Henry 10-Q 2001 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934.
	For the Quarterly Period Ended June 30, 2001
	Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934.

For the transition period from __________ to __________.

Commission file number 333-59485

HENRY COMPANY(Exact Name of Registrant as Specific in Its Charter
California	95-3618402
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2911 Slauson Avenue, Huntington Park, California	90255
(Address of Principal Executive Offices)	(Zip Code)
(323) 583-5000
Registrant's Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.

Indicate by check X 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 o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of June 30, 2001, there were 221,500 shares of the registrant's common stock and 6,000 shares of Class A Common Stock, no par value, outstanding.

HENRY COMPANY
FORM 10-Q
TABLE OF CONTENTS
JUNE 30, 2001

PART I.			FINANCIAL INFORMATION
	ITEM 1.			Financial Statements
		Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001 (Unaudited)
		Consolidated Statements of Operations for the three months and six months ended June 30, 2000 and 2001 (Unaudited)
		Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the six months ended June 30, 2001 (Unaudited)
		Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 2001 (Unaudited)
		Notes to Consolidated Financial Statements
	ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II.			OTHER INFORMATION
	ITEM 4.			SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6.			EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

Part I. Financial Information

             Item 1.  Financial Statements

HENRY COMPANY
CONSOLIDATED BALANCE SHEETS

				December 31,			June 30,
				2000			2001
							(Unaudited)
ASSETS:
Current assets:
	Cash and cash equivalents			$	1,046,115		$	766,637
	Trade accounts receivable, net of allowance for doubtful accounts of $2,044,158 and $2,570,500 for 2000 and 2001, respectively			25,253,299			33,398,601
	Inventories			18,013,098			18,571,686
	Receivables from affiliate			2,123,910			1,205,345
	Notes receivable			763,947			775,675
	Prepaid expenses and other current assets			1,492,074			1,587,589
	Income tax receivable			133,935			314,091
	Deferred income taxes			5,257,223			5,256,817
			Total current assets	54,083,601			61,876,441
Property and equipment, net				34,180,641			32,118,663
Cash surrender value of life insurance, net				5,087,384			3,127,790
Intangibles, net				26,820,922			25,521,493
Notes receivable				271,600			266,501
Note receivable from affiliate				1,863,072			1,863,072
Deferred income taxes				2,754,746			4,680,934
Other				225,603			221,295
			Total assets	$	125,287,569		$	129,676,189
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current liabilities:
	Accounts payable			$	6,143,253		$	8,602,697
	Accrued expenses			8,990,604			9,882,443
	Book overdrafts			4,516,278			4,132,383
	Income taxes payable			—			262,711
	Deferred income taxes			130,342			130,342
	Notes payable, current portion			51,596			56,193
	Borrowings under lines of credit			13,454,094			19,335,481
			Total current liabilities	33,286,167			42,402,250
Notes payable				464,618			434,694
Environmental reserve				3,301,546			3,272,635
Deferred income taxes				8,063,613			7,899,403
Deferred warranty revenue				2,278,821			2,417,223
Deferred compensation				937,908			798,179
Series B Senior Notes				81,400,000			81,400,000
			Total liabilities	129,732,673			138,624,384
Commitments and contingencies
Redeemable convertible preferred stock				1,919,433			2,001,021
Shareholders' equity (deficit):
		Common stock		4,691,080			4,691,080
		Additional paid-in capital		2,364,308			2,282,720
		Cumulative translation adjustment		(497,228		)	(578,964		)
		Accumulated deficit		(12,922,697		)	(17,344,052		)
			Total shareholders' deficit	(6,364,537		)	(10,949,216		)
			Total liabilities and shareholders' equity (deficit)	$	125,287,569		$	129,676,189

                        The accompanying notes are an integral part of these consolidated financial statements.

HENRY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2000			2001			2000			2001
Net sales			$	51,540,724		$	54,045,465		$	93,093,069		$	94,054,279
Cost of sales			38,795,828			39,251,425			69,276,099			69,137,939
	Gross profit		12,744,896			14,794,040			23,816,970			24,916,340
Operating expenses:
	Selling, general and administrative		12,933,257			13,296,148			24,488,983			24,760,428
	Amortization of intangibles		635,187			635,460			1,273,410			1,272,438
	Operating income (loss)		(823,548		)	862,432			(1,945,423		)	(1,116,526		)
Other expense (income):
	Interest expense		2,504,624			2,581,707			4,716,769			4,976,839
	Interest and other income, net		(58,584		)	(46,683		)	(114,326		)	(106,852		)
		Loss before benefit for income taxes	(3,269,588		)	(1,672,592		)	(6,547,866		)	(5,986,513		)
Benefit for income taxes			(897,391		)	(233,756		)	(1,782,558		)	(1,565,158		)
		Net loss	$	(2,372,197	)	$	(1,438,836	)	$	(4,765,308	)	$	(4,421,355	)

             The accompanying notes are an integral part of these consolidated financial statements.

HENRY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)

			Common Stock
										Cumulative
			Issued				Additional			Translation			Accumulated
			Shares		Amount		Paid-in Capital			Adjustment			Deficit			Total
Balance, December 31, 2000				227,500	$	4,691,080	$	2,364,308		$	(497,228	)	$	(12,922,697	)	$	(6,364,537	)
Accretion on redeemable convertible preferred stock			—		—		(81,588		)	—			—			(81,588		)
Comprehensive loss:
	Net loss		—		—		—			—			(4,421,355		)	(4,421,355		)
	Other comprehensive loss
		Change in cumulative translation adjustment	—		—		—			(81,736		)	—			(81,736		)
Total comprehensive loss			—		—		—			—			—			(4,503,091		)
Balance, June 30, 2001				227,500	$	4,691,080	$	2,282,720		$	(578,964	)	$	(17,344,052	)	$	(10,949,216	)

             The accompanying notes are an integral part of these consolidated financial statements.

