Servotronics Announces Second Quarter 2024 Financial Results

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Aug 08, 2024, 08:45 ET

-- Continued market demand and operating performance results in year-over-year revenue and profit growth --

ELMA, N.Y., Aug. 8, 2024 /PRNewswire/ -- Servotronics, Inc. (NYSE American – SVT), a designer and manufacturer of servo-control components and other advanced technology products, today reported financial results for the second quarter ended June 30, 2024.

Highlights for the second quarter financial results include the following:

Consolidated revenues were $12.3 million, up 15.3% from $10.7 million in the second quarter of 2023. Revenue growth resulted from higher volumes driven by strong customer demand and improved pricing, partially offset by unfavorable sales mix.
Gross profit increased to $3.1 million or 25.0% of revenue in the second quarter, up from $1.6 million, or 14.6% of revenue in the second quarter of 2023. The improvement in gross profit was driven primarily by increased volume and operational efficiencies.
Selling, general and administrative (SG&A) expenses decreased $0.9 million to $2.4 million in the second quarter of 2024 compared to $3.3 million in the second quarter of 2023. The decrease in SG&A was primarily driven by lower professional and legal costs resulting from elevated non-recurring costs in the prior year related to bank refinancing, proxy contest and corporate restructuring.
Operating income for the quarter was $0.7 million or 5.4% of revenue compared to an operating loss of $1.7 million in the second quarter of 2023, resulted from the gross profit growth driven by volume and operational improvements combined with lower SG&A costs.
Net income from continuing operations was $0.6 million, or $0.22 per diluted share in the second quarter of 2024, compared to a net loss from continuing operations of ($3.3) million, or ($1.33) per diluted share in the second quarter of 2023.

"I am very pleased with our second quarter results and our rebound from the slow start to the year. I am particularly proud of our continuous improvement efforts that have directly impacted our strong top-line growth, accelerated margins, and favorable operating income as we continue to properly manage our operating costs," said Chief Executive Officer William F. Farrell, Jr.

Second Quarter Business Results

	Three Months Ended June 30,
(dollars in thousands)	2024		2023		2024 vs 2023
		%		%	$	%
	Dollars	Sales	Dollars	Sales	Change	Change
Revenues	$ 12,273	100.0 %	$ 10,649	100.0 %	$ 1,624	15.3 %
Cost of goods sold	9,210	75.0 %	9,092	85.4 %	118	1.3 %
Gross Profit	3,063	25.0 %	1,557	14.6 %	1,506	96.7 %

Selling, general and administrative	2,397	19.5 %	3,269	30.7 %	(872)	(26.7) %
Operating income (loss)	666	5.4 %	(1,712)	(16.1) %	2,378	138.9 %

Other expenses	98	0.8 %	89	0.8 %	9	10.1 %

Income (loss) before income taxes	568	4.6 %	(1,801)	(16.9) %	2,369	131.5 %

Income (loss) from continuing operations	-	0.0 %	1,479	13.9 %	(1,479)	(100.0) %
	$ 568	4.6 %	$ (3,280)	(30.8) %	$ 3,848	117.3 %

Servotronics' Chief Financial Officer Robert A. Fraass commented, "The growth in revenues and profitability combined with our effective working capital management resulted in a dramatic improvement in cash flow from operations in the first six months of the year. Increased cash flow and debt reduction provide us the liquidity to continue investing in our growth. As we evaluate our strategic initiatives, we will continue to invest capital where it has the greatest impact for our customers and shareholders."

The Company's operating cash flows increased by approximately $6.6 million compared to the same period in 2023 primarily driven by an increase in net income and reductions in accounts receivable, partially offset by increases in inventory to support volume growth.

Mr. Farrell concluded, "The work we have done to position Servotronics for long-term, sustainable growth is now showing the results we anticipated. Looking at the remainder of the year, we expect strong demand in our key end markets. As we continue to execute on our long-term strategic goals, we believe that our commitment to meeting the needs of customers will result in enhanced shareholder value."

ABOUT SERVOTRONICS

Servotronics designs, develops and manufactures servo controls and other components for various commercial and government applications including aircraft, jet engines, missiles, manufacturing equipment and other aerospace applications at its operating facilities in Elma and Franklinville, New York.

FORWARD-LOOKING STATEMENTS

This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "project," "believe," "plan," "anticipate," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve numerous risks and uncertainties which may cause the actual results of the Company to be materially different from future results expressed or implied by such forward-looking statements. There are a number of factors that will influence the Company's future operations, including: uncertainties in today's global economy, including political risks, adverse changes in legal and regulatory environments, and difficulty in predicting defense appropriations, the introduction of new technologies and the impact of competitive products, the vitality of the commercial aviation industry and its ability to purchase new aircraft, the willingness and ability of the Company's customers to fund long-term purchase programs, and market demand and acceptance both for the Company's products and its customers' products which incorporate Company-made components, the Company's ability to accurately align capacity with demand, the availability of financing and changes in interest rates, the outcome of pending and potential litigation, and on commercial activity and demand across our and our customers' businesses, and on global supply chains, the ability of the Company to obtain and retain key executives and employees and the additional risks discussed in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only as of the date hereof. The Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

