The Company, through its subsidiaries, designs, manufactures and markets power electronics, motion control, power protection, power quality electromagnetic and specialized communication equipment that is used in a variety of commercial and military aerospace, computer, datacom, industrial, medical, telecom, transportation and utility equipment applications. The Company is comprised of four domestic business segments, three of which have significant manufacturing operations in Mexico. SLPE has manufacturing, engineering and sales capability in the People's Republic of China. Most of the Company's sales are made to customers who are based in the United States. However, over the years the Company has increased its presence in international markets. The Company places an emphasis on highly engineered, well-built, high quality, dependable products and continues its dedication to product enhancement and innovations. The Company's business strategy has been to enhance the growth and profitability of each of its businesses through the penetration of attractive new market niches, further improvement of operations through the implementation of lean manufacturing principles and expansion of global capabilities. The Company expects to achieve these goals through organic growth and strategic acquisitions. The Company also continues to pursue strategic alternatives to maximize shareholder value. Some of these alternatives have included, and will continue to include, selective acquisitions, divestitures and sales of certain assets. The Company has provided, and may from time to time in the future provide, information to interested parties.

Business Trends
The Company has experienced continued pressure on sales and income due to the current global economic downturn. Given the nature of the global economic weakness and its effects on the Company's end markets, management has a limited ability to accurately forecast demand for its products or the prices of raw materials. With little visibility in the marketplace, the Company has taken action to reduce its cost structure and align its capacity with lower business levels and has postponed planned capital investment. It is difficult to predict when economic growth will resume.
In the sections that follow, statements with respect to the quarter ended 2009 or six months ended 2009 refer to the three-month and six-month periods ended June 30, 2009. Statements with respect to the quarter ended 2008 or six months ended 2008 refer to the three-month and six-month periods ended June 30, 2008. Critical Accounting Policies
The Company's consolidated financial statements have been prepared in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the amounts of reported and contingent assets and liabilities at the date of the consolidated financial statements and the amounts of reported net sales and expenses during the reporting period.
In December 2001, the Securities and Exchange Commission (the "SEC") issued disclosure guidance for "critical accounting policies." The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The Company's significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Part IV of the Company's Annual Report on Form 10-K for the year ended December 31, 2008. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies are deemed to be critical within the SEC definition. The Company's senior management has reviewed these critical accounting policies and estimates and the related Management's Discussion and Analysis of Financial Condition and Results of Operations with the Audit Committee of the Board of Directors. Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectibility is reasonably assured. Revenue is recorded in accordance with Staff Accounting Bulletin ("SAB") No. 104 and in certain circumstances in accordance with the guidance provided by the Emerging Issues Task Force ("EITF") 00-21 "Revenue Arrangements with Multiple Deliverables." The major portion of the Company's revenue is derived from equipment sales. However, RFL has customer service revenue, which accounted for less than one percent of consolidated net revenue for each of the quarters ended 2009 and 2008. The Company recognizes equipment revenue upon shipment and transfer of title. Provisions are established for product warranties, principally based on historical experience. At times the Company establishes reserves for specific warranty issues known by management. Service and installation revenue is recognized when completed. At SL-MTI, revenue from one particular contract is considered a multiple element arrangement and, in that case, is allocated among the separate accounting units based on relative fair value. In this case the total arrangement consideration is fixed and there is objective and reliable evidence of fair value.