HENRY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 2001
(UNAUDITED)

					2000			2001
Cash flows from operating activities:
	Net loss				$	(4,765,308	)	$	(4,421,355	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			2,511,504			2,609,256
		Provision for doubtful accounts			127,417			526,342
		Deferred income taxes			(289,224		)	(2,089,992		)
		Noncompetition and goodwill amortization			1,276,333			1,274,174
		Loss on disposal of property and equipment and other assets			221,045			-
		Changes in operating assets and liabilities, net of assets acquired:
			Accounts receivable		(12,421,088		)	(8,671,644		)
			Inventories		(4,640,868		)	(558,588		)
			Receivables from affiliates		(238,534		)	918,565
			Notes receivable		(10,873		)	(6,629		)
			Other assets		(7,604		)	(91,207		)
			Income tax receivable		(1,514,500		)	(180,156		)
			Accounts payable and accrued expenses		2,929,202			3,585,084
			Deferred warranty revenue		219,448			138,402
			Deferred compensation		(44,647		)	(139,729		)
				Net cash used in operating activities	(16,647,697		)	(7,107,477		)
Cash flows from investing activities:
	Capital expenditures				(1,246,162		)	(606,012		)
	Proceeds from the disposal of property and equipment				15,955			-
	Investment in affiliate				4,643			-
				Net cash used in investing activities	(1,225,564		)	(606,012		)
Cash flows from financing activities:
	Net borrowings under line-of-credit agreements				16,030,559			5,881,387
	Repayments under notes payable agreements				(140,911		)	(29,924		)
	Borrowings under notes payable agreements				34,491			4,597
	Increase (decrease) in book overdrafts				2,998,150			(383,896		)
	Cash surrender value of life insurance				(258,532		)	1,959,594
				Net cash provided by financing activities	18,663,757			7,431,758
Effect of exchange rate changes on cash and cash equivalents					(127,306		)	2,253
				Net increase (decrease) in cash and cash equivalents	663,190			(279,478		)
Cash and cash equivalents, beginning of period					685,044			1,046,115
Cash and cash equivalents, end of period					$	1,348,234		$	766,637

             The accompanying notes are an integral part of these consolidated financial statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. Interim Financial Statements:

             The accompanying unaudited condensed consolidated financial statements of Henry Company, a California corporation (the "Company"), include all adjustments (consisting of normal recurring entries) which management believes are necessary for a fair presentation of the financial position and results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with quarterly reporting guidelines. The year-end condensed balance sheet data was derived from the Company's audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accompanying financial statements should be read in conjunction with the Company's audited consolidated financial statements and footnotes as of and for the year ended December 31, 2000 as included in the Company's Annual Report on Form 10-K. Operating results for the six months ended June 30, 2001 are not necessarily indicative of the operating results for the full fiscal year.

             The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reporting period. Actual results could differ from those estimates.

2. Recent Accounting Pronouncements

             In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivatives and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. The Company adopted SFAS No. 133 in the first quarter of 2001. The Company’s adoption of SFAS No. 133 did not have a significant impact on the Company's financial position, results of operations, or cash flows.

             In July 2001, the FASB issued SFAS Nos. 141 and 142, "Business Combinations" and "Goodwill and Other Intangible Assets".  SFAS No. 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively.  It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill.  SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach.  Under SFAS No. 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. SFAS No. 141 and SFAS No. 142 are effective for all business combinations completed after June 30, 2001.  Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified to goodwill.  Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted.  The Company will adopt SFAS No. 142 on January 1, 2002, the beginning of fiscal year 2002.  In connection with the adoption of SFAS No. 142, the Company will be required to perform a transitional goodwill impairment assessment.  The Company has not yet determined the impact these standards will have on the Company's results of operations and financial position.

3. Inventories:

             Inventories consist of the following:

	December 31,		June 30,
	2000		2001
Raw materials	$	8,296,980	$	7,981,841
Finished goods	9,716,118		10,589,845
	$	18,013,098	$	18,571,686

4. Property and Equipment:

Property and equipment consists of the following:

	December 31,			June 30,
	2000			2001
Buildings	$	14,856,607		$	14,818,645
Machinery and equipment	27,579,944			27,744,820
Office furniture and equipment	6,953,666			6,984,883
Automotive equipment	1,349,267			1,353,172
Leasehold improvements	2,928,565			2,929,263
Other assets	454,834			486,535
	54,122,883			54,317,318
Less, accumulated depreciation and
amortization	(24,582,232		)	(27,157,743		)
	29,540,651			27,159,575
Land	3,262,550			3,254,839
Construction-in-progress	1,377,440			1,704,249
	$	34,180,641		$	32,118,663

5. Long-term Debt and Credit Facilities:

             In April 1998, the Company privately issued and sold $85,000,000 of Series B Senior Notes (the "Senior Notes") due in 2008. Interest on the Senior Notes is payable semi-annually at 10% per annum. In October 1998, the Company completed an exchange offer for all of the Senior Notes. The terms of the new Senior Notes are identical in all material respects to the original private issue. The proceeds from the offering were used to (i) retire existing Henry Company bank debt, (ii) retire existing Henry Company subordinated shareholder debt, (iii) acquire Monsey Bakor, (iv) retire a substantial portion of Monsey Bakor's then-existing bank debt with (v) the remainder providing additional working capital.

