-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SlD/OzAaCVDWFsUbBbWcSrIZhD5g0fJBvw10RIWaQZ397GJW+QgJbxCy7yhcy+m2 0MGlkMtCyIdEIqCi7mUXdA== 0000914317-02-000523.txt : 20020509 0000914317-02-000523.hdr.sgml : 20020509 ACCESSION NUMBER: 0000914317-02-000523 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESPEY MANUFACTURING & ELECTRONICS CORP CENTRAL INDEX KEY: 0000033533 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 141387171 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04383 FILM NUMBER: 02639524 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-Q 1 form10q-45034_0502.txt 5/8/02 11:36 AM UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2002 Commission File Number I-4383 ESPEY MFG. & ELECTRONICS CORP. -------------------------------------------------- (Exact name of registrant as specified in charter) NEW YORK 14-1387171 - ------------------------ -------------------------------------- (State of Incorporation) (I.R.S. Employer's Identification No.) 233 Ballston Avenue, Saratoga Springs, New York 12866 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 518-584-4100 --------------------------- Number of shares outstanding of issuer's class of common stock $.33-1/3 par value as of May 4, 2002: 1,032,961. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] ESPEY MFG. & ELECTRONICS CORP. I N D E X PART I FINANCIAL INFORMATION PAGE Item 1 Financial Statements: Consolidated Balance Sheets - March 31, 2002 and June 30, 2001 1 Consolidated Statements of Income - Three and Nine Months Ended March 31, 2002 and 2001 3 Consolidated Statements of Cash Flows - Nine Months Ended March 31, 2002 and 2001 4 Notes to Consolidated Financial Statements 5 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. 6 PART II OTHER INFORMATION 9 SIGNATURES 9 ESPEY MFG. & ELECTRONICS CORP. Consolidated Balance Sheets March 31, 2002 and June 30, 2001 ------------------------------------ A S S E T S
Unaudited 2002 2001 March 31 June 30 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 9,474,734 $ 5,200,736 Investment securities 352,000 737,600 Trade accounts receivable, net 2,409,848 2,537,310 Other receivables 18,347 31,179 ----------- ----------- Total Receivables 2,428,195 2,568,489 ----------- ----------- Inventories: Raw materials and supplies 1,226,228 1,036,726 Work-in-process 4,400,461 2,658,436 Costs relating to contracts in process, net of advance payments of $2,194,269 at March 31, 2002 and $289,000 at June 30, 2001 6,577,601 11,237,515 ----------- ----------- Total Inventories 12,204,290 14,932,677 ----------- ----------- Deferred income taxes 140,569 145,609 Prepaid expenses and other current assets 247,018 151,880 ----------- ----------- Total Current Assets 24,846,806 23,736,991 ----------- ----------- Net property, plant and equipment 3,391,411 3,491,890 ----------- ----------- Total Assets $28,238,217 $27,228,881 =========== ===========
See accompanying notes to the consolidated financial statements (Continued) 1 ESPEY MFG. & ELECTRONICS CORP. Consolidated Balance Sheets, Continued March 31,2002 and June 30, 2001 ------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY
Unaudited 2002 2001 March 31 June 30 ------------ ------------ CURRENT LIABILITIES: Accounts payable $ 562,575 $ 334,772 Accrued expenses: Salaries, wages and commissions 84,304 124,081 Employees' insurance costs 6,366 61,798 Vacation 348,874 345,546 ESOP payable 404,814 -- Dividends payable 77,209 -- Other 34,022 37,711 Payroll and other taxes withheld and accrued 30,423 39,397 Income taxes payable 232,773 61,440 Deferred income taxes 58,752 58,752 ------------ ------------ Total Current Liabilities 1,840,112 1,063,497 STOCKHOLDERS' EQUITY: Common stock, par value .33-1/3 per share Authorized 10,000,000 shares; issued 1,514,937 shares on March 31, 2002 and June 30, 2001 Outstanding 1,031,961 and 1,029,461 on March 31, 2002 and June 30, 2001, respectively 504,979 504,979 Accumulated other comprehensive loss (40,921) (50,281) Capital in excess of par value 10,482,665 10,496,287 Retained earnings 24,797,474 24,607,239 ------------ ------------ Less: Common stock subscribed (1,675,987) (1,675,987) Cost of 482,976 and 485,476 shares on March 31, 2002 and June 30, 2001 respectively of common stock in treasury (7,670,105) (7,716,853) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 26,398,105 26,165,384 ------------ ------------ Total Liabilities And Stockholders' Equity $ 28,238,217 $ 27,228,881 ============ ============
