**U.S. Securities and Exchange Commission**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **ý**                          |   | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------------------------------------|--------|----------------------------------------------------------------------------------------------|
|                                |   |                                                                                         |
| **For  the quarterly period ended** |
|                                |   |                                                                                         |
| **February 28, 2003**               |
|                                |   |                                                                                         |
| **o**                               |   | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**      |

 

**For thetransition period from N/A to N/A**

 

**Commissionfile no. 1-7755**

 

**Summa Industries**

(Name of registrant asspecified 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** |
| (Address of principle  executive offices, including zip code)         |
|                                                                  |   |                                     |
| Registrant’s telephone  number:  **(310) 792-7024**         |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes  ý      No o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).

Yes  o       No ý

 

The number of shares of common stock outstanding as of March 24, 2003was 4,410,617.

 

** **

----

 

**Summa Industries**

 

**INDEX**

 
| PART I - FINANCIAL INFORMATION |
|--------------------------------|
|                           |   |
| Item 1.                        | Financial Statements: |
|                           |   |
|                           | Condensed  Consolidated Balance Sheets -  February 28, 2002, August 31, 2002 and February 28, 2003 |
|                           |   |
|                           | Condensed  Consolidated Statements of Operations -  three months and six months ended February 28, 2002 and 2003 |
|                           |   |
|                           | Condensed  Consolidated Statements of Cash Flows -  six months ended February 28, 2002 and 2003 |
|                           |   |
|                           | Notes  to Condensed Consolidated Financial Statements |
|                           |   |
| Item 2.                        | Management’s Discussion and  Analysis of   Financial Condition and Results of Operations |
|                           |   |
| Item 3.                        | Quantitative and Qualitative Disclosure  about Market Risk. |
|                           |   |
| Item 4.                        | Controls and Procedures. |
|                           |   |
| PART  II - OTHER INFORMATION   |
|                           |   |
| Item 1.                        | Legal Proceedings |
| Item 2.                        | Changes in  Securities and Use of Proceeds |
| Item 3.                        | Defaults upon Senior  Securities |
| Item 4.                        | Submission of Matters to a  Vote of Security Holders |
| Item 5.                        | Other Information |
| Item 6.                        | Exhibits and Reports on  Form 8-K |
|                           |   |
| Signature Page                 |

 

2

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**Summa Industries**

CONDENSED CONSOLIDATED BALANCESHEETS

 
|                                                                                                                                                                                       |   | **February  28, 2002** |        | **August 31,  2002** |   | **February  28, 2003** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|----------------------|--------|------------------------|--------|
| **ASSETS**                                                                                                                                                                                 |   |                   |        |                 |   |                   |   |
| Current assets:                                                                                                                                                                            |   |                   |        |                 |   |                   |   |
| Cash and cash  equivalents                                                                                                                                                                 |   | $                      | 410,000     |                 | $      | 690,000                |   | $ | 462,000 |   |
| Accounts  receivable                                                                                                                                                                       |   | 17,663,000             |        | 17,594,000           |   | 17,285,000             |   |
| Inventories                                                                                                                                                                                |   | 14,254,000             |        | 12,313,000           |   | 11,928,000             |   |
| Prepaid expenses  and other                                                                                                                                                                |   | 3,747,000              |        | 3,181,000            |   | 3,246,000              |   |
| Total current  assets                                                                                                                                                                      |   | 36,074,000             |        | 33,778,000           |   | 32,921,000             |   |
| Property, plant  and equipment                                                                                                                                                             |   | 52,232,000             |        | 51,845,000           |   | 54,151,000             |   |
| Less accumulated  depreciation                                                                                                                                                             |   | (23,265,000            | )           | (25,025,000          | )      | (27,382,000            | )      |
| Net property,  plant and equipment                                                                                                                                                         |   | 28,967,000             |        | 26,820,000           |   | 26,769,000             |   |
| Other assets                                                                                                                                                                               |   | 144,000                |        | 124,000              |   | 2,917,000              |   |
| Goodwill and  other intangibles, net                                                                                                                                                       |   | 37,454,000             |        | 36,843,000           |   | 9,566,000              |   |
| Total assets                                                                                                                                                                               |   | $                      | 102,639,000 |                 | $      | 97,565,000             |   | $ | 72,173,000 |   |
| Current  liabilities:                                                                                                                                                                      |   |                   |        |                 |   |                   |   |
| Accounts payable                                                                                                                                                                           |   | $                      | 6,657,000   |                 | $      | 6,410,000              |   | $ | 5,440,000 |   |
| Accrued  liabilities                                                                                                                                                                       |   | 5,323,000              |        | 6,001,000            |   | 5,011,000              |   |
| Current  maturities of long-term debt                                                                                                                                                      |   | 5,791,000              |        | 5,066,000            |   | 4,597,000              |   |
| Total current  liabilities                                                                                                                                                                 |   | 17,771,000             |        | 17,477,000           |   | 15,048,000             |   |
| Long-term debt,  net of current maturities                                                                                                                                                 |   | 27,984,000             |        | 19,845,000           |   | 19,187,000             |   |
| Other long-term  liabilities                                                                                                                                                               |   | 4,061,000              |        | 4,658,000            |   | 2,637,000              |   |
| Total long-term  liabilities                                                                                                                                                               |   | 32,045,000             |        | 24,503,000           |   | 21,824,000             |   |
| Mandatorily  redeemable convertible preferred stock, par value $.001, 5,000 shares  authorized, issued and outstanding                                                                     |   | 5,116,000              |        | 5,366,000            |   | 5,735,000              |   |
| Mandatorily  redeemable common stock                                                                                                                                                       |   | 530,000                |        | —               |   | —                 |   |
| Stockholders’  equity:                                                                                                                                                                |   |                   |        |                 |   |                   |   |
| Common stock,  par value $.001; 10,000,000 shares authorized; issued and outstanding:   4,418,336 at February 28, 2002,  4,401,769 at August 31, 2002 and   4,429,217 at February 28, 2003 |   | 18,439,000             |        | 18,894,000           |   | 19,111,000             |   |
| Retained  earnings                                                                                                                                                                         |   | 28,785,000             |        | 31,325,000           |   | 10,455,000             |   |
| Accumulated  other comprehensive (loss)                                                                                                                                                    |   | (47,000)               |        | —               |   | —                 |   |
| Total  stockholders’ equity                                                                                                                                                           |   | 47,177,000             |        | 50,219,000           |   | 29,566,000             |   |
| Total  liabilities and stockholders’ equity                                                                                                                                           |   | $                      | 102,639,000 |                 | $      | 97,565,000             |   | $ | 72,173,000 |   |

