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 December 31, 2002
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 by check mark whether registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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. 32,721,832 shares of Common
Stock as of January 31, 2003.
FORM 10-Q
---------
CONTENTS
--------
PAGE
----
PART I - FINANCIAL INFORMATION (Unaudited)
---------------------
Condensed Consolidated Balance Sheets at December 31, 2002
and September 30, 2002........................................ 1
Condensed Consolidated Statements of Operations for the Three
Months Ended December 31, 2002 and 2001 ...................... 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 2002 and 2001 ................ 4
Notes to Condensed Consolidated Financial Statements.......... 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
Quantitative and Qualitative Disclosure about Market Risk..... 11
Controls and Procedures....................................... 11
PART II -OTHER INFORMATION
-----------------
Item 1: Legal Proceedings .................................... 12
Item 2: Changes in Securities ................................ 12
Item 3: Defaults upon Senior Securities ...................... 12
Item 4: Submission of Matters to a Vote of Security Holders... 12
Item 5: Other Information .................................... 12
Item 6: Exhibits and Reports on Form 8-K ..................... 12
Signature .................................................... 13
Certifications................................................ 14
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
December 31, September 30,
2002 2002
----------- ------------
(Unaudited) (Note 1)
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 45,507,000 $ 45,749,000
Accounts receivable, less allowance for
doubtful accounts 138,840,000 147,890,000
Contract costs and recognized income not
yet billed 51,978,000 58,440,000
Inventories (Note 2) 108,328,000 104,792,000
Prepaid expenses and other current assets 27,220,000 25,470,000
------------ ------------
Total current assets 371,873,000 382,341,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $130,373,000 at
December 31, 2002 and $126,560,000 at
September 30, 2002 152,425,000 148,253,000
OTHER ASSETS:
Costs in excess of fair value of net
assets of businesses acquired (Note 1) 46,238,000 44,978,000
Other 12,546,000 12,122,000
------------ ------------
58,784,000 57,100,000
------------ ------------
$583,082,000 $587,694,000
============ ============
See notes to condensed consolidated financial statements.
1
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
December 31, September 30,
2002 2002
----------- ------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts and notes payable $ 57,486,000 $ 65,832,000
Other current liabilities 107,094,000 123,315,000
------------ ------------
Total current liabilities 164,580,000 189,147,000
------------ ------------
LONG-TERM DEBT 86,444,000 74,640,000
------------ ------------
MINORITY INTEREST AND OTHER 29,364,000 30,938,000
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.25 per
share, authorized 3,000,000 shares,
no shares issued --- ---
Common stock, par value $.25 per
share, authorized 85,000,000
shares, issued 36,342,692 shares at
December 31, 2002 and 36,337,192 shares at
September 30, 2002; 3,583,983 and 3,266,983
shares in treasury at December 31, 2002 and
September 30, 2002, respectively 9,086,000 9,084,000
Other shareholders' equity 293,608,000 283,885,000
------------ ------------
Total shareholders' equity 302,694,000 292,969,000
------------ ------------
$583,082,000 $587,694,000
============ ============
See notes to condensed consolidated financial statements.
2
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2002 2001
---- ----
Net sales $302,154,000 $301,902,000
Cost of sales 215,156,000 218,062,000
------------ ------------
Gross profit 86,998,000 83,840,000
Selling, general and administrative expenses 65,346,000 62,412,000
------------ ------------
Income from operations 21,652,000 21,428,000
------------ ------------
Other income (expense):
Interest expense (1,105,000) (1,361,000)
Interest income 336,000 300,000
Other, net 198,000 (73,000)
------------ ------------
(571,000) (1,134,000)
------------ ------------
Income before income taxes 21,081,000 20,294,000
Provision for income taxes 8,011,000 8,117,000
------------ ------------
Income before minority interest and cumulative
effect of a change in accounting principle 13,070,000 12,177,000
Minority interest (2,150,000) (1,595,000)
----------- -----------
Income before cumulative effect of a change in
accounting principle 10,920,000 10,582,000
Cumulative effect of a change in accounting principle, net
of income taxes of $2,457,000 (Note 1) --- (24,118,000)
----------- ------------
Net income (loss) $ 10,920,000 $(13,536,000)
============ ============
Basic earnings (loss) per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .33 $ .32
Cumulative effect of a change in accounting principle -- (.73)
------------ ------------
$ .33 $ (.41)
============ ============
Diluted earnings (loss) per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .32 $ .31
Cumulative effect of a change in accounting principle -- (.70)
------------ ------------
$ .32 $ (.39)
============ ============
See notes to condensed consolidated financial statements.
