-- Actions to increase production to meet
strong market demand drove 31% top-line growth --
-- Gross margin rose 770 basis points compared
to prior-year quarter driven by higher volumes and production
improvements --
ELMA,
N.Y., Nov. 9, 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 third quarter and nine
months ended September 30, 2023.
Servotronics achieved significant growth in revenue, gross
margin and operating income in the third quarter of 2023.
This is aligned with prior expectations of a strong second half of
2023. The Company continues to execute against its long-term
strategic plan and has expanded production output to meet growing
industry demand. A solid backlog and improved operational
efficiencies have positioned the Company for continued sequential
growth for the remainder of 2023 and into 2024.
As previously announced, during the second quarter, the Company
divested and is winding down the assets of the Consumer Products
Group (CPG) business segment. Accordingly, the financial results of
the CPG segment have been classified as discontinued operations for
all periods presented. Unless otherwise noted, all financial
results are based on the results of continuing
operations.
Highlights for the third quarter financial results include:
- Revenues were $11.6 million, up
31.3% from $8.8 million in the third
quarter of 2022.
- Gross profit more than doubled to $2.5
million or 21.6% of revenue in the third quarter, up from
$1.2 million, or 13.9% of revenue in
the third quarter of 2022.
- Operating income improved by $1.0
million compared to the third quarter of 2022.
- Net income from continuing operations was $0.2 million, or $0.07 per diluted share in the third quarter of
2023, compared to a net loss from continuing operations of
$0.6 million, or ($0.24) per diluted share in the third quarter of
2022.
"Ongoing investments in our people, operations, and product
quality strengthened our output in the third quarter to meet the
growing demand for Servotronics products. With our
strong backlog we expect continued top-line growth in the fourth
quarter of the year and into 2024," said Chief Executive Officer
William F. Farrell, Jr. "I am
incredibly proud of our team and the strides taken towards
achieving our long-term goals. As we focus on executing our
strategic growth and profitability improvement plan, we will
continue to capitalize on opportunities in the strong aerospace
market and will drive improved operating results, all leading to
enhanced shareholder value."
Business Results
|
000's
|
Three Months
Ended
|
|
Sep 30, 2023
|
|
Sep 30, 2022
|
|
$ Change
|
|
% Change
|
|
Revenue
|
$
11,582
|
|
$
8,823
|
|
$
2,760
|
|
31.3 %
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
9,083
|
|
7,596
|
|
1,483
|
|
19.5 %
|
|
Gross Profit
|
2,499
|
|
1,227
|
|
1,272
|
|
103.7 %
|
|
Gross Margin
|
21.6 %
|
|
13.9 %
|
|
|
|
7.7 %
|
|
|
|
|
|
|
|
|
|
SG&A
Expenses
|
2,219
|
|
1,918
|
|
301
|
|
15.7 %
|
|
as a % of
Revenue
|
19.2 %
|
|
21.7 %
|
|
10.9 %
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)
|
$
280
|
|
$
(691)
|
|
$
971
|
|
140.5 %
|
|
Operating
Margin
|
2.4 %
|
|
(7.8 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
(98)
|
|
(50)
|
|
(48)
|
|
96.0 %
|
|
Tax
Benefit/(Expense)
|
-
|
|
154
|
|
(154)
|
|
(100.0 %)
|
|
Net Income (Loss)
from Continuing Operations
|
$
182
|
|
$
(587)
|
|
$
769
|
|
(131.0 %)
|
Servotronics' Chief Financial Officer Robert A. Fraass commented, "Our financial
results in the third quarter demonstrate the potential operating
leverage embedded in our operating model. The Servotronics
team's efforts to increase output, along with our lean initiatives
and focus on continuous improvement, enabled us to generate a
significant increase in gross profit on a 31% increase in sales."
Revenues increased to $11.6
million in the 2023 third quarter, up 31.3% from the third
quarter of 2022, due primarily to increased sales volume driven by
the growth of the commercial aircraft market and increased unit
volumes achieved during the period.
For the third quarter, gross profit increased 103.7% to
$2.5 million, or 21.6% of sales, up
from $1.2 million, or 13.9% of sales
in the prior-year period. Gross profit benefited from
increased sales volumes resulting in favorable production
efficiencies and lower overhead costs.
Third-quarter SG&A expenses increased approximately
$0.3 million compared to the
prior-year period. SG&A expenses were driven primarily by
increased sales & marketing personnel costs and higher R&D
costs attributable to projects focused on expanding the product
portfolio.
