ESP 10-Q
Espey Mfg & Electronics Corp (ESP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
For the quarterly period
ended
OR
Commission File Number
(Exact name of registrant as specified in its charter)
| Trading Symbol | ||
| (State of incorporation) | ESP | (I.R.S. Employer's Identification No.) |
(Address of principal executive offices)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:
| ☐ Large accelerated filer | ☐ |
| ☐ Accelerated filer | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
At May 8, 2025, there were
ESPEY MFG. & ELECTRONICS CORP.
Quarterly Report on Form 10-Q
I N D E X
PART I: FINANCIAL INFORMATION
ESPEY MFG. & ELECTRONICS CORP.
Balance Sheets
March 31, 2025 (Unaudited) and June 30, 2024
| March 31, 2025 | June 30, 2024 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment securities | ||||||||
| Trade accounts receivable, less allowance for credit losses of $ | ||||||||
| Inventories: | ||||||||
| Raw materials | ||||||||
| Work-in-process | ||||||||
| Costs related to contracts in process | ||||||||
| Total inventories | ||||||||
| Net deferred tax assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses: | ||||||||
| Salaries and wages | ||||||||
| Vacation | ||||||||
| ESOP payable | ||||||||
| Other | ||||||||
| Payroll and other taxes withheld | ||||||||
| Contract liabilities | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 5) | ||||||||
| Common stock, par value $.33-1/3 per share | ||||||||
| Capital in excess of par value | ||||||||
| Accumulated other comprehensive gain | ||||||||
| Retained earnings | ||||||||
| Less: Unearned ESOP shares | ( | ) | ( | ) | ||||
| Cost of | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
1
ESPEY MFG. & ELECTRONICS CORP.
Statements of Comprehensive Income (Unaudited)
Three and Nine Months Ended March 31, 2025 and 2024
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other | ||||||||||||||||
| Total other income | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income, net of tax: | ||||||||||||||||
| Unrealized gain on investment securities | ||||||||||||||||
| Total comprehensive income | $ | $ | $ | $ | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Dividends per share: | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of the financial statements.
2
Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity (Unaudited)
Three Months Ended March 31, 2025
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital in | Other | Unearned | Total | |||||||||||||||||||||||||||||||||
| Outstanding | Common | Excess of | Comprehensive | Retained | Treasury | Treasury | ESOP | Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Par Value | Gain | Earnings | Shares | Amount | Shares | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||
| Net income | $ | |||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax of $ | ||||||||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Dividends paid on common stock $ | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
3
Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity (Unaudited)
Nine Months Ended March 31, 2025
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital in | Other | Unearned | Total | |||||||||||||||||||||||||||||||||
| Outstanding | Common | Excess of | Comprehensive | Retained | Treasury | Treasury | ESOP | Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Par Value | Gain | Earnings | Shares | Amount | Shares | Equity | ||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||
| Other comprehensive gain, net of tax of $ | ||||||||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Dividends paid on common stock $ | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
4
Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity (Unaudited)
Three Months Ended March 31, 2024
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital in | Other | Unearned | Total | |||||||||||||||||||||||||||||||||
| Outstanding | Common | Excess of | Comprehensive | Retained | Treasury | Treasury | ESOP | Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Par Value | Gain | Earnings | Shares | Amount | Shares | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax of $ | ||||||||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Dividends paid on common stock $ | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
5
Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity (Unaudited)
Nine Months Ended March 31, 2024
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital in | Other | Unearned | Total | |||||||||||||||||||||||||||||||||
| Outstanding | Common | Excess of | Comprehensive | Retained | Treasury | Treasury | ESOP | Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Par Value | (Loss) Gain | Earnings | Shares | Amount | Shares | Equity | ||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax of $ | ||||||||||||||||||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Dividends paid on common stock $ | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
6
ESPEY MFG. & ELECTRONICS CORP.
Statements of Cash Flows (Unaudited)
Nine Months Ended March 31, 2025 and 2024
| March 31, 2025 | March 31, 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Depreciation | ||||||||
| ESOP compensation expense | ||||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| (Gain) Loss on disposal of property, plant and equipment | ||||||||
| Changes in assets and liabilities: | ||||||||
| Decrease in trade accounts receivable | ||||||||
| Decrease in income taxes receivable | ||||||||
| Decrease in inventories | ||||||||
| Increase in prepaid expenses and other current assets | ( | ) | ||||||
| Decrease in accounts payable | ( | ) | ||||||
| Decrease in accrued salaries and wages | ( | ) | ( | ) | ||||
| Increase in vacation accrual | ( | ) | ||||||
| Increase in ESOP payable | ( | ) | ( | ) | ||||
| Increase in other accrued expenses | ||||||||
| Increase in payroll and other taxes withheld | ||||||||
| Increase in contract liabilities | ( | ) | ||||||
| Increase in income taxes payable | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows from Investing Activities: | ||||||||
| Additions to property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from grant award | ||||||||
| Proceeds from sale of property, plant and equipment | ||||||||
| Purchase of investment securities | ( | ) | ( | ) | ||||
| Proceeds from sale/maturity of investment securities | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Dividends on common stock | ( | ) | ( | ) | ||||
| Proceeds from exercise of stock options | ||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental Schedule of Cash Flow Information: | ||||||||
| Income taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
7
ESPEY MFG. & ELECTRONICS CORP.
