INVESTING IN CERAMICS: A Superior Opportunity
In 2003, Superior Quartz Products, Inc. (SQP) faced a dilemma not uncommon in industry today: one of its long-time service providers was going out of business, and rather suddenly at that. Instead of casting around to find a new company that could take care of its quartz and ceramic machining needs, SQP took a different route. It acquired the service provider's assets, brought all of its machining in-house, and launched a new division to serve the existing customer base.
Almost sounds simple, doesn't it? Not quite, but a new $4.8-million facility is making a big difference.
First, A Little HistorySQP's origins date back to 1957, when Armando Losco and Edward Polinski, two electrical engineers from Westinghouse Inc., founded a company called Terrace Electronics. Located in Verona, N.J., Terrace manufactured neon glow lamps and electronic tubes. In 1958, Joseph Losco joined the company and began developing blueprinting-style lamps.
The partners sold the neon glow lamp portion of the business in 1960 and incorporated as Superior Quartz Products, Inc. That same year, SQP moved to Budd Lake, N.J.; blueprinting lamps were its main product line. "At that time in history, blueprinting lamps were a big part of the printing industry," says Dennis Losco, Jr., SQP's present-day chief financial officer. "Superior Quartz proved to be one of the largest OEM producers of that type of lamp in the country."
SQP operated with four employees in its 2500-square-foot location at Budd Lake until 1965, when the company more than doubled its facilities by moving to a 7000-square-foot plant in Alpha, N.J. As the printing industry evolved to high-speed ultraviolet (UV) printing, SQP's business switched from blueprinting lamps to those suitable for UV printing. In 1983, the company moved to a new 15,500-square-foot facility in Phillipsburg, N.J., to accommodate its increasing business.
In 1995, SQP acquired two engineers from Hanovia, a xenon lamp manufacturer. Helge Austad had developed the horizontal xenon short arc lamp, and Mike Burke had been general manager of Hanovia's air-cooled short arc division. Their expertise enabled SQP to expand into the air-cooled xenon short arc lamp market. "The process for making xenon lamps is similar to what we do in UV, but it's a completely different market," says Losco. "Xenon lamps are used in industries like cinema, searchlight and solar simulation, so it is altogether different than what we were doing in UV printing."
The new product line took off, and an expansion in 1996 brought the Phillipsburg facility to 25,000 square feet with about 48 employees. In 2000, SQP acquired assets from Duro-Test Corp. that enabled it to enter the market for liquid-cooled short arc lamps, which are used by organizations such as the National Aeronautics and Space Administration (NASA) and IMAX®(see Light it Up sidebar). After a 5000-square-foot addition in 2000, the Phillipsburg facility reached its maximum size of 30,000 square feet, and SQP employed 62 people.
Out of ServiceThe manufacture of xenon lamps requires a fair amount of quartz and ceramic machining, and SQP turned to Borges Technical Ceramics for machining services from 1996-2003. When Borges announced it was closing its doors in 2003, Losco and others visited the facility with the aim of purchasing one or two pieces of equipment in order to bring some of SQP's machining in-house. They expected to pay at most $20,000 total for the equipment, and subsequently save the $60,000-$70,0000 per year they'd been spending for Borges' services. But then they had an even better idea.
"We negotiated with them for the entire lot, about 30 pieces of equipment, and we ended up buying the company," says Losco. "We bought basically everything but the name-all the equipment and raw materials. We also decided to expand, working with Borges' customers and entering into ceramic machining, an entirely new market for us."
SQP's minimal investment in the Borges assets ($30,000-$35,000) has resulted in sales of over $800,000. The acquisition also enabled SQP to bring all of its machining in-house, which has dramatically reduced costs, and the added equipment allowed the company to pursue R&D projects it could not have taken on previously. "We now have three people working in the quartz and ceramic machining division," says Losco. "Also, the experience of working with other ceramic OEMs and customers has enabled us to implement some of that information into our lamp product lines. It's been an excellent acquisition for us."
SQP also acquired John De Mai, Borges' chief production manager. "Borges had a lot of customers that needed work done," says Jack Sabo, SQP's operations manager. "John had also worked out on the floor, and he was very knowledgeable regarding the customer base. His input has been invaluable."
