**U.S. Securities and ExchangeCommission**

**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**                                                           |
|       |   |                                                                                         |
|       |   | **November 30, 2003**                                                                        |
|       |   |                                                                                         |
| **o**      |   | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**      |

 

**For the transition period from N/A to N/A**

 

**Commission file no. 1-7755**

 

**Summa Industries**

(Name of registrant as specified in itscharter)

 

| **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 December 23,2003 was 4,360,142.

 

 

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**SummaIndustries**

 

**INDEX**

 

 
| PART I - FINANCIAL INFORMATION                                     |                                                                                                                       |
|--------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|
|                                                               |                                                                                                                       |
| Item 1.                                                            | Financial Statements:                                                                                                      |   |
|                                                               |                                                                                                                       |
|                                                               | Condensed Consolidated Balance Sheets -  November 30, 2002 (unaudited), August 31, 2003 and November 30, 2003  (unaudited) |   |   |
|                                                               |                                                                                                                       |   |   |
|                                                               | Condensed Consolidated Statements of  Operations (unaudited) -  three months ended November 30, 2002 and 2003              |   |   |
|                                                               |                                                                                                                       |   |   |
|                                                               | Condensed Consolidated Statements of Cash  Flows (unaudited) -  three months ended November 30, 2002 and 2003              |   |   |
|                                                               |                                                                                                                       |   |   |
|                                                               | Notes to Condensed Consolidated Financial  Statements (unaudited)                                                          |   |   |
|                                                               |                                                                                                                       |
| 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**

CONDENSEDCONSOLIDATED BALANCE SHEETS

(unaudited)

 
|                                                                                                                                                                                      |   | **November 30, 2002** |       | **August 31, 2003** |   | **November 30, 2003** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|---------------------|--------|-----------------------|--------|
| **ASSETS**                                                                                                                                                                                |   |                  |       |                |   |                  |   |
| Current  assets:                                                                                                                                                                          |   |                  |       |                |   |                  |   |
| Cash  and cash equivalents                                                                                                                                                                |   | $                     | 1,170,000  |                | $      | 380,000               |   | $ | 297,000 |   |
| Accounts  receivable                                                                                                                                                                      |   | 16,825,000            |       | 15,729,000          |   | 15,681,000            |   |
| Inventories                                                                                                                                                                               |   | 12,178,000            |       | 11,645,000          |   | 13,198,000            |   |
| Prepaid  expenses and other                                                                                                                                                               |   | 3,352,000             |       | 2,710,000           |   | 3,060,000             |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Total  current assets                                                                                                                                                                     |   | 33,525,000            |       | 30,464,000          |   | 32,236,000            |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Property,  plant and equipment                                                                                                                                                            |   | 52,840,000            |       | 55,731,000          |   | 56,261,000            |   |
| Less  accumulated depreciation                                                                                                                                                            |   | (26,195,000           | )          | (29,619,000         | )      | (30,637,000           | )      |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Net  property, plant and equipment                                                                                                                                                        |   | 26,645,000            |       | 26,112,000          |   | 25,624,000            |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Other  assets                                                                                                                                                                             |   | 2,899,000             |       | 2,518,000           |   | 2,518,000             |   |
| Goodwill  and other intangibles, net                                                                                                                                                      |   | 9,625,000             |       | 9,422,000           |   | 9,361,000             |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Total  assets                                                                                                                                                                             |   | $                     | 72,694,000 |                | $      | 68,516,000            |   | $ | 69,739,000 |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Current  liabilities:                                                                                                                                                                     |   |                  |       |                |   |                  |   |
| Accounts  payable                                                                                                                                                                         |   | $                     | 5,264,000  |                | $      | 5,302,000             |   | $ | 6,149,000 |   |
| Accrued  liabilities                                                                                                                                                                      |   | 5,043,000             |       | 5,015,000           |   | 4,504,000             |   |
| Current  maturities of long-term debt                                                                                                                                                     |   | 5,062,000             |       | 3,896,000           |   | 3,448,000             |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Total  current liabilities                                                                                                                                                                |   | 15,369,000            |       | 14,213,000          |   | 14,101,000            |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Long-term  debt, net of current maturities                                                                                                                                                |   | 19,641,000            |       | 16,219,000          |   | 16,247,000            |   |
| Other  long-term liabilities                                                                                                                                                              |   | 2,641,000             |       | 2,601,000           |   | 2,594,000             |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Total  long-term liabilities                                                                                                                                                              |   | 22,282,000            |       | 18,820,000          |   | 18,841,000            |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Mandatorily  redeemable convertible preferred stock,  par value $.001, 5,000 shares authorized, issued and outstanding                                                                    |   | 5,551,000             |       | 6,103,000           |   | 6,287,000             |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Stockholders’  equity:                                                                                                                                                               |   |                  |       |                |   |                  |   |
| Common  stock, par value $.001; 10,000,000  shares authorized; issued and outstanding:  4,474,492 at November 30, 2002,  4,246,103 at August 31, 2003 and  4,317,492 at November 30, 2003 |   | 19,540,000            |       | 17,577,000          |   | 18,061,000            |   |
| Retained  earnings                                                                                                                                                                        |   | 9,952,000             |       | 11,803,000          |   | 12,449,000            |   |
|                                                                                                                                                                                      |   |                  |       |                |   |                  |   |
| Total  stockholders’ equity                                                                                                                                                          |   | 29,492,000            |       | 29,380,000          |   | 30,510,000            |   |
| Total  liabilities, mandatorily redeemable preferred stock  and stockholders’ equity                                                                                                 |   | $                     | 72,694,000 |                | $      | 68,516,000            |   | $ | 69,739,000 |   |

