<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION 1
WASHINGTON, D.C. 20549
FORM 10-K
(mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
---------- ---------
Commission File No. 0-1412
M. H. Rhodes, Inc
(Exact name of registrant as specified in its charter)
Delaware 06-0509270
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
99 Thompson Road, Avon, Connecticut 06001
- --------------------------------------- ------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (860) 673-3281
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Par Value $1.00 Share
- --------------------------------------------------------------------------------
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $480,750 on March 27, 1996 based on a bid price of $5.00 per
share reported by one of the firms that follow the stock of the Company. No
asked price was reported.
The number of shares of the registrant's common stock, $1.00 par value,
outstanding on March 27, 1996 was 202,599.
This report contains 34 pages in accordance with the sequential numbering
system. The exhibit index is located on sequentially numbered page 32.
<PAGE> 2
2
PART I
ITEM 1. BUSINESS
GENERAL
M. H. Rhodes, Inc. (the "Company") and its Canadian Subsidiary, M. H.
Rhodes (Canada) Limited, (hereinafter collectively referred to as the
"Companies") manufacture mechanical and electrical timers. The Company has
been in business since 1930 and M. H. Rhodes (Canada) Limited has been in
business since 1960. In 1990, the Company expanded its product lines by
acquiring machinery, equipment and inventory of the Ripley Company, Inc.
(Ripley) Photocontrol Division.
PRODUCTS 1995
PHOTOCONTROLS: The expansion of the electronic solid state photocontrol was
an important part in maintaining Ripley's market share. 1995's sales of
$1,779,000 consisted of 55% electronics, leaving the balance to magnetic and
thermal photocontrols. As U.S. utilities continue to switch from magnetic
devices to electronic photocontrols, Ripley is positioned to increase its sales
in 1996 by having available a full featured electronic line.
TIMERS: Rhodes' mechanical timer line showed a decrease in sales of
approximately 18%. The greatest decrease occurred in government sales, OEM
sales, and retail sales. Government sales for the second straight year were
down 53%. OEM sales were down 21%. This decline was caused by the loss of two
major customers' business. Our retail consumer line continued to decline due
to lower pricing from the Far East competition, and the dominance of larger
distributors who buy directly from China, Taiwan and Hong Kong. The 1996
objective will be to develop new niche markets for mechanical interval timers
with a future outlook to expand into electronics.
SOURCE AND AVAILABILITY OF RAW MATERIALS
The Companies have never experienced a serious problem in obtaining raw
material and component parts, as there are generally many suppliers available
to meet the Companies' requirements.
PATENTS AND TRADEMARKS
The Companies have many patents, and many that have contributed to the
success of the business of the Companies. However, the skills and know-how
developed by the Companies over a period of 65 years are now more significant.
The Companies have seven (7) trademarks which are actively used: MARK TIME,
RHODES, SUNSWITCH, LIGHT WATCHMAN and SPECTRUM INNOVATIONS. COMPETITOR AND
SURVIVOR SERIES are the newest additions for the Photocontrol and new consumer
lines.
I-1
<PAGE> 3
3
BUSINESS CYCLE
The Companies' business is not seasonal or cyclical.
CUSTOMERS
The customer base consists of approximately 1500 accounts. The loss of
any one customer would not have a material adverse financial effect on the
companies.
GOVERNMENT BUSINESS
The Companies do business with various municipal governments and U.S
Government agencies. No significant portion of this business is subject to
renegotiation of profits or termination at the election of a governmental
agency.
NET SALES BACKLOG
The backlog at December 31, 1995 and 1994 was $2,809,000 and $3,469,000
respectively. The backlog includes orders which are deliverable over various
periods and which may be changed or cancelled in the future. However, based on
past experience, the effect of changes and cancellations is expected to be
minimal. It is anticipated that the backlog at December 31, 1995 will be
filled within the next 18 months.
COMPETITION
Offshore competitors continue to be our major competition in all timer
production lines. To offset this, our company is focusing on value added
assembly and manufacturing work with our current customer base numbering
between 1200 to 1500 different companies.
The company has also relocated all of its timer production back into Avon,
Ct. and has closed its Mexican timer assembly operations.
Our customers have more and more switched their production lines over to a
J.I.T. (Just in Time) concept which requires weekly delivery of smaller
quantities shipped to their factories. Using this concept gives our company an
edge over our foreign competition as well as allowing us to become more
flexible in the U.S.A. rather than Mexico.
PRODUCT DEVELOPMENT
1995 was a year where much of the engineering was focused to provide the
basic research for new niche market timers which will be introduced in 1996.
The main focus was both in the electronic applications as well as special
mechanical timer applications. These introductions will be announced in 1996.
I-2
<PAGE> 4
4
EMPLOYEES
As of December 31, 1995, the Companies employed 89 persons, 84 in Avon,
Connecticut, 4 in Ottawa, Ontario and 1 in El Paso, Texas. Of the Avon
employees, 59 are represented by the International Association of Machinists,
with the balance being salaried employees. The Companies consider their
relationship with their employees to be satisfactory.
ITEM 2. PROPERTIES
The Company owns factory, warehouse and office facilities, aggregating
92,000 square feet in Avon, Connecticut. M. H. Rhodes (Canada) Limited leases
manufacturing and office facilities, totaling 2,500 square feet in Ottawa,
Ontario, Canada.
In the Company's opinion, these facilities are adequate for the Companies'
present needs.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
I-3
<PAGE> 5
5
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of the Company's
Executive Officers.
All Executive Officers serve for one-year terms or until their successors
are duly elected and qualified. Officers are elected annually at the meeting
of Directors, which immediately follows the Annual Meeting of Shareholders.
