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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2000

OR

For the transition period from               

Commission file number 333-59485

HENRY COMPANY
(Exact Name of Registrant as Specified in its Charter)

Registrant's telephone number, including area code (323) 583-5000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

10% Series B Senior Notes Due 2008
(Title of Class)

    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 / /  No /x/

    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.

    As of June 30, 2001, there were outstanding 221,500 shares of the Registrant's common stock ("Common Stock") and 6,000 shares of the Registrant's class A common stock ("Class A Common Stock"). As of June 30, 2001, no shares of the Common Stock or the Class A Common Stock were held by non-affiliates of the Registrant.

HENRY COMPANY
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2000

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS

    Statements in this Form 10-K that are not historical facts are hereby identified as "forward looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the "Securities Act"). Henry Company ("Henry" or the "Company") cautions readers that such "forward looking statements," including without limitation those relating to the Company's future business prospects, revenues, working capital, liquidity, capital needs and income, wherever they may appear in this document or in other statements attributable to the Company, are necessarily estimates reflecting the best judgment of the Company's senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward looking statements." Such "forward looking statements" should, therefore, be considered in light of various important factors ("Cautionary Statements"), including those set forth below and others set forth from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission (the "SEC").

    These "forward looking statements" are found at various places throughout this document. Additionally, the discussions herein under the captions "Business," "Properties," "Legal Proceedings," and "Management's Discussion and Analysis of Financial Condition and Results of Operation" are susceptible to the risks and uncertainties discussed under "Risk Factors" and elsewhere in this Form 10-K. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will," "expect," "should," "intend," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar terminology. Moreover, the Company, through its senior management or persons acting on its behalf, may from time to time make "forward looking statements" about the matters described herein or other matters concerning the Company and such statements are subject to the qualifications set forth herein and in the Cautionary Statements. The Company disclaims any intent or obligation to update publicly or revise "forward looking statements."

PART I

ITEM 1.  BUSINESS

General

    The Company is a construction materials company focusing primarily on products for roofing, sealing and paving applications. The Company develops, manufactures and markets several separate but related product lines including roof and driveway coatings and paving products, industrial emulsions, air barriers, polyurethane foam for roofing and commercial uses, sealants for construction and marine uses and specialty products.

    Beginning in 1988, the Company's management focused on expanding the Henry brand from its Southern California base initially through the acquisition of regional roof coatings manufacturers and distributors in contiguous regions of the Southwest, the Northwest, Northern California and the Rocky Mountain region. In 1998, the Company became a national organization by acquiring Monsey Bakor (the "Acquisition"), which has served the U.S. and Canadian markets for over 50 years as a leading manufacturer and distributor of a broad spectrum of building products for residential and commercial use with a product line consisting of roof coatings, adhesives and membranes, roofing and air barrier systems as well as specialized industrial emulsions. In 1999, the Company acquired Grundy Industries, a leading roof coatings manufacturer focused on servicing the professional trade in the Midwest and Rocky Mountain region of the U.S.

Divisions

    The Company's two major divisions are the Henry Coatings Division and the Resin Technology Division.

Henry Coatings Division

    The Henry Coatings Division, which accounted for the bulk of the Company's 2000 net sales, develops, manufactures and markets coatings, sealants and membranes for construction, industrial, building materials and other specialty applications. The Company also manufactures wax-based emulsions for the gypsum industry.

Products

    Roofing products represent the majority of the Coatings Division's total revenues. Henry's roofing products are designed to address the problems of water invasion, wind erosion and ultraviolet damage. Henry offers a full line of liquid roof coatings and adhesives including both solvent and water-based products. In addition to roof coatings and mastics, Henry manufactures high-quality styrene-butadiene-styrene (SBS) modified bitumen roofing membrane products designed to be used in roofing systems that can meet the challenge of the elements encountered throughout North America.

    The Company offers a full line of reflective coatings designed to improve roof aesthetics and aid in the conservation of energy through their reflective qualities. Henry's reflective coatings product line includes both white acrylic and solvent-based coatings and high-quality aluminum products and the accessories needed to protect roofs for years.

