520 Fellowship Road, Suite A114
Company Perspectives
SL Industries is a growth company, driven to provide superior shareholder value. The markets we serve are dynamic and growing. We meet the needs of those customers by continuously improving our technology and developing the skill of our employees. The Company strives to generate excellent returns for its shareholders by investing in new product development and expanding its operations and customer base in new markets and territories.
SL Industries, Inc. is a public company trading on the American Stock Exchange involved in the manufacture of power electronics, power motion, and power protection equipment, mostly sold to original equipment manufacturers for use in aerospace, computer, datacom, industrial, medical, telecommunications, and utility equipment. The Mt. Laurel, New Jersey-based company operates through four main subsidiaries. Condor D.C. Power Supplies, Inc. is an Oxnard, California company that designs and manufactures AC/DC and DC/DC power supplies for medical devices and commercial applications such as elevator controls, test equipment, laboratory instruments, embroidery machines, document feeders, engraving equipment, and money order dispensers, and linear power supplies for both medical and commercial applications. New Jersey-based RFL Electronics makes telecommunications protection products, used to protect electric utility transmission lines and equipment by isolating troubled lines from the transmission grid. Operating out of Montevideo, Minnesota, SL Montevideo Technology, Inc., produces high-performance precision AC and DC motors, amplifiers and drives, controllers, and windings for the aerospace, defense, and industrial markets. Teal Electronics Corporation is a San Diego company that manufactures Power Conditioning and Distribution Units (PCDUs), subsystems used to control power-related products. Although SL is involved in mundane businesses, throughout its history it has dabbled in a range of enterprises, bought and sold scores of companies, and been involved in several, sometimes bitter, proxy fights for control of the company.
Company's Founding in the 1950s
SL Industries was incorporated in 1956 by Stephen Girard Lax and Dr. Edward A. Gaugler (holder of a doctorate in physics). Drawing on the first letters of their last names, they called the company G-L Electronics. They took the company public in 1963 as G-L Industries, and the company sought to become a diversified manufacturer. It also began a pattern of buying and casting off companies, forever tinkering with its product mix, which now expanded beyond electrical products to include metalworking. G-L acquired Glaspy Corp. in 1964, followed a year later by B&S Screw Machine Products, Inc., Mercury Packaging Machinery Corp. in 1966, and Modern Hard Chrome Service in 1967. By this time, in 1967, Gaugler left the company, but Lax continued to use the G-L name until November 1970, when he drew on his initials to rename it SGL Industries.
The acquisition spree continued after Gaugler's departure, as the company bought Dependable Printed Circuit Corp. and Galaxie Manufacturing Company in 1968. G-L Microwave Corporation also was organized in 1968. In 1969 the company completed three acquisitions: Dumor Hard Chrome Company, Modern Decorating Company, and Creative Decorating Company (the latter two purchases moved the company into the bottle decorating business). They were merged in 1970 to create Modern Creative Corporation.
In 1970, SGL sold G-L Microwave and bought Waber Electronics. A year later it added General Grinding Wheel Corp. to its metalworking portfolio and also bought the assets of United Chromium Corp. Although the acquisition pace fell off somewhat, SGL completed several more purchases in the 1970s, two of which moved the company into the automotive arena: Detroit's Batteries Manufacturing Company in 1974 and, in 1976, Auburn Spark Plug Company, maker of sparkplugs and igniters used in aircraft and industrial applications. Other acquisitions during the decade included Lube/Systems Corporation, Sculpta Glass Corporation, and the Grinding Wheel division of Michigan General Corp. in 1977. A year later SGL divested its graphics division, which was sold to Pittsburgh-based Pannier Corp.
SGL underwent a number of significant changes in the early 1980s. Lax died and his family sold back their shares in SGL to the company. Then in 1984, to avoid some confusion with Supermarkets General, which traded on the New York Stock Exchange under the SGL symbol, the company changed its name to SL Industries Inc. But according to Barron's, "A bigger reason for the switch is that the SL designation is simpler for marketing purposes. 'We could name a line of products the "SuperLine" and highlight the SL,' says [CEO John C.] Instone. 'That's just one idea we're considering.'" By now the company divided its businesses into four business groupings: electrical products, metalworking, plastics, and services. By far the largest contributor, accounting for more than half of the company's total revenues and the lion's share of profits, was electrical products, which included spark plugs and igniters, voltage-surge protectors, and multiple-electrical outlet strips.