 

See accompanying notes to condensed consolidated financial statements*.*

 

3

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**Summa Industries**

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 
|                                                                                           |   | **Three months ended  November 30** |        |
|------------------------------------------------------------------------------------------------|--------|-------------------------------------|-------------|
|                                                                                           |   | **2002**                            |        | **2003** |   |
|                                                                                           |   |                                |        |   |   |
| Net  sales                                                                                     |   | $                                   | 28,548,000  |   | $ | 25,926,000 |   |
| Cost  of sales                                                                                 |   | 21,124,000                          |        | 19,555,000 |   |
|                                                                                           |   |                                |        |   |   |
| Gross  profit                                                                                  |   | 7,424,000                           |        | 6,371,000 |   |
| Selling,  general, administrative and other expenses                                           |   | 5,265,000                           |        | 4,820,000 |   |
|                                                                                           |   |                                |        |   |   |
| Operating  income                                                                              |   | 2,159,000                           |        | 1,551,000 |   |
| Interest  expense                                                                              |   | 405,000                             |        | 305,000 |   |
|                                                                                           |   |                                |        |   |   |
| Income  before income taxes and cumulative effect of a change in accounting principle          |   | 1,754,000                           |        | 1,246,000 |   |
| Provision  for income taxes                                                                    |   | 599,000                             |        | 416,000 |   |
|                                                                                           |   |                                |        |   |   |
| Income  before cumulative effect of a change in accounting principle                           |   | 1,155,000                           |        | 830,000 |   |
| Cumulative  effect of a change in accounting principle                                         |   | (22,343,000                         | )           | — |   |
|                                                                                           |   |                                |        |   |   |
| Net  income (loss)                                                                             |   | $                                   | (21,188,000 | ) | $ | 830,000 |   |
|                                                                                           |   |                                |        |   |   |
| Preferred  stock accretion                                                                     |   | $                                   | 184,000     |   | $ | 184,000 |   |
|                                                                                           |   |                                |        |   |   |
| Net  income (loss) available to common stockholders:                                           |   |                                |        |   |   |
| Before  cumulative effect of a change in accounting principle                                  |   | $                                   | 971,000     |   | $ | 646,000 |   |
| After  cumulative effect of a change in accounting principle                                   |   | $                                   | (21,372,000 | ) | $ | 646,000 |   |
|                                                                                           |   |                                |        |   |   |
| Earnings  per common share before cumulative effect of a change in accounting principle        |   |                                |        |   |   |
| Basic                                                                                          |   | $                                   | .22         |   | $ | .15 |   |
| Diluted                                                                                        |   | $                                   | .21         |   | $ | .15 |   |
|                                                                                           |   |                                |        |   |   |
| Earnings  (loss) per common share after cumulative effect of a change in accounting  principle |   |                                |        |   |   |
| Basic                                                                                          |   | $                                   | (4.82       | ) | $ | .15 |   |
| Diluted                                                                                        |   | $                                   | (4.82       | ) | $ | .15 |   |

 

See accompanying notes to condensed consolidated financial statements.

 

 

4

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**Summa Industries**

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 
|                                                                                      |   | **Three months ended  November 30** |        |
|-------------------------------------------------------------------------------------------|--------|-------------------------------------|-------------|
|                                                                                      |   | **2002**                            |        | **2003** |   |
|                                                                                      |   |                                |        |   |   |
| Operating  activities:                                                                    |   |                                |        |   |   |
| Net  income (loss)                                                                        |   | $                                   | (21,188,000 | ) | $ | 830,000 |   |
|                                                                                      |   |                                |        |   |   |
| Adjustments  to reconcile net income (loss) to net cash provided by operating activities: |   |                                |        |   |   |
| Depreciation                                                                              |   | 1,189,000                           |        | 1,163,000 |   |
| Amortization                                                                              |   | 63,000                              |        | 61,000 |   |
| Cumulative  effect of a change in accounting principle                                    |   | 22,343,000                          |        | — |   |
| Net  change in assets and liabilities:                                                    |   |                                |        |   |   |
| Accounts  receivable                                                                      |   | 769,000                             |        | 48,000 |   |
| Inventories                                                                               |   | 135,000                             |        | (1,553,000 | ) |
| Prepaid  expenses and other assets                                                        |   | (147,000                            | )           | (350,000 | ) |
| Accounts  payable                                                                         |   | (1,146,000                          | )           | 847,000 |   |
| Accrued  liabilities                                                                      |   | (533,000                            | )           | (173,000 | ) |
|                                                                                      |   |                                |        |   |   |
| Total  adjustments                                                                        |   | 22,673,000                          |        | 43,000 |   |
|                                                                                      |   |                                |        |   |   |
| Net  cash provided by operating activities                                                |   | 1,485,000                           |        | 873,000 |   |
|                                                                                      |   |                                |        |   |   |
| Investing  activities:                                                                    |   |                                |        |   |   |
| Purchases  of property and equipment                                                      |   | (1,014,000                          | )           | (675,000 | ) |
|                                                                                      |   |                                |        |   |   |
| Net  cash (used in) investing activities                                                  |   | (1,014,000                          | )           | (675,000 | ) |
|                                                                                      |   |                                |        |   |   |
| Financing  activities:                                                                    |   |                                |        |   |   |
| Net  proceeds from line of credit                                                         |   | 1,055,000                           |        | 877,000 |   |
| Payments  on long-term debt                                                               |   | (1,263,000                          | )           | (1,297,000 | ) |
| Proceeds  from the exercise of stock options                                              |   | 227,000                             |        | 139,000 |   |
| Purchase  of common stock                                                                 |   | (10,000                             | )           | — |   |
|                                                                                      |   |                                |        |   |   |
| Net  cash provided by (used in) financing activities                                      |   | 9,000                               |        | (281,000 | ) |
|                                                                                      |   |                                |        |   |   |
| Net  increase (decrease) in cash and cash equivalents                                     |   | 480,000                             |        | (83,000 | ) |
| Cash  and cash equivalents, beginning of period                                           |   | 690,000                             |        | 380,000 |   |
|                                                                                      |   |                                |        |   |   |
| Cash  and cash equivalents, end of period                                                 |   | $                                   | 1,170,000   |   | $ | 297,000 |   |

