-- Sales and gross margin reflect sequential
improvement over fourth quarter of 2022 --
ELMA,
N.Y., May 15, 2023 /PRNewswire/ -- Servotronics,
Inc. (NYSE American – SVT) a designer and manufacturer of
servo-control components and other advanced technology products
today reported financial results for the first quarter ended
March 31, 2023.
Highlights for the first quarter financial results include the
following:
- Consolidated revenues were $10.8
million, down 3.3% from $11.2
million in the first quarter of 2022. Sequentially,
consolidated revenues were up 3.5% from $10.4 million as compared to the fourth quarter
of 2022.
- Gross profit decreased to $0.9
million or 8.5% of revenue in the first quarter, down from
$3.0 million, or 26.5% of revenue in
the first quarter of 2022 which included an unusually favorable
product mix. Sequentially, gross profit increased 48.8% from
$0.6 million, or 5.9% of revenues, in
the fourth quarter of 2022.
- Selling, General and Administrative ("SG&A") costs
increased $0.3 million to
$2.8 million in the first quarter of
2023 compared to $2.5 million in the
first quarter of 2022.
- Operating loss for the quarter was $1.9
million compared with operating income of $0.5 million in the first quarter of 2022.
- Net loss was $1.5 million, or a
loss of ($0.63) per diluted share in
the first quarter of 2023 compared to net income of $0.3 million, or $0.13 per diluted share in the first quarter of
2022 which, as previously noted, benefited from unusually favorable
product mix.
"As we noted when reporting our fourth quarter results, our
business continued to be affected by supply chain issues which are
evident in our first quarter results," said Chief Executive Officer
William F. Farrell, Jr. "We
generated solid sequential improvement in sales and gross margin in
the first quarter, but unfavorable product mix and continued
inflationary pressures on our operating costs also impacted our
overall results. However, as also expected when we reported our
2022 year-end results, we have started to see some progress and
continue to anticipate improvement in these conditions to be
apparent in our financial results in the second half of the
year. We are confident in the outlook for our key end
markets, and demand has remained resilient in our ATG segment, with
increasing unit sales volume during the quarter. Further, to
address long-term performance concerns of our CPG segment, we have
recently announced a review of strategic alternatives for the group
with the intention of generating the maximum value for our
shareholders as this is completed over the coming quarters."
Business Segment Results
First quarter ATG revenues declined to $9.0 million in 2023, down 1.2% from the first
quarter of 2022, driven primarily from an unfavorable product mix
partially offset by increases in pricing and higher volumes. CPG
revenues decreased 12.9%, to $1.7
million, from $2.0 million in
the prior-year period. The CPG revenue decline was the result
of an unfavorable product mix and reduced volume.
For the first quarter, ATG gross profit declined to $1.0 million, or 10.9% of sales, down from
$2.4 million, or 25.7% of sales in
the prior year period which benefited significantly from unusually
favorable product mix. Current year ATG gross profit was
unfavorably impacted by product mix, higher operating costs, and
reduced productivity, partially offset by increased volume and
improved pricing. The increased operating costs include investments
in staffing to support growing customer demand. CPG gross profit
was a loss of $0.1 million or (4.0%)
of sales from $0.3 million, or 14.3%
of sales in the first quarter of 2022. CPG gross profit
declined due to unfavorable product mix partially offset by
favorable operating variances.
($000s)
|
1Q23
|
4Q22
|
3Q22
|
2Q22
|
1Q22
|
FY22
|
FY21
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
ATG
|
$9,060
|
$8,446
|
$8,823
|
$8,748
|
$9,168
|
$35,185
|
$31,677
|
CPG
|
1,742
|
1,986
|
2,168
|
2,482
|
2,000
|
8,636
|
8,881
|
Consolidated
|
10,802
|
10,432
|
10,991
|
11,230
|
11,168
|
43,821
|
40,558
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
|
|
|
|
|
ATG
|
$984
|
$234
|
$850
|
$693
|
$2,353
|
$4,130
|
$5,748
|
CPG
|
(69)
|
381
|
673
|
475
|
285
|
1,814
|
240
|
Consolidated
|
915
|
615
|
1,523
|
1,168
|
2,638
|
5,944
|
5,988
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
|
|
|
|
|
ATG
|
10.9 %
|
2.8 %
|
9.6 %
|
7.9 %
|
25.7 %
|
11.7 %
|
18.1 %
|
CPG
|
(4.0 %)
|
19.2 %
|
31.0 %
|
19.1 %
|
14.3 %
|
21.0 %
|
2.7 %
|
Consolidated
|
8.5 %
|
5.9 %
|
13.9 %
|
10.4 %
|
23.6 %
|
13.6 %
|
14.8 %
|
First-quarter SG&A expenses increased approximately
$0.3 million compared to the
prior-year period. SG&A expenses at CPG increased approximately
$0.2 million due to higher
compensation and benefits and increased outbound freight and
professional fees. SG&A expenses at ATG increased by
$0.1 million due to higher R&D
and insurance expense.
