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, 2004
|_| 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
New York 14-1387171
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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(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
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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| Yes |_| No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
|_| Yes |X| No
The aggregate market value of the voting stock held by non-affiliates of the registrant was $23,184,021 based upon the closing sale price of $22.85 on the American Stock Exchange on June 30, 2004.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at September 14, 2001
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Common stock, $.33-1/3 par value 1,010,804 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants definitive proxy statement relating to the 2004 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, are incorporated by reference in Part III, Items 10 and 14 on Form 10-K as indicated herein.
PART I
Item 1. Business.
General
Espey Mfg. & Electronics Corp. (the "Company") located in Saratoga Springs, New York, is engaged principally in the development, design, production and sale 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 ("build to print"). 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 and medium range communication systems, (v)
navigation systems and (vi) 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, 2004 and 2003, the Company's total sales were $22,507,199 and $19,773,411, respectively. Sales to two domestic customers and one foreign customer accounted for 22%, 16% and 18% and 25%, 19% and 12%, of total sales in 2004 and 2003, respectively. Sales to two domestic customers and one foreign customer accounted for 26%, 21% and 14% respectively, of total sales in 2002.
Export sales in 2004, 2003 and 2002 were approximately $9,800,000, $7,100,000, and $6,600,000, respectively.
Sources of 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 a majority of its raw materials. However, certain components used in our products are available from only a limited number of sources, and other components are only available from a single source. Despite the risk associated with limited or single source suppliers, the benefits of higher quality goods and timely delivery minimize and often limit any potential risk and can eliminate problems with part failures during production.
Sales Backlog
At September 14, 2004, the Company's backlog was approximately $14.0 million. The total backlog at June 30, 2004 was approximately $15.4 million as compared to approximately $21.4 million at June 30, 2003. 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 $15.2 million of orders comprising the June 30, 2004 backlog will be filled during the fiscal year ending June 30, 2005. The minimum of $15.2 million does not include any shipments, which may be made against orders subsequently received during the fiscal year ending June 30, 2005. The estimate of the June 30, 2004 backlog to be shipped in fiscal 2005 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 large industrial manufacturers and defense companies, the government of the 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 United States 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.
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 $150,000, $100,000, and $335,000, in 2004, 2003 and 2002, 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 Company had 181 employees as of September 14, 2004. Some of these employees are represented by the International Brotherhood of Electrical Workers Local #1799. The current collective bargaining agreement expires on June 30, 2008. The contract includes a 3.75% annual pay increase in the fiscal period 2004 through 2007, and no increase for 2008. Relations with the Union are considered good. Union membership at September 14, 2004 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 fiscal 2004, and the Company believes will not in fiscal year 2005 have a material effect upon the capital expenditures, net income, or competitive position of the Company.
Item 2. Properties
The Company's manufacturing and engineering facilities are at its plant in Saratoga Springs, New York.
The Saratoga Springs plant, which the Company owns, consists of various 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.
Item 3. Legal Proceedings.
On June 3, 2004, the Company was informed by the American Stock Exchange, Inc. ("AMEX") that its review of events that had occurred at the Company's annual meeting on November 13, 2003 had been completed and that no further action was warranted.
At the annual meeting, a vote was taken on a shareholder proposal, to remove certain incumbent directors, that had not been included in the Company's proxy material sent to shareholders in advance of the meeting. AMEX informed the Company in January 2004 that it would be conducting a review of such incident. The Board of Directors engaged special counsel to investigate whether any directors or officers of the Company had engaged in misconduct in connection with the shareholder proposal presented at the meeting. Special counsel subsequently reported to the Board of Directors that no such finding had been made, and that action taken on the shareholder proposal presented at the annual meeting was inappropriate.
In April 2004, the Board of Directors adopted various corporate governance modifications, including the creation of a nominating committee comprised of independent directors and various other corporate by-law amendments. The results of special counsel's reports and the corporate governance modifications were supplied to AMEX incidental to its review.
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:
2004 High Low First Quarter 23.00 17.60 Second Quarter 27.35 22.99 Third Quarter 26.00 24.60 Fourth Quarter 27.14 21.00 2003 High Low First Quarter 20.50 18.48 Second Quarter 19.75 18.65 Third Quarter 20.75 17.55 Fourth Quarter 18.49 17.70 |
Holders
The approximate number of holders of record of the common stock was 141 on September 14, 2004 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 cash dividends on the common stock of $1.50, $.35, and $.30 per share for the fiscal years ended June 30, 2004, 2003 and 2002, respectively. The Board of Directors has authorized the payment of a fiscal 2005 first quarter dividend of $.15 payable September 30, 2004.
See also Item 12 for a discussion of Securities Authorized for Issuance under Equity Compensation plans.
During fiscal 2004 the Company sold common stock to certain employees as they exercised existing stock options granted under a shareholder approved plan. 8,500 shares were sold at various times during the year at prices that ranged from $13.25 a share to $19.85 a share. The securities were sold for cash and were made without registration under the Securities Act in reliance upon the exemption from registration afforded under Section 4(2) of the Securities Act of 1933. Proceeds were used for general working capital purposes.
There were no purchases of equity securities in the fiscal 2004 fourth quarter.
Item 6. Selected Financial Data.
ESPEY MFG. & ELECTRONICS CORP.
Five Years Ended June 30, 2004
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Selected Income Statement Data 2004 2003 2002 2001 2000
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Net Sales ........................... $22,507,199 $19,773,411 $18,405,213 $17,251,640 $14,719,818
Operating Income .................... 1,178,723 1,146,386 549,139 1,169,271 733,617
Other income ........................ 121,894 139,880 179,615 305,833 459,326
----------- ----------- ----------- ----------- -----------
Net income ................. 960,826 964,700 545,754 1,033,069 782,943
Income per common share:
Basic ............................. $ .95 $ .94 $ .53 $ 1.00 $ .75
Diluted .......................... $ .94 $ .94 $ .53 $ 1.00 $ .75
=========== =========== =========== =========== ===========
Selected Balance Sheet Data
Current Assets ...................... 26,030,744 26,528,434 25,008,710 23,736,991 22,540,316
Current Liabilities ................. 965,038 1,639,755 1,158,439 1,063,497 1,329,171
Working Capital ..................... 25,065,706 24,888,679 23,850,271 22,673,494 21,211,145
Total Assets ........................ 29,131,260 29,795,497 28,332,962 27,228,881 26,118,037
Stockholders' equity ................ 27,841,906 27,953,508 27,054,442 26,165,384 24,788,866
Cash dividends declared and
paid per common share ............. $ 1.50 $ .35 $ .30 $ .20 $ .20
=========== =========== =========== =========== ===========
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Outlook
During fiscal year 2004, while net sales increased, new orders received by the Company did not keep pace with backlog relieved. Thus, while the sales backlog of approximately $15.4 million at June 30, 2004 gives the Company a solid base of future sales, the Company anticipates that the reduction of backlog may result in a reduction of sales during fiscal 2005. Management also anticipates a concurrent reduction in costs. Management believes that existing customers have been delayed in placing orders for additional products, but anticipates that new orders will be received in the current calendar year which should result in a significant increase in backlog. Many potential orders are currently being discussed and negotiated with our customers. In addition to the backlog, the Company currently has outstanding quotations representing in excess of $40 million in the aggregate for both repeat and new programs. Based on management's communications with customers, the Company expects to receive substantial orders for spare parts on the various types of transmitters which are already in service, a number of contracts for further development and manufacture of power supplies, transformers and additional contracts for pre-engineered hardware. We expect these contracts to substantially increase sales in years beyond 2005.
The outstanding quotations encompass various new and previously manufactured power supplies, transformers, and subassemblies. However, there can be no assurance that the Company will acquire any or all of the anticipated orders described above, many of which are subject to allocations of the United States defense spending and factors affecting the defense industry and military procurement generally.
Results of Operations
Net Sales for fiscal years ended June 30, 2004, 2003 and 2002, were $22,507,199, $19,773,411, and $18,405,213, respectively. The 13.8% increase in net sales in 2004 as compared to 2003, is the result of increased transmitter component shipments on two of the Company's products. In fiscal 2004, the Company continued to realize the benefits of increased business with existing customers and continued to establish new customer relationships. Enhanced customer relationships and the quality of our products have provided for the continued increase in sales that has occurred over the last five years. The sales backlog at June 30, 2004, as discussed above includes significant orders for land and shipboard high voltage radar power supply/transmitters, industrial power supplies, and contracts to manufacture certain customer products in accordance with pre-engineered requirements. The increase in net sales in 2003 as compared to 2002 was the result of increased shipments of small transformers, certain power supplies, and shipments made on build to print orders.
The primary factor in determining gross profit and net income is product mix. The gross profits on mature products and build to print contracts are higher than with respect to the products which are still in the engineering development stage or in the early stages of production. In any given accounting period the mix of product shipments between higher margin mature programs and less mature programs including loss contracts, has a significant impact on gross profit and net income. For fiscal years ended June 30, 2004, 2003 and 2002 gross profits were $3,714,865, $3,097,861, and $2,300,994, respectively. The increase in gross profit between 2004, 2003 and 2002 was predominately due to an increase in net sales and favorable product mix. Gross profit as a percentage of sales was 16.5%, 15.7%, and 12.5% for fiscal 2004, 2003, and 2002, respectively. 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. Employment at June 30, 2004 was 181 people compared to 192 people at June 30,2003.
Net income for fiscal 2004, was $960,826 or $.95 and $.94 per share, basic and diluted, respectively, compared to $964,700 or $.94 per share, both basic and diluted, for fiscal 2003. The change in net income per share was due to increased sales and improved gross profit offset primarily by one loss contract and higher selling, general and administrative expenses. Net income for fiscal 2003, was $964,700 or $.94 per share compared to net income of $545,754 or $.53 per share for fiscal 2002. The increase in net income per share was due to decreased expenditures made on engineering development contracts, higher sales and favorable product mix. The decrease in engineering development expenditures occurred naturally as the related programs moved from the engineering design phase into the production phase of the associated contracts. The increase in net income was partially offset by an increase in selling, general and administrative expenses.
Selling, general and administrative expenses were $2,536,142, for the fiscal year ended June 30, 2004, an increase of $584,667, or 30.0% as compared to the prior year. This
increase is primarily due to an increase in professional fees, insurance costs and administrative salaries. The increase in professional fees was attributable, in part, to legal fees incurred relating to the review conducted by the American Stock Exchange following the Company's Annual Meeting in November 2003 and the implementation of corporate governance modifications, including the amendment of the corporate by-laws. Selling, general and administrative expenses were $ 1,951,475 for the year ended June 30, 2003, an increase of $199,620, or 11.4% as compared to the prior year. This increase is mainly attributable to an increase in insurance premiums and increased selling expenses.
Other income for fiscal 2004 decreased as compared to fiscal 2003 due to lower dividend and interest income. The Company does not believe that there is significant risk associated with its investment policy, since at June 30, 2004 all of the investments are primarily represented by short-term liquid investments including certificates of deposit and money market accounts. Total other income in fiscal 2003, as compared to 2002 declined as expected, as the Company sold its higher interest bearing preferred securities, and interest rates continued to decline.
The effective income tax rate was 26.1% in 2004, 25.0% in 2003, and 25.1% in 2002. The effective tax rate is less than the statutory tax rate mainly due to the foreign exportation benefit the Company receives on its foreign sales.