             Long-term debt consists of the following at June 30, 2001:

10.0% Series B Senior Notes due 2008	$	81,400,000
Various term notes payable to third parties with interest rates ranging from 6% to 9.25%, maturing from 2001 to 2013	19,826,368
	101,226,368
Less, current maturities	19,391,674
	$	81,834,694

             The Company's Senior Notes are guaranteed by the Company's United States subsidiary (the "Subsidiary Guarantor"). The guarantee obligations of the Subsidiary Guarantor are full, unconditional and joint and several. See Note 8 for the Guarantor Condensed Consolidating Financial Statements.

             In 1999, the Company repurchased and retired $3.6 million of the Senior Notes which resulted in a gain of $0.6 million, net of income taxes.

             In August 2001, the Company entered into a replacement credit facility agreement with two new financial institutions, and received funding. The replacement credit facility provides for a $25 million revolving credit facility and a $10 million term loan.  Upon closing, $3.5 million of the term loan was funded.  The replacement credit facility expires in August 2006 and is collateralized by substantially all of the Company’s United States assets. Borrowings on the line of credit bear interest at the prime rate with an option to borrow based on the LIBOR rate. The prime rate was 6.75% at June 30, 2001. The Company also has a Canadian bank line of credit, subject to annual confirmation, aggregating $4,440,000 with interest charged at prime plus 0.5%. At June 30, 2001, $2,718,374 was outstanding under this Canadian line.

6. Income Taxes:

             The significant components of the provision (benefit) for income taxes are as follows:

		Six Months Ended			Six Months Ended
		June 30, 2000			June 30, 2001
Current:
	Federal	$	(1,578,400	)	—
	State	(278,500		)	—
	Foreign	$	271,971		$	485,811
		(1,584,929		)	485,811
Deferred:
	Federal	(155,201		)	(1,730,376		)
	State	(42,428		)	(320,593		)
	Foreign	—			—
		(197,629		)	(2,050,969		)
		$	(1,782,558	)	$	(1,565,158	)

The Company's effective tax rate differs from the federal statutory tax rate for and the six month periods ended June 30, 2001 and 2000 as follows:

	Six Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2000		2001
Provision (benefit) for income taxes at the federal statutory tax rate	(34.0	%)	(34.0	%)
State taxes, net of federal tax benefit	(6.0	)	(3.0	)
Foreign income taxes in excess of U.S. statutory rate	4.2		1.0
Nondeductible intangibles	9.7		5.0
Nondeductible life insurance	—		1.0
Other, net	(1.1	)	3.9
	(27.2	%)	(26.1	%)

             Loss before income taxes of the Company's Canadian operations was $67,810 and $606,632 for the six month periods ended June 30, 2001 and 2000, respectively.

7. Related Party Transactions:

             During the six month periods ended June 30, 2001 and 2000, the Company has charged the Henry Wine Group approximately $387,500 each period for reimbursement of administrative services provided by the Company pursuant to an administrative services agreement that was effective as of January 1, 1998.

8. GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:

             The Company's United States subsidiary, Kimberton Enterprises, Inc. (the "Guarantor Subsidiary") is an unconditional guarantor, on a full, joint and several basis, of the Company's debt represented by the Senior Notes. The Company's Canadian subsidiaries are not guarantors of the Senior Notes.

             Condensed consolidating financial statements of the Guarantor are combined with the Henry Company and are presented below. Separate financial statements of the Guarantor Subsidiary are not presented and the Guarantor Subsidiary is not filing separate reports under the Exchange Act because the Subsidiary Guarantor has fully and unconditionally guaranteed the Senior Notes on a full, joint and several basis under the guarantees and management has determined that separate financial statements and other disclosures concerning the Guarantor Subsidiary are not material to investors.

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)

			Henry Company
			(Parent
			Corporation)					Consolidated
			And Guarantor			Nonguarantor		Elimination			Consolidated
			Subsidiary			Subsidiaries		Entries			Total
ASSETS:
Current assets:
	Cash and cash equivalents		$	764,502		$	2,135	—			$	766,637
	Accounts receivable, net		28,388,022			5,010,579		—			33,398,601
	Inventories		13,755,170			4,816,516		—			18,571,686
	Receivables from affiliate		7,084,013			1,552,244		$	(7,430,912	)	1,205,345
	Notes receivable		775,675			—		—			775,675
	Prepaid expenses and other current assets		1,496,312			91,277		—			1,587,589
	Income tax receivable		—			314,091		—			314,091
	Deferred income taxes		5,218,525			38,292		—			5,256,817
		Total current assets	57,482,219			11,825,134		(7,430,912		)	61,876,441
Property and equipment, net			26,431,009			5,687,654		—			32,118,663
Investment in subsidiaries			8,564,729			—		(8,564,729		)	—
Cash surrender value of life insurance, net			3,127,790			—		—			3,127,790
Intangibles, net			23,139,644			2,381,849		—			25,521,493
Notes receivable			266,501			—		—			266,501
Note receivable from affiliate			1,863,072			—		—			1,863,072
Deferred income taxes			4,680,934			—		—			4,680,934
Other assets			221,295			—		—			221,295
Total assets			$		125,777,193	$	19,894,637	$	(15,995,641	)	$	129,676,189