Net loss for the first quarter was $1.5
million, or a loss of ($0.63)
per diluted share compared to net income of $0.3 million, or $0.13 per diluted share in the first quarter of
2022. The significant change is primarily due to significantly
favorable product mix last year and investments in staffing in the
current year to support growing customer demand.
Operating cash flow for the quarter was a use of $2.8 million as compared to a use of $0.5 million in the prior-year period. The
higher cash usage was a direct result of the lower net income,
along with an increase in inventory and accounts receivable
compared to the prior year. As a result, the Company's total cash
balance declined to $1.2 million on
March 31, 2023.
Mr. Farrell concluded, "While certain of our first-quarter
results were an improvement over the fourth quarter, our team
continues to focus on improving our operations and driving
profitability. Our actions are shaped by the four key
objectives of our strategic vision: profitable growth, people
centric culture, operational excellence, and quality. Our
revitalized culture of integrity, accountability, and transparency
will continue to propel Servotronics as we bring in new talent and
leaders to drive continuous improvement in every aspect of our
operations. While we have made considerable progress so far, we
realize there is much work left to do, so we will continue to
prioritize growth and profitability which will help drive
sustainable long-term value for all of our stakeholders."
ABOUT SERVOTRONICS
The Company is composed of two groups – the Advanced Technology
Group (ATG) and the Consumer Products Group (CPG). The ATG
primarily designs, develops and manufactures servo controls and
other components for various commercial and government applications
(i.e., aircraft, jet engines, missiles, manufacturing equipment,
etc.). The CPG designs and manufactures cutlery, bayonets, pocket
knives, machetes and combat knives, survival, sporting,
agricultural knives and other edged products for both commercial
and government applications.
FORWARD-LOOKING STATEMENTS
This news release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this release, the words "project,"
"believe," "plan," "anticipate," "expect" and similar expressions
are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words.
Forward-looking statements involve numerous risks and uncertainties
which may cause the actual results of the Company to be materially
different from future results expressed or implied by such
forward-looking statements. There are a number of factors that will
influence the Company's future operations, including: uncertainties
in today's global economy, including political risks, adverse
changes in legal and regulatory environments, and difficulty in
predicting defense appropriations, the introduction of new
technologies and the impact of competitive products, the vitality
of the commercial aviation industry and its ability to purchase new
aircraft, the willingness and ability of the Company's customers to
fund long-term purchase programs, and market demand and acceptance
both for the Company's products and its customers' products which
incorporate Company-made components, the Company's ability to
accurately align capacity with demand, the availability of
financing and changes in interest rates, the outcome of pending and
potential litigation, the severity, magnitude and duration of the
COVID-19 pandemic, including impacts of the pandemic and of
businesses' and governments' responses to the pandemic on our
operations and personnel, and on commercial activity and demand
across our and our customers' businesses, and on global supply
chains, the ability of the Company to obtain and retain key
executives and employees and the additional risks discussed in the
Company's filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect management's analysis
only as of the date hereof. The Company assumes no obligation to
update forward-looking statements, whether as a result of new
information, future events or otherwise.
