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, 1996 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 Ident No.)
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 1,118,646 .
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
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
ESPEY MFG. & ELECTRONICS CORP.
I N D E X
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statments:
Balance Sheets - March 31, 1996 1
and June 30, 1995
Statements of Earnings - Nine Months 3
and Three Months Ended March 31, 1996
and 1995
Statements of Cash Flows - Nine Months 4
Ended March 31, 1996 and 1995
Notes to Financial Statements 5
March 31, 1996 and 1995
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of
Operations.
PART II OTHER INFORMATION 9
SIGNATURES 10
<PAGE>
<TABLE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets
March 31, 1996 and June 30, 1995
A S S E T S
Unaudited
1996 1995
March 31 June 30
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivelents $ 146,368 $ 231,675
Short-term investments at cost
(market value March 31, 1996,
$300,528 and June 30, 1995,
$1,497,681) 300,000 1,467,540
Total Cash and Short-term
Investments 446,368 1,699,215
Marketable investment securities - current 5,715,769 10,454,464
Trade accounts receivable net of
$3000 allowance March 31, 1996
and June 30, 1995 2,959,153 1,925,778
Other receivables 200,377 20,627
NET RECEIVABLES 3,159,530 1,946,405
Inventories:
Raw materials and supplies 327,266 400,778
Work-in-process 1,015,000 1,078,169
Costs relating to contracts in
process, net of progress payments
of $ - 0 - March 31, 1996 and
$2,121,800 - June 30,1995 10,425,698 8,769,378
NET INVENTORIES 11,767,964 10,248,325
Income tax refund receivable 160,581 410,467
Prepaid expenses and other current assets 256,135 385,033
TOTAL CURRENT ASSETS 21,506,347 25,143,909
MARKETABLE INVESTMENT SECURITIES 100,000 100,000
PROPERTY, PLANT AND EQUIPMENT AT COST 11,776,259 11,464,636
Less: Accumulated depreciation and
amortization (8,261,369) (7,868,827)
NET PROPERTY, PLANT AND EQUIPMENT 3,514,890 3,595,809
TOTAL $ 25,121,237 $ 28,839,718
- 1 - (Continued)
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<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets, Continued
March 31, 1996 and June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Unaudited
1996 1995
March 31 June 30
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 618,163 $ 596,823
Accrued expenses:
Salaries, wages and commissions 289,891 104,269
Employees' insurance costs 51,946 50,293
ESOP payable 319,715 -
Other 14,488 14,588
Payroll and other taxes withheld
and accrued 137,322 141,513
Dividends payable - -
Deferred income taxes - current 32,593 75,915
TOTAL CURRENT LIABILITIES 1,464,118 983,401
Deferred income taxes 26,070 30,697
TOTAL LIABILITIES 1,490,188 1,014,098
STOCKHOLDERS' EQUITY:
Common stock, par value .33-1/3 per
share. Authorized 2,250,000 shares;
issued 1,514,937 shares March 31, 1996
and June 30, 1995. 504,979 504,979
Capital in excess of par value 10,496,287 10,496,287
Retained earnings 24,179,977 24,678,208
35,181,243 35,679,474
Less: Common stock subscribed ( 5,027,962) ( 5,027,962)
Cost of 396,291 shares on March
31, 1996 and 171,489 shares on
June 30, 1995 of common stock in
treasury ( 6,522,232) ( 2,825,892)
TOTAL STOCKHOLDERS' EQUITY 23,631,049 27,825,620
TOTAL $ 25,121,237 $ 28,839,718
<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, 1996 and 1995
Unaudited Unaudited
Three Months Nine Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ 4,352,275 $ 3,496,584 $ 12,787,976 $ 10,472,748
Cost of sales 3,818,718 3,229,122 11,362,828 9,297,301
Gross profit 533,557 267,462 1,425,148 1,175,447
Selling, general and administrative expenses 397,074 320,759 1,251,804 1,122,442
Operating income 136,483 ( 53,297) 173,344 53,005
Other income
Interest income and dividends 133,329 202,043 459,539 505,207
Sundry income 667 403 7,942 4,109
