<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4987
SL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 21-0682685
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
520 FELLOWSHIP ROAD, SUITE A114, MT. LAUREL, NJ 08054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 856-727-1500
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
<S> <C>
Common stock, $.20 par value New York Stock Exchange
Philadelphia Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of common stock outstanding as of August 4, 2000, were
5,637,810.
<PAGE> 2
Item 1. Financial Statements
SL INDUSTRIES, INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents ....................................................... $ 426,000 $ 1,117,000
Receivables, less allowances of
$2,428,000 and $1,899,000, respectively ........................................ 24,821,000 25,471,000
Inventories (Note 2) ............................................................ 27,423,000 28,083,000
Prepaid expenses ................................................................ 1,291,000 1,317,000
Deferred income taxes ........................................................... 3,952,000 4,075,000
------------- -------------
Total current assets ........................................................ 57,913,000 60,063,000
------------- -------------
Property, plant and equipment, less accumulated depreciation
of $21,697,000 and $20,434,000, respectively ..................................... 21,462,000 22,027,000
Long-term note receivable .......................................................... 2,139,000 2,149,000
Deferred income taxes .............................................................. 1,784,000 1,950,000
Cash surrender value of life insurance policies .................................... 9,558,000 9,923,000
Intangible assets, less accumulated amortization
of $4,693,000 and $4,080,000, respectively ....................................... 19,910,000 19,785,000
Other assets ....................................................................... 1,641,000 1,153,000
------------- -------------
Total assets ............................................................... $ 114,407,000 $ 117,050,000
============= =============
LIABILITIES
Current liabilities:
Short-term bank debt ............................................................ $ 732,000 $ 772,000
Long-term debt due within one year .............................................. 184,000 190,000
Accounts payable ................................................................ 10,250,000 13,104,000
Accrued income taxes ............................................................ 874,000 411,000
Accrued liabilities:
Payroll and related costs ..................................................... 4,561,000 4,377,000
Other ......................................................................... 9,632,000 8,167,000
------------- -------------
Total current liabilities .................................................. 26,233,000 27,021,000
------------- -------------
Long-term debt less portion due within one year .................................... 36,253,000 39,245,000
Deferred compensation and supplemental retirement benefits ......................... 5,669,000 5,650,000
Other liabilities .................................................................. 3,189,000 3,062,000
------------- -------------
Total liabilities .......................................................... $ 71,344,000 $ 74,978,000
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, no par value; authorized, 6,000,000 shares; none issued ........... $ - $ -
Common stock, $.20 par value; authorized, 25,000,000 shares;
issued, 8,298,000 and 8,272,000 shares, respectively ............................. 1,660,000 1,654,000
Capital in excess of par value ..................................................... 38,166,000 37,771,000
Retained earnings .................................................................. 19,473,000 18,410,000
Accumulated other comprehensive income ............................................. 27,000 53,000
Treasury stock at cost, 2,662,000 and 2,650,000 shares, respectively ............... (16,263,000) (15,816,000)
------------- -------------
Total shareholders' equity ................................................. 43,063,000 42,072,000
------------- -------------
Total liabilities and shareholders' equity ................................. $ 114,407,000 $ 117,050,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
SL INDUSTRIES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three-Months Ended Six-Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales .................................................. $ 44,144,000 $ 33,151,000 $ 87,681,000 $ 63,218,000
------------ ------------ ------------ ------------
Cost and expenses:
Cost of products sold .................................... 29,182,000 21,815,000 57,656,000 40,770,000
Engineering and product development ...................... 3,178,000 2,121,000 6,269,000 4,076,000
Selling, general and administrative ...................... 8,560,000 6,175,000 17,380,000 11,666,000
Depreciation and amortization ............................ 1,245,000 1,012,000 2,583,000 1,998,000
Restructuring costs ...................................... 6,000 -- 45,000 --
------------ ------------ ------------ ------------
Total cost and expenses .................................... 42,171,000 31,123,000 83,933,000 58,510,000
------------ ------------ ------------ ------------
Income from operations ..................................... 1,973,000 2,028,000 3,748,000 4,708,000
Other income (expense):
Interest income .......................................... 135,000 53,000 202,000 124,000
Interest expense ......................................... (754,000) (286,000) (1,515,000) (472,000)
------------ ------------ ------------ ------------
Income before income taxes ................................. 1,354,000 1,795,000 2,435,000 4,360,000
Provision for income taxes ................................. 558,000 753,000 1,091,000 1,794,000
------------ ------------ ------------ ------------
Net income ................................................. $ 796,000 $ 1,042,000 $ 1,344,000 $ 2,566,000
------------ ------------ ------------ ------------
Basic net income per common share .......................... $ 0.14 $ 0.18 $ 0.24 $ 0.45
============ ============ ============ ============
Diluted net income per common share ........................ $ 0.14 $ 0.18 $ 0.23 $ 0.44
============ ============ ============ ============
Shares used in computing basic net income
per common share ......................................... 5,615,000 5,633,000 5,621,000 5,647,000
Shares used in computing diluted net income
per common share ......................................... 5,714,000 5,862,000 5,768,000 5,884,000
</TABLE>
See accompanying notes to consolidated financial statements.
SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
<TABLE>
<CAPTION>
Three-Months Ended Six-Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income ................................................. $ 796,000 $ 1,042,000 $ 1,344,000 $ 2,566,000
Other comprehensive income (loss):
Currency translation adjustment, net of related taxes .... (38,000) (84,000) (26,000) (254,000)
------------ ------------ ------------ ------------
$ 758,000 $ 958,000 $ 1,318,000 $ 2,312,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SL INDUSTRIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six-Months Ended
June 30,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ......................................................................... $ 1,344,000 $ 2,566,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................................................... 1,786,000 1,331,000
Amortization .................................................................... 797,000 666,000
Restructuring charges............................................................ 45,000 --
Provisions for losses on accounts receivable .................................... 531,000 (136,000)
Additions to other assets........................................................ (499,000) (788,000)
Cash surrender value of life insurance premiums ................................. (350,000) (331,000)
Deferred compensation and supplemental retirement benefits ...................... 265,000 623,000
Deferred compensation and supplemental retirement benefit payments .............. (246,000) (346,000)
Decrease (Increase) in deferred income taxes .................................... 287,000 (1,347,000)
Gain on sales of equipment ...................................................... (5,000) (16,000)
Changes in operating assets and liabilities:
Accounts receivable ........................................................... 191,000 (469,000)
Inventories ................................................................... 507,000 (706,000)
Prepaid expenses .............................................................. 23,000 (162,000)
Accounts payable .............................................................. (2,935,000) 1,629,000
Other accrued liabilities ..................................................... 1,552,000 1,008,000
Accrued income taxes .......................................................... 457,000 868,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ 3,750,000 $ 4,393,000
------------ ------------
INVESTING ACTIVITIES:
Investment in Kreiss Johnson ....................................................... 41,000 6,000
Proceeds from sales of equipment ................................................... 59,000 17,000
Purchases of property, plant and equipment ......................................... (989,000) (1,140,000)
Decrease (Increase) in notes receivable ............................................ (10,000) 5,000
Payments for acquisitions, net of cash acquired .................................... (360,000) (11,251,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ................................................ $ (1,259,000) $(12,363,000)
------------ ------------
FINANCING ACTIVITIES:
Cash Dividends Paid ................................................................ (279,000) (281,000)
Proceeds from short-term debt ...................................................... -- 6,596,000
Proceeds from long-term debt ....................................................... 3,800,000 23,060,000
Payments on short-term debt......................................................... (75,000) (7,008,000)
Payments on long-term debt ......................................................... (6,710,000) (13,875,000)
Proceeds from stock options exercised .............................................. 397,000 344,000
Treasury stock acquired............................................................. (447,000) (1,018,000)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES ................................................ $ (3,314,000) $ 7,818,000
------------ ------------
Effect of exchange rate changes on cash .............................................. $ 132,000 $ 203,000
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS .............................................. $ (691,000) $ 52,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....................................... 1,117,000 --
------------ ------------
CASH AND CASH EQUIVALENTS AT JUNE 30, ................................................ $ 426,000 $ 52,000
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ......................................................................... $ 1,347,000 $ 427,000
Income taxes ..................................................................... $ 736,000 $ 1,648,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SL INDUSTRIES, INC.
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with Article 10 of Regulation S-X and, accordingly, do
not include all the information and footnotes required by generally accepted
accounting principles. In the opinion of the Registrant, the accompanying
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. These financial statements
should be read in conjunction with the Registrant's audited financial statements
and notes thereon included in the Registrant's Annual Report to Shareholders and
Form 10-K for the year ended July 31, 1999, along with any subsequent Form 10-Qs
and Form 8-Ks.