Notes to Financial Statements (Unaudited)
Note 1. Basis of Presentation
In the opinion of management the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for such periods. The results for any interim period are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventories, income taxes, and stock-based compensation. Specific to inventories, including work-in-process and contracts in process, management evaluates, quarterly, those estimates used in determining the cost to complete for each contract on Espey Mfg. & Electronics Corp.’s (the “Company”) sales backlog. The change in estimates may affect the reported amount of inventories and gross profit in the current or a future period and could result in the Company recording a loss contingency when a loss is determined to be probable and reasonably estimated. Management bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. These financial statements should be read in conjunction with the Company's most recent audited financial statements included in its report on Form 10-K for the year ended June 30, 2024. Certain reclassifications may have been made to the prior year financial statements to conform to the current year presentation.
Note 2. Investment Securities
FASB Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| ◾ | Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
| ◾ | Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
| ◾ | Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
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 March 31, 2025 and June 30, 2024 because of the immediate or short-term maturity of these financial instruments.
Investment securities at March 31, 2025 and June
30, 2024 consisted of certificates of deposit, municipal bonds and U.S. Treasury bills. The Company classifies investment securities as
available-for-sale which have been determined to be level 1 assets.
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| March 31, 2025 | ||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||
| Municipal bonds | ( | ) | ||||||||||||||
| U.S. Treasury bills | ||||||||||||||||
| Total investment securities | $ | $ | $ | ( | ) | $ | ||||||||||
| June 30, 2024 | ||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||
| Municipal bonds | ( | ) | ||||||||||||||
| U.S. Treasury bills | ||||||||||||||||
| Total investment securities | $ | $ | $ | ( | ) | $ | ||||||||||
8
The portfolio is diversified and highly liquid and primarily consists of investment grade fixed income instruments. At March 31, 2025, the Company did not have any investments in individual securities that have been in a continuous loss position considered to be other than temporary.
As of March 31, 2025 and June 30, 2024, the remaining contractual maturities of available-for-sale debt securities were as follows:
| Years to Maturity | ||||||||||||
| Less than | One to | |||||||||||
| One Year | Five Years | Total | ||||||||||
| March 31, 2025 | ||||||||||||
| Available-for-sale | $ | $ | $ | |||||||||
| June 30, 2024 | ||||||||||||
| Available-for-sale | $ | $ | $ | |||||||||
Note 3. Net Income per Share
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 income of the
Company. The computation of diluted net income per share excluded options to purchase
The following table sets forth the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for continuing operations for the three month periods ended March 31:
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net income | $ | $ | ||||||
| Denominator: | ||||||||
| Basic EPS: | ||||||||
| Common shares outstanding, beginning of period | ||||||||
| Unearned ESOP shares | ( |
) | ( |
) | ||||
| Weighted average common shares issued during the period | ||||||||
| Weighted average ESOP shares earned during the period | ||||||||
| Denominator for basic earnings per common shares – | ||||||||
| Weighted average common shares | ||||||||
| Diluted EPS: | ||||||||
| Common shares outstanding, beginning of period | ||||||||
| Unearned ESOP shares | ( |
) | ( |
) | ||||
| Weighted average common shares issued during the period | ||||||||
| Weighted average ESOP shares earned during the period | ||||||||
| Weighted average dilutive effect of stock options | ||||||||
| Denominator for diluted earnings per common shares – | ||||||||
| Weighted average common shares | ||||||||
9
The following table sets forth the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for continuing operations for the nine month periods ended March 31:
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net income | $ | $ | ||||||
| Denominator: | ||||||||
| Basic EPS: | ||||||||
| Common shares outstanding, beginning of period | ||||||||
| Unearned ESOP shares | ( | ) | ( | ) | ||||
| Weighted average common shares issued during the period | ||||||||
| Weighted average ESOP shares earned during the period | ||||||||
| Denominator for basic earnings per common shares – | ||||||||
| Weighted average common shares | ||||||||
| Diluted EPS: | ||||||||
| Common shares outstanding, beginning of period | ||||||||
| Unearned ESOP shares | ( | ) | ( | ) | ||||
| Weighted average common shares issued during the period | ||||||||
| Weighted average ESOP shares earned during the period | ||||||||
| Weighted average dilutive effect of stock options | ||||||||
| Denominator for diluted earnings per common shares – | ||||||||
| Weighted average common shares | ||||||||
Note 4. Stock Based Compensation
The Company follows ASC 718 “Compensation - Stock Compensation” in establishing standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans.