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)

             LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):

Current liabilities:
	Accounts payable				$	4,860,945		$	3,741,752		—			$	8,602,697
	Accrued expenses				9,035,901			846,542			—			9,882,443
	Book overdrafts				4,092,018			40,365			—			4,132,383
	Intercompany payables				1,552,244			5,878,668			$	(7,430,912	)	—
	Income taxes payable				—			262,711			—			262,711
	Deferred income taxes				130,342			—			—			130,342
		Notes payable, current portion			56,193			—			—			56,193
		Borrowings under line of credit			16,617,107			2,718,374			—			19,335,481
				Total current liabilities:	36,344,750			13,488,412			(7,430,912		)	42,402,250
Notes payable					434,694			—			—			434,694
Environmental reserve					3,272,635			—			—			3,272,635
Deferred income taxes					6,248,326			1,651,077			—			7,899,403
Deferred warranty revenue					2,201,243			215,980			—			2,417,223
Deferred compensation					798,179			—			—			798,179
Series B Senior Notes					81,400,000			—			—			81,400,000
				Total liabilities	130,699,827			15,355,469			(7,430,912		)	138,624,384
Redeemable convertible preferred stock					2,001,021			—			—			2,001,021
Shareholder equity (deficit):
Common stock					4,691,080			7,194,402			(7,194,402		)	4,691,080
Additional paid-incapital					2,282,720			—			—			2,282,720
Cumulative translation adjustment					—			(1,166,964		)	588,000			(578,964		)
Accumulated deficit					(13,897,455		)	(1,488,270		)	(1,958,327		)	(17,344,052		)
			Total shareholders' equity (deficit)		(6,923,655		)	4,539,168			(8,564,729		)	(10,949,216		)
			Total liabilities and shareholders' equity (deficit)		$	125,777,193		$	19,894,637		$	(15,995,641	)	$	129,676,189

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)

			Henry Company
			(Parent
			Corporation)						Consolidated
			And Guarantor			Nonguarantor			Elimination			Consolidated
			Subsidiary			Subsidiaries			Entries			Total
Net sales			$	81,805,789		$	16,919,487		$	(4,670,997	)	$	94,054,279
Cost of sales			60,746,222			13,062,714			(4,670,997		)	69,137,939
		Gross profit	21,059,567			3,856,773			—			24,916,340
Operating expenses:
	Selling, general and administrative		21,037,347			3,723,081			—			24,760,428
	Amortization of intangibles		1,212,294			60,144			—			1,272,438
		Operating income(loss)	(1,190,074		)	73,548			—			(1,116,526		)
Other expense (income):
	Interest expense		4,835,481			141,358			—			4,976,839
	Interest and other income, net		(106,852		)	—			—			(106,852		)
		Loss before benefit for income taxes	(5,918,703		)	(67,810		)	—			(5,986,513		)
Provision (benefit) for income taxes			(2,050,969		)	485,811			—			(1,565,158		)
	Net loss		$	(3,867,734	)	$	(553,621	)	—			$	(4,421,355	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(UNAUDITED)

			Henry Company (Parent Corporation) And Guarantor Subsidiary			Nonguarantor Subsidiaries			Consolidated Elimination Entries			Consolidated Total
Net sales			$	46,680,048		$	9,850,681		$	(2,485,264	)	$	54,045,465
Cost of sales			34,276,742			7,480,401			(2,505,718		)	39,251,425
		Gross profit	12,403,306			2,370,280			20,454			14,794,040
Operating expenses:
	Selling, general and administrative		11,307,067			1,968,627			20,454			13,296,148
	Amortization of intangibles		605,388			30,072			0			635,460
		Operating income	490,851			371,581			0			862,432
Other expense (income):
	Interest expense		2,506,872			74,835			0			2,581,707
	Interest and other income, net		(46,683		)	0			0			(46,683		)
		Income (loss) before provision (benefit) for income taxes	(1,969,338		)	296,746			0			(1,672,592		)
Provision (benefit) for income taxes			(612,265		)	378,509			-			(233,756		)
		Net loss	$	(1,357,073	)	$	(81,763	)	$	0		$	(1,438,836	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)

					Henry Company
					(Parent
					Corporation)						Consolidated
					And Guarantor			Nonguarantor			Elimination	Consolidated
					Subsidiary			Subsidiaries			Entries	Total
Net cash provided by (used in) operating activities					($8,404,650		)	$	1,297,173		—	($7,107,477		)
Cash flows from investing activities:
	Capital expenditures				(532,981		)	(73,031		)	—	(606,012		)
				Net cash used in investing activities	(532,981		)	(73,031		)	—	(606,012		)
Cash flows from financing activities:
	Net borrowings (repayments) under line-of-credit agreements				6,799,120			(917,733		)	—	5,881,387
	Repayments under notes payable agreements				(29,924		)	—			—	(29,924		)
	Borrowings under notes payable agreements				4,597							4,597
	Decrease in book overdrafts				(75,530		)	(308,366		)	—	(383,896		)
	Cash surrender value of life insurance				1,959,594			—			—	1,959,594
			Net cash provided by (used in) financing activities		8,657,857			(1,226,099		)	—	7,431,758
		Effect of changes in exchange rate on cash and cash equivalents			—			2,253			—	2,253
		Net increase (decrease) in cash and cash equivalents			(279,774		)	296			—	(279,478		)
Cash and cash equivalents, beginning of period.					1,044,276			1,839			—	1,046,115
Cash and cash equivalents, end of period					$	764,502		$	2,135		—	$	766,637