 

See accompanying notes to condensed consolidated financial statements*.*

 

3

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**Summa Industries**

CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS

 
|                                                                                          |   | **Three  months ended February 28** |          | **Six months  ended February 28** |   |
|-----------------------------------------------------------------------------------------------|--------|-------------------------------------|---------------|-----------------------------------|--------|
|                                                                                          |   | **2002**                            |          | **2003**                          |   | **2002** |   | **2003** |   |
| Net sales                                                                                     |   | $                                   | 27,093,000    |                              | $      | 27,562,000 |   | $ | 52,274,000 |   | $ | 56,110,000 |   |
| Cost of sales                                                                                 |   | 20,553,000                          |          | 20,853,000                        |   | 38,833,000 |   | 41,743,000 |   |
|                                                                                          |   |                                |          |                              |   |   |   |   |   |
| Gross profit                                                                                  |   | 6,540,000                           |          | 6,709,000                         |   | 13,441,000 |   | 14,367,000 |   |
| Selling,  general, administrative and other expenses                                          |   | 5,271,000                           |          | 5,328,000                         |   | 10,652,000 |   | 10,827,000 |   |
| Operating income                                                                              |   | 1,269,000                           |          | 1,381,000                         |   | 2,789,000 |   | 3,540,000 |   |
| Interest expense                                                                              |   |  661,000                       |          | 373,000                           |   | 1,396,000 |   | 778,000 |   |
| Income before  income taxes and cumulative effect of a change in accounting principle         |   | 608,000                             |          | 1,008,000                         |   | 1,393,000 |   | 2,762,000 |   |
| Provision for  income taxes                                                                   |   | 215,000                             |          | 321,000                           |   |  495,000 |   | 920,000 |   |
| Income before  cumulative effect of a change in accounting principle                          |   | 393,000                        |          | 687,000                      |   | 898,000  |   | 1,842,000  |   |
| Cumulative  effect of a change in accounting principle, net of tax                            |   | —                              |          | —                            |   | — |   | (22,343,000 | ) |
| Net income  (loss)                                                                            |   | $                                   | 393,000       |                              | $      | 687,000 |   | $ | 898,000 |   | $ | (20,501,000 | ) |
| Preferred stock  accretion                                                                    |   | $                                   | 116,000       |                              | $      | 185,000 |   | $ | 116,000 |   | $ | 369,000 |   |
| Net income  (loss) available to common stockholders:                                          |   |                                |          |                              |   |   |   |   |   |
| Before  cumulative effect of a change in accounting principle                                 |   | $                                   | 277,000  |                              | $      | 502,000  |   | $ | 782,000  |   | $ | 1,473,000 |   |
| After cumulative  effect of a change in accounting principle                                  |   | $                                   | 277,000       |                              | $      | 502,000 |   | $ | 782,000 |   | $ | (20,870,000) |   |
| Earnings per  common share before cumulative effect of a change in accounting principle       |   |                                |          |                              |   |   |   |   |   |
| Basic                                                                                         |   | $                                   | .06           |                              | $      | .11 |   | $ | .18 |   | $ | .33 |   |
| Diluted                                                                                       |   | $                                   | .06           |                              | $      | .11 |   | $ | .17 |   | $ | .32 |   |
| Earnings (loss)  per common share after cumulative effect of a change in accounting principle |   |                                |          |                              |   |   |   |   |   |
| Basic                                                                                         |   | $                                   | .06           |                              | $      | .11 |   | $ | .18 |   | $ | (4.70 | ) |
| Diluted                                                                                       |   | $                                   | .06           |                              | $      | .11 |   | $ | .17 |   | $ | (4.58 | ) |

 

See accompanying notes to condensed consolidated financial statements.

 

4

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**Summa Industries**

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

 
|                                                                               |   | **Six months  ended February 28** |    |
|------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                               |   | **2002**                          |    | **2003** |   |
| Operating  activities:                                                             |   |                              |    |   |   |
| Net income  (loss)                                                                 |   | $                                 | 898,000 |   | $ | (20,501,000 | ) |
| Adjustments to  reconcile net income to net cash provided by operating activities: |   |                              |    |   |   |
| Depreciation                                                                       |   | 2,567,000                         |    | 2,385,000 |   |
| Amortization                                                                       |   | 619,000                           |    | 122,000 |   |
| Cumulative  effect of a change in accounting principle, net of tax                 |   | —                            |    | 22,343,000 |   |
| (Gain) on  disposition of property, plant and equipment                            |   | (1,000                            | )       | (15,000 | ) |
| Net change in  assets and liabilities, net of effects of acquisitions:             |   |                              |    |   |   |
| Accounts  receivable                                                               |   | 94,000                            |    | 309,000 |   |
| Inventories                                                                        |   | (348,000                          | )       | 385,000 |   |
| Prepaid expenses  and other assets                                                 |   | (417,000                          | )       | (59,000 | ) |
| Accounts payable                                                                   |   | 5,000                             |    | (970,000 | ) |
| Accrued  liabilities                                                               |   | (542,000                          | )       | (569,000 | ) |
| Total  adjustments                                                                 |   | 1,977,000                         |    | 23,931,000 |   |
| Net cash  provided by operating activities                                         |   | 2,875,000                         |    | 3,430,000 |   |
| Investing  activities:                                                             |   |                              |    |   |   |
| Acquisition of  business, net of cash acquired                                     |   | (2,685,000                        | )       | — |   |
| Purchases of  property and equipment                                               |   | (1,491,000                        | )       | (2,335,000 | ) |
| Proceeds from  sale of property and equipment                                      |   | 36,000                            |    | 16,000 |   |
| Net cash (used  in) investing activities                                           |   | (4,140,000                        | )       | (2,319,000 | ) |
| Financing  activities:                                                             |   |                              |    |   |   |
| Net proceeds  from line of credit                                                  |   | 1,226,000                         |    | 1,490,000 |   |
| Proceeds from  issuance of long-term debt                                          |   | 4,007,000                         |    | — |   |
| Payments on  long-term debt                                                        |   | (9,069,000                        | )       | (2,617,000 | ) |
| Proceeds from  the exercise of stock options                                       |   | 267,000                           |    | 263,000 |   |
| Proceeds from  sale of redeemable convertible preferred stock                      |   | 5,000,000                         |    | — |   |
| Purchase of  common stock                                                          |   | —                            |    | (475,000 | ) |
| Net cash  provided by (used in) financing activities                               |   | 1,431,000                         |    | (1,339,000 | ) |
| Effect of  exchange rate changes on cash                                           |   | (2,000                            | )       | — |   |
| Net increase  (decrease) in cash and cash equivalents                              |   | 164,000                           |    | (228,000 | ) |
| Cash and cash  equivalents, beginning of period                                    |   | 246,000                           |    | 690,000 |   |
| Cash and cash  equivalents, end of period                                          |   | $                                 | 410,000 |   | $ | 462,000 |   |

