-- Revenue expected to increase in the fourth quarter of 2022 driven by increasing order volume from Servotronics' Advanced Technology Group --

ELMA, N.Y., Nov. 14, 2022 /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 quarter and nine months ended September 30, 2022.

The Company reported third quarter 2022 net loss of $(316,000), or $(0.13) per diluted share as compared to third quarter 2021 net income of $3.2 million, or $1.34 per diluted share.   In the third quarter of 2021, the Company's net income included non-recurring other income related to two COVID-19 government assistance programs as well as non-recurring expenses related to legal settlement awards. See the Condensed Consolidated Statements of Operations below and the Company's Quarterly Report on Form 10-Q for additional information regarding these non-recurring items.

Consolidated revenues were $11.0 million in the third quarter of 2022 compared to $10.9 million for the same period last year.  The modest revenue growth in the third quarter of 2022 benefited from the recovery of business within the commercial aircraft market for the Advanced Technology Group (ATG) as well as a shift in product mix toward higher-priced products in that segment.  That growth was partially offset by reduced volumes and lower-priced products sold by the Consumer Products Group (CPG).  For the quarter, ATG revenue grew to $8.8 million in 2022, increasing 4.4% from $8.4 million last year, and CPG revenue was $2.2 million in 2022, decreasing 12.1% from $2.5 million in 2021.

Revenues increased $3.4 million, or 11.3% in the first nine months of 2022 compared to the first nine months of 2021. Net loss for the nine-month period ended September 30, 2022 was $(801,000), or $(0.33) per diluted share as compared to net income of $5.0 million, or $2.06 per diluted share for the same period last year.

"Our third quarter continued the improvements in performance in 2022" said Chief Executive Officer William F Farrell, Jr.  "We believe our recently-announced, updated strategy will allow us to capitalize on increased customer demand and the strength of the commercial aircraft market as well allow us to enter potential new markets. As we grow and retain our group of dedicated team members, we anticipate temporary pressure on margins, however, we believe these investments are necessary now to support the growth we anticipate as we head into 2023 and beyond. I am very optimistic that Servotronics is well positioned for future success."

Growth in consolidated revenue is expected to continue in the fourth quarter of 2022 and into 2023 as compared to the same periods in prior years.  This will be driven primarily by anticipated increases in ATG revenue and units shipped under long-term prime contracts and subcontracts.

($000s, unaudited)

3Q22

2Q22

1Q22

FY22 to date

4Q21

3Q21

2Q21

1Q21

FY21











Revenue










ATG

$   8,823

$   8,748

$   9,168

$        26,739

$   8,182

$   8,449

$   7,823

$   7,223

$ 31,677

CPG

2,168

2,482

2,000

6,650

2,373

2,466

2,205

1,837

8,881

Consolidated

$ 10,991

$ 11,230

$ 11,168

$        33,389

$ 10,555

$ 10,915

$ 10,028

$   9,060

$ 40,558

Gross Profit










ATG

$       850

$       693

$   2,353

$          3,896

$   1,467

$   1,687

$   1,581

$   1,013

$   5,748

CPG

673

475

285

1,433

(116)

85

291

(20)

240

Consolidated

$   1,523

$   1,168

$   2,638

$          3,806

$   1,351

$   1,772

$   1,872

$       993

$   5,988

Gross Margin %










ATG

9.6 %

7.9 %

25.7 %

14.6 %

17.9 %

20.0 %

20.2 %

14.0 %

18.1 %

CPG

31.0 %

19.1 %

14.3 %

21.5 %

-4.9 %

3.4 %

13.2 %

-1.1 %

2.7 %

Consolidated

13.9 %

10.4 %

23.6 %

16.0 %

12.8 %

16.2 %

18.7 %

11.0 %

14.8 %

 

Third quarter consolidated gross profit was $1.5 million in 2022 compared with $1.8 million in 2021.  Gross profit as a percentage of revenue was 13.9% in 2022, declining from 16.2% in last year's quarter.  The primary contributors to the gross profit reduction were the discontinuation of the Company's participation in the New York State Shared Work Program which began in the first quarter of 2021 and ended in the third quarter of 2021 as well as increased compensation expense in third quarter 2022 to prepare for the ramp-up of production at the ATG.

A reduction in third quarter 2022 selling, general and administrative expenses (SG&A) was driven by lower legal fees at the ATG and the elimination of non-recurring legal settlements in 2021 for both segments.  Third quarter SG&A was $1.9 million in 2022, compared to $4.6 million last year which included $1.9 million of legal settlements.  Third quarter SG&A as a percentage of revenue improved to 17.7% in 2022 from 42.2% last year.

Servotronics third quarter operating loss was $(420,000) for 2022, an improvement of $2.4 million from an operating loss of $(2.8) million last year, as current year non-recurring expenses and the discontinuation of last year's non-recurring benefits were fully offset by an increase in sales and a decrease in SG&A. 

