U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
ý | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
February 28, 2006
o | | 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)
Delaware | | 95-1240978 |
(State or other jurisdiction of | | (I.R.S. employer identification number) |
incorporation or organization) | | |
21250 Hawthorne Boulevard, Suite 500, Torrance, California 90503
www.summaindustries.com
(Address of principle 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 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer (as “large accelerated filer” and “accelerated filer” are defined in Rule 12b-2 of the Exchange Act).
Large Accelerated Filer o | | Accelerated Filer o | | Non-Accelerated Filer ý |
Indicate by check mark whether the registrant is as shell company (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 31, 2006 was 3,904,453
Summa Industries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| | February 28, 2005 | | August 31, 2005 | | February 28, 2006 | |
ASSETS | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 930,000 | | $ | 1,233,000 | | $ | 1,105,000 | |
Accounts receivable | | 19,251,000 | | 16,919,000 | | 17,633,000 | |
Inventories | | 15,213,000 | | 12,665,000 | | 16,398,000 | |
Prepaid expenses and other | | 4,188,000 | | 3,471,000 | | 3,874,000 | |
Assets held for sale | | — | | 3,641,000 | | — | |
Total current assets | | 39,582,000 | | 37,929,000 | | 39,010,000 | |
Property, plant and equipment | | 67,483,000 | | 62,629,000 | | 58,247,000 | |
Less accumulated depreciation | | (34,638,000 | ) | (33,416,000 | ) | (33,085,000 | ) |
Net property, plant and equipment | | 32,845,000 | | 29,213,000 | | 25,162,000 | |
Other assets | | 1,852,000 | | 1,454,000 | | 1,433,000 | |
Goodwill and other intangibles, net | | 9,117,000 | | 8,981,000 | | 8,892,000 | |
Assets held for sale | | — | | 2,458,000 | | 1,967,000 | |
Total assets | | $ | 83,396,000 | | $ | 80,035,000 | | $ | 76,464,000 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 8,793,000 | | $ | 8,731,000 | | $ | 8,958,000 | |
Accrued liabilities | | 5,450,000 | | 5,774,000 | | 6,153,000 | |
Current maturities of long-term debt | | 4,955,000 | | 3,069,000 | | 2,940,000 | |
Liabilities held for sale | | — | | 1,280,000 | | — | |
Total current liabilities | | 19,198,000 | | 18,854,000 | | 18,051,000 | |
Long-term debt, net of current maturities | | 30,603,000 | | 27,520,000 | | 23,857,000 | |
Other long-term liabilities | | 2,492,000 | | 2,441,000 | | 3,048,000 | |
Total long-term liabilities | | 33,095,000 | | 29,961,000 | | 26,905,000 | |
Minority interest in subsidiary | | 172,000 | | 132,000 | | 95,000 | |
Stockholders’ equity: | | | | | | | |
Common stock, par value $.001; 10,000,000 shares authorized; issued and outstanding: 4,002,022 at February 28, 2005, 3,940,041 at August 31, 2005 and 3,892,628 at February 28, 2006 | | 15,561,000 | | 15,046,000 | | 14,727,000 | |
Retained earnings | | 15,370,000 | | 16,042,000 | | 16,686,000 | |
Total stockholders’ equity | | 30,931,000 | | 31,088,000 | | 31,413,000 | |
Total liabilities and stockholders’ equity | | $ | 83,396,000 | | $ | 80,035,000 | | $ | 76,464,000 | |
See accompanying notes to condensed consolidated financial statements.
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Summa Industries
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)
| | Three months ended February 28 | | Six months ended February 28 | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
Net sales | | $ | 26,686,000 | | $ | 27,510,000 | | $ | 52,174,000 | | $ | 55,250,000 | |
Cost of sales | | 20,746,000 | | 20,955,000 | | 39,790,000 | | 41,911,000 | |
Gross profit | | 5,940,000 | | 6,555,000 | | 12,384,000 | | 13,339,000 | |
Selling, general, administrative and other expenses | | 4,574,000 | | 4,919,000 | | 9,355,000 | | 9,892,000 | |
(Gain) on sale of real estate | | — | | — | | (43,000 | ) | 205,000 | ) |
Operating income | | 1,366,000 | | 1,636,000 | | 3,072,000 | | 3,652,000 | |
Interest expense | | 408,000 | | 524,000 | | 717,000 | | 972,000 | |
Income from continuing operations before income taxes and minority interest | | 958,000 | | 1,112,000 | | 2,355,000 | | 2,680,000 | |
Provision for income taxes | | 341,000 | | 402,000 | | 836,000 | | 963,000 | |
| | | | | | | | | |
Income from continuing operations before minority interest | | 617,000 | | 710,000 | | 1,519,000 | | 1,717,000 | |
Minority interest in net loss of subsidiary | | 33,000 | | 6,000 | | 33,000 | | 37,000 | |
| | | | | | | | | |
Income from continuing operations | | 650,000 | | 716,000 | | 1,552,000 | | 1,754,000 | |
(Loss) from discontinued operations, net of tax benefit of $197,000, $9,000, $341,000 and $208,000 | | (374,000 | ) | (18,000 | ) | (666,000 | ) | (405,000 | ) |
Net income | | $ | 276,000 | | $ | 698,000 | | $ | 886,000 | | $ | 1,349,000 | |
Earnings (loss) per common share | | | | | | | | | |
Basic | | | | | | | | | |
Continuing operations | | $ | 0.16 | | $ | 0.18 | | $ | 0.39 | | $ | 0.45 | |
Discontinued operations | | $ | (0.09 | ) | — | | $ | (0.17 | ) | $ | (0.10 | ) |
Net income | | $ | 0.07 | | $ | 0.18 | | $ | 0.22 | | $ | 0.35 | |
Diluted | | | | | | | | | |
Continuing operations | | $ | 0.16 | | $ | 0.18 | | $ | 0.38 | | $ | 0.44 | |
Discontinued operations | | $ | (0.09 | ) | — | | $ | (0.16 | ) | $ | (0.10 | ) |
Net income | | $ | 0.07 | | $ | 0.18 | | $ | 0.22 | | $ | 0.34 | |
Weighted average common shares outstanding: | | | | | | | | | |
Basic | | 4,002,000 | | 3,893,000 | | 3,993,000 | | 3,910,000 | |
Diluted | | 4,079,000 | | 3,926,000 | | 4,071,000 | | 3,943,000 | |
See accompanying notes to condensed consolidated financial statements.