Numerous Assets Bought and Sold in the Mid-1980s
SL elected to exit some of the less promising businesses and buy into areas associated with emerging technologies. Hence, during the two-year period between January 1984 and January 1985, SL was involved in a flurry of buying and selling of assets. In January 1984 it sold its printed circuit division, and two months later divested B&S Screw Machine Products. In November of that year, S&L acquired New Rochelle Manufacturing, Inc. and its affiliate Dynagro Corp., involved in the manufacture of precision thermoplastic products. The Modern Creative division was sold in February 1985, followed by the sale of SL Homalite Corp. in May of the same year, and its Electronics division in August. SL also completed a pair of acquisitions in 1985, adding Montevideo Technology, Inc., producer of avionics components, and the aircraft spark plug product line of Allied Corporation's Autolite division. As a result, SL entered 1986 with a business mix that included electrical products, aviation, metalworking, and plastics, with electrical products and aviation contributing 65 percent of all sales. Now trading on the New York Stock Exchange, SL appeared to be well positioned for ongoing growth, and even moved its corporate headquarters to a new business center after years of dowdy accommodations. But the company was too dependent on defense industries, which went into decline in the late 1980s with the end of the Cold War as the Soviet Union and its Eastern European neighbors abandoned Communism. By the 1990s SL found itself struggling financially, no longer followed by investment analysts.
At the age of 64, Instone turned over the president and CEO roles to Daryl L. Renschler, 20 years younger, in February 1988 in what the company called an orderly transition. The company also launched a restructuring program to eliminate some layers of management, consolidate operations, and streamline the decision-making process. Over the years, SL had granted divisions and subsidiaries a great deal of autonomy while keeping a thin corporate operation, but it now shifted to a more direct management approach favored by Renschler. It did not work out as planned, however. The company faltered and in April 1991 Renschler was replaced by Owen Farren. Even before Farren took charge, the company had made attempts once again to adjust its business mix, acquiring Dynatech Computer Power, Inc. and Electrostatic Technology, Inc., while casting off SL Plastics, Inc. and SL Abrasives, Inc. But Farren would find the task of turning around SL further complicated by a series of proxy fights over control of the company, engineered by dissident shareholders, or corporate raiders, in the opinion of management.
In 1992 a group led by Wilmer J. Thomas of Palm Beach, Florida, and Martin L. Solomon of Coconut Grove, Florida, who together owned less than 8 percent of SL, nominated a slate of candidates, including themselves, to the board of directors. If successful, they would seize control of the company, and promised to make changes that they said would be in the best interests of shareholders and the company. The company painted Thomas as little more than a "greenmailer," because in 1990 he had met with SL's chairman and indicated he might be interested in selling back his stock to the company. Thomas accused SL management of attempting to assassinate his character "because they can't run on their record." In the end, the dissidents took three of SL's seven board seats in December 1992, but fell short of gaining control. There was public talk of pulling together for the sake of the company from both factions, but within the year, Thomas and Solomon stepped down from the board, selling back their shares to the company in a move, according to Philadelphia Business Journal, that left "many shareholders shocked and suspicious." Solomon told the publication, "Nothing very mysterious prompted my early retirement," adding, "I just didn't have a large enough economic interest in this to continue putting in all the time and energy I was."
One significant move made by SL during the time Thomas and Solomon served on the board was the February 1992 acquisition of Condor D.C. Power Supplies, Inc. and its Mexican affiliate, Electronica Condor de Mexico S.A. de C.V. In addition, SL hoped to invest more in product development. "We knew a couple of years ago that the defense business would be in rapid decline," Farren told the Wall Street Journal in August 1993. "So we had to move aggressively out of that area and create our own proprietary products. We have now become a problem solver and solution creator rather than a build-from-order company." Despite the rosy pictures Farren painted, a new dissident shareholder, Warren Lichtenstein, a 28-year-old partner in a New York investment firm, sought to replace the board but only won a seat on the board of directors for himself. According to Philadelphia Business Journal, the annual shareholders meeting "was tense and punctuated by complaints from shareholders about lack of stock performance... . Solomon's and Thomas' resignations and their stock buyout brought allegations of 'greenmail' from shareholder Charles L. Klein... . 'You people keep bleeding us dry,' Klein told the board of directors."