SERVOTRONICS, INC. (SVT) IS LISTED ON NYSE America
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
($000's omitted except
share and per share data)
|
|
|
|
|
March
31,
|
December
31,
|
|
|
|
2023
|
2022
|
|
|
|
(Unaudited)
|
(Audited)
|
Current
assets:
|
|
|
|
Cash
|
$
671
|
$
4,004
|
|
Cash,
restricted
|
500
|
$
-
|
|
Accounts receivable,
net
|
10,746
|
9,469
|
|
Inventories,
net
|
20,007
|
19,044
|
|
Prepaid income
taxes
|
138
|
138
|
|
Other current
assets
|
1,619
|
597
|
|
|
Total current
assets
|
33,681
|
33,252
|
|
|
|
|
|
Property, plant and
equipment, net
|
10,790
|
10,656
|
|
|
|
|
|
Deferred income
taxes
|
1,067
|
1,072
|
|
|
|
|
|
Other non-current
assets
|
311
|
314
|
|
|
|
|
|
Total
Assets
|
$
45,849
|
$
45,294
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
939
|
$
-
|
|
Current portion of
equipment financing and capital leases
|
-
|
501
|
|
Current portion of
postretirement benefits
|
87
|
87
|
|
Accounts
payable
|
4,085
|
3,113
|
|
Accrued employee
compensation and benefits costs
|
1,377
|
1,163
|
|
Accrued
warranty
|
594
|
581
|
|
Other accrued
liabilities
|
1,150
|
762
|
|
|
Total current
liabilities
|
8,232
|
6,207
|
|
|
|
|
|
Long-term
debt
|
-
|
-
|
|
|
|
|
|
Post retirement
obligation
|
3,998
|
3,975
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common stock, par value
$0.20; authorized 4,000,000
|
|
|
|
shares; issued
2,629,052 shares; outstanding
|
|
|
|
2,484,042
(2,483,318 - 2022) shares
|
523
|
523
|
|
Capital in excess of
par value
|
14,573
|
14,556
|
|
Retained
earnings
|
22,194
|
23,741
|
|
Accumulated other
comprehensive loss
|
(2,324)
|
(2,337)
|
|
Employee stock
ownership trust commitment
|
(157)
|
(157)
|
|
Treasury stock, at cost
103,739 (104,464 - 2022) shares
|
(1,190)
|
(1,214)
|
|
|
Total shareholders'
equity
|
33,619
|
35,112
|
|
|
|
|
|
Total Liabilities
and Shareholders' Equity
|
$
45,849
|
$
45,294
|
SERVOTRONICS, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
($000's omitted except
per share data)
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2023
|
2022
|
|
|
|
|
Revenue
|
|
$
10,802
|
$
11,168
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
Cost of goods sold,
inclusive of depreciation and amortization
|
9,887
|
8,211
|
Gross
profit
|
|
915
|
2,957
|
|
|
|
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative
|
|
2,826
|
2,501
|
Total operating
expenses
|
|
2,826
|
2,501
|
Operating
(loss)/income
|
|
(1,911)
|
456
|
|
|
|
|
Other
(expense)/income:
|
|
|
|
Interest
expense
|
|
(53)
|
(70)
|
Gain on sale of
equipment
|
|
-
|
26
|
Total other expense,
net
|
|
(53)
|
(44)
|
|
|
|
|
(Loss)/income before
income taxes
|
|
(1,964)
|
412
|
|
|
|
|
Income tax
benefit/(provision)
|
|
417
|
(87)
|
|
|
|
|
Net
(loss)/income
|
|
$
(1,547)
|
$
325
|
|
|
|
|
|
|
|
|
Income per
share:
|
|
|
|
Basic
|
|
|
|
Net income per
share
|
|
$
(0.63)
|
$
0.13
|
|
|
|
|
Diluted
|
|
|
|
Net income per
share
|
|
$
(0.63)
|
$
0.13
|
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
($000's
omitted)
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2023
|
2022
|
Cash flows related
to operating activities:
|
|
|
|
Net (Loss)
Income
|
$
(1,547)
|
$
325
|
|
Adjustments to
reconcile net (loss) income to net cash
|
|
|
|
used by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
306
|
313
|
|
|
Gain on sale of
equipment
