0000914317-01-500369.txt : 20011009 0000914317-01-500369.hdr.sgml : 20011009 ACCESSION NUMBER: 0000914317-01-500369 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010928 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04383 FILM NUMBER: 1747621 BUSINESS ADDRESS: STREET 1: 233 BALLSTON AVE STREET 2: CONGRESS & BALLSTON AVENUES CITY: SARATOGA SPRINGS STATE: NY ZIP: 12866 BUSINESS PHONE: 5185844100 MAIL ADDRESS: STREET 1: 233 BALLSTON AVE CITY: SARATOGA SPRINGS STATE: NY ZIP: 12866 10-K 1 form10k40876-925.txt 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10 - K [ X ] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the fiscal year ended June 30, 2001 [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the transition period from to Commission File No. 1-4383 Espey Mfg. & ELECTRONICS CORP. -------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 14-1387171 -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 233 Ballston Avenue, Saratoga Springs, NY 12866 -------------------------------------------------------------------------------- (Address of principal executive offices including Zip Code) (Registrant's telephone number including area code) (518)245-4400 Name of Each Exchange Title of Each class on Which Registered ------------------- -------------------- Common Stock $.33-1/3 par value American Stock Exchange Common Stock Purchase Rights American Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to the filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days [X} Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant was $19,034,734 as of September 18, 2001 based upon the closing sale price of $18.49 on the American Stock Exchange on September 18, 2001. The number of shares of common stock outstanding as of September 18, 2001 was 1,029,461. PART I Item 1. Business. General Espey Mfg. & Electronics Corp. (the "Company") is engaged principally in the development, design, production and sales of specialized electronic power supplies, a wide variety of transformers and other types of iron-core components, and electronic system components. In some cases, the Company manufactures such products in accordance with pre-developed mechanical and electrical requirements. In other cases, the Company is responsible for both the overall design and manufacture of the product. The Company does not generally manufacture standardized components. The Company operates a one-segment business and was incorporated in 1928. The electronic power supplies and components manufactured by the Company find application principally in (i) shipboard and land based radar, (ii) locomotives, (iii) aircraft, (iv) short, medium range and global communication systems, (v) navigation systems for aircraft, (vi) nuclear submarine control systems, (vii) missile guidance and control systems and (viii) land based military vehicles. The Company's iron-core components include (i) transformers of the audio, power and pulse types, (ii) magnetic amplifiers and (iii) audio filters. The electronic system components manufactured by the Company include antenna systems and high power radar transmitters. These system components utilize the Company's own electronic power supplies, transformers and other iron-core components and mechanical assemblies. In the fiscal year ended June 30, 2001 (referred to herein as "2001"), the Company's total sales were $17,251,640. Sales to two domestic customers and one foreign customer accounted for 40%, 20%, and 12%, respectively, of total sales in 2001. Sales to two domestic customers accounted for 30% and 26% respectively, of total sales in 2000. Sales to two domestic customers and one foreign customer accounted for 38%, 25%, and 11%, respectively, of total sales in 1999. Export sales in 2001, 2000 and 1999 were approximately $8,700,000, $4,200,000 and $2,500,000, respectively. During 1999, the Company established a foreign sales corporation. Raw Materials The Company has never experienced any significant delay or shortage with respect to the purchase of raw materials and components used in the manufacture of its products, and has at least two potential sources of supply for all raw materials. Sales Backlog At September 18, 2001, the Company's backlog was approximately $25 million. The total backlog at June 30, 2001 was approximately $27.5 million as compared to approximately $29.1 million at June 30, 2000. The Company's backlog is discussed in greater detail in Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in Item 7 below. It is presently anticipated that a minimum of $16 million of orders comprising the June 30, 2001 backlog will be filled during the fiscal year ending June 30, 2002. The minimum of $16 million does not include any shipments which may be made against orders subsequently received during the fiscal year ending June 30, 2002. The estimate of the June 30, 2001 backlog to be shipped in fiscal 2002 is subject to future events which may cause the amount of the backlog actually shipped to differ from such estimate. Marketing and Competition The Company markets its products primarily through its own direct sales organization. Business is solicited from Fortune 500 companies, United States and foreign governments and major foreign electronic equipment companies. In certain countries the Company has external sales representatives to help solicit and coordinate foreign contracts. The Company is also on the eligible list of contractors of many agencies of the Department of Defense and generally is automatically solicited by such agencies for procurement needs falling within the major classes of products produced by the Company. In addition, the Company directly solicits bids from both the Department of Defense and other United States Government agencies for prime contracts. There is competition in all classes of products manufactured by the Company, from divisions of the largest electronic companies, as well as many small companies. The Company's sales do not represent a significant share of the industry's market for any class of its products. The principal methods of competition for electronic products of both a military and industrial nature include, among other factors, price, product performance, the experience of the particular company and history of its dealings in such products. The Company, as well as other companies engaged in supplying equipment for military use, is subject to various risks, including, without limitation, dependence on U.S. and foreign government appropriations and program allocations, the competition for available military business, and government termination of orders for convenience. The Company's business is not considered to be of seasonal nature. Research and Development The Company's expenditures for research and development were approximately $249,000, $255,000 and $291,000 in 2001, 2000 and 1999, respectively. Some of the Company's engineers and technicians spend varying degrees of time on either development of new products or improvement of existing products. Employees The number of persons employed by the Company as of September 18, 2001 was 194. Some of these employees are represented by the International Brotherhood of Electrical Workers Local #1799. The current collective bargaining agreement expires on June 30, 2003. The contract includes a 3% pay increase in fiscal 2002, and 2003. Relations with the Union are considered good. Union membership at September 18, 2001 was 78 people. Government Regulations Compliance with federal, state and local provisions that have been enacted or adopted to regulate the discharge of materials into the environment, or otherwise relating to the protection of the environment, did not in 2001, and the Company believes will not in fiscal year 2002 have a material effect upon the capital expenditures, earnings, or competitive position of the Company. Item 2. Properties The Company's manufacturing and engineering facilities are at its plant which it owns in Saratoga Springs, New York. The Saratoga Springs plant consists of various closely adjoining one-story buildings. The plant has a sprinkler system throughout and contains approximately 151,000 square feet of floor space, of which 90,000 is used for manufacturing, 24,000 for engineering, 33,000 for shipping and climatically secured storage, and 4,000 for offices. The offices, engineering and some manufacturing areas are air-conditioned. In addition to assembly and wiring operations, the plant includes facilities for varnishing, potting, plating, impregnation and spray-painting operations. The manufacturing operation also includes a complete machine shop, with welding and sheet metal fabrication facilities adequate for substantially all of the Company's current operations. Besides normal test equipment, the Company maintains a sophisticated on-site environmental test facility. In addition to meeting all of the Company's in-house needs, the plating, machine shop and environmental facilities are available to other companies on a contract basis. The Company owns an additional manufacturing facility in a three-story building of approximately 4,000 square feet in Gloversville, New York. The facility was used primarily for subcomponent wiring and assembly. In 2001, this facility was closed down due to economic reasons and operations were consolidated into the Saratoga facility. The Company maintained a sales office in Great Neck, New York. This space, compromising approximately 750 square feet, was leased from a non-affiliated person for a term that expired on September 9, 2001. The Company did not renew this lease and all sales activities are conducted out of the Saratoga facility. Item 3. Legal Proceedings. None Item 4. Submission of Matters to a Vote of Security Holders. None PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Price Range of Common Stock The table below shows the range of high and low prices for the Company's common stock on the American Stock Exchange, the principal market for trading in the common stock, for each quarterly period for the last two fiscal years ended June 30: 2001 High Low First Quarter 17.50 14.00 Second Quarter 17.938 15.875 Third Quarter 19.50 16.625 Fourth Quarter 18.16 17.60 2000 High Low First Quarter 14 3/4 12 1/8 Second Quarter 15 1/4 13 5/8 Third Quarter 15 9/16 12 7/8 Fourth Quarter 15 1/8 13 7/8 Holders The approximate number of holders of record of the common stock was 157 on September 18, 2001 according to records of the Company's transfer agent. Included in this number are shares held in "nominee" or "street" name and, therefore, the number of beneficial owners of the common stock is believed to be substantially in excess of the foregoing number. Dividends The Company paid a cash dividend on the common stock of $.20 per share for the fiscal years ended June 30, 2001, 2000 and 1999. The Board of Directors has authorized the payment of a fiscal year 2002 dividend of $.30 payable quarterly. Item 6. Selected Financial Data.