SL launched a restructuring program to transform itself from a mere maker of specialty products, overly dependent on defense and aerospace work, into a designer and producer of proprietary advanced systems and equipment. Customers for such products would be greatly increased because of the incorporation of microprocessors in an expanding number of products, all of which would require power conversion solutions. SL placed a great deal of emphasis on SL Waber, maker of power strips and surge protectors, which now developed surge units for large satellite installations. It was also during this time that SL acquired Teal Electronics (May 1995) while divesting businesses serving old-guard markets, such as SL LUBE/systems, Inc. in 1995 and SL Piping Systems, Inc., fabricator of metallic piping systems, in 1996.
Strong Mid-1990s Performance
In the mid-1990s, SL's strategy appeared to be working well. Sales increased from $54.7 million in 1991 to $117.3 million in 1996. In 1997 the company sold SL Auburn, Inc., a move that management said signaled the end of its restructuring effort, and began increasing its investment in product development. In 1998 the company spent a record $6.3 million on engineering and product development, a 16.7 percent jump over the previous year. Also in 1998, SL improved its global presence by acquiring a German company, Elektro-Metall Export GmbH, a designer and manufacturer of PDQ products, such as actuators, motor controllers, and power distribution units used by industrial and aerospace original equipment manufacturers.
As the 1990s came to a close, SL's momentum was blunted; the company was adversely impacted by a recession in Asia and a slump in the semiconductor industry. SL turned to the electric utilities market, which was undergoing deregulation, and management believed offered market opportunities. In May 1999 SL acquired RFL Electronics, a maker of teleprotection systems, high-speed communications equipment, and relaying devices, with a strong base of utility customers. It also acquired Todd Products Corporation, a supplier of power supplies to the datacom, telecommunications, and computer industries, to beef up the Condor subsidiary. The overall strategy was to gear up to meet the anticipated global demand for telecommunications and data communications products. It proved to be the wrong call, as the telecommunications field and semiconductor market entered an extended downturn. Moreover, the company's surge protectors and power strips had become low-profit commodities. In response, SL discontinued these lines and consolidated Condor, Todd Products, and SL Waber into a single division, Power Electronics, a restructuring effort that cost SL more than $1 million.
Due in part to restructuring charges, revenues increased to $167.7 million in 2000, but profits fell from $5.4 million in 1999 to $1.7 million in 2000. SL's financial situation had become precarious, however. Credit Suisse First Boston was hired in February 2001 to help management explore "strategic alternatives." A group of dissident shareholders, again led by Lichtenstein, pressed for a quick sale of the company. Instead only SL Waber and Waber de Mexico were sold. Another proxy fight ensued, and this time Lichtenstein prevailed and he took over as CEO and chairman.
Under Lichtenstein, SL sold Elektro-Metall and SL Surface Technologies, but initially the company did not perform better than under the previous management regime. Sales dipped from $107.9 million in 2002 to $105.3 million in 2003, and the company's net loss grew from $470,000 in 2002 to $1.3 million in 2003. Business improved in 2004, when SL returned to profitability, earning nearly $8.7 million on revenues of $118.8 million. In August 2005, Lichtenstein turned over the CEO job to James C. Taylor, although he retained the chairmanship. Taylor had been the company's chief operating officer and had played a key role in SL's turnaround, which continued in 2005.
Principal Subsidiaries
Condor D.C. Power Supplies, Inc.; RFL Electronics, Inc.; SL Montevideo Technology, Inc.; Teal Electronics Corporation.
Principal Competitors
American Power Conversion Corporation; Emerson Electric Co.; Power-One, Inc.
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