Name Company Position, Principal Occupation
- ------------- --------------------------------------
J. L. Morelli was appointed President and Chairman of the Board in
April, 1989. Previously, since November, 1988, he
was Acting General Manager, and prior to this, Vice
President of Operations since January, 1987. From
1985 to 1987, he was Vice President of Operations
with Rapid Power Technologies, a manufacturer of
power supplies. Age 65.
H. B. Matles has served as a Vice President of Marketing in charge
of the Company's consumer sales since 1973. Age 59.
A. D. Springer joined the Company in September, 1987 as Controller
was elected its Corporate Controller/Treasurer in
September, 1988 and was elected its Vice
President-Finance in May 1994. Prior to joining the
Company, he was with the Arrow Hart Division of
Cooper Industries for 15 years in various financial
positions. His last position was Controller. Age
56.
S. L. Vanasse has served the Company as an administrative employee
since 1977. In September, 1988, she was elected
Secretary of the Company. She had been elected
Assistant Secretary in April, 1985. Age 40.
I-4
<PAGE> 6
6
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no generally recognized or established public trading market for
the common stock of the Company.
The following chart reflects no payment of dividends over the past two
years and, in the absence of any known source of published information, the
range of bid prices for 1995 as supplied by a brokerage firm that follows the
stock of the Company. This information does not necessarily represent actual
transactions and may not reflect retail markups, markdowns, or commissions.
<TABLE>
<CAPTION>
PRICES
------
High Low Dividend
---- --- --------
<S> <C> <C> <C>
1995
First Quarter .............. $ 6 $ 5
Second Quarter .............. 6 5 .00
Third Quarter .............. 6 5
Fourth Quarter .............. 6 5
1994
First Quarter .............. $ 6 $ 5
Second Quarter .............. 6 5 .00
Third Quarter .............. 6 5
Fourth Quarter .............. 6 5
</TABLE>
As reported by one of the firms that follow the Company's stock, the bid
price for such stock was $5.00 on March 27, 1996. No asked price was reported.
On March 27, 1996, there were approximately 667 record holders of the
Company's common stock. The number of record shareholders excludes individual
participants in security position listings.
Mellon Shareholders Services, L.L.C., 85 Challenger Rd., Overpeck Center,
Ridgefield Park, N.J. 07660 is the Company's Stock Registrar and Transfer
Agent. (1-800-288-9591)
It had been the Company's policy prior to 1988 to pay an annual dividend
of $.10 per share. Pursuant to a loan agreement between the Company and the
Connecticut National Bank (K/N/A Fleet Bank) dated December 19, 1985, the
Company has covenanted that it will not declare or pay dividends exceeding in
the aggregate 10% of its annual net earnings after taxes. Due to this agreement
no dividend was declared for 1993 (payable in 1994) and for 1994 (payable in
1995). The Company may or may not declare future dividends depending on its
earnings, financial conditions and other factors.
II-1
<PAGE> 7
7
ITEM 6. SELECTED FINANCIAL DATA
M. H. RHODES, INC. AND M. H. RHODES (CANADA) LIMITED CONSOLIDATED(1)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $8,081,871 $9,815,715 $10,304,525 $10,448,886 $12,179,649
Net income(loss) (895,488) 79,351 129,521 (678,353) 75,534
Per share earnings(loss) (4.38) .38 .62 (3.23) .35
Total assets 5,346,957 6,998,344 6,709,115 6,999,996 7,915,548
Long term
obligations 275,621 1,160,610 1,039,688 37,021 1,561,432
Cash dividends paid
per share .00 .00 .00 .00 .00
</TABLE>
(1) M. H. Rhodes (Canada) Limited Financial Statements have been translated
from Canadian to U.S. currency at applicable exchange rates.
II-2
<PAGE> 8
8
ITEM 7. MANAGEMENT"S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
1995 Compared to 1994
Consolidated net sales for 1995 decreased 18% compared to 1994. This
decrease in net sales was directly due to decreases in the following market
segments: OEM sales were down 21% or approximately $1,100,000; Retail and
Government sales were down 21% and 53% respectively. Although no major
customers were lost to competition, 1995 appeared to be a year where many of
the company's customers reduced their conventional blanket orders and large
volume buys and proceeded to new smaller size production lots which is typical
with J.I.T.
(Just in Time or Kaizan Production techniques which is being implemented
throughout the U.S.A.).
Gross profit as a percentage of consolidated net sales was 10.5% in 1995
compared with 19.0% in 1994. The principal reasons for this were: (1) The
decline in sales; (2) Relocation of certain production lines and inventory back
to Avon from Mexico; (3) Additional write off of obsolete and slow moving
inventory; and (4) Non-cash accounting adjustments for prior years' items
capitalized into inventory that were charged to earnings due to the significant
decrease in inventory in 1995.
Selling, general and administrative expenses as a percentage of net sales
were 19.5% in 1995 compared to 17.0% in 1994. This increase was primarily due
to fixed expenses which did not decrease in the same proportion as the sales
decline.
The increase in interest expense was due to a higher bank prime rate in
1995 compared to 1994 which increased borrowing costs on the line of credit and
the Employee Stock Ownership Plan (ESOP) loan.
The decrease in other income was a result of: (1) A decrease in the
amount of machinery and equipment sold in 1995 compared to 1994; and (2) 1994
recorded interest earned on cash deposits from the State of Connecticut
Financial Assistance Program which was used for tooling and equipment on the
new Photocontrol line.
The net loss for 1995 was $895,488 compared to a net income of $79,351 for
1994. As stated above, the decrease in sales, an obsolete inventory write off,
accounting inventory adjustments, and relocation of production lines to Avon
contributed. Although the net loss was unfavorable, there were favorable sides
to 1995. These were a reduction in liabilities to the company of $884,000 and
a decrease in inventories of $1,242,000.
