SL Industries Fourth Quarter and Year End Results, 2006

Posted & filed under SL Industries News and Updates.

SL Industries Announces 2006 Fourth Quarter and Year-End Results

Announces Stock Repurchase Program

MT. LAUREL, N.J.–(BUSINESS WIRE)–SL INDUSTRIES, INC. (AMEX & PHLX: SLI) announced today that its net income for the year ended December 31, 2006 was $3,553,000, or $.61 per diluted share. Net income for the year included loss from discontinued operations, after tax, of $3,307,000, or $.57 per diluted share. Income for the year from continuing operations was $6,860,000, or $1.18 per diluted share. Discontinued operations include legacy costs associated with businesses divested by the Company. The exceptionally high loss from discontinued operations was attributable to a $2,480,000 reserve, net of tax, which was recorded in the fourth quarter in connection with certain estimated environmental liabilities. In addition to the environmental reserve, relative earnings decreased by $.64 per diluted share, compared to prior year, primarily as a result of an increase in the Company’s effective tax rate to 33%, from 19% in 2005.

For the year ended December 31, 2005, net income was $7,147,000, or $1.25 per diluted share. The net income for 2005 included loss from discontinued operations of $473,000, or $.08 per diluted share. Income from continuing operations for 2005 was $7,620,000, or $1.33 per diluted share.

Net sales from continuing operations for 2006 were $176,773,000, compared with net sales from continuing operations for 2005 of $126,873,000.

The Company’s operating segments recorded mixed results, as compared to 2005. With the acquisition of Ault Incorporated in January 2006, SL Power Electronics Corp. recorded net sales of $87,949,000, with income from operations of $6,316,000, compared with net sales of $43,233,000 and income from operations of $4,543,000 for 2005. With the acquisition of MTE Corporation in October 2006, the High Power Group recorded net sales of $39,993,000, with income from operations of $5,836,000, compared with net sales of $32,777,000 and income from operations of $4,911,000 for 2005. In 2006, SL Montevideo Technology recorded net sales of $25,704,000, with income from operations of $1,555,000, compared with net sales of $28,085,000 and income from operations of $3,371,000 for 2005. RFL Electronics recorded net sales of $23,127,000, with income from operations of $2,217,000, compared with net sales of $22,778,000 and income from operations of $2,284,000 for 2005.

For the three months ended December 31, 2006, net loss was $1,148,000, or $.20 per diluted share. Loss from discontinued operations for the period was $2,862,000, or $.49 per diluted share. Income from continuing operations for the period was $1,714,000, or $.29 per diluted share.

For the three months ended December 31, 2005, net income was $1,667,000, or $.29 per diluted share. Loss from discontinued operations for the period was $74,000, or $.01 per diluted share. Income from continuing operations for the period was $1,741,000, or $.30 per diluted share. Income from continuing operations benefited by approximately $.06 per diluted share due to foreign tax credits recorded during the quarter.

Net sales from continuing operations for the three months ended December 31, 2006 were $49,209,000, compared with net sales from continuing operations of $31,060,000 for the same period last year.

In addition, the Company announced that on March 23, 2007, the Board of Directors authorized the repurchase of up to 560,000 shares of its common stock. Any repurchases would be made if and when management considers appropriate and in open market or negotiated transactions.

James Taylor, President and Chief Executive Officer of SL Industries, commented, “2006 was a pivotal year for SL Industries. Despite the sharp decline in reported earnings, the Company achieved critical goals to further its strategic objectives. Moreover, the Company performed better than its earnings would indicate. Earnings decreased approximately $.67 per diluted share due to (i) an increase in the Company’s effective tax rate due to less available foreign tax credits, and (ii) a fourth quarter charge to address anticipated environmental liabilities associated with discontinued operations. Pre-tax income from continuing operations, which does not include these items, rose 9%, or $.15 per diluted share.”