3
GRIFFON CORPORATION AND SUBSIDIARIES
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,920,000 $(13,536,000)
------------ ------------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 6,207,000 5,329,000
Minority interest 2,150,000 1,595,000
Cumulative effect of a change in accounting
principle --- 24,118,000
Provision for losses on accounts receivable 217,000 672,000
Change in assets and liabilities:
Decrease in accounts receivable and contract
costs and recognized income not yet billed 16,364,000 9,949,000
(Increase) decrease in inventories (3,896,000) 4,434,000
(Increase) decrease in prepaid expenses and
other assets (2,604,000) 667,000
Decrease in accounts payable, accrued
liabilities and income taxes (18,322,000) (9,183,000)
Other changes, net (1,227,000) 712,000
------------ ------------
Total adjustments (1,111,000) 38,293,000
------------ ------------
Net cash provided by operating activities 9,809,000 24,757,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (9,830,000) (6,029,000)
Balance paid for acquired business (13,112,000) ---
Proceeds from divestiture 1,426,000 ---
Decrease in equipment lease deposits 3,494,000 555,000
------------ ------------
Net cash used in investing activities (18,022,000) (5,474,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (3,834,000) (22,000)
Proceeds from issuance of long-term debt 17,000,000 2,000,000
Payments of long-term debt (2,642,000) (10,503,000)
Increase (decrease) in short-term borrowings 1,399,000 (1,800,000)
Distributions to minority interests (5,072,000) (3,270,000)
Other, net 1,120,000 529,000
------------ ------------
Net cash provided by (used in) financing activities 7,971,000 (13,066,000)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (242,000) 6,217,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 45,749,000 40,096,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,507,000 $ 46,313,000
============ ============
See notes to condensed consolidated financial statements.
4
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. 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 period
ended December 31, 2002 are not necessarily indicative of the results that may
be expected for the year ending September 30, 2003. The balance sheet at
September 30, 2002 has been derived from the audited financial statements at
that date. 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, 2002.
Effective October 1, 2001, the company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," (SFAS
142). SFAS 142 addresses accounting and reporting for acquired goodwill. It
eliminates the previous requirement to amortize goodwill and establishes new
requirements with respect to the recognition and valuation of goodwill. With the
assistance of a third-party valuation expert, the company ascertained the fair
value of its reporting units as part of adopting SFAS 142 and determined that
goodwill of the installation services segment was impaired pursuant to the new
standard. Results for the quarter ended December 31, 2001 include the related
cumulative effect of a change in accounting principle in the amount of
$24,118,000 (net of an income tax benefit of $2,457,000) to reflect the
impairment.
Recent accounting pronouncements:
The Financial Accounting Standards Board has issued Interpretations Nos.
45, "Guarantor's Accounting and Disclosure Requirements for Guarantees including
Indirect Guarantees of Indebtedness of Others" and 46, "Consolidation of
Variable Interest Entities."
Interpretation No. 45 elaborates on disclosures to be made by a
guarantor in its financial statements about its obligations under certain
guarantees that it has issued. As a part of some transactions, the company may
provide routine indemnifications in which it retains certain environmental, tax
and other liabilities whose terms range in duration and for which the company's
ultimate obligation is not quantifiable. To date, the company has not made any
significant payments in connection with such indemnifications.
