<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 SEPTEMBER 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)
<TABLE>
<S> <C>
NEW JERSEY 21-0682685
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
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 November 3, 2000, were
5,648,718.
<PAGE> 2
Item 1. Financial Statements
SL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ -- $ 1,117,000
Receivables, less allowances of
$2,541,000 and $1,899,000, respectively ................................ 23,049,000 25,471,000
Inventories (Note 2) .................................................... 24,014,000 28,083,000
Prepaid expenses ........................................................ 1,286,000 1,317,000
Deferred income taxes ................................................... 3,915,000 4,075,000
------------- -------------
Total current assets ................................................ 52,264,000 60,063,000
------------- -------------
Property, plant and equipment, less accumulated depreciation
of $21,580,000 and $20,434,000, respectively ............................. 20,614,000 22,027,000
Long-term note receivable .................................................. 2,128,000 2,149,000
Deferred income taxes ...................................................... 1,880,000 1,950,000
Cash surrender value of life insurance policies ............................ 11,350,000 9,923,000
Intangible assets, less accumulated amortization
of $5,013,000 and $4,080,000, respectively ............................... 21,087,000 19,785,000
Other assets ............................................................... 842,000 1,153,000
------------- -------------
Total assets ....................................................... $ 110,165,000 $ 117,050,000
============= =============
LIABILITIES
Current liabilities:
Short-term bank debt .................................................... $ -- $ 772,000
Long-term debt due within one year ...................................... 172,000 190,000
Accounts payable ........................................................ 9,582,000 13,104,000
Accrued income taxes .................................................... 289,000 411,000
Accrued liabilities:
Payroll and related costs ............................................. 4,358,000 4,377,000
Other ................................................................. 7,961,000 8,167,000
------------- -------------
Total current liabilities .......................................... 22,362,000 27,021,000
------------- -------------
Long-term debt less portion due within one year ............................ 35,443,000 39,245,000
Deferred compensation and supplemental retirement benefits ................. 5,734,000 5,650,000
Other liabilities .......................................................... 3,044,000 3,062,000
------------- -------------
Total liabilities .................................................. $ 66,583,000 $ 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 ............................................. 38,210,000 37,771,000
Retained earnings .......................................................... 19,919,000 18,410,000
Accumulated other comprehensive income ..................................... 98,000 53,000
Treasury stock at cost, 2,646,000 and 2,650,000 shares, respectively ....... (16,305,000) (15,816,000)
------------- -------------
Total shareholders' equity ......................................... 43,582,000 42,072,000
------------- -------------
Total liabilities and shareholders' equity ......................... $ 110,165,000 $ 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 Nine-Months Ended
September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales ................................. $ 40,842,000 $ 39,771,000 $ 128,523,000 $ 102,989,000
------------- ------------- ------------- -------------
Cost and expenses:
Cost of products sold ................... 29,406,000 25,712,000 87,062,000 66,482,000
Engineering and product development ..... 2,568,000 2,583,000 8,837,000 6,659,000
Selling, general and administrative ..... 6,769,000 8,001,000 24,149,000 19,667,000
Depreciation and amortization ........... 1,197,000 1,281,000 3,780,000 3,279,000
Restructuring costs ..................... 504,000 -- 549,000 --
Settlement of Class Action Suit ......... (875,000) -- (875,000) --
------------- ------------- ------------- -------------
Total cost and expenses ................... 39,569,000 37,577,000 123,502,000 96,087,000
------------- ------------- ------------- -------------
Income from operations .................... 1,273,000 2,194,000 5,021,000 6,902,000
Other income (expense):
Interest income ......................... 60,000 41,000 262,000 165,000
Interest expense ........................ (707,000) (538,000) (2,222,000) (1,010,000)
------------- ------------- ------------- -------------
Income before income taxes ................ 626,000 1,697,000 3,061,000 6,057,000
Income tax provision(benefit) ............. (103,000) 543,000 988,000 2,337,000
------------- ------------- ------------- -------------
Net income ................................ $ 729,000 $ 1,154,000 $ 2,073,000 $ 3,720,000
============= ============= ============= =============
Basic net income per common share ......... $ 0.13 $ 0.20 $ 0.37 $ 0.66
============= ============= ============= =============
Diluted net income per common share ....... $ 0.13 $ 0.20 $ 0.36 $ 0.63
============= ============= ============= =============
Shares used in computing basic net income
per common share ........................ 5,643,000 5,632,000 5,628,000 5,642,000
Shares used in computing diluted net income
per common share ........................ 5,743,000 5,864,000 5,760,000 5,877,000
</TABLE>
See accompanying notes to consolidated financial statements
SL INDUSTRIES, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
<TABLE>
<CAPTION>
Three-Months Ended Nine-Months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income ............................................ $ 729,000 $ 1,154,000 $ 2,073,000 $ 3,720,000
Other comprehensive income (loss):
Currency translation adjustment, net of related taxes 71,000 113,000 45,000 (141,000)
----------- ----------- ----------- -----------
