-----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, VrpUDnBIfwjEnjvDZp96G/xaVHRcgRNufsdwDsDpAYmYfqe9luu4hg1kmSEmD0Ac EHg+RCanjS7rBbK3SJ6HqA== 0000950152-96-003975.txt : 19960813 0000950152-96-003975.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950152-96-003975 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 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: 96608200 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. 10QSB 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 June 30, 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 July 31, 1996 - ------------------------------------ ---------------------------- Common Stock, $.20 par value 2,357,189 (Including shares 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, June 30, 1996 3 b) Consolidated Statement of Income, Three and Six Months Ended June 30, 1996 and 1995 4 c) Consolidated Statement of Cash Flows for the Six Months Ended June 30, 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 4. Submission of matters to a Vote of Security Holders 13 Item 6(a). Exhibits 27 Financial Data Schedule
-2- 3 PART I FINANCIAL INFORMATION SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 1996 ($000's omitted except per share data) (Unaudited) Assets Current assets: Cash $ 675 Accounts receivable 2,047 Inventories 6,938 Prepaid income taxes 139 Deferred tax asset 501 Other 1,499 -------- Total current assets 11,799 Property, plant and equipment, net 7,636 Other assets 463 -------- $ 19,898 ======== Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 226 Accounts payable 1,029 Accrued employee compensation and benefit costs 736 Other accrued liabilities 108 -------- Total current liabilities 2,099 -------- Long-term debt 6,785 Non-current deferred tax liability 635 Shareholders' equity: Common stock, par value $.20; authorized 4,000,000 shares; Issued 2,614,506 shares 523 (including 174,098 shares issued for Stock Dividend) Capital in excess of par value 13,269 Retained earnings 871 -------- 14,663 Employee stock ownership trust commitment (3,044) Treasury stock, at cost, 257,317 shares (1,240) -------- Total shareholders' equity 10,379 -------- $ 19,898 ========
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 Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $4,414 $4,481 $7,900 $8,418 Costs and expenses: Cost of goods sold 3,036 3,145 5,452 5,803 Selling, general and administrative 835 798 1,564 1,533 Interest 85 110 165 186 Depreciation and amortization 157 135 313 298 ------ ------ ------ ------ 4,113 4,188 7,494 7,820 ------ ------ ------ ------ Income before income taxes 301 293 406 598 Income tax provision 111 114 146 230 ------ ------ ------ ------ Net income $ 190 $ 179 $ 260 $ 368 ====== ====== ====== ====== Net income per share $ 0.11 $ 0.11* $ 0.16 $ 0.23* ====== ====== ====== ====== * Restated to give effect to shares issued pursuant to the 8% stock dividend declared in May 1996 (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)
Six Months Ended June 30, 1996 1995 ---- ---- Cash flows related to operating activities: Net income $ 260 $ 368 Adjustments to reconcile net income to net cash provided by (used in) operating activities - Depreciation and amortization 313 298 Deferred taxes Change in assets and liabilities - Accounts receivable 448 617 Inventories (270) (835) Prepaid income taxes 122 (29) Other current assets (549) (591) Other assets 7 7 Accounts payable 131 (72) Accrued employee compensation & benefit costs 49 (63) Other accrued liabilities (101) 17 ----- ----- Net cash provided by (used in) operating activities 410 (283) ----- ----- Cash flows related to investing activities: Capital expenditures - property, plant & equipment (242) (195) ----- ----- Net cash used in investing activities (242) (195) ----- ----- Cash flows related to financing activities: Acquisition of long-term debt 0 31 Increase in demand loan 0 475 Principal payments on long-term debt (105) (74) Payments on demand loan 0 (300) ----- ----- Net cash (used in) provided by financing activities (105) 132 ----- ----- Net increase (decrease) in cash 63 (346) Cash at beginning of period 612 490 ----- ----- Cash at end of period $ 675 $ 144 ===== =====
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 other current assets is $664,000 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. Reclassification of prior year balances --------------------------------------- Certain prior year balances have been reclassified to conform with the current year presentation.
