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 December 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 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 1,338,046.
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
<PAGE>
ESPEY MFG. & ELECTRONICS CORP.
I N D E X
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statments:
Balance Sheets - December 31, 1995 1
and June 30, 1995
Statements of Earnings - Six Months 3
Ended December 31, 1995 and 1994
Statements of Cash Flows - Six Months 4
and Three Months Ended December 31, 1995
and 1994
Notes to Financial Statements 5
December 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
<PAGE>
<TABLE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets
December 31, 1995 and June 30, 1995
A S S E T S
Unaudited
1995 1995
December 31 June 30
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivelents $ 846,609 $ 231,675
Short-term investments at cost
(market value December 31, 1995,
$300,235 and June 30, 1995,
$1,497,681) 300,000 1,467,540
Total Cash and Short-term
Investments 1,146,609 1,699,215
Marketable investment securities - current 9,469,817 10,454,464
Trade accounts receivable net of
$3000 allowance December 31, 1995
and June 30, 1995 2,386,905 1,925,778
Other receivables 302,313 20,627
NET RECEIVABLES 2,689,218 1,946,405
Inventories:
Raw materials and supplies 309,562 400,778
Work-in-process 1,148,000 1,078,169
Costs relating to contracts in
process, net of progress payments
of $773,800 - December 31, 1995 and
$2,121,800 - June 30,1995 9,689,451 8,769,378
NET INVENTORIES 11,147,013 10,248,325
Income tax refund receivable 277,564 410,467
Prepaid expenses and other current assets 340,356 385,033
TOTAL CURRENT ASSETS 25,070,577 25,143,909
MARKETABLE INVESTMENT SECURITIES 100,000 100,000
PROPERTY, PLANT AND EQUIPMENT AT COST 11,568,602 11,464,636
Less: Accumulated depreciation and
amortization (8,080,521) (7,868,827)
NET PROPERTY, PLANT AND EQUIPMENT 3,488,081 3,595,809
TOTAL $ 28,658,658 $ 28,839,718
- 1 - (Continued)
<PAGE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets, Continued
December 31, 1995 and June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Unaudited
1995 1995
December 31 June 30
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 756,386 $ 596,823
Accrued expenses:
Salaries, wages and commissions 314,142 104,269
Employees' insurance costs 46,229 50,293
ESOP payable 213,143 -
Other 15,693 14,588
Payroll and other taxes withheld
and accrued 156,750 141,513
Dividends payable - -
Deferred income taxes - current 40,645 75,915
TOTAL CURRENT LIABILITIES 1,542,988 983,401
Deferred income taxes 34,000 30,697
TOTAL LIABILITIES 1,576,988 1,014,098
STOCKHOLDERS' EQUITY:
Common stock, par value .33-1/3 per
share. Authorized 2,250,000 shares;
issued 1,514,937 shares December 31, 1995
and June 30, 1995. 504,979 504,979
Capital in excess of par value 10,496,287 10,496,287
Retained earnings 24,010,498 24,678,208
35,011,764 35,679,474
Less: Common stock subscribed ( 5,027,962) ( 5,027,962)
Cost of 176,891 shares on December
31, 1995 and 171,489 shares on
June 30, 1995 of common stock in
treasury ( 2,902,132) ( 2,825,892)
TOTAL STOCKHOLDERS' EQUITY 27,081,670 27,825,620
TOTAL $ 28,658,658 $ 28,839,718
<FN>
<F1>
See accompanying notes to financial statements
</FN>
- 2 -
<PAGE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
STATEMENTS OF EARNINGS
Six and Three Months Ended December 31, 1995 and 1994
Unaudited Unaudited
Three Months Six Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 4,434,896 $ 2,814,595 $ 8,435,701 $ 6,976,164
Cost of sales 3,947,980 2,520,964 7,544,110 6,068,179
Gross profit 486,916 293,631 891,591 907,985
Selling, general and administrative expenses 443,195 386,019 854,730 801,683
Operating income (loss) 43,721 ( 92,388) 36,861 106,302
Other income
Interest income and dividends 166,748 156,725 326,210 303,164
Sundry income 437 1,070 7,275 3,706
167,185 157,795 333,485 306,870
Earnings before income taxes 210,906 65,407 370,346 413,172
Provision for income taxes 85,000 32,000 146,000 205,000
Net earnings $ 125,906 $ 33,407 $ 224,346 $ 208,172
Earnings per share:
Net earnings $ .10 $ .02 $ .17 $ .15
Average number of shares outstanding 1,338,552 1,347,572 1,339,951 1,348,488
<FN>
<F1>
See accompanying notes to Financical Statements
</FN>
- 3 -
<PAGE>
<CAPTION>
ESPEY MFG. & ELECTRONICS CORP.
