PULLMAN, Wash.With continued strong performance in the domestic electric-utility market, Schweitzer Engineering Laboratories Inc. will surpass $100 million in sales this year and says it could grow much larger as it wades deeper into international sales and begins tapping new markets.


There are few utilities in North America that the 19-year-old maker of protective relays and related devices cant count among its customers. Now the company, which currently makes a third of its sales to overseas customers, sees the international utility market and the plumbing of new industrial markets, such as the mining and petroleum industries, as its strongest potential for future growth.


SEL, whose employment ranks are expected to top 600 by year-end, is overflowing its 156,000-square-foot headquarters and manufacturing complex situated on a Palouse hilltop here overlooking Washington State University. It plans to start work soon on a 40,000-square-foot expansion of its main manufacturing facility and has bought 35 additional acres of adjacent land for future expansion, giving it 40 acres. The company also operates 39 field offices globally, says Doug Voda, SEL vice president for marketing and customer service.


From its beginnings as a manufacturer of sophisticated protective relays primarily for high-voltage electrical transmission systems, SEL has expanded into developing similar products for lower voltage, electrical-distribution systems, which make up a much larger portion of an electric utilitys line system. Voda says SELs move into distribution products, as well as a growing emphasis on sales to non-utility customers, has triggered a tenfold increase in its customer base over the past five years, from about 300 customers in 1996, to more than 3,000 today. He says sales of such products as electrical-protection devices for electric pumps to the mining and petroleum industries have become the fastest-growing segment of SELs business.


Annual sales have increased steadily in recent years, Voda says, rising from $46 million in 1998 to $73 million in 1999 and $91.5 million last year. While he acknowledges that sales are expected to exceed $100 million this year, he declines to say by how much.


Our international sales are awesome this yearway ahead of plan, he says. Weve had great adoption in North America, but it isnt even a tenth of the globe of opportunity for us.


Still, Voda says SEL intends to proceed cautiously in the development of international markets.


Its not for lack of (international) market demand. We could be, next year maybe, a lot bigger than we are now, but that could have a long-term negative impact on our company.


Voda says the privately held SEL is declining to sell products in international markets where it has yet to establish the field offices it believes are necessary to provide good customer-service.


If we cant serve a customer with the same level of price, quality, innovation, and service internationally as we do domestically, then we wont go, he says


That long-term view of business, says Voda, comes from SEL co-founder Ed Schweitzer, who with his wife, Mary, started SEL in the basement of their Pullman home in 1982. The Schweitzers since then have placed a third of the companys ownership into an employee stock ownership plan (ESOP) and say they intend to have the ESOP acquire the rest of the company when they retire. The Schweitzers have no intention of taking the fast-growing company public, he says.


Companies go public when they need the cash to grow, Voda says. Weve been so successful in managing our business and controlling our funds that we no longer, for the foreseeable future, require any external funding to achieve growth.


Voda says SELs electrical-relay products have grown progressively sophisticated, evolving from performing protection functions for electrical systems to providing remote control of those systems. He says the companys product line also has diversified in recent years.


We were offering lower-end products, like cables and modems, at $30 to $60 and higher-end products at $10,000, he says. Now, its from $30 to a half a million dollars.


SELs latest product development is called a turnkey control house, which controls electrical substations. Priced in the $500,000 range, the trailer-sized units contain SEL-manufactured equipment that provides system monitoring, protection, information management, and communications control for the substations. Voda says the new drop-in control houses, can be constructed by SEL in a fraction of the time required for a utility to construct them on site, can be thoroughly tested prior to delivery, and then mounted on site on concrete pads by utility workers. One utility has bought eight of the new units from SEL this year, he says.


More products are planned. SEL will invest a whopping 20 percent of sales in research and development this year, and typically spends around 18 percent, Voda says.


I know of no other organization that comes close to making the (R&D) investment we make as a percent of sales, Voda asserts. And thats not on profit, but as a percentage of revenues.


Keeps chips in Pullman


Ranking behind only WSU as the largest employer in rural Whitman County, SELs concern about being able to get all the employees it needs here prompted management to consider opening a satellite production facility in Spokane. Although a nagging shortage of employees in positions that require advanced technical degrees still contributes to significant overtime work at SEL, Voda says the company no longer is considering opening manufacturing or R&D facilities outside of Pullman.


Weve begun to see a reversal in the past few years; people are coming to us now because of the fact this is a rural community, says Voda. People from L.A., Seattle, and Chicago are moving here.


SEL also has addressed its need for management and technical skills internally, setting up its own management-training programs and providing an educational allotment to each employee on what Voda says is an honor system. Although employees receive the allotment regardless of whether they use it for educational purposes, Voda says many of SELs technically skilled employees began their careers with the company as product assemblers and later gained the skills to advance.


In fact, Voda says, SEL attributes much of the success of the company and the quality of its products to the areas rural community values, as evidenced by what he says is extremely low turnover in the companys work force and the long-term loyalty of its employees. Thats one of the reasons why SEL will keep its manufacturing activities in Pullman, he says.


Weve had offers from Korea and China to open facilities abroad, he says. They would build everything, and we could move in at absolutely no cost. But the way we view it is that, if we save $15 million in labor costs and the product doesnt last 15 years, we fail.