One unexpected benefit has been the way the two divisions-lamps and ceramic machining-benefit each other. "In the UV printing industry, a variety of ceramic end-fittings are needed to support the lamps," explains Sabo. "We take advantage of our ceramic machining because we can modify an existing fitting in-house, while our competitors might need to go out, get it engineered and buy it from a supplier. We're able to make the fittings ourselves and get lamps out in the field more quickly."
SQP offers surface grinding, turning and limited threading on ODs, generally in smaller quantities. "We're more of a job shop than production," says Sabo. "Normally we stick to specialty jobs, the high-tolerance, highly machined pieces. Our forte is intricate machining."
A Big MoveWith the addition of the new machining division and average growth of 10% per year in its lamp business alone, SQP was running at nearly 100% capacity at its Phillipsburg facility. Inefficient workflow was also a problem. "With so many additions on the building at different periods, workflow wasn't very smooth," Losco explains. "We had to do a lot of walking, and material constantly needed to be transported from one place to another."
The company began looking for property to develop in order to build a new facility, and Losco discovered that the state of Pennsylvania offered a variety of incentives. "They gave us a lot of state and federal incentives to move from New Jersey to Pennsylvania, so we got different types of financing packages that really worked to our advantage," he says.
SQP settled on Bethlehem, Pa., and began building its new $4.8-million facility in the fall of 2005. The new building is 62,000 square feet, and further expansion to over 100,000 square feet is possible. The company moved in June 2006. "One of the biggest challenges was just moving all the equipment," says Losco. "We have approximately 200 pieces of equipment, including glass lathes and saws, furnaces, ceramic mills, drill presses, and grinding equipment. And then after it was moved, all of the equipment had to be set back up again, realigned and brought back to high tolerance. That was a major job."
But it was well worth the trouble. The new building has solved the workflow inefficiencies that plagued the company in the past. "One of our biggest objectives when we moved to this new facility was having more streamlined production flows," says Losco. "Now we have basically three or four linear flows for our products, and it's cutting down costs and allowing us to make better profit margins from a workflow standpoint."
Production has also increased now that space is no longer a problem. "We were producing about 200 UV lamps a day in the old plant, and we're up to about 300 now," says Losco. "Xenon output has gone up to 30-35 a day from about 20, and we now make two liquid-cooled lamps a day vs. one in the old plant, so we went up 100% there."
The Phillipsburg facility had only about 5000 square feet for the ceramic machining division, while the new building offers 10,000 square feet. "From a production standpoint, we were at almost 100% capacity in the old building," says Losco. "Right now, we're only at about 30% capacity with the ceramic division, and we've got a lot of ability to expand."
SQP currently employs 70 people, and Losco estimates that number will increase to close to 100 within five to 10 years.
The Future is BrightNow that there's plenty of room and workflow has been streamlined, the new facility will enable SQP to establish an R&D department and focus on the future. "This new building will allow us to expand our existing product lines and also enter new types of markets," says Losco. "We plan to work heavily on R&D to create new markets for ceramics and our quartz lamp industries as well."
For more information regarding Superior Quartz Products, contact the company at 2701 Baglyos Circle, Bethlehem, PA 18020; (610) 317-3450; fax (610) 317-3451; e-mail email@example.com; or visit www.sqpuv.comwww.sqpuv.com.
SIDEBAR: Light it UpSQP's acquisition of Duro-Test in 2000 enabled its entry into the xenon short arc lamp market. These lamps, which are filled with xenon gas and reach 80% of total output immediately after ignition, provide high-intensity light similar to daylight with a color temperature of approximately 6000 K. Along with high output in the visible spectrum, xenon short arc lamps provide an excellent supply of infrared radiation.
In 2001, SQP received notification from IMAX that it would use these lamps in all of its projection equipment, and additional customers include NASA, Lockheed Martin and the Jet Propulsion Laboratory. Liquid-cooled xenon short arc lamps for cinema applications range from 12,000 to 15,000 watts, while lamps for spot lighting, search lighting and solar simulation are in the range of 12,000 to 32,000 watts. Each lamp costs between $5000-$6000.