**U. S. Securities andExchange Commission**

**Washington,D.C. 20549**

 

**FORM 10-K/A**

**(AmendmentNo. 1)**

 
| **ý**                     | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------------------------------|-------------------------------------------------------------------------------------------|
|                           |                                                                                      |
| **For  the fiscal year ended** |
|                           |                                                                                      |
| **August  31, 2002**           |
|                           |                                                                                      |
| **o**                          | **TRANSITION REPORT UNDER SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**   |

 

**Forthe transition periodfrom   N/A   to   N/A**

 

**Commissionfile no. 1-7755**

 

| **Summa Industries**                                                                           |
|------------------------------------------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)                                        |
|                                                                                           |
| **Delaware**                                                                                   |   | **95-1240978** |
| (State or other  jurisdiction of  incorporation or organization)                               |   | (I.R.S. employer  identification number) |
|                                                                                           |   |   |
| **21250  Hawthorne Boulevard, Suite 500, Torrance, California 90503  www.summaindustries.com** |
| (Address of  principal executive offices, including zip code)                                  |
|                                                                                           |
| Registrant’s  telephone number:  **(310) 792-7024**                                  |

 

Securitiesregistered pursuant to Section 12(b) of the Exchange Act:  **None**

Securitiesregistered pursuant to Section 12(g) of the Exchange Act:

 

**CommonStock, $.001 par value**

(Title of class)

 

Indicate by checkmarkwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the preceding 12 months (or forsuch 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 checkmark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and disclosure will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K.  o

 

The aggregate marketvalue of registrant’s Common Stock held by non-affiliates as of October 22, 2002,based upon the closing price of a share of the Common Stock on The NasdaqNational Market on that date, was $33,274,000. The number of shares of registrant’s Common Stock outstanding as ofOctober 22, 2002 was 4,422,644.

 

DOCUMENTS INCORPORATED BYREFERENCE: Portions of registrant’s Proxy Statement for the Annual Meeting ofStockholders to be held on January 8, 2003 to be filed with the Commission notlater than 120 days after the end of the fiscal year covered by this AnnualReport on Form 10-K are incorporated by reference in Part III hereof.

 

 

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**PARTI**

 

**EXPLANATORY NOTE**

** **

Summa Industries herebyamends its Annual Report on Form 10-K for the fiscal year ended August 31, 2002(the “Form 10-K”) (filed on November 1, 2002) as set forth in this Annual Reporton Form 10-K/A (Amendment No. 1) (the “Form 10-K/A”).  The purpose of this amendment to the Form 10-K is to report fivebusiness segments instead of the one segment previously reported.  This Form 10-K/A includes amendments forsegment disclosure to the following sections of the Form 10-K: Business;Properties; Management’s Discussion and Analysis of Financial Condition andResults of Operations; and Note 17 (Segment Information) of the Notes toConsolidated Financial Statements.

 

**ITEM 1.          BUSINESS.**

 

##### **General**

 

Summa Industries (“Summa”or the “Company”) was incorporated as Southern California Plastics Co. in theState of California in 1942 and subsequently reincorporated in the State ofDelaware in 1998. Since 1946, Summa has been a publicly-owned corporation whoseCommon Stock is registered under Section 12(g) of the Securities Exchange Actof 1934, as amended (the “Exchange Act”), and is currently traded on The NasdaqNational Market under the symbol “SUMX”. Growth has been achieved byacquisition, development of new products and expansion of the Company’s salesorganization.  Through its fivereportable segments described below, Summa designs and manufacturesinjection-molded and formed plastic optical components for original equipmentmanufacturer (“OEM”) customers in the lighting industry; molded plastic modularconveyor belt and chain for the food processing industry; plastic fittings,valves, filters and tubing for the agricultural irrigation industry;****molded plastic coil forms (“bobbins”) foruse in transformers, motors, relays and switches; and other molded and extrudedplastic components for diverse industries.

 

The principal executiveoffices of the Company are located at 21250 Hawthorne Boulevard, Suite 500,Torrance, California 90503; its telephone number is (310) 792-7024; itsfacsimile number is (310) 792-7079; and its website is www.summaindustries.com.

 

**Strategy**

 

Summa has a strategy ofgrowth through acquisitions of profitable manufacturing companies withproprietary products or protected market niches, with the intent of expandingits operations by acquiring additional product offerings, enhancing grossprofit margins, increasing combined sales so that general and administrativecosts would constitute a smaller percentage of total revenues, enhancingoverall profitability, and increasing the market value of Summa’s Common Stockto provide liquidity and value for its stockholders by increasing the number ofoutstanding shares in the public float and the trading activity in the stock.In 1995, the Company refined the strategy to focus on manufacturers of plasticcomponents for industrial and commercial markets.   In general, Summa’s corporate staff does not manage operationsof acquired subsidiaries on an ongoing basis, but provides planning, financialand legal oversight, and financing; conducts the acquisition program andbusiness development activities; and manages the investor relations, riskmanagement and employee benefit programs.  Corporate charges are assessed on a basis established annually, relatedto asset utilization by each operating subsidiary.

 

**Historyof Acquisitions — Continuing Operations **

 

***KVP Falcon Plastic Belting, Inc. ***InJuly 1993, Summa acquired all of the outstanding capital stock of KVP Systems,Inc., a California corporation, renamed KVP Falcon Plastic Belting, Inc. in May1998 after its acquisition of Falcon Belting, Inc. described below (“KVP”),which designs, manufactures and markets injection-molded plastic conveyorbelting for the food processing industry. Belts which can operate on a curvewere pioneered by KVP.

 

***LexaLite International Corporation. ***In November 1996, Summa acquired all of theoutstanding capital stock of LexaLite International Corporation, a Delawarecorporation (“LexaLite”), which manufactures injection-molded plastic prismaticcomponents for lighting fixtures.

 

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***Calnetics Corporation. ***InOctober 1997, Summa acquired all of the outstanding capital stock of CalneticsCorporation, a California corporation (“Calnetics”).  The principal operating subsidiary of Calnetics was AgriculturalProducts, Inc., which manufactures plastic fittings, filters, tubing andaccessories, primarily for agricultural irrigation.

 

***Falcon Belting, Inc. ***In May1998, Summa acquired all of the outstanding capital stock of Falcon Belting,Inc., an Oklahoma corporation (“Falcon”), which  manufactures modular plastic conveyor belting used in foodprocessing industries. The operations of Falcon were consolidated with KVP.

 

***Canyon Mold. ***In September 1998, Summa acquiredsubstantially all of the assets of Canyon Mold, Inc., a California corporation(“Canyon”).  The operations of Canyonwere relocated to and integrated into the Company’s molding facility in Corona,California.  Canyon had provided tooldesign and manufacturing services almost exclusively for the Company.

 

***Plastron Industries, Inc.***  In March1999, Summa acquired substantially all of the assets of Plastron Industries,L.P. (“Plastron”), which manufactures molded plastic coil forms (“bobbins”) foruse in transformers, motors, relays and switches.

 

***Broadview Injection Molding, Inc.***  In September 1999, Summa acquired substantially all of the assets ofBroadview Injection Molding Co., Inc. (“Broadview”), which manufacturers moldedplastic coil forms (“bobbins”) for use in transformers, motors, relays andswitches.  The operations of Broadviewwere consolidated with Plastron.

 

***Yarbrough-Timco.  *** In May 2000, Summa acquired substantially all of the assets ofYarbrough-Timco (“Yarbrough”), which is a distributor and manufacturer ofmolded plastic coil forms (“bobbins”) for use in transformers, motors, relaysand switches.  The operations ofYarbrough were consolidated with Plastron.

 

***Plastic Specialties, Inc. ***InOctober 2000, Summa acquired all of the outstanding capital stock of PlasticSpecialties, Inc. (“PSI”), which manufactures formed and extruded plasticcomponents for lighting fixtures.

 

***Ram Belts & Chains. ***InDecember 2000, Summa acquired substantially all of the assets of the Ram Belts& Chains division (“Ram”) of Rainbow Industrial Products Corp., whichmanufactures injection molded plastic chain and conveyor belting for the foodprocessing and beverage industries.

 

***Genesta. ***In January  2002, Summa acquired substantially all of the assets of theGenesta Manufacturing division (“Genesta”) of Pavaco Plastics, Inc.  Genesta manufactures extruded sheet andprofiles and thermoformed components for the lighting and other industries.  The primary reasons for the acquisition werethat the acquisition of Genesta increased the Company’s North American marketshare, provided entrée to new markets, provided a low cost manufacturinglocation and provided other manufacturing cost and sales and distributionsynergies.

 

In evaluating futureacquisitions, Summa will endeavor to identify target companies that manufactureplastic components which have a proprietary advantage because of patentprotection, brand recognition, unique manufacturing processes or othercomparable characteristics.  It isanticipated that target companies typically will have been profitable in recentperiods, particularly if the acquisition is to be made through the issuance ofSumma Common Stock, so that the acquisition will not have an immediate dilutiveeffect on post-acquisition, consolidated earnings per share.

 

Although the existingmanagement of an acquired company typically would be retained to manage day today operations, it is anticipated that the business of the acquired companycould be expanded with the support of Summa’s corporate staff.  Any such expansion could place a significantstrain on Summa’s management and resources, require Summa to implementadditional operating, marketing and financial controls, and necessitate thatSumma hire additional personnel, which could have a significant adverse effecton Summa’s operating results.  It isalso likely that any such acquisition would require Summa to raise additionalcapital to finance the acquisition or provide working capital to the acquiredcompany.  If this additional capitalwere raised through debt financings, Summa would incur substantial additionalinterest expense; sales of additional equity to raise the needed capital woulddilute, on a pro-rata basis, the percentage ownership of all holders of SummaCommon Stock.  There can, however, be noassurance that sufficient financing will be available to Summa to continue its

 

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acquisition strategy onterms and conditions that are acceptable to Summa.

 

Continued implementationof the Company’s strategy will depend to a significant extent upon the abilityof Summa’s management to identify appropriate candidates for acquisition,negotiate deals acceptable to the Board of Directors and stockholders of theCompany, obtain acceptable acquisition prices, and supervise the management ofoperating subsidiaries.  There can be noassurance that the terms upon which a prospective company can be acquired willbe favorable to Summa, or that Summa will not encounter unforeseen difficultiesand liabilities in connection with any such acquisition.

 

##### **Segmentsand Products**

 

Summa manufacturesdiverse plastic products in five reportable segments.  From fiscal 1999 to fiscal 2001, the Company reported resultsfrom two segments -“Engineered Polymer Components” and “Extruded PlasticProducts,” the principal differences being the channels of distribution and theproduction processes involved.  Thebusiness evolved to the point where the business attributes which resulted in thatsegmentation no longer met the aggregation criteria necessary to report on atwo-segment basis.  In its initialfiling of the Form 10-K, the business was reported as a single segment.  After further analysis, it has beendetermined that the Company has five reportable segments as described below,and prior period disclosures in this Form 10-K/A regarding segments have beenrestated to conform to this presentation.

 

***Optical Components.***  In itsOptical Components segment, Summa designs and manufactures plastic prismaticlenses, refractors and reflectors and other plastic products, which are used incommercial and industrial lighting fixtures, and in display, signage,architectural and other applications. Products, many of which are patented, are injection-molded usingspecially compounded lighting grade polycarbonate or acrylic, extruded fromsimilar materials, or thermoformed from sheet extruded by the OpticalComponents Segment.  The principaladvantages of Summa’s injection-molded plastic components over more traditionalglass or metal components are superior optical performance, lighter weight, andin certain instances, lower cost.

 

***Material Handling Components.**** *In its Material Handling Components segment, Summadesigns and manufactures  engineered plasticcomponents which form conveyer belts and chains and other plasticproducts.  The material handlingcomponents,  many of which are patented,are constructed of non-toxic, non-corrosive plastic materials and are designedto be easily cleaned, meeting FDA or similar requirements for food contactapplications.   The components do notrequire lubrication and thus offer the advantage of operation free fromcontaminants such as grease, oil and metal particles.  Because these components are lightweight, they require lessenergy to operate than steel belts, and are quieter in operation and easier toservice in place than metal belts.

 

***Electrical Components.***  In itsElectrical Components segment, Summa designs and manufactures thermoplasticcoil forms or “bobbins” and other plastic products used principally in themanufacture of magnetic devices such as transformers, relays, switches, powersupplies and small electro motors. These devices are utilized in lighting controls, process controls, HVACequipment, appliances, vehicles, telecommunications equipment and otherapplications.

 

***Irrigation Components.***  In itsIrrigation Components segment, Summa designs and manufactures plasticinjection-molded fittings, valves, filters and accessories, extruded tubing andother plastic products for drip irrigation systems and other applications.  The use of drip irrigation systems conserveswater and allows more precise control of delivery of water and solublenutrients to plants than is possible with spray, sprinkler or flood irrigationtechniques.

 

***Miscellaneous Plastic Components.***  In its Miscellaneous Plastic Components segment, Summa designsand manufactures plastic injection-molded products for diverse industrial andcommercial applications.  This segmentalso manufactures products for other Summa segments.

 

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The following table setsforth external sales by segment as a percent of total Company sales:

 
|                              |   | **2000** |   | **2001** |   | **2002** |   |
|-----------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                              |   |     |   |     |   |     |   |
| Optical  Components               |   | 48       | %      | 52       | %      | 52       | %      |
| Material  Handling Components     |   | 16       | %      | 18       | %      | 22       | %      |
| Electrical  Components            |   | 17       | %      | 14       | %      | 11       | %      |
| Irrigation  Components            |   | 16       | %      | 13       | %      | 12       | %      |
| Miscellaneous  Plastic Components |   | 3        | %      | 3        | %      | 3        | %      |

 

For financial informationby reportable segment, including revenue, profit or loss and total assetinformation, see Note 17 in the “Notes to Consolidated Financial Statements” ofthe Company in this Annual Report on Form 10-K/A.  The prior period financial information contained in Note 17 hasbeen restated to conform to the current reportable segments.

 

**Researchand Development**

 

Summa investssignificantly in the development of new products and manufacturingprocesses.  Only direct costs associatedwith new tooling for products are capitalized. All other costs, including salaries and wages of employees involved inresearch and development, are expensed as incurred.

 

**Production**

 

***Injection Molding.***  Summa’sprincipal manufacturing operation is injection molding of plastic parts.  Some products are molded by third-partyvendors.  Injection molds and tools aremade by Summa and outside vendors. Products are made on modern molding machines, which range from 28 to1500 tons clamping force, using a wide variety of plastic resins.

 

***Thermoforming. ***Summa vacuum forms and pressure formsproducts from sheet which it produces and buys from third parties.  Tooling for the forming process is producedby third-party vendors.

 

***Extrusion.***  Summaextrudes plastic sheet, profiles and tubing. The Company’s sheet and profile products are primarily made of polycarbonateand acrylic, while the tubing is extruded from polyethylene andpolyvinylchloride (PVC).

 

In addition to injectionmolding, thermoforming and extrusion, Summa performs additional productionoperations including laser cutting, machining and welding of plastic parts,vacuum deposition, coating, assembly and testing. Summa operates on ajust-in-time basis with many of its customers, and inventories are managed tominimal levels.  Four of Summa’smanufacturing plants are ISO registered.

 

**Marketingand Distribution**

 

Summa manufacturesplastic products and components which are generally sold to other manufacturers(“OEM’s”) who incorporate Summa’s components in their products, and tobusinesses which incorporate the Company’s products in systems assembled fortheir own use or for their customers’ use. The Company generally considers its customers to be OEM’s, distributorsand, to a limited extent, end users. Most sales are made directly by employees of the Company, although Summautilizes several independent manufacturers’ representatives.  Sales in the Optical Components, ElectricalComponents and Miscellaneous Plastic Components segments are almost exclusivelyto OEM’s, while sales in the Material Handling Components and IrrigationComponents segments are primarily to distributors.   The Company delivers its products principally by truck throughthe use of independent freight carriers and, to a lesser extent, by air and seatransport.

 

Summa’s largest threecustomers, all of whom are customers of the Optical Components segment,accounted for 10.3%, 4.2% and 3.6% of sales in fiscal 2002.  Summa’s largest customer in fiscal 2002 wasAcuity Brands, Inc.  The Company hasseveral thousand active accounts including Fortune 1,000 and large privatelyheld businesses.

 

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**RawMaterials**

 

Summa’s principal rawmaterial is pelletized plastic resin which is delivered in bulk by truck, or inlarge boxes, typically weighing 1,000 pounds (“Gaylords”).  The Company is a large user of resin anddoes not rely on any single vendor for more than 15% of its raw material. Everymaterial used is available from several vendors.  Primary resins used include polycarbonate, acrylic, polyethylene,polyvinylchloride, polypropylene, acetal and nylon.  Principal vendors include AtoFina, Bayer, Cyro, Dow, Dupont, GEPlastics and Lucite, among others.  Theresins used by the Company are crude oil or natural gas derivatives and may beaffected to some extent by the supply, demand and price trends in the petroleumindustry.  The Company did not incur anyshortages or unavailability of raw materials during fiscal 2002.  Prices were relatively stable in fiscal 2001and 2002.

 

**Backlogand Seasonality**

 

On August 31, 2002, Summahad a backlog of orders, believed to be firm, in the amount of $9,225,000, ascompared to a backlog of $7,982,000  onAugust 31, 2001.  The increase isprimarily attributable to the inclusion of the backlog of operations acquiredin fiscal 2002. The open order backlog is comprised of orders for componentsand tooling.  Because the time betweenentering an order, shipping the product and recording a sale is typicallyshorter than one month, backlog levels are not a reliable indicator of futuresales volume.

 

Summa’s sales exhibit modestseasonality, especially in its Irrigation Components segment. Excluding the effects of economic cycles, growth and acquisitions, theCompany expects sales, as a percentage of fiscal year’s sales, to occurapproximately as follows:

 

| **Quarter**  |   | **Percent of  Sales** |   |
|--------------|--------|-----------------------|--------|
| 1st  quarter |   | 24                    | %      |
| 2nd  quarter |   | 23                    | %      |
| 3rd  quarter |   | 27                    | %      |
| 4th  quarter |   | 26                    | %      |
|         |   | 100                   | %      |

 

Because a portion ofoverhead is fixed and, therefor, does not vary with sales volume, profit mayvary from quarter to quarter with more volatility than sales volume.