Net income from continuing operations was $0.2 million compared to a net loss from
continuing operations of $0.6 million
in the third quarter of 2022.
During the third quarter, Servotronics executed the sale of
assets of The Ontario Knife Company on August 1, 2023 and closed operations. The
third quarter loss from discontinued operations was $0.4 million, and the Company will continue to
wind down and divest the Consumer Products Group business segment,
which should be substantially complete by the end of 2023.
Mr. Farrell concluded, "The third quarter results demonstrate
another step towards achieving our short-term strategic objectives.
We will continue to grow as we achieve production rates aligned
with our aerospace customers while we also diversify into new
markets. The efforts of the Servotronics' team are resulting
in operational gains which will create value for all
stakeholders. I look forward to seeing additional progress
over the upcoming quarters."
ABOUT SERVOTRONICS
Servotronics designs, develops and manufactures servo controls
and other components for various commercial and government
applications including aircraft, jet engines, missiles,
manufacturing equipment and other aerospace applications at its
operating facilities in Elma and
Franklinville, New York.
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)
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
2023
|
|
2022
|
|
|
|
(Unaudited)
|
|
(Reclassified)
|
|
Current
assets:
|
|
|
|
|
Cash
|
$
158
|
|
$
3,812
|
|
Cash,
restricted
|
150
|
|
-
|
|
Accounts receivable,
net
|
12,297
|
|
8,453
|
|
Inventories,
net
|
15,048
|
|
14,286
|
|
Prepaid income
taxes
|
139
|
|
138
|
|
Other current
assets
|
727
|
|
477
|
|
Assets related to
discontinued operation
|
1,981
|
|
9,528
|
|
|
Total current
assets
|
30,500
|
|
36,694
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
7,172
|
|
7,355
|
|
|
|
|
|
|
|
Deferred income taxes,
net
|
-
|
|
1,072
|
|
|
|
|
|
|
|
Other non-current
assets
|
42
|
|
173
|
|
|
|
|
|
|
|
Total
Assets
|
$
37,714
|
|
$
45,294
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Line of
credit
|
$
2,164
|
|
$
-
|
|
Current portion of
eqiupment financing and capital leases
|
-
|
|
501
|
|
Current portion of post
retirement obligation
|
87
|
|
87
|
|
Accounts
payable
|
2,958
|
|
1,840
|
|
Accrued employee
compensation and benefits costs
|
1,286
|
|
1,057
|
|
Accrued
warranty
|
544
|
|
581
|
|
Other accrued
liabilities
|
925
|
|
396
|
|
Liabilities related to
discontinued operation
|
1,741
|
|
1,745
|
|
|
Total current
liabilities
|
9,705
|
|
6,207
|
|
|
|
|
|
|
|
Post retirement
obligation
|
3,996
|
|
3,975
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.20; authorized 4,000,000
|
|
|
|
|
shares; issued
2,629,052 shares; outstanding
|
|
|
|
|
2,496,211 (2,483,318 -
2022) shares
|
525
|
|
523
|
|
Capital in excess of
par value
|
14,603
|
|
14,556
|
|
Retained
earnings
|
12,489
|
|
23,741
|
|
Accumulated other
comprehensive loss
|
(2,295)
|
|
(2,337)
|
|
Employee stock
ownership trust commitment
|
(157)
|
|
(157)
|
|
Treasury stock, at cost
91,570 (104,464 - 2022) shares
|
(1,152)
|
|
(1,214)
|
|
|
Total shareholders'
equity
|
24,013
|
|
35,112
|
|
|
|
|
|
|
|
Total Liabilities
and Shareholders' Equity
|
$
37,714
|
|
$
45,294
|
|
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
($000's omitted except per share data)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
11,582
|
|
$
8,823
|
|
$
31,291
|
|
$
26,739
|
|
|
|
|
|
|
|
|
|
|
Costs of goods sold,
inclusive of depreciation
|
|
|
|
|
|
|
|
|
and
amortization
|
9,083
|
|
7,596
|
|
26,252
|
|
21,814
|
|
Gross
profit
|
2,499
|
|
1,227
|
|
5,039
|
|