See accompanying notes to the consolidated financial statements 2 ESPEY MFG. & ELECTRONICS CORP. Consolidated Statements of Income Three and Nine Months Ended March 31, 2001 and 2000 ------------------------------------------------------
Unaudited Unaudited Three Months Nine Months 2002 2001 2002 2001 ----------------------------- ------------------------------- Net sales $ 4,616,587 $ 4,615,138 $ 14,401,620 $ 12,967,365 Cost of sales 3,916,571 3,920,377 12,500,450 10,695,335 ----------- ----------- ----------- ----------- Gross profit 700,016 694,761 1,901,170 2,272,030 Selling, general and administrative expenses 408,350 456,964 1,329,484 1,461,207 ----------- ----------- ----------- ----------- Operating income 291,666 237,797 571,686 810,823 ----------- ----------- ----------- ----------- Other income Interest and dividend income 38,179 59,716 153,385 193,462 Other (26,061) 5,575 (13,167) 31,199 ----------- ----------- ----------- ----------- 12,118 65,291 140,218 224,661 ----------- ----------- ----------- ----------- Income before income taxes 303,784 303,088 711,904 1,035,484 Provision for income taxes 91,140 97,534 213,571 357,242 ----------- ----------- ----------- ----------- Net Income $ 212,644 $ 205,554 $ 498,333 $ 678,242 =========== =========== =========== =========== Income per share: Basic and diluted income per share $ .20 $ .20 $ .48 $ .66 ----------- ----------- ----------- ----------- Weighted average number of shares outstanding Basic 1,029,850 1,029,461 1,029,589 1,032,048 Diluted 1,034,961 1,032,445 1,034,083 1,034,469 =========== =========== =========== ===========
See accompanying notes to the consolidated financial statements 3 ESPEY MFG. & ELECTRONICS CORP. Consolidated Statements of Cash Flows Nine Months Ended March 31, 2001 and 2000
Unaudited March 31, 2002 2001 ----------- ----------- Cash Flows From Operating Activities: Net income $ 498,333 $ 678,242 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Depreciation 392,422 469,121 (Gain)/loss on disposal of assets 27,082 (14,721) Deferred Income Tax Benefit 872 -- Changes in assets and liabilities: Decrease in receivables 140,292 972,737 Decrease (Increase) in inventories 2,728,387 (392,511) (Increase) Decrease in prepaid expenses and other current assets (95,138) 46,818 Increase (Decrease) in accounts payable 227,803 (25,725) Decrease in accrued salaries, wages and commissions (39,777) (83,945) (Decrease)Increase in accrued employee (55,432) 71,479 insurance costs (Decrease) Increase in other accrued expenses (3,689) 4,640 Increase in vacation accrual 3,329 42,131 (Decrease) Increase in payroll & other taxes withheld and accrued (8,974) 4,337 Increase in income taxes payable 171,334 166,324 Increase in ESOP contributions 404,814 409,541 ----------- ----------- Net cash provided by operating activities 4,391,658 2,348,468 ----------- ----------- Cash Flows From Investing Activities: Proceeds from maturity of investment securities 399,128 -- Additions to property, plant & equipment (330,975) (450,007) Proceeds on sale of assets, net 11,950 14,750 ----------- ----------- Net cash provided by (used in) investing activities 80,103 (435,257) ----------- ----------- Cash Flows From Financing Activities: Dividends on common stock (230,888) (103,362) Purchase of treasury stock - (70,891) Proceeds from exercise of stock options 33,126 - ----------- ----------- Net cash used in financing activities (197,762) (174,253) ----------- ----------- Increase in cash and cash equivalents 4,273,999 1,738,958 Cash and cash equivalents, beginning of period 5,200,735 2,367,191 ----------- ----------- Cash and cash equivalents, end of period 9,474,734 $ 4,106,149 ----------- ----------- Income Taxes Paid $ 42,238 $ 175,000 =========== =========== Noncash Financing Activities Dividends Payable $ 77,209 $ 51,473 =========== ===========