 

**CompetitiveConditions**

 

The markets for theproducts currently manufactured and sold by Summa are characterized byextensive competition.  Numerouscompanies currently offer competing products nationally and internationally,and in certain geographic areas the Company has competition from localmanufacturers as well.  It can beexpected that other companies will introduce additional competing products inthe future.  Many existing and potentialcompetitors have greater financial, marketing and research resources thanSumma.  Several of Summa’s segmentsinclude one or more dominant competitors, such as Interlox and Rexnord in theMaterial Handling Components segment, Cosmo in the Electrical Componentssegment, and Toro and Netafim in the Irrigation Components segment.  In addition, some of Summa’s largestcustomers have the resources to internally manufacture products comparable tothose currently purchased from Summa, and some of Summa’s customers also competewith the Company in certain areas.

 

Summa believes that itstrade names and reputation are significant to its competitive position.  In addition, Summa believes that price is asignificant element of competition.  However,factors such as engineering, performance, availability and reliability areconsidered in the purchasing process. The performance of Summa in the future will depend on its ability todevelop and market new products that will gain customer acceptance and loyalty,as well as its ability to adapt its product offerings to meet changing pricingconsiderations and other market factors. The Company’s operating performance would be adversely affected if itwere to incur delays in developing new products or if such products did notgain market acceptance.  There can be noassurance that existing or future products will be sufficiently successful toenable Summa to effectively compete in its markets or, should new productofferings meet with significant customer acceptance, that one or more currentor future competitors will not introduce products that render the Company’sproducts noncompetitive.

 

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**Patents,Trademarks and Licenses**

 

The Company owns andlicenses many domestic and foreign patents on products which it has developedor acquired that expire on dates ranging to 2019.  In addition, several patent applications are currently inprocess.  The extent to which patentsprovide a commercial advantage or inhibit the development of competing productsvaries.  The expiration of certain patents,particularly in the Optical Components segment, could result in increasedfuture competition and decreased profitability.  Summa also relies upon common law concepts of confidentiality andtrade secrets, as well as economic barriers created by the required investmentsin tooling and technical personnel and the development of customerrelationships, to protect its proprietary products.  Summa also has domestic and foreign trade name and trademarkregistrations covering many of the names and logos which appear on its productswhich are helpful in enabling the Company to maintain its present competitiveposition.

 

**EnvironmentalMatters**

 

The Company is subject tonational and regional environmental laws, rules and regulations of thejurisdictions in which it operates and has operated facilities, including thosegoverning air quality, water quality, soil quality and hazardous wastemanagement and disposal.  The Companydoes not anticipate that future expenditures for the compliance with such laws,rules and regulations will have a material effect on its capital expendituresor its financial condition or results of operations.

 

**Employees**

 

At October 22, 2002,Summa had 773 employees, including five employees who comprise the Company’scorporate staff.  Approximately 40 ofSumma’s employees are covered by a collective bargaining agreement.  The Company considers its relationship withits employees to be good.

 

**ExportSales**

 

For information regardingSumma’s export sales by geographic area for the past three fiscal years, seeNote 17 in the “Notes to Consolidated Financial Statements” of the Company inthis Annual Report on Form 10-K/A.

 

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| **ITEM  2.** |   | **PROPERTIES.** |
|--------------|--------|-----------------|

 

The Company operatesprimarily at the following facilities:

 
| **Location**               |   | **Sq. Ft.** |   | **Principal Activity**   |   | **Segment**       |   | **Lease Expires** |
|----------------------------|--------|-------------|--------|--------------------------|--------|-------------------|--------|-------------------|
|                       |   |        |   |                     |   |              |   |              |
| Torrance, California       |   | 280         |   | Corporate office         |   |              |   | Month-to-Month    |
| Charlevoix, Michigan       |   | 94,000      |   | Manufacturing            |   | Optical           |   | Owned             |
| Dickson, Tennessee         |   | 55,000      |   | Manufacturing            |   | Optical           |   | Owned             |
| Olive Branch, Mississippi  |   | 128,000     |   | Manufacturing, warehouse |   | Optical           |   | Owned             |
| Guelph, Ontario            |   | 41,000      |   | Manufacturing, warehouse |   | Optical           |   | January 2007      |
| Reading, Pennsylvania      |   | 40,000      |   | Manufacturing, warehouse |   | Material Handling |   | August 2003       |
| Rancho Cordova, California |   | 48,000      |   | Manufacturing, warehouse |   | Material Handling |   | February 2006     |
| Bensenville, Illinois      |   | 76,500      |   | Manufacturing            |   | Electrical        |   | Owned             |
| Ontario, California        |   | 72,000      |   | Manufacturing, warehouse |   | Irrigation        |   | August 2009       |
| Winter Haven, Florida      |   | 28,000      |   | Manufacturing            |   | Irrigation        |   | Owned             |
| Visalia, California        |   | 4,500       |   | Manufacturing, warehouse |   | Irrigation        |   | January 2003      |
| Corona, California         |   | 53,000      |   | Manufacturing            |   | Misc. Plastic     |   | May 2004          |

 

The Company’s facilitiesare well-maintained, and well suited for its operations. The Company believesit has adequate capacity to meet foreseeable demand.

 

In addition, the Companyowns 63,000 square feet of factory and office space in Fullerton, California,and a 15,000 square foot office and warehouse facility in Charlevoix, Michigan,which are leased to unrelated parties. The Fullerton lease expires in July 2006 and the Charlevoix leaseexpires in June 2003.  The Company has a27,500 square foot manufacturing facility in Charlevoix, Michigan which isbeing held for sale.

** **
| **ITEM  3.** |   | **LEGAL  PROCEEDINGS.** |
|--------------|--------|-------------------------|

** **

The Company encounterslawsuits from time to time in the ordinary course of business and, at August31, 2002, the Company and/or its affiliates were parties to several civillawsuits.  Summa does not expect thatthe resolution of these lawsuits will have a material adverse impact on futureresults of operations or financial position.  Certain lawsuits filed against the Company from time to time containclaims not covered by insurance, or seek damages in excess of policy limits,and such claims could be filed in the future. Any losses that Summa may suffer from such lawsuits, and the effect suchlitigation may have upon the reputation and marketability of Summa’s products,could have a material adverse impact on the future results of operations,financial condition and/or prospects of the Company.  See also “Business—Environmental Matters” above.

 
| **ITEM  4.** |   | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS.** |
|--------------|--------|-----------------------------------------------------------|

 

No matters were submittedduring the fourth quarter of the fiscal year ended August 31, 2002 to a vote ofSumma’s stockholders, through solicitation of proxies or otherwise.

 

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**PARTII**

 
| **ITEM  5.** |   | **MARKET  FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.** |
|--------------|--------|----------------------------------------------------------------------------------|

 

**RecentMarket Prices**

 

Summa’s Common Stock istraded on The Nasdaq National Market under the symbol “SUMX.”  During the year ended August 31, 2002, theaverage weekly trading volume was approximately 42,000 shares.  The stock markets have experienced extremeprice and volume fluctuations during certain periods.  These broad market fluctuations and other factors may adverselyaffect the market price of Summa’s Common Stock for reasons unrelated toSumma’s operating performance.  Thefollowing table sets forth the high and low prices for a share of Summa’sCommon Stock on The Nasdaq National Market for the periods indicated.

 

| **Quarter  Ended** |   | **11/30/00** |   | **2/28/01** |   | **5/31/01** |   | **8/31/01** |   | **11/30/01** |   | **2/28/02** |   | **5/31/02** |   | **8/31/02** |   |
|--------------------|--------|--------------|--------|-------------|--------|-------------|--------|-------------|--------|--------------|--------|-------------|--------|-------------|--------|-------------|--------|
| **High**           |   | $            | 14.00  |        | $      | 11.25       |   | $           | 10.10  |         | $      | 12.01       |   | $           | 11.15  |        | $      | 9.55 |   | $ | 10.00 |   | $ | 10.23 |   |
| **Low**            |   | $            | 9.88   |        | $      | 6.75        |   | $           | 8.25   |         | $      | 9.00        |   | $           | 6.80   |        | $      | 7.51 |   | $ | 8.10 |   | $ | 8.26 |   |

 

On October 22, 2002, theclosing price on The Nasdaq National Market for a share of Summa Common Stockwas $9.46.

 

### **Recent Issuances andRepurchases**

### ** **

In December 2001 theCompany issued and sold 5,000 shares of newly-authorized Series A PreferredStock in a private sale made in reliance on the exemption from registrationcontained in Rule 506 promulgated under the Securities Act of 1933 by theSecurities and Exchange Commission (“Rule 506”) to an investment group for anaggregate purchase price of $5,000,000. The purpose of the issuance was to fundthe acquisition of the Genesta Manufacturing division (“Genesta”) of PavacoPlastics Inc., an Ontario corporation (“Pavaco”), from Pavaco and to reduceoutstanding debt and strengthen the Company’s financial position.   The holders of the Series A Preferred Stockare not entitled to dividends or to vote prior to conversion, but are entitledto a liquidation preference of $1,000 per share (subject to adjustment upon theoccurrence of certain events as set forth in the Certificate of Designationsfor the Series A Preferred Stock (the “Certificate of Designations”)).  Shares of Series A Preferred Stock areconvertible at any time at the request of the holder thereof into common stockof the Company at a ratio of one hundred and twenty five shares of common stockfor each share of Series A Preferred Stock, or 625,000 shares in the aggregate,with such conversion ratio subject to adjustment upon the occurrence of certainevents as set forth in the Certificate of Designations.  At the option of the holder, the Series APreferred Stock shall be redeemed by the Company at any time commencing on thethird anniversary of the date of issuance and ending immediately prior to thefourth anniversary of the date of issuance at a price  which equals a twelve percent annual increase over the originalissuance price in cash, subject to adjustment upon the occurrence of certainevents as set forth in the Certificate of Designations. At the option of theCompany, the Series A Preferred Stock may be redeemed at any time commencing onthe fourth anniversary of the date of issuance and ending immediately prior tothe fifth anniversary of the date of issuance at a price  which equals a twenty percent annualincrease over the original issuance price in cash, subject to adjustment uponthe occurrence of certain events as set forth in the Certificate ofDesignations. Unless earlier converted or redeemed, on the fifth anniversary ofthe date of issuance any Series A Preferred Stock outstanding shall be redeemedby the Company at the original issuance price, subject to adjustment upon theoccurrence of certain events as set forth in the Certificate of Designations.

 

In connection with theacquisition of Genesta in January 2002, the Company issued 40,000 shares of theCompany’s unregistered common stock to Pavaco as partial consideration for theacquisition, with the right of the holder thereof to require the Company torepurchase such stock for $13.25 per share for a ninety day period commencingeighteen months from closing.  Thisissuance was made in reliance on the exemption from registration contained inRule 506.  Subsequently, the Companyrepurchased the 40,000 shares from Pavaco at a discounted price of $11.25 pershare in August 2002.

 

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In late fiscal 2002, theBoard of Directors of the Company authorized the repurchase of up to $2.0million worth of the Company’s Common Stock in open market transactions on TheNasdaq National Market.   As of August31, 2002, no repurchases had been made thereunder.  Any repurchases will be at the discretion of senior managementand subject to market conditions, compliance with regulations and otherfactors. No minimum amount of repurchases is required and no time limit hasbeen set. The Company intends to finance any repurchases from working capital.

 

**Descriptionof Securities**

 

The authorized capitalstock of Summa consists of 10,000,000 shares of Common Stock, $.001 par value,and 5,000,000 shares of Preferred Stock, $.001 par value.  As of August 31, 2002, 4,401,769 shares ofthe Company’s Common Stock were issued and outstanding and 5,000 shares ofSeries A Preferred Stock were issued and outstanding.  The number of holders of record of Summa’s Common Stock as ofAugust 31, 2002 was 290.  In addition,based upon the number of copies of this Annual Report requested byintermediaries on behalf of their clients, Summa estimates that there areapproximately 2,500 additional stockholders whose shares are held in “streetname”, including approximately 800 stockholders who own shares through theSumma Industries 401(k) Savings and Retirement Plan.

 

***Common Stock***.  Holders ofCommon Stock are entitled to one vote per share on each matter submitted to avote of the stockholders of Summa, and there is no cumulative voting for theelection of directors.  Subject topreferences applicable to the holders of outstanding Preferred Stock, eachholder of Common Stock is entitled to receive ratably such dividends, if any,as may be declared by the Board of Directors out of funds legally availabletherefor.  Upon the liquidation,dissolution or winding up of Summa, holders of Common Stock are entitled toshare ratably in all assets of Summa which are legally available fordistribution, after payment of all debts and other liabilities and theliquidation preference of outstanding Preferred Stock.  Holders of Common Stock have no preemptive,subscription, redemption or conversion rights. The transfer agent and registrar for the Common Stock is U. S. StockTransfer Corporation, 1745 Gardena Avenue, Glendale, California 91204, www.usst.com,and its telephone number is:  (800)835-8778.

 

***Preferred Stock***.  The Board ofDirectors is authorized, subject to any limitations prescribed by applicablelaws, rules and regulations, to provide for the issuance of Preferred Stock inone or more series, to establish from time to time the number of shares to beincluded in each such series, to fix the designations, powers, preferences andrights of the shares of each such series and any qualifications, limitations orrestrictions thereof, and to increase or decrease the number of shares of anysuch series (but not below the number of shares of such series thenoutstanding) without any further vote or action by the stockholders.  Although Summa has no present plan to issueany additional shares of Preferred Stock besides the existing Series APreferred Stock (See “Recent Issuances and Repurchases” above), the issuance ofPreferred Stock in the future could provide voting or conversion rights thatwould adversely affect the voting power or other rights of the holders ofCommon Stock and thereby reduce the value of the Common Stock.  In addition, the issuance of Preferred Stockmay have the effect of delaying, deferring or preventing a change in control ofSumma.  In particular, specific rightsgranted to future holders of Preferred Stock could be used to restrict Summa’sability to merge with or sell its assets to a third party, or otherwise delay,discourage or prevent a change in control of Summa.

 

***Anti-Takeover Devices***.  In additionto the ability to issue Preferred Stock, Summa’s Certificate of Incorporationand Bylaws specifically prohibit cumulative voting and the right ofstockholders to call a special meeting of stockholders, provide for theclassification of the Board of Directors into three classes with one classelected annually, require a two-thirds supermajority stockholder vote to amendcertain provisions of the Certificate of Incorporation and Bylaws, and includeother provisions which are also likely to delay, discourage or prevent a changein control of Summa not approved by the Board of Directors and the Company’sstockholders.  Further, neither theCompany’s Certificate of Incorporation and Bylaws nor Delaware law prohibit theCompany from adopting a stockholders’ rights plan, or poison pill.

 

**SharesIssuable Upon Exercise of Options**

 

As of August 31, 2002,1,337,546 shares of Summa common stock were issuable upon exercise of optionsgranted and/or available to be granted under its stock option plans and inconnection with acquisitions, all of which are registered under the SecuritiesAct.  The existence of these stockoptions may adversely affect the terms on 

 

10

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which Summa can obtainadditional financing, and the holders of the options can be expected toexercise or convert them at a time when Summa, in all likelihood, would be ableto obtain additional capital by offering shares of its Common Stock on termsmore favorable to Summa than those provided by the exercise or conversion ofsuch options.   All options vest in fullimmediately prior to a change of control of the Company, as defined in thestock option plans.

 

**DividendPolicy**

 

Summa has not paid a cashdividend since the fiscal year ended August 31, 1983.  Summa does not intend to pay cash dividends on its Common Stock inthe foreseeable future.

 

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| **ITEM  6.** |   | **SELECTED  FINANCIAL DATA.** |
|--------------|--------|-------------------------------|

 

The selected financialdata set forth below for the years ended August 31, 2000, 2001 and 2002 havebeen derived from the audited consolidated financial statements of Summaincluded elsewhere herein.  The selectedfinancial data set forth below for the years ended August 31, 1998 and 1999have been derived from audited consolidated financial statements of Summa thatare not included herein.  Prior yearsales and certain costs and expenses have been reclassified to conform withcurrent year presentations.  Theselected financial data set forth below should be read in conjunction withthose financial statements (including the notes thereto) and with “Management’sDiscussion and Analysis of Financial Condition and Results of Operation” inItem 7 below.

 
|                                                          |   | **At and for the Fiscal Years Ended August 31,** |   |
|---------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                          |   | **1998**                                         |   | **1999** |   | **2000** |   | **2001** |   | **2002** |   |
|                                                          |   | **(in thousands, except per share amounts)**     |   |
| **Statement of Income Data:**                                 |   |                                             |   |   |   |   |   |   |   |   |   |
| Net sales                                                     |   | $                                                | 87,038 |   | $ | 108,575 |   | $ | 125,746 |   | $ | 127,002 |   | $ | 116,241 |   |
| Costs and expenses:                                           |   |                                             |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                 |   | 60,941                                           |   | 76,203 |   | 90,833 |   | 93,650 |   | 85,765 |   |
| Selling, general and administrative and other expenses        |   | 16,717                                           |   | 19,494 |   | 20,923 |   | 23,118 |   | 21,911 |   |
| Interest, net                                                 |   | 1,607                                            |   | 2,280 |   | 2,984 |   | 3,851 |   | 2,500 |   |
| Costs and expenses of continuing operations                   |   | 79,265                                           |   | 97,977 |   | 114,740 |   | 120,619 |   | 110,176 |   |
| Income from continuing operations before provision for taxes  |   | 7,773                                            |   | 10,598 |   | 11,006 |   | 6,383 |   | 6,065 |   |
| Provision for income taxes                                    |   | 3,215                                            |   | 4,043 |   | 3,700 |   | 1,970 |   | 2,136 |   |
| Income from continuing operations                             |   | 4,558                                            |   | 6,555 |   | 7,306 |   | 4,413 |   | 3,929 |   |
| Income from discontinued operations, net of income tax effect |   | 316                                              |   | — |   | — |   | — |   | — |   |
| Net income                                                    |   | $                                                | 4,874  |   | $ | 6,555 |   | $ | 7,306 |   | $ | 4,413 |   | $ | 3,929 |   |
| Preferred stock accretion                                     |   | —                                           |   | — |   | — |   | — |   | 491 |   |
| Net income  available to common stockholders                  |   | $                                                | 4,874  |   | $ | 6,555 |   | $ | 7,306 |   | $ | 4,413 |   | $ | 3,438 |   |
|                                                          |   |                                             |   |   |   |   |   |   |   |   |   |
| Earnings per common  share:                                   |   |                                             |   |   |   |   |   |   |   |   |   |
| Basic:                                                        |   |                                             |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                        |   | $                                                | 1.09   |   | $ | 1.53 |   | $ | 1.71 |   | $ | 1.04 |   | $ | 0.78 |   |
| Discontinued  operations                                      |   | $                                                | 0.07   |   | — |   | — |   | — |   | — |   |
| Net income                                                    |   | $                                                | 1.16   |   | $ | 1.53 |   | $ | 1.71 |   | $ | 1.04 |   | $ | 0.78 |   |
| Diluted:                                                      |   |                                             |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                        |   | $                                                | 1.03   |   | $ | 1.46 |   | $ | 1.62 |   | $ | 1.00 |   | $ | 0.76 |   |
| Discontinued  operations                                      |   | $                                                | 0.07   |   | — |   | — |   | — |   | — |   |
| Net income                                                    |   | $                                                | 1.10   |   | $ | 1.46 |   | $ | 1.62 |   | $ | 1.00 |   | $ | 0.76 |   |
| Weighted average  number of shares:                           |   |                                             |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   | 4,199                                            |   | 4,278 |   | 4,284 |   | 4,255 |   | 4,398 |   |
| Diluted                                                       |   | 4,420                                            |   | 4,488 |   | 4,506 |   | 4,424 |   | 4,512 |   |
|                                                          |   |                                             |   |   |   |   |   |   |   |   |   |
| **Balance  Sheet Data:**                                      |   |                                             |   |   |   |   |   |   |   |   |   |
| Assets                                                        |   | $                                                | 63,983 |   | $ | 87,654 |   | $ | 89,940 |   | $ | 98,279 |   | $ | 97,565 |   |
| Working capital                                               |   | $                                                | 10,854 |   | $ | 10,326 |   | $ | 12,761 |   | $ | 14,539 |   | $ | 16,301 |   |
| Long-term debt, net of current maturities                     |   | $                                                | 18,675 |   | $ | 27,987 |   | $ | 25,777 |   | $ | 29,178 |   | $ | 19,845 |   |
| Mandatorily redeemable preferred stock                        |   | —                                           |   | — |   | — |   | — |   | $ | 5,366 |   |
| Stockholders’ equity                                     |   | $                                                | 28,118 |   | $ | 35,373 |   | $ | 41,060 |   | $ | 45,807 |   | $ | 50,219 |   |
|                                                          |   |                                             |   |   |   |   |   |   |   |   |   |
| Common shares outstanding                                     |   | 4,257                                            |   | 4,313 |   | 4,225 |   | 4,297 |   | 4,402 |   |
| Preferred shares outstanding                                  |   | —                                           |   | — |   | — |   | — |   | 5 |   |

