SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20459
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number I-4383
ESPEY MFG. & ELECTRONICS CORP.
(Exact name of registrant as specified in charter)
NEW YORK 14-1387171
(State of Incorporation) (I.R.S. Employer's IdentNo.)
P. O. Box 422, Saratoga Springs, New York 12866
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code 518-584-4100
Number of shares outstanding of issuer's class of common stock
$.33-1/3 par value as at the end of the period covered by this
report 1,343,448 .
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act
of 1934 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
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ESPEY MFG. & ELECTRONICS CORP.
I N D E X
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statments:
Balance Sheets - March 31, 1995 1
and June 30, 1994
Statements of Earnings - Nine and Three 3
Months Ended March 31, 1995 and 1994
Statements of Cash Flows - Nine Months 4
Ended March 31, 1995 and 1994
Notes to Financial Statements 5
March 31, 1995 and 1994
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of
Operations.
PART II OTHER INFORMATION 9
SIGNATURES 10
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<TABLE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets
March 31, 1995 and June 30, 1994
A S S E T S
Unaudited
1995 1994
March 31 June 30
<S> <C> <C>
CURRENT ASSETS:
Cash $ 206,404 $ 178,696
Short-term investments at cost
(market value March 31, 1995,
$12,558,682 and June 30, 1994,
$13,335,488) 12,408,898 13,290,888
Total Cash and Short-term
Investments 12,615,302 13,469,584
Trade accounts receivable net of
$3000 allowance March 31, 1995
and June 30, 1994 1,851,456 1,156,093
Other receivables 150,285 15,861
NET RECEIVABLES 2,001,741 1,171,954
Inventories:
Raw materials and supplies 286,367 501,337
Work-in-process 1,188,363 1,599,148
Costs relating to contracts in
process, net of progress payments
of $3,109,300 - March 31, 1995 and
$1,991,300 - June 30,1994 8,012,768 8,078,077
NET INVENTORIES 9,487,498 10,178,562
Income tax refund receivable 298,201 358,418
Prepaid expenses and other current assets 246,647 185,917
TOTAL CURRENT ASSETS 24,649,389 25,364,435
MARKETABLE SECURITIES AT COST 100,000 100,000
PROPERTY, PLANT AND EQUIPMENT AT COST 11,348,050 10,385,193
Less: Accumulated depreciation and
amortization (7,689,289) (7,375,092)
NET PROPERTY, PLANT AND EQUIPMENT 3,658,761 3,010,101
TOTAL $ 28,408,150 $ 28,474,536
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<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets, Continued
March 31, 1995 and June 30, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Unaudited
1995 1994
March 31 June 30
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 423,346 $ 336,882
Accrued expenses:
Salaries, wages and commissions 270,960 99,552
Employees' insurance costs 57,086 58,272
ESOP payable 324,443 -
Other 13,906 17,018
Payroll and other taxes withheld
and accrued 128,923 140,802
Dividends payable - -
Deferred income taxes - current 32,169 69,644
TOTAL CURRENT LIABILITIES 1,250,833 722,170
Deferred income taxes 99,806 124,619
TOTAL LIABILITIES 1,350,639 846,789
STOCKHOLDERS' EQUITY:
Common stock, par value .33-1/3 per
share. Authorized 2,250,000 shares;
issued 1,514,937 shares March 31, 1995
and June 30, 1994. 504,979 504,979
Capital in excess of par value 10,496,287 10,496,287
Retained earnings 24,468,761 24,945,412
35,470,027 35,946,678
Less: Common stock subscribed ( 5,586,624) ( 5,586,624)
Cost of 171,489 shares on March
31, 1995 and 164,229 shares on
June 30, 1994 of common stock in
treasury ( 2,825,892) ( 2,732,307)
TOTAL STOCKHOLDERS' EQUITY 27,057,511 27,627,747
TOTAL $ 28,408,150 $ 28,474,536
<FN>
<F1>
See accompanying notes to financial statements
</FN>
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<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
STATEMENTS OF EARNINGS
Nine and Three Months Ended March 31, 1995 and 1994
Unaudited Unaudited
Three Months Nine Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 3,496,584 $ 1,989,770 $ 10,472,748 $ 10,861,269
Cost of sales 3,229,122 1,402,732 9,297,301 8,551,503
Gross profit 267,462 587,038 1,175,447 2,309,766
Selling, general and administrative expenses 320,759 318,855 1,122,442 1,069,980
Operating income ( 53,297) 268,183 53,005 1,239,786
Other income
Interest income and dividends 202,043 103,333 505,207 308,645
Sundry income 403 885 4,109 1,821
202,446 104,218 509,316 310,466
Earnings before income taxes and cumulative 149,149 372,401 562,321 1,550,252
effect of change in accounting principle
