Fast-growing Summa Industries is fine-tuning its operations, looking for higher visibility with resin suppliers and scoping out more expansion opportunities.
Through major acquisitions since late 1996, Summa's annual sales rate has grown to a pro forma $88.4 million from $12.7 million. Now, the tweaking involves eight plants operating in California, Michigan, Tennessee and Florida.
And Torrance, Calif.-based Summa, which employs 625, continues to look for acquisitions.
``We think Summa is an excellent vehicle for the change of ownership of a private company where shareholders are looking to sell or diversify holdings,'' James Swartwout, chairman and chief executive officer, said in a telephone interview.
Two analysts discussed Summa.
``My sense [is that Summa has] a well-defined financial plan that will allow [Swartwout] to grow the business in a pretty dramatic fashion,'' said Pete Castellanos, senior vice president in Santa Barbara, Calif., for Cruttenden Roth Inc.
``The stock is clearly undiscovered by the investment community,'' Mark Koprucki said in an Oct. 31 report. ``We expect 70 percent share price appreciation within the next 12-18 months.''
Koprucki is vice president and research director with the equity capital markets group of Ohio Co. in Columbus, Ohio.
Summa common stock closed at $10 in Nov. 24 trading on the Nasdaq National Market.
On Oct. 28, Summa acquired Calnetics Corp. for $22.3 million in cash and assumption of $1.8 million in debt.
In November 1996, Summa acquired LexaLite International Corp. for shares that approximated 58 percent of Summa's stock outstanding immediately after the merger.
KVP Systems Inc. was acquired in 1993, and GST Industries Inc. in 1991. All fit Swartwout's approach to ``grow by acquiring businesses with strong market positions by virtue of proprietary products.''
``Most of our companies make injection molded plastic parts,'' Swartwout said, but ``we focus on products rather than that they are injection molded. We don't define ourselves as injection molders, but in terms of customers.''
Six operating units serve various industrial markets.
``I think that is a positive attribute for cyclical reasons [because it is] unlikely they would all soften at the same time,'' Swartwout said.
Some end uses involve lighting fixture components, agricultural irrigation systems, food-processing operations and electronics.
In financing the Calnetics deal, Summa increased debt to $27.9 million from $5.6 million, using a major new financing relationship that also put in place capital for future expansion. Summa's debt-to-equity ratio is 1.25:1, but Swartwout expects cash generation from operations to result in a 1:1 ratio within six months.
Clinton G. Gerlach retired as Calnetics chairman and president. He invested in the company in 1988 and held about 40 percent of Calnetics' stock prior to the transfer of ownership to Summa.
Some new Summa employees had participated in a Calnetics stock plan. They received replacement options for 346,000 shares of Summa common stock at an average exercise price of $3.77. Summa has 4.1 million shares outstanding.
Summa reported profit of $2.3 million on sales of $43.2 million for the fiscal year ended Aug. 31.
Calnetics reported profit of $2 million on sales of $36.6 million for the fiscal year ended June 30. For now, interest charges on the borrowed funds and goodwill amortization will limit the bottom-line contribution of Calnetics' operations to Summa's profit.