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 JANUARY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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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 incorporation or organization) (I.R.S. Employer Identification No.)
520 FELLOWSHIP ROAD, SUITE 306C, MT. LAUREL, NJ 08054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 609-727-1500
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
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The number of shares of common stock outstanding as of March 1, 1996, was
5,705,130.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SL INDUSTRIES, INC.
Consolidated Balance Sheets
January 31, July 31,
1996 1995
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(Unaudited) *
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 22,000 $ 577,000
Receivables, less allowances
of $2,373,000 and $1,820,000, respectively . . . . . . . . . . 15,226,000 12,442,000
Inventories (Note 2) . . . . . . . . . . . . . . . . . . . . . . 21,366,000 20,622,000
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,077,000 890,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 2,518,000 2,457,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . 40,209,000 36,988,000
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Property, plant and equipment,
less accumulated depreciation of
$13,449,000 and $12,468,000, respectively . . . . . . . . . . . . 10,145,000 10,173,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 575,000 551,000
Cash surrender value of life insurance policies . . . . . . . . . . 6,815,000 6,595,000
Intangible assets, less accumulated amortization of
$1,077,000 and $782,000, respectively . . . . . . . . . . . . . . 7,400,000 7,468,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,000 381,000
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $65,500,000 $62,156,000
=========== ===========
LIABILITIES
Current liabilities:
Long-term debt due within one year . . . . . . . . . . . . . . . $ 187,000 $ 187,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 6,062,000 5,658,000
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . 749,000 1,140,000
Accrued liabilities:
Payroll and other related costs . . . . . . . . . . . . . . . . 4,571,000 3,938,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,187,000 4,136,000
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Total current liabilities . . . . . . . . . . . . . . . . . 16,756,000 15,059,000
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Long-term debt less portion due within one year . . . . . . . . . . 17,320,000 17,373,000
Deferred compensation and supplemental retirement benefits . . . . 3,463,000 3,322,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1,333,000 1,472,000
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Total liabilities . . . . . . . . . . . . . . . . . . . . . $38,872,000 $37,226,000
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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, 7,844,000 and 7,773,000 shares, respectively. . . . . . . 1,569,000 1,555,000
Capital in excess of par value . . . . . . . . . . . . . . . . . . 34,016,000 33,735,000
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . 445,000 (958,000)
Treasury stock at cost, 2,141,000 and 2,141,000 shares,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . (9,402,000) (9,402,000)
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . 26,628,000 24,930,000
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Total liabilities & shareholders' equity . . . . . . . . . . $65,500,000 $62,156,000
=========== ===========
*Condensed from audited financial statements.
See accompanying notes to consolidated financial statements.
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SL INDUSTRIES, INC.
Consolidated Statements of Earnings
Three-Months Ended Six-Months Ended
January 31, January 31,
1996 1995 * 1996 1995 *
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . $29,635,000 $21,777,000 $58,574,000 $42,205,000
----------- ----------- ----------- -----------
Cost and expenses:
Cost of products sold . . . . . . . . . . . . . . . . . 19,459,000 14,460,000 38,437,000 28,068,000
Engineering and product development . . . . . . . . . . 1,109,000 613,000 2,181,000 1,307,000
Selling, general and administrative . . . . . . . . . . 6,870,000 5,253,000 13,687,000 9,914,000
Depreciation and amortization . . . . . . . . . . . . . 693,000 483,000 1,356,000 965,000
----------- ----------- ----------- -----------
Total cost and expenses . . . . . . . . . . . . . . . . . 28,131,000 20,809,000 55,661,000 40,254,000
----------- ----------- ----------- -----------
Income from operations . . . . . . . . . . . . . . . . . 1,504,000 968,000 2,913,000 1,951,000
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . 18,000 13,000 65,000 15,000
Interest expense . . . . . . . . . . . . . . . . . . . (300,000) (200,000) (596,000) (374,000)
----------- ----------- ----------- -----------
Income before income taxes . . . . . . . . . . . . . . . 1,222,000 781,000 2,382,000 1,592,000
Provision for federal and state income taxes. . . . . . . 405,000 301,000 808,000 595,000
----------- ----------- ----------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 817,000 $ 480,000 $ 1,574,000 $ 997,000
=========== =========== =========== ===========
Net income per common share - primary and fully diluted . $ 0.14 $ 0.08 $ 0.27 $ 0.17
=========== =========== =========== ===========
Weighted average shares outstanding: **
Primary . . . . . . . . . . . . . . . . . . . . . . . . 5,943,000 6,015,000 5,916,000 6,010,000
Fully diluted . . . . . . . . . . . . . . . . . . . . . 5,943,000 6,015,000 5,936,000 6,010,000
Cash dividend per share . . . . . . . . . . . . . . . . . --- --- $.03 $.03
* Reclassified to conform with current year's presentation.