 

See accompanying notes to condensed consolidated financial statements*.*

 

5

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**SummaIndustries**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

November 30, 2003

 

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

 

The accompanying unaudited condensed consolidatedfinancial statements of Summa Industries (the “Company”) have been condensed incertain respects and should, therefor, be read in conjunction with the auditedconsolidated financial statements and notes related thereto contained in theCompany’s Annual Report on Form 10-K for the year ended August 31, 2003.Certain prior year amounts have been reclassified in the accompanying financialstatements to conform with current year presentations.  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 threemonths ended November 30, 2003 are not necessarily indicative of the results tobe expected for the full year ending August 31, 2004.

 

**Recent accountingpronouncements**

 

The Company adopted FASBStatement of Financial Accounting Standards No. 150, “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity”(“SFAS 150”), as of September 1, 2003. This Statement establishes standards for how an issuer classifies andmeasures certain financial instruments with characteristics of both liabilitiesand equity.  It requires that an issuerclassify a financial instrument that is within its scope as a liability (or anasset in some circumstances).  Theprovisions of SFAS 150 are effective for financial instruments entered into ormodified after May 31, 2003, and otherwise are effective at the beginning ofthe first interim period beginning after June 15, 2003.  The adoption of SFAS 150 did not have anyeffect on the Company’s financial position or results of operations.

 

**2.****                                      Inventories**

 

Inventorieswere as follows:

 
|                |   | **November  30, 2002** |       | **August 31,  2003** |    | **November  30, 2003** |    |
|---------------------|--------|------------------------|------------|----------------------|---------|------------------------|---------|
|                |   |                   |       |                 |    |                   |    |
| Finished goods      |   | $                      | 5,102,000  |                 | $       | 4,266,000              |    | $ | 5,202,000 |   |
| Work in process     |   | $                      | 288,000    |                 | 515,000 |                   | 325,000 |   |
| Materials and parts |   | 6,788,000              |       | 6,864,000            |    | 7,671,000              |    |
|                |   |                   |       |                 |    |                   |    |
|                |   | $                      | 12,178,000 |                 | $       | 11,645,000             |    | $ | 13,198,000 |   |

 

**3.****                                      Cumulativeeffect of a change in accounting 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.  SFAS 142 also requires the Company to assess the recoverabilityof recorded 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 accounting principleas of the adoption date.  SFAS 142requires that the initial assessment be completed within six months of the dateof adoption and the impairment, if any, be reported retroactively to thebeginning of the year of adoption.

 

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.

 

**4.****                                      Earningsper share**

 

Basic earnings per share (“EPS”) was computed bydividing net income available to common stockholders by the weighted averagenumber of common shares outstanding during each period. The Company has 5,000shares of redeemable convertible preferred stock outstanding with an originalissue price of $5,000,000.  No dividendsare required 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

 

6

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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 couldoccur if securities or other contracts to issue common stock were exercised orconverted into common stock.  DilutedEPS, before cumulative effect of a change in accounting principle, 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 398,000 common shares as of November 30, 2002 and 616,000 commonshares as of November 30, 2003 were excluded from the calculation of equivalentshares, as they would have been anti-dilutive. The 5,000 shares of outstanding preferred stock, convertible into 625,000shares of common stock, were excluded from the calculation of equivalent sharesfor the three month periods ended November 30, 2002 and November 30, 2003, asthey would have been anti-dilutive. Diluted EPS after cumulative effect of a change in accounting principle,for the three month period ended November 30, 2002, excludes common stockequivalents, as they would have been anti-dilutive.

 

The following is a reconciliation of the numeratorsand denominators of the basic and diluted EPS computations for “incomeavailable to common stockholders” and other disclosures required by FASBStatement of Accounting Standards No. 128, “Earnings per Share”:

 
|                                                                   |   | **Three months ended  November 30** |        |
|------------------------------------------------------------------------|--------|-------------------------------------|-------------|
|                                                                   |   | **2002**                            |        | **2003** |   |
| Numerators:                                                            |   |                                |        |   |   |
|                                                                   |   |                                |        |   |   |
| Before cumulative effect of a change in accounting principle:          |   |                                |        |   |   |
| Net income                                                             |   | $                                   | 1,155,000   |   | $ | 830,000 |   |
| Preferred stock accretion                                              |   | (184,000                            | )           | (184,000 | ) |
| Income available to common stockholders                                |   | $                                   | 971,000     |   | $ | 646,000 |   |
|                                                                   |   |                                |        |   |   |
| After cumulative effect of a change in accounting principle:           |   |                                |        |   |   |
| Net income (loss)                                                      |   | $                                   | (21,188,000 | ) | $ | 830,000 |   |
| Preferred stock accretion                                              |   | (184,000                            | )           | (184,000 | ) |
| Income (loss) available to common stockholders                         |   | $                                   | (21,372,000 | ) | $ | 646,000 |   |
|                                                                   |   |                                |        |   |   |
| Denominators:                                                          |   |                                |        |   |   |
|                                                                   |   |                                |        |   |   |
| Weighted  average shares outstanding – basic                      |   | 4,437,000                           |        | 4,287,000 |   |
| Impact of common shares assumed to be issued  under stock option plans |   | 115,000                             |        | 68,000 |   |
| Weighted average shares outstanding – diluted                     |   | 4,552,000                           |        | 4,355,000 |   |

 

**5. Stock-based compensation plans**

 

The Company accounts for stock options issued to employees anddirectors in accordance with the recognition and measurement principles ofAccounting Principles Board Opinion No. 25 and Financial Interpretation No. 44.Consequently, no compensation expense was recognized for the Company’s stockoption plans. The following table illustrates the effect on net earnings andnet earnings per share if the Company had applied the fair value recognitionprovisions of Statement of Financial Accounting Standards No. 123, “Accountingfor Stock-Based Compensation”. The fair value estimate was computed using theBlack-Scholes option pricing model.

 

7

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** **
|                                                         |   | **Three months ended  November 30** |    |
|--------------------------------------------------------------|--------|-------------------------------------|---------|
|                                                         |   | **2002**                            |    | **2003** |   |
| Before cumulative effect of a change in accounting principle |   |                                |    |   |   |
| Income available to stockholders                             |   | $                                   | 971,000 |   | $ | 646,000 |   |
| Pro forma impact of expensing stock options                  |   | 19,000                              |    | (30,000 | ) |
| Pro forma income available to common stockholders            |   | $                                   | 990,000 |   | $ | 616,000 |   |
|                                                         |   |                                |    |   |   |
| Earnings per share:                                          |   |                                |    |   |   |
| As reported:                                                 |   |                                |    |   |   |
| Basic                                                        |   | $                                   | .22     |   | $ | .15 |   |
| Diluted                                                      |   | $                                   | .21     |   | $ | .15 |   |
|                                                         |   |                                |    |   |   |
| Pro forma:                                                   |   |                                |    |   |   |
| Basic                                                        |   | $                                   | .22     |   | $ | .14 |   |
| Diluted                                                      |   | $                                   | .22     |   | $ | .14 |   |

 

**6.****                                      Supplementalcash flow information**

** **
|                                                             |   | **Three  months ended  November 30** |    |
|------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                             |   | **2002**                             |    | **2003** |   |
| Cash paid during the period:                                     |   |                                 |    |   |   |
| Interest                                                         |   | $                                    | 369,000 |   | $ | 250,000 |   |
| Income taxes                                                     |   | $                                    | 741,000 |   | $ | 36,000 |   |
| Non-cash financing activity:

Common stock issued to 401(k) Plan |   | $                                    | 429,000 |   | $ | 345,000 |   |

 

**7.****                                      SegmentInformation**

 

Summa manufactures diverse plastic products in five reportable segmentsas described below:

 

***Optical Components.***  In its Optical Components segment, Summadesigns and manufactures plastic prismatic lenses, refractors and reflectorsand other plastic products, which are used in commercial and industriallighting fixtures, and in display, signage, architectural and otherapplications.  Products, many of whichare patented, are injection-molded using specially compounded lighting gradepolycarbonate or acrylic, extruded from similar materials, or thermoformed fromsheet extruded by the Optical Components Segment.  The principal advantages of Summa’s injection-molded plasticcomponents over more traditional glass or metal components are superior opticalperformance, lighter weight, and in certain instances, lower cost.

 

***Material HandlingComponents.**** *Inits Material Handling Components segment, Summa designs and manufacturesengineered plastic components which form conveyer belts and chains and otherplastic products.  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 its Electrical Components segment, Summadesigns and manufactures thermoplastic coil forms or “bobbins” and otherplastic products used principally in the manufacture of magnetic devices suchas transformers, relays, switches, power supplies and small electromotors.  These devices are utilized inlighting controls, process controls, HVAC equipment, appliances, vehicles,telecommunications equipment and other applications.

 

8

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***IrrigationComponents. ***Inits Irrigation 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.

 

***MiscellaneousPlastic Components. ***Inits Miscellaneous Plastic Components segment, Summa designs and manufacturesplastic injection-molded products for diverse industrial and commercialapplications.  This segment alsomanufactures products for other Summa segments.