1994 Compared to 1993
Consolidated net sales for 1994 decreased 4.7% compared to 1993. This
decrease in net sales was principally caused by a decrease of U.S. Government
sales which was directly due to the cutbacks in the U.S. Department of Defense
spending.
Gross profit as a percentage of consolidated net sales was 19.0% in 1994
compared with 20.1% for 1993. The principal reason for this was due to the
decline in net sales. Fixed expenses could not decrease in the same proportion
as the reduction in sales.
II-3
<PAGE> 9
9
Selling, general and administrative expenses as a percentage of net sales
were 17.0% in 1994 compared to 17.8% in 1993. The principal reasons for this
were lower spending in the following areas: (1) Consulting services; (2)
Salesmen's commissions; (3) Data Processing; and (4) Payrolls.
The increase in interest expense was caused by the following two reasons:
(1) A higher prime rate in 1994 than in 1993 which increased borrowing costs;
and (2) Interest expense accrued pertaining to the Loan Agreement with the
State of Connecticut.
The increase in other income was a result of interest earned on cash
deposits from the State of Connecticut Financial Assistance Program.
The net income for 1994 was $79,351 compared to a net income of $129,521
in 1993. The principal reason for this decline in net income was the decrease
in sales which was favorably offset by a decrease in expenses for the Selling,
General and Administrative areas.
LIQUIDITY
The Company in June 1995 reduced its revolving line of credit from
$1,200,000 to $1,000,000. The amount borrowed cannot exceed 80% of acceptable
Accounts Receivables. This line of credit is the source for generating cash to
meet liquidity needs. On December 31, 1995 the Company had $599,000 borrowed
under the revolver.
Working capital decreased $1,496,000 for the twelve month period ended
December 31, 1995. This decrease was the result of a significant decrease in
inventories which resulted in reductions in the current liabilities principally
accounts payable and other short term debt.
The Company is not in compliance of certain covenants in a mortgage note.
As a result of the noncompliance, the entire balance of the mortgage note has
been classified as current. The Company lacks the financial resources to repay
the mortgage note if payment is demanded. (See Note 1 and Note 7.)
CAPITAL RESOURCES
Capital expenditures during 1995 were $17,000 compared to 1994 capital
expenditures of $101,000. During 1996, the Company expects capital
expenditures to be approximately $100,000, principally for tools and molds.
Capital expenditures will be funded through internal cash flows.
INFLATION
The Company believes that inflation has not had a material effect on
operations.
II-4
<PAGE> 10
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted on pages II-8 thru II-18 of this
report.
II-5
<PAGE> 11
[RIGGS, MAHONEY & SABOL LETTERHEAD]
11
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of M.H. Rhodes, Inc.:
We have audited the accompanying consolidated balance sheet of M.H. Rhodes,
Inc. (a Delaware corporation) and subsidiary (the Company) as of December 31,
1995 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of M.H. Rhodes, Inc. and
subsidiary as of December 31, 1995 and the results of their operations and
their cash flows for the year then ended in conformity with gernerally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company
incurred a loss of $895,488 for the year ended December 31, 1995 and is not in
compliance with certain covenants contained in the mortgage note. As a result
of the noncompliance, the entire balance of the mortgage note has been
classified as current. If the bank demanded payment of this obligation, the
Company would have to obtain alternative sources of financing to satisfy its
financial obligations and operational needs. This uncertainty raises
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Riggs, Mahoney & Sabal
February 27, 1996
II-6
<PAGE> 12
[WHITTLESEY & HADLEY, P.C. LETTERHEAD]
12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
M. H. Rhodes, Inc.:
We have audited the accompanying consolidated balance sheets of M. H.
Rhodes, Inc. (a Delaware corporation) and subsidiary as of December 31, 1994
and 1993, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 opiinion, the financial statements referred to above present
fairly, in all material respects, the financial position of M. H. Rhodes, Inc.
and subsidiary as of December 31, 1994 and 1993; and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Whittlesey & Hadley, P.C.