Total stock-based compensation expense recognized
in the statements of comprehensive income for the three-month periods ended March 31, 2025 and 2024 was $
As of March 31, 2025, there was $
10
The Company has one employee stock option plan
under which options or stock awards may be granted, the 2017 Stock Option and Restricted Stock Plan (the "2017 Plan"). The Board
of Directors may grant options to acquire shares of common stock to employees and non-employee directors of the Company at the fair market
value of the common stock on the date of grant. The maximum aggregate number of shares of Common Stock subject to options or awards to
non-employee directors is
ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model, which incorporates various assumptions including those for dividend yield, volatility, expected life and interest rates.
The table below outlines the weighted average assumptions that the Company used to calculate the fair value of each option award for the nine months ended March 31, 2025 and 2024.
| March 31, 2025 | March 31, 2024 | |||||||
| Dividend yield | ||||||||
| Company’s expected volatility | ||||||||
| Risk-free interest rate | ||||||||
| Expected term | ||||||||
| Weighted average fair value per share of options granted during the period | $ | $ | ||||||
The Company declared and paid regular cash dividends
of $
The following table summarizes stock option activity during the nine months ended March 31, 2025:
| Employee Stock Option Plans | ||||||||||||||||
| Weighted | ||||||||||||||||
| Number of | Weighted | Average | ||||||||||||||
| Shares | Average | Remaining | Aggregate | |||||||||||||
| Subject | Exercise | Contractual | Intrinsic | |||||||||||||
| to Option | Price | Term | Value | |||||||||||||
| Balance at July 1, 2024 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Forfeited or expired | ( | ) | $ | |||||||||||||
| Outstanding at March 31, 2025 | $ | $ | ||||||||||||||
| Vested or expected to vest at March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2025 | $ | $ | ||||||||||||||
The aggregate intrinsic value in the table above
represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock as reported
on the NYSE American on March 31, 2025 and the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders if all option holders had exercised their options on March 31, 2025. This amount changes based on the fair
market value of the Company’s common stock. The intrinsic value of options exercised during the nine months ended March 31, 2025
and 2024 was $
11
The following table summarizes changes in non-vested stock options during the nine months ended March 31, 2025:
| Weighted Number | Average | |||||||
| of Shares | Grant Date | |||||||
| Subject | Fair Value | |||||||
| to Option | (per Option) | |||||||
| Non-vested at July 1, 2024 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited or expired | ( | ) | $ | |||||
| Non-vested at March 31, 2025 | $ | |||||||
Note 5. Commitments and Contingencies
The Company from time to time, enters 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 to
We are party to various litigation matters and claims arising from time to time in the ordinary course of business. There are no pending litigation matters or claims which we believe will have a material adverse effect on our business, financial condition, results of operations or cash flows.
The Company was awarded $
In June 2024, the Company notified the third-party
administrator of the IBEW Local 1799 Pension Fund of its intention to withdraw permanently from the plan. As required by the Employee
Retirement Income Security Act “ERISA”, the Company is subject to a termination withdrawal liability. The recorded termination
withdrawal obligation at March 31, 2025 and June 30, 2024 totaled $
In December 2024, the Company was awarded $
12
Note 6. Revenue
The Company follows ASC 606 “Revenue from Contracts with Customers” to determine the recognition of revenue. This standard requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues. Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services.
Significant judgment is required in determining the satisfaction of performance obligations. Revenues from our performance obligations are satisfied over time using the output method which considers the appraisal of results achieved and milestones reached or units delivered based on contractual shipment terms, typically shipping point. Revenue is recognized when, or as, the customer takes control of the product or services. The output method best depicts the transfer of control to the customer as the output method represents work completed. Control is typically transferred to the customer at the shipping point, as the Company has a present right to payment, the customer has legal title to the asset, the customer has the significant risks and rewards of ownership of the asset, and in most instances the customer has accepted the asset.
Total revenue recognized for the three and nine
months ended March 31, 2025 based on units delivered was $
The Company offers a standard one-year product warranty. Product warranties offered by the Company are classified as assurance-type warranties, which means the warranty only guarantees that the good or service functions as promised. Based on this, the provided warranty is not considered to be a distinct performance obligation. The impact of variable consideration has been considered but none identified which would be required to be allocated to the transaction price as of March 31, 2025. Our payment terms are generally 30-60 days.