 

Financial information by reportable business segment is reported in thefollowing tables:

 
|                              |   | **Three months ended November 30** |       |
|-----------------------------------|--------|------------------------------------|------------|
|                              |   | **2002**                           |       | **2003** |   |
| External sales                    |   |                               |       |   |   |
| Optical  components               |   | $                                  | 16,115,000 |   | $ | 13,592,000 |   |
| Material  handling components     |   | 5,861,000                          |       | 5,893,000 |   |
| Electrical  components            |   | 3,274,000                          |       | 2,861,000 |   |
| Irrigation  components            |   | 2,760,000                          |       | 3,271,000 |   |
| Miscellaneous  plastic components |   | 538,000                            |       | 309,000 |   |
| Consolidated                      |   | $                                  | 28,548,000 |   | $ | 25,926,000 |   |
|                              |   |                               |       |   |   |
| Inter-segment sales               |   |                               |       |   |   |
| Optical  components               |   | $                                  | —     |   | $ | 446,000 |   |
| Material  handling components     |   | —                             |       | — |   |
| Electrical  components            |   | —                             |       | — |   |
| Irrigation  components            |   | —                             |       | — |   |
| Miscellaneous  plastic components |   | 652,000                            |       | 798,000 |   |
| Other                             |   | (652,000                           | )          | (1,244,000 | ) |
| Consolidated                      |   | $                                  | —     |   | $ | — |   |
|                              |   |                               |       |   |   |
| Total sales                       |   |                               |       |   |   |
| Optical  components               |   | $                                  | 16,115,000 |   | $ | 14,038,000 |   |
| Material  handling components     |   | 5,861,000                          |       | 5,893,000 |   |
| Electrical  components            |   | 3,274,000                          |       | 2,861,000 |   |
| Irrigation  components            |   | 2,760,000                          |       | 3,271,000 |   |
| Miscellaneous  plastic components |   | 1,190,000                          |       | 1,107,000 |   |
| Other                             |   | (652,000                           | )          | (1,244,000 | ) |
| Consolidated                      |   | $                                  | 28,548,000 |   | $ | 25,926,000 |   |
|                              |   |                               |       |   |   |
| Operating income (loss)           |   |                               |       |   |   |
| Optical  components               |   | $                                  | 2,371,000  |   | $ | 1,808,000 |   |
| Material  handling components     |   | 508,000                            |       | 157,000 |   |
| Electrical  components            |   | 150,000                            |       | 140,000 |   |
| Irrigation  components            |   | (69,000                            | )          | 56,000 |   |
| Miscellaneous  plastic components |   | (401,000                           | )          | (150,000 | ) |
| Other                             |   | (400,000                           | )          | (460,000 | ) |
| Consolidated                      |   | $                                  | 2,159,000  |   | $ | 1,551,000 |   |

 
|                             |   | **November 30  2002** |       | **August 31  2003** |   | **November 30  2003** |   |
|----------------------------------|--------|-----------------------|------------|---------------------|--------|-----------------------|--------|
| Assets                           |   |                  |       |                |   |                  |   |
| Optical components               |   | $                     | 32,286,000 |                | $      | 28,228,000            |   | $ | 28,737,000 |   |
| Material handling components     |   | 16,822,000            |       | 18,335,000          |   | 19,271,000            |   |
| Electrical components            |   | 8,268,000             |       | 6,999,000           |   | 6,956,000             |   |
| Irrigation components            |   | 7,008,000             |       | 7,556,000           |   | 7,895,000             |   |
| Miscellaneous plastic components |   | 2,526,000             |       | 2,941,000           |   | 2,299,000             |   |
| Other                            |   | 5,784,000             |       | 4,457,000           |   | 4,581,000             |   |
| Consolidated                     |   | $                     | 72,694,000 |                | $      | 68,516,000            |   | $ | 69,739,000 |   |

 

9

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Operating income is the measure of profit or loss reported by segment asinterest expense and income taxes are not fully allocated by segment.  “Other” includes inter-company eliminationsand corporate and other expenses not allocated by segment.  The impairment charge described in footnote3 to these interim financial statements was comprised of the following chargesby segment: $5,953,000 in Optical Components, $7,851,000 in ElectricalComponents, $6,831,000 in Irrigation Components and $1,708,000 in MiscellaneousPlastic Components.

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Statements contained inthis Quarterly Report on Form 10-Q, 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 PartII, Item 1 “Legal Proceedings” below. Actual results could differ materially from those projected in anyforward-looking statements as a result of a number of factors, including thosedetailed in this “Management’s Discussion and Analysis” section and elsewhereherein and in the Company’s Annual Report on Form 10-K for the fiscal yearended August 31, 2003.  Theforward-looking statements are made as of the date hereof, and the Companyassumes no obligation to update the forward-looking statements, or to updatethe reasons why actual results could differ materially from those projected inthe forward-looking statements.  For adiscussion of risks and uncertainties that should be considered and which couldmaterially adversely affect the Company, please see “Risk Factors” in the“Management Discussion and Analysis” section of the Company’s Annual Report onForm 10-K for the fiscal year ended August 31, 2003.

 

Summa manufactures plastic products for diverse commercial andindustrial markets. Through its five reportable segments, Summa designs andmanufactures injection-molded and formed plastic optical components for OEMcustomers in the lighting industry; modular plastic conveyor belt and chain forthe food processing industry; engineered plastic fittings, valves, filters andtubing 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 consolidated financial statements andbecause 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:

 

###### *Impairment of Long-Lived Assets andLong-Lived Assets to be Disposed of.*  The Company reviews its long-lived assets and certainidentifiable intangibles for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. 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 propertyand equipment and intangible assets. The determination as to whether events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable involves management’s judgment. In addition, should the Companyconclude that recoverability ofan asset is in question, the estimate of undiscounted future operating cashflows to determine whether an asset is recoverable and, if not, the final determination of the fairvalue of the asset are also based on the judgment of management. Thesejudgments can be impacted by a variety of underlying assumptions, such as thegeneral business climate, effectiveness of competition and supply and cost ofresources.  Accordingly, actual resultscan differ significantly from the assumptions made by management in making itsestimates. Future changes in management’s estimates could result in indicatorsof impairment and future impairment charges.

