<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-12
Universal Mfg. Co.
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(Name of Registrant as Specified In Its Charter)
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(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:
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/ / 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:
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(4) Date Filed:
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<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 28, 2000 at 9:30 a.m. for the
election of members of the Board of Directors for the ensuing year and for the
transaction of such other business as may properly come before the meeting.
The date of record for voting at this 2000 Annual Meeting was the close of
business on September 20, 2000. 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 2000 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 28, 2000
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 28, 2000, 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 9:30 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, 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 20, 2000, 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 20,
2000. The 2000 annual report of the Company to its shareholders is being mailed
to shareholders with this proxy statement.
October 20, 2000.
<PAGE>
ELECTION OF DIRECTORS
The only proposal for the 2000 Annual Meeting is the election of three
directors to hold office until the 2002 Annual Meeting of Shareholders or until
a successor is duly elected and qualified. The following current directors have
been nominated: Donald D. Heupel, Daniel H. Meginnis and T. Warren Thompson.
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.
CURRENT DIRECTORS AND NOMINEES
Three directors are to be elected at this Annual Meeting to hold office
until the 2002 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 three to be elected in 2000 and four to be elected in 2001.
All of the nominees are presently directors of the Company and have
been previously elected by the shareholders with the exception of Daniel H.
Meginnis, who was selected by the remaining directors to fill a vacancy on the
Board of Directors in July 2000. Mr. Meginnis is a second generation director
who has extensive experience in the automobile and trucking industry. Mr.
Meginnis graduated from Arizona State University in 1983 with a bachelor's
degree in finance. He is currently the owner of Hollis Trucking Co and has owned
and operated Hollis Trucking Co. since 1989. Prior to establishing Hollis
Trucking Co., Mr. Meginnis worked for Petroleum Technologies, Inc. as a sales
representative marketing automobile lubricants and fuel supplements from 1988 to
1989. From 1983 through 1988, Mr. Meginnis worked for a professional auto
detailing and wholesale company in Phoenix, Arizona.
Management recommends a vote FOR the election of the nominated
directors.
<PAGE>
The following table contains certain information with respect to the
persons currently serving as directors including those persons nominated for
election at the 2000 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
CURRENT NOMINEES: Year First
Became Term
Name and Principal Occupation Age Director Expires
----------------------------- --- ---------- ---------
<S> <C> <C> <C>
DONALD D. HEUPEL 53 1985 2000
President of the Company
Algona, Iowa
DANIEL H. MEGINNIS 40 2000 2000
Hollis Trucking Co.
Lincoln, Nebraska
T. WARREN THOMPSON 70 1969 2000
Secretary of the Company
Commercial Real Estate Broker
Wahoo, Nebraska
<CAPTION>
OTHER DIRECTORS: Year First
Became Term
Name and Principal Occupation Age Director Expires
----------------------------- --- ---------- ---------
<S> <C> <C> <C>
RICHARD R. AGEE 48 1998 2001
Owner & General Manager,
Agee's Automotive Repair & Parking
Lincoln, Nebraska
RICHARD E. McFAYDEN 48 1984 2001
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 47 1997 2001
Account Executive, SFI, LLC
Santa Fe Springs, California
THOMAS W. RASMUSSEN 38 1997 2001
Field Service Engineer
MSX International
Denver, Colorado
</TABLE>
<PAGE>
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 four regularly
scheduled meetings during the fiscal year ended July 31, 2000, with each such
meeting being a meeting of the Audit Committee, as well. In addition, the Board
of Directors held five 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
2000 election had to be received no earlier than February 1, 2000 and no later
than June 1, 2000. The nominating committee did not receive any nominee
submissions for the 2000 election. Nominations for election to the Board of
Directors to be considered at the 2001 Annual Meeting must be submitted in
writing to the committee no earlier than February 1, 2001 and no later than June
1, 2001.
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.
