U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended |
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February 29, 2004 |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from N/A to N/A |
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Commission file no. 1-7755 |
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Summa Industries
(Name of registrant as specified in its charter)
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Delaware |
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95-1240978 |
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(State or other jurisdiction of |
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(I.R.S. employer identification number) |
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21250 Hawthorne Boulevard, Suite 500, Torrance, California 90503 |
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(Address of principle executive offices, including zip code) |
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Registrant’s telephone number: (310) 792-7024 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ý
The number of shares of common stock outstanding as of March 26, 2004 was 4,379,530.
Summa Industries
INDEX
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PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements: |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosure about Market Risk. |
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2
Summa Industries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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February 28, 2003 |
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August 31, 2003 |
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February 29, 2004 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
462,000 |
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$ |
380,000 |
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$ |
147,000 |
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Accounts receivable |
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17,285,000 |
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15,729,000 |
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17,669,000 |
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Inventories |
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11,928,000 |
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11,645,000 |
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13,828,000 |
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Prepaid expenses and other |
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3,246,000 |
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2,710,000 |
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3,108,000 |
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Total current assets |
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32,921,000 |
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30,464,000 |
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34,752,000 |
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Property, plant and equipment |
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54,151,000 |
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55,731,000 |
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59,351,000 |
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Less accumulated depreciation |
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(27,382,000 |
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(29,619,000 |
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(31,384,000 |
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Net property, plant and equipment |
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26,769,000 |
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26,112,000 |
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27,967,000 |
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Other assets |
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2,917,000 |
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2,518,000 |
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2,518,000 |
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Goodwill and other intangibles, net |
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9,566,000 |
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9,422,000 |
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9,378,000 |
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Total assets |
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$ |
72,173,000 |
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$ |
68,516,000 |
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$ |
74,615,000 |
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Current liabilities: |
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Accounts payable |
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$ |
5,440,000 |
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$ |
5,302,000 |
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$ |
5,871,000 |
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Accrued liabilities |
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5,011,000 |
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5,015,000 |
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4,211,000 |
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Current maturities of long-term debt |
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4,597,000 |
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3,896,000 |
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2,110,000 |
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Total current liabilities |
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15,048,000 |
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14,213,000 |
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12,192,000 |
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Long-term debt, net of current maturities |
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19,187,000 |
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16,219,000 |
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21,818,000 |
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Other long-term liabilities |
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2,637,000 |
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2,601,000 |
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2,585,000 |
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Total long-term liabilities |
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21,824,000 |
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18,820,000 |
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24,403,000 |
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Mandatorily redeemable convertible preferred stock, par value $.001, 5,000 shares authorized, issued and outstanding |
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5,735,000 |
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6,103,000 |
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6,472,000 |
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Minority interest in subsidiary |
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— |
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— |
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205,000 |
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Stockholders’ equity: |
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Common stock, par value $.001; 10,000,000 shares authorized; issued and outstanding: |
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4,429,217 at February 28, 2003, 4,246,103 at August 31, 2003 and 4,378,030 at February 29, 2004 |
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19,111,000 |
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17,577,000 |
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18,626,000 |
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Retained earnings |
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10,455,000 |
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11,803,000 |
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12,717,000 |
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Total stockholders’ equity |
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29,566,000 |
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29,380,000 |
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31,343,000 |
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Total liabilities, mandatorily redeemable preferred stock And stockholders’ equity |
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$ |
72,173,000 |
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$ |
68,516,000 |
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$ |
74,615,000 |
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See accompanying notes to condensed consolidated financial statements.
3
Summa Industries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three months ended |
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Six months ended |
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February
28 |
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February
29 |
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February
28 |
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February
29 |
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Net sales |
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$ |
27,562,000 |
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$ |
26,545,000 |
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$ |
56,110,000 |
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$ |
52,471,000 |
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Cost of sales |
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20,833,000 |
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20,256,000 |
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41,957,000 |
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39,811,000 |
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Gross profit |
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6,729,000 |
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6,289,000 |
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14,153,000 |
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12,660,000 |
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Selling, general, administrative and other expenses |
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5,348,000 |
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5,038,000 |
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10,613,000 |
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9,858,000 |
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Operating income |
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1,381,000 |
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1,251,000 |
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3,540,000 |
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2,802,000 |
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Interest expense |
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373,000 |
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584,000 |
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778,000 |
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889,000 |
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Income before income taxes and cumulative effect of a change in accounting principle |
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1,008,000 |
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667,000 |
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2,762,000 |
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1,913,000 |
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Provision for income taxes |
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321,000 |
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214,000 |
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920,000 |
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630,000 |
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Income before cumulative effect of a change in accounting principle |
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687,000 |
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453,000 |
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1,842,000 |
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1,283,000 |
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Cumulative effect of a change in accounting principle, net of tax |
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— |
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— |
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(22,343,000 |
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— |
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Net income (loss) |
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$ |
687,000 |
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$ |
453,000 |
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$ |
(20,501,000 |
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$ |
1,283,000 |
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Preferred stock accretion |
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$ |
185,000 |
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$ |
185,000 |
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$ |
369,000 |
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$ |
369,000 |
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Net income (loss) available to common stockholders: |
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Before cumulative effect of a change in accounting principle |
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$ |
502,000 |
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$ |
268,000 |
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$ |
1,473,000 |
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$ |
914,000 |
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After cumulative effect of a change in accounting principle |
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$ |
502,000 |
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$ |
268,000 |
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$ |
(20,870,000 |
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$ |
914,000 |
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Earnings per common share before cumulative effect of a change in accounting principle: |
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Basic |
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$ |
.11 |
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$ |
.06 |
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$ |
.33 |
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$ |
.21 |
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Diluted |
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$ |
.11 |
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$ |
.06 |
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$ |
.32 |
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$ |
.21 |
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Earnings (loss) per common share after cumulative effect of a change in accounting principle: |
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Basic |
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$ |
.11 |
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$ |
.06 |
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$ |
(4.70 |
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$ |
.21 |
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Diluted |
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$ |
.11 |
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$ |
.06 |
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$ |
(4.70 |
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$ |
.21 |
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See accompanying notes to condensed consolidated financial statements.
