Servotronics Announces Third Quarter 2024 Financial Results
-- Strong revenue growth despite industry-wide challenges --
ELMA, N.Y., Nov. 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 third quarter and nine months ended September 30, 2024.
Highlights of the third-quarter financial results are as follows:
-- Revenues were $12.4 million, up 7.3% from $11.6 million in the third
quarter of 2023, driven by higher volumes and improved pricing.
-- Gross profit of $2.3 million, or 18.2% of sales, down 9.2% from $2.5
million, or 21.6% in the third quarter of 2023, due to unfavorable
product mix and higher overhead costs driven primarily by fewer research
& development (R&D) projects.
-- Selling, general & administrative (SG&A) costs down 10.8%, or 323 basis
points (as a % of revenue), compared to the third quarter of 2023 due to
continued focus on aligning costs with sales growth, and lower R&D
project costs.
-- Legal costs for pending settlement with the Company's former CEO of
approximately $0.6 million resulting from employment contract disputes
originating in 2021, expected to be finalized in the fourth quarter of
2024.
-- Adjusted (exclusive of legal settlement costs) operating income of $0.3
million consistent with the third quarter of 2023, driven by higher
sales and lower SG&A costs, partially offset by lower gross profit.
-- Positive results for the quarter were partially offset by ongoing,
industry-wide supply chain, quality and labor force challenges impacting
customer production output and resulting in reforecasting of demand for
the Company's products.
"I am very pleased with our revenue growth for the third quarter and the way our team has managed through the current ongoing challenges that we are experiencing as a key supplier to the commercial aerospace industry. Production delays within the industry resulted in deferral of some deliveries of our products impacting revenue, profit, and inventory. We are working closely with our customers to align our operations with their needs for the remainder of the year. Overall, demand for our products and services remains very strong and we are optimistic about the future of our business as the industry returns to growth," said Chief Executive Officer William F. Farrell, Jr.
Summary of Results from Continuing Operations
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2024 2023 % Change 2024 2023 % Change
Revenues $12,430 $11,582 7.3 % $35,149 $31,291 12.3 %
Gross profit 2,268 2,499 (9.2) % 7,066 5,039 40.2 %
Gross margin 18.2 % 21.6 % (3.4) % 20.1 % 16.1 % 4.0 %
Selling, general and administrative 1,979 2,219 (10.8) % 6,394 7,663 (16.6) %
Legal settlement 570 100.0 % 570 100.0 %
Total operating expenses 2,549 2,219 14.9 % 6,964 7,663 (9.1) %
Operating (loss) income (281) 280 (200.4) % 102 (2,624) 103.9 %
Net (loss) income $(453) $182 (348.9) % $(251) $(3,926) 93.6 %
Non-GAAP measures for comparison:
Operating (loss) income per above $(281) $280 (200.4) % $102 $(2,624) 103.9 %
Addback: legal settlement 570 100.0 % 570 100.0 %
Adjusted operating income (loss) $289 $280 3.2 % $672 $(2,624) 125.6 %
Net (loss) income per above $(453) $182 (348.9) % $(251) $(3,926) 93.6 %
Addback: legal settlement 570 100.0 % 570 100.0 %
Adjusted net income (loss) $117 $182 (35.7) % $319 $(3,926) 108.1 %
Servotronics' Chief Financial Officer Robert A. Fraass commented, "I am encouraged by our significant improvement in operating cash flow compared to 2023, however, the recent volatility in the industry will continue to apply pressure on our working capital needs. Actively managing this remains a major focus during the fourth quarter and moving into 2025."
The Company's operating cash flows increased by approximately $4.9 million for the year compared to the same period in 2023 primarily driven by the prior year's significant net loss and higher accounts receivable.
