-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PlqUDLip4rjJTftr+fIhrNAZ2rog1+D5O8BjBwcPIjTJ00gylTgNjWOeeXbSo7VQ J71OEToqL07MNurEfA4C6w== 0000950152-95-000973.txt : 19950517 0000950152-95-000973.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950152-95-000973 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-07109 FILM NUMBER: 95537801 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 10QSB 1 SERVOTRONICS, INC. FORM 10-QSB 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, 1995 __ 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, 1995 ---------------------------- ---------------------------------- Common Stock, $.20 par value 2,059,931 2 INDEX
PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements a) Consolidated Balance Sheet, March 31, 1995 3 b) Consolidated Statement of Income, Three Months Ended March 31, 1995 and 1994 4 c) Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1995 and 1994 5 d) Notes to Consolidated Financial Statements 6 e) Signatures 9 Item 2. Management's Discussion and Analysis or Plan of Operation 10
- 2 - 3 PART I FINANCIAL INFORMATION SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1995 ($000's omitted except per share data) (Unaudited) Assets Current assets: Cash $ 421 Accounts receivable 2,857 Inventories 6,398 Prepaid income taxes 309 Deferred tax asset 498 Other 1,304 ----------- Total current assets 11,787 Property, plant and equipment, net 8,237 Other assets 481 ----------- $ 20,505 =========== Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 164 Demand loan 775 Accounts payable 1,591 Accrued employee compensation and benefit cost 461 Other accrued liabilities 483 ----------- Total current liabilities 3,474 ----------- Long-term debt 6,418 Non-current deferred tax liability 602 Shareholders' equity: Common stock, par value $.20; authorized 4,000,000 shares; Issued 2,317,248 shares 463 Capital in excess of par value 11,982 Retained earnings 1,951 ----------- 14,396 Employee stock ownership trust commitment (3,145) Treasury stock, at cost, 257,317 shares (1,240) ----------- Total shareholders' equity 10,011 ----------- $ 20,505 =========== 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, 1995 1994 ---- ---- Net sales $ 3,937 $ 3,414 Costs and expenses: Cost of goods sold 2,658 2,234 Selling, general and administrative 735 679 Interest 76 74 Depreciation and amortization 163 97 ---------- --------- 3,632 3,084 ---------- --------- Income before income taxes 305 330 Income tax provision 116 128 ---------- ---------- Net income $ 189 $ 202 ========== ========== Net income per share $ 0.14 $ 0.15 ========== ========== 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, 1995 1994 ---- ---- Cash flows from operating activities: Net income $ 189 $ 202 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 163 97 Deferred taxes 1 0 Change in assets and liabilities - Accounts receivable 204 35 Inventories (284) (539) Prepaid income taxes (25) 58 Other current assets (195) 4 Other assets 4 0 Accounts payable (199) (458) Accrued employee compensation & benefit costs (207) 68 Other accrued liabilities 70 (35) ---------- ---------- Net cash used in operating activities (279) (568) ---------- ---------- Cash flows related to investing activities: Capital expenditures - property, plant & equipment - net (128) (151) ---------- ---------- Net cash used in investing activities (128) (151) ---------- ---------- Cash flows related to financing activities: Acquisition of long-term debt 0 1,004 Increase in demand loan 375 0 Payments on long-term debt (37) (34) Purchase of treasury stock 0 (2) ---------- ---------- Net cash provided by financing activities 338 968 ---------- ---------- Net (decrease) increase in cash (69) 249 Cash at beginning of period 490 562 ---------- ---------- Cash at end of period $ 421 $ 811 ========== ========== See notes to consolidated financial statements
- 5 - 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($000 omitted in tables except for 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 accounts receivable is $115,000 of unbilled revenues which represents revenue earned under the percentage of completion method (cost-to-cost) not yet billable under the terms of the contracts. Included in other accrued liabilities is $240,000 of deferred revenue which represents billings under the terms of the contracts in excess of revenue earned under the percentage of completion method. During 1994, the Company suffered damages caused by a fire at one of its subsidiaries. The Company maintains property and business interruption insurance. Reclassification of prior year balances --------------------------------------- Certain prior year balances have been reclassified to conform with the current year presentation. 2. Inventories -----------
March 31, 1995 -------------- Raw materials and common parts $ 1,496 Work-in-process (including engineering and other support costs) 4,751 Finished goods 387 --------- 6,634 Less common parts expected to be used after one year (236) --------- $ 6,398 =========
- 6 - 7 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. 3. Property, plant and equipment -----------------------------
March 31, 1995 -------------- Land $ 19 Buildings 6,616 Machinery, equipment and tooling 6,895 --------- 13,530 Less accumulated depreciation (5,293) --------- $ 8,237 =========
