ESPEY MFG & ELECTRONICS CORP
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
ESP$46.11+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001174947-24-000742
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001174947-24-001258
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 54 previous paragraphs and 52 current paragraphs.
28 unchanged; 21 reworded; 3 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
Accounts Receivable and Allowance for Credit Losses
Current report
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 September 30, 2024 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.
Current report
For the three months ended September 30, 2024, the increase in sales when compared to the same period last year is primarily due to product mix with an overall increase in shipments on numerous power supplies contracts, with the largest increase related to a contract for power supplies supporting the AESA radar program. The increase in sales was offset, in part, by a decrease in magnetic shipments on several programs, with the largest decrease related to a contract for a family of power distribution transformers. These differences are mainly the result of the underlying contractual terms including contract value and delivery schedules.
Removed paragraphs (5)
Previous report
While our previously reported expectation that new orders in fiscal 2024 would exceed new orders in fiscal 2023 remains attainable, prolonged negotiations with certain customers may cause some anticipated orders to be completed in the next fiscal year. As market factors including competition and product costs impact gross profit margins, management will continue to evaluate our sales strategy, employment levels, and facility costs.
Previous report
For the three months ended March 31, 2024, the decrease in sales when compared to the same period last year is primarily due to (i) shipments on several build to print contracts which had significantly fewer or no sales in the current reporting period as compared to the same period last year, and (ii) decreased shipments on product used on AESA radar programs when compared to similar product sales in the same period last year. These decreases were offset, in part, by an increase in sales on (i) shipments on a large multi-year magnetics contract for transformers, and (ii) shipments on a large follow-on order for power distribution panels.
Previous report
For the nine months ended March 31, 2024 sales were flat when compared to the same period last year. Sales were higher primarily from (i) sales on a large follow-on order for power distribution panels, (ii) increased shipments on a large multi-year magnetics contract for transformers, (iii) sales on a new engineering development contract in which there were no comparable sales in the prior period, and (iv) the shipment of a one-time build to print unit of which there were no sales in the prior year. These increases were offset, in part, by a decrease in sales on (i) contracts related to a family of power distribution transformers for a single customer due to specified contractual delivery dates, (ii) several build to print contracts which had significantly fewer or no sales in the current reporting period as compared to the same period last year, and (iii) the absence of sales in the current period on a large engineering design and production contract which had sales associated with engineering design deliverables in the prior year.
Previous report
The increase in gross profit for the three months ended March 31, 2024 when compared to the same period last year resulted primarily from (i) product mix, (ii) improved margins on shipments related to a large transformer contract due to additional contract funding received in the second quarter of the current fiscal year, and (iii) specific to the prior period, gross profit was negatively impacted by significant unanticipated costs incurred on a certain fixed-priced engineering design contract for a power supply due to unforeseen complexity of the design and the unavailability of mil-spec rated parts in the marketplace resulting from part obsolescence or exceptionally long lead times. The improvement in the current quarter gross profit was offset, in part, by (i) costs incurred on an engineering development job, and (ii) costs related to a final unit of a build to print contract, likely to be cancelled prior to completion, due to manufacturing complexities, lead time of parts, and rising production costs.
Previous report
The increase in gross profit for the nine months ended March 31, 2024 when compared to the same period last year resulted primarily from (i) product mix, (ii) improved margins on shipments related to a large transformer contract due to additional contract funding received in the second quarter of the current fiscal year, (iii) higher sales on a large follow-on order for power distribution panels which had minimal sales in the prior year and due to the incurred costs in the prior year negatively impacted gross profit, as these costs were associated with the original engineering and design efforts, and (iv) specific to the prior period, gross profit was negatively impacted by significant unanticipated costs incurred on a certain fixed-priced engineering design contract for a power supply due to unforeseen complexity of the design and the unavailability of mil-spec rated parts in the marketplace resulting from part obsolescence or exceptionally long lead times. The improvement in the current quarter gross profit was offset, in part, by (i) costs incurred on an engineering development job, and (ii) costs related to a final unit of a build to print contract, likely to be cancelled prior to completion, due to manufacturing complexities, lead time of parts, and rising production costs.
Reworded paragraphs (21)
Previous wording
Espey Mfg. & Electronics Corp. (“Espey”) is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering highly reliable products for use in military and severe environment applications. Design, manufacturing, and testing is performed in our 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.”
Current wording
Espey Mfg. & Electronics Corp. (“Espey”) is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering highly 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.”
Previous wording
Espey is ISO 9001:2015 and AS9100:2016 certified. Our primary products are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems, antennas and high power radar systems. The applications of these products include AC and DC locomotives, shipboard power, shipboard radar, airborne power, ground-based radar, and ground mobile power.
Current wording
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.
