<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, 1996
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 $229,529 on March 12, 1997 based on a bid price of $2.25 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 12, 1997 was 202,599.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the proxy statement for the Company's Annual Shareholders Meeting to be
held in May, 1997 has been incorporated by reference into Form 10-K, Part III,
Items 10, 11 and 12.
This report contains 33 pages in accordance with the sequential numbering
system. The exhibit index is located on sequentially numbered page 31.
<PAGE> 2
2
PART I
ITEM 1. BUSINESS
GENERAL
M. H. Rhodes, Inc. (the "Company") manufactures mechanical and electrical
timers. The Company has been in business since 1930. The Company's Canadian
subsidiary, M. H. Rhodes (Canada) Limited, which also manufactures timers had
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. On September 30, 1996 the Company ceased active
business operation for the Canadian subsidiary and transferred its assets and
liabilities to its parent company, M. H. Rhodes, Inc. The Company's Board of
Directors dissolved the Canadian subsidiary on December 31, 1996.
PRODUCTS
PHOTOCONTROLS: Photocontrols are devices that are inserted on the tops of
street and roadway lights. Their prime purpose is to individually turn the light
on at certain darkness levels and off at dawn lightness. There are over
19,000,000 units in service in the United States. As predicted in 1996 the
electronic solid state photocontrol continues to gain market share in the U.S.
utility market. Ripley's total sales in 1996 for photocontrols was approximately
10% of the total U.S. utility photocontrol market of which 60% was electronic
solid state devices. Ripley also manufactures magnetic type photocontrols and
thermal type photocontrols which are still the majority of types sold into the
international market.
TIMERS: Timers are used in commercial cooking equipment, HVAC applications,
bio-medical devices that require a set time interval with an opening and closing
of an electrical switch. Rhodes' mechanical timer line sales remained stable in
1996. Rhodes' sales to OEM's were 68% of total timer and switch sales. Rhodes'
OEM sales are made to "Original Equipment Manufacturers" who produce products
that require time devices in their products, i.e.: oven manufacturers, blender
manufacturers, battery chargers, etc. Much of 1996 was spent developing new
products for the mechanical timer variety which will be introduced in the first
quarter of 1997. These timers are projected to increase our timer sales by
approximately 14%. These products are designed to sell in unique niche markets
and will not be in competition with imports from China or Tunisia. Electronic
niche markets are being studied for applications that Rhodes can take advantage
of its larger OEM customer base.
SOURCE AND AVAILABILITY OF RAW MATERIALS
The Company has never experienced a serious problem in obtaining raw
material and component parts, as there are generally many suppliers available to
meet the Company's requirements.
PATENTS AND TRADEMARKS
The Company has held hundreds of patents over the past 66 years along with
registered trademarks. These are maintained and reviewed as they come up for
renewal. The Company retains a patent attorney who monitors all activities. The
Company has 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 Company business is not seasonal or cyclical.
CUSTOMERS
The customer base consists of approximately 1,500 accounts. The loss of any
one customer would not have a material adverse financial effect on the
companies.
GOVERNMENT BUSINESS
The Company does 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, 1996 and 1995 was $3,435,000 and $2,809,000
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, 1996 will be filled
within the next 18 months.
COMPETITION
All mechanical interval timers sold in the U.S. other than Rhodes are
imports. Rhodes produces all of its mechanical timers sold into the OEM,
electrical distributor, special distributors, government sales and parking meter
markets in Avon, Connecticut, U.S.A. This gives Rhodes a distinct advantage when
quantities requested have to be delivered in just-in-time quantities on a weekly
basis. It also allows Rhodes engineers to work with our customers on a first
name basis and be available for meetings within a one day requirement.
As part of our consolidation of timer production in Avon, it was decided to
close Rhodes Canadian assembly operation which had produced losses in 1995 and
the first half of 1996. In doing so, the second half of 1996 became profitable
and now positions 1997 in a much brighter perspective to make the company once
again become profitable.