<PAGE>
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 (53) President of the Company for more than the past five
years.
T. Warren Thompson (70) Secretary of the Company for more than the past five
years; Treasurer of the Company until October 31, 1995
Steve Nelson (44) . . . . . . . . . . . Vice President of the Company since November 16,
1999;(1) Director of Distribution Operations,
Universal Distribution LLC(2) since July 12, 1999.(3)
Patrick Warner (49) . . . . . . . . . . Controller of the Company since October 1999. (4)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Board of Directors appointed Mr. Nelson as Vice President of the
Company at its 1999 annual meeting.
(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.
(4) The Company hired Mr. Warner as Controller in October 1999 as a result
of the resignation of Harold J. Pursley on October 8, 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.
The Company hired Pat Warner as Controller of the Company upon the
resignation of Harold J. Pursley in October 1999. Prior to joining the Company,
Patrick Warner held the position of Controller at ATI Global Incorporated, now
known as Attachment Technologies Incorporated ("ATI"), for eleven years. ATI is
a manufacturing company which produces construction equipment attachments. Mr.
Warner received his bachelor's degree in accounting from Northwest Missouri
State and obtained an MBA from the University of Iowa.
<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:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR(1) SALARY COMPENSATION
<S> <C> <C> <C>
Donald D. Heupel, 2000 $64,913.58(2) $21,946.94(3)
President of the Company
---------------------------------------------------------------------------------------------
</TABLE>
(1) For fiscal year ended July 31, 2000.
(2) Mr. Donald Heupel was compensated in fiscal 2000 partly by fixed salary
and partly by commission expressed as a percentage of before-tax
profits. Mr. Heupel's fixed salary for fiscal 2000 was $44,430.97. 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 the fiscal year ended July 31, 2000 was $20,482.61
(3) Mr. Heupel was paid $12,000 in director fees and received a bonus in
the amount of $6,400.95. The amount listed as other compensation also
includes an annual contribution of $2,499.44 made by the Company to Mr.
Heupel's 401(k) account and a value of $1,046.55 allocated to Mr.
Heupel's personal use of a Company automobile.
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 $4,900 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 currently participates in the
Plan.
<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 20, 2000:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Owner Beneficial 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 Daniel H. Meginnis 1,720 0.21%
1000 Rockhurst Drive
Lincoln, NE 68510
Common Stock Thomas W. Rasmussen 97,436(2) 11.94%(3)
P.O. Box 61428
Denver, CO 80206
Common Stock T. Warren Thompson 2,600(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 Rasmussen 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 and shared dispositive power over
44,136 shares owned by Patricia Ann Rasmussen. 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.
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.
<PAGE>
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 20, 2000:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Beneficial Ownership of Class
--------------- ---------------------- -----------
<S> <C> <C>
Common Stock 125,801(1) 15.42%
----------------------------------------------------------------------------------------------------------
</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
In July 1999, 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. 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.
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.
<PAGE>
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.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth the names and certain information with
respect to each person who, as of September 20, 2000, was known by the Company
to be the beneficial or record 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 Cede & Co. 581,509(2) 71.26%
Box 20
Bowling Green Station
New York, NY 10004
Common Stock Mary McFayden Donahue 46,258 5.67%
1301 South 80th Street
Omaha, NE 68124
Common Stock Patricia Ann Rasmussen 44,136(3) 5.41%
93 Palma Drive
Rancho Mirage, CA 92270
Common Stock Thomas Rasmussen 97,436(4) 11.94%(5)
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) The Company's stock transfer records reflect that these shares are held
in nominee name. The Company believes these shares are beneficially
owned by more than one beneficial owner.
(3) 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.
(4) 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 Rasmussen (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.
(5) 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.
<PAGE>
FINANCIAL STATEMENTS
-----------------------
The Company's annual report for the fiscal year ended July 31, 2000,
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, 2000. 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 18, 2000,
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, 2001, 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
31, 2001.