 

See accompanying notes to condensed consolidated financial statements*.*

 

5

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**Summa Industries**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

February 28, 2003

 

**1.****                                      Basisof presentation**

 

The accompanying unaudited condensed consolidated financial statementsof Summa Industries (the “Company”) have been condensed in certain respects andshould, therefor, be read in conjunction with the audited consolidatedfinancial statements and notes related thereto contained in the Company’sAnnual Report on Form 10-K for the year ended August 31, 2002.  In the opinion of the Company, thesefinancial statements contain all adjustments necessary for a fair presentationfor the interim period, all of which were normal recurring adjustments.  The results of operations for the six monthsended February 28, 2003 are not necessarily indicative of the results to beexpected for the full year ending August 31, 2003.

 

**Recentaccounting pronouncements**

 

The Company adopted Financial Accounting Standards Board (“FASB”)Statement of Financial Accounting Standards No. 142 (“SFAS 142”) “Goodwill andOther Intangible Assets” as of September 1, 2002, the beginning of its currentfiscal year.  The effect of the adoptionof SFAS 142 is described in Note 3, below.

 

The Company adopted FASB Statement of Accounting Standards No. 143(“SFAS 143”) “Accounting for Asset Retirement Obligations” as of September 1,2002, the beginning of its current fiscal year.  SFAS 143 addresses financial accounting and reporting forobligations associated with the retirement of tangible long-lived assets andthe associated asset retirement costs. The adoption of SFAS 143 had no effecton the Company’s financial position or results of operations.

 

The Company adopted FASB Statement of Accounting Standards No. 144  (“SFAS 144”) “Accounting for the Impairmentor Disposal of Long-Lived Assets” as of September 1, 2002, the beginning of itscurrent fiscal year.  The adoption ofSFAS 144 had no effect on the Company’s financial position or results ofoperations.

 

The Company adopted FASB Statement of Accounting Standards No. 145(“SFAS 145”) “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASBStatement No. 13, and Technical Corrections” as of September 1, 2002, thebeginning of its current fiscal year. The adoption of SFAS 145 had no effect on the Company’s financialposition or results of operation.

 

The Company adopted FASB Statement of Financial Accounting StandardsNo. 146 (“SFAS 146”) “Accounting for Costs Associated with Exit or DisposalActivities” as of January 1, 2003. SFAS 146 requires that costs associated withan exit or disposal activity be recognized only when the liability is incurred(that is, when it meets the definition of a liability in the FASB’s conceptualframework). SFAS 146 also establishes fair value as the objective for initialmeasurement of liabilities related to exit or disposal activities.  SFAS 146 is effective for exit or disposalactivities that are initiated after December 31, 2002. The adoption of SFAS 146did not have a material impact on the Company’s financial position or resultsof operation.

 

The Company adopted FASB Interpretation No. 45, “Guarantor’s Accountingand Disclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness to Others” (“FIN 45”) as of January 1, 2003. This Interpretationelaborates on the disclosures to be made by a guarantor in its interim andannual financial statements about its obligations under certain guarantees thatit has issued. It also clarifies that a guarantor is required to recognize, atthe inception of a guarantee, a liability for the fair value of the obligationundertaken in issuing the guarantee. This interpretation is effective forguarantees issued or modified after December 31, 2002 for initial recognitionand initial measurement provisions and for interim financial statements ofannual periods ending after December 15, 2002 for disclosure requirements. Theadoption of FIN 45 did not have any effect on the Company’s financial positionor results of operations. The Company has no such guarantees.

 

In December 2002, the FASB issued Statement of Financial AccountingStandards No. 148 (“SFAS 148”) “Accounting for Stock-BasedCompensation-Transition and Disclosure”, which provides alternative methods oftransition for a voluntary change to the fair value based method of accountingfor stock-based compensation. SFAS 148 also requires certain disclosures aboutthe method of accounting for stock-based employee compensation and the effectof the method used on reported results. SFAS 148 is effective for fiscal yearsending after December 15, 2002 for transition guidance and annual disclosureprovisions and for interim periods beginning after December 15, 2002 forfinancial reports containing financial statements for interim periods.

 

In January 2003, the FASB issued FASB InterpretationNo. 46,  “Consolidation of VariableInterest Entities” (“FIN 46”). This interpretation clarifies the application ofAccounting Research Bulletin No. 51, “Consolidated Financial Statements”and requires companies to evaluate variable interest entities for specificcharacteristics to determine whether additional consolidation and disclosurerequirements apply. This interpretation is immediately applicable for variableinterest entities created after January 31, 2003, and applies to fiscalperiods beginning after June 15, 2003 for variable interest entities 

6

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acquired prior to February 1, 2003. The Company does not expectthat the adoption of this interpretation will have any impact on our financialposition or results of operations. The Company does not have any variableinterest entities.

