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, 1996
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. 28,886,704 shares of Common
Stock as of July 31, 1996.
FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Condensed Consolidated Balance Sheets at June 30, 1996
and September 30, 1995
Condensed Consolidated Statements of Income for the Three
Months and Nine Months Ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1996 and 1995
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,
1996 1995
----------- -------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,243,000 $ 9,656,000
Marketable securities 3,307,000 12,197,000
Accounts receivable, less allowance
for doubtful accounts 85,140,000 71,461,000
Contract costs and recognized
income not yet billed 29,835,000 31,490,000
Inventories (Note 2) 85,676,000 78,823,000
Prepaid expenses and other current
assets 6,681,000 8,419,000
------------ ------------
Total current assets 225,882,000 212,046,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $55,168,000 at
June 30, 1996 and $48,333,000 at
September 30, 1995 59,584,000 48,401,000
OTHER ASSETS 26,345,000 25,169,000
------------ ------------
$311,811,000 $285,616,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1996 1995
------------ -------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 48,301,000 $ 46,532,000
Other current liabilities 55,686,000 51,274,000
------------ ------------
Total current liabilities 103,987,000 97,806,000
------------ ------------
LONG-TERM DEBT (Notes 4 and 5) 39,872,000 16,074,000
------------ ------------
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, par value $.25 per share,
authorized 3,000,000 shares --
Second Preferred Stock, Series I,
authorized 1,950,000 shares, issued
1,662,346 shares at June 30, 1996
and 1,669,537 shares at September 30,
1995 (liquidation value $16,623,000
and $16,695,000, respectively) 416,000 417,000
Common stock, par value $.25 per share,
authorized 85,000,000 shares, issued
29,221,599 shares at June 30, 1996
and 31,081,499 shares at September 30,
1995, and 334,896 shares and 162,796
shares in treasury at June 30, 1996
and September 30, 1995, respectively 7,305,000 7,770,000
Other shareholders' equity 160,231,000 163,549,000
------------ ------------
Total shareholders' equity 167,952,000 171,736,000
------------ ------------
$311,811,000 $285,616,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
------------ ------------
Net sales $180,494,000 $135,238,000
Cost of sales 134,885,000 100,981,000
------------ ------------
Gross profit 45,609,000 34,257,000
Selling, general and administrative
expenses 31,848,000 26,020,000
------------ ------------
Income from operations 13,761,000 8,237,000
------------ ------------
Other income (expense):
Interest expense (1,006,000) (542,000)
Interest income 238,000 221,000
Other, net 45,000 137,000
------------ ------------
(723,000) (184,000)
------------ ------------
Income before income taxes 13,038,000 8,053,000
------------ ------------
Provision for income taxes:
Federal 4,253,000 2,396,000
State and other 782,000 605,000
------------ ------------
5,035,000 3,001,000
------------ ------------
Net income $ 8,003,000 $ 5,052,000
============ ============
Net income per share of common stock (Note 3) $ .26 $ .15
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
NINE MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
------------ ------------
Net sales $494,398,000 $388,949,000
Cost of sales 373,582,000 285,031,000
------------ ------------
Gross profit 120,816,000 103,918,000
Selling, general and administrative
expenses 90,290,000 77,435,000
------------ ------------
Income from operations 30,526,000 26,483,000
------------ ------------
Other income (expense):
Interest expense (2,542,000) (1,589,000)
Interest income 886,000 1,059,000
Other, net 116,000 389,000
------------ ------------
(1,540,000) (141,000)
------------ ------------
Income before income taxes 28,986,000 26,342,000
------------ ------------
Provision for income taxes:
Federal 9,475,000 8,389,000
State and other 1,779,000 1,928,000
------------ ------------
11,254,000 10,317,000
------------ ------------
Net income $ 17,732,000 $ 16,025,000
============ ============
Net income per share of common stock (Note 3) $ .55 $ .47
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED JUNE 30,
--------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $17,732,000 $16,025,000
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,902,000 6,310,000
Provision for losses on accounts receivable 959,000 822,000
Change in assets and liabilities:
Increase in accounts receivable and contract
costs and recognized income not yet billed (1,324,000) (1,066,000)
(Increase) decrease in inventories 3,161,000 (7,966,000)
(Increase) decrease in prepaid expenses and other
assets 977,000 (892,000)
Decrease in accounts payable and accrued liabilities (6,281,000) (11,061,000)
