Common Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

Common Shareholders' Equity

9. Common Shareholders’ Equity

	Common stock															Accumulated
	Number				Capital in											Other			Total
	of shares				excess of		Retained						Treasury			Comprehensive			Shareholders’
	issued		Amount		par value		earnings			ESOT			stock			Loss			Equity
	($000’s omitted except share amounts)
Balance December 31, 2010		2,614,506	$	523	$	13,491	$	11,467		($	1,367	)	($	2,724	)	($	78	)	$	21,312
Net income		-		-		-		2,626			-			-			-			2,626
Retirement benefits adjustment		-		-		-		-			-			-			11			11
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
Net income		-		-		-		320			-			-			-			320
Retirement benefits adjustment		-		-		-		-			-			-			(18	)		(18	)
Compensation expense		-		-		-		-			101			-			-			101
Purchase of treasury shares		-		-		-		-			-			(110	)		-			(110	)
Cash dividend		-		-		-		(716	)		-			-			-			(716	)
Exercise of stock options, net of tax benefit		-		-		213		(323	)		-			555			-			445
Balance December 31, 2012		2,614,506	$	523	$	13,987	$	11,771		($	1,165	)	($	1,765	)	($	85	)	$	23,266

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. During the year ended December 31, 2012, 13,737 shares were repurchased for $110,000 and added to treasury stock. As of February 28, 2013, the Company has purchased 263,812 shares and there remain 186,188 shares available to purchase under this program.

In 2012, certain option holders, including the independent directors, Chief Executive Officer and then current Chief Operating Officer, elected to exercise 71,000 options, of which 2,500 were bought back by the Company resulting in 68,500 net shares issued out of treasury stock for net proceeds of approximately $215,000. Such transactions were properly reported on Form 4 with the Securities and Exchange Commission. A tax benefit to the Company of approximately $213,000 associated with these transactions reduced taxes payable and was credited directly to capital in excess of par value. Also in the first quarter of 2012, one option holder elected to exercise 9,000 options, resulting in 9,000 shares issued out of treasury stock for proceeds of approximately $18,000.

In 2011, certain option holders elected 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. Also in 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 May 14, 2012 the Company announced that its Board of Directors declared a $0.15 per share cash dividend. The dividend was paid on July 2, 2012 to shareholders of record on June 1, 2012 and was approximately $358,000 in the aggregate. On November 19, 2012 the Company announced that its Board of Directors declared a $0.15 per share cash dividend. The dividend was paid on December 19, 2012 to shareholders of record on November 29, 2012 and was approximately $358,000 in the aggregate. During the twelve months ended December 31, 2011, dividends amounting to approximately $682,000 were declared and paid to shareholders. 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, 2012 is $85,000 ($67,000 – 2011) of unrecognized actuarial losses and net transition obligations for post retirement, health and life insurance benefits (see Note 7, Employee Benefit Plans). These amounts are shown net of income tax benefit of $44,000 at December 31, 2012 ($39,000 – 2011).

    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,
	2012			2011
	($000’s omitted
	except per share data)
Income from continuing operations	$	1,647		$	3,659
Loss from discontinued operations		(1,327	)		(1,033	)
Net income	$	320		$	2,626
Weighted average common shares outstanding (basic)		2,132			1,997
Incremental shares from assumed conversions of stock options		15			112
Weighted average common shares outstanding (diluted)		2,147			2,109
Basic
Income per share from continuing operations	$	0.77		$	1.83
Loss per share from discontinued operations		(0.62	)		(0.52	)
Total net income per share	$	0.15		$	1.31
Diluted
Income per share from continuing operations	$	0.77		$	1.73
Loss per share from discontinued operations		(0.62	)		(0.49	)
Total net income per share	$	0.15		$	1.24

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 2012 or 2011. At December 31, 2012, there were no stock options available for issuance as no awards are available to be granted after July 2, 2012 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:

					Weighted
			Weighted		Average		Aggregate
			Average		Remaining		Intrinsic
	Options		Exercise		Contractual		Value
	Outstanding		Price ($)		Life		($)
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 as of December 31, 2011		108,500		3.60		2.96
Granted in 2012		-		-
Expired in 2012		7,500		4.70
Exercised in 2012		80,000		3.21
Outstanding and exercisable as of December 31, 2012		21,000		4.70		3.00		65,100

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value based on the closing stock price of $7.80 at December 31, 2012. The total intrinsic value of options exercised during the year ended December 31, 2012 amounted to $517,000.

Shareholders’ Rights Plan

During 2012, 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 October 15, 2012. The Rights Plan replaced a previous shareholders rights plan that was adopted in 2002 and expired on August 28, 2012. 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.