 

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| **ITEM  7.** |   | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.** |
|--------------|--------|--------------------------------------------------------------------------------------------------|

 

**General**

 

Statements contained inthis Annual Report on Form 10-K/A, which are not purely historical, areforward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933 and Section 21E of the Securities Exchange Act of 1934, includingbut not limited to statements regarding Summa’s expectations, hopes, beliefs,intentions or strategies regarding the future, such as those set forth in“Business—Legal Proceedings” above. Actual results could differ materially from those projected in anyforward-looking statements as a result of a number of factors, including thosedetailed in “Risk Factors” below and elsewhere in this Annual Report on Form10-K/A.  The forward-looking statementsare made as of the date hereof, and the Company assumes no obligation to updatethe forward-looking statements, or to update the reasons why actual resultscould differ materially from those projected in the forward-looking statements.

 

Summa manufacturesplastic products for diverse commercial and industrial markets. Through itsfive reportable segments, Summa designs and manufactures injection-molded andformed plastic optical components for OEM customers in the lighting industry;modular plastic conveyor belt and chain for the food processing industry;engineered plastic fittings, valves, filters and tubing for the agriculturalirrigation industry; molded plastic coil forms (“bobbins”) for use intransformers, motors, relays and switches; and other molded and extrudedplastic components for diverse industries.

 

**RiskFactors**

 

Growth has been achievedby acquisition, development of new products and expansion of the Company’ssales organization. There can be no assurance that Summa will be able tocontinue to consummate acquisitions, develop new products or expand sales tosustain rates of revenue growth and profitability in future periods comparableto those experienced in the past several years.  See “Business — History of Acquisitions — Continuing Operations”above.  Any future success that theCompany may achieve will depend upon many factors including factors which maybe beyond the control of Summa or which cannot be predicted at this time.  Uncertainties and factors which could causeactual results or events to differ materially from those set forth or impliedinclude:

 

•                  changes in the markets for the products offered by theCompany through its operating subsidiaries

•                  increased levels of competition, including the entryof additional foreign and domestic competitors and increased success byexisting competitors

•                  reduced margins caused by competitive pressures,expiration of patents and other factors

•                  increases in operating costs including costs ofproduction, energy, materials, supplies, personnel, equipment, import dutiesand transportation

•                  increases in borrowing costs and/or the availabilityof funds

•                  increases in insurance costs, or the failure orinability to obtain adequate levels of insurance

•                  increases in governmental regulation imposed underfederal, state or local laws, including regulations applicable toenvironmental, labor and trade matters

•                  changes in governmental regulation, including changesaffecting the favorable tax benefits for export sales made by domestic entities

•                  changing customer profiles

•                  general political, economic and industry conditionsthat affect customer demand and sales volume, both domestically andinternationally

•                  the introduction of new products by competitors or thefailure to gain acceptance of new Company products

•                  the timing of Summa’s advertising and promotionalcampaigns

•                  effects on the Company of its cost reductioninitiatives

•                  the loss of key personnel

 

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#### **Critical AccountingPolicies and Estimates**

#### ** **

The following discussionand analysis of the Company’s financial condition and results of operations arebased upon the consolidated financial statements of the Company, which havebeen prepared in accordance with accounting principles generally accepted inthe United States of America. The preparation of such financial statementsrequires management to make estimates and assumptions in applying certaincritical accounting policies. Certain accounting estimates are particularlysensitive because of their significance to the Company’s condensed consolidatedfinancial statements and because of the possibility that future eventsaffecting the estimates could differ markedly from current expectations. TheCompany believes that the following are some of the more critical judgmentareas in the application of its accounting policies that affect the Company’sfinancial statements.

 

**Impairmentof Long-Lived Assets and Long-Lived Assets to be Disposed of.** The Company reviews its long-lived assets and certain identifiableintangibles for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. Recoverability ofassets to be held and used is measured by a comparison of the carrying amountof an asset to the undiscounted future operating cash flows expected to begenerated by the asset. If such assets are considered to be impaired, theimpairment to be recognized is measured by the amount by which the carryingamount of the assets exceeds the fair value of the assets. Assets to be disposedof by sale are reported at the lower of the carrying amount or fair value lesscosts to sell.

######  

The Company has asignificant amount of property and equipment and intangible assets. Thedetermination as to whether events or changes in circumstances indicate thatthe carrying amount of an asset may not be recoverable involves management’sjudgment. In addition, should the Company conclude that recoverability of anasset is in question, the estimate of undiscounted future operating cash flowsto determine whether an asset is recoverable and, if not, the finaldetermination of the fair value of the asset are also based on the judgment ofmanagement. These judgments can be impacted by a variety of underlyingassumptions, such as the general business climate, effectiveness of competitionand supply and cost of resources. Accordingly, actual results can differ significantly from theassumptions made by management in making its estimates. Future changes inmanagement’s estimates could result in indicators of impairment and futureimpairment charges.

 

New accounting standardsto be adopted by the Company effective September 1, 2002 eliminate theimpairment recoverability tests for goodwill and certain other intangibleassets with indefinite lives and require that such assets be valued at thelower of their carrying value or fair value. Significant management judgment isinvolved in determining the fair value of assets. Accordingly, future changesin management’s estimates could result in impairment charges of goodwill andindefinite lived intangible assets.

 

**Valuationof Inventory.**** **The Company values its inventories at thelower of cost or market using the first-in, first-out (FIFO) method.Accordingly, the Company records adjustments to the value of inventory basedupon obsolescence and changes in market value as permanent changes in thecarrying amount of such inventory until its ultimate sale or other disposition.The Company has evaluated the current level of inventories considering plannedsales volume and other factors and, based on this evaluation, has recordedadjustments to cost of goods sold to adjust inventory to net realizablevalue.  These adjustments are estimates,which could vary significantly, either favorably or unfavorably, from actualrequirements if future economic conditions, customer demand or competitiondiffer from expectations.

 

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**Resultsof Operations**

 

The following table setsforth certain information derived from Summa’s consolidated statements ofincome from continuing operations as a percentage of sales for the three yearsended August 31, 2002, as well as the Company’s effective income tax rate foreach period presented.  For adescription of acquisitions during the periods presented, see “Business —History of Acquisitions — Continuing Operations” above.

 

|                                |   | **2000** |   | **2001** |   | **2002** |   |
|-------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                |   |     |   |     |   |     |   |
| Net sales                           |   | 100.0    | %      | 100.0    | %      | 100.0    | %      |
| Cost of sales                       |   | 72.3     |   | 73.7     |   | 73.8     |   |
| Gross profit                        |   | 27.7     |   | 26.3     |   | 26.2     |   |
| S,G, & A and other expense, net |   | 16.6     |   | 18.2     |   | 18.8     |   |
| Operating income                    |   | 11.1     |   | 8.1      |   | 7.4      |   |
| Interest expense, net               |   | 2.4      |   | 3.1      |   | 2.2      |   |
| Income before income taxes          |   | 8.7      |   | 5.0      |   | 5.2      |   |
| Provision for income taxes          |   | 2.9      |   | 1.5      |   | 1.8      |   |
| Net income                          |   | 5.8      | %      | 3.5      | %      | 3.4      | %      |
|                                |   |     |   |     |   |     |   |
| Effective tax rate                  |   | 33.6     | %      | 30.9     | %      | 35.2     | %      |

 

***Net Sales. ***For the year ended August 31, 2001, netsales increased by $1,256,000, or 1%, over the prior fiscal year, due to theinclusion of $18,620,000 in sales of newly acquired operations, substantiallyoffset by a decrease in sales of previously owned businesses of$17,364,000.  See “Business — History ofAcquisitions — Continuing Operations” above. Comparative same business unit sales declined 12%, due to the generalbusiness downturn and discontinuation of some low margin commodityproducts.  Of the 12% decline,approximately 4% was a result of the discontinuation of some commodity productsand manufacturing services, primarily in the Optical Components segment.  Sales weakened throughout the year as aresult of a deteriorating economy. Optical Components segment sales of previously owned businesses declined14% though reported sales increased 11% due to sales from newly acquiredoperations; Material Handling Components segment sales of previously ownedbusinesses declined 6% though reported sales increased 14% due to sales fromnewly acquired operations;  ElectricalComponents segment sales declined 17%; Irrigation Components segment salesdeclined 17%; and Miscellaneous Plastic Components segment sales declined 24%,primarily due to the loss of a significant customer and market weakness.  Sales in the Material Handling Componentssegment declined less than in the other segments because a significant portionof its sales are due to replacement and repair.

 

For the year ended August31, 2002, net sales decreased by $10,761,000, or 8%, from the prior fiscalyear, due to a decrease in sales of previously owned businesses of $16,995,000,partially offset by the inclusion of $6,234,000 in sales of newly acquiredoperations. See “Business — History of Acquisitions — Continuing Operations”above.  Comparative same business unitsales declined 13%, due to the general business downturn and discontinuation ofsome low margin commodity products.  Ofthe 13% decline, approximately 4% was a result of the discontinuation of somecommodity products and manufacturing services, primarily in the OpticalComponents segment.  Sales weakenedthroughout the year as a result of a deteriorating economy.  Optical Components segment sales ofpreviously owned businesses declined 22% due to weakness in the non-residentialconstruction market and less sales to off-shore manufacturers though reportedsales declined only  8% due to salesfrom newly acquired operations; Material Handling Components segment sales ofpreviously owned businesses increased 6% due to strength in demand forautomation in food processing industries though reported sales increased 10%due to sales from newly acquired operations; Electrical Components segmentsales declined 27% due to the general business downturn, especially in thetelecommunications and computer equipment markets, and the migration of somekey accounts to off-shore manufacturing sites; Irrigation Components segmentsales declined 16% due to weakness in the agricultural markets the Companyserves; and Miscellaneous Plastic Components segment sales declined 7%, due tothe loss of a significant  customer andmarket weakness.  The downward trendobserved in fiscal 2001 was exacerbated in the beginning of fiscal 2002 by theeffects of the September 11, 2001 attacks and ongoing related events.

 

15

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***Cost of Sales.*** For the year ended August 31, 2001, cost of salesincreased by $2,817,000, or 3%, from the prior fiscal year, due to the inclusionof the results of newly acquired operations of $14,117,000, and plantconsolidation expenses of $1,800,000 incurred, partially offset by the declinein sales and related costs of previously owned businesses.  As a percent of sales, costs of goods soldincreased from 72.3% to 73.7%, due to the blending of newly acquired businesseswith historically higher costs of goods sold, and the effects of reduced salesvolume and costs related to plant consolidations.  During the fiscal year, four facilities were closed andconsolidated with other operations of the Company.

 

For the year ended August31, 2002, cost of sales decreased by $7,885,000, or 8%, from the prior fiscalyear, due to the decline in sales of previously owned businesses, partiallyoffset by the inclusion of the cost of sales of newly acquired operations of$4,930,000.  As a percent of sales,costs of goods sold increased from 73.7% to 73.8%, due to the blending of newlyacquired businesses with historically higher costs of goods sold, and the effectsof reduced sales volume and costs related to plant consolidations, offset bythe benefits of plant consolidations and other cost reduction initiatives.  During the fiscal year, three facilitieswere closed and consolidated with other operations of the Company.

 

***Gross Profit.***For the year ended August 31, 2001, gross profitdecreased $1,561,000, or 4%, from the prior fiscal year, primarily due to salesdecreases in previously owned businesses and plant consolidation expenses ofapproximately $1,800,000, partially offset by operating cost savings ofapproximately $1,000,000 and by the effects of acquisitions.  Gross margin declined from 27.7% to 26.3%,due to the effects of sales volume decreases and plant consolidation expenses.

 

For the year ended August31, 2002, gross profit decreased $2,876,000, or 9%, from the prior fiscal year,primarily due to sales decreases in previously owned businesses, partiallyoffset by the effects of acquisitions of $1,304,000.  Gross margin declined from 26.3% to 26.2%, primarily due to theeffects of sales volume decreases and the effects of acquisitions, offset bycost reduction initiatives.

 

***Selling, General, Administrative and Other Expense, Net(“Operating Expense”)*****.* ***For the year ended August 31, 2001, operating expensesincreased $2,195,000, or 10%, from the prior fiscal year, primarily due to theinclusion of the operating expenses of newly acquired businesses, partiallyoffset by decreases in operating expenses of previously owned operations and again on the sale of property, plant and equipment.  See “Business — History of Acquisitions — Continuing Operations”above.  As a percent of sales, operatingexpenses increased from 16.6% to 18.2%, primarily as a result of the effects ofsales volume decreases and the blending of newly acquired businesses withhistorically higher operating expenses.

 

For the year ended August31, 2002, operating expenses decreased $1,207,000, or 5%, from the prior fiscalyear, primarily due to the inclusion of a $723,000 gain on the sale of anIrrigation Components segment facility and to decreases in operating expenses of previously owned operations,partially offset by the inclusion of operating expenses of newly acquiredoperations.  See “Business — History ofAcquisitions — Continuing Operations” above. As a percent of sales, operating expenses increased from 18.2% to 18.8%,primarily as a result of the effects of sales volume decreases, partiallyoffset by the blending of newly acquired businesses with historically loweroperating expenses.

 

***Operating Income.*** For the year ended August 31, 2001, operating incomewas $3,756,000, or 27%, lower than in the comparable prior year period, due tothe changes discussed above.  Bysegment, operating income decreased $1,140,000 in the Optical Componentssegment, due primarily to decreased sales of previously owned businesses;decreased $532,000 in the Material Handling Components segment, primarily dueto decreased sales of previously owned businesses; decreased $1,266,000 in theElectrical Components segment due primarily to decreased sales volume andpricing pressures; increased $181,000 in the Irrigation Components segment,primarily due to product mix comprised of less commodity sales; and decreased$690,000 in the Miscellaneous Plastic Components segment, primarily due todecreased volume resulting from the loss of a significant customer and marketweakness, as well as inefficiencies created by the repatriation of Companytools from third party molders.  Operatingmargin for the year decreased from 11.1% in fiscal 2000 to 8.1% in fiscal 2001,as a result of the changes in gross margin and operating expenses discussedabove.

 

16

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For the year ended August31, 2002, operating income was $1,669,000, or 16%, lower than in the comparableprior year period, due to the changes discussed above.  By segment, operating income decreased$72,000 in the Optical Components segment; increased $606,000 in the MaterialHandling Components segment, primarily due to increased sales from existing andnewly acquired operations; decreased $448,000 in the Electrical Componentssegment, due primarily to decreased sales and continuing pricing pressures;decreased $252,000 in the Irrigation Components segment, primarily due todecreased sales volume; and decreased $1,651,000 in the Miscellaneous PlasticComponents segment, primarily due to decreased volume from the loss of asignificant customer, market weakness, a continued shift toward inter-companymolding, as well as inefficiencies created by the repatriation of Company toolsfrom third party molders.  Operatingmargin for the year decreased from 8.1% in fiscal 2001 to 7.4% in fiscal 2002,as a result of the changes in gross margin and operating expenses discussedabove.

 

***Interest Expense, Net*****.**  Interestexpense increased from $2,984,000 in fiscal 2000 to $3,851,000 in fiscal 2001,due to higher average levels of debt during the year, partially offset bydecreasing variable interest rates during fiscal 2001.  For fiscal 2002, interest expense decreasedto $2,500,000 due to reduced levels of debt and lower interest rates.  Interest expense relates primarily tointerest on debt owed to banks, pursuant to the borrowing arrangement describedin “Liquidity and Capital Resources — Financial Arrangements” below.  Most of the outstanding borrowings underthese arrangements were for acquisitions.

 

***Net Income. ***As a result of the changes describedabove, net income decreased by $2,893,000, or 40%, in fiscal 2001 and decreasedby $484,000, or 11%, in fiscal 2002.

 

***Effective Tax Rate.***  For fiscal2001, the effective tax rate decreased from 33.6% to 30.9% due to thedistribution of earnings in lower tax rate jurisdictions, including a higherpercentage of foreign sales corporation tax benefit relative to pre-taxearnings, and other non-recurring tax benefits.   For fiscal 2002, the effective tax rate increased to 35.2%primarily due to changes in the distribution of earnings among various taxjurisdictions, including reduced foreign sales tax benefit.

 

The ExtraterritorialIncome Exclusion of the U.S. Tax Code, which replaced the foreign salescorporation tax benefit, has been challenged by the World Trade Organizationand may be revised in the future.  Ifthe Code were changed to eliminate this benefit, the effective tax rate of theCompany would be higher by approximately 2% to 3% of pretax income.

