SECURITIES AND EXCHANGE COMMISSION

                                   WASHINGTON, D. C.  20459

                                          FORM   10-Q

                     QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
                                   SECURITIES EXCHANGE ACT OF 1934


 For Quarter Ended   March 31,September 30, 1995    Commission File Number  I-4383  


                            ESPEY MFG. & ELECTRONICS CORP.                    
        (Exact name of registrant as specified in charter)                     
                                                          

                 NEW YORK                                14-1387171           
       (State of Incorporation)                   (I.R.S. Employer's IdentNo.Ident No.)


                P. O. Box 422,  Saratoga Springs,  New York            12866  
                (Address of principal executive offices)             (Zip Code)



              Registrant's telephone number, include area code     518-584-4100




              Number of shares outstanding of issuer's class of common stock
              $.33-1/3 par value as at the end of the period covered by this
              report    1,343,4481,338,741    .


     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15 (d) of theSecuritiesthe 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.


                            YES    X                                 NO       

  












                                     ESPEY MFG. & ELECTRONICS CORP.

                                              I N D E X





PART I               FINANCIAL INFORMATION                                 PAGE


                     Item 1        Financial Statments:


                                   Balance Sheets - March 31,September 30, 1995        1
                                   and June 30, 19941995                          


                                   Statements of Earnings - Nine and Three Months      3
                                   Months Ended March 31,September 30, 1995 and 1994
                                                                      

                                   Statements of Cash Flows - NineThree Months    4
                                   Ended March 31,September 30, 1995 and 1994          


                                   Notes to Financial Statements              5
                                   March 31,September 30, 1995 and 1994                


                     Item 2        Management's Discussion and Analysis of    7
                                   Financial Condition and Results of         
                                   Operations.                                



PART II              OTHER INFORMATION                                        9 

                     SIGNATURES                                               10
              
                                                                              











