<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
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 No. 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)
Registrant's telephone number, including area code: (516) 938-5544
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF CLASS WHICH REGISTERED
COMMON STOCK, $.25 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of
the Act:
NONE
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [x].
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. (The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.) As of November 15, 1997 -- approximately $425,000,000.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date (applicable only to
corporate registrants). As of November 15, 1997 -- 30,689,613.
Documents incorporated by reference: Part III - Registrant's definitive
proxy statement to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934.
<PAGE> 2
PART I
ITEM ONE - BUSINESS
GENERAL
Griffon Corporation ("the Company") is a diversified manufacturer with
operations in three business segments: Building Products, Specialty Plastic
Films and Electronic Information and Communication Systems.
BUILDING PRODUCTS
Management believes that its wholly-owned subsidiary, Clopay, is the
largest manufacturer of residential garage doors and among the largest
manufacturers of commercial garage doors in the United States. Clopay sells a
broad line of steel and wood garage doors for residential and commercial use
which are manufactured in stock sizes and styles as well as special order to
customer specifications.
Clopay also operates a service company that installs and services
manufactured fireplaces, garage doors and openers and a range of related
products. This part of Clopay's business grew substantially in 1997 through
internal growth and acquisitions, while continuing to expand into new markets.
Management believes that the service business is one of the country's leading
fireplace dealers.
Clopay's strategy is to produce a broad line of high quality garage
doors for distribution throughout North America to professional installer,
retail and wholesale channels. Clopay has focused on increasing its market share
by introducing new products, expanding its distribution, sales and marketing
programs and through strategic acquisitions.
In July 1997 the company acquired Holmes-Hally Industries, a
manufacturer and installer of residential garage doors and related hardware with
annual sales of approximately $80,000,000. Also acquired during 1997 in cash
transactions were several other companies involved in the installation of
building products.
In October 1995 Clopay acquired the Atlas Roll-Lite Door Corporation, a
manufacturer of heavy duty rolling steel doors, grilles and counter shutters for
industrial and commercial markets; sectional garage doors for residential
applications; and doors and components for the self-storage market. A company
involved in the installation of building products was also acquired in fiscal
1996. These businesses have annual sales of approximately $80,000,000.
Clopay sells residential garage doors to a large number of retailers
throughout North America, including home centers and building material
cooperative buying groups. Significant customers include The Home Depot Inc.,
Menards, Inc., Lowe's Companies, Inc. and 84