 

***Inflation.***  Inflation didnot have a significant impact on Summa’s operations during fiscal 2000 exceptduring the fourth quarter of fiscal 2000. During that period, oil price increases resulted in increasing andincreasingly volatile costs of plastic resin, energy and transportation.  These factors did not have a material impacton the Company’s financial results except in the fourth quarter, when theycontributed to reduced gross margins.

 

In fiscal 2001, prices ofplastic resins stabilized, and the Company implemented price increases onselected products.  Energy costsincreased significantly in California. During fiscal 2001, the Company reduced its exposure to Californiaenergy costs by relocating several operations to the Midwest.  In fiscal 2002, resin prices remainedrelatively stable.  No significantamount of sales or purchases is made pursuant to fixed price, long-termagreements.

 

**Liquidityand Capital Resources**

 

***Sources and Uses of Funds.*** The Company’s primary sources of funds have been cash generated fromoperating activities and borrowings from third parties.  See “Financing Arrangements” below.   During the three fiscal years ended August31, 2002, net cash provided by operating activities was $8,368,000 in 2000,$13,476,000 in 2001 and $11,865,000 in 2002. Cash flows from operations increased in 2001 compared to 2000 primarilydue to reductions in accounts receivable and inventory resulting from decliningsame business unit sales and intentionally discontinued product lines.  Cash flows from operations declined in 2002compared to 2001 primarily due to decreased income and changes in the componentsof working capital.

 

17

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Summa’s principal uses ofcash have been the (i) support of operating activities, (ii) acquisitions ofbusinesses,  (iii) investment in capitalimprovements, (iv) reduction of debt and (v) repurchase of common stock.  Cash used for certain investing activitiesfor the three fiscal years ended August 31, 2002 is summarized in the followingtable:

 
|                                            |   | **Fiscal Years Ended August 31,** |      |
|-------------------------------------------------|--------|-----------------------------------|-----------|
|                                            |   | **2000**                          |      | **2001** |   | **2002** |   |
|                                            |   |                              |      |   |   |   |   |
| Acquisitions of businesses                      |   | $                                 | 2,174,000 |   | $ | 15,998,000 |   | $ | 2,685,000 |   |
| Investment in capital improvements              |   | $                                 | 4,333,000 |   | $ | 3,207,000 |   | $ | 3,380,000 |   |
| Capital investment as a percent of depreciation |   | 92                                | %         | 59 | % | 68 | % |

 

Investment is primarilyfor new product tooling activity, manufacturing equipment upgrades and newcomputer systems.  Capital spendingdeclined in 2001 primarily because certain assets of acquired businesses wereredeployed throughout the organization. Although Summa expects to continue making substantial investments intooling for new products, at August 31, 2002, Summa was not committed to anyoutside supplier for major capital expenditures, and believes its presentcapacity, augmented by anticipated continued investment in new product toolingand equipment, will be sufficient to meet demand for its products. Forinformation relating to acquisitions, see “Business — History of Acquisitions —Continuing Operations” above.

 

In August 2002, theCompany announced a plan to repurchase up to $2,000,000 of its common stock,with no time limit.  As of August 31,2002, no repurchases had been made pursuant to this buy-back plan.

 

***Working Capital; Asset Utilization. ***At fiscal year end August 31, working capital was$12,761,000 in 2000, $14,539,000 in 2001 and $16,301,000 in 2002, representingan increase of 14% from 2000 to 2001 and an increase of 12% from 2001 to2002.  The increase in 2001 wasattributable to the inclusion of newly acquired operations, partially offset bya decline in working capital in previously owned businesses.  The increase in 2002 was primarilyattributable to a reduction in the current maturities of long-term debt and theinclusion of newly acquired operations, partially offset by a decline inworking capital in previously owned businesses.

 

Asset utilization for thethree fiscal years ended August 31, 2002 is illustrated in the following table:

 
|                                  |   | **Fiscal  Years Ended August 31,** |       |
|---------------------------------------|--------|------------------------------------|------------|
|                                  |   | **2000**                           |       | **2001** |   | **2002** |   |
|                                  |   |                               | ** ** |   | ** ** |   | ** ** |
| Average working  capital turnover     |   | 10.9 times                         |       | 9.3 times |   | 7.5 times |   |
| Average accounts  receivable turnover |   | 7.4 times                          |       | 7.4 times |   | 6.8 times |   |
| Average  inventory turnover           |   | 7.4 times                          |       | 7.1 times |   | 6.7 times |   |

 

***Financing Arrangements.***  Summa hasseveral debt relationships in place as described below.   Substantially all of the Company’s assetsare pledged to secure debt.  The bankterm loans and revolving line of credit require compliance with variouscovenants.

 

Summary of the Company’sdebt at August 31, 2002:

 
| **Description of Debt**      |   | **Balance** |       | **Weighted  Average  Interest Rate** |   | **Additional  Availability** |   | **Due**   |   |
|------------------------------|--------|-------------|------------|--------------------------------------|--------|------------------------------|--------|-----------|--------|
|                         |   |        |       |                                 |   |                         |   |      |   |
| Revolving line  of credit    |   | $           | 5,510,000  |                                 | 4.3    | %                            | $      | 9,467,000 |   | 2004 |   |
| Bank term loans              |   | 10,378,000  |       | 7.9                                  | %      | —                       |   | 2003-2005 |   |
| Real estate and  other loans |   | 9,023,000   |       | 4.5                                  | %      | —                       |   | 2003-2007 |   |
| Total debt                   |   | $           | 24,911,000 |                                 | 5.9    | %                            | $      | 9,467,000 |   |   |   |

 

Interest rates on therevolving line of credit and certain real estate loans are subject to marketfluctuation, and the rates on the revolving line of credit are subject toreduction as the Company achieves certain financial milestones.  See also Note 9 in the “Notes toConsolidated Financial Statements” of the Company in this Annual Report on Form10-K/A.

 

18

----

 

Summa believes that cashflows from operations and existing credit facilities will be sufficient to fundworking capital requirements, planned capital expenditures and debt service forthe next twelve months.  The Company hasa strategy of growth by acquisition.  Inthe event an acquisition plan is adopted which requires funds exceeding theavailability described above, an alternate source of funds to accomplish theacquisition would have to be developed. The Company has 10,000,000 shares ofcommon stock authorized, of which 4,401,769 shares were outstanding at August31, 2002, and 5,000,000 shares of “blank check” preferred stock authorized, ofwhich 5,000 shares were outstanding at August 31, 2002.  The Company could issue additional shares ofcommon or preferred stock or enter into new or revised borrowing arrangementsto raise funds.

 

**RecentAccounting Pronouncements**

 

See Note 1 in the “Notesto Consolidated Financial Statements” in Part IV of this Annual Report on Form 10-K/A.

 

**Effectivenessof Disclosure Controls and Procedures**

 

Within the ninety daysprior to the date of this report, the Company carried out an evaluation, underthe supervision and with the participation of the Company’s management,including the Company’s Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of the design and operation of the Company’s disclosurecontrols and procedures pursuant to Exchange Act Rule 13a – 14.  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective.  There were no significant changes in the Company’s internalcontrols or in other factors that could significantly affect these controlssubsequent to the date of their evaluation.

 
| **ITEM  7A.** |   | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.** |
|---------------|--------|------------------------------------------------------------------|

 

The Company’s market riskrelates to interest rate exposure on long-term borrowings.  The Company does not use financialinstruments for trading or other speculative purposes.  Excess cash is primarily used to pay downthe revolving line of credit. Borrowings against the revolving line of credit and certain real estateloans are at variable interest rates. All other borrowings are at fixed rates.

 

At August 31, 2001, theCompany had $13,201,000 of outstanding loans with interest rates varying from2.8 percent to 6.8 percent, in traunches. A one percent increase in interest rates charged on the Company’soutstanding variable rate borrowings would have resulted in an increase inannual interest expense of approximately $132,000, assuming the totaloutstanding amount of variable interest debt had remained the same as on August31, 2001.

 

At August 31, 2002, theCompany had $15,917,000 of outstanding loans with interest rates varying from4.0 percent to 4.9 percent, in traunches. A one percent increase in interest rates charged on the Company’s outstandingvariable rate borrowings would result in an increase in annual interest expenseof approximately $159,000, assuming the total outstanding amount of variableinterest debt were to remain the same as on August 31, 2002.

 
| **ITEM  8.** |   | **FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA.** |
|--------------|--------|---------------------------------------------------|

 

The financial statementsand related notes thereto of the Company filed herewith are set forth in Item14 and included in Part IV of this Annual Report on Form 10-K/A.

 
| **ITEM  9.** |   | **CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.** |
|--------------|--------|--------------------------------------------------------------------------------------------|

 

As previously reported,effective on May 20, 2002 the Company dismissed its former independent publicaccountants, Arthur Andersen LLP (“Andersen”) and, on May 21, 2002, the Companyretained KPMG LLP as its new independent public accountants. The change inaccountants was ratified and approved by the Board of Directors of the Company,upon the recommendation of the Audit Committee of the Board of Directors.  KPMG LLP reviewed the Company’s financialstatements for its fiscal quarter ended May 31, 2002, included in the

 

19

----

 

Company’s QuarterlyReport on Form 10-Q for such quarter, and audited the financial statements ofthe Company for the fiscal year ending August 31, 2002 included elsewhere inthis Annual Report on Form 10-K/A.

 

During the Company’sfiscal years ended August 31, 2000 and 2001, and the subsequent interim periodthrough May 20, 2002, there were no disagreements between the Company andAndersen on any matter of accounting principles or practices, financialstatement disclosure, or auditing scope or procedure, which disagreements, ifnot resolved to Andersen’s satisfaction, would have caused Andersen to makereference to the subject matter of the disagreement in connection with itsreports on the Company’s financial statements for such periods.

 

None of the reportableevents described under Item 304(a)(1)(v) of Regulation S-K occurred during theCompany’s fiscal years ended August 31, 2000 and 2001, or during the subsequentinterim period through May 20, 2002.

 

The audit reports issuedby Andersen on the consolidated financial statements of the Company as of andfor the fiscal years ended August 31, 2000 and August 31, 2001 did not containany adverse opinion or disclaimer of opinion, nor were they qualified ormodified as to uncertainty, audit scope or accounting principles.  The Company provided Andersen with a copy ofthe foregoing disclosures at the time of dismissal, and a letter from Andersenconfirming its agreement with these disclosures is attached to the Company’sForm 8-K dated May 20, 2002.

 

During the Company’sfiscal years ended August 31, 2000 and 2001 and through May 20, 2002, theCompany did not consult with KPMG LLP with respect to the application ofaccounting principles to a specified transaction or regarding any of the othermatters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

 

**PARTIII**

 
| **ITEM  10.** |   | **DIRECTORS  AND EXECUTIVE OFFICERS OF REGISTRANT.** |
|---------------|--------|------------------------------------------------------|

 

Incorporated by referencefrom Summa’s definitive Proxy Statement to be filed with the Commission notlater than 120 days after the end of the fiscal year covered by this AnnualReport on Form 10-K.   Specificallyexcludes from incorporation disclosures in the Proxy Statement made under Item7(d)(3) of Regulation 14A.

 
| **ITEM  11.** |   | **EXECUTIVE  COMPENSATION.** |
|---------------|--------|------------------------------|

 

Incorporated by referencefrom Summa’s definitive Proxy Statement to be filed with the Commission notlater than 120 days after the end of the fiscal year covered by this AnnualReport on Form 10-K.   Specificallyexcludes from incorporation disclosures in the Proxy Statement made underparagraphs (k) and (l) of Item 402 of Regulation S-K.

 
| **ITEM  12.** |   | **SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.** |
|---------------|--------|----------------------------------------------------------------------|

 

Incorporated by referencefrom Summa’s definitive Proxy Statement to be filed with the Commission notlater than 120 days after the end of the fiscal year covered by this AnnualReport on Form 10-K.

 
| **ITEM  13.** |   | **CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS.** |
|---------------|--------|------------------------------------------------------|

 

Incorporated by referencefrom Summa’s definitive Proxy Statement to be filed with the Commission notlater than 120 days after the end of the fiscal year covered by this AnnualReport on Form 10-K.

 

**PARTIV**

 
| **ITEM  14.** |   | **EXHIBITS,  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.** |
|---------------|--------|-----------------------------------------------------------------------|

 

(a)   Financial Statements, Financial StatementSchedules and Exhibits:

 

The following documentsare either filed herewith or incorporated herein by reference:

 

1.  *Financial Statements. *The audited consolidated financial statements of Summaand subsidiaries as of

 

20

----

 

August 31, 2001 and 2002 and for each of the three years in the periodended August 31, 2002 (including the notes thereto which contain unauditedquarterly financial data for each of the two years ended August 31, 2002), andthe report of independent public accountants thereon, are included herein asset forth in the “Index to Consolidated Financial Statements” set forth on pageF-1.

 

2.  *FinancialStatement Schedules.  *Thefollowing financial statement schedules:

 

Schedule II - Valuationand qualifying accounts.

 

3.  *Exhibits. *The following exhibits to thisAnnual Report on Form 10-K/A are either filed herewith or incorporated hereinby reference as indicated:

 
| **Exhibit  Number** |   | **Document**                                                                                                                                                                                                                                                                                                                                                                                        |   |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 2.1                 |   | Agreement and Plan of  Reorganization dated March 19, 1993 by and between the Company and KVP  Systems, Inc. relating to the acquisition by the Company of KVP (1)                                                                                                                                                                                                                                  |   |
| 2.2                 |   | Agreement and Plan of  Merger dated November 22, 1996 by and among the Company, LexaLite  International Corporation and Charlevoix The Beautiful, Inc. relating to the  acquisition by the Company of LexaLite (2)                                                                                                                                                                                  |   |
| 2.3                 |   | Agreement and Plan of  Acquisition dated July 2, 1997 by and between the Company and Calnetics  Corporation relating to the acquisition by the Company of Calnetics and its  subsidiaries(3)                                                                                                                                                                                                        |   |
| 2.4                 |   | Stock Purchase  Agreement and Amendment No. 1 thereto dated April 8, 1998 and April 24, 1998,  respectively, by and among Mr. William G. Faulkner, KVP Systems, Inc. and the  Company relating to the acquisition by the Company of Falcon Belting, Inc.  (4)                                                                                                                                       |   |
| 2.5                 |   | Stock Purchase  Agreement dated June 12, 1998 by and between P&L Growth Industries, Inc.,  a California corporation, and the Company relating to the divestiture by the  Company of GST Industries, Inc. (4)                                                                                                                                                                                    |   |
| 2.6                 |   | Asset Purchase  Agreement dated February 17, 1999 among Plastron Industries, Inc., Plastron  Industries L.P., the Company and Plastron Management, Inc.  relating to the acquisition of Plastron by  the Company (5)                                                                                                                                                                           |   |
| 2.7                 |   | Asset Purchase Agreement  dated August 18, 1999 among Broadview Injection Molding, Inc., Broadview  Injection Molding Co., Inc., the Cervenka and Hetzel Joint Venture, Marvin E.  Hetzel and Joseph J. Cervenka relating to the acquisition of Broadview by the  Company (6)                                                                                                                       |   |
| 2.8                 |   | Stock Purchase  Agreement dated October 4, 2000 by and among the Company and the shareholders  of Plastic Specialties, Inc. relating to the acquisition by the Company of  Plastic Specialties, Inc. (7)                                                                                                                                                                                            |   |
| 2.9                 |   | Asset Purchase  Agreement dated November 3, 2000 among the Company, Ram Belts & Chains,  Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of the  Company (“Buyer”), Rainbow Industrial Products Corp. (“Rainbow”), and Howard  and Lee Beth Miller relating to the purchase of assets of the Ram Belts &  Chains division of Rainbow by Buyer (8) |   |
| 2.10                |   | Asset Purchase  Agreement dated January 4, 2002 by and among the Company, Pavaco Plastics  Inc., Genesta Inc. and 1238579 Ontario Inc relating to the purchase of assets  of Genesta Manufacturing division of Pavaco (9).                                                                                                                                                                          |   |
| 2.11                |   | Series A Preferred  Stock Purchase Agreement dated December 14, 2001 by and among the Company and  the Investors set forth therein (9)                                                                                                                                                                                                                                                              |   |
| 3.1                 |   | Certificate of  Incorporation of the Company (10)                                                                                                                                                                                                                                                                                                                                                   |   |
| 3.2                 |   | Bylaws of the Company  (10)                                                                                                                                                                                                                                                                                                                                                                         |   |
| 3.3                 |   | Certificate of  Designations of the Series A Preferred Stock of the Company (9)                                                                                                                                                                                                                                                                                                                     |   |
| 10.1                |   | Amended and Restated  Loan Agreement dated March 5, 1999 between the Company and a group of lenders  (5)                                                                                                                                                                                                                                                                                            |   |
| 10.2                |   | 1991 Stock Option Plan  of the Company (11)                                                                                                                                                                                                                                                                                                                                                         |   |
| 10.3                |   | 1995 Stock Option Plan  of the Company (12)                                                                                                                                                                                                                                                                                                                                                         |   |
| 10.4                |   | 1999 Stock Option Plan  of the Company (13)                                                                                                                                                                                                                                                                                                                                                         |   |
| 10.5                |   | Form of Amended and  Restated Employment Agreement dated June 1, 2001 between the Company and each  of Messrs. Swartwout, Thoresen and Walbrun (14)                                                                                                                                                                                                                                                 |   |

 

21

----

 
| 21.1 |   | Subsidiaries of the  Registrant(*)                     |   |
|------|--------|--------------------------------------------------------|--------|
| 23.1 |   | Consent of KPMG LLP  (**)                              |   |
| 99.1 |   | Certification pursuant  to 18 U.S.C. Section 1350 (**) |   |

 

----

(1)  Incorporated by reference from the exhibitsto the Company’s Registration Statement on Form S-4 filed with the Commissionon May 24, 1993.

(2)  Incorporated by reference from theappendices to the Company’s definitive Proxy Statement on Schedule 14A for theAnnual  Meeting of Shareholders heldNovember 21, 1996.

(3)  Incorporated by reference from theappendices to the Calnetics’ definitive Proxy Statement on Schedule 14A for theSpecial Meeting of Shareholders held October 28, 1997.

(4)  Incorporated by reference from exhibits tothe Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May31, 1998.

(5)  Incorporated by reference from exhibits tothe Company’s Current Report on Form 8-K dated March 5, 1999.

(6)  Incorporated by reference from exhibits tothe Company’s Annual Report on Form 10-K for the fiscal year ended August 31,1999.

(7)  Incorporated by reference from exhibits tothe Company’s Current Report on Form 8-K dated October 5, 2000.