** For the three and six-month periods ended January 31, 1996, weighted average
shares outstanding included the effect of dilutive stock options. The
effect of dilutive stock options was not material for the three and
six-month periods ended January 31, 1995.
See accompanying notes to consolidated financial statements.
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SL INDUSTRIES, INC.
Consolidated Statements Of Cash Flows
Six-Months Ended
January 31,
1996 1995 *
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(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,574,000 $ 997,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,012,000 796,000
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344,000 169,000
Provisions for losses on accounts receivable . . . . . . . . . . . . . 39,000 51,000
Additions to deferred charges and other assets . . . . . . . . . . . . (266,000) (7,000)
Cash surrender value of life insurance premiums . . . . . . . . . . . (220,000) (470,000)
Deferred compensation and supplemental retirement payments . . . . . . 371,000 236,000
Deferred compensation and suppl. retirement benefit cash payments . . (223,000) (223,000)
Increase in deferred income taxes . . . . . . . . . . . . . . . . . . (85,000) ---
Gain on the sale of equipment . . . . . . . . . . . . . . . . . . . . (18,000) (3,000)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . (2,823,000) 602,000
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . (744,000) 838,000
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (187,000) (114,000)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 404,000 (1,193,000)
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 1,539,000 (512,000)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . (391,000) (141,000)
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NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . $ 326,000 $ 1,026,000
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INVESTING ACTIVITIES:
Proceeds from sales of equipment . . . . . . . . . . . . . . . . . . . . . 20,000 11,000
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . (972,000) (610,000)
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NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . $ (952,000) $ (599,000)
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FINANCING ACTIVITIES:
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170,000) (180,000)
Rights redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (48,000)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . --- 1,100,000
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (53,000) (1,493,000)
Proceeds from stock options exercised . . . . . . . . . . . . . . . . . . 294,000 66,000
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . $ 71,000 $ (555,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . (555,000) (128,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . 577,000 197,000
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CASH AND CASH EQUIVALENTS AT JANUARY 31, . . . . . . . $ 22,000 $ 69,000
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Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $556,000 $370,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,284,000 $430,000
*Contains reclassifications to conform with current year's presentation.
See accompanying notes to consolidated financial statements.
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SL INDUSTRIES, INC.
Notes to Consolidated Financial Statements
1. In the opinion of the Registrant, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) and reclassifications necessary to present fairly the
financial position as of January 31, 1996, and July 31, 1995, the results of
operations for the three-month and six-month periods ended January 31, 1996 and
1995, and the cash flows for the three-month and six-month periods ended
January 31, 1996 and 1995.
2. Inventories at January 31, 1996, and July 31, 1995, were as follows:
January 31, July 31,
1996 1995
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Raw materials $ 9,790,000 $ 9,060,000
Work in process 4,189,000 3,259,000
Finished goods 7,387,000 8,303,000
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$21,366,000 $20,622,000
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3. 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, 1995.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Principal sources of cash during the first six months of fiscal 1996 were
$326,000 by operating activities and $71,000 by financing activities, while
investing activities used cash of $952,000. The net cash provided by financing
activities was primarily from proceeds received upon exercise of stock options.
