FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended 04-30-00 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 (IRS Employer Identification No.)
incorporation 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 04-30-00 816,000
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Common
Transitional Small Business Disclosed Format ( Check one ):
Yes NO X
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1
UNIVERSAL MFG. CO.
FORM 10-QSB
INDEX
PAGES
Part I FINANCIAL INFORMATION
Item 1. Financial Statements: 3
Consolidated Balance Sheets as of April 30, 2000
(unaudited) and July 31, 1999
Consolidated Statements of Income and Retained 4
Earnings - Three Months ended April 30, 2000
(unaudited) and April 30, 1999 (unaudited)
Consolidated Statements of Income and Retained 5
Earnings - Nine Months ended April 30, 2000
(unaudited) and April 30, 1999 (unaudited)
Consolidated Statements of Cash Flows - Nine Months ended 6
April 30, 2000 (unaudited) and April 30, 1999 (unaudited)
Notes to Consolidated Financial Statements as of and for the Nine Months 7-8
ended April 30, 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
2
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL MFG. CO.
CONSOLIDATED BALANCE SHEETS
April 30,
2000 July 31,
(unaudited) 1999
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 266,335 $ 424,188
Accounts receivable 1,852,836 2,559,918
Inventories 4,723,016 3,620,018
Prepaid expenses (7,715) 12,027
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Total current assets 6,834,473 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 (2,410,793) (2,266,225)
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Property - net 1,575,621 1,646,688
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$8,687,599 $8,540,344
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,615,588 $3,089,945
Dividends payable 122,400 122,400
Income tax payable (28,006) 226,989
Payroll taxes 11,919 41,195
Accrued compensation 50,498 59,443
Accrued local taxes 23,013 18,625
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Total current liabilities 3,795,412 3,558,597
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MINORITY INTEREST IN SUBSIDIARY 4,846 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 4,053,479 4,143,684
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Total stockholders' equity 4,887,341 4,977,546
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$8,687,599 $8,540,344
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3
UNIVERSAL MFG. CO.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three Months Ended
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April 30, April 30,
2000 1999
(unaudited) (unaudited)
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NET SALES $5,444,565 $4,653,668
COST OF GOODS SOLD 4,707,582 4,039,094
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GROSS PROFIT 736,983 614,574
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 727,592 745,869
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INCOME/(LOSS) FROM OPERATIONS 9,391 (131,295)
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OTHER INCOME:
Interest 21,276 15,455
Gain on Sale of Property 0 162,411
Other income 3,274 5,602
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Total other income 24,550 183,468
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INCOME BEFORE MINORITY INTEREST AND INCOME TAXES 33,941 52,173
MINORITY INTEREST 241 0
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INCOME BEFORE INCOME TAXES 33,700 52,173
INCOME TAX EXPENSE 13,236 20,347
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NET INCOME 20,464 31,826
RETAINED EARNINGS, Beginning of period 4,155,415 4,141,527
DIVIDENDS (122,400) (122,400)
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RETAINED EARNINGS, End of period $4,053,479 $4,050,953
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PER COMMON SHARE INFORMATION:
Earnings per common share $0.03 $0.04
Dividends per common share 0.15 0.15
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4
UNIVERSAL MFG. CO.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Nine Months Ended
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April 30, April 30,
2000 1999
(unaudited) (unaudited)
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NET SALES $15,563,977 $13,913,335
COST OF GOODS SOLD 13,009,036 11,731,278
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GROSS PROFIT 2,554,941 2,182,057
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,191,038 2,016,493
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INCOME FROM OPERATIONS 363,903 165,564
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OTHER INCOME:
Interest 74,209 61,374
Gain on Sale of Property 0 160,206
Other income 21,062 24,933
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Total other income 95,271 246,513
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INCOME BEFORE MINORITY INTEREST AND INCOME TAXES 459,174 412,077
MINORITY INTEREST 3,048 0
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INCOME BEFORE INCOME TAXES 456,126 412,077
INCOME TAX EXPENSE 179,131 159,470
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NET INCOME 276,995 252,607
RETAINED EARNINGS, Beginning of period 4,143,684 4,206,346
DIVIDENDS (367,200) (408,000)
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RETAINED EARNINGS, End of period $ 4,053,479 $ 4,050,953
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PER COMMON SHARE INFORMATION:
Earnings per common share $0.34 $0.31
Dividends per common share 0.45 0.50
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5
UNIVERSAL MFG. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
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April 30, April 30,
2000 1999
(unaudited) (unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 276,995 $ 252,607
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 144,568 177,506
Gain on sale of property 0 (160,206)
Changes in operating assets and liabilities:
Accounts receivable 707,081 163,328
Inventories (1,102,998) (547,222)
Prepaid expenses 19,742 7,246
Income taxes payable (254,995) (10,629)
Accounts payable 525,643 422,460
Payroll taxes (29,276) 1,097
Accrued compensation (8,945) (32,242)
Accrued local taxes 4,388 (4,318)
Minority interest 645
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Net cash flows from operating activities 282,848 269,627
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property (73,501) (111,008)
Proceeds from Sale of Property 197,681
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(73,501) 86,673
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (367,200) (448,800)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (157,853) (92,500)
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 $ 266,335 $1,141,507
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $ 434,124 $ 170,100
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6
UNIVERSAL MFG. CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS
ENDED April 30, 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:
ASSETS DEPRECIATION METHOD LIVES
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
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 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
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 April 30,2000, and the results of operations and cash flows for
the nine month periods, and three month periods ending April 30,2000 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
slightly exceeded this amount.
On June 10, 1998, the Company received notice from the EPA authorizing
submission of a proposal for treatment of 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
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Sales for the third quarter were 17% higher than the third quarter a year ago.
This resulted in 12 % higher sales for the first nine months of the fiscal year.
Sales of engine assemblies and of Motorcraft branded products led to sales
increases, and accounted for strong overall sales despite unit sales decreases
of several other remanufactured product lines.
Third quarter earnings this year were slightly lower than third quarter earnings
last year. This was due to a gain on the sale of property a year ago. Income
from operations was $140,000.00 higher the third quarter of this fiscal year
than the third quarter of last year, due to higher sales. Cost of goods sold as
a percentage of sales was the same for each quarter of each year, but selling,
warehouse, and administrative expenses were down for the third quarter of this
year as opposed to third quarter of last year.
The lower level of cash and cash equivalents at the end of the quarter compared
to a year ago was due to increased inventory investment. This inventory
investment increase is the result of higher prices on 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
ITEM 5. OTHER INFORMATION
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
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 6-12-00 /s/ Donald D. Heupel
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Donald D. Heupel, President and Chief Financial Officer
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