    Henry's industrial emulsions are used as coating, sizing, strengthening and moisture-proofing additives by manufacturers of fiber products such as gypsum wallboard, insulation board, gaskets, paper board, and glass fibers. The Company's primary emulsion product, wax-based industrial emulsions, are specifically used by manufacturers of gypsum wallboards. Sales of industrial emulsions have increased in recent years partially due to increased environmental restrictions on volatile organic compound emissions, which has created a demand for emulsion-based products over solvent-based products. The

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Company's wax-based emulsions are manufactured with proprietary and patented processes that management believes contributes to higher margins relative to those of competitors.

    Driveway maintenance and paving products manufactured by Henry are used for the asphalt highway market and the preventative maintenance of asphalt parking lots and driveways. Henry Company produces polymerized asphalt, an asphalt binder that is a key ingredient of paving asphalts.

    The Company's air barrier systems are designed to reduce air flows through exterior walls of buildings. The movement of air into a building (infiltration) and out of a building (exfiltration) is caused by pressure differences produced by wind, chimney effect and pressurization. If air flows through a building and exfiltrates, it can deposit moisture on the cold masonry cladding, causing brick or stone to undergo major changes due to moisture absorption. This dampness can cause dimensional changes and accelerate the deterioration process. Moisture-laden air from a humidified building can also develop into ice under freezing conditions, causing displacement of the exterior masonry cladding, corrosion, and lower energy efficiency. The advantage of the Company's prefabricated modified bitumen sheet is that it provides a flexible air barrier membrane capable of bridging construction gaps and absorbing deflection. The Company's line of air barriers can be installed into existing buildings on either internal or external walls or used in the construction of new buildings. In 1986, Canada required air barriers in all buildings as an amendment to the National Building Code. In the United States, however, there is no national standard and the air barrier market remains in its infancy.

    The Company's specialty products include protective coatings for a variety of industrial and commercial applications, such as specialty asphalt coatings to protect wood, metal, mortar or thermal insulation. The Company manufactures undercoatings for mobile homes, as well as both solvent and water-based rust-proofing products for the automobile industry. The Company also produces a broad range of paint products for interior and exterior use and a number of coatings for wood preservation and agricultural purposes.

    The Company's sealant line has three distinct product categories: sealants for construction applications, hatch cover sealants for ocean freighters, and preformed adhesive waterstops for expansion joint applications on construction projects. Products include preformed plastic gaskets for precast concrete structures, which provides watertight sealing for joints such as those on underground concrete drainage and manhole structures. These products are also used for sealing hatch covers on ships to prevent water damage to cargoes that can occur in heavy seas. There is also a preformed plastic adhesive waterstop which is used as a construction joint sealant in poured-in-place concrete structures. Henry Company believes this product allows for an easier, more reliable and more efficient sealing method than the traditional PVC-type waterstop.

Manufacturing

    For purposes of organizing its manufacturing process, the Company uses seven related product groups. The product groups are: cold applied liquid coatings, cements and adhesives; asphalt, coal tar and wax emulsions; acrylic-based roof and insulation coatings; hot melt rubberized asphalt roofing and waterproofing products; SBS modified bitumen membranes, air barrier and waterproofing membranes; specialty adhesives; and specialty preformed asphaltic tapes. The facilities at which these products are produced are shown in Item 2 ("Properties").

    The key materials used in the production of roofing and pavement products are asphalt, mineral spirits, various fibers, resins, and polyester and glass matting. For the production of industrial emulsions, the primary material is refined wax. These raw materials are generally available on a regional basis and supply disruptions are very rare. The Company maintains multiple sourcing arrangements for all of its key materials helping to mitigate price increases over the past year. In addition to raw materials, packaging supplies represent a meaningful portion of production cost.

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    The Company, like many of its competitors, uses fibers such as chrysotile asbestos in its production process. Management believes that its use of chrysotile asbestos is in accordance with regulations of the Occupational Safety and Health Administration ("OSHA"). OSHA requires that chrysotile asbestos fibers not be exposed to an open-air environment. In the Company's production process, the cellulose or chrysotile asbestos fiber is pumped through a negative pressure fluffer that separates the fibers for optimal dispersion in the product mixture. The fibers are then mixed into and fully encapsulated by the asphalt. Once encapsulated the fibers are "locked" into the asphalt cutback and cannot be physically separated from the product. OSHA and other regulatory bodies have determined that encapsulation renders the chrysotile asbestos harmless. The Environmental Protection Agency ("EPA") does not regulate or enforce any special procedures for the application of chrysotile asbestos-containing roof coatings or sealants.