Comprehensive income .................................. $ 800,000 $ 1,267,000 $ 2,118,000 $ 3,579,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine-Months Ended
September 30,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................... $ 2,073,000 $ 3,720,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .......................................................... 2,575,000 2,216,000
Amortization .......................................................... 1,205,000 1,063,000
Restructuring charges ................................................. 549,000 --
Provisions for losses on accounts receivable .......................... 646,000 (107,000)
Additions to other assets ............................................. (615,000) (834,000)
Cash surrender value of life insurance premiums ....................... (1,399,000) (496,000)
Deferred compensation and supplemental retirement benefits ............ 473,000 713,000
Deferred compensation and supplemental retirement benefit payments .... (388,000) (474,000)
Decrease (increase) in deferred income taxes .......................... 223,000 (991,000)
Gain on sales of equipment ............................................ (1,000) (2,000)
Changes in operating assets and liabilities:
Accounts receivable ................................................. 2,007,000 (4,697,000)
Inventories ......................................................... 2,448,000 (7,893,000)
Prepaid expenses .................................................... 18,000 (812,000)
Accounts payable .................................................... (3,543,000) 4,991,000
Other accrued liabilities ........................................... (760,000) 5,050,000
Accrued income taxes ................................................ (97,000) 365,000
Cash dividends declared, but not paid ............................... (283,000) (282,000)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................................. $ 5,131,000 $ 1,530,000
------------ ------------
INVESTING ACTIVITIES:
Investment in Kreiss Johnson ............................................. 68,000 52,000
Proceeds from sales of equipment ......................................... 59,000 18,000
Purchases of property, plant and equipment ............................... (1,753,000) (2,187,000)
Increase in note receivable .............................................. (10,000) (6,000)
Payments for acquisitions, net of cash acquired .......................... (372,000) (19,549,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ...................................... $ (2,008,000) $(21,672,000)
------------ ------------
FINANCING ACTIVITIES:
Cash dividends paid ...................................................... (280,000) (281,000)
Proceeds from short-term debt ............................................ -- 6,236,000
Proceeds from long-term debt ............................................. 8,760,000 39,052,000
Payments on short-term debt .............................................. (809,000) (6,652,000)
Payments on long-term debt ............................................... (11,794,000) (17,739,000)
Proceeds from stock options exercised .................................... 448,000 506,000
Treasury stock acquired .................................................. (489,000) (1,214,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ........................ $ (4,164,000) $ 19,908,000
------------ ------------
Effect of exchange rate changes on cash .................................... $ (76,000) $ 233,000
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS .................................... $ (1,117,000) $ --
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................. 1,117,000 --
------------ ------------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, ................................. $ -- $ --
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ............................................................... $ 2,261,000 $ 883,000
Income taxes ........................................................... $ 1,064,000 $ 2,530,000
</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; therefore, the interim
financial information and statements have been prepared in accordance with
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 September 30, 2000, and December 31, 1999, were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Raw materials $16,287,000 $20,678,000
Work in process 5,254,000 3,959,000
Finished goods 2,473,000 3,446,000
----------- -----------
$24,014,000 $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
------------------------------------------------------------------------------------
September 30, 2000 September 30, 1999
-------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per common
share $ 729,000 5,643,000 $.13 $1,154,000 5,632,000 $.20
Effect of dilutive securities -- 100,000 -- -- 232,000 --
---------- ---------- ---- ---------- ---------- ----
Dilutive net income per
common share $ 729,000 5,743,000 $.13 $1,154,000 5,864,000 $.20
========== ========== ==== ========== ========== ====
</TABLE>
<TABLE>
<CAPTION>
Per Per
Share Share
Income Shares Amount Income Shares Amount
------------------------------------------------------------------------------------
Nine-Months Ended
------------------------------------------------------------------------------------
September 30, 2000 September 30, 1999
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per common
share $2,073,000 5,628,000 $.37 $3,720,000 5,642,000 $.66
Effect of dilutive securities -- 132,000 (.01) -- 235,000 (.03)
---------- ---------- ---- ---------- ---------- ----
Dilutive net income per
common share $2,073,000 5,760,000 $.36 $3,720,000 5,877,000 $.63
========== ========== ==== ========== ========== ====
</TABLE>
For the three-month periods ended September 30, 2000 and 1999, 60,272 and 86,038
common stock options, respectively, were excluded from the dilutive computation
because their effect would be anti-dilutive. For the nine-month periods ended
September 30, 2000 and 1999, 600,181 and 173,114 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 $650,000 provision for excess and obsolete inventory was charged to
cost of products sold, and an additional $504,000 of restructuring costs was
charged to expense in the three-month period ended September 30, 2000.
