-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WbWpfZbWlvkolWswwyKdqdDOQEC0xn5bpVa4NmjE+qqbLmo+3/62ZorfE100USd1 KOEq5C8yjiuHngiTjW8FeA== 0000898430-96-001231.txt : 19960409 0000898430-96-001231.hdr.sgml : 19960409 ACCESSION NUMBER: 0000898430-96-001231 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960408 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMA INDUSTRIES INC CENTRAL INDEX KEY: 0000062262 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 951240978 STATE OF INCORPORATION: CA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07755 FILM NUMBER: 96544981 BUSINESS ADDRESS: STREET 1: 1600 W COMMONWEALTH AVE CITY: FULLERTON STATE: CA ZIP: 92633 BUSINESS PHONE: 7147385000 MAIL ADDRESS: STREET 1: 1600 W COMMONWEALTH AVE CITY: FULLERTON STATE: CA ZIP: 92633 FORMER COMPANY: FORMER CONFORMED NAME: MOREHOUSE INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MAXAD INC DATE OF NAME CHANGE: 19740304 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One)* [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended FEBRUARY 29, 1996 [_] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to ________ Commission file number 1-7755 ------------------------------------ SUMMA INDUSTRIES - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-1240978 - ------------------------------------ -------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1600 WEST COMMONWEALTH AVE, FULLERTON, CA 92633 - ------------------------------------------ ------------------------------- (Address of principal executive offices) (Zip Code) 714 738 5000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for, such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of common stock outstanding as of February 29, 1996 was 1,541,929. 1 SUMMA INDUSTRIES INDEX
Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets - February 29, 1996 (unaudited) and August 31, 1995.......................... 3 Condensed Consolidated Statements of Income (unaudited) - three months and six months ended February 29, 1996 and February 28, 1995.. 4 Condensed Consolidated Statements of Cash Flows (unaudited) - six months ended February 29, 1996 and February 28, 1995................... 5 Notes to Condensed Consolidated Financial Statements (unaudited)........... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 7,8 PART II - OTHER INFORMATION.................................................. 8,9 Signature Page............................................................. 10
2 PART I - FINANCIAL INFORMATION SUMMA INDUSTRIES CONDENSED CONSOLIDATED BALANCE SHEETS
February 29, August 31, 1996 1995 (unaudited) ------------ ------------ ASSETS Current assets: Cash $ 74,000 $ 182,000 Accounts receivable 1,484,000 1,396,000 Inventories 1,938,000 1,685,000 Prepaid expenses and other 542,000 640,000 ----------- ----------- Total current assets 4,038,000 3,903,000 Property, plant and equipment 5,597,000 5,158,000 Less accumulated depreciation 1,797,000 1,554,000 ----------- ----------- Net property, plant and equipment 3,800,000 3,604,000 Net assets of discontinued operations 2,396,000 2,712,000 Goodwill and other intangibles, net 986,000 1,010,000 ----------- ----------- $11,220,000 $11,229,000 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving line of credit $ 622,000 $ 938,000 Accounts payable 660,000 486,000 Accrued liabilities 658,000 656,000 Current maturities of long-term debt 100,000 --- ----------- ----------- Total current liabilities 2,040,000 2,080,000 Long-term debt, deferred credits and other long term liabilities 1,137,000 1,219,000 ----------- ----------- Total liabilities 3,177,000 3,299,000 ----------- ----------- Shareholders' equity: Common stock, par value $.001; 10,000,000 shares authorized, 1,541,929 and 1,541,930 shares issued and outstanding at February 29, 1996 and August 31, 1995, respectively. 6,011,000 6,011,000 Retained earnings 2,032,000 1,919,000 ----------- ----------- Total shareholders' equity 8,043,000 7,930,000 ----------- ----------- $11,220,000 $11,229,000 =========== ===========