4
Summa Industries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six months ended |
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Six months ended |
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Operating activities: |
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Net income (loss) |
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$ |
(20,501,000 |
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$ |
1,283,000 |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation |
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2,385,000 |
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2,288,000 |
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Amortization |
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122,000 |
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124,000 |
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Cumulative effect of a change in accounting principle, net of tax |
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22,343,000 |
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— |
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(Gain) on disposition of property, plant and equipment |
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(15,000 |
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(2,000 |
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Net change in assets and liabilities, net of effects of acquisitions: |
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Accounts receivable |
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309,000 |
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(1,940,000 |
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Inventories |
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385,000 |
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(1,318,000 |
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Prepaid expenses and other assets |
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(59,000 |
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(354,000 |
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Accounts payable |
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(970,000 |
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569,000 |
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Accrued liabilities |
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(569,000 |
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(597,000 |
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Total adjustments |
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23,931,000 |
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(1,230,000 |
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Net cash provided by operating activities |
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3,430,000 |
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53,000 |
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Investing activities: |
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Acquisition of business |
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— |
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(1,903,000 |
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Purchases of property and equipment |
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(2,335,000 |
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(2,707,000 |
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Proceeds from sale of property and equipment |
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16,000 |
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2,000 |
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Net cash (used in) investing activities |
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(2,319,000 |
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(4,608,000 |
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Financing activities: |
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Net proceeds from line of credit |
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1,490,000 |
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4,943,000 |
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Proceeds from issuance of long-term debt |
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— |
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5,000,000 |
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Payments on long-term debt |
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(2,617,000 |
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(6,130,000 |
) |
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Proceeds from the exercise of stock options |
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263,000 |
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526,000 |
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Purchase of common stock |
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(475,000 |
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(17,000 |
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Net cash provided by (used in) financing activities |
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(1,339,000 |
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4,322,000 |
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Net (decrease) in cash and cash equivalents |
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(228,000 |
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(233,000 |
) |
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Cash and cash equivalents, beginning of period |
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690,000 |
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380,000 |
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Cash and cash equivalents, end of period |
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$ |
462,000 |
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$ |
147,000 |
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See accompanying notes to condensed consolidated financial statements.
5
Summa Industries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2004
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Summa Industries (the “Company”) have been condensed in certain respects and should, therefor, be read in conjunction with the audited consolidated financial statements and notes related thereto contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2003. Certain prior year amounts have been reclassified in the accompanying financial statements to conform with current year presentations. In the opinion of the Company, these financial statements contain all adjustments necessary for a fair presentation for the interim period, all of which were normal recurring adjustments. The results of operations for the three months and six months ended February 29, 2004 are not necessarily indicative of the results to be expected for the full year ending August 31, 2004.
Recent accounting pronouncements
The Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”), as of September 1, 2003. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003, and otherwise are effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 did not have any effect on the Company’s financial position or results of operations.
2. Inventories
Inventories were as follows:
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February 28, 2003 |
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August 31, 2003 |
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February 29, 2004 |
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Finished goods |
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$ |
4,942,000 |
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$ |
4,266,000 |
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$ |
5,658,000 |
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Work in process |
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369,000 |
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515,000 |
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380,000 |
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Materials and parts |
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6,617,000 |
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6,864,000 |
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7,790,000 |
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$ |
11,928,000 |
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$ |
11,645,000 |
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$ |
13,828,000 |
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3. Cumulative effect of a change in accounting principle
The Company adopted FASB Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), effective September 1, 2002. As a result, the Company discontinued the amortization of goodwill. SFAS 142 also requires the Company to assess the recoverability of recorded goodwill at the adoption date. Impairments of goodwill that are identified as a result of the assessment, if any, are to be reported as a cumulative change in accounting principle as of the adoption date. SFAS 142 requires that the initial assessment be completed within six months of the date of adoption and the impairment, if any, be reported retroactively to the beginning of the year of adoption.
The Company performed a transitional fair value based impairment test on its goodwill as of September 1, 2002. As a result, an impairment charge of $22,343,000 was recorded as of September 1, 2002. The charge is presented as the cumulative effect of a change in accounting principle in the accompanying condensed consolidated statements of operations. The charge is net of an income tax benefit of $4,812,000.
4. Earnings per share
Basic earnings per share (“EPS”) was computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. The Company has 5,000 shares of redeemable convertible preferred stock outstanding with an original issue price of $5,000,000. No dividends are required to be paid on the stock, but the preferred stockholders have the right, provided the preferred stock has not been converted to common shares, to require the Company to repurchase the stock during a one year period beginning December 14, 2004 at an
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aggregate price which increases daily from $7,025,000 on December 14, 2004 to $7,868,000 on December 13, 2005. The net income available to common stockholders used in the EPS calculations is the net income less the reported accretion in the value of the preferred stock for that period.
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted EPS, before cumulative effect of a change in accounting principle, was calculated using the “treasury stock” method as if dilutive options had been exercised and the funds were used to purchase common shares at the average market price during the period. Options to purchase 600,837 common shares as of February 28, 2003 and 489,481 common shares as of February 29, 2004 were excluded from the calculation of equivalent shares, as they would have been anti-dilutive. The 5,000 shares of outstanding preferred stock, convertible into 625,000 shares of common stock, were excluded from the calculation of equivalent shares for the three month and six month periods ended February 28, 2003 and February 29, 2004, as they would have been anti-dilutive. Diluted EPS after cumulative effect of a change in accounting principle, for the six month period ended February 28, 2003, excludes common stock equivalents, as they would have been anti-dilutive.