(8)  Incorporated by reference from exhibits tothe Company’s Current Report on Form 8-K dated December 1, 2000.

(9)    Incorporated by reference from exhibits tothe Company’s Quarterly Report on Form 10-Q for the fiscal quarter endedNovember 30, 2001.

(10)  Incorporated by reference from theappendices to the Company’s definitive Proxy Statement on Schedule 14A for theAnnual  Meeting of Shareholders heldJanuary 26, 1998.

(11)  Incorporated by reference from exhibits tothe Company’s Registration Statement on Form S-8 filed with the Commission onApril 15, 1993.

(12) Incorporated byreference from exhibits to the Company’s Registration Statement on Form S-8filed with the Commission on January 30, 1997.

(13) Incorporated byreference from exhibits to the Company’s Registration Statement on Form S-8filed with the Commission on December 15, 1998.

(14)  Incorporated by reference from exhibits tothe Company’s Annual Report on Form 10-K for the fiscal year ended August 31,2001.

* Previously filed asexhibits to the Company’s Annual Report on Form 10-K for the fiscal year endedAugust 31, 2002.

** Filed herewith.

 

(b)     Reports on Form 8-K filed during thelast quarter of the fiscal year ended August 31, 2002:

 

None.

 

22

----

 

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**

 

 
| Report of  Independent Public Accountants                                                                 |
|-----------------------------------------------------------------------------------------------------------|
| Report  of Former Independent Public Accountants                                                          |
| Consolidated Balance Sheets  as of August 31, 2001 and 2002                                               |
| Consolidated Statements  of Income for the years ended August 31, 2000, 2001 and 2002                     |
| Consolidated  Statements of Stockholders’ Equity for the years ended August 31, 2000, 2001  and 2002 |
| Consolidated Statements  of Cash Flows for the years ended August 31, 2000, 2001 and 2002                 |
| Notes to  Consolidated Financial Statements                                                               |
| Report  of  Independent Public Accountants                                                           |
| Schedule II - Valuation and Qualifying  Accounts                                                          |

 

F - 1

----

 

Reports of Independent Public Accountants

 

 

TO:         The Board of Directors and Stockholdersof Summa Industries:

 

 

We have auditedthe 2002 accompanying consolidated balance sheet of Summa Industries andsubsidiaries as of August 31, 2002 and the related consolidated statements ofincome, stockholders’ equity and cash flows for the year ended August 31,2002.  These financial statements arethe responsibility of the Company’s management.  Our responsibility is to express an opinion on these financialstatements based on our audit.   The2001 and 2000 consolidated financial statements of Summa Industries andsubsidiaries were audited by other auditors who have ceased operations.  Those auditors expressed an unqualifiedopinion on those consolidated financial statements, before the restatementdescribed in Note 17 to the consolidated financial statements, in their reportdated October 9, 2001.

 

We conducted ouraudit in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are freeof material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements.  An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe thatour audit provides a reasonable basis for our opinion.

 

In our opinion,the 2002 consolidated financial statements referred to above present fairly, inall material respects, the financial position of Summa Industries andsubsidiaries as of August 31, 2002, and the results of their operations andtheir cash flows for the year then ended, in conformity with accountingprinciples generally accepted in the United States of America.

 

As described innote 17 to the consolidated financial statements, the Company restated thedisclosure related to its reportable segments. As discussed above, the 2001 and 2000 consolidated financial statementsof Summa Industries and subsidiaries were audited by other auditors who haveceased operations.  The amounts in the2001 and 2000 consolidated financial statements relating to reportable segmentshave been restated to conform to the 2002 restated reportable segments.  We audited the adjustments that were appliedto restate the disclosures for reportable segments reflected in the 2001 and2000 consolidated financial statements. In our opinion, such adjustments are appropriate and have been properlyapplied.  However, we were not engagedto audit, review, or apply any procedures to the 2001 and 2000 consolidatedfinancial statements of Summa Industries and subsidiaries other than withrespect to such adjustments, and accordingly, we do not express an opinion orany other form of assurance on the 2001 and 2000 consolidated financialstatements taken as a whole.

 

 
| /s/ KPMG LLP                                                         |   |
|----------------------------------------------------------------------|--------|
|                                                                 |
| Los Angeles, California                                              |
| October  7, 2002, except for  note 17, which is as of  July 9, 2003. |

 

F - 2

----

 

Reports of FormerIndependent Public Accountants

 

(Copyof previously issued Arthur Andersen LLP report; not reissued by Arthur AndersenLLP)

 

TO:                            The Board of Directors and Stockholdersof Summa Industries:

 

We have audited theaccompanying consolidated balance sheets of Summa Industries (a Delawarecorporation) and subsidiaries as of August 31, 2000 and 2001 and the relatedconsolidated statements of income, stockholders’ equity and cash flows for eachof the three years in the period ended August 31, 2001.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our auditsin accordance with auditing standards generally accepted in the UnitedStates.  Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the financial position of Summa Industries and subsidiaries as ofAugust 31, 2000 and 2001, and the results of their operations and their cashflows for each of the three years in the period ended August 31, 2001, inconformity with accounting principles generally accepted in the United States.

 
| /s/ ARTHUR ANDERSEN LLP |   |
|-------------------------|--------|
|                    |
| Los Angeles, California |
|                    |
| October 9, 2001         |

 

F - 3

----

 

**SummaIndustries**

 

CONSOLIDATED BALANCESHEETS

as of August 31

 
|                                                                                                                                                 |   | **2001**   |       | **2002**   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|------------|--------|
| **ASSETS**                                                                                                                                           |   |       |       |       |   |
|                                                                                                                                                 |   |       |       |       |   |
| Current assets:                                                                                                                                      |   |       |       |       |   |
| Cash and cash equivalents                                                                                                                            |   | $          | 246,000    |       | $      | 690,000 |   |
| Accounts receivable, net of allowances of $514,000 in 2001 and  $633,000 in 2002                                                                     |   | 16,513,000 |       | 17,594,000 |   |
| Inventories                                                                                                                                          |   | 13,383,000 |       | 12,313,000 |   |
| Prepaid expenses and other                                                                                                                           |   | 1,106,000  |       | 1,189,000  |   |
| Deferred tax asset                                                                                                                                   |   | 1,081,000  |       | 1,992,000  |   |
| Prepaid income taxes                                                                                                                                 |   | 1,057,000  |       | —     |   |
| Total current assets                                                                                                                                 |   | 33,386,000 |       | 33,778,000 |   |
| Property, plant and equipment, net                                                                                                                   |   | 29,567,000 |       | 26,820,000 |   |
| Other assets                                                                                                                                         |   | 164,000    |       | 124,000    |   |
| Goodwill and other intangibles, net                                                                                                                  |   | 35,162,000 |       | 36,843,000 |   |
| Total assets                                                                                                                                         |   | $          | 98,279,000 |       | $      | 97,565,000 |   |
|                                                                                                                                                 |   |       |       |       |   |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**                                                                                                       |   |       |       |       |   |
|                                                                                                                                                 |   |       |       |       |   |
| Current liabilities:                                                                                                                                 |   |       |       |       |   |
| Current maturities of long-term debt                                                                                                                 |   | $          | 7,682,000  |       | $      | 5,066,000 |   |
| Accounts payable                                                                                                                                     |   | 5,594,000  |       | 6,410,000  |   |
| Accrued salaries, wages and benefits                                                                                                                 |   | 2,868,000  |       | 3,185,000  |   |
| Other accrued liabilities                                                                                                                            |   | 2,703,000  |       | 2,816,000  |   |
| Total current liabilities                                                                                                                            |   | 18,847,000 |       | 17,477,000 |   |
| Long-term debt, net of current maturities                                                                                                            |   | 29,178,000 |       | 19,845,000 |   |
| Deferred tax liabilities                                                                                                                             |   | 1,241,000  |       | 2,013,000  |   |
| Other long-term liabilities                                                                                                                          |   | 3,206,000  |       | 2,645,000  |   |
| Total long-term liabilities                                                                                                                          |   | 33,625,000 |       | 24,503,000 |   |
| Manditorily redeemable convertible preferred stock, par value $.001;  5,000 shares authorized, issued and outstanding                                |   | —     |       | 5,366,000  |   |
| Stockholders’ equity:                                                                                                                           |   |       |       |       |   |
| Preferred stock, par value $.001; 4,995,000 shares authorized; none  outstanding                                                                     |   | —     |       | —     |   |
| Common stock, par value $.001; 10,000,000 shares authorized; issued  and outstanding: 4,297,313 at August 31, 2001 and 4,401,769 at August 31,  2002 |   | 18,048,000 |       | 18,894,000 |   |
| Retained earnings                                                                                                                                    |   | 27,887,000 |       | 31,325,000 |   |
| Accumulatedother comprehensive loss                                                                                                                  |   | (128,000   | )          | —     |   |
| Total stockholders’ equity                                                                                                                      |   | 45,807,000 |       | 50,219,000 |   |
| Total liabilities and stockholders’ equity                                                                                                      |   | $          | 98,279,000 |       | $      | 97,565,000 |   |

 

See accompanying notes toconsolidated financial statements*.*

 

F - 4

----

 

**SummaIndustries**

 

CONSOLIDATED STATEMENTSOF INCOME

for the yearsended August 31

 
|                                                     |   | **2000**   |        | **2001**   |   | **2002**    |   |
|----------------------------------------------------------|--------|------------|-------------|------------|--------|-------------|--------|
| Net sales                                                |   | $          | 125,746,000 |       | $      | 127,002,000 |   | $ | 116,241,000 |   |
| Cost of sales                                            |   | 90,833,000 |        | 93,650,000 |   | 85,765,000  |   |
| Gross profit                                             |   | 34,913,000 |        | 33,352,000 |   | 30,476,000  |   |
| Selling, general, and administrative and  other expenses |   | 20,923,000 |        | 23,118,000 |   | 21,911,000  |   |
| Operating income                                         |   | 13,990,000 |        | 10,234,000 |   | 8,565,000   |   |
| Interest expense, net                                    |   | 2,984,000  |        | 3,851,000  |   | 2,500,000   |   |
| Income before income taxes                               |   | 11,006,000 |        | 6,383,000  |   | 6,065,000   |   |
| Provision for income taxes                               |   | 3,700,000  |        | 1,970,000  |   | 2,136,000   |   |
| Net income                                               |   | $          | 7,306,000   |       | $      | 4,413,000   |   | $ | 3,929,000 |   |
| Preferred stock accretion                                |   | —     |        | —     |   | 491,000     |   |
| Net income available to common stockholders              |   | $          | 7,306,000   |       | $      | 4,413,000   |   | $ | 3,438,000 |   |
| Earnings per common share:                               |   |       |        |       |   |        |   |
| Basic                                                    |   | $          | 1.71        |       | $      | 1.04        |   | $ | 0.78 |   |
| Diluted                                                  |   | $          | 1.62        |       | $      | 1.00        |   | $ | 0.76 |   |
| Weighted average common shares outstanding:              |   |       |        |       |   |        |   |
| Basic                                                    |   | 4,284,000  |        | 4,255,000  |   | 4,398,000   |   |
| Diluted                                                  |   | 4,506,000  |        | 4,424,000  |   | 4,512,000   |   |

 

See accompanying notes toconsolidated financial statements.

 

F - 5

----

 

**SummaIndustries**

 

CONSOLIDATED STATEMENTSOF STOCKHOLDERS’ EQUITY

for the threeyears ended August 31, 2002

 
|                                                          |   | **Common  Shares** |   | **Common  Stock** |       | **Retained  Earnings** |   | **Accumulated  Other   Comprehensive  Income (Loss****)** |     | **Total**  |     |
|---------------------------------------------------------------|--------|--------------------|--------|-------------------|------------|------------------------|--------|-----------------------------------------------------------|----------|------------|----------|
| Balance at August 31, 1999                                    |   | 4,313,481          |   | $                 | 19,205,000 |                   | $      | 16,168,000                                                |     | —     |     | $ | 35,373,000 |   |
| Cashout of odd lots                                           |   | (6                 | )      | —            |       | —                 |   | —                                                    |     | —     |     |
| Exercise of stock options                                     |   | 45,288             |   | 354,000           |       | —                 |   | —                                                    |     | 354,000    |     |
| Repurchase of common stock                                    |   | (134,048           | )      | (1,473,000        | )          | —                 |   | —                                                    |     | (1,473,000 | )        |
| Repurchase of warrants issued in connection  with acquisition |   | —             |   | (500,000          | )          | —                 |   | —                                                    |     | (500,000   | )        |
| Net income                                                    |   | —             |   | —            |       | 7,306,000              |   | —                                                    |     | 7,306,000  |     |
| Balance at August 31, 2000                                    |   | 4,224,715          |   | $                 | 17,586,000 |                   | $      | 23,474,000                                                |     | —     |     | $ | 41,060,000 |   |
| Cashout of odd lots                                           |   | (1                 | )      | —            |       | —                 |   | —                                                    |     | —     |     |
| Sale of common stock                                          |   | 5,861              |   | 62,000            |       | —                 |   | —                                                    |     | 62,000     |     |
| Exercise of stock options                                     |   | 66,738             |   | 400,000           |       | —                 |   | —                                                    |     | 400,000    |     |
| Net income                                                    |   | —             |   | —            |       | 4,413,000              |   | —                                                    |     | 4,413,000  |     |
| Other comprehensive loss                                      |   | —             |   | —            |       | —                 |   | $                                                         | (128,000 | )          | (128,000 | ) |
| Balance at August 31, 2001                                    |   | 4,297,313          |   | $                 | 18,048,000 |                   | $      | 27,887,000                                                |     | $          | (128,000 | ) | $ | 45,807,000 |   |
| Contribution to ESOP                                          |   | 29,023             |   | 240,000           |       | —                 |   | —                                                    |     | 240,000    |     |
| Common stock issued for business  acquisition                 |   | 40,000             |   | 530,000           |       | —                 |   | —                                                    |     | 530,000    |     |
| Exercise of stock options                                     |   | 80,433             |   | 441,000           |       | —                 |   | —                                                    |     | 441,000    |     |
| Stock redeemed in exercise of stock options                   |   | (5,000             | )      | (40,000           | )          | —                 |   | —                                                    |     | (40,000    | )        |
| Repurchase of common stock                                    |   | (40,000            | )      | (450,000          | )          | —                 |   | —                                                    |     | (450,000   | )        |
| Net income                                                    |   | —             |   | —            |       | 3,929,000              |   |                                                      |     | 3,929,000  |     |
| Beneficial conversion on issuance of  preferred stock         |   | —             |   | 125,000           |       | —                 |   | —                                                    |     | 125,000    |     |
| Preferred stock accretion                                     |   | —             |   | —            |       | (491,000               | )      | —                                                    |     | (491,000   | )        |
| Other comprehensive  income                              |   | —             |   | —            |       | —                 |   | 128,000                                                   |     | 128,000    |     |
| Balance at August 31, 2002                                    |   | 4,401,769          |   | $                 | 18,894,000 |                   | $      | 31,325,000                                                |     | —     |     | $ | 50,219,000 |   |

 

See accompanying notes to consolidated financialstatements*.*

 

F - 6

----

 

**SummaIndustries**

 

CONSOLIDATED STATEMENTSOF CASH FLOWS

for the yearsended August 31

 
|                                                                               |   | **2000**   |      | **2001**    |   | **2002**    |   |
|------------------------------------------------------------------------------------|--------|------------|-----------|-------------|--------|-------------|--------|
| Operating activities:                                                              |   |       |      |        |   |        |   |
| Net income                                                                         |   | $          | 7,306,000 |        | $      | 4,413,000   |   | $ | 3,929,000 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |       |      |        |   |        |   |
| Depreciation                                                                       |   | 4,718,000  |      | 5,445,000   |   | 4,927,000   |   |
| Amortization                                                                       |   | 965,000    |      | 1,147,000   |   | 1,286,000   |   |
| Change in net deferred income taxes                                                |   | (216,000   | )         | 117,000     |   | (139,000    | )      |
| (Gain) on disposition of property, plant  and equipment                            |   | (24,000    | )         | (194,000    | )      | (742,000    | )      |
| Net change in assets and liabilities, net  of effects of acquisitions              |   | (4,381,000 | )         | 2,548,000   |   | 2,604,000   |   |
| Total adjustments                                                                  |   | 1,062,000  |      | 9,063,000   |   | 7,936,000   |   |
| Net cash provided by operating activities                                          |   | 8,368,000  |      | 13,476,000  |   | 11,865,000  |   |
| Investing activities:                                                              |   |       |      |        |   |        |   |
| Acquisitions of businesses, net of cash  acquired                                  |   | (2,174,000 | )         | (15,998,000 | )      | (2,685,000  | )      |
| Purchases of property and equipment                                                |   | (4,333,000 | )         | (3,207,000  | )      | (3,380,000  | )      |
| Cash paid for patents                                                              |   | (95,000    | )         | —      |   | —      |   |
| Net proceeds from the sale of property  plant and equipment                        |   | 51,000     |      | 950,000     |   | 2,397,000   |   |
| Proceeds from insurance claim                                                      |   | 350,000    |      | —      |   | —      |   |
| Proceeds from cash surrender value of life  insurance                              |   | —     |      | 403,000     |   | —      |   |
| Net cash (used in) investing activities                                            |   | (6,201,000 | )         | (17,852,000 | )      | (3,668,000  | )      |
| Financing activities:                                                              |   |       |      |        |   |        |   |
| Net proceeds from (payments on) revolving  line of credit                          |   | 1,260,000  |      | (1,912,000  | )      | (1,854,000  | )      |
| Proceeds from issuance of long-term debt                                           |   | 3,258,000  |      | 17,406,000  |   | 4,007,000   |   |
| Payments on long-term debt                                                         |   | (5,871,000 | )         | (11,677,000 | )      | (14,857,000 | )      |
| Proceeds from the exercise of stock  options, net                                  |   | 354,000    |      | 400,000     |   | 401,000     |   |
| Proceeds from sale of redeemable preferred  stock                                  |   | —     |      | —      |   | 5,000,000   |   |
| Proceeds from sale of common stock                                                 |   | —     |      | 62,000      |   | —      |   |
| Purchase of common stock                                                           |   | (1,473,000 | )         | —      |   | (450,000    | )      |
| Purchase of warrants                                                               |   | (500,000   | )         | —      |   | —      |   |
| Net cash provided by (used in) financing  activities                               |   | (2,972,000 | )         | 4,279,000   |   | (7,753,000  | )      |
| Net increase (decrease) in cash and cash  equivalents                              |   | (805,000   | )         | (97,000     | )      | 444,000     |   |
| Cash and cash equivalents, beginning of  year                                      |   | 1,148,000  |      | 343,000     |   | 246,000     |   |
| Cash and cash equivalents, end of year                                             |   | $          | 343,000   |        | $      | 246,000     |   | $ | 690,000 |   |

 

See accompanying notes toconsolidated financial statements*.*

 

F - 7

----

 

Summa Industries

 

*Notes to Consolidated FinancialStatements*

 

For the year ended August31, 2002

 

**1.      Description of business and summary ofsignificant accounting policies**

 

**Natureof operations**

 

Summa Industries, aDelaware corporation (“Summa” or the “Company”), develops and manufacturesproprietary plastic products for diverse industrial and commercial markets,primarily located in the United States.

