SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 3, 1995
[ ] Transaction Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
Commission File No. 1-9440
HARROW INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1499075
(State of Incorporation) (I.R.S. Employer Identification No.)
2627 East Beltline, S.E., Grand Rapids, MI 49546
Registrant's telephone number, including area code
(616) 942-1440
Securities registered pursuant to Section 12(b) of the Act:
$65,000,000 12-3/8% Senior Subordinated Debentures due 2002
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months with the Commission and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
<PAGE>
ITEM 1. BUSINESS
General
Through its subsidiaries and divisions, Harrow designs, manufactures
and markets a wide variety of products primarily for the consumer, home
remodeling, commercial retrofit, new residential and commercial construction,
access control, and time and attendance markets. The Company's major
products include consumer and architectural hardware, custom residential
cabinetry, water source heat pumps, electronic locking systems, biometric
identification devices, as well as professional and consumer pruning and
harvesting hand tools.
Harrow's business is affected by various general economic
conditions, including the rate of new construction, which is related to
the availability and cost of financing and other economic conditions.
Management's strategy has been to limit Harrow's sensitivity to changes
in the economy by maintaining a diversified product base and emphasizing
the development of products marketed to the commercial and home remodeling
and do-it-yourself markets, which management believes have historically been
less sensitive to economic downturns. There can be no assurances, however,
that a significant decline in the rate of new construction would not have
a material adverse effect on Harrow's business.
Some of Harrow's operations have seasonal characteristics. This
generally produces lower results in Harrow's first and third fiscal quarters
than in the second and fourth quarters. Since most of its operations are
driven by orders received throughout the year, backlog is not a significant
factor to Harrow's overall business. The largest customer of Harrow, served
by two unrelated divisions, accounts for approximately 8% of consolidated
net sales. No other customer accounts for 5% or more of consolidated sales.
Segment Information
Harrow currently operates in two industry segments, Consumer
Products Group and the Commercial and Industrial Products Group.
Principal products of the Consumer Products Group include consumer
hardware, pruning shears, custom kitchen and other cabinetry and water source
heat pumps.
Principal products of the Commercial and Industrial Products Group
include architectural and commercial hardware, electronic locking systems,
biometric identification devices and professional pruning and harvesting
tools.
Information concerning sales, operating profits and identifiable
assets, and certain other information by industry segment is found in Note N
to the Consolidated Financial Statements.
In accordance with management's philosophy that Harrow's operations
be <PAGE> decentralized and its subsidiaries and divisions be granted
significant autonomy, most aspects of the operations, including purchasing,
engineering, manufacturing and marketing are conducted locally. Management
believes that this philosophy permits its various businesses to respond more
quickly to, and operate more effectively in the markets they serve. Following
is a description of the businesses operating in each of the two industry
segments.
Consumer Products Group
H.B. Ives
H.B. Ives ("Ives"), Harrow's largest operation is headquartered in
Wallingford, Connecticut with manufacturing and distribution facilities in
New Haven, Connecticut, Michigan City, Indiana, and a distribution center
in Los Angeles, California. A significant increase or decrease in Ives'
operating performance could have a material effect on Harrow's performance.
Ives is a vertically integrated manufacturer of a diversified line
of architectural, builder, and consumer hardware including door bolts, window
locks, door trim and door stops. Through a separate operation, Ives also
manufactures wire products and storage hooks.
Sales to the consumer residential hardware market are direct in the
case of some large customers, and through independent wholesalers to other
customers who are serviced by manufacturers' representatives.
Rutt
Rutt, located in Goodville, Pennsylvania, is a leading manufacturer
of high quality custom kitchens, bath and other cabinetry primarily to the
home renovation markets.
Rutt's cabinetry is made to order and is of such high quality that
Rutt receives, through the efforts of its own sales force, extensive
representation by dealers in affluent residential areas of the country. Rutt
currently has products on display in over 130 authorized dealer locations.
Approximately 80% of Rutt's sales are to the home renovation market.
Rutt is perceived to be the quality leader in the custom residential
cabinet market.
FHP Manufacturing
FHP Manufacturing ("FHP"), located in Fort Lauderdale, Florida, is
one of the largest manufacturers of water source heat pumps in the United
States. These units are sold throughout North America under the trade name
of Florida Heat Pump.
FHP is a leader in heating and cooling technology that uses the
energy available in natural water supplies. Tests show that FHP units can
save from 30% to 50% of the energy used by conventional units, which offsets
the higher capital and installation costs of FHP equipment for customers with
certain levels of heating and cooling requirements.
<PAGE>
FHP sells through manufacturers' representatives to large mechanical
contractors and through multi-branch stocking distributors who in turn sell
to smaller dealers. FHP acts as its own distributor in southern Florida.
Corona Clipper
Corona Clipper, located in Corona, California, designs, manufactures
and distributes forged and stamped pruning and harvesting tools, shears, saws
and other hand-held gardening tools for homeowners and nurseries.
Corona sells to the retail market through a combination of in-house
salespeople and manufacturers' representatives.
Corona's customers include mass merchandisers, home improvement
centers, hardware chains and various lawn and garden distributors.
Commercial and Industrial Products Group
H.B. Ives
Ives manufactures a broad line of commercial hardware including door
coordinators, exterior door hardware, door stops, surface bolts, and cabinet
and bath hardware. Through a separate operation, Ives manufactures wire
products and storage hooks.
Ives sells to the contractor hardware market through distributor
serviced by its own sales force.
Corona Clipper
Corona Clipper designs, manufactures and distributes a line of
high quality professional pruning and harvesting tools for agricultural
applications in the grape, avocado and apple industries as well as to
distributors that service professional landscapers.
The professional market for pruning tools is served by Corona
Clipper through a combination of in-house salespeople and manufacturers'
representatives.
Locknetics Security Engineering
Locknetics Security Engineering ("LSE") located in Forestville,
Connecticut, designs, manufactures and distributes electronic locking systems
including electromagnetic and electromechanical security products and systems
primarily for security system wholesalers, contract hardware, locksmith
dealers, alarm wholesalers and automatic door operator manufacturers. LSE
products are sold through its own sales force and manufacturers'
representatives.
<PAGE>
Recognition Systems, Inc.
Recognition Systems, Inc. ("RSI"), acquired as of the beginning of
fiscal 1995, is located in Campbell, California and was founded in 1986 with
a charter to develop, manufacture and market biometric identification devices
based upon the measurement of three dimensional hand geometry by using a
sophisticated combination of infrared cameras, electronic circuitry and
associated algorithms.
RSI sells its products into three markets - access control, time
and attendance and personal identification - through a nationwide network of
sales representative agencies. International sales are made to authorized
country distributors who resell within their territories.
Employees
As of January 2, 1996, Harrow employed 1,142 employees, including
907 in production (management and hourly), 101 in marketing and sales, and
134 in finance and administration. During the year, hourly production
employees can increase by as many as 60 employees, depending on seasonal
workloads in some Harrow plants.
Harrow provides benefit plans offering life, health and disability
insurance and pension benefits to eligible employees. In some instances,
employees contribute to the plans.
ITEM 2. PROPERTIES
The following table sets forth the facilities of Harrow, excluding
public warehouse space, by location and operation. Each location (except
the facilities designated as warehouses and sales showrooms) include
administrative offices:
Owned Leased
Division/Subsidiary (Square Ft.) (Square Ft.) Use
[S] [C] [C] [C]
Grand Rapids, MI -- 4,264(1) Corporate Offices.
New Haven, CT
(H.B. Ives) 100,000 -- Manufacture of builder
and consumer hardware,
warehouse and shipping
facilities.
Wallingford, CT
(H.B. Ives) -- 46,700(1) Sales office and
warehouse and shipping
facilities.
Michigan City, IN
(H.B. Ives) 69,000 -- Manufacture of wire
hardware, warehouse and
shipping facilities.
Forestville, CT
(LSE) -- 30,000(1) Manufacture of
electronic locking
systems and accessories,
warehouse and shipping
facilities.
<PAGE>
Goodville, PA
(Rutt) 174,843 -- Manufacture of custom
cabinetry, warehouse
and shipping facilities.
Earland, PA
(Rutt) -- 3,840(1) Warehouse and shipping
facilities.
Los Angeles, CA
(Rutt) -- 2,668(1) Sales showroom sublet
to independent dealer.
Atlanta, GA
(Rutt) -- 1,958(1) Sales showroom sublet
to independent dealer.
Chicago, IL
(Rutt) -- 2,860(1) Sales showroom sublet
to independent dealer.
Fort Lauderdale, FL
(FHP) 63,600 -- Manufacture of heat
pumps, warehouse and
shipping facilities.
Corona, CA
(Corona Clipper) 73,000 -- Manufacture of pruning
tools and other forged
products, warehouse and
shipping facilities.
Campbell, CA
(RSI) -- 13,694(1) Manufacture of biometric
identification devices,
warehouse and shipping
facilities.
(1) Lease Terms:
Grand Rapids, MI--Annual Rental $60,679--expiration August 31, 1996.
Wallingford, CT--Annual Rental $252,180--expiration December 31, 2002.