    Management believes that chrysotile asbestos-fibered roofing cements have better application quality and durability as compared to those containing chrysotile asbestos substitutes. The primary industries that currently continue to use chrysotile asbestos are those manufacturing chrysotile asbestos-cement pipe and shingles, automobile brake pads, gaskets and roof coatings and sealants. Although chrysotile asbestos-cement pipe and shingles are no longer manufactured in the United States, these products are still currently sold in various parts of the country. Domestic manufacturers of brake pads, gaskets and roof coatings use roughly 22,000 tons of chrysotile asbestos annually because of its strength, durability and heat resistance. Although some roofing products manufacturers have switched to an exclusively non-asbestos line, some of the leading firms in the industry continue to use asbestos in at least some of their products.

Sales, Marketing and Distribution

    Due to the many products manufactured by the Henry Coatings Division, the Company markets its products by focusing on four business segments. These segments are: Retail; Industrial, Commercial and Institutional ("ICI"); Specialty Products; and International.

    The Retail segment is focused on selling products to national home center chains, retail building material suppliers, hardware distributors, paint and sundry distributors, farm and hardware cooperatives, and mass merchandisers. To reach customers, the Company employs a trained sales organization and has an in-house Creative Services Department which produces customized brochures and promotional materials and coordinates national and regional advertising programs.

    The ICI products are used by contractors throughout North America and sold through both national and regional roofing distributors. Henry maintains a technical selling staff engaged in both sales and training to help ensure that the Company's products are applied properly.

    The Specialty Products segment markets a broad array of products using a technical sales force trained to help customers in the use of the various products. The two leading products in the Specialty Products segment are wax emulsions and asphalt emulsions. Wax emulsions are sold to the gypsum wallboard industry while major roofing companies are the primary market for asphalt emulsions for use as a sizing agent in insulation board.

    The International segment is engaged in the sale of all Henry products to the international market with special focus on the Company's basic product line of roof coatings and cements and industrial emulsions.

Roofing Systems

    Henry Company has developed a roofing systems segment for one-stop commercial roofing or re-roofing or roofing maintenance with warranty protection. The Company's personnel work with architects, building owners and contractors to develop custom specifications utilizing Henry products for

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the design, construction and maintenance of commercial roofs. An important component of the Company's roof systems program's success is that building owners are assured that Henry Company will stand behind the roof from beginning to end. A Henry Company sales consultant will write a custom specification for the roof and the roofing system will be applied by a Henry Company-approved contractor generally using Henry Company products. A Henry Company technical inspector will inspect the roof application during installation and regular follow-up inspections and in some instances maintenance will be performed throughout the life of the warranty. Henry Company offers 5 to 20-year warranties on its reroofing systems and 5-year warranties on its maintenance systems calculated on a fee per square-foot basis. Since its inception, expenses for warranty claims experience has been very low. In part, this is due to Henry Company's continuing inspection program. Management believes that the roofing systems business represents a significant growth opportunity.

Resin Technology Division

    The Resin Technology Company ("RTC"), founded as an independent company in 1982 and now a division of the Company, produces polyurethane foam products for roofing and other industrial applications. RTC also sells coating products manufactured for it by third parties for application on foam. The acquisition of RTC in 1988 has enabled the Company to offer a broader range of roofing products to meet the needs of the commercial and residential roofing markets.

Products

    RTC's primary product categories are polyurethane foam and coatings. Polyurethane foam has two liquid components, resin and hardener, which are mixed together in a spray unit during application. A chemical reaction causes the liquid to expand many times in thickness creating a rigid layer of closed-cell foam. In roofing applications, this foam is strong enough to be walked on minutes after the application. The result is a seamless barrier against water penetration that is durable and easy to maintain. In roofing applications, an elastomeric coating must be applied as protection against the sun's ultraviolet radiation. RTC sells acrylic, urethane, silicone and polyurea coatings.

    RTC's products offer users several advantages, including a seamless barrier that minimizes the likelihood of leaks and provides superior insulation characteristics that can reduce energy costs. It is relatively light in weight and is therefore particularly adaptable to large arenas or other structures that may benefit from a lighter weight roof. Furthermore, it can be applied directly over an existing roof, potentially avoiding the costly "tear-offs" that may be required with other roofing systems.

