-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TOjYjr7h5YqqRCHRNv3jHJId8HU3WsaLu94tgS6LVJbdyFS3ALEOvDFVsM74Sx6j X+jdMAiMG+Jb2bFuBtiZMg== 0000033533-97-000002.txt : 19970509 0000033533-97-000002.hdr.sgml : 19970509 ACCESSION NUMBER: 0000033533-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESPEY MANUFACTURING & ELECTRONICS CORP CENTRAL INDEX KEY: 0000033533 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 141387171 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04383 FILM NUMBER: 97598236 BUSINESS ADDRESS: STREET 1: PO BOX 422 STREET 2: CONGRESS & BALLSTON AVENUES CITY: SARATOGA SPRINGS STATE: NY ZIP: 12866 BUSINESS PHONE: 5185844100 10-Q 1 3RD QUARTER 10Q 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, 1997 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.) 233 Ballston Avenue, Saratoga Springs, New York 12866-4755 (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 1,111,220 . 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, 1997 1 and June 30, 1996 Statements of Earnings - Three Months 3 and Nine Months Ended March 31, 1997 and 1996 Statements of Cash Flows - Nine Months 4 Ended March 31, 1997 and 1996 Notes to Financial Statements 5 March 31, 1997 and 1996 Item 2 Management's Discussion and Analysis of 7 Financial Condition and Results of Operations. PART II OTHER INFORMATION 10 SIGNATURES 11
ESPEY MFG. & ELECTRONICS CORP. Balance Sheets March 31, 1997 and June 30, 1996 A S S E T S Unaudited 1997 1996 March 31 June 30 CURRENT ASSETS: Cash and cash equivelents $ 659,198 $ 1,112,767 Short-term investments at cost (market value March 31, 1997, $10,891,321 and June 30, 1996, $4,577,305) 10,838,480 4,484,312 Total Cash and Short-term Investments 11,497,678 5,597,079 Marketable investment securities - current 100,000 3,021,195 Trade accounts receivable net of $3000 allowance March 31, 1997 and June 30, 1996 1,899,723 1,556,404 Other receivables 500 18,177 NET RECEIVABLES 1,900,223 1,574,581 Inventories: Raw materials and supplies 530,934 499,900 Work-in-process 1,785,343 1,561,742 Costs relating to contracts in process 5,809,835 8,971,704 NET INVENTORIES 8,126,112 11,033,346 Deferred Income taxes - 796 Prepaid expenses and other current assets 292,525 272,808 TOTAL CURRENT ASSETS 21,916,538 21,499,805 Deferred income taxes 86,844 9,088 PROPERTY, PLANT AND EQUIPMENT AT COST 12,112,889 11,813,137 Less: Accumulated depreciation and amortization (8,771,913) (8,371,987) NET PROPERTY, PLANT AND EQUIPMENT 3,340,976 3,441,150 TOTAL $ 25,344,358 $ 24,950,043 - 1 - (Continued) ESPEY MFG. & ELECTRONICS CORP. Balance Sheets, Continued March 31, 1997 and June 30, 1996 LIABILITIES AND STOCKHOLDERS' EQUITY Unaudited 1997 1996 March 31 June 30 CURRENT LIABILITIES: Accounts Payable $ 339,588 $ 158,631 Accrued expenses: Salaries, wages and commissions 275,894 116,351 Employees' insurance costs 37,174 54,739 ESOP payable 330,746 - Other 12,319 17,440 Payroll and other taxes withheld and accrued 110,516 156,890 Dividends payable - - Deferred income taxes 38,918 - Income tax payable 120,007 119,857 TOTAL CURRENT LIABILITIES 1,265,162 623,908 STOCKHOLDERS' EQUITY: Common stock, par value .33-1/3 per share. Authorized 2,250,000 shares; issued 1,514,937 shares March 31, 1997 and June 30, 1996. 504,979 504,979 Capital in excess of par value 10,496,287 10,496,287 Retained earnings 24,185,493 24,316,400 35,186,759 35,317,666 Less: Common stock subscribed ( 4,469,299) ( 4,469,299) Cost of 403,717 shares on March 31, 1997 and 396,291 shares on June 30, 1996 of common stock in treasury ( 6,638,264) ( 6,522,232) TOTAL STOCKHOLDERS' EQUITY 24,079,196 24,326,135 TOTAL $ 25,344,358 $ 24,950,043 See accompanying notes to financial statements - 2 - ESPEY MFG. & ELECTRONICS CORP. STATEMENTS OF EARNINGS Three and Nine Months Ended March 31, 1997 and 1996 Unaudited Unaudited Three Months Nine Months 1997 1996 1997 1996 Net Sales $ 3,805,569 $ 4,352,275 $ 12,458,847 $ 12,787,976 Cost of sales 3,261,532 3,818,718 10,487,571 11,362,828 Gross profit 544,037 533,557 1,971,276 1,425,148 Selling, general and administrative expenses 467,407 397,074 1,374,285 1,251,804 Operating income 76,630 136,483 596,991 173,344 Other income Interest income 130,072 133,329 378,595 459,539 Sundry income 668 667 3,629 7,942 130,740 133,996 382,224 467,481 Earnings before income taxes 207,370 270,479 979,215 640,825 Provision for income taxes 80,000 101,000 379,000 247,000 Net earnings $ 127,370 $ 169,479 $ 600,215 $ 393,825 Earnings per share: Net earnings $ .12 $ .13 $ .54 $ .30 Average number of shares outstanding 1,111,220 1,264,912 1,112,358 1,319,375 See accompanying notes to Financical Statements - 3 - ESPEY MFG. & ELECTRONICS CORP. Statements of Cash Flows Nine Months Ended