Forestville, CT--Annual Rental $183,000--expiration May 31, 2008.
Earland, PA--Annual Rental $13,094--expiration December 31, 1996.
Los Angeles, CA--Annual Rental $62,253--expiration March 31, 2005;
Sub-lease Rental $62,253--expiration March 31, 2005.
Atlanta, GA--Annual Rental $36,877--expiration April 30, 2000;
Sub-lease Rental $36,877--expiration April 30, 2000.
Chicago, IL--Annual Rental $68,411--expiration November 30, 2005;
Sub-lease Rental $68,411--expiration November 30, 2005.
Campbell, CA--Annual Rental $115,030--expiration September 30, 1998.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in proceedings with respect to environmental
matters including sites where the Company has been identified as a
potentially responsible party under federal and state environmental laws
and regulations. While it is not possible to quantify with certainty the
potential impact of actions regarding environmental matters, particularly
any future remediation and other compliance efforts, in the opinion of
management, compliance with the present environmental protection laws will
not have a material adverse effect on the financial condition or competitive
position of the Company. However, the Company's efforts to comply with
increasingly stringent environmental regulations may have an adverse effect
on the Company's future earnings.
Provisions of $428,000 in 1995, $484,000 in 1994 and $121,000 in
1993 were recorded to cover the costs of remedial actions expected to be
taken with respect to the cleanup of these sites. As of December 3, 1995,
the remaining recorded liability related to these issues totaled $448,000,
of which $250,000 was provided to cover estimated remediation costs of a
former plant site. Annual remediation costs for this site currently
approximate $75,000, and remediation is expected to be completed in as few
as three years or as many as twenty years.
The Company is also subject to legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of management,
the amount of ultimate liability with respect to these actions will not
materially affect the consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is not registered nor is it publicly
traded. See Item 12 for information concerning the distribution of ownership
of the Company's common stock.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Fiscal Year Ended (1)
December 3, November 27, November 29, November 28, December 1,
1995 1994 1993 1992 1991
(Thousands of Dollars, Except Per Share Data and Ratios)
<S> <C> <C> <C> <C> <C>
Statement of
operations data
from continuing
operations:
Net sales $134,657 $139,393 $128,823 $124,679 $118,755
Operating income 10,989 8,759 6,636 7,203 6,129
Interest expense 6,617 6,313 6,488 6,788 7,503
Other expenses
(income)--net (223) (145) (34) (58) (237)
Earnings (loss)
from continuing
operations
before income
taxes 4,595 2,591 182 473 (1,137)
Earnings (loss)
from continuing
operations 3,403 1,615 (226) 205 (1,311)
Earnings (loss)
from continuing
operations per
share of common
stock (2) 2.91 1.29 (.41) .01 (1.51)
Ratio of earnings
to fixed
charges (3) 1.63x 1.37x 1.03x 1.06x .86x
Balance sheet data:
Total assets $ 68,989 $ 61,378 $ 58,622 $ 59,143 $ 64,132
Long-term debt
and other
noncurrent
liabilities (4) 52,510 50,337 50,088 51,132 56,168
Stockholders'
equity
(deficit) (5) (399) (3,730) (5,122) (4,701) (4,467)
(1) Fiscal 1995 includes 53 weeks; all other fiscal years shown include 52
weeks.
(2) Earnings per share of common stock are calculated based on an average
outstanding shares of 1,100,000 in 1995; 1,096,671 in 1994, 1,043,340
in 1993 and 999,994 in 1992 and 1991.
(3) Earnings used in computing the ratio of earnings to fixed charges
consist of pretax earnings (loss) from continuing operations before
fixed charges. Fixed charges consist of interest expense, amortization
of deferred financing costs and the interest portion of rental expense.
In 1991, pretax earnings before fixed charges were inadequate to cover
fixed charges by $1,137,000.
(4) Includes current maturities of long-term debt and capital lease
obligations.
(5) Includes the effects of the restructuring transactions which occurred
in 1987, as described in Note L to the Consolidated Financial Statements.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's cash requirements relate primarily to the seasonal
financing of working capital, the purchase of property, plant and equipment,
business acquisition opportunities, the servicing of outstanding debt and
cash dividends. Cash provided by operating activities continues to be the
major source of the Company's funds and is expected to satisfy a substantial
portion of future cash needs. These funds have been augmented by long-term
debt under a revolving credit agreement.
Cash provided by operating activities totaled $6.4 million in 1995
as compared to $3.2 million in 1994 and $4.5 million in 1993. The improvement
in cash flow resulting from increased earnings approximated $1.8 million in
both 1995 and 1994. Increased investment in accounts receivable and inventory
resulting from growth in the Company's businesses partially offset these cash
flow improvements. Working capital at December 3, 1995 was $13.3 million
compared to $16.5 million at the end of fiscal 1994. The Company's current
ratio of 1.8 to 1 at the end of 1995 declined slightly from 2.1 to 1 at the
end of 1994.
Capital expenditures were $3.6 million in 1995, $4.3 million in
1994 and $2.1 million in 1993. The expenditures were primarily for cost
reduction, replacement and capacity expansion. Capital additions for 1996
are expected to approximate $5.0 million and will be primarily for profit
improvement, replacement, capacity expansion and new products.
On January 4, 1995, the Company purchased all of the common stock
of Recognition Systems, Inc. (RSI) for a cash purchase price (net of cash
acquired) of $9.6 million. The acquisition was financed initially through
borrowings under the revolving credit facility.
On February 6, 1995, the Company completed the sale of substantially
all of the assets of its Leigh Products Division and all of the issued and
outstanding capital stock of its wholly-owned Canadian subsidiary, Leigh
Metal Products, Ltd. The cash generated from the sale approximated $5.4
million after deducting transaction expenses and the amount used to fund
fiscal 1995 losses during the period prior to the sale.
The Senior Subordinated Debentures required annual sinking fund
payments; however, as a result of the repurchase of debentures in 1990 and
1991, no principal maturities are due until 1999.
Under the terms of the revolving credit agreement, the Company can
borrow up to $20 million. During 1995 maximum borrowings under the agreement
were $12.4 million and, as of year end, outstanding borrowings were $1.4
million and the available unused credit under the asset-based limitation
formula of the agreement approximated $12.2 million.
<PAGE>
Effects of Inflation
The Company believes inflation has not had a material overall
effect on its operations during the past three years.
Results of Operations - 1995 Compared to 1994
The comparability of operating results is affected by the
acquisition of Recognition Systems, Inc. (RSI) (see Note B to the consolidated
financial statements) and the sale of Leigh businesses (see Note C).
Operating results of the Leigh businesses are included in consolidated
results for 1994 and, except for the gain on the sale, excluded from 1995
consolidated results. Operating results of RSI are included in consolidated
results effective as of the beginning of fiscal 1995.
Consolidated net sales decreased from $139.4 million in 1994 to
$134.7 million in 1995. Net sales for the consumer products segment decreased
from $95.9 million to $82.2 million. However, net sales of continuing product
lines (excluding air control and other products related to the Leigh business
from 1994 amounts) increased by $10.5 million or 14.7% in 1995. All consumer
product lines experienced sales increases with custom cabinetry and pruning
tools showing the largest gains. Smaller gains were realized in consumer
hardware and water source heat pumps. Net sales of the commercial and
industrial products segment increased $8.9 million or 20.6% from $43.5
million in 1994 to $52.4 million in 1995 due primarily to increased sales of
commercial security products and the addition of hand reader sales resulting
from the acquisition of RSI. Commercial hardware products and professional
pruning tools contributed modest sales gains.
Gross margin increased from $46.3 million in 1994 to $49.0 million
in 1995. As a percentage of net sales, gross margin increased from 33.2% in
1994 to 36.4% in 1995. The elimination of the lower margin Leigh businesses
combined with the acquisition of RSI contributed significantly to the
improvement in gross margin percentages. Higher sales volume of other
product lines, a favorable workers compensation insurance experience
adjustment, and improved manufacturing efficiencies, particularly for custom
cabinetry and pruning and harvesting tools, also contributed to the gross
margin improvement. Offsetting these factors were aluminum, brass and copper
cost increases which affected builder and consumer hardware gross margins.
Selling, administrative and general expenses increased by 1.1% from
$37.6 million in 1994 to $38.0 million in 1995. As a percentage of net sales,
selling, administrative and general expenses increased from 26.9% in 1994
to 28.2% for 1995. Selling, administrative and general expenses for 1995
decreased by $5.7 million as a result of the sale of the Leigh businesses.
This decrease was more than offset by the addition of RSI expenses,
volume-related increases for all other operations and a provision of $1.0
million to provide for estimated postemployment benefits and certain other
costs related to the Company's former chairman and its former president and
chief executive officer.
<PAGE>
Operating income increased $2.2 million from $8.8 million in 1994
to $11.0 million in 1995. Operating income as a percentage of net sales
improved to 8.2% in 1995 compared to 6.3% in 1994.
Interest expense increased from $6.3 million in 1994 to $6.6 million
in 1995 due primarily to higher average borrowings under the revolving credit
agreement.