4
Summa Industries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the six months ended February 28, 2006
(unaudited)
| | Common
Shares | | Common
Stock | | Retained
Earnings | | Total | |
Balance at August 31, 2005 | | 3,940,041 | | $ | 15,046,000 | | $ | 16,042,000 | | $ | 31,088,000 | |
Exercise of stock options, including tax benefit of $3,000 | | 10,000 | | 59,000 | | — | | 59,000 | |
Repurchases of common stock | | (57,413 | ) | (448,000 | ) | — | | (448,000 | ) |
Net income | | — | | — | | 1,349,000 | | 1,349,000 | |
Stock-based compensation | | — | | 70,000 | | — | | 70,000 | |
Payment of dividends | | — | | — | | (471,000 | ) | (471,000 | ) |
Declaration of pending dividend | | — | | — | | (234,000 | ) | (234,000 | ) |
Balance at February 28, 2006 | | 3,892,628 | | $ | 14,727,000 | | $ | 16,686,000 | | $ | 31,413,000 | |
| | | | | | | | | | | | | | | |
See accompanying notes to condensed consolidated financial statements.
5
Summa Industries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | Six months ended
February 28, 2005 | | Six months ended
February 28, 2006 | |
Operating activities: | | | | | |
Net income | | $ | 886,000 | | $ | 1,349,000 | |
Adjustments to reconcile net income to net cash (used in) operating activities: | | | | | |
Depreciation | | 2,566,000 | | 2,322,000 | |
Amortization | | 137,000 | | 89,000 | |
(Gain) on disposition of property, plant and equipment | | (114,000 | ) | (300,000 | ) |
Minority interest in net loss of subsidiary | | (33,000 | ) | (37,000 | ) |
Stock-based compensation | | — | | 70,000 | |
Net changes in assets and liabilities: | | | | | |
Accounts receivable | | (1,024,000 | ) | (714,000 | ) |
Inventories | | (464,000 | ) | (3,733,000 | ) |
Prepaid expenses and other assets | | (454,000 | ) | (601,000 | ) |
Accounts payable | | (295,000 | ) | 227,000 | |
Accrued liabilities | | (1,734,000 | ) | 751,000 | |
Total adjustments | | (1,415,000 | ) | (1,926,000 | ) |
Net cash (used in) operating activities | | (529,000 | ) | (577,000 | ) |
Investing activities: | | | | | |
Purchases of property and equipment | | (5,223,000 | ) | (1,744,000 | ) |
Proceeds from sale of property and equipment | | 979,000 | | 4,265,000 | |
Proceeds from sale of note receivable | | — | | 2,280,000 | |
Proceeds from sale of business | | — | | 300,000 | |
Net cash provided by (used in) investing activities | | (4,244,000 | ) | 5,101,000 | |
Financing activities: | | | | | |
Net proceeds from line of credit | | 2,152,000 | | 1,187,000 | |
Proceeds from issuance of long-term debt | | 3,789,000 | | 2,952,000 | |
Payments on long-term debt | | (1,241,000 | ) | (7,931,000 | ) |
Proceeds from the exercise of stock options | | — | | 59,000 | |
Purchases of common stock | | (5,000 | ) | (448,000 | ) |
Payments of cash dividends | | (240,000 | ) | (471,000 | ) |
Net cash provided by (used in) financing activities | | 4,455,000 | | (4,652,000 | ) |
Net (decrease) in cash and cash equivalents | | (318,000 | ) | (128,000 | ) |
Cash and cash equivalents, beginning of period | | 1,248,000 | | 1,233,000 | |
Cash and cash equivalents, end of period | | $ | 930,000 | | $ | 1,105,000 | |
See accompanying notes to condensed consolidated financial statements.