133,996 202,446 467,481 509,316
Earnings before income taxes 270,479 149,149 640,825 562,321
Provision for income taxes 101,000 75,000 247,000 280,000
Net earnings $ 169,479 $ 74,149 $ 393,825 $ 282,321
Earnings per share:
Net earnings $ .13 $ .06 $ .30 $ .21
Average number of shares outstanding 1,264,912 1,346,044 1,319,375 1,347,855
<FN>
<F1>
See accompanying notes to Financical Statements
</FN>
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<PAGE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Statements of Cash Flows
Nine Months Ended March 31, 1996 and 1995
Unaudited
March 31
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 393,825 $ 282,321
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Tax effect of dividends on unallocated ESOP shares 45,063 50,070
Depreciation 392,542 314,197
Changes in assets and liabilities:
Decrease (increase) in receivables, net ( 1,213,125) ( 829,787)
Decrease (increase) in inventories, net ( 1,519,639) 691,064
Decrease (increase) in other current assets 128,898 ( 60,730)
Decrease (increase) in income tax refund receivable 249,886 60,217
Increase (decrease) in accounts payable 21,340 86,464
Increase (decrease) in accrued salaries, 185,622 171,408
wages and commissions
Increase (decrease) in accrued employee 1,653 ( 1,186)
insurance costs
Increase (decrease) in other accrued expenses ( 100) ( 3,112)
Increase (decrease) in payroll & other ( 4,191) ( 11,879)
taxes withheld and accrued
Increase (decrease) in income tax payable - -
Decrease in deferred income taxes ( 47,949) ( 62,288)
Increase (decrease) in accrued ESOP contributions 319,715 324,443
Net cash provided by
operating activities ( 1,046,460) 1,011,202
Cash Flows From Investing Activities:
Additions to property, plant & equipment ( 311,623) ( 962,857)
Proceeds from sale of marketable investment securities 11,445,421 -
Purchases of marketable investment securities ( 6,706,726) -
Net cash used in
investing activities 4,427,072 ( 962,857)
Cash Flows From Financing Activities:
Dividends on common stock ( 937,119) ( 809,042)
Purchase of treasury stock ( 3,696,340) ( 93,585)
Net cash used in
financing activities ( 4,633,459) ( 902,627)
Increase (decrease) in cash and short-term investments ( 1,252,847) ( 854,282)
Cash and short-term investments, beginning of period 1,699,215 13,469,584
Cash and short-term investments, end of period $ 446,368 $ 12,615,302
Income Taxes Paid $ - $ 232,000
<FN>
<F1>
See accompanying notes to financial statements.
</FN>
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</TABLE>
<PAGE>
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, 1996, and the results of operations for each of the nine
months ended March 31, 1996 and 1995 and cash flows for the nine months
ended March 31, 1996 and 1995.
2. The earnings per share computations for March 31, 1996 were based on
1,319,375 shares and on 1,347,855 shares for March 31, 1995. 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.
- 5 -
<PAGE>
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, 1996 there were 118,986 shares allocated to
participants.
- 6 -
<PAGE>
ESPEY MFG. & ELECTRONICS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales for the nine months ended March 31, 1996 were $12,787,976 as compared to
$10,472,748 for the same period in 1995, an increase of approximately 22%.
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, 1996 were $393,825 or
$.30 per share compared to $282,321 or $.21 per share for the corresponding
period ended March 31, 1995. Net earnings per share reflects an increase of
approximately 43% over the prior year's nine month period. Net earnings per
share of $.13 for the quarter ended March 31, 1996 indicates an increase
of 30% over the net earnings of $.10 per share for the prior quarter ended
December 31, 1995, and an increase of more than 100% over the net earnings per
share of $.06 for the quarter ended March 31, 1995.
