-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNIAV8bhMXPdHAgBDl2ly1tWHqlgaE7bloldyA+UaKgQeCbn1WT92y/gkucbdyW4 DSxs1dRIYlmr1QTEdAec1Q== 0000950152-96-002471.txt : 19960517 0000950152-96-002471.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950152-96-002471 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVOTRONICS INC /DE/ CENTRAL INDEX KEY: 0000089140 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 160837866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07109 FILM NUMBER: 96565327 BUSINESS ADDRESS: STREET 1: 1110 MAPLE ST CITY: ELMA STATE: NY ZIP: 14059 BUSINESS PHONE: 7166335990 MAIL ADDRESS: STREET 1: P O BOX 300 STREET 2: ELMA STATE: NY ZIP: 14059-0300 10-Q 1 SERVITRONICS 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - -- OF 1934 For the quarterly period ended March 31, 1996 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - -- For the transition period from ____________________ to ____________________ Commission File No. 1-7109 SERVOTRONICS, INC. - ------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 16-0837866 -------- -------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1110 Maple Street, Elma, New York 14059-0300 -------------------------------------------- (Address of principal executive offices) 716-655-5990 ------------ (Issuer's telephone number) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 . ----- ----- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at April 30, 1996 ----------------------------- ----------------------------- Common Stock, $.20 par value 2,357,738 (Including shares to be issued for stock dividend; see Note 5 to Consolidated Financial Statements) 2 INDEX -----
PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements a) Consolidated Balance Sheet, March 31, 1996 3 b) Consolidated Statement of Income, Three Months Ended March 31, 1996 and 1995 4 c) Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1996 and 1995 5 d) Notes to Consolidated Financial Statements 6 e) Signatures 9 Item 2. Management's Discussion and Analysis or Plan of Operation 10 PART II. OTHER INFORMATION Item 6(a). Exhibits 27 Financial Data Schedule
- 2 - 3 PART I FINANCIAL INFORMATION SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 ($000's omitted except per share data) (Unaudited) Assets Current assets: Cash $ 612 Accounts receivable 2,253 Inventories 7,258 Prepaid income taxes 253 Deferred tax asset 501 Other 943 -------- Total current assets 11,820 Property, plant and equipment, net 7,649 Other assets 466 -------- $ 19,935 ======== Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 226 Accounts payable 1,021 Accrued employee compensation and benefit costs 817 Other accrued liabilities 208 -------- Total current liabilities 2,272 -------- Long-term debt 6,837 Non-current deferred tax liability 635 Shareholders' equity: Common stock, par value $.20; authorized 4,000,000 shares; Issued 2,615,055 shares 523 (including 174,647 shares to be issued for Stock Dividend; see Note 5 to Consolidated Financial Statements) Capital in excess of par value 13,269 Retained earnings 683 -------- 14,475 Employee stock ownership trust commitment (3,044) Treasury stock, at cost, 257,317 shares (1,240) -------- Total shareholders' equity 10,191 -------- $ 19,935 ========
See notes to consolidated financial statements - 3 - 4 SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME ($000's omitted except per share data) (Unaudited)
Three Months Ended March 31, 1996 1995 ---- ---- Net sales $ 3,486 $ 3,937 Costs and expenses: Cost of goods sold 2,416 2,658 Selling, general and administrative 729 735 Interest 80 76 Depreciation and amortization 156 163 ------- ------- 3,381 3,632 ------- ------- Income before income taxes 105 305 Income tax provision 35 116 ------- ------- Net income $ 70 $ 189 ======= ======= Net income per share $ 0.04 * $ 0.12 ** ======= ======= *Consideration given to effect for shares issued in conjunction with the 8% stock dividend declared in May 1996 (See Note 5 to Consolidated Financial Statements). **Restated to give effect for shares issued in conjunction with the 8% stock dividend declared in May 1996 and the 6% stock dividend declared in June 1995 (See Note 5 to Consolidated Financial Statements).
See notes to consolidated financial statements - 4 - 5 SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS ($000's omitted) (Unaudited)
Three Months Ended March 31, 1996 1995 ---- ---- Cash flows related to operating activites: Net income $ 70 $ 189 Adjustments to reconcile net income to net cash provided by (used in) operating activites - Depreciation and amortization 156 163 Deferred taxes 0 1 Change in assets and liabilities - Accounts receivable 242 204 Inventories (590) (284) Prepaid income taxes 8 (25) Other current assets 7 (195) Other assets 4 4 Accounts payable 123 (199) Accrued employee compensation & benefit costs 130 (207) Other accrued liabilities 0 70 ------ ------ Net cash provided by (used in) operating activities 150 (279) Cash flows related to investing activites: Capital expenditures - property, plant & equipment (97) (128) ------ ------ Net cash used in investing activities (97) (128) Cash flows related to financing activities: Increase in demand loan 0 375 Principal payments on long-term debt (53) (37) ------ ------ Net cash (used in) provided by financing activities (53) 338 ------ ------ Net decrease in cash 0 (69) Cash at beginning of period 612 490 ------ ------ $ 612 $ 421 ====== ======
See notes to consolidated financial statements - 5 - 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($000's omitted in tables except for per share data) 1. The information set forth herein is unaudited. This financial information reflects all normal accruals and adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. Revenue recognition ------------------- The Company incurred costs for certain contracts which are long term. These contracts are accounted for under the percentage of completion method (cost-to-cost) which recognizes revenue as the work progresses towards completion. Revenues on the remaining contracts are recognized when the terms of purchase orders are met. Included in other accrued liabilities is $93,000 of deferred revenue which represents billings under the terms of the contracts in excess of revenue earned under the percentage of completion method. Reclassification of prior year balances --------------------------------------- Certain prior year balances have been reclassified to conform with the current year presentation.