2. Inventories June 30, 1996 ----------- ------------- Raw materials and common parts $ 1,210 Work-in-process (including engineering and other support costs) 5,450 Finished goods 514 ------- 7,174 Less common parts expected to be used after one year (236) ------- $ 6,938 =======
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 June 30, 1996 ----------------------------- ------------- Land $ 19 Buildings 6,363 Machinery, equipment and tooling 7,389 -------- 13,771 Less accumulated depreciation (6,135) -------- $ 7,636 ========
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 --------------
June 30, 1996 ------------- Industrial Development Revenue Bonds; secured by a letter of credit from a bank with interest payable monthly at a floating rate (3.80% at June 30, 1996) $ 5,000 Unsecured term note; payable to a bank with interest at prime plus 1/4% (8.50% at June 30, 1996); quarterly principal payments of $34,439 through November 1, 2000 585 Secured term note; payable to a government agency with interest at 6%; monthly principal payments of $2,778 commencing on July 1, 1996 through May 1, 2004, with a final principal payment of $102,754 due June 1, 2004 366 Various other secured term notes payable to government agencies 1,060 ------- 7,011 Less current portion (226) ------- $ 6,785 =======
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 to 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 174,098 35 774 (811) -- -- Net income -- -- -- 260 -- -- --------- -------- ---------- --------- --------- ---------- Balance June 30, 1996 2,614,506 $ 523 $ 13,269 $ 871 ($ 3,044) ($ 1,240) ========= ======== ========== ========= ========= ==========
Per share data is based on weighted average outstanding shares of 1,661,815 and 1,628,844 for the second quarter ended June 30, 1996 and 1995 and 1,661,815 and 1,,628,844 for the six month period ended June 30, 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 was July 1, 1996. Accordingly, per share data for all periods presented in the accompanying income statement has been restated to give effect to the issuance of these shares. -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: August 12, 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 periods 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 Relationship to Period to net sales period $ net sales period $ quarter ended increase six months ended increase June 30, (decrease) June 30, (decrease) 1996 1995 96-95 1996 1995 96-95 ------------------------------- ---- ---- ---------- Net sales Advanced technology products 57.7% 48.7% 7.9% 52.5% 48.8% 0.6% Consumer products 42.3% 51.3% -10.4% 47.5% 51.2% -6.7% ----- ----- ----- ----- ----- ----- 100.0% 100.0% -1.5% 100.0% 100.0% -6.2% Cost of goods sold, exclusive of depreciation 68.8% 70.2% -3.5% 69.0% 68.9% -6.0% ----- ----- ----- ----- ----- ----- Gross profit 31.2% 29.8% 3.1% 31.0% 31.1% -6.2% ----- ----- ----- ----- ----- ----- Selling, general and administrative 18.9% 17.8% 4.6% 19.8% 18.2% 2.0% Interest 1.9% 2.5% -22.7% 2.1% 2.2% -11.3% Depreciation and amortization 3.6% 3.0% 16.3% 4.0% 3.5% 5.0% ----- ----- ----- ----- ----- ----- 24.4% 23.3% -1.8% 25.9% 23.9% -4.3% ----- ----- ----- ----- ----- ----- Income before provision for income taxes 6.8% 6.5% 2.7% 5.1% 7.2% -32.1% Income tax provision 2.5% 2.5% -2.6% 1.8% 2.8% -36.5% ----- ----- ----- ----- ----- ----- Net income 4.3% 4.0% 6.1% 3.3% 4.4% -29.3% ----- ----- ----- ----- ----- -----
- 10 - 11 Management Discussion - --------------------- During the six month period ended June 30, 1996 and for the comparable period ended June 30, 1995, approximately 28% and 37% respectively, of the Company's revenues were derived from contracts with agencies of the US Government or their prime contractors. For the second quarter of 1996 and 1995, approximately 30% and 36% respectively, of the Company's revenues were derived from comparable sources. 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. Because of such uncertainties and because such adverse occurrences may not be counterbalanced with new programs or otherwise mitigated, that cyclical downturns in operational performances are realistic expectations. Results of Operations - --------------------- The Company's consolidated results of operations for the six month period ended June 30, 1996 showed an approximate 6.2% decrease in net sales and a decrease in net income of approximately 29.3% when compared to the same six month period of 1995. For the second quarter of 1996, net sales decreased approximately 1.5% with an increase in net income of 6.1% compared to the same period in 1995. The decrease in sales is the result of a decrease in sales at the Consumer Products Group's operations due to a decrease in customer demands offset by an increase in sales at the Advanced Technology Group operations. The Advanced Technology Group's total backlog (funded and unfunded) as of June 30, 1996 increased by approximately 56% from a year earlier. The June 30, 1996 total backlog is approximately $33,000,000 as compared to $21,200,000 of which $25,500,000 and $12,900,000 were unfunded in each of the respective comparative periods. Approximately $9,600,000 of the June 30, 1996 backlog is for product deliveries beyond 1999. The unfunded -11- 12 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 six month period ended June 30, 1996 decreased to 5.1% from 7.2% as reported for the same six month period of 1995. For the second quarter of 1996 operating profit as a percent of net sales increased to 6.8% from 6.5% when compared to the same period in 1995. 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 increased for the six month period and quarter ended June 30, 1996 when compared to the comparable periods of 1995 due to an increase in sales and professional costs. Income taxes for the six month period and quarter ended June 30, 1996 decreased as a percentage of income before taxes when compared to the comparable periods of 1995 primarily because of 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 June 30, 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 times. During the six month period ended June 30, 1996, the Company expended $242,000 on capital expenditures. The Company also has a $1,000,000 line of credit at June 30, 1996, of which nothing is outstanding at June 30, 1996. There are no material commitments for capital expenditures at June 30, 1996. -12- 13 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 July 31, no additional shares have been purchased. PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- The annual meeting of shareholders of the Registrant was held on June 28, 1996. At the meeting, each of the directors of the Registrant was elected to serve until the next annual meeting of shareholders until his successor is elected and qualified. The following table shows the results of the voting at the meeting.
Withheld Name of Nominee For Authority --------------- --- --------- Dr. William H. Duerig 1,933,618.006 8,732 Donald W. Hedges 1,933,618.006 8,732 Nicholas D. Trbovich, Jr. 1,933,614.006 8,736 Dr. Nicholas D. Trbovich 1,933,614.006 8,736
-13- EX-27 2 EXHIBIT 27
5 0000089140 SERVOTRONICS, INC. 1,000 6-MOS DEC-31-1996 JUN-30-1996 675 0 2,047 0 6,938 11,799 7,636 0 19,898 2,099 6,785 523 0 0 9,856 19,898 7,900 7,900 5,452 7,494 0 0 165 406 146 260 0 0 0 260 0.16 0.16
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