The net cash used by investing activities was primarily for purchases of
manufacturing equipment.
The Registrant's borrowing capacity at January 31, 1996, remained above its use
of outside financing. As of January 31, 1996, the Registrant had $4,250,000
available under its $22,000,000 Revolving Credit Agreement since $750,000 was
allocated to outstanding trade letters of credit, $6,300,000 utilized to
purchase substantially all of the assets of Teal Electronics Corporation on May
8, 1995, $7,100,000 utilized to purchase all of the stock of Condor D.C. Power
Supplies, Inc., and all of the assets of Electronica Condor de Mexico, S.A. de
C.V., on February 16, 1993, $1,570,000 utilized for working capital
requirements and $2,030,000 utilized to purchase 507,361 shares of common stock
held by two former directors, Wilmer J. Thomas, Jr. and Martin Solomon. The
available credit facility is subject to commitment fees, but not compensating
balances. In addition, the Agreement contains limitations on borrowings and
their use, restricts the payment of cash dividends to $600,000 per fiscal year,
requires maintenance of specified ratios, with all of which the Registrant is
in compliance, and has a maturity date of December 31, 1997. Also, as of
January 31, 1996, the Registrant had $6,815,000 available from the cash
surrender value of its life insurance policies.
During the three-month period ended January 31, 1996, the ratio of current
assets to current liabilities stayed constant at 2.4 to 1, as compared to
October 31, 1995.
Capital expenditures for the six-month period ended January 31, 1996, amounted
to $972,000 and, as mentioned above, were primarily for purchases of
manufacturing 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
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meet its future needs, which include payment of dividends, capital expenditures
and expenditures for working capital requirements.
Results of Operations
FISCAL 1996 COMPARED TO FISCAL 1995
Consolidated net sales for the three-month and six-month periods ended January
31, 1996, increased 36% and 39%, respectively, as compared to the net sales
realized during the corresponding periods a year ago. This increase came
primarily from companies within the Power and Data Quality segment, where
continued growth was realized. In addition the increase included the
contribution made by Teal Electronics Corporation ("Teal"), which was acquired
in May 1995. An analysis of net sales by business segment for the three-month
and six-month periods ended January 31, 1996, as compared to the same periods
of the prior year, is as follows:
Power and Data Quality Segment -
For the three-month and six-month periods, net sales for the Power and Data
Quality segment increased 43% and 48%, respectively, when compared to net sales
of the prior year. If Teal's net sales were excluded from the three-month and
six-month periods, an increase of 24% and 29%, respectively, would have been
realized. For the three-month and six-month periods, sales of surge protection
and uninterruptible power supplies increased primarily as a result of increased
market share and the sales of new products, sales of standard and custom AC-DC
power supplies increased primarily as a result of new customer programs and
increased demand and sales of precision motor products increased primarily as a
result of increased volume.
Specialty Products Segment -
For the three-month and six-month periods, net sales for the Specialty Products
segment increased 9% and 2%, respectively, when compared to net sales reported
for the preceding year. If SL LUBE/systems, Inc.'s ("LUBE") net sales were
excluded from the prior periods three-month and six-month periods results, net
sales increased 22% and 13%, respectively, as compared to the same periods last
year. For the three-month and six-month periods, sales of aviation and
industrial igniters and pipe fabrication products increased. These increases
were primarily demand related. Sales of chrome plating services increased for
the three-month period due to increased demand and decreased for the six-month
period. The decrease was primarily due to corrugated paper machinery
manufacturers switching to alternative coatings. This was partially offset by
sales of chrome plating services using "NUchrome(TM)", which is an improved
chrome plating product and process.