PRODUCT DEVELOPMENT
During the year the Company continued to develop new products directed
toward niche markets. In the area of photocontrols, emphasis was placed on
electronic units that will meet the requirements of utilities located in the
Southern lighting belt areas, high heat applications, high humidity and
corrosive atmospheres.
I-2
<PAGE> 4
4
In the timer line, new timers were developed for production in fire
fighting equipment which signals the firemen the amount of air supply they have
left in their oxygen equipment. Also timers were developed for extreme corrosive
atmospheric conditions where stainless steel, brass and protective coatings are
required. This is typical of our new development mission which is to develop
niche markets such as timers for handicap applications, medical devices and
other special requirements. 1997 will introduce several of these products.
EMPLOYEES
As of December 31, 1996, the Company employed 94 persons, 93 in Avon,
Connecticut and 1 in El Paso, Texas. Of the Avon employees, 70 are represented
by the International Association of Machinists, with the balance being salaried
employees. The Company considers its relationship with its employees to be
satisfactory.
ITEM 2. PROPERTIES
The Company owns factory, warehouse and office facilities, aggregating
92,000 square feet in Avon, Connecticut.
In the Company's opinion, this facility is adequate for the Company's
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 66.
H. B. Matles has served as a Vice President of Marketing in
charge of the Company's consumer sales since
1973. Age 60.
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 57.
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 41.
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 1996 was 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.
PRICES
<TABLE>
<CAPTION>
High Low Dividend
-------- -------- --------
<S> <C> <C> <C>
1996
- ----
First Quarter .............. $ 6 1/4 $ 5 1/4
Second Quarter .............. 6 1/4 5 1/4 .00
Third Quarter .............. 5 1/4 4 3/4
Fourth Quarter .............. 3 3/4 3 1/2
1995
- ----
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 $2.25 on March 12, 1997. No asked price was reported.
On March 12, 1997, 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, now the
Wilshire Credit Corporation, 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 1995 (payable in 1996)
and for 1996 (payable in 1997). 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>
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 8,011,086 $ 8,081,871 $ 9,815,715 $ 10,304,525 $ 10,448,886
Net income(loss) (177,373) (895,488) 79,351 129,521 (678,353)
Per share earnings(loss) (.88) (4.38) .38 .62 (3.23)
Total assets 4,886,532 5,346,957 6,998,344 6,709,115 6,999,996
Long term
obligations 726,537 275,621 1,160,610 1,039,688 37,021
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.
1996 Compared to 1995
Consolidated Net Sales for 1996 decreased by 1% compared to 1995. The
principal reason for this slight decrease was the phaseout of active business
operations in the Canadian subsidiary at the end of the fourth quarter. Canadian
sales decreased due to this phaseout in the second half of 1996 by $100,000.
Higher sales are expected in 1997 as manufacturing has been transferred to the
parent and distribution has been revised.
Gross profit as a percentage of Consolidated Net Sales was 19.4% in 1996
compared with 10.5% in 1995. The principal reasons for this were: (1) Inventory
obsolescence write-off of $50,000 compared to a 1995 write-off of $240,000. (2)
Stability in certain production lines whereas in 1995 relocation of these lines
was taking place at a cost of $46,000; (3) Significant decline in the inventory
decrease of $311,000 in 1996 compared to $1,242,000 in 1995 resulting in lower
non-cash accounting adjustments for prior years' items capitalized into
inventory that were charged to earnings for 1996 at $72,000 compared to 1995 at
$185,000; and, (4) Depreciation decreased as a result of assets being fully
depreciated.
Selling, General and Administrative expenses as a percentage of Net Sales
were 20.0% in 1996 compared to 19.5%. The principal reason for this was higher
legal fees.
The decrease in interest expense was due to a lower bank prime rate
involving the Company's line of credit (see Note 6) and the ESOP loan (see Note
8) in 1996 compared to 1995 and decreased borrowings. During 1996, the Company
paid down principal on its' ESOP loan by $170,000. The remaining balance on the
loan as of December 31, 1996 was $680,088. The State of Connecticut was paid
$47,000 in principal during 1996 and a balance of $242,825 remains as of
December 31, 1996. The line of credit was paid down $205,224 and the balance on
December 31, 1996 was $393,755.