Earnings before income taxes was $4.6 million in 1995 compared to
$2.6 million in 1994. The increase of $2.0 million was due primarily to
improved operations offset partially by increased interest expense. A gain
from the sale of the Leigh businesses of $270,000 is included in other income
and also contributed to the increase.
The 1995 provision for income taxes was less than the amount expected
using the statutory federal income rate of 34% due to the tax effects of the
Leigh sale, an adjustment to reduce prior years' estimated liabilities as a
result of the expiration of the statute of limitation for fiscal 1991 and the
realization of certain export incentives. These reductions more than offset
the provision for state income taxes and the tax effect of nondeductible
items (principally goodwill amortization). The Company's effective income
tax rate for 1994 was higher than the statutory rate due primarily to state
income taxes, the effect of nondeductible goodwill amortization and the
inability to utilize foreign net operating losses.
Net earnings were $3.4 million ($2.91 per share) in 1995 compared
to $1.6 million ($1.29 per share) in 1994.
Results of Operations - 1994 Compared to 1993
Net sales increased $10.6 million or 8.2% from $128.8 million in
1993 to $139.4 million in 1994. Net sales for the consumer products segment
increased $5.3 million or 5.8% from $90.6 million in 1993 to $95.9 million in
1994. The increase in net sales was due primarily to higher sales of pruning
and harvesting tools resulting from a remerchandising program introduced in
late 1993 and improved market penetration of the Company's water source heat
pumps. The Company's custom cabinetry operation experienced modest sales
gains while the Leigh and Leigh Metal Products operations experienced
declines. Net sales of the commercial and industrial products segment
increased $5.3 million or 13.8% from $38.2 million in 1993 to $43.5 million
in 1994 primarily due to increased sales of commercial security products and
professional pruning tools. Smaller sales increases in commercial hardware
products were also realized.
Gross margin increased $4.8 million or 10.8% from $41.8 million in
1993 to $46.3 million in 1994. As a percent of net sales, gross profit
increased from 32.4% in 1993 to 33.2% in 1994. The increase in 1994 gross
margin was due to higher volume, modest price increases and improved product
mix with higher margin products generally showing greater sales gains than
lower margin items. These increases were partially offset by higher material
costs. Nonrecurring costs in 1993 related to elimination of low volume
products, the write-off of inventory and related tooling and certain
restructuring activities depressed 1993 margins.
<PAGE>
Selling, administrative and general expenses increased $2.4 million
or 6.8% from $35.2 million in 1993 to $37.6 million in 1994. As a percent of
net sales, selling, administrative and general expenses decreased from 27.2%
in 1993 to 26.9% in 1994. The dollar increase was due to higher employment
costs, commissions, increased sales support activities and higher
environmental costs to complete the remediation at a former plant site.
The reduction in selling, administrative and general expenses as a percent
of net sales was primarily due to the effect of nonrecurring expenses in 1993
related to a complete remerchandising program for both professional and
consumer tools of the Company's Corona Clipper division.
Operating income increased 32.0% from $6.6 million in 1993 to $8.8
million in 1994. Operating income as a percentage of net sales improved to
6.3% in 1994 compared to 5.2% in 1992.
Interest expense decreased 2.7% from $6.5 million in 1993 to $6.3
million in 1994 primarily due to lower average borrowings under the Company's
revolving credit agreement.
Earnings before income taxes was $2.6 million in 1994 compared to
$182,000 in 1993. Theincrease was due primarily to the impact of higher net
sales; however, an improved gross margin percentage, lower selling and
administrative expenses as a percent of net sales and reduced interest costs
also contributed to the increase.
The Company's effective income tax rate for both 1994 and 1993 was
higher than the statutory federal income tax rate due primarily to state
income taxes, the effect of nondeductible goodwill amortization and the
inability to utilize foreign net operating losses.
Net earnings was $1.6 million ($1.29 per share) in 1994 compared to
a net loss of $226,000 ($0.41 per share) in 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of Harrow Industries, Inc. and
subsidiaries as of December 3, 1995 and November 27, 1994, and the related
consolidated statements of stockholders' equity, operations and cash flows
for each of the three fiscal years in the period ended December 3, 1995, and
the notes thereto, are included with the financial statement schedules in a
separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
The following table sets forth certain information regarding the
executive officers and directors of the Company. Officers serve at the
pleasure of the Board of Directors. Directors serve until the election and
qualification of their successors.
Name Age Position
<S> <C> <C>
Dudley C. Mecum (1) 61 Chairman, Chief Executive Officer,
Interim President and Director
George L. Ohrstrom, Jr. (1) 68 Vice President and Director
John S. Hogan 41 Vice President, Chief Financial Officer
and Treasurer
Gary L. Humphreys 53 Vice President and Corporate Controller
Donald D. Fenstermacher 54 Vice President of Management Information
Services
Betsy F. Raymond 37 Vice President of Human Resources and
Secretary
Robert A. Hoagland 57 President of H.B. Ives
Jerry D. Price 49 President of Rutt
Clifford A. Young, Jr. 53 President of FHP Manufacturing
James J. Scott 43 President of Locknetics Security
Engineering
James C. McGovern 53 President of Corona Clipper
Charles T. Thompson 52 President of Recognition Systems, Inc.
W. Lawrence Banks (1) (2) 57 Director
David H. Benson 58 Director
Donald G. Calder (1) 58 Director
Axel May 47 Director
George F. Ohrstrom (1) (2) 42 Director
Georg Graf Schall-
Riaucour (3) 55 Director
Eriberto R. Scocimara 59 Director
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Chairman of Audit Committee.
</TABLE>
<PAGE>
Dudley C. Mecum was appointed as a Director of the Company on
January 25, 1995. Mr. Mecum has been a partner of G.L. Ohrstrom & Co. since
August 1989. Prior thereto, he was the chairman of Mecum Associates, Inc.,
a business consulting firm, from January 1987 to August 1989. Mr. Mecum
is a director of Travelers, Inc., Lyondell Petrochemical Company, Vicorp
Restaurants, Inc., Fingerhut Companies, Inc., DynCorp. and Roper Industries,
Inc. Mr. Mecum was appointed Chairman of the Board and Interim President of
the Company effective November 2, 1995.
George L. Ohrstrom, Jr. has been a director and a Vice President of
Harrow or its predecessor since 1962. He has been a partner at G.L. Ohrstrom
& Co. since 1962 and devotes a substantial amount of his time in connection
therewith. He is a director of Carlisle Companies Incorporated and Roper
Industries. Mr. Ohrstrom is the father of George F. Ohrstrom.
John S. Hogan was appointed Vice President and Chief Financial
Officer in January 1990 and has been Treasurer of Harrow since January 1987.
From 1979 to January 1987 he was Corporate Accounting Manager of Harrow or
its predecessor. Prior to joining Harrow he had been on the audit staff of
Ernst & Young LLP, the Company's independent accountants.
Gary L. Humphreys joined Harrow in October 1994 as Vice President
and Corporate Controller. Mr. Humphreys was a partner of Ernst & Young LLP,
the Company's independent accountants, from October 1976 to September 1994.
Donald D. Fenstermacher joined Harrow in June 1984 as Director of
Management Information Services. He was elected Vice President effective
May 1, 1990. Prior to joining Harrow he was the Director of Management
Information Services for Keeler Brass Company.
Betsy F. Raymond joined Harrow in June 1991 as Vice President of
Human Resources and Assistant Corporate Secretary and was elected Corporate
Secretary effective February 1, 1992. Prior to joining Harrow, she was Human
Resource Director of a large office equipment dealer.
Robert A. Hoagland joined Harrow as President of H.B. Ives on
January 1, 1991. Prior to joining Harrow he was President and Chief Executive
Officer of the Thermos Companies' domestic operations.
Jerry D. Price joined Harrow as President of Rutt effective in July
1993. Prior to joining Harrow he was group Vice President of Manufacturing
for TJ International and Executive Vice President-Operations for Biltbest
Windows.
Clifford A. Young, Jr. has been President of FHP since 1971.
James J. Scott has been President of Locknetics Security Engineering
since November 1989.
<PAGE>
James C. McGovern joined Harrow as President of Corona Clipper on
May 20, 1992. Prior to joining Harrow he was President of Aluminum Forge
Company.
Charles T. Thompson joined Harrow on October 20, 1995 as General
Manager of Recognition Systems, Inc. (RSI). He was appointed President of
RSI on January 1, 1996. Prior to joining Harrow he was Chief Operating
Officer of City Net, Inc. and President of DuPont Design Technologies, Inc.
W. Lawrence Banks has served as a director of Harrow since 1980.
He has been a director of Robert Fleming Holdings Limited, an English
merchant banking firm, for more than five years. He is also a director
of Roper Industries.
David H. Benson has served as a director of Harrow since 1980. He
is a merchant banker at Kleinwort Benson Limited, an English merchant banking
firm.