Restructuring costs for the nine-month period ended September 30, 2000, were
$549,000. In addition, approximately $296,000 of additional restructuring costs
will be recognized during the fourth quarter of calendar year 2000. The
additional restructuring costs are the result of the Registrant's decision to
integrate the operations of its SL Waber and Condor D.C. Power Supplies
subsidiaries and are primarily for severance and other payroll related costs.
The Registrant anticipates that
<PAGE> 7
substantially all of the charges will be paid or incurred by the end of the
fourth quarter of calendar year 2000. At September 30, 2000, the restructuring
costs, inventory writedowns and losses on commitments remaining from the
$5,472,000 in charges was as follows: $1,314,000 in inventory reserves, $146,000
in accrued liabilities, and $79,000 in accounts payable.
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
nine-month periods are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
---------
Power Supplies .............................. $ 15,372 $ 13,245 $ 48,672 $ 31,102
PCDUs ....................................... 8,532 7,657 25,728 20,904
Motion Control Systems ...................... 5,536 6,044 16,397 17,058
Electric Utility Equipment
Protection Systems ........................ 5,529 5,069 18,234 8,657
Surge Suppressors ........................... 4,381 6,615 15,196 21,647
Other ....................................... 1,492 1,141 4,296 3,621
--------- --------- --------- ---------
Consolidated ................................ $ 40,842 $ 39,771 $ 128,523 $ 102,989
========= ========= ========= =========
Operating income (loss)
-----------------------
Power Supplies .............................. $ 788 $ 1,413 $ 3,902 $ 4,525
PCDUs ....................................... 996 1,114 3,732 2,983
Motion Control Systems ...................... 806 487 1,867 1,742
Electric Utility Equipment
Protection Systems ........................ 397 354 1,905 753
Surge Suppressors ........................... (2,144) (720) (5,222) (2,224)
Other ....................................... 59 (454) (1,489) (877)
--------- --------- --------- ---------
Subtotal .................................... 902 2,194 4,695 6,902
Restructuring costs ......................... (504) -- (549) --
Settlement of Class Action Suit ............. 875 -- 875 --
--------- --------- --------- ---------
Consolidated ................................ $ 1,273 $ 2,194 $ 5,021 $ 6,902
========= ========= ========= =========
</TABLE>
<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 nine-month period ending
September 30, 2000, of $5,131,000 net, was provided by operating activities,
while investing and financing activities used cash of $2,008,000, net, and
$4,164,000, net, respectively. The net cash provided by operating activities
resulted primarily from net income before depreciation and amortization,
accounts receivable collections and inventory reductions, offset, in part, by
payments of vendor invoices. 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 September 30, 2000, remained above its
use of outside financing. As of September 30, 2000, the Registrant had
$4,394,000 available for use under its $40,000,000 Revolving Credit Agreement
since $1,344,000 was allocated to outstanding trade letters of credit,
$5,561,000 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 $9,501,000 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, requires maintenance of specified ratios, as amended, with all of
which the Registrant is in compliance, and has a maturity date of October 31,
2003. As amended on September 30, 2000, borrowings under the Agreement are
collateralized by substantially all of the Registrant's trade accounts
receivable and cash surrender value of its life insurance policies. As of
September 30, 2000, the Registrant had a $5,000,0000 leasing agreement with one
of its banks. Under this agreement, the Registrant can 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 $4,283,000 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 7.95%. No financial
covenants are required. Also, as of September 30, 2000, the Registrant had
$11,350,000 available from the cash surrender value of its life insurance
policies.