Hartford, Connecticut
February 15, 1995
II-7
<PAGE> 13
M.H. RHODES, INC. AND SUBSIDIARY 13
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 32,502 $ 6,161
Accounts Receivable 1,252,210 1,549,003
Inventories 3,150,262 4,391,823
Prepaid Expenses and Other 35,622 15,640
----------- -----------
TOTAL CURRENT ASSETS 4,470,596 5,962,627
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 844,307 995,106
OTHER ASSETS 32,054 40,611
----------- -----------
TOTAL ASSETS $5,346,957 $ 6,998,334
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 598,979 $ 723,194
Current Portion of Long-term Debt 947,331 217,630
Accounts Payable 513,432 1,058,516
Other Accrued Expenses 324,909 381,123
----------- -----------
TOTAL CURRENT LIABILITIES 2,384,651 2,380,463
----------- -----------
LONG-TERM DEBT, less current portion 275,621 1,160,610
----------- -----------
OTHER NON-CURRENT LIABILITIES 121,757 126,346
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $1.00 par value,
400,000 shares authorized 300,880 300,880
Paid-in Capital 3,697 3,697
Retained Earnings 4,158,862 5,046,455
----------- -----------
4,463,439 5,351,032
Less: Treasury Stock, at cost
98,281 shares in 1995 and
92,750 shares in 1994 (1,048,431) (1,000,035)
Unallocated ESOP shares (850,080) (1,020,072)
----------- -----------
2,564,928 3,330,925
----------- -----------
$5,346,957 $6,998,344
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-8
<PAGE> 14
14
M. H. RHODES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES $ 8,081,871 $9,815,715 $10,304,525
COST OF SALES 7,231,797 7,953,273 8,235,838
----------- ---------- -----------
Gross profit 850,074 1,862,442 2,068,687
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,577,616 1,664,239 1,831,619
----------- ---------- -----------
Operating income (loss) (727,542) 198,203 237,068
INTEREST EXPENSE (159,177) (153,966) (122,164)
OTHER INCOME, net 1,873 28,323 23,756
----------- ---------- -----------
Income (loss) before
income taxes (884,846) 72,560 138,660
PROVISION (BENEFIT) FOR
INCOME TAXES 10,642 (6,791) 9,139
----------- ---------- -----------
Net income (loss) $ (895,488) $ 79,351 $ 129,521
----------- ---------- -----------
Net income (loss) per share $ (4.38) $ .38 $ .62
----------- ---------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 204,387 210,047 210,283
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-9
<PAGE> 15
15
M.H. RHODES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock
------------ Paid-in Retained Treasury Stock Unallocated
Shares Par Value Capital Earnings Shares Cost ESOP Shares TOTAL
------ --------- ------- -------- ------ ---- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 300,880 $300,880 $3,697 $4,873,223 90,597 $ (981,196) $(1,360,056) $2,836,548
Net income - - - 129,521 - - - 129,521
ESOP Expense - - - - - - 169,992 169,992
Translation adjustments - - - (15,580) - - - (15,580)
------- -------- ------ ---------- ------ --------- ----------- ----------
Balance, December 31, 1993 300,880 300,880 3,697 4,987,164 90,597 (981,196) (1,190,064) 3,120,481
Net income - - - 79,351 - - - 79,351
ESOP Expense - - - - - - 169,992 169,992
Translation adjustments - - - (20,060) - - - (20,060)
Purchase of treasury stock - - - - 2,153 (18,839) - (18,839)
------- ------- ----- ---------- ------ ---------- ----------- ----------
Balance, December 31, 1994 300,880 300,880 3,697 5,046,455 92,750 (1,000,035) (1,020,072) 3,330,925
Net income (loss) - - - (895,488) - - - (895,488)
ESOP Expense - - - - - - 169,992 169,992
Translation adjustments - - - 7,895 - - - 7,895
Purchase of treasury stock - - - - 5,531 (48,396) - (48,396)
------- ------- ------ ---------- ------ ---------- ----------- ----------
Balance, December 31, 1995 300,880 $300,880 $3,697 $4,158,862 98,281 $1,048,431 (850,080) $2,564,928
======= ======== ====== ========== ====== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
II-10
<PAGE> 16
16
M. H. RHODES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (895,488) $ 79,351 $ 129,521
---------- --------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 178,190 214,887 246,502
Amortization of deferred compensation 169,992 169,992 169,992
Gain on sale of assets - - (10,900)
Translation adjustments 7,895 (20,060) (15,580)
Change in assets and liabilities:
Accounts receivable 296,793 (7,079) (113,999)
Inventories 1,241,561 (423,193) 196,965
Accounts payable, accrued expenses
and other, net (628,369) (11,020) (519,732)
---------- --------- ---------
Net cash provided by
operating activities 370,574 2,878 82,769
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,334) (100,959) (23,711)
Proceeds from sale of property and
equipment - - 10,900
---------- --------- ---------
Net cash used in investing
activities (16,334) (100,959) (12,811)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings 7,973,328 9,435,839 2,848,641
Proceeds from State of Connecticut
financial assistance package - 400,000 -
Repayment of debt (8,252,831) (9,727,052) (2,954,148)
Purchase of treasury stock (48,396) (18,839) -
---------- --------- ---------
Net cash provided by
(used in) financing
activities (327,899) 89,948 (105,507)
---------- --------- ---------
Net Increase(decrease) in cash 26,341 (8,133) (35,549)
CASH, beginning of year 6,161 14,294 49,843
---------- --------- ---------
CASH, end of year $ 32,502 $ 6,161 $ 14,294
---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-11
<PAGE> 17
17
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - GENERAL:
The Company manufactures timing devices and photoelectric lighting
controls primarily for sale to distributors and original equipment
manufacturers.
The Company incurred a loss of $895,488 for the year ended December 31,
1995 and is not in compliance with certain covenants contained in the
mortgage note. As a result of the noncompliance, the entire balance of
the mortgage note has been classified as current. The Company lacks the
financial resources to repay the mortgage note if payment is demanded.
Management is continuing to negotiate with the bank. If these
negotiations are unsuccessful, the Company will have to obtain additional
financing or liquidate assets in order to meet the obligations under the
mortgage note.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements
include the accounts of M.H. Rhodes, Inc. (the Company) and its 96% owned
subsidiary, M.H. Rhodes (Canada) Limited. All significant intercompany
balances and transactions have been eliminated.
Foreign currency translation - The financial statements of M.H. Rhodes
(Canada) Limited have been translated from Canadian to U.S. currency at
the applicable exchange rates. The resulting translation adjustments are
recorded directly in a separate component of stockholders' equity.
Inventories- Inventories are valued at the lower of cost or market using
the first-in, first-out method of accounting.
Property, plant and equipment- Depreciation is provided using straight-
line and accelerated methods over estimated useful lives which range from
10 to 40 years for buildings and improvments and 3 to 10 years for
machinery and equipment.
Other assets- Other assets include transaction costs related to the
Photocontrols acquisition and loan origination. The acquisition costs
are being amortized on a straight-line basis over a ten-year period and
the loan origination costs over eighteen months. The loan origination
costs were fully amortized at December 31, 1995.
Per share data - Net income(loss) per share is based on the weighted
average number of shares outstanding during each year. The change in
shares outstanding in 1995 was due to the acquisition of treasury stock
from terminated and/or retired employees who participated in the Employee
Stock Ownership Plan (see Note 8).