 

New accounting standards adopted by theCompany effective September 1, 2002 required that the Company perform atransitional fair value based impairment test for goodwill and required thatgoodwill be valued at the lower of carrying value or fair value. For a summaryof the impairment charge to goodwill taken by the Company effective September1, 2002, see 

 

10

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Note 3 in the “Notes to CondensedConsolidated Financial Statements”.  TheCompany reviews goodwill for impairment annually in the fourth quarter.  Significant management judgment is involvedin determining the fair value of assets. Future changes in management’sestimates could result in additional impairment charges to goodwill.

 

###### ***Valuation of Inventory.***  The Companyvalues its inventories at the lower of cost or market using the first-in,first-out (FIFO) method. 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 historical sales and other factors and, based on this evaluation,has recorded adjustments to cost of goods sold to adjust inventory to netrealizable value.  These adjustments areestimates, which could vary significantly, either favorably or unfavorably,from actual requirements if future economic conditions, customer demand or competitiondiffer from expectations.

 

**Accounts Receivable.**  TheCompany performs ongoing evaluations of customers and adjusts credit limitsbased upon each customer’s payment history and credit worthiness, as determinedby credit information available at that time. The Company monitors collections and payments from customers andmaintains allowances for doubtful accounts for the inability of customers tomake required payments.  If thefinancial condition of customers were to deteriorate resulting in an impairmentof their ability to make payments, additional allowances may be required.

 

**Accounting for Stock Options**.  Statement of Financial Accounting StandardsNo. 123, Accounting for Stock-Based Compensation (‘SFAS 123”), as amended bySFAS 148, allows entities to continue to apply the provisions of AccountingPrinciples Board (“APB”) Opinion No. 25, Accounting for Stock Issued toEmployees, and provide pro forma income and pro forma earnings per sharedisclosures for stock-based awards as if the fair-value based method defined inSFAS 123 had been applied.  Inaccordance with APB Opinion No. 25, and related interpretations, compensationexpense would generally be recorded for fixed option grants only if, on thedate of the grant, the current price of the underlying stock exceeded theexercise price.  The Company has electedto continue to apply the provisions of APB Opinion No. 25 and provide the proforma disclosure provisions of SFAS 123. Accordingly, no compensation expense has been recognized for the Company’sstock option plans and award of options to non-employee directors.

 

***Results ofOperations***

 

The following table sets forth certain information,derived from Summa’s unaudited condensed consolidated statements of operations,as a percent of sales for the three month periods ended November 30, 2002 and2003 and the Company’s effective income tax rate during those periods:

 
|                                                                         |   | **Three months ended  November 30** |   |
|------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                         |   | **2002**                            |   | **2003** |   |
| Net sales                                                                    |   | 100.0                               | %      | 100.0 | % |
| Cost of sales                                                                |   | 74.0                                | %      | 75.4 | % |
|                                                                         |   |                                |   |   |   |
| Gross profit                                                                 |   | 26.0                                | %      | 24.6 | % |
| S, G & A and other expenses, net                                         |   | 18.5                                | %      | 18.6 | % |
|                                                                         |   |                                |   |   |   |
| Operating income                                                             |   | 7.5                                 | %      | 6.0 | % |
| Interest expense, net                                                        |   | 1.4                                 | %      | 1.2 | % |
|                                                                         |   |                                |   |   |   |
| Income before tax and cumulative effect of a change in  accounting principle |   | 6.1                                 | %      | 4.8 | % |
| Provision for income taxes                                                   |   | 2.1                                 | %      | 1.6 | % |
| Income before cumulative effect of a change in accounting  principle         |   | 4.0                                 | %      | 3.2 | % |
|                                                                         |   |                                |   |   |   |
| Effective tax rate                                                           |   | 34.2                                | %      | 33.4 | % |

 

11

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Sales for the first quarter ended November30, 2003 decreased $2,622,000, or 9%, compared to the same period in the prioryear, due to the continuing business downturn, especially in non-residentialconstruction, lower prices and increased international competition, primarilyfrom China. Sales declined $2,523,000, or 16% in the Optical Componentssegment, due to weakness in the non-residential construction market, the lossof some contract manufacturing work to competitors and lower sales of certainpatented products due to increased sales of products deemed by the Company tobe infringing on its intellectual property. Sales declined $413,000, or 13%, in the Electrical Components segment,primarily due to the loss of business from a major customer which transferredits operations to China.  Salesincreased $511,000, or 19%, in the Irrigation Components segment, primarily dueto favorable weather conditions and off-season sales promotions.  Sales declined $229,000, or 43%, in theMiscellaneous Plastic Components segment, primarily due to the loss of acustomer which is now procuring its molded products from China.

 

Gross profit for the firstquarter decreased $1,053,000, or 14%, from the comparable prior year period,primarily due the effects of lower sales volume and inefficiencies related to aplant consolidation.  Gross margindecreased from 26.0% to 24.6% overall, due to lower overhead absorption as aresult of lower sales, unfavorable business mix, and inefficiencies related toa plant consolidation.

 

Operating expenses for thethree months ended November 30, 2003 decreased $445,000, or 8%, from thecomparable prior year period, primarily due to management initiatives and lowervariable selling expenses resulting from lower sales.  As a percentage of sales, operating expenses increased slightlyfrom 18.5% to 18.6%.