    RTC's products are also used in a number of original equipment manufacturer applications. The insulation and weight characteristics of polyurethane foam make it an integral part of the thermal panel, spa and packaging industries, among others.

Manufacturing

    RTC manufactures all of its polyurethane foam products in its Ontario, California manufacturing facility. Its polyurethane resin system is made up of two components: a hardening agent that is purchased by the Company and resin that is manufactured in the Ontario facility. Raw materials are automatically pumped from one or more of the 11 raw material storage tanks within the facility, blended and then poured into 55-gallon drums, tote capsules or bulk tanker trucks. The production process is highly automated. The bulk of RTC's coatings products for polyurethane foam applications are produced by a third-party manufacturer also located in Ontario. The Company believes that it derives its success in the polyurethane foam market from its superior understanding of technology and the Company has secured a number of original equipment manufacturer accounts because of its ability to produce products for a customer's very specific technical requirements.

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Sales, Marketing and Distribution

    The Resin Technology Company sells primarily to roofing contractors and original equipment manufacturers in the western United States. RTC's roofing products are sold directly to pre-qualified contractors experienced in applying and spraying polyurethane foam onto roofs. Sales to original equipment manufacturers include those to spa equipment manufacturers, and management believes the Company is the leading supplier to this market. RTC also supplies manufacturers in many other industries including those producing freezer panels, thermal food transportation equipment, boat floatation and packaging products. RTC's remaining sales are made to several distributors, particularly in the Northwest and upper Midwest.

    RTC supports its sales efforts with a sales staff organized according to market segment and regional location. Henry Company believes that RTC's marketing advantages are based on a commitment to technical development and customer support and also believes that RTC has captured a number of original equipment manufacturer accounts from its competitors by efficiently responding to the customer's technical requirements. In both the roofing and original equipment manufacturer segments Henry Company provides just-in-time delivery capability which is essential in time and labor-sensitive roofing applications.

Employees

    As of December 31, 2000, Henry Company employed approximately 660 persons, the majority of whom were involved in production and distribution, with the balance engaged in administration, sales and clerical work. Of these employees, approximately 520 were employed in the United States and 140 in Canada. Approximately 40 employees located in Huntington Park, California, 25 employees in Kimberton, Pennsylvania, 8 employees in Rock Hill, South Carolina, 29 employees in Ville St. Pierre, Quebec and 2 employees in Mirabel, Quebec are unionized and covered by collective bargaining agreements. These collective bargaining agreements expire on June 30, 2003, March 31, 2003, February 1, 2004, June 30, 2002 and June 30, 2002, respectively. The Company believes that its relationship with its employees is good. The Company has not experienced a work stoppage at any of its facilities in over 20 years.

Risk Factors

Substantial Leverage

    The Company has consolidated indebtedness that is substantial in relation to the book value of its shareholders' equity. As of December 31, 2000, Henry Company had approximately $95.4 million of debt (the sum of long-term debt, including current maturities of long-term debt, notes payable and capitalized lease obligations) and a shareholders' deficit of approximately ($6.4) million.

    The Company's significant level of borrowings has several important consequences for the Company including but not limited to the following: (i) a substantial portion of the Company's cash flow from operations must be dedicated to debt service and are not available for other purposes; (ii) the Company's ability to obtain additional financing in the future for working capital, acquisitions or capital expenditures has been significantly impaired and (iii) the Company's substantial leverage may make it more vulnerable to economic downturns and may limit its ability to withstand competitive pressures or to take advantage of business opportunities.

    The Company's ability to make cash payments to satisfy its debt obligations will depend on its future operating performance, which will be affected by financial, business, competitive, general economic and other factors, many of which are beyond the Company's control. Based upon current levels of operations and anticipated cost savings and future growth, the Company believes that its expected cash flows from operations, together with available borrowings under its credit facility will be

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adequate to meet its anticipated requirements for working capital, scheduled principal and interest payments, lease payments and capital expenditures for the next twelve months. See "Management's Discussion and Analysis of Financial Condition, Results of Operations, and Liquidity and Capital Resources".