See accompanying notes to the consolidated financial statements 4 ESPEY MFG. & ELECTRONICS CORP. Notes to Financial Statements ----------------------------- 1. In the opinion of management the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation for results for such periods. The results for any interim period are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the Company's most recent audited financial statements included in its 2001 Form 10-K. 2. Other income consists principally of interest on money market accounts and dividends on equity securities. 3. For purposes of the statements of cash flows, the Company considers all liquid debt instruments with original maturities of three months or less to be cash equivalents. 4. 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. 5. In fiscal 1989 the Company established an Employee Stock Ownership Plan (ESOP) for eligible non-union employees. The ESOP used the proceeds of a loan from the Company to purchase 316,224 shares of the Company's common stock for approximately $8.4 million and the Company contributed approximately $400,000 to the ESOP, which was used by the ESOP to purchase an additional 15,000 shares of the Company's common stock. As of March 31, 2002 there were 199,876 shares allocated to participants. 6. Total comprehensive income consists of:
Three Months Ended Nine Months Ended March 31, March 31, 2002 2001 2002 2001 -------- -------- -------- -------- Net income $212,644 $205,554 $498,333 $678,242 Accumulated other comprehensive income: Unrealized gain (loss) on available for sale securities (11,440) 26,884 9,360 60,684 -------- -------- --------- -------- Total comprehensive income $201,204 $232,438 $507,693 $738,926 ======== ======== ========= ========
5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates We believe our most critical accounting policies include revenue recognition and cost estimation on our contracts. Revenue recognition and cost estimation A significant portion of our business is comprised of development and production contracts which are accounted for under the provisions of the American Institute of Certified Public Accountants (AICPA) Statement of Position No. 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts." Generally revenue on long-term fixed-price contracts are recorded on a percentage of completion basis using units of delivery as the measurement basis for progress toward completion. Contract accounting requires judgment relative to estimating costs and making assumptions related to technical issues and delivery schedule. Contract costs include material, subcontract costs, labor and an allocation of indirect costs. The estimation of cost at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract. Given the significance of the estimation processes and judgments described above, it is possible that materially different amounts of contract costs could be recorded if different assumptions were used in the estimation of cost at completion. When a change in contract value or estimated cost is determined, changes are reflected in current period earnings. Results of Operations Net sales for the nine months ended March 31, 2002, (fiscal 2002) were $14,401,620 as compared to $12,967,365 for the same period in 2001, an 11% increase. Net sales for the three months ended March 31, 2002 were $4,616,587 as compared to $4,615,138 for the same period in 2001. The Company's increase in sales for the three and nine month periods ended March 31, 2002, as compared to March 31, 2001, is due to an increase in antenna, radar transmitter, and transmitter component shipments. During the first nine months of fiscal 2002 gross profits as a percentage of sales decreased approximately 4.3% as compared with the first nine months of fiscal 2001. For the three months ended March 31, 2002 gross profit remained consistent as compared to the same period in 2001. Net income for the nine months ended March 31, 2002 was $498,333 or $.48 per share compared to $678,242 or $.66 per share for the corresponding period ended March 31, 2001. For the three months ended March 31, 2002 net income increased nominally as compared to the same period in 2001. The decrease in gross profit and net income for the nine-month period ended March 31, 2002, was a result of the Company investing engineering resources in several new customer specific programs and products. These engineering and prototype developmental expenditures, which have a negative impact on current operations, in management's estimate, should improve the operating results of the Company when future production orders are received. Gross profit and net income for the three-month period ended March 31, 2002 as compared to the same period last year remained relatively consistent with slight increases in both categories. Management continues to evaluate the Company's workforce to ensure that production and overall execution of the backlog orders and additional anticipated orders are successfully performed in a cost effective manner. Employment at March 31, 2002 was 189 people compared to March 31, 2001 when 217 people were employed. The backlog at March 31, 2002 was approximately $ 26,212,000, an increase of approximately $1 million from the prior year. Management continues to market the engineering capabilities and products of the Company. New orders for the quarter totaled approximately $5 million. 