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 20, 2000
<PAGE>
PRESIDENT'S MESSAGE TO OUR STOCKHOLDERS
The fiscal year ended July 31, 2000, was another year of record sales for
Universal Mfg. Co. While total earnings did not quite match earnings of the last
fiscal year, earnings from operations improved significantly.
Total sales were $21,631,919, which is about an 11% increase from the year
before. Sales of remanufactured engine assemblies and sales of Motorcraft
branded service parts led the sales increases. This was the second year of
Motorcraft branded product sales, and sales increased from approximately
$900,000 to approximately $2,800,000.
Earnings per share of outstanding common stock for the fiscal year ended July
31, 2000, was $.55. This compares with $.57 earned in 1999, and $1.34 in 1998.
Earnings from operations last fiscal year were $651,000, compared to $407,000
the year before. In fiscal year 1999, we received extraordinary income due to
gain from the sale of a warehouse. Also, in fiscal year 1999, income taxes were
lower due to state income tax refunds.
During fiscal year 2000, Universal Mfg. Co. introduced the "ReTech" brand of
remanufactured products. This brand name will be used for product lines which
will cover all makes and models, and which will be marketed to the independent
automotive aftermarket.
Two new product lines were introduced under the "ReTech" brand late in June of
this year - remanufactured transfer cases and transfer case motors. The initial
interest in these lines has been very high, particularly in transfer cases.
Transfer cases are used on all four-wheel drive vehicles, including pickups and
SUVs, therefore the vehicle population which will potentially need this product
is growing. Several distribution centers in the western states are stocking and
distributing these transfer cases, with potential for more. Sales the first two
months were 287 units, and significant growth is expected.
Other product lines offered with the "ReTech" label include fuel pumps, power
steering pumps, and steering gears. Of these, the most significant is electric
fuel pumps, as several distribution warehouses are stocking this product. Other
product lines are under consideration.
In April 1999, the Company earned QS-9000/ISO-9002 quality certification. This
certification has been maintained through continued process improvements and
regular surveillance audits.
Last fiscal year, Universal Distribution LLC was formed to enhance the
Company's distribution capability and growth of sales of products provided by
outside vendors. Sales by Universal Distribution LLC have grown to be over
90% of the Company's total sales. Several new product lines were added to the
distribution line up this year. These include Motorcraft remanufactured
engines, calipers, constant velocity driveshafts, air conditioner
compressors, and window lift motors.
In fiscal year 1999, we moved to a larger warehouse facility in Des Moines,
Iowa, and completed a major addition in Peoria, Illinois. In fiscal year 2000,
we completed arrangements to lease a larger more convenient warehouse in Omaha,
Nebraska. We moved into this facility in October.
In order to fully utilize distribution capability and facilities, and to
increase distribution sales and earnings, the Company actively worked to add
markets and product lines. Negotiations were initiated with Rainbo Oil Company
of Dubuque, Iowa, to merge with their parts distribution operations.
Effective September 29, 2000, Rainbo Oil Company merged its parts distribution
division with Universal Distribution LLC to form Rainbo Company LLC, d/b/a Value
Independent Parts. Value Independent Parts markets primarily to automobile
dealerships, independent jobbers, and repair shops in Northeast Iowa, Northern
Illinois, and Southwest Wisconsin. It distributes AC Delco parts in addition to
Motorcraft and other lines.
We continue to be optimistic about the future of the Company. We anticipate
continued growth in distribution programs, as new product lines and markets are
added. Growth of the "ReTech" lines will continue.
The investment in Rainbo Company LLC, along with other distribution and
manufacturing related investments, will result in discontinuation or reduction
of quarterly dividends in the near term. However, these investments
significantly increase the assets of the Company, and in the opinion of the
Board of Directors will increase earning capability and enhance shareholder
value.
