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ELMA, N.Y., Nov. 15, 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 September 30, 2021.
In the third quarter of 2021, Servotronics reported a net income of $3,238,000 (or $1.34 per share Basic and Diluted) compared to a net loss of $1,782,000 (or ($0.75) per share Basic and Diluted) for the comparable period ended September 30, 2020.
Revenues for the quarter were $10,915,000, a 6.0% increase compared with $10,297,000 in the third quarter of 2020. The increase in revenue is due to higher sales volume and higher prices, equally split on a consolidated basis. Although the ATG shipments were lower in the third quarter of 2021, a more financially favorable mix of product with higher prices were shipped. The CPG shipments were higher in the third quarter of 2021 and additionally the CPG shipped a more financially favorable mix of product with higher prices.
Gross margin for the third quarter of 2021 on a consolidated basis increased to $1,772,000, as compared to a negative gross margin of $165,000 for the same period in 2020. The ATG increase in gross margin is due to lower costs per unit shipped offset by the underutilization of production resources and the continued weak absorption of manufacturing overhead. The CPG decrease in gross margins is due an increase in the number of units shipped offset by higher costs per unit shipped, including the underutilization of production resources as compared to the same period in 2020.
Selling, general and administrative (SG&A) expenses increased approximately $625,000 or 29.8% for the three-month period ended September 30, 2021 compared to the same period in 2020. This is due to the increased expenditures for legal and professional fees. There were also legal charges for pending litigation reflected in SG&A on a consolidated basis, of approximately $1,890,000.
As permitted under the Coronavirus Aid, Relief, and Economic Security Act, the Company recognized a $1,978,000 employee retention credit (ERC) during the quarter ended September 30, 2021. The ERC is a refundable tax credit against certain employment taxes and is recognized in other income. 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 and the entire loan amount was forgiven by the SBA. Accordingly, during the third quarter a gain of $4,000,000 was recognized in other income.
Operating loss, which does not include the ERC, PPP loan forgiveness and interest expense, was $2,839,000 for the quarter ended September 30, 2021 compared to an operating loss of $2,261,000 for the comparable period ended September 30, 2020. Due to the ERC and PPP loan forgiveness, net income at the ATG was higher by approximately $5,015,000 as compared to the same period in 2020. The net loss at the CPG improved by approximately $5,000 as compared to the same period in 2020.
"We continue to be impacted by the COVID-19 pandemic as we adjust our operations to meet both short and long-term customer demand" said James C. Takacs, Chief Operating Officer. "While our sales at both the ATG and CPG have increased each of the last two quarters sequentially, we have not yet rebounded to pre-pandemic levels. We continue to be optimistic regarding our expectation for growth in future periods and have committed to making investments in our team, facilities, and product development efforts to position the Company for success. As we look ahead, we will remain focused on delivering benefits to all of our stakeholders."
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.