 

**2.****                                      Inventories**

 

Inventories were as follows:

 
|                 |   | **February  28, 2002** |       | **August 31,  2002** |   | **February  28, 2003** |   |
|----------------------|--------|------------------------|------------|----------------------|--------|------------------------|--------|
| Finished goods       |   | $                      | 6,242,000  |                 | $      | 5,457,000              |   | $ | 4,942,000 |   |
| Work in process      |   | 710,000                |       | 290,000              |   | 369,000                |   |
| Materials and  parts |   | 7,302,000              |       | 6,566,000            |   | 6,617,000              |   |
|                 |   |                   |       |                 |   |                   |   |
|                 |   | $                      | 14,254,000 |                 | $      | 12,313,000             |   | $ | 11,928,000 |   |

 

**3.             Cumulative effect of a change inaccounting principle**

 

The Company adopted FASB Statement of Financial Accounting StandardsNo. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), effectiveSeptember 1, 2002.  As a result, theCompany discontinued the amortization of goodwill arising from businesscombinations consummated prior to June 30, 2001 that have been accounted forusing the purchase method of accounting. Goodwill aggregated to a net amount of $35,190,000 at August 31, 2002and goodwill amortization was $278,000 for the three months ended November 30,2001 and $556,000 for the six months ended February 28, 2002.

 

SFAS 142 also requires the Company to assess the recoverability ofrecorded goodwill at the adoption date. Impairments of goodwill that are identified as a result of theassessment, if any, are to be reported as a cumulative change in accountingprinciple as of the adoption date.  SFAS142 requires that assessment to be completed within six months of the date ofadoption and to be reported retroactively to the beginning of the year adopted.

 

The Company performed a transitional fair value based impairment teston its goodwill as of September 1, 2002. As a result, an impairment charge of $22,343,000 was recorded as ofSeptember 1, 2002.  The charge ispresented as the cumulative effect of a change in accounting principle in theaccompanying condensed consolidated statements of operations.  The charge is net of an income tax benefitof $4,812,000.

 

7

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A reconciliation of previously reported net income and earnings pershare to the amounts adjusted for the exclusion of goodwill amortizationfollows:

 
|                                                 |   | **Three  months ended  February 28** |    | **Six months  ended  February 28** |   |
|------------------------------------------------------|--------|--------------------------------------|---------|------------------------------------|--------|
|                                                 |   | **2002**                             |    | **2003**                           |   | **2002** |   | **2003** |   |
|                                                 |   |                                 |    |                               |   |   |   |   |   |
| Reported net income                                  |   | $                                    | 393,000 |                               | $      | 687,000 |   | $ | 898,000 |   | $ | 1,842,000 |   |
| Add back:  Goodwill  amortization, net of taxes |   | 220,000                              |    | —                             |   | 440,000 |   | — |   |
| Adjusted net income                                  |   | $                                    | 613,000 |                               | $      | 687,000 |   | $ | 1,338,000 |   | $ | 1,842,000 |   |
|                                                 |   |                                 |    |                               |   |   |   |   |   |
| Basic earnings per share:                            |   |                                 |    |                               |   |   |   |   |   |
|                                                 |   |                                 |    |                               |   |   |   |   |   |
| Reported net income                                  |   | $                                    | .06     |                               | $      | .11 |   | $ | .18 |   | $ | .33 |   |
| Goodwill amortization                                |   | .05                                  |    | —                             |   | .10 |   | — |   |
| Adjusted net income                                  |   | $                                    | .11     |                               | $      | .11 |   | $ | .28 |   | $ | .33 |   |
|                                                 |   |                                 |    |                               |   |   |   |   |   |
| Diluted earnings per share:                          |   |                                 |    |                               |   |   |   |   |   |
|                                                 |   |                                 |    |                               |   |   |   |   |   |
| Reported net income                                  |   | $                                    | .06     |                               | $      | .11 |   | $ | .17 |   | $ | .32 |   |
| Goodwill amortization                                |   | .05                                  |    | —                             |   | .10 |   | — |   |
| Adjusted net income                                  |   | $                                    | .11     |                               | $      | .11 |   | $ | .27 |   | $ | .32 |   |

 

**4.             Earnings per share**

 

Basic earnings per share (“EPS”) was computed by dividing net incomeavailable to common stockholders by the weighted average number of commonshares outstanding during each period. The Company has 5,000 shares ofredeemable convertible preferred stock outstanding with an original issue priceof $5,000,000.  No dividends arerequired to be paid on the stock, but the preferred stockholders have theright, provided the preferred stock has not been converted to common shares, torequire the Company to repurchase the stock during a one year period beginningDecember 14, 2004 at an aggregate price which increases daily from $7,025,000on December 14, 2004 to $7,868,000 on December 13, 2005.  The net income available to commonstockholders used in the EPS calculations is the net income less the reportedaccretion in the value of the preferred stock for that period.

 

Diluted EPS reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock were exercised or convertedinto common stock.  Diluted EPS wascalculated using the “treasury stock” method as if dilutive options had beenexercised and the funds were used to purchase common shares at the averagemarket price during the period.  Optionsto purchase 624,634 common shares as of February 28, 2002 and 600,837 commonshares as of February 28, 2003 were excluded from the calculation of equivalentshares, as they would have been anti-dilutive. The 5,000 shares of outstanding preferred stock, convertible into625,000 shares of common stock, were excluded from the calculation ofequivalent shares for the three and six month periods ended February 28, 2002and February 28, 2003, as they would have been anti-dilutive.

 

8

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The following is a reconciliation of the numerators and denominators ofthe basic and diluted EPS computations for “income available to commonstockholders” and other disclosures required by FASB Statement of AccountingStandards No. 128, “Earnings per Share”:

 
|                                                                   |   | **Three  months ended** |    | **Six months  ended** |   |
|------------------------------------------------------------------------|--------|-------------------------|---------|-----------------------|--------|
|                                                                   |   | **February  28**        |    | **February 28**       |   |
|                                                                   |   | **2002**                |    | **2003**              |   | **2002** |   | **2003** |   |
| Numerators:                                                            |   |                    |    |                  |   |   |   |   |   |
|                                                                   |   |                    |    |                  |   |   |   |   |   |
| Before  cumulative effect of a change in accounting principle:         |   |                    |    |                  |   |   |   |   |   |
| Net income                                                             |   | $                       | 393,000 |                  | $      | 687,000 |   | $ | 898,000 |   | $ | 1,842,000 |   |
| Preferred stock  accretion                                             |   | (116,000                | )       | (185,000              | )      | (116,000 | ) | (369,000 | ) |
| Income available  to common stockholders                               |   | $                       | 277,000 |                  | $      | 502,000 |   | $ | 782,000 |   | $ | 1,473,000 |   |
|                                                                   |   |                    |    |                  |   |   |   |   |   |
| After cumulative  effect of a change in accounting principle:          |   |                    |    |                  |   |   |   |   |   |
| Net income  (loss)                                                     |   | $                       | 393,000 |                  | $      | 687,000 |   | $ | 898,000 |   | $ | (20,501,000 | ) |
| Preferred stock  accretion                                             |   | (116,000                | )       | (185,000              | )      | (116,000 | ) | (369,000 | ) |
| Income (loss)  available to common stockholders                        |   | $                       | 277,000 |                  | $      | 502,000 |   | $ | 782,000 |   | $ | (20,870,000 | ) |
|                                                                   |   |                    |    |                  |   |   |   |   |   |
| Denominators:                                                          |   |                    |    |                  |   |   |   |   |   |
|                                                                   |   |                    |    |                  |   |   |   |   |   |
| Weighted average  shares outstanding – basic                      |   | 4,405,000               |    | 4,450,000             |   | 4,371,000 |   | 4,444,000 |   |
| Impact of common  shares assumed to be issued under stock option plans |   | 104,000                 |    | 106,000               |   | 110,000 |   | 110,000 |   |
| Weighted average  shares outstanding – diluted                    |   | 4,509,000               |    | 4,556,000             |   | 4,481,000 |   | 4,554,000 |   |

 

**5.             Supplemental cash flow information**

** **
|                                         |   | **Six months  ended  February 28** |      |
|----------------------------------------------|--------|------------------------------------|-----------|
|                                         |   | **2002**                           |      | **2003** |   |
| Cash paid during  the period:                |   |                               |      |   |   |
| Interest                                     |   | $                                  | 1,375,000 |   | $ | 765,000 |   |
| Income taxes                                 |   | $                                  | 226,000   |   | $ | 1,652,000 |   |
|                                         |   |                               |      |   |   |
| Non-cash  financing activity:                |   |                               |      |   |   |
| Details of  acquisition                      |   |                               |      |   |   |
| Fair value of  assets acquired               |   | $                                  | 5,283,000 |   | $ | — |   |
| Liabilities  assumed or incurred             |   | 2,598,000                          |      | — |   |
| Cash paid                                    |   | 2,685,000                          |      | — |   |
| Less cash  acquired                          |   | —                             |      | — |   |
| Net cash used in  acquisition                |   | $                                  | 2,685,000 |   | $ | — |   |
|                                         |   |                               |      |   |   |
| Common stock  issued to ESOP and 401(k) Plan |   | $                                  | 240,000   |   | $ | 429,000 |   |

 

**6.             Comprehensive income (loss)**

 

As part of its interest rate management program, the Companyperiodically enters into interest rate swap agreements with respect to portionsof its outstanding debt.  The purpose ofthese swaps is to mitigate the adverse effect on cash flows of an increase ininterest rates.  There was no swapagreement in place as of February 28, 2003.

 

9

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The reconciliation of net income to total comprehensive income for thethree and six month periods ending February 28, 2002 and 2003 is as follows:

 
|                                      |   | **Three  months ended   February 28** |    | **Six months  ended  February 28** |   |
|-------------------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|
|                                      |   | **2002**                              |    | **2003**                           |   | **2002** |   | **2003** |   |
| Net income (loss)                         |   | $                                     | 393,000 |                               | $      | 687,000 |   | $ | 898,000 |   | $ | (20,501,000 | ) |
| Foreign currency  translation adjustments |   | (9,000                                | )       | —                             |   | (9,000 | ) | — |   |
| Changes in value  of interest rate swaps  |   | 66,000                                |    | —                             |   | 90,000 |   | — |   |
| Total  comprehensive income (loss)        |   | $                                     | 450,000 |                               | $      | 687,000 |   | $ | 979,000 |   | $ | (20,501,000 | ) |

 

**MANAGEMENT’S DISCUSSION****ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Statements contained in this Quarterly Report on Form 10-Q, which arenot purely historical, are forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934, including but not limited to statements regarding Summa’sexpectations, hopes, beliefs, intentions or strategies regarding the future,such as those set forth in Part II, Item 1 “Legal Proceedings” below.  Actual results could differ materially fromthose projected in any forward-looking statements as a result of a number offactors, including those detailed in this “Management’s Discussion andAnalysis” section and elsewhere herein and in the Company’s Annual Report onForm 10-K for the fiscal year ended August 31, 2002.  The forward-looking statements are made as of the date hereof,and the Company assumes no obligation to update the forward-looking statements,or to update the reasons why actual results could differ materially from thoseprojected in the forward-looking statements. For a discussion of risks and uncertainties that should be consideredand which could materially adversely affect the Company, please see “RiskFactors” in the “Management Discussion and Analysis” section of the Company’sAnnual Report on Form 10-K for the fiscal year ended August 31, 2002.

 

Summa manufactures plastic products for diverse commercial andindustrial markets. Growth has been achieved by acquisition, development of newproducts and expansion of the Company’s sales organization. Summa designs andmanufactures injection-molded and thermo-formed plastic optical components forOEM customers in the lighting industry; modular plastic conveyor belt and chainfor the food processing industry; engineered plastic fittings, valves, filtersand tubing for the agricultural irrigation industry; molded plastic coil forms(“bobbins”) for use in transformers, motors, relays and switches; and othermolded and extruded plastic components for diverse industries.

 

***Critical AccountingPolicies and Estimates***

 

The following discussion and analysis of theCompany’s financial condition and results of operations are based upon theconsolidated financial statements of the Company, which have been prepared inaccordance with accounting principles generally accepted in the United Statesof America. The preparation of such financial statements requires management tomake estimates and assumptions in applying certain critical accountingpolicies. Certain accounting estimates are particularly sensitive because oftheir significance to the Company’s condensed consolidated financial statementsand because of the possibility that future events affecting the estimates coulddiffer markedly from current expectations. The Company believes that thefollowing are some of the more critical judgment areas in the application ofits accounting policies that affect the Company’s financial statements.

 

**Impairmentof Long-Lived Assets and Long-Lived Assets to be Disposed of.**  The Company reviews its long-livedassets and certain identifiable intangibles for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to the undiscounted futureoperating cash flows expected to be generated by the asset. If such assets areconsidered to be impaired, the impairment to be recognized is measured by theamount by which the carrying amount of the assets exceeds the fair value of theassets. Assets to be disposed of by sale are reported at the lower of thecarrying amount or fair value less costs to sell.

