t74842_8k.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 23, 2012

Servotronics, Inc.
(Exact name of registrant as specified in its charter)

Commission File Number: 001-07109
 
Delaware
16-0837866
(State or other jurisdiction
(IRS Employer
of incorporation)
Identification No.)
 
1110 Maple Street
Elma, New York 14059-0300
(Address of principal executive offices, including zip code)

(716) 655-5990
(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
Item 2.01                      Completion of Acquisition or Disposition of Assets.

In the third quarter of 2012, Aero Metal Products, Inc. (“AMP”), a wholly owned subsidiary of Servotronics, Inc. (the “Company”), ceased all manufacturing operations and the Company will account for AMP as discontinued operations in such period. On October 23, 2012, AMP announced that it will surrender all assets under the personal property and real property lease to the lessor, Aero Inc., a previously reported related party, by November 3, 2012.

In 2009, AMP leased certain personal property from a related party through the execution of a capital lease. Also in 2009, AMP entered into a real property operating lease agreement, with the same related party. These transactions have been disclosed as related party transactions in the Company’s filings with the Securities and Exchange Commission because the wife of one of the Company’s directors is the sole shareholder of Aero, Inc., the company that is leasing the assets to AMP.

As previously reported, on July 23, 2012, the Company gave notice of termination of the Personal Property Lease dated as of November 3, 2009 (the “Agreement”). Under the terms of the Agreement, monthly payments of $7,500 still continue to July 2013. The term of the real property lease is scheduled to end on November 3, 2012 and AMP will surrender the property by such date.

Item 9.01                      Financial Statements and Exhibits.

(b)           Pro-forma Financial Statements

The following unaudited Pro Forma Consolidated Financial Statements of the Company for the years ended December 31, 2011 and 2010 and as of and for the six months ended June 30, 2012 are attached hereto:
 
Page
Pro Forma Consolidated Financial Statements (Unaudited)
F-1
Pro Forma Consolidated Balance Sheet (Unaudited) - As of June 30, 2012
F-2
Pro Forma Consolidated Statement of Income (Unaudited) - for the Six Months Ended June 30, 2012
F-3
Pro Forma Consolidated Statement of Income (Unaudited) - for the Year Ended December 31, 2011
F-4
Pro Forma Consolidated Statement of Income (Unaudited) - for the Year Ended December 31, 2010
Notes to the Pro Forma Consolidated Financial Statements
F-5
F-6

 
 
 
 
 
SIGNATURE(S)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
DATED: October 24, 2012    
     
  SERVOTRONICS, INC.  
     
       
 
By:
/s/Cari L. Jaroslawsky, Chief Financial Officer  
    Cari L. Jaroslawsky  
    Chief Financial Officer  
       

 
 
 
 
 
SERVOTRONICS, INC.

Pro Forma Consolidated Financial Statements
(Unaudited)


In the third quarter of 2012, Aero Metal Products, Inc. (“AMP”), a wholly owned subsidiary of Servotronics, Inc. (the “Company”) ceased all manufacturing operations and the Company has accounted for AMP as a discontinued operation as of such date (the “Disposition”).  On October 23, 2012, AMP announced that it will surrender all assets under the personal property and real property lease to the lessor, Aero Inc., a previously reported related party, by November 3, 2012.

In 2009, AMP leased certain personal property from a related party through the execution of a capital lease. Also in 2009, AMP entered into a real property operating lease agreement, with the same related party. These transactions have been disclosed as related party transactions in the Company’s filings with the Securities and Exchange Commission because the wife of one of the Company’s directors is the sole shareholder of Aero, Inc., the company that is leasing the assets to AMP.

As previously reported, on July 23, 2012, the Company gave notice of termination of that certain Personal Property Lease dated as of November 3, 2009 (the “Agreement”). Under the terms of the Agreement, monthly payments of $7,500 still continue to July 2013. The term of the real property lease is scheduled to end on November 3, 2012 and AMP will surrender the property by such date.

The following pro forma consolidated balance sheet (unaudited) as of June 30, 2012 and pro forma consolidated statements of operations (unaudited) of Servotronics, Inc. for the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010, give effect to the Disposition. The pro forma consolidated financial statements have been prepared by management of the Company based upon the historical financial statements of the Company and the adjustments and assumptions in the accompanying notes to the pro forma consolidated financial statements.