Previous wording
Espey services include design and development to specification, 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.
Current wording
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.
Previous wording
The total backlog at March 31, 2024 was $84.2 million, which included approximately $54.5 million from five significant customers, compared to $82.1 million at March 31, 2023, which included approximately $66.3 million from six significant customers. The Company’s total backlog represents the estimated remaining sales value of work to be performed under firm contracts. The backlog at March 31, 2024 is fully funded except for $3.3 million, representing one firm follow-on multi-year order 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 as information is known and estimable.
Current wording
The total backlog at September 30, 2024 was approximately $94.6 million, which included $58 million from four significant customers, compared to approximately $87.1 million at September 30, 2023, which included approximately $59.9 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, therefore a customer’s future reorder point may vary. The backlog at September 30, 2024 is fully funded except for $1.7 million, representing one firm follow-on multi-year order 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 as information is known and estimable.
Previous wording
Management expects revenues in fiscal year 2024 to be higher than revenues during fiscal year 2023 and expects net income per share to be higher in fiscal 2024 as compared to the net income per share realized during fiscal year 2023. Sales fluctuations may occur during comparable fiscal periods as the direct result of product mix, directly influenced by the specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules.
Current wording
Management expects revenues in fiscal year 2025 to be higher than revenues recognized during fiscal year 2024 but expects that net income per share will be lower than fiscal 2024 net income per share, although ahead of fiscal 2023 net income per share. This expectation is driven primarily by orders already in our backlog that will be shipped in fiscal year 2025 with higher anticipated aggregate costs than the product mix shipped during fiscal 2024. The expected increase in aggregate costs during fiscal year 2025 includes cost associated with the one time charge attributable to the pension withdrawal obligation recorded in June 2024, explained in greater detail in Financial Statement Note 5. Commitments and Contingencies. Sales fluctuations occur during comparable fiscal periods as the direct result of product mix, directly influenced by the specific contractual terms of those firm orders placed, including contract value, scope of work, and contract delivery schedules.
Previous wording
The growth and continuing demand in the power electronics industry across multiple manufacturing sectors, coupled with resulting supply chain disruptions from the effects of global events, has created volatility and unpredictability in the availability of certain electronic components and, in some cases, continues to create industry shortages. These supply chain disruptions, including extended lead times and part obsolescence, continue to affect our production, however, we are better able to manage these factors and adequately factor lead times into internal planning schedules and new customer quotations. These shortages will likely continue to impact our ability to support our customer’s schedule demands, as lead times for these components have, in some instances, increased from readily available to waiting times of nearly a year or more. We continue to work with our customers to mitigate any adverse impact upon our ability to service their requirements. These issues, if they persist, 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 2024.
Current wording
Ongoing demand in the power electronics industry across multiple manufacturing sectors continues to create shortages and extended lead times. In some instances, waiting times for certain components approach a year or more. We adequately factor supplier-provided lead times into internal planning schedules and new customer quotations. 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.
Previous wording
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 and the fact fewer workers, in general, are seeking employment. Unemployment rates in the local geographic region are lower than the national average. 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, future unforeseen labor disruptions could delay shipments and result in missing our backlog fulfillment projections and recognizing lower operating income.
Current wording
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.
Previous wording
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 schedule 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 $9.5 million.
Current wording
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 schedule 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 $9.8 million.
Previous wording
New orders received in the first nine months of fiscal year 2024 were approximately $27.8 million as compared to $32.6 million new orders received in the first nine months of fiscal year 2023. It is presently anticipated that a minimum of $10.8 million of orders comprising the March 31, 2024 backlog will be filled during the fiscal year ending June 30, 2024 subject, however, to the impact of the factors identified above. The minimum of $10.8 million does not include any shipments, which may be made against orders subsequently received during the fiscal year ending June 30, 2024.
Current wording
It is presently anticipated that a minimum of $33.6 million of orders comprising the September 30, 2024 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 $33.6 million does not include any shipments which may be made against orders subsequently received during the fiscal year ending June 30, 2025.
Previous wording
In addition to the backlog, the Company currently has outstanding opportunities representing approximately $84 million in the aggregate as of May 6, 2024 for both repeat and new programs*.*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 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.
Current wording
The Company currently expects new orders in fiscal 2025 to be greater than those received in fiscal year 2024. New orders received in the first three months of fiscal year 2025 were approximately $7.8 million as compared to $12.1 million new orders received in the first three months of fiscal year 2024. In addition to the backlog and the new orders already booked in fiscal year 2025, the Company currently has outstanding opportunities representing approximately $124 million in the aggregate as of November 6, 2024 for both repeat and new programs. Included in outstanding opportunities is a large multi-year purchase from a single customer for several products currently being manufactured by the Company, expected to be formalized prior to December 31, 2024. 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, as well as, the fact many solicitations we receive for the procurement of goods and services are associated with competitive bidding processes.
