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.
<PAGE>
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
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
(Unaudited) (Note 1)
<S> <C> <C>
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
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
(Unaudited) (Note 1)
<S> <C> <C>
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
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
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
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
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
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
---------------------------
1995 1994
----------- ------------
<S> <C> <C>
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)
----------- -----------
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
---------------------------
1995 1994
----------- ------------
<S> <C> <C>
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
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------- -------------
<S> <C> <C>
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
=========== ===========
</TABLE>
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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)
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 11,353,000
<SECURITIES> 3,355,000
<RECEIVABLES> 86,795,000
<ALLOWANCES> 3,976,000
<INVENTORY> 76,290,000
<CURRENT-ASSETS> 180,741,000
<PP&E> 98,308,000
<DEPRECIATION> 48,061,000
<TOTAL-ASSETS> 255,023,000
<CURRENT-LIABILITIES> 80,272,000
<BONDS> 15,728,000
<COMMON> 7,765,000
0
417,000
<OTHER-SE> 150,841,000
<TOTAL-LIABILITY-AND-EQUITY> 255,023,000
<SALES> 253,711,000
<TOTAL-REVENUES> 253,711,000
<CGS> 184,050,000
<TOTAL-COSTS> 184,050,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 406,000
<INTEREST-EXPENSE> 1,047,000
<INCOME-PRETAX> 18,289,000
<INCOME-TAX> 7,316,000
<INCOME-CONTINUING> 10,973,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,973,000
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