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000

				Henry Company
				(Parent
				Corporation) and				Consolidated
				Guarantor		Nonguarantor		Elimination			Consolidated
				Subsidiaries		Subsidiaries		Entries			Total
ASSETS:
Current assets:
	Cash and cash equivalents			$	1,044,276	$	1,839	—			$	1,046,115
	Accounts receivable, net			22,201,195		3,052,104		—			25,253,299
	Inventories, net			14,257,986		3,755,112		—			18,013,098
	Receivables from affiliate			7,000,818		2,486,652		$	(7,363,560	)	2,123,910
	Notes receivable			763,947		—		—			763,947
	Prepaid expenses and other current assets			1,364,281		127,793		—			1,492,074
	Income tax receivable			—		133,935		—			133,935
	Deferred income taxes			5,218,525		38,698		—			5,257,223
		Total current assets		51,851,028		9,596,133		(7,363,560		)	54,083,601
Property and equipment, net				28,169,355		6,011,286		—			34,180,641
Investment in subsidiaries				8,564,729		—		(8,564,729		)	—
Cash surrender value of life insurance, net				5,087,384		—		—			5,087,384
Intangibles, net				24,353,674		2,467,248		—			26,820,922
Notes receivable				271,600		—		—			271,600
Note receivable from affiliate				1,863,072		—		—			1,863,072
Deferred income taxes				2,754,746		—		—			2,754,746
Other assets				225,603		—		—			225,603
			Total assets	$	123,141,191	$	18,074,667	$	(15,928,289	)	$	125,287,569

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000

LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
	Accounts payable				$	4,886,168		$	1,257,085		—			$	6,143,253
	Accrued expenses				8,033,860			956,744			—			8,990,604
	Book overdrafts				4,167,547			348,731			—			4,516,278
	Intercompany payables				2,486,652			4,876,908			$	(7,363,560	)	—
	Deferred income taxes				130,342			—			—			130,342
	Notes payable, current portion				51,596			—			—			51,596
	Borrowings under line of credit				9,817,987			3,636,107			—			13,454,094
				Total current liabilities	29,574,152			11,075,575			(7,363,560		)	33,286,167
Notes payable					464,618			—			—			464,618
Environmental reserve					3,301,546			—			—			3,301,546
Deferred income taxes					6,395,322			1,668,291			—			8,063,613
Deferred warranty revenue					2,122,546			156,275			—			2,278,821
Deferred compensation					937,908			—			—			937,908
Senior notes					81,400,000			—			—			81,400,000
				Total liabilities	124,196,092			12,900,141			(7,363,560		)	129,732,673
Redeemable convertible preferred stock					1,919,433			—			—			1,919,433
Shareholders' equity (deficit):
		Common stock			4,691,080			7,194,402			(7,194,402		)	4,691,080
		Additional paid-in capital			2,364,308			—			—			2,364,308
		Cumulative translation adjustment			—			(1,085,228		)	588,000			(497,228		)
		Accumulated deficit			(10,029,722		)	(934,648		)	(1,958,327		)	(12,922,697		)
			Total shareholders' equity (deficit)		(2,974,334		)	5,174,526			(8,564,729		)	(6,364,537		)
			Total liabilities and shareholders' equity (deficit)		$	123,141,191		$	18,074,667		$	(15,928,289	)	$	125,287,569

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)

			Henry Company
			(Parent
			Corporation)				Consolidated
			And Guarantor		Nonguarantor		Elimination		Consolidated
			Subsidiary		Subsidiaries		Entries		Total
Net sales			$ 81,699,070		$ 16,045,125		($4,651,126	)	$ 93,093,069
Cost of sales			61,381,918		12,608,211		(4,714,030	)	69,276,099
		Gross profit	20,317,152		3,436,914		62,904		23,816,970
Operating expenses:
	Selling, general and administrative		20,563,030		3,863,049		62,904		24,488,983
	Amortization of intangibles		1,210,992		62,418		—		1,273,410
		Operating loss	(1,456,870	)	(488,553	)	—		(1,945,423	)
Other expense (income):
	Interest expense		4,598,690		118,079		—		4,716,769
	Interest and other income, net		(114,326	)	—		—		(114,326	)
		Loss before benefit for income taxes	(5,941,234	)	(606,632	)	—		(6,547,866	)
Provision (benefit) for income taxes			(2,054,529	)	271,971		—		(1,782,558	)
	Net loss		($3,886,705	)	($878,603	)	—		($4,765,308	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
(UNAUDITED)

			Henry Company (Parent Corporation) And Guarantor Subsidiaries			Nonguarantor Subsidiaries			Consolidated Elimination Entries			Consolidated Total
Net sales			$	44,659,471		$	9,150,357		$	(2,269,104	)	$	51,540,724
Cost of sales			33,930,779			7,165,605			(2,300,556		)	38,795,828
		Gross profit	10,728,692			1,984,752			31,452			12,744,896
Operating expenses:
	Selling, general and administrative		10,887,820			2,013,985			31,452			12,933,257
	Amortization of intangibles		603,978			31,209			0			635,187
		Operating loss	(763,106		)	(60,442		)	0			(823,548		)
Other expense (income):
	Interest expense		2,434,060			70,564			0			2,504,624
	Interest and other income, net		(58,584		)	0			0			(58,584		)
		Loss before provision (benefit) for income taxes	(3,138,582		)	(131,006		)	0			(3,269,588		)
Provision (benefit) for income taxes			(1,098,811		)	201,420			-			(897,391		)
		Net loss	$	(2,039,771	)	$	(332,426	)	$	0		$	(2,372,197	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)