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Summa Industries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
February 28, 2006
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of Summa Industries (the “Company”) have been condensed in certain respects and should, therefore, 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, 2005. 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 month and six month periods ended February 28, 2006 are not necessarily indicative of the results to be expected for the full year ending August 31, 2006.
Recent accounting pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payments,” which requires companies to recognize in the income statement the grant-date fair value of stock options and equity-based compensation issued to employees. Prior to its adoption in the first quarter of fiscal 2006, the Company reported equity based compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25 and Financial Interpretation No. 44, and accordingly, no compensation expense was recognized in the financial statements prior to September 1, 2005. The pro forma effect of equity-based compensation under SFAS No. 123, “Accounting for Stock-Based Compensation,” for the period prior to the adoption of SFAS No, 123R and the expense charged to earnings since its adoption are disclosed in Note 5, below.
In October 2005, the FASB issued Staff Position Financial Accounting Standard (“FAS”)13-1, “Accounting for Rental Costs Incurred during a Construction Period,” which requires rental costs associated with ground or building operating leases that are incurred during a construction period to be recognized as rental expense. This Staff Position is effective for reporting periods beginning after December 15, 2005, and retrospective application is permitted but not required. The Company does not believe its adoption will have a material impact on its consolidated results of operations or financial position.
In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a Replacement of APB No. 20 and FAS No.3”. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error calculations. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application is impracticable. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively. Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is required to be adopted for reporting periods beginning after December 15, 2005. The Company does not believe its adoption will have a material impact on its consolidated results of operations or financial position.
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2. Inventories
Inventories were as follows:
| | February 28, 2005 | | August 31, 2005 | | February 28, 2006 | |
Finished goods | | $ | 7,135,000 | | $ | 6,097,000 | | $ | 7,787,000 | |
Work in process | | 234,000 | | 199,000 | | 200,000 | |
Materials and parts | | 7,844,000 | | 6,369,000 | | 8,411,000 | |
| | $ | 15,213,000 | | $ | 12,665,000 | | $ | 16,398,000 | |
3. Assets held for sale
The net book values of assets held for sale were:
| | August 31, 2005 | | February 28, 2006 | |
Vacant real estate | | $ | 2,373,000 | | $ | 1,961,000 | |
Machinery & equipment | | 85,000 | | 6,000 | |
Working capital of discontinued operations | | 2,361,000 | | — | |
Total assets held for sale | | $ | 4,819,000 | | $ | 1,967,000 | |
The working capital of discontinued operations at August 31, 2005 was net of liabilities held for sale of $1,280,000. See Note 6 below.
4. Earnings per share
Basic earnings per share (“EPS”) was computed by dividing net income by the weighted average number of common shares outstanding during each 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 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 314,000 shares of common stock as of February 28, 2005 and 836,693 shares of common stock as of February 28, 2006 were excluded from the calculation of equivalent shares, 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”:
| | Three months ended February 28 | | Six months ended February 28 | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
Numerators: | | | | | | | | | |
| | | | | | | | | |
Net income | | $ | 276,000 | | $ | 698,000 | | $ | 886,000 | | $ | 1,349,000 | |
| | | | | | | | | |
Denominators: | | | | | | | | | |
| | | | | | | | | |
Weighted average shares outstanding- basic | | 4,002,000 | | 3,893,000 | | 3,993,000 | | 3,910,000 | |
Impact of common shares assumed to be issued under stock option plans | | 77,000 | | 33,000 | | 78,000 | | 33,000 | |
Weighted average shares outstanding- diluted. | | 4,079,000 | | 3,926,000 | | 4,071,000 | | 3,943,000 | |
| | | | | | | | | | | | | |
8
5. Stock-based compensation
Effective September 1, 2005, the Company adopted SFAS No. 123R, “Share-Based Payment,” which revised SFAS No. 123, “Accounting for Stock-Based Compensation”, and superseded Accounting Principals Board Opinion (“APB”) No. 25 “Accounting for Stock Issued to Employees”, and its related interpretations. SFAS 123R requires that new, modified and unvested share-based payment transactions with employees, such as stock options, be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. The Company has elected to use the modified prospective method, under which previously reported financial results are not restated to reflect the stock-based compensation formerly recognized in the required pro forma footnote disclosures.
The Company deemed it to be in the best interests of the Company and its stockholders to minimize the compensation expense that would be required to be recognized under SFAS No. 123R for “out-of -the-money” or “underwater” stock options. Consequently, in the fiscal year ended August 31, 2005, the Company accelerated the vesting of most of the then outstanding stock options that contained exercise prices greater than the market trading price at that time. As a result of this early vesting, employee compensation expense of $380,000, net of tax, was recognized in the pro forma footnote disclosure for the year ended August 31, 2005 and will not be recognized in the reported results of operations in the periods following the adoption of SFAS No. 123R.