Interpretation No. 46 addresses consolidation of variable interest
entities and related disclosure. A subsidiary of the company is a party to lease
and other agreements with a variable interest entity for the purpose of renting
one of the company's facilities which has a total cost of $10.5 million. The
company does not anticipate incurring any liabilities in connection with such
agreements beyond its obligations for rental payments pursuant to the lease.
The company does not anticipate that adopting Interpretations Nos. 45
and 46 will have a material effect on results of operations or financial
condition.
5
(2) Inventories -
-----------
Inventories, stated at the lower of cost (first-in, first-out or
average) or market, are comprised of the following:
December 31, September 30,
2002 2002
------------ -------------
Finished goods......................... $ 48,199,000 $ 45,288,000
Work in process........................ 39,266,000 37,870,000
Raw materials and supplies............. 20,863,000 21,634,000
----------- ------------
$108,328,000 $104,792,000
============ ============
(3) Earnings per share (EPS) -
------------------------
Basic EPS is calculated by dividing income by the weighted average
number of shares of common stock outstanding during the period. The weighted
average number of shares of common stock used in determining basic EPS was
33,123,000 for the three months ended December 31, 2002 and 33,056,000 for the
three months ended December 31, 2001.
Diluted EPS is calculated by dividing income by the weighted average
number of shares of common stock outstanding plus additional common shares that
could be issued in connection with potentially dilutive securities. The weighted
average number of shares of common stock used in determining diluted EPS was
34,041,000 and 34,573,000 for the three months ended December 31, 2002 and 2001,
respectively, and reflects additional shares in connection with stock option and
other stock-based compensation plans.
Options to purchase approximately 2,059,000 and 1,019,000 shares of
common stock were not included in the computations of diluted earnings per share
for the three months ended December 31, 2002 and 2001, respectively, because the
effects would have been antidilutive.
(4) Business segments -
-----------------
The company's reportable business segments are as follows - Garage
Doors (manufacture and sale of residential and commercial/industrial garage
doors, and related products); Installation Services (sale and installation of
building products primarily for new construction, such as garage doors, garage
door openers, manufactured fireplaces and surrounds, and cabinets); Electronic
Information and Communication Systems (communication and information systems for
government and commercial markets) and Specialty Plastic Films (manufacture and
sale of plastic films and film laminates for baby diapers, adult incontinence
care products, disposable surgical and patient care products and plastic
packaging).
6
Information on the company's business segments is as follows:
Electronic
Information
Specialty and
Garage Installation Plastic Communication
Doors Services Films Systems Totals
------ ------------ --------- ------------- ------
Revenues from
external customers -
Three months ended
December 31, 2002 $106,763,000 $ 72,288,000 $ 87,342,000 $ 35,761,000 $302,154,000
Three months ended
December 31, 2001 112,616,000 71,033,000 $ 72,566,000 45,687,000 301,902,000
Intersegment revenues -
Three months ended
December 31, 2002 $ 6,700,000 $ 32,000 $ --- $ --- $ 6,732,000
Three months ended
December 31, 2001 7,121,000 77,000 --- --- 7,198,000
Segment profit -
Three months ended
December 31, 2002 $ 10,917,000 $ 1,679,000 $ 10,666,000 $ 1,722,000 $ 24,984,000
Three months ended
December 31, 2001 9,245,000 2,384,000 9,820,000 2,440,000 23,889,000
Following is a reconciliation of segment profit to amounts reported in
the consolidated financial statements:
Three Months Ended December 31,
-------------------------------
2002 2001
---- ----
Profit for all segments $24,984,000 $23,889,000
Unallocated amounts (3,134,000) (2,534,000)
Interest expense, net (769,000) (1,061,000)
------------ -----------
Income before income taxes $21,081,000 $20,294,000
=========== ===========
Goodwill at December 31, 2002 includes $12.9 million attributable to
the garage doors segment, $14.3 million in the electronic information and
communication systems segment and $19.0 million in the specialty plastic films
segment.