Ability to Achieve Anticipated Cost Savings or Revenue Growth

    The Company's operating and financial results for the year 2000 were disappointing. Accordingly, the Company has instituted a number of initiatives to improve operating results including, but not limited to (i) the adoption of a restructuring plan in which the Company closed a plant and reorganized or eliminated certain administrative functions, and (ii) a change in executive level management, appointing Mr. Baribault as temporary Chief Operating Officer and President. There can be no assurance that any of these actions will result in any improvement in the Company's future financial and operating results. Any statements concerning potential cost savings and revenue growth contained in this annual report are forward-looking statements that are based on estimates and assumptions made by the Company's management. The following important factors, among others, could cause the Company's business, financial condition or results of operations to be adversely affected in future periods: (i) loss of key customers or continued or increased competitive pressures; (ii) changes in customer spending levels; (iii) absence of inclement weather; (iv) loss or retirement of key members of management; (v) increases in interest rates or the Company's cost of borrowing or additional defaults under any material debt agreement; (vi) unavailability of funds for capital expenditures or research and development; (vii) changes in governmental, environmental or other regulations or (viii) changes in general economic conditions. Certain of these factors are discussed in more detail elsewhere in this annual report. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Fluctuation of Raw Material Cost

    The Company utilizes a number of raw materials in its manufacturing processes, some of which have historically fluctuated in price at particular times. These price fluctuations have been based on such factors as the capacity of the raw material supply chain, demand in the market, weather, general economic factors and the availability of alternative raw materials. Raw materials utilized by the Company that have historically experienced some price fluctuation include asphalt, aluminum paste, rubber and certain diisocynates, among others. For example, asphalt, which is a byproduct of crude oil refining, has fluctuated in price with changes in worldwide crude oil prices and capacity and with changes in the supply and demand in the oil, gasoline and fossil fuel markets. Significant increases in asphalt prices or in the prices of other raw materials, if not offset by product price increases, could have a material adverse impact on the profits of the Company. Specifically, in 2000 the cost of petroleum based products did increase and the Company was unable to offset such increases fully with price increases, thereby adversely affecting the Company's operating results in 2000. There can be no assurance that the Company will be able to pass any future cost increases through to its customers in the form of price increases.

Impact of Weather

    Because many of the Company's products are designed to patch or fix damaged roofs, the Company's revenues are affected by weather conditions. Sales of roofing products have historically tended to increase in areas which have experienced severe weather. The results of severe weather or the anticipation of severe weather may motivate property owners to undertake required roof maintenance or to replace an old or worn roof. The absence of inclement weather in some or all of the

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Company's markets could have an adverse impact on the Company's business, financial condition or results of operations.

Product Liability and Asbestos Litigation

    The Company's business entails an inherent risk of product liability claims, including a particular risk with respect to chrysotile asbestos-containing products that the Company manufactures. Although some roofing products manufacturers have switched to an exclusively non-asbestos line, some of the leading firms in the industry continue to use chrysotile asbestos in at least some of their products. The Company believes that its use of chrysotile asbestos fibers, which are encapsulated by asphalt in the manufacturing process, is in accordance with applicable laws. However, the Company has been named as a defendant in suits alleging certain asbestos-related injuries. Although the Company has not paid any amounts in judgment or settlement of any asbestos-related claim to date, there can be no assurance that any such claim will not in the future result in a material adverse judgment against, or settlement by, the Company. Other than these asbestos-related claims, no material product liability claims are currently pending against Henry Company. However, there can be no assurance that such claims will not arise in the future. The costs of defending the pending asbestos-related suits are currently funded by a joint defense arrangement among the Company's insurance carriers and the Company believes such insurance coverage is adequate. However, Henry Company is not covered by insurance for asbestos-related claims for injuries that are alleged to have arisen after 1985.

    The Company maintains product liability insurance for non-asbestos claims in the amount of $21,000,000. However, there can be no assurance that the product liability coverage maintained by the Company will be adequate to cover product liability claims or that the applicable insurer will be solvent at the time of any required payment. In addition, there can be no assurance that the Company will be able to maintain its product liability coverage on current or otherwise acceptable terms. A product liability or asbestos-related claim that results in a judgment or settlement in excess of the Company's insurance coverage, or a material judgment or settlement for an asbestos-related claim for injuries alleged to have arisen after 1985, would have a material adverse effect on the Company.