Contract liabilities were $
The Company’s backlog at March 31, 2025
totaling approximately $
Note 7. Recently Issued Accounting Standards
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Additionally, the Company would be required to disclose income taxes paid (net of refunds received) disaggregated by individual jurisdictions, when the taxes paid in an individual jurisdiction is equal to or greater than five percent of the Company’s total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective for the annual period beginning July 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023-09 on its financial statements.
13
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. The adoption of ASU 2023-07 is not expected to have a significant impact on the financial statements. The Company is currently evaluating the impact of this new guidance on its financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)” with the goal of improving disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in captions that are commonly presented on the face of the financial statements such as cost of sales, SG&A, and research and development. These amendments are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and should be applied either prospectively to financial statements issued for reporting periods after the effect date of the updates or retrospectively to any or all prior periods presented in the financial statements. The Company will evaluate the impact of this guidance on its financial statements.
Recent Accounting Pronouncements Adopted
None
Note 8. Employee Stock Ownership Plan
The Company sponsors a leveraged employee
stock ownership plan (the "ESOP") that covers all nonunion employees who work
The ESOP shares as of March 31, 2025 and 2024 were as follows:
| March 31, 2025 | March 31, 2024 | |||||||
| Allocated shares | ||||||||
| Committed-to-be-released shares | ||||||||
| Unreleased shares | ||||||||
| Total shares held by the ESOP | ||||||||
| Fair value of unreleased shares | $ | $ | ||||||
The Company may at times be required to repurchase shares at the ESOP participants’ request at the shares’ fair market value. During the three and nine months ended March 31, 2025 and 2024, the Company did not repurchase shares previously held by the ESOP.
The ESOP allows for eligible participants to
take whole share distributions from the Plan on specific dates in accordance with the provision of the Plan. Share distributions from
the ESOP during the nine months ended March 31, 2025 and 2024 totaled
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Espey Mfg. & Electronics Corp. (“Espey”) is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering reliable products for use in military and severe environment applications. Design, manufacturing, and testing is performed in our in-service 150,000+ square foot facility located at 233 Ballston Ave, Saratoga Springs, New York. Espey is classified as a “smaller reporting company” for purposes of the reporting requirements under the Securities Exchange Act of 1934, as amended. Espey’s common stock is publicly-traded on the NYSE American under the symbol “ESP.”
Espey began operations after incorporation in New York in 1928. We strive to remain competitive as a leader in high power energy conversion and transformer solutions through the design and manufacture of new and improved products by using advanced and “cutting edge” electronics technologies.
Espey is an ISO 9001:2015 and AS9100:2016 certified manufacturer of power conversion, advanced magnetics and build to print specifications provided by the customer “build to print” products for the rugged industrial and military marketplace. Our primary products are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems, and antennas. The applications of these products include AC and DC locomotives, shipboard power, shipboard radar, airborne power, ground-based radar, and ground mobile power.
Espey services include design and development to specification, build to specifications provided by the customer “build to print”, design services, design studies, environmental testing services, metal fabrication, painting services, and development of automatic testing equipment. Espey is vertically integrated, meaning that the Company produces individual components (including inductors), populates printed circuit boards, fabricates metalwork, paints, wires, qualifies, and fully tests items, mechanically, electrically and environmentally, in house. Portions of the manufacturing and testing process are subcontracted to vendors from time to time.
The Company markets its products primarily through its own direct sales organization and through outside sales representatives. Business is solicited from large industrial manufacturers and defense companies, the government of the United States, foreign governments and major foreign electronic equipment companies. Espey is also on the eligible list of contractors with the United States Department of Defense. We pursue opportunities for prime contracts directly with the Department of Defense and are generally automatically solicited by Department of Defense procurement agencies for their needs falling within the major classes of products produced by the Company. Espey contracts with the Federal Government under cage code 20950 as Espey Mfg. & Electronics Corp.
There is competition in all classes of products manufactured by the Company, ranging from divisions of the largest electronic companies, to 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.
Our business is not seasonal. However, the concentration of our business in the rail industry, and in equipment for military applications and industrial applications, and our customer concentrations expose us to on-going associated risks. These risks include, without limitation, fluctuating requirements for power supplies in the rail industry, dependence on appropriations from the United States Government and the governments of foreign nations, program allocations, the potential of governmental termination of orders for convenience, and the general strength of the industry sectors in which our customers transact business.
