-----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, O0FseTOBWY0EDYK70IIe66lipPmW+1SgcDOf8BJPjdWbgBsqiV1v2feRER/t7SHL Qdv8nt5gk8o3Y7LbE3bRvw== 0001017062-97-001242.txt : 19970627 0001017062-97-001242.hdr.sgml : 19970627 ACCESSION NUMBER: 0001017062-97-001242 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970626 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMA INDUSTRIES CENTRAL INDEX KEY: 0000062262 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] 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: 97630376 BUSINESS ADDRESS: STREET 1: 21250 HAWTHORNE BLVD., SUITE 500 CITY: TORRANCE STATE: CA ZIP: 90503 BUSINESS PHONE: 3107927024 MAIL ADDRESS: STREET 1: 1101 CALIFORNIA AVE STE 200 CITY: CORONA STATE: CA ZIP: 91719 FORMER COMPANY: FORMER CONFORMED NAME: SUMMA INDUSTRIES INC DATE OF NAME CHANGE: 19951212 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 FOR PERIOD ENDED 05-31-1997 U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from N/A to N/A --- --- Commission File No. 1-7755 SUMMA INDUSTRIES (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) 21250 HAWTHORNE BOULEVARD, SUITE 500, TORRANCE, CALIFORNIA 90503 (Address of principal executive offices, including Zip Code) Registrant's Telephone Number: (310) 792-7024 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 May 31, 1997 was 4,058,566. 1 SUMMA INDUSTRIES INDEX PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements: Condensed Consolidated Balance Sheets - May 31, 1997 (unaudited) and August 31, 1996....... 3 Condensed Consolidated Statements of Income (unaudited) - three months and nine months ended May 31, 1997 and 1996........................ 4 Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended May 31, 1997 and 1996.............................. 5 Notes to Condensed Consolidated Financial Statements (unaudited)............................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 7 PART II - OTHER INFORMATION................................ 8 Signature Page............................................. 10 2 SUMMA INDUSTRIES CONDENSED CONSOLIDATED BALANCE SHEETS
May 31, 1997 August 31, 1996 (unaudited) ------------ --------------- ASSETS Current assets: Cash...................................... $ 1,345,000 $ 567,000 Accounts receivable....................... 6,939,000 1,627,000 Inventories............................... 3,915,000 2,186,000 Prepaid expenses and other................ 1,163,000 656,000 ----------- ----------- Total current assets.................... 13,362,000 5,036,000 Property, plant and equipment................ 20,980,000 6,060,000 Less accumulated depreciation............. 3,409,000 2,082,000 ----------- ----------- Net property, plant and equipment....... 17,571,000 3,978,000 Other assets................................. 2,938,000 1,865,000 Goodwill and other intangibles, net.......... 1,350,000 946,000 ----------- ----------- $35,221,000 $11,825,000 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................... $ 1,552,000 $ 812,000 Accrued liabilities....................... 3,038,000 1,249,000 Current maturities of long-term debt...... 2,300,000 - ----------- ----------- Total current liabilities............... 6,890,000 2,061,000 Long-term debt, net of current maturities.... 6,344,000 300,000 Other long-term liabilities.................. 1,999,000 820,000 ----------- ----------- Total liabilities....................... 15,233,000 3,181,000 Shareholders' equity: Common stock, par value $.001; 10,000,000 shares authorized, 4,058,566 and 1,603,483 shares issued and outstanding at May 31, 1997 and August 31, 1996, respectively............................ 16,039,000 6,157,000 Retained earnings......................... 3,949,000 2,487,000 ----------- ----------- Total shareholders' equity.............. 19,988,000 8,644,000 ----------- ----------- $35,221,000 $11,825,000 =========== ===========
See accompanying notes. 3 SUMMA INDUSTRIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three months ended Nine months ended -------------------------------- ------------------------------ May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996 ------------- ------------- ------------- ------------- Net sales................................... $13,075,000 $ 3,136,000 $29,726,000 $ 8,903,000 Cost of sales............................... 8,904,000 1,779,000 20,070,000 4,928,000 ----------- ----------- ----------- ----------- Gross profit................................ 4,171,000 1,357,000 9,656,000 3,975,000 Selling, general and administrative......... 2,803,000 989,000 6,779,000 3,015,000 ----------- ----------- ----------- ----------- Operating income from continuing operations................................ 1,368,000 368,000 2,877,000 960,000 Interest expense, net....................... 105,000 -- 186,000 -- Other expense............................... 220,000 16,000 235,000 20,000 ----------- ----------- ----------- ----------- Income from continuing operations before provision for taxes................ 1,043,000 352,000 2,456,000 940,000 Provision for income taxes.................. 423,000 145,000 994,000 399,000 ----------- ----------- ----------- ----------- Income from continuing operations........... 620,000 207,000 1,462.000 541,000 (Loss) from discontinued operations, net of the effect of income tax........... -- (14,000) -- (235,000) ----------- ----------- ----------- ----------- Net income.................................. $ 620,000 $ 193,000 $ 1,462,000 $ 306,000 =========== =========== =========== =========== Income per common and equivalent share: Income from continuing operations......... $ .15 $ .13 $ .44 $ .34 (Loss) from discontinued operations, net of the effect of income tax......... -- (.01) -- .19 ----------- ----------- ----------- ----------- Net Income per common and equivalent share.......................... $ .15 $ .12 $ .44 $ (.15) =========== =========== =========== =========== Weighted average shares outstanding......... 4,105,000 1,613,000 3,286,000 1,582,000 =========== =========== =========== ===========