The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for “income available to common stockholders” and other disclosures required by FASB Statement of Accounting Standards No. 128, “Earnings per Share”:
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Three months ended |
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Six months ended |
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Feb 28, 2003 |
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Feb 29, 2004 |
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Feb 28, 2003 |
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Feb 29, 2004 |
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Numerators: |
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Before cumulative effect of a change in accounting principle: |
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Income |
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$ |
687,000 |
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$ |
453,000 |
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$ |
1,842,000 |
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$ |
1,283,000 |
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Preferred stock accretion |
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(185,000 |
) |
(185,000 |
) |
(369,000 |
) |
(369,000 |
) |
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Income available to common stockholders |
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$ |
502,000 |
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$ |
268,000 |
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$ |
1,473,000 |
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$ |
914,000 |
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After cumulative effect of a change in accounting principle: |
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Net income (loss) |
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$ |
687,000 |
|
$ |
453,000 |
|
$ |
(20,501,000 |
) |
$ |
1,283,000 |
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|
Preferred stock accretion |
|
(185,000 |
) |
(185,000 |
) |
(369,000 |
) |
(369,000 |
) |
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Income (loss) available to common stockholders |
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$ |
502,000 |
|
$ |
268,000 |
|
$ |
(20,870,000 |
) |
$ |
914,000 |
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Denominators: |
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Weighted average shares outstanding – basic |
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4,450,000 |
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4,370,000 |
|
4,444,000 |
|
4,328,000 |
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Impact of common shares assumed to be issued under stock option plans |
|
106,000 |
|
80,000 |
|
110,000 |
|
75,000 |
|
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Weighted average shares outstanding – diluted |
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4,556,000 |
|
4,450,000 |
|
4,554,000 |
|
4,403,000 |
|
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5. Stock-based compensation plans
The Company accounts for stock options issued to employees and directors in accordance with the recognition and measurement principles of Accounting Principles Board Opinion No. 25 and Financial Interpretation No. 44. Consequently, no compensation expense was recognized for the Company’s stock option plans. The following table illustrates the effect on net earnings and net earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”. The fair value estimate was computed using the Black-Scholes option pricing model.
7
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Three months ended |
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Six months ended |
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Feb 28, 2003 |
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Feb 29, 2004 |
|
Feb 28, 2003 |
|
Feb 29, 2004 |
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Before cumulative effect of a change in accounting principle |
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|
|
|
|
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|
||||
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Income available to stockholders |
|
$ |
502,000 |
|
$ |
268,000 |
|
$ |
1,473,000 |
|
$ |
914,000 |
|
|
Pro forma impact of expensing stock options |
|
(77,000 |
) |
10,000 |
|
(99,000 |
) |
(20,000 |
) |
||||
|
Pro forma income available to common stockholders |
|
$ |
425,000 |
|
$ |
278,000 |
|
$ |
1,374,000 |
|
$ |
894,000 |
|
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||||
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Earnings per share: |
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|
||||
|
As reported: |
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|
|
|
|
|
|
||||
|
Basic |
|
$ |
.11 |
|
$ |
.06 |
|
$ |
.33 |
|
$ |
.21 |
|
|
Diluted |
|
$ |
.11 |
|
$ |
.06 |
|
$ |
.32 |
|
$ |
.21 |
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|
|
|
|
|
|
||||
|
Pro forma: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
.10 |
|
$ |
.06 |
|
$ |
.31 |
|
$ |
.21 |
|
|
Diluted |
|
$ |
.09 |
|
$ |
.06 |
|
$ |
.30 |
|
$ |
.20 |
|
6. Supplemental cash flow information
|
|
|
Six months ended |
|
||||
|
|
|
Feb 28, 2003 |
|
Feb 29, 2004 |
|
||
|
Cash paid during the period: |
|
|
|
|
|
||
|
Interest |
|
$ |
765,000 |
|
$ |
923,000 |
|
|
Income taxes |
|
$ |
1,652,000 |
|
$ |
664,000 |
|
|
Non-cash financing activity: |
|
|
|
|
|
||
|
Common stock issued to 401(k) Plan |
|
$ |
429,000 |
|
$ |
345,000 |
|
|
Minority interest in subsidiary given as partial consideration for land and building |
|
— |
|
$ |
205,000 |
|
|
7. Refinancing of indebtedness
During the quarter, the Company refinanced its bank revolving line of credit and bank term loan with a new bank. The former revolving line of credit and bank term loan were paid and replaced with a new line of credit of up to $25,000,000 and a five-year term loan with a fixed interest rate of 4.7%.
8. Segment Information
Summa manufactures diverse plastic products in five reportable segments as described below:
Optical Components. In its Optical Components segment, Summa designs and manufactures plastic prismatic lenses, refractors and reflectors and other plastic products, which are used in commercial and industrial lighting fixtures, display, signage, architectural and other applications.
Material Handling Components. In its Material Handling Components segment, Summa designs and manufactures engineered plastic components, which form conveyer belts and chains and other plastic products for use in food processing.
Electrical Components. In its Electrical Components segment, Summa designs and manufactures thermoplastic coil forms or “bobbins” and other plastic products used principally in the manufacture of magnetic devices such as transformers, relays, switches, power supplies and small electric motors.
Irrigation Components. In its Irrigation Components segment, Summa designs and manufactures plastic injection-molded fittings, valves, filters and accessories, extruded tubing and other plastic products for drip irrigation systems used in agriculture, commercial landscape and other applications.
8
Miscellaneous Plastic Components. In its Miscellaneous Plastic Components segment, Summa designs and manufactures plastic injection-molded products for diverse industrial and commercial applications. This segment also manufactures products for other Summa segments.