Future procurement needs supporting the military and the rail industry continue to drive competition. Many of our competitors have invested, and continue to invest, aggressively in upfront product design costs and accept lower profit margins as a strategic means of maintaining existing business and enhancing market share. This continues to put pressure on the pricing of our current products and has lowered our profit margins on some of our new business. In order to compete effectively for new business, in some cases we have invested in upfront design costs, thereby reducing initial profitability as a means of procuring new long-term programs. As part of our strategy, we adjust our pricing in order to achieve a balance which enables us both to retain repeat programs while being more competitive in bidding on new programs.
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Our sales strategy includes identifying and obtaining multiple new engineering design and development contracts in any given fiscal year to ensure optimal utilization of our engineering personnel in addition to securing follow-on production awards for product previously designed in-house, as well as, new or follow-on build to print opportunities. The Company targets those programs and opportunities which will generate future longer-term production tails in ensuing years. From time to time, we accept work associated with engineering design studies. While unlikely to result in near-term follow-on orders, this positions us competitively for future awards and expands our engineering team’s skillset.
The total backlog at March 31, 2025 was $138 million, which included approximately $97.7 million from three significant customers, compared to $84.2 million at March 31, 2024, which included approximately $54.5 million from five significant customers. The Company’s total backlog represents the estimated remaining sales value of work to be performed under firm contracts. It is not uncommon to receive orders which include delivery schedules extending beyond a year from the contract purchase date. Due to this, a customer’s future reorder point may vary. The backlog at March 31, 2025 is fully funded, except for approximately $33.3 million, representing six firm follow-on multi-year orders from a single customer. While there is no guarantee that future budgets and appropriations will provide funding for individual programs, management has included in the unfunded backlog only those programs that it believes are likely to receive funding based on program status and discussions with customers. Contracts are subject to modification, change or cancellation, and the Company accounts for these changes as they are probable and estimable. The Company evaluates the impact of any scope modifications and will adjust reserves to the extent information is known or estimable.
Management expects revenues and earnings per share to be higher in fiscal year 2025 than fiscal year 2024. This expectation is driven primarily by orders already in our backlog that will be shipped in the final quarter of fiscal year 2025 and the change in product mix shipped during fiscal year 2025 as compared to fiscal year 2024.
From time to time, we encounter part obsolescence which requires us to identify an alternate part suitable for use. We continue to work with our customers on strategies to mitigate any adverse impact upon our ability to service their requirements. Factors which may arise after the placement of the customer’s order may cause us to miss projected delivery dates. Inflationary costs are expected to continue, but are not expected to have a significant impact on operating income in fiscal year 2025. Tariffs on steel and aluminum imports from various countries continue to be a concern. Although we are not currently experiencing any significant financial or raw material sourcing issues resulting from the product tariffs, the Company is continuing to monitor the changes in foreign trade policies and the potential impact they could have on our business moving forward.
The labor workforce remains stable. Management continues to closely monitor workforce labor requirements to support our sales backlog and planned delivery schedules. Longer time-to-hire challenges remain for certain positions due to specific skillsets required for those positions. Unemployment rates in the local geographic region trend lower than the national average which has created a competitive recruiting environment. Where possible, the Company continues to offer on-the-job training and when necessary, continues to recruit personnel outside the local region. Combined with supply chain constraints, unforeseen labor disruptions could delay shipments and result in missing our backlog fulfillment projections and recognizing lower than anticipated operating income.
Successful conversion of engineering program backlog into sales is largely dependent on the execution and completion of our engineering design efforts. It is not uncommon to experience technical or scheduling delays which arise from time to time as a result of, among other reasons, design complexity, the availability of personnel with the requisite expertise, and the requirements to obtain customer approval at various milestones. Cost overruns which may arise from technical and scheduling delays and increased raw material costs could negatively impact the timing of the conversion of backlog into sales, or the profitability of such sales. Engineering programs in both the funded and unfunded portions of the current backlog aggregate $12.3 million.
It is presently anticipated that a minimum of $9.6 million of orders comprising the March 31, 2025 backlog will be filled during the fiscal year ending June 30, 2025 subject, however, to the impact of the factors identified above. The minimum of $9.6 million does not include any shipments which may be made against orders subsequently received during the fiscal year ending June 30, 2025.
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As of March 31, 2025, new orders received year to date have exceeded total new orders received in fiscal 2024. New orders received in the first nine months of fiscal year 2025 were $75.1 million as compared to approximately $27.8 million new orders received in the first nine months of fiscal year 2024. Included in new orders received during the current fiscal year are two awards, one for $29.5 million and the other $19.8 million, when fully funded, to provide electric power distribution panels for the U.S. Navy’s Columbia class submarines through calendar year 2032. In addition to the backlog and the new orders already booked in fiscal year 2025, the Company currently has outstanding opportunities representing approximately $151 million in the aggregate as of May 1, 2025 for both repeat and new programs. Outstanding opportunities encompass various new and previously manufactured power supplies, transformers, and subassemblies. We consider the value of those opportunities we believe are likely to be awarded based on factors which include: quotation status, communicated award dates, historical ordering, public information on defense programs and program funding, discussion with customers, and our cost competitiveness. However, there can be no assurance that the Company will acquire any of the outstanding opportunities described above, many of which are subject to allocations of the United States defense spending and factors affecting the defense industry. Also, many solicitations we receive for the procurement of goods and services are associated with competitive bidding processes.