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, 2004, 2003 and 2002 was $25,065,706, $24,888,679, and $23,850,271, respectively. During 2004, 2003 and 2002 the Company repurchased 13,625, 15,918, and 0 shares, respectively, of its common stock from the Company's Employee Retirement Plan and Trust ("ESOP") and in other open market transactions, for a total purchase price of $272,329, $311,468, and $0, respectively. Under existing authorizations from the Company's Board of Directors, as of June 30, 2004, management is authorized to purchase an additional $542,566 of Company stock.
The table below presents the summary of cash flow information for the fiscal year indicated:
2004 2003
----------- -----------
Net cash provided by operating activities ........................ $ 3,874,800 $ 1,936,468
Net cash (used) provided by investing activities ................. (910,855) 523,370
Net cash used in financing activities ............................ 1,649,456 656,317
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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, purchases of inventory, receipt of progress payments, level of sales and payments of accounts payable. Net cash (used) provided by investing activities changed in fiscal 2004 due to slightly lower additions of plant and equipment and the purchase of short-term investments. The increase in cash used in financing activities is due primarily to the increase in the amount of dividends paid during 2004 as compared to 2003.
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 does business. Historically, bad debt expense has been minimal.
During fiscal year 2004 and 2003, the Company expended $413,517 and $438,481, respectively, for plant improvements and new equipment. The Company has budgeted approximately $450,000 for new equipment and plant improvements in fiscal 2005. Management presently anticipates that the funds required will be available from current operations.
The Company has entered into standby letters of credit agreements with financial institutions primarily relating to the guarantee of future performance on certain contracts. Contingent liabilities on outstanding standby letters of credit agreements aggregated approximately $190,000 at June 30, 2004. The Company does not expect to fund any of the amounts under the standby letters of credit.
The Company has an operating lease for $500 a month which expires June 1, 2008.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in Note 2 to the financial statements. We believe our most critical accounting policies include revenue recognition and cost estimation on our contracts.
Revenue Recognition and Estimates
A significant portion of our business is comprised of development and production contracts. Generally revenues 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.
Percentage of completion accounting requires judgment relative to expected sales, estimating costs and making assumptions related to technical issues and delivery schedule. Contract costs include material, subcontract costs, labor and an allocation of overhead 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, based on changes in circumstances, in the estimation of cost at completion. When a change in expected sales value or estimated cost is determined, changes are reflected in current period earnings.
Other Matters
An Employee Retirement Plan and Trust ("ESOP") was established for the eligible non-union employees of the Company, effective as of July 1, 1988. The ESOP used the proceeds of a loan from the Company made on June 5, 1989 to purchase 316,224 shares of the Company's common stock for approximately $8,400,000 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.
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, 2004, there were 240,749 shares allocated to participants. Dividends attributable to allocated shares were likewise allocated to the participants' accounts, whereas the dividends on unallocated shares were used toward the loan repayment, thus reducing the Company's required contribution.
The loan from the Company to the ESOP was repayable in annual installments of $1,039,605, including interest through June 30, 2004. Interest was 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 sheet as of June 30, 2003.
Effective June 30, 2004 the loan from the Company to the ESOP was paid in full and all shares have been allocated to participant's accounts.
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.
Item 8. Financial Statements
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Espey Mfg. & Electronics Corp.:
We have audited the accompanying balance sheet of Espey Mfg. & Electronics Corp. as of June 30, 2004, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Espey Mfg. & Electronics Corp. as of June 30, 2004, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP ----------------- KPMG LLP Albany, New York August 6, 2004 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Espey Mfg. & Electronics Corp. :
In our opinion, the 2003 and 2002 financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Espey Mfg. & Electronics Corp. (the Company) at June 30, 2003, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2003 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 financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 1, 2003 |
Espey Mfg. & Electronics Corp.
Balance Sheets
June 30, 2004 and 2003
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2004 2003
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ASSETS
Cash and cash equivalents ................................................. $ 12,310,972 $ 10,996,483
Short term investments .................................................... 1,056,000 --
Trade accounts receivable, net ............................................ 2,140,397 3,470,895
Other receivables ......................................................... 1,809 11,638
Inventories:
Raw materials and supplies ....................................... 1,543,930 1,570,028
Work in Process .................................................. 3,390,133 3,020,081
Costs related to contracts in process,
net of progress payments of $905,646
in 2004 and $3,314,816 in 2003 ................................... 5,151,234 7,246,158
------------ ------------
Total inventories ................................................ 10,085,297 11,836,267
------------ ------------
Deferred income taxes ..................................................... 76,876 88,643
Prepaid expenses and other current assets ................................. 359,393 124,508
------------ ------------
Total current assets ............................................. 26,030,744 26,528,434
------------ ------------
Property, plant and equipment, net ........................................ 3,100,516 3,267,063
------------ ------------
Total Assets ................................................. $ 29,131,260 $ 29,795,497
============ ============
LIABILITIES AND STOCKHOLDERS'EQUITY
Accounts payable .......................................................... $ 250,675 $ 647,597
Accrued expenses:
Salaries, wages and commissions .................................. 44,519 88,287
Employee insurance costs ......................................... 7,487 7,038
Vacation ......................................................... 451,516 465,815
Other ............................................................ 50,370 42,361
Payroll and other taxes withheld and accrued .............................. 26,000 38,425
Income taxes payable ...................................................... 134,471 350,232
------------ ------------
Total current liabilities .................................... 965,038 1,639,755
------------ ------------
Deferred income taxes ..................................................... 324,316 202,234
------------ ------------
Total liabilities ............................................ 1,289,354 1,841,989
------------ ------------
Common stock, par value $.33-1/3 per share
Authorized 10,000,000 shares; Issued 1,514,937
shares in 2004 and 2003, outstanding 1,014,618
and 1,019,643 shares in 2004 and 2003 ............................ 504,979 504,979
Capital in excess of par value ............................................ 10,411,915 10,459,278
Retained Earnings ......................................................... 24,911,920 25,458,400
------------ ------------
35,828,814 36,422,657
Less common stock subscribed .............................................. -- (558,662)
Cost of 500,319 and 495,294 shares of
common stock in treasury in 2004
and 2003, respectively ........................................... (7,986,908) (7,910,487)
------------ ------------
Total stockholders' equity ................................... 27,841,906 27,953,508
------------ ------------
Total liabilities and
stockholders' equity ......................................... $ 29,131,260 $ 29,795,497
============ ============
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The accompanying notes are an integral part of the financial statements.
2004 2003 2002
------------ ------------ ------------
Net sales ................................................... $ 22,507,199 $ 19,773,411 $ 18,405,213
Cost of sales ............................................... 18,792,334 16,675,550 16,104,219
------------ ------------ ------------
Gross profit ................................ 3,714,865 3,097,861 2,300,994
Selling, general and
administrative expenses ................................ 2,536,142 1,951,475 1,751,855
------------ ------------ ------------
Operating income ............................ 1,178,723 1,146,386 549,139
Other income (expense)
Interest and dividend income ................ 94,655 140,000 199,050
Other income (loss) ......................... 27,239 (120) (19,435)
------------ ------------ ------------
Total other income .......................... 121,894 139,880 179,615
------------ ------------ ------------
Income before income taxes .................................. 1,300,617 1,286,266 728,754
Provision for income taxes .................................. 339,791 321,566 183,000
------------ ------------ ------------
Net income .................................. $ 960,826 $ 964,700 $ 545,754
============ ============ ============
Net Income per share:
Basic .................................................. $ .95 $ .94 $ .53
Diluted ................................................ $ .94 $ .94 $ .53
------------ ------------ ------------
Weighted average number
of shares outstanding
Basic ....................................... 1,013,663 1,025,200 1,030,556
Diluted ..................................... 1,022,344 1,027,686 1,034,904
============ ============ ============
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The accompanying notes are an integral part of the financial statements.
Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity
Years Ended June 30, 2004, 2003 and 2002
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Accumulated
Other
Capital in Comprehen-
Common Excess of sive income Retained
Shares Amount par Value (Loss) Earnings
----------- ----------- ----------- ----------- -----------
Balance as of June 30, 2001 1,029,461 $ 504,979 $10,496,287 $ (50,281) $24,607,239
----------- ----------- ----------- ----------- -----------
Comprehensive income:
Net income, 2002 545,754
Other comprehensive income,
net of tax benefit of $9,940 21,202
Comprehensive income
Stock option exercises 5,100 (30,409)
Dividends paid on common stock
$.30 per share (309,176)
Tax effect of dividends on
unallocated ESOP shares 5,041
Purchase of treasury stock
Reduction of common stock subscribed
----------- ----------- ----------- ----------- -----------
Balance as of June 30, 2002 1,034,561 504,979 10,465,878 (29,079) 24,848,858
----------- ----------- ----------- ----------- -----------
Comprehensive income:
Net income, 2003 964,700
Other comprehensive income,
net of tax benefit of $15,599 19,589
Reclassification adjustment 9,490
Comprehensive income
Stock option exercises 1,000 (6,600)
Dividends paid on common stock
$.35 per share (358,099)
Tax effect of dividends on
unallocated ESOP shares 2,941
Purchase of treasury stock (15,918)
Reduction of common stock subscribed
----------- ----------- ----------- ----------- -----------
Balance as of June 30, 2003 1,019,643 504,979 10,459,278 -- 25,458,400
----------- ----------- ----------- ----------- -----------
Net income, 2004 960,826
Stock option exercises 8,600 (53,122)
Dividends paid on common stock
$1.50 per share (1,519,913)
Tax effect of stock options exercised 5,759
Tax effect of dividends on
unallocated ESOP shares 12,607
Purchase of treasury stock (13,625)
Reduction of common stock subscribed
----------- ----------- ----------- ----------- -----------
Balance as of June 30, 2004 1,014,618 $ 504,979 $10,411,915 $ -- $24,911,920
=========== =========== =========== =========== ===========
|
Common Treasury Stock Total
Stock --------------------------- Stockholders'
Subscribed Shares Amount Equity
----------- ----------- ----------- -----------
Balance as of June 30, 2001 (1,675,987) 485,476 $(7,716,853) $26,165,384
----------- ----------- ----------- -----------
Comprehensive income:
Net income, 2002 545,754
Other comprehensive income,
net of tax benefit of $9,940 21,202
-----------
Comprehensive income 566,956
Stock option exercises (5,100) 97,984 67,575
Dividends paid on common stock
$.30 per share (309,176)
Tax effect of dividends on
unallocated ESOP shares 5,041
Reduction of common stock subscribed 558,662 558,662
----------- ----------- ----------- -----------
Balance as of June 30, 2002 (1,117,325) 480,376 (7,618,869) 27,054,442
----------- ----------- ----------- -----------
Comprehensive income:
Net income, 2003 964,700
Other comprehensive gain,
net of tax benefit of $15,599 19,589
Reclassification adjustment 9,490
-----------
Comprehensive income 993,779
Stock option exercises (1,000) 19,850 13,250
Dividends paid on common stock
$.35 per share (358,099)
Tax effect of dividends on
unallocated ESOP shares 2,941
Purchase of treasury stock 15,918 (311,468) (311,468)
Reduction of common stock subscribed 558,663 558,663
----------- ----------- ----------- -----------
Balance as of June 30, 2003 (558,662) 495,294 (7,910,487) 27,953,508
----------- ----------- ----------- -----------
Net income, 2004 960,826
Stock option exercises (8,600) 195,908 142,786
Dividends paid on common stock
$1.50 per share (1,519,913)
Tax effect on stock options exercised 5,759
Tax effect of dividends on
unallocated ESOP shares 12,607
Purchase of treasury stock 13,625 (272,329) (272,329)
Reduction of common stock subscribed 558,662 558,662
----------- ----------- ----------- -----------
Balance as of June 30, 2004 -- 500,319 $(7,986,908) $27,841,906
=========== =========== =========== ===========
|
The accompanying notes are an integral part of the financial statements.