As a result of adopting SFAS 123R, the Company recognized compensation expense for stock options of $28,000 in the three month period ended February 28, 2006 and $ 43,000 in the six month period ended February 28, 2006, net of tax benefit. Prior to the adoption of SFAS 123R, the Company applied the provisions of APB No. 25 and Financial Interpretation No. 44. Consequently, no compensation expense was recognized for stock options in the three-month and six-month periods ended February 28, 2005.
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 SFAS No. 123 as of September 1, 2004. Since the amounts attributable to forfeitures of stock options for the three and six month periods ended February 28, 2005 exceeded the amount allocable to expense for stock option grants, the pro forma impact of expensing stock options was a net benefit for each of the periods. The fair value estimate was computed using the Black-Scholes option pricing model.
| | Three months ended | | Six months ended | |
| | February 28, 2005 | | February 28, 2005 | |
Net income | | $ | 276,000 | | $ | 886,000 | |
Share-based compensation included in net income | | — | | — | |
Pro forma impact of expensing stock options net of the effect of tax of $42,000 and $22,000 | | 68,000 | | 37,000 | |
| | $ | 344,000 | | $ | 923,000 | |
| | | | | |
Earnings per share: | | | | | |
| | | | | |
As reported: | | | | | |
Basic | | $ | 0.07 | | $ | 0.22 | |
Diluted | | $ | 0.07 | | $ | 0.22 | |
| | | | | |
Pro forma: | | | | | |
Basic | | $ | 0.09 | | $ | 0.23 | |
Diluted | | $ | 0.08 | | $ | 0.23 | |
6. Discontinued operations
As previously disclosed, in September 2005, the Company sold certain assets and liabilities of its former Electrical Components segment at their book value to an investor group for $300,000 cash and a $2,280,000 note due in August 2006, and leased related equipment and facilities to the investor group for five years. During the second fiscal quarter, the Company sold the note, the leased fixed assets and substantially all of the remaining assets of Plastron, other than real estate, for $5,698,000, the aggregate book value. The proceeds were used to pay off related equipment financing and other debt. Additional assets, principally real estate located in Illinois, are reported in assets held for sale. The financial results of Plastron, which were formerly reported as the Electrical Components segment, have been excluded from results of operations for the periods presented herein and have been presented as a discontinued operation.
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7. Supplemental cash flow information
| | Six months ended February 28 | |
| | 2005 | | 2006 | |
Cash paid during the period: | | | | | |
Interest | | $ | 1,111,000 | | $ | 1,053,000 | |
Income taxes | | $ | 1,488,000 | | $ | 1,072,000 | |
Non-cash financing activity: | | | | | |
Common stock issued to 401(k) Plan | | $ | 261,000 | | $ | — | |
Dividend declared | | $ | — | | $ | 234,000 | |
8. Segment information
The Company has three reportable segments identified by differences in products and distribution channels. The accounting policies of the segments are the same as those described in the summary of significant accounting polices described in the Company’s Annual Report on Form 10-K for the year ended August 31, 2005. The Company’s operations are reported in the following business segments:
Optical Components. In its Optical Components segment, Summa designs and manufactures plastic prismatic lenses, reflectors and diffusers and other plastic products, which are used in commercial and industrial lighting fixtures 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.
Irrigation Components. In its Irrigation Components segment, Summa designs and manufactures plastic injection-molded fittings, micro-sprinklers, emitters, valves, filters and accessories, extruded tubing and other plastic products for drip irrigation systems used in agriculture, commercial landscape and other applications.
Formerly, the Company also operated in an Electrical Components segment which was discontinued in the first quarter of fiscal 2006 and has been reported as discontinued operations at August 31, 2005 and for the periods ended February 28, 2006.
