Discontinued operations

12 Months Ended

Dec. 31, 2012

2. Discontinued Operations

During the second quarter of 2012, the Company committed to a plan to enhance profit margins through the expected sale of a component. On September 18, 2012, Queen Cutlery Company (“QCC”), a wholly owned subsidiary of Servotronics Inc., completed the disposition through a sale of substantially all of its assets for cash consideration of $650,000. QCC is accounted for as a discontinued operation in the accompanying consolidated financial statements. During the twelve months ended December 31, 2012, QCC reported a loss from discontinued operations before income tax of $793,000 that included a pre-tax loss on disposal related to a write-down of certain assets to lower of cost or market of $406,000.

On July 23, 2012, Aero Metal Products, Inc. (“AMP”), a wholly owned subsidiary of Servotronics, Inc., gave twelve months notice of termination of a personal property capital lease for machinery and equipment previously reported under a $588,000 capital lease with a related party. Due to the termination, beginning in July 2012, this lease is accounted for as an operating lease rather than a capital lease for the remaining term and the related assets and liabilities were removed from the consolidated balance sheet. In the third quarter of 2012, AMP ceased all manufacturing operations and in the fourth quarter of 2012, the Company surrendered all assets under the personal property and real property lease to the lessor, Aero Inc., a previously reported related party. As of December 31, 2012, AMP has recorded a loss from discontinued operations before income tax of $1,153,000 that included a pre-tax loss on disposal relating to a write-down of certain assets to lower of cost or market, accrual of remaining balance on operating leases and expected payroll and closing costs to surrender assets of $592,000.

The following is a summary of discontinued operations:


	Years Ended
	December 31,
	2012			2011
	($000’s omitted)
Discontinued operations:
Revenue of QCC and AMP	$	1,002		$	1,282

Loss from operations of QCC and AMP	$	(948	)		(1,504	)
Income tax benefit		301			471
Net loss from operations of QCC and AMP		(647	)		(1,033	)

Loss on disposal of QCC and AMP		(998	)		-
Income tax benefit		318			-
Net loss on disposal of QCC and AMP		(680	)		-

Loss from discontinued operations	$	(1,327	)	$	(1,033	)