2. Inventories March 31, 1996 ----------- -------------- Raw materials and common parts $ 1,223 Work-in-process (including engineering and other support costs) 5,768 Finished goods 503 ------- 7,494 Less common parts expected to be used after one year (236) ------- $ 7,258 =======
Engineering and other support costs are incurred in fulfilling certain contracts which have a production cycle longer than one year. A portion of these costs will, therefore, not be realized within one year. - 6 - 7
3. Property, plant and equipment March 31, 1996 ----------------------------- -------------- Land $ 19 Buildings 6,358 Machinery, equipment and tooling 7,251 ------- 13,628 Less accumulated depreciation (5,979) ------- $ 7,649 =======
Property, plant and equipment includes land and building under a $5,000,000 capital lease which can be purchased for a nominal amount at the end of the lease term.
4. Long-term debt March 31, 1996 -------------- -------------- Industrial Development Revenue Bonds; secured by a letter of credit from a bank with interest payable monthly at a floating rate 3.65% at March 31, 1996) $5,000 Unsecured term note; payable to a bank with interest at prime plus 1/4% (8.5% at March 31, 1996); quarterly principal payments of $34,439 through November 1, 2000 620 Secured term note; payable to a government agency with interest at 6%; monthly principal payments of $2,778 commencing on July 1, 1995 through May 1, 2004, with a final principal payment of $102,754 due June 1, 2004 375 Various other secured term notes payable to government agencies 1,068 ------ 7,063 Less current portion (226) ------ $6,837 ======
Industrial Development Revenue Bonds were issued by a government agency in 1994 to replace an interim construction loan related to the construction of the Company's new headquarters/Advanced Technology facility. Annual sinking fund payments of $170,000 commence December 1, 2000 and continue through 2013, with a final payment of $2,620,000 due December 1, 2014. The Company has agreed to reimburse the issuer of the letter of credit if there are draws on that letter of credit. The Company pays the letter of credit bank an annual fee of 1% of the amount secured thereby and pays the remarketing agent for the bonds an annual fee of .25% of the principal amount outstanding. The Company's interest - 7 - 8 under the facility capital lease has been pledged to secure its obligations to the government agency, the bank and the bondholders. The letter of credit reimbursement agreement, the unsecured term note agreement and a secured term note contain, among other things, covenants relative to maintenance of working capital and tangible net worth and restrictions on capital expenditures, leases and additional borrowings. The secured term notes are secured by certain property and equipment and contain, among other things, covenants restricting loan proceeds for use in the construction of the Company's new headquarters/Advanced Technology facility. 5. Common shareholders' equity ---------------------------
Common stock ------------ Number Capital in of shares excess of Retained Treasury issued Amount par value earnings ESOP stock ------ ------ --------- -------- ---- ----- Balance December 31, 1995 2,440,408 $ 488 $ 12,495 $ 1,422 ($3,044) ($ 1,240) Stock dividend 174,647 35 774 (809) -- -- Net income -- -- -- 70 -- -- ---------- -------- --------- -------- ------- -------- Balance March 31, 1996 2,615,055 $ 523 $ 13,269 $ 683 ($3,044) ($ 1,240) ========= ======== ========= ======== ======= ========
Per share data is based on weighted average outstanding shares of 1,662,364 and 1,629,393 for the first quarter ended March 31, 1996 and 1995. On May 3, 1996 the Company's Board of Directors declared an 8% stock dividend payable to shareholders of record on May 31, 1996. The payment date for the stock dividend is July 1, 1996. Accordingly, per share data for all periods presented in the accompanying income statement have been stated to give effect to the issuance of these shares and shares issued in conjunction with the 6% stock dividend declared on June 30, 1995 and paid on August 11, 1995. - 8 - 9 SIGNATURES 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. Date: May 14, 1996 SERVOTRONICS, INC. By: /s/ Lee D. Burns, Treasurer ------------------------------------------ Lee D. Burns, Treasurer and Chief Financial Officer By: /s/ Raymond C. Zielinski, Vice President ------------------------------------------ Raymond C. Zielinski, Vice President - 9 - 10 SERVOTRONICS, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - ------ --------------------------------------------------------- The following table sets forth for the period indicated the percentage relationship of certain items in the consolidated statement of income to net sales and the percentage increase or decrease of such items as compared to the indicated prior period.