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Financial information by reportable business segment follows:
| | Three months ended February 28 | | Six months ended February 28 | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
External sales | | | | | | | | | |
Optical components | | $ | 13,718,000 | | $ | 13,973,000 | | $ | 27,868,000 | | $ | 28,496,000 | |
Material handling components | | 6,206,000 | | 7,187,000 | | 12,615,000 | | 13,712,000 | |
Irrigation components | | 6,762,000 | | 6,350,000 | | 11,691,000 | | 13,042,000 | |
Consolidated | | $ | 26,686,000 | | $ | 27,510,000 | | $ | 52,174,000 | | $ | 55,250,000 | |
| | | | | | | | | |
Inter-segment sales | | | | | | | | | |
Optical components | | $ | 18,000 | | $ | 34,000 | | $ | 309,000 | | $ | 34,000 | |
Material handling components | | — | | — | | — | | — | |
Irrigation components | | — | | — | | — | | — | |
Other | | (18,000 | ) | (34,000 | ) | (309,000 | ) | (34,000 | ) |
Consolidated | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | | |
Total sales | | | | | | | | | |
Optical components | | $ | 13,736,000 | | $ | 14,007,000 | | $ | 28,177,000 | | $ | 28,530,000 | |
Material handling components | | 6,206,000 | | 7,187,000 | | 12,615,000 | | 13,712,000 | |
Irrigation components | | 6,762,000 | | 6,350,000 | | 11,691,000 | | 13,042,000 | |
Other | | (18,000 | ) | (34,000 | ) | (309,000 | ) | (34,000 | ) |
Consolidated | | $ | 26,686,000 | | $ | 27,510,000 | | $ | 52,174,000 | | $ | 55,250,000 | |
| | | | | | | | | |
Operating income (loss) | | | | | | | | | |
Optical components | | $ | 1,228,000 | | $ | 908,000 | | $ | 2,510,000 | | $ | 2,712,000 | |
Material handling components | | 370,000 | | 1,072,000 | | 1,080,000 | | 1,795,000 | |
Irrigation components | | 260,000 | | 323,000 | | 418,000 | | 486,000 | |
Other | | (492,000 | ) | (667,000 | ) | (936,000 | ) | (1,341,000 | ) |
Consolidated | | $ | 1,366,000 | | $ | 1,636,000 | | $ | 3,072,000 | | $ | 3,652,000 | |
| | February 28, 2005 | | August 31, 2005 | | February 28, 2006 | |
Assets | | | | | | | |
Optical components | | $ | 29,818,000 | | $ | 28,668,000 | | $ | 29,973,000 | |
Material handling components | | 22,543,000 | | 23,270,000 | | 25,252,000 | |
Irrigation components | | 15,230,000 | | 13,046,000 | | 13,539,000 | |
Assets held for sale | | — | | 6,099,000 | | 1,967,000 | |
Other | | 15,805,000 | | 8,952,000 | | 5,733,000 | |
| | | | | | | |
Consolidated | | $ | 83,396,000 | | $ | 80,035,000 | | $ | 76,464,000 | |
Interest expense and income taxes are not shown in the preceding table, as they are not fully allocated by segment. “Other” includes inter-company eliminations, corporate and other expenses and assets not allocated by segment.
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, 2005. 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, 2005.
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Summa manufactures plastic products for diverse commercial and industrial markets. Through its three 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, micro-sprinklers, emitters, valves, filters and tubing for irrigation systems used in agriculture, commercial landscape and other applications; and other molded and extruded plastic components for diverse industries.
Significant events and developments during the second quarter of fiscal 2006, ended February 28, 2006
As previously announced, during the first quarter of fiscal 2006, the Company sold certain current assets of its subsidiary, Plastron Industries, Inc., at their book value and leased certain retained fixed assets of Plastron to an investor group. Plastron comprised Summa’s former Electrical Components segment, which is now reported as a discontinued operation. A substantial portion of the consideration for the assets sold was in the form of a promissory note. During the second fiscal quarter, the Company sold the note and the leased fixed assets for $5.7 million in cash to a private company. Summa did not report a significant gain or loss as a result of this transaction. The transaction accelerated the usability of certain deferred tax assets, which can offset approximately $2 million of current income tax obligations. The proceeds from this transaction were used to reduce debt. Plastron real estate remains held for sale.
In recent periods, plastic resin, the principal raw material used by the Company, has experienced extreme price inflation and volatility, as a result of a number of factors including petrochemical plant interruptions related to hurricanes in the Gulf of Mexico. The price volatility was particularly evident with respect to polyethylene, a primary material used in the Irrigation Components segment. During the second fiscal quarter, price volatility abated and the Company now has passed through all the price increases resulting from raw material cost increases, to the extent possible. Sales of certain polyethylene based products manufactured in the Irrigation Components segment were artificially low in the second quarter of fiscal 2006 as a result of higher than normal sales of those products in the first quarter of fiscal 2006 due to speculative purchases to hedge against anticipated future higher prices for resin.
Results of Operations
The following table sets forth certain information regarding continuing operations, derived from Summa’s unaudited condensed consolidated statements of income, as a percent of sales for the three month and six month periods ended February 28, 2005 and February 28, 2006, and the Company’s effective income tax rate during those periods:
| | Three months ended February 28 | | Six months ended February 28 | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
Net sales | | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Cost of sales | | 77.7 | % | 76.2 | % | 76.3 | % | 75.9 | % |
Gross profit | | 22.3 | % | 23.8 | % | 23.7 | % | 24.1 | % |
S,G & A and other expenses | | 17.2 | % | 17.9 | % | 17.9 | % | 17.9 | % |
(Gain) on sale of real estate | | — | % | — | % | (0.1 | )% | (0.4 | )% |
Operating income | | 5.1 | % | 5.9 | % | 5.9 | % | 6.6 | % |
Interest expense, net | | 1.5 | % | 1.9 | % | 1.4 | % | 1.7 | % |
Income before tax and minority interest | | 3.6 | % | 4.0 | % | 4.5 | % | 4.9 | % |
| | | | | | | | | |
Effective tax rate | | 35.6 | % | 36.2 | % | 35.5 | % | 35.9 | % |
Quarter ended February 28, 2006 compared to the quarter ended February 28, 2005
Sales for the second quarter ended February 28, 2006, increased $824,000, or 3%, primarily due to the effects of price increases (approximately $1,200,000), partially offset by intentionally eliminated unprofitable sales (approximately $300,000) and lower unit sales due to speculative buying in the first quarter by Irrigation Components segment customers. Sales increased $255,000, or 2%, in the Optical Components segment, primarily due to price increases (approximately $500,000), substantially offset by business lost due to competitive pricing; increased $981,000, or 16%, in the Material Handling Components segment, primarily due to strength in core markets and price increases (approximately $200,000);
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and decreased $412,000, or 6%, in the Irrigation Components segment, primarily due to speculative buying in the first quarter, and intentionally eliminated unprofitable sales (approximately $300,000), partially offset by price increases (approximately $500,000).
