-- Anticipated first quarter 2022 total
revenue growth on improving Advanced Technology Group sales is
attributed to process improvements and maintenance of production
capabilities, including
Servotronics' highly skilled workforce, over the last two years
--
ELMA,
N.Y., March 31, 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 fourth
quarter and twelve months ended December 31,
2021 including net income growth and record high levels of
operating cash flow and year-end cash.
The company reported net income of $4.1
million, or $1.68 per diluted
share, in 2021, its highest level since 2015 and up from
$100,000, or $0.04, in 2020.
Net income in 2021 reflected the impact of $1.9 million in legal settlement expenses
associated with the resolution of previously disclosed commercial
litigation, which were offset by $9.6
million in other income from Paycheck Protection Program
("PPP") loan forgiveness and employee retention credits ("ERC").
The federal PPP and ERC stimulus programs supported successful
efforts to prevent involuntary workforce reductions since the
outset of the Covid-19 pandemic, as part of a strategy to recruit
and retain the Servotronics advanced manufacturing employees who
are essential to the company's ability to meet and exceed
commercial, government, defense, and other customers' high
standards for quality, reliability and on-time delivery.
"We attribute fourth quarter 2021 revenue stability and expected
first quarter 2022 revenue growth to our commitment to use what we
viewed as a temporary delay in Servotronics' largest-customer
orders over the last two years as an opportunity for improvement,"
said Chief Operating Officer James C.
Takacs. "We implemented a number of process-improvement
initiatives, preserved inventories of essential material and
components for our proprietary products, and maintained our
production capabilities, including our advanced manufacturing and
engineering workforce in Western New
York. In 2021, we also reduced total operating costs and
expenses, and enhanced the company's cash position, positioning
Servotronics to rapidly respond to a recovery in Advanced
Technology Group orders, deliver on long-term contracts, and pursue
new markets for our products in 2022 and beyond."
As publicly announced in 2021, Servotronics Board of Directors
commenced a national search for a new chief executive officer. The
Board has also initiated the process of recruiting diverse,
highly-qualified independent directors with experience relevant to
its businesses and operations. Both of these important
initiatives are well underway.
Consolidated annual revenues were $40.6
million in 2021 compared to $49.8
million the year prior, reflecting a reduction in units
shipped by its Advanced Technology Group (ATG) and Consumer
Products Group (CPG) segments, which primarily resulted from the
impact of the pandemic on key customers.
Fourth quarter consolidated revenues remained relatively stable,
at $10.6 million in each of 2021 and
2020. Fourth quarter ATG revenues grew to $8.2 million in 2021, up 8.3% from 2020,
reflecting a recovery in units shipped. This offset fourth quarter
CPG revenue declining to $2.4
million, down 22.0% from the last three months of 2020.
Servotronics expects to report first quarter 2022 consolidated
revenue growth, over the first and fourth quarters of 2021, driven
primarily by increases in ATG revenue and units shipped under
long-term prime contracts and subcontracts. The company signed two
new long-term contracts in 2021 and one in the first quarter of
2022 with ATG customers.
($000s)
|
4Q21
|
3Q21
|
2Q21
|
1Q21
|
4Q20
|
FY21
|
FY20
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
ATG
|
$8,182
|
$8,449
|
$7,823
|
$7,223
|
$7,554
|
$31,677
|
$40,782
|
CPG
|
2,373
|
2,466
|
2,205
|
1,837
|
3,041
|
8,881
|
9,062
|
Consolidated
|
10,555
|
10,915
|
10,028
|
9,060
|
10,595
|
40,558
|
49,844
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
|
|
|
|
|
ATG
|
$1,467
|
$1,687
|
$1,581
|
$1,013
|
$609
|
$5,748
|
$7,342
|
CPG
|
-116
|
85
|
291
|
-20
|
64
|
240
|
898
|
Consolidated
|
1,351
|
1,772
|
1,872
|
993
|
673
|
5,988
|
8,240
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
|
|
|
|
|
ATG
|
17.9%
|
20.0%
|
20.2%
|
14.0%
|
8.1%
|
18.1%
|
18.0%
|
CPG
|
-4.9%
|
3.4%
|
13.2%
|
-1.1%
|
2.1%
|
2.7%
|
9.9%
|
Consolidated
|
12.8%
|
16.2%
|
18.7%
|
11.0%
|
6.4%
|
14.8%
|
16.5%
|
Consolidated gross margin was $6.0
million or 14.8% of revenue in 2021, compared to
$8.2 million or 16.5% for 2020.