II-12
<PAGE> 18
18
M.H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued):
Income taxes - Deferred income taxes, which are included in other non-
current liabilities in the accompanying consolidated balance sheets, are
provided for timing differences in the recognition of certain expenses
for financial reporting and income tax purposes, primarily related to the
use of differing methods of recording depreciation, investment in M. H.
Rhodes (Canada) Limited, reserve for obsolete inventory, and allowance
for doubtful accounts.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
NOTE 3 - INVENTORIES:
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials and component parts $1,404,565 $1,260,740
Work-in-process 1,418,297 2,666,695
Finished goods 327,400 464,388
---------- ----------
$3,150,262 $4,391,823
---------- ----------
</TABLE>
NOTE 4 - NET PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Buildings and improvements $1,270,698 $1,270,698
Machinery and equipment 2,518,231 2,501,897
Land $ 65,000 65,000
---------- ----------
3,853,929 3,837,595
Less: Accumulated depreciation 3,009,622 2,842,489
---------- ----------
$ 844,307 995,106
---------- ----------
</TABLE>
II-13
<PAGE> 19
19
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5 - INCOME TAXES:
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ - $ 77,406 $ (4,832)
State 10,642 31,495 15,000
Foreign - 1,710 (5,861)
--------- --------- ---------
Total current $ 10,642 110,611 4,307
--------- --------- ---------
Deferred:
Federal $ - (56,315) $ 4,832
State - (39,996) -
Foreign - (21,091) -
--------- --------- ---------
Total deferred - (117,402) -
--------- --------- ---------
$ 10,642 $ (6,791) $ 9,139
--------- --------- ---------
</TABLE>
An analysis of the provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal provision (benefit) at
statutory rate - 34% (34)%
Net operating loss (utilization)
limitation - (5) (34)
State tax provision (benefit) - (12) 11
Provision (benefit) for Canadian
loss - (26) (4)
--- --- ---
Total current - (9)% 7%
--- --- ---
</TABLE>
The Company has approximately $1,580,000 of net operating loss
carryforwards available to reduce taxable income for Federal income tax
purposes, the majority of which expire in 2003. For State income tax
purposes, the Company's net operating loss carryforwards are approximately
$825,000, the majority of which expire in 2000.
II-14
<PAGE> 20
M. H. RHODES, INC. AND SUBSIDIARY 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5 - INCOME TAXES (continued):
Deferred tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Receivables $ 6,788 $ 3,363
Inventory 142,125 56,145
Federal tax loss carryforwards 372,504 241,604
State tax loss carryforwards 85,315 19,192
Foreign tax loss carryforwards 18,000 21,091
Other 5,020 6,725
-------- --------
629,752 348,120
Less: Valuation allowance (247,482) -
-------- --------
Total deferred tax assets 382,270 348,120
-------- --------
Deferred tax liabilities:
Deferred Compensation 285,813 201,008
Property, plant and equipment 47,150 63,528
Investment in subsidiary 62,251 96,881
Debt issue costs 1,614 1,261
-------- --------
Total deferred tax liabilities 396,828 362,678
-------- --------
Net deferred tax liabilities $(14,558) $(14,558)
-------- --------
</TABLE>
The Company paid approximately, $10,900, $13,100 and $3,400 for income taxes
for 1995, 1994 and 1993 respectively.
NOTE 6 - NOTES PAYABLE:
At December 31, 1995 and 1994, the Company had a note payable of $598,979
and $723,194 respectively, under an accounts receivable asset backed
revolver not to exceed the lesser of $1,000,000 or 80% of acceptable
accounts receivable. Interest is paid monthly at the prime rate (8.5% at
December 31, 1995 and 1994), plus 1 1/2% and principal is due upon the
collection of accounts receivable backing the outstanding advances. The
revolving loan expires April 30, 1996. The note is guaranteed by M.H.
Rhodes (Canada) Limited, and collateralized by a life insurance policy on a
key officer of the Company, and by all other assets of the Company. The
Company is charged interest at a minimum base borrowing of $500,000 even if
outstanding borrowings fall below that threshold.
II-15
<PAGE> 21
21
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 7 - LONG-TERM DEBT:
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Mortgage payable to bank due in
monthly principal installments of
$14,166, plus interest at 82-1/2%
of the bank's prime rate through
December, 2000 (see Note 8) $ 850,080 $1,020,072
Term note payable to State of
Connecticut with interest at 6.5%
due in monthly principal and
interest installments of
$5,323 commencing in February
1995 through January, 2001. 289,821 300,000
Obligations under stock repurchase
agreements with certain former
employees due in annual installments
plus interest at approximately 8%
(see Note 8) 83,051 58,168
---------- ----------
1,222,952 1,378,240
Less - Current portion 947,331 217,630
---------- ----------
$ 275,621 $1,160,610
---------- ----------
</TABLE>
Aggregate principal payments of long-term debt for the next five years and
thereafter are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1996 $ 947,331
1997 63,562
1998 66,984
1999 66,841
2000 61,100
Thereafter 17,134
----------
$1,222,952
----------
</TABLE>
II-16
<PAGE> 22
22
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 7 - LONG-TERM DEBT (continued):
The mortgage note payable to the bank contains certain covenants, among
others, which require the Company to maintain a current ratio of at least
1.75 to 1, net worth of at least $3,100,000 on an unconsolidated basis, a
liabilities to net worth ratio of no more than 1.5 to 1, a current maturity
of long-term debt ratio of no less than 1.2 to 1 and restrictions on
payment of dividends. At December 31, 1995 the Company was in violation of
the net worth and current maturity of long-term debt covenants. The bank
has not waived the noncompliance; therefore, the entire balance of the
mortgage note payable has been classified as current.