The increase in other expense was due to the write off of prior years'
amortization costs of $6,000.
The Net Loss for 1996 was $177,373 compared to a Net Loss of $895,488 for
1995. In summary, the principal reasons for this 1996 loss were: (1) Non-cash
accounting adjustments during the first six months of 1996 for prior years'
items capitalized into inventory; (2) Canadian losses and the closing costs of
Canada; and (3) Higher legal fees. It should be noted that both the 1996 third
quarter and fourth quarter were profitable with a Net Income of $20,000 and
$42,000 respectively.
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.).
II-3
<PAGE> 9
9
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.
LIQUIDITY
The Company during 1996 reduced its borrowing availability under the
revolving line of credit from $1,000,000 to $650,000. The amount borrowed cannot
exceed 75% of acceptable Accounts Receivables. This line of credit is the source
for generating cash to meet liquidity needs. On December 31, 1996 the Company
had $393,755 borrowed under the revolver.
Working capital increased $518,000 for the twelve month period ended
December 31, 1996. This increase was the result of a long term mortgage note
$510,096 classified as current in 1995 and at the end of 1996 reclassified back
to long term debt. The reason for this was in 1995 the Company was not in
compliance of certain covenants on a mortgage note and a technical default was
invoked. However, the technical default has since been waived and the
reclassification has been recorded.
The inventory reduction of $311,000 provided the majority of cash generated
from operating activities. For investing activities, $50,000 of capital
expenditures were incurred. For financing activities, $445,000 was used in the
repayment of debt. The above resulted in the highest cash balances in several
years.
II-4
<PAGE> 10
10
CAPITAL RESOURCES
Capital expenditures during 1996 were $50,000 compared to 1995 capital
expenditures of $16,000. During 1997, 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-5
<PAGE> 11
11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted on pages II-9 thru II-19 of this
report.
II-6
<PAGE> 12
12
RIGGS &
ASSOCIATES, LLP
- ----------------
CERTIFIED PUBLIC
ACCOUNTANTS
AND CONSULTANTS
- ---------------- INDEPENDENT AUDITORS' REPORT
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 (the Company) as of December 31, 1996
and 1995 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 audit. The
consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31,
1994 were audited by other auditors whose report dated
February 15, 1995 expressed an unqualified opinion
thereon.
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 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, 1996 and 1995 and the results of
their operations and their cash flows for the years
then ended in conformity with generally accepted
accounting principles.
Riggs & Associates, LLP
Hartford, Connecticut
February 7, 1997
One State Street
Hartford, CT 06103
Telephone (860)549-8500
FAX (860)549-8501
II-7
<PAGE> 13
13
WHITTLESEY & HADLEY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
149 CHARTER OAK AVENUE
HARTFORD, CONNECTICUT 06106-5101
(860) 522-3111
FAX (860) 728-0232
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 as of December 31, 1994,
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 assurances 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, 1994, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
Whittlesey & Hadley, P.C.
