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 04-30-97 Commission File Number 0-2865
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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 (I.R.S. Employer
incorporation or organization) Identification No.)
405 Diagonal St., P. O. Box 190, Algona, Iowa 50511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515)-295-3557
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NOT APPLICABLE
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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 90 days."
YES X NO
-- -- -----
"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 04-30-1997 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
Part I FINANCIAL INFORMATION PAGES
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Item 1. Financial Statements:
Balance Sheets - April 30, 1997
(unaudited) and July 31, 1996 3
Statements of Income and Retained Earnings -
Nine Months Ended April 30, 1997
and 1996 (unaudited) 4
Statements of Income and Retained Earnings -
Three Months Ended April 30, 1997
and 1996 (unaudited) 5
Statements of Cash Flows -
Nine Months Ended April 30, 1997
and 1996 (unaudited) 6
Statements of Cash Flows -
Three Months Ended April 30, 1997
and 1996 (unaudited) 7
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security
Holders 10
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.
BALANCE SHEETS
April 30,
1997 July 31,
(Unaudited) 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $947,804 $934,072
Accounts receivable 1,479,213 1,654,992
Inventories 3,073,163 2,479,713
Income taxes recoverable 52,995 -
Prepaid expenses 102,571 50,282
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Total current assets 5,655,746 5,119,059
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Deferred Income Taxes 42,329 42,329
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Lease Receivable 17,231 26,073
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PROPERTY - At cost
Land 120,499 120,499
Buildings 1,141,123 1,099,594
Machinery and equipment 936,748 899,997
Furniture and fixtures 206,468 209,947
Trucks and automobiles 742,258 699,240
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Total property 3,147,096 3,029,277
Less accumulated depreciation (2,007,088) (1,985,412)
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Property - net 1,140,008 1,043,865
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$6,855,314 $6,231,326
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,945,014 $1,507,944
Dividends payable 204,000 204,000
Payroll taxes 11,100 10,539
Income taxes payable - 56,790
Accrued compensation 52,464 90,046
Accrued local taxes 13,884 13,984
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Total current liabilities 2,226,462 1,883,303
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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 3,794,990 3,514,161
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Total stockholders' equity 4,628,852 4,348,023
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$6,855,314 $6,231,326
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3
UNIVERSAL MFG. CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
Nine Months Ended
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April 30, April 30,
1997 1996
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NET SALES $14,112,798 $12,900,800
COST OF GOODS SOLD 11,168,363 10,086,717
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GROSS PROFIT 2,944,435 2,814,083
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,535,191 1,483,394
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INCOME FROM OPERATIONS 1,409,244 1,330,689
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OTHER INCOME:
Interest 42,815 31,294
Other income 11,595 10,684
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Total other income 54,410 41,978
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INCOME BEFORE INCOME TAXES 1,463,654 1,372,667
INCOME TAXES 570,825 542,864
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NET INCOME 892,829 829,803
RETAINED EARNINGS, Beginning of period 3,514,161 3,073,307
DIVIDENDS (612,000) (489,600)
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RETAINED EARNINGS, End of period $3,794,990 $3,413,510
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EARNINGS PER COMMON SHARE:
Earnings per common share $1.09 $1.02
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4
UNIVERSAL MFG. CO.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
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April 30, April 30,
1997 1996
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NET SALES $4,463,762 $4,546,240
COST OF GOODS SOLD 3,609,911 3,504,152
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GROSS PROFIT 853,851 1,042,088
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 525,906 520,151
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INCOME FROM OPERATIONS 327,945 521,937
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OTHER INCOME:
Interest 15,631 10,124
Other income 2,504 3,046
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Total other income 18,135 13,170
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INCOME BEFORE INCOME TAXES 346,080 535,107
INCOME TAXES 134,971 216,216
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NET INCOME 211,109 318,891
RETAINED EARNINGS, BEGINNING OF QUARTER 3,787,881 3,257,819
DIVIDENDS PAID (204,000) (163,200)
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RETAINED EARNINGS, END OF QUARTER $3,794,990 $3,413,510
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EARNINGS PER COMMON SHARE:
Earnings per common share $0.26 $0.39
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5
UNIVERSAL MFG. CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
--------------------------------
April 30, April 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $892,829 $829,803
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 146,951 141,993
Gain on sale of property (2,459) (1,547)
Changes in operating assets and liabilities:
Accounts receivable 175,779 112,560
Inventories (593,450) (28,861)
Prepaid expenses (52,289) 25,115
Income taxes recoverable (52,995) 109,646
Lease receivable 8,842 7,464
Accounts payable 437,070 128,823
Payroll taxes 561 17,647
Accrued compensation (37,582) (14,994)
Accrued local taxes 100 109,266
Income taxes payable (56,790) 4,442
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Net cash flows from operating activities 866,367 1,441,357
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 10,200 2,874
Purchases of property (250,835) (199,212)
Proceeds from maturities of investments - 67,597
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Net cash flows from investing activities (240,635) (128,741)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (612,000) (489,600)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 13,732 823,016
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 934,072 210,467
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $947,804 $1,033,483
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $680,610 $428,776
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6
UNIVERSAL MFG., CO.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
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April 30, April 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $211,109 $318,891
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 48,814 31,244
Gain on sale of property (1,864) -
Changes in operating assets and liabilities:
Accounts receivable 378,538 (4,496)
Inventories (889,934) (167,517)
Prepaid expenses 12,042 12,177
Income taxes recoverable 8,385 14,416
Lease receivable 3,068 2,599
Accounts payable 740,116 194,494
Payroll taxes (22,638) (8,466)
Accrued compensation 4,961 10,604
Accrued local taxes (5,239) 38,457
Income taxes payable - 4,442
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Net cash flows from operating activities 487,358 446,845
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 2,900 -
Purchases of property (101,978) (46,163)
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Net cash flows from investing activities (99,078) (46,163)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (204,000) (163,200)
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INCREASE IN CASH AND CASH EQUIVALENTS 184,280 237,482
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 763,524 796,001
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $947,804 $1,033,483
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for:
Income taxes $126,586 $197,357
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7
UNIVERSAL MFG. CO.