The Company has pledged, on a subordinated basis to the aforementioned
accounts receivable asset backed revolving loan (see Note 6), substantially
all assets as collateral for the mortgage note.
The Company received $400,000 in financial assistance from the State of
Connecticut, Department of Economic Development (The State) on March 24,
1994. The State provided a $300,000 loan and a $100,000 grant to be used
for new product tooling and equipment. The $100,000 grant, which is
included with other non-current liabilities in the accompanying balance
sheet, requires the fulfillment of certain conditions as set forth in the
grant agreement. Failure to fulfill the conditions could result in the
return of funds to the State along with a penalty charge of 7.5% per annum,
per year the grant is outstanding.
The Company paid approximately $173,388, $138,200 and $116,000 for interest
in 1995, 1994 and 1993, respectively.
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN:
The Company established a non-contributory Employee Stock Ownership Plan
(ESOP) for qualified non-union employees effective January 1, 1983, and in
1985, the ESOP acquired approximately 55% of the Company's outstanding
stock. The funds required to finance this purchase were loaned to the ESOP
by the Company using funds borrowed from a bank on the same terms as the
bank debt. (see Note 7).
At the time of the purchase, the Company recorded unallocated ESOP shares
of $2,550,000 for current and future ESOP contributions as a deduction from
stockholders' equity. Contributions to the ESOP are based upon the terms
of the bank debt, resulting in ESOP expense of $169,992 per year. Interest
expense for the related note payable was $69,781, $65,155 and $64,569 in
1995, 1994 and 1993, respectively.
II-17
<PAGE> 23
23
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN (continued):
The ESOP allows salaried employees to earn shares of the Company's stock
while they are employed by the Company. Upon the cessation of their
employment, former employees can require the Company to purchase their
vested shares at an appraised value ($8.37 per share at December 31, 1994)
payable over a five-year period. The amount owed to such former employees
for their shares is included in long-term debt in the accompanying balance
sheet (see Note 7).
Shares of the plan are released for allocation to participants based on
annual principal payments of $169,992 made on the ESOP debt. At December
31, 1995, 74,008 shares are allocated, 5,565 shares are committed to be
released and 23,351 shares are held in suspense. The value of unearned
ESOP shares at December 31, 1995 is estimated to be $195,448.
NOTE 9 - CONTINGENCIES:
The Company is subject to legal proceedings, claims and liabilities,
including environmental matters, which are incidental to its business. It
is management's opinion that the disposition of these matters will not have
a material effect on the Company's consolidated financial position or
results of operations.
NOTE 10 - PENSION PLAN:
Under the terms of an agreement with the International Association of
Machinists, the Company contributes specified amounts to union-administered
pension funds. Contributions were $28,397, $37,244 and $39,790 in 1995,
1994 and 1993, respectively. Since this plan is a multiemployer plan,
actuarial present values of accumulated plan benefits for a particular
employer are not available.
NOTE 11 - MAJOR CUSTOMER:
For the year ended December 31, 1993, the Company had sales of
approximately $1,050,000 to one customer operating in the U.S. defense
contracting industry.
II-18
<PAGE> 24
24
ITEM 9. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
The Board of Directors of M. H. Rhodes, Inc. approved the recommendation
of the Registrant's Officers to dismiss Whittlesey & Hadley, P.C., 147 Charter
Oak Avenue, Hartford, Connecticut, 06106 as its independent accountants and to
engage the accounting firm of Riggs Mahoney & Sabol, One State Street,
Hartford, Connecticut, 06103 as independent accountants for the Registrant for
1995. The engagement of Whittlesey & Hadley,P.C. 147 Charter Oak Avenue,
Hartford, Connecticut, 06106 has ceased as of January 31, 1996.
Whittlesey & Hadley, P.C. served as auditors for the Registrant since
1993. During none of the years for which Whittlesey & Hadley, P.C. served as
independent auditors for the Company nor for the subsequent interim period
preceding the replacement of Whittlesey & Hadley, P.C., were there any
disagreements between the Registrant and Whittlesey & Hadley, P.C. on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure that would have caused them to make reference in
their report to the subject matter of the disagreement. There were no
"reportable events" (within the meaning of the applicable rules and regulations
of the Securities and Exchange Commission) during the two years ended December
31, 1994 or the subsequent interim period.
Whittlesey & Hadley, P.C.'s report on the financial statements as of
December 1993 and 1994 for the years then ended was unqualified.
The registrant has requested that Whittlesey & Hadley, P.C. furnish it
with a letter addressed to the SEC stating whether it agrees with the above
statements. A copy of Whittlesey & Hadley, P.C.'s letter to the SEC dated
January 31, 1996 is filed as Exhibit 1 to the Form 8-K.
The Registrant's Audit Committee of the Board of Directors approved the
change in the accountants.
II-19
<PAGE> 25
25
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT
Information concerning Executive Officers is included at the end of Part I
of this Form 10-K.
The following table sets forth the names and ages of the Company's
Directors:
<TABLE>
<CAPTION>
Year First
Name Elected Business Experience
---- ---------- -------------------
<S> <C> <C>
A. J. Campanelli 1978 Mr. Campanelli is the Director of Bank
Relations for Loan Guarantee Investment
Corporation. Previously he retired from
Shawmut National Bank in December, 1992,
where he had been a Senior Vice President
since 1977. Age 60.
E. J. Doyle 1985 Mr. Doyle retired from the Company in
January, 1989. He stepped down as President
of the Company in January, 1987 and assumed a
position as one of the Company's Vice
Presidents as an Account Executive until his
retirement. He had served as President of
the Company since September, 1985.