The pro forma consolidated balance sheet sets forth the effects of the Disposition as if it had been consummated on June 30, 2012.

The pro forma consolidated statements of income set forth the effect of the Disposition as if it had been consummated on January 1, 2010.

These pro forma consolidated financial statements may not be indicative of the results that actually would have occurred if the Disposition had occurred on the dates indicated or which may be obtained in the future. The pro forma consolidated financial statements should be read in conjunction with the consolidated financial statements and notes of the Company included in its annual report on Form 10-K for the year ended December 31, 2011.

 
F-1
 
 
 
SERVOTRONICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2012
($000’s omitted except share and per share data)
 (Unaudited)
 
   
As Reported
   
Pro Forma
Adjustments
   
Proforma
 
                   
Assets
                 
                   
Current Assets:
                 
   Cash and cash equivalents
  $ 4,266     $ (74 )   $ 4,192  
   Accounts receivable, net
    6,162       (100 )     6,062  
   Inventories, net
    11,684       (425 )     11,259  
   Prepaid income taxes
    447       (104 )     343  
   Deferred income taxes
    754       -       754  
   Other assets
    808       (31 )     777  
   Assets held for sale
    650       -       650  
        Total current assets
    24,771       (734 )     24,037  
                         
Property, plant and equipment, net
    5,881       (383 )     5,498  
Other non-current assets
    353       -       353  
Total Assets
  $ 31,005     $ (1,117 )   $ 29,888  
 
                       
Liabilities and Shareholders' Equity
                       
                         
Current Liabilities:
                       
   Current portion of long-term debt
  $ 191     $ -     $ 191  
   Current portion of capital lease related party
    81       (81 )     -  
   Accounts payable
    1,439       (1 )     1,438  
   Accrued employee compensation and benefit costs
    1,515       (19 )     1,496  
   Dividends payable
    358       -       358  
   Other accured liabilities
    191       -       191  
       Total current liabilities
    3,775       (101 )     3,674  
                         
Long-term debt
    2,845       -       2,845  
Long-term portion of capital lease related party
    292       (292 )     -  
Deferred income taxes
    496       -       496  
                         
Shareholders' equity:
                       
   Common Stock, par value $.20; authorized
                       
      4,000,000 shares; issued 2,614,506 shares;
                       
      outstanding 2,148,992 shares
    523       -       523  
   Capital in excess of par value
    13,926       -       13,926  
   Retained earnings
    12,158       (724 )     11,434  
   Accumulated other comprehensive loss
    (67 )     -       (67 )
   Employee stock ownership trust commitment
    (1,266 )     -       (1,266 )
   Treasury stock, at cost 230,400 shares
    (1,677 )     -       (1,677 )
          Total shareholders' equity
    23,597       (724 )     22,873  
                         
Total Liabilities and Shareholders' Equity
  $ 31,005     $ (1,117 )   $ 29,888  
 
 
F-2
 
 

SERVOTRONICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2012
($000’s omitted except per share data)
(Unaudited)
 
   
As Reported
   
Pro Forma
Adjustments
   
Proforma
 
                   
Revenue
  $ 16,007     $ (221 )   $ 15,786  
                         
Costs, expenses and other income:
                       
Costs of good sold, exclusive of depreciation and amortization
    11,991       (447 )     11,544  
Selling, general and administrative and administrative
    2,573       (95 )     2,478  
Interest expense
    27       (4 )     23  
Depreciation and amortization
    340       (44 )     296  
Other income, net
    (10 )           (10 )
Total expenses
    14,921       (590 )     14,331  
Income before from continuing operations before income tax provision
    1,086       369       1,455  
Income tax provision
    309       125       434  
                         
Income from continuing operations
    777       244       1,021  
                         
Discontinued Operations:
                       
Loss from operations of discontinued component, net of income tax benefit
    (160 )           (160 )
Write-down of assets associated with a discontinued component, net of income tax benefit
    (268 )           (268 )
Loss from discontinued operations
    (428 )           (428 )
                         
Net income
  $ 349     $ 244     $ 593  
                         
Income (loss) per share:
                       
Basic
                       
Income per share from continuing operations
  $ 0.37     $ 0.12     $ 0.49  
Loss per share from discontinued operations
    (0.20 )           (0.20 )
Total net income per share
  $ 0.17     $ 0.12     $ 0.29  
                         