ESPEY MFG. & ELECTRONICS CORP. Balance Sheets March 31,September 30, 1995 and June 30, 19941995 A S S E T S Unaudited 1995 1994 March 311995 September 30 June 30 CURRENT ASSETS: Cash $ 206,404126,931 $ 178,696231,675 Short-term investments at cost (market value March 31,September 30, 1995, $12,558,682$500,000 and June 30, 1994, $13,335,488) 12,408,898 13,290,8881995, $1,497,681) 500,000 1,467,540 Total Cash and Short-term Investments 12,615,302 13,469,584626,931 1,699,215 Marketable investment securities - current 11,375,203 10,454,464 Trade accounts receivable net of $3000 allowance March 31,September 30, 1995 and June 30, 1994 1,851,456 1,156,0931995 1,707,618 1,925,778 Other receivables 150,285 15,861320,949 20,627 NET RECEIVABLES 2,001,741 1,171,9542,028,567 1,946,405 Inventories: Raw materials and supplies 286,367 501,337275,092 400,778 Work-in-process 1,188,363 1,599,1481,251,000 1,078,169 Costs relating to contracts in process, net of progress payments of $3,109,300$1,297,800 - March 31,September 30, 1995 and $1,991,300$2,121,800 - June 30,1994 8,012,768 8,078,07730,1995 9,646,106 8,769,378 NET INVENTORIES 9,487,498 10,178,56211,172,198 10,248,325 Income tax refund receivable 298,201 358,418378,547 410,467 Prepaid expenses and other current assets 246,647 185,917109,545 385,033 TOTAL CURRENT ASSETS 24,649,389 25,364,43525,690,991 25,143,909 MARKETABLE INVESTMENT SECURITIES AT COST 100,000 100,000 PROPERTY, PLANT AND EQUIPMENT AT COST 11,348,050 10,385,19311,486,517 11,464,636 Less: Accumulated depreciation and amortization (7,689,289) (7,375,092)(7,973,746) (7,868,827) NET PROPERTY, PLANT AND EQUIPMENT 3,658,761 3,010,1013,512,771 3,595,809 TOTAL $ 28,408,15029,303,762 $ 28,474,53628,839,718 - 1 - (Continued) ESPEY MFG. & ELECTRONICS CORP. Balance Sheets, Continued March 31,September 30, 1995 and June 30, 19941995 LIABILITIES AND STOCKHOLDERS' EQUITY Unaudited 1995 1994 March 311995 September 30 June 30 CURRENT LIABILITIES: Accounts Payable $ 423,346898,890 $ 336,882596,823 Accrued expenses: Salaries, wages and commissions 270,960 99,552170,986 104,269 Employees' insurance costs 57,086 58,27247,620 50,293 ESOP payable 324,443106,572 - Other 13,906 17,01813,353 14,588 Payroll and other taxes withheld and accrued 128,923 140,80273,664 141,513 Dividends payable -937,119 - Deferred income taxes - current 32,169 69,64441,682 75,915 TOTAL CURRENT LIABILITIES 1,250,833 722,1702,289,886 983,401 Deferred income taxes 99,806 124,61948,947 30,697 TOTAL LIABILITIES 1,350,639 846,7892,338,833 1,014,098 STOCKHOLDERS' EQUITY: Common stock, par value .33-1/3 per share. Authorized 2,250,000 shares; issued 1,514,937 shares March 31,September 30, 1995 and June 30, 1994.1995. 504,979 504,979 Capital in excess of par value 10,496,287 10,496,287 Retained earnings 24,468,761 24,945,412 35,470,027 35,946,67823,884,592 24,678,208 34,885,858 35,679,474 Less: Common stock subscribed ( 5,586,624)5,027,962) ( 5,586,624)5,027,962) Cost of 171,489176,196 shares on March 31,September 30, 1995 and 164,229171,489 shares on June 30, 19941995 of common stock in treasury ( 2,825,892)2,892,967) ( 2,732,307)2,825,892) TOTAL STOCKHOLDERS' EQUITY 27,057,511 27,627,74726,964,929 27,825,620 TOTAL $ 28,408,15029,303,762 $ 28,474,53628,839,718 See accompanying notes to financial statements - 2 - ESPEY MFG. & ELECTRONICS CORP. STATEMENTS OF EARNINGS Nine andStatements of Earnings Three Months Ended March 31,September 30, 1995 and 1994 Unaudited Unaudited Three Months Nine MonthsSeptember 1995 1994 1995September 1994 Net Sales $ 3,496,5844,000,805 $ 1,989,770 $ 10,472,748 $ 10,861,2694,161,569 Cost of sales 3,229,122 1,402,732 9,297,301 8,551,503 Gross profit 267,462 587,038 1,175,447 2,309,7663,596,130 3,547,215 GROSS PROFIT 404,675 614,354 Selling, general and administrative expenses 320,759 318,855 1,122,442 1,069,980 Operating income411,535 415,664 OPERATING INCOME ( 53,297) 268,183 53,005 1,239,7866,860) 198,690 Other incomeIncome: Interest income and dividends 202,043 103,333 505,207 308,645159,462 146,439 Sundry income 403 885 4,109 1,821 202,446 104,218 509,316 310,4666,838 2,636 166,300 149,075 Earnings before income taxes and cumulative 149,149 372,401 562,321 1,550,252 effect of change in accounting principle159,440 347,765 Provision for income taxes 75,000 149,000 280,000 625,513 Net earnings before cumulative effect of 74,149 223,401 282,321 924,739 change in accounting principle Cumulative effect of change in accounting - - - 201,653 for income taxes61,000 173,000 NET EARNINGS $ 98,440 $ 174,765 Earnings per Share: Net earnings $ 74,149.07 $ 223,401 $ 282,321 $ 1,126,392 Earnings per share: Earnings before cumulative effect of change $ .06 $ .17 $ .21 $ .69 in accounting principle Net earnings $ .06 $ .17 $ .21 $ .84.13 Average number of shares outstanding 1,346,044 1,350,708 1,347,855 1,350,7081,341,350 1,349,405 See accompanying notes to Financical Statementsfinancial statements - 3 - ESPEY MFG. & ELECTRONICS CORP. Statements of Cash Flows NineThree Months Ended March 31,September 30, 1995 and 1994 Unaudited March 31September 30 1995 1994 Cash Flows From Operating Activities: Net earnings $ 282,32198,440 $ 1,126,392174,765 Adjustments to reconcile net earnings to net cash provided by operating activities: Tax effect of dividends on unallocated ESOP shares 45,063 50,070 55,007 Depreciation 314,197 316,832104,919 102,073 Changes in assets and liabilities: Decrease (increase) in receivables, net ( 829,787) 24,62782,162) ( 1,301,772) Decrease (increase) in inventories, net 691,064 5,636( 923,873) 761,620 Decrease (increase) in other current assets ( 60,730) ( 1,998)275,488 94,432 Decrease (increase) in income tax refund receivable 60,217 ( 240,718)31,920 143,691 Increase (decrease) in accounts payable 86,464 324,816302,067 229,842 Increase (decrease) in accrued salaries, 171,408 112,22166,717 67,353 wages and commissions Increase (decrease) in accrued employee ( 1,186)2,673) ( 67,547)14,096) insurance costs Increase (decrease) in other accrued expenses ( 3,112) 47,8251,235) ( 3,390) Increase (decrease) in payroll & other ( 11,879)67,849) ( 33,549)68,926) taxes withheld and accrued Increase (decrease) in income tax payable - ( 8,279) Decrease in deferred income taxes ( 62,288)15,983) ( 261,689)20,761) Increase (decrease) in accrued ESOP contributions 324,443 314,537106,572 108,148 Net cash provided by (used by) operating activities 1,011,202 1,714,113( 62,589) 323,049 Cash Flows From Investing Activities: Additions to property, plant & equipment ( 962,857)21,881) ( 96,813)341,819) Proceeds from sale of marketable investment securities 971,174 - Purchases of marketable investment securities ( 1,891,913) - Net cash used inprovided by (used in) investing activities ( 962,857)942,620) ( 96,813)341,819) Cash Flows From Financing Activities: Dividends on common stock ( 809,042) ( 810,424) Purchase of treasury stock ( 93,585) -67,075) ( 31,837) Net cash used in financing activities ( 902,627)67,075) ( 810,424)31,837) Increase (decrease) in cash and short-term investments ( 854,282) 806,8761,072,284) ( 50,607) Cash and short-term investments, beginning of period 1,699,215 13,469,584 12,262,467 Cash and short-term investments, end of period $ 12,615,302626,931 $ 13,069,34313,418,977 Income Taxes Paid $ 232,000- $ 879,538- See accompanying notes to financial statements. - 4 -
ESPEY MFG. & ELECTRONICS CORP. Notes to Financial Statements ___________________ 1. In1.In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of March 31,September 30, 1995, and the results of operations for each of the three and nine month periods ended March 31, 1995 and 1994 and cash flows for each of the nine month periods ended March 31,September 30, 1995 and 1994. 2. The2.The earnings per share computations for March 31,September 30, 1995 were based on 1,347,8551,341,350 shares and on 1,350,7081,349,405 shares for March 31,September 30, 1994. These represent the average number of shares outstanding for each respective period. 3. Revenues3.Revenues and other income include interest on Certificates of Deposit and Treasury Bills in addition to dividends on preferred stocks. 4. There4.There were no material unusual charges or credits to operations or a change in accountants during the most recently completed quarter which would require the filing of a Form 8-K. 5. There5.There were no securities sold by the Company during the current quarter which were not registered under the Securities Act of 1934 in reliance upon an exemption from registration provided in Section 4 (2) of the Act. 6. For6.For purposes of the statements of cash flows, the Company considers all liquid debt instruments with original maturities of three months or less to be cash equivalents. 7. In7.In fiscal 1989 the Company established an Employee Stock Ownership Plan (ESOP) for eligible non-union employees. The ESOP used the proceeds of a loan from the Company to purchase 316,224 shares of the Company's common stock for approximately $8.4 million and the Company contributed approximately $400,000 to the ESOP which was used by the ESOP to purchase an additional 15,000 shares of the Company's common stock. The loan from the Company to the ESOP is repayable in annual installments of $1,039,605, including interest, through June 30, 2004. Interest is payable at a rate of 9% per annum. The Company's receivable from the ESOP is recorded as common stock subscribed in the accompanying balance sheets. - 5 - Each year, the Company will make contributions to the ESOP which will be used to make loan interest and principal payments. With each loan and interest payment, a portion of the common stock will be allocated to participating employees. As of March 31,September 30, 1995 there were 103,375119,680 shares allocated to participants. 8. The8.The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109,115, "Accounting for Income Taxes", as ofCertain Investments in Debt and Equity Securities," at July 1, 1993 on a prospective basis. The cumulative effect of the change in accounting for income taxes as of July 1, 1993 was $201,653 and is separately identified in the statements of earnings for the nine month period ended March 31, 1994. Prior years' financial statements were not restated to apply the provisionsUpon adoption of SFAS No. 109.115, at July 1, 1994, all amounts included in short-term investments matured within three months of the adoption date. Therefore no amounts were transferred to marketable investment securities upon adoption and there was no cumulative effect from this change. - 6 - ESPEY MFG. & ELECTRONICS CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations Sales for the ninethree months ended March 31,September 30, 1995 were $10,472,748$4,000,805 as compared to $10,861,269$4,161,569 for the same period in fiscal 1994. Sales volume is largely dependent on both lead times required for new orders and the specific delivery needs of our customers. Net earnings for the ninethree month period ended