<PAGE>
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
NOVEMBER 30, 1995
[ ] 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 Identification Number)
incorporation or organization)
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 November 30, 1995 was
1,541,929.
<PAGE>
SUMMA INDUSTRIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
November 30, 1995 (unaudited) and August 31, 1995................. 3
Condensed Consolidated Statements of Income (unaudited) -
three months ended November 30, 1995 and 1994..................... 4
Condensed Consolidated Statements of Cash Flows (unaudited) -
three months ended November 30, 1995 and 1994..................... 5
Notes to Condensed Consolidated
Financial Statements (unaudited)................................. 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................. 6
PART II - OTHER INFORMATION................................................. 7
Signature Page............................................................... 8
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMA INDUSTRIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Note 1)
<TABLE>
<CAPTION>
November 30, August 31,
1995 1995
(unaudited)
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 42,000 $ 182,000
Accounts receivable 2,471,000 2,382,000
Inventories 3,906,000 4,057,000
Prepaid expenses and other 759,000 739,000
------------ -----------
Total current assets 7,178,000 7,360,000
------------ -----------
Property, plant and equipment 7,402,000 7,132,000
Less accumulated depreciation 3,302,000 3,140,000
------------ -----------
Net property, plant and equipment 4,100,000 3,992,000
------------ -----------
Goodwill and other intangibles, net 1,302,000 1,307,000
------------ -----------
$12,580,000 $12,659,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 799,000 $ 938,000
Accounts payable 1,024,000 1,189,000
Accrued liabilities 1,503,000 1,383,000
Current maturities of long-term debt 100,000 -
------------ -----------
Total current liabilities 3,426,000 3,510,000
Long-term debt, deferred credits and other long term liabilities 1,133,000 1,219,000
------------ -----------
Total liabilities 4,559,000 4,729,000
------------ -----------
Shareholders' equity:
Common stock, par value $.001; 10,000,000 shares authorized,
1,541,929 and 1,541,930 shares issued and outstanding at
November 30, 1995 and August 31, 1995, respectively.
6,011,000 6,011,000
Retained earnings 2,010,000 1,919,000
------------ -----------
Total shareholders' equity 8,021,000 7,930,000
------------ -----------
$12,580,000 $12,659,000
============ ===========
See accompanying notes.
</TABLE>
3
<PAGE>
SUMMA INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
November 30, 1995 November 30, 1994
----------------- -----------------
<S> <C> <C>
Net sales $4,907,000 $3,978,000
Cost of sales 3,146,000 2,270,000
----------------- -----------------
Gross profit 1,761,000 1,708,000
Selling, general and administrative and
other expenses 1,576,000 1,376,000
----------------- -----------------
Income from operations 185,000 332,000
Interest expense 34,000 13,000
----------------- -----------------
Income before provision for taxes 151,000 319,000
Provision for income taxes 60,000 167,000
----------------- -----------------
Net income $ 91,000 $ 152,000
================= =================
Net income per common and equivalent share $ .06 $ .10
================= =================
Weighted average shares outstanding 1,557,000 1,538,000
================= =================
See accompanying notes.
</TABLE>
4
<PAGE>
SUMMA INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
November 30, 1995 November 30, 1994
----------------- -----------------
<S> <C> <C>
Operating activities:
Net income $ 91,000 $ 152,000
----------------- -----------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 187,000 180,000
Provision for doubtful accounts receivable 3,000 -
Provision for inventory reserves 58,000 22,000
Gain on disposition of property, plant and equipment (3,000) (13,000)
Net change in assets and liabilities
Accounts receivable (92,000) 41,000
Inventories 93,000 (568,000)
Prepaid expenses and other (37,000) (13,000)
Accounts payable (165,000) 396,000
Accrued liabilities 134,000 242,000
----------------- -----------------
Total adjustments 178,000 287,000
----------------- -----------------
Net cash provided by operating activities 269,000 439,000
----------------- -----------------
Investing activities:
Property, plant & equipment (270,000) (193,000)
----------------- -----------------
Net cash (used) by investing activities (270,000) (193,000)
----------------- -----------------
Financing activities:
Net payments on line of credit (139,000) -
Payment on long term contract payable - (2,000)
Principal payments under capitalized lease - (2,000)
Exercise of stock options - 33,000
----------------- -----------------
Net cash provided (used) by financing activities (139,000) 29,000
----------------- -----------------
Net increase (decrease) in cash (140,000) 275,000
Cash at beginning of period 182,000 234,000
----------------- -----------------
Cash at end of period $ 42,000 $ 509,000
================= =================
Supplemental cash flow information:
Cash paid during the period for:
Interest payments 34,000 13,000
================= =================
Income tax payments 51,000 45,000
================= =================
See accompanying notes.