Hartford, Connecticut
February 15, 1995
II-8
<PAGE> 14
M.H. RHODES, INC. AND SUBSIDIARY 14
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 137,750 $ 32,502
Accounts Receivable, net of allowance
for doubtful accounts of $26,670 in
1996 and $20,186 in 1995 1,091,401 1,252,210
Inventories 2,839,417 3,150,262
Prepaid Expenses and Other 38,716 35,622
----------- -----------
TOTAL CURRENT ASSETS 4,107,284 4,470,596
NET PROPERTY, PLANT AND EQUIPMENT 759,042 844,307
OTHER ASSETS 20,206 32,054
----------- -----------
TOTAL ASSETS $ 4,886,532 $ 5,346,957
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 393,755 $ 598,979
Current Portion of Long-term Debt 256,173 947,331
Accounts Payable 531,843 513,432
Other Accrued Expenses 321,295 324,909
----------- -----------
TOTAL CURRENT LIABILITIES 1,503,066 2,384,651
LONG-TERM DEBT, less current portion 726,537 275,621
OTHER NON-CURRENT LIABILITIES 100,000 121,757
COMMITMENTS AND CONTINGENCIES
Redeemable Common Stock, $1.00 par value,
73,321 and 68,592 shares outstanding
in 1996 and 1995, respectively 73,321 68,592
STOCKHOLDERS EQUITY:
Common Stock, $1.00 par value, 400,000
shares authorized, 300,880 issued and
129,278 and 134,007 shares outstanding
in 1996 and 1995, respectively 227,559 232,288
Paid-in Capital 3,697 3,697
Retained Earnings 3,980,871 4,158,862
----------- -----------
4,212,127 4,394,847
Less: Treasury Stock, at cost 98,281
shares in 1996 and 1995 (1,048,431) (1,048,431)
Unallocated ESOP shares (680,088) (850,080)
----------- -----------
2,483,608 2,496,336
----------- -----------
$ 4,886,532 $ 5,346,957
=========== ===========
</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 OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $ 8,011,086 $ 8,081,871 $ 9,815,715
COST OF SALES 6,458,508 7,231,797 7,953,273
----------- ----------- -----------
Gross profit 1,552,578 850,074 1,862,442
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,600,849 1,577,616 1,664,239
----------- ----------- -----------
Operating income (loss) (48,271) (727,542) 198,203
OTHER INCOME(EXPENSE):
INTEREST EXPENSE (132,448) (159,177) (153,966)
OTHER INCOME, (EXPENSE) net (4,106) 1,873 28,323
----------- ----------- -----------
(136,554) (157,304) (125,643)
----------- ----------- -----------
Income (loss) before
income taxes (184,825) (884,846) 72,560
PROVISION (BENEFIT) FOR
INCOME TAXES (7,452) 10,642 (6,791)
----------- ----------- -----------
Net income (loss) $ (177,373) $ (895,488) $ 79,351
=========== =========== ===========
Net income (loss) per share $ (.88) $ (4.38) $ .38
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 202,599 204,387 210,047
=========== =========== ===========
</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 STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<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, 1993 248,385 $248,385 $ 3,697 $4,987,164 90,597 $ (981,196) $(1,190,064) $3,067,986
Net Income -- -- -- 79,351 -- -- -- 79,351
ESOP Expense -- -- -- -- -- -- 169,992 169,992
Translation adjustments -- -- -- (20,060) -- -- -- (20,060)
Redeemable common stock (5,061) (5,061) -- -- -- -- -- (5,061)
Purchase of treasury stock -- -- -- -- 2,153 (18,839) -- (18,839)
------- -------- -------- ---------- ------ ----------- ----------- ----------
Balance, December 31, 1994 243,324 243,324 3,697 5,046,455 92,750 (1,000,035) (1,020,072) 3,273,369
Net loss -- -- -- (895,488) -- -- -- (895,488)
ESOP Expense -- -- -- -- -- -- 169,992 169,992
Translation adjustments -- -- -- 7,895 -- -- -- 7,895
Redeemable common stock (11,036) (11,036) -- -- -- -- -- (11,036)
Purchase of treasury stock -- -- -- -- 5,531 (48,396) -- (48,396)
------- -------- -------- ---------- ------ ----------- ----------- ----------
Balance, December 31, 1995 232,288 232,288 3,697 4,158,862 98,281 (1,048,431) (850,080) 2,496,336
Net loss -- -- -- (177,373) -- -- -- (177,373)
ESOP Expense -- -- -- -- -- -- 169,992 169,992
Redeemable common stock (4,729) (4,729) -- -- -- -- -- (4,729)
Translation adjustments -- -- -- (618) -- -- -- (618)
------- -------- -------- ---------- ------ ----------- ----------- ----------
Balance, December 31, 1996 227,559 $227,559 $ 3,697 $3,980,871 98,281 $(1,048,431) $ (680,088) $2,483,608
======= ======== ======== ========== ====== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
II-11
<PAGE> 17
17
M. H. RHODES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (177,373) $ (895,488) $ 79,351
----------- ----------- -----------
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 137,057 178,190 214,887
ESOP expense 169,992 169,992 169,992
Loss on sale of assets 559 -- --
Translation adjustments (618) 7,895 (20,060)
Change in assets and liabilities:
Accounts receivable 160,809 296,793 (7,079)
Inventories 310,845 1,241,561 (423,193)
Accounts payable, accrued expenses