Financial information by reportable business segment is reported in the following tables:
|
|
|
Three months ended |
|
Six months ended |
|
||||||||
|
|
|
Feb 28, 2003 |
|
Feb 29, 2004 |
|
Feb 28, 2003 |
|
Feb 29, 2004 |
|
||||
|
External sales |
|
|
|
|
|
|
|
|
|
||||
|
Optical components |
|
$ |
14,297,000 |
|
$ |
12,714,000 |
|
$ |
30,412,000 |
|
$ |
26,306,000 |
|
|
Material handling components |
|
6,613,000 |
|
6,511,000 |
|
12,474,000 |
|
12,404,000 |
|
||||
|
Electrical components |
|
2,973,000 |
|
2,859,000 |
|
6,247,000 |
|
5,720,000 |
|
||||
|
Irrigation components |
|
3,348,000 |
|
4,245,000 |
|
6,108,000 |
|
7,516,000 |
|
||||
|
Miscellaneous plastic components |
|
331,000 |
|
216,000 |
|
869,000 |
|
525,000 |
|
||||
|
Other |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Consolidated |
|
$ |
27,562,000 |
|
$ |
26,545,000 |
|
$ |
56,110,000 |
|
$ |
52,471,000 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Inter-segment sales |
|
|
|
|
|
|
|
|
|
||||
|
Optical components |
|
$ |
— |
|
$ |
678,000 |
|
$ |
— |
|
$ |
1,124,000 |
|
|
Material handling components |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Electrical components |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Irrigation components |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Miscellaneous plastic components |
|
873,000 |
|
451,000 |
|
1,525,000 |
|
1,249,000 |
|
||||
|
Other |
|
(873,000 |
) |
(1,129,000 |
) |
(1,525,000 |
) |
(2,373,000 |
) |
||||
|
Consolidated |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total sales |
|
|
|
|
|
|
|
|
|
||||
|
Optical components |
|
$ |
14,297,000 |
|
$ |
13,392,000 |
|
$ |
30,412,000 |
|
$ |
27,430,000 |
|
|
Material handling components |
|
6,613,000 |
|
6,511,000 |
|
12,474,000 |
|
12,404,000 |
|
||||
|
Electrical components |
|
2,973,000 |
|
2,859,000 |
|
6,247,000 |
|
5,720,000 |
|
||||
|
Irrigation components |
|
3,348,000 |
|
4,245,000 |
|
6,108,000 |
|
7,516,000 |
|
||||
|
Miscellaneous plastic components |
|
1,204,000 |
|
667,000 |
|
2,394,000 |
|
1,774,000 |
|
||||
|
Other |
|
(873,000 |
) |
(1,129,000 |
) |
(1,525,000 |
) |
(2,373,000 |
) |
||||
|
Consolidated |
|
$ |
27,562,000 |
|
$ |
26,545,000 |
|
$ |
56,110,000 |
|
$ |
52,471,000 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
||||
|
Optical components |
|
$ |
1,427,000 |
|
$ |
1,462,000 |
|
$ |
3,798,000 |
|
$ |
3,270,000 |
|
|
Material handling components |
|
538,000 |
|
354,000 |
|
1,046,000 |
|
511,000 |
|
||||
|
Electrical components |
|
43,000 |
|
(16,000 |
) |
193,000 |
|
124,000 |
|
||||
|
Irrigation components |
|
151,000 |
|
278,000 |
|
82,000 |
|
334,000 |
|
||||
|
Miscellaneous plastic components |
|
(385,000 |
) |
(344,000 |
) |
(786,000 |
) |
(554,000 |
) |
||||
|
Other |
|
(393,000 |
) |
(483,000 |
) |
(793,000 |
) |
(883,000 |
) |
||||
|
Consolidated |
|
$ |
1,381,000 |
|
$ |
1,251,000 |
|
$ |
3,540,000 |
|
$ |
2,802,000 |
|
|
|
|
February
28 |
|
August 31 |
|
February
29 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Assets |
|
|
|
|
|
|
|
|||
|
Optical components |
|
$ |
30,238,000 |
|
$ |
28,228,000 |
|
$ |
28,018,000 |
|
|
Material handling components |
|
16,968,000 |
|
18,335,000 |
|
20,037,000 |
|
|||
|
Electrical components |
|
8,085,000 |
|
6,999,000 |
|
8,625,000 |
|
|||
|
Irrigation components |
|
7,967,000 |
|
7,556,000 |
|
11,316,000 |
|
|||
|
Miscellaneous plastic components |
|
3,362,000 |
|
2,941,000 |
|
1,627,000 |
|
|||
|
Other |
|
5,553,000 |
|
4,457,000 |
|
4,992,000 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Consolidated |
|
$ |
72,173,000 |
|
$ |
68,516,000 |
|
$ |
74,615,000 |
|
9
Operating income is the measure of profit or loss reported by segment as interest expense and income taxes are not fully allocated by segment. “Other” includes inter-company eliminations and corporate and other expenses not allocated by segment. The impairment charge described in Note 3 to these interim financial statements was comprised of the following charges by segment: $5,953,000 in Optical Components, $7,851,000 in Electrical Components, $6,831,000 in Irrigation Components and $1,708,000 in Miscellaneous Plastic Components.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this Quarterly Report on Form 10-Q, which are not purely historical, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including but not limited to statements regarding Summa’s expectations, hopes, beliefs, intentions or strategies regarding the future, such as those set forth in Part II, Item 1 “Legal Proceedings” below. Actual results could differ materially from those projected in any forward-looking statements as a result of a number of factors, including those detailed in this “Management’s Discussion and Analysis” section and elsewhere herein and in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003. The forward-looking statements are made as of the date hereof, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ materially from those projected in the forward-looking statements. For a discussion of risks and uncertainties that should be considered and which could materially adversely affect the Company, please see “Risk Factors” in the “Management Discussion and Analysis” section of the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003.