ESPEY MFG. & ELECTRONICS CORP. Five Years Ended June 30, 2001 ------------------------------------------------------------------------------------- Selected Income Statement Data 2001 2000 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ Net Sales ..................... $ 17,251,640 $ 14,719,818 $ 13,629,692 $ 10,793,572 $ 15,166,075 Operating Income (loss) ....... 1,169,271 733,617 690,839 (1,750,663) 342,177 Other income, net ............. 305,833 459,326 441,762 595,691 525,046 ------------ ------------ ------------ ------------ ------------ Net income (loss) 1,033,069 782,943 730,601 (739,602) 563,128 Income (loss) per common share: $ 1.00 $ .75 $ .66 $ (.67) $ .51 ============ ============ ============ ============ ============ Selected Balance Sheet Data Current Assets ................ 23,736,990 22,540,316 22,091,114 21,309,658 21,819,899 Current Liabilities ........... 1,063,497 1,329,171 1,274,126 883,980 599,180 Working Capital ............... 22,673,493 21,211,145 20,816,988 20,425,678 21,220,719 Total Assets .................. 27,228,881 26,118,037 25,394,712 24,574,108 25,199,951 Long-term liabilities (deferred income taxes) ..... -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Stockholders' equity .......... 26,165,384 24,788,866 24,120,586 23,690,128 24,600,771 ------------ ------------ ------------ ------------ ------------ Cash dividends declared and paid per common share ...... $ .20 $ .20 $ .20 $ .70 $ .70 ============ ============ ============ ============ ============
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net Sales for fiscal years ended June 30, 2001, 2000, and 1999, were $17,251,640, $14,719,818, and $13,629,692, respectively. The 17.2% increase in sales over 2000 is a result of the Company continuing to realize the benefits of intensified sales and marketing efforts in an attempt to increase business with existing customers as well as establishing new customer relationships. These efforts have provided for the continued increase in sales that has occurred over the last three years. The sales backlog at June 30, 2001 was approximately $27.5 million. Several new customers have been added and business with existing customers has continued to grow. The backlog includes significant orders for the Company's land and shipboard high voltage radar power supply/transmitters, industrial power supplies, and significant contracts to manufacture certain customer products in accordance with pre-developed requirements. The increase in net sales in 2000 as compared to 1999 was also a result of intensified sales and marketing efforts which increased the sales order backlog and allowed the Company to ship significantly more in 2000. Significant shipments in 2000 and 1999 included high voltage radar power supply/transmitters, repair depot, and industrial power supplies. Net income for fiscal 2001, was $1,033,069 or $1.00 per share compared to $782,943 or $.75 per share for fiscal 2000. The 33% increase in earnings per share was due to increased net sales and enhanced internal cost controls, which resulted in lower selling, general and administrative expenses. Net income for fiscal 2000, was $782,943 or $.75 per share compared to a net income of $730,601 or $.66 per share for fiscal 1999. The net income increase in 2000 was due to increased net sales and a favorable product mix. For fiscal years ended June 30, 2001, 2000 and 1999 gross profits were $3,061,730, $2,735,934, and $2,537,676, respectively. The increase in gross profit between 2001, 2000, and 1999, was predominately due to increased efficiency in the manufacturing and engineering workforces and an increase in net sales. Selling, general and administrative expenses were $1,892,459 for the fiscal year ended June 30, 2001, a decrease of $109,858, or 5.5% as compared to the prior year. This decrease is mainly attributable to an overall decrease in selling expenses. Selling, general and administrative expenses were $2,002,317 for the year ended June 30, 2000, an increase of $155,480, or 8% as compared to the prior year. The increase is primarily related to an increase in professional fees, officers salaries and employment-related expenses. Total other income in fiscal 2001, as compared to 2000 declined as expected as interest rates declined continuously in fiscal 2001. Total other income in fiscal 2000 remained relatively consistent with fiscal 1999. Interest and dividend income decreased as expected, however, this decrease was offset by government grants received related to increased employment. Business Outlook The Company continues to increase net sales while also maintaining a sizable sales backlog. The sales backlog of $28.0 million as of September 18, 2001 gives the Company a solid base to grow over the next few years. In addition to the backlog, the Company currently has outstanding quotations in excess of $22 million for both repeat and new programs. The Company has received major contracts for pre-engineered transmitters. The Company also expects to receive substantial orders for spare parts on the various types of transmitters which are already in the field, a number of contracts for further development and manufacture of numerous power supplies and transformers. The outstanding quotations encompass various new and previously manufactured power supplies, transformers, and subassemblies. Management presently anticipates that the Company will realize both an increase in revenues and income in 2002, however, there can be no assurance that the Company will acquire any or all of the proposed orders described above since such a forward-looking statement is subject to future events, market conditions, political stability of foreign governments, and allocations of the United States defense budget. Liquidity and Capital Resources The Company's working capital is an appropriate indicator of the liquidity of its business, and during the past three fiscal years, the Company, when possible, has funded all of its operations with cash flows resulting from operating activities and when necessary from its existing cash and investments. The Company did not borrow any funds during the last three fiscal years. Management has available a $3,000,000 line of credit to help fund further growth or working capital needs, if necessary, but does not anticipate the need for any borrowed funds in the foreseeable future. The Company's working capital as of June 30, 2001, 2000, and 1999 was $22,673,494, $21,211,145, and $20,816,988, respectively. During 2001, 2000 and 1999 the Company repurchased 4,170, 30,027 and 47,562 shares, respectively, of its common stock from the Company's ESOP and in other private and public transactions, for a total purchase price of $70,891, $403,472 and $604,226, respectively. Under existing authorizations from the Company's Board of Directors, as of September 18, 2001, management is authorized to purchase an additional $854,860 of Company stock. The table below presents the summary of cash flow information for the fiscal year indicated:
2001 2000 ----------- ----------- Net cash provided by (used in) operating activities $ 3,073,481 ($2,076,644) Net cash provided by investing activities ......... 37,264 2,691,701 Net cash used in financing activities ............. 277,200 612,201
Net cash provided by (used in) operating activities fluctuates between periods primarily as a result of differences in net income, the timing of the collection of accounts receivable, purchases of inventory, level of sales and payments of accounts payable. Net cash provided by investing activities decreased in fiscal 2001 due to the maturities of the Company's investment securities with no offsetting purchase of new investments in fiscal 2000. The decrease in cash used in financing activities is due to the decrease in the amount of treasury stock purchased during 2001. The Company believes that the cash generated from operations and when necessary, from existing cash and cash equivalents, will be sufficient to meet its long-term funding requirements for the foreseeable future. Management believes that the Company's reserve for bad debts of $3,000 is adequate given the customers with whom the Company deals. The amount of bad debts over the years has been minimal. During fiscal year 2001, and 2000, the Company expended approximately $537,000 and $782,100, respectively, for plant improvements and new equipment. The Company has budgeted approximately $350,000 for new equipment and plant improvements in fiscal 2002. Management presently anticipates that the funds required will be available from current operations. Management Restructuring At the end of the fiscal 1998, the Company implemented a management succession plan. The plan was effectuated through agreements with five executive officers of the Company: Joseph Canterino (former President and Chief Executive Officer), Barry Pinsley (former Vice President-Investor Relations and Human Resources), Seymour Saslow (Senior Vice President), Herbert Potoker (Treasurer and Principal Financial Officer), and Reita Wojtowecz (Secretary). Under the terms of the agreements, the executives agreed to resign from their positions as executive officers and are being compensated in accordance with their respective agreements. The implementation of this plan resulted in the Company recording in fiscal 1998 a $479,500 pre-tax charge for payments due under the contracts and costs related to the implementation of the plan. The costs of the plan are being paid with cash flows from the Company's operating activities. At June 30, 2001 approximately $39,000 remains to be paid under these agreements. Other Matters An Employee Retirement Plan and Trust ("ESOP") was established for the eligible non-union employees of the Company and was effective as of July 1, 1988. The ESOP used the proceeds of a loan from the Company to purchase 316,224 shares of the Company's common stock for approximately $8,400,000 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. Each year the Company makes contributions to the ESOP, which are used to make loan interest and principal payments. With each loan and interest payment, a portion of the common stock is allocated to participating employees. As of June 30, 2001, there were 208,896 shares allocated to participants. Dividends attributable to allocated shares were likewise allocated to the participants' accounts, whereas the dividends on unallocated shares were used in part of the loan repayment, thus reducing the Company's required contribution. 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. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 It should be noted that 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. The terms "believe, " "anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking statements. 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 form 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 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. Item 8. Financial Statements Report of Independent Accountants To the Board of Directors and Stockholders of Espey Mfg. & Electronics Corp. and Subsidiary: In our opinion, the consolidated financial statements listed in the index appearing under Item 14 (a) (1) present fairly, in all material respects, the financial position of Espey Mfg. & Electronics Corp. and Subsidiary at June 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP ----------------------------- PricewaterhouseCoopers LLP Albany, New York August 16, 2001