See accompanying notes. 4 SUMMA INDUSTRIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine months ended ----------------------------- May 31, 1997 May 31, 1996 ------------- ------------- Operating activities: Net income..................................................... $ 1,462,000 $ 306,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................. 1,510,000 596,000 Gain on disposition of property, plant and equipment.......... (2,000) (55,000) Net change in assets and liabilities Accounts receivable.......................................... 342,000 85,000 Inventories.................................................. 89,000 (38,000) Prepaid expenses and other................................... 115,000 174,000 Accounts payable............................................. (839,000) 4,000 Accrued liabilities.......................................... (587,000) (44,000) ------------- ------------- Total adjustments.............................................. 628,000 722,000 ------------- ------------- Net cash provided by operating activities.................. 2,090,000 1,028,000 ------------- ------------- Investing activities: Property, plant & equipment................................... (1,231,000) (870,000) Other assets.................................................. (15,000) (8,000) Proceeds from sale of equipment............................... 5,000 91,000 Net decrease in unexpended industrial revenue bond proceeds... 204,000 -- Proceeds from cash surrender value of life insurance.......... 254,000 -- ------------- ------------- Net cash used in investing activities...................... (783,000) (787,000) ------------- ------------- Financing activities: Payments on line of credit.................................... (275,000) (356,000) Payments on long term debt.................................... (612,000) -- Proceeds from issuance of long term debt...................... -- 31,000 Proceeds from the exercise of stock options................... 40,000 140,000 Cash acquired in acquisition of LexaLite, net of cash paid.... 318,000 -- ------------- ------------- Net cash used in financing activities...................... (529,000) (185,000) ------------- ------------- Net increase in cash........................................... 778,000 56,000 Cash at beginning of period.................................... 567,000 182,000 ------------- ------------- Cash at end of period.......................................... $ 1,345,000 $ 238,000 ============= ============= Supplemental cash flow information: Cash paid during the period for: Interest payments.......................................... $ 302,000 $ 89,000 ============= ============= Income tax payments, (net of refunds)...................... $ 857,000 $ 156,000 ============= ============= Non-cash investing and financing activities Common stock issued for acquisition (Note 3).................. $ 9,842,000 $ -- ============= ============= Details of acquisition (Note 3): Fair value of assets acquired................................. $24,064,000 $ -- Liabilities assumed or incurred............................... 14,027,000 -- Common stock issued........................................... 9,842,000 -- ------------- ------------- Cash paid..................................................... 195,000 -- Less cash acquired............................................ (513,000) -- ------------- ------------- Net cash acquired in acquisition.............................. $ (318,000) $ -- ------------- -------------
See accompanying notes. 5 SUMMA INDUSTRIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation The accompanying consolidated financial statements of SUMMA INDUSTRIES ("the Company"), some of which are unaudited, have been condensed in certain respects and should, therefore, be read in conjunction with the audited financial statements and notes related thereto contained in the Company's Annual Report on Form 10-K for the year ended August 31, 1996. In the opinion of the Company, the accompanying unaudited interim consolidated financial statements contain all adjustments (all of which are of a normal recurring nature) necessary for a fair presentation for the interim periods. (See Note 3, below.) The results of operations for the three months and nine months ended May 31, 1997 are not necessarily indicative of the results to be expected for the full year ending August 31, 1997. 2. Inventories Inventories at May 31, 1997 and August 31, 1996 were as follows:
May 31, 1997 August 31, 1996 (unaudited) ------------ --------------- Finished goods........ $1,650,000 $ 713,000 Work in process....... 177,000 81,000 Material and parts.... 2,088,000 1,392,000 ---------- ---------- $3,915,000 $2,186,000 ========== ==========