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
<PAGE>
MESSAGE TO THE STOCKHOLDERS FROM STEVE NELSON
Fiscal year 2000 was a pivotal period for Universal Distribution LLC ("UD"), as
it represented our first full year as a Motorcraft distributor. I am pleased to
say that I believe we are successfully meeting the challenge, as our sales and
market share have increased significantly, and we have consistently demonstrated
an ability to meet or exceed the performance standards that Ford Motor Company
has established for its distributors.
Our activities during the past year have touched on several different facets of
the operation, all aimed at providing exceptional customer service and value.
Among these are longer warehouse hours, increased deliveries in metro areas,
extended shipping times, enhanced purchase, freight and returns terms, frequent
price/merchandise promotions, salable inventory on our trucks, and the
establishment of an employee dress code.
Generally speaking, the Motorcraft market across our territory has been and is
expected to remain very competitive. The most effective countermeasure, of
course, is to assure that UD's staff consistently exceeds our customers'
expectations in every way: phone support, accuracy, fill rate, delivery, core
retrieval and frequent contact.
While our Motorcraft sales have grown to approximately 25% of UD's total sales,
they still trail our long-time bread and butter, which are remanufactured
engines, transmissions, light powertrain and currently authorized FAR small
parts. On these product lines (in which sales are completely dependent upon
dealer demand) we endeavor to provide the same high level of service as the
Motorcraft line.
As previously stated in the President's Message, Universal Mfg. Co. and UD
partnered with Rainbo Oil Company to form Rainbo Company LLC. This transaction
enables UD to distribute parts from ACDelco (General Motors Corporation), and
will provide UD and Rainbo Company LLC an opportunity to find synergies and cost
reductions aimed at improving profit for both organizations. The employees of
both UD and Rainbo Company LLC are excited, optimistic and supportive of this
important step in Universal Mfg. Co.'s current and future growth.
Priorities for fiscal year 2001 will be focused on maximizing the many benefits
realized by the merger, expanding our customer base, consolidating and
evaluating our buildings/sites, executing an aftermarket strategy for UD
locations and updating our web site to include on-line inventory and shopping
cart capability.
On behalf of all employees, I wish to thank the Board and Universal Mfg. Co.
stockholders for their continued support and the opportunity to serve.
Steve Nelson
Vice President
Universal Mfg. Co.
-------------------------------------------------------------------------------
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 parts
<TABLE>
<CAPTION>
2000 1999 1998
--------------------
<S> <C> <C> <C>
Automobile and Truck Engines 36% 33% 27%
Automobile and Truck Parts 51% 62% 73%
Motorcraft Branded Parts 13% 5% 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>
2000 1999 1998
------------------
<S> <C> <C> <C>
Ford Authorized Remanufactured to Dealers 5% 32% 48%
Distribution Program to Dealers 86% 54% 35%
Parts to Other Ford Remanufacturers 6% 13% 16%
Miscellaneous Sales 3% 1% 1%
</TABLE>
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED JULY 31
2000 1999 1998 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $21,631,919 $19,511,446 $19,372,976 $19,089,166 $17,678,542
Income Before Taxes 680,733 635,054 1,769,874 1,971,377 1,888,950
Income Taxes 230,104 167,316 680,221 818,450 754,491
Net Income 450,629 467,738 1,089,653 1,152,927 1,134,159
Net Income Per Share
of Outstanding
Common Stock .55 .57 1.34 1.41 1.39
Cash Dividends Per
Share Declared .60 .65 .90 1.00 .85
----------- ----------- ----------- ---------- -----------
Total Assets $ 9,950,600 $ 8,540,344 $ 7,530,045 $6,443,524 $6,231,331
</TABLE>
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 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>
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
<C> <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 8.5 4.4375 4.625
3rd Quarter 1999 6 6.75 5 5.625
4th Quarter 1999 6 6.625 5.3785 5.75
1st Quarter 2000 7.125 7.5 5.5 5.75
2nd Quarter 2000 7.125 7.5 6.25 6.5
</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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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.