ATG gross margin stability at 18.1% in 2021, up 10 basis points
from the year prior, was offset by a CPG gross margin of 2.7% in
2021, down 720 basis points from the year prior.
For the fourth quarter, consolidated gross margin increased to
$1.4 million or 12.8% of revenue in
2021, approximately doubling from the $673,000 or 6.4% reported in 2020.
The company believes that its production resources and
maintenance of a highly skilled advance manufacturing workforce
have positioned Servotronics well for recovering orders, which will
be critical to reducing per-unit costs and sustainably enhancing
gross margin. As the ATG revenue volume increases it is expected
that the utilization of the production resources will improve and
improve gross margin percentages similar to the first half of 2020.
The company also expects to see improvement in the CPG gross margin
percentages.
The company's total annual operating costs and expenses declined
on lower revenue to $45.9 million in
2021, down 7.5% from $49.6 million
the year prior to their lowest level since 2018. Fourth quarter
total operating costs and expenses declined on lower revenue to
$11.7 million in 2021, down 0.7% from
$11.8 million in 2020.
Annual operating costs and expenses in 2021 declined in spite of
the third quarter accrual of $1.9
million for legal settlements resolving two previously
disclosed and unrelated commercial litigation matters. This
included $1.8 million to resolve
litigation commenced in July 2013
with Aero, Inc. and $90,000 to
resolve litigation commenced in March
2016 with an independent contractor for one of the company's
wholly-owned subsidiaries.
Annual operating costs and expenses in 2021 also reflected
initiatives designed to recruit and retain advanced manufacturing
and engineering employees in what has been widely recognized as one
of the most competitive U.S. labor markets in generations. For
example, 2021 wage enhancements included, but were not limited to,
higher minimum starting pay for new hourly employees, higher
second-shift hourly pay, safety certification compensation, and
implementation of a pay raise across the entire workforce. In
addition, benefits enhancements include expanded time off policies,
hybrid scheduling, and flexibility including an optional four-day,
40-hour work week.
Servotronics generated all-time-high annual operating cash flow
of $4.6 million in 2021, up 455.8%
from 2020. The company's total cash balance grew by 60.8% in 2021
to a record year-end cash balance of $9.5
million on December 31. Total
working capital grew by 9.6% in 2021 to $34.1 million on December
31, primarily due to the increase in our cash position.
The company believes its cash generating capability and
financial condition, together with available credit facilities,
will be adequate to meet future operating and investing
needs. Its credit facilities include but are not limited to a
$6.0 million line of credit, of which
$4.25 million was outstanding at
December 31, 2021.
During the fourth quarter of 2021 the company completed a
previously disclosed remediation plan addressing internal controls
over financial reporting related to inventory and post-retirement
benefits. The company continues to implement a remediation plan to
address internal control deficiencies related to the assessment and
documentation of certain entity-level controls and the design and
implementation of certain IT general controls including information
technology policies, risk assessments, offsite backup, and
monitoring that were identified as of December 31, 2021 and had no material impact on
Servotronics' financial position, results of operations or cash
flows.
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, including statements the Company makes regarding expected
operating results, the utilization of production resources and
liquidity to fund its business operations. 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 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
American
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000's omitted except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Current
assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
9,546
|
|
$
|
5,935
|
Accounts receivable,
net
|
|
|
7,198
|
|
|
7,636
|
Inventories,
net
|
|
|
20,132
|
|
|
23,406
|
Prepaid income
taxes
|
|
|
792
|
|
|
483
|
Other current
assets
|
|
|
647
|
|
|
383
|
Total current
assets
|
|
|
38,315
|
|
|
37,843
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
10,557
|
|
|
12,017
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
|
900
|
|
|
137
|
|
|
|
|
|
|
|
Other non-current
assets
|
|
|
321
|
|
|
331
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
50,093
|
|
$
|
50,328
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
—
|
|
$
|
2,334
|
Current portion of
equipment financing and finance leases