March 31, 1997 and 1996 Unaudited March 31 1997 1996 Cash Flows From Operating Activities: Net earnings $ 600,215 $ 393,825 Adjustments to reconcile net earnings to net cash provided by operating activities: Tax effect of dividends on unallocated ESOP shares 46,732 45,063 Depreciation 399,926 392,542 Changes in assets and liabilities: Decrease (increase) in receivables, net ( 325,642) ( 1,213,125) Decrease (increase) in inventories, net 2,907,234 ( 1,519,639) Decrease (increase) in other current assets ( 19,717) 128,898 Decrease (increase) in income tax refund receivable - 249,886 Increase (decrease) in accounts payable 180,957 21,340 Increase (decrease) in accrued salaries, 159,543 185,622 wages and commissions Increase (decrease) in accrued employee ( 17,565) 1,653 insurance costs Increase (decrease) in other accrued expenses ( 5,121) ( 100) Increase (decrease) in payroll & other ( 46,374) ( 4,191) taxes withheld and accrued Increase (decrease) in income tax payable 150 - Decrease (increase) in deferred income taxes ( 38,042) ( 47,949) Increase (decrease) in accrued ESOP contributions 330,746 319,715 Net cash provided by (used in) operating activities 4,173,042 ( 1,046,460) Cash Flows From Investing Activities: Additions to property, plant & equipment ( 299,752) ( 311,623) Proceeds from maturity of marketable investment securities 4,880,073 11,445,421 Purchases of marketable investment securities ( 1,958,878) ( 6,706,726) Net cash provided by(used in) investing activities 2,621,443 4,427,072 Cash Flows From Financing Activities: Dividends on common stock ( 777,854) ( 937,119) Purchase of treasury stock ( 116,032) ( 3,696,340) Net cash used in financing activities ( 893,886) ( 4,633,459) Increase (decrease) in cash and short-term investments 5,900,599 ( 1,252,847) Cash and short-term investments, beginning of period 5,597,079 1,699,215 Cash and short-term investments, end of period $ 11,497,678 $ 446,368 Income Taxes Paid $ 367,000 $ - See accompanying notes to financial statements. - 4 -
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, 1997, and the results of operations for each of the nine months ended March 31, 1997 and 1996 and cash flows for the nine months ended March 31, 1997 and 1996. The operating results for the nine months ended March 31, 1997 are not necessarily indicative of the operating results to be expected for the full fiscal year. These statements should be read in conjunction with the Company's most recent Annual Report to Stockholders and Annual Report on Form 10-K. 2. The earnings per share computations for March 31, 1997 were based on 1,112,358 shares and on 1,319,375 shares for March 31, 1996. These represent the average number of shares outstanding for each respective period. 3. Other income consists principally of interest on Certificates of Deposit, Treasury Bills and money market accounts. 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 - 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, 1997 there were 131,439 shares allocated to participants. 8. The Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", as of July 1, 1995. This accounting standard required that certain long- lived assets be reviewed for impairment when events or circumstances indicate that the carrying amount of the assets may not be recoverable. If such review indicates that the carrying value is written down to fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. The adoption of this accounting standard had no effect on the financial position or results of operations of the Company. - 6 - ESPEY MFG. & ELECTRONICS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations Sales for the nine months ended March 31, 1997 were $12,458,847 as compared to $12,787,976 for the same period in 1996. 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 current nine month period were $600,215 compared to $393,825 for the corresponding period last year. This is an increase of approximately 52%. Current earnings per common share rose to $.54 per share from $.30 per common share last year. This increase reflects not only the increase in net earnings but the decrease in the average number of common shares outstanding during the comparable nine month periods from 1,319,375 to 1,112,358. Similar to the first half of this year, many of the contracts shipped in the current quarter carried a somewhat higher gross profit margin than those shipped during the corresponding half of last year. As a result, Cost of Sales for the current nine month period dropped to 84% compared to the 89% reflected last year. This factor was the primary reason for the increase in net profits although there was a decrease in sales of nearly 3%. The Company is still striving to enhance