Most of the contracts shipped during the current nine month period reflected
about the same gross profit margin as those shipped in the comparable nine month
period of last year. Cost of sales for both nine month periods was 89%. The
increase in gross earnings was due primarily to the increase in Sales. We feel
that this is a continuation of a positive trend, and will continue to strive to
increase sales and profitability primarily through the introduction of products
and services of a more proprietary nature in both the military and industrial
marketplace. The President's message contained in the 1995 Annual Report
addressed some of our specific areas of concentration.
Selling and G & A expenses increased by about 11% during the current six month
period. The major factor accounting for this was an increase in selling
salaries.
Investment Income declined by approximately 9% for the current nine month
period, due to both a decrease in our investment base and overall declining
interest rates. 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 of a major utility.
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.
- 7 -
<PAGE>
The Company, when possible, funds all of its operations 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 six month period
capital expenditures were approximately $311,623.
On February 9, 1996 the Board of Directors authorized additional funds for the
continuing purchase of shares of the company's common stock in either the open
market or in private transactions. As of that date the total authorization
stood at $5,000,000. On March 7, 1996 the company purchased, for an aggregate
amount of $3,620,100, the entire holdings of Espey common stock amounting to
219,400 shares, from both the Entwistle Co. and Global Securities. On March 11,
1996 a Form 8K was filed with the Securities and Exchange Commission disclosing
this transaction.
During the nine month period ended March 31, 1996, the Company repurchased
224,802 shares of its common stock.
Under existing authorizations, as of March 31, 1996, funds in the amount of
$1,379,900 were available for the continuing repurchase of the Company's shares.
The backlog as of March 31, 1996 was $18,666,969. The backlog as of March 31,
1995 was $16,884,994.
A dividend in the amount of $.70 per share was declared payable November 21,
1995 to shareholders of record on October 27, 1995.
- 8 -
<PAGE>
ESPEY MFG. & ELECTRONICS CORP.
PART II: Other Information and Signatures
Item 4. Submission of Matters to a Vote of Security Holders
At the rescheduled 1995 Annual Meeting of Shareholders held on
March 28, 1996, three shareholder proposals, none of which
received a majority of the votes cast, were included in
the proxy statement as follows:
Proposal 1
A recommendation to the Board of Directors that the 1989
Shareholder Rights Plan be redeemed.
Proposal 2
A recommendation to the Board of Directors to declassify the Board
so that all directors are elected each year.
Proposal 3
A recommendation that the Board of Directors initiate steps to
achieve a sale, merger or other restructuring of the Company.
The result of the voting was as follows:
Proposal 1 Proposal 2 Proposal 3
For 178,966 169,006 132,911
Against 821,641 825,546 865,924
Abstain 2,360 8,415 4,133
Broker non-votes 300,384 300,384 300,384
Item 5. Other Information
None during the quarter.
Item 6. Exhibits and Reports on Form 8-K
On March 11, 1996, a Form 8-K was filed reflecting the repurchase
of 219,400 shares of the Company's common stock.
- 9 -
<PAGE>
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
13 May 1996
Date
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 3RD
QUARTER 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 446,368
<SECURITIES> 5,715,769
<RECEIVABLES> 3,159,530
<ALLOWANCES> 0
<INVENTORY> 11,767,964
<CURRENT-ASSETS> 21,506,347
<PP&E> 11,776,259
<DEPRECIATION> 8,261,369
<TOTAL-ASSETS> 25,121,237
<CURRENT-LIABILITIES> 1,464,118
<BONDS> 0
0
0
<COMMON> 504,979
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,121,237
<SALES> 12,787,976
<TOTAL-REVENUES> 12,787,976
<CGS> 11,362,828
<TOTAL-COSTS> 11,362,828
<OTHER-EXPENSES> 1,251,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 640,825
<INCOME-TAX> 247,000
<INCOME-CONTINUING> 393,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393,825
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