Espey Mfg. & Electronics Corp. and Subsidiary Consolidated Balance Sheets June 30, 2001 and 2000 ------------------------------------------------------------------------------------------------------ 2001 2000 ------------ ------------ ASSETS Current assets: Cash and cash equivalents ............................ $ 5,200,736 $ 2,367,191 Investment securities ................................ 737,600 650,000 ------------ ------------ Net cash and cash equivalents and investment securities .......... 5,938,336 3,017,191 ------------ ------------ Trade accounts receivable, net ....................... 2,537,310 4,105,028 Other receivables .................................... 31,179 46,435 ------------ ------------ Net receivables .................... 2,568,489 4,151,463 ------------ ------------ Inventories: Raw materials and supplies ................ 1,036,726 822,814 Work in Process ........................... 2,658,436 3,113,708 Costs related to contracts in process, net of progress payments of $289,000 in 2001 and $537,468 in 2000 ....... 11,237,515 10,889,930 ------------ ------------ Net inventories .................... 14,932,677 14,826,452 ------------ ------------ Deferred income taxes ................................ 145,609 299,709 Prepaid expenses and other current assets ............ 151,880 245,501 ------------ ------------ Total current assets ...................... 23,736,991 22,540,316 ------------ ------------ Deferred income taxes - ......................................... 6,516 ------------ ------------ Property plant and equipment, at cost ........................... 11,334,007 13,165,043 Less accumulated depreciation ................................... (7,842,117) (9,593,838) ------------ ------------ Net property, plant and equipment .................... 3,491,890 3,571,205 ------------ ------------ Total Assets .............................. $ 27,228,881 $ 26,118,037 ============ ============
LIABILITIES AND STOCKHOLDERS'EQUITY Current Liabilities: Accounts payable ............................................... $ 334,772 $ 541,636 Accrued expenses: Salaries, wages and commissions ..................... 124,081 244,865 Vacation ............................................ 345,546 280,493 Employee insurance costs ............................ 61,798 65,194 Other ............................................... 37,711 21,109 Payroll and other taxes withheld and accrued ................... 39,397 51,799 Income taxes payable ........................................... 61,440 124,075 Deferred Income Taxes .......................................... 58,752 -- ------------ ------------ Total current liabilities .................... 1,063,497 1,329,171 ------------ ------------ Stockholders' equity Common stock, par value $.33-1/3 per share Authorized 10,000,000 shares; Issued 1,514,937 shares in 2001 and 2000, outstanding 1,029,461 and 1,033,631 shares in 2001 and 2000 ............................................. 504,979 504,979 Capital in excess of par value ................................. 10,496,287 10,496,287 Accumulated other comprehensive (loss) ......................... (50,281) (107,221) Retained Earnings 24,607,239 ................................... 23,775,433 ------------ ------------ 35,558,224 34,669,478 Less common stock subscribed ................................... (1,675,987) (2,234,650) Cost of 485,476 and 481,306 shares of common stock in treasury in 2001 and 2000, respectively ....................................... (7,716,853) (7,645,962) ------------ ------------ Total stockholders' equity .......................... 26,165,384 24,788,866 ------------ ------------ Total liabilities and stockholders' equity .............................. 27,228,881 $ 26,118,037 ============ ============
The accompanying notes are an integral part of the consolidated financial statements.
Espey Mfg. & Electronics Corp. and Subsidiary Consolidated Statements of Income Years Ended June 30, 2001, 2000 and 1999 ----------------------------------------------------------------------------------------------- 2001 2000 1999 Net sales .................................. $17,251,640 $14,719,818 $13,629,692 Cost of sales .............................. 14,189,910 11,983,884 11,092,016 ----------- ----------- ----------- Gross profit ....................... 3,061,730 2,735,934 2,537,676 Selling, general and administrative expenses .................. 1,892,459 2,002,317 1,846,837 ----------- ----------- ----------- Operating income ................... 1,169,271 733,617 690,839 Other income Interest and dividend income ....... 271,935 363,599 425,330 Other .............................. 33,898 95,727 16,432 ----------- ----------- ----------- Total other income .......... 305,833 459,326 441,762 ----------- ----------- ----------- Income before income taxes .. 1,475,104 1,192,943 1,132,601 Provision for income taxes ................. 442,035 410,000 402,000 ----------- ----------- ----------- Net income .................. $ 1,033,069 $ 782,943 $ 730,601 =========== =========== =========== Income per common share; Net income per common share - basic and diluted ........... $ 1.00 $ .75 $ .66 =========== =========== =========== Weighted average outstanding shares: Basic ....................... 1,031,403 1,045,520 1,100,065 =========== =========== =========== Diluted ..................... 1,033,989 1,045,235 1,100,065 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
Espey Mfg. & Electronics Corp. and Subsidiary Consolidated Statements of Changes in Stockholders' Equity Years Ended June 30, 2001, 2000 and 1999 --------------------------------------------------------------------------------------------------------------------------------- Accumulated Other Capital in Comprehen- Excess of par sive income Retained Common Stock Value (Loss) Earnings ----------- ----------- ----------- ----------- Balance at June 30, 1998 $ 504,979 $10,496,287 $ 7,260 $22,671,840 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 1999 730,601 Other comprehensive loss, net of tax benefit of $25,557 (45,435) Comprehensive income Dividends paid on common stock $.20 per share (217,112) Tax effect of dividends on unallocated ESOP shares 7,968 Purchase of treasury stock Reduction of common stock subscribed ----------- ----------- ----------- ----------- Balance as of June 30, 1999 504,979 10,496,287 (38,175) 23,193,297 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 2000 782,943 Other comprehensive loss, net of tax benefit of $39,962 (69,046) Comprehensive income Dividends paid on common stock $.20 per share (208,729) Tax effect of dividends on unallocated ESOP shares 7,922 Purchase of treasury stock Reduction of common stock subscribed ----------- ----------- ----------- ----------- Balance as of June 30, 2000 504,979 10,496,287 (107,221) 23,775,433 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 2001 1,033,069 Other comprehensive income, net of tax benefit of $30,660 56,940 Comprehensive income Dividends paid on common stock $.20 per share (206,309) Tax effect of dividends on unallocated ESOP shares 5,043 Purchase of treasury stock Reduction of common stock subscribed ----------- ----------- ----------- ----------- Balance as of June 30, 2001 $ 504,979 $10,496,287 $ (50,281) $24,607,239 =========== =========== =========== ===========
Common Treasury Stock Total Stock ---------------------------------- Stockholders' Subscribed Shares Amount Equity ---------- ------ ------ ------ Balance at June 30, 1998 $(3,351,974) 403,717 $(6,638,264) $23,690,128 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 1999 730,601 Other comprehensive loss, net of tax benefit of $25,557 (45,435) --------- Comprehensive income 685,166 Dividends paid on common stock $.20 per share (217,112) Tax effect of dividends on unallocated ESOP shares 7,968 Purchase of treasury stock 47,562 (604,226) (604,226) Reduction of common stock subscribed 558,662 558,662 ----------- ----------- ----------- ----------- Balance as of June 30, 1999 (2,793,312) 451,279 (7,242,490) 24,120,586 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 2000 782,943 Other comprehensive loss, net of tax benefit of $39,962 (69,046) --------- Comprehensive income 713,897 Dividends paid on common stock $.20 per share (208,729) Tax effect of dividends on unallocated ESOP shares 7,922 Purchase of treasury stock 30,027 (403,472) (403,472) Reduction of common stock subscribed 558,662 558,662 ----------- ----------- ----------- ----------- Balance as of June 30, 2000 (2,234,650) 481,306 (7,645,962) 24,788,866 ----------- ----------- ----------- ----------- Comprehensive income (loss): Net income, 2001 1,033,069 Other comprehensive income, net of tax benefit of $30,660 56,940 --------- Comprehensive income 1,090,009 Dividends paid on common stock $.20 per share (206,309) Tax effect of dividends on unallocated ESOP shares 5,043 Purchase of treasury stock 4,170 (70,891) (70,891) Reduction of common stock subscribed 558,662 558,662 ----------- ----------- ----------- ----------- Balance as of June 30, 2001 $(1,675,988) 485,476 $(7,716,853) $26,165,380 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