SLPE has two sales programs with distributors, pursuant to which credits are issued to distributors: (1) a scrap program and (2) a competitive discount program. The distributor scrap program allows distributors to scrap and/or rotate up to a pre-determined percentage of their purchases over the previous six month period. SLPE provides for this allowance as a decrease to revenue based upon the amount of sales to each distributor and other historical factors. The competitive discount program allows a distributor to sell a product out of its inventory at less than list price in order to meet certain competitive situations. SLPE records this discount as a reduction to revenue based on the distributor's eligible inventory. The eligible distributor inventory is reviewed at least quarterly. No cash is paid under either distributor program. These programs affected consolidated gross revenue for each of the six-month periods ended 2009 and 2008 by approximately 0.7% and 0.6%, respectively. Certain judgments affect the application of the Company's revenue policy, as mentioned above. Revenue recognition is significant because net revenue is a key component of results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions, royalties and certain incentive programs. Revenue results are difficult to predict. Any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from year to year and quarter to quarter. Allowance For Doubtful Accounts
The Company's estimate for the allowance for doubtful accounts related to trade receivables is based on two methods. The amounts calculated from each of these methods are combined to determine the total amount reserved. First, the Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations (e.g., bankruptcy or insolvency). In these cases, the Company uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific reserves are reevaluated and adjusted as additional information is received that impacts the amount reserved. Second, a general reserve is established for all customers based on several factors, including historical write-offs as a percentage of sales. If circumstances change (e.g., higher than expected defaults or an unexpected material adverse change in a major customer's ability to meet its financial obligation), the Company's estimates of the recoverability of amounts due could be reduced by a material amount. The Company's allowance for doubtful accounts represented 3.3% and 2.5% of gross trade receivables at June 30, 2009 and December 31, 2008, respectively. Inventories
The Company values inventory at the lower of cost or market, and continually reviews the book value of discontinued product lines to determine if these items are properly valued. The Company identifies these items and assesses the ability to dispose of them at a price greater than cost. If it is determined that cost is less than market value, then cost is used for inventory valuation. If market value is less than cost, then related inventory is adjusted to market value. If a write down to the current market value is necessary, the market value cannot be greater than the net realizable value, which is defined as selling price less costs to complete and dispose, and cannot be lower than the net realizable value less a normal profit margin. The Company also continually evaluates the composition of its inventory and identifies slow-moving and excess inventories. Inventory items identified as slow-moving or excess are evaluated to determine if reserves are required. If the Company were not able to achieve its expectations of the net realizable value of the inventory at current market value, it would have to adjust its reserves accordingly. The Company attempts to accurately estimate future product demand to properly adjust inventory levels. However, significant unanticipated changes in demand could have a significant impact on the value of inventory and of operating results.

Accounting For Income Taxes
The Company has reported gross unrecognized tax benefits, excluding interest and penalties, of $2,922,000 and $2,845,000 as of June 30, 2009 and December 31, 2008, respectively. These amounts represent unrecognized tax benefits, which, if ultimately recognized, will reduce the Company's effective tax rate. As of June 30, 2009, the Company reported accrued interest and penalties related to unrecognized tax benefits of $512,000. For additional disclosures related to FIN 48, see Note 3 of the Notes to the Consolidated Financial Statements included in

Goodwill
The Company has allocated its adjusted goodwill balance to its reporting units. The Company tests goodwill for impairment annually at fiscal year-end and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired, such as a significant adverse change in business climate, an adverse action or assessment by a regulator or the decision to sell a business, that would make it more likely than not that an impairment may have occurred. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares the fair value to the net book value. In determining fair value, the accounting guidance allows for the use of several valuation methodologies, although it states quoted market prices are the best evidence of fair value. The Company uses a combination of expected present values of future cash flows and comparative market multiples and has performed a review of market capitalization with estimated control premiums at December 31, 2008. If the fair value of a reporting unit is less than its net book value, the second step of the analysis compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the Company recognizes an impairment loss equal to that excess amount. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates, selecting comparable companies within each reporting unit and market and determining control premiums. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. There were no impairment charges for the quarters ended 2009 and 2008. As of June 30, 2009 and December 31, 2008, goodwill totaled $22,769,000 (representing 23% and 22% of total assets), respectively.
As of the testing conducted as of December 31, 2008, the Company concluded that no impairment charge was warranted. However, there can be no assurance that the economic conditions currently affecting the world economy or other events may not have a negative material impact on the long-term business prospects of any of the Company's reporting units. In such case, the Company may need to record an impairment loss, as stated above. The next annual impairment test will be conducted as of December 31, 2009.
Management has not identified any triggering events, as defined by SFAS No. 142, during 2009. Accordingly, no interim impairment test has been performed. Impairment Of Long-Lived And Intangible Assets The Company's long-lived and intangible assets primarily consist of fixed assets, goodwill and other intangible assets. The Company periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses the recoverability of the asset by estimated cash flows and at times by independent appraisals. It compares estimated cash flows expected to be generated from the related assets, or the appraised value of the asset, to the carrying amounts to determine whether impairment has occurred. If the estimate of cash flows expected to be generated changes in the future, the Company may be required to record impairment charges that were not previously recorded for these assets. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Asset impairment evaluations are by nature highly subjective. The Company recorded asset impairment charges of approximately $77,000, net of tax, related to properties it owns in Camden, New Jersey and Pennsauken, New Jersey. These charges were recorded as part of discontinued operations in the second quarter of 2008.