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
<PAGE>
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.
UNIVERSAL DISTRIBUTION LLC
Due to the substantial growth in its distribution operations, the Company formed
Universal Distribution LLC, a Nebraska limited liability company, as a
subsidiary of the Company through which the Company operates its distribution
operations. The Company is the manager of Universal Distribution LLC and owns a
ninety-nine percent (99%) membership interest in Universal Distribution LLC. Mr.
Donald D. Heupel owns the remaining one percent (1%) membership interest.
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.
RECENT DEVELOPMENTS -- RAINBO COMPANY LLC
FORMATION OF RAINBO COMPANY LLC
Effective September 29, 2000, the Company finalized its negotiations with
Rainbo Oil Company of Dubuque, Iowa, to form a new entity to acquire Rainbo
Oil Company's 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.
VIP ACQUISITION
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
<PAGE>
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 .
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%.
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.
YEAR 2000 DISCLOSURE
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.
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, customer requirements for our products, the continuing strength of
the automotive industry, competitive pricing, maintenance of our current
momentum, weather conditions and other factors.
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
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
<PAGE>
INDEPENDENT AUDITORS' REPORT
To 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.
Deloitte & Touche LLP
September 8, 2000
<PAGE>
UNIVERSAL MFG. CO. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
JULY 31, 2000 AND 1999
-----------------------------------------------------------------------------------------------------------------------
JULY 31
---------------------------
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>
UNIVERSAL MFG. CO. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
---------------------------------------------------------------------------------------------------------------
THREE YEARS ENDED JULY 31, 2000
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>
UNIVERSAL MFG. CO. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------------------
THREE YEARS ENDED JULY 31, 2000
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 450,629 $ 467,738 $ 1,089,653
Adjustments to reconcile net income to net cash 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 issuances 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 AT BEGINNING OF YEAR 424,188 1,234,007 881,389
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT 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>
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>
9UNIVERSAL 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.
<PAGE>
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).
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>
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>
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:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
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
========= ========
</TABLE>
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 rate 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>
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>
<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>
<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
</TABLE>
<TABLE>
<CAPTION>
1999
---------------------------------------------------------
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>
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.
<PAGE>
EXECUTIVE OFFICERS
-------------------------------------------------------------------------------
Donald D. Heupel Steven H. Nelson T. Warren Thompson
President Vice President Secretary
<TABLE>
<S><C>
-------------------------------------------------------------------------------
DIRECTORS
-------------------------------------------------------------------------------
Richard R. Agee, Owner and General Manager Helen Ann McHugh, Account Executive
Agee's Automotive Repair & Parking SFI, LLC
Lincoln, Nebraska Sante Fe Springs, California
Donald D. Heupel, President of the Company Daniel H. Meginnis, Owner
Algona, Iowa Hollis Trucking Co.
Richard E. McFayden, Partner Lincoln, Nebraska
Perrigrine Partners, a Real Estate & Thomas W. Rasmussen, Field Service Engineer
Investment Partnership MSX International
Professor of Business and Associate Director Denver, Colorado
of Student Services, Buena Vista University
Omaha, Nebraska T. Warren Thompson, Commercial Real Estate Broker
Wahoo, Nebraska
</TABLE>
<PAGE>
UNIVERSAL MFG. CO.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON NOVEMBER 28, 2000
The undersigned hereby constitutes and appoints Helen Ann McHugh and Richard R.
Agee, 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. (the "Company") to be held at
the The Sheraton Hotel, formerly the Westin Aquila Hotel, 1615 Howard Street,
Omaha, Nebraska, on the 28th day of November, 2000, at 9:30 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: Donald D. Heupel, Daniel H. Meginnis and
T. Warren Thomspon
_________________________________________________________________
/ / 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) 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.
DATED: _____________________, 2000.
<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.)