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

CONDENSED CONSOLIDATED BALANCE SHEETS

($000's omitted except share and per share data)

Unaudited










September 30, 


December 31, 



2022


2021



(Unaudited)


(Audited)

Current assets:







Cash


$

4,261


$

9,546

Accounts receivable, net



11,412



7,198

Inventories, net



18,852



20,132

Prepaid income taxes



265



792

Other current assets



904



647

Total current assets



35,694



38,315








Property, plant and equipment, net



10,558



10,557








Deferred income taxes



876



900








Other non-current assets



316



321








Total Assets


$

47,444


$

50,093








Liabilities and Shareholders' Equity







Current liabilities:







Current portion of long-term debt and finance leases


$

240


$

276

Accounts payable



3,274



663

Accrued employee compensation and benefits costs



1,645



1,759

Current portion of post retirement obligation



136



136

Other accrued liabilities



1,317



1,414

Total current liabilities



6,612



4,248

Long-term debt



326



4,750

Post retirement obligation



5,749



5,729








Shareholders' equity:







Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,614,506
shares; outstanding 2,453,406 (2,435,032 - 2021) shares



523



523

Capital in excess of par value



14,535



14,500

Retained earnings



25,057



25,858

Accumulated other comprehensive loss



(3,842)



(3,908)

Employee stock ownership trust commitment



(258)



(258)

Treasury stock, at cost 104,464 (122,839 - 2021) shares



(1,258)



(1,349)

Total shareholders' equity



34,757



35,366








Total Liabilities and Shareholders' Equity


$

47,444


$

50,093

 

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($000's omitted except per share data)

(Unaudited)








Three Months Ended


Nine Months Ended



September 30, 


September 30, 



2022


2021


2022


2021














Revenue


$

10,991


$

10,915


$

33,389


$

30,003














Costs of goods sold, inclusive of depreciation and amortization



9,468



9,143



28,060



25,366

Gross profit



1,523



1,772



5,329



4,637














Operating Expenses:













Selling, general and administrative



1,943



2,721



6,196



6,903

Legal settlement awards





1,890





1,890

Total selling, general and administrative



1,943



4,611



6,196



8,793

Total operating costs and expenses



11,411



13,754



34,256



34,159

Operating loss



(420)



(2,839)



(867)



(4,156)














Other (expense)/income:













Other income: Employee retention credit (ERC)





1,978





5,622

Other income: Paycheck Protection Program loan forgiveness





4,000





4,000

Interest expense



(50)



(5)



(194)



(132)

Gain on sale of equipment







26



Total other (expense)/income, net



(50)



5,973



(168)



9,490














(Loss)/income before income taxes



(470)



3,134



(1,035)



5,334














Income tax (benefit)/provision



(154)



(104)



(234)



369














Net (loss)/income


$

(316)


$

3,238


$

(801)


$

4,965














Income per share:













Basic













Net (loss)/income per share


$

(0.13)


$

1.34


$

(0.33)


$

2.07














Diluted













Net (loss)/income per share


$

(0.13)


$

1.34


$

(0.33)


$

2.06

 

 

 

SERVOTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($000's omitted)

(Unaudited)






Nine Months Ended



September 30, 



2022


2021

Cash flows related to operating activities:







Net (loss)/income


$

(801)


$

4,965

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:







Paycheck Protection Program loan forgiveness





(4,000)

Depreciation and amortization



916



1,043

Gain on disposal of property



(26)



Stock based compensation



126



81

Increase (decrease) in doubtful accounts



9



(34)

Decrease in inventory reserve



(111)



(75)

Increase in warranty reserve



32



14

Deferred income taxes



24



12

Change in assets and liabilities:







Accounts receivable



(4,223)



(481)

Other receivables: employee retention credit





(1,028)

Inventories



1,391



2,861

Prepaid income taxes



527



18

Other current assets



(257)



(242)

Accounts payable



2,611



(43)

Accrued employee compensation and benefit costs



(114)



509

Other accrued liabilities



(128)



2,665

Postretirement benefits



86



73

Net cash provided by operating activities



62



6,338








Cash flows related to investing activities:







Capital expenditures - property, plant and equipment



(925)



(68)

Proceeds from sale of assets



38



Net cash used by investing activities



(887)



(68)








Cash flows related to financing activities:







Principal payments on long-term debt



(4,250)



(911)

Principal payments on equipment financing lease obligations



(210)



(271)

Proceeds from equipment note and equipment financing lease obligations





384

Proceeds from the line of credit





500

Purchase of treasury shares





(81)








Net cash used by financing activities



(4,460)



(379)








Net (decrease)/increase in cash



(5,285)



5,891








Cash at beginning of period



9,546



5,935








Cash at end of period


$

4,261


$

11,826

 

Cision View original content:https://www.prnewswire.com/news-releases/servotronics-announces-financial-results-for-third-quarter-2022-301677608.html

SOURCE Servotronics, Inc.

Copyright 2022 PR Newswire

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