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COST OF SALES
Cost of sales for the three-month and six-month periods increased 35% and 37%,
respectively, as compared to last year. If Teal's and LUBE's results were
excluded from the three-month and six-month periods, cost of sales increased
23% and 25%, respectively, as compared to last year. This increase was
primarily related to increased volume. As a percentage of net sales, cost of
sales for both the three-month and six-month periods was 66%, as compared to
66% and 67%, respectively, for the corresponding periods a year ago. Again, if
Teal's and LUBE's results were excluded, cost of sales, as a percentage of net
sales, was 67% for all periods. As a percentage of net sales, cost reduction
efforts and improved efficiencies within the Power and Data Quality segment
were offset by unfavorable product mix and higher manufacturing costs within
the Specialty Products segment, primarily those associated with the development
of "NUchrome(TM)".
ENGINEERING AND PRODUCT DEVELOPMENT EXPENSES
For the three-month and six-month periods, engineering and product development
expenses increased 81% and 67%, respectively, as compared to the same periods
last year. If Teal's and LUBE's results were excluded from the three-month and
six-month periods, engineering and product development expenses increased 48%
and 37%, respectively, as compared to the same periods last year. These
increases were primarily related to the development of new products within the
Power and Data Quality segment. As a percentage of net sales, engineering and
product development expenses were 4% for both the three-month and six-month
periods, as compared to 3% for both periods a year ago. Again, if Teal's and
LUBE's results were excluded, engineering and product development expenses, as
a percentage of net sales, were 3% for all periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the three-month and six-month periods, selling, general and administrative
expenses increased 31% and 38%, respectively, as compared to last year. If
Teal's and LUBE's results were excluded from the three-month and six-month
periods, selling, general and administrative expenses increased 23% and 30%,
respectively, as compared to the same periods last year. These increases were
primarily related to increased volume and increased marketing expenses. As a
percentage of net sales, selling, general and administrative expenses were 23%
for both the three-month and six-month periods, as compared to 24% for both
periods a year ago. If Teal and LUBE are excluded, selling, general and
administrative expenses, as a percentage of net sales, were 24% for both the
three-month and six-month periods, as compared to 24% and 23%, respectively,
last year.
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This increase was primarily related to increased marketing expenses.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense for the three-month and six-month periods
increased 44% and 41%, respectively, as compared to last year. The increase is
primarily related to Teal's amortization of goodwill and trademarks. If you
exclude the depreciation and amortization expense related to the addition of
Teal, the expense for the three-month and six-month periods increased 15% and
12%, respectively, as compared to last year.
INTEREST
Interest income for the three-month and six-month periods increased $5,000 and
$45,000, respectively, as compared to last year. The six-month increase
included a nonrecurring item in the amount of $31,000. The three-month period
increase and the remaining increase of the six-month period was a result of
additional cash available for investment at slightly higher interest rates, as
compared to the same periods a year ago. Interest expense for the three-month
and six-month periods increased 50% and 59%, respectively, as compared to last
year. This increase resulted primarily from the utilization of our revolving
line of credit for the acquisition of Teal.
TAXES
The effective tax rate for the three-month and six-month periods was 33% and
34%, respectively, as compared to 39% and 37%, respectively, a year ago. Both
decreases were primarily related to deductible permanent tax adjustments.
PART II - OTHER INFORMATION
Item 5. Other information
On February 16, 1996, the Registrant sold substantially all of the assets of SL
Piping Systems, Inc., to Apex Piping Systems, Inc., for approximately $1,300,00
in cash and the assumption of certain liabilities. The sale is not expected to
have any impact on the current or future earnings of the Registrant.
Item 6. Exhibits and Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the quarter ended
January 31, 1996.
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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.
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Registrant
Dated: March 11, 1996 Owen Farren
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Owen Farren
President and
Chief Executive Officer
Dated: March 11, 1996 James E. Morris
---------------- ---------------
James E. Morris
Vice President,
Corporate Controller,
Treasurer and Secretary
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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 Page
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11 Statement Re Computation of Per Share 13
Earnings
27 Financial Data Schedule 14