Gross profit for the second quarter increased $615,000, or 10%, from the comparable prior year period, primarily due to increased sales, partially offset by increased material costs. Gross margin increased from 22.3% to 23.8%, primarily due to resin price increases passed through to customers, favorable business mix, improved labor efficiency and management cost reduction initiatives.
Operating expenses for the second quarter increased $345,000, or 8%, from the comparable prior year period, primarily due to the benefit of $186,000 in the prior year second quarter from partial collection of a fully reserved note receivable, unusually high recruiting and consulting expense, the inclusion of $45,000 of stock based compensation in the most recent quarter as a result of the adoption of SFAS 123R and increased variable sales expenses related to higher sales, partially offset by management cost reduction initiatives. As a percent of sales, operating expenses increased from 17.2% to 17.9%.
Operating income for the second quarter was $1,636,000, which was $270,000, or 20%, higher than in the comparable prior year period. By segment, operating income decreased $320,000 in the Optical Components segment, primarily due to price pressure and unfavorable product mix; increased $702,000 in the Material Handling Components segment, primarily due to the effects of higher sales volume and continuing benefits of a previous facility consolidation; and increased $63,000 in the Irrigation Components segment, despite lower sales volume, primarily due to favorable product mix and management cost reduction initiatives. Operating margin for the quarter increased from 5.1% in the second quarter of fiscal 2005 to 5.9% in the second quarter of fiscal 2006, due to the factors discussed above.
Net interest expense for the quarter ended February 28, 2006 was $524,000, $116,000 higher than in the prior year second quarter, due to the effects of higher average interest rates in the most recent period and debt prepayment costs related to the sale of Plastron assets, partially offset by lower average debt levels during the most recent quarter. The weighted average interest rate was 6.1% on $26.8 million in debt at February 28, 2006, versus 5.0% on $35.6 million in debt a year earlier.
The provision for income taxes in the second quarter of fiscal 2006 was $402,000, $61,000 higher than in the prior year second quarter, due to higher income before taxes and a higher tax rate. The effective income tax rate was 36.2% in the most recent quarter versus 35.6% a year earlier.
Six months ended February 28, 2006 compared to the six months ended February 28, 2005
Sales for the six months ended February 28, 2006 increased $3,076,000, or 6%, primarily due to price increases (approximately $2,300,000) and increases in unit sales, partially offset by the intentionally eliminated unprofitable sales (approximately $300,000). Sales increased $628,000, or 2%, in the Optical Components segment due to price increases (approximately $1,200,000), partially offset by business lost due to competitive pricing; increased $1,097,000, or 9%, in the Material Handling Components segment, primarily due to strength in core markets and price increases (approximately $200,000); and increased $1,351,000, or 12%, in the Irrigation Components segment, primarily due to price increases (approximately $900,000), increased sales to existing customers and favorable market conditions, partially offset by intentionally eliminated unprofitable sales (approximately $300,000).
Gross profit for the six months ended February 28, 2006 increased $955,000, or 8%, from the comparable prior year period, primarily due to increased sales. Gross margin increased from 23.7% to 24.1%, primarily due to the effects of higher sales volume and favorable business mix.
Operating expenses for the six months ended February 28, 2006, excluding a $205,000 gain from the sale of excess real estate in the most recent six month period, versus a $43,000 gain from a real estate sale in the comparable prior year period, increased $537,000, or 6%, from the comparable prior year period, primarily due to the benefit of $186,000 from partial collection in the comparable prior year period of a fully reserved note receivable, unusually high recruiting and consulting expense in the most recent six month period, the inclusion of $70,000 of stock based compensation in the most recent six month period as a result of the adoption of SFAS 123R and increased variable sales expenses related to higher sales, partially offset by management cost reduction initiatives. As a percent of sales, operating expenses were unchanged at 17.9%.
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Operating income for the six months ended February 28, 2006, including a gain on sales of real estate which was $162,000 greater than in the prior year six month period, was $3,652,000, which was $580,000, or 19%, higher than in the comparable prior year period. By segment, operating income increased $202,000 in the Optical Components segment, primarily due to a gain of $205,000 on the sale of an excess building, implementation of price increases and management cost reduction initiatives, partially offset by unusually high recruiting and consulting expense; increased $715,000 in the Material Handling Components segment, primarily due to the effects of higher sales volume and continuing benefits of a previous facility consolidation; and increased $68,000 in the Irrigation Components segment, primarily due to the effects of higher sales volume. Operating margin increased to 6.6% in the six months ended February 28, 2006 from 5.9% in the comparable prior year period, due to the factors discussed above.