March 31, 1995 were $282,321$98,440, or $.21$.07 per share compared to $1,126,392$174,765, or $.84$.13 per share for the nine month period ended March 31, 1994. The March 31, 1994 earnings included a cumulative adjustment for the adoption of SFAS 109 which increased net earnings by $201,653, or $.15 per share. This adjustment has been more fully explained in prior financial statements. Manufacturing expenses increased marginally over the corresponding nine month period of last year. Both general & administration and selling expenses decreased slightly. As anticipatedMost of the contracts shipped in the current quarter reflected an increase in earnings overcarried a lower gross profit margin than those shipped last year. As a result, cost of sales rose to 90% compared to the prior quarter, due mainly to certain cost containment measures taken by the Company. Earnings for the current nine month period, however, are less than for the corresponding nine months of85% reflected last year. This has been brought about mainly thruincrease is the restructuringprimary reason for the decrease in net profits. As previously indicated in prior reports we are making every effort to alleviate this situation, primarily by attempting to introduce products and services of a more proprietary nature into both the military and industrial marketplace. The President's message contained in the Annual Report addressed some of our pricing policies due tospecific areas of concentration. Selling and G & A expenses decreased marginally during the increasingly competitive nature of doing business in the military electronics field. In line with this the Company is endeavoring to penetrate the industrial marketplace, not only with our basic expertise in the design, development, and production of specialized power supplies and iron core components, but with the offering of attendant services such as electro-plating and environmental testing. We are currently experiencing marginal success with our power supplies and iron core components, however the future looks extremely promising. A new Division has been set up with the name of Saratoga Electro-Finishing. A capital expenditure of approximately $700,000 has been made for the expansion and modernization of our electro-plating facility. This facility, by employing the most modern and environmentally approved features, will enable us to offer sophisticated services to both industrial and military customers. Our demographic studies have indicated that there is no similar facility in either our immediate or neighboring geographic areas. The facility is currently operating on a limited basis. We are undertaking a marketing effort to insure that we will maximize its potential as it becomes fully operational.current period. Although our investment base was somewhat lower induring the current period, aninvestment income rose by approximately 10% due to a continuing increase in short-term rates resulted in an increase of about $200,000 in our investment income for the nine month period ended March 31, 1995 as compared to the nine month period ended March 31, 1994.interest rates. The Company does not feel that there is any risk associated with its investment policy, since approximately 90% of our investments are represented by U.S. Government T-Bills, with the balance represented by Certificates of Deposit and one preferred stock issue in a major utility. - 7 - Since the debt of the Company's ESOP is not to an outside party, we have eliminated from the Statements of Earnings the offsetting items of Interest Income and Interest Expense relating to the ESOP. We have also eliminated the offsetting accruals from the Balance Sheets. The Company, when possible, funds all of its operations when possible, including Financing Activities and Investing Activities with cash flows resulting from Operating Activities. It is felt that in the future, funds from Operating Activities will continue to be adequate to meet these needs. For the current ninethree month period capital expenditures were approximately $962,000.$22,000. During the ninethree month period ended March 31,September 30, 1995 the Company repurchased 7,2604,707 shares of its common stock. On March 24,1995Under existing authorizations, as of September 30, 1995, funds in the Boardamount of Directors authorized an additional one million dollars$1,016,242 were available for the continuing repurchase of the Company's shares making the total available as of March 31, 1995 $1,083,317.shares. The backlog as of March 31,September 30, 1994 was $21,142,465.$18,055,689. The backlog as of March 31,September 30, 1995 was $16,884,994.$18,319,247. A dividend in the amount of $.60$.70 per share was paiddeclared payable November 21, 19941995 to shareholders of record on October 28, 1994. On October 20, 1994, Albert K. Braim, a director since 1968, died. The Company and all of its Directors and Employees wish to express their condolences to Mr. Sol Pinsley, longtime President and CEO, who lost his wife on March 21,27, 1995. - 87 - ESPEY MFG. & ELECTRONICS CORP. PART II: Other Information and Signatures Item 4. Submission of Matters to a Vote of Security Holders None during the quarter. Item 5. Other Information None during the quarter. Item 6. Exhibits and Reports on Form 8-K None during the quarter. - 98 - 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. Sol Pinsley, President Herbert Potoker, Treasurer and Chief Financial Officer 10 May06 November 1995 Date - 109 -