During the three-month period ended September 30, 2000, the ratio of current
assets to current liabilities increased from 2.2 to 1 to 2.3 to 1. The increase
was primarily related to a 15% decrease in current liabilities, offset, in part,
by a 10% decrease in current assets.
Capital expenditures for the nine-month period ended September 30, 2000,
amounted to $1,753,000 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
<PAGE> 9
funded by cash generated by operations, and to the extent necessary, the
utilization of borrowings under the Registrant's Revolving Credit Agreement.
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 nine-month periods ended
September 30, 2000, increased 3% and 25%, respectively, as compared to the net
sales realized during the corresponding periods a year ago. The three-month
sales increase included three months of net sales realized from the Todd
Products' product lines, which were acquired at the end of July 1999. If the
noncomparative net sales of Todd Products' product lines were excluded from the
current three-month period, net sales decreased by 1%, as compared to the same
period last year. In addition to the Todd Products' product lines, the
nine-month sales increase included the net sales of RFL, which was acquired in
May 1999. If the noncomparative net sales of RFL and Todd Products' product
lines were excluded from the current nine-month period, net sales increased by
2%, as compared to the same period last year. Net sales for the three-month and
nine-month periods ended September 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 and surge
suppressors segments decreased during the three-month and nine-month periods
ended September 30, 2000. The sales increases in the power supplies segment were
primarily due to an increase in orders received from medical and
telecommunications customers, as well as customers in the distribution channel.
The sales increase in the power conditioning and distribution units segment
during the three-month period ended September 30, 2000, was a result of strong
demand. The sales increase during the nine-month period was a result of strong
demand and a weak semiconductor market during the first half of the prior year.
The sales increases in both periods were offset, in part, by the affect of the
strong dollar on the segment's European business. The sales increases in the
electric utility equipment protection systems segment were primarily due to
increased demand, as well as the inclusion of RFL Electronics Inc.'s results for
nine months in calendar 2000, as compared to five months in calendar 1999. The
sales decreases in the motion control systems segment during the three-month and
nine-month periods were primarily due to extended lead times for components,
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 the nonpursuit of unprofitable business
within the retail market. The business within this segment is integrating its
operations with the business within the power supplies segment and has refocused
its efforts on higher margin opportunities to supply power protection systems to
major service providers and equipment manufacturers. All of the businesses
within the above segments are being adversely affected by electronic component
shortages.
The Registrant also realized operating income of $1,273,000 and $5,021,000 for
the three-month and nine-month periods, respectively, as compared to operating
income of $2,194,000 and
<PAGE> 10
$6,902,000, during the corresponding periods a year ago. The operating income
for the three-month and nine-month periods ended September 30, 2000, included
the $650,000 charge to cost of products sold, and restructuring costs of
$504,000 and $549,000, respectively, that were recognized by the Registrant's SL
Waber subsidiary. In addition, approximately $296,000 of additional
restructuring costs will be recognized during the fourth quarter of calendar
year 2000 as a result of the integration of SL Waber and Condor D.C. 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.
