UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) 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: 1-6620
GRIFFON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-1893410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 JERICHO QUADRANGLE, JERICHO, NEW YORK 11753
(Address of principal executive offices) (Zip Code)
(516) 938-5544
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 30,908,378 shares of Common
Stock as of July 21, 1995.
FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 1995
and September 30, 1994
Condensed Consolidated Statements of Income for the Three
Months and Nine Months Ended June 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signature
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1995 1994
------------ -------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,097,000 $ 28,659,000
Marketable securities 3,288,000 29,727,000
Accounts receivable, less allowance
for doubtful accounts 64,621,000 59,191,000
Contract costs and recognized
income not yet billed 27,505,000 29,194,000
Inventories (Note 2) 80,358,000 68,918,000
Prepaid expenses and other current
assets 8,330,000 6,987,000
------------ ------------
Total current assets 199,199,000 222,676,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $50,035,000 at
June 30, 1995 and $44,843,000 at
September 30, 1994 49,847,000 49,890,000
OTHER ASSETS 24,002,000 20,649,000
------------ ------------
$273,048,000 $293,215,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1995 1994
------------ -------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES (Note 4):
Accounts and notes payable $ 47,418,000 $ 33,704,000
Other current liabilities 45,924,000 67,924,000
------------ ------------
Total current liabilities 93,342,000 101,628,000
------------ ------------
LONG-TERM DEBT (Note 5) 15,966,000 15,538,000
------------ ------------
SHAREHOLDERS' EQUITY (Note 6):
Preferred stock, par value $.25 per share,
authorized 3,000,000 shares --
Second Preferred Stock, Series I,
authorized 1,950,000 shares, issued
1,669,862 shares at June 30, 1995
and 1,677,129 shares at September 30,
1994 (liquidation value $16,699,000
and $16,771,000, respectively) 417,000 419,000
Common Stock, par value $.25 per share,
authorized 85,000,000 shares, issued
31,061,174 shares at June 30, 1995
and 33,887,739 shares at September 30,
1994, and 162,794 shares and 34,500
shares in treasury at June 30, 1995
and September 30, 1994, respectively 7,765,000 8,472,000
Other shareholders' equity 155,558,000 167,158,000
------------ ------------
Total shareholders' equity 163,740,000 176,049,000
------------ ------------
$273,048,000 $293,215,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED JUNE 30,
1995 1994
------------ ------------
Net sales $135,238,000 $125,287,000
Cost of sales 100,981,000 88,666,000
------------ ------------
Gross profit 34,257,000 36,621,000
Selling, general and administrative
expenses 26,020,000 24,129,000
------------ ------------
Income from operations 8,237,000 12,492,000
------------ ------------
Other income (expense):
Interest expense (542,000) (428,000)
Interest income 221,000 448,000
Other, net 137,000 (19,000)
------------ ------------
(184,000) 1,000
------------ ------------
Income before income taxes 8,053,000 12,493,000
------------ ------------
Provision for income taxes:
Federal 2,396,000 4,223,000
State and other 605,000 899,000
------------ ------------
3,001,000 5,122,000
------------ ------------
Net income $ 5,052,000 $ 7,371,000
============ ============
Net income per share of common stock (Note 3) $ .15 $ .20
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
NINE MONTHS ENDED JUNE 30,
1995 1994
------------ ------------
Net sales $388,949,000 $347,299,000
Cost of sales 285,031,000 245,012,000
------------ ------------
Gross profit 103,918,000 102,287,000
Selling, general and administrative
expenses 77,435,000 69,993,000
------------ ------------
Income from operations 26,483,000 32,294,000
------------ ------------
Other income (expense):
Interest expense (1,589,000) (1,319,000)
Interest income 1,059,000 1,294,000
Other, net 389,000 107,000
------------ ------------
(141,000) 82,000
------------ ------------
Income before income taxes 26,342,000 32,376,000
------------ ------------
Provision for income taxes:
Federal 8,389,000 10,923,000
State and other 1,928,000 2,351,000
------------ ------------
10,317,000 13,274,000
------------ ------------
Net income $ 16,025,000 $ 19,102,000
============ ============
Net income per share of common stock (Note 3) $ .47 $ .51
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED JUNE 30,
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $16,025,000 $19,102,000
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,310,000 7,241,000
Provision for losses on accounts receivable 822,000 588,000
Change in assets and liabilities:
(Increase) decrease in accounts receivable and
contract costs and recognized income not yet
billed (1,066,000) 8,104,000
Increase in inventories (7,966,000) (5,036,000)
Increase in prepaid expenses and other assets (892,000) (51,000)
Decrease in accounts payable and accrued liabilities (11,061,000) (8,064,000)
Other changes, net 260,000 (33,000)
----------- -----------
Total adjustments (13,593,000) 2,749,000
----------- -----------
Net cash provided by operating
activities 2,432,000 21,851,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in marketable securities 26,439,000 (10,001,000)
Acquisition of property, plant and equipment (5,864,000) (7,369,000)
Proceeds from sale of stock of affiliate --- 11,615,000
Acquired businesses (7,758,000) (1,877,000)
Decrease in equipment lease deposits and other 279,000 1,202,000
----------- -----------
Net cash provided by (used in) investing
activities 13,096,000 (6,430,000)
----------- -----------
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
NINE MONTHS ENDED JUNE 30,
1995 1994
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common shares (28,233,000) (13,361,000)
Proceeds from issuance of long-term debt 500,000 5,100,000
Payment of long-term debt (9,396,000) (8,304,000)
Increase in short-term borrowings 8,500,000 ---
Other, net (461,000) (129,000)
----------- -----------
Net cash used in financing activities (29,090,000) (16,694,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,562,000) (1,273,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,659,000 26,466,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $15,097,000 $25,193,000
=========== ===========
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation -
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The balance sheet at September 30, 1994 has
been derived from the audited financial statements at that date. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month and nine-month periods ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report to shareholders for the year ended September 30, 1994. The Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," for the year beginning
October 1, 1994. Adoption of this standard did not have a material effect on
the Company's financial position or results of operations.
At the February 8, 1995 Annual Meeting of Stockholders, the stockholders
approved changing the Company's name from "Instrument Systems Corporation" to
"Griffon Corporation." The name change became effective in March 1995.
(2) Inventories -
Inventories, stated at the lower of cost (first-in, first-out or average)
or market, are comprised of the following:
June 30, September 30,
1995 1994
----------- -------------
Finished goods . . . . . . . . . . $20,982,000 $16,664,000
Work in process . . . . . . . . . 30,163,000 26,674,000
Raw materials and supplies . . . . 29,213,000 25,580,000
----------- -----------
$80,358,000 $68,918,000
=========== ===========
(3) Net Income Per Share -
Net income per share is calculated using the weighted average number of
shares of common stock, and where dilutive, common stock equivalents outstanding
during each period. Shares used in computing per share results were 33,057,000
and 36,814,000 for the three months ended June 30, 1995 and 1994 and 33,821,000
and 37,408,000 for the nine months ended June 30, 1995 and 1994, respectively.
(4) Notes Payable -
In December 1994, outstanding borrowings under a long-term debt agreement
were refinanced under a short-term line of credit. Interest on this obligation
is at approximately the prime rate.
(5) Long-Term Debt -
During the quarter ended June 30, 1995, the Company entered into an eight-
year loan agreement with two banks. The agreement provides for up to $60
million of revolving credit for three years after which outstanding borrowings
may be converted into a five-year term loan. Borrowings bear interest at rates
based upon the London Interbank Offered Rate or at the prime rate.
(6) Self-Tender Offer -
In December 1994, the Company completed a self-tender offer for 3,002,840
shares of the Company's Common Stock, which were then retired, at a price of
$8.75 per share. During the nine months ended June 30, 1995, approximately
$28,200,000 was used to acquire 3,128,050 shares of Common Stock.
(7) Acquisitions -
During the quarter ended December 31, 1994, the Company acquired two
companies for the building products business for an aggregate price of
$7,758,000. The acquisitions have been accounted for as purchases.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended June 30, 1995
Net sales -
Net sales were $135.2 million for the three-month period ended June 30,
1995, an increase of $10.0 million or 7.9% over last year's comparable quarter.
Net sales of the building products business were $75.0 million, an
increase of $11.6 million or 18.3% over last year. Acquired businesses
accounted for $9.7 million of the higher sales.