Espey Mfg. & Electronics Corp.
Statements of Cash Flows
Years Ended June 30, 2004, 2003 and 2002
-------------------------------------------------------------------------------------------------------------------------
2004 2003 2002
----------- ----------- -----------
Cash Flows From Operating Activities:
Net income .................................................. $ 960,826 $ 964,700 $ 545,754
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Tax effect of dividends on
unallocated ESOP shares ..................................... 12,607 2,941 5,043
Tax effect on stock options exercised ....................... 5,759 -- --
Depreciation ................................................ 557,943 495,670 513,470
Loss on disposal of plant and equipment ..................... 22,121 -- 35,782
Loss on sale of investment securities ....................... -- 15,817 --
Deferred income tax ......................................... 133,849 57,359 112,097
Changes in assets and liabilities:
Decrease (increase) in receivables ..................... 1,340,327 (1,059,414) 145,370
Decrease in inventories, net ........................... 1,750,970 904,528 2,191,882
(Increase) decrease in prepaid
expenses and other current assets ................... (234,885) 73,553 (46,181)
(Decrease) increase in accounts payable ................ (396,922) 150,143 162,682
(Decrease) increase in accrued
salaries, wages and commissions ..................... (43,768) 1,406 (37,200)
Increase (decrease) in accrued
employee insurance costs ............................ 449 150 (54,911)
(Decrease) increase in vacation accrual ................ (14,299) 66,916 53,352
Increase in other accrued expenses ..................... 8,009 951 3,699
(Decrease) increase in payroll and
other taxes withheld and accrued .................... (12,425) 482 (1,454)
(Decrease) increase in income
taxes payable ....................................... (215,761) 261,266 27,526
----------- ----------- -----------
Net cash provided by
operating activities .................... $ 3,874,800 $ 1,936,468 $ 3,656,911
----------- ----------- -----------
|
The accompanying notes are an integral part of the financial statements.
(Continued)
Cash Flows From Investing Activities:
Proceeds from maturity of investment
securities ............................................. -- 403,188 399,869
Additions to property, plant and equipment ............... (413,517) (438,481) (393,865)
Purchase of short term investments ....................... (1,056,000) -- --
Proceeds on sale of plant and equipment .................. -- -- 12,250
Reduction of common stock subscribed ..................... 558,662 558,663 558,662
------------ ------------ ------------
Net cash (used) provided by
investing activities ................. (910,855) 523,370 576,916
------------ ------------ ------------
Cash Flows From Financing Activities:
Dividends on common stock ................................ (1,519,913) (358,099) (309,176)
Purchase of treasury stock ............................... (272,329) (311,468) --
Proceeds from exercise of stock options .................. 142,786 13,250 67,575
------------ ------------ ------------
Net cash used in
financing activities ................. (1,649,456) (656,317) (241,601)
------------ ------------ ------------
Increase in cash and cash equivalents ......................... 1,314,489 1,803,521 3,992,226
Cash and cash equivalents, beginning of the year .............. 10,996,483 9,192,962 5,200,736
------------ ------------ ------------
Cash and cash equivalents, end of the year .................... $ 12,310,972 $ 10,996,483 $ 9,192,962
============ ============ ============
Net Income Taxes Paid ......................................... $ 403,337 $ -- $ 62,238
============ ============ ============
|
The accompanying notes are an integral part of the financial statements.
Espey Mfg. & Electronics Corp.
Note 1. Nature of operations
Espey Mfg. & Electronics Corp. (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 the year the Company dissolved Espey International, Inc, a wholly owned subsidiary. The subsidiary was an inactive foreign sales corporation.
Note 2. Summary of Significant Accounting Policies
Inventory Valuation, Cost Estimation and Revenue Recognition Raw materials 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. Provision for losses on contracts is made when the 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). A significant portion of our business is comprised of development and production contracts. Generally, revenues 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.
Percentage of completion accounting requires judgment relative to expected sales, estimating costs and making assumptions related to technical issues and delivery schedule. Contract costs include material, subcontract costs, labor and an allocation of overhead 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, based on changes in circumstances, in the estimation of cost at completion. When a change in expected sales value or estimated cost is determined, changes are reflected in current period earnings.
Depreciation
Depreciation of plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets.
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 |
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. The effect on deferred taxes and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. 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.
Note 2. Summary of Significant Accounting Policies, Continued
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, certificates of deposit, and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Short-term investments include certificates of deposit with maturities greater than three months to a year.
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.
The Company has elected to account for its stock-based compensation plans under the intrinsic value-based method of accounting as permitted by SFAS No. 123 and as prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - An Interpretation of APB No. 25, in accounting for its fixed stock option plans. Under this method, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for Stock Based Compensation. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123, Accounting for Stock Based Compensation, to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure requirements of SFAS No. 123 and SFAS No. 148, as required.
The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS no. 123, to stock-based employee compensation.
Year Ended June 30,
2004 2003 2002
-----------------------------------------
Net income
as reported $ 960,826 $ 964,700 $ 545,754
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards, net of
related tax effects (31,460) (36,912) (36,080)
---------- --------- ---------
Pro forma net income $ 929,366 $ 927,788 $ 509,674
========== ========= =========
Net income per share:
Basic-as reported $ .95 $ .94 $ .53
========== ========= =========
Basic-pro forma $ .92 $ .91 $ .49
========== ========= =========
Diluted-as reported $ .94 $ .94 $ .53
========== ========= =========
Diluted-pro forma $ .91 $ .91 $ .49
========== ========= =========
17
|
Note 2. Summary of Significant Accounting Policies, Continued
Per Share Amounts
Basic net income per share excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income 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 net income of the Company.
Comprehensive Income
Comprehensive income in 2003 and 2002 consists of net income and unrealized gains (losses) on securities available-for-sale and is presented in the Statement of Changes in Stockholders' Equity. In 2004, comprehensive income is equal to net income.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect 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 may have been made to the prior year financial statements to conform to the current year presentation.
Impairment of Long-Lived Assets
Long-lived assets, including property, plant, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.
Concentrations of Risk
The market for our defense electronics products is largely dependent on the availability of new contracts from the United States and foreign governments to prime contractors to which we provide components. Any decline in expenditures by the United States or foreign governments may have an adverse effect on our financial performance.
Also, our international sales are denominated in United States currency. Consequently, changes in exchange rates that strengthen the United States dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitor's products.
Note 3. Contracts in Process
Contracts in process at June 30, 2004 and 2003 are as follows:
2004 2003
----------- -----------
Gross contract value $15,425,540 $21,370,490
Costs related to contracts in process,
net of progress payments of $905,646
in 2004 and $3,314,816 in 2003 $ 5,151,234 $ 7,246,158
18
|
Note 3. Contracts in Process, Continued
Included in costs relating to contracts in process at June 30, 2004 and 2003 are costs of $1,237,135 and $1,460,338, 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.
Note 4. Property, Plant and Equipment
A summary of the original cost of property, plant and equipment at June 30, 2004 and 2003 is as follows:
2004 2003
------------ ------------
Land $ 45,000 $ 45,000
Building and improvements 4,040,155 3,981,689
Machinery and equipment 7,506,843 7,273,596
Furniture, fixtures and office equipment 309,407 308,394
------------ ------------
11,901,405 11,608,679
Accumulated depreciation (8,800,880) (8,341,616)
------------ ------------
$ 3,100,516 $ 3,267,063
============ ============
|
Depreciation expense was $557,943, $495,670, and $513,470 during the years ended June 30, 2004, 2003, and 2002, respectively.
Note 5. Line of credit
At June 30, 2004, the Company has an uncommitted and 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) 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.
Note 6. Research and Development Costs
Research and development costs charged to cost of sales during the years ended June 30, 2004, 2003 and 2002 were approximately $150,000, $100,000, and $335,000, respectively.
Note 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 $91,265 in 2004, $93,066 in 2003, and $83,778 in 2002.
The Company sponsors a 401(k) plan with employee and employer matching contributions. The employer match is 10% of the employee contribution and was $31,721, $29,030, and $25,744 for fiscal years 2004, 2003 and 2002 respectively.
Note 8. Provision for Income Taxes
A summary of the components of the provision for income taxes for the years ended June 30, 2004, 2003 and 2002 is as follows:
2004 2003 2002
-------- -------- --------
Current tax expense - federal $190,387 $252,961 $ 49,653
Current tax expense - state 15,555 11,246 1,383
Deferred tax expense 133,849 57,359 131,964
-------- -------- --------
$339,791 $321,566 $183,000
======== ======== ========
19
|
Mfg. & Electronics Corp.
Notes to Financial Statements
-------------------------------------------------------------------------------------------------------
Note 8. Provision for Income Taxes, Continued
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 26.1%, 25.0%,
and 25.1%, for 2004, 2003 and 2002 respectively, differed from the statutory
U.S. federal income tax rate for the following reasons:
2004 2003 2002
------ ------ ------
U.S. federal statutory income tax rate 34.0% 34.0% 34.0%
Increase (reduction) in rate
resulting from:
Dividends received deduction -- (1.0) (1.0)
State franchise tax, net of federal
income tax benefit 1.0 1.0 1.1
Foreign exportation benefit (7.7) (5.0) (7.3)
Other (1.2) (4.0) (1.7)
------ ------ ------
Effective tax rate 26.1% 25.0% 25.1%
====== ====== ======
|
For the years ended June 30, 2004 and 2003 deferred income tax expense of $133,849 and $57,359, 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, 2004 and 2003 are presented as follows:
2004 2003
--------- ---------
Deferred tax assets:
Common stock subscribed - due to difference
in interest recognition .......................... $ -- $ 142,159
Non-deductible accruals ............................... 108,485 105,443
Other ................................................. 15,428 16,875
--------- ---------
Total deferred tax assets ............... 123,913 264,477
--------- ---------
Deferred tax liabilities:
Property, plant and equipment - principally due
to differences in depreciation methods ........... 324,316 344,393
Inventory - effect on uniform capitalization .......... 47,037 33,675
--------- ---------
Total deferred tax liabilities .......... 371,353 378,068
--------- ---------
Net deferred tax liability ................................ $(247,440) $(113,591)
========= =========
|
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 scheduled 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.
Note 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 22%, 16%, and 18%, respectively, of total sales in 2004. Sales to two domestic customers and one foreign customer accounted for 25%, 19%, and 12%, respectively, of total sales in 2003. Sales to two domestic customers and one foreign customer accounted for 26%, 21%, and 14% respectively, of total sales in 2002.