2. Inventories at June 30, 2000, and December 31, 1999, were as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials $19,157,000 $20,678,000
Work in process 4,136,000 3,959,000
Finished goods 4,130,000 3,446,000
----------- -----------
$27,423,000 $28,083,000
=========== ===========
</TABLE>
3. The Registrant has presented net income per common share pursuant to the
Financial Accounting Standards Board Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share." Basic net income per common share is
computed by dividing reported net income available to common shareholders by
weighted average shares outstanding for the period. Diluted net income per
common share is computed by dividing reported net income available to common
shareholders by weighted average shares outstanding for the period, adjusted for
the dilutive effect of common stock equivalents, which consist of stock options,
using the treasury stock method.
<PAGE> 6
The table below sets forth the reconciliation of the numerators and denominators
of the basic and diluted net income per common share computations:
<TABLE>
<CAPTION>
Per Per
Share Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
------------------------------------------------------------------------------------------
Three-Months Ended
------------------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
--------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per common
share $ 796,000 5,615,000 $ .14 $1,042,000 5,633,000 $ .18
Effect of dilutive securities -- 99,000 -- -- 229,000 --
---------- --------- ------- ---------- --------- -------
Dilutive net income per
common share $ 796,000 5,714,000 $ .14 $1,042,000 5,862,000 $ .18
========== ========= ======= ========== ========= =======
</TABLE>
<TABLE>
<CAPTION>
Per Per
Share Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
------------------------------------------------------------------------------------------
Six-Months Ended
------------------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
--------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per common
share $1,344,000 5,621,000 $ .24 $2,566,000 5,647,000 $ .45
Effect of dilutive securities -- 147,000 (.01) -- 237,000 (.01)
---------- --------- ------- ---------- --------- -------
Dilutive net income per
common share $1,344,000 5,768,000 $ .23 $2,566,000 5,884,000 $ .44
========== ========= ======= ========== ========= =======
</TABLE>
For the three-month periods ended, June 30, 2000 and 1999, 287,457 and 39,000
common stock options, respectively, were excluded from the dilutive computation
because their effect would be anti-dilutive. For the six-month periods ended
June 30, 2000 and 1999, 539,909 and 87,076 common stock options, respectively,
were excluded from the dilutive computation because their effect would be
anti-dilutive.
4. During the five-month transition period ended December 31, 1999, the
Registrant recorded charges of $4,273,000 to cover restructuring, inventory
writedowns and losses on commitments recognized by its SL Waber subsidiary. An
additional $6,000 of restructuring costs was charged to expense in the
three-month period ended June 30, 2000 and $45,000 in the six-month period ended
June 30, 2000. In addition, approximately $800,000 of additional restructuring
costs will be recognized during the second half of calendar year 2000 as a
result of the Registrant's decision to integrate the operations of its SL Waber
and Condor D.C. Power Supplies subsidiaries. The Registrant anticipates that all
of the charges will be paid or incurred by the end of the fourth quarter of
calendar year 2000. At June 30, 2000, the restructuring costs, inventory
writedowns and losses on commitments remaining from the $4,318,000 in charges
was as follows: $1,247,000 in inventory reserves, $146,000 in accrued
liabilities, and $79,000 in accounts payable.
<PAGE> 7
5. Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"), was adopted by the
Registrant effective July 31, 1999. Under the disclosure requirements of SFAS
131, the Registrant classifies its operations into the following six business
segments: Power Supplies, Power Conditioning and Distribution Units ("PCDUs"),
Motion Control Systems, Electric Utility Equipment Protection Systems, Surge
Suppressors and Other. Comparative results in thousands for the three-month and
six-month periods are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales
---------
Power Supplies $16,607 $ 9,317 $33,300 $17,857
PCDUs 9,032 6,969 17,196 13,247
Motion Control Systems 5,358 4,719 10,861 11,014
Electric Utility Equipment
Protection Systems 6,918 3,588 12,705 3,588
Surge Suppressors 4,843 7,449 10,815 15,032
Other 1,386 1,109 2,804 2,480
------- ------- ------- -------
Consolidated $44,144 $33,151 $87,681 $63,218
======= ======= ======= =======
Operating income (loss)
-----------------------
Power Supplies $ 1,609 $ 1,555 $ 3,114 $ 3,112
PCDUs 1,409 883 2,736 1,869
Motion Control Systems 472 317 1,061 1,255
Electric Utility Equipment
Protection Systems 834 399 1,508 399
Surge Suppressors (1,551) (1,294) (3,078) (1,504)
Other (794) 168 (1,548) (423)
-------- -------- -------- -------
Subtotal 1,979 2,028 3,793 4,708
Restructuring costs (6) -- (45) --
-------- -------- -------- -------
Consolidated $ 1,973 $ 2,028 $ 3,748 $ 4,708
======== ======== ======== =======
</TABLE>
6. Subsequent Event: During the month of July, the Registrant was advised by one
of its life insurance companies that it had settled a class action suit brought
by certain of its policyholders. As a result of the settlement, the Registrant
has been awarded approximately $831,000 of paid-up additions, which will
increase the cash surrender and death benefit values of its life insurance
policies. As part of the settlement, the Registrant also received a cash award
in the amount of approximately $44,000. The total award of $875,000 will be
recognized as income by the Registrant during its third quarter ending September
30, 2000.