Net sales of the specialty plastic films business were $27.0 million
compared to $29.0 million last year. As previously reported, a major customer
of the specialty plastic films business has made a design change which
substantially phased out the specialty plastic's thin laminate program during
the first half of 1995. During the quarter, decreased sales of thin laminate
($6.3 million) were partially offset by the effect of higher selling prices
($2.3 million) and increased sales of other film products ($2.0 million).
Net sales of the electronic information and communication systems business
were $23.1 million compared to $23.4 million last year.
Operating income -
Income from operations for the three-month period ended June 30, 1995 was
$8.2 million compared to $12.5 million in last year's comparable quarter.
Operating income of the building products business was approximately the
same as last year. Increases from acquired businesses' operating income and
higher selling prices were offset by increased raw material and other
manufacturing costs.
Operating income of the specialty plastic films business decreased by
approximately $5 million compared to last year primarily due to the phase-out of
the thin laminate program, delays in receipt of anticipated orders related to
ongoing development projects and substantial cost increases for polyethylene
resin used in its business. The Company has generally been able to pass on such
increases to its customers in the past. However, the specialty plastic film
industry has experienced a period of soft demand and excess production capacity.
As a result, although the Company has implemented selling price increases, due
to the magnitude of the cost increases and the economic conditions, such selling
price adjustments have not fully compensated for the cost increases. Although
raw material costs recently decreased, it is not known at this time if there
will be further decreases or the extent that such decreases will be retained by
the business.
Operating income of the electronic information and communication systems
business was approximately the same as last year.
Nine months ended June 30, 1995
Net sales -
Net sales were $388.9 million in the nine-month period ended June 30,
1995, an increase of $41.7 million or 12.0% over last year's comparable period.
Net sales of the building products business were $213.5 million, an
increase of $46.4 million or 27.7% over last year. Acquired companies accounted
for $26.5 million of the increase, with the remainder of the increase
principally attributable to increased unit sales of garage doors ($14.4 million)
and price increases.
Net sales of the specialty plastic films business were $81.2 million
compared to $85.6 million last year, due primarily to the phase-out of the thin
laminate program partially offset by the effect of higher selling prices
($6.3 million) and increased unit sales of health care and other film products
($5.8 million).
Net sales of the electronic information and communication systems business
were $63.9 million compared to $66.3 million last year, principally due to
decreased revenues on certain military programs that are nearing completion.
Operating income -
Income from operations for the nine-month period ended June 30, 1995 was
$26.5 million compared to $32.3 million last year.
Operating income of the building products business increased approximately
$3.8 million over last year's comparable period primarily due to the increased
sales.
Operating income of the specialty plastic films business decreased
approximately $10 million for the reasons discussed above.
Operating income of the electronic information and communication systems
business decreased approximately $1.0 million due to the lower sales.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations was $2.4 million after reflecting a
reduction of current liabilities of approximately $8.3 million.
In December 1994, the Company completed a self-tender offer for 3,002,840
shares of its Common Stock at a price of $8.75 per share. During the nine
months, a total of $28.2 million was used to acquire 3,128,050 shares of Common
Stock. These purchases were funded by existing cash and marketable securities,
which decreased due to the stock purchases and $7.8 million used for two
acquisitions for the building products business.
In June 1995, the Company entered into a $60 million eight-year loan
agreement with two banks that provides revolving credit for three years after
which outstanding borrowings may be converted into a five-year term loan.
Borrowings bear interest at rates based upon the London Interbank Offered
Rate or at the prime rate and may be used for general corporate purposes,
including business acquisitions.
Anticipated cash flows from operations, together with existing cash and
lease line availability, should be adequate to finance presently anticipated
working capital and capital expenditure requirements.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
There are no material changes in the information previously reported
under this item.
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
27 -- Financial Data Schedule (for electronic submission only)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFON CORPORATION
By Robert Balemian
-----------------------
Robert Balemian
President
(Principal Financial Officer)
Date: July 26, 1995
5
9-MOS
SEP-30-1995
JUN-30-1995
15,097,000
3,288,000
96,371,000
4,245,000
80,358,000
199,199,000
99,882,000
50,035,000
273,048,000
93,342,000
15,966,000
7,765,000
0
417,000
155,558,000
273,048,000
388,949,000
388,949,000
285,031,000
285,031,000
0
822,000
1,589,000
26,342,000
10,317,000
16,025,000
0
0
0
16,025,000
.47
0