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. Net sales to five significant customers represented 82% of the Company’s total sales for the three-month period ended March 31, 2025. Net sales to four significant customers represented 79% of the Company’s total sales for the three-month period ended March 31, 2024. Net sales to six significant customers represented approximately 75% of the Company’s total sales for the nine-month period ended March 31, 2025. Net sales to four significant customers represented 74% of the Company’s total sales for the nine-month period ended March 31, 2024. A loss of one of these customers or programs related to these customers, or customer requested deferrals of product delivery could significantly impact the Company.
Historically, a small number of customers have accounted for a large percentage of the Company’s total sales in any given fiscal year. Management continues to pursue opportunities with current and new customers with an overall objective of lowering the concentration of sales, mitigating excessive reliance upon a single major product of a particular program and minimizing the impact of the loss of a single significant customer. Given the nature of our business, we believe our existing sales order backlog is fairly diversified in terms of customers and the category of products on order.
Critical Accounting Policies and Estimates
Management believes our most critical accounting policies include revenue recognition and cost estimation on our contracts.
Revenue
The majority of our sales are generated from military contracts from defense companies, the United States Department of Defense, other agencies of the government of the United States and foreign governments, for the design and development and/or manufacture of products. Sales are also generated from industrial manufacturers for similar services. We provide our products and design and development services under fixed-price contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss.
We account for a contract with a customer after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collection of substantially all of the amount to which the entity will be entitled in exchange for the goods or services that will be transferred to the customer is probable. We assess each contract at its inception to determine whether it should be combined with other contracts. When making this determination, we consider factors such as whether two or more contracts were negotiated and executed at or near the same time, or were negotiated with an overall profit objective.
We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. Significant judgment is required in determining performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. The transaction price for each performance obligation is based on the estimated standalone selling price of the product or service underlying each performance obligation. Transaction prices on our contracts subject to the Federal Acquisition Regulations (FAR) are typically based on estimated costs plus a reasonable profit margin.
17
We recognize revenue using the output method based on the appraisal of results achieved and milestones reached or units delivered based on contractual shipment terms, typically shipping point.
Inventory
Raw materials are valued at the lower of cost (average cost) or net realizable value. Balances for slow-moving and obsolete inventory are reviewed on a regular basis by analyzing estimated demand, inventory on hand, sales levels, market conditions, and other information. Inventory balances are reduced based on this analysis.
Inventoried work relating to contracts in process and work-in-process is valued at actual production cost, including factory overhead incurred to date. Contract costs include material, subcontract costs, labor, and an allocation of overhead costs. Work-in-process represents spare units and parts and other inventory items acquired or produced to service units previously sold or to meet anticipated future orders. Provision for losses on contracts is made when the existence of such losses becomes probable and estimable. The provision for losses on contracts is included in other accrued expenses on the Company’s balance sheet. 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.
The estimation of total 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 expected sales and contract costs could be recorded if different assumptions were used, based on changes in circumstances, in the estimation process. When a change in expected sales value or estimated cost is determined, the change is reflected in current period earnings.
Contract Liabilities
Contract liabilities include advance payments and billings in excess of revenue recognized.
Accounts Receivable and Allowance for Credit Losses
The Company extends credit to its customers in the normal course of business and collateral is generally not required for trade receivables. Exposure to credit risk is controlled through the use of credit approvals, credit limits, and monitoring procedures. Accounts receivable are reported net of an allowance for credit losses. The Company estimates the allowance based on its analysis of historical experience, current economic market conditions, performance of specific account reviews, and other factored considerations to include, but not limited to, contracts covered by government funding and the overall health of the industry. Interest is not charged on past due balances. Based on these factors, there was an allowance for credit losses of $3,000 at March 31, 2025 and June 30, 2024. Changes to the allowance for credit losses are charged to expense and reduced by charge-offs, net of recoveries. The opening accounts receivable balance, net of allowance for credit losses of $3,000, at July 1, 2023 and July 1, 2024 were $5,755,282 and $6,635,490, respectively.