The operating income for the three-month and nine-month periods also included a
reversal of a $650,000 accrual for environmental penalties since management
believes, based on consultation with legal counsel, that the chance of payment
is remote. In addition, operating income for both periods included a gain of
$875,000 from the settlement of a class action suit with one of the registrant's
life insurance carriers. During the three-month and nine-month periods ended
September 30, 2000, operating income increased in the motion control systems and
electric utility equipment protection systems segments, while operating income
decreased in the power supplies and surge suppressors segments. During the
three-month period, operating income also decreased in the power conditioning
distribution unit segment, while increasing during the nine-month period ended
September 30, 2000. The increased operating income in the motion control systems
segment was primarily due to higher margins, offset, in part, by the affect of
the strong dollar on the segment's European business. 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 Electronics Inc.'s
results for nine months in calendar 2000, as compared to five months in calendar
1999. The decreased operating income in the power supplies segment was primarily
due to product mix, lower volume as a result of electronic component shortages
and the incremental costs associated with the integration of both the Todd
Products' product lines and surge suppressors business. The decreased operating
income in the surge suppressors segment was primarily due to lower sales volume
and the $650,000 provision for excess and obsolete inventory. The three-month
period decrease in operating income in the power conditioning distribution units
segment was related to $540,000 of costs associated with the expansion of the
Registrant's European power distribution business. The nine-month period
increase in operating income in the power conditioning distribution units
segment was primarily due to higher sales volume and lower operating cost,
offset, in part, by the costs associated with the power distribution business
expansion.
Cost of products sold for the three-month and nine-month periods increased 14%
and 31%, as compared to last year. If the noncomparative results of RFL and Todd
Products' product lines were excluded from the three-month and nine-month
periods, cost of products sold increased 10% and 7%, respectively, as compared
to last year. As a percentage of net sales, cost of products sold for the
three-month period was 72% and for the nine-month period was 68%, as compared to
65% for both periods 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 nine-month periods was 71% and 68%, as
compared to 65% for both periods
<PAGE> 11
last year. The above increases were primarily related to the $650,000 provision
for excess and obsolete inventory at SL Waber and product mix.
Engineering and product development expenses for the three-month period
decreased 1% and for the nine-month period increased 33%, 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 nine-month periods,
engineering and product development expenses decreased 7% and increased 4%,
respectively, as compared to last year. As a percentage of net sales,
engineering and product development expenses for the three-month and nine-month
periods were 6% and 7%, respectively, as compared to 7% 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 6% and 7%, respectively, as compared to 7% for both periods
last year.
Selling, general and administrative expenses for the three-month period
decreased 15% and for the nine-month period increased 23%, 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 nine-month periods,
selling, general and administrative expenses decreased approximately 18% and
increased approximately 2%, 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 nine-month periods were 17% and 19%, respectively, as
compared to 20% and 19%, respectively, a year ago. If the noncomparative results
of RFL and the Todd Products' product lines were excluded, selling, general and
administrative expenses, as a percentage of net sales, were 17% and 19%,
respectively, as compared to 20% and 19% a year ago. The three-month decrease
was primarily related to the reversal of the $650,000 accrual for environmental
penalties that is no longer required and decreased delivery expenses.
Depreciation and amortization expense for the three-month and nine-month periods
decreased 7% and increased 15%, as compared to last year. If the noncomparative
results of RFL and Todd Products' product lines were excluded from the
three-month and nine-month results, depreciation and amortization expense
decreased 9% and 6%, 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 nine-month periods increased by 46% and
59%, 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 nine-month periods increased 31% and 120%, respectively,
as compared to last year. The three-month increase resulted primarily from a
higher debt balance as a result of the Todd Products' product lines acquisition
and the nine-month 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 nine-month periods was (16%) and
32%, respectively, as compared to 32% and 39%, respectively, a year ago. Both
the three and nine-month period effective tax rates reflect the $875,000 gain
from the settlement of the class action
<PAGE> 12
suit which is not subject to tax, offset, in part, by 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, unanticipated losses, unpredictability of future revenues,
potential fluctuations in quarterly operating results, inability to achieve
increased operational efficiencies, failure to produce anticipated customer
benefits, failure of products to perform to specifications, changes in the
general economy, global economic conditions, 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, currency fluctuations, 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, develop and
retain employees, its ability to successfully implement new technology,
shortages of 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
-----------------------------------------------------------------
There have been no material changes in quantitative and qualitative market risk
from the disclosure contained in Item 7A of the July 31, 1999, Form 10K which is
incorporated herein by reference.
<PAGE> 13
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 September 30, 2000.
<PAGE> 14
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: Owen Farren
------------------------ -------------------------
Owen Farren
President,
Chief Executive Officer
and Chairman of the Board
Dated: James E. Morris
----------------------- -------------------------
James E. Morris
Vice President,
Corporate Controller,
and Treasurer
<PAGE> 15
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).