Provision for income taxes 75,000 149,000 280,000 625,513
Net earnings before cumulative effect of 74,149 223,401 282,321 924,739
change in accounting principle
Cumulative effect of change in accounting - - - 201,653
for income taxes
Net earnings $ 74,149 $ 223,401 $ 282,321 $ 1,126,392
Earnings per share:
Earnings before cumulative effect of change $ .06 $ .17 $ .21 $ .69
in accounting principle
Net earnings $ .06 $ .17 $ .21 $ .84
Average number of shares outstanding 1,346,044 1,350,708 1,347,855 1,350,708
<FN>
<F1>
See accompanying notes to Financical Statements
</FN>
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<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Statements of Cash Flows
Nine Months Ended March 31, 1995 and 1994
Unaudited
March 31
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 282,321 $ 1,126,392
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Tax effect of dividends on unallocated ESOP shares 50,070 55,007
Depreciation 314,197 316,832
Changes in assets and liabilities:
Decrease (increase) in receivables, net ( 829,787) 24,627
Decrease (increase) in inventories, net 691,064 5,636
Decrease (increase) in other current assets ( 60,730) ( 1,998)
Decrease (increase) in income tax refund receivable 60,217 ( 240,718)
Increase (decrease) in accounts payable 86,464 324,816
Increase (decrease) in accrued salaries, 171,408 112,221
wages and commissions
Increase (decrease) in accrued employee ( 1,186) ( 67,547)
insurance costs
Increase (decrease) in other accrued expenses ( 3,112) 47,825
Increase (decrease) in payroll & other ( 11,879) ( 33,549)
taxes withheld and accrued
Increase (decrease) in income tax payable - ( 8,279)
Decrease in deferred income taxes ( 62,288) ( 261,689)
Increase (decrease) in accrued ESOP contributions 324,443 314,537
Net cash provided by
operating activities 1,011,202 1,714,113
Cash Flows From Investing Activities:
Additions to property, plant & equipment ( 962,857) ( 96,813)
Net cash used in
investing activities ( 962,857) ( 96,813)
Cash Flows From Financing Activities:
Dividends on common stock ( 809,042) ( 810,424)
Purchase of treasury stock ( 93,585) -
Net cash used in
financing activities ( 902,627) ( 810,424)
Increase (decrease) in cash and short-term investments ( 854,282) 806,876
Cash and short-term investments, beginning of period 13,469,584 12,262,467
Cash and short-term investments, end of period $ 12,615,302 $ 13,069,343
Income Taxes Paid $ 232,000 $ 879,538
<FN>
<F1>
See accompanying notes to financial statements.
</FN>
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ESPEY MFG. & ELECTRONICS CORP.
Notes to Financial Statements
___________________
1. In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position of the Company as of
March 31, 1995, and the results of operations for each of the three and nine
month periods ended March 31, 1995 and 1994 and cash flows for each of the
nine month periods ended March 31, 1995 and 1994.
2. The earnings per share computations for March 31, 1995 were based on
1,347,855 shares and on 1,350,708 shares for March 31, 1994. These represent
the average number of shares outstanding for each respective period.
3. Revenues and other income include interest on Certificates of Deposit and
Treasury Bills in addition to dividends on preferred stocks.
4. There were no material unusual charges or credits to operations or a
change in accountants during the most recently completed quarter which
would require the filing of a Form 8-K.
5. There were no securities sold by the Company during the current quarter which
were not registered under the Securities Act of 1934 in reliance upon an
exemption from registration provided in Section 4 (2) of the Act.
6. For purposes of the statements of cash flows, the Company considers all
liquid debt instruments with original maturities of three months or less to
be cash equivalents.
7. In fiscal 1989 the Company established an Employee Stock Ownership Plan
(ESOP) for eligible non-union employees. The ESOP used the proceeds of a
loan from the Company to purchase 316,224 shares of the Company's common
stock for approximately $8.4 million and the Company contributed approximately
$400,000 to the ESOP which was used by the ESOP to purchase an additional
15,000 shares of the Company's common stock.
The loan from the Company to the ESOP is repayable in annual installments of
$1,039,605, including interest, through June 30, 2004. Interest is payable
at a rate of 9% per annum. The Company's receivable from the ESOP is
recorded as common stock subscribed in the accompanying balance sheets.