Results of Operations
Net sales for the three months ended March 31, 2025 and 2024 were $10,302,719 and $8,254,653, respectively, a 24.8% increase. Net sales for the nine months ended March 31, 2025 and 2024 were $34,354,677 and $27,125,408, respectively, a 26.7% increase. In general, sales fluctuations may occur during comparable fiscal periods as the direct result of sales backlog levels, product mix, and specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules.
For the three months ended March 31, 2025, the increase in sales when compared to the same period last year is primarily due to more deliveries against an overall higher sales backlog and the product mix comprising those shipments. The increase in sales in the current year was mainly related to our power supply and build to print programs. During the current quarter, sales increased on deliveries for some key build to print and power supply contracts. These increases were partially offset by the completion of a power supply program which had sales in the prior comparable period and a decrease in sales relating to two main magnetics programs. These decreases are attributable to the timing of shipments on certain programs.
For the nine months ended March 31, 2025, the increase in sales when compared to the same period last year is primarily related to our power supply and build to print programs. These increases were partially offset by a decrease in sales for two main magnetics programs also attributable to the timing of shipments on certain programs.
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Gross profits for the three months ended March 31, 2025 and 2024 were $2,948,384 and $2,064,191, respectively. Gross profit as a percentage of sales was approximately 28.6% and 25.0%, for the same periods, respectively. Gross profits for the nine months ended March 31, 2025 and 2024 were $8,912,978 and $7,452,143, respectively. Gross profit as a percentage of sales was approximately 25.9% and 27.5% for the same periods, respectively.
Gross profits as a percentage increased for the three months ended March 31, 2025 when compared to the same period last year and decreased for the nine months ended March 31, 2025 when compared to the same period last year. The increase in the gross margin percentage for the three months ended March 31, 2025 is mainly attributable to product mix, increased shipments on various power supply programs with higher than average gross margins, and increased margins on a key build to print program when compared to the same period last year. The gross margin percentage decreased for the nine months ended March 31, 2025 when compared to the same period last year due to the completion of two build to print contracts in the prior comparable period in which there were less sales in the nine months ended March 31, 2025. Further, there was increased spending and decreased margins for two main magnetics programs which management is confident will improve as the contracts progress.
The primary factors in determining the change in gross profit and net income are overall sales levels and product mix. The gross profits on mature products and build to print contracts are typically higher as compared to products which are still in the engineering development stage or in early stages of production. In the case of the latter, the Company can incur what it refers to as “loss contracts,” primarily on engineering design contracts in which the Company invests with the objective of developing future product sales. In any given accounting period the mix of product shipments between higher margin programs, less mature programs, and expenditures associated with loss contracts, has a significant impact on gross profit and net income.
Selling, general and administrative expenses were $1,197,262 for the three months ended March 31, 2025, an increase of $226,042, compared to the three months ended March 31, 2024. Selling, general and administrative expenses were $3,418,206 for the nine months ended March 31, 2025, an increase of $373,615 compared to the nine months ended March 31, 2024. The increase in spending for the three months ended March 31, 2025 as compared to the same period in 2024 relates mainly to the increase in employee compensation costs, outside selling costs related to non-employee sales representatives, an increase in employee recruitment fees, and increases in dues, subscriptions and training costs. The increase in spending for the nine months ended March 31, 2025 as compared to the same period in 2024 relates mainly to the increase in employee compensation costs, outside selling costs related to non-employee sales representatives, an increase in outbound freight costs related to higher sales, and an increase in employee recruitment fees.
Other income for the three months ended March 31, 2025 and 2024 was $336,306 and $184,821, respectively. Other income for the nine months ended March 31, 2025 and 2024 was $883,139 and $513,158, respectively. The increase for the three and nine months ended March 31, 2025 is primarily due to the increase in interest income resulting from an increase in cash held in money markets and investment securities. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.
The Company’s effective tax rate for the three and nine months ended March 31, 2025 was approximately 18.3%, compared to 19.2% and 20.3% for the three and nine months ended March 31, 2024. The effective tax rate in fiscal 2025 and fiscal 2024 is less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares as well as the benefit from foreign derived intangible income, offset in part, by the permanent difference for incentive stock option expense recorded for book purposes which is not deductible for tax purposes. The effective tax rate for the three and nine months ended March 31, 2025 was lower than the prior year primarily from a greater benefit derived from the ESOP dividends paid on allocated shares and the benefit derived from the exercise of incentive stock options in the current period when compared to the same prior year period.