Net interest expense for the six months ended February 28, 2006 was $972,000, $255,000 higher than in the comparable prior year period, due to the effects of higher average interest rates in the most recent period and debt prepayment costs related to the sale of Plastron assets, partially offset by lower average debt levels during the most recent period.
The provision for income taxes for the six months ended February 28, 2006 was $963,000, $127,000 higher than in the comparable prior year period, due to higher income before taxes. The effective income tax rate was 35.9% in the most recent six month period versus 35.5% a year earlier.
The Company’s backlog of unfilled orders, believed to be firm, was $6,940,000 at February 28, 2005, $5,592,000 at August 31, 2005 and $6,656,000 at February 28, 2006. Because the time between entering an order and shipping the product and 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 $20,384,000 at February 28, 2005; $19,075,000 at August 31, 2005 and $20,959,000 at February 28, 2006.
Summary of the Company’s debt at February 28, 2006:
| | | | | | | | Fiscal Year Due | |
Description of Debt | | Balance | | Weighted
Average
Interest
Rate | | Additional
Availability | | 2006 | | 2007 | | 2008 | | 2009 | | 2010 and thereafter | |
Revolving line of credit | | $ | 13,370,000 | | 6.2 | % | $ | 6,475,000 | | $ | — | | $ | 13,370,000 | | $ | — | | $ | — | | $ | — | |
Bank term loan | | 3,065,000 | | 4.7 | % | — | | 493,000 | | 1,022,000 | | 1,071,000 | | 479,000 | | — | |
Real estate and other loans | | 10,362,000 | | 6.5 | % | — | | 382,000 | | 1,926,000 | | 730,000 | | 416,000 | | 6,908,000 | |
Total debt | | $ | 26,797,000 | | 6.1 | % | $ | 6,475,000 | | $ | 875,000 | | $ | 16,318,000 | | $ | 1,801,000 | | $ | 895,000 | | $ | 6,908,000 | |
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.
Sources and Uses of Funds. Net cash used in operating activities for the first six months of fiscal 2006 was $577,000 compared to $529,000 used in operating activities for the first six months of fiscal 2005. The decrease was primarily due to a larger increase in inventory than in the comparable prior year period, substantially offset by higher net income, a smaller increase in accounts receivable in the most recent six month period than in the prior year and increases in accounts payable and accrued liabilities in the most recent period versus decreases in the prior year period. The increase in inventory in the most recent period was primarily due to a level loaded manufacturing initiative in the seasonal irrigation business, price inflation, selected increases to improve customer service levels and the accumulation of excess regrind at an extrusion plant. Increases in accounts payable were primarily related to inventory increases. Net cash provided by investing activities was $5,101,000 in the six months, versus $4,244,000 used in the first six months of fiscal 2005, primarily due to an unusually large investment in a new facility in the Material Handling Components segment and investments in equipment in the first half of fiscal 2005 and substantially higher proceeds from sales of assets and the sale of the note receivable in the first six months of fiscal 2006. Net cash of $4,652,000 was used in financing activities for the six months of fiscal 2006, compared to $4,455,000 in net cash provided in the prior year first six months. The change primarily represents retirement of debt in the most recent period, versus increase in debt in the prior year associated with the new facility investment. Additionally, the Company used $448,000 for the repurchase of stock in the open market and $471,000 for the payment of dividends in the first six months of fiscal 2006 versus $5,000 for stock repurchases and $240,000 for dividends in the first six months of fiscal 2005.
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In October 2004, the Company announced a plan to repurchase up to $2,000,000 of its Common Stock with no time limit (the “2005 Buy Back”). As of February 28, 2006, the status of the 2005 Buy Back was as follows:
| | Shares repurchased | | Average cost per share | | Repurchase cost | |
Prior to December 2005 | | 84,796 | | $ | 8.17 | | $ | 693,000 | |
| | | | | | | |
December 2005 | | 30,051 | | $ | 7.84 | | $ | 235,000 | |
January 2006 | | 5,000 | | $ | 7.77 | | $ | 39,000 | |
February 2006 | | 47 | | $ | 7.81 | | — | |
Total for the quarter | | 35,098 | | $ | 7.83 | | $ | 274,000 | |
| | | | | | | |
Total for the plan | | 119,894 | | $ | 8.07 | | $ | 967,000 | |
The cost per share includes commissions where applicable.
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. In addition, funds may be generated from a limited number of sales of certain non-core assets of the Company. The Company has a strategy which includes growth 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 3,892,628 shares were outstanding at February 28, 2006 and 5,000,000 shares of “blank check” preferred stock authorized, of which none was outstanding at February 28, 2006. The Company could issue additional shares of common or preferred stock or enter into new or revised borrowing arrangements to raise funds.