Other changes, net (719,000) 260,000
----------- -----------
Total adjustments 4,675,000 (13,593,000)
----------- -----------
Net cash provided by operating
activities 22,407,000 2,432,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in marketable securities 8,890,000 26,439,000
Acquisition of property, plant and equipment (8,018,000) (5,864,000)
Acquired businesses (22,240,000) (7,758,000)
Decrease in equipment lease deposits and other 1,786,000 279,000
----------- -----------
Net cash provided by (used in) investing
activities (19,582,000) 13,096,000
----------- -----------
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
NINE MONTHS ENDED JUNE 30,
--------------------------
1996 1995
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common shares (21,574,000) (28,233,000)
Proceeds from issuance of long-term debt 25,000,000 500,000
Payment of long-term debt (405,000) (9,396,000)
Increase in short-term borrowings --- 8,500,000
Other, net (259,000) (461,000)
----------- -----------
Net cash provided by (used in) financing
activities 2,762,000 (29,090,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,587,000 (13,562,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,656,000 28,659,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $15,243,000 $15,097,000
=========== ===========
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, 1995 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 and nine-month periods ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1996. 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, 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,
1996 1995
----------- -------------
Finished goods . . . . . . . . . . $27,249,000 $22,824,000
Work in process . . . . . . . . . 29,686,000 31,048,000
Raw materials and supplies . . . . 28,741,000 24,951,000
----------- -----------
$85,676,000 $78,823,000
=========== ===========
(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 31,013,000
and 33,057,000 for the three months ended June 30, 1996 and 1995, respectively
and 32,224,000 and 33,821,000 for the nine months ended June 30, 1996 and 1995,
respectively.
(4) Self-Tender Offer -
In March 1996, the Company completed a self-tender offer for 2,000,000
shares of the Company's Common Stock, which were then retired, at a price of
$9.75 per share. During the nine months ended June 30, 1996, approximately
$21.6 million was used to acquire 2,172,100 shares of Common Stock. The self-
tender was primarily funded by borrowings under the Company's revolving credit
loan agreement.
(5) Acquisitions -
During the nine months, approximately $22 million was used to acquire
companies for the building products business, including a manufacturer of heavy
rolling doors, sectional garage doors, grilles and other door products for
commercial, industrial and residential applications with annual sales of
$60 million. These acquisitions were primarily funded by borrowings under the
Company's revolving credit loan agreement. 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, 1996
Net sales were $180.5 million for the three-month period ended June 30,
1996, an increase of $45.3 million or 33.5% over last year.
Net sales of the building products business were $107.3 million, an
increase of $32.4 million or 43.2% over last year principally due to sales of
acquired businesses (approximately $20 million) and internal growth attributable
primarily to increased unit sales. Net sales of the specialty plastic films
business were $30.0 million, an increase of $3.0 million or 11.0% over last
year. The increase is primarily due to sales of new products to its major
customer for the infant diaper market, partially offset by lower selling prices.
Net sales of the electronic information and communication systems business were
$31.5 million, an increase of $8.5 million or 36.6% compared to last year
principally due to new program awards.
Income from operations for the three-month period ended June 30, 1996 was
$13.8 million, an increase of $5.5 million or 67.1% compared to last year.
Operating income of the building products business increased by approximately
$4.4 million over last year principally due to the sales increase related to
internal growth. Operating income of the specialty plastic films business
increased by approximately $.5 million for the quarter. The increase was
attributable to the new product sales and raw material cost decreases in excess
of selling price decreases, partly offset by new product start-up costs.
Operating income of the electronic information and communication systems
business increased by approximately $.9 million principally due to the sales
increase.
Net interest expense increased by $.4 million compared to last year's
comparable quarter. The increase was due to higher borrowings in connection
with the acquisitions made in the first quarter and the Company's second quarter
self-tender offer for 2,000,000 shares of its Common Stock.
