Common Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity Note [Abstract]

Common Shareholders' Equity

8. Common Shareholders’ Equity

	Common stock
	Number of shares issued		Amount		Capital in excess of par value		Retained earnings			ESOP			Treasury stock			Accumulated Other Comprehensive Loss			Total Shareholders Equity
	($000’s omitted except share amounts)
Balance December 31, 2009		2,614,506	$	523	$	13,296	$	10,248		($	1,468	)	($	2,724	)	($	61	)	$	19,814
Comprehensive income:
Net income		-		-		-	$	2,128			-			-			-		$	2,128
Other comprehensive income, net of tax Retirement benefits adjustment		-		-		-		-			-			-			(17	)		(17	)
Total comprehensive income		-		-		-		-			-			-			-			2,111
Compensation expense		-		-		-		-			101			-			-			101
Cash dividend		-		-		-		(336	)		-			-			-			(336	)
Surrender of unexercised options, net of tax benefit		-		-		195		(573	)		-			-			-			(378	)
Balance December 31, 2010		2,614,506	$	523	$	13,491	$	11,467		($	1,367	)	($	2,724	)	($	78	)	$	21,312
Comprehensive income:
Net income		-		-		-	$	2,626			-			-			-		$	2,626
Other comprehensive loss, net of tax Retirement benefits adjustment		-		-		-		-			-			-			11			11
Total comprehensive income		-		-		-		-			-			-			-			2,637
Compensation expense		-		-		-		-			101			-			-			101
Cash dividend		-		-		-		(682	)		-			-			-			(682	)
Surrender of unexercised options, net of tax benefit		-		-		176		(517	)		-			-			-			(341	)
Exercise of stock options, net of tax benefit		-		-		107		(404	)		-			514			-			217
Balance December 31, 2011		2,614,506	$	523	$	13,774	$	12,490		($	1,266	)	($	2,210	)	($	67	)	$	23,244

In January of 2006, the Company’s Board of Directors authorized the purchase by the Company of up to 250,000 shares of its common stock in the open market or in privately negotiated transactions. On October 31, 2008, the Company announced that its Board of Directors authorized the purchase of an additional 200,000 shares of the Company’s common stock under the Company’s current purchase program. As of February 29, 2012, the Company has purchased 238,088 shares and there remain 211,912 shares available to purchase under this program.

Consistent with the Company’s current policy to reduce the number of outstanding Company shares thereby increasing the reported earnings per share, certain option holders elected on July 12, 2011 to surrender 112,000 unexercised options to the Company in exchange for a cash payment equal to the difference between the exercise price and the average of the high and the low market price of the Company’s common stock on the day of surrender less an administrative charge. Such transactions aggregated $517,000. A tax benefit, to the Company of approximately $176,000 associated with these transactions reduced taxes payable and was credited directly to capital in excess of par value. In the fourth quarter of 2011 certain option holders elected to exercise 78,000 options, of which 6,000 were bought back by the Company resulting in 72,000 net shares issued out of treasury stock. A tax benefit, to the Company, of approximately $107,000 associated with these transactions reduced taxes payable and was credited directly to capital in excess of par value.

On April 4, 2011, the Company announced that its Board of Directors declared a $0.15 per share cash dividend. The dividend was paid on May 20, 2011 to shareholders of record on April 29, 2011 and was approximately $336,000 in the aggregate. On November 8, 2011, the Company announced that its Board of Directors declared a $0.15 per share cash dividend. The dividend was paid on December 16, 2011 to shareholders of record on November 28, 2011 and was approximately $346,000 in the aggregate. These dividends do not represent that the Company will pay dividends on a regular or scheduled basis.

Other Comprehensive Loss

The only component of accumulated other comprehensive loss included in equity at December 31, 2011 is $67,000 ($78,000 – 2010) of unrecognized actuarial losses and net transition obligations for post retirement, health and life insurance benefits (see Note 6 Employee Benefit Plans). These amounts are shown net of income tax benefit of $39,000 ($46,000 – 2010).

Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on earnings per share were outstanding for the period. Unallocated ESOP shares are not included in the calculation of weighted average common shares outstanding. Incremental shares from assumed conversions are calculated as the number of shares that would be issued, net of the number of shares that could be purchased in the marketplace with the cash received upon stock option exercise.

	Year Ended
	December 31,
	2011		2010
	($000’s omitted
	except per share data)
Net income	$	2,626	$	2,128
Weighted average common shares outstanding (basic)		1,997		1,964
Incremental shares from assumed conversions of stock options		112		145
Weighted average common shares outstanding (diluted)		2,109		2,109
Basic
Net income per share	$	1.31	$	1.08
Diluted
Net income per share	$	1.24	$	1.01

Share Based Payments

Under the Servotronics, Inc. 2000 Employee Stock Option Plan authorized by the Board of Directors and the 2001Long-Term Stock Incentive Plan authorized by the Board of Directors and the Shareholders, and other separate agreements authorized by the Board of Directors, the Company has granted options to certain Directors, Officers and employees. No options were granted and there was no corresponding stock based compensation in 2011 or 2010. At December 31, 2011, there were no stock options available for issuance as no awards are available to be granted after July 2, 2011 under the 2001Long-Term Stock Incentive Plan. Options granted under this plan have durations of ten years and vesting periods ranging from immediate vesting to four years.

A summary of the status of options granted under all employee plans is presented below:

	Options Outstanding		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value ($)
Outstanding as of December 31, 2009		407,700		3.55		5.11
Granted in 2010		-		-
Exercised in 2010		-		-
Surrendered in 2010		101,200		3.73
Outstanding as of December 31, 2010		306,500		3.49		2.55
Granted in 2011		-		-
Expired in 2011		8,000		4.38
Exercised in 2011		78,000		2.05
Surrendered in 2011		112,000		4.33
Outstanding and exercisable as of December 31, 2011		108,500		3.60		2.96		586,025

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value based on the closing stock price of $9.00 at December 31, 2011. The total intrinsic value of options exercised during the year ended December 31, 2011 amounted to $497,340.

Shareholders’ Rights Plan

During 2002, the Company’s Board of Directors adopted a shareholders’ rights plan (the “Rights Plan”) and simultaneously declared a dividend distribution of one right for each outstanding share of the Company’s common stock outstanding at August 28, 2002. The Rights Plan replaced a previous shareholders rights plan that was adopted in 1992 and expired on August 28, 2002. The Rights do not become exercisable until the earlier of (i) the date of the Company’s public announcement that a person or affiliated group other than Dr. Nicholas D. Trbovich or the ESOP trust (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 25% or more of the Company’s common stock (excluding shares held by the ESOP trust) or (ii) ten business days following the commencement of a tender offer that would result in a person or affiliated group becoming an Acquiring Person.

The exercise price of a right has been established at $32.00. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock. In the event that any person becomes an Acquiring Person, each Right would entitle any holder other than the Acquiring Person to purchase common stock or other securities of the Company having a value equal to three times the exercise price. The Board of Directors has the discretion in such event to exchange two shares of common stock or two one-hundredths of a share of preferred stock for each Right held by any holder other than the Acquiring Person.