 

Operating income decreased$608,000, or 28%, from the comparable prior year period, due to the changesdiscussed above.  By segment, operatingincome decreased $563,000, or 24%, in the Optical Components segment, dueprimarily to lower sales; decreased $351,000, or 69%, in the Material HandlingComponents segment, due to inefficiencies related to a plant consolidation;decreased $10,000, or 7%, in the Electrical Components segment; and was $56,000versus an operating loss of $69,000 in the Irrigation Components segment,primarily due to higher sales.  Theoperating loss decreased $251,000 in the Miscellaneous Plastic Componentssegment, primarily due to management initiatives.  Operating margin for the quarter decreased from 7.5% in the firstquarter of fiscal 2003 to 6.0% in the first quarter of fiscal 2004, as a resultof the changes in gross margin and operating expenses discussed above.

 

Net interest expense forthe first quarter ended November 30, 2003 decreased $100,000 from the prioryear first quarter, due to decreased average debt levels and decreased interestrates.

 

The decrease in the effective tax rate in thefirst quarter of fiscal 2004 versus fiscal 2003, from 34.2% to 33.4%, wasprimarily due to a favorable change in the distribution of earnings amongvarious tax jurisdictions.

 

The Company’s backlog ofunfilled orders, believed to be firm, was $8,594,000 at November 30, 2002;$7,892,000 at August 31, 2003 and $7,699,000 at November 30, 2003.  Because the time between entering an orderand shipping the product and recording a sale is typically shorter than onemonth, backlog levels are not a reliable indicator of future sales volume.

 

***Liquidity andCapital Resources***

 

*WorkingCapital. *TheCompany’s working capital was $18,156,000 at November 30, 2002; $16,251,000 atAugust 31, 2003 and $18,135,000 at November 30, 2003.

 

*FinancingArrangements.* The Company 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 debtat November 30, 2003:

 
|                        |   |        |       | **Weighted  Average  Interest  Rate** |   | **Additional  Availability** |   |       |   |      |      |      |   |      |   |                     |      |
|-----------------------------|--------|-------------|------------|---------------------------------------|--------|------------------------------|--------|------------|--------|-----------|-----------|-----------|--------|-----------|--------|--------------------------|-----------|
| **Description of Debt**     |   | **Balance** |       |                                  |   | **Fiscal Year Due**          |   |
|                        |   |        |       |                                  |   |                         |   | **2004**   |   | **2005**  |      | **2006**  |   | **2007**  |   | **2008 and  thereafter** |      |
|                        |   |        |       |                                  |   |                         |   |       |   |      |      |      |   |      |   |                     |      |
| Revolving line of credit    |   | $           | 5,634,000  |                                  | 3.5    | %                            | $      | 11,353,000 |   | $         | —    |      | $      | 5,634,000 |   | $                        | —    |   | $ | — |   | $ | — |   |
| Bank term loan              |   | 4,907,000   |       | 8.9                                   | %      | —                       |   | 1,920,000  |   | 2,560,000 |      | 427,000   |   | —    |   | —                   |      |
| Real estate and other loans |   | 9,154,000   |       | 3.5                                   | %      | —                       |   | 711,000    |   | 911,000   |      | 3,778,000 |   | 3,413,000 |   | 341,000                  |      |
|                        |   |        |       |                                  |   |                         |   |       |   |      |      |      |   |      |   |                     |      |
| Total debt                  |   | $           | 19,695,000 |                                  | 4.9    | %                            | $      | 11,353,000 |   | $         | 2,631,000 |      | $      | 9,105,000 |   | $                        | 4,205,000 |   | $ | 3,413,000 |   | $ | 341,000 |   |

 

The interest rate on the bank term loan is fixed for two years.  Interest rates on the bank line of creditare subject to market fluctuation and are subject to reduction as the Companyachieves certain financial milestones. Interest rates on most of the real estate and other loans are subject tomarket fluctuation.

 

In June 2003, the Companyannounced a plan to repurchase up to $2,000,000 of its common stock with notime limit (the “2003 Buy Back”).  As ofNovember 30, 2003, the status of the plan was as follows:

 
|                      |   | **2003 Buy Back**       |   |                        |   |
|---------------------------|--------|-------------------------|--------|-----------------------------|--------|
|                      |   | **Shares  repurchased** |   | **Average  cost per share** |   | **Repurchase  cost** |   |
|                      |   |                    |   |                        |   |   |   |
| Prior to  September 2003  |   | 5,300                   |   | $                           | 7.15   |   | $ | 38,000 |   |
| September 2003            |   | 47                      |   | $                           | 7.41   |   |   |   |
| October 2003              |   | —                  |   | —                      |   | — |   |
| November 2003             |   | —                  |   | —                      |   | — |   |
| Total                     |   | 5,347                   |   | $                           | 7.15   |   | $ | 38,000 |   |
|                      |   |                    |   |                        |   |   |   |
| Available for  repurchase |   |                    |   |                        |   | $ | 1,962,000 |   |

 

The cost per shareincludes commissions where applicable. All share repurchases in the reported period were made pursuant to the2003 Buy Back.

 

Net cash provided byoperating activities in the first three months of fiscal 2004 was $873,000,$612,000 less than in the first three months of fiscal 2003, primarily due tolower income before a non-cash charge for a cumulative effect of a change inaccounting principle.  Net cash used ininvesting activities was $675,000 in the first quarter of fiscal 2004, $339,000less than in the first quarter of fiscal 2003, primarily due to timing in thepurchase of property and equipment.  $281,000in cash was used in financing activities in the first quarter of fiscal 2004,versus $9,000 provided in the first quarter of fiscal 2003, primarily due toincreased net reduction of debt.