Statements of Cash Flows
Six Months Ended December 31, 1995 and 1994
Unaudited
December 31
1995 1994
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $ 224,346 $ 208,172
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 211,694 207,039
Changes in assets and liabilities:
Decrease (increase) in receivables, net ( 742,813) ( 850,849)
Decrease (increase) in inventories, net ( 898,688) 168,445
Decrease (increase) in other current assets 44,677 ( 134,037)
Decrease (increase) in income tax refund receivable 132,903 88,999
Increase (decrease) in accounts payable 159,563 522,876
Increase (decrease) in accrued salaries, 209,873 176,645
wages and commissions
Increase (decrease) in accrued employee ( 4,064) ( 15,635)
insurance costs
Increase (decrease) in other accrued expenses 1,105 ( 4,508)
Increase (decrease) in payroll & other 15,237 ( 20,464)
taxes withheld and accrued
Increase (decrease) in income tax payable - -
Decrease in deferred income taxes ( 31,967) ( 41,527)
Increase (decrease) in accrued ESOP contributions 213,143 216,295
Net cash provided by (used in)
operating activities ( 419,928) 571,521
Cash Flows From Investing Activities:
Additions to property, plant & equipment ( 103,966) ( 706,340)
Proceeds from sale of marketable investment securities 4,796,099 -
Purchases of marketable investment securities ( 3,811,452) -
Net cash provided by (used in)
investing activities 880,681 ( 706,340)
Cash Flows From Financing Activities:
Dividends on common stock ( 937,119) ( 809,042)
Purchase of treasury stock ( 76,240) ( 54,094)
Net cash used in
financing activities ( 1,013,359) ( 863,136)
Increase (decrease) in cash and short-term investments ( 552,606) ( 997,955)
Cash and short-term investments, beginning of period 1,699,215 13,469,584
Cash and short-term investments, end of period $ 1,146,609 $ 12,471,629
Income Taxes Paid $ - $ 116,000
<FN>
<F1>
See accompanying notes to financial statements.
</FN>
- 4 -
</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
Decmember 31, 1995, and the results of operations for each of the three and
six month periods ended December 31, 1995 and 1994 and cash flows for the six
month periods ended December 31, 1995 and 1994.
2. The earnings per share computations for December 31, 1995 were based on
1,339,951 shares and on 1,348,488 shares for December 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.
- 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 December 31, 1995 there were 118,986 shares allocated to
participants.
8. The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," at July 1, 1994. Upon adoption of SFAS No. 115, at
July 1, 1994, all amounts included in short-term investments matured within
three months of the adoption date. Therefore no amounts were transferred to
marketable investment securities upon adoption and there was no cumulative
effect from this change.
- 6 -
<PAGE>
ESPEY MFG. & ELECTRONICS CORP.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales for the six months ended December 31, 1995 were $8,435,701 as compared to
$6,976,164 for the same period in 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 six month period were $224,346 or $.17 per share compared
to $208,172 or $.15 per share for the corresponding period of last year.
Most of the contracts shipped during the current six month period reflected
about the same gross profit margin as those shipped in the comparable six month
period last year. Cost of sales for both six month periods was 90%, which is
consistent with the Cost of Sales for the first quarter of this year. We feel
that this is a positive trend, and will continue to strive to increase
profitibility 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 6% during the current six month
period. The major factor accounting for this was an increase in selling
salaries.
Although our investment base was somewhat lower during the current period,
Investment Income rose slightly. 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.
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 $103,966.
During the six month period ended December 31, 1995, the Company repurchased
5402 shares of its common stock.
- 7 -
<PAGE>
Under existing authorizations, as of December 31, 1995, funds in the amount of
$1,007,077 were available for the continuing repurchase of the Company's shares.
The backlog as of December 31, 1994 was $16,666,187. The backlog as of December
31, 1995 was $18,596,016.
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
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.
- 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 February 1996
Date
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 2ND
QUARTER 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 846,609
<SECURITIES> 9,469,817
<RECEIVABLES> 2,689,218
<ALLOWANCES> 0
<INVENTORY> 11,147,013
<CURRENT-ASSETS> 25,070,577
<PP&E> 3,488,081
<DEPRECIATION> 8,080,521
<TOTAL-ASSETS> 28,658,658
<CURRENT-LIABILITIES> 1,576,988
<BONDS> 0
0
0
<COMMON> 504,979
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,658,658
<SALES> 8,435,701
<TOTAL-REVENUES> 8,435,701
<CGS> 7,544,110
<TOTAL-COSTS> 7,544,110
<OTHER-EXPENSES> 854,730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 370,346
<INCOME-TAX> 146,000
<INCOME-CONTINUING> 224,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,346
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
