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6
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UNIVERSAL MFG. CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS
ENDED JANUARY 31, 2000 (unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - The Company is engaged in the business of remanufacturing
and distribution, on a wholesale basis, of engines and other automobile parts
for Ford, Lincoln and Mercury automobiles and trucks. On October 1, 1998, the
Company signed a new sales agreement with Ford Motor Company authorizing the
Company to be a Ford authorized distributor. Remanufactured engines for non-Ford
vehicles are also marketed on a limited basis. The principal markets for the
Company's products are automotive dealers and jobber supply houses.
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 to consolidation.
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 reported period. Actual results could differ from those estimates.
INVENTORIES - Inventories are stated at the lower of cost (last -in first-out
method) or market.
DEPRECIATION, MAINTENANCE, AND REPAIRS - Property is depreciated generally as
follows:
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<CAPTION>
ASSETS DEPRECIATION METHOD LIVES
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Buildings Straight-line and declining balance 10 - 31.5 years
Mach & Equip Declining balance 7 - 10 years
Furniture & Fix. Declining balance 5 - 7 years
Trucks & Auto's Declining balance 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. The applicable property accounts are relieved of the cost and related
depreciation upon disposition. Gains or losses are recognized at the time of
disposal.
REVENUE RECOGNITION - Sales and related cost of sales are recognized primarily
upon shipment of product.
CASH EQUIVALENT - For the purposes of the Consolidated Statement of Cash Flows,
the Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents.
WARRANTY - Warranty expense is based upon receipt of warranty claims and prior
historical experience.
7
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NOTES TO FINANCIAL STATEMENTS - CONTINUED
(unaudited)
Financial Instruments - Cash and cash equivalents, accounts receivable and
accounts payable are short term in nature and the values at which they are
recorded are considered to be reasonable estimates of their fair market values.
Earnings Per Share - Earnings per share have been computed on the weighted
average number of shares outstanding. (816,000 shares.)
Company Representation - In the opinion of the Company, the accompanying
unaudited, consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the financial
position as of January 31, 2000, and the results of operations and cash flows
for the six month periods, and three month periods ending January 31, 2000 and
1999. The results of operations for these periods are not necessarily indicative
of results to be expected for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The Company
suggests that these condensed,consolidated financial statements be read in
conjunction with the consolidated financial statements and notes included in the
Company's Form 10-KSB for the fiscal year ended July 31, 1999.
EPA PROJECT COSTS
In February, 1991, the Company was served with a complaint from the United
States Environmental Protection Agency (EPA), which contained eight counts of
alleged violations of the Resource Conservation and Recovery Act of 1976 and the
Hazardous Solid Waste Amendments of 1984. The complaint alleges, among other
things, that the Company failed to adequately test and properly transport
certain residue of hazardous wastes, which it was treating at its facility. The
Company entered into a Consent Agreement and Consent Order with the EPA, dated
May 6, 1994, which provides for settlement of this complaint. This settlement
called for payment of civil penalties of $32,955 and for completion of certain
remedial projects, estimated to cost approximately $149,725. Total costs paid as
of January 31, 2000, have slightly exceeded this amount.
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. On August 6, 1998, the Company received a proposal to
study the additional contamination. This study is now complete, with the costs
being included in the above settlement amount.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Sales for the second quarter were 16% higher than the second quarter a year ago.
The strong second quarter sales resulted in a sales increase for the first six
months of the fiscal year of over 9%. Sales increases of Motorcraft branded
products and engine assemblies more than offset sales decreases of starters,
alternators, and electric fuel pumps. Engine sales increased 13%, and Motorcraft
sales increased by over $1,200,000.
Second Quarter earnings increased due to higher sales levels. Also, a year ago,
significant costs associated with becoming established as a Ford Authorized
Distributor were being incurred.
The lower level of cash and cash equivalents at the end of the quarter compared
to a year ago were due to increased inventory investment. This inventory
investment increase is the result of significantly higher prices of transmission
and engine assemblies, and of increased inventory of Motorcraft products
required to support increased sales levels.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS NONE
ITEM 2. CHANGES IN SECURITIES NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES NONE
ITEM 4. SUBMISSION OF MATTERS TO A NONE
VOTE OF SECURITY HOLDERS
9
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ITEM 5. OTHER INFORMATION
The Company encountered no significant Y2K issues.
FORWARD LOOKING STATEMENTS:
Statements herein that are not historical facts, including statements about the
Company's confidence and strategies and the Company's expectations about future
market opportunities, market demand or acceptance of the Company's products are
forward looking statements that involve risks and uncertainties. These
uncertainties include, without limitation, the effect of general economic and
market conditions, customer requirements for our products, the continuing
strength of the automotive industry, competitor pricing, maintenance of our
current momentum, weather conditions and other factors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits None
b. Reports on Form 8-K None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
Undersigned thereunto duly authorized.
Date 2-29-00 /s/ Donald D. Heupel
- ------------ -------------------------------------------------------
Donald D. Heupel, President and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-28-2000
<CASH> (1959)
<SECURITIES> 0
<RECEIVABLES> 2,235,323
<ALLOWANCES> 0
<INVENTORY> 4,919,756
<CURRENT-ASSETS> 7,153,120
<PP&E> 3,986,414
<DEPRECIATION> (2,361,603)
<TOTAL-ASSETS> 8,777,931
<CURRENT-LIABILITIES> 3,788,654
<BONDS> 0
0
0
<COMMON> 816,000
<OTHER-SE> 4,173,277
<TOTAL-LIABILITY-AND-EQUITY> 8,777,931
<SALES> 10,119,413
<TOTAL-REVENUES> 10,197,134
<CGS> 8,301,454
<TOTAL-COSTS> 8,301,454
<OTHER-EXPENSES> 1,473,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 422,426
<INCOME-TAX> 165,895
<INCOME-CONTINUING> 256,531
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256,531
<EPS-BASIC> .31
<EPS-DILUTED> 0
</TABLE>