Previous wording
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 four significant customers represented 79% of the Company’s total sales for the three-month period ended March 31, 2024. Net sales to two significant customers represented 60% of the Company’s total sales for the three-month period ended March 31, 2023. Net sales to four significant customers represented 74% of the Company’s total sales for the nine-month period ended March 31, 2024. Net sales to four significant customers represented 73% of the Company’s total sales for the nine-month period ended March 31, 2023. 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.
Current wording
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 three significant customers represented 51.8% of the Company’s total sales for the three-month period ended September 30, 2024. Net sales to three significant customers represented 69% of the Company’s total sales for the three-month period ended September 30, 2023. 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.
Previous wording
Net sales for the three months ended March 31, 2024 and 2023 were $8,254,653 and $9,809,616, respectively, a 15.9% decrease. Net sales for the nine months ended March 31, 2024 and 2023 were comparable and totaled $27,125,408 and $27,249,520, respectively, a 0.5% decrease. In general, sales fluctuations may occur during comparable fiscal periods as the direct result of product mix, directly influenced by the specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules.
Current wording
Net sales for the three months ended September 30, 2024 and 2023 were $10,443,218 and $8,568,214, respectively, a 21.9% 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.
Previous wording
Gross profits for the three months ended March 31, 2024 and 2023 were $2,064,191 and $1,973,429, respectively. Gross profit as a percentage of sales was approximately 25.0% and 20.1%, for the same periods, respectively. Gross profits for the nine months ended March 31, 2024 and 2023 were $7,452,143 and $6,046,293, respectively. Gross profit as a percentage of sales was approximately 27.5% and 22.2%for the same periods, respectively.
Current wording
Gross profits for the three months ended September 30, 2024 and 2023 were $2,800,882 and $2,245,377, respectively. Gross profit as a percentage of sales was approximately 26.8% and 26.2%, for the same periods, respectively. The increase in gross profit for the three months ended September 30, 2024 when compared to the same period last year resulted primarily from the increase in sales. The slight increase in the gross profit percentage resulted primarily from product mix.
Previous wording
Selling, general and administrative expenses were $971,220 for the three months ended March 31, 2024, a decrease of $43,519, compared to the three months ended March 31, 2023. Selling, general and administrative expenses were $3,044,591 for the nine months ended March 31, 2024, an increase of $315,891 compared to the nine months ended March 31, 2023. The decrease in spending for the three months ended March 31, 2024 as compared to the same period in 2023 relates mainly to the decrease in outside selling costs related to non-employee sales representatives, a decrease in conference and training costs, offset in part, by an increase in employee compensation costs which includes a new business development employee. The increase in spending for the nine months ended March 31, 2024 compared to the same period in 2023 mainly relates to the increase in employee compensation costs which includes a new business development employee. In addition, and to a lesser extent, expenses increased related totravel expenses, recruiting expenses, and freight costs incurred on outgoing shipments. These increases were offset, in part, by a decrease in utility and outside selling costs related to non-employee sales representatives.
Current wording
Selling, general and administrative expenses were $1,081,669 for the three months ended September 30, 2024, an increase of $57,988, compared to the three months ended September 30, 2023. The increase in spending for the three months ended September 30, 2024 as compared to the same period in 2023 relates mainly to the increase in employee compensation costs, offset in part, by a decrease in travel expenses incurred during the period.
Previous wording
Other income for the three months ended March 31, 2024 and 2023 was $184,821 and $145,810, respectively. Other income for the nine months ended March 31, 2024 and 2023 was $513,158 and $231,926, respectively. The increase for the three and nine months ended is primarily due to the increase in interest income resulting from an increase in investment securities and an increase in interest rates. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.
Current wording
Other income for the three months ended September 30, 2024 and 2023 was $278,408 and $161,573, respectively. The increase for the three months ended September 30, 2024 is primarily due to the increase in interest income resulting from an increase in investment securities and an increase in fixed interest rates. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.
Previous wording
The Company’s effective tax rate for the three and nine months ended March 31, 2024 was approximately 19.2% and 20.3% respectively, compared to 21.5% and 21.6% for the three and nine months ended March 31, 2023. The effective tax rate in fiscal 2024 is less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares and benefit from foreign derived intangible income, offset in part by permanent differences related to incentive stock options. The effective tax rate in fiscal 2023 is greater than the statutory tax rate mainly due to the permanent difference for incentive stock option expense recorded for book purposes which is not deductible for tax purposes. During this year, there was no benefit received from ESOP dividends paid on allocated shares due to the suspension of the company dividend thru February 2023. The effective tax rate in the three and nine month periods ended March 31, 2024 was lower than the prior year primarily from the benefit derived from ESOP dividends paid on allocated shares, greater benefit derived from foreign derived intangible income and a benefit derived from the exercise of incentive stock options in the current period when compared to same period in the prior year.