See accompanying notes. 3 SUMMA INDUSTRIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three months ended Six months ended ---------------------------- -------------------------------- February 29, February 28, February 29, February 28, 1996 1995 1996 1995 ------------ ------------ ------------ ---------------- Net sales $2,928,000 $2,503,000 $5,767,000 $4,879,000 Cost of sales 1,589,000 1,394,000 3,149,000 2,702,000 ---------- ---------- ---------- ---------- Gross profit 1,339,000 1,109,000 2,618,000 2,177,000 Selling, general and administrative and other expenses 1,045,000 843,000 2,030,000 1,668,000 ---------- ---------- ---------- ---------- Income from continuing operations before provision for taxes 294,000 266,000 588,000 509,000 Provision for income taxes 137,000 118,000 254,000 246,000 ---------- ---------- ---------- ---------- Income from continuing operations 157,000 148,000 334,000 263,000 Loss from discontinued operations, net of the effect of income tax (135,000) (49,000) (221,000) (12,000) ---------- ---------- ---------- ---------- Net Income $ 22,000 $ 99,000 $ 113,000 $ 251,000 ========== ========== ========== ========== Income per common and equivalent share: Income from continuing operations $ .10 $ .10 $ .21 $ .16 Loss from discontinued operations, net of the effect of income tax (.09) (.04) (.14) .00 ---------- ---------- ---------- ---------- Net Income per common and equivalent share $ .01 $ .06 $ .07 $ .16 ========== ========== ========== ========== Weighted average shares outstanding 1,576,000 1,557,000 1,567,000 1,548,000 ========== ========== ========== ==========
See accompanying notes. 4 SUMMA INDUSTRIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended -------------------------------------- February 29, 1996 February 28, 1995 ----------------- ----------------- Operating activities: Net income $ 113,000 $ 251,000 --------- ----------- Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 389,000 349,000 Provision for doubtful accounts receivable 14,000 1,000 Provision for inventory reserves 105,000 43,000 Gain on disposition of property, plant and equipment (37,000) (13,000) Net change in assets and liabilities Accounts receivable 289,000 (460,000) Inventories 21,000 (1,162,000) Prepaid expenses and other 86,000 1,000 Accounts payable (173,000) 871,000 Accrued liabilities (162,000) 32,000 --------- ----------- Total adjustments 532,000 (338,000) --------- ----------- Net cash provided (used) by operating activities: 645,000 (87,000) --------- ----------- Investing activities: Property, plant & equipment (499,000) (389,000) Other assets --- (12,000) Proceeds from sale of equipment 62,000 20,000 --------- ----------- Net cash (used) by investing activities (437,000) (381,000) --------- ----------- Financing activities: Proceeds (payments) on line of credit (316,000) 420,000 Payment on long term contract payable --- (2,000) Principal payments under capitalized lease --- (4,000) Exercise of stock options --- 33,000 Issuance of common stock --- 24,000 --------- ----------- Net cash provided (used) by financing activities (316,000) 471,000 --------- ----------- Net increase (decrease) in cash (108,000) 3,000 Cash at beginning of period 182,000 234,000 --------- ----------- Cash at end of period $ 74,000 $ 237,000 ========= =========== Supplemental cash flow information: Cash paid during the period for: Interest payments 62,000 28,000 ========= =========== Income tax payments 119,000 423,000 ========= ===========
See accompanying notes. 5 SUMMA INDUSTRIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation The accompanying consolidated financial statements, some of which are unaudited, have been condensed in certain respects and should, therefor, be read in conjunction with the financial statements and notes related thereto contained in the Company's annual report to shareholders for the year ended August 31, 1995. In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation for the interim period. (See Note 3. below.) The results of operations for the three months and six months ended February 29, 1996 are not necessarily indicative of the results to be expected for the full year. 2. Inventories Inventories of continuing operations at February 29, 1996 and August 31, 1995 were as follows:
February 29, 1996 August 31, 1995 (unaudited) ----------------- --------------- Finished goods $ 502,000 $ 538,000 Work in process 144,000 71,000 Material and parts 1,292,000 1,076,000 ---------- ---------- $1,938,000 $1,685,000 ========== ==========
3. Discontinued Operations The Company has announced its planned divestiture of its industrial process equipment subsidiary, Morehouse-COWLES, Inc. (See Part II, Other Information.) Accordingly, this business unit is being accounted for as a discontinued operation and results of its operations are segregated in the accompanying consolidated statements of income. The assets and liabilities of discontinued operations have been classified in the consolidated balance sheets as, "Net assets of discontinued operations." Discontinued operations have not been segregated in the consolidated statements of cash flow. The components of net assets of discontinued operations included in the consolidated balance sheets at August 31, 1995 and February 29, 1996 are as follows:
February 29, 1996 August 31, 1995 ----------------- --------------- ASSETS Accounts receivable, net $ 595,000 $ 986,000 Inventory 1,993,000 2,372,000 Prepaid expenses 96,000 99,000 Property, plant and equipment, net 333,000 388,000 Goodwill and intangibles, net 280,000 297,000 ---------- ---------- Total assets 3,297,000 4,142,000 LIABILITIES Accounts payable 356,000 703,000 Accrued liabilities 545,000 727,000 ---------- ---------- Total liabilities 901,000 1,430,000 ---------- ---------- Net assets of discontinued operations $2,396,000 $2,712,000 ========== ==========
6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Net cash provided by operating activities for the six month period ended February 29, 1996 was $645,000. In the comparable prior year period, $87,000 was used by operating activities. The improved cash flows are primarily attributable to lower growth in inventories related to improved turnover and lower required tax payments. The investment in property, plant and equipment relates primarily to the acquisition of molds for new products in the material handling components business. The Company expects to continue to invest heavily in tooling for new products. In January 1996, the Company's revolving line of credit facility of $2,000,000 was extended to January 1, 1997. The line of credit is secured by all the assets of the Company. The outstanding balance bears interest at a per annum rate one- quarter percentage point above the bank's prime rate. The amount outstanding under the Company's line of credit at February 29, 1996 was $622,000, a reduction of $316,000 from the August 31, 1995 amount due. The Company believes that cash flows from operations and the available line of credit will be sufficient to fund working capital and planned capital expenditure requirements for the next twelve months. The effect on liquidity of the planned divestiture of Morehouse-COWLES, Inc. is not known, but the Company expects that liquidity will be improved. The Company has a strategy of growth by acquisition. Although there are no plans to make a specific acquisition, in the event such a plan were adopted, 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 1,541,929 shares are outstanding, and 5,000,000 shares of "blank check" preferred stock authorized of which none is outstanding. Although there are no plans to do so, the Company could issue additional shares of common or preferred stock to raise funds. Results of Operations - --------------------- The following table sets forth certain Statements of Income information as a percent of sales for the quarter and six months ended February 29, 1996 and February 28, 1995.
Three months ended Six months ended ---------------------------- ---------------------------- February 29, February 28, February 29, February 28, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Sales 100.0% 100.0% 100.0% 100.0% Gross profit 45.7% 44.3% 45.4% 44.6% S,G & A and other expense 35.7% 33.7% 35.2% 34.2% Income from continuing operations before provision for taxes 10.0% 10.6% 10.2% 10.4% Income from continuing operations 5.4% 5.9% 5.8% 5.4% ===== ===== ===== ===== Effective tax rate 46.6% 44.4% 43.2% 48.3%
Sales for the second quarter, ended February 29, 1996, increased $425,000, or 17% compared to the same period in the prior year, as a result of growth in the sales of each of the continuing businesses. Consolidated gross profit increased $230,000, or 21% primarily related to sales growth. Gross profit as a percentage of sales increased from 44% to 46% primarily due to the leveraging benefit of higher volume. Operating expenses increased $202,000, or 24% from the comparable prior year period, primarily due to expansion of sales and marketing activities in the material handling components business. Income from continuing operations for the quarter was $157,000 compared to $148,000 for the same period last year. 7 Sales of the continuing businesses for the six months ended February 29, 1996, increased $888,000, or 18% from the comparable prior year period, primarily due to increased sales in the material handling components business. Consolidated gross profits increased $441,000, or 20%, primarily related to the sales increase in the material handling components business. Operating expenses increased $362,000, or 22% from the comparable period last year and as a percentage of sales increased from 34% to 35% primarily because of expanded sales and marketing activities in the material handling components business. Income from continuing operations for the six month period was $334,000 compared to $263,000, for the same period last year, a 27% increase. The Company's backlog of the continuing businesses at February 29, 1996, believed to be firm, was $2,949,000, 9% higher than a year earlier. The amount of backlog cannot necessarily be used as an indicator of future sales volume. Sales and operating results of the discontinued business unit for the periods were as follows: ($000's omitted)