and expand its Sales and Marketing departments. In this regard the Company has contacted, and is developing, a number of new customers. As indicated previously, certain specifics concerning the products that the Company is concentrating on are addressed in both the President's message accompanying our 1996 Annual Report to Stockholders and in our most recently filed Form 10K. Selling and General & Administrative expenses show an increase of approximately 18% for the current nine month period. This is primarily due to the reclassification of certain salaries from manufacturing expenses to general and administrative expenses, in addition to an increase in legal expenses thru the Company's efforts to obtain patents on a number of its products. In the Statements of Cash Flows the decrease in inventories is due for the most part to a decrease in material purchases in keeping with the reduction in our current backlog. Investment income declined by approximately 22% for the current nine month period primarily due to a reduction in our investment base brought about by a major repurchase of our common stock during the latter part of our last fiscal year. Management presently does not feel that there is any risk associated with its investment policy, since the majority of our investments are represented by U.S. Government securities, Certificates of Deposit and money market accounts. - 7 - Since the debt of the Company's ESOP is not to an outside party, the Company has eliminated from the Statements of Earnings the offsetting items of interest income and interest expense relating to the ESOP. The Company has 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. Management currently feels that during the next fiscal year, funds from Operating Activities will continue to be adequate to meet these needs. For the current nine month period capital expenditures were approximately $300,000. During the nine month period ended March 31, 1997 the Company repurchased 7,426 shares of its common stock. Under existing authorizations, as of March 31, 1997, funds in the amount of $1,883,969 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, 1997 was $9,404,756. As indicated in prior reports customer order patterns are inherently difficult to predict. As previously disclosed, one of the Company's major customers has announced the consolidation and relocation of several of its facilities and various personnel. The transition stage of this consolidation has caused delays in both ongoing and newly proposed programs. At the present time the Company does not know what effect, if any, this will have on the receipt of currently pending new business from this customer. The Company is hopeful that any further delay will be minimal. In spite of this, in light of our projected expanding customer base, the Company believes that in the long term it will continue to obtain contracts consistent with our past experience. The Company conservatively estimates that it currently has outstanding quotations well in excess of $35,000,000 for both repeat and new programs, in addition to increase option clauses in various existing contracts. The Company is presently optimistic that a significant portion of these quotations and options will result in firm contracts. A dividend in the amount of $.70 per share was paid November 22, 1996 to shareholders of record on October 28, 1996. It should be noted that certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company's current expectations or beliefs concerning future events. The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including the Company's dependence on timely development, introduction and customer acceptance of new products, the impact of competition and price erosion, as well as - 8 - supply and manufacturing constraints and other risks and uncertainties. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. -9- ESPEY MFG. & ELECTRONICS CORP. PART II: Other Information and Signatures Item 4. Submission of Matters to a Vote of Security Holders None during this quarter. Item 5. Other Information None during this quarter. Item 6. Exhibits and Reports on Form 8-K 27 Financial Data Schedule (for electronic filing only) - 10 - 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. Joseph Canterino, President Herbert Potoker, Treasurer and Chief Financial Officer 07 May 1997 Date - 11 - EX-27 2
5 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. 9-MOS JUN-30-1997 MAR-31-1997 11,497,678 100,000 1,900,223 0 8,126,112 21,916,538 12,112,889 ( 8,771,913) 25,344,358 1,265,162 0 0 0 504,979 24,079,196 25,344,358 12,458,847 12,458,847 10,487,571 10,487,571 1,374,285 0 0 979,215 379,000 600,215 0 0 0 600,215 .54 0 -----END PRIVACY-ENHANCED MESSAGE-----