Export sales aggregated approximately $9,800,000, $7,100,000, and $6,600,000, for the years ended June 30, 2004, 2003 and 2002, respectively.
Note 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, then 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.
Note 11. Employee Stock Ownership Plan
In 1989, the Company established an Employee Stock Ownership Plan (ESOP) with an effective date of July 1, 1988, for eligible non-union employees. The ESOP used the proceeds of a loan from the Company made in June 1989 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 135,235 shares of the Company's common stock to pay benefits to participants. At June 30, 2004 and 2003, the ESOP held a total of 240,749 and 251,574 shares, respectively, of the Company's common stock, of which 240,749 and 230,562 shares, respectively, were allocated to participants in the Plan.
The loan from the Company to the ESOP was repayable in annual installments of $1,039,605 including interest, through June 30, 2004. Interest was payable at a rate of 9% per annum. The Company's receivable from the ESOP at June 30, 2003 is recorded as common stock subscribed in the accompanying balance sheet. The Company Espey recognizes the principal payments of the ESOP debt, on a straight-line basis over the term of the note, as compensation expense.
Note 11. Employee Stock Ownership Plan, Continued
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, 2004 and 2003, 21,012 shares were allocated to participants. In 2004, the Company's required contribution of $1,039,605 was reduced by $31,518, which represents the dividends paid on unallocated ESOP shares. The resulting payment of $1,008,087 includes $527,144 classified as compensation expense. In 2003, the Company's required contribution of $1,039,605 was reduced by $14,708, which represents the dividends paid on unallocated ESOP shares. The resulting payment of $1,024,897 includes $543,954 classified as compensation expense. In 2002, the Company's required contribution of $1,039,605 was reduced by $18,911, which represents the dividends paid on the unallocated ESOP shares. The resulting payment of $1,020,694 includes $539,752 classified as compensation expense. All shares purchased by the ESOP are considered to be outstanding for the income per share computations.
Effective June 30, 2004 the loan from the Company to the ESOP was paid in full and all shares have been allocated to participants' accounts.
Note 12. Stock Based Compensation
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. Options authorized for issuance under the Plan totaled 150,000. As of June 30, 2004, the Plan was authorized to grant options to purchase 98,400 shares of the Company's common stock.
Options granted under the Plan have been granted with exercise prices at fair market value at the grant date and vest over a period of two years. All options must be exercised within 10 years from the date of grant and are exercisable anytime after the two year vesting period.
Information concerning the plans incentive and non-qualified stock options is as follows:
Option Option Price
Shares Per Share
------------------------------------------------------------------
June 30, 2001 24,000 $13.25 - 17.95
------------------------------------------------------------------
Options granted 13,000 19.85
Options canceled (500) $13.25 - 17.95
Options exercised (5,100) 13.25
------------------------------------------------------------------
June 30, 2002 31,400 $13.25 - 19.85
------------------------------------------------------------------
Options granted 15,100 18.50
Options canceled -- --
Options exercised (1,000) 13.25
------------------------------------------------------------------
June 30, 2003 45,500 $13.25 - 19.85
------------------------------------------------------------------
Options granted -- --
Options canceled -- --
Options exercised (8,500) $13.25 - 19.85
------------------------------------------------------------------
June 30, 2004 37,000 $13.25 - 19.85
==================================================================
22
|
Espey Mfg. & Electronics Corp.
Notes to Financial Statements
-----------------------------------------------------------------------------------------------------------------
Note 12. Stock Based Compensation, Continued
The table below summarizes information with respect to stock options outstanding
as of June 30, 2004:
Remaining Exercise Price of
Exercise Options Contractual Options Exercisable
Prices Outstanding Life Exercisable Options
---------------------------------------------------------------------------------------------------
$ 13.25 1,600 6 1,600 $ 13.25
$ 17.95 8,500 7 8,500 $ 17.95
$ 19.85 11,800 8 11,800 $ 19.85
$ 18.50 15,100 9 -- --
---------------------------------------------------------------------------
Total 37,000 21,900
===========================================================================
|
During 2004, no stock options were granted under the plan. The weighted average fair value of options granted under the plans during fiscal years 2003 and 2002 was $4.31, and $3.93, respectively. The assumptions used for the Black-Scholes model are as follows:
2003 2002
------ ------
Risk-free interest rate................................. 3.5% 4.5%
Expected term........................................... 5 years 5 years
Company's expected volatility........................... 20.0% 20.0%
Dividend yield.......................................... 2.5% 2.5%
|
Note 13. Financial Instruments/Concentration of Credit Risk
The carrying amounts of financial instruments, including cash and cash equivalents, short term investments, accounts receivable, accounts payable and accrued expenses, approximated fair value as of June 30, 2004 and 2003 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, short term investments 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 9, 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. The related accounts receivable balance represented by three customers was 29% and 57% of the Company's total trade accounts receivable balance at June 30, 2004 and 2003, 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. and foreign governments, 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.
Note 14. Related Parties
The Company paid a law firm in which a director of the Company is a partner, a total of $11,524, $22,000, and $24,000 for legal services during fiscal years ended June 30, 2004, 2003, and 2002, respectively.
Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 15. Commitments and Contingencies
The Company has entered into standby letters of credit agreements with financial
institutions primarily relating to the guarantee of future performance on
certain contracts. Contingent liabilities on outstanding standby letters of
credit agreements aggregated approximately $190,000 at June 30, 2004. The
Company does not expect to fund any of the amounts under the standby letters of
credit.
The Company also has an operating lease commitment for a copier machine for $500
per month which expires on June 1, 2008.
Note 16. Quarterly Financial Information (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
2004
Net Sales .................... $5,095,317 $5,871,675 $6,116,221 $5,423,986
Gross profit .............. 900,172 727,876 717,562 1,369,255
Net income ................ 280,965 61,430 54,008 564,423
Net income per share -
Basic ........................ 0.28 0.06 0.05 0.56
Diluted ...................... 0.28 0.06 0.05 0.55
2003
Net Sales ..................... $4,491,359 $5,374,456 $5,707,503 $4,200,093
Gross profit (loss) ....... 789,221 (75,254) 1,223,106 1,160,788
Net income (loss) ......... 306,545 (417,334) 575,586 499,903
Net income (loss)
(per share - basic and
diluted) ..................... 0.30 (0.41) 0.56 0.49
2002
Net Sales ..................... $4,585,515 $5,199,517 $4,616,587 $4,003,594
Gross profit .............. 607,585 593,569 700,016 399,824
Net income ................ 203,691 81,999 212,644 47,420
Net income
(per share - basic and
diluted) ..................... 0.20 0.08 0.20 0.05
|
Item 9. Changes in and disagreements with accountants on accounting and
financial disclosure
None
Item 9A. Controls and Procedures
(a) The Company's management, with the participation of the Company's chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) There have been no changes in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B. Other information
None.
PART III
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 60
December 2005
Director since 1992
William P. Greene Annual Meeting in None 74
December 2004
Director since 1992
Carl Helmetag Annual Meeting in None 56
December 2006
Director since 1999
Barry Pinsley Annual Meeting in Non-Executive 62
December 2005 officer
Director since 1994
Howard Pinsley Annual Meeting in President and Chief 64
December 2006 Executive Officer
Director since 1992
Alvin O. Sabo Annual Meeting in None 61
December 2006
Director since 1999
Seymour Saslow Annual Meeting in None 83
December 2004
Director since 1992
Michael W. Wool Annual Meeting in None 58
December 2005
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- 64
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 December 10, 1998
John J. Pompay, Jr. Vice President- Since December 6, 1996 69
Marketing and Sales Retired April 5, 2004
David A. O'Neil Treasurer & Principal Since January 4, 2000. 39
Financial Officer Controller and Assistant
Treasurer from December 11,
1998 to January 3, 2000
Peggy A. Murphy Secretary Since December 11, 1998 46
Garry M. Jones Assistant Treasurer Since August 4, 1988. 64
& Principal Accounting Principal Financial
Officer Officer from August 4, 1988
to September 10, 1993
Timothy A. Polidore Assistant Treasurer Since December 8, 2000 44
|
The terms of office of Mrs. Peggy A. Murphy, Mr. David A. O'Neil, Mr. Timothy 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 terms of office of Mr. Howard Pinsley and Mr. John Pompay are subject to the agreements between them and the Company. See "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 licensed by the State of [New York], and has been a Professor of Business at Skidmore College in Saratoga Springs, NY 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. was vice president of operations for the Company until December 31, 2000 when he retired. Prior to joining the Company's management team he 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, 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.
Barry Pinsley is a Certified Public Accountant who for more than 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 first 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. On December 10, 1998 he became the President and Chief Executive Officer.
Seymour Saslow had been Senior Vice President of the Company 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.
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 since 1978 and has served 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 than the past five years has been employed by the Company on a full-time basis as Vice President-Marketing and Sales since December 6, 1996. Effective April 5, 2004, Mr. Pompay retired as an executive officer.
Timothy A. Polidore was 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. Effective August 6, 2004 Mr. Polidore resigned.
Garry M. Jones for more than the past five years has been employed by the Company on a full-time basis since 1970, and has served as Assistant Treasurer and Principal Accounting Officer since August 4, 1988.
Directorships
Howard Pinsley serves as a director of All American Semiconductor Inc.
None of the other 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 directors 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.
Procedures For Shareholders to Nominate Directors
The information regarding this item is included under "Procedures For Shareholders to Nominate Directors" in our Proxy Statement for our 2004 annual meeting of shareholders.
Compliance with Section 16(a) of the Securities Exchange Act
The information regarding this item is included under "Compliance with Section 16(a) of the Securities Exchange Act" in our Proxy Statement for our 2004 annual meeting of shareholders.
Code of Ethics
Item 11. Executive Compensation
The following table summarizes the annual compensation for each of the fiscal years ended June 30, 2004, 2003, and 2002 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, 2004.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Securities
Name and Fiscal Annual Underlying All Other
Principal Position Year Salary Bonus Options(#) Compensation(1)
------------------ ------ ------ ------ ------------ ---------------
Howard Pinsley 2004 $190,120 $20,000 0 $ 34,826
President and 2003 $180,404 $12,500 2,000 $ 19,109
Chief Executive Officer 2002 $173,120 $25,000 2,000 $ 11,841
John J. Pompay, Jr.(2) 2004 $165,622 $25,000 0 $ 34,733
Vice President-Sales 2003 $160,554 $25,000 800 $ 19,244
2002 $154,340 $25,000 800 $ 12,134
David A. O'Neil 2004 $112,250 $12,500 0 $ 13,101
Treasurer and Principal 2003 $105,490 $10,000 800 $ 10,738
Financial Officer 2002 $ 99,950 $12,500 800 $ 9,899
|
(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 the Company's matching contribution under the 401K plan.
(2) Mr. Pompay retired, effective April 5, 2004, as an executive officer.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted during the year ended June 30, 2004.
The following table sets forth information concerning unexercised options held on June 30, 2004 by the named executive officers:
AGGREGATED OPTIONS AT FISCAL YEAR-END AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Options at Options at
On Value Fiscal Year-End (#) Fiscal Year-End ($)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
------------- --------- --------- ------------------------- --------------------------
Howard Pinsley 0 0 4,000/2,000 15,800/8,700
John J. Pompay Jr.* 0 0 800/800 2,400/3,480
David A. O'Neil 0 0 800/800 2,400/3,480
|
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, 2013.