Nine Months Ended June 30, 1996
Net sales were $494.4 million for the nine-month period ended June 30,
1996, an increase of $105.4 million or 27.1% over last year.
Net sales of the building products business were $285.2 million, an
increase of $71.7 million or 33.6% over last year primarily due to sales of
acquired businesses (approximately $55 million) and internal growth. Net sales
of the specialty plastic films business were $94.2 million, an increase of $13.0
million or 16.0% over last year. The increase is primarily due to sales of new
products to its major customer for the infant diaper market, partially offset by
the previously reported phase-out of the thin laminate program with this
customer and lower selling prices. Net sales of the electronic information and
communication systems business were $81.9 million, an increase of $18.0 million
or 28.2% compared to last year principally due to new program awards.
Income from operations for the nine-month period ended June 30, 1996 was
$30.5 million, an increase of $4.0 million or 15.3% compared to last year.
Operating income of the building products business increased $2.1 million
compared to last year. Higher garage door unit sales due to strengthening in
the construction and related retail markets in the third fiscal quarter and the
earnings of acquired companies, partly offset by severe winter weather
conditions and additional costs to phase-out an unprofitable product line were
the principal reasons for the increase. Operating income of the specialty
plastic films business increased by $.8 million compared to last year, and
operating income of the electronic information and communication systems
business increased by $1.9 million due to the reasons discussed above.
Net interest expense increased by $1.1 million compared to last year's
comparable period due to the higher borrowings incurred to consummate
acquisitions of building products companies for approximately $22 million and
for purchases of Common Stock for approximately $22 million during the first six
months of the year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations for the nine months was $22.4 million and
working capital was $121.9 million at June 30, 1996.
During the nine months, approximately $22 million was used to acquire
companies for the building products business, including a manufacturer of heavy
rolling doors, sectional garage doors, grilles and other door products for
commercial, industrial and residential applications with annual sales of
$60 million.
In March 1996, the Company completed a self-tender offer for 2 million
shares of its Common Stock at a price of $9.75 per share. During the nine
months, $21.6 million was used to acquire approximately 2.2 million shares of
Common Stock. Approximately 7.5 million shares of the Company's Common Stock
have been purchased under its stock repurchase program covering 9 million shares
of the Company's Common and Preferred Stock.
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 other than as follows:
The Town of New Windsor v. Tesa Tuck, et al. As previously
reported, in or about March 1993, the Town of New Windsor instituted
an action in the United States District Court for the Southern
District of New York against Lightron Corporation, a wholly-owned
subsidiary of the Company, and other defendants in which it was
seeking, inter alia, a declaratory judgment decreeing that Lightron
and the other defendants were jointly and severally responsible to
contribute to the response costs incurred and to be incurred by the
plaintiff in connection with the remediation of a landfill located
in the Town of New Windsor, New York (the "Site"). The plaintiff's
claim against Lightron was premised upon its contention that
Lightron of Cornwall, Inc., a former division of Lightron
Corporation, allegedly disposed of full and empty drums of lacquer
paints and thinners at the Site. The plaintiff alleged in its
complaint that total response costs for the Site were estimated to
be approximately $8,000,000. Lightron served and filed an answer
denying the material allegations of the complaint and asserting
several affirmative defenses.
In July 1996, Lightron settled the above described action for the
sum of $350,000 and the matter is now finally and fully settled with
regard to all defendants.
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
a) 27 -- Financial Data Schedule (for electronic submission only)
b) Report on Form 8-K dated May 9, 1996 covering Item 5 -- Other
Events and Item 6 -- Exhibits.
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: August 1, 1996
5
9-MOS
SEP-30-1996
JUN-30-1996
15,243,000
3,307,000
120,157,000
5,182,000
85,676,000
225,882,000
114,752,000
55,168,000
311,811,000
103,987,000
39,872,000
0
416,000
7,305,000
160,231,000
311,811,000
494,398,000
494,398,000
373,582,000
373,582,000
0
959,000
2,542,000
28,986,000
11,254,000
17,732,000
0
0
0
17,732,000
.55
0