6 Selling, general and administrative expenses were $1,329,484 for the nine months ended March 31, 2002, a decrease of $131,723, or 9.0%, as compared to the nine months ended March 31, 2001. Selling, general and administrative expenses were $408,350 for the three months ended March 31, 2002, a decrease of $48,614, or 10.6%, compared to the three months ended March 31, 2001. The decrease is primarily due to a decrease in employees, selling expenses and professional fees. Other income for the three and nine months ended March 31, 2002 decreased as compared to the three and nine months ended March 31, 2001 due to lower interest income for both periods associated with lower interest rates and a charge for the loss on disposal of fixed assets. The Company does not believe there is significant risk associated with its investment policy, since a majority of the investments are preferred equity securities and a money market account. Liquidity and Capital Resources As of March 31, 2002, the Company had working capital of $ 23.0 million compared to $22.7 million at March 31, 2001. The Company meets its short-term financing needs through cash from operations and when necessary, from its existing cash and cash equivalents. The table below presents the summary of cash flow for the periods indicated:
Nine Months Ended March 31, ----------------------------- 2002 2001 -------- -------- Net cash provided by operating activities $4,391,658 $ 2,348,468 Net cash provided by (used in) investing activities 80,103 (435,257) Net cash used in financing activities (197,762) (174,253)
Net cash provided by operating activities fluctuates between periods primarily as a result of differences in net income, the timing of the collection of accounts receivable, purchase of inventory, level of sales and payment of accounts payable. The decrease in net cash provided by (used in) investing activities is due to the maturity of investment securities with no offsetting purchase of new investments in the prior year. The increase in net cash used in financing activities is due to increased dividend payments offset partially by decreased treasury stock purchases. The Company currently believes that the cash generated from operations and when necessary, from cash and cash equivalents, will be sufficient to meet its long-term funding requirements. Management if necessary, has at its disposal a $3,000,000 line of credit to help fund further growth. For the first nine months of fiscal 2002 capital expenditures were approximately $331,000. Since the debt of the Company's ESOP is not to an outside party the Company has eliminated from the Consolidated Statements of Income the offsetting items of interest income and interest expense relating to ESOP. During the nine months ended March 31, 2002 and 2001, the Company repurchased 0, and 4,170 shares respectively, of its common stock from the Company's ESOP and through other public transactions. As of March 31, 2002, under existing Board authorization, $854,859 could be utilized to repurchase shares of company stock. As of March 31, 2002, 2,500 stock options were exercised under the Company's existing stock option plan. 7 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 from those set forth in the forward-looking statements, including the Company's dependence on timely development, introduction and customer acceptance of new products, the impact of competition and price erosion, as well as 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. 8 ESPEY MFG. & ELECTRONICS CORP. PART II: Other Information and Signatures Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K None S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ESPEY MFG. & ELECTRONICS CORP. /s/ Howard Pinsley -------------------------------- Howard Pinsley, President and Chief Executive Officer /s/ David O'Neil -------------------------------- David O'Neil, Treasurer and Principal Financial Officer May 9, 2002 - --------------- Date -----END PRIVACY-ENHANCED MESSAGE-----