*Mr. Pompay retired, effective April 5, 2004, as an executive officer.
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. Certain technical amendments not considered material were adopted effective as of June 30, 1994 and July 1, 2002.
Of the 240,749 shares of common stock of the Company allocated to participants of the ESOP as of June 30, 2004, 11,161 shares were allocated to John J. Pompay Jr., 10,712 shares were allocated to Howard Pinsley, 2,382 shares were allocated to David A. O'Neil and 3,369 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 $15,000 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. Each director that serves as a member of the Succession Committee or the Mergers and Acquisition Committee is compensated an additional $2,500 for each committee. These fees are paid monthly to the Directors. 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 year ended June 30, 2004 the following options remain granted and unexercised by the Board of Directors in accordance with this Plan.
Name Number of Options Exercise Price Range ---- ----------------- -------------------- Seymour Saslow 1,500 $17.95 - 19.85 Barry Pinsley 1,500 13.25 - 19.85 Michael W. Wool 1,500 17.95 - 19.85 William P. Greene 900 17.95 - 19.85 Paul J. Corr 1,600 13.25 - 19.85 Alvin O. Sabo 1,400 13.25 - 19.85 Carl Helmetag 800 13.25 - 19.85 Howard Pinsley 6,000 17.95 - 19.85 |
The above options have exercise dates ranging from March 1, 2002 and expiring on March 1, 2013.
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, 2003, and allowed, on April 5, 2004, Mr. Pompay to voluntarily resign as Vice President of Marketing and Sales and accept an option under the contract as a non-executive officer in which he will receive full benefits plus full compensation for 13 weeks and then for the next 143 weeks receive $1,000 per week for services to be rendered. This contract expires on April 5, 2007.
The Company entered into an agreement with Howard Pinsley, President and CEO effective July 1, 2002. The contract allows Mr. Pinsley upon his resignation or termination to become a non-executive officer of the Company for a period of thirty-six months. In consideration for services to be provided by Mr. Pinsley for the equivalent of two days a month after his resignation or termination, and to perform duties as reasonably requested by the Company, he will receive full benefits plus, $15,000 per month for the first three months, and $4,333 per month for the next thirty-three consecutive months. This agreement expires on December 31, 2005.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following information is furnished as of September 14, 2004 (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 Franklin Advisory 78,000 - Direct (1) 7.70%
Services, LLC
777 Mariners Island Blvd
P.O. Box 7777
San Mateo, CA 94403-7777
" The Adirondack Trust 236,735 - Direct (2) 23.42%
Company, as Trustee of
the Company's Employee
Retirement Plan and Trust
473 Broadway
Saratoga Springs, NY 12866
" Advisory Research, Inc. 70,700 - Direct (3) 7.00%
180 North Stetson St.
Suite 5780
Chicago, IL 60601
" Howard Pinsley 46,634 - Direct (4) 5.65%
233 Ballston Avenue 10,712 - Indirect (4)
Saratoga Springs, NY 12866
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(1) The information as to the number of shares of common stock and the percent of class ownership of the Company that may be deemed beneficially owned by Franklin Advisory Services, LLC ("Franklin") is from the Schedule 13G, dated February 4, 2004 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.
(2) The information as to the number of shares of common stock of the Company that may be deemed beneficially owned by The Adirondack Trust is from the Form 4 dated August 26, 2004 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, as directed by the ESOP Committee appointed by the Company's Board of Directors. As to the common shares allocated to participants, 236,735 shares as of August 26, 2004, the ESOP Trustee has the power to vote such shares as directed by such ESOP Committee to the extent the participants do not direct the manner in which such shares are to be voted.
(3) The information as to the number of shares of common stock and the percent of class ownership of the Company that may be deemed beneficially owned by advisory clients of Advisory Research, Inc. ("Advisory") is from the Schedule 13G dated February 12, 2004 filed with the Securities and Exchange Commission (the "SEC"). Advisory, a registered investment advisor, is deemed to have beneficial ownership of 70,700 shares of Espey Mfg. & Electronics Corp. stock as of February 12, 2004, all of which shares are held in Advisory investment companies, trusts and accounts. Advisory, in its role as investment advisor and/or manager, reported sole voting power with respect to 70,700 shares.
(4) This information is from Form 4 dated July 29, 2004. Indirect shares represent stock being held in the Company ESOP. Direct shares include options to acquire shares which are exercisable within 60 days.
Security Ownership
The following information is furnished as of September 14, 2004 (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
Paul J. Corr 2,000 - Direct (1) *
" William P. Greene 700 - Direct (1) *
" Carl Helmetag 3,400 - Direct (1) *
500 - Indirect (2)
" Garry M. Jones 400 - Direct (1)
4,923 - Indirect (3) *
" Peggy Murphy 600 - Direct (1)
3,644 - Indirect (3) *
" David A. O'Neil 3,200 - Direct (1) *
2,382 - Indirect (3)
" Barry Pinsley 34,830 - Direct (1) 3.78%
3,370 - Indirect (3,4)
" Howard Pinsley 46,634 - Direct (1) 5.65%
10,712 - Indirect (3)
" Alvin O. Sabo 1,100 - Direct (1) *
" Seymour Saslow 8,559 - Direct (1) *
" Michael W. Wool 1,100 - Direct (1) *
" Officers and Directors 102,523 - Direct (1) 10.14%
as a Group (13 persons) 26,614 - Indirect (2,3,4)
|
* Less than one percent
(1) Direct shares include options to acquire shares which are exercisable within 60 days as follows:
Name of Exercisable Name of Exercisable Beneficial Owner Options Beneficial Owner Options ----------------- ------------ ----------------- ------------ Paul J. Corr 1,000 William P. Greene 600 Carl Helmetag 400 Garry M. Jones 400 Peggy Murphy 600 David A. O'Neil 800 Barry Pinsley 1,000 Howard Pinsley 4,000 Alvin O. Sabo 900 Seymour Saslow 1,000 Michael W. Wool 1,000 |
(2) 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 806 shares owned by the spouse of Mr. Helmetag. Beneficial ownership is disclaimed by Mr. Helmetag.
(3) Includes shares allocated to named director or officer as of June 30, 2004 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.
(4) Excludes 2,000 shares owned by the spouse of Barry Pinsley. Beneficial ownership of the shares is disclaimed by Mr. Pinsley.
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.
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, 2004, the Plan was authorized to grant options to purchase 98,700 shares of the Company's common stock with a maximum grant of 15,000 options in any one year.
The Stock Option Committee of the Board of Directors administers the 2000 Plan. The Committee may designate, from time to time, the individuals to whom awards are made under the 2000 Plan, the amount of any such award and the price and other terms and conditions of any such award. The Committee has the full and exclusive power to interpret the 2000 Plan and may, subject to the provisions of the 2000 Plan, establish the rules for its operation.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Number of Securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plan
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
----------------------------------------------------------------------------------------------------------------
(a) (b) (c)
----------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 37,000 18.58 98,400
Equity compensation
plans not approved
by security holders -- -- --
------ ------
Total 37,000 98,400
----------------------------------------------------------------------------------------------------------------
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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, 2004, there were 240,749 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. Effective June 30, 2004 the loan was paid in full and all shares were allocated to participants. Officers of the Company, (including Howard Pinsley) who is also a director, 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 $11,524 for legal services during the fiscal year ended June 30, 2004.
Item 14 Principal Accountant Fees and Services
The information required by this item is included in "Audit Fees" in our Proxy Statement for our 2004 annual meeting of shareholders.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
Included in Part II, Item 8, of this report:
Report of Independent Registered Public Accounting Firm 2004
Report of Independent Registered Public Accounting Firm 2003
Balance Sheets at June 30, 2004 and 2003
Statements of Income for the years ended June 30, 2004, 2003
and 2002
Statements of Changes in Stockholders' Equity for the years
ended June 30, 2004, 2003 and 2002
Statements of Cash Flows for the years ended June 30, 2004,
2003 and 2002
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
3.1 Certificate of incorporation and all amendments thereto(filed herewith)
3.2 By-laws incorporated by reference to Exhibit 3.2 to Espey's March 31, 2004 Form 10-Q
4.1 Amended and Restated Rights Agreement, dated March 31, 1989, as amended February 12, 1999 and December 31, 1999, between Espey Mfg. & Electronics Corp. and Registrar and Transfer Company incorporated by reference to Espey's Form 8-K dated December 20, 1999
10.1 2000 Stock Option Plan incorporated by reference to Espey's Definitive Proxy Statement dated December 6, 1999 for the January 4, 2000 annual meeting
11.1 Statement re: Computation of Per Share Net income
(filed herewith)
31.1 Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2 Certification of the Principal Financial Officer
pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
32.1 Certification of the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
32.2 Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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
/s/ Howard Pinsley President
--------------------------- (Chief Executive Officer)
Howard Pinsley September 14, 2004
/s/ David A. O'Neil Treasurer
--------------------------- (Principal Financial Officer)
David A. O'Neil September 14, 2004
/s/ Garry M. Jones Assistant Treasurer
--------------------------- (Principal Accounting Officer)
Garry M. Jones September 14, 2004
/s/ Barry Pinsley Director
--------------------------- September 14, 2004
Barry Pinsley
/s/ Seymour Saslow Director
--------------------------- September 14, 2004
Seymour Saslow
/s/ William P. Greene Director
--------------------------- September 14, 2004
William P. Greene
/s/ Michael W. Wool Director
--------------------------- September 14, 2004
Michael W. Wool
/s/ Paul J. Corr Director
--------------------------- September 14, 2004
Paul J. Corr
/s/ Alvin O. Sabo Director
--------------------------- September 14, 2004
Alvin O. Sabo
/s/ Carl Helmetag Director
--------------------------- September 14, 2004
Carl Helmetag
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
-OF-
ESPEY MANUFACTURING COMPANY, INC.
PURSUANT TO ARTICLE II OF THE STOCK CORPORATION LAW
WE, the undersigned for the purpose of forming a corporation pursuant to Article II of the Stock Corporation Law of the State of New York certify:
FIRST: The name of the corporation shall be "ESPEY MANUFACTURING
COMPANY, INC."
SECOND: The purposes for which it is to be formed are as follows
1. To do a general wholesale and retail business in radio equipment, supplies and accessories; to manufacture, repair, buy, sell, lease, import, export and generally deal in all kinds of radio apparatus, equipment and appliances for the sending and receiving of radio and wireless messages and also to manufacture, buy, sell, lease, import and export and generally deal in machinery and all kinds of such mechanical devices and engineering appliances as are generally manufactured, bought, sold, leased, imported, exported and dealt in by manufacturers and dealers in a similar line of business; to construct, purchase or otherwise acquire, deal in, sell, hire, lease, use, repair, operate and maintain radio and wireless equipment and apparatus of every kind and character whatsoever and all parts, appliances, accessories and machinery which are or can be properly used in connection therewith or which may be adapted for use in the construction of, upon or in connection with the same, also generating and propelling apparatus, motor power and machinery thereof.
2. To purchase, hire, or otherwise acquire, take, own, hold, improve, develop, plan, deal in and with, manufacture, mortgage or otherwise encumber, and to lease, sell, exchange, transfer or in any other manner whatsoever dispose of or contract in any manner in regard to any real property and any interest or estate therein within or without the state of New York wheresoever situated.