Current wording
The Company’s effective tax rate for the three months ended September 30, 2024 was approximately 20.0% compared to 20.9% for the three months ended September 30, 2023. 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 in the three month period ended September 30, 2024 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 same period in the prior year.
Previous wording
Net income for the three months ended March 31, 2024, was $1,031,930 or $0.41 and $0.40 per share, basic and diluted, compared to net income of $867,288 or $0.35 per share, basic and diluted, for the three months ended March 31, 2023. Net income for the nine months ended March 31, 2024 was $3,921,844 or $1.58 and $1.56 per share, basic and diluted, compared to $2,781,596 or $1.13 per share, basic and diluted, for the nine months ended March 31, 2023. The increase in net income in the three months ended March 31, 2024 resulted primarily from the increase in gross profit and an increase in interest income, offset in part, by an increase in the provision for income taxes, all discussed above. The increase in net income in the nine months ended March 31, 2024 resulted primarily from the increase in gross profit and an 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.
Current wording
Net income for the three months ended September 30, 2024, was $1,598,317 or $0.63 and $0.61 per share, basic and diluted, compared to net income of $1,094,544 or $0.44 per share, basic and diluted, for the three months ended September 30, 2023. The increase in net income in the three months ended September 30, 2024 resulted primarily from the increase in gross profit and an increase in other 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.
Previous wording
The Company's working capital is an appropriate indicator of the liquidity of its business, and during the past two 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 two 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. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at March 31, 2024 and 2023. The existing line of credit was extended and expires February 28, 2025.
Current wording
The Company's working capital is an appropriate indicator of the liquidity of its business, and during the past two 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 two 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. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at September 30, 2024 and 2023. The existing line of credit expires February 28, 2025.
Previous wording
The Company's working capital as of March 31, 2024 and 2023 was approximately $36.6 million and $32.3 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, 2024 and 2023, 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, 2024, management is authorized to purchase an additional $783,460 of Company stock.
Current wording
The Company's working capital as of September 30, 2024 and 2023 was approximately $38.6 million and $32.8 million, respectively. The Company may at times be required to repurchase shares at the ESOP participants’ request at fair market value. During the three months ended September 30, 2024 and 2023, the Company did not repurchase any shares held by the ESOP. Under an existing authorization from the Company's Board of Directors, as of September 30, 2024, management is authorized to purchase an additional $783,460 of Company stock.
Previous wording
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 net income, a decrease in prepaid expenses and other current assets, an increase in accounts payable and other accrued expenses, offset in part, by a decrease in contract liabilities, and an increase in trade accounts receivable. Net cash used in investing activities increased in the nine months ended March 31, 2024 as compared to the same period in 2023 due to an increase in investment securities when compared to the same period last year, in addition to additions to property, plant and equipment, partially offset by proceeds received from the grant award. Cash used in financing activities for the nine months ended March 31, 2024 relates 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.
Current wording
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 decrease in cash provided by operating activities compared to the prior year primarily relates to an increase in inventories, the payment of accounts payable and taxes payable, offset in part, by an increase in net income. Net cash used in investing activities decreased in the three months ended September 30, 2024 as compared to the same period in 2023 due to fewer additions to property, plant and equipment and higher investment securities when compared to the same period last year. Cash used in financing activities for the three months ended September 30, 2024 relates primarily to dividend payments on common stock, offset in part, by proceeds from the exercise of stock options. Comparably, the dividend in the prior year was declared but paid in the following quarter of fiscal year 2024. 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.
Previous wording
During the nine months ended March 31, 2024 and 2023, the Company expended $4,501,997 and $178,513, respectively, for plant improvements and new equipment, of which $4,294,632 and $38,650, respectively, was either reimbursed or eligible to be reimbursed under a not to exceed $7.4 million award received by the Company. The award received by the Company is in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. This funding award is part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. The Company has budgeted approximately $300,000 for new equipment and plant improvements in fiscal year 2024, not reimbursable under the funding award received. A majority of these expenditures will be made to stay competitive in the marketplace and to meet the needs of current contracts.
Current wording
During the three months ended September 30, 2024 and 2023, the Company expended $664,351 and $2,228,802, respectively, for plant improvements and new equipment, of which $595,823 and $2,149,160, respectively, was either reimbursed or eligible to be reimbursed under a not to exceed $7.4 million award received by the Company. The award received by the Company is in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. This funding award is 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 award received. A majority of these expenditures will be made to stay competitive in the marketplace and to meet the needs of current contracts.