Reliance on Key Personnel

    The Company's future success will depend to a significant extent on its executive officers and other key management personnel. Although the Company has employment agreements with two of its executive officers, Monsey Bakor's former Chairman of the Board and the former President of Monsey Bakor's Canadian operations, there can be no assurance that the Company will be able to retain its executive officers and key personnel or attract additional qualified management in the future. Although the Company is the beneficiary under key-person life insurance policies on the life of and Monsey Bakor's former Chairman of the Board (who has become a Vice Chairman of the Board and an executive officer of the Company following the Acquisition), there can be no assurance that the proceeds of these policies would be adequate to compensate the Company for the loss of services due to the death of such individual.

Competition

    The roofing products and roofing systems industries are highly competitive in most product categories and geographic regions. Competition is largely based on quality, service, price and distribution capabilities. The Company competes for retail and wholesale business with both large national manufacturers and smaller regional producers. In certain circumstances, due primarily to factors such as freight rates and customer preference for local brands, manufacturers with better access to certain geographic markets may have a competitive advantage in such markets. In addition, many of the Company's competitors within the roofing products industry have greater financial, marketing, distribution, management and other resources than the Company, and as the industry consolidates, the

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Company's competitors may further enhance these resources. The Company also believes that excess capacity in the roofing products and roofing systems industry, especially during slow periods for the industry, could result in downward pricing pressure and intensified competition. Given these factors, there can be no assurance that the Company will be able to continue to compete successfully against existing or new competitors, and the failure to do so would have a material adverse effect on the Company's business, financial condition and results of operations.

Environmental Matters

    The past and present business operations of the Company and the past and present ownership and operation of real property by the Company are subject to extensive and changing federal, state, local and foreign environmental laws and regulations pertaining to the discharge of materials into the environment, the handling, storage, treatment and disposal of wastes (including solid and hazardous wastes), the remediation of releases of toxic or hazardous materials or otherwise relating to health, safety and protection of the environment ("Environmental Laws"). As such, the nature of the Company's operations as well as previous operations by others at real property owned, leased or used by the Company, expose the Company to the risk of claims under Environmental Laws, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Based on its experience to date, the Company does not expect such claims or the costs of compliance with the scope or enforcement of Environmental Laws to have a material impact on its earnings or competitive position. The Company believes that it is in substantial compliance with applicable Environmental Laws. No assurance can be given, however, that the discovery of presently unknown environmental conditions, changes in the scope or enforcement of Environmental Laws or their interpretation, or other unanticipated events will not give rise to expenditures or liabilities that may have a material adverse effect on the Company's business, financial condition or results of operations. The Company, through its acquisition of Monsey Bakor, has been named as a potentially responsible party in litigation concerning contamination at a former waste-oil recycling facility used by it in Douglassville, Pennsylvania. The Company, also through its acquisition of Monsey Bakor, is also a party to a consent decree issued by the federal Environmental Protection Agency relating to remediation of contamination at its corporate headquarters. It is sharing remediation costs with a former owner of the facility that is also a party to the consent decree. Based on currently available information, the Company believes that neither this litigation nor this remediation will have a material adverse effect on the Company's business, financial condition or results of operations.

Governmental Regulation and Permits

    The Company is subject to regulation under various federal, state and local laws, including laws regulating its manufacturing operations and laws relating to employee health and safety. Permits are required for operation of the Company's business, and such permits are subject to renewal, modification and, in certain circumstances, revocation by governmental authorities. The loss of certain of such permits could have a material adverse effect on the Company's business, financial condition or results of operations. The Company expects to incur ongoing capital and operating costs and administrative expenses to maintain compliance with its permits and with applicable laws and regulations. The Company cannot predict the legislation or regulations that may be enacted in the future or how existing or future laws or regulations will be administered or interpreted. Compliance with new laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretation of existing laws, may require additional expenditures by the Company, some or all of which may be material.

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ITEM 2.  PROPERTIES

    The Company's operations are conducted at the owned or leased facilities described below:

    The Company also owns or leases smaller sales and administration facilities in Costa Mesa, California and Mississauga, Ontario. In addition, the Company owns a small facility in Troy, New York that it leases to a third party. The Company believes that its facilities are in good operating condition and are adequate to meet anticipated future requirements.