3. To apply for, obtain, purchase or otherwise acquire, and to register, hold, own, use, sell or otherwise dispose of any and all trade marks, trade names, processes, brands, formulae, trade secrets, inventions and devices of all kinds whether secured under letters patent of the United States, or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade marks and trade names, and to develop, work and operate, and to grant sublicenses concerning the same, and to pay and receive royalties and other emoluments therefore, and to carry on any business of manufacturing or otherwise which may directly or indirectly effectuate these objects, or any of them.
4. To enter into, make, perform and carry out contracts of every kind, which may be necessary for or incidental to the business of the corporation, with any person, firm, corporation, private, public or municipal body politic, under the government of the United States, or any territory, district, protectorate, dependency or insular or other possession or acquisition of the United states, or any foreign government, so far as and to the extent that the same may be done and performed by a corporation organized under the Stock Corporation Law.
5. Subject to the restrictions or limitations imposed by law, to subscribe or cause to be subscribed for, to purchase or otherwise acquire, hold, own, sell, assign, transfer, mortgage, pledge, exchange, distribute and otherwise dispose of and deal in the whole or any part thereof, the shares of the capital stock, bonds, debenture stock, obligations, coupons, mortgages, deeds of trust, debentures or other securities or evidences of indebtedness of other corporations, domestic or foreign, and the good will, rights, assets and property of any and every kind, or any part thereof, of any person, firm or corporation, domestic or foreign, and if desirable to issue in exchange therefore the stock, bonds or other obligations of this company, and while the owner of such shares of the capital stock to exercise all rights, powers and privileges of ownership, including the power to vote thereon; and for any and all lawful purposes, in the course of the transaction of the business and affairs of the corporation, to acquire real and personal property, rights and interests of every nature, and to execute and issue bonds, debentures and other negotiable or transferable instruments, and to mortgage or pledge any and all of the property of the corporation; to secure such bonds, debentures or other instruments upon such terms and conditions as may be set forth in the instrument or instruments mortgaging or pledging the same, or in any deed, contract or other instrument relating thereto. Shares of stock in other corporations held by this corporation shall be voted by such officer or officers of this corporation as the board of directors by a majority vote shall
designate for that purpose, or by a proxy thereunto duly authorized by like vote of said board, except as otherwise ordered by vote of the holders of a majority of the shares outstanding and entitled to vote.
6. To lend money to any corporation, partnership, person, firm, corporation or association upon the securing of his or their or its undertaking, property, estate, assets and effects or any part thereof, and upon such terms as the board of directors may deem expedient, but nothing herein shall be construed to authorize the making of loans which a corporation organized under the Stock Corporation Law in forbidden to make.
7. To act as agents, other than as fiscal or transfer agents, for others in any business, or for any purpose and upon any terms, and with or without remuneration.
8. To make any guarantee respecting dividends, shares of stock, bonds, debentures, contracts and other obligations, to the extent that such powers may be exercised by corporations organized under the Stock Corporation Law.
9. No contract or other transaction between the corporation and any other corporation shall be affected or invalidated by the fact that any one or more of the directors of this corporation is or are interested in, or is a director or officer, or any directors or officers of such other corporation, and any director or directors, individually or jointly, may be a party or parties to, or may be interested in, any contract or transaction of this corporation or in which this corporation is interested; and no contract, act or transaction of this corporation with any person or persons, firm or corporation, shall be affected or invalidated by the fact that any director or directors of this corporation is a party, or are parties to or interested in such contract, act or transaction, or in any way connected with such person or persons, firm or association, and each and every person who may become a director of this corporation is hereby relieved from any liability that might otherwise exist from contracting with the corporation for the benefit of himself or any firm, association or corporation in which he may be in anywise interested.
10. The corporation may have offices, agencies, or branches, conduct its business or any part thereof, purchase, lease or otherwise acquire, hold, mortgage and convey real and personal property, and do all or any of the acts and things herein set forth as purposes and such other acts and things as may be requisite for the corporation in the convenient transaction of its business, outside the State of New York, as well as within the state, and in any or all the other states of the United states, in the district of Columbia, in any of the territories, districts, protectorates, dependencies or insular or other possessions or acquisitions of the United States, and in any or all foreign countries.
11. The corporation shall have the power to do any and all things set forth as its objects to the same extent and as fully as a natural person might or could do, and to do all and everything necessary, suitable and proper for the accomplishment of any of the purposes or the attainment of any of the objects or the furtherance of any of the powers hereinbefore set forth, either alone or associated with other corporations, firms or individuals, and to do any other act or acts, thing or things, incidental or pertaining to or growing out of, or connected with the aforesaid business, or powers, or any part or parts thereof, provided the same be not inconsistent with the law under which this corporation is organized.
12. The purposes and powers specified in the clauses contained in article Second of this certificate shall, except when otherwise expressed in said article, be in no wise limited or restricted by reference to, or inference from, the terms of any other clause of this or any other article in this certificate, but the purposes and powers specified in each of the clauses of this article shall be regarded as independent purposes and powers, and the specification herein contained of particular powers of the corporation is not intended to be, and is not in limitation but in furtherance of the powers granted to corporations organized under the Stock Corporation Law under, and in pursuance of the provisions of which this corporation is formed.
13. Nothing in this Certificate contained, however, shall authorize the corporation to carry on any business or exercise any powers in any State or County in which a similar corporation organized under the laws of such state or county could not carry on or exercise, or to engage in the State of New York in any business or to do anything except such as may lawfully be engaged in or done by a corporation organized under the Stock Corporation Law of the State of New York.
THIRD: The total number of shares that may be issued by the corporation is two hundred (200) all of which are to be of one class and without par value.
FOURTH: The capital of the corporation shall be at least equal to the sum of the aggregate par value of all issued shares having par value, plus the aggregate amount of consideration received by the corporation for the issuance of shares without par value, plus such amounts as from time to time by resolution of the Board of Directors may be transferred thereto.
FIFTH: The office of the corporation is to be located in the Borough of Manhattan, City, County and State of New York.
SIXTH: Its duration is to be perpetual.
SEVENTH: The number of its directors is to be three (3). The directors need not be stockholders.
EIGHTH: The names and post office addresses of the directors until the first annual meeting of stockholders are as follows:
NAMES POST OFFICE ADDRESSES
Harold Shevers 58 Warren Street, N.Y. City
Nathan Pinsky 58 Warren Street, N.Y. City
Gulian V. Weir 58 Warren Street, N.Y. City
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NINTH: The names and post office addresses of the subscribers of this certificate and a statement of the number of shares of stock which each agrees to take, are as follows:
NAMES POST OFFICE ADDRESSES NO. OF SHARES Harold Shevers 58 Warren St., N.Y. City 1 Nathan Pinsky 58 Warren St., N.Y. City 1 Gulian V. Weir 58 Warren St., N.Y. City 1 |
TENTH: All the subscribers of this certificate are of full age; at least two thirds of them are citizens of the United States, and at least one of them is a resident of the State of New York. All of the persons named as directors are of full age and at least one of them is a citizen of the United States and a resident of the State of New York.
ELEVENTH: The corporation shall issue and sell its authorized shares without par value of such consideration as may from time to time be fixed by the Board of Directors.
IN WITNESS THEREOF, we have made, signed, acknowledged and filed this certificate in duplicate, this 30th day of June, one thousand nine hundred and twenty eight.
Harold Shevers (L.S.) Nathan Pinsley (L.S.) Gulian V. Weir (L.S.)
1st amendment
CERTIFICATE OF INCREASE OF CAPITAL STOCK AND NUMBER OF SHARES
OF ESPEY MANUFACTURING COMPANY INC.
PURSUANT TO SECTIONS 36 AND 37 OF STOCK CORPORATION LAW.
WE, HAROLD SHEVERS and NATHAN PINSKY, being respectively the President of Espey Manufacturing Company, Inc. and the Secretary thereof, certify,
1. The name of the Corporation is ESPEY MANUFACTURING COMPANY, INC.
2. The certificate of incorporation was filed in the office of the Secretary of State on July 9, 1928.
3. The total number of shares which the Corporation is already authorized to issue is 200, all of which are issued and outstanding and all of which have no par value.
4. The shares already authorized are not classified.
5. The statements respecting the capital of the Corporation contained in its certificate of incorporation are the following:
"The capital of the corporation shall be at least equal to the sum of the aggregate par value of all issued shares having par value, plus the aggregate amount of consideration received for the issuance of shares without par value, plus such amounts as from time to time by resolution of the Board of Directors may be transferred thereto".
6. The total number of shares including those previously authorized which the Corporation may henceforth have, is 200 shares no par value, and 500 shares 6% preferred stock of the par value of $100.00 each.
7. It is not proposed to change authorized shares issued or unissued.
8. The designations, preferences, privileges, voting powers, restrictions or qualifications of the new shares shall be as follows: There shall be 500 new shares, each of the par value of $100.00; the said new shares shall be known as 6% preferred shares; the said new shares shall be preferred over the shares already authorized as to dividends only, non-cumulatively, at the rate of six (6%) percent per annum; the said new shares shall have no voting power; the shares previously authorized and the new shares shall participate equally in the assets of the corporation. Except as herein qualified by the authorization of and preferences, designations and privileges granted the new shares, the designations, preferences, privileges and voting powers of the already authorized shares of stock of the Corporation and the restrictions and qualifications thereof shall remain as heretofore.
IN WITNESS WHEREOF, we have made and subscribed this certificate in triplicate this 10th day of February, 1940.
2nd amendment
CERTIFICATE ADDING PROVISIONS TO CERTIFICATE OF
INCORPORATION, AND INCREASING THE NUMBER OF
DIRECTORS
ESPEY MANUFACTURING COMPANY, INC.
(Pursuant to section 35 of the Stock Corporation Law.)
The undersigned, officers of Espey Manufacturing Company, Inc. do hereby certify as follows;
1. The name of the Corporation is ESPEY MANUFACTURING COMPANY INC.
2. The Certificate of Incorporation was filed in the office of the Secretary of State on July 9, 1928, and a Certificate of Amendment increasing the capital stock was filed in the office of the Secretary of State on February 26, 1940.
3. The following is to be added to the Certificate of Incorporation as Article "Twelfth".
"Each person who is, has been or hereafter becomes a director or officer of the Corporation, or who is, has been or hereafter becomes a director or officer of any corporation which he served as such at the request of the Corporation, and the estate of each such person, shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding in which such person or estate is a party by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation, or of any corporation which he served as such at the request of the Corporation, or in connection with any appeal therein, except in relation to matters as to which it shall be finally adjudged in such action, suit or proceeding that such officer or director is liable for negligence or misconduct in the performance of his duties. The right of indemnification shall also include indemnification for the reasonable cost of a settlement made with a view to avoiding costs of litigation. The determination of the amount payable by way of indemnification shall be made either by the court in such litigation or by the vote of a majority of the entire Board of Directors but the director or directors to be indemnified shall not vote thereon. Such rights of indemnification shall not be deemed exclusive of any other rights or remedies which such director or officers may have independent hereof. In the event that the determination of an amount payable by way of indemnity is by the Board of Directors or in any manner otherwise than pursuant to court order, the corporation shall, within eighteen months from the date of payment, mail to its stockholders of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amounts of the payments, and the final disposition of the litigation. The Corporation shall have the right to intervene in and defend all such actions, suits or proceedings brought against any person or former director or officers of the Corporation."