Off-Balance Sheet Arrangements
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 28, 2006 are approximately as follows:
Fiscal Year | | Amount | |
2006 | | $ | 542,000 | |
2007 | | $ | 915,000 | |
2008 | | $ | 787,000 | |
2009 | | $ | 573,000 | |
2010 | | $ | 18,000 | |
2011 and thereafter | | — | |
Critical Accounting Policies and Estimates
The foregoing 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:
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Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. The Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future operating cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell.
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, is 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.
Valuation of Inventory. The Company values its inventories at the lower of cost or market using the first-in, first-out (FIFO) method. The Company records adjustments to the value of inventory based upon obsolescence and changes in market value as permanent changes in the carrying amount of such inventory until its ultimate sale or other disposition. The Company has evaluated the current level of inventories considering historical sales and other factors and, based on this evaluation, has recorded adjustments to cost of goods sold to adjust inventory to net realizable value. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer demand or competition differ from expectations.
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.
Goodwill. Goodwill represents the excess of purchase price over fair value of net assets acquired. Goodwill is tested for impairment annually in the fourth quarter, after completion of an annual planning process, or earlier if events occur which require an impairment analysis to be performed. With respect to each reporting unit which has any goodwill, the fair value is determined using traditional valuation methodology, and compared with its carrying value. If the fair value exceeds the unit’s carrying value, goodwill of the reporting unit is considered not to be impaired. If the unit’s carrying value exceeds its fair value, assets of the unit are individually valued to determine the implied fair value of the reporting unit goodwill. Impairment loss is recognized to the extent that the carrying value of the goodwill exceeds its implied fair value. 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.
Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for tax credit carryforwards and then assessed (including the anticipation of future income) to determine the likelihood of realization. Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Accounting for Stock Options. The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The Company uses the Black-Scholes model to calculate the fair value and is required to exercise judgment and make assumptions concerning the expected term, the expected volatility, and the expected dividends. If actual results differ significantly from these estimates, stock-based compensation expense and results of operations could be impacted. The Company has elected to use the modified prospective method, under which previously reported financial results are not restated to reflect the stock-based compensation expense formerly recognized in pro forma footnote disclosures and could affect comparability of historical results to results reported subsequent to the adoption of SFAS No. 123R.
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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, 2005. The Company has no market risk sensitive instruments entered into for trading purposes.
CONTROLS AND PROCEDURES
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.
The Company is currently not an accelerated filer under applicable rules and regulations of the Securities and Exchange Commission and, as such, has not been required to comply with all of the regulations recently adopted by the Commission, particularly the requirement that the Company include in its Annual Report on Form 10-K a report of management and accompanying auditor’s report on the Company’s internal control over financial reporting (“404 reporting”). Compliance with the 404 reporting rules and regulations has been extended for non-accelerated filers to fiscal years ending on or after July 15, 2007.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company encounters lawsuits from time to time in the ordinary course of business and, at February 28, 2006, 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.
Item 1A. Risk Factors
As of the date of this filing, there has been no material change to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, other than the Company believes that the risk associated with the following risk factor has been substantially eliminated due to the sale of the remaining assets (including the promissory note but excluding real estate) of this discontinued operation during the quarter:
“Discontinued Operations. In September 2005, the Company sold certain current assets and current liabilities of its former Electrical Components segment at their book value and agreed to lease certain retained fixed assets of that Segment, which is now reported as a discontinued operation. Summa does not expect to report a material gain or loss as a result of the transaction. However, a substantial portion of the consideration for the assets sold was in the form of a promissory note due August 30, 2006 and various leases of equipment and real property. In the event the buyer fails to fulfill its obligations under the note and/or the asset leases, the Company will incur significant legal expenses and a substantial loss in reclaiming and liquidating the assets.”
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In October 2004, the Company announced a plan to repurchase up to $2,000,000 of its Common Stock with no time limit (the “2005 Buy Back”). As of February 28, 2006, the status of the 2005 Buy Back was as follows:
| | Shares repurchased | | Average cost per share | | Repurchase cost | |
Prior to December 2005 | | 84,796 | | $ | 8.17 | | $ | 693,000 | |
| | | | | | | |
December 2005 | | 30,051 | | $ | 7.84 | | $ | 235,000 | |
January 2006 | | 5,000 | | $ | 7.77 | | $ | 39,000 | |
February 20006 | | 47 | | $ | 7.81 | | — | |
Total for the quarter | | 35,098 | | $ | 7.83 | | $ | 274,000 | |
| | | | | | | |
Total for the plan | | 119,894 | | $ | 8.07 | | $ | 967,000 | |
The cost per share includes commissions where applicable.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company’s Annual Meeting of Stockholders held on January 26, 2006, incumbent director David McConaughy and nominee Robert L. Underwood were 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. McConaughy received 3,369,877 votes in his favor, with 165,117 votes withheld, and Messr. Underwood received 3,381,677 votes in his favor, with 153,317 votes withheld. There were no broker non-votes. Incumbent directors William R. Zimmerman, Michael L. Horst, James R. Swartwout, 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.
Item 5. Other Information
None.
Item 6. Exhibits
31.1 Section 302 Certification
32.1 Section 906 Certification
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 6, 2006.
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 |
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