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Espey Mfg. & Electronics Corp Reports Operating Results (10-Q)

May 12, 2010 | About:
10qk

10qk

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Espey Mfg. & Electronics Corp (ESP) filed Quarterly Report for the period ended 2010-03-31.

Espey Mfg. & Electronics Corp has a market cap of $45.2 million; its shares were traded at around $19.52 with a P/E ratio of 10.6 and P/S ratio of 1.7. The dividend yield of Espey Mfg. & Electronics Corp stocks is 4.6%. Espey Mfg. & Electronics Corp had an annual average earning growth of 19.2% over the past 10 years.ESP is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

New orders received in the first nine months of fiscal 2010 were approximately $13.7 million, representing a 3.8% decrease from the amount of new orders received in the first nine months of fiscal 2009. These orders are in line with the Company s strategy of getting involved in long-term high quantity military and industrial products and are predominately for follow-on production of mature products. The Company's backlog was $33.1 million at March 31, 2010 which includes $21.3 million from three customers compared to $40.0 million at March 31, 2009 which included $20.9 million from two significant customers. The backlog for the Company represents the estimated remaining sales value of work to be performed under firm contracts.

Net sales for the three months ended March 31, 2010 were $6,955,827 as compared to $6,709,880 for the same period in 2009, representing an 3.7% increase. Net sales for the nine months ended March 31, 2010 were $19,697,098 as compared to $18,957,576 for the same period in 2009, representing a 3.9% increase. Generally, the increases and decreases in net sales can be attributed to the contract specific nature of the Company's business. The increase for the three months ended March 31, 2010, was due to an overall increase in power supply shipments including engineering design services offset by a decrease in transmitter component shipments. The increase for the nine months ended March 31, 2010 was primarily due to an increase in transmitter component and transformer shipments and an increase in engineering design services offset by a decrease in power supply shipments.

For the three months ended March 31, 2010 and 2009 gross profits were $1,838,782 and $1,732,812, respectively. Gross profit as a percentage of sales was 26.4% and 25.8%, for the three months ended March 31, 2010 and 2009, respectively. For the nine months ended March 31, 2010 and 2009 gross profits were $5,359,077 and $3,510,017, respectively. Gross profit as a percentage of sales was 27.2% and 18.5%, for the nine months ended March 31, 2010 and 2009, respectively. 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 as compared to 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. The increased gross profit and gross profit percentage in the three and nine months ended March 2010, was primarily the result of favorable product mix with only minor cost overruns related to loss contracts. For the nine months ended March 31, 2009 the Company had unexpected losses incurred on programs with significant engineering and production time required for design efforts. These programs experienced significant cost overruns due to extended product qualification testing and difficulties moving the products from engineering design into full production.

Selling, general and administrative expenses were $753,414 for the three months ended March 31, 2010; an increase of $95,299, compared to the three months ended March 31, 2009. Selling, general and administrative expenses were $2,302,549 for the nine months ended March 31, 2010; an increase of $176,622 compared to the nine months ended March 31, 2009. The increase for the three and nine months ended March 31, 2010, relates primarily to an increase in salary expense, consulting fees, and director fees.

Net income for the three months ended March 31, 2010, was $808,723 or $.38 per share, both basic and diluted, compared to $781,272 or $.37 per share, both basic and diluted, for the three months ended March 31, 2009. Net income for the nine months ended March 31, 2010, was $2,315,657 or $1.09 and $1.08 per share, basic and diluted, respectively, compared to $1,137,155 or $.54 per share, both basic and diluted, for the nine months ended March 31, 2009. The increase in net income per share was primarily due to higher gross profit on sales offset by higher selling, general and administrative expenses and decreased interest income.

The Company's working capital as of March 31, 2010 and 2009 was approximately $24.5 million and $24.1 million, respectively. During the three months ended March 31, 2010 and 2009 the Company repurchased 0 and 14,350 shares, respectively, of its common stock for a total purchase price of $0 and $209,035, respectively. Of the total purchases, 0 shares and 10,699 shares, respectively, were purchased from the Company's Employee Retirement Plan and Trust ("ESOP") for a purchase price of $0 and $157,222, respectively. All remaining shares were purchased on the open market. During the nine months ended March 31, 2010 and 2009 the Company repurchased 23,513 and 19,899 shares, respectively, of its common stock for a total purchase price of $452,155 and $311,545, respectively. Of the total purchases, 23,513 shares and 11,499 shares, respectively, were purchased from the Company's Employee Retirement Plan and Trust ("ESOP") for a purchase price of $452,155 and $171,662, respectively. All remaining shares were purchased on the open market. Under existing authorizations from the Company's Board of Directors, as of March 31, 2010, management is authorized to purchase an additional $1,236,300 million of Company stock.

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