 

Summa believes that cashflows from operations and existing credit facilities will be sufficient to fundworking capital requirements, planned investments and debt service for the nexttwelve months.  The Company has astrategy 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 of common stock authorized, of which4,317,492 shares were outstanding at November 30, 2003 and 5,000,000 shares of“blank check” preferred stock authorized, of which 5,000 shares wereoutstanding as mandatorily redeemable convertible preferred stock at November30, 2003.  The Company could issue additionalshares of common or preferred stock or enter into new or revised borrowingarrangements to raise funds.

 

13

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***Off-Balance Sheet Arrangements***

 

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

 

*Future leasepayments.*  TheCompany leases offices and manufacturing facilities and certain equipment undernon-cancelable operating leases.  Futurepayments under these leases at November 30, 2003 are approximately as follows:

 
| **Fiscal Year**      |   | **Amount** |      |
|----------------------|--------|------------|-----------|
| 2004                 |   | $          | 1,217,000 |   |
| 2005                 |   | $          | 961,000   |   |
| 2006                 |   | $          | 746,000   |   |
| 2007                 |   | $          | 496,000   |   |
| 2008                 |   | $          | 451,000   |   |
| 2009 and  thereafter |   | $          | 421,000   |   |

 

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

 

*Contingent preferredstock redemption obligation.*  In December 2001, in order to finance an acquisition, reduceoutstanding debt and strengthen the Company’s financial position, the Companyissued and sold 5,000 shares of newly-authorized Series A Preferred Stock (the“Preferred Stock”) in a private sale for an aggregate purchase price of$5,000,000.  The terms of the PreferredStock were negotiated at arms length, including (i) non-voting, (ii) nodividend, (iii) liquidation preference, (iv) convertible into an aggregate of625,000 shares of common stock, (v) redeemable by the holder’s electioncommencing on the third anniversary of the date of issuance and endingimmediately prior to the fourth anniversary at a price which equals a twelvepercent annual increase over the original issuance price in cash, subject toadjustment, (vi) redeemable at the Company’s option commencing on the fourthanniversary of the date of issuance and ending immediately prior to the fifthanniversary at a price which equals a twenty percent annual increase over theoriginal issuance price in cash, subject to adjustment, and (vii) ifoutstanding, redeemable on the fifth anniversary of the date of issuance by theCompany at the original issuance price, subject to adjustment.  If redemption is elected by the holder ofthe Preferred Stock during the one-year time period referenced above, thecontingent preferred stock redemption obligation would require the Company topay an aggregate price which increases daily from $7,025,000 on December 14,2004 to $7,868,000 on December 13, 2005. For related disclosure regarding accretion of the preferred stock to itsredemption value, see Note 4 in the “Notes to Condensed Consolidated FinancialStatements” above.

 

**QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

Except for the outstanding debt and related variableinterest rates set forth in “Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Liquidity and Capital Resources” above,there are no material changes to the disclosure set forth in Item 7A of theCompany’s Annual Report on Form 10-K for the fiscal year ended August 31,2003.  The Company has no market risksensitive instruments entered into for trading purposes.

 

**EFFECTIVENESS OF DISCLOSURE CONTROLS ANDPROCEDURES**

 

As of the end of the period covered by this report,the Company carried out an evaluation, under the supervision and with theparticipation of the Company’s management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedurespursuant to Exchange Act Rules 13a — 14 and 13a-15.  Based upon that evaluation, the Chief Executive Officer and ChiefFinancial Officer concluded that the Company’s disclosure controls and proceduresare effective.  There were nosignificant changes in the Company’s internal controls that could significantlyaffect these controls subsequent to the date of their evaluation.

 

**PART II - OTHER INFORMATION**

 

### ***Item 1.  LegalProceedings***

 

The Company encounters lawsuits from time to time in the ordinarycourse of business and, at November 30, 2003, the Company and/or its affiliateswere parties to several civil lawsuits. Summa does not expect that theresolution 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,

 

14

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and such claims could be filed in the future.  The Company has filed several lawsuits in U.S. District Courtagainst unrelated third parties for infringement of a patent and trade dressowned by a Company subsidiary, and the Company may file additional infringementand/or other types of lawsuits in the future which may result in materiallyincreased costs and other adverse consequences.  Any costs and/or losses that Summa may suffer from such lawsuits,and the effect such litigation may have upon the reputation and marketabilityof Summa’s products, could have a material adverse impact on the future resultsof operations, financial condition and/or prospects of the Company.

###### * *

###### ***Item 2.  Changes in Securities and Use of Proceeds***

 

None.

 

#### ***Item 3.  Defaultsupon Senior Securities***

 

None.

 

***Item 4. Submission of Matters to a Vote of Security Holders***

 

None.

 

***Item 5.  Other Information***

 

None.

 

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

 

**(a)****           Exhibits**

 

31.1  Section 302 Certification

32.1  Section 906 Certification

 

**(b)****           CurrentReports on Form 8-K**

 

Form 8-K dated October 8, 2003 regarding the Company’s results ofoperations and financial condition for the fiscal fourth quarter and fiscalyear ended August 31, 2003

 

**SIGNATURES**

 

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized onJanuary 7, 2004.

 

**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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