Common Shareholders' Equity

12 Months Ended

Dec. 31, 2013

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, 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
Net income		-		-		-		975			-			-			-			975
Retirement benefits adjustment		-		-		-		-			-			-			59			59
Compensation expense		-		-		-		-			100			-			-			100
Purchase of treasury shares		-		-		-		-			-			(607	)		-			(607	)
Stock based compensation		-		-		16		-			-			239			-			255
Cash dividend		-		-		-		(406	)		-			-			-			(406	)
Exercise of stock options, net of tax benefit		-		-		21		(38	)		-			109			-			92
Balance December 31, 2013		2,614,506	$	523	$	14,024	$	12,302		($	1,065	)	($	2,024	)	($	26	)	$	23,734

The Company’s Board of Directors has authorized the purchase by the Company of up to 450,000 shares of its common stock in the open market or in privately negotiated transactions. During the year ended December 31, 2013, 71,458 shares were repurchased for $607,000 and added to treasury stock. Subsequent to December 31, 2013 the Company repurchased an additional 1,850 shares for approximately $15,000. As of February 28, 2014, the Company has purchased 325,133 shares and there remain 124,867 shares available to purchase under this program.

In the first quarter of 2013 certain option holders elected to exercise 15,000 options. These shares were issued out of treasury stock for net proceeds of approximately $70,000. Such transactions were properly reported on Form 4 with the Securities and Exchange Commission. A tax benefit to the Company of approximately $21,000 associated with these transactions reduced taxes payable and was credited directly to capital in excess of par value.

On April 18, 2013, the Company issued 165,000 shares of restricted stock to Executive Officers of the Company under the Company’s 2012 Long-Term Incentive Plan that was approved by the shareholders at the 2012 Annual Meeting of Shareholders. This plan authorizes the issuance of up to 300,000 shares. The restricted share awards vest over four year periods between January 2014 and January 2017; however these shares, have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value is expected to be $1,336,500 and will be recognized over the four year requisite service period. During the year ended December 31, 2013, there was $255,000 of compensation expense related to the restricted share awards.

On May 28, 2013 the Company announced that its Board of Directors declared a $0.16 per share cash dividend. The dividend was subsequently paid on July 15, 2013 to shareholders of record on June 24, 2013 and was approximately $406,000 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, 2013 is $26,000 ($85,000 – 2012) 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 $14,000 at December 31, 2013 ($44,000 – 2012).

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,
	2013		2012
	($000’s omitted
	except per share data)
Income from continuing operations	$	975	$	1,647
Loss from discontinued operations		-		(1,327	)
Net income	$	975	$	320
Weighted average common shares outstanding (basic)		2,266		2,132
Incremental shares from assumed conversions of stock options		1		15
Weighted average common shares outstanding (diluted)		2,267		2,147
Basic
Income per share from continuing operations	$	0.43	$	0.77
Loss per share from discontinued operations		-		(0.62	)
Total net income per share	$	0.43	$	0.15
Diluted
Income per share from continuing operations	$	0.43	$	0.77
Loss per share from discontinued operations		-		(0.62	)
Total net income per share	$	0.43	$	0.15

Share Based Payments

Under the Servotronics, Inc. 2001 Long-Term Stock Incentive Plan authorized by the Board of Directors and the Shareholders, the Company has granted options to certain Directors, Officers and employees. No options were granted under this plan since 2005. Options granted under this plan have durations of ten years and all outstanding options are currently exercisable.

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, 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
Granted in 2013		-		-
Expired in 2013		5,000		4.70
Exercised in 2013		15,000		4.70
Outstanding and exercisable as of December 31, 2013		1,000		4.70		2.00		3,400

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value based on the closing stock price of $8.10 at December 31, 2013. The total intrinsic value of options exercised during the year ended December 31, 2013 amounted to $63,000.

The Company’s 2012 Long-Term Incentive Plan was approved by the shareholders at the 2012 Annual Meeting of Shareholders. This plan authorizes the issuance of up to 300,000 shares. On April 18, 2013, the Company issued 165,000 shares of restricted stock to Executive Officers of the Company The restricted share awards vest over four year periods between January 2014 and January 2017; however, the restricted shares have voting rights and accrue dividends prior to vesting. The aggregate amount of expense to the Company, measured based on grant date fair value is expected to be $1,336,500 and will be recognized over the four year requisite service period. During the year ended December 31, 2013, there was $255,000 of compensation expense related to the restricted share awards.

A summary of the status of restricted share awards granted under all employee plans is presented below:

			Weighted Average
	Shares		Grant Date Fair Value
Restricted Share Activity:
Unvested at December 31, 2013		-		-
Granted in 2013		165,000	$	8.10
Forfeited in 2013		-
Vested in 2013		-
Unvested at December 31, 2013		165,000	$	8.10

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.