Net income for the three months ended March 31, 2025 was $1,704,487 or $0.66 and $0.63 per share, basic and diluted, compared to net income of $1,031,930 or $0.41 and $0.40 per share, basic and diluted, for the three months ended March 31, 2024. Net income for the nine months ended March 31, 2025 was $5,211,303 or $2.03 and $1.95 per share, basic and diluted, compared to $3,921,844 or $1.58 and $1.56 per share, basic and diluted, for the nine months ended March 31, 2024. The increase in net income in the three months ended March 31, 2025 when compared to the same period last year resulted primarily from the increase in gross profits and interest income which is slightly offset by an increase in selling, general, and administrative expenses and an increase in the provision for income taxes. The increase in net income in the nine months ended March 31, 2025 when compared to the same period last year resulted primarily from the increase in gross profit and the increase in interest income, offset in part, by an increase in selling, general, and administrative expenses and an increase in the provision for income taxes, all discussed above.
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Liquidity and Capital Resources
The Company's working capital is an appropriate indicator of the liquidity of its business. During the past two fiscal years, the Company 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 two fiscal years. Management has a $3,000,000 line of credit available to help fund further growth or working capital needs but does not anticipate the need for any borrowed funds in the foreseeable future. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at March 31, 2025 and 2024. The existing line of credit was renewed in March 2025.
The Company's working capital as of March 31, 2025 and 2024 was approximately $40.8 million and approximately $36.6 million, respectively. The Company may at times be required to repurchase shares at the ESOP participants’ request at fair market value. During the three and nine months ended March 31, 2025 and 2024, the Company did not repurchase any shares held by the ESOP. Under an existing authorization from the Company's Board of Directors, as of March 31, 2025, management is authorized to purchase an additional $783,460 of Company stock.
The table below presents the summary of cash flow information for the fiscal years indicated:
| Nine Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash provided by operating activities | $ | 18,219,771 | $ | 7,350,662 | ||||
| Net cash used in investing activities | (8,265,308 | ) | (3,869,358 | ) | ||||
| Net cash used in financing activities | (446,971 | ) | (673,795 | ) | ||||
Net cash provided by operating activities fluctuates between periods primarily as a result of differences in sales and net income, provision for income taxes, the timing of the collection of accounts receivable, purchase of inventory, and payment of accounts payable. The increase in cash provided by operating activities compared to the prior year primarily relates to an increase in contract liabilities for cash advances received from customers and an increase in prepaid expenses and other current assets offset in part by a decrease in inventories and decrease in accounts payable. Net cash used in investing activities increased in the nine months ended March 31, 2025 as compared to the same period in 2024 due to higher investment securities offset in part by the increased proceeds from the maturity of investment securities when compared to the same period last year. Cash used in financing activities for the nine months ended March 31, 2025 slightly increased primarily to dividend payments on common stock, offset in part, by proceeds from the exercise of stock options. The Company currently believes that the cash flow generated from operations and when necessary, from cash and cash equivalents will be sufficient to meet its long-term funding requirements for the foreseeable future.
During the nine months ended March 31, 2025 and 2024, the Company expended $2,509,088 and $4,501,997, respectively, for plant improvements and new equipment, of which $2,346,233 and $4,294,632, respectively, was either reimbursed or eligible to be reimbursed under the not to exceed $7.4 million and $3.4 million awards received by the Company. The awards received by the Company are in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. These funding awards are part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. The Company has budgeted approximately $500,000 for new equipment and plant improvements in fiscal year 2025, not reimbursable under the funding awards received. A majority of these expenditures will be made to stay competitive in the marketplace and to meet the needs of current contracts.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning 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, supply and manufacturing constraints, potential new orders from customers, the impact of cyber or other security threats or other disruptions to our business, the impact of inflationary pressures on the United States economy and our operations 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 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is a smaller reporting company as defined under Securities and Exchange Commission Rule 12b-2. Pursuant to the exemption available to smaller reporting company issuers under Item 305 of Regulation S-K, quantitative and qualitative disclosures about market risk, the Company is not required to provide the information for this item.
Item 4. Controls and Procedures
(a) The Company's management, with the participation of the Company's Chief Executive Officer and Principal 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 Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Principal 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.
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PART II: Other Information and Signatures
| Item 1. | Legal Proceedings |
Currently, there are no matters pending against the Company which could reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| (a) | Securities Sold |
| (c) | Securities Repurchased |
As of March 31, 2025 the Company can repurchase up to $783,460 of its common stock pursuant to an existing authorization by the Board of Directors. During the quarter ended March 31, 2025 no shares were repurchased.
| Item 3. | Defaults Upon Senior Securities |
None
| Item 4. | Mine Safety Disclosures |
Not applicable
| Item 5. | Other Information |
| Item 6. | Exhibits |
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ESPEY MFG. & ELECTRONICS CORP. | |
| /s/ David O’Neil | |
| David O’Neil | |
| President and Chief Executive Officer | |
| /s/ Kaitlyn O’Neil | |
| Kaitlyn O’Neil | |
| Principal Financial Officer |
Date: May 12, 2025
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