				Henry Company
				(Parent
				Corporation)						Consolidated
				And Guarantor			Nonguarantor			Elimination	Consolidated
				Subsidiary			Subsidiaries			Entries	Total
Net cash used in operating activities				($14,517,659		)	($2,130,038		)	—	($16,647,697		)
	Cash flows from investing activites:
		Capital expenditures		(882,748		)	(363,414		)	—	(1,246,162		)
		Proceeds from the disposal of property and equipment		15,955			—			—	15,955
		Investment in affiliate		4,643			—			—	4,643
			Net cash used in investing activities	(862,150		)	(363,414		)	—	(1,225,564		)
Cash flows from financing activities:
	Net borrowings under line-of-credit agreements			13,656,719			2,373,840			—	16,030,559
	Repayments under notes payable agreements			(86,558		)	(54,353		)	—	(140,911		)
	Borrowings under notes payable agreements			34,491			—			—	34,491
	Increase in book overdrafts			2,696,924			301,226			—	2,998,150
	Cash surrender value of life insurance			(258,532		)	—			—	(258,532		)
			Net cash provided by financing activities	16,043,044			2,620,713			—	18,663,757
			Effect of changes in exchange rate on cash and cash equivalents	—			(127,306		)	—	(127,306		)
			Net increase (decrease) in cash and cash equivalents	663,235			(45		)	—	663,190
Cash and cash equivalents, beginning of period				683,138			1,906			—	685,044
Cash and cash equivalents, end of period				$	1,346,373		$	1,861		—	$	1,348,234

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
	AND RESULTS OF OPERATIONS

             The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of the Company. This discussion should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2001 of which this commentary is a part, the unaudited condensed consolidated financial statements and the related notes thereto.

             General

             The Company manages its business through two reportable segments or primary business units with separate management teams, infrastructures, marketing strategies and customers. The Company's reportable segments are: the Henry Building Products Division, which develops, manufactures and markets roof and driveway coatings and paving products, industrial emulsions, air barriers, and specialty products; and the Resin Technology Division, which develops, manufactures and sells polyurethane foam for roofing and commercial construction. The Company evaluates the performance of its operating segments based on net sales, gross profit and operating income. Intersegment sales and transfers are not significant.

             Summarized financial information concerning the Company's reportable segments is shown below.

	Six Months Ended June 30, 2001								Six Months Ended June 30, 2000
	Henry								Henry
	Building			Resin					Building			Resin
	Products			Technology					Products			Technology
	Division			Division		Total			Division			Division		Total
Net sales	$	83,501,136		$	10,553,143	$	94,054,279		$	82,672,714		$	10,420,355	$	93,093,069
Gross profit	23,022,644			1,893,696		24,916,340			21,985,801			1,831,169		23,816,970
Operating income (loss)	(1,139,249		)	22,723		(1,116,526		)	(2,376,533		)	431,110		(1,945,4253		)
Depreciation and amortization	3,785,770			97,660		3,883,430			3,703,725			84,112		3,787,837
Total assets	116,656,802			13,019,387		129,676,189			118,003,934			14,332,167		132,336,101
Capital expenditures	552,027			53,985		606,012			1,190,075			56,087		1,246,162

             The Company is domiciled in the United States with foreign operations based in Canada which were acquired in April 1998. Prior to the April 1998 acquisition of Monsey Bakor, the Company had no foreign operations. Summarized geographic data related to the Company's operations for the six month period ended June 30, 2001 and 2000 are as follows:

						Long-lived		Long-lived
		Net Sales		Net Sales		Assets		Assets
		June 30, 2001		June 30, 2000		June 30, 2001		June 30, 2000
United States		$	77,134,792	$	77,047,944	$	57,858,630	$	61,731,382
Canada		16,919,487		16,045,125		8,069,503		8,751,138
	Total	$	94,054,279	$	93,093,069	$	65,928,133	$	70,482,520

Results of Operations

              SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF HENRY COMPANY

Consolidated Statements of Operations Data:

		Three Months Ended June 30											Six Months Ended June 30
		($ in millions)											($ in millions)
		2000			% of sales		2001			% of sales			2000				% of sales		2001					% of sales
Net sales		$	51.5		100.0	%	$	54.1		100.0	%	$			93.1		100.0	%		$		94.1		100.0	%
Cost of sales		38.8			75.3	%	39.3			72.6	%	69.3					74.4	%		69.1				73.4	%
	Gross Profit	12.7			24.7	%	14.8			27.4	%	23.8					25.6	%		25.0				26.6	%
Operating expenses:
	Selling, general and administrative	12.9			25.0	%	13.3			24.6	%	24.5					26.3	%		24.8				26.4	%
	Amortization of intangibles	0.6			1.2	%	0.6			1.1	%	1.3					1.4	%		1.3				1.4	%
	Operating income(loss)	(0.8		)	(1.5	%)	0.9			(1.7	%)	(2.0				)	(2.1	%)		(1.1			)	(1.2	%)
Interest expense		2.5			4.9	%	2.6			4.8	%	4.7					5.0	%		5.0				5.3	%
Interest and other income, net		—			—	%	(.1		)	(.1	%)	(.1				)	(.1	%)		(.1			)	(.1	%)
	Loss before benefit for income taxes	(3.3		)	(6.4	%)	(1.6		)	(3.0	%)	(6.6				)	(7.1	%)		(6.0			)	(6.4	%)
Benefit for income taxes		(0.9		)	(1.7	%)	(0.2		)	(0.4	%)	(1.8				)	(1.9	%)		(1.6			)	(1.7	%)
Net loss			($2.4	)	(4.7	%)		($1.4	)	(2.6	%)			($4.8		)	(5.2	%)			($4.4		)	(4.7	%)

FOR THE THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 2000

NET SALES. The Company's net sales increased to $54.1 million for the three months ended June 30, 2001, an increase of $2.6 million, or 5.0%, from $51.5 million for the three months ended June 30, 2000. The increase was primarily due to the implementation of price increases on solvent-based products associated with the increased cost of petroleum-based raw materials.