(5) Comprehensive income -
--------------------
Comprehensive income, which consists of net income (loss) and foreign
currency translation adjustments, was $13.3 million and ($14.4) million for the
three-month periods ended December 31, 2002 and 2001, respectively.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating results (in thousands) by business segment were as follows
for the quarters ended December 31:
Segment
Net Sales Operating Profit
----------------- ------------------
2002 2001 2002 2001
---- ---- ---- ----
Garage doors $113,463 $119,737 $10,917 $ 9,245
Installation services 72,320 71,110 1,679 2,384
Specialty plastic films 87,342 72,566 10,666 9,820
Electronic information
and communication systems 35,761 45,687 1,722 2,440
Intersegment revenues (6,732) (7,198) - -
-------- -------- ------- -------
$302,154 $301,902 $24,984 $23,889
======== ======== ======= =======
Garage Doors
- ------------
Net sales of the garage door segment decreased by $6.3 million or 5.2%
compared to last year. The decrease was due to the divestiture in 2002 of Atlas,
an unprofitable commercial operation ($5.2 million) and the net effect ($1.1
million) of lower unit sales partly offset by favorable pricing and product mix.
Operating profit of the garage doors segment increased $1.7 million
compared to last year. The Atlas divestiture accounted for $.7 million of the
increase. Gross margin percentage increased to approximately 32.5% in 2002 from
30.5% last year. The increased margin was due primarily to improved pricing and
mix, and increased manufacturing efficiencies. Selling, general and
administrative expenses decreased due to the Atlas divestiture and as a
percentage of sales were 22.9% compared to 22.8% last year.
Installation Services
- ---------------------
Net sales of the installation services segment increased by $1.2
million or 1.7% compared to last year. The increase was principally due to the
segment's expanded product offering and increased market share. Sales were
strong during the first half of the quarter, but weakened in the second half due
to winter weather conditions and economic factors.
Operating profit of the installation services segment decreased $.7
million compared to last year. Gross margin percentage was 27.3% compared to
27.7% last year. Selling, general and administrative expenses as a percentage of
sales increased to approximately 25.0% from 24.4% last year. The operating cost
growth was primarily due to increased installation labor costs to support the
sales growth in the first half of the quarter and a lag in adjusting labor
levels as sales softened in the second half of the quarter.
Specialty Plastic Films
- -----------------------
Net sales of the specialty plastic films segment increased $14.8
million or 20.4% compared to last year. The increase was principally due to the
impact ($6 million) of higher unit volumes and product mix, the effect of a
weaker U.S. dollar on translated foreign sales ($4.5 million), the net sales
($3.0 million) of the segment's Brazilian operation which was acquired in the
latter half of fiscal 2002 and selling price
8
adjustments to pass through raw material cost increases to customers
($1.2 million).
Operating profit of the specialty plastic films segment increased $.8
million compared to last year. Gross margin percentage decreased to 24.1% from
24.6% last year. The decrease was principally due to the excess (approximately
$.9 million) of raw material cost increases over related selling price
adjustments, partly offset by the effect of improved product mix. Selling,
general and administrative expenses as a percentage of sales increased to
approximately 12.1% from 11.0% last year principally due to higher freight and
administrative costs associated with the segment's European operations and to
support anticipated future sales growth.
Electronic Information and Communication Systems
- ------------------------------------------------
Net sales of the electronic information and communication systems
segment decreased $9.9 million or 21.7% compared to last year. The decrease was
primarily due to certain programs nearing completion and delays in anticipated
awards of new orders.