Donald G. Calder has been a director since 1972 and a Vice President
of Harrow or its predecessor from 1972 through August 1989. Mr. Calder has
been a partner at G.L. Ohrstrom & Co. since 1970 and devotes a substantial
amount of his time in connection therewith. He is a director of Carlisle
Companies Incorporated, Central Securities Corporation and Roper Industries.
Axel May has been a director of Harrow since June 1987. Since 1980
he has been managing director of Harald Quandt Vermoegensverwaltung GmbH, a
private investment company, in Bad Homburg, Federal Republic of Germany.
George F. Ohrstrom has been a director of Harrow since 1986. From
1983 to 1987, he was an associate at Bear, Stearns & Co., Inc. Since
December 1987, he has been a partner of G.L. Ohrstrom & Co.
Georg Graf Schall-Riaucour was appointed by the Board of Directors
on January 25, 1995, to a new Director position. He has been general manager
of Wittelsbacher Ausgleichsfonds since May 1994, prior to which, since 1971
he was senior partner of the Munich, Germany law firm of Stever & Belten.
Mr. Schall-Riacour is director of Roper Industries, Inc. and several
privately held U.S. companies.
Eriberto R. Scocimara has been a director of Harrow or its
predecessor since 1972. Mr. Scocimara has been president and chief executive
officer of the Hungarian-American Enterprise Fund, a privately-managed
investment company, since April 1994, and he has been the president of
Scocimara & Company, Inc., an investment management company, since 1984.
Mr. Scocimara was a partner of G.L. Ohrstrom & Co. from 1969 to 1984.
Mr. Scocimara is a director of Carlisle Companies, Incorporated, Roper
Industries, Inc., Quaker Fabric Coroporation and several privately owned
companies.
<PAGE>
<TABLE>
<CAPTION>
ITEM 11. SUMMARY COMPENSATION TABLE
The following table sets forth cash compensation earned during the
fiscal year ended December 3, 1995 for the chief executive officer and the
other four most highly compensated executive officers whose aggregate cash
compensation exceeded $100,000.
Annual Compensation Long-Term
Name and Principal Fiscal Year Salary Bonus Compensation*
Position Ended $ $ $
<S> <C> <C> <C> <C>
Dudley C. Mecum
Chairman and CEO 1995 8,000** -
Larry L. Adams
Former President
and CEO 1995 290,000 -
1994 260,000 212,641
1993 250,000 91,172
Philip A. Uzielli
Former Chairman 1995 271,000 -
1994 271,000 221,637
1993 271,000 91,172
Robert A. Hoagland
President of H.B. Ives 1995 165,500 102,362
1994 159,100 119,325
1993 153,500 109,701
Clifford A. Young, Jr.
President of FHP 1995 149,700 127,214 12,280
1994 143,900 122,315 22,766
1993 139,000 108,629 -
John S. Hogan
Vice President & CFO 1995 140,300 100,525 20,743
135,600 94,445 4,103
131,000 40,610 -
*Payments from Long-Term Growth Account were for the purchase of performance
shares under the prior bonus plan. Performance shares were last awarded for
fiscal 1990. Final payments under the prior plan were made in February 1996.
**On November 2, 1995, Dudley C. Mecum became Chairman of the Board of
Directors and Interim President of the Company succeeding Philip A. Uzielli
as Chairman and Larry L. Adams as President. The Board has initiated a search
in order to appoint a permanent successor for the position of President.
</TABLE>
All directors are compensated at $7,500 per annum in their capacity
as directors of the Company. Mr. Banks is compensated an additional $7,500
for his involvement in various committees. Members of the Audit Committee
receive $500 per meeting. The Chairman of the Audit Committee receives $750
per meeting.
<PAGE>
Compensation Plans
Bonus Plan
Harrow maintains an Executive/Middle Management Performance Program
(the "Bonus Plan") in which officers (with the exception of George L.
Ohrstrom) and presidents of divisions and subsidiaries of Harrow designated
by the president of Harrow are eligible. An individual is eligible only if
he is a full-time employee for the full 12 months of the fiscal year covered
by the Bonus Plan.
The Bonus Plan includes an annual (the "Annual Plan") component
and a long-term (the "Long-Term Plan") component. Under the Annual Plan,
participants may earn a cash bonus of up to 55% of base salary, (65% for the
chief executive and operating officers, the "Executive Officers") based
upon a comparison of actual results with financial and nonfinancial goals
established for the year. The incentive to be earned ranges from 16% to 55%
of salary (adjusted proportionately for Executive Officers), if results
equal 85% of established goals to 110% or more of goals.
The Long-Term Plan provides incentive compensation for achievement
of three year objectives. Under the Long-Term Plan participants may earn a
cash bonus of up to 30% of base salary (35% for Executive Officers) based
upon aggregate profitability (60% of total) and individual nonfinancial
strategic objectives (40% of total). The financial portion of the bonus
is based upon a comparison of three year actual results with operating income
targets.
Retirement Plans
Harrow Products, Inc., a subsidiary maintains a retirement plan
(the "Retirement Plan for the Employees of Harrow Products, Inc.") in which
all eligible employees participate. It is a non-contributory, defined benefit
pension plan, under which a participant with a vested benefit receives a
benefit at age 65 equal to 1.075% of Final Average Salary up to covered
compensation, plus 1.7% of Final Average salary in excess of covered
compensation, times credited service (maximumof 30 years.) "Covered
Compensation" is the average of 35 years of Social Security wage bases
ending in the year of Social Security Retirement age. "Final Average Salary"
means salary excluding bonuses, overtime or any other additional or
non-recuring compensation and is computed using the highest 60 of the
last 120 months of service prior to retirement, or age 65, whichever is
earlier. Credited Service starts at age 21 and Vesting Service at age 18.
Employees retiring after age 55, but before age 65 receive reduced annual
benefits. Benefits under the HPI Retirement Plan vest after five years of
Vesting Service.
<PAGE>
<TABLE>
<CAPTION>
The table below shows the approximate annual retirement benefits
payable to executive officers for life from normal retirement date (age 65)
pursuant to the Retirement Plan. For purposes of determining the pension
benefits payable under the HPI Retirement Plan, estimated years of Credited
Service at age 65 under the HPI Retirement Plan for the individuals named
in the comensation table are as follows: Mr. Uzielli, 25 years; Mr. Adams,
5 years; Mr. Hogan, 30 years; Mr. Young, 30 years; Mr. Hoagland, 13 years.
Final
Average Years of Service
Earnings* 10 15 20 25 30
<S> <C> <C> <C> <C> <C>
$100,000 $15,400 $23,100 $30,800 $38,500 $46,100
125,000 19,600 29,400 39,300 49,100 58,900
150,000 23,900 35,800 47,800 59,700 71,600
175,000 27,700 41,800 55,900 69,600 84,000
200,000 31,600 47,700 63,900 80,100 96,300
225,000 34,500 52,300 70,200 88,000 105,800
250,000 34,500 52,300 70,200 88,000 **
275,000 34,500 52,300 70,200 88,000 **
300,000 34,500 52,300 70,200 88,000 **
*Earnings used to calculate benefits are capped by the limit described in
Section 401(a)(17) of the Internal Revenue Code; the limit for 1995 is
$150,000.
**Benefit is limited by Section 415 of the Internal Revenue Code; the limit
for 1995 is $120,000.
</TABLE>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
The following tables set forth certain information as to the number
of shares of Harrow common stock beneficially owned as of the date of this
report by each stockholder known to Harrow to own beneficially more than 5%
of the outstanding shares for such common stock, by each director and by all
officers and directors as a group. Except as otherwise indicated, each of
the stockholders named below has sole voting and investment power with
respect to the shares of common stock beneficially owned by him.
Company Common Stock
Number of Shares
Name and Address of Beneficial Owner Beneficially Owned Percentage
<S> <C> <C>
Larry L. Adams
1591 Winterwood Dr. SE
Grand Rapids, MI 49546 60,150 5.47%
Auda Securities GmbH
c/o Harald Quandt
Vermoegensverwaltung GmbH
Harald Quandt Haus
AM Pilgerrain 17
6380 Bad Homburg
Federal Republic of Germany 77,902 (1) 7.08%
Citicorp Venture Capital, Ltd.
153 East 53rd Street
New York, NY 10043 57,429 5.22%
Guarantee Reassurance
Corporation
P.O. Box 550640
Jacksonville, FL 32255 76,642 6.97%
Philip A. Uzielli
c/o Joseph Cooper
1675 Broadway, 16th Floor
New York, NY 10019 108,707 9.88%
W. Lawrence Banks 1,000 *
David H. Benson 1,520 *
Donald G. Calder 22,632 (2) 2.06%
<PAGE>
Gary L. Humphreys 8,000 *
John S. Hogan 33,000 3.00%
Axel May 1,000 *
George F. Ohrstrom 7,761 *
George L. Ohrstrom, Jr. 29,914 (3) 2.72%
Betsy F. Raymond 17,692 1.61%
Georg Graf Schall-Riaucour 51,992 (4) 4.73%
Eriberto R. Scocimara 26,728 (5) 2.43%
All Directors and Officers as a group 244,129 (6) 22.19%
*Less than 1%.