 

The Company has a significant amount of property and equipment andintangible assets. The determination as to whether events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable involves management’s judgment. In addition, should the Companyconclude that recoverability of an asset is in question, the estimate ofundiscounted future operating cash flows to determine whether an asset isrecoverable and, if not, the final determination of the fair value of the assetare also based on the judgment of management. These judgments can be impactedby a variety of underlying assumptions, such as the general business climate,effectiveness of competition and 

 

10

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supply and cost of resources. Accordingly, actual results can differ significantly from the assumptionsmade by management in making its estimates. Future changes in management’sestimates could result in indicators of impairment and future impairmentcharges.

 

New accounting standards adopted by the Companyeffective September 1, 2002 eliminated the impairment recoverability tests forgoodwill and certain other intangible assets with indefinite lives and requirethat such assets be valued at the lower of their carrying value or fairvalue.  For a summary of the impairmentcharge to goodwill taken by the Company effective September 1, 2002, see Note 3in the “Notes to Condensed Consolidated Financial Statements”, above.  Significant management judgment is involvedin determining the fair value of assets. Accordingly, future changes inmanagement’s estimates could result in additional impairment charges ofgoodwill and indefinite lived intangible assets.

 

**Valuation of Inventory. **The Company valuesits inventories at the lower of cost or market using the first-in, first-out(FIFO) method. Accordingly, the Company records adjustments to the value ofinventory based upon obsolescence and changes in market value as permanentchanges in the carrying amount of such inventory until its ultimate sale orother disposition. The Company has evaluated the current level of inventoriesconsidering planned sales volume and other factors and, based on thisevaluation, has recorded adjustments to cost of goods sold to adjust inventoryto lower of cost or market.  Theseadjustments are estimates, which could vary significantly, either favorably orunfavorably, from actual requirements if future economic conditions, customerdemand or competition differ from expectations.

 

***Results of Operations***

 

The following table sets forth certain information, derived fromSumma’s unaudited condensed consolidated statements of operations, as a percentof sales for the three month and six month periods ended February 28, 2002 and2003, and the Company’s effective income tax rate during those periods:

 
|                                                                         |   | **Three  months ended   February 28** |   | **Six months  ended   February 28** |   |
|------------------------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                                         |   | **2002**                              |   | **2003**                            |   | **2002** |   | **2003** |   |
| Net sales                                                                    |   | 100.0                                 | %      | 100.0                               | %      | 100.0 | % | 100.0 | % |
| Cost of sales                                                                |   | 75.9                                  | %      | 75.7                                | %      | 74.3 | % | 74.4 | % |
| Gross profit                                                                 |   | 24.1                                  | %      | 24.3                                | %      | 25.7 | % | 25.6 | % |
| S, G & A and  other expenses, net                                        |   | 19.4                                  | %      | 19.3                                | %      | 20.4 | % | 19.3 | % |
|                                                                         |   |                                  |   |                                |   |   |   |   |   |
| Operating income                                                             |   | 4.7                                   | %      | 5.0                                 | %      | 5.3 | % | 6.3 | % |
| Interest  expense, net                                                       |   | 2.4                                   | %      | 1.3                                 | %      | 2.7 | % | 1.4 | % |
| Income before  tax and cumulative effect of a change in accounting principle |   | 2.3                                   | %      | 3.7                                 | %      | 2.6 | % | 4.9 | % |
| Provision for  income taxes                                                  |   | 0.8                                   | %      | 1.2                                 | %      | 0.9 | % | 1.6 | % |
| Income before  cumulative effect of a change in accounting principle         |   | 1.5                                   | %      | 2.5                                 | %      | 1.7 | % | 3.3 | % |
|                                                                         |   |                                  |   |                                |   |   |   |   |   |
| Effective tax  rate                                                          |   | 35.4                                  | %      | 31.9                                | %      | 35.5 | % | 33.3 | % |

 

Sales for the second quarter ended February 28, 2003 increased$469,000, or 2%, compared to the same period in the prior year, due to theinclusion of the sales of recently acquired operations for a full three months,versus two months in the prior year, partially offset by a slight decrease inthe sales of other operations, primarily due to the general economicdownturn.  Same business sales in thesecond quarter were about 1% higher than in the second quarter of the priorfiscal year.  Due to the small change inoverall sales and the large number of individual products sold, it is notpossible to determine the relative effects of volume and pricing on reportedsales.

 

Sales for the six months ended February 28, 2003 increased $3,836,000,or 7%, compared to the same period in the prior year, primarily due to theinclusion of the sales of recently acquired operations.  Same business unit sales in the periodincreased 2%, compared to the first six months of fiscal 2002.  Due to the small change in overall sales andthe large number of individual products sold, it is not possible to determinethe relative effects of volume and pricing on reported sales.

 

Gross profit for the second quarter increased $169,000, or 3%, from thecomparable prior year period, primarily due to production efficiencies and afavorable mix of products sold, partially offset by facility consolidationcosts incurred.  Gross 

 

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margin increased slightly from 24.1% to 24.3% primarily due to costreductions and product mix, partially offset by expenses related to facilityconsolidation.

 

Gross profit for the six months ended February 28, 2003 increased$926,000, or 7%, from the comparable prior year period, due to the inclusion ofthe gross profit of recently acquired operations and increased sales.  Gross margin decreased slightly from 25.7%to 25.6%, due to expenses related to facility consolidations, partially offsetby cost reductions.

 

Operating expenses for the three months ended February 28, 2003increased $57,000, or 1%, from the comparable prior year period, primarily dueto costs related to facility consolidations, partially off-set by theelimination of goodwill amortization which was $278,000 in the quarter endedFebruary 28, 2002.  As a percent ofsales, operating expenses decreased slightly from 19.4% to 19.3%.

 

Operating expenses for the six months ended February 28, 2003 increased$175,000, or 2%, from the comparable prior year period, primarily due to theinclusion of operating expenses of newly acquired operations, and otheroperating expense increases including facility consolidation costs, partiallyoff-set by the elimination of goodwill amortization which was $556,000 in thecomparable prior year period.  As apercent of sales, operating expenses decreased from 20.4% to 19.3%.