|
-
|
(26)
|
|
|
Stock based
compensation
|
55
|
25
|
|
|
(Decrease)/increase in
allowance for credit losses
|
(10)
|
65
|
|
|
(Decrease)/increase in
inventory reserve
|
(175)
|
168
|
|
|
Increase in warranty
reserve
|
13
|
-
|
|
|
Deferred income
taxes
|
2
|
-
|
Change in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
(1,267)
|
(2,171)
|
|
Inventories
|
(788)
|
(222)
|
|
Prepaid income
taxes
|
-
|
199
|
|
Other current
assets
|
(1,022)
|
(783)
|
|
Accounts
payable
|
972
|
1,669
|
|
Accrued employee
compensation and benefit costs
|
200
|
(72)
|
|
Post retirement
obligation
|
39
|
34
|
|
Other accrued
liabilities
|
388
|
(68)
|
|
Accrued income
taxes
|
-
|
-
|
|
|
|
|
|
|
Net cash used by
operating activities
|
(2,834)
|
(544)
|
|
|
|
|
|
|
Cash flows related
to investing activities:
|
|
|
|
Capital expenditures -
property, plant and equipment
|
(437)
|
(115)
|
|
Proceeds from sale of
assets
|
-
|
38
|
|
|
|
|
|
|
Net cash used by
investing activities
|
(437)
|
(77)
|
|
|
|
|
|
|
Cash flows related
to financing activities:
|
|
|
|
Principal payments on
equipment financing lease/note obligations
|
(501)
|
(70)
|
|
Proceeds from line of
credit, net
|
939
|
-
|
|
|
|
|
|
|
Net cash provided
(used) by financing activities
|
438
|
(70)
|
|
|
|
|
|
|
Net decrease in cash
and restricted cash
|
(2,833)
|
(691)
|
|
|
|
|
|
|
Cash and restricted
cash at beginning of period
|
4,004
|
9,546
|
|
|
|
|
|
|
Cash and restricted
cash at end of period
|
$
1,171
|
$
8,855
|
SERVOTRONICS, INC.
AND SUBSIDIARIES
BUSINESS
SEGMENTS
|
|
|
|
($000's omitted
except per share data)
|
|
|
ATG
|
CPG
|
Consolidated
|
|
|
Three Months
Ended
|
Three Months
Ended
|
Three Months
Ended
|
|
|
March
31,
|
March
31,
|
March
31,
|
|
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
Revenues from
unaffiliated customers
|
$
9,060
|
$
9,168
|
$
1,742
|
$
2,000
|
$
10,802
|
$
11,168
|
|
|
|
|
|
|
|
|
Cost of goods sold,
inclusive of depreciation
|
(8,076)
|
(6,496)
|
(1,811)
|
(1,715)
|
(9,887)
|
$
(8,211)
|
Gross profit
(loss)
|
984
|
2,672
|
(69)
|
285
|
915
|
2,957
|
|
Gross margin
%
|
10.9 %
|
29.1 %
|
(4.0) %
|
14.3 %
|
8.5 %
|
26.5 %
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Selling, general and
administrative
|
(2,175)
|
(2,093)
|
(651)
|
(408)
|
(2,826)
|
(2,501)
|
Total operating
costs and expenses
|
(10,251)
|
(8,589)
|
(2,462)
|
(2,123)
|
(12,713)
|
(10,712)
|
Operating
(loss)/income
|
(1,191)
|
579
|
(720)
|
(123)
|
(1,911)
|
456
|
|
|
|
|
|
|
|
|
Other
(expenses)/income:
|
|
|
|
|
|
|
Interest
expense
|
(53)
|
(70)
|
-
|
-
|
(53)
|
(70)
|
Gain on sale of
equipment
|
-
|
26
|
-
|
-
|
-
|
26
|
Total other
expenses, net
|
(53)
|
(44)
|
-
|
-
|
(53)
|
(44)
|
(Loss)/income before
income tax provision
|
(1,244)
|
535
|
(720)
|
(123)
|
(1,964)
|
412
|
Income tax
benefit/(provision)
|
264
|
(113)
|
153
|
26
|
417
|
(87)
|
Net
(loss)/income
|
$
(980)
|
$
422
|
$
(567)
|
$
(97)
|
$
(1,547)
|
$
325
|
|
|
|
|
|
|
|
|
Total assets
|
$
36,096
|
$
42,382
|
$
9,753
|
$
9,546
|
$
45,849
|
$
51,928
|
Capital expenditures,
net
|
$
302
|
$
77
|
$
135
|
$
-
|
$
437
|
$
77
|
Foreign derived
sales
|
$
2,023
|
$
2,962
|
$
63
|
$
37
|
$
2,086
|
$
2,999
|
View original
content:https://www.prnewswire.com/news-releases/servotronics-announces-first-quarter-2023-financial-results-301823990.html
SOURCE Servotronics, Inc.