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.
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(Exact name of registrant as specified in its charter)
New York 14-1387171
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
233 Ballston Avenue, Saratoga Springs, NY 12866
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(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
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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
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2001 2000
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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