(1) Axel May, a director of the Company, as Managing Director of the holder,
has voting and investment power on these shares, but he declaims any
beneficial interest in these shares.
(2) Does not include total of 28,511 shares owned by his wife and his wife
as custodian for minor children and in which he disclaims any beneficial
ownership.
(3) Includes 613 shares held in a trust of which he is a co-fiduciary sharing
voting and investment powers and in which he disclaims any beneficial
interest.
(4) Shares are owned by Wittelsbacher Ausgleichsfonds of which Mr. Schall-
Riaucour is general director, and as such, is authorized to vote and dispose
of such shares. Mr. Schall-Riaucour disclaims beneficial ownership of all
such shares.
(5) Does not include 10,500 shares owned by his wife, and in which he
disclaims any beneficial ownership.
(6) Does not include shares referred to in Notes (2), (4) or (5).
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
a) 1 and 2. List of Financial Statements and Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a separate
section of this report.
3. Exhibit Index:
Reference is made to the Exhibit Index which is found as a separate
section of this report.
b) Reports on Form 8-K:
The registrant filed a Form 8-K on November 6, 1995 to report under
Item 5 the appointment of Dudley C. Mecum as Chairman of the Board
of Directors and Interim President of the Company succeeding Philip
A. Uzielli as Chairman and Larry L. Adams as President.
c) Exhibits:
Exhibits pertaining to this Form 10-K are submitted as a separate
section of this report.
d) Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a separate
section of this report.
<PAGE>
(THIS PAGE LEFT BLANK INTENTIONALLY.)
<PAGE>
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2)
List of Financial Statements and
Financial Statement Schedules
Financial Statements and Supplementary Data
Financial Statement Schedules
Certain Exhibits
Fiscal Year Ended December 3, 1995
Harrow Industries, Inc. and Subsidiaries
Grand Rapids, Michigan
<PAGE>
Form 10-K - Item 8, Item 14(a)(1) and (2)
Harrow Industries, Inc. and Subsidiaries
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Harrow Industries, Inc.
and subsidiaries are included in Item 8:
- Consolidated balance sheets - December 3, 1995 and November 27, 1994
- Consolidated statements of stockholders' equity (deficit) - Fiscal
years ended December 3, 1995, November 27, 1994 and November 28, 1993
- Consolidated statements of operations - Fiscal years ended December 3,
1995, November 27, 1994, November 28, 1993
- Consolidated statements of cash flows - Fiscal years ended December 3,
1995, November 27, 1994 and November 28, 1993
- Notes to consolidated financial statements - December 3, 1995,
November 27, 1994 and November 28, 1993
The following consolidated financial statement schedule of Harrow
Industries, Inc. and subsidiaries is included in Item 14(d):
- Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
<PAGE>
Report of Independent Auditors
Board of Directors
Harrow Industries, Inc.
We have audited the accompanying consolidated balance sheets of Harrow
Industries, Inc. and subsidiaries as of December 3, 1995 and November 27,
1994, and the related consolidated statements of stockholders' equity
(deficit), operations and cash flows for each of the three fiscal years in
the period ended December 3, 1995. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Harrow Industries, Inc. and subsidiaries at December 3, 1995 and
November 27, 1994, and the consolidated results of their operations and
their cash flows for each of the three fiscal years in the period ended
December 3, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young LLP
Grand Rapids, Michigan
January 12, 1996
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
December 3, November 27,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 676,000 $ 919,000
Accounts receivable, less allowances
(1995-$824,000; 1994-$674,000) 16,453,000 17,484,000
Inventories:
Finished products 3,524,000 3,585,000
Work in process 3,956,000 4,139,000
Raw materials 2,926,000 3,737,000
10,406,000 11,461,000
Deferred income taxes 1,790,000 830,000
Other current assets 831,000 536,000
Total current assets 30,156,000 31,230,000
Property, plant and equipment:
Land 2,312,000 2,552,000
Buildings 11,059,000 12,297,000
Machinery and equipment 25,859,000 26,347,000
39,230,000 41,196,000
Less accumulated depreciation 21,662,000 22,422,000
17,568,000 18,774,000
Other assets:
Intangible assets, less accumulated
amortization (1995-$5,797,000;
1994-$4,985,000) 13,892,000 4,942,000
Prepaid pension costs 6,875,000 5,623,000
Other 498,000 809,000
21,265,000 11,374,000
$68,989,000 $61,378,000
</TABLE>
<PAGE>
<TABLE>
December 3, November 27,
1995 1994
<S> <C> <C>
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $10,454,000 $ 9,482,000
Salaries, wages and commissions 4,953,000 3,936,000
Taxes, other than income taxes 298,000 365,000
Income taxes 410,000 298,000
Accrued interest 763,000 690,000
Total current liabilities 16,878,000 14,771,000
Long-term debt 46,365,000 45,005,000
Other noncurrent liabilities:
Deferred income taxes 5,540,000 4,619,000
Deferred compensation 605,000 713,000
6,145,000 5,332,000
Stockholders' equity (deficit):
Junior preferred stock, par value $0.01
per share - authorized: 470,000 shares;
issued and outstanding: 399,964 shares 4,000 4,000
Common stock, par value $0.01 per share -
authorized, issued and outstanding:
1,100,000 shares 11,000 11,000
Additional paid-in capital 4,006,000 4,006,000
Retained earnings 9,688,000 6,485,000
Accumulated translation adjustments
(deduct) (128,000)
Deficit arising from restructuring
transactions (14,108,000) (14,108,000)
(399,000) (3,730,000)
$68,989,000 $61,378,000
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
Fiscal year ended
December 3, November 27, November 28,
1995 1994 1993
<S> <C> <C> <C>
Junior preferred stock
Balance at beginning and end
of year $ 4,000 $ 4,000 $ 4,000
Common stock
Balance at beginning of year 11,000 11,000 10,000
Issuance of common stock
(1994-13,315 shares;
1993-86,691 shares) -0- 1,000
Balance at end of year 11,000 11,000 11,000
Additional paid-in capital
Balance at beginning of year 4,006,000 3,993,000 3,907,000
Issuance of common stock 13,000 86,000
Balance at end of year 4,006,000 4,006,000 3,993,000
Retained earnings
Balance at beginning of year 6,485,000 5,070,000 5,496,000
Net earnings (loss) 3,403,000 1,615,000 (226,000)
Cash dividends on junior
preferred stock
($0.50 per share) (200,000) (200,000) (200,000)
Balance at end of year 9,688,000 6,485,000 5,070,000
Accumulated translation adjustments
Balance at beginning of year (128,000) (92,000) (10,000)
Sale of foreign subsidiary 128,000
Equity adjustment from foreign
currency translation (36,000) (82,000)
Balance at end of year -0- (128,000) (92,000)
Deficit arising from restructuring
transactions
Balance at beginning and end
of year (14,108,000) (14,108,000) (14,108,000)
Stockholders' equity (deficit)
at end of year $ (399,000) $(3,730,000) $(5,122,000)
( ) Denotes deduction.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
Fiscal year ended
December 3, November 27, November 28,
1995 1994 1993
<S> <C> <C> <C>
Net sales $134,657,000 $139,393,000 $128,823,000
Cost of products sold 85,681,000 93,076,000 87,034,000
Gross margin 48,976,000 46,317,000 41,789,000
Selling, administrative and
general expenses 37,987,000 37,558,000 35,153,000
Operating income 10,989,000 8,759,000 6,636,000
Other expenses (income):
Interest expense 6,617,000 6,313,000 6,488,000
Interest income (20,000) (66,000) (92,000)
Other (203,000) (79,000) 58,000
6,394,000 6,168,000 6,454,000
Earnings before income taxes 4,595,000 2,591,000 182,000
Income taxes 1,192,000 976,000 408,000
Net earnings (loss) $ 3,403,000 $ 1,615,000 $ (226,000)
Earnings (loss) attributable
to common stock $ 3,203,000 $ 1,415,000 $ (426,000)
Net earnings (loss) per share $2.91 $1.29 $(0.41)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Fiscal year ended
December 3, November 27, November 28,
1995 1994 1993
<S> <C> <C> <C>
Operating activities
Net earnings (loss) $ 3,403,000 $ 1,615,000 $ (226,000)
Adjustments necessary to
reconcile net earnings (loss)
to net cash provided by
operating activities:
Depreciation and amortization 3,437,000 3,449,000 3,581,000
Pension income (590,000) (684,000) (779,000)
Deferred income taxes (credit) (799,000) 172,000 296,000
Other (278,000) 206,000 170,000
Changes in operating assets
and liabilities:
Accounts receivable (974,000) (1,233,000) (1,105,000)
Inventories (995,000) (1,686,000) 1,961,000
Other current assets (290,000) 295,000 (364,000)
Accounts payable 2,725,000 480,000 838,000
Other accrued expenses 727,000 635,000 106,000
Net cash provided by operating
activities 6,366,000 3,249,000 4,478,000
Investing activities
Additions to property, plant
and equipment (3,612,000) (4,261,000) (2,050,000)
Purchase of business, less
cash acquired (9,556,000)
Sale of business 5,351,000
Other 53,000 (172,000) 227,000
Net cash used in investing
activities (7,764,000) (4,433,000) (1,823,000)
Financing activities
Proceeds from long-term
borrowings 12,442,000 3,402,000 3,954,000
Payments of long-term debt (11,087,000) (3,402,000) (4,989,000)
Cash dividends on preferred
stock (200,000) (200,000) (200,000)
Issuance of common stock 13,000 87,000
Net cash provided by (used in)
financing activities 1,155,000 (187,000) (1,148,000)
Effect of foreign exchange rate
changes (13,000) (55,000)
Increase (decrease) in cash and
cash equivalents (243,000) (1,384,000) 1,452,000
Cash and cash equivalents at
beginning of year 919,000 2,303,000 851,000
Cash and cash equivalents at end
of year $ 676,000 $ 919,000 $ 2,303,000
( ) Denotes reduction in cash and cash equivalents.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 3, 1995, November 27, 1994 and November 28, 1993
Note A-Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Harrow
Industries, Inc. (the Company) and its wholly owned subsidiaries. Upon
consolidation, all intercompany accounts, transactions and profits are
eliminated.
