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Servotronics earnings dip as knife plant is expanded

Servotronics executives expect the company’s expanded cutlery factory in Franklinville to help it win more business and make it more efficient.

But for the moment, the costs associated with the new $4 million plant and the disruption it’s causing to its cutlery business are hurting the bottom line.

The company lost $127,000 during the fourth quarter, almost double the $64,000 it lost during the final three months of 2013.

All of the loss came from Servotronics’ cutlery business, where declining sales and a more than doubling of its losses wiped out solid sales gains and a more than doubling of the earnings from its motion-control equipment business.

Kenneth Trbovich, Servotronics’ president, said the struggles of the cutlery business during the fourth quarter were expected.

“We are re-engineering operations,” Trbovich said.

The expanded plant for its Consumer Products Group will allow the company to reconfigure the factory’s production and allow it to add new equipment. But during the fourth quarter, the expansion also cut into its sales and production during the transition into the larger factory, Trbovich said.

Servotronics’ loss widened to $127,000, or 6 cents per share, from a loss of $64,000, or 3 cents per share, a year ago.

The company’s Advanced Technology Group, which makes motion-control equipment, strengthened, with profits more than doubling to $278,000 from $128,000. The group’s sales rose by 28 percent to $7 million from $5.5 million.

The cutlery business lost $405,000, more than double its loss of $192,000 a year ago. Cutlery sales dipped by 4 percent to $1.6 million from $1.7 million.

Servotronics also said it has reached an agreement with its insurance carrier that will pay the company $4.5 million toward the $5.2 million it owes former CEO Nicholas D. Trvbovich Jr. through an arbitration award over his dismissal two years ago. The arbitrator ruled that the ouster of Nicholas Trbovich, a 36-year employee at the company founded by his father, was “a sham” and “not justifiable.”

The insurance payment will cover about 87 percent of the company’s obligations under the arbitrator’s decision. Servotronics will pay the rest, but because the company already set aside funds to cover its share of the expense during the third quarter, leading to a $3.3 million loss, the company will be able to reverse that charge during the current quarter, which will significantly bolster its first-quarter profits.