 

Operating income for the second quarter was $112,000, 9% higher than inthe comparable prior year period, due to the changes discussed above. Operatingmargin for the quarter increased to 5.0% from 4.7% in the second quarter offiscal 2002.

 

Operating income for the six months ended February 28, 2003 was $751,000,27% higher than in the comparable prior year period, primarily due to theelimination of goodwill amortization of $556,000 in the period ended February28, 2002.  Operating margin improvedfrom 5.3% in the six months ended February 28, 2002 to 6.3% in the six monthsended February 28, 2003, due to the factors discussed above.

 

Net interest expense for the second quarter ended February 28, 2003decreased $288,000 from the prior year second quarter, due to decreased averagedebt levels and decreased interest rates. Net interest expense for the six months ended February 28, 2003decreased $618,000 from the comparable prior year period due to decreasedaverage debt levels and decreased interest rates.

 

The decrease in the effective tax rate in the second quarter of fiscal2003 versus fiscal 2002, from 35.4% to 31.8%, was primarily due to theelimination of the amortization of goodwill, a substantial portion of which wasnot tax deductible.

 

The Company’s backlog of unfilled orders, believed to be firm, was$9,721,000 at February 28, 2002, $9,225,000 at August 31, 2002 and $9,058,000at February 28, 2003.  Because the timebetween entering an order and shipping the product and recording a sale istypically shorter than one month, backlog levels are not a reliable indicatorof future sales volume.

 

***Liquidity and Capital Resources***

 

*WorkingCapital. *TheCompany’s working capital was $18,303,000 at February 28, 2002, $16,301,000 atAugust 31, 2002 and $17,873,000 at February 28, 2003.

 

*FinancingArrangements.*  TheCompany has several debt relationships as described below.  Substantially all of the Company’s assetsare pledged to secure debt.  The termdebt and revolving line of credit require compliance with financial andoperating covenants.

 

12

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Summary of the Company’s debt at February 28, 2003:

 
| **Description  of   Debt**  |   | **Balance** |       | **Weighted  Average  Interest  Rate** |   | **Additional  Availability** |   | **Fiscal Year Due** |   |
|-----------------------------|--------|-------------|------------|---------------------------------------|--------|------------------------------|--------|---------------------|--------|
|                        |   |        |       |                                  |
|                        |   |        |       |                                  |
|                        |   |        |       | **2003**                              |   | **2004**                     |   | **2005**            |   | **2006** |   | **2007** |   |
| Revolving line of credit    |   | $           | 7,000,000  |                                  | 3.7    | %                            | $      | 11,302,000          |   | $ | — |   | $ | — |   | $ | 7,000,000 |   | $ | — |   | $ | — |   |
| Bank term loans             |   | 8,190,000   |       | 8.0                                   | %      | —                       |   | 2,189,000           |   | 3,014,000 |   | 2,560,000 |   | 427,000 |   | — |   |
| Real estate and other loans |   | 8,594,000   |       | 3.9                                   | %      | 2,000,000                    |   | 338,000             |   | 761,000 |   | 1,002,000 |   | 3,442,000 |   | 3,051,000 |   |
|                        |   |        |       |                                  |   |                         |   |                |   |   |   |   |   |   |   |   |   |
| Total debt                  |   | $           | 23,784,000 |                                  | 5.2    | %                            | $      | 13,302,000          |   | $ | 2,527,000 |   | $ | 3,775,000 |   | $ | 10,562,000 |   | $ | 3,869,000 |   | $ | 3,051,000 |   |

 

Interest rates on the bank term loans are fixed for periods of one monthto four years.  Interest rates on thebank line of credit are subject to market fluctuation and are subject toreduction as the Company achieves certain financial milestones.  Interest rates on most of the real estateand other loans are subject to market fluctuation.

 

The Company previously announced a plan to repurchase up to $2,000,000of its common stock with no time limit. As of February 28, 2003, the Company had purchased 51,000 shares in theopen market at an average cost of $9.31 per share, pursuant to this buy-backplan.

 

Net cash provided by operating activities in the first six months offiscal 2003 was $3,431,000, $556,000 more than in the first six months offiscal 2002, primarily due to increased operating income.  Net cash used in investing activities was$2,319,000 in the first six months of fiscal 2003, $1,821,000 less than in thefirst six months of fiscal 2002, primarily due to an acquisition in the prioryear period.  $1,339,000 in cash was usedin financing activities in the first six months of fiscal 2003 versus$1,431,000 provided in the first six months of fiscal 2002, primarily due tofinancings in the prior year period to fund an acquisition.

 

Summa believes that cash flows from operations and existing creditfacilities will be sufficient to fund working capital requirements, plannedinvestments and debt service for the next twelve months.  The Company has a strategy of growth byacquisition.  In the event anacquisition plan is adopted which requires funds exceeding the availabilitydescribed above, an alternate source of funds to accomplish the acquisitionwould have to be developed.  The Companyhas 10,000,000 shares of common stock authorized, of which 4,429,217 shareswere outstanding at February 28, 2003 and 5,000,000 shares of “blank check”preferred stock authorized, of which 5,000 shares were outstanding asmandatorily redeemable convertible preferred stock at February 28, 2003.  The Company could issue additional shares ofcommon or preferred stock or enter into new or revised borrowing arrangementsto raise funds.

 

***Off-Balance SheetArrangements***

 

The Company’s material off-balance sheet arrangements are as follows:

 

*Futurelease payments.*  TheCompany leases offices and manufacturing facilities and certain equipment undernon-cancelable operating leases.  Futurepayments under these leases at February 28, 2003 are approximately as follows:

 

| **Fiscal  Year**    |   | **Amount** |      |
|---------------------|--------|------------|-----------|
| 2003                |   | $          | 750,000   |   |
| 2004                |   | $          | 1,178,000 |   |
| 2005                |   | $          | 872,000   |   |
| 2006                |   | $          | 693,000   |   |
| 2007                |   | $          | 472,000   |   |
| 2008 and thereafter |   | $          | 799,000   |   |

 

In recent years the Company has consolidated and/or abandoned severalfacilities in an effort to improve efficiencies and operating results and plansfurther consolidations.  In the eventthe Company were to abandon a facility prior to its being leased to a newtenant, the Company could become obligated for accelerated payments or otherexpenses.