Three months ended Six months ended ----------------------------- ---------------------------- February 29, February 28, February 29, February 28, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Sales $1,921 $2,026 $3,989 $3,628 Loss from operations before income taxes (226) (93) (369) (17) Income tax benefit (91) (44) (148) (5) ------ ------ ------ ------ Net loss from discontinued operations (135) (49) (221) (12)
The Company has accrued certain expenses directly associated with the divestiture of the business unit. It is not anticipated that the Company will incur further losses from the operation of the business unit held for sale or from the sale itself, although there is currently no firm sale agreement and the timing and terms of a potential transaction are uncertain. PART II - OTHER INFORMATION Item 1. Legal proceedings - -------------------------- At February 29, 1996, the Company was a party to four civil lawsuits which are described in the report on Form 10K for the year ended August 31, 1995. Item 2. Change in Securities - ----------------------------- None. Item 3. Default upon Senior Securities - --------------------------------------- None. Item 4. Submission of matters to a vote of security holders - ------------------------------------------------------------ As reported on Form 10Q for the period ended November 30, 1995, at the Company's annual meeting of shareholders on December 14, 1995, the Company's 1995 Stock Option Plan was approved and the four director nominees were re-elected. 8 Item 5. Other Information - -------------------------- On January 30, 1996, the Company announced it had signed a letter of intent to sell its subsidiary, Morehouse-COWLES, Inc., a manufacturer of process equipment, to a privately held company. Subsequently, the negotiations with that company were terminated, and SUMMA INDUSTRIES is seeking other potential acquirors. In the last two years, SUMMA invested significantly in Morehouse, resulting in substantially increased sales but lagging profits. Although the operational issues adversely impacting profits at Morehouse-COWLES are being aggressively addressed and the long term prospects for that business are good, projected return on investment is below that of SUMMA's other businesses, leading to the decision to divest Morehouse and re-deploy the invested capital. Pro-forma earnings of the Company, restated for the last three fiscal years to reflect the planned divestiture, are:
Fiscal Years Ended August 31 ($000 omitted, except per share amounts) ----------------------------------------- 1995 1994 1993 ------------ ------------- ---------- Sales $10,247 $10,279 $5,284 Income before results of discontinued operations, extraordinary item and cumulative effect of accounting change 676 501 213 Results of discontinued operations, net of the effect of income taxes (28) 118 179 Extraordinary item, tax benefit of net operating less carryforward --- --- 321 Cumulative effect of accounting change --- 100 --- ------------------------------------ Net income $ 648 $ 719 $ 713 ==================================== Income per common and equivalent shares Income before results of discontinued operations, extraordinary item and cumulative effect of accounting change .44 .32 .21 Results of discontinued operations, net of the effect of income taxes (.02) .08 .17 Extraordinary item --- --- .32 Cumulative effect of accounting change --- .06 --- ------------------------------------ Net Income per common and equivalent shares $ .42 $ .46 $ .70 ====================================
Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits. None. --------- (b) Current Reports on Form 8-K. ---------------------------- 9 SIGNATURES 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 5, 1996. SUMMA INDUSTRIES /s/ James R. Swartwout ----------------------------------------- James R. Swartwout, President and Chief Financial Officer /s/ Paul A. Walbrun ---------------------------------------- Paul A. Walbrun, Vice President, Controller and Secretary 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS 6-MOS AUG-31-1996 AUG-31-1996 DEC-01-1995 SEP-01-1995 FEB-29-1996 FEB-29-1996 74,000 0 0 0 1,548,000 0 64,000 0 1,938,000 0 4,038,000 0 5,597,000 0 1,797,000 0 11,220,000 0 2,040,000 0 0 0 0 0 0 0 6,011,000 0 2,032,000 0 11,220,000 0 2,928,000 5,767,000 2,928,000 5,767,000 1,589,000 3,149,000 1,589,000 3,149,000 1,045,000 2,030,000 0 0 0 0 294,000 588,000 137,000 254,000 157,000 334,000 (135,000) (221,000) 0 0 0 0 22,000 113,000 .01 .07 .01 .07
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