Relationship to Period to net sales period $ three months ended increase March 31, (decrease) 1996 1995 96-95 ---- ---- ----- Net sales Advanced technology products 45.4% 49.1% -8.9% Consumer products 54.6% 50.9% -2.6% ----- ----- ------ 100.0% 100.0% -11.5% Cost of goods sold, exclusive of depreciation 69.3% 67.5% -9.1% ----- ----- ------ Gross profit 30.7% 32.5% 5.3% ----- ----- ------ Selling, general and administrative 20.9% 18.7% -0.8% Interest 2.3% 1.9% 5.3% Depreciation and amortization 4.5% 4.1% -4.3% ----- ----- ------ 27.7% 24.7% 0.2% ----- ----- ------ Income before provision for income taxes 3.0% 7.8% -65.6% Income tax provision 1.0% 2.9% -69.8% ----- ----- ------ Net income 2.0% 4.9% -63.0% ----- ----- ------
- 10 - 11 Management Discussion - --------------------- During the three month period ended March 31, 1996 and for the comparable period ended March 31, 1995, approximately 20% and 25% respectively, of the Company's revenues were derived from contracts with agencies of the US Government or their prime contractors. The Company's business is performed under fixed price contracts. It is noted that, the many uncertainties in today's global economy, the national deficit and defense cutbacks (both actual and proposed) preclude any guarantees or even assurances that current programs will be continued or that programs in the prototype stages will ultimately result in production applications. It is because of such uncertainties and because such adverse occurrences may not be counterbalanced with new programs or otherwise that cyclical downturns in operational performances are realistic expectations. Results of Operations - --------------------- The Company's consolidated results of operations for the three month period ended March 31, 1996 showed an approximate 11.5% decrease in net sales and a decrease in net income of approximately 63.0% when compared to the same three month period of 1995. The decrease in sales occurred in both the Advanced Technology and Consumer Products operations. Decreased sales at the Advanced Technology operations is primarily due to a decrease from 1995 to 1996 in the number of contracts subject to revenue recognition of revenues under the percentage of completion method (cost-to-cost), under which revenue is recognized as work progresses toward completion. Decreased sales at the Consumer Products operations is due to a decrease in customer demands. The Advanced Technology Group's total backlog (funded and unfunded) as of March 31, 1996 increased by approximately 37% from a year earlier. The March 31, 1996 total backlog is approximately $32,100,000 as compared to $23,400,000 of which $24,700,000 and $14,600,000 were unfunded in each of the respective comparable periods. Approximately $9,600,000 of the March 31, 1996 backlog is for product deliveries beyond 1999. The unfunded portion of the backlog is based on the Company's customers' estimated quantities for multi-year agreements for which the Company has not received firm orders. Operating profit as a percentage of net sales for the three month period ended March 31, 1996 decreased to 3.0 % from 7.8% as reported for the same three month period of 1995. - 11 - 12 The fluctuations in operating profit as a percentage of net sales is a result of differences in the product mix. Selling, general and administrative costs decreased for the three month period ended March 31, 1996 when compared to the same three month period of 1995 due to a decrease in sales and professional costs. Income taxes for the three month period ended March 31, 1996 decreased as a percentage of income before taxes when compared to the same three month period of 1995 due primarily to variable state income tax rates. Liquidity and Capital Resources - ------------------------------- Certain contracts of the Advanced Technology Group require development and engineering costs in addition to hardware and the maintenance of inventory for replacement and/or overhaul. The replacement and/or overhaul units are billed at the time of shipment. The inventories at March 31, 1996, include costs associated with the initiation and maintenance of certain programs and costs in anticipation of increased demands upon the Company to support new programs and the request of customers' for shorter production lead time. During the three month period ended March 31, 1996, the Company expended $99,000 on capital expenditures. The Company also has a $1,000,000 line of credit at March 31, 1996 of which nothing is outstanding at March 31, 1996. There are no material commitments for capital expenditures at March 31, 1996. In 1991, the Company's Board of Directors authorized the purchase by the Company of up to 250,000 additional shares of its common stock in open and privately negotiated transactions for a total authorized purchase of up to 350,000 shares, of which 257,317 shares have been purchased. In 1996, through April 30, no additional shares have been purchased. - 12 - EX-27 2 EXHIBIT 27
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 612 0 2,253 0 7,258 11,820 7,649 0 19,935 2,272 6,837 523 0 0 9,668 19,935 3,486 3,486 2,416 3,381 0 0 80 105 35 0 0 0 0 70 0.04 0.04
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