SERVOTRONICS, INC. (SVT) IS LISTED ON NYSE America

SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($000's omitted except share and per share data)

	June 30,		December 31,
	2024		2023
	(Unaudited)		(Audited)
Current assets:
Cash	$	119	$	95
Cash, restricted		150		150
Accounts receivable, net		10,706		12,065
Inventories, net		15,830		14,198
Prepaid and other current assets		945		1,507
Assets related to discontinued operation		1,480		1,552
Total current assets		29,230		29,567

Property, plant and equipment, net		7,082		6,978
Other non-current assets		42		42
Total Assets	$	36,354	$	36,587

Liabilities and Shareholders' Equity
Current liabilities:
Line of credit	$	1,473	$	2,103
Current portion of post retirement obligation		97		97
Accounts payable		2,432		2,061
Accrued employee compensation and benefits costs		989		1,003
Accrued warranty		449		542
Other accrued liabilities		1,827		1,909
Liabilities related to discontinued operation		24		213
Total current liabilities		7,291		7,928

Post retirement obligation		4,202		4,165

Shareholders' equity:
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,629,052 shares; outstanding 2,531,175 (2,514,775 - 2023) shares		525		525
Capital in excess of par value		14,762		14,617
Retained earnings		13,127		12,954
Accumulated other comprehensive loss		(2,350)		(2,389)
Employee stock ownership trust commitment		(56)		(56)
Treasury stock, at cost 71,125 (87,525 - 2023) shares		(1,147)		(1,157)
Total shareholders' equity		24,861		24,494

Total Liabilities and Shareholders' Equity	$	36,354	$	36,587

SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($000's omitted except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

Revenue	$	12,273	$	10,649	$	22,719	$	19,709

Costs of goods sold, inclusive of depreciation and amortization		9,210		9,092		17,921		17,168
Gross profit		3,063		1,557		4,798		2,541

Operating expenses
Selling, general and administrative		2,397		3,269		4,415		5,444
Operating income (loss)		666		(1,712)		383		(2,903)

Other expense
Interest & other expense, net		98		89		181		142
Total other expense		98		89		181		142

Income (loss) from continuing operations before income taxes		568		(1,801)		202		(3,045)
Income taxes		-		1,479		-		1,063
Income (loss) from continuing operations, net of tax		568		(3,280)		202		(4,108)

Loss from discontinued operation before income taxes		(12)		(6,220)		(29)		(6,940)
Income taxes		-		-		-		-
Loss from discontinued operation, net of tax (Note 2)		(12)		(6,220)		(29)		(6,940)

Net income (loss)	$	556	$	(9,500)	$	173	$	(11,048)

Basic earnings (loss) per share:
Continuing operations	$	0.23	$	(1.33)	$	0.08	$	(1.67)
Discontinued operation		-		(2.53)		(0.01)		(2.82)
Basic earnings (loss) per share	$	0.23	$	(3.86)	$	0.07	$	(4.49)

Diluted earnings (loss) per share:
Continuing operations	$	0.22	$	(1.33)	$	0.08	$	(1.67)
Discontinued operation		-		(2.53)		(0.01)		(2.82)
Diluted earnings (loss) per share	$	0.22	$	(3.86)	$	0.07	$	(4.49)

SERVOTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ($000's omitted)

	Six Months Ended
	June 30,
	2024		2023
Cash flows related to operating activities:
Income (loss) from continuing operations	$	202	$	(4,108)
Adjustments to reconcile income (loss) from continuing operations to net cash provided (used) by operating activities:
Depreciation and amortization		543		517
Stock based compensation		176		74
Allowance for credit losses		(18)		(25)
Inventory reserve		139		14
Warranty reserve		(93)		(2)
Deferred income taxes		-		1,072
Changes in assets and liabilities providing (using) cash:
Accounts receivable		1,377		(2,663)
Inventories		(1,771)		(826)
Prepaid and other current assets		562		(520)
Accounts payable		371		1,064
Accrued employee compensation and benefit costs		25		301
Post retirement obligations		37		66
Other accrued liabilities		(82)		(105)
Net cash provided (used) by operating activities from continuing operations		1,468		(5,141)

Cash flows related to investing activities:
Purchase of property, plant and equipment		(647)		(403)
Net cash used by investing activities from continuing operations		(647)		(403)

Cash flows related to financing activities:
(Payments on) proceeds from line of credit		(630)		3,697
Purchase of treasury shares		(21)		-
Principal payments on finance lease obligations		-		(501)
Net cash (used) provided by financing activities from continuing operations		(651)		3,196

Discontinued Operation
Cash used by operating activities		(146)		(568)
Net cash used by operating activities from discontinued operation		(146)		(568)
Net increase (decrease) in cash and restricted cash		24		(2,916)
Cash and restricted cash at beginning of period		245		3,812
Cash and restricted cash at end of period	$	269	$	896