Espey Mfg. & Electronics Corp. and Subsidiary Consolidated Statements of Cash Flows Years Ended June 30, 2001, 2000 and 1999 ------------------------------------------------------------------------------------------------------------------------------ 2001 2000 1999 Cash flows from operating activities: Net income .......................................................... $ 1,033,069 $ 782,943 $ 730,601 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Tax effect of dividends on unallocated ESOP shares ...................................... 5,043 7,922 7,968 Depreciation ................................................. 604,988 472,149 430,111 Gain on disposal of assets ................................... (4,272) -- -- Deferred income tax benefit .................................. 188,709 103,600 85,000 Change in assets and liabilities Decrease (increase) in trade account receivables, and other receivables, net .............................. 1,582,974 299,655 (2,566,142) Increase in inventories, net ........................... (106,225) (3,784,508) (2,253,233) Decrease in income tax refund receivable ................................... -- -- 270,408 Decrease (increase) in prepaid expenses and other current assets ...................................... 93,621 (13,450) (42,491) Increase (decrease) in accounts payable .................................... (206,864) 256,355 77,397 Increase (decrease) in accrued salaries, wages and commissions ..................... (120,784) (253,830) (64,363) Increase (decrease) in accrued employee insurance costs ............................ (3,396) 6,655 21,066 Increase (decrease) in other accrued expenses .................................... 16,602 (37,879) 29,048 Increase in vacation accrual ........................... 65,053 69,331 191,161 Increase (decrease) in payroll and other taxes withheld and accrued ......................................... (12,402) (46,675) 72,851 Increase (decrease) in income taxes payable ....................................... (62,635) 61,088 62,987 ----------- ----------- ----------- Net cash provided by (used in) operating activities .......................... 3,073,481 (2,076,644) (2,947,631) ----------- ----------- -----------
Cash flows from investing activities Proceeds from maturity of investment securities .......................... -- 2,915,161 10,000,000 Additions to property, plant and equipment ........................... (536,749) (782,122) (507,684) Proceeds on sale of assets ................. 15,350 -- -- Purchases of investment securities ......... -- -- (6,509,413) Reduction of common stock subscribed ....... 558,662 558,662 558,662 ------------ ------------ ------------ Net cash provided by investing activities ..... 37,263 2,691,701 3,541,565 ------------ ------------ ------------ Cash flows from financing activities Dividends on common stock .................. (206,309) (208,729) (217,112) Purchase of treasury stock ................. (70,891) (403,472) (604,226) ------------ ------------ ------------ Net cash used in financing activities ..... (277,200) (612,201) (821,338) ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents ......................... 2,833,544 2,856 (227,404) Cash and cash equivalents, beginning of the year ................................ 2,367,191 2,364,335 2,591,739 ------------ ------------ ------------ Cash and cash equivalents, end of the year ................................ $ 5,200,735 $ 2,367,191 $ 2,364,335 ============ ============ ============ Supplement disclosures of cash flow information: Income taxed paid .......................... $ 295,000 $ 237,500 $ 331,045 ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements ---- 1. Summary of Significant Accounting Policies Nature of operations Espey Mfg. & Electronics Corp. and Subsidiary (the Company) is a manufacturer of electronic equipment used primarily in military and industrial applications. The principal markets for the Company's products are companies that provide electronic support to both military and industrial applications. During 1999, the Company established a foreign sales corporation (subsidiary). Inventory Valuation and Revenue Recognition Raw materials are stated at the lower of cost or market and are valued at weighted average cost. Inventoried work relating to contracts in process and work in process is valued at actual production cost, including factory overhead incurred to date. Work in process represents spare units, parts and other inventory items acquired or produced to service units previously sold or to meet anticipated future orders. The cost elements of contracts in process and work in process consist of production costs of goods and services currently in process and overhead relative to those contracts where such costs are reimbursable under the terms of the contracts. Provision for losses on contracts is made when existence of such losses becomes evident. The costs attributed to units delivered under contracts are based on the estimated average cost of all units expected to be produced. Certain contracts are expected to extend beyond twelve months. Revenue is recognized on contracts in the period in which the units are delivered and billed (unit-of-delivery method). Depreciation Depreciation of plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets. Income Taxes The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the provisions of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In addition, SFAS No. 109 requires that the tax benefit of tax-deductible dividends on unallocated ESOP shares be recorded as a direct addition to retained earnings rather than as a reduction of income tax expense. Cash and Cash Equivalents Cash and cash equivalents consist of cash in banks, certificates of deposit, money market accounts, and U.S. Treasury bills with original maturities of three months or less. Investment Securities The Company accounts for its investments in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investment securities at June 30, 2001 and 2000 consist of corporate equity securities. The Company classifies corporate equity securities as available-for-sale. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 1. Summary of Significant Accounting Policies, Continued Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders' equity until realized. Realized gains and losses for securities classified as available-for-sale are included in income and are determined using the specific identification method. Interest income is recognized when earned. Stock-Based Compensation The intrinsic value method of accounting is used for stock-based compensation plans. Under the intrinsic value method, compensation cost is measured as the excess, if any, of the quoted market price of the stock at the grant date over the amount an employee must pay to acquire the stock. Per Share Amounts Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the income of the Company. Comprehensive Income In 1999, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This statement established rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and unrealized gains (losses) on securities available-for-sale and is presented in the Statement of Changes in Stockholders' Equity. Components of other comprehensive income include unrealized gains (losses) on securities available-for-sale. There were no realized gains (losses) included in net income requiring reclassification adjustments to other comprehensive income in all years presented. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and 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. Investment Tax Credits Investment tax credits are accounted for as a reduction of income tax expense in the year taxes payable are reduced. Reclassifications Certain reclassifications have been made to the prior year fiscal statements to conform to the current year presentation. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board Issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 was subsequently amended by SFAS No. 137, issued June 1999, which delayed the effective date for implementation of SFAS No. 133 until fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133 did not impact the Company's consolidated financial statements. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 1. Summary of Significant Accounting Policies, Continued In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company was required to adopt SAB 101 in the quarter ended June 30, 2001. The adoption of SAB 101 did not have a material effect on the Company's financial condition or results in operations. 2. Investment Securities Investment securities at June 30, 2001, consist of corporate equity securities, which are classified as available-for-sale securities, and recorded at market value. The cost, gross unrealized holding losses and fair value of available-for-sale securities by major security type at June 30, 2001 and 2000 are as follow:
Gross Unrealized 2001 Cost Holding Loss Fair Value ---- ------------ ---------- Corporate Equity securities $ 819,005 $ 81,405 $ 737,600 2000 Corporate Equity securities $ 819,005 $ 169,005 $ 650,000
The change in unrealized holding gain (loss) on available for sale investment securities net of tax was $56,940 and ($69,046) in 2001 and 2000, respectively. 3. Contracts in Process Contracts in process at June 30, 2001 and 2000 are as follows:
2001 2000 ------------ ------------ Gross contract value $ 27,446,185 $ 29,128,352 Costs related to contracts in process, net of progress payments of $289,000 in 2001 and $537,468 in 2000 $ 11,237,515 $ 10,889,930
Included in costs relating to contracts in process at June 30, 2001 and 2000 are costs of $1,693,364 and $748,722, respectively, relative to contracts that may not be completed within the ensuing year. Under the unit-of-delivery method, the related sale and cost of sales will not be reflected in the statement of income until the units under contract are shipped. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 4. Property, Plant and Equipment A summary of the original cost of property, plant and equipment at June 30, 2001 and 2000 is as follows:
2001 2000 ------------ ------------ Land $ 50,000 $ 50,000 Building and improvements 3,895,524 3,992,041 Machinery and equipment 7,031,298 8,755,010 Furniture, fixtures and office equipment 357,185 367,992 ------------ ------------ $ 11,334,007 $ 13,165,043 ============ ============
Estimated useful lives of depreciable assets are as follows:
Buildings and improvements 10 - 25 years Machinery and equipment 3 - 10 years Furniture, fixtures and office equipment 10 years
5. Line of credit At June 30, 2001, the Company has an available unused Line of Credit with a financial institution. The agreement provides that the Company may borrow up to $3,000,000. The line provides for interest at the borrower's choice of (I) floating prime minus .75% or (II) LIBOR plus 1.80% for periods of 1, 2, or 3 months. Any borrowing under the line of credit will be collateralized by accounts receivable. 6. Research and Development Costs Research and development costs charged to operations during the years ended June 30, 2001, 2000 and 1999 were approximately $249,000, $255,000, and $291,000, respectively. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 7. Pension Expense Under terms of a negotiated union contract, the Company is obligated to make contributions to a union-sponsored defined benefit pension plan covering eligible employees. Such contributions are based upon hours worked at a specified rate and amounted to $92,662 in 2001, $88,660 in 2000, and $64,829 in 1999. 8. Provision (Benefit) for Income Taxes A summary of the components of the provision (benefit) for income taxes for the years ended June 30, 2001, 2000 and 1999 is as follows:
2001 2000 1999 --------- --------- --------- Current tax expense (benefit)-federal $ 257,400 $ 295,400 $ 313,000 Current tax expense - state 17,000 11,000 4,000 Deferred tax expense (benefit) 167,635 103,600 85,000 --------- --------- --------- $ 442,035 $ 410,000 $ 402,000 ========= ========= =========
Deferred income taxes reflect the impact of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. These "temporary differences" are determined in accordance with SFAS No. 109. The combined U.S. federal and state effective income tax rates of 30.0%, 34.4% and 35.5% for 2001, 2000 and 1999 respectively, differed from the statutory U.S. federal income tax rate for the following reasons:
2001 2000 1999 ------ ------ ------ U.S. federal statutory income tax rate 34% 34% 34% Increase (reduction) in rate resulting from: Dividends received deduction (0.8) (1.2) (0.5) State franchise tax, net of federal income tax benefit 1.4 1.7 2.3 Foreign sales corporation benefit (4.7) (1.0) (1.1) Other .1 .9 .8 ------ ------ ------ Effective tax rate 30.0% 34.4% 35.5% ====== ====== ======
For the years ended June 30, 2001 and 2000 deferred income tax expense of $167,635 and $103,600, respectively, result from the changes in temporary differences for each year. The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of June, 30, 2001 and 2000 are presented as follows: Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 8. Provision (Benefit) for Income Taxes, Continued
2001 2000 -------- -------- Deferred tax assets: Inventory - differences in valuation methods ... $ 30,120 $150,945 Unrealized loss on available-for-sale investment securities ..................... 9,302 61,779 Common stock subscribed - due to difference in interest recognition ................... 343,811 407,791 Non-deductible accruals ........................ 125,699 152,100 Other .......................................... 19,821 16,695 -------- -------- Total deferred tax assets .......... 528,753 789,310 -------- -------- Deferred tax liabilities: Property, plant and equipment - principally due to differences in depreciation methods ... 402,563 401,275 Inventory - effect on uniform capitalization ... 39,333 81,810 -------- -------- Total deferred tax liabilities ..... 441,896 483,085 -------- -------- Net deferred tax asset ............................. $ 86,857 $306,225 ======== ========
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the schedule reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projection for future taxable income over the period in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these temporary differences without consideration of a valuation allowance. 9. Significant Customers A significant portion of the Company's business is the production of military and industrial electronic equipment for use by the U.S. and foreign governments and certain industrial customers. Sales to two domestic customers and one foreign customer accounted for 40%, 20%, and 12%, respectively, of total sales in 2001. Sales to two domestic customers accounted for 30% and 26% respectively, of total sales in 2000. Sales to two domestic customers and one foreign customer accounted for 38%, 25%, and 11%, respectively, of total sales in 1999. Export sales aggregated approximately $8,700,000, $4,200,000, and $2,500,000, for the years ended June 30, 2001, 2000 and 1999, respectively. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 10. Stock Rights Plan The Company has a Shareholder Rights Plan which expires on December 31, 2009. Under this plan, common stock purchase rights were distributed as a dividend at the rate of one right for each share of common stock outstanding as of or issued subsequent to April 14, 1989. Each right entitles the holder thereof to buy one-half share of common stock of the Company at an exercise price of $50 per share subject to adjustment. The rights are exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock or commences a tender or exchange offer which, if consummated, would result in the offer or, together with all affiliates and associates thereof, being the beneficial owner of 15% or more of the Company's common stock. If a 15% or larger shareholder should engage in certain self-dealing transactions or a merger with the Company in which the Company is the surviving corporation and its shares of common stock are not changed or converted into equity securities of any other person, or if any person were to become the beneficial owner of 15% or more of the Company's common stock, than each right not owned by such shareholder or related parties of such shareholder (all of which will be void) will entitle its holder to purchase, at the right's then current exercise price, shares of the Company's common stock having a value of twice the right's exercise price. In addition, if the Company is involved in any other merger or consolidation with, or sells 50% or more of its assets or earning power to, another person, each right will entitle its holder to purchase, at the right's then current exercise price, shares of common stock of such other person having a value of twice the right's exercise price. The Company generally is entitled to redeem the rights at one cent per right at any time until the 15th day (or 25th day if extended by the Company's Board of Directors) following public announcement that a 15% position has been acquired or the commencement of a tender or exchange offer which, if consummated, would result in the offer or, together with all affiliates and associates thereof, being the beneficial owner of 15% or more of the Company's common stock. 11. Employee Stock Ownership Plan In 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 in 1989 to the ESOP which was used by the ESOP to purchase an additional 15,000 shares of the Company's common stock. Since inception of the Plan, the ESOP has sold or distributed 83,653 shares of the Company's common stock to pay benefits to participants. At June 30, 2001 and 2000, the ESOP held a total of 271,932 and 281,185 shares, respectively, of the Company's common stock, of which 208,896 and 197,137 shares, respectively, were allocated to participants in the Plan. 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. The Company recognizes the principal payments of the ESOP debt, on a straight-line basis over the term of the note, as compensation expense. Each year, the Company makes contributions to the ESOP which are used to make loan payments. With each loan payment, a portion of the common stock is allocated to participating employees. For the periods ended June 30, 2001 and 2000, 21,012 shares were allocated to participants. In 2001, the Company's Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 11. Employee Stock Ownership Plan, Continued required contribution of $1,039,605 was reduced by $16,809 which represents the dividends paid on unallocated ESOP shares. The resulting payment of $1,022,796 includes $541,853 classified as compensation expense. In 2000, the Company's required contribution of $1,039,605 was reduced by $21,012, which represents the dividends paid on the unallocated ESOP shares. The resulting payment of $1,018,593 includes $537,650 classified as compensation expense. In 1999, the Company's required contribution of $1,039,605 was reduced by $25,214, which represents the dividends paid on unallocated ESOP shares. The resulting payment of $1,014,319 includes $533,449 classified as compensation expense. All shares purchased by the ESOP are considered to be outstanding for the income per share computations. 12. Stock Options During fiscal 2000, the Board of Directors and shareholders approved, the 2000 Stock Option Plan (the Plan). Under the Plan, incentive and non-qualified stock options will be granted to purchase shares of common stock of the Company. As of June 30, 2000 the Plan was authorized to issue options to purchase 150,000 shares of the Company's common stock. Options granted under the Plan have been granted at not less than the fair market value at the grant date and vest over a maximum period of ten years. On March 1, 2001 and 2000, 13,100 at an exercise price of $17.95 and 11,500 at an exercise price of $13.25, respectively, stock options were granted under the plan which vest over two years. As of June 30, 2001 no options were forfeited. The Company has elected to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for the Plan. Under APB 25, no compensation expense has been recognized. Had compensation cost and fair value been determined pursuant to Statement of Financial Accounting Standards No. 123 (FAS 123) "Accounting for Stock-Based Compensation," net income would have decreased from $1,033,069 to $1,018,526 and $782,943 to $778,296 for the years ended June 30, 2001 and 2000, respectively. Proforma basic and diluted earnings per share would have been $.99 and $.74 respectively. The initial impact of FAS 123 on pro forma earnings per share may not be representative of the effect on income in future years because options vest over several years and additional option grants may be made each year. The weighted average fair value of options granted under the plans during fiscal years 2000 and 2001 was $3.71 and $4.67, respectively. The assumptions used for the Black-Scholes model are as follows: 2000 2001 ---- ---- Risk-free interest rate.............. 6% 5% Expected term........................ 5 years 5 years Company's expected volatility........ 16.4% 25% Dividend yield....................... 2.5% 2.5% Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 13. Financial Instruments/Concentration of Credit Risk The carrying amounts of financial instruments, including cash and cash equivalents, investment securities, accounts receivable, accounts payable and accrued expenses, approximated fair value as of June 30, 2001 and 2000 because of the relatively short maturities of these instruments. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investment securities and accounts receivable. The Company maintains cash and cash equivalents with various financial institutions. At times such investments may be in excess of FDIC insurance limits. As disclosed in Note 10, a significant portion of the Company's business is production of military and industrial electronic equipment for use by the U.S. and foreign Government and certain industrial customers. The related accounts receivable balance represented by three customers was 75% and 64% of the Company's total trade accounts receivable balance at June 30, 2001 and 2000, respectively. Although the Company's exposure to credit risk associated with nonpayment of these balances is affected by the conditions or occurrences within the U.S. Government, the Company believes that its trade accounts receivable credit risk exposure is limited. The Company performs ongoing credit evaluations of its customer's financial conditions and requires collateral, such as progress payments, in certain circumstances. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. 14. Other Costs During 1998 the Company implemented a management succession plan that involves agreements with five members of management. These agreements require the Company to pay certain amounts for a period of approximately two years after the employees' resignations from the Company in exchange for the employees' agreements to be available to the Company on an as-needed basis. Since there is no minimum service required by the agreements, the Company accrued for these payments on the effective date of the plan as the employees are eligible for the benefit at that date. At June 30, 2000, approximately $142,000 was accrued to record the liabilities relating to these agreements. At June 30, 2001, approximately $39,000 remained to be paid to these individuals. 15. Related Parties The Company paid a law firm in which a director of the Company is a partner, a total of $27,000 for legal services during fiscal year ended June 30, 2001, and a total of $42,000 for each fiscal year ended June 30, 2000 and 1999. The Company paid a director of the Company, a total of $5,600 and approximately $15,975 for consulting services during the fiscal years ended June 30, 2001 and 2000, respectively. Espey Mfg. & Electronics Corp. and Subsidiary Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- 16. Quarterly Financial Information (Unaudited)
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Net Sales ........ $4,167,234 $4,184,994 $4,615,137 $4,284,274 Gross profit ..... 688,261 889,008 694,761 789,699 Net income (loss) 203,420 269,269 205,554 354,826 Net income (per share - basic and diluted) 0.20 0.26 0.20 0.34 2000 Net Sales ........ $3,298,980 $3,412,424 $3,289,816 $4,718,598 Gross profit ..... 414,586 493,051 771,435 1,056,862 Net income (loss) 39,593 47,092 263,548 432,710 Net income (per share - basic and diluted) 0.04 0.04 0.25 0.42 1999 Net Sales ........ $2,523,984 $3,134,377 $3,089,547 $4,881,784 Gross profit ..... 398,705 625,453 451,815 1,061,703 Net income (loss) 84,042 166,109 99,723 380,727 Net income (per share - basic and diluted) 0.08 0.15 0.90 0.34
PART III Item 9. Changes in and disagreements with accountants on accounting and financial disclosures None Item 10. Directors and Executive Officers of the Registrant Identification of Directors Date Present Term Other Positions Expires and Period and Offices Held Name Served as Director With Registrant Age ---- ------------------ ---------------- --- Paul J. Corr Annual Meeting in None 57 December 2002 Director since 1992 William P. Greene Annual Meeting in None 71 December 2001 Director since 1992 Carl Helmetag Annual Meeting in None 53 December 2003 Director since 1999 Barry Pinsley Annual Meeting in None 59 December 2002 Director since 1994 Howard Pinsley Annual Meeting in President and Chief 61 December 2003 Executive Officer Director since 1992 Alvin O. Sabo Annual Meeting in None 58 December 2003 Director since 1999 Seymour Saslow Annual Meeting in None 80 December 2001 Director since 1992 Gerald B. H. Solomon Annual Meeting in None 71 December 2001 Director since 1999 Michael W. Wool Annual Meeting in None 55 December 2002 Director since 1990 Identification of Executive Officers Positions and Offices Held Period Served As Name With Company Executive Officer Age ---- ----------------- ----------------- --- Howard Pinsley President and Served as Vice President- 61 Chief Executive Special Power Supplies Officer from April 3, 1992 until being elected as Executive Vice President on December 6, 1997. Elected to present office on June 9, 1998 John J. Pompay, Jr. Vice President- Since December 6, 1996 66 Marketing and Sales David A. O'Neil Treasurer & Principal Since January 4, 2000 36 Financial Officer Controller and Assistant Treasurer from December 11, 1998 to January 3, 2000 Garry M. Jones Assistant Treasurer Since August 4, 1988 61 & Principal Accounting Principal Financial Officer Officer from August 4, 1988 to September 10, 1993 Peggy A. Murphy Secretary Since December 11, 1998 43 Tim A. Polidore Assistant Treasurer Since December 8, 2000 41 The terms of office of Mr. Howard Pinsley, Mrs. Peggy A. Murphy, Mr. David A. O'Neil, Mr. Tim A. Polidore, and Mr. Garry M. Jones are until the next annual meeting of the Board of Directors unless successors are sooner appointed by the Board of Directors. The term of office of Mr. Pompay is subject to the provisions of an agreement between him and the Company. See "Executive Compensation-Employment Contracts and Termination of Employment." Family Relationships Barry Pinsley and Howard Pinsley are cousins. Business Experience of Directors and Officers Paul J. Corr is a Certified Public Accountant and has been a Professor of Business at Skidmore College in Saratoga Springs, New York since 1981. Mr. Corr currently holds the position of Associate Professor. Mr. Corr is also a shareholder in the Latham, New York accounting firm of Rutnik, Matt & Corr, P.C. William P. Greene, D.B.A. prior to joining the Company's management team was Vice President of Finance for ComCierge, LLC, San Diego, CA since August 1997. Prior to that position, Dr. Greene held the position of Vice President Operations for Bulk Materials International, Newtown, CT from 1993 to July 1997. From 1991 to 1993, Dr. Greene was Associate Professor of Finance and International Business at Pennsylvania State University Kutztown, Kutztown, PA. From 1985 to 1990, he was Associate Dean of the School of Business, United States International University, San Diego, CA. From 1992 to 1995, he was Chairman of the Department of Business, Skidmore College, Saratoga Springs, NY. Prior to that time, he had been employed as an officer with several financial institutions. Barry Pinsley is a Certified Public Accountant who for five years acted as a consultant to the Company prior to his election as Vice President-Special Projects on March 25, 1994. On December 6, 1997, Mr. Pinsley was elected to the position of Vice President-Investor Relations and Human Resources, from which he resigned on June 9, 1998. Mr. Pinsley has been a practicing Certified Public Accountant in Saratoga Springs, New York since 1975. Howard Pinsley for more than the past five years has been employed by the Company on a full-time basis as a Program Director prior to being elected Vice President-Special Power Supplies on April 3, 1992. On December 6, 1996, Mr. Pinsley was elected to the position of Executive Vice President. On June 9, 1998 he was elected to the positions of President and Chief Operating Officer. Subsequently he became the President and Chief Executive Officer. Seymour Saslow had been Senior Vice President since December 6, 1996. Prior to being elected to Senior Vice President, Mr. Saslow served as Vice President-Engineering since April 3, 1992. Mr. Saslow resigned as an executive officer effective December 31, 1999. Gerald B. H. Solomon is currently President and Chief Executive Officer of the Solomon Group. The Solomon Group is an international consulting firm providing strategic advice and counsel to corporations worldwide. Prior to becoming President of the Solomon Group he retired from the United States Congress where he served as congressman from New York State for twenty years. Michael W. Wool is an attorney engaged in the private practice of law and as a senior partner since 1982 in the law firm of Langrock, Sperry & Wool with offices in Burlington and Middlebury, Vermont. Alvin O. Sabo is an attorney engaged in private practice of law and Senior Partner of the law firm of Donohue, Sabo, Varley & Armstrong, P.C. in Albany, NY since 1980. Prior to that position, he was Assistant Attorney General, State of New York, Department of Law for eleven years. Carl Helmetag is currently President and CEO of UVEX Inc. in Providence, RI. From 1996 to 1999, he was President and CEO of Head USA Inc. Prior to that position, Mr. Helmetag was Executive Vice President, and then President at Dynastar Inc. from 1978 to 1996. He is an MBA graduate from the Wharton School of Business, University of Pennsylvania. Peggy Murphy is Secretary of the Company since December 11, 1998. She has been employed by the Company as Director of Human Resources since October 1998. David A. O'Neil is currently the Treasurer and Principal Financial Officer of the Company. Mr. O'Neil is a Certified Public Accountant who joined the Company as Controller and Assistant Treasurer on November 6, 1998. Prior to joining the Company, Mr. O'Neil was a Senior Manager at the accounting firm of KPMG LLP. John J. Pompay, Jr. for more that the past five years has been employed by the Company on a full-time basis as Director of Marketing and Sales prior to being elected Vice President-Marketing and Sales on December 6, 1996. Tim A. Polidore is currently the Assistant Treasurer of the Company. Mr. Polidore joined the Company on May 17, 1999. Prior to joining the Company he was Accounting Manager for Brinks, Inc. Garry M. Jones for more than the past five years has been employed by the Company on a full-time basis as Senior Accountant prior to being elected Assistant Treasurer and Principal Accounting Officer on August 4, 1988. Directorships None of the directors holds a directorship in any other company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15 (d) of that Act or any company registered as an Investment company under the Investment Company Act of 1940. Legal Proceedings None of the directorships or executive officers of the Company were involved during the past five years in any legal proceedings specified under Item 401(f) of Regulation S-K. Item 11. Executive Compensation The following table summarizes the annual compensation for each of the fiscal years ended June 30, 2001, 2000, and 1999 received by the Company's Chief Executive Officer and the other highest paid executive officers of the Company that received over $100,000 in total compensation as of June 30, 2001.