Fiscal Year
The Company's fiscal year is the 52- or 53-week period ending on the Sunday
nearest the end of November. Fiscal 1995 includes 53 weeks and fiscal 1994
and 1993 include 52 weeks.
Cash Equivalents
Cash and cash equivalents include cash on deposit and amounts due from banks
that mature within 90 days of purchase.
Inventories
The majority of inventories are stated at the lower of last-in, first-out
(LIFO) cost or market (see Note D). The remainder of inventories are valued
using the lower of first-in, first-out (FIFO) cost or market.
Property, Plant and Equipment
Property, plant and equipment are recorded on the basis of cost and include
expenditures for new facilities, major renewals and betterments. Normal
repairs and maintenance are expensed as incurred.
Depreciation of plant and equipment is computed using the straight-line method
over the estimated useful lives of the respective assets.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note A-Summary of Significant Accounting Policies (continued)
Amortization of Intangible Assets
Goodwill (the excess of purchase price over net tangible assets of businesses
acquired) is amortized principally over 20 years using the straight-line
method. Deferred loan issue costs are amortized using the effective interest
method. Other intangible assets are amortized over periods ranging from 5 to
17 years using the straight-line method.
Income Taxes
The provision for income taxes is based on earnings reported in the
consolidated financial statements. A deferred income tax asset or liability
is determined by applying currently enacted tax laws and rates to the
cumulative temporary differences between the carrying value of assets and
liabilities for financial statement and income tax purposes. Deferred income
tax expense is measured by the change in the net deferred income tax asset or
liability during the year.
Earnings Per Share
Earnings per share are computed based on the weighted average number of shares
of common stock outstanding. Net earnings are reduced in the computation by
preferred stock dividend requirements.
Note B-Business Acquisition
Effective as of the beginning of fiscal 1995, the Company acquired all of the
common stock of Recognition Systems, Inc. (RSI) for a net cash purchase price
including related acquisition expenses of $9,556,000. RSI manufactures and
markets biometric identification devices based on the measurement of three-
dimensional hand geometry and had net sales of $3,300,000 in 1994. The
acquisition, which was accounted for under the purchase method, was financed
principally through borrowings under the Company's revolving credit facility
(see Note F). Goodwill and other intangible assets recognized in the
transaction totaled $9,734,000. Pro forma consolidated net earnings for 1994,
assuming the acquisition had occurred as of the beginning of the fiscal
year, would have been $1,450,000 ($1.14 per share).
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note C-Sale of Business
On February 6, 1995, the Company completed the sale of the net assets of its
Leigh business - consisting of the Leigh Products Division in Coopersville,
Michigan and a Canadian subsidiary, Leigh Metal Products, Ltd. - to Milcor
Limited Partnership for net cash proceeds of $5,351,000. Leigh manufactures
specialty sheet metal products for the home remodeling, do-it-yourself and
new residential construction markets. Consolidated net sales include
$24,304,000 in 1994 and $26,218,000 in 1993 related to the Leigh business.
Operating income of the Leigh business was not significant in either year.
Results of operations of the Leigh business for the 1995 period prior to the
sale are included as part of the $270,000 gain recognized on the sale.
Note D-Inventories
Inventories of $9,981,000 at December 3, 1995 and $11,247,000 at November 27,
1994 are stated at cost, determined by the LIFO method. If the FIFO method
had been used, the amounts would have been $3,040,000 and $4,122,000 higher
than reported at December 3, 1995 and November 27, 1994, respectively.
Reductions in inventory quantities during 1993 resulted in the liquidation of
LIFO inventory layers carried at costs prevailing in prior years that were
lower than current costs. The effect of these reductions was to reduce the
net loss in 1993 by $330,000 ($0.32 per share).
Note E-Intangible Assets
<TABLE>
<CAPTION>
Intangible assets consist of the following at December 3, 1995 and
November 27, 1994:
Accumulated
Cost Amortization
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Goodwill $11,784,000 $3,950,000 $1,280,000 $ 985,000
Patents 2,176,000 276,000 353,000 155,000
Deferred loan issue costs 3,145,000 3,141,000 2,179,000 1,953,000
Other 2,584,000 2,560,000 1,985,000 1,892,000
$19,689,000 $9,927,000 $5,797,000 $4,985,000
</TABLE>
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note F-Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following obligations:
December 3, November 27,
1995 1994
<S> <C> <C>
Senior subordinated debentures,
less unaccreted discount $37,975,000 $38,005,000
Junior subordinated debentures 7,000,000 7,000,000
Revolving credit obligation 1,390,000
$46,365,000 $45,005,000
</TABLE>
The senior subordinated debentures are in the principal amount of $37,995,000,
bear interest at 12.375% and mature on April 15, 2002. The debentures may be
redeemed at the option of the Company, in whole or in part, at any time at
par plus accrued interest to the date of redemption. The debentures require
annual sinking fund payments of $6,500,000. Sinking fund payments may be
deferred to the extent that debentures purchased on the open market are
tendered for cancellation. As a result of the repurchase of debentures
principally in 1990 and 1991, no principal maturities are due until 1999,
when a net amount of $5,495,000 is due. The indenture governing the debentures
restricts, among other things, the incurrence of additional senior
indebtedness by both the Company and its subsidiaries, the sale of
substantially all assets to another corporation, and the payment of dividends
on common stock and the redemption of capital stock or junior subordinated
debentures until such time as consolidated stockholders' equity exceeds
$1,000,000.
The junior subordinated debentures, due July 15, 2002, are subordinated, in
right of payment of principal and interest, to the senior subordinated
debentures and bear interest at 14%. The related debenture prohibits the
redemption of capital stock.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note F-Long-Term Debt (continued)
The revolving credit agreement allows for borrowings of up to the lesser of
85% of eligible accounts receivable (as defined) plus 50% of eligible
inventory (as defined) or $20,000,000. The amount available is subject to
various reserve requirements, as established by the lender. As of December 3,
1995, the available unused credit under the agreement approximated
$12,200,000. Borrowings under the agreement are due on April 17, 1997, bear
interest at the lender's prime rate (8.75% at December 3, 1995) plus 1.625%
and are collateralized by accounts receivable, inventories, general intangible
assets and certain real estate. The Company is required to pay an annual fee
equal to 0.5% of the total unused credit available under the agreement. At
the expiration date of the agreement, the Company and the lender may agree
to extend the agreement for successive one-year terms. The terms of the credit
agreement require the Company, among other things, to maintain certain
financial ratios and minimum levels of working capital, cash flow and
tangible net worth. The agreement also restricts the Company's ability to
merge or consolidate, issue additional debt or purchase its common stock. In
addition, the agreement restricts leases, acquisitions, dispositions and
capital expenditures.
Note G-Leases
Certain office, warehouse and showroom space, machinery, motor vehicles and
data processing equipment are leased under various operating lease agreements.
The Company is required to pay real estate taxes and other occupancy costs
under the facility leases.
Future minimum rental payments due under noncancelable leases at December 3,
1995 are as follows: 1996-$1,441,000; 1997-$1,003,000; 1998-$642,000;
1999-$425,000; 2000-$412,000; thereafter-$1,801,000. These minimum obligations
are net of the following sublease rentals related to certain dealer showrooms:
1996-$168,000; 1997-$186,000; 1998-$197,000; 1999-$212,000; 2000-$194,000;
thereafter-$865,000.
Rent expense was $2,126,000 in 1995, $2,060,000 in 1994 and $1,862,000 in
1993. Contingent rentals were not significant in any of these years.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note H-Pension Plan
The Company has a noncontributory, defined benefit pension plan covering
substantially all of its employees. The plan provides benefits that are based
on the employee's years of service and final average earnings (as defined).
The Company intends to annually contribute amounts deemed necessary, if any,
to maintain the plan on a sound actuarial basis.