and other, net (3,475) (628,369) (11,020)
----------- ----------- -----------
Net cash provided by
operating activities 597,796 370,574 2,878
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (50,459) (16,334) (100,959)
Proceeds from sale of property and
equipment 3,377 -- --
----------- ----------- -----------
Net cash used in investing
activities (47,082) (16,334) (100,959)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings 7,698,882 7,973,328 9,435,839
Proceeds from State of Connecticut
Financial Assistance Package -- -- 400,000
Repayment of debt (8,144,348) (8,252,831) (9,727,052)
Purchase of treasury stock -- (48,396) (18,839)
----------- ----------- -----------
Net cash provided by
(used in) financing
activities (445,466) (327,899) 89,948
----------- ----------- -----------
Net Increase(decrease) in cash 105,248 26,341 (8,133)
CASH AND CASH EQUIVALENTS, beginning of year 32,502 6,161 14,294
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 137,750 $ 32,502 $ 6,161
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-12
<PAGE> 18
18
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - GENERAL:
The Company manufactures timing devices and photoelectric lighting controls
primarily for sale to distributors and original equipment manufacturers.
These products are sold primarily in domestic and certain foreign markets.
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. As of September 30, 1996
operations ceased at M. H. Rhodes (Canada) Limited and the Board of
Directors voted for its dissolution. The Company purchased the minority
stockholders interest and all assets, excluding fixed assets which were
sold to outside parties, were transferred to the Company.
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.
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash equivalents.
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 improvements 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.
Revenue Recognition - Revenues from sales of timing devices and
photoelectric lighting controls is generally recognized upon delivery to
the customer.
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 and 1994 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-13
<PAGE> 19
19
M.H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
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.
Concentration of Credit Risk - The Company maintains their cash and cash
equivalents in high credit quality financial institutions. The balances,
at times, may be in excess of federally insured limits.
Fair Values of Financial Instruments - The Company values financial
instruments as required by Statement of Financial Accounting Standards No.
107, "Disclosure about Fair Values of Financial Instruments." The carrying
amounts of cash and cash equivalents, accounts receivable, and current
liabilities approximate fair value.
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>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials and component parts $1,576,083 $1,404,565
Work-in-process 843,654 1,418,297
Finished goods 419,680 327,400
---------- ----------
$2,839,417 $3,150,262
---------- ----------
</TABLE>
NOTE 4 - NET PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Buildings and improvements $1,270,698 $1,270,698
Machinery and equipment 2,529,388 2,518,231
Land 65,000 65,000
Construction in progress 8,250 --
---------- ----------
3,873,336 3,853,929
Less: Accumulated depreciation 3,114,294 3,009,622
---------- ----------
$ 759,042 844,307
---------- ----------
</TABLE>
II-14
<PAGE> 20
20
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 5 - INCOME TAXES:
The components of the provision (benefit) for income taxes at December 31
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ 77,406
State 7,106 10,642 31,495
Foreign -- -- 1,710
--------- --------- ---------
Total current $ 7,106 10,642 110,611
--------- --------- ---------
Deferred:
Federal $ (14,558) -- $ (56,315)
State -- -- (39,996)
Foreign -- -- (21,091)
--------- --------- ---------
Total deferred (14,558) -- (117,402)
--------- --------- ---------
$ (7,452) $ 10,462 $ (6,791)
--------- --------- ---------
</TABLE>
An analysis of the provision (benefit) for income taxes at December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal provision at statutory
rate --% --% 34%
Net operating loss limitation -- -- (5)
State tax benefit -- -- (12)
Benefit for Canadian loss -- -- (26)
---- ---- ----
--% --% (9)%
---- ---- ----
</TABLE>
The Company has approximately $1,830,000 of net operating loss
carryforwards available to reduce taxable income for Federal income tax
reporting purposes which expire between 2003 and 2015. For State income tax
purposes, the Company's net operating loss carryforwards are approximately
$1,025,000, which expire between 1997 and 2001.