4,925
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
2,219
|
|
1,918
|
|
7,663
|
|
5,919
|
|
Total operating costs
and expenses
|
11,302
|
|
9,514
|
|
33,915
|
|
27,733
|
|
Operating
income/(loss)
|
280
|
|
(691)
|
|
(2,624)
|
|
(994)
|
|
|
|
|
|
|
|
|
|
|
Other
(expense)/income:
|
|
|
|
|
|
|
|
|
Interest
expense
|
(98)
|
|
(50)
|
|
(239)
|
|
(194)
|
|
Gain on sale of
equipment
|
-
|
|
-
|
|
-
|
|
26
|
|
Total other
(expense)/income, net
|
(98)
|
|
(50)
|
|
(239)
|
|
(168)
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from
continuing operations before income
taxes
|
182
|
|
(741)
|
|
(2,863)
|
|
(1,162)
|
|
Income tax
benefit/(expense)
|
-
|
|
154
|
|
(1,063)
|
|
234
|
|
Income/(loss) from
continuing operations
|
182
|
|
(587)
|
|
(3,926)
|
|
(928)
|
|
(Loss)/income from
discontinued operation, net of tax (Note 2)
|
(386)
|
|
271
|
|
(7,326)
|
|
127
|
|
Net
loss
|
$
(204)
|
|
$
(316)
|
|
$ (11,252)
|
|
$
(801)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income/(loss) per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
0.07
|
|
$
(0.24)
|
|
$
(1.59)
|
|
$
(0.38)
|
|
Discontinued
operation
|
(0.16)
|
|
0.11
|
|
(2.97)
|
|
0.05
|
|
Basic and diluted loss
per share
|
$
(0.09)
|
|
$
(0.13)
|
|
$
(4.56)
|
|
$
(0.33)
|
|
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
($000's omitted)
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
|
|
|
2023
|
|
2022
|
|
Cash flows related
to operating activities:
|
|
|
|
|
Loss from continuing
operations
|
$
(3,926)
|
|
$
(928)
|
|
Adjustments to
reconcile net loss to net cash used
|
|
|
|
|
by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
790
|
|
751
|
|
|
Stock based
compensation
|
110
|
|
126
|
|
|
Decrease in allowance
for credit losses
|
8
|
|
5
|
|
|
Increase (decrease) in
inventory reserve
|
34
|
|
(112)
|
|
|
(Decrease) increase in
warranty reserve
|
(37)
|
|
32
|
|
|
Deferred income
taxes
|
1,077
|
|
24
|
|
|
Gain on sale of
equipment
|
-
|
|
(26)
|
|
Change in assets and
liabilities:
|
|
|
|
|
Accounts
receivable
|
(3,852)
|
|
(3,772)
|
|
Inventories
|
(796)
|
|
1,928
|
|
Prepaid income
taxes
|
(1)
|
|
527
|
|
Other current
assets
|
(250)
|
|
(233)
|
|
Accounts
payable
|
1,118
|
|
1,467
|
|
Accrued employee
compensation and benefit costs
|
229
|
|
(66)
|
|
Post retirement
obligations
|
59
|
|
86
|
|
Other accrued
liabilities
|
529
|
|
44
|
|
|
|
|
|
|
|
|
Net cash used in
operating activities from continuing operations
|
(4,908)
|
|
(147)
|
|
Cash flows related
to investing activities:
|
|
|
|
|
Capital expenditures -
property, plant and equipment
|
(606)
|
|
(879)
|
|
Proceeds from sale of
assets
|
-
|
|
38
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities from continuing operations
|
(606)
|
|
(841)
|
|
|
|
|
|
|
|
|
Cash flows related
to financing activities:
|
|
|
|
|
Advances on line of
credit, net of payments
|
2,164
|
|
-
|
|
Principal payments on
long-term debt
|
-
|
|
(4,250)
|
|
Principal payments on
equipment financing lease obligations
|
(501)
|
|
(210)
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing activities from continuing
operations
|
1,663
|
|
(4,460)
|
|
Discontinued
Operation
|
|
|
|
|
Cash (used in) provided
by operating activites
|
(1,753)
|
|
151
|
|
Cash provided by
investing activities
|
2,100
|
|
-
|
|
Net cash provided by
operating and investing activities from discontinued
operation
|
347
|
|
151
|
|
Net decrease in cash
and restricted cash
|
(3,504)
|
|
(5,297)
|
|
Cash and restricted
cash at beginning of period
|
3,812
|
|
9,433
|
|
Cash and restricted
cash at end of period
|
$
308
|
|
$
4,136
|
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SOURCE Servotronics, Inc.