Previously he had been Vice President of the
Company since May, 1953. Age 75.
H. T. LeMay 1993 Mr. LeMay retired as the Vice President
of Industrial Relations and Personnel of
the Chandler Evans Division of Colt
Industries in 1984, a post which he had
held since 1962. The Chandler Evans
Division of Colt Industries manufactures
fuel control devices. Age 79.
J.L. Morelli 1989 Mr. Morelli was appointed President and
Chairman of the Board in April, 1989.
Previously, since November, 1988, he had been
Acting General Manager, and prior to this, he
had been Vice President of Operations since
January, 1987. From 1985 to 1987, he was
Vice President of Operations with Rapid Power
Technologies, manufacturers of power
supplies. Between 1978 and 1985, he served
as Executive Vice President and Vice
President of Operations for Napco, Division
of Thermo-Electron, manufacturers of auto-
plating equipment. Age 65.
</TABLE>
All Directors serve for one-year terms or until their successors are duly
elected and qualified. Directors are elected annually at the Annual Meeting of
Shareholders.
III-1
<PAGE> 26
26
ITEM 11. EXECUTIVE COMPENSATION
Conpensation - Executive Officers
No officer of the Company was paid cash compensation in excess of $100,000
in 1995. All executive officers as a group (4 persons) received $268,951 for
the year ended December 31, 1995. The information concerning Mr. Morelli's
compensation is required to be disclosed because of his position as Chief
Executive Officer, notwithstanding that his salary and bonus did not exceed
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation All Other
Principal Position Year Salary($) Bonus($) Compensation(1)
------------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Joseph L. Morelli 1995 $94,474 -0- $15,446
Chairman of the Board 1994 $90,240 -0- $14,858
and Chief Executive Officer 1993 $80,988 -0- $10,809
</TABLE>
(1) Includes amounts allocated under the Company's Employee Stock Ownership
Plan during 1995 as a result of Company contributions and interest earned
on plan assets including previously allocated shares of the Company. As
of January 1, 1996 the vested interest for Mr. Morelli was 100%.
III-2
<PAGE> 27
27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to the beneficial ownership of the common stock
of the Company as of March 27, 1996 by each person who is known by the Company
to own beneficially more than 5% of the common stock, by each director of the
Company and by all officers and directors as a group, is set forth in the
following table:
<TABLE>
<CAPTION>
Amount and
Name of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Ownership(1) Class
-------- ---------- ------------ ----------
<S> <C> <C> <C>
Common Stock M.H.Rhodes, Inc. Employee 102,924 50.80
Stock Ownership Trust For
Non-Bargaining Unit Employee
Group(2)
Common Stock A. J. Campanelli - -
Common Stock E. J. Doyle 2,025 *
Common Stock H. T. LeMay - -
Common Stock J. L. Morelli 6,413 (3) 3.16
Common Stock All Officers and Directors
(7) as a group 27,256 (3) 13.45
</TABLE>
(1) Record ownership unless otherwise indicated.
(2) Mailing address: 99 Thompson Road, Avon, Connecticut, 06001
(3) Includes shares allocated to ESOP accounts respectively for Mr. Morelli
(6,413) and all other Officers and Directors as a group (23,731).
(*) Less than 1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III-3
<PAGE> 28
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. The following documents are filed as a part of this report:
1. Financial Statements Page No.
-------------------- --------
The following Consolidated Financial Statements of M.H.
Rhodes, Inc. and Subsidiaries are included in Item 8: II-5
Opinion of Independent Public Accountants. II-6-7
Consolidated Balance Sheets - December 31, 1995 and 1994. II-8
Consolidated Statements of Operations -
Years ended December 31, 1995, 1994 and 1993. II-9
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995, 1994 and 1993. II-10
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994 and 1993 II-11
Notes to Consolidated Financial Statements. II-12-18
2. Supplementary Data and Financial Statements Schedules
All Schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the
Financial Statements or Notes thereto.
Separate Financial Statements and Supplemental Schedules of the Company
are omitted since the Company is primarily an operating Company and its
subsidiary, included in the Consolidated Financial Statements being filed,
does not have a minority equity interest or indebtedness to any person
other than the Company in an amount which exceeds five percent of the
total assets as shown by the Consolidated Financial Statements as filed
herein.
IV-1
<PAGE> 29
29
<TABLE>
<CAPTION>
3. Exhibits Cross Reference Information
-------- ---------------------------
<S> <C>
(3) Articles of Incorporation and By-Laws Filed as Exhibit to Form
10 filed on April 27, 1965
(4A) Specimen Common Stock Certificate Filed as Exhibit 4A to
Form 10-K, File No. 0-1412
dated March 25, 1987.
(4B) Loan Agreement, Term Loan Note and
Open End Mortgage Between the Company
and The Connecticut National Bank **
dated December 19, 1985
(4C) Loan Agreement 5-Year Term Loan Note Filed as Exhibit 4C to
and Open End Mortgage Between the Form 10-K, File No. 0-1412
Company and The Connecticut National dated March 27, 1990.
Bank dated December 7, 1989
(4D) Loan Agreement, Eighteen month Filed as Exhibit 4D to
Accounts Receivable Asset Backed Form 10-K, File No. 0-1412
Revolver between the Company and dated March 30, 1994.
Affiliated Business Credit Corporation
dated October 21, 1993.
(4E) Loan Agreement/Grant, 7-year loan Filed as Exhibit 4E to
between the Company and the State of Form 10-K, File No. 0-1412
Connecticut, dated March 24, 1994. dated March 30, 1994.
(4F) Loan Modification Agreement, Term Loan Filed as Exhibit 4F to
Note and Open End Mortgage Between the Form 10-K, File No. 0-1412
Company and The Connecticut National dated March 30, 1994.