 

*Contingentpreferred stock redemption obligation.*  In December 2001, in order to finance anacquisition, reduce outstanding debt and strengthen the Company’s financialposition, the Company issued and sold 5,000 shares of newly-authorized Series APreferred Stock (the “Preferred Stock”) in a private sale for an aggregatepurchase price of 

 

13

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$5,000,000.  The terms of thePreferred Stock were negotiated at arms length, including (i) non-voting, (ii)no dividend, (iii) liquidation preference, (iv) convertible into common stock,(v) redeemable by the holder’s election commencing on the third anniversary ofthe date of issuance and ending immediately prior to the fourth anniversary ata price which equals a twelve percent annual increase over the originalissuance price in cash, subject to adjustment, (vi) redeemable at the Company’soption commencing on the fourth anniversary of the date of issuance and endingimmediately prior to the fifth anniversary at a price which equals a twentypercent annual increase over the original issuance price in cash, subject toadjustment, and (vii) if outstanding, redeemable on the fifth anniversary ofthe date of issuance by the Company at the original issuance price, subject toadjustment.

 

If redemption is elected by the holder of the Preferred Stock duringthe one-year time period referenced above, the contingent preferred stockredemption obligation would require the Company to pay an aggregate price whichincreases daily from $7,025,000 on December 14, 2004 to $7,868,000 on December13, 2005.  For related disclosure, seeNote 4 in the “Notes to Condensed Consolidated Financial Statements” above.

 

**QUANTITATIVE****ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Except for the outstanding debt and related variable interest rates setforth in “Management’s Discussion and Analysis of Financial Condition andResults of Operations – Liquidity and Capital Resources” above, there are nomaterial changes to the disclosure set forth in Item 7A of the Company’s AnnualReport on Form 10-K for the fiscal year ended August 31, 2002.  The Company has no market risk sensitiveinstruments entered into for trading purposes.

 

**EFFECTIVENESSOF DISCLOSURE CONTROLS AND PROCEDURES**

** **

Within the ninety days prior to the date of this report, the Companycarried out an evaluation, under the supervision and with the participation ofthe Company’s management, including the Company’s Chief Executive Officer andChief Financial Officer, of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures pursuant to Exchange Act Rule13a – 14.  Based upon that evaluation,the Chief Executive Officer and Chief Financial Officer concluded that theCompany’s disclosure controls and procedures are effective.  There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of their evaluation.

 

**PART II****- OTHERINFORMATION**

 

***Item 1.  Legal Proceedings***

 

The Company encounters lawsuits from time to time in the ordinarycourse of business and, at February 28, 2003, the Company and/or its affiliateswere parties to several civil lawsuits. Summa does not expect that the resolution of these lawsuits will have amaterial adverse impact on future results of operations or financial position.   Certain lawsuits filed against the Companyfrom time to time contain claims not covered by insurance, or seek damages inexcess of policy limits, and such claims could be filed in the future.  In addition, the Company recently filedseveral lawsuits in U.S. District Court against unrelated third parties for infringementof a patent and trade dress owned by a Company subsidiary, and the Company mayfile additional infringement and/or other types of lawsuits in the future whichmay result in materially increased costs and other adverse consequences.  Any costs and/or losses that Summa maysuffer from such lawsuits, and the effect such litigation may have upon thereputation and marketability of Summa’s products, could have a material adverseimpact on the future results of operations, financial condition and/or prospectsof the Company.

 

***Item 2.  Changes in Securities and Use ofProceeds***

 

None.

 

***Item 3.  Defaults upon Senior Securities***

 

None.

 

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***Item 4.  Submission of Matters to a Vote of SecurityHolders***

 

At the Company’s Annual Meeting of Stockholders held on January 8,2003, incumbent directors David McConaughy and Josh T. Barnes were re-electedto the Board of Directors of the Company to serve as one Class of the Board ofDirectors for a three year term and until their successors are elected andqualified.  Messr. McConaughy received3,925,840 votes in his favor, with 28,931 votes withheld, and Messr. Barnesreceived 3,943,940 votes in his favor, with 10,831 votes withheld.  The were no votes against and no brokernon-votes.  Incumbent directors MichaelL. Horst, William R. Zimmerman, James R. Swartwout, Jack L. Watts and CharlesA. Tourville are members of two additional Classes of the Board of Directors,and their terms of office continued after the Annual Meeting.

 

***Item 5.   Other Information***

 

None.

 

***Item 6.  Exhibits and Reports on Form 8-K***

 
| **(a)** |   | **Exhibits**                                                                                                                                                                         |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                 |
|    |   | 99.1   Certification pursuant to 18 U.S.C. Section 1350                                                                                                                         |
|    |   |                                                                                                                                                                                 |
| **(b)** |   | **Current  Reports on Form 8-K**                                                                                                                                                     |
|    |   |                                                                                                                                                                                 |
|    |   | Form 8-K dated December 13, 2002 relating to the adoption  by the Company of Statement of Financial Accounting Standards No. 142,  “Goodwill and Other Intangible Assets”. |

 

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized on March 28, 2003.

 

**Summa Industries**

 
| /s/ James R. Swartwout                |                         | /s/ Trygve M. Thoresen |   |
|---------------------------------------|------------------------------|------------------------|--------|
| James R. Swartwout                    | Trygve M. Thoresen           |
| President and Chief Financial Officer | Vice President and Secretary |

 

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**CERTIFICATION PURSUANT TO RULE 13a – 14**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

 

I, James R. Swartwout, certify that:

 

1.             I have reviewedthis Quarterly Report on Form 10-Q of Summa Industries;

 

2.             Based on myknowledge, this Quarterly Report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this Quarterly Report;

 

3.             Based on myknowledge, the financial statements, and other financial information includedin this Report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this Quarterly Report;

 

4.             The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

(a)           designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisQuarterly Report is being prepared;

 

(b)           evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing of this Quarterly Report (the“Evaluation Date”); and

 

(c)           presented in thisQuarterly Report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.             The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

(a)           all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

(b)           any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.             The registrant’sother certifying officers and I have indicated in this Quarterly Report whetherthere were significant changes in internal controls or in other factors thatcould significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
|   |    /s/ James R. Swartwout         |   |
|--------|--------------------------------------------------|--------|
|   | James R. Swartwout                               |
|   | Chief Executive Officer  Chief Financial Officer |
|   | March 28, 2003                                   |

 

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