 

**Basis ofpresentation and principles of consolidation**

 

The accompanyingconsolidated financial statements include the accounts of Summa and itswholly-owned subsidiaries and is prepared in accordance with generally acceptedaccounting principles in the United States of America. The results ofoperations of acquired companies have been included in the consolidatedstatements of income and cash flows of the Company since the dates ofacquisitions.  See Note 15.  All intercompany account balances andtransactions have been eliminated in consolidation.   Prior year amounts in the accompanying financial statements havebeen reclassified to conform with current year presentations.

 

**Use ofestimates in the preparation of financial statements**

 

The preparation offinancial statements in conformity with United States generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

**Revenuerecognition**

 

Revenue from productsales is recognized when title passes to the buyer, usually upon shipment.

 

**Inventories**

 

Inventories are stated atthe lower of cost (determined on a first-in, first-out basis) or market.  Cost includes material, labor andmanufacturing overhead.  Lower of costor market adjustments are charged to cost of sales as identified.

 

**Property,plant and equipment**

 

Depreciation is chargedagainst earnings, principally using the straight-line method, over theestimated useful lives of the related assets as follows:

 

| Building and  improvements      |   | 10-40 years                                                 |
|---------------------------------|--------|-------------------------------------------------------------|
| Machinery and equipment         |   | 3-10 years                                                  |
| Office furniture and  equipment |   | 3-7 years                                                   |
| Leasehold improvements          |   | Lesser of remaining  term of lease or estimated useful life |

 

Maintenance, repairs andminor renewals are charged directly to expense as incurred.  Additions and improvements to property,plant and equipment are capitalized. When assets are disposed of, the related cost and accumulateddepreciation thereon are removed from the accounts, and any gain or loss isincluded in operations.

 

F - 8

----

 

**Intangibleassets**

 

Intangible assets includegoodwill and other intangibles such as trade names, patents and customer listsrecognized in connection with business acquisitions.  Goodwill was amortized over 15-40 years until August 31, 2002.  Other intangibles are being amortized overtheir estimated useful lives of 10-17 years. See Note 7 and “Recent accounting pronouncements”, below.

 

**Long-livedassets**

 

The Company has adoptedthe Statement of Financial Accounting Standards (SFAS) No. 121, “Accounting forthe Impairment of Long-Lived Assets and Long-Lived Assets to be Disposedof”.  Management monitors its long-livedassets, identifiable intangibles and goodwill related to those assets, andconsiders whether events or changes in circumstances have occurred whichindicate that the value of assets may not be recoverable. Recoverability ismeasured by comparison of carrying amount to the undiscounted future net cashflows an asset is expected to generate. If an asset is considered to be impaired,the impairment to be recognized is measured by the amount at which the carryingamount of the assets exceeds the projected discounted future cash flows.   No impairment has occurred as of August 31,2002.

 

**Earningsper common share**

 

Basic earnings per commonshare (EPS) is based on income available to common stockholders divided by theweighted average number of common shares outstanding during the year.  Diluted EPS is similar to the computationfor basic EPS except that the denominator is increased to include the number ofadditional common shares that would have been outstanding if the dilutivepotential common shares had been issued. See Note 2 for details of the computation.

 

**Cashequivalents**

 

The Company considers allhighly liquid debt instruments with an original maturity of three months orless to be cash equivalents.

 

**Incometaxes**

 

The Company accounts forincome taxes in accordance with the SFAS No. 109 “Accounting for IncomeTaxes”.  This statement requires thatincome taxes be accounted for using the asset and liability method.  Under the asset and liability method,deferred tax assets and liabilities are recognized for the estimated future taxconsequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective taxbases.  This method also requires therecognition of future tax benefits such as net operating loss carryforwards, tothe extent  that realization of suchbenefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change intax rates is recognized in income in the period that includes the enactmentdate.

 

**Stock-basedcompensation**

 

The Company reports stockbased compensation to employees and directors in accordance with AccountingPrinciples Board (APB) Opinion No. 25, “Accounting for Stock issued toEmployees” and Financial Interpretation No. 44, “Accounting for CertainTransactions Regarding Stock Compensation.” The Company has adopted the appropriate disclosure requirements of SFASNo. 123, “Accounting for Stock-Based Compensation.”  See Note 12.

 

**Recentaccounting pronouncements**

 

In June 2001, theFinancial Accounting Standards Board (“FASB”) issued Statements of FinancialAccounting Standards No. 141 (“SFAS 141”) “Business Combinations” and No. 142(“SFAS 142”) “Goodwill and Other Intangible Assets.”  These statements eliminate the pooling of interests method ofaccounting for business combinations as of June 30, 2001 and eliminate theamortization of goodwill for all fiscal years beginning after December 15,2001.  Goodwill is accounted for underan impairment-only method after this date. The Company has adopted SFAS 141 and SFAS 142 with respect to newgoodwill as of July 1, 2001 and will adopt SFAS 142 with respect to existinggoodwill as of September 1, 2002, the first day of its 2003 fiscal year.  The adoption of SFAS 141

 

F - 9

----

 

has not impacted theCompany’s financial condition or results of operations.  In accordance with SFAS 142, existinggoodwill was amortized through the end of fiscal 2002 at which timeamortization ceased.  The Company iscurrently assessing the impact of adopting SFAS 142 with respect to existinggoodwill and will perform a transitional goodwill impairment test during thefirst half of fiscal 2003.  Totalgoodwill amortization was $882,000 in fiscal 2000, $1,062,000 in fiscal 2001and $1,096,000 in fiscal 2002.

 

In August 2001, the FASBissued Statement of Accounting Standards No. 143 (“SFAS 143”) “Accounting forAsset Retirement Obligations”.  SFAS 143is to be adopted for all fiscal years beginning after June 15, 2002.  The Company will adopt SFAS 143 in fiscal2003.  The Company is currentlyreviewing the requirements of SFAS 143 and has not yet determined its impact,if any, on the Company’s financial position and results of operations.

 

In August 2001, the FASBissued Statement of Financial Accounting Standards No. 144 (“SFAS 144”)“Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 isto be adopted for all fiscal years beginning after December 15, 2001.  The Company will adopt SFAS 144 in fiscalyear 2003.  The Company is currentlyreviewing the requirements of SFAS 144 and has not yet determined its impact,if any, on the Company’s financial position and results of operations.

 

In April 2002, the FASBissued Statement of Financial Accounting Standards No. 145 (“SFAS 145”)“Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB StatementNo. 13, and Technical Corrections” which requires that the extinguishment of debtnot be considered an extraordinary item under APB Opinion No. 30 (“APB 30”)“Reporting the Results of Operations – Reporting the Effects of Disposal of aSegment of Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions” unless the debt extinguishment meets the “unusual innature and infrequent of occurrence” criteria in APB 30.  SFAS 145 is effective for fiscal yearsbeginning after May 15, 2002 and, upon adoption, companies must reclassifyprior period items that do not meet the extraordinary item classificationcriteria in APB 30.  The adoption ofSFAS 145 is not expected to have any impact on the Company’s financial positionor results of operation.

 

In July 2002, the FASBissued Statement of Financial Accounting Standards No. 146 (“SFAS 146”)“Accounting for Costs Associated with Exit or Disposal Activities” whichnullifies EITF Issue No. 94-3 “Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity (including Certain CostsIncurred in a Restructuring).”  SFAS 146requires that costs associated with an exit or disposal activity be recognizedonly when the liability is incurred (that is, when it meets the definition of aliability in the FASB’s conceptual framework). SFAS 146 also establishes fairvalue as the objective for initial measurement of liabilities related to exitor disposal activities.  SFAS 146 iseffective for exit or disposal activities that are initiated after December 31,2002. The adoption of SFAS 146 is not expected to have a material impact on theCompany’s financial position or results of operation.

 

**2.      Earnings per share**

 

Basic earnings per share(“EPS”) was computed by dividing net income available to common stockholders bythe weighted average number of common shares outstanding during each period.The Company has 5,000 shares of convertible preferred stock outstanding with anoriginal issue price of $5,000,000.  Nodividends are required to be paid on the stock, but the preferred stockholdershave the right, provided the preferred stock has not been converted to commonshares, to require the Company to repurchase the stock during a one year periodbeginning December 14, 2004 at an aggregate price which increases daily from$7,025,000 on December 14, 2004 to $7,868,000 on December 13, 2005.  The net income available to commonstockholders used in the EPS calculations is the reported net income less thereported accretion in the value of the preferred stock for that period.

 

Diluted EPS reflects thepotential dilution that could occur if securities or other contracts to issuecommon 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 fundswere used to purchase common shares at the average market price during theperiod.  Options to purchase 203,708common shares as of August 31, 2000, 206,926 common shares as of August 31,2001 and 412,940 common shares as of August 31, 2002 were excluded from the calculationof equivalent shares, as they would have been anti-dilutive.  The 5,000 shares of outstanding preferredstock, convertible into 625,000 shares of common stock, were excluded from thecalculation of equivalent shares, as they would have been anti-dilutive.

 

The following is areconciliation of the numerators and denominators of the basic and diluted EPScomputations for “income available to common stockholders” and otherdisclosures required by Statement of Accounting Standards No. 128, “Earningsper Share”, for the years ended August 31:

 

F - 10

----

 
|                                                          |   | **2000**  |      | **2001**  |   | **2002**  |   |
|---------------------------------------------------------------|--------|-----------|-----------|-----------|--------|-----------|--------|
| Numerators:                                                   |   |      |      |      |   |      |   |
|                                                          |   |      |      |      |   |      |   |
| Net income                                                    |   | $         | 7,306,000 |      | $      | 4,413,000 |   | $ | 3,929,000 |   |
| Preferred stock accretion                                     |   | —    |      | —    |   | (491,000  | )      |
| Income available to common stockholders                       |   | $         | 7,306,000 |      | $      | 4,413,000 |   | $ | 3,438,000 |   |
|                                                          |   |      |      |      |   |      |   |
| Denominators:                                                 |   |      |      |      |   |      |   |
|                                                          |   |      |      |      |   |      |   |
| Weighted average shares outstanding – basic              |   | 4,284,000 |      | 4,255,000 |   | 4,398,000 |   |
| Impact of common shares to be issued under stock option plans |   | 218,000   |      | 169,000   |   | 114,000   |   |
| Impact of common shares to be issued with respect to warrants |   | 4,000     |      | —    |   | —    |   |
| Weighted average shares outstanding –   diluted     |   | 4,506,000 |      | 4,424,000 |   | 4,512,000 |   |

 

**3.      Supplemental cash flow information**

 

Cash flows from netchanges in assets and liabilities, net of effects of acquisitions for the yearsended August 31:

** **
|                                                                                      |   | **2000**   |       | **2001**   |   | **2002**  |   |
|-------------------------------------------------------------------------------------------|--------|------------|------------|------------|--------|-----------|--------|
|                                                                                      |   |       |       |       |   |      |   |
| Accounts receivable, net                                                                  |   | $          | (1,392,000 | )          | $      | 4,459,000 |   | $ | 168,000 |   |
| Inventories                                                                               |   | (1,003,000 | )          | 2,661,000  |   | 1,595,000 |   |
| Prepaid expenses and other  assets                                                        |   | (20,000    | )          | 59,000     |   | 1,103,000 |   |
| Accounts payable                                                                          |   | (363,000   | )          | (2,188,000 | )      | (249,000  | )      |
| Accrued liabilities                                                                       |   | (1,603,000 | )          | (2,443,000 | )      | (13,000   | )      |
| Cash flows from net change in assets and liabilities, net of the  effects of acquisitions |   | $          | (4,381,000 | )          | $      | 2,548,000 |   | $ | 2,604,000 |   |

 

Cash paid during theyears ended August 31:

 
|         |   | **2000** |      | **2001** |   | **2002**  |   |
|--------------|--------|----------|-----------|----------|--------|-----------|--------|
|         |   |     |      |     |   |      |   |
| Interest     |   | $        | 3,100,000 |     | $      | 3,876,000 |   | $ | 2,536,000 |   |
| Income taxes |   | $        | 4,245,000 |     | $      | 1,428,000 |   | $ | 470,000 |   |

 

Non-cash investing andfinancing activities:

 
|                                        |   | **2000**  |      | **2001**   |   | **2002**   |   |
|---------------------------------------------|--------|-----------|-----------|------------|--------|------------|--------|
| Common stock issued to ESOP                 |   | $         | —    |       | $      | —     |   | $ | 240,000 |   |
| Common stock issued in business acquisition |   | $         | —    |       | $      | —     |   | $ | 530,000 |   |
| Accretion of redeemable  preferred stock    |   | $         | —    |       | $      | —     |   | $ | 491,000 |   |
|                                        |   |      |      |       |   |       |   |
| Details of acquisitions (Note  15):         |   |      |      |       |   |       |   |
|                                        |   |      |      |       |   |       |   |
| Fair value of assets acquired               |   | $         | 2,882,000 |       | $      | 20,299,000 |   | $ | 5,344,000 |   |
| Liabilities assumed or incurred             |   | (589,000  | )         | (3,314,000 | )      | (2,659,000 | )      |
| Cash paid                                   |   | 2,293,000 |      | 16,985,000 |   | 2,685,000  |   |
| Less cash acquired                          |   | (119,000  | )         | (987,000   | )      | —     |   |
| Net cash used in acquisitions               |   | $         | 2,174,000 |       | $      | 15,998,000 |   | $ | 2,685,000 |   |

 

F - 11

----

 

**4.      Disclosures about fair value of financialinstruments**

 

The following methods andassumptions were used to estimate the fair value of each class of financialinstrument for which it is practicable to estimate:

 

Cash and cashequivalents, accounts receivable and accounts payable - the carrying amount isa reasonable estimate of fair value due to quick turnover.

 

Long-term debt - atAugust 31, 2001, the fair value of total long-term debt was approximately$37,997,000 compared to the carrying value of $36,860,000.  At August 31, 2002, the fair value of totallong-term debt was $25,667,000 compared to the carrying value of $24,911,000.

 

**5.      Inventories**

 

Inventories consisted ofthe following at August 31:

 
|                |   | **2001**  |       | **2002**  |   |
|---------------------|--------|-----------|------------|-----------|--------|
|                |   |      |       |      |   |
| Finished goods      |   | $         | 6,375,000  |      | $      | 5,457,000 |   |
| Work in process     |   | 533,000   |       | 290,000   |   |
| Materials and parts |   | 6,475,000 |       | 6,566,000 |   |
|                |   | $         | 13,383,000 |      | $      | 12,313,000 |   |

 

**6.      Property, plant and equipment**

 

Property, plant andequipment consisted of the following at August 31:

 
|                                           |   | **2001**    |       | **2002**    |   |
|------------------------------------------------|--------|-------------|------------|-------------|--------|
|                                           |   |        |       |        |   |
| Land, at cost                                  |   | $           | 3,270,000  |        | $      | 2,636,000 |   |
| Buildings and leasehold  improvements, at cost |   | 15,459,000  |       | 14,619,000  |   |
| Machinery and equipment, at  cost              |   | 28,461,000  |       | 31,228,000  |   |
| Office furniture and equipment, at cost        |   | 3,169,000   |       | 3,362,000   |   |
|                                           |   | 50,359,000  |       | 51,845,000  |   |
| Accumulated depreciation                       |   | (20,792,000 | )          | (25,025,000 | )      |
| Net property, plant and equipment              |   | $           | 29,567,000 |        | $      | 26,820,000 |   |

 

**7.      Goodwill and other intangibles**

 

Goodwill and otherintangibles consisted of the following at August 31:

 
|                                |   | **2001**   |       | **2002**   |   |
|-------------------------------------|--------|------------|------------|------------|--------|
|                                |   |       |       |       |   |
| Goodwill                            |   | $          | 36,871,000 |       | $      | 39,321,000 |   |
| Other intangibles                   |   | 1,807,000  |       | 2,324,000  |   |
|                                |   | 38,678,000 |       | 41,645,000 |   |
| Less: accumulated amortization      |   | (3,516,000 | )          | (4,802,000 | )      |
| Goodwill and other intangibles, net |   | $          | 35,162,000 |       | $      | 36,843,000 |   |

 

F - 12

----

 

**8.      Income taxes**

 

The following tableprovides a reconciliation between the provision for taxes based on incomeincluded in the accompanying consolidated statements of income and theprovision for taxes computed by applying the statutory income tax rate toincome before taxes for the years ended August 31:

 
|                                      |   | **2000** |      | **2001** |   | **2002**  |   |
|-------------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
|                                      |   |     |      |     |   |      |   |
| Provision for taxes at statutory rates    |   | $        | 3,742,000 |     | $      | 2,170,000 |   | $ | 2,074,000 |   |
| State tax, net of federal benefit         |   | 250,000  |      | 130,000  |   | 50,000    |   |
| Amortization of nondeductible goodwill    |   | 185,000  |      | 159,000  |   | 192,000   |   |
| Foreign sales corporation benefit         |   | (230,000 | )         | (226,000 | )      | —    |   |
| Extraterritorial income exclusion benefit |   | —   |      | —   |   | (147,000  | )      |
| Other, net                                |   | (247,000 | )         | (263,000 | )      | (33,000   | )      |
| Provision for income taxes                |   | $        | 3,700,000 |     | $      | 1,970,000 |   | $ | 2,136,000 |   |

 

The provision for incometaxes consisted of the following for the years ended August 31:

 
|                       |   | **2000**  |      | **2001**  |   | **2002**  |   |
|----------------------------|--------|-----------|-----------|-----------|--------|-----------|--------|
| Current:                   |   |      |      |      |   |      |   |
| Federal                    |   | $         | 3,267,000 |      | $      | 1,878,000 |   | $ | 2,190,000 |   |
| State                      |   | 649,000   |      | 209,000   |   | 85,000    |   |
|                       |   | 3,916,000 |      | 2,087,000 |   | 2,275,000 |   |
| Deferred:                  |   |      |      |      |   |      |   |
| Federal                    |   | (193,000  | )         | (105,000  | )      | (133,000  | )      |
| State                      |   | (23,000   | )         | (12,000   | )      | (6,000    | )      |
|                       |   | (216,000  | )         | (117,000  | )      | (139,000  | )      |
| Provision for income taxes |   | $         | 3,700,000 |      | $      | 1,970,000 |   | $ | 2,136,000 |   |

 

The components of theCompany’s net deferred tax liabilities at August 31, 2001 and 2002 were asfollows:

 
|                           |   | **2001**   |     | **2002**   |   |
|--------------------------------|--------|------------|----------|------------|--------|
|                           |   |       |     |       |   |
| State taxes                    |   | $          | 69,000   |       | $      | 190,000 |   |
| Reserves                       |   | 1,707,000  |     | 1,802,000  |   |
| Total deferred tax assets      |   | 1,776,000  |     | 1,992,000  |   |
| Depreciation                   |   | (1,461,000 | )        | (1,575,000 | )      |
| Amortization                   |   | (475,000   | )        | (438,000   | )      |
|                           |   |       |     |       |   |
| Total deferred tax liabilities |   | (1,936,000 | )        | (2,013,000 | )      |
| Net deferred tax liabilities   |   | $          | (160,000 | )          | $      | (21,000 | ) |

 

**9.      Revolving line of credit and long-termdebt**

 

The Company had bank termloans in the aggregate amount of $10,378,000 at August 31, 2002.   Monthly principal payments are due asfollows: $365,000 through November 2003; and $213,000 through October2005.  The average interest rate on theterm loans was 9.0% at August 31, 2001 and 7.9% at August 31, 2002.

