Servotronics, Inc. has a market cap of $19.6 million; its shares were traded at around $8.09 with a P/E ratio of 8 and P/S ratio of 0.6. The dividend yield of Servotronics, Inc. stocks is 3.6%. Servotronics, Inc. had an annual average earning growth of 19.2% over the past 10 years. GuruFocus rated Servotronics, Inc. the business predictability rank of 4-star.
Highlight of Business Operations:During the three months ended September 30, 2012 and 2011 approximately 26% and 43%, respectively, and 31% and 42% for the nine months ended September 30, 2012 and 2011, respectively, of the Company s revenues from continuing operations were derived from contracts with agencies of the U.S. Government or their prime contractors and their subcontractors. Sales of products sold for government applications decreased when comparing the results of the three and nine months ended September 30, 2012 to September 30, 2011, due to decreased government shipments at the Consumer Products Group in the amount of approximately $1,716,000 and $3,141,000, respectively, while shipments to the government at the Advanced Technology Group remained consistent. The Company believes that government involvement in military operations overseas will continue to have an impact on the financial results for both the ATG s and CPG s markets. While the Company is optimistic in relation to these potential opportunities, it recognizes that sales to the government are affected by defense budgets, the foreign policies of the U.S. and other nations, the level of military operations and other factors, and as such, it is difficult to predict the impact on future financial results.
The Company s consolidated revenues for continuing operations decreased approximately $1,034,000 or 12.1% for the three month period ended September 30, 2012 and $1,290,000 or 5.2% for the nine month period ended September 30, 2012 when compared to the same three and nine month periods in 2011. The decrease is due to decreased shipments at the Consumer Products Group (CPG) mainly due to a decrease in shipments related to orders from the U.S. Government and its prime vendors. These decreases are not fully offset by increases in commercial shipments at the CPG and ATG. Procurements and timing of shipments under Government contracts at the CPG may, at times, significantly impact operating results from period to period.
Income from continuing operations for the three month period ended September 30, 2012 decreased $801,000 or 72.4% when compared to the same period ended September 30, 2011. Income from continuing operations for the nine month period ended September 30, 2012 decreased $1,242,000 or 48.0% when compared to the same period ended September 30, 2011. The decrease in income from continuing operations is primarily the result of decreased revenues and shipments of products with lower margins at the Company s Consumer Products Group.
As previously reported, 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 of substantially all of its assets for cash consideration of $650,000, less $10,000 in escrow. QCC is accounted for as a discontinued operation in the accompanying consolidated financial statements. During the three and nine months ended September 30, 2012, QCC reported a loss on disposal related to a write-down of certain assets to lower of cost or market resulting in a before tax loss of approximately zero and $406,000, respectively.
The Company generated approximately $609,000 in cash from operations during the nine months ended September 30, 2012. Cash was generated primarily through net income, collection of receivables, an increase in accrued employee compensation and benefit costs as well as an increase to other accrued liabilities. The primary use of cash for the Company s operating activities for the nine months ended September 30, 2012 include working capital requirements, mainly inventory, prepayments on insurances and property tax, other current assets and prepaid income 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 2012 included approximately $358,000 for cash dividends paid on July 2, 2012. The Company also expended approximately $394,000 for capital expenditures during the nine months ended September 30, 2012. These uses are partially offset by cash generated in the amount of $640,000 for the sale of Queen Cutlery Company.
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