Mr. Farrell concluded, "Our overall customer demand and backlog remain strong, and our operational advancements are driving higher revenue and improved operating results in the current year. We believe the customer delays we are seeing are temporary and we are managing our way through them. We remain steadfast on achieving our strategy of long-term growth and increasing 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)
September 30, December 31,
2024 2023
(Unaudited) (Audited)
Current Assets:
Cash $
46 $
95
Cash, restricted 150 150
Accounts receivable, net 12,598 12,065
Inventories, net 15,408 14,198
Prepaid and other current assets 810 1,507
Assets related to discontinued operation 1,466 1,552
Total current assets 30,478 29,567
Property, plant and equipment, net 7,143 6,978
Other non-current assets 42 42
Total Assets $
37,663 $
36,587
Liabilities and Shareholders' Equity
Current Liabilities:
Line of credit $
3,169 $
2,103
Current portion of post-retirement obligation 97 97
Accounts payable 2,954 2,061
Accrued employee compensation and benefits costs 927 1,003
Accrued warranty 413 542
Other accrued liabilities 1,046 1,909
Liabilities related to discontinued operation 27 213
Total Current Liabilities 8,633 7,928
Post-retirement obligation 4,210 4,165
Other long-term liabilities 427
Total Liabilities 13,270 12,093
Shareholders' Equity:
Common stock, par value $0.20; authorized 4,000,000 shares; issued 2,629,052 525 525
shares; outstanding 2,527,484 (2,514,775 - 2023) shares
Capital in excess of par value 14,796 14,617
Retained earnings 12,631 12,954
Accumulated other comprehensive loss (2,331) (2,389)
Employee stock ownership trust commitment (56) (56)
Treasury stock, at cost 74,816 (87,525 - 2023) shares (1,172) (1,157)
Total shareholders' equity 24,393 24,494
Total Liabilities and Shareholders' Equity $
37,663 $
36,587
SERVOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's omitted except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Revenue $
12,430 $
11,582 $
35,149 $
31,291
Costs of goods sold, inclusive of depreciation and amortization 10,162 9,083 28,083 26,252
Gross profit 2,268 2,499 7,066 5,039
Operating expenses
Selling, general and administrative 1,979 2,219 6,394 7,663
Legal settlement (Note 9) 570 570
Total operating expenses 2,549 2,219 6,964 7,663
Operating (loss) income (281) 280 102 (2,624)
Other expense
Interest & other expense, net 172 98 353 239
Total other expense 172 98 353 239
(Loss) income from continuing operations before income (453) 182 (251) (2,863)
taxes
Income tax expense (1,063)
(Loss) income from continuing operations, net of tax (453) 182 (251) (3,926)
Loss from discontinued operation before income taxes (43) (386) (72) (7,326)
Income taxes
Loss from discontinued operation, net of tax (Note 2) (43) (386) (72) (7,326)
Net loss $
(496) $
(204) $
(323) $
(11,252)
Basic and diluted (loss) earnings per share:
Continuing operations $
(0.18) $
0.07 $
(0.10) $
(1.59)
Discontinued operation (0.02) (0.16) (0.03) (2.97)
Basic and diluted loss per share $
(0.20) $
(0.09) $
(0.13) $
(4.56)
SERVOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's omitted)
Nine Months Ended
September 30,
2024 2023
Cash flows related to operating activities:
Loss from continuing operations $
(251) $
(3,926)
Adjustments to reconcile loss from continuing operations to net cash provided
(used) by operating activities:
Depreciation and amortization 768 790
Stock based compensation 185 111
Allowance for credit losses (90) 8
Inventory reserve 108 34
Warranty reserve (129) (37)
Deferred income taxes 1,077
Changes in assets and liabilities providing (using) cash:
Accounts receivable (443) (3,852)
Inventories (1,318) (796)
Prepaid and other current assets 697 (251)
Accounts payable 893 1,118
Accrued employee compensation and benefit costs (18) 229
Other accrued liabilities (863) 528
Post-retirement obligations 45 59
Other long-term liabilities 427
Net cash provided (used) by operating activities from continuing 11 (4,908)
operations
Cash flows related to investing activities:
Purchase of property, plant and equipment, net of disposals (933) (606)
Net cash used by investing activities from continuing operations (933) (606)
Cash flows related to financing activities:
Proceeds from line of credit, net of payments 1,066 2,164
Purchase of treasury shares (21)
Payments on finance lease obligations (501)
Net cash provided by financing activities from continuing operations 1,045 1,663
Discontinued Operation
Cash used by operating activities (172) (1,753)
Cash provided by investing activities 2,100
Net cash (used) provided by discontinued operation (172) 347
Net decrease in cash and restricted cash (49) (3,504)
Cash and restricted cash at beginning of period 245 3,812
Cash and restricted cash at end of period $
196 $
308
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SOURCE Servotronics, Inc.