II-15
<PAGE> 21
M. H. RHODES, INC. AND SUBSIDIARY 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 5 - INCOME TAXES (continued):
Deferred tax assets and liabilities at December 31 resulted from the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Receivables $ 8,818 $ 6,788
Inventory 43,957 142,125
Federal tax loss carryforwards 457,891 372,504
State tax loss carryforwards 110,561 85,315
Foreign tax loss carryforwards -- 18,000
Other -- 5,020
-------- --------
621,227 629,752
Less: Valuation allowance (280,353) (247,482)
-------- --------
Total deferred tax assets 340,874 382,270
Deferred tax liabilities:
Deferred Compensation 261,409 285,813
Property, plant and equipment 43,415 47,150
Investment in subsidiary 35,418 62,251
Debt issue costs 632 1,614
-------- --------
Total deferred tax liabilities 340,874 396,828
-------- --------
Net deferred tax liabilities $ -- $(14,558)
-------- --------
</TABLE>
The Company paid approximately, $8,200, $10,900 and $13,100 for income taxes for
1996, 1995 and 1994 respectively.
NOTE 6 - NOTES PAYABLE:
At December 31, 1996 and 1995, the Company had a note payable of $393,755
and $598,979 respectively, under an accounts receivable asset backed
revolver not to exceed the lesser of $650,000 or 75% of acceptable accounts
receivable and $1,000,000 or 80% of acceptable accounts receivable,
respectively. Interest is paid monthly at the prime rate (8.25% and 8.5% at
December 31, 1996 and 1995, respectively), plus 1 1/2% and principal is due
upon the collection of accounts receivable backing the outstanding
advances. The revolving loan expires February 28, 1997. 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 $400,000 even if outstanding borrowings fall below that threshold.
II-16
<PAGE> 22
22
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7 - LONG-TERM DEBT:
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Mortgage note 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) $ 680,088 $ 850,080
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. 242,825 289,821
Obligations under stock repurchase
agreements with certain former
employees due in annual installments
plus interest at approximately 8%
(see Note 8) 59,797 83,051
---------- ----------
982,710 1,222,952
Less - Current portion 256,173 947,331
---------- ----------
$ 726,537 $ 275,621
---------- ----------
</TABLE>
Aggregate principal payments of long-term debt for the next five years are
as follows:
Year ending December 31:
<TABLE>
<S> <C>
1997 $ 256,173
1998 241,358
1999 236,833
2000 231,212
2001 17,134
----------
$ 982,710
----------
</TABLE>
II-17
<PAGE> 23
23
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7 - LONG-TERM DEBT (continued):
The mortgage note payable contains various financial covenants primarily
related to the current ratio, net worth, liabilities to net worth, current
maturity of long-term debt ratio and restrictions on payment of dividends.
As of and for the year ended at December 31, 1996 and 1995 the Company was
not in compliance with the stipulated net worth and current maturity of
long-term debt covenants. On February 4, 1997, the lender waived the
provisions of the net worth and current maturity of long-term debt
covenants as of and for the year ended December 31, 1996.
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 $135,661, $173,388 and $138,200 for interest
in 1996, 1995 and 1994, 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 $65,495, $69,781 and $65,155 in
1996, 1995 and 1994, respectively.
II-18
<PAGE> 24
24
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 ($7.50 per share at December 31, 1995)
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 as
compensation based on annual principal payments of $169,992 made on the
ESOP debt. At December 31, 1996, 79,574 shares are allocated, 5,245 shares
are committed to be released and 18,105 shares are held in suspense. The
value of unearned ESOP shares at December 31, 1996 is estimated to be
$135,790.