3. Acquisition On November 22, 1996, the Company completed the acquisition of LexaLite International Corporation ("LexaLite"). The acquisition, which has been accounted for using the purchase method of accounting, is more fully described in Part II, Other Information. As a consequence of the acquisition, the consolidated balance sheet of the Company at May 31, 1997 includes the balance sheet of LexaLite with purchase accounting adjustments. The results of operations of LexaLite have been included in the consolidated results of operations and the consolidated statement of cash flows of the Company since November 22, 1996, the date of acquisition, and the shares issued to complete the acquisition have been included in the earnings per share calculation. 4. New accounting pronouncements Effective September 1, 1997, the Company will be required to adopt Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." The statement requires new computation, presentation and disclosures of earnings per share. The Company has reviewed the provisions of SFAS No. 128 and has determined that with the adoption of this pronouncement, the diluted earnings per share reported will be the same as the previously reported net income per common and equivalent share. Effective September 1, 1997, the Company will be required to adopt SFAS No. 129, "Disclosures of Information about Capital Structure." The statement requires certain disclosures regarding a company's capital structure. Adoption of this statement will have no effect with regards to financial reporting. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements contained in this Quarterly Report on Form 10-Q that 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. 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 in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1996. 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. Liquidity and Capital Resources - ------------------------------ The Company's working capital at May 31, 1997 was $6,472,000 compared to $2,975,000 at August 31, 1996. The primary reason for the increase was the inclusion of the assets and liabilities of recently acquired LexaLite in the Company's consolidated balance sheet. Cash provided by operations is the Company's principal source of liquidity. For the nine months ended May 31, 1997, net cash provided by operating activities was $2,090,000 compared to $1,028,000 for the comparable prior year period. The improved cash flows from operations were primarily due to the inclusion of LexaLite. The Company has various working capital and equipment acquisition credit facilities, aggregating $7,000,000, of which none was in use at May 31, 1997. The facilities expire at various dates beginning in October 1997. The Company believes that cash flows from operations and available lines of credit will be sufficient to fund working capital and planned capital expenditures for the next twelve months. The Company has a strategy of growth by acquisition. If the Company adopts a plan to acquire a business in the near future, funds would have to be arranged with a new or increased debt facility. Alternately, the Company could use its securities as consideration in a transaction, or sell securities to raise acquisition funds. The Company has 10,000,000 shares of common stock authorized, of which 4,058,566 shares were outstanding at May 31, 1997, and 5,000,000 shares of "blank check" preferred stock authorized, of which none is outstanding. Results of Operations - --------------------- The following table sets forth certain Statements of Income information as a percent of sales for the quarter and nine months ended May 31, 1997 and May 31, 1996.
Three months ended Nine months ended -------------------------- -------------------------- May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996 ------------ ------------ ------------ ------------ ................................ Sales.............................. 100.0% 100.0% 100.0% 100.0% Gross profit....................... 31.9% 43.3% 32.5% 44.6% S, G & A........................... 21.4% 31.6% 22.8% 33.8% Interest expense, net.............. 0.8% --% 0.6% --% Other expense...................... 1.7% 0.5% 0.8% 0.2% Income from continuing operations before provision for taxes....... 8.0% 11.2% 8.3% 10.6% Income from continuing operations.. 4.7% 6.6% 4.9% 6.1% ========= ========== ========== ========== Effective tax rate................. 40.6% 41.2% 40.5% 42.4%
7 Results for the third quarter and year to date were reduced by a $210,000 pre- tax charge included in other expense related to the planned merger with Calnetics Corporation which was terminated in May 1997. Sales for the third quarter, ended May 31, 1997, increased $9,939,000, or 317% compared to the same period in the prior year, due to the inclusion of the recently acquired business of LexaLite and an increase in the sales of the previously owned business. Consolidated gross profit increased $2,814,000, or 207%, for the same reasons. Gross profit as a percentage of sales decreased from 43% to 32%, primarily due to the inclusion of LexaLite sales at typically lower margin margins than those of SUMMA's other businesses. The gross margin percentages of SUMMA's businesses other than LexaLite increased about 4%, due primarily to price increases and increased volume. LexaLite's gross margin percentages were consistent with recent prior experience. Operating expenses increased $1,814,000, or 183%, from the comparable prior year period, but as a percentage of sales, decreased from 32% to 21%, due primarily to the inclusion of LexaLite. Income from continuing operations for the quarter was $620,000 compared to $207,000 for the same period last year. Sales for the nine months ended May 31, 1997, increased $20,823,000, or 234%, from the comparable prior year period, primarily due to the inclusion of the sales of LexaLite and an increase in the sales of the other previously owned businesses. Consolidated gross profits increased $5,681,000, or 143%, primarily related to