“This year the Company accomplished several goals to accelerate its growth and profitability. The acquisitions of Ault Incorporated and MTE Corporation were successfully completed and established a global platform for the Company’s Power Electronics Group, which now enable it to offer wider product applications, enhanced sales and design capabilities and low-cost manufacturing operations. In addition, this year we launched several initiatives to reduce costs and improve processes at each division. Most notably, we have begun to implement lean management principles throughout the organization. This process is ongoing, as it requires a wholesale change in business procedures and philosophy to accelerate process times, reduce working capital and improve customer service.”

“During 2006, we also restructured SL Montevideo Technology to refocus that business in its core markets for military and commercial aerospace motors and motion controls and to transform its operations from a low mix/high volume production system to a high mix/low volume model. All of these initiatives involve short-term direct and indirect costs; however, we believe they will ultimately improve the Company’s competitive position and its financial performance.”

Taylor continued, “At the same time, the Company did experience some difficulties and market challenges during the year. Most importantly, our inability to complete the senior management team for the Power Electronics Group represented a significant setback, and contributed to a sharp decline in Condor product line sales and margin during the fourth quarter. To address this weakness, I have assumed responsibilities as President of SL Power Electronics Corp. while we continue to search for new leadership. Recruiting outstanding executives to fill these open positions is a high priority for 2007.”

“Also, SL Montevideo Technology and RFL Electronics struggled though difficult market conditions for most of 2006. At SL-MTI, the abrupt deferral of certain high volume military aerospace programs required a major downsizing and restructuring of the business. RFL’s results were affected by the continued postponement of a number of utility system upgrades in North America. Each division experienced improved market demand in the second half and each reported its best results of the year in the fourth quarter.”

Taylor added, “Last year all of the business segments generated positive cash flows and recorded good returns on invested capital. SL’s net cash provided by operating activities from continuing operations aggregated $6,327,000, despite the restructuring initiatives discussed above. Corporate and other expenses, which related to corporate administration, strategic management and oversight, capital financing, risk management, corporate governance and controls, legal and litigation activities and public reporting expenses were $4,871,000 for 2006, as compared to $4,911,000 for last year. Corporate expenses decreased to 3% of net sales for the year, compared to 4% of net sales for 2005.”

“Despite the significant accomplishments achieved last year in creating long-term shareholder value, the market price of the Company’s publicly traded shares experienced a sharp decline over the past five months. We believe that SL Industries common stock represents an outstanding investment opportunity. Consequently, the Board of Directors recently approved a stock repurchase program. To maximize shareholder value, we will aggressively evaluate opportunities to repurchase shares of the Company’s common stock, as well as acquire strategic assets and invest in new product development.”

Taylor concluded, “Looking forward, we continue to see excellent long-term opportunities in all of the Company’s served markets through organic growth and acquisition. While many of the plans referred to above must still be completed, the Company has undertaken the key first steps necessary to take advantage of these opportunities.”

“The Board of Directors has established May 16, 2007 at 2:00 p.m. as the date and time of the 2007 Annual Meeting of Shareholders for shareholders of record on April 2, 2007. We look forward to further reporting on the Company’s progress at that time.”

About SL Industries, Inc.

SL Industries, Inc. designs, manufactures and markets equipment and systems for industrial, medical, electric utility, aerospace and telecommunications applications. For more information about SL Industries, Inc. and its products, please visit the Company’s website at www.slindustries.com

Forward-Looking Statements

This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about the Company’s business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and the following: the effectiveness of the cost reduction initiatives undertaken by the Company, changes in demand for the Company’s products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, constraints on supplies of critical components, excess or shortage of production capacity, difficulties encountered in the integration of acquired businesses and other risks discussed from time to time in the Company’s Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

 

Contact:

SL Industries, Inc.
David Nuzzo, 856-727-1500, ext. 5515
Facsimile: 856-727-1683
David.Nuzzo@slindustries.com

Source: SL Industries, Inc.