Summa manufactures plastic products for diverse commercial and industrial markets. Through its five reportable segments, Summa designs and manufactures injection-molded and formed plastic optical components for OEM customers in the lighting industry; modular plastic conveyor belt and chain for the food processing industry; engineered plastic fittings, valves, filters and tubing for irrigation systems used in agriculture, commercial landscape and other applications; molded plastic coil forms (“bobbins”) for use in transformers, motors, relays and switches; and other molded and extruded plastic components for diverse industries.
Recent Events
Asset Acquisition. During the quarter, Summa acquired certain assets from the Micro-irrigation division of R.M. Wade & Co. (“Wade”), including the product brand “Pepco” and transitional rights to the product brand “Wade Rain”. Pepco is a brand of products for commercial landscape irrigation and Wade Rain is a brand of products used in agricultural irrigation. The acquisition is expected to add about $5 million in sales to the Irrigation Components segment. Pursuant to the agreement, Summa will supply products to Wade for use in leach mining applications. Summa has assumed operation of the Wade injection molding and extrusion facility in Fresno, California, which is in the center of the California agriculture market. Consideration for the assets was approximately $2 million. The purchase price was allocated primarily to inventory and to machinery and equipment based upon their fair values at the date of acquisition. The pro forma results of operations for the prior year would not have been materially different, if the acquisition had been made as of the beginning of the prior year. Summa expects the acquisition to be accretive to earnings per share by the third quarter of the current fiscal year.
Texas-Mexico Development. During the quarter, Summa entered into a comprehensive relationship with Mr. David Frye of Longview, Texas to collaborate on the implementation of a new proprietary injection molding process at a facility in Pharr, Texas, in the greater McAllen/Reynosa cross-border metropolitan area. This process was developed to enable the Electrical Components segment to reduce lead-times to most of its North American customers and provide more flexibility in selection of materials and lot sizes, while dramatically increasing quality. The location will also enable the Company to more easily serve its customers with operations in Northeast Mexico and Southeast Texas. As part of this transaction, the Electrical Components segment purchased the Pharr plastic molding plant from Mr. Frye, and he purchased approximately five percent of that segment. Mr. Frye agreed to provide technical services to Summa under a long-term agreement. The Company intends to invest about $4 million for new, state-of-the-art, automated systems for the plant.
Settlement of Infringement Litigations. During the quarter, Summa entered into confidential agreements with Cooper Industries (NYSE:CBE) and Grandlite International Corporation to settle two patent infringement lawsuits filed by the Optical Components segment. Under the agreements, the parties acknowledged the validity of certain of Summa’s intellectual property and agreed to certain on-going business relationships.
Refinancing of Indebtedness. During the quarter, Summa entered into a new comprehensive banking relationship with
10
Wells Fargo Bank, National Association, to replace the previously existing relationship with Comerica Bank – California. For further information, see “Liquidity and Capital Resources – Financing Arrangements” below.
Results of Operations
The following table sets forth certain information, derived from Summa’s unaudited condensed consolidated statements of operations, as a percent of sales for the three month and six month periods ended February 28, 2003 and February 29, 2004, and the Company’s effective income tax rate during those periods:
|
|
|
Three months ended |
|
Six months ended |
|
||||
|
|
|
Feb 28, 2003 |
|
Feb 29, 2004 |
|
Feb 28, 2003 |
|
Feb 29, 2004 |
|
|
Net sales |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
|
Cost of sales |
|
75.6 |
% |
76.3 |
% |
74.8 |
% |
75.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
24.4 |
% |
23.7 |
% |
25.2 |
% |
24.1 |
% |
|
S,G & A and other expenses, net |
|
19.4 |
% |
19.0 |
% |
18.9 |
% |
18.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
5.0 |
% |
4.7 |
% |
6.3 |
% |
5.3 |
% |
|
Interest expense, net |
|
1.3 |
% |
2.2 |
% |
1.4 |
% |
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Income before tax and cumulative effect of a change in accounting principle |
|
3.7 |
% |
2.5 |
% |
4.9 |
% |
3.6 |
% |
|
Provision for income taxes |
|
1.2 |
% |
0.8 |
% |
1.6 |
% |
1.2 |
% |
|
Income before cumulative effect of a change in accounting principle |
|
2.5 |
% |
1.7 |
% |
3.3 |
% |
2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
31.8 |
% |
32.1 |
% |
33.3 |
% |
32.9 |
% |
As has been previously discussed in press releases and in the Company’s Annual Report on Form 10-K for the period ended August 31, 2003 and it’s Quarterly Report on Form 10-Q for the period ended November 30, 2003, sales in the Company’s Optical Components segment were lower over the past 12 months, in part due to the manufacture of products by certain customers which Summa deemed to infringe on its intellectual property related to its Reflexor® brand prismatic reflector products. During the quarter ended February 29, 2004, the Company settled it lawsuits with the two customers and has resumed manufacturing and selling reflectors to those customers. While the Company expects an increase of sales in future quarters as a result, the sales will be at lower price levels and, as part of a previously announced strategy, the Company is offering lower priced substitute products and lowering its prices on certain patented products to discourage similar future competition. While it is not possible to quantify the sales previously lost, nor to accurately predict the effects of lower prices in the future, the resolution of these lawsuits was considered by management to be a favorable and significant development. Litigation expense related to this matter was approximately $260,000, incurred evenly over the last four quarters.