|
|
|
276
|
|
|
301
|
Dividend
payable
|
|
|
—
|
|
|
12
|
Accounts
payable
|
|
|
663
|
|
|
1,599
|
Accrued employee
compensation and benefits costs
|
|
|
1,759
|
|
|
1,649
|
Current portion of post
retirement obligation
|
|
|
136
|
|
|
—
|
Other accrued
liabilities
|
|
|
1,414
|
|
|
874
|
Total current
liabilities
|
|
|
4,248
|
|
|
6,769
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
4,750
|
|
|
7,293
|
|
|
|
|
|
|
|
Post retirement
obligation
|
|
|
5,729
|
|
|
2,529
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock, par value
$0.20; authorized 4,000,000 shares; issued 2,614,506 shares;
outstanding 2,435,032 (2,416,683 - 2020) shares
|
|
|
523
|
|
|
523
|
Capital in excess of
par value
|
|
|
14,500
|
|
|
14,481
|
Retained
earnings
|
|
|
25,858
|
|
|
21,803
|
Accumulated other
comprehensive loss
|
|
|
(3,908)
|
|
|
(1,356)
|
Employee stock
ownership trust commitment
|
|
|
(258)
|
|
|
(359)
|
Treasury stock, at cost
122,839 (126,079 - 2020) shares
|
|
|
(1,349)
|
|
|
(1,355)
|
Total shareholders'
equity
|
|
|
35,366
|
|
|
33,737
|
|
|
|
|
|
|
|
Total Liabilities
and Shareholders' Equity
|
|
$
|
50,093
|
|
$
|
50,328
|
SERVOTRONICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's omitted except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Revenue
|
|
$
|
40,558
|
|
$
|
49,844
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of goods sold,
inclusive of depreciation and amortization
|
|
|
34,570
|
|
|
41,604
|
Gross margin
|
|
|
5,988
|
|
|
8,240
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
9,423
|
|
|
7,998
|
Legal settlement
awards
|
|
|
1,890
|
|
|
—
|
Total operating
expenses
|
|
|
11,313
|
|
|
7,998
|
Operating
(loss)/income
|
|
|
(5,325)
|
|
|
242
|
|
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
|
|
|
Employee retention
credit (ERC)
|
|
|
5,622
|
|
|
—
|
Paycheck Protection
Program loan forgiveness
|
|
|
4,000
|
|
|
—
|
Loss on sale of
equipment
|
|
|
(98)
|
|
|
—
|
Interest expense,
net
|
|
|
(187)
|
|
|
(180)
|
Total other
income/(expense)
|
|
|
9,337
|
|
|
(180)
|
|
|
|
|
|
|
|
Income before income
tax provision
|
|
|
4,012
|
|
|
62
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
(43)
|
|
|
(38)
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
4,055
|
|
$
|
100
|
|
|
|
|
|
|
|
Income per
share:
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
Net income per
share
|
|
$
|
1.68
|
|
$
|
0.04
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
Net income per
share
|
|
$
|
1.68
|
|
$
|
0.04
|
SERVOTRONICS, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS ($000's omitted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Cash flows related
to operating activities:
|
|
|
|
|
|
|
Net Income
|
|
$
|
4,055
|
|
$
|
100
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
Paycheck Protection
loan forgiveness
|
|
|
(4,000)
|
|
|
—
|
Depreciation and
amortization
|
|
|
1,368
|
|
|
1,442
|
Loss/(Gain) on disposal
of property
|
|
|
98
|
|
|
(1)
|
Stock based
compensation
|
|
|
106
|
|
|
339
|
(Decrease) in allowance
for doubtful accounts
|
|
|
(57)
|
|
|
(149)
|
Increase in inventory
reserve
|
|
|
22
|
|
|
283
|
Increase/(Decrease) in
warranty reserve
|
|
|
129
|
|
|
(38)
|
Deferred income
taxes
|
|
|
(84)
|
|
|
(30)
|
|
|
|
|
|
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
495
|
|
|
5,696
|
Inventories
|
|
|
3,252
|
|
|
(3,538)
|
Prepaid income
taxes
|
|
|
(309)
|
|
|
(67)
|
Other current
assets
|
|
|
(264)
|
|
|
139
|
Accounts
payable
|
|
|
(948)
|
|
|
(2,859)
|
Accrued employee
compensation and benefit costs
|
|
|
110
|
|
|
(634)
|
Other accrued
liabilities
|
|
|
412
|
|
|
(126)
|
Post retirement
obligation
|
|
|
105
|
|
|
168
|
Employee stock
ownership trust payment
|
|
|
101
|
|
|
101
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
4,591
|
|
|
826
|
|
|
|
|
|
|
|
Cash flows related
to investing activities:
|
|
|
|
|
|
|
Capital expenditures -
property, plant and equipment
|
|
|
(267)
|
|
|
(729)
|
Proceeds from sale of
assets
|
|
|
270
|
|
|
—
|
Net cash provided
(used) by investing activities
|
|
|
3
|
|
|
(729)
|
|
|
|
|
|
|
|
Cash flows related
to financing activities:
|
|
|
|
|
|
|
Principal payments on
long-term debt
|
|
|
(1,334)
|
|
|
(547)
|
Principal payments on
equipment financing lease obligations
|
|
|
(452)
|
|
|
(294)
|
Proceeds from equipment
note and equipment financing lease
|
|
|
384
|
|
|
—
|
Proceeds from line of
credit
|
|
|
500
|
|
|
750
|
Purchase of treasury
shares
|
|
|
(81)
|
|
|
(100)
|
Proceeds from paycheck
protection program
|
|
|
—
|
|
|
4,000
|
|
|
|
|
|
|
|
Net cash (used)
provided by financing activities
|
|
|
(983)
|
|
|
3,809
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
3,611
|
|
|
3,906
|
|
|
|
|
|
|
|
Cash at beginning of
year
|
|
|
5,935
|
|
|
2,029
|
|
|
|
|
|
|
|
Cash at end of
year
|
|
$
|
9,546
|
|
$
|
5,935
|
SERVOTRONICS, INC.