<TABLE>
The following summarizes the status of the Company's pension assets and
related obligations:
December 3, November 27,
1995 1994
<S> <C> <C>
Pension assets at fair value $35,504,000 $30,612,000
Actuarial present value of accumulated
plan benefits:
Vested 22,511,000 17,027,000
Nonvested 617,000 572,000
23,128,000 17,599,000
Effect of estimated future increases
in compensation 4,473,000 4,103,000
Projected benefit obligation on service
rendered to date 27,601,000 21,702,000
Net pension assets $ 7,903,000 $ 8,910,000
Components of net pension assets:
Prepaid pension costs recognized in
other assets $ 6,875,000 $ 5,623,000
Unrecognized amounts, net of amortization:
Transition assets 2,217,000 2,741,000
Prior service costs (74,000) (168,000)
Net actuarial gains (losses) (1,115,000) 714,000
$ 7,903,000 $ 8,910,000
</TABLE>
The assumed discount rate used in determining the actuarial present value of
the projected benefit obligation was 7.25% at December 3, 1995 and 8.75% at
November 27, 1994. The assumed rate of increase in future compensation used
in the computations was 4% at December 3, 1995 and 4.5% at November 27, 1994.
These changes and the adoption of updated mortality tables increased the
projected benefit obligation at December 3, 1995 by approximately $4,700,000.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note H-Pension Plan (continued)
At December 3, 1995, plan assets were invested in equity securities (58%),
fixed income funds (32%), real estate investments (8%) and cash and cash
equivalents (2%). The expected long-term return on pension assets was 9.5%
for 1993 through 1995.
<TABLE>
<CAPTION>
The following is a summary of net pension income recognized by the Company:
1995 1994 1993
<S> <C> <C> <C>
Service cost pertaining to
benefits earned during the year $ 840,000 $ 969,000 $ 753,000
Interest cost on projected benefit
obligation 1,832,000 1,694,000 1,601,000
Actual net investment income (6,704,000) (334,000) (3,454,000)
Net amortization and deferral 3,442,000 (3,013,000) 321,000
Net pension income $ (590,000) $ (684,000) $ (779,000)
</TABLE>
The Company also recognized a curtailment gain of $662,000 as a result of
terminating employees in connection with the sale of the Leigh business. This
curtailment gain is included in the related gain on sale of the business (see
Note C).
Note I-Junior Preferred Stock
The junior preferred stock is nonvoting and may be redeemed for $10 per share,
at the option of the Company, at any time after the repayment of the junior
subordinated debentures provided that, so long as any senior subordinated
debentures are outstanding, such redemption may only be made with the proceeds
received by the Company from the issuance of equity securities of the Company,
from indebtedness that is junior in right ofpayment to the senior subordinated
debentures or if, after giving effect to such redemptions, consolidated
stockholders' equity exceeds $1,000,000. Annual noncumulative dividends on
the junior preferred stock are $0.50 per share.
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note J-Income Taxes
The provisions for income taxes consist of the following:
1995 1994 1993
<S> <C> <C> <C>
Currently payable:
Federal $1,690,000 $550,000 $ 52,000
State 240,000 165,000 60,000
Canadian 61,000 89,000
1,991,000 804,000 112,000
Deferred (credit):
Federal (748,000) 400,000 220,000
State 6,000 6,000 76,000
Canadian (57,000) (234,000)
(799,000) 172,000 296,000
$1,192,000 $976,000 $408,000
</TABLE>
<TABLE>
<CAPTION>
A reconciliation of the Company's total income tax expense and the amount
computed by applying the statutory federal income tax rate of 34% to earnings
before income taxes is as follows:
1995 1994 1993
<S> <C> <C> <C>
Income taxes at statutory rate $1,562,000 $881,000 $ 62,000
State income taxes, net of
federal income tax reduction 162,000 113,000 89,000
Excess basis in stock of
Canadian subsidiary sold (292,000)
Foreign tax credits realized (104,000)
Unrecognized income tax benefits of
foreign net operating loss 18,000 232,000
Differences between Canadian and
federal statutory income tax
rates (49,000)
Nondeductible goodwill amortization 100,000 53,000 54,000
Elimination of excess taxes
provided in prior years (205,000) (108,000)
Other (31,000) 19,000 20,000
$1,192,000 $976,000 $408,000
</TABLE>
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note J-Income Taxes (continued)
<TABLE>
<CAPTION>
Significant components of the Company's deferred income tax liabilities and
assets are as follows:
December 3, November 27,
1995 1994
<S> <C> <C>
Deferred income tax liabilities:
Excess tax depreciation $2,595,000 $2,532,000
Prepaid pension costs 2,564,000 2,098,000
Patents 637,000
Other 138,000 615,000
Total deferred income tax
liabilities 5,934,000 5,245,000
Deferred income tax assets:
Accounts receivable and inventory
valuation allowances 687,000 592,000
Accrued liabilities 1,134,000 423,000
Deferred compensation accruals 288,000 298,000
Foreign tax credit carryforwards 818,000 1,142,000
Foreign net operating loss
carryforward 220,000
Other 75,000 182,000
Total deferred income tax assets 3,002,000 2,857,000
Valuation allowance for deferred
income tax assets (818,000) (1,401,000)
Net deferred income tax assets 2,184,000 1,456,000
Net deferred income tax liabilities $3,750,000 $3,789,000
</TABLE>
At December 3, 1995, the Company has foreign tax credit carryforwards of
$818,000 that are available to reduce U.S. income taxes on certain foreign
source income through 2000. For financial reporting purposes, a valuation
allowance has been recognized to offset the deferred income tax asset related
to this carryforward, due to the uncertainty of the Company's ability to
realize benefits in the future.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note K-Contingencies
The Company is involved in proceedings with respect to environmental matters
including sites where the Company has been identified as a potentially
responsible party under federal and state environmental laws and regulations.
While it is not possible to quantify with certainty the potential impact of
actions regarding environmental matters, particularly any future remediation
and other compliance efforts, in the opinion of management, compliance with
the present environmental protection laws will not have a material adverse
effect on the financial condition or competitive position of the Company.
However, the Company's efforts to comply with increasingly stringent
environmental regulations may have an adverse effect on the Company's future
earnings.
The Company is also subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect
the consolidated financial position of the Company.
Note L-Restructuring Transactions
In connection with a series of mutually dependent transactions completed in
1987 to acquire the common stock of Harrow Corporation, a subsidiary of the
Company was merged with and into Harrow Corporation. As a result of the
merger, the existing stockholders of Harrow Corporation received cash and
equity securities that exceeded the book value of their interest in its
net assets by $14,108,000. This excess is reflected as a reduction of
stockholders' equity in the consolidated balance sheets. The consolidated
financial statements of the Company have been prepared on a historical cost
basis.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M-Quarterly Results of Operations (unaudited)
<TABLE>
<CAPTION>
The following is a tabulation of the quarterly results of operations:
Fiscal year ended
December 3, November 27,
1995 1994
<S> <C> <C>
Net sales
First quarter $ 32,370,000 $ 31,439,000
Second quarter 33,517,000 36,042,000
Third quarter 31,641,000 35,824,000
Fourth quarter 37,129,000 36,088,000
$134,657,000 $139,393,000
Gross margin
First quarter $ 11,052,000 $ 9,972,000
Second quarter 12,216,000 12,042,000
Third quarter 12,040,000 12,115,000
Fourth quarter 13,668,000 12,188,000
$ 48,976,000 $ 46,317,000
Net earnings (loss)
First quarter $ 1,136,000 $ (331,000)
Second quarter 760,000 303,000
Third quarter 673,000 484,000
Fourth quarter 834,000 1,159,000
$ 3,403,000 $ 1,615,000
Net earnings (loss) per share
First quarter $ 0.99 $ (0.35)
Second quarter 0.64 0.23
Third quarter 0.57 0.39
Fourth quarter 0.71 1.02
$ 2.91 $ 1.29
</TABLE>
The fourth quarter of fiscal 1995 includes 14 weeks. All other quarters were
13-week periods.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note M-Quarterly Results of Operations (unaudited) (continued)
The first quarter of fiscal 1995 included an estimated gain of $800,000 on the
sale of the Leigh business (see Note C), which was subsequently adjusted
downward by $300,000 in the third quarter and $230,000 in the fourth quarter.
The fourth quarter of fiscal 1995 also includes a charge of $1,000,000 to
provide for estimated postemployment benefits and certain other costs related
to the Company's former chairman and its president and chief executive
officer. Adjustments to the provisions for income taxes increased fourth
quarter net earnings by $100,000 in 1995 and $150,000 in 1994.
Note N-Industry Segments
The Company operates in two segments consisting of (1) consumer products and
(2) commercial and industrial products.
Consumer Products Group
Principal products include a variety of consumer hardware, pruning shears,
custom kitchen and other cabinetry, and water source heat pumps. Prior to the
sale of the Leigh business as of the beginning of fiscal 1995 (see Note C),
this segment also included registers, rents, grilles and other air control
products. Consumer products are marketed through hardware chains and home
improvement centers, dealers and other retailers who serve the residential
construction and remodeling markets.