the inclusion of LexaLite's sales and related to increased sales and improved margins in the Company's previously owned businesses. Operating expenses increased $3,764,000, or 125% from the comparable period last year but as a percentage of sales decreased from 34% to 23% primarily because of the inclusions of LexaLite. Income from continuing operations for the six month period was $1,462,000 compared to $541,000, for the same period last year, a 170% increase. The Company's backlog at May 31, 1997, believed to be firm, was $6,691,000. The amount of backlog cannot necessarily be used as an indicator of future sales volume. PART II - OTHER INFORMATION Item 1. Legal proceedings - ------------------------- The Company encounters lawsuits from time to time in the ordinary course of business, and at May 31, 1997, the Company's wholly-owned subsidiaries KVP Systems, Inc. and the Stang division of GTS Industries, Inc. were each a party to a civil lawsuit as described below. Although the Company has obtained liability insurance coverage for each of the past five years, such insurance may not be available in the future at economically feasible premium rates. Additionally, some lawsuits filed against the Company in the past have contained claims not covered by insurance, or sought damages in excess of policy limits, and such claims could be filed in the future. Any losses that the Company may suffer from current or future lawsuits, and the effect such litigation may have upon the reputation and marketability of the company's products, could have a material adverse impact on the financial condition and prospects of the Company. Laitram. et al. v. KVP Systems, Inc. et al., and counterclaims was filed in the - ------------------------------------------- U.S. District Court in Eastern Louisiana in September 1993. The plaintiffs claim KVP has infringed upon two patents. The venue was changed to Federal District Court in Sacramento, California. On April 24, 1997, the court ruled that KVP's products do not infringe Laitram's patents, and dismissed KVP's counter-claims. Laitram has indicated its intention to appeal. Although the Company believes it has a reasonable expectation of prevailing, because no reserve therefor has been established, and in the absence of applicable insurance, the consequences of an adverse determination would be borne by the Company. In Wright v. Stang, et al., a piece of pipe, to which a water cannon ----------------------- manufactured by Stang was attached, broke, knocking a fireman down. Since Stang did not make or supply the pipe which failed, the case was dismissed. On appeal, the dismissal was reversed. The Company has $2,000,000 in product liability insurance applicable to this case. 8 Item 2. Change in Securities - ---------------------------- None Item 3. Default upon Senior Securities - -------------------------------------- None Item 4. Submission of matters to a vote of security holders - ----------------------------------------------------------- None Item 5. Other Information - ------------------------- Pro-forma results including operations of LexaLite The following information is presented as if the acquisition of LexaLite had been made as of September 1, 1996 and September 1, 1995, respectively, with pro- forma adjustments to give effect to the amortization of goodwill and other intangibles, adjustments in depreciation and inventory value, the related income tax effects, and the effect upon earnings per share of the additional shares of stock given in exchange for LexaLite stock.
Three months ended Nine months ended --------------------------- ---------------------------- May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996 (Actual) (Pro-forma) (Pro-forma) (Pro-forma) ------------ ------------ ------------ ------------ Net sales.................................... $13,075,000 $12,672,000 $38,333,000 $35,164,000 Income from continuing operations............ 620,000 534,000 1,967,000 1,514,000 Net income................................... $ 620,000 $ 520,000 1,967,000 1,279,000 ============ ============ ============ ============ Income per common and equivalent share Income from continuing operations............................... $ .15 $ .13 $ .47 $ .38 Net income per common and equivalent share............................. $ .15 $ .13 $ .47 $ .32
Such pro-forma results are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisition had been effective at the beginning of the periods presented or of the results which may be achieved in the future. Termination of SUMMA-Calnetics Acquisition Agreement On March 26, 1997, the Company entered into a definitive agreement for the acquisition of Calnetics Corporation, whose stock is traded in The Nasdaq National Market. On May 7, 1997, SUMMA and Calnetics jointly announced the termination of that agreement. 9 Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits. None. -------- (b) Current Reports on Form 8-K. None. ---------------------------- 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 June 24, 1997. 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 9-MOS AUG-31-1997 AUG-31-1997 MAR-01-1997 SEP-01-1996 MAY-31-1997 MAY-31-1997 1,345,000 0 0 0 6,939,000 0 0 0 3,915,000 0 13,362,000 0 20,980,000 0 3,409,000 0 35,221,000 0 6,890,000 0 0 0 0 0 0 0 16,039,000 0 3,949,000 0 35,221,000 0 13,075,000 29,726,000 13,075,000 29,726,000 8,904,000 20,070,000 8,904,000 20,070,000 3,023,000 7,014,000 0 0 105,000 186,000 1,043,000 2,456,000 423,000 994,000 620,000 1,462,000 0 0 0 0 0 0 620,000 1,462,000 .15 .44 .15 .44
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