SUMMARY COMPENSATION TABLE Long Term Compensation ------------ Securities Name and Fiscal Annual Underlying All Other Principal Position Year Salary Bonus Options(#) Compensation(1) ------------------ ------ ------ ----- ------------ --------------- Howard Pinsley 2001 $172,600 $25,000 2,000 $ 9,590 President and 2000 $160,520 $25,000 1,500 $ 8,623 Chief Executive Officer 1999 $127,700 $ 0 0 $11,492 Seymour Saslow (2) 2001 $ 62,400 $ 0 0 $ 6,072 Senior Vice President 2000 $111,150 $25,000 0 $ 7,633 1999 $124,625 $ 0 0 $10,568 John J. Pompay, Jr. 2001 $152,938 $25,000 800 $ 9,737 Vice President-Sales 2000 $237,816 $20,000 600 $ 8,822 1999 $189,399 $ 0 0 $ 8,679 David A. O'Neil 2001 $ 91,200 $12,500 800 $ 7,703 Treasurer and Principal 2000 $ 84,930 $10,000 600 $ 6,162 Financial Officer
(1) Represents (a) the cash and market value of the shares allocated for the respective fiscal years under the Company's ESOP to the extent to which each named executive officer is vested, and (b) directors' fees except for Mr. Pompay through April 1, 1999. Effective April 1, 1999 employees of the Company that also serve on the Board do not receive director's fees. (2) Represents wages as both an executive officer and non-executive officer. Mr. Saslow resigned as Senior Vice President on December 31, 1999.
OPTION GRANTS Potential Realizable Value at Assumed Annual Number of Percent Rates of Stock Securities of Total Price Appreciation Underlying Options for Option Term (1) Options Granted to Exercise -------------------------- Name Granted Employees Price Range 5%($) 10%($) ---------------- ---------- ---------- ------------- ------ ------ Howard Pinsley 3,500 13% 13.25 - 17.95 35,072 88,895 John J. Pompay Jr. 1,400 5% 13.25 - 17.95 14,029 35,558 David A. O'Neil 1,400 5% 13.25 - 17.95 14,029 35,558
(1) Amounts reflect certain assumed rates of appreciation set forth in the Commission's executive compensation disclosure rules. Actual gains, if any, on stock option exercises will depend on future performance of the Common Stock. No assurance can be made that the amounts reflected in these columns will be achieved. The values in these columns assume that the fair market value on the date of grant of each option was equal to the exercise price thereof. In accordance with the 2000 Stock Option Plan the above options have exercise dates that range from March 1, 2002 through and expiring on March 1, 2011. Accordingly, no options were exercised by the above named executive officers in fiscal 2001. Insurance The executive officers and directors of the Company can elect to be covered under the company sponsored health plans which do not discriminate in favor of the officers or directors of the Company and which are available generally to all employees. In addition, the executive officers are covered under a group life plan, which does not discriminate, and is available to all employees. The Company maintains insurance coverage, as authorized by Section 727 of the New York Business Corporation Law, providing for (a) reimbursement of the Company for payments it makes to indemnify officers and directors of the Company, and (b) payment on behalf of officers and directors of the Company for losses, costs and expenses incurred by them in any actions. Employee Retirement Plan and Trust Under the Company's ESOP, approved by the Board of Directors on June 2, 1989, effective July 1, 1988, all non-union employees of the Company, including the Company's executive and non-executive officers are eligible to participate. The ESOP is a non-contributory plan which is designed to invest primarily in shares of common stock of the Company. Reference is made to, and there is incorporated by reference, the description of the ESOP, its implementation and pertinent documents attached as exhibits in the Company's Form 8-K dated June 16, 1989, filed with the Commission on June 20, 1989, and to the amendments thereto filed as an Exhibit to the 10-K Report for the fiscal year ended June 30, 1991. Certain technical amendments not considered material were adopted effective as of June 30, 1994. Of the 208,896 shares of common stock of the Company allocated to participants of the ESOP as of June 30, 2001, 8,052 shares were allocated to John J. Pompay Jr., 7,602 shares were allocated to Howard Pinsley, 6,475 shares were allocated to Seymour Saslow, 853 shares were allocated to David A. O'Neil and 2,845 shares were allocated to Barry Pinsley. Compensation of Directors The Company's standard arrangement compensates each director of the Company an annual fee in the amount of $10,000 for being a member of the Board of Directors. Each Director that also serves as a member of the Audit Committee is compensated an additional annual fee of $5,000. These fees are paid monthly to the Directors. Barry Pinsley was paid $5,600 for additional services in connection with his duties as a director for the fiscal year ended June 30, 2001. Executive officers that also serve on the Company's Board of Directors do not receive director's fees. Directors are also eligible to receive stock options under the 2000 Stock Option Plan at the discretion of the stock option committee. The stock option committee consists of three appointed board members. For the years ended June 30, 2001, and 2000, the following options have been granted to the Board of Directors in accordance with this Plan. Name Number of Options Exercise Price Range ---- ----------------- -------------------- Seymour Saslow 1,200 $13.25 - 17.95 Barry Pinsley 1,100 13.25 - 17.95 Michael W. Wool 800 13.25 - 17.95 William P. Greene 900 13.25 - 17.95 Paul J. Corr 800 13.25 - 17.95 Alvin O. Sabo 600 13.25 - 17.95 Carl Helmetag 500 13.25 - 17.95 Gerald B. H. Solomon 500 13.25 - 17.95 The above options have exercise dates ranging from March 1, 2002 and expiring on March 1, 2011. Employment Contracts and Termination of Employment The Company has an employment contract with John J. Pompay Jr. in connection with his duties as Vice President-Marketing and Sales. The contract was effective as of January 1, 2001, and expires on December 31, 2001 unless the parties mutually agree to extend the agreement. The contract provides for a minimum base annual salary of $143,000 plus commissions at the rate of 3% on all payments received by the Company against Mr. Pompay's open orders booked up to and including December 31, 1996, and 1% on all payments received against orders booked by the Company between January 1, 1997 and December 31, 1998. The contract further provides that if Mr. Pompay's employment is terminated by the Company prior to the expiration date, other than for cause, he will continue to receive his full salary for 27 months and commissions due on his orders when payment is received. The contract also provides for a restrictive covenant of non-competition by Mr. Pompay for a period of two years upon termination for cause or termination of the contract by Mr. Pompay. At the end of the contract term Mr. Pompay has the option to accept at the time of his voluntary resignation as an executive officer, an employment contract as a non-executive officer in which he would receive full compensation for 13 weeks and then for the next 104 weeks receive $1,000 per week for services rendered. As part of a management succession plan as implemented by the Board of Directors in June 1998, the Company has entered into agreements with the following named executive officers: Joseph Canterino, Barry Pinsley, Seymour Saslow and Herbert Potoker. The contracts provide for the resignation of the above officers from their positions as executive officers and for them to be compensated in accordance with their respective agreements. The effective date of the resignations of Mr. Canterino and Mr. Barry Pinsley as executive officers was June 9, 1998. The effective date of the resignation of Mr. Potoker as an executive officer was December 31, 1998. The effective date of the resignation of Mr. Saslow as an executive officer was December 31, 1999. The compensation to be paid under the agreement is $1,000 per week for Messrs. Canterino, Saslow and Potoker and $500 per week for Mr. Pinsley during such two-year period. In the event of a named executive officer's death, the Company is obligated to continue the payments as scheduled under the terms of the agreements. All of the named executive officers' contracts contain a restrictive covenant regarding non-competition with the Company during the term of the agreement and for a period of five years after the termination of the agreement, and an agreement regarding the treatment of confidential information. Item 12. Security Ownership of Certain Beneficial Owners and Management Security Ownership of Certain Beneficial Owners The following information is furnished as of September 18, 2001 (unless otherwise indicated) with respect to any person (including any "group" as that term is used in Section 13(d)(3) of the Act) who is known to the Company to be the beneficial owner of more than five percent of any class of the Company's voting securities:
Amount and Nature of Title Name and Address Beneficial Percent of Class of Beneficial Owner Ownership Class ----- ------------------- --------- ----- Common Stock Dimensional Fund 72,600 - Direct (1) 7.02% Advisors Inc. 1299 Ocean Avenue 11th Floor Santa Monica, CA 90401 " Franklin Advisory 80,000 - Direct (2) 7.7% Services, LLC 777 Mariners Island Blvd P.O. Box 7777 San Mateo, CA 94403-7777 " The Adirondack Trust 262,932 - Direct (3) 25.5% Company, as Trustee of the Company's Employee Retirement Plan and Trust 473 Broadway Saratoga Springs, NY 12866