GROSS PROFIT. The Company's gross profit increased to $14.8 million for the three months ended June 30, 2001, an increase of $2.1 million, or 16.5%, from $12.7 million for the three months ended June 30, 2000. Gross profit as a percentage of net sales increased to 27.4% for the three months ended June 30, 2001 from 24.7% for the three months ended June 30, 2000. The increase was due to price increases on solvent-based products and improved cost containment.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased to $13.3 million for the three months ended June 30, 2001, a increase of $0.4 million, or 3.1%, from $12.9 million for the three months ended June 30, 2000. Selling, general and administrative expenses as a percentage of sales decreased to 24.6% for the three months ended June 30, 2001 from 25.0% for the three months ended June 30, 2000. The increase of $0.4 million was primarily due to a higher level of sales activity, offset by savings realized from the Company’s cost reduction plan.

AMORTIZATION OF INTANGIBLES. Amortization of intangibles remained static at $0.6 million for both the three months ended June 30, 2001 and 2000. Amortization expense is primarily due to the amortization of intangibles resulting from the acquisition of Monsey Bakor in 1998.

OPERATING INCOME (LOSS). The Company's operating income increased $0.9 million for the three month period ended June 30, 2001, an increase of $1.7 million, or 212.5%, from a loss of $0.8 million for the three months ended June 30, 2000. The increase of $1.7 million was primarily attributable to higher sales, price increases on solvent-based products, and the benefits of the Company’s cost reduction plan.

INTEREST EXPENSE. Interest expense increased to $2.6 million for the three months ended June 30, 2001, an increase of $0.1 million, or 4.0%, from $2.5 million for the three months ended June 30, 2000. The increase was primarily due to additional working capital borrowings required to support the operating expenses of the Company.

BENEFIT FOR INCOME TAXES. The benefit for income taxes decreased to $0.2 million for the three months ended June 30, 2001, or 77.8%, from a benefit for income taxes of $0.9 million for the three months ended June 30, 2000. The decrease is primarily related to the Company's increased operating income for the three months ended June 30, 2001.

NET LOSS.  The net loss decreased to $1.4 million for the three months ended June 30, 2001, a decrease of $1.0 million, or 41.7% from a loss of $2.4 million for the three months ended June 30, 2000. The decrease was primarily due to increased sales and other factors discussed above.

FOR THE SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2000

NET SALES. The Company's net sales increased to $94.1 million for the six months ended June 30, 2001, an increase of $1.0 million, or 1.1%, from $93.1 million for the six months ended June 30, 2000. The increase was primarily due to price increases on solvent-based products associated with increased costs of petroleum-based raw materials.

GROSS PROFIT. The Company's gross profit increased to $25 million for the six months ended June 30, 2001, an increase of $1.2 million, or 5%, from $23.8 million for the six months ended June 30, 2000. Gross profit as a percentage of net sales increased to 26.6% for the six months ended June 30, 2001 from 25.6% for the six months ended June 30, 2000. The increase was due to price increases on solvent-based products and improved cost containment.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased to $24.8 million for the six months ended June 30, 2001, an increase of $0.3 million, or 1.2%, from $24.5 million for the six months ended June 30, 2000. Selling, general and administrative expenses as a percentage of sales increased to 26.4% for the six months ended June 30, 2001 from 26.3% for the six months ended June 30, 2000. The increase of $0.3 million was primarily due to a higher level of sales activity and the Company’s continued support of its national brand strategy.

AMORTIZATION OF INTANGIBLES. Amortization of intangibles remained static at $1.3 million for both the six month periods ended June 30, 2001 and 2000. Amortization expense is primarily due to the amortization of intangibles resulting from the acquisition of Monsey Bakor in 1998.

OPERATING LOSS. The Company's operating loss decreased to $1.1 million for the six months ended June 30, 2001, a decrease of $0.9 million, or 45.0%, from a loss of $2.0 million for the six months ended June 30, 2000. The decrease of $0.9 million was primarily attributable to higher sales, price increases on solvent-based products, and the benefits of the Company’s cost reduction plan.

INTEREST EXPENSE. Interest expense increased to $5.0 million for the six months ended June 30, 2001, an increase of $0.3 million, or 6.4%, from $4.7 million for the six months ended June 30, 2000. The increase was primarily due to increased working capital borrowings required to support the operating expenses of the Company.

BENEFIT FOR INCOME TAXES. The benefit for income taxes decreased to $1.6 million for the six months ended June 30, 2001, or 11.1%, from a benefit for income taxes of $1.8 million for the six months ended June 30, 2000. The decrease is primarily related to the Company's decreased operating loss for the six months ended June 30, 2001.