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-------------------------------------------------------------------------------
Liquidity and Capital Resources
-------------------------------
The principal source of cash during the Registrant's six-month period ending
June 30, 2000, of $3,750,000, net, was provided by operating activities, while
investing and financing activities used cash of $1,259,000, net, and $3,314,000,
net, respectively. The net cash provided by operating activities resulted
primarily from net income before depreciation and amortization, partially offset
by a decrease in operating liabilities. The net cash used in investing
activities resulted primarily from purchases of tooling, production, computer
and telephone equipment, and the acquisition of a small machining operation. The
net cash used in financing activities resulted primarily from the net repayment
of long-term debt.
The Registrant's borrowing capacity at June 30, 2000, remained above its use of
outside financing. As of June 30, 2000, the Registrant had $4,977,000 available
for use under its $40,000,000 Revolving Credit Agreement since $95,000 was
allocated to outstanding trade letters of credit, $5,927,000 remained from the
acquisition of all of the issued and outstanding shares of Elektro-Metall Export
GmbH ("EME"), $12,000,000 remained from the acquisition of all the issued and
outstanding common shares of RFL Electronics Inc. ("RFL"), $7,200,000 was
utilized for the acquisition of certain net operating assets of Todd Products
Corporation and Todd Power Corporation (together, "Todd Products") and
$9,801,000 was utilized for working capital requirements. The available credit
facility is subject to commitment fees, but not compensating balances. The
Agreement contains limitations on borrowings and their use, and requires
maintenance of specified ratios, as amended, with all of which the Registrant is
in compliance. In addition, the Agreement's maturity date has been extended
until October 31, 2003. During the three-month period ended June 30, 2000, the
Registrant entered into a $5,000,0000 leasing agreement with one of its banks.
Under this agreement, the Registrant will lease its capital equipment for
periods ranging from three to seven years at interest rates of 3.05% to 8.08%.
In addition, EME has approximately $4,638,000 in lines of credit with its banks.
Under the terms of its lines of credit, the subsidiary can borrow for any
purpose at interest rates of 3.7% to 7.45%. No financial covenants are required.
Also, as of June 30, 2000, the Registrant had $9,558,000 available from the cash
surrender value of its life insurance policies.
During the three-month period ended June 30, 2000, the ratio of current assets
to current liabilities increased from 2.1 to 1 to 2.2 to 1. The increase was
primarily related to a 1% increase in current assets, and a 3% decrease in
current liabilities.
Capital expenditures for the six-month period ended June 30, 2000, amounted to
$989,000 and were primarily for purchases of tooling, production, computer and
telephone equipment. The Registrant anticipates that future commitments for
additional capital equipment will be funded under the terms of its leasing
agreement. The remaining capital expenditures will be funded by cash generated
by operations, and to the extent necessary, the utilization of borrowings under
the Registrant's Revolving Credit Agreement.
<PAGE> 9
The Registrant is not aware of any demands, commitments or uncertainties in the
normal course which are likely to impair its ability to generate or borrow
adequate amounts of cash to meet its future needs, which include payment of
dividends, capital expenditures and expenditures for working capital
requirements.