ITEM 3.  LEGAL PROCEEDINGS

    In the ordinary course of business, the Company is periodically named as a defendant in a variety of product liability lawsuits including "slip and fall" claims relating to pavement sealants and claims for alleged product failure. The Company does not believe these cases will have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

    As of December 31, 2000, the Company was a party to approximately 30 active state court cases alleging certain asbestos-related injuries. There were two new cases filed in 2000, six in 1999, seven in 1998 and two in 1997. The Company believes that its use of chrysotile asbestos fibers, which are encapsulated by asphalt in the manufacturing process, is in accordance with applicable laws. Although the Company has not paid any amounts in judgment or settlement of any asbestos-related claim to date, there can be no assurance that any such claim will not in the future result in a material adverse judgment against, or settlement by, the Company. The costs of these suits are currently funded by a joint-defense arrangement among the Company's insurance carriers and the Company believes that such insurance coverage is adequate. However, Henry Company is not covered by insurance for asbestos-related claims for injuries that are alleged to have arisen after December 1, 1985.

    The Company does not believe, based in part on the advice of outside counsel, that the outcome of these suits and legal proceedings will have a material adverse effect on the Company's financial condition, results of operations, or cash flows.

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Environmental Matters

    The Company is subject to extensive and changing environmental laws and regulations with which it believes it is in substantial compliance. However, there can be no assurance that the discovery of presently unknown environmental conditions or changes in the scope, interpretation or enforcement of environmental laws and regulations will not have a material adverse effect on the Company's business, financial condition or results of operations.

    The Company's Kimberton facility was formerly occupied by a pharmaceutical manufacturer whose operations resulted in groundwater contamination identified on the site and surrounding area. The contaminant of concern was trichloroethylene which required various remedial activities, including the provision of alternate water supplies to users in the surrounding area and a groundwater treatment program. Remedial work is being completed under a consent decree the EPA negotiated in 1990 with the pharmaceutical manufacturer and the Company and a confidential cost sharing agreement between these two companies. The Company's costs under the consent decree in 1998, 1999 and 2000 were approximately $70,000, $73,000 and $73,000, respectively, and are not expected to be significantly different during 2001 and 2002. The Company has a liability recorded for the entire expected costs of the remedial work over the remaining term of the consent decree and cost-sharing agreement. Costs paid under the consent decree and cost-sharing agreement of $73,000 in 2000 reduced the liability to $3.3 million at December 31, 2000.

    The Company is currently upgrading, replacing or closing underground storage tanks that it owns or operates to meet certain corrosion protection and overfill/spill containment standards. The Company estimates that the capital expenditures required to comply with various regulatory programs in 2001 will not have a material adverse effect on the Company's earnings, cash flows or competitive position. Such estimates, however, are based on factors and assumptions that are subject to change, including potential modifications of regulatory requirements, detection of unanticipated environmental conditions or other currently unexpected circumstances.

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

    No matters were submitted to a vote of the Company's stockholders during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

    There is no established public trading market for the Company's common equity.

    As of December 31, 2000, there were seven (7) beneficial holders of the Company's Common Stock and one beneficial holder of the Company's Class A Common Stock.

    At the present time, the Company intends to retain all earnings for use in the operation and development of its business and does not expect to declare or pay any cash dividends in the foreseeable future. The Company's credit facility also prohibits the payment of any dividends. Any determination in the future to pay dividends will depend on the Company's earnings, financial condition, capital requirements, level of indebtedness and other factors deemed relevant by the Company's Board of Directors, including any contractual or statutory restrictions on the Company's ability to pay dividends.

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ITEM 6.  SELECTED FINANCIAL DATA

    The following selected consolidated financial data should be read in conjunction with Henry Company's consolidated financial statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this document. The consolidated statement of operations data for each of the years in the three-year period ended December 31, 2000, and the consolidated balance sheet data at December 31, 1999 and 2000, are derived from the consolidated financial statements of Henry Company which have been audited by PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere in this document. The consolidated statement of operations data for the years ended December 31, 1996 and 1997, respectively, and the consolidated balance sheet data at December 31, 1996, 1997, and 1998 are derived from audited financial statements of Henry Company not included in the document. Historical results are not necessarily indicative of the results to be expected in the future.