Commercial and Industrial Products Group
Principal products include architectural and commercial hardware, biometric
identification devices, electronic and electromagnetic security systems, and
professional pruning tools for the citrus, grape and avocado industries.
Hardware and security devices are marketed through a variety of channels to
builders and contractors who serve the industrial and commercial construction
markets. Biometric identification devices are sold through a network of
independent sales representatives to governmental and commercial customers
for use in access control, time and attendance, and personal identification
applications. Pruning equipment is sold directly as well as through
manufacturer's representatives.
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note N-Industry Segments (continued)
<TABLE>
<CAPTION>
The following is a summary of sales and operating income by industry segment:
1995 1994 1993
<S> <C> <C> <C>
Sales to unaffiliated customers:
Consumer products $82,211,000 $95,892,000 $90,596,000
Commercial and industrial
products 52,446,000 43,501,000 38,227,000
$134,657,000 $139,393,000 $128,823,000
Operating income:
Consumer products $ 7,840,000 $ 6,222,000 $ 5,424,000
Commercial and industrial
products 9,637,000 7,627,000 5,385,000
17,477,000 13,849,000 10,809,000
Corporate:
Interest expense (6,617,000) (6,313,000) (6,488,000)
Interest income 20,000 66,000 92,000
Nonoperating income (expense) 203,000 79,000 (58,000)
General expenses (6,488,000) (5,090,000) (4,173,000)
Earnings before income taxes 4,595,000 2,591,000 182,000
Income taxes 1,192,000 976,000 408,000
Net earnings (loss) $ 3,403,000 $ 1,615,000 $ (226,000)
</TABLE>
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note N-Industry Segments (continued)
<TABLE>
<CAPTION>
Other industry segment information is as follows:
1995 1994 1993
<S> <C> <C> <C>
Identifiable assets:
Consumer products $31,291,000 $35,670,000 $35,001,000
Commercial and industrial
products 26,474,000 15,967,000 14,049,000
Corporate 11,224,000 9,741,000 9,572,000
$68,989,000 $61,378,000 $58,622,000
Depreciation and amortization:
Consumer products $ 1,695,000 $ 1,940,000 $ 2,012,000
Commercial and industrial
products 1,426,000 1,073,000 1,120,000
Corporate 316,000 436,000 449,000
$ 3,437,000 $ 3,449,000 $ 3,581,000
Capital additions:
Consumer products $ 2,228,000 $ 3,029,000 $ 1,229,000
Commercial and industrial
products 1,276,000 1,214,000 802,000
Corporate 108,000 18,000 19,000
$ 3,612,000 $ 4,261,000 $ 2,050,000
</TABLE>
Corporate assets include cash and cash equivalents, refundable and deferred
income taxes, prepaid pension costs, deferred loan issue expenses and other
general corporate assets.
Intersegment sales and export sales are not significant for the fiscal years
presented. No single customer accounts for more than 10% of the consolidated
net sales.
Note O-Other Cash Flow Information
<TABLE>
<CAPTION>
The following is a summary of other cash flow information:
1995 1994 1993
<S> <C> <C> <C>
Interest payments $6,320,000 $6,000,000 $6,179,000
Income tax payments 1,798,000 525,000 117,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Schedule II-Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E
Additions
(1) (2)
Charged to Charged
Balance at Costs and to Other Deductions- Balance
Description Beginning Expenses Accounts- Describe at End of
of Period Describe Period
<S> <C> <C> <C> <C> <C>
Fiscal year
ended
December 3,
1995:
Allowance for
doubtful
accounts $674,000 $381,000 $231,000 (A) $824,000
Allowance for
excess and
obsolete
inventory 576,000 253,000 169,000 (B) 660,000
Fiscal year
ended
November 27,
1994:
Allowance for
doubtful
accounts 566,000 265,000 157,000 (A) 674,000
Allowance for
excess and
obsolete
inventory 863,000 429,000 716,000 (B) 576,000
Fiscal year
ended
November 28,
1993:
Allowance for
doubtful
accounts 518,000 144,000 96,000 (A) 566,000
Allowance for
excess and
obsolete
inventory 817,000 418,000 372,000 (B) 863,000
A-Accounts charged off, net of recoveries.
B-Excess and obsolete inventory disposed of.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the ___th day of
February, 1996.
HARROW INDUSTRIES, INC.
(Registrant)
By s/Dudley C. Mecum
Dudley C. Mecum
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934
this report has been signed by the following persons in the capacities
indicated on the ___th day of February, 1996:
Signature Title
s/Dudley C. Mecum Chairman of the Board
Dudley C. Mecum (Chief Executive Officer)
s/John S. Hogan Treasurer
John S. Hogan (Chief Financial Officer)
s/Gary L. Humphreys Controller
Gary L. Humphreys (Chief Accounting Officer)
Director
W. Lawrence Banks
s/David H. Benson Director
David H. Benson
s/Donald G. Calder Director
Donald G. Calder
<PAGE>
Director
Axel C. May
s/George F. Ohrstrom Director
George F. Ohrstrom
Director
George L. Ohrstrom, Jr.
s/Eriberto R. Scocimara Director
Eriberto R. Scocimara
s/Georg Graf Schall-Riacour Director
Georg Graf Schall-Riacour
<PAGE>
Exhibit Index
Page
*3.1 Certificate of Incorporation
**3.2 By laws
**4.1 Indenture with United States Trust Company of New York
****4.2 Loan and Security Agreement with Barclays Business
Credit, Inc.
**10.1 Securities Purchase Agreement
****10.3 Harrow Industries, Inc. Executive/Middle Management
Performance Plan
**10.4 Harrow Products, Inc. Retirement Plan
**10.6 Deferred Compensation Agreement between Harrow
Products, Inc. and Stanley B. O'Kane
***10.7 Employment Agreement with Larry L. Adams
11 Computation of earnings per share
12 Computation of ratio of earnings to fixed charges
22 List of Subsidiaries
*Incorporated herein by reference to Form 10-K for year ended
November 27, 1987.
**Incorporated herein by reference to Harrow Industries, Inc.
Registration Statement (No. 33-12266) on Form S-1 filed April 16, 1987.
***Incorporated herein by reference to Form 10-K for the fiscal year
ended December 2, 1990.
****Incorporated herein by reference to Form 10-K for the fiscal year
ended December 1, 1991.
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Exhibit 11--Statement Regarding Computation of Per Share Earnings
Fiscal year ended
December 3, November 27, November 28,
1995 1994 1993
<S> <C> <C> <C>
Primary and fully diluted
Weighted average shares
outstanding 1,100,000 1,096,671 1,043,340
Net earnings (loss) $3,403,000 $1,615,000 ($226,000)
Preferred stock dividend
requirements (200,000) (200,000) (200,000)
Total $3,203,000 $1,415,000 ($426,000)
Per share amount $2.91 $1.29 ($0.41)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Harrow Industries, Inc. and Subsidiaries
Exhibit 12--Statement Regarding Computation of Ratio of Earnings
to Fixed Charges
Fiscal year ended
December 3, November 27, November 28, November 29, December 1,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earnings (loss)
before income
taxes and
extraordinary
item $4,595,000 $2,591,000 $182,000 $473,000 ($1,137,000)*
Fixed charges:
Interest
expense 6,391,000 5,980,000 6,145,000 6,438,000 7,196,000
Amortization
of deferred
financing
costs 226,000 333,000 343,000 350,000 307,000
Interest
portion of
rental
expense 709,000 687,000 621,000 573,000 547,000
Total fixed
charges 7,326,000 7,000,000 7,109,000 7,361,000 8,050,000
Earnings $11,921,000 $9,591,000 $7,291,000 $7,834,000 $6,913,000
Ratio of
earnings to
fixed charges 1.63x 1.37x 1.03x 1.06x 0.86x
*Excludes pretax gain from early extinguishment of debt of $4,797,000 in
fiscal 1991.
</TABLE>
<PAGE>
Harrow Industries, Inc. and Subsidiaries
Exhibit 22
Name Jurisdiction
Harrow Products, Inc. Delaware
Harrow Corporation Delaware
Harrow Products, Inc. (Delaware) Delaware
The Harrow Group International, Inc. U.S. Virgin Islands
Harrow Real Estate, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-03-1995
<PERIOD-END> DEC-03-1995
<CASH> 676
<SECURITIES> 0
<RECEIVABLES> 17,777
<ALLOWANCES> 824
<INVENTORY> 10,406
<CURRENT-ASSETS> 30,156
<PP&E> 39,230
<DEPRECIATION> 21,662
<TOTAL-ASSETS> 68,989
<CURRENT-LIABILITIES> 16,878
<BONDS> 46,365
0
4
<COMMON> 11
<OTHER-SE> (114)
<TOTAL-LIABILITY-AND-EQUITY> 68,989
<SALES> 134,657
<TOTAL-REVENUES> 134,657
<CGS> 85,681
<TOTAL-COSTS> 85,681
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,617
<INCOME-PRETAX> 4,595
<INCOME-TAX> 1,192
<INCOME-CONTINUING> 3,403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,403
<EPS-PRIMARY> 2.91
<EPS-DILUTED> 2.91
</TABLE>