Results of Operations
---------------------
Calendar 2000 Compared to Calendar 1999
Consolidated net sales for the three-month and six-month periods ended June 30,
2000, increased 33% and 39%, respectively, as compared to the net sales realized
during the corresponding periods a year ago. The sales increases included three
months of net sales realized by RFL, which was acquired in May 1999 and the net
sales realized from the Todd Products' product lines, which were acquired in
July 1999. If the noncomparative net sales of RFL and Todd Products' product
lines were excluded from the current three-month and six-month periods, net
sales increased by 6% and 3% respectively, as compared to the same periods last
year. Net sales for the three-month and six-month periods ended June 30, 2000,
increased in the power supplies, power conditioning and distribution units, and
electric utility equipment protection systems segments. Net sales in the motion
control systems segment increased during the three-month period ended June 30,
2000, while decreasing during the six-month period ended June 30, 2000. Net
sales in the surge suppressors segment decreased during both periods. The sales
increases in the power supplies segment were primarily due to an increase in
orders received from customers in the distribution channel. The sales increases
in the power conditioning and distribution units segment was a result of both
strong demand and a weak semiconductor market, a year ago. The sales increase in
the motion control systems segment during the three-month period ended June 30,
2000, was due to increased volume, offset, in part, by the affect of the strong
dollar on its European business. The sales decrease in the motion control
systems segment during the six-month period ended June 30, 2000, was primarily
due to customers' rescheduling their orders for precision motor products and the
affect of the strong dollar on its European business. The sales decreases in the
surge suppressors segment were related to continued delays in the introduction
of new surge protection products, competitors' aggressive pricing initiatives
and the nonpursuit of unprofitable business. The business within this segment
has refocused its efforts on higher margin opportunities to supply power
protection systems to major service providers and equipment manufacturers.
The Registrant also realized operating income of $1,973,000 and $3,748,000 for
the three-month and six-month periods, respectively, as compared to operating
income of $2,028,000 and $4,708,000, during the corresponding periods a year
ago. The operating income for the three-month and six-month periods ended June
30, 2000, included restructuring costs of $6,000 and $39,000, respectively, that
were recognized by the Registrant's SL Waber subsidiary. In addition,
approximately $800,000 of additional restructuring costs will be recognized
during the third and fourth quarters of calendar year 2000 as a result of the
integration of SL Waber and Condor D.C.
<PAGE> 10
Power Supplies. We anticipate that SL Waber will continue to realize adverse
operating financial results through the remainder of Calendar 2000, which will
continue to negatively impact the Company's consolidated operating financial
results. During the three-month and six-month periods ended June 30, 2000,
operating income increased in the power supplies, power conditioning
distribution units, and electric utility equipment protection systems segments,
while operating income decreased in the surge suppressors segment. During the
three-month period ended June 30, 2000, operating income also increased in the
motion control systems segment, while decreasing during the six-month period
ended June 30, 2000. The increased operating income in the power supplies
segment was primarily due to higher sales volume, offset, in part, by the
incremental costs associated with the integration of the Todd Products' product
lines. The increased operating income in the power conditioning and distribution
units segment was primarily due to higher sales volume and lower operating
costs. The increased operating income in the electric utility equipment
protection system segment was the result of increased volume, as well as the
inclusion of RFL Electronic Inc.'s results for six months in calendar 2000, as
compared to two months in calendar 1999. The decreased operating income in the
surge suppressors segment was primarily due to lower sales volume.
Cost of products sold for the three-month and six-month periods increased 34%
and 41%, as compared to last year. If the noncomparative results of RFL and Todd
Products' product lines were excluded from the three-month period and six-month
periods, cost of products sold increased 4% and 5%, respectively, as compared to
last year. As a percentage of net sales, cost of products sold for both the
three-month and six-month periods was 66%, as compared to 66% and 65%,
respectively, a year ago. If the noncomparative results of RFL and Todd
Products' product lines were excluded, cost of products sold, as a percentage of
net sales, for the three-month and six-month periods was 64% and 66%, as
compared to 66% and 65%, a year ago. The above increases were primarily related
to product mix.
Engineering and product development expenses for the three-month and six-month
periods increased 50% and 54%, respectively, as compared to the same periods
last year. If the noncomparative results of RFL and Todd Products' product lines
were excluded from the three-month and six-month periods, engineering and
product development expenses increased 14% and 11%, respectively, as compared to
last year. As a percentage of net sales, engineering and product development
expenses for the three-month and six-month periods were 7% for both periods, as
compared to 6% for both periods last year. If the noncomparative results of RFL
and Todd Products' product lines were excluded, engineering and product
development expenses, as a percentage of net sales, were also 7% for both
periods, as compared to 6% for both periods last year.
