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 March 31, 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)


                        INSTRUMENT SYSTEMS CORPORATION
                  (Former name, if changed since last report)


      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.  30,903,383 shares of Common
Stock as of April 28, 1995.


                                    FORM 10-Q

                                    CONTENTS


PART I -  FINANCIAL INFORMATION (Unaudited)

          Condensed Consolidated Balance Sheets at March 31, 1995
          and September 30, 1994

          Condensed Consolidated Statements of Income for the Three
          Months and Six Months Ended March 31, 1995 and 1994

          Condensed Consolidated Statements of Cash Flows for the Six
          Months Ended March 31, 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
March 31, September 30, 1995 1994 ------------ ------------- (Unaudited) (Note 1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,353,000 $ 28,659,000 Marketable securities 3,355,000 29,727,000 Accounts receivable, less allowance for doubtful accounts 54,553,000 59,191,000 Contract costs and recognized income not yet billed 28,266,000 29,194,000 Inventories (Note 2) 76,290,000 68,918,000 Prepaid expenses and other current assets 6,924,000 6,987,000 ------------ ------------ Total current assets 180,741,000 222,676,000 PROPERTY, PLANT AND EQUIPMENT at cost, less accumulated depreciation and amortization of $48,061,000 at March 31, 1995 and $44,843,000 at September 30, 1994 50,247,000 49,890,000 OTHER ASSETS 24,035,000 20,649,000 ------------ ------------ $255,023,000 $293,215,000 ============ ============ See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30, 1995 1994 ------------ ------------- (Unaudited) (Note 1) LIABILITIES AND SHARHOLDERS' EQUITY CURRENT LIABILITIES (Note 4): Accounts and notes payable $ 36,660,000 $ 33,704,000 Other current liabilities 43,612,000 67,924,000 ------------ ------------ Total current liabilities 80,272,000 101,628,000 ------------ ------------ LONG-TERM DEBT 15,728,000 15,538,000 ------------ ------------ SHAREHOLDERS' EQUITY (Note 5): Preferred stock, par value $.25 per share, authorized 3,000,000 shares -- Second Preferred Stock, Series I, authorized 1,950,000 shares, issued 1,669,882 shares at March 31, 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 31,058,158 shares at March 31, 1995 and 33,887,739 shares at September 30, 1994, and 154,784 shares and 34,500 shares in treasury at March 31, 1995 and September 30, 1994, respectively 7,765,000 8,472,000 Other shareholders' equity 150,841,000 167,158,000 ------------ ------------ Total shareholders' equity 159,023,000 176,049,000 ------------ ------------ $255,023,000 $293,215,000 ============ ============ See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED MARCH 31, ----------------------------- 1995 1994 ------------ ------------ Net sales $120,149,000 $105,857,000 Cost of sales 88,834,000 74,558,000 ------------ ------------ Gross profit 31,315,000 31,299,000 Selling, general and administrative expenses 25,804,000 22,947,000 ------------ ------------ Income from operations 5,511,000 8,352,000 ------------ ------------ Other income (expense): Interest expense (532,000) (430,000) Interest income 219,000 394,000 Other, net 221,000 34,000 ------------ ------------ (92,000) (2,000) ------------ ------------ Income before income taxes 5,419,000 8,350,000 ------------ ------------ Provision for income taxes: Federal 1,743,000 2,808,000 State and other 425,000 616,000 ------------ ------------ 2,168,000 3,424,000 ------------ ------------ Net income $ 3,251,000 $ 4,926,000 ============ ============ Net income per share of common stock (Note 3) $ .10 $ .13 ============ ============ See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
SIX MONTHS ENDED MARCH 31, ----------------------------- 1995 1994 ------------ ------------ Net sales $253,711,000 $222,012,000 Cost of sales 184,050,000 156,346,000 ------------ ------------ Gross profit 69,661,000 65,666,000 Selling, general and administrative expenses 51,415,000 45,864,000 ------------ ------------ Income from operations 18,246,000 19,802,000 ------------ ------------ Other income (expense): Interest expense (1,047,000) (891,000) Interest income 838,000 846,000 Other, net 252,000 126,000 ------------ ------------ 43,000 81,000 ------------ ------------ Income before income taxes 18,289,000 19,883,000 ------------ ------------ Provision for income taxes: Federal 5,993,000 6,700,000 State and other 1,323,000 1,452,000 ------------ ------------ 7,316,000 8,152,000 ------------ ------------ Net income $ 10,973,000 $ 11,731,000 ============ ============ Net income per share of common stock (Note 3) $ .32 $ .31 ============ ============ See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED MARCH 31, --------------------------- 1995 1994 ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $10,973,000 $11,731,000 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,139,000 4,730,000 Provision for losses on accounts receivable 406,000 379,000 Change in assets and liabilities: Decrease in accounts receivable and contract costs and recognized income not yet billed 8,657,000 8,696,000 Increase in inventories (3,898,000) (2,995,000) (Increase) decrease in prepaid expenses and other assets 456,000 (434,000) Decrease in accounts payable and accrued liabilities (24,126,000) (14,542,000) Other changes, net 263,000 (23,000) ----------- ----------- Total adjustments (14,103,000) (4,189,000) ----------- ----------- Net cash provided by (used in) operating activities (3,130,000) 7,542,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in marketable securities 26,372,000 (14,975,000) Acquisition of property, plant and equipment (4,250,000) (2,337,000) Proceeds from sale of stock of affiliate --- 11,615,000 Acquired businesses (7,758,000) (1,557,000) Decrease in equipment lease deposits and other 439,000 1,665,000 ----------- ----------- Net cash provided by (used in) investing activities 14,803,000 (5,589,000) ----------- -----------
GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited)
SIX MONTHS ENDED MARCH 31, --------------------------- 1995 1994 ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of common shares (28,166,000) (6,037,000) Proceeds from issuance of long-term debt --- 1,900,000 Payment of long-term debt (9,264,000) (5,716,000) Increase in short-term borrowings 8,500,000 --- Other, net (49,000) 266,000 ----------- ----------- Net cash used in financing activities (28,979,000) (9,587,000) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (17,306,000) (7,634,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,659,000 26,466,000 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,353,000 $18,832,000 =========== =========== 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 six-month periods ended March 31, 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:
March 31, September 30, 1995 1994 ----------- ------------- Finished goods . . . . . . . . . . $19,690,000 $16,664,000 Work in process . . . . . . . . . 30,261,000 26,674,000 Raw materials and supplies . . . . 26,339,000 25,580,000 ----------- ----------- $76,290,000 $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 33,111,000 and 37,481,000 for the three months ended March 31, 1995 and 1994 and 34,203,000 and 37,704,000 for the six months ended March 31, 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) 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 six months ended March 31, 1995, approximately $28,200,000 was used to acquire 3,120,040 shares of Common Stock. (6) 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 March 31, 1995 Net sales - Net sales were $120.1 million for the three-month period ended March 31, 1995, an increase of $14.3 million or 13.5% over last year's comparable quarter. Net sales of the building products business were $58.7 million, an increase of $16.0 million or 37.3% over last year. Acquired businesses accounted for $9.5 million of the higher sales; the remainder of the increase was principally due to increased unit sales of garage doors ($5.6 million) and increased prices. Net sales of the specialty plastic films business were $27.6 million compared to $29.7 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 ($6.2 million) were partially offset by the effect of higher selling prices ($2.7 million) and increased unit sales of other film products ($1.0 million). Net sales of the electronic information and communication systems business were $23.3 million compared to $23.8 million last year. Operating income - Income from operations for the three-month period ended March 31, 1995 was $5.5 million compared to $8.4 million in last year's comparable quarter. Operating income of the building products business, in what is historically its weakest quarter, increased by approximately $1.0 million compared to last year. The effect of higher sales was partially offset by higher general and administrative expenses due to the business growth. Operating income of the specialty plastic films business decreased by approximately $3.5 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. Although the Company has implemented selling price increases, due to the magnitude of the cost increases, such selling price adjustments have not fully compensated for the cost increases. It is not known at this time if there will be further cost increases or if prices have stabilized. Operating income of the electronic information and communication systems business decreased approximately $.5 million principally due to the lower sales. Six months ended March 31, 1995 Net sales - Net sales were $253.7 million in the six-month period ended March 31, 1995, an increase of $31.7 million or 14.3% over last year's comparable period. Net sales of the building products business were $138.6 million, an increase of $34.8 million or 33.5% over last year. Acquired companies accounted for $16.8 million of the increase, with the remainder of the increase principally attributable to increased unit sales of garage doors and price increases. Net sales of the specialty plastic films business were $54.2 million compared to $56.6 million last year, due primarily to the phase-out of the thin laminate program partially offset by the effect of higher selling prices ($3.9 million) and increased unit sales of health care and other film products ($3.7 million). Net sales of the electronic information and communication systems business were $40.8 million compared to $43.0 million last year, principally due to decreased revenues on certain military programs that are nearing completion. Operating income - Income from operations for the six-month period ended March 31, 1995 was $18.2 million compared to $19.8 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 and the electronic information and communication systems business decreased approximately $4.7 million and $.9 million, respectively, for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES Cash flow used in operations was $3.1 million, reflecting a reduction of current liabilities of approximately $24.1 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 six months, a total of $28.2 million was used to acquire 3,120,040 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. 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. GRIFFON CORPORATION AND SUBSIDIARIES 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: May 3, 1995
 

5 The schedule contains summary financial information extracted from the condensed consolidated financial statements for the quarter ended March 31, 1995 and is qualified in its entirety by reference to such statements. 6-MOS SEP-30-1995 MAR-31-1995 11,353,000 3,355,000 86,795,000 3,976,000 76,290,000 180,741,000 98,308,000 48,061,000 255,023,000 80,272,000 15,728,000 7,765,000 0 417,000 150,841,000 255,023,000 253,711,000 253,711,000 184,050,000 184,050,000 0 406,000 1,047,000 18,289,000 7,316,000 10,973,000 0 0 0 10,973,000 .32 0