Diluted
                       
Income per share from continuing operations
  $ 0.36     $ 0.11     $ 0.48  
Loss per share from discontinued operations
    (0.20 )           (0.20 )
Total net income per share
  $ 0.16     $ 0.11     $ 0.28  
 
 
F-3
 
 
 
SERVOTRONICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
($000’s omitted except per share data)
(Unaudited)

   
As Reported
   
Pro Forma
Adjustments
   
Proforma
 
                   
Revenue
  $ 34,181     $ (310 )   $ 33,871  
                         
Costs, expenses and other income:
                       
Costs of good sold, exclusive of depreciation and amortization
    25,278       (957 )     24,321  
Selling, general and administrative and administrative
    5,019       (178 )     4,841  
Interest expense
    65       (9 )     56  
Depreciation and amortization
    686       (87 )     599  
Other income, net
    (162 )     -       (162 )
Total expenses
    30,886       (1,231 )     29,655  
                         
Income before income tax provision
    3,295       921       4,216  
                         
Income tax provision
    669       313       982  
                         
Net income
  $ 2,626     $ 608     $ 3,234  
                         
                         
Income Per Share:
                       
                         
Basic
                       
Net income per share
  $ 1.31     $ 0.31     $ 1.62  
                         
Diluted
                       
Net income per share
  $ 1.24     $ 0.29     $ 1.53  
 
 
F-4
 
 

SERVOTRONICS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2010
($000’s omitted except per share data)
(Unaudited)

   
As Reported
   
Pro Forma
Adjustments
   
Proforma
 
                   
Revenue
  $ 31,659     $ (292 )   $ 31,367  
                         
Costs, expenses and other income:
                       
Costs of good sold, exclusive of depreciation and amortization
    22,900       (558 )     22,342  
Selling, general and administrative and administrative
    5,001       (184 )     4,817  
Interest expense
    74       (11 )     63  
Depreciation and amortization
    664       (85 )     579  
Other income, net
    (28 )     -       (28 )
Total expenses
    28,611       (838 )     27,773  
                         
Income before income tax provision
    3,048       546       3,594  
                         
Income tax provision
    920       186       1,106  
                         
Net income
  $ 2,128     $ 360     $ 2,488  
                         
Income Per Share:
                       
Basic
                       
Net income per share
  $ 1.08     $ 0.18     $ 1.26  
                         
Diluted
                       
Net income per share
  $ 1.01     $ 0.17     $ 1.18  
 
 
F-5
 
 

SERVOTRONICS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The pro forma consolidated financial statements have been prepared by management of the Company based upon the historical financial statements of the Company and include pro forma adjustments to account for the closing of Aero Metal Products Inc., a wholly owned related party subsidiary of Servotronics, Inc.

The pro forma adjustments remove all revenue and expense results of Aero Metal Products Inc. in the periods presented as the Company has ceased all manufacturing operations as of September 30, 2012 and does not plan to sell or produce the product line of Aero Metal Products Inc. in the future. The pro forma adjustments also remove the related assets and liabilities of Aero Metal Products, Inc. with the exception of $35,000 in general manufacturing equipment that will be transferred to and put into operation at a subsidiary of the Company.

In conjunction with the disposal transaction, management will be evaluating inventory on hand as of September 30, 2012 to determine if an adjustment is required to record items at the lower of cost or market. Management will also evaluate potential options to liquidate inventory on hand at September 30, 2012. The write-down and related tax effect have not been considered in the pro forma adjustments on the accompanying consolidated statements of income.

On July 23, 2012, the Company gave notice of termination on the Personal Property Lease dated as of November 3, 2009 being accounted for as a capital lease related party in the previously reported consolidated financial statements. Under the terms of the agreement, monthly payments of $7,500 continue to July 2013. As a result of this notice and the aforementioned disposal transaction, removal of the related machinery and equipment and capital lease liability are reflected in the pro forma adjustments on the accompanying consolidated balance sheet. During the three months ended September 30, 2012, a liability for the loss associated with the remaining payments on the Personal Property Lease with related party will be recorded and has not been considered in the pro forma adjustments on the accompanying consolidated financial statements.
 
F-6