(1) The information as to the number of shares of common stock of the Company that may be deemed beneficially owned by advisory clients of Dimensional Fund Advisors Inc. ("Dimensional") is from the Schedule 13G dated February 2, 2001 filed with the Securities and Exchange Commission (the "SEC"). Dimensional, a registered investment advisor, is deemed to have beneficial ownership of 72,600 shares of Espey Mfg. & Electronics Corp. stock as of December 31, 2000, all of which shares are held in Dimensional investment companies, trusts and accounts. Dimensional, in its role as investment advisor and/or manager, disclaims beneficial ownership of all such shares. Dimensional, it its role as investment advisor and/or manager, reported sole voting power with respect to 72,600 shares. (2) The information as the number of shares of common stock of the Company that may be deemed beneficially owned by Franklin Advisory Services, LLC ("Franklin") is from the Schedule 13G, dated January 26, 2001 filed with the SEC. The Franklin statement indicated that Franklin's investment "advisory subsidiaries," have sole voting and dispositive power with respect to all of the shares of common stock shown in the table above for Franklin. The Franklin statement indicates that the common stock set forth in the table is beneficially owned by one or more open or closed-end investment companies or other managed accounts which are advised by direct and indirect Franklin investment advisory subsidiaries. The statement also indicated that it filed the Schedule 13G on behalf of itself and Franklin's principal shareholders, Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders"), all of which are deemed beneficial owners of the shares of common stock shown in the above table for Franklin. Franklin and the Principal Shareholders disclaim any economic interest or beneficial ownership in any of the common stock shown in the table for Franklin. (3) This information is from the Form 4 dated September 18, 2001 filed with the SEC by the Trustee on behalf of the Company's ESOP. The ESOP Trustee has sole voting power with respect to unallocated common shares owned by the Trust, 63,036 shares as of September 18, 2001, as directed by the Plan Administrator appointed by the Company's Board of Directors. As to the common shares allocated to participants, 199,896 shares as of September 18, 2001, the ESOP Trustee has the power to vote such shares as directed by such Plan Administrator to the extent the participants do not direct the manner in which such shares are to be voted. Security Ownership of Management The following information is furnished as of September 18, 2001 (unless otherwise indicated), as to each class of equity securities of the Company beneficially owned by all Directors and Executive Officers and by Directors and Executive Officers of the Company as a Group:
Amount and Nature of Title Name of Beneficial Percent of Class Beneficial Owner Ownership Class ----- ------------------- ---------- ---------- Common Stock $.33-1/3 p.v. Paul J. Corr 3,000 - Direct 0.29% " William P. Greene 100 - Direct 0.08% 765 - Indirect (2) " Carl Helmetag 2,500 - Direct 0.29% 500 - Indirect (4) " Gary M. Jones 3,789 - Indirect (2) 0.37% " Peggy Murphy 2,449 - Indirect (2) 0.24% " David A. O'Neil 1,000 - Direct 0.18% 853 - Indirect (2) " Barry Pinsley 41,630 - Direct 4.32% 2,845 - Indirect (1) (2) " Howard Pinsley 42,134 - Direct 4.83% 7,603 - Indirect (2) " John J. Pompay, Jr. 8,052 - Indirect (2) 0.78% " Alvin O. Sabo 0 - Indirect - " Seymour Saslow 351 - Direct 0.66% 6,475 - Indirect (2) " Gerald B. H. Solomon 0 - Indirect (3) - " Michael W. Wool 100 - Direct 0.01% " Officers and Directors 90,815 - Direct 12.06% as a Group 33,331 - Indirect
(1) Excludes 2,000 shares owned by the spouse of Barry Pinsley. Beneficial ownership of the shares is disclaimed by Mr. Pinsley (2) Includes shares allocated to named director or executive officer as of June 30, 2001 as a participant in the Company's ESOP. Each such person has the right to direct the manner in which such shares allocated to him or her are to be voted by the ESOP Trustee. (3) Excludes 400 shares owned by the spouse of Gerald B. H. Solomon. Beneficial ownership of the shares is disclaimed by Mr. Solomon. (4) Includes 500 shares owned by the trust of Molly K. Helmetag. As trustee of the trust, Mr. Helmetag is deemed beneficial owner, as defined in rule 13d-3, of the shares held by the trust. Excludes 500 shares owned by the spouse of Mr. Helmetag. Beneficial ownership is disclaimed by Mr. Helmetag. There are no arrangements known to the Company, the execution of which may at a subsequent date, result in change of control of the Company. Item 13 Certain Relationships and Related Transactions As previously reported, the Company established and sold to the ESOP Trust on June 5, 1989, 331,224 shares of the Company's treasury stock at a price of $26.50 per share, which purchase price was funded by the Company making a cash contribution and loan. Each year, the Company makes contributions to the ESOP, which are used to make loan interest and principal payments to the Company. With each such payment, a portion of the common stock held by the ESOP is allocated to participating employees. As of June 30, 2001, there were 208,896 shares allocated to participants. The loan from the Company to the ESOP is repayable in annual installments of $1,039,605, including interest, through June 30, 2004. Officers of the Company, including two (Howard Pinsley and Bill Greene) who are also directors, are eligible to participate in the ESOP and to have shares and cash allocated to their accounts and distributed to them in accordance with the terms of the ESOP. The Company paid the law firm of Langrock, Sperry & Wool, of which Michael W. Wool, a director of the Company, is a partner, a total of $27,000 for legal services during the fiscal year ended June 30, 2001. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements Included in Part II, Item 8, of this report: Reports of Independent Accountants Balance Sheets at June 30, 2001 and 2000 Statements of Income for the years ended June 30, 2001, 2000 and 1999 Statements of Changes in Stockholders' Equity for the years ended June 30, 2001, 2000 and 1999 Statements of Cash Flows for the years ended June 30, 2001, 2000 and 1999 Notes to Financial Statements 2. Financial Statement Schedules Schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. 3. Exhibits 11.2 Statement re: Computation of Per Share Earnings (b) Reports on Form 8-K None S I G N A T U R E S Pursuant to the requirements of Section 13 and 15 (d) 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. /s/Howard Pinsley ---------------------------------- Howard Pinsley, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/Howard Pinsley President -------------------------------------- (Principal Executive Officer) Howard Pinsley September 18, 2001 /s/David O'Neil Treasurer -------------------------------------- (Principal Financial Officer) David O'Neil September 18, 2001 /s/Garry M. Jones Assistant Treasurer -------------------------------------- (Principal Accounting Officer) Garry M. Jones September 18, 2001 /s/Barry Pinsley Director -------------------------------------- Barry Pinsley September 18, 2001 /s/Seymour Saslow Director -------------------------------------- September 18, 2001 Seymour Saslow /s/William P. Greene Director -------------------------------------- September 18, 2001 William P. Greene /s/Michael W. Wool Director -------------------------------------- September 18, 2001 Michael W. Wool /s/Paul J. Corr Director -------------------------------------- September 18, 2001 Paul J. Corr /s/Gerald B. H. Solomon Director -------------------------------------- September 18, 2001 Gerald B. H. Solomon /s/Alvin O. Sabo Director -------------------------------------- September 18, 2001 Alvin O. Sabo /s/Carl Helmetag Director -------------------------------------- September 18, 2001 Carl Helmetag EX-11 3 ex-11.txt EX-11
EXHIBIT 11.1 ESPEY MFG. & ELECTRONICS CORP. Computation of per Share Earnings as Disclosed in Item 14 of Form 10-K Five years ended June 30, 2001 2001 2000 1999 1998 1997 ---------- ------- ------- -------- ------- Computation of earnings per share: BASIC Weighted average number of primary shares outstanding 1,031,403 1,045,520 1,100,065 1,111,220 1,112,074 ========== ========= ========= ========= ========= Net income (loss) ........ $1,033,069 782,942 730,601 (739,602) 563,128 ========== ========= ========= ========= ========= Per share-basic .......... $ 1.00 .75 .66 (.67) .51 ========== ========= ========= ========= ========= DILUTED Weighted average number of primary shares outstanding 1,033,989 1,045,235 1,100,065 1,111,220 1,112,074 ========== ========= ========= ========= ========= Net effect of dilutive stock options based on treasury stock method ........... 2,585 285 -- -- -- ========== ========= ========= ========= ========= Net income (loss) ........ $1,033,069 782,942 730,601 (739,602) 563,128 ========== ========= ========= ========= ========= Per share-diluted ........ $ 1.00 .75 .66 (.67) .51 ========== ========= ========= ========= =========