4. The number of directors previously authorized is three (3), and the number of directors is to be increased to not less than three (3) nor more than seven (7).
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 30th day of August, 1946.
3rd Amendment
CERTIFICATE PROVOIDING FOR AN INCREASE IN THE AMOUNT OF
CAPITAL STOCK, FOR CHANGING PREVIOUSLY AUTHORIZED
SHARES INTO A DIFFERENT NUMBER OF SHARES AND
CLASS OF STOCK AND FOR ELIMINATION OF PREFERRED
STOCK
-of-
ESPEY MANUFACTURING COMPANY, INC.
(pursuant to Section 36 of the Stock Corporation Law.)
The undersigned, officers of Espey Manufacturing Company, Inc., do hereby certify as follows:
1. The name of the Corporation is ESPEY MANUFACTURING COMPANY, INC.
2. The Certificate of Incorporation was filed in the office of the Secretary of State on July 9, 1928; and a Certificate of Amendment increasing the capital stock was filed in the Office of Secretary of State on February 26, 1940.
3. The total number of shares which the Corporation is presently authorized to issue is two hundred (200) shares of common Stock, no par value, and five hundred (500) shares six (6%) percent preferred stock of the par value of One hundred ($100.) Dollars each.
4. The number of shares of each class of stock previously issued and outstanding is; 200 shares of common stock, no par value
5. The designations, preferences, privileges and voting powers of of the shares of each class, and the restrictions and qualifications thereof are as follows:
a) The two hundred (200) shares of common stock, no par value, have complete voting rights.
b) The five hundred (500) shares 6% preferred stock of par value of One hundred ($100) Dollars each, are preferred over the authorized Common stock as to dividend only, non-cumulative, at the rate of six (6%) per anum and said shares have no voting power. The common stock and preferred stock share equally in the assets of the Corporation.
6. The statements respecting the capital of the Corporation contained in its certificate of incorporation are the following:
"The capital of the corporation shall be at least equal to the sum of the aggregate par value of all issued shares having par value, plus the aggregate amount of consideration received from the issuance of shares without par value, plus such amounts as from time to time by resolution of the Board of Directors may be transferred thereto."
7. The amount of capital stock which the Corporation shall have hereafter is three hundred thousand ($300,000.) Dollars, of common stock.
8. The total number of shares of common stock which the Corporation may henceforth have is three hundred thousand (300,000) shares, all of which are to have a par value of One ($1.) Dollar each.
9. a) It is proposed to change all the previously authorized common stock without par value, issued and unissued, into shares of new common stock with a par value of One ($1.) Dollar each, on the basis of five hundred (500) shares of new common stock for each share of previously authorized common stock.
b) It is proposed to eliminate all the previously authorized six (6%) percent preferred stock with a par value of One hundred ($100.) Dollars each.
10. No holder of any shares of this Corporation shall have a preemptive or other right to purchase, subscribe for or take any part of any stock of this Corporation issued, optioned or sold by it whether the stock issued, optioned or sold be stock authorized by the Certificate of Incorporation or any amended certificate heretofore or hereafter duly filed. Any part of the capital stock of this corporation authorized by this certificate, or any amended certificate, may at any time be issued, optioned for sale and sold or disposed
of by this Corporation pursuant to resolution of its Board of Directors to such persons and upon such terms and conditions as may, to such Board seem proper and advisable without first offering the said stock or any part thereof to existing stockholders.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 30th day of August, 1946.
4th Amendment
CERTIFICATE PROVIDING FOR A CHANGE OF PART OF PREVIOUSLY AUTHORIZED STOCK INTO SAME NUMBER OF SHARES OF DIFFERENT CLASS
ESPEY MANUFACTURING COMPANY, INC.
Pursuant to Section 36 of the Stock Corporation Law
The undersigned, officers of Espey Manufacturing Company, Inc. do hereby certify as follows:
1. The name of the corporation is ESPEY MANUFACTURING COMPANY, INC.
2. The certificate of Incorporation was filed in the office of the Secretary of State on July 9, 1928; and Certificates of Amendment increasing the capital stock were filed in the office of the Secretary of State on February 26, 1940 and October 7, 1946 respectively.
3. The total amount previously authorized capital stock is $300,000, consisting of 300,000 shares of common stock having a par value of One ($1) Dollar per share, of which 137,721 shares are issued and outstanding.
4. The above shares already authorized are not classified.
5. The total amount of capital stock, which the corporation is hereafter to have is $300,000.
6. The total number of shares, which the corporation may henceforth have, is 300,000 shares, all of which shall be common, par value One ($1) Dollar, of which 47,721 shares shall be Class A Stock and 252,279 shares shall be Common Stock without reclassification.
7. It is proposed to change 47,721 of previously authorized shares of Common Stock, par value One ($1) Dollar, issued, into Class A Stock of One ($1) Dollar Par value, on the basis of share for share.
8. The designations, preferences, privileges and voting powers of the shares of each class and the restrictions and qualifications thereof are as follows:
The holders of Class A Stock shall be entitled to receive, when and as declared by the Board of Directors of the corporation, dividends at the rate of 30 cents per year before any dividends are payable to holders of Common Stock; such dividends shall be noncumulative, shall be payable at such times in each year as appears advisable in the discretion of the Board of Directors and shall accrue only after date of declaration. In the event the Board of Directors shall declare in any year a dividend in excess of 30 cents per share, then the holders of Class A Stock and Common Stock shall share equally on a pro rata basis share for share in the amount in excess of 30 cents per share.
The holders of Class A Stock and of Common Stock shall have the same voting rights share for share, shall share pro rata share for share in the corporate assets in any dissolution, liquidation or winding up of the corporation and shall in all respects other than priority per share of Class A Stock to 30 cents in dividends, have equal rights share for share.
IN WITNESS WHEREOF, the undersigned have signed this certificate this 30th day of December, 1947.
5th Amendment
CERTIFICATE PROVIDING FOR A CHANGE OF CLASS A STOCK, PREVIOUSLY AUTORIZED, INTO THE SAME NUMBER OF SHARES OF COMMON STOCK
We, Nathan Pinsley and Morris Pinsley, being respectively the president of Espey Manufacturing Company, Inc., and the secretary thereof, certify:
1. The name of the Corporation is Espey Manufacturing Company, Inc.
2. The certificate of incorporation was filed in the office of the Secretary of State on July 9, 1928.
3. The certificate of incorporation as amended by the certificate for a change of part of stock into stock of a different class, heretofore filed in the Office of the Secretary of State on January 2, 1948, provides that the capital stock is $300,000 consisting of 300,000 shares having a par value of $1 per share, of which 47, 721 shares are Class A Stock and 252, 279 shares are common stock.
4. The number of shares of Class A Stock issued and outstanding is, 44,296, and the number of shares of common shares of common stock issued and outstanding is 93, 425 shares.
5. Pursuant to authorization in subdivision "2" of Section 35 of the Stock Corporation Law, the certificate of incorporation as amended, is hereby amended, is hereby amended as follows:
(a) The previously authorized 47,721 shares of Class A Stock of the par value of $1 each, are hereby changed, and this Corporation shall have in place thereof 47,721 Common shares of the par value of $1 each.
(b) The amount of the capital stock of the Corporation is unchanged.
(c) The total number of shares which the Corporation shall hereafter have is 300,000 shares, all of which shall be Common stock of the par value of $1 each.
6. The 47,721 shares of previously authorized Class A Stock, par value One ($1.00) Dollar, shall be changed into Common stock of One ($1.00) par value per share, on the basis of share for share.
7. Paragraph "8" of the certificate of amendment filed on the Office of the Secretary of State on January 2, 1948, amending the Certificate of Incorporation, and relating to the designations, preferences, privileges and voting powers, is hereby eliminated.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 19th day of September, 1950.
Nathan Pinsley
--------------
Nathan Pinsley, President
Morris Pinsley
--------------
Morris Pinsley, Secretary
43
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6th Amendment
CERTIFICATE OF AMENDMENT
Of
CERTIFICATE OF INCORPORATION
Of
ESPEY MANUFACTURING COMPANY INC.
(Pursuant to section 36 of the Stock Corporation Law)
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We, Nathan Pinsley and Sol Pinsley, being respectively the President of ESPEY MANUFACTURING COMPANY, INC. and the Secretary thereof, certify:
1. The name of the Corporation is ESPEY MANUFACTURING COMPANY INC.
2. The Certificate of Incorporation was filed in the Office of the Secretary of State on July 9, 1928.
3. The Certificate of Incorporation as amended by the Certificate filed in the Office of the Secretary of State on September 21, 1950, provides that the capital stock is $300,000, consisting of 300,000 shares of common stock having a par value of $1 each.
4. The number of shares of common stock issued and outstanding is 155,721.
5. The Certificate of Incorporation as amended is hereby amended to change the name of the Corporation pursuant to section forty of the General Corporation Law, and to increase the capital stock and the number of shares, pursuant to authorization in subdivision 2 of Section 35 of the Stock Corporation Law, as follows:
a) The name of the Corporation shall be ESPEY MFG. & ELECTRONICS
CORP.
b) The amount of the capital stock which this Corporation shall have is $750,000. The total number of shares which the Corporation shall have is 750,000 shares of common stock with a par value of $1 each.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 21st day of March, 1960.
7th Amendment
CERTIFICATE OF CHANGE
AS TO
ESPEY MFG. & ELECTRONICS CORP.
Pursuant to Section 805-A of the Business Corporation Law.
The undersigned, being the President and Secretary of ESPEY MFG. & ELECTRONICS CORP., do certify and set forth:
1. The name of the Corporation is ESPEY MFG. & ELECTRONICS CORP. The Corporation was formed under the name of ESPEY MANUFACTURING COMPANY, INC.
2. The Certificate of Incorporation of ESPEY MFG. & ELECTRONICS CORP. was filed on July 9, 1928.
3. The Certificate of Incorporation of ESPEY MFG. ELECTRONICS CORP. is hereby changed, pursuant to the Business Corporation Law 803 (b) (1) to effect a change in the location of the office of the corporation, and pursuant to the Business Corporation Law 803 (b) (2) to change the post office address to which the Secretary Of State shall mail a copy of any process against the Corporation served upon him.
4. Paragraph "FIFTH" of the Certificate of Incorporation is hereby changed as follows:
FIFTH: The office of the Corporation is to be located in Great Neck, County of Nassau, and State of New York.
5. The Certificate of Designation portion (filed May15, 1956) of the Certificate of Incorporation, is hereby changed as follows:
That the address to which the Secretary of State shall mail a copy of any process against the Corporation which may be served upon him pursuant to law is c/o Morris Pinsley, Esq. 200 West 57th Street, New York, New York.
6. The manner in which these changes to the Certificate of Incorporation of ESPEY MFG & ELECTRONICS CORP. were authorized was by resolutions adopted by unanimous vote of the Board of Directors on October 28,1966.
IN WITNESS WHEREOF, the undersigned have executed and signed this certificate this 12th day of November 1966.