Selling, general and administrative expenses for the three-month and six-month
periods increased 39% and 49%, respectively, as compared to the same periods
last year. If the noncomparative results of RFL and Todd Products' product lines
were excluded from the three-month and six-month periods, selling, general and
administrative expenses decreased approximately 2% and increased approximately
5%, respectively, as compared to the same periods last year. As a percentage of
net sales, selling, general and administrative expenses for the three-month and
six-month periods were 19% and 20%, respectively, as compared to 19% for both
periods, a year
<PAGE> 11
ago. If the noncomparative results of RFL and the costs associated with the Todd
Products' product lines were excluded from the three-month and six-month
periods, selling, general and administrative expenses, as a percentage of net
sales, were 17% and 19%, respectively, as compared to 19% for both periods, a
year ago. The six-month increases were primarily related to increased
administrative and selling expenses, offset, in part, by decreased delivery
expenses.
Depreciation and amortization expense for the three-month and six-month periods
increased 23% and 29%, as compared to last year. If the noncomparative results
of RFL and Todd Products' product lines were excluded from the three-month and
six-month results, depreciation and amortization expense decreased 5% and 4%,
respectively, as compared to last year. The decreases were primarily related to
reduced depreciation and amortization of computer hardware and software,
respectively.
Interest income for the three-month and six-month periods increased by 155% and
63%, respectively, as compared to last year. The reason for the increase was
more cash available for investment and higher interest rates. Interest expense
for the three-month and six-month periods increased 164% and 221%, respectively,
as compared to last year. The increase resulted primarily from a higher debt
balance as a result of the RFL and Todd Products' product lines acquisitions.
The effective tax rate for the three-month and six-month periods was 41% and
45%, respectively, as compared to 42% and 41%, respectively, a year ago. The
six-month period effective tax rate reflects the higher effective tax rate
associated with the Registrant's profitable German operation.
Forward-Looking Information
From time to time, information provided by the Registrant, including written or
oral statements made by its representatives, may contain forward-looking
information as defined in the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, which address
activities, events or developments that the Registrant expects or anticipates
will or may occur in the future, including such things as expansion and growth
of the Registrant's business, future capital expenditures and the Registrant's
prospects, contain forward-looking information. In reviewing such information,
it should be kept in mind that actual results may differ materially from those
projected or suggested in such forward-looking information. This forward-looking
information is based on various factors and was derived utilizing numerous
assumptions. Many of these factors have been previously been identified in
filings or statements made by or on behalf of the Registrant.
Important assumptions and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking
information include changes in the general economy, changes in consumer
spending, competitive factors and other factors affecting the Company's business
in or beyond the Company's control. These factors include changes in the rate of
inflation, changes in state or federal legislation or regulation, adverse
determinations with respect to litigation or other claims (including
environmental matters), the Company's ability to recruit and develop employees,
its ability to successfully implement new technology, shortages of
<PAGE> 12
key electronic components and the stability of product costs. These factors also
include, in particular, whether, and the extent to which, certain of the
Registrant's markets which had experienced a slowdown recover or continue to
recover. The Registrant's financial results will also depend on the extent to
which management is able to successfully integrate the operations of the
Registrant's surge suppressors segment with the operation of its power supplies
segment.
Other factors and assumptions not identified above could also cause actual
results to differ materially from those set forth in the forward-looking
information. The Registrant does not undertake to update forward-looking
information contained herein or elsewhere to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
information.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
The information called for by this section is listed in the Exhibit Index
of this report.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the three-month
period ended June 30, 2000.
<PAGE> 13
Signatures
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 thereunto duly authorized.
SL INDUSTRIES, INC.
-------------------
Registrant
Dated: August 11, 2000 /s/ Owen Farren
--------------- ------------------------------
Owen Farren
President,
Chief Executive Officer
and Chairman of the Board
Dated: August 11, 2000 /s/ James E. Morris
--------------- ----------------------------
James E. Morris
Vice President,
Corporate Controller,
and Treasurer
<PAGE> 14
INDEX TO EXHIBITS
The exhibit number, description and sequential page number in the original copy
of this document where exhibits can be found follows:
Exhibit Description
27 Financial Data Schedule (Schedule is furnished for the
information of the Securities and Exchange Commission and is
not to be deemed "filed" as part of Form 10-Q, or otherwise
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934).