 

The Company has arevolving line of credit, expiring in December 2003, in an amount of up to $25million, subject to covenants.  Interestis due monthly on both the term loans and the revolving line of credit and isbased upon the banks’ prime rate or the LIBOR plus a margin, at the Company’soption, and has provision for increases or decreases in the applicable marginsbased upon the senior debt to EBITDA ratio. The average interest rate on the revolver was 6.1% at August 31, 2001 and4.3% at August 31, 2002.  The bankloans, which require compliance with various covenants, are secured bysubstantially all of the Company’s assets other than real estate.  At August 31, 2002, the Company hadavailability of $9,467,000 under its revolving line of credit.

 

Other debt consists ofreal estate and equipment loans secured by the related assets.  These loans mature between 2003 and 2007 andhad average interest rates 6.1% at August 31, 2001 and 4.5% at August 31, 2002.

 

F - 13

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Long-term debt consistedof the following at August 31:

 
|                     |   | **2001**   |       | **2002**   |   |
|--------------------------|--------|------------|------------|------------|--------|
|                     |   |       |       |       |   |
| Revolving line of credit |   | $          | 7,364,000  |       | $      | 5,510,000 |   |
| Bank term loans          |   | 20,867,000 |       | 10,378,000 |   |
| Industrial revenue bonds |   | 1,335,000  |       | —     |   |
| Other                    |   | 7,294,000  |       | 9,023,000  |   |
| Total                    |   | 36,860,000 |       | 24,911,000 |   |
| Less: current maturities |   | 7,682,000  |       | 5,066,000  |   |
| Long-term portion        |   | $          | 29,178,000 |       | $      | 19,845,000 |   |

 

Future maturities oflong-term debt at August 31, 2002 were as follows:

 
| **Fiscal Year**     |   | **Amount** |      |
|---------------------|--------|------------|-----------|
|                |   |       |      |
| 2004                |   | $          | 9,238,000 |   |
| 2005                |   | 3,633,000  |      |
| 2006                |   | 3,921,000  |      |
| 2007                |   | 3,053,000  |      |
| 2008 and thereafter |   | —     |      |
|                     |        |            |           |  |

 

**10.    Commitments and contingencies**

 

The Company leases officeand manufacturing facilities and certain equipment under non-cancelable operatingleases which expire at various dates through May 2009.  Rental expense charged to operations wasapproximately $1,302,000 in 2000, $1,623,000 in 2001 and $1,362,000 in 2002.

 

The aggregate minimumfuture lease payments under these leases at August 31, 2002 are approximatelyas follows:

 
| **Fiscal  Year**    |   | **Amount** |      |
|---------------------|--------|------------|-----------|
|                |   |       |      |
| 2003                |   | $          | 1,377,000 |   |
| 2004                |   | 1,133,000  |      |
| 2005                |   | 827,000    |      |
| 2006                |   | 609,000    |      |
| 2007                |   | 435,000    |      |
| 2008 and thereafter |   | 800,000    |      |
|                     |        |            |           |  |

 

The Company has adopted aSavings and Retirement Plan.  The plan,which qualifies under Section 401(k) of the Internal Revenue Code, allowsemployees to defer specified percentages of their compensation in atax-deferred trust.  The Company mayelect to make matching contributions and discretionary contributions, which canbe made in cash or the Company’s common stock. The cost of the Company matching contribution is partially offset by areduction in payroll taxes.  Companycontributions to the plan totaled $741,000 in 2000, $642,000 in 2001 and$618,000 in 2002.

 

The Company had anEmployee Stock Ownership Plan (the “ESOP”). Under the ESOP, the Company could make cash contributions to the ESOPtrust for purchases of shares of the Company’s Common Stock, or couldcontribute Common Stock directly to the ESOP trust. The total contributions bythe Company to the ESOP were $325,000 in 2000, $336,000 in 2001 and $290,000 infiscal 2002.  In August 2002, the ESOPwas merged with the Savings and Retirement Plan.

 

The Company is subject tolegal proceedings and claims arising in the ordinary course of business.  Although occasional adverse decisions mayoccur, the Company believes that the final disposition of existing matters willnot have a material adverse effect on its financial condition or results ofoperation.

 

F - 14

----

 

**11.    Related party transactions**

 

The Company is obligatedto pay fees and commissions on certain products to one of its directors,pursuant to pre-existing agreements with a subsidiary acquired in fiscal 1997.  Total fees and commissions were $204,000 in2000, $207,000 in 2001 and $42,000 in 2002. The agreements continue until 2009.

 

**12.    Stock-based compensation plans**

 

The Company has fourstock option plans (the Plans) which have been approved by the Stockholders andare administered by its Board of Directors. Under the Plans, options to acquire shares of common stock may begranted to key employees, directors, consultants, vendors and others in thefollowing amounts:

 
| **Plan**  |   | **Total  Shares Authorized** |   | **Shares Remaining  and  Available  for Grant  at August 31, 2002** |   |
|-----------|--------|------------------------------|--------|--------------------------------------------------------------------------|--------|
|      |   |                         |   |                                                                     |   |
| 1984 Plan |   | 25,000                       |   | —                                                                   |   |
| 1991 Plan |   | 150,000                      |   | —                                                                   |   |
| 1995 Plan |   | 350,000                      |   | 777                                                                      |   |
| 1999 Plan |   | 750,000                      |   | 254,616                                                                  |   |

 

In addition, options havebeen issued in conjunction with acquisitions, the fair value of which wasincluded in the acquisition purchase prices.

 

The Company accounts forstock options issued to employees and directors under APB Opinion No. 25 andFinancial Interpretation No. 44.  UnderAPB 25, if the exercise price of the stock option equals the market price ofthe underlying stock on the issuance date, no compensation expense isrecognized.  Consequently, nocompensation expense was recognized under these plans for fiscal years 2000,2001 and 2002.  The Company is requiredby SFAS No. 123 “Accounting for Stock-Based Compensation” to provide pro formadisclosures under an alternate fair value method of accounting.

 

Had compensation cost forstock options awarded under these plans been determined consistent with SFASStatement No. 123, the Company’s net income and earnings per share would havereflected the following pro forma amounts at August 31:

 
|                                |   | **2000** |      | **2001** |   | **2002**  |   |
|-------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
|                                |   |     |      |     |   |      |   |
| Income from  continuing operations  |   |     |      |     |   |      |   |
| As reported                         |   | $        | 7,306,000 |     | $      | 4,413,000 |   | $ | 3,438,000 |   |
| Pro forma                           |   | $        | 6,952,000 |     | $      | 4,044,000 |   | $ | 3,136,000 |   |
| Diluted earnings  per common share: |   |     |      |     |   |      |   |
| As reported                         |   | $        | 1.62      |     | $      | 1.00      |   | $ | 0.76 |   |
| Pro forma                           |   | $        | 1.54      |     | $      | .91       |   | $ | .70 |   |

 

The fair value of eachoption grant is estimated on the date of grant using the Black-Scholes pricingmodel with the following assumptions used for grants in fiscal years 2000, 2001and 2002:

 
|                                     |   | **2000** |   | **2001** |   | **2002** |   |
|------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                     |   |     |   |     |   |     |   |
| Weighted average risk-free interest rate |   | 6.1      | %      | 5.4      | %      | 4.2      | %      |
| Volatility                               |   | 35       | %      | 35       | %      | 35       | %      |
| Expected dividend yields                 |   | —   |   | —   |   | —   |   |
| Weighted average expected life in years  |   | 4.7      |   | 5.4      |   | 4.8      |   |

 

Under these Plans, theoptions are generally issued with exercise prices equal to the market price ofthe Company’s stock on the grant date. Options vest cumulatively over various periods, at the discretion of theBoard of Directors, up to five years from the grant date, are exercisable inwhole or in installments, and expire up to ten years from the date ofgrant.  Options that are forfeited areagain available for grant under the Plans. All options fully vest immediately prior to a change in control of theCompany, as defined in the stock option plans.

 

F - 15

----

 

A summary of the statusof the Company’s stock options at August 31, 2000, 2001 and 2002 and changesduring the years then ended, is presented in the following table:

 
|                                           |   | **2000**   |   | **2001**                                 |   | **2002**   |      |
|------------------------------------------------|--------|------------|--------|------------------------------------------|--------|------------|-----------|
|                                           |   | **Shares** |   | **Weighted  Average  Exercise****Price** |   | **Shares** |      | **Weighted  Average  Exercise****Price** |   | **Shares** |   | **Weighted  Average  Exercise****Price** |   |
|                                           |   |       |   |                                     |   |       |      |   |   |   |   |   |   |
| Outstanding at beginning of year               |   | 869,088    |   | $                                        | 6.81   |       | 940,182   |   | $ | 7.54 |   | 1,044,012 |   | $ | 8.33 |   |
| Granted under Stockholder Approved plans       |   | 132,824    |   | $                                        | 11.92  |       | 196,800   |   | $ | 10.09 |   | 165,000 |   | $ | 8.41 |   |
| Granted in  conjunction with Acquisitions      |   | —     |   | —                                   |   | 23,500     |      | $ | 10.58 |   | — |   | — |   |
| Exercised                                      |   | (45,288    | )      | $                                        | 5.02   |       | (66,738   | ) | $ | 3.36 |   | (80,433 | ) | $ | 3.30 |   |
| Forfeited/expired                              |   | (16,442    | )      | $                                        | 11.30  |       | (49,732   | ) | $ | 9.00 |   | (46,426 | ) | $ | 11.36 |   |
| Outstanding at end of year                     |   | 940,182    |   | $                                        | 7.54   |       | 1,044,012 |   | $ | 8.33 |   | 1,082,153 |   | $ | 8.58 |   |
| Exercisable at end of year                     |   | 630,287    |   | $                                        | 6.22   |       | 661,905   |   | $ | 6.94 |   | 744,161 |   | $ | 8.04 |   |
| Weighted average fair value of options granted |   |       |   | $                                        | 4.84   |       |      |   | $ | 4.32 |   |   |   | $ | 3.26 |   |

 

The following tablesummarizes information about stock options outstanding at August 31, 2002:

 

|                         |   |                                           |       | **Outstanding**                     |       | **Exercisable**                        |       |
|------------------------------|--------|------------------------------------------------|------------|-------------------------------------|------------|----------------------------------------|------------|
| **Exercise  Price****Range** |   | **Weighted  Average  Remaining  Term (Years)** | ** ** | **Number of  Options  Outstanding** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number of  Options  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $  2.32 - $ 3.61             |   | 2.6                                            |       | 73,040                              |       | $                                      | 3.09       |   | 73,040 |   | $ | 3.09 |   |
| $  4.25 - $ 5.75             |   | 4.3                                            |       | 236,023                             |       | $                                      | 5.19       |   | 236,023 |   | $ | 5.19 |   |
| $  6.50 - $ 9.65             |   | 6.3                                            |       | 350,150                             |       | $                                      | 8.72       |   | 190,575 |   | $ | 8.88 |   |
| $  9.75 - $ 12.50            |   | 6.7                                            |       | 373,084                             |       | $                                      | 10.99      |   | 195,532 |   | $ | 11.26 |   |
| $  13.31 - $ 13.72           |   | 3.9                                            |       | 49,856                              |       | $                                      | 13.71      |   | 49,106 |   | $ | 13.72 |   |

 

F - 16

----

 

**13.    Unaudited quarterly information**

** **
|                                        |   | **Quarters  ended**                           |   |
|---------------------------------------------|--------|-----------------------------------------------|--------|
|                                        |   | **November**                                  |   | **February** |   | **May** |   | **August** |   | **Fiscal  Year** |   |
|                                        |   | **(in  thousands, except per share amounts)** |   |
| Fiscal 2001:                                |   |                                          |   |   |   |   |   |   |   |   |   |
| Net sales                                   |   | $                                             | 31,998 |   | $ | 31,942 |   | $ | 33,199 |   | $ | 29,863 |   | $ | 127,002 |   |
| Gross profit                                |   | $                                             | 8,342  |   | $ | 7,936 |   | $ | 8,902 |   | $ | 8,172 |   | $ | 33,352 |   |
| Net income                                  |   | $                                             | 1,192  |   | $ | 657 |   | $ | 1,318 |   | $ | 1,246 |   | $ | 4,413 |   |
|                                        |   |                                          |   |   |   |   |   |   |   |   |   |
| Earnings per common share:                  |   |                                          |   |   |   |   |   |   |   |   |   |
| Basic                                       |   | $                                             | .28    |   | $ | .15 |   | $ | .31 |   | $ | .30 |   | $ | 1.04 |   |
| Diluted                                     |   | $                                             | .27    |   | $ | .15 |   | $ | .30 |   | $ | .28 |   | $ | 1.00 |   |
|                                        |   |                                          |   |   |   |   |   |   |   |   |   |
| Fiscal 2002:                                |   |                                          |   |   |   |   |   |   |   |   |   |
| Net sales                                   |   | $                                             | 25,181 |   | $ | 27,093 |   | $ | 32,861 |   | $ | 31,106 |   | $ | 116,241 |   |
| Gross profit                                |   | $                                             | 6,901  |   | $ | 6,540 |   | $ | 8,709 |   | $ | 8,326 |   | $ | 30,476 |   |
| Net income                                  |   | $                                             | 505    |   | $ | 393 |   | $ | 1,326 |   | $ | 1,705 |   | $ | 3,929 |   |
| Preferred stock accretion                   |   | —                                        |   | $ | 116 |   | $ | 173 |   | $ | 202 |   | $ | 491 |   |
| Net income available to common stockholders |   | $                                             | 505    |   | $ | 277 |   | $ | 1,153 |   | $ | 1,503 |   | $ | 3,438 |   |
|                                        |   |                                          |   |   |   |   |   |   |   |   |   |
| Earnings per common share:                  |   |                                          |   |   |   |   |   |   |   |   |   |
| Basic                                       |   | $                                             | .12    |   | $ | .06 |   | $ | .26 |   | $ | .34 |   | $ | .78 |   |
| Diluted                                     |   | $                                             | .11    |   | $ | .06 |   | $ | .25 |   | $ | .33 |   | $ | .76 |   |

 

**14.    Comprehensive Income**

 

As part of its interestrate management program, the Company periodically enters into interest rateswap agreements with respect to portions of its outstanding debt.  The purpose of these swaps is to mitigatethe adverse effect on cash flows of an increase in interest rates.  There were no swap agreements in place as ofAugust 31, 2002.  When used, these swapagreements qualified as derivative instruments under Statement of FinancialAccounting Standards No. 133, “Accounting for Derivative Instruments and forHedging Activities” and, accordingly, changes in their fair value resulted inthe recognition of other comprehensive income or loss pursuant to SFAS No.133.  In addition, the Companyrecognized a loss of $36,000 upon adoption of SFAS No. 133, which wasrecognized on September 1, 2000.

 

The reconciliation of netincome to total comprehensive income for the years ended August 31 is asfollows:

** **
|                                    |   | **2000** |      | **2001** |   | **2002**  |   |
|-----------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
|                                    |   |     |      |     |   |      |   |
| Net income                              |   | $        | 7,306,000 |     | $      | 4,413,000 |   | $ | 3,929,000 |   |
| Cumulative effect of accounting change  |   | —   |      | (36,000  | )      | —    |   |
| Changes in value of interest rate swaps |   | —   |      | (92,000  | )      | 128,000   |   |
| Total comprehensive income              |   | $        | 7,306,000 |     | $      | 4,285,000 |   | $ | 4,057,000 |   |

 

**15.    Acquisitions**

 

On October 5, 2000, Summaacquired all of the outstanding capital stock of Plastic Specialties, Inc.(“PSI”).  The aggregate purchase pricepaid for PSI consisted of $6,287,000 in cash, $4,873,000 in assumed debtconcurrently paid, liabilities assumed or incurred of $2,191,000 andacquisition costs of $50,000.  Thetransaction has been accounted for using the purchase method of accounting, andaccordingly, the purchase price has been allocated to identifiable tangible andintangible assets purchased and liabilities assumed or incurred based upontheir fair value at the date of acquisition. The excess of the purchase price over the fair value of net acquiredassets were $2,676,000 and was recorded as goodwill, which was amortized on astraight-line basis over 35 years until August 31, 2002.

 

On December 1, 2000,Summa acquired substantially all of the assets of the Ram Belts & Chainsdivision (“Ram”) of

 

F - 17

----

 

Rainbow IndustrialProducts Corp.  The aggregate purchaseprice paid for Ram consisted of $5,825,000 in cash, an unsecured note adjustedto $565,000, liabilities assumed or incurred of $483,000 and acquisition costsof $25,000.  The transaction has beenaccounted for using the purchase method of accounting, and accordingly, thepurchase price has been allocated to identifiable tangible and intangible assetspurchased and liabilities assumed or incurred based upon their fair value atthe date of acquisition.  The excess ofthe purchase price over the fair value of net acquired assets was $3,633,000which was recorded as goodwill, which was amortized on a straight-line basisover 25 years until August 31, 2002.