Operating profit of the electronic information and communication
systems segment decreased $.7 million compared to last year. The decrease is
principally attributable to the sales decrease and increased research and
development expenditures. Gross margin percentage increased to 25.3% from 21.0%
last year due primarily to lower margins last year in connection with certain
development phase programs. Selling, general and administrative expenses as a
percentage of sales were 21.3% compared to 16.0% last year primarily due to the
sales decrease. Sales and operating profits of this segment in the second fiscal
quarter are expected to lag last year, with improvement anticipated in the
second half of fiscal 2003.
Net Interest Expense
- --------------------
Net interest expense decreased by $.3 million compared to last year due
to the effect of debt repayments and lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated by operations for the quarter was $9.8 million
compared to $24.8 million last year and working capital was $207.3 million at
December 31, 2002. Operating cash flows decreased compared to last year
primarily due to changes in operating assets and current liabilities.
During the quarter the company paid $13.1 million for the balance of
the Brazilian operation's purchase price, which was funded by bank borrowings.
The company also had capital expenditures of approximately $9.8 million,
principally made in connection with increasing production capacity and for the
specialty plastic films segment's capital program to support new opportunities
with its major customers.
Financing cash flows consisted primarily of net bank borrowings of
$15.8 million, treasury stock purchases of $3.8 million and distributions to
minority shareholders of $5.1 million. Additional purchases of the company's
Common Stock under its stock buyback program will be made, depending upon market
conditions, at prices deemed appropriate by management. At December 31, 2002,
future minimum payments under noncancellable operating leases and payments to be
made for notes payable and maturities of long-term debt over the next five years
are as follows (000's omitted):
Operating Debt
Year Leases Repayments Total
- ---- --------- ---------- -----
2003 $21,100 $ 9,600 $30,700
2004 15,300 9,000 24,300
2005 10,100 3,000 13,100
2006 6,600 9,800 16,400
2007 3,000 63,300 66,300
9
The $63.3 million of debt repayments reflected as payable in 2007 is
primarily due to the scheduled expiration of the company's revolving credit
agreement. The company anticipates that all or a substantial portion of that
amount will be refinanced. Anticipated cash flows from operations, together with
existing cash, bank lines of credit and lease line availability, should be
adequate to finance presently anticipated working capital and capital
expenditure requirements and to repay other long-term debt as it matures.
ACCOUNTING POLICIES AND PRONOUNCEMENTS
Critical Accounting Policies
- ----------------------------
The company's significant accounting policies are set forth in Note 1
of Notes to Consolidated Financial Statements in the company's annual report to
shareholders for the year ended September 30, 2002. The following discussion of
critical accounting policies addresses those policies that require management
judgment and estimates and are most important in determining the company's
operating results and financial condition.
The company recognizes revenues for most of its operations when title
and the risks of ownership pass to its customers. Provisions for estimated
losses resulting from the inability of our customers to remit payments are
recorded in the company's consolidated financial statements. Judgment is
required to estimate the ultimate realization of receivables.
The company's electronic information and communication systems segment
does a significant portion of its business under long-term contracts with
government agencies. This unit generally recognizes contract-related revenue and
profit using the percentage of completion method of accounting, which relies
primarily on estimates of total expected contract costs. The company follows
this method since reasonably dependable estimates of costs applicable to various
elements of a contract can be made. Since the financial reporting of these
contracts depends on estimates, recognized revenues and profit are subject to
revisions as contracts progress to completion. Contract cost estimates are
generally updated quarterly. Revisions in revenue and profit estimates are
reflected in the period in which the circumstances requiring the revision become
known. Provisions are made currently for anticipated losses on uncompleted
contracts.
Inventory is stated at the lower of cost (principally first-in,
first-out) or market. Inventory valuation requires the company to use judgment
to estimate any necessary allowances for excess, slow-moving and obsolete
inventory, which estimates are based on assessments about future demands, market
conditions and management actions.
