ELMA, N.Y., Nov. 13, 2020 /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 September 30, 2020.
In the third quarter of 2020, Servotronics reported a net loss of $1,782,000 (or ($0.75) per share Basic and Diluted) compared to net income of $1,132,000 (or $0.49 per share Basic and $0.47 Diluted) for the comparable period ended September 30, 2019.
Revenues for the quarter were $10,297,000, a 16.7% decrease compared with $12,362,000 in the third quarter of 2019. The decline in revenue is due to lower sales volume and an unfavorable mix of units shipped at the ATG as customer orders have been delayed to future periods due to the COVID-19 pandemic, partially offset by an increase in shipments coupled with a slightly unfavorable mix at the CPG.
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 third quarter of 2020 resulting in negative gross margin of $165,000 or (1.6)% on a consolidated basis compared to gross margin of $3,535,000 or 28.6% for the same period in 2019.
Selling, general and administrative expenses decreased approximately $38,000 or (1.8)% for the three-month period ended September 30, 2020 compared to the same period in 2019. As a percentage of revenue, these operating expenses were 20.3% compared to 17.3% for the same period in 2019.
"From the start of the COVID-19 pandemic, Servotronics has continued to focus its efforts on safeguarding our employees and maintaining a competitive cost structure as we service our customers' needs," said Kenneth D. Trbovich, CEO and Chairman of the Board. "As a result of reduced economic activity, caused by the response to the COVID-19 pandemic, we experienced lower earnings and net income in the quarter. The Company has taken actions to reduce costs and prioritize spending and we will adjust production as conditions warrant and are prepared to respond quickly to any changes in customer demand."
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. As of September 30, 2020, the Company incurred payroll costs and other eligible qualifying expenses that the Company believes to be consistent with the terms of the PPP loan. The use of these funds allowed the Company to avoid certain involuntary furloughs and layoffs of employees during the third quarter. While there is no guarantee that the Company will receive forgiveness for any outstanding amounts under the PPP loan, the Company believes that it has acted in compliance with the terms of the program.
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 capital resources and profitability 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.