</TABLE>
5
<PAGE>
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 audited 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. The results of operations for the three months
ended November 30, 1995 are not necessarily indicative of the results to be
expected for the full year ending August 31, 1996.
2. Inventories
Inventories at November 30, 1995 and August 31, 1995 were as follows:
<TABLE>
<CAPTION>
November 30, 1995
(unaudited) August 31, 1995
----------------- ---------------
<S> <C> <C>
Finished goods $1,066,000 $1,169,000
Work in process 575,000 565,000
Material and parts 2,265,000 2,323,000
----------------- ---------------
3,906,000 4,057,000
================= ===============
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Financial Condition
- -------------------
During the first quarter of fiscal year 1996, ended November 30, 1995, working
capital decreased by $98,000, or 3% to $3,752,000. The decrease in current
assets of $182,000 primarily reflects inventory management efforts in the
industrial process equipment business and intentionally reduced cash balances
partially offset by growth in accounts receivable related to increased sales.
The decrease in current liabilities of $84,000 primarily comprises decreases in
accounts payable and the balance due on the revolving line of credit partially
offset by miscellaneous accruals and the reclassification of $100,000 to current
maturities from long term debt.
Cash provided by operations is the Company's principal source of liquidity.
Additionally, the Company has an agreement with a bank for a $2,000,000
revolving line of credit of which $799,000 was in use at November 30, 1995. The
line of credit is secured by all the assets of the Company. 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 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.
6
<PAGE>
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 preferred stock to raise
additional funds.
Results of Operations
- ---------------------
The following table sets forth certain Statement of Income Information as a
percent of sales for the fiscal quarter ended November 30.
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Sales 100.0% 100.0%
Gross profit 35.9% 42.9%
S,G & A and other expense 32.1% 34.6%
Income before taxes 3.1% 8.0%
Net profit 1.9% 3.8%
===== =====
Effective tax rate 39.7% 52.4%
</TABLE>
Although first quarter fiscal 1996 sales increased 23% over the first quarter of
fiscal 1995, net income decreased. The principle reason for the decrease was the
deterioration of gross margin from 42.9% in the first quarter of fiscal 1995 to
35.9% in the first quarter of fiscal 1996 due to losses on several large
contracts at Morehouse-COWLES, Inc., the Company's process equipment subsidiary.
In response, several initiatives, including a stringent pre-proposal review
system announced in October 1995, and a recent 15% reduction in force, were
positively affecting operations at Morehouse by the end of the first quarter.
The results for the quarter ended November 30, 1995 are not necessarily
indicative of performance to be expected for the entire year. The decline in
gross margin as a percent of sales was mitigated by a decline in S,G&A and other
expenses as a percent of sales from 34.6% to 32.1% in the respective quarters.
Sales and operating profit were up 38% and 55% respectively at KVP Systems,
Inc., the Company's material handling components subsidiary, for the first
quarter of fiscal 1996 versus the first quarter of fiscal 1995. The performance
of KVP will be more fully reflected in the future consolidated results of SUMMA
INDUSTRIES as the benefits of the Morehouse-COWLES initiatives are realized.
The Company's backlog at November 30, 1995, believed to be firm, was $5,280,000,
4% higher than a year earlier.
The effective income tax rate, comprised of a composite of Federal and State
taxes, decreased from 52.4% to 39.7% in fiscal 1996, due to decreases in non-
deductible contingent performance provisions related to the defense business.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
- --------------------------
At November 30, 1995, the Company was a party to four 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
- ------------------------------------------------------------
Subsequent to the end of the first fiscal quarter at the Company's annual
shareholder meeting on December 14, 1995, the following directors were nominated
for reelection and were reelected to serve for a term of two years:
Dale Morehouse
William Zimmerman
David McConaughy
Byron Roth
The 1995 Stock Option Plan was approved.
Item 5. Other Information
- --------------------------
None
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 December 20, 1995.
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
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 42,000
<SECURITIES> 0
<RECEIVABLES> 2,543,000
<ALLOWANCES> 0
<INVENTORY> 3,906,000
<CURRENT-ASSETS> 7,178,000
<PP&E> 7,402,000
<DEPRECIATION> 3,302,000
<TOTAL-ASSETS> 4,100,000
<CURRENT-LIABILITIES> 3,426,000
<BONDS> 0
<COMMON> 6,011,000
0
0
<OTHER-SE> 2,010,000
<TOTAL-LIABILITY-AND-EQUITY> 12,580,000
<SALES> 4,907,000
<TOTAL-REVENUES> 4,907,000
<CGS> 3,146,000
<TOTAL-COSTS> 3,146,000
<OTHER-EXPENSES> 1,576,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,000
<INCOME-PRETAX> 151,000
<INCOME-TAX> 60,000
<INCOME-CONTINUING> 91,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,000
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
