Servotronics Inc. has a market cap of $19 million; its shares were traded at around $8.5 with a P/E ratio of 9.6 and P/S ratio of 0.6. The dividend yield of Servotronics Inc. stocks is 1.8%. Servotronics Inc. had an annual average earning growth of 12.6% over the past 10 years.
Highlight of Business Operations:The Company s consolidated revenues increased approximately $1,462,000 or 19.9% for the three month period ended September 30, 2011 and $2,063,000 or 8.8% for the nine month period ended September 30, 2011 when compared to the same three and nine month periods in 2010. The increase is due to increased commercial shipments across various product lines at the Advanced Technology Group (ATG) for the three and nine month periods ended September 30, 2011 and increased shipments under government contracts for the three month period ended September 30, 2011 at the Consumer Products Group (CPG). Procurements and timing of shipments under Government contracts at the CPG may, at times, significantly impact operating results from period to period.
Cost of goods sold as a percentage of sales decreased from 76.8% to 71.3% for the three month period ended September 30, 2011 mainly due to the growth in ATG sales allowing revenues to exceed break-even point by a greater margin. Cost of goods sold as a percentage of revenues increased from 71.9% to 72.4% for the nine month period ended September 30, 2011 when compared to the same period in 2010 mainly due to an approximate $79,000 increase in reserve for slow-moving inventory at CPG and the write off start up costs associated with new product lines/products and development efforts in the amount of approximately $464,000 compared to $531,000 for the nine month periods ended September 30, 2011 and 2010. Variations in cost of goods sold as a percentage of sales is also largely dependent upon the mix of product sold within the operating groups as well as the relative percentage of each operating group s sales to total consolidated sales.
Selling, general and administrative (SG&A) expenses as a percentage of revenue decreased from 16.7% to 13.7% for the three month period ended September 30, 2011 and 15.7% to 14.7% for the nine month period ended September 30, 2011 as compared to the same periods in 2010 mainly due to increased shipments and revenues combined with cost containment. Selling, general and administrative expenses are attributable to marketing of products (i.e., costs of internal and external sales efforts, catalog production, and the promotion of new and existing products in current and new markets). Also included in SG&A expenses are the labor and related costs for general and administrative support, accounting, professional, legal and information technology costs. Selling, general and administrative expenses remained relatively consistent for the three month period ended September 30, 2011 and increased $75,000 for the nine month period ended September 30, 2011, respectively, when compared to the same periods in 2010 mainly due to increased salaries and wages at both the ATG and CPG partially offset by decreases in professional and consulting expenses.
Net income increased for the three month period ended September 30, 2011 $699,000 or 341.0% and increased $432,000 or 26.9% for the nine month period when compared to the same periods ended September 30, 2010. The increase in net income is primarily the result of increases in revenues and shipments combined with continued cost containment activities and negotiated pricing to maintain product margins.
The Company generated approximately $1,950,000 in cash from operations during the nine months ended September 30, 2011 as compared to generating $1,885,000 during the nine months ended September 30, 2010. Cash was generated primarily through net income and timing differences on prepaid income taxes and accrual items. The primary use of cash for the Company s operating activities for the nine months ended September 30, 2011 include working capital requirements, mainly accounts receivable, inventory and prepayments on insurances and payments for property taxes. Cash generated and used in operations is consistent with sales volume, customer expectations and competitive pressures. The Company s primary use of cash in its financing and investing activities in the first nine months of 2011 included current principal payments on long-term debt, as well as approximately $336,000 for a cash dividend paid on May 20, 2011 to shareholders of record on April 29, 2011. The Company expended approximately $435,000 for capital expenditures. The Company also expended $517,000 to purchase outstanding stock options.
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