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(1)

For periods prior to April 22, 1998, the Company's financial statements were prepared on a combined basis with Warner Development Company of Texas ("Warner Development") as both entities were under common control with identical shareholder ownership interests. On April 21, 1998, Warner Development was merged into Henry Company and the outstanding shares of Warner Development capital stock were cancelled.

(2)

Prior to April 1998, Henry Company was operated as a subchapter "S" Corporation under the Code. As a result, Henry Company did not incur federal and state income taxes (except with respect to certain states) and, accordingly, the provision for income taxes only includes the applicable state income tax. Federal and state income taxes (except with respect to certain states) on the income of Henry Company have been incurred and paid directly by the shareholders of Henry Company. It had been the policy of Henry Company to make periodic distributions to the shareholders in respect of such tax liabilities. During the year ended December 31, 1998, Henry Company paid distributions of $1.2 million for the shareholders' 1997 tax liabilities. On April 22, 1998, the Company converted to a "C" corporation under the Code and will subsequently pay all future tax obligations of the Company to the appropriate taxing authorities.

(3)

As described in Note (2) above, Henry Company was operated as a Subchapter "S" Corporation for the historical years presented through 1997. The pro forma provision (benefit) for income taxes and pro forma net income (loss) reflect the results as if Henry Company were operated as a "C" Corporation for the historical periods presented.

(4)

EBITDA, as defined in the indenture relating to the Company's outstanding 10% Senior Notes, represents net earnings before taking into consideration taxes on earnings, interest expense, depreciation and amortization, and non-recurring, non-cash charges, less any cash expended that funds a non-recurring, non-cash charge. While EBITDA should not be construed as a substitute for operating earnings, net earnings, or cash flows from operating activities in analyzing operating performance, financial position or cash flows, EBITDA has been included because it is commonly used by certain investors and analysts to analyze and compare companies on the basis of operating performance, leverage and liquidity. This data is relevant to an understanding of the economics of the Company's business as it indicates cash flow available from operations (and/or trends in cash flow available from operations) to service debt and satisfy certain fixed obligations. A

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reconciliation of net income (loss) to EBITDA for the respective years and related interim periods is as follows:

(5)

On April 22, 1998, the Company acquired Monsey Bakor and its subsidiaries. The acquisition was accounted for using the purchase method of accounting and as such, the results of operations of Monsey Bakor since the acquisition date have been included in the consolidated financial statements of the Company.

(6)

In 1999, the Company repurchased $3.6 million of the Senior Notes which were issued in conjunction with the acquisition of Monsey Bakor. The resulting gain is shown net of taxes.

(7)

In 2000, the Company recorded a $735,127 restructuring charge related to a plant closing and the reorganization or elimination of certain administrative and selling functions. The charges represent severance and other personnel payments related to the streamlining of operations associated with the implementation of cost reduction initiatives noted above.

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The following discussion and analysis of the Company's consolidated results of operations and consolidated financial position should be read in conjunction with the Selected Financial Data and the Company's Consolidated Financial Statements, including notes thereto, appearing elsewhere in this Annual Report.

General

    The Company is a construction materials company focusing primarily on products for roofing, sealing and paving applications. The Company develops, manufactures and markets several separate but related product lines including roof and driveway coatings and paving products, industrial emulsions, air barriers, polyurethane foam for roofing and commercial uses, sealants for construction and marine uses and specialty products. The Company has nineteen manufacturing and distribution facilities throughout North America. The Company's business is seasonal and is dependent on weather trends which vary by geographic region.

    The Company's operations include the operations of Monsey Bakor and its subsidiaries which were acquired in April 1998 for a purchase price of $46 million (including $3.2 million for a noncompetition agreement). The acquisition was accounted for using the purchase method of accounting. Concurrent with this acquisition, the Company conducted a senior note offering in the aggregate principal amount of $85.0 million.

    The Company's operating and financial results for the year 2000 were disappointing. Accordingly, the Company has instituted a number of initiatives to improve operating results including, but not limited to (i) the adoption of a restructuring plan in which the Company closed a plant and reorganized or eliminated certain administrative functions, and (ii) a change in executive level management, appointing Mr. Baribault as temporary Chief Operating Officer and President.

    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 Coatings 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 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.

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