NET LOSS.  The net loss decreased to $4.4 million for the six months ended June 30, 2001, a decrease of $0.4 million, or 8.3% from a net loss of $4.8 million for the six months ended June 30, 2000. The decrease was primarily due to increased sales and other factors discussed above.

Liquidity and Capital Resources

             The Company's historical requirements for capital have been primarily for working capital, capital expenditures and acquisitions. Henry Company's primary sources of capital to finance such needs have been cash flow from operations and borrowings under bank credit facilities.  In August 2001, the Company entered into a replacement credit facility agreement with two new financial institutions, and received funding. The replacement credit facility provides for a $25 million revolving credit facility and a $10 million term loan.  Upon closing, $3.5 million of the term loan was funded.  The facility expires in August 2006 and is collateralized by substantially all of the Company's United States assets. Borrowings on the line of credit will bear interest at the prime rate with an option to borrow based on the LIBOR rate.  The Company also maintains a credit line with a Canadian bank. Balances outstanding under this line were $2.7 million at June 30, 2001.

Cash flows for the Six Months Ended June 30, 2001 Compared to The Six Months Ended June 30, 2000

             The Company's net cash used in operations were ($7.1) million and $(16.7) million for the six months ended June 30, 2001 and 2000, respectively. The decrease in cash used in operations from June 30, 2000 to June 30, 2001 of $9.6 million was primarily attributable to decreased cash used in accounts receivable and inventories. Cash flows used in investing activities were ($0.6) million and ($1.2) million for the six months ended June 30, 2001 and 2000, respectively. The decrease in cash used in investing activities was due primarily to a decrease in capital expenditures of $0.6 million.  Cash flows provided by financing activities during the six months ended June 30, 2001 and the six months ended June 30, 2000 were $7.4 million and $18.7 million, respectively. The decrease of $11.3 million from the six months ended June 30, 2000 to the six months ended June 30, 2001 was primarily due to decreased borrowings under the line of credit agreement.

             The Company believes that available cash and cash equivalents, cash generated from operations and available borrowings under the Company's various credit facilities will be sufficient to finance working capital, capital expenditures, and scheduled principal and interest payments for the next twelve months. There can be no assurance, however, that such resources will be sufficient to meet the Company's anticipated working capital and capital expenditure requirements or that the Company will not require additional financing within this time frame.

Recent Accounting Pronouncements

             In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging Activities", which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company’s adoption of this statement did not have a significant impact on the Company's financial position, results of operations, or cash flows.

In July 2001, the FASB issued SFAS Nos. 141 and 142, "Business Combinations" and "Goodwill and Other Intangible Assets".  SFAS No. 141 replaces APB 16 and eliminates pooling-of-interests accounting prospectively.  It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill.  SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach.  Under SFAS No. 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. SFAS No. 141 and SFAS No. 142 are effective for all business combinations completed after June 30, 2001.  Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified to goodwill.  Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted.  The Company will adopt SFAS No. 142 on January 1, 2002, the beginning of fiscal year 2002.  In connection with the adoption of SFAS No. 142, the Company will be required to perform a transitional goodwill impairment assessment.  The Company has not yet determined the impact these standards will have on the Company's results of operations and financial position.

SAFE HARBOR STATEMENT

             Investors are cautioned that certain statements contained in this document, as well as some statements by the Company in periodic press releases and some oral statements by Company officials to ratings agencies and bondholders during presentations about the Company are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "hopes," and similar expressions constitute forward-looking statements. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, which may be provided by management are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company, economic and market factors and the construction materials industry, among other things. These statements are not guaranties of future performance, and the Company has no specific intention to update these statements.

             Actual events and results may differ materially from those expressed or forecasted in the forward-looking statements made by the Company or Company officials due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in general economic conditions either nationally or in regions where the Company operates or may commence operations, employment growth or unemployment rates, fluctuations in asphalt or other raw material costs, labor costs, the impact of weather, product liability and asbestos litigation, reliance on key personnel, environmental matters, costs and effects of unanticipated legal or administrative proceedings or governmental regulation and capital or credit market conditions affecting the Company's cost of capital; as well as competition, and unanticipated delays in the Company's operations. See the Company's Amendment No. 2 to Registration Statement on Form S-4 filed September 11, 1998 (Registration No. 333-59485) for a further discussion of risks and uncertainties applicable to the Company's business.

             The Company undertakes no obligation to update any forward-looking statements in this Report on Form 10-Q or elsewhere.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

             There have been no material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the notes to the Company's December 31, 2000 audited financial statements and management's discussion and analysis included in the Company's Annual Report on Form 10-K.

Part II.       Other Information

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                   Election of Directors

                   The board of directors, consisting of Messrs. Warner W. Henry, Terrill M. Gloege, Frederick H. Muhs, Paul H. Beemer, Jeffrey A. Wahba, Donald M. Ford, Joseph A. Mooney, Jr. and Mrs. Carol F. Henry, was re-elected in its entirety to serve as directors until the next annual meeting of shareholders or until otherwise replaced. One hundred percent (100%) of the votes cast by the shareholders were voted in favor of the reelection of each director.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

                           (a)         Exhibits

             The registrant has filed herewith the following exhibits:

             (b)        Reports on Form 8-K

             The following reports on Form 8-K were filed during the quarterly period ended June 30, 2001:

             None

SIGNATURES

             Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 24, 2001	HENRY COMPANY
	/s/ Jeffrey A. Wahba
	By:  JEFFREY A. WAHBA
	Its:  Vice President, Secretary
	and Chief Financial Officer