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ELMA, N.Y., Aug. 13, 2021 /PRNewswire/ -- Servotronics, Inc. (NYSE American – SVT) a designer and manufacturer of servo-control components and other advanced technology products announced today the results of its operations for the quarter ended June 30, 2021.
In the second quarter of 2021, Servotronics reported a net income of $1,186,000 (or $0.49 per share Basic and Diluted) compared to net income of $965,000 (or $0.41 per share Basic and $0.40 Diluted) for the comparable period ended June 30, 2020.
Revenues for the quarter were $10,028,000, a 25.7% decrease compared with $13,504,000 in the second quarter of 2020. The decline in revenue is due to lower sales volume partially offset by a favorable price and mix of units shipped at the ATG as customer orders have been delayed to future periods due to the COVID-19 pandemic. Additionally, a slight decline in revenue by the CPG is due to lower sales volume offset by a favorable price and mix of units shipped.
The push-out of orders and reduction in units shipped at the ATG led to the underutilization of production resources and the weak absorption of manufacturing overhead during the second quarter of 2021 resulting in a lower gross margin of $1,581,000 or (42.2)% slightly offset by an increase in gross margin to $291,000 or 2.5% at the CPG due to improving utilization of production resources. On a consolidated basis the Company had lower gross margin of $1,872,000 or (38.0)% as compared to gross margin of $3,020,000 for the same period in 2020.
Selling, general and administrative expenses increased approximately $461,000 or (26.4)% for the three-month period ended June 30, 2021 compared to the same period in 2020. This is primarily due to increased legal fees and professional fees. As a percentage of revenue, these operating expenses were 22.0% compared to 12.9% for the same period in 2020.
As permitted under the Coronavirus Aid, Relief, and Economic Security Act, the Company recognized a $1,914,000 employee retention credit (ERC) during the quarter ended June 30, 2021. The ERC is a refundable tax credit against certain employment taxes and is recognized in other income. Operating income (loss), which does not include the ERC and interest expense, was ($337,000) for the quarter ended June 30, 2021 compared to operating income of $1,272,000 for the comparable period ended June 20, 2020. Due to the ERC, net income at the ATG and CPG was higher by approximately $25,000 and $196,000, respectively or $221,000 on a consolidated basis.
In April 2020, the Company applied for and received a loan in the principal amount of $4,000,000 as part of the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA). On August 4, 2021, the Company submitted a PPP Loan forgiveness application to Bank of America, NA (the "Lender"). The Lender has 60 days to review and process the forgiveness application. Upon completion of the Lender's review, the Lender is required to notify the SBA. The SBA has 90 days from receipt of the forgiveness application to approve or reject the application. As of the date of our filing, the Company has not received any determination of its application. No assurance can be given that we will obtain forgiveness of the PPP Loan in whole or in part.
"The Company continued to experience reduced economic activity in the second quarter compared to pre-pandemic levels" said James C. Takacs, Chief Operating Officer. "While we recognize we are operating in an ever-changing environment, we believe we are starting to see encouraging signs of improvement. I congratulate our entire team for not only responding to the challenges we faced over the past few quarters but also for positioning the Company for future growth as the environment stabilizes."
The Company is composed of two groups – the ATG and the CPG. The ATG primarily designs, develops and manufactures servo controls and other components for various commercial and government applications (i.e., aircraft, jet engines, missiles, manufacturing equipment, etc.). The CPG designs and manufactures cutlery, bayonets, pocket knives, machetes and combat knives, survival, sporting, agricultural knives and other edged products for both commercial and government applications.
Certain paragraphs of this release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as those pertaining to the Company's PPP Loan forgiveness application and the Company's inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations. Forward-looking statements involve numerous risks and uncertainties. The Company derives a material portion of its revenue from fixed price contracts with agencies of the U.S. Government or their prime contractors. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: 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 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 American
SOURCE Servotronics, Inc.