Environmental Expenditures
The Company is subject to United States, Mexican, Chinese and United Kingdom environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, and generation, handling, storage, transportation, treatment and disposal of waste materials. The Company is also subject to other federal, state and local environmental laws and regulations, including those that require it to remediate or mitigate the effects of the disposal or release of certain chemical substances at various sites, including some where the Company has ceased operations. It is impossible to predict precisely what effect these laws and regulations will have in the future. Expenditures that relate to current operations are charged to expense or capitalized, as appropriate. Expenditures that relate to an existing condition caused by formerly owned operations are expensed and recorded as part of discontinued operations. Expenditures include costs of remediation and legal fees to defend against claims for environmental liability. Liabilities are recorded when remedial efforts are probable and the costs can be reasonably estimated. The liability for remediation expenditures includes, as appropriate, elements of costs such as site investigations, consultants' fees, feasibility studies, outside contractor expenses and monitoring expenses. Estimates are not discounted and they are not reduced by potential claims for recovery from insurance carriers. The liability is periodically reviewed and adjusted to reflect current remediation progress, prospective estimates of required activity and other relevant factors, including changes in technology or regulations. For additional information related to environmental matters, see Note 13 of the Notes to the Consolidated Financial Statements included in Part IV of the Company's Annual Report on Form 10-K for the year ended December 31, 2008. The above listing is not intended to be a comprehensive list of all of the Company's accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for management's judgment in its application. There are also areas in which management's judgment in selecting any available alternatives would not produce a materially different result. For a discussion of accounting policies and other disclosures required by GAAP, see the Company's audited Consolidated Financial Statements and Notes thereto included in Part IV of the Company's Annual Report on Form 10-K for the year ended December 31, 2008. Liquidity And Capital Resources

                              June 30,       December 31,
                                2009             2008           $ Variance       % Variance
                                                      (in thousands)
  Cash and cash equivalents   $   2,893     $          504     $      2,389              474 %
  Bank debt                   $       -     $            -     $          -                -
  Working capital             $  28,515     $       27,222     $      1,293                5 %
  Shareholders' equity        $  64,887     $       64,860     $         27              N/M