NOTE 9 - REDEEMABLE COMMON STOCK:
In connection with the ESOP, 73,321 and 68,592 shares of common stock have
been classified as redeemable at December 31, 1996 and 1995, respectively.
These shares represent the vested portion of all common stock held by
employees with the right to put those shares to the Company upon cessation
of their employment (see Note 8).
NOTE 10 - 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 11 - 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 $45,189, $28,397 and $37,244 in 1996,
1995 and 1994, respectively. Since this plan is a multiemployer plan,
actuarial present values of accumulated plan benefits and other information
for a particular employer are not available.
II-19
<PAGE> 25
25
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-20
<PAGE> 26
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item with respect to Directors is incorporated
by reference in the Company's Proxy Statement for the Annual Shareholders
meeting to be held in May, 1997, pursuant to General Instruction G to Form 10-K.
Information concerning Executive Officers is included at the end of Part I of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference in the
Company's Proxy Statement for the Annual Shareholders meeting to be held in May,
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by this Item is incorporated by reference in the
Company's Proxy Statement for the Annual Shareholders meeting to be held in May,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III-1
<PAGE> 27
27
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-6
Opinion of Independent Public Accountants. II-7-8
Consolidated Balance Sheets - December 31, 1996 and 1995. II-9
Consolidated Statements of Operations -
Years ended December 31, 1996, 1995 and 1994. II-10
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1996, 1995 and 1994. II-11
Consolidated Statements of Cash Flows -
Years ended December 31, 1996, 1995 and 1994. II-12
Notes to Consolidated Financial Statements. II-13-19
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> 28
28
3. Exhibits Cross Reference Information
-------- ---------------------------
(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
** 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> 29
29
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> 30
30
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: /s/ Joseph L. Morelli
----------------------------
Joseph L. Morelli, President
and Chief Executive Officer
March 25, 1997
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: /s/ Joseph L. Morelli
----------------------------
Joseph L. Morelli, President
and Chief Executive Officer
March 25, 1997
By: /s/ Allan D. Springer
---------------------------------
Allan D. Springer, Vice President
Finance and Chief Financial
Officer/Principal Accounting
Officer
March 25, 1997
By: /s/ Edward J. Doyle
-------------------------
Edward J. Doyle, Director
March 25, 1997
By: /s/ Anthony J. Campanelli
-------------------------------
Anthony J. Campanelli, Director
March 25, 1997
By:
-------------------------
Harold T. LeMay, Director
March , 1997
<PAGE> 31
31
EXHIBIT INDEX
Sequential Numbering
System, Page number or
Exhibit Number Cross Reference Information
- -------------- ---------------------------
(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
** 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
32
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
33
EXHIBIT 21
SUBSIDIARIES OF COMPANY
The Company had 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 owned 96% of this
subsidiary's securities.
On September 30, 1996, the Company ceased active business operation for the
Canadian subsidiary and transferred its assets and liabilities to its parent
company, M. H. Rhodes, Inc. The Company's Board of Directors dissolved the
subsidiary on December 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 137,750
<SECURITIES> 0
<RECEIVABLES> 1,091,401
<ALLOWANCES> 0
<INVENTORY> 2,889,417
<CURRENT-ASSETS> 4,107,284
<PP&E> 3,873,336
<DEPRECIATION> 3,114,294
<TOTAL-ASSETS> 4,886,532
<CURRENT-LIABILITIES> 1,503,066
<BONDS> 0
0
0
<COMMON> 300,880
<OTHER-SE> 2,256,049
<TOTAL-LIABILITY-AND-EQUITY> 4,886,532
<SALES> 8,011,086
<TOTAL-REVENUES> 8,011,086
<CGS> 6,458,508
<TOTAL-COSTS> 6,458,508
<OTHER-EXPENSES> 1,600,849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132,448
<INCOME-PRETAX> (184,825)
<INCOME-TAX> (7,452)
<INCOME-CONTINUING> (177,373)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