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, 1995 -------------- Industrial Development Revenue Bonds; secured by a letter of credit from a bank with interest payable monthly at a floating rate (4.55% at March 31, 1995) $ 5,000 Unsecured term note; payable to a bank with interest at prime plus 1/4% (9.25% at March 31, 1995); quarterly principal payments of $34,439 through November 1, 2000 758 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 400 Various other secured term notes payable to government agencies 424 -------- 6,582 Less current portion (164) -------- $ 6,418 ========
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 - 7 - 8 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 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, 1994 2,317,248 $ 463 $ 11,982 $ 1,762 ($3,145) ($1,240) Net income -- -- -- 189 -- -- --------- -------- -------- -------- ------- ------- Balance March 31, 1995 2,317,248 $ 463 $ 11,982 $ 1,951 ($3,145) ($1,240) ========= ======== ======== ======== ======= =======
Per share data is based on weighted average outstanding shares of 1,393,832 and 1,361,604 for the first quarter ended March 31, 1995 and 1994. - 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 11, 1995 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) 1995 1994 95-94 ---- ---- ----- Net sales Advanced technology products 49.0% 48.2% 8.5% Cutlery products 51.0% 51.8% 7.1% ----- ----- ---- 100.0% 100.0% 15.3% Cost of goods sold, exclusive of depreciation 67.5% 65.4% 19.0% ----- ----- ----- Gross profit 32.5% 34.6% 2.7% ----- ----- ---- Selling, general and administrative 18.7% 19.9% 8.2% Interest 1.9% 2.2% 2.7% Depreciation and amortization 4.1% 2.8% 68.0% ---- ---- ----- 24.7% 24.9% 78.9% ----- ----- ----- Income before provision for income taxes 7.8% 9.7% -7.6% Income tax provision 2.9% 3.7% -9.4% ---- ---- ----- Net income 4.9% 6.0% -6.4% ==== ==== =====
- 10 - 11 Management Discussion --------------------- During the three month period ended March 31, 1995 and for the comparable period ended March 31, 1994, approximately 25% and 27%, 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, 1995 showed an approximate 15.3% increase in net sales and a decrease in net income of approximately 6.4% when compared to the same three month period of 1994. The increase in sales occurred in both the Advanced Technology and Cutlery operations. Increased sales at the Advanced Technology operations is primarily due to revenue recognized under long-term contracts and increased shipments. Increased sales at the Cutlery operations is due to increased shipments and price increases. The respective amounts of funded and unfunded sales backlog at March 31, 1995 and 1994 for the Advanced Technology Group (ATG) were approximately $8,800,000 of funded and $14,600,000 of unfunded and approximately $6,700,000 of funded and $17,100,000 of unfunded. Approximately $9,600,000 of the March 31, 1995 backlog is for product deliveries beyond 1998. 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, 1995 decreased to 7.8% from 9.7% as reported for the same three month period of 1994. The - 11 - 12 fluctuations in operating profit as a percentage of net sales is a result of differences in the product mix in combination with higher depreciation and interest associated with the acquisition of the new Advanced Technology facility as previously reported. Selling, general and administrative costs increased for the three month period ended March 31, 1995 when compared to the same three month period of 1994 due to an increase in sales, professional costs and financing costs. Further, depreciation and interest expense for the same period increased as a result of an increase in institutional debt and the acquisition of the new Advanced Technology facility as previously reported. Income taxes for the three month period ended March 31, 1995 decreased as a percentage of income before taxes when compared to the same three month period of 1994 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, 1995, 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, 1995, the Company expended $128,000 on capital expenditures. As previously reported, the Company moved into its new corporate headquarters/Advanced Technology facility during 1994. The financing of certain construction and related costs of the new facility was government assisted. Nonetheless, the new facility has resulted in an increase in long-term debt and substantial increase in related interest and depreciation expense. The Company has received an Industrial Development Revenue Bond backed by a letter of credit from a financial institution to finance the construction and certain equipment for the new corporate headquarters/Advanced - 12 - 13 Technology facility. The Company has agreed to reimburse the financial institution if there are any draws under the letter of credit. The Company also has a $1,000,000 line of credit at March 31, 1995 of which $775,000 is outstanding at March 31, 1995. There are no material commitments for capital expenditures at March 31, 1995. 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 1995, through April 30, no additional shares have been purchased. - 13 - EX-27 2 SERVOTRONICS, INC. EXHIBIT 27
5 0000089140 SERVOTRONICS, INC. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 421 0 2,857 0 6,398 11,787 13,530 5,293 20,505 3,474 6,418 463 0 0 9,548 20,505 3,937 3,937 2,658 898 0 0 76 305 116 0 0 0 0 189 0.14 0.14
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