 

On January 4, 2002, Summaacquired substantially all of the assets of the Genesta Manufacturing division(“Genesta”) of Pavaco Plastics, Inc. Genesta manufactures extruded sheet and profiles and thermoformed componentsfor the lighting and other industries. The primary reasons for the acquisition are that the acquisition ofGenesta increases the Company’s North American market share, provides entrée tonew markets, provides a low cost manufacturing location and provides othermanufacturing cost and sales and distribution synergies.  The aggregate purchase price paid for theassets consisted of $2,685,000 in cash, an unsecured note for $627,000, 40,000shares of the Company’s unregistered common stock valued at $530,000(subsequently repurchased at a discounted price of $450,000 in August 2002),liabilities assumed or incurred of $1,433,000 and acquisition costs of $69,000.The transaction was accounted for using the purchase method of accounting, andaccordingly, the purchase price was allocated to identifiable tangible andintangible assets acquired and liabilities assumed or incurred based upon theirfair value at the date of acquisition. The excess of the purchase price over the fair value of net acquiredassets was $2,450,000, which was recorded as goodwill.

 

The results of operationsof each of the above described acquisitions have been included in theconsolidated results of operations and statements of cash flows of the Companysince the date of acquisition.  The followingpro forma financial information presents the results of operations of thecontinuing businesses of the Company as though the acquisitions of PSI, Ram andGenesta had been made as of September 1, 2000. Pro forma adjustments have been made to give the effect to the amortizationof goodwill and other intangibles, adjustments in depreciation and inventoryvalue, interest expense related to acquisition debt, the related tax effectsand the effect upon diluted earnings per share of accretion in the value ofpreferred stock issued in conjunction with the acquisitions.

 

| **For the years ended August 31,** |   | **2001**        |        | **2002**            |   |
|------------------------------------|--------|-----------------|-------------|---------------------|--------|
|                               |   | **(unaudited)** |        | **(unaudited****)** |   |
|                               |   |            |        |                |   |
| Net sales                          |   | $               | 137,362,000 |                | $      | 119,113,000 |   |
| Net income                         |   | $               | 4,771,000   |                | $      | 4,087,000 |   |
| Net income per common share:       |   |            |        |                |   |
| Basic                              |   | $               | .95         |                | $      | .76 |   |
| Diluted                            |   | $               | .91         |                | $      | .74 |   |

 

The above pro formaresults are not necessarily indicative of what the actual consolidated resultsof operations might have been if the acquisition had been effective at thebeginning of the periods presented or of the results which may be achieved inthe future.

 

**16.    Redeemable Preferred Stock**

 

The Company has issuedand outstanding 5,000 shares of non-voting, redeemable, convertible Series APreferred Stock (“Series A”), par value $.001, which sold for an original issueprice of $5,000.000. The Series A does not pay dividends but has a liquidationpreference of $1,000 per share.  Sharesof Series A are convertible at any time at the request of the holder thereofinto common stock of the Company at a ratio of one hundred and twenty fiveshares of common stock for each share of Series A.  At the option of the holder, the Series A shall be redeemed bythe Company during a one year period commencing on December 14, 2004, initiallyfor $7,025,000, which represents a twelve percent annual return on investment.The redemption amount increases daily at the rate of twelve percent per annumto $7,868,000 on December 13, 2005. The Series A may be redeemed by the Companyat any time during a one year period commencing on December 14, 2005 at a pricewhich equals a twenty percent annual increase over the original issuance pricein cash. Unless earlier converted or redeemed, on the fifth anniversary of thedate of issuance, any Series A outstanding shall be redeemed by the Company atthe original issuance price.   Theinitial carrying value of the Series A was $4,875,000 (representing theoriginal issue price of $5,000.000 less $125,000 for the value of the embeddedconversion feature upon issuance), which is being accreted for the guaranteedreturn to the Series A holders.

 

F - 18

----

 

**17.    Segment Information - Restated**

 

From fiscal 1999 tofiscal 2001, the Company reported results from two segments –“EngineeredPolymer Components” and “Extruded Plastic Products”.    In its initial filing of the 2002 Form 10-K, the business wasreported as a single segment.  Afterfurther analysis, it has been determined that the Company had five reportablesegments as described below, and prior period disclosures in this Form 10-K/Aregarding segments have been restated to conform to this presentation.

 

The Company’s reportablesegments have been organized around differences in products and distributionchannels, and operating segments have been aggregated.  The accounting policies of the segments arethe same as those described in the summary of significant accountingpolices.  The Company’s operations arereported in the following five businesses segments:

 

***Optical Components.***  In itsOptical Components segment, Summa designs and manufactures plastic prismaticlenses, refractors and reflectors and other plastic products, which are used incommercial and industrial lighting fixtures, display, signage, architecturaland other applications.

 

***Material Handling Components.**** *In its Material Handling Components segment, Summadesigns and manufactures engineered plastic components, which form conveyerbelts and chains and other plastic products for use in food processing.

 

***Electrical Components.***  In itsElectrical Components segment, Summa designs and manufactures thermoplasticcoil forms or “bobbins” and other plastic products used principally in themanufacture of magnetic devices such as transformers, relays, switches, powersupplies and small electric motors.

 

***Irrigation Components.***  In itsIrrigation Components segment, Summa designs and manufactures plasticinjection-molded fittings, valves, filters and accessories, extruded tubing andother plastic products for drip irrigation systems and other applications.

 

***Miscellaneous Plastic Components.***  In its Miscellaneous Plastic Components segment, Summa designsand manufactures plastic injection-molded products for diverse industrial andcommercial applications.  This segmentalso manufactures products for other Summa segments.

 

Financial information byreportable business segment is reported in the following tables:

 
|                              |   | **2000**            |    | **2001** |   | **2002** |   |
|-----------------------------------|--------|---------------------|---------|----------|--------|----------|--------|
|                              |   | **(in  thousands)** |    |
| External sales:                   |   |                |    |     |   |     |   |
| Optical  Components               |   | $                   | 59,914  |     | $      | 66,324   |   | $ | 60,908 |   |
| Material  Handling Components     |   | 20,328              |    | 23,085   |   | 25,468   |   |
| Electrical  Components            |   | 21,471              |    | 17,923   |   | 13,038   |   |
| Irrigation  Components            |   | 19,556              |    | 16,267   |   | 13,660   |   |
| Miscellaneous  Plastic Components |   | 4,477               |    | 3,403    |   | 3,167    |   |
| Other                             |   | —              |    | —   |   | —   |   |
| Consolidated                      |   | $                   | 125,746 |     | $      | 127,002  |   | $ | 116,241 |   |
|                              |   |                |    |     |   |     |   |
| Inter-segment  sales:             |   |                |    |     |   |     |   |
| Optical  Components               |   | $                   | —  |     | $      | —   |   | $ | — |   |
| Material  Handling Components     |   | —              |    | —   |   | —   |   |
| Electrical  Components            |   | —              |    | —   |   | —   |   |
| Irrigation  Components            |   | —              |    | —   |   | —   |   |
| Miscellaneous  Plastic Components |   | 1,537               |    | 1,801    |   | 2,903    |   |
| Other                             |   | (1,537              | )       | (1,801   | )      | (2,903   | )      |
| Consolidated                      |   | $                   | —  |     | $      | —   |   | $ | — |   |
|                              |   |                |    |     |   |     |   |
| Total sales:                      |   |                |    |     |   |     |   |
| Optical  Components               |   | $                   | 59,914  |     | $      | 66,324   |   | $ | 60,908 |   |
| Material  Handling Components     |   | 20,328              |    | 23,085   |   | 25,468   |   |
| Electrical  Components            |   | 21,471              |    | 17,923   |   | 13,038   |   |
| Irrigation  Components            |   | 19,556              |    | 16,267   |   | 13,660   |   |
| Miscellaneous  Plastic Components |   | 6,014               |    | 5,204    |   | 6,070    |   |
| Other                             |   | (1,537              | )       | (1,801   | )      | (2,903   | )      |
| Consolidated                      |   | $                   | 125,746 |     | $      | 127,002  |   | $ | 116,241 |   |

 

F - 19

----

 
| Operating  income:                |   |   |   |   |   |   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Optical  Components               |   | $      | 9,044  |   | $      | 7,904  |   | $ | 7,832 |   |
| Material  Handling Components     |   | 2,634  |   | 2,102  |   | 2,708  |   |
| Electrical  Components            |   | 2,368  |   | 1,102  |   | 654    |   |
| Irrigation  Components            |   | 944    |   | 1,125  |   | 873    |   |
| Miscellaneous  Plastic Components |   | 355    |   | (335   | )      | (1,986 | )      |
| Other                             |   | (1,355 | )      | (1,664 | )      | (1,516 | )      |
| Consolidated                      |   | $      | 13,990 |   | $      | 10,234 |   | $ | 8,565 |   |
|                              |   |   |   |   |   |   |   |
| Assets:                           |   |   |   |   |   |   |   |
| Optical  Components               |   | $      | 32,270 |   | $      | 35,676 |   | $ | 38,643 |   |
| Material  Handling Components     |   | 12,312 |   | 17,905 |   | 17,063 |   |
| Electrical  Components            |   | 24,860 |   | 22,089 |   | 20,973 |   |
| Irrigation  Components            |   | 15,082 |   | 15,318 |   | 13,679 |   |
| Miscellaneous  Plastic Components |   | 4,378  |   | 4,363  |   | 4,583  |   |
| Other                             |   | 1,038  |   | 2,928  |   | 2,624  |   |
| Consolidated                      |   | $      | 89,940 |   | $      | 98,279 |   | $ | 97,565 |   |
|                              |   |   |   |   |   |   |   |
| Capital  expenditures:            |   |   |   |   |   |   |   |
| Optical  Components               |   | $      | 1,969  |   | $      | 980    |   | $ | 1,661 |   |
| Material  Handling Components     |   | 1,202  |   | 1,239  |   | 581    |   |
| Electrical  Components            |   | 376    |   | 314    |   | 93     |   |
| Irrigation  Components            |   | 446    |   | 528    |   | 848    |   |
| Miscellaneous  Plastic Components |   | 314    |   | 111    |   | 197    |   |
| Other                             |   | 26     |   | 35     |   | — |   |
| Consolidated                      |   | $      | 4,333  |   | $      | 3,207  |   | $ | 3,380 |   |
|                              |   |   |   |   |   |   |   |
| Depreciation and  amortization:   |   |   |   |   |   |   |   |
| Optical  Components               |   | $      | 2,683  |   | $      | 3,075  |   | $ | 2,733 |   |
| Material  Handling Components     |   | 1,147  |   | 1,658  |   | 1,619  |   |
| Electrical  Components            |   | 1,039  |   | 1,102  |   | 1,104  |   |
| Irrigation  Components            |   | 503    |   | 442    |   | 430    |   |
| Misc. Plastic  Components         |   | 261    |   | 253    |   | 287    |   |
| Other                             |   | 50     |   | 62     |   | 40     |   |
| Consolidated                      |   | $      | 5,683  |   | $      | 6,592  |   | $ | 6,213 |   |

 

Interest expense andincome taxes are not shown in the above table, as they are not fully allocatedby segment.  “Other” includesinter-company eliminations, corporate and other expenses not allocated bysegment.

 

Sales to the Company’slargest single customer, as a percent of total sales, represented 8.6% in 2000,7.6% in 2001, and 10.3% in 2002.

 

Export sales bygeographic area were as follows for the years ended August 31:

 
|               |   | **2000**  |       | **2001**  |       | **2002**   |       |
|--------------------|--------|-----------|------------|-----------|------------|------------|------------|
|               |   |      | ** ** |      | ** ** |       | ** ** |
| Europe             |   | $         | 6,600,000  |      | $          | 6,649,000  |       | $ | 6,551,000 |   |
| Mexico  and Canada |   | 6,125,000 |       | 6,096,000 |       | 7,726,000  |       |
| Latin  America     |   | 2,166,000 |       | 1,745,000 |       | 1,312,000  |       |
| Asia               |   | 1,677,000 |       | 1,156,000 |       | 974,000    |       |
| Other              |   | 786,000   |       | 1,119,000 |       | 1,302,000  |       |
|               |   | $         | 17,354,000 |      | $          | 16,765,000 |       | $ | 17,865,000 |   |

 

F - 20

----

 

Report of Independent PublicAccountants

 

TO:         The Board of Directors and Stockholdersof Summa Industries:

 

We have audited inaccordance with auditing standards generally accepted in the United States ofAmerica, the consolidated balance sheet of Summa Industries and subsidiaries asof August 31, 2002, and the related consolidated statements of income,stockholders’ equity and cash flows for the fiscal year ended, and have issuedour report thereon dated October 7, 2002, except for note 17, which is as ofJuly 9, 2003,.  Our audit was made forthe purpose of forming an opinion on those consolidated financial statementstaken as a whole.  Schedule II,“Valuation and Qualifying Accounts”, is the responsibility of the Company’smanagement and is presented for purposes of complying with the Securities andExchange Commission’s rules and is not part of the basic 2002 consolidatedfinancial statements.  The informationset forth in this schedule for 2002 has been subjected to the auditing proceduresapplied in our audit of the basic 2002 consolidated financial statements and,in our opinion, fairly states in all material respects the financial datarequired to be set forth therein in relation to the basic 2002 consolidatedfinancial statements taken as a whole.

 

 
| /s/ KPMG LLP                 |   |   |
|------------------------------|--------|--------|
|                         |   |
| Los Angeles, California      |   |
| October 7, 2002, except  for |   |
| note 17, which  is as of     |   |
| July 9, 2003.                |   |

 

Report of Former Independent Public Accountants

 

(Copy of previouslyissued Arthur Andersen LLP report; not reissued by Arthur Andersen LLP)

 

TO:         The Board of Directors and Stockholdersof Summa Industries:

 

We have audited inaccordance with auditing standards generally accepted in the United States, theconsolidated financial statements included in Summa Industries andsubsidiaries’ annual report to stockholders included in this Form 10-K, andhave issued our report thereon dated October 9, 2001.  Our audit was made for the purpose of forming an opinion on thosestatements taken as a whole.  Theschedule listed in the index to consolidated financial statements is theresponsibility of the Company’s management and is presented for purposes ofcomplying with the Securities and Exchange Commission’s rules and is not partof the basic consolidated financial statements.  This schedule has been subjected to the auditing proceduresapplied in the audits of the basic consolidated financial statements and, inour opinion, fairly states in all material respects the financial data requiredto be set forth therein in relation to the basic consolidated financialstatements taken as a whole.

 

 
| /s/ ARTHUR ANDERSEN LLP |   |
|-------------------------|--------|
|                    |
| Los Angeles, California |
| October 9, 2001         |

 

F - 21

----

 

Summa Industries

Schedule II

 

Valuation andQualifying Accounts

 

Allowance forDoubtful Accounts

 

For the years endedAugust 31, 2002

 
|   |   | **Balance at  beginning of  period** |    | **Amounts  charged to  expense** |   | **Other  adjustments** |   | **Amounts  written off** |   | **Balance at  end of period** |   |
|--------|--------|--------------------------------------|---------|----------------------------------|--------|------------------------|--------|--------------------------|--------|-------------------------------|--------|
|   |   |                                 |    |                             |   |                   |   |                     |   |                          |   |
| 2002   |   | $                                    | 514,000 |                             | $      | 221,000                |   | $                        | 16,000 |                          | $      | (118,000 | ) | $ | 633,000 |   |
| 2001   |   | $                                    | 636,000 |                             | $      | 127,000                |   | $                        | 66,000 |                          | $      | (315,000 | ) | $ | 514,000 |   |
| 2000   |   | $                                    | 626,000 |                             | $      | 114,000                |   | $                        | 25,000 |                          | $      | (129,000 | ) | $ | 636,000 |   |

 

F - 22

----

 

**Signatures**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Act of 1934, as amended,Summa has duly caused this Annual Report on Form 10-K/A for the fiscal yearended August 31, 2002 to be signed on its behalf by the undersigned, thereuntoduly authorized, on July 14, 2003.

 

 
|   | Summa Industries |
|--------|------------------|
|   |             |   |
|   | By:              | /s/ James R. Swartwout |   |
|   |             | James R. Swartwout |
|   |             | President |

 

Pursuant to therequirements of the Securities Act of 1934, as amended, this Annual Report onForm 10-K/A for the fiscal year ended August 31, 2002 has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated.

 
| **Signature**             |   | **Title**                                    |   | **Date**      |
|---------------------------|--------|----------------------------------------------|--------|---------------|
|                      |   |                                         |   |          |
| /s/ James R. Swartwout    |   | Chairman of the Board,  President            |   | July 14, 2003 |
| James R. Swartwout        |   | & Chief Financial  Officer               |   |          |
|                      |   | (Principal Executive  and Financial Officer) |   |          |
|                      |   |                                         |   |          |
| /s/ Michael L. Horst      |   | Director                                     |   | July 14, 2003 |
| Michael L. Horst          |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ William R.  Zimmerman |   | Director                                     |   | July 14, 2003 |
| William R. Zimmerman      |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ David McConaughy      |   | Director                                     |   | July 14, 2003 |
| David McConaughy          |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ Josh T. Barnes        |   | Director                                     |   | July 14, 2003 |
| Josh T. Barnes            |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ Jack L. Watts         |   | Director                                     |   | July 14, 2003 |
| Jack L. Watts             |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ Charles A.  Tourville |   | Director                                     |   | July 14, 2003 |
| Charles A. Tourville      |   |                                         |   |          |
|                      |   |                                         |   |          |
| /s/ Paul A. Walbrun       |   | Vice President &  Controller             |   | July 14, 2003 |
| Paul A. Walbrun           |   | (Principal Accounting  Officer)              |   |          |
|                           |        |                                              |        |               |  |

 

----

 

**Certification**

 

I, James R. Swartwout,certify that:

 

1.             I have reviewed this Annual Report on Form 10-K/A ofSumma Industries;

 

2.             Based on my knowledge, this Annual Report does notcontain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the periodcovered by this Annual Report;

 

3.             Based on my knowledge, the financial statements, andother financial information included in this Annual Report, fairly present inall material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this AnnualReport;

 

4.             The registrant’s other certifying officers and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant andhave:

 

(a)           designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this Annual Report isbeing prepared;

 

(b)           evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing of this Annual Report (the “Evaluation Date”); and

 

(c)           presented in this Annual Report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.             The registrant’s other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

 

(a)           all significant deficiencies in thedesign or operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

(b)           any fraud, whether or not material,that involves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.             The registrant’s other certifying officers and I haveindicated in this Annual Report whether there were significant changes ininternal controls or in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses.

 
|   |   /s/ James R. Swartwout |   |
|--------|------------------------------------|--------|
|   |                               |
|   | James R. Swartwout                 |
|   | Chief Executive Officer            |
|   | Chief Financial Officer            |
|   | July 18, 2003                      |

 

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