Sales for the second quarter ended February 29, 2004 decreased $1,017,000, or 4%, compared to the same period in the prior year, despite the inclusion of sales of $573,000 from recently acquired operations in the Irrigation Components Segment for one and a half months, primarily due to general economic conditions. Same business sales in the second quarter were about 6% lower than in the second quarter of the prior fiscal year. Sales decreased 11% in the Optical Components segment, primarily due to weakness in the commercial/industrial lighting sector, loss of some contract manufacturing work to competitors due to price, lower sales of certain patented products due to increased sales of products deemed by the Company to be infringing on its intellectual property, reduced prices on continuing business and the transfer of production to Asia by certain customers, partially offset by sales of new products; decreased 4% in the Electrical Components segment, primarily due to the loss of business from a major customer which transferred its operations to China and competitive price pressure; increased 27% in the Irrigation Components segment, primarily due to the inclusion of sales of recently acquired operations, recaptured market share from certain major customers and improved market conditions; and decreased 35% in the Miscellaneous Plastic Components segment, primarily due to the loss of a customer which is now procuring its molded products from China and the shift toward inter-segment sales. The Company has adopted a plan to phase out the Miscellaneous Plastics Components segment, the assets and operations of which will be absorbed by the Irrigation Components segment.
Sales for the six months ended February 29, 2004 decreased $3,639,000, or 6%, compared to the same period in the prior year, primarily due to the general market conditions. Same business unit sales in the period decreased 8%, compared to
11
the first six months of fiscal 2003. Sales decreased 14% in the Optical Components segment, primarily due to weakness in the commercial/industrial lighting sector, loss of some contract manufacturing work to competitors due to price, lower sales of certain patented products due to increased sales of products deemed by the Company to be infringing on its intellectual property, reduced prices on continuing business and the transfer of production to Asia by certain customers, partially offset by sales of new products; decreased 8% in the Electrical Components segment, primarily due to the loss of business from a major customer which transferred its operations to China and competitive price pressure; increased 23% in the Irrigation Components segment, primarily due to recaptured market share from certain major customers, the inclusion of sales of recently acquired operations and improved market conditions; and decreased 40% in the Miscellaneous Plastic Components segment, primarily due to the loss of a customer which is now procuring its molded products from China and the shift toward inter-segment sales.
Gross profit for the second quarter decreased $440,000, or 7%, from the comparable prior year period, primarily due to lower sales and inefficiencies related to a plant consolidation. Gross margin decreased from 24.4% to 23.7% primarily due to the effects of lower sales volume, inefficiencies related to a plant consolidation and generally lower selling prices due to competitive price pressure.
Gross profit for the six months ended February 29, 2004 decreased $1,493,000, or 11%, from the comparable prior year period, primarily due to lower sales and inefficiencies related to a plant consolidation. Gross margin decreased from 25.2% to 24.1%, primarily due to the effects of lower sales volume, inefficiencies related to a plant consolidation and generally lower selling prices due to competitive price pressure.
Operating expenses for the second quarter decreased $310,000, or 6%, from the comparable prior year period, despite the inclusion of operating expenses of newly acquired operations, primarily due to non-recurring facility consolidation expenses included in the second quarter of fiscal 2003, management cost reduction initiatives and lower variable selling expenses resulting from lower sales. As a percent of sales, operating expenses decreased from 19.4% to 19.0%.
Operating expenses for the six months ended February 29, 2004 decreased $755,000, or 7%, from the comparable prior year period, despite the inclusion of operating expenses of newly acquired operations, primarily due to non-recurring facility consolidation expenses included in the prior year period, management cost reduction initiatives and lower variable selling expenses resulting from lower sales. As a percent of sales, operating expenses decreased slightly from 18.9% to 18.8%.
Operating income for the second quarter was $1,251,000, which was $130,000, or 9%, lower than in the comparable prior year period. By segment, operating income increased $35,000 in the Optical Components segment, due primarily to favorable product mix on lower sales; decreased $184,000 in the Material Handling Components segment, primarily due to inefficiencies related to a plant consolidation; decreased $59,000 to a loss of ($16,000) in the Electrical Components segment, primarily due to decreased sales and continuing pricing pressures; increased $127,000 in the Irrigation Components segment, primarily due to the effects of higher sales volume; and the operating loss was $41,000 less in the Miscellaneous Plastic Components segment, primarily due to cost reductions initiatives. Operating margin for the quarter decreased to 4.7% from 5.0% in the second quarter of fiscal 2003, due to the factors discussed above.
Operating income for the six months ended February 29, 2004 was $2,802,000, which was $738,000, or 21%, lower than in the comparable prior year period. By segment, operating income decreased $528,000 in the Optical Components segment, due primarily to lower volumes and lower prices; decreased $535,000 in the Material Handling Components segment, primarily due to inefficiencies related to a plant consolidation; decreased $69,000 in the Electrical Components segment primarily due to lower volume; increased $252,000 in the Irrigation Components segment, primarily due to the effects of higher sales volume; and the operating loss was $232,000 lower in the Miscellaneous Plastic Components segment, primarily due to cost reduction initiatives. Operating margin decreased from 6.3% in the six months ended February 28, 2003 to 5.3% in the six months ended February 29, 2004, due to the factors discussed above.
Net interest expense for the second quarter ended February 29, 2004 increased $211,000 from the prior year second quarter, due to term loan break-up fees and the write-off of unamortized bank fees resulting in a non-recurring charge of $266,000, related to refinancing of bank debt, partially offset by decreased interest rates. Net interest expense for the six months ended February 29, 2004 increased $111,000 from the comparable prior year period due to term loan break-up fees and the write-off of unamortized bank fees resulting in a non-recurring charge of $266,000, related to refinancing of bank debt, partially offset by decreased interest rates.
The Company’s backlog of unfilled orders, believed to be firm, was $9,058,000 at February 28, 2003, $7,892,000 at August 31, 2003 and $8,134,000 at February 29, 2004. Because the time between entering an order and shipping the product and
12
recording a sale is typically shorter than one month, backlog levels are not a reliable indicator of future sales volume.