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS
ENDED APRIL 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - The Company is engaged in the business of
remanufacturing and selling on a wholesale basis remanufactured
engines and other remanufactured automobile parts for Ford,
Lincoln and Mercury automobiles and trucks. The Company is a
franchised remanufacturer for Ford Motor Company with a defined
sales territory. The Company purchases the majority of its new
raw materials from Ford Motor Company. 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. The Company has no separate
segments, major customers, foreign operations or export sales.
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.
INVENTORIES - Inventories are stated at the lower of cost (last-
in first-out method) or market.
INVESTMENTS - Short-term investments are considered as either
trading securities or available for sale securities and,
accordingly, are carried at fair value in the Company's financial
statements.
DEPRECIATION, MAINTENANCE, AND REPAIRS - Property is depreciated
generally as follows:
ASSETS DEPRECIATION METHOD LIVES
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Buildings Straight-line and
declining balance 10 - 20 years
Machinery and
equipment Declining-balance 7 - 10 years
Furniture and
fixtures Declining-balance 5 - 7 years
Trucks and
automobiles 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 accumulated
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 products.
CASH EQUIVALENTS - For the purposes of the Statements of Cash
Flows, the Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash
equivalents.
8
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 values.
EARNINGS PER SHARE - Earning 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 financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of April 30,
1997, and the results of operations and cash flows for the nine
month and three month periods ended April 30, 1997 and 1996. The
results of operations for the periods ended April 30, 1997 and
1996 are not necessarily indicative of the 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 financial statements be read in
conjunction with the financial statements and notes included in
the Company's Form 10-KSB for the fiscal year ended July 31, 1996.
2. CHANGES IN ACCOUNTING PRINCIPLES
INVESTMENTS - During the year ended July 31, 1995 the Company
adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities. The adoption of SFAS No. 115 had no
effect on the 1995 financial statements.
3. LEASE RECEIVABLE
On May 26, 1993, the Company entered into a lease agreement with
another manufacturer to lease equipment at 8% interest for a
sixty-month period. The total minimum lease payments are $34,216
and the unearned income is $16,985 at April 30, 1997. These
amounts are shown on a net basis for financial statement purposes.
4. 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 has 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 calls for payment of a civil penalty of $32,955,
and for the completion of certain remedial projects, estimated to
cost approximately $149,725. Total costs paid as of April 30,
1997 are $90,113. The remaining amount of $59,612 has been
recorded in the accompanying financial statements.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales for the third quarter, fiscal year 1997 were 2% lower
than for the third quarter of 1996. Sales a year ago were
assisted by some extremely cold temperatures, while weather
was not as much of a factor this year.
Sales for the nine months of 1997 were 9% higher than for
the same period last year. The sales increase was led by
sales of remanufactured engine assemblies and electric fuel
pumps.
Earnings for the third quarter were lower than for the third
quarter a year ago due to lower total sales and a sales mix
of more lower margin product lines.
Earnings for the nine months ended April 30, 1997 were
7% higher than a year ago due to the increased sales volume.
Inventories increased for the quarter ended April 30, 1997,
compared to Fiscal year end 1996 by 24%. This was due to
increased participation by the Company in distribution of
FQR (Ford Quality Renewal) engine and transmission assemblies
for Ford Motor Company.
Accounts payable increased by 29%, due to increased purchases
of FQR assemblies.
PART II
ITEM 1. LEGAL PROCEEDINGS:
With respect to the Supplemental Environmental Project
(the "SEP") being performed by the Company pursuant to the
May 6, 1994 Consent Agreement with the United States
Environmental Protection Agency ("EPA"), the Company has
paid total costs of $90,113 for work performed. No further
direction has been received from the EPA regarding any testing
or clean-up that may be required for contamination found in
the large pit after the sludge was removed. No estimate of
these costs can be made at this time. If the EPA determines
that no further work is required under the SEP, the Company
will owe a deferred penalty of approximately $32,955 under the
terms of the Consent Agreement with the EPA.
Please refer to the Part I, Item 3 of the Form 10-KSB report
for the Company's fiscal year ended July 31, 1996 for further
discussion of this matter.
ITEM 2. CHANGES IN SECURITIES: NONE.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES: NONE.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE.
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ITEM 5. OTHER INFORMATION: NONE.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: NONE.
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(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during
the quarter for which this report is filed.
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.
UNIVERSAL MFG. CO
Date 5-23-97 /s/ Gary L. Christiansen
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Gary L. Christiansen, Vice President/Treasurer
Date 5-23-97 /s/ Donald D. Heupel
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Donald D. Heupel, President and Chief Financial Officer
11