Recent Accounting Pronouncements
- --------------------------------
The Financial Accounting Standards Board has issued a number of other
Financial Accounting Standards and Interpretations. See Note 1 of Notes to
Condensed Consolidated Financial Statements for a discussion of these
pronouncements. The company does not anticipate that adopting these
pronouncements, where applicable, will have a material effect on results of
operations or financial condition.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in
this report, including without limitation statements regarding the company's
financial position, business strategy, and the plans and objectives of the
company's management for future operations, are forward-looking statements. When
used in this report, words such as "anticipate", "believe", "estimate",
"expect", "intend" and similar expressions, as they relate to the company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the company's management,
10
as well as assumptions made by and information currently available to the
company's management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors,
including but not limited to, business and economic conditions, competitive
factors and pricing pressures, capacity and supply constraints. Such statements
reflect the views of the company with respect to future events and are subject
to these and other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of the company.
Readers are cautioned not to place undue reliance on these forward-looking
statements. The company does not undertake any obligation to release publicly
any revisions to these forward-looking statements to reflect future events or
circumstances or to reflect the occurrence of unanticipated events.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management does not believe that there is any material market risk
exposure with respect to derivative or other financial instruments that is
required to be disclosed.
CONTROLS AND PROCEDURES
Under the supervision and with the participation of our Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO") the company's disclosure
controls and procedures were evaluated as of a date within 90 days prior to the
filing of this report. Based on that evaluation, the company's CEO and CFO
concluded that the company's disclosure controls and procedures were effective.
There were no significant changes in the company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
11
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
None
Item 2 Changes in Securities
---------------------
None
Item 3 Defaults upon Senior Securities
-------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Registrant held its Annual Meeting of Stockholders
on February 5, 2003
(b) Not applicable
(c) Four directors were elected at the Annual Meeting to
serve until the Annual Meeting of Stockholders in 2006.
The names of these directors and votes cast in favor of
their election and shares withheld are as follows:
Name Votes For Votes Withheld
---- --------- --------------
Robert Balemian 29,796,848 715,095
Harvey R. Blau 29,720,556 791,387
Ronald J. Kramer 29,797,272 714,671
Lt. Gen. James W. Stansberry (Ret.) 29,797,990 713,953
Item 5 Other Information
-----------------
None
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 99 - Certifications pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
12
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/s/Robert Balemian
--------------------
Robert Balemian
President and Chief Financial Officer
(Principal Financial Officer)
Date: February 12, 2003
13
CERTIFICATION
I, Harvey R. Blau, Chairman of the Board and Chief Executive Officer of
Griffon Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Griffon
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
14
Date: February 12, 2003
By/s/Harvey R. Blau
-------------------
Harvey R. Blau
Chairman of the Board and
Chief Executive Officer
(principal executive officer)
15
CERTIFICATION
I, Robert Balemian, President and Chief Financial Officer of Griffon
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Griffon
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
16
Date: February 12, 2003
By/s/Robert Balemian
--------------------
Robert Balemian
President and Chief Financial Officer
(principal financial officer)
17
Exhibit 99
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Harvey R. Blau, Chief Executive Officer of Griffon Corporation,
hereby certify that the Form 10-Q of Griffon Corporation for the period ended
December 31, 2002 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and the information contained in such
report fairly presents, in all material respects, the financial condition and
results of operations of Griffon Corporation.
/s/Harvey R. Blau
------------------------
Name: Harvey R. Blau
Date: February 12, 2003
I, Robert Balemian, Chief Financial Officer of Griffon Corporation,
hereby certify that the Form 10-Q of Griffon Corporation for the period ended
December 31, 2002 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and the information contained in such
report fairly presents, in all material respects, the financial condition and
results of operations of Griffon Corporation.
/s/Robert Balemian
------------------------
Name: Robert Balemian
Date: February 12, 2003
These certifications are being furnished pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and, except to the extent required by the
Sarbanes-Oxley Act, shall not be deemed to be filed as part of the periodic
report described herein nor shall they be deemed filed by Griffon Corporation
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.