Bank (K/N/A Shawmut Bank) dated
December 19, 1985, modified on
October 21, 1993.
(11) Statement re: computation per share earnings filed with this report
(16) Letter re: Change in certifying Accountants Pg. filed as Exhibit 16
to form 10-K, File No. 0-1412 dated March 30, 1994
(21) Subsidiaries of Company filed with this report
</TABLE>
** Incorporated by reference in Exhibit 4 to Schedule 13D, dated
December 27, 1985, filed by M. H. Rhodes, Inc. Employee Stock Ownership Trust
for the Non-Bargaining Unit Employee Group of the M. H. Rhodes, Inc. Employee
Stock Ownership Plan for the Non-Bargaining Unit Employee Group. This Schedule
13D was filed with the SEC on December 30, 1985. Exhibit 4 is found at pages
98, et seq. of such filing in accordance with the sequential numbering
system.
IV-2
<PAGE> 30
30
B. Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
IV-3
<PAGE> 31
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
M. H. RHODES, INC.
By:
----------------------------
Joseph L. Morelli, President
and Chief Executive Officer
April , 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, and in the capacities and on the dates indicated.
By:
----------------------------
Joseph L. Morelli, President
and Chief Executive Officer
April , 1996
By:
----------------------------
Allan D. Springer, Vice President
Finance and Chief Financial
Officer/Principal Accounting
Officer
April , 1996
By:
----------------------------
Edward J. Doyle, Director
April , 1996
By:
----------------------------
Anthony J. Campanelli, Director
April , 1996
By:
----------------------------
Harold T. LeMay, Director
April , 1996
<PAGE> 32
32
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential Numbering
System, Page number or
Exhibit Number Cross Reference Information
- -------------- ---------------------------
<S> <C>
(3) Articles of Incorporation and By-Laws Filed as Exhibit to Form
10 filed on April 27, 1965
(4A) Specimen Common Stock Certificate Filed as Exhibit 4A to
Form 10-K, File No. 0-1412
dated March 25, 1987.
(4B) Loan Agreement, Term Loan Note and
Open End Mortgage Between the Company
and The Connecticut National Bank **
dated December 19, 1985
(4C) Loan Agreement 5-Year Term Loan Note Filed as Exhibit 4C to
and Open End Mortgage Between the Form 10-k, File No. 0-1412
Company and The Connecticut National dated March 27, 1990.
Bank dated December 7, 1989
(4D) Loan Agreement, Eighteen Month Filed as Exhibit 4D to
Accounts Receivable Asset Backed Form 10-K, File No. 0-1412
Revolver between the Company and dated March 30, 1994.
Affiliated Business Credit
Corporation dated October 21, 1993.
(4E) Loan Agreement/Grant, 7-year loan Filed as Exhibit 4C to
between the Company and the State Form 10-K, File No. 0-1412
of Connecticut, dated March 24, 1994. dated March 30, 1994.
(4F) Loan Modification Agreement, Term Loan Filed as Exhibit 4D to
Note and Open End Mortgage Between the Form 10-K, File No. 0-1412
Company and The Connecticut National dated March 30, 1994.
Bank (K/N/A Shawmut Bank) dated
December 19, 1985, modified on
October 21, 1993.
(11) Statement re: computation per share earnings filed with this report
(16) Letter re: Change in certifying Accountants Pg. filed as Exhibit
16 to form 10-K, File No. 0-1412 dated March 30, 1994
(21) Subsidiaries of Company filed with this report
</TABLE>
** Incorporated by reference in Exhibit 4 to Schedule 13D, dated
December 27, 1985, filed by M. H. Rhodes, Inc. Employee Stock Ownership Trust
for the Non-Bargaining Unit Employee Group of the M. H. Rhodes, Inc. Employee
Stock Ownership Plan for the Non-Bargaining Unit Employee Group. This Schedule
13D was filed with the SEC on December 30, 1985. Exhibit 4 is found at pages
98, et seq. of such filing in accordance with the sequential numbering
system.
<PAGE> 1
33
EXHIBIT 11
STATEMENT RE: COMPUTATION PER SHARE EARNINGS
The computation of earnings per share is made by dividing the Company's
earnings for the fiscal year by the weighted average number of shares of the
Company's common stock outstanding during each year.
<PAGE> 1
34
EXHIBIT 21
SUBSIDIARIES OF COMPANY
The Company has one subsidiary.
M. H. Rhodes (Canada) Limited was incorporated in 1960 as a private
Company under the laws of the Province of Ontario, Canada. The Company owns
96% of this subsidiary's securities.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF M.H. RHODES, INC. FOR THE YEAR ENDED DECEMBER 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 32,502
<SECURITIES> 0
<RECEIVABLES> 1,252,210
<ALLOWANCES> 0
<INVENTORY> 3,150,262
<CURRENT-ASSETS> 4,470,596
<PP&E> 3,853,929
<DEPRECIATION> 3,009,622
<TOTAL-ASSETS> 5,346,957
<CURRENT-LIABILITIES> 2,384,651
<BONDS> 0
0
0
<COMMON> 300,880
<OTHER-SE> 2,264,048
<TOTAL-LIABILITY-AND-EQUITY> 5,346,957
<SALES> 8,081,871
<TOTAL-REVENUES> 8,081,871
<CGS> 7,231,797
<TOTAL-COSTS> 7,231,797
<OTHER-EXPENSES> 1,577,616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 159,177
<INCOME-PRETAX> (884,846)
<INCOME-TAX> 10,642
<INCOME-CONTINUING> (895,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (895,488)
<EPS-PRIMARY> (4.38)
<EPS-DILUTED> 0
</TABLE>