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Each year, the Company will make contributions to the ESOP which will be used
to make loan interest and principal payments. With each loan and interest
payment, a portion of the common stock will be allocated to participating
employees. As of March 31, 1995 there were 103,375 shares allocated to
participants.
8. The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", as of July 1, 1993
on a prospective basis. The cumulative effect of the change in accounting
for income taxes as of July 1, 1993 was $201,653 and is separately identified
in the statements of earnings for the nine month period ended March 31, 1994.
Prior years' financial statements were not restated to apply the provisions
of SFAS No. 109.
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ESPEY MFG. & ELECTRONICS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales for the nine months ended March 31, 1995 were $10,472,748 as compared
to $10,861,269 for same period in fiscal 1994. Sales volume is largely
dependent on both lead times required for new orders and the specific
delivery needs of our customers.
Net earnings for the nine month period ended March 31, 1995 were $282,321 or
$.21 per share compared to $1,126,392 or $.84 per share for the nine month
period ended March 31, 1994. The March 31, 1994 earnings included a
cumulative adjustment for the adoption of SFAS 109 which increased net
earnings by $201,653, or $.15 per share. This adjustment has been more fully
explained in prior financial statements.
Manufacturing expenses increased marginally over the corresponding nine month
period of last year. Both general & administration and selling expenses
decreased slightly. As anticipated the current quarter reflected an increase
in earnings over the prior quarter, due mainly to certain cost containment
measures taken by the Company. Earnings for the current nine month period,
however, are less than for the corresponding nine months of last year. This
has been brought about mainly thru the restructuring of our pricing policies
due to the increasingly competitive nature of doing business in the military
electronics field. In line with this the Company is endeavoring to penetrate
the industrial marketplace, not only with our basic expertise in the design,
development, and production of specialized power supplies and iron core
components, but with the offering of attendant services such as
electro-plating and environmental testing. We are currently experiencing
marginal success with our power supplies and iron core components, however
the future looks extremely promising. A new Division has been set up with the
name of Saratoga Electro-Finishing. A capital expenditure of approximately
$700,000 has been made for the expansion and modernization of our
electro-plating facility. This facility, by employing the most modern and
environmentally approved features, will enable us to offer sophisticated
services to both industrial and military customers. Our demographic studies
have indicated that there is no similar facility in either our immediate or
neighboring geographic areas. The facility is currently operating on a
limited basis. We are undertaking a marketing effort to insure that we will
maximize its potential as it becomes fully operational.
Although our investment base was somewhat lower in the current period, an
increase in short-term rates resulted in an increase of about $200,000 in our
investment income for the nine month period ended March 31, 1995 as compared
to the nine month period ended March 31, 1994. The Company does not feel that
there is any risk associated with its investment policy, since approximately
90% of our investments are represented by U.S. Government T-Bills, with the
balance represented by Certificates of Deposit and one preferred stock issue
in a major utility.
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Since the debt of the Company's ESOP is not to an outside party, we have
eliminated from the Statements of Earnings the offsetting items of Interest
Income and Interest Expense relating to the ESOP. We have also eliminated
the offsetting accruals from the Balance Sheets.
The Company funds all of its operations, when possible, including Financing
Activities and Investing Activities with cash flows resulting from Operating
Activities. It is felt that in the future, funds from Operating Activities
will continue to be adequate to meet these needs. For the current nine month
period capital expenditures were approximately $962,000.
During the nine month period ended March 31, 1995 the Company repurchased
7,260 shares of its common stock.
On March 24,1995 the Board of Directors authorized an additional one million
dollars for the continuing repurchase of the Company's shares making the
total available as of March 31, 1995 $1,083,317.
The backlog as of March 31, 1994 was $21,142,465. The backlog as of
March 31, 1995 was $16,884,994.
A dividend in the amount of $.60 per share was paid November 21, 1994 to
shareholders of record on October 28, 1994.
On October 20, 1994, Albert K. Braim, a director since 1968, died.
The Company and all of its Directors and Employees wish to express their
condolences to Mr. Sol Pinsley, longtime President and CEO, who lost his wife
on March 21, 1995.
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ESPEY MFG. & ELECTRONICS CORP.
PART II: Other Information and Signatures
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter.
Item 5. Other Information
None during the quarter.
Item 6. Exhibits and Reports on Form 8-K
None during the quarter.
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S I G N A T U R E S
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.
ESPEY MFG. & ELECTRONICS CORP.
Sol Pinsley, President
Herbert Potoker, Treasurer and
Chief Financial Officer
10 May 1995
Date
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