Liquidity and Capital Resources
Working Capital. The Company’s working capital was $17,873,000 at February 28, 2003; $16,251,000 at August 31, 2003 and $22,560,000 at February 29, 2004. Working capital at February 29, 2004 was $6,309,000 greater than at August 31, 2003, primarily due to a seasonal increase in accounts receivable, the refinancing of a term loan which reduced the current portion of term debt, an increase in inventory in anticipation of increased sales, and a bulk purchase of inventory as part of the Fresno acquisition. Working capital at February 29, 2004 was $4,687,000 greater than at February 28, 2003, primarily due to the refinancing of a term loan which reduced the current portion of term debt, an increase in inventory in anticipation of increased sales, and a bulk purchase of inventory as part of the Fresno acquisition.
Summary of the Company’s debt at February 29, 2004:
|
|
|
|
|
Weighted |
|
|
|
Fiscal Year Due |
|
|||||||||||||||
|
Description of Debt |
|
Balance |
|
Interest |
|
Additional |
|
2004 |
|
2005 |
|
2006 |
|
2007 |
|
2008 and |
|
|||||||
|
Revolving line of credit |
|
$ |
9,700,000 |
|
2.6 |
% |
$ |
12,344,000 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
9,700,000 |
|
$ |
— |
|
|
Bank term loan |
|
5,000,000 |
|
4.7 |
% |
— |
|
463,000 |
|
926,000 |
|
971,000 |
|
1,019,000 |
|
1,621,000 |
|
|||||||
|
Real estate and other loans |
|
9,228,000 |
|
3.5 |
% |
— |
|
757,000 |
|
911,000 |
|
3,808,000 |
|
3,411,000 |
|
341,000 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Total debt |
|
$ |
23,928,000 |
|
3.4 |
% |
$ |
12,344,000 |
|
$ |
1,220,000 |
|
$ |
1,837,000 |
|
$ |
4,779,000 |
|
$ |
14,130,000 |
|
$ |
1,962,000 |
|
The interest rate on the bank term loan is fixed for five years. Interest rates on the bank line of credit are subject to market fluctuation and are subject to reduction as the Company achieves certain financial milestones. Interest rates on most of the real estate and other loans are subject to market fluctuation.
In June 2003, the Company announced a plan to repurchase up to $2,000,000 of its common stock with no time limit (the “2003 Buy Back”). As of February 29, 2004, the status of the 2003 Buy Back was as follows:
|
|
|
Shares |
|
Average |
|
Repurchase |
|
||
|
Prior to December 2003 |
|
5,347 |
|
$ |
7.15 |
|
$ |
38,000 |
|
|
December 2003 |
|
1,000 |
|
$ |
8.95 |
|
9,000 |
|
|
|
January 2004 |
|
— |
|
— |
|
— |
|
||
|
February 2004 |
|
850 |
|
$ |
9.47 |
|
8,000 |
|
|
|
Total |
|
7,197 |
|
$ |
7.44 |
|
$ |
55,000 |
|
|
|
|
|
|
|
|
|
|
||
|
Remaining authorization for repurchase |
|
|
|
|
|
$ |
1,945,000 |
|
|
The cost per share includes commissions where applicable. All share repurchases in the reported period were made pursuant to the 2003 Buy Back.
Sources and Uses of Funds. Net cash provided by operating activities in the first six months of fiscal 2004 was $53,000, $3,377,000 less than in the first six months of fiscal 2003, primarily due to increases in accounts receivables and inventory and lower income before a non-cash charge for a cumulative effect of a change in accounting principle. Net cash used in investing activities was $4,608,000 in the first six months of fiscal 2004, $2,289,000 more than in the first quarter of fiscal 2003, primarily due to a business acquisition. Net cash of $4,322,000 was provided by financing activities in the quarter ended February 29, 2004, primarily from additional borrowing, versus $1,339,000 used in the comparable prior year period.
Summa believes that cash flows from operations and existing credit facilities will be sufficient to fund working capital requirements, planned investments and debt service for the next twelve months. The Company has a strategy of growth
13
by acquisition. In the event an acquisition plan is adopted which requires funds exceeding the availability described above, an alternate source of funds to accomplish the acquisition would have to be developed. The Company has 10,000,000 shares of common stock authorized, of which 4,378,030 shares were outstanding at February 29, 2004 and 5,000,000 shares of “blank check” preferred stock authorized, of which 5,000 shares were outstanding as mandatorily redeemable convertible preferred stock at February 29, 2004. The Company could issue additional shares of common or preferred stock or enter into new or revised borrowing arrangements to raise funds.
The Company’s material off-balance sheet arrangements are as follows:
Future lease payments. The Company leases offices and manufacturing facilities and certain equipment under non-cancelable operating leases. Future payments under these leases at February 29, 2004 are approximately as follows:
|
Fiscal Year |
|
Amount |
|
|
|
2004 |
|
$ |
845,000 |
|
|
2005 |
|
$ |
1,202,000 |
|
|
2006 |
|
$ |
932,000 |
|
|
2007 |
|
$ |
502,000 |
|
|
2008 |
|
$ |
451,000 |
|
|
2009 and thereafter |
|
$ |
421,000 |
|
In recent years the Company has consolidated and/or abandoned several facilities in an effort to improve efficiencies and operating results, and plans further consolidations. In the event the Company were to abandon a facility prior to its being leased to a new tenant, the Company could become obligated for accelerated lease payments or other expenses.