During the six-month period ended June 30, 2009, the net cash provided by operating activities from continuing operations was $3,472,000, as compared to net cash provided by operating activities from continuing operations of $1,800,000 during the six-month period ended June 30, 2008. The sources of cash from operating activities for the six-month period ended June 30, 2009 were a decrease in accounts receivable of $4,012,000 and a decrease in inventories of $800,000. The decrease in accounts receivable was primarily related to improved collections at most entities. The increased collections were $1,598,000 at SLPE, $1,008,000 at RFL, $976,000 at MTE and $624,000 at Teal. Days sales outstanding (defined as current accounts receivable divided by the average of the last three months sales) were 55.1 days at June 30, 2009. These sources of cash were primarily offset by a decrease in accounts payable of $1,995,000 and a decrease in accrued liabilities of $1,537,000. The decreases in accounts payable were primarily related to SLPE ($787,000) and Teal ($615,000). Legal and consulting payables of $370,000 related to environmental matters are charged to discontinued operations. The increase in prepaid expenses was primarily related to the renewal of certain insurance policies in the first quarter. The sources of cash from operating activities for the six-month period ended June 30, 2008 were income from continuing operations of $3,346,000 and an increase in accounts payable of $1,192,000. These sources of cash were primarily offset by a decrease in accrued liabilities of $3,255,000 and an increase in inventory of $1,824,000. The decrease in accrued liabilities was primarily due to the timing of payments related to employee bonuses and consulting and audit fees, most of which were paid in the first quarter of 2008, which are not recurring on a quarterly basis. The increase of accounts payable was related to the timing of vendor payments. The increase in inventory was primarily caused by the deferral of certain customers' existing orders at Teal, lower than expected orders at SLPE and the increase of orders at MTE.
During the six-month period ended June 30, 2009, net cash used in investing activities was $514,000. This use of cash is primarily related to a building expansion in Matamoros, Mexico for SL-MTI, the purchase of machinery, computer hardware, software and demonstration equipment. During the six-month period ended June 30, 2008, net cash used in investing activities was $1,253,000. This use of cash in investing activities during the period was primarily related to the purchase of machinery, computer hardware, software and demonstration equipment.
During the six-month period ended June 30, 2009, net cash provided by financing activities was $297,000, which is related to treasury stock activity. During the six-month period ended June 30, 2008, net cash used in financing activities was $506,000, which was primarily related to borrowings under the Company's previous credit facility in the amount of $6,239,000, offset by payments thereunder of $7,000,000.
The Company's current ratio was 2.25 to 1 at June 30, 2009 and 2.03 to 1 at December 31, 2008. Current assets decreased by $2,287,000 from December 31, 2008, while current liabilities decreased by $3,580,000 during the same period. The Company had no outstanding bank debt at June 30, 2009 and at December 31, 2008.
Capital expenditures were $496,000 in the first six months of 2009, which represents a decrease of $479,000, or 49%, from the capital expenditure levels of the comparable period in 2008. Capital expenditures in the first six months of 2009 were attributable to a plant expansion, as mentioned above, machinery, computer hardware and software purchases. Capital expenditures of $975,000 were made during the first six months of 2008. These expenditures primarily related to machinery, computer hardware and software purchases.

The Company has been able to generate adequate amounts of cash to meet its operating needs and expects to do so in the future.
With the exception of the segment reported as "Other" (which consists primarily of corporate office expenses, financing activities, public reporting costs and costs not specifically allocated to the reportable business segments), all of the Company's operating segments, except SLPE, recorded income from operations for the periods presented.
Contractual Obligations
The following is a summary of the Company's contractual obligations at June 30, 2009 for the periods indicated:

                             Less Than      1 to 3       4 to 5       After
                              1 Year         Years       Years       5 Years       Total
                                                   (in thousands)
         Operating Leases   $     1,230     $ 1,365     $    270     $      -     $ 2,865
         Debt                         -           -            -            -           -
         Capital Leases               8           -            -            -           8

                            $     1,238     $ 1,365     $    270     $      -     $ 2,873

Off-Balance Sheet Arrangements
It is not the Company's usual business practice to enter into off-balance sheet arrangements such as guarantees on loans and financial commitments, indemnification arrangements and retained interests in assets transferred to an unconsolidated entity for securitization purposes. Consequently, the Company has no off-balance sheet arrangements, except for operating lease commitments disclosed in the table above, which have, or are reasonably likely to have, a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Results of Operations
Three months ended June 30, 2009, compared with three months ended June 30, 2008 The Company has experienced continued pressure on sales and income due to the current global economic downturn. Given the nature of the global economic weakness and its effects on the Company's end markets, management has a limited ability to accurately forecast demand for its products or the prices of raw materials. With little visibility in the marketplace, the Company has taken action to reduce its cost structure and align its capacity with lower business levels and has postponed all non-essential capital investment. During the three months ended June 30, 2009, the Company recorded restructuring charges of $534,000 at SLPE. For additional information on the restructuring charges, see "Restructuring Charges" in the detail that follows.

The tables below show the comparisons of net sales and (loss) income from operations for the quarter ended June 30, 2009 ("2009") and the quarter ended June 30, 2008 ("2008").

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