Nathan Pinsley Nathan Pinsley, President
Sol Pinsley Sol Pinsley, Secretary
8th Amendment
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ESPEY MFG. & ELECTRONICS CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned President and Secretary of Espey Mfg. & Electronics Corp., pursuant to Section 805 of the Business Corporation Law of the State of New York, do hereby certify as follows:
FIRST: The name of the corporation is Espey Mfg. & Electronics Corp.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on July 9, 1928 under the name ESPEY MANUFACTURING
COMPANY, INC.
THIRD: The amendment of the certificate of incorporation as heretofore amended effected by this certificate of amendment is to increase the authorized number of shares which the corporation is authorized to issue from 750,000 shares of common stock to 2,250,000 shares of common stock and to reduce the par value per share from $1 to $.33 1/3. There is no change in the amount of the capital stock.
FOURTH: To accomplish the foregoing change, the provision of the certificate of incorporation relating to the capital stock of the corporation is amended to read as follows:
"The amount of the capital stock which this Corporation shall have is $750,000. The total number of shares which the Corporation is authorized to issue is 2,250,000 shares of common stock with a par value of $.33 1/3 each."
FIFTH: The foregoing amendment to the certificate of incorporation was authorized by the majority vote of the shareholders entitled to vote at the Annual Meeting of Shareholders held on December 2, 1983.
IN WITNESS WHEREOF, we hereunto sign our name and affirm that the statements made herein are true under the penalty of perjury this 2nd day of December, 1983.
9th Amendment
CERTIFICATE OF CHANGE
OF
ESPEY MFG. & ELECTRONICS CORP.
UNDER SECTION 805-A OF THE BUSINESS CORPORATION LAW
The undersigned, being the President and the Secretary of Espey Mfg. & Electronics Corp., do hereby certify and set forth:
1. The name of the corporation is Espey Mfg. & Electronics Corp. The name under which the corporation was formed is Espey Manufacturing Company, Inc.
2. The certificate of incorporation of the corporation was filed by the Department Of State on July 9, 1928.
3. The certificate of incorporation of Espey Mfg. & Electronics Corp. is hereby changed to effect a change in the location of the office of the corporation pursuant to 801(b) (3) of the Business Corporation Law.
4. Paragraph "FIFTH" of the certificate of incorporation which sets forth the location of the office of the corporation is hereby changed as follows:
FIFTH: The office of the corporation is to be located is Saratoga Springs, State of New York, Saratoga County.
5. The manner in which the foregoing change to the certificate of Incorporation of Espey Mfg. & Electronics Corp. was authorized was by resolution adopted by majority vote of the Board of Directors.
6. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is hereby changed, Pursuant to 803 (b) (2) of the Business Corporation Law, as follows:
Espey Mfg. & Electronics Corp.
Ballston and Congress Avenues
Saratoga Springs, New York 12866
7. The manner in which the foregoing change of the post office address to which the Secretary of State shall mail a copy of any process against the Corporation served upon his was authorized was by majority vote of the board of directors.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalty of perjury this 16th day Of July, 1984.
10th Amendment
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ESPEY MFG. & ELECTRONICS CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned President and Secretary of Espey Mfg. & Electronics Corp., pursuant to Section 805 of the Business Corporation Law of the State of New York, do hereby certify as follows:
FIRST: The name of the corporation is Espey Mfg. & Electronics Corp.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on July 9, 1928 under the name ESPEY MANUFACTURING
COMPANY, INC.
THIRD: The amendment of the certificate of incorporation as heretofore amended effected by this certificate of amendment is to eliminate the personal liability of directors to the corporation or its shareholders for damages for any breach of duty in such capacity to the fullest extent permitted by section four hundred and two, paragraph (b) of the business corporation law, as added by Chapter 367 of the Laws of 1987.
FOURTH: To accomplish the foregoing amendment, there is added to the certificate of incorporation a new article THIRTEENTH reading as follows:
"THIRTEENTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provisions of paragraph (b) of Section 402 of the Business Corporation Law of the State of New York, as the same may be amended and supplemented."
FIFTH: The foregoing amendment to the certificate of Incorporation was authorized by the majority vote of the shareholders entitled to vote at the Annual Meeting of Shareholders held on December 11, 1987.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalty of perjury the 11th day of December, 1987.
11th Amendment
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ESPEY MFG. & ELECTRONICS CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned President and Secretary of Espey Mfg. & Electronics Corp., pursuant to Section 805 of the Business Corporation Law of the State of New York, do hereby certify as follows:
FIRST: The name of the corporation is Espey Mfg. & Electronics Corp.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on July 9, 1928 under the name ESPEY MANUFACTURING
COMPANY, INC.
THIRD: The amendment of the certificate of incorporation, as heretofore amended, effected by this certificate of amendment is to increase the number of directors which shall constitute the whole Board of Directors from seven to nine.
FOURTH: To accomplish the foregoing amendment, the first sentence of Article SEVENTH of the certificate of incorporation, as heretofore amended, is amended to read as follows:
"The number of directors shall be not less than three nor more than nine."
FIFTH: The foregoing amendment to the certificate of incorporation was authorized by the Board of Directors at a meeting duly held on September 18, 1992 and was followed by the authorization of such amendment by a majority vote of the shareholders entitled to vote at the annual meeting of shareholders held on December 11, 1992.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalty of perjury this 11th day of December, 1992.
12th Amendment
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ESPEY MFG. & ELECTRONICS CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned President and Secretary of Espey Mfg. & Electronics Corp., pursuant to Section 805 of the Business Corporation Law of the State of New York, do hereby certify as follows:
FIRST: The name of the corporation is Espey Mfg. & Electronics Corp.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on July 9, 1928 under the name ESPEY MANUFACTURING
COMPANY, INC.
THIRD: The amendment of the certificate of incorporation, as heretofore amended, effected by this certificate of amendment is to provide that nine is the number of Directors which shall constitute the entire Board of Directors and to divide the Board into three classes of three directors each, with the term of office of the respective Class A, B and C directors expiring on the first, second and third annual meetings following the election of the first classified Board, and after the election of the first classified Board, directors of each class are to be elected for a term of three years.
FOURTH: To accomplish the foregoing amendment, the first sentence of Article SEVENTH of the certificate of incorporation, as heretofore amended, is amended to read as follows:
"The entire Board of Directors shall consist of nine persons. The directors shall be divided into three classes, each class to consist of three directors. The term of office of the first class (Class A) shall expire at the first annual meeting of the Company after their election, the term of office of the second class (Class B) shall expire at the second succeeding annual meeting, and the third class (Class C) at the third succeeding annual meeting. At each annual meeting after the election of the first classified Board, directors shall be elected for a term of three years to replace those whose terms shall expire."
FIFTH: The foregoing amendment to the certificate of incorporation was authorized by the Board of Directors at a meeting duly held on October 26, 1993 and was followed by the authorization of such amendment by a majority vote of the shareholders entitled to vote at the annual meeting of shareholders held on December 10, 1993.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements made herein are true under the penalty of perjury this 10th day of December, 1993.
13th Amendment
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION OF
ESPEY MFG. & ELECTRONICS CORP.
Under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the Corporation is: Espey Mfg. & Electronics Corp. (the "Corporation"). The name under which the Corporation was formed in "Espey Manufacturing Company, Inc."
(2) The Certificate of Incorporation (as amended, the "Certificate of Incorporation") was filed by the Department of State on July 9, 1928.
(3) The Certificate of Incorporation is hereby changed to effect a change in the aggregate number of shares of common stock which the Corporation shall have the authority to issue from 2,250,000 shares to 10,000,000 shares.
(4) Article THIRD of the Certificate of Incorporation, as amended by Certificate of Amendment dated December 2, 1983, now provides as follows:
"THIRD: The amount of capital stock which this Corporation shall have is $750,000. The total number of shares which the Corporation is authorized to issue is 2,250,000 shares of common stock with a par value of $.33 1/3 each."
(5) Paragraph "THIRD" of the Certificate of Incorporation of the Corporation is hereby amended to read as follows:
"THIRD" The amount of capital stock which this Corporation shall have is $750,000. The aggregate number of shares which the Corporation shall have the authority to issue is 10,000,000 shares of common stock with a par value of $.33 1/3 each.
(6) The number, par value and class of issued shares is not changed by this amendment.
(7) The number of unissued shares of stock is increased by 7,750,000. The class and par value of the total number of unissued shares are not changed by this amendment.
(8) This amendment to the Certificate of Incorporation was authorized by unanimous vote of the board of directors and was subsequently authorized by the majority vote of the shareholders entitled to vote.
IN WITNESS WHEREOF, we have hereunto subscribed this Certificate of Amendment this 15th day of March, 2000.
Peggy A. Murphy Howard Pinsley
--------------- --------------
Peggy A. Murphy, Secretary Howard Pinsley, President
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EXHIBIT 11.1
ESPEY MFG. & ELECTRONICS CORP.
Computation of per Share Net Income as
Disclosed in Item 14 of Form 10-K
Five years ended June 30, 2004
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- ----------
Computation of net income
per share:
BASIC
Weighted average
number of primary
shares outstanding .......... 1,013,663 1,025,200 1,030,556 1,031,403 1,045,235
=========== =========== =========== =========== ==========
Net income ........................... $ 960,826 $ 964,700 $ 545,754 $ 1,033,069 $ 782,943
=========== =========== =========== =========== ==========
Per share-basic ...................... $ .95 $ .94 $ .53 $ 1.00 $ .75
=========== =========== =========== =========== ==========
DILUTED
Weighted average
number of primary
shares outstanding .......... 1,022,344 1,027,686 1,034,904 1,033,989 1,045,520
=========== =========== =========== =========== ==========
Net effect of
dilutive stock
options based on
treasury stock
method ...................... 8,681 2,486 4,348 2,586 285
=========== =========== =========== =========== ==========
Net income ........................... $ 960,826 $ 964,700 $ 545,754 $ 1,033,069 $ 782,943
=========== =========== =========== =========== ==========
Per share-diluted .................... $ .94 $ .94 $ .53 $ 1.00 $ .75
=========== =========== =========== =========== ==========
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Exhibit 31.1 Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Howard Pinsley, certify that:
1. I have reviewed this annual report on Form 10-K of Espey Mfg. & Electronics Corp (the "registrant").
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within the entity, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 14, 2004
/s/ Howard Pinsley
----------------------------
Howard Pinsley
President and
Chief Executive Officer
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Exhibit 31.2
Certification of the Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David O'Neil, certify that:
1. I have reviewed this annual report on Form 10-K of Espey Mfg. & Electronics Corp (the "registrant").
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within the entity, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 14, 2004
/s/ David A. O'Neil
-----------------------------------------
David A. O'Neil
Treasurer and Principal Financial Officer
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Exhibit 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with this annual report of Espey Mfg. & Electronics Corp. (the "Company") on Form 10-K for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "report"), I, Howard Pinsley, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 14, 2004
/s/ Howard Pinsley
----------------------------------
Howard Pinsley
President and
Chief Executive Officer
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Exhibit 32.2
Certification of the Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
In connection with this annual report of Espey Mfg. & Electronics Corp. (the
"Company") on Form 10-K for the period ended June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "report"), I, David
A. O'Neil, Principal Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:
1. The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 14, 2004
/s/ David A. O'Neil
-----------------------------------------
David A. O'Neil
Treasurer and Principal Financial Officer
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