AND SUBSIDIARIES BUSINESS SEGMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000's omitted except
per share data)
|
|
|
|
ATG
|
|
CPG
|
|
Consolidated
|
|
|
|
Years Ended
|
|
Years Ended
|
|
Years Ended
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues from
unaffiliated customers
|
|
$
|
31,677
|
|
$
|
40,782
|
|
$
|
8,881
|
|
$
|
9,062
|
|
$
|
40,558
|
|
$
|
49,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold,
inclusive of depreciation
|
|
|
(25,929)
|
|
|
(33,440)
|
|
|
(8,641)
|
|
|
(8,164)
|
|
|
(34,570)
|
|
|
(41,604)
|
|
Gross margin
|
|
|
5,748
|
|
|
7,342
|
|
|
240
|
|
|
898
|
|
|
5,988
|
|
|
8,240
|
|
Gross margin
%
|
|
|
18.1
|
%
|
|
18.0
|
%
|
|
2.7
|
%
|
|
9.9
|
%
|
|
14.8
|
%
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
(7,661)
|
|
|
(6,245)
|
|
|
(1,762)
|
|
|
(1,753)
|
|
|
(9,423)
|
|
|
(7,998)
|
|
Legal settlement
awards
|
|
|
(1,800)
|
|
|
—
|
|
|
(90)
|
|
|
—
|
|
|
(1,890)
|
|
|
—
|
|
Total operating
expenses
|
|
|
(9,461)
|
|
|
(6,245)
|
|
|
(1,852)
|
|
|
(1,753)
|
|
|
(11,313)
|
|
|
(7,998)
|
|
Operating
(loss)/income
|
|
|
(3,713)
|
|
|
1,097
|
|
|
(1,612)
|
|
|
(855)
|
|
|
(5,325)
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
employee retention credit (ERC)
|
|
|
4,584
|
|
|
—
|
|
|
1,038
|
|
|
—
|
|
|
5,622
|
|
|
—
|
|
Other income: PPP
loan forgiveness
|
|
|
4,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,000
|
|
|
—
|
|
Interest
expense
|
|
|
(185)
|
|
|
(170)
|
|
|
(2)
|
|
|
(10)
|
|
|
(187)
|
|
|
(180)
|
|
Loss on sale of
equipment
|
|
|
(98)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(98)
|
|
|
—
|
|
Total other
income/(expense)
|
|
|
8,301
|
|
|
(170)
|
|
|
1,036
|
|
|
(10)
|
|
|
9,337
|
|
|
(180)
|
|
Income (loss) before
income tax provision
|
|
|
4,588
|
|
|
927
|
|
|
(576)
|
|
|
(865)
|
|
|
4,012
|
|
|
62
|
|
Income tax provision
expense/(benefit)
|
|
|
78
|
|
|
492
|
|
|
(121)
|
|
|
(530)
|
|
|
(43)
|
|
|
(38)
|
|
Net
income/(loss)
|
|
$
|
4,510
|
|
$
|
435
|
|
$
|
(455)
|
|
$
|
(335)
|
|
$
|
4,055
|
|
$
|
100
|
|
1110 Maple
Street ♦ P.O. Box 300 ♦ Elma, New York 14059-0300 ♦
716-655-5990 ♦ FAX 716-655-6012
View original
content:https://www.prnewswire.com/news-releases/servotronics-announces-2021-financial-results-including-eps-of-1-68--record-operating-cash-flow-lower-total-operating-costs-and-expenses-and-enhanced-balance-sheet-strength-301515284.html
SOURCE Servotronics, Inc.