Contingent preferred stock redemption obligation. In December 2001, in order to finance an acquisition, reduce outstanding debt and strengthen the Company’s financial position, the Company issued and sold 5,000 shares of newly-authorized Series A Preferred Stock (the “Preferred Stock”) in a private sale for an aggregate purchase price of $5,000,000. The terms of the Preferred Stock were negotiated at arms length, including (i) non-voting, (ii) no dividend, (iii) liquidation preference, (iv) convertible into an aggregate of 625,000 shares of common stock, (v) redeemable by the holder’s election commencing on the third anniversary of the date of issuance and ending immediately prior to the fourth anniversary at a price which equals a twelve percent annual increase over the original issuance price in cash, subject to adjustment, (vi) redeemable at the Company’s option commencing on the fourth anniversary of the date of issuance and ending immediately prior to the fifth anniversary at a price which equals a twenty percent annual increase over the original issuance price in cash, subject to adjustment, and (vii) if outstanding, redeemable on the fifth anniversary of the date of issuance by the Company at the original issuance price, subject to adjustment. If redemption is elected by the holder of the Preferred Stock during the one-year time period referenced above, the contingent preferred stock redemption obligation would require the Company to pay an aggregate price which increases daily from $7,025,000 on December 14, 2004 to $7,868,000 on December 13, 2005. For related disclosure regarding accretion of the preferred stock to its redemption value, see Note 4 in the “Notes to Condensed Consolidated Financial Statements” above.
The above discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements of the Company, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions in applying certain critical accounting policies. Certain accounting estimates are particularly sensitive because of their significance to the Company’s consolidated financial statements and because of the possibility that future events affecting the estimates could differ markedly from current expectations. The Company believes that the following are some of the more critical judgment areas in the application of its accounting policies that affect the Company’s financial statements:
14
The Company has a significant amount of property and equipment and intangible assets. The determination as to whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable involves management’s judgment. In addition, should the Company conclude that recoverability of an asset is in question, the estimate of undiscounted future operating cash flows to determine whether an asset is recoverable and, if not, the final determination of the fair value of the asset are also based on the judgment of management. These judgments can be impacted by a variety of underlying assumptions, such as the general business climate, effectiveness of competition and supply and cost of resources. Accordingly, actual results can differ significantly from the assumptions made by management in making its estimates. Future changes in management’s estimates could result in indicators of impairment and future impairment charges.
Accounting standards adopted by the Company effective September 1, 2002 required that the Company perform a transitional fair value based impairment test for goodwill and required that goodwill be valued at the lower of carrying value or fair value. For a summary of the impairment charge to goodwill taken by the Company effective September 1, 2002, see Note 3 in the “Notes to Condensed Consolidated Financial Statements”. The Company reviews goodwill for impairment annually in the fourth quarter. Significant management judgment is involved in determining the fair value of assets. Future changes in management’s estimates could result in additional impairment charges to goodwill.
Accounts Receivable. The Company performs ongoing evaluations of customers and adjusts credit limits based upon each customer’s payment history and credit worthiness, as determined by credit information available at that time. The Company monitors collections and payments from customers and maintains allowances for doubtful accounts for the inability of customers to make required payments. If the financial condition of customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances may be required.
Accounting for Stock Options. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by SFAS 148, allows entities to continue to apply the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and provide pro forma income and pro forma earnings per share disclosures for stock-based awards as if the fair-value based method defined in SFAS 123 had been applied. In accordance with APB Opinion No. 25, and related interpretations, compensation expense would generally be recorded for fixed option grants only if, on the date of the grant, the current price of the underlying stock exceeded the exercise price. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS 123. Accordingly, no compensation expense has been recorded for the issuance of options to employees or non-employee directors.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except for the outstanding debt and related variable interest rates set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” above, there are no material changes to the disclosure set forth in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003. The Company has no market risk sensitive instruments entered into for trading purposes.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a – 14 and 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls that could significantly affect these controls subsequent to the date of their evaluation.
16
PART II - OTHER INFORMATION
The Company encounters lawsuits from time to time in the ordinary course of business and, at February 29, 2004, the Company and/or its affiliates were parties to several civil lawsuits. Summa does not expect that the resolution of these lawsuits will have a material adverse impact on future results of operations or financial position. Certain lawsuits filed against the Company from time to time contain claims not covered by insurance, or seek damages in excess of policy limits, and such claims could be filed in the future. The Company may file patent infringement and/or other types of lawsuits in the future which may result in materially increased costs and other adverse consequences. Any costs and/or losses that Summa may suffer from such lawsuits, and the effect such litigation may have upon the reputation and marketability of Summa’s products, could have a material adverse impact on the future results of operations, financial condition and/or prospects of the Company.
None.
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company’s Annual Meeting of Stockholders held on January 13, 2004, incumbent directors Michael L. Horst and William R. Zimmerman were re-elected to the Board of Directors of the Company to serve as one Class of the Board of Directors for a three year term and until their successors are elected and qualified. Messr. Horst received 3,954,284 votes in his favor, with 78,670 votes withheld, and Messr. Zimmerman received 3,934,004 votes in his favor, with 98,950 votes withheld. There were no broker non-votes. Incumbent directors David McConaughy, James R. Swartwout, Josh T. Barnes, Jack L. Watts and Charles A. Tourville are members of two additional Classes of the Board of Directors, and their terms of office continued after the Annual Meeting.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Asset Purchase Agreement dated January 15, 2004 between Central Valley Manufacturing, Inc., a newly-formed California corporation and wholly-owned subsidiary of the Company (“Buyer”), and R.M. Wade & Co., an Oregon corporation (“Seller”), relating to the purchase of certain assets of the micro irrigation division of Seller by Buyer
10.1 Credit Agreement dated February 20, 2004 between the Company and Wells Fargo Bank, National Association
31.1 Section 302 Certification
32.1 Section 906 Certification
(b) Current Reports on Form 8-K
Form 8-K dated December 23, 2003 regarding the Company’s results of operations and financial condition for the fiscal first quarter ended November 30, 2003
17
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on April 7, 2004.
|
Summa Industries |
|||
|
|
|
||
|
/s/ James R. Swartwout |
|
/s/ Trygve M. Thoresen |
|
|
James R. Swartwout |
Trygve M. Thoresen |
||
|
President and Chief Financial Officer |
Vice President and Secretary |
||
18