<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD NOVEMBER 1, 1999 TO DECEMBER 31, 1999
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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:
Title of each class Name of each exchange on which registered
Common stock, $.20 par value New York Stock Exchange
Philadelphia Stock Exchange
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 February 4, 2000, was
5,624,451.
<PAGE> 2
Item 1. Financial Statements
SL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 1,117,000 $ 71,000
Receivables, less allowances of
$1,899,000 and $1,985,000, respectively ....................................... 25,471,000 23,663,000
Inventories (Note 2) ........................................................... 28,083,000 26,151,000
Prepaid expenses ............................................................... 1,317,000 1,069,000
Deferred income taxes .......................................................... 4,075,000 3,033,000
------------ ------------
Total current assets ....................................................... 60,063,000 53,987,000
------------ ------------
Property, plant and equipment, less accumulated depreciation
of $20,434,000 and $19,103,000, respectively .................................... 22,027,000 21,416,000
Long-term note receivable ......................................................... 2,149,000 2,167,000
Deferred income taxes ............................................................. 1,950,000 1,813,000
Cash surrender value of life insurance policies ................................... 9,923,000 9,592,000
Intangible assets, less accumulated amortization
of $4,080,000 and $3,554,000, respectively ...................................... 19,785,000 22,350,000
Other assets ...................................................................... 1,153,000 1,361,000
------------ ------------
Total assets .............................................................. $117,050,000 $112,686,000
============ ============
LIABILITIES
Current liabilities:
Short-term bank debt ........................................................... $ 772,000 $ --
Long-term debt due within one year ............................................. 190,000 1,095,000
Accounts payable ............................................................... 13,104,000 12,085,000
Accrued income taxes ........................................................... 411,000 1,220,000
Accrued liabilities:
Payroll and related costs .................................................... 4,377,000 5,405,000
Other ........................................................................ 8,167,000 9,370,000
------------ ------------
Total current liabilities ................................................. 27,021,000 29,175,000
------------ ------------
Long-term debt less portion due within one year ................................... 39,245,000 31,984,000
Deferred compensation and supplemental retirement benefits ........................ 5,650,000 5,486,000
Other liabilities ................................................................. 3,062,000 3,199,000
------------ ------------
Total liabilities ......................................................... $ 74,978,000 $ 69,844,000
------------ ------------
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, 8,272,000 and 8,240,000 shares, respectively ............................ 1,654,000 1,648,000
Capital in excess of par value .................................................... 37,771,000 36,932,000
Retained earnings ................................................................. 18,410,000 19,374,000
Accumulated other comprehensive income ............................................ 53,000 49,000
Treasury stock at cost, 2,646,000 and 2,608,000 shares, respectively .............. (15,816,000) (15,161,000)
------------ ------------
Total shareholders' equity ................................................ 42,072,000 42,842,000
------------ ------------
Total liabilities and shareholders' equity ................................ $117,050,000 $112,686,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Two-Months Ended Five-Months Ended
December 31, December 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales .............................................. $28,814,000 $19,569,000 $70,970,000 $49,816,000
Cost and expenses:
Cost of products sold ................................ 19,772,000 12,955,000 47,459,000 32,379,000
Write-down of inventory and losses on commitments..... -- -- 3,145,000 --
Engineering and product development .................. 1,924,000 1,132,000 4,849,000 3,049,000
Selling, general and administrative .................. 5,574,000 3,752,000 14,066,000 9,538,000
Depreciation and amortization ........................ 700,000 650,000 2,129,000 1,614,000
Restructuring costs .................................. 77,000 -- 1,128,000 --
----------- ----------- ----------- -----------
Total cost and expenses ................................ 28,047,000 18,489,000 72,776,000 46,580,000
----------- ----------- ----------- -----------
Income (Loss) from operations .......................... 767,000 1,080,000 (1,806,000) 3,236,000
Other income (expense):
Interest income ...................................... 31,000 58,000 76,000 134,000
Interest expense ..................................... (468,000) (150,000) (1,078,000) (391,000)
Gain from demutualization of inurance company ........ -- -- 1,812,000 --
----------- ----------- ----------- -----------
Income (Loss) before income taxes ...................... 330,000 988,000 (996,000) 2,979,000
Provision (Benefit) for income taxes ................... 163,000 240,000 (312,000) 1,018,000
----------- ----------- ----------- -----------
Net income (loss) ...................................... $ 167,000 $ 748,000 $ (684,000) $ 1,961,000
=========== =========== =========== ===========
Basic net income (loss) per common share ............... $ 0.03 $ 0.13 $ (0.12) $ 0.35
=========== =========== =========== ===========
Diluted net income (loss) per common share ............. $ 0.03 $ 0.13 $ (0.12) $ 0.33
=========== =========== =========== ===========
Shares used in computing basic net income (loss)
per common share ..................................... 5,612,000 5,663,000 5,624,000 5,641,000
Shares used in computing diluted net income (loss)
per common share ..................................... 5,813,000 5,919,000 5,624,000 5,886,000
</TABLE>
See accompanying notes to consolidated financial statements
SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
<TABLE>
<CAPTION>
Two-Months Ended Five-Months Ended
December 31, December 31,
1999 1998 1999 1998
-------- --------- --------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) .......................................... $167,000 $ 748,000 $(684,000) $1,961,000
Other comprehensive income (loss):
Currency translation adjustment, net of related taxes..... 12,000 (126,000) 4,000 72,000
-------- --------- --------- ----------
Comprehensive income (loss) ................................ $179,000 $ 622,000 $(680,000) $2,033,000
======== ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 4
SL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Five-Months Ended
December 31,
1999 1998
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ......................................................... $ (684,000) $ 1,961,000
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation ........................................................... 1,428,000 1,103,000
Amortization ........................................................... 698,000 511,000
Restructuring charges, inventory writedown and losses on commitments ... 4,273,000 --
Provisions for losses on accounts receivable ........................... 40,000 33,000
Additions to other assets .............................................. (816,000) (425,000)
Cash surrender value of life insurance premium ......................... (298,000) (249,000)
Deferred compensation and supplemental retirement payments ............. 356,000 470,000
Deferred compensation and supplemental retirement benefit cash payments (219,000) (274,000)
(Increase) Decrease in deferred income taxes ........................... (1,815,000) 422,000
(Gain) Loss on sale of equipment ........................................ 1,000 (11,000)
Changes in operating assets and liabilities:
Accounts receivable .................................................. (2,031,000) 2,235,000
Inventories .......................................................... (4,409,000) (606,000)
Prepaid expenses ..................................................... (260,000) 289,000
Accounts payable ..................................................... 181,000 (621,000)
Other accrued liabilities ............................................ (1,423,000) (3,502,000)
Accrued income taxes ................................................. 191,000 (854,000)
----------- ------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ......................... $(4,787,000) $ 482,000
----------- ------------
INVESTING ACTIVITIES:
Investment in Kreiss Johnson .............................................. 58,000 (257,000)
Proceeds from disposals of property, plant and equipment .................. 2,000 902,000
Purchases of property, plant and equipment ................................ (1,375,000) (1,390,000)
Proceeds from notes receivable ............................................ 28,000 37,000
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES ....................................... $(1,287,000) $ (708,000)
----------- ------------
FINANCING ACTIVITIES:
Cash dividends paid ....................................................... (280,000) (226,000)
Proceeds from short-term debt ............................................. -- 1,267,000
Proceeds from long-term debt .............................................. 15,279,000 11,443,000
Payments on long-term debt ................................................ (7,915,000) (12,500,000)
Proceeds from stock options exercised ..................................... 257,000 108,000
Treasury stock (acquired) sold ............................................ (531,000) 287,000
----------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................... $ 6,810,000 $ 379,000
----------- ------------
Effect of exchange rate changes on cash ..................................... $ 309,000 $ (153,000)
----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS ..................................... $ 1,045,000 $ --
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .............................. 71,000 --
----------- ------------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, ................................... $ 1,116,000 $ --
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................................ $ 970,000 $ 434,000
Income taxes ............................................................ $ 1,646,000 $ 807,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SL INDUSTRIES, INC.
Notes to Consolidated Financial Statements
1. Pursuant to a resolution adopted by the Registrant's Board of Directors on
September 24, 1999, the Registrant changed the date for the end of its fiscal
year from July 31 to December 31, commencing January 1, 2000; therefore, in the
opinion of the Registrant, the accompanying unaudited transition period
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) and reclassifications necessary to present fairly the
financial position as of December 31, 1999, and July 31, 1999, the results of
operations and comprehensive operations for the two-month and five-month periods
ended December 31, 1999 and 1998, and the cash flows for the five-month periods
ended December 31, 1999 and 1998.
2. Inventories at December 31, 1999, and July 31, 1999, were as follows:
<TABLE>
<CAPTION>
December 31, 1999 July 31, 1999
----------------- -------------
<S> <C> <C>
Raw materials $ 20,678,000 $16,395,000
Work in process 3,959,000 4,336,000
Finished goods 3,446,000 5,420,000
----------- -----------
$28,083,000 $26,151,000
=========== ===========
</TABLE>
3. The Registrant has presented earnings per share pursuant to the Financial
Accounting Standards Board Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share." Basic earnings per share is computed by dividing
reported earnings available to common shareholders by weighted average shares
outstanding for the period. Diluted earnings per share is computed by dividing
reported earnings 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.
The table below sets forth the reconciliation of the numerators and denominators
of the basic and diluted net income (loss) per common share computations:
<TABLE>
<CAPTION>
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
---------------------------------------------------------------------------
Two-Months Ended
---------------------------------------------------------------------------
December 31, 1999 December 31, 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per
common share $167,000 5,612,000 $.03 $748,000 5,663,000 $.13
Effect of dilutive securities -- 201,000 -- -- 256,000 --
-------- --------- ---- -------- --------- ----
Dilutive net income (loss)
per common share $167,000 5,813,000 $.03 $748,000 5,919,000 $.13
======== ========= ==== ======== ========= ====
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Five-Months Ended
-------------------------------------------------------------------------
December 31, 1999 December 31, 1998
----------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per
common share $(684,000) 5,624,000 $(.12) $1,961,000 5,641,000 $ .35
Effect of dilutive securities -- -- -- -- 245,000 (.02)
-------- --------- ----- -------- --------- -----
Dilutive net income (loss)
per common share $(684,000) 5,624,000 $(.12) $1,961,000 5,886,000 $ .33
========= ========= ===== ========== ========= =====
</TABLE>
For the two-month periods ended December 31, 1999 and 1998, 251,278 and 61,580
common stock options, respectively, were excluded from the dilutive computation
because their effect would be anti-dilutive. For the five-month periods ended
December 31, 1999 and 1998, 844,375 and 86,674 common stock options,
respectively, were excluded from the dilutive computation because their effect
would be anti-dilutive.
4. In October 1999, the Registrant recorded charges of $4,196,000 to cover
restructuring, inventory writedowns and losses on commitments recognized by its
SL Waber subsidiary. An additional $77,000 of restructuring costs was recorded
in the two-month period ended December 31, 1999. In addition, approximately
$240,000 of additional restructuring costs will be recognized through the first
half of calendar year 2000. The Registrant anticipates that substantially all of
the charges will be paid or incurred by the end of the first half of calendar
year 2000. Also in October 1999, the Registrant recorded a nonrecurring gain of
$1,812,000 from the demutualization of a life insurance company. At December 31,
1999, the restructuring costs, inventory writedowns and losses on commitments
remaining from the $4,273,000 in charges was as follows: $1,342,000 in inventory
reserves, $168,000 in accrued liabilities, and $849,000 in accounts payable. See
Management's Discussion and Analysis for additional information regarding the
above charges.
<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 for the two-month and five-month
periods are as follows:
<TABLE>
<CAPTION>
Two Months Ended Five-Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales
Power Supplies .............................. $ 10,927 $ 5,345 $ 26,091 $ 13,348
PCDUs ....................................... 4,730 4,049 12,878 9,328
Motion Control Systems ...................... 3,222 4,088 8,802 9,816
Electric Utility Equipment
Protection Systems ....................... 4,574 -- 10,073 --
Surge Suppressors ........................... 4,555 5,429 11,176 15,392
Other ....................................... 806 658 1,950 1,932
-------- -------- -------- --------
Consolidated ................................ $ 28,814 $ 19,569 $ 70,970 $ 49,816
======== ======== ======== ========
Operating income (loss)
Power Supplies .............................. $ 787 $ 954 $ 2,007 $ 2,372
PCDUs ....................................... 560 (111) 1,704 37
Motion Control Systems ...................... 27 663 571 1,278
Electric Utility Equipment
Protection Systems ....................... 660 -- 1,167 --
Surge Suppressors ........................... (682) 3 (1,804) 556
Other ....................................... (508) (429) (1,178) (1,007)
-------- -------- -------- --------
Subtotal .................................... 844 1,080 2,467 3,236
Write-down of inventory and losses
on commitments ............................ -- -- (3,145) --
Restructuring costs ......................... (77) -- (1,128) --
-------- -------- -------- --------
Consolidated ................................ $ 767 $ 1,080 $ (1,806) $ 3,236
======== ======== ======== ========
</TABLE>
6. These statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report To Shareholders and
Form 10-K for the year ended July 31, 1999, along with any subsequent Form
10-Q's and Form 8-K's. The interim results of operations are not necessarily
indicative of future financial results.
<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 five-month transition
period ending December 31, 1999, of $6,810,000, net, was provided by financing
activities, while operating and investing activities used cash of $4,787,000,
net, and $1,287,000, net, respectively. The net cash provided by financing
activities resulted primarily from net debt proceeds of $7,364,000. The net cash
used in operating activities resulted primarily from increased inventories and
accounts receivable and decreased accrued liabilities. The decrease in accrued
liabilities resulted primarily from payment of bonuses and employee fringe
benefits. The net cash used in investing activities resulted primarily from
purchases of tooling and production equipment.
The Registrant's borrowing capacity at December 31, 1999, remained above its use
of outside financing. As of December 31, 1999, the Registrant had $3,487,415
available for use under its $40,000,000 Revolving Credit Agreement since
$264,654 was allocated to outstanding trade letters of credit, $6,147,931
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 $10,900,000 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, with all of which the Registrant is in
compliance, and has a maturity date of October 31, 2001. In addition, EME has
approximately $4,891,000 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 6.45%. No financial covenants are required. Also, as of December 31,
1999, the Registrant had $9,923,056 available from the cash surrender value of
its life insurance policies.
During the two-month period ended December 31, 1999, the ratio of current assets
to current liabilities increased from 1.9 to 1 to 2.2 to 1. The increase was
primarily related to a 2% increase in current assets and a 13% decrease in
current liabilities.
Capital expenditures for the five-month period ended December 31, 1999, amounted
to $1,375,000 and were primarily for purchases of tooling and production
equipment. The Registrant anticipates that future commitments for additional
capital expenditures will be funded primarily by cash generated by operations
and, to the extent necessary, the utilization of borrowings under its 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
<PAGE> 9
future needs, which include payment of dividends, capital expenditures and
expenditures for working capital requirements.
Results of Operations
Transition Period Compared to Fiscal 1999
Consolidated net sales for the two-month and five-month periods ended December
31, 1999, increased 47% and 42%, respectively, as compared to the net sales
realized during the corresponding periods a year ago. The sales increase
included the net sales realized by RFL and the net sales realized from the Todd
Products' product lines, which were acquired in May 1999 and July 1999,
respectively. If the net sales of the RFL and Todd Products' product lines were
excluded from the current two-month and five-month periods, net sales decreased
3% and 1%, as compared to last year. Sales increases in the power conditioning
and distribution units and power supplies segments were offset by sales
decreases in the motion control systems and surge suppressors segments. The
sales increase 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 power supplies segment was primarily due to an increase in
orders received from customers in the distribution channel. The motion control
systems segment's sales decreased due to customers' rescheduling their orders
for precision motor products and sales in the surge suppressors segment
decreased because of continued delays in the introduction of new surge
protection products and competitors' aggressive pricing initiatives.
The Registrant also realized operating income of $767,000 for the two-month
period and an operating loss of $1,806,000 for the five-month period, as
compared to operating income of $1,080,000 and $3,236,000, respectively, during
the corresponding periods a year ago. The operating income for the two-month
period ended December 31, 1999, included restructuring costs of $77,000. The
operating loss for the five-month period ended December 31, 1999, included
restructuring costs of $1,128,000 and inventory writedowns and losses on
commitments of $3,145,000. The restructuring costs, inventory writedowns and
losses on commitments were recognized by the Registrant's SL Waber subsidiary.
In addition, approximately $240,000 of additional restructuring costs will be
recognized through the first half of calendar year 2000. These charges are a
result of actions taken to restructure SL Waber's operations and to recognize
unprofitable commitments. As a result of a review of its business and
operations, a plan is in place to place greater emphasis on markets and channels
of distribution where SL Waber has a record of sustained profitability. This
plan also includes the scheduled consolidation of many of SL Waber's operations
at its manufacturing facility in Nogales, Mexico. We anticipate that SL Waber
will continue to realize adverse operating financial results until at least
March 31, 2000, which will continue to negatively impact the Company's
consolidated operating financial results. At December 31, 1999, the
restructuring costs, inventory writedowns and losses on commitments remaining
from the $4,273,000 in charges was as follows: $1,342,000 in inventory reserves,
$168,000 in accrued liabilities, and
<PAGE> 10
$849,000 in accounts payable. If the $77,000 and $4,273,000 in charges were
excluded from the current two-month and five-month periods, respectively,
operating income would have decreased 22% and 24%, respectively, as compared to
the same periods last year. Decreased operating income in the power supplies,
motion control systems and surge suppressors segments was partially offset by
increased operating income in the power conditioning and distribution units
segment, as well as the operating income contributed by the electric utility
equipment protection systems segment. The decreased operating income in the
power supplies segment was primarily due to the incremental costs associated
with the integration of the Todd Products' product lines. The decreased
operating income in the motion controls systems segment was primarily due to
lower sales volume. As previously mentioned, the decreased operating income in
the surge suppressors segment was because of continued delays in the
introduction of new surge protection products and competitor's aggressive
pricing initiatives. The increased operating income in the power conditioning
and distribution units segment was primarily due to higher sales volume and
lower operating costs.
Cost of sales for the two-month and five-month periods increased 53% and 47%, as
compared to last year. If the results of RFL and Todd Products' product lines
were excluded from the current two-month and five-month periods, cost of sales
increased 2% and 4%, respectively, as compared to last year. As a percentage of
net sales, cost of sales for the current two-month and five-month periods was
69% and 67%, respectively as compared to 66% and 65%, respectively, a year ago.
If the results of RFL and Todd Products' product lines were excluded from the
two-month and five-month periods, cost of sales, as a percentage of net sales,
was 70% and 68%, respectively as compared to 66% and 65%, respectively, a year
ago. If you exclude the results of RFL and the Todd Products' product lines, the
above increases were primarily related to lower volume and product mix.
Engineering and product development expenses for the two-month and five-month
periods increased 70% and 59%, respectively, as compared to the same periods
last year. If the results of RFL and Todd Products' product lines were excluded
from the current two-month and five-month periods, engineering and product
development expenses increased 7% and 3%, respectively, as compared to last
year. The increases were primarily due to the employment of additional
engineering resources. As a percentage of net sales, engineering and product
development expenses were 7% for both the two-month and five-month periods, as
compared to 6%, for both periods a year ago. If the results of RFL and Todd
Products' product lines were excluded, engineering and product development
expenses, as a percentage of net sales, were 6% for the two-month and five-month
periods as compared to 6% for both periods a year ago.
Selling, general and administrative expenses for the two-month and five-month
periods increased 49% and 48%, respectively, as compared to last year. If the
results of RFL and the costs associated with the Todd Products' product lines
were excluded from the current two-month and five-month periods, selling,
general and administrative expenses increased approximately 11% and 7%,
respectively, as compared to last year. The increase was primarily related to
increased administrative expenses, offset, in part, by decreased delivery
expenses. As a
<PAGE> 11
percentage of net sales, selling, general and administrative expenses for the
two-month and five-month periods were 19% and 20%, respectively, as compared to
19%, for both periods a year ago. If the results of RFL and the costs associated
with the Todd Products' product lines were excluded from the current two-month
and five-month periods, selling, general and administrative expenses, as a
percentage of net sales, were 19% for both periods, as compared to 19%, for both
periods a year ago.
Depreciation and amortization expense for the two-month and five-month periods
increased 8% and 32%, respectively, as compared to last year. The increases were
primarily related to depreciation and amortization of computer hardware and
software, respectively, as well as the acquisitions of RFL and Todd Products'
product lines. If the results of RFL and Todd Products' product lines were
excluded from the current two-month and five-month results, depreciation and
amortization expense decreased 18% and 6%, respectively, as compared to last
year. The decreases were primarily related to fully depreciated assets and fully
amortized intangible assets.
Interest income for the two-month and five-month periods decreased 47% and 43%,
respectively, as compared to last year. The primarily reason for the decrease
was less cash available for investment. Interest expense for the two-month and
five-month periods increased 212% and 176%, 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 two-month and five-month periods was a provision
of 49% and a net benefit of 31%, respectively, as compared to a provision of 24%
and 34%, respectively, a year ago. The current two-month period effective tax
rate includes the higher effective tax rate associated with the Registrant's
profitable international operations. The current five-month period effective tax
rate reflects a tax benefit associated with losses from a domestic operation,
offset, in part, by a tax provision which includes the higher effective tax
rates associated with the Registrant's profitable international operations.
Year 2000
As of the date of this filing, the Registrant has not incurred and is not
expected to incur business disruptions as a result of Year 2000 issues.
Prior to January 1, 2000, the Registrant took actions to address and complete
the work associated with the Year 2000 issue. Each of its business units and
corporate headquarters established teams to identify and correct Year 2000
issues. Attention was given to computer hardware and software, communications
equipment, manufacturing equipment and facilities and products sold, if any, to
achieve compliance in all these areas. The teams were also charged with
investigating the Year 2000 capabilities of suppliers, customers and other
external entities, and with the development of contingency plans.
<PAGE> 12
A detailed accounting and assessment of all computer systems and application
software utilized throughout the Registrant's operations was completed, and
plans for establishing compliance were developed. These plans identified which
non-compliant hardware and software were to be remediated, upgraded or replaced
and the timetable and resource requirements to achieve those objectives. All
material remediation and testing activities were completed at each of the
Registrant's business units and at corporate headquarters. In addition, written
contingency plans were completed by each business unit.
The Registrant requested information from all its key third party vendors on
their Year 2000 readiness to determine the extent to which their failure to
remedy their own Year 2000 problems would have affected the Registrant. In most
circumstances, the information that the Registrant received from its key third
party vendors indicated that they would be Year 2000 compliant by the end of
1999. As of the date of this filing, the Registrant has not been adversely
affected by a major supplier's inability to manufacture and deliver material.
The Company's Year 2000 spending did not materially affect consolidated
profitability or liquidity.
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 and Year 2000 strategy, 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), adverse effects of failure to achieve Year 2000
compliance, the Company's ability to recruit and develop employees, its ability
to successfully implement new technology 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
<PAGE> 13
financial results will also depend on the extent to which management is able to
successfully address the operating issues in the Registrant's surge suppressors
segment and in the uniterruptible power supplies portion 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
two-month period ended December 31, 1999.
<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: February 10, 2000 Owen Farren
--------------------------
Owen Farren
President,
Chief Executive Officer
and Chairman of the Board
Dated: February 10, 2000 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).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REGISTRANT'S 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> NOV-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,117
<SECURITIES> 0
<RECEIVABLES> 27,370
<ALLOWANCES> 1,899
<INVENTORY> 28,083
<CURRENT-ASSETS> 60,063
<PP&E> 42,461
<DEPRECIATION> 20,434
<TOTAL-ASSETS> 117,050
<CURRENT-LIABILITIES> 27,021
<BONDS> 0
0
0
<COMMON> 1,654
<OTHER-SE> 42,072
<TOTAL-LIABILITY-AND-EQUITY> 117,050
<SALES> 28,814
<TOTAL-REVENUES> 28,814
<CGS> 19,772
<TOTAL-COSTS> 28,047
<OTHER-EXPENSES> 437
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 330
<INCOME-TAX> 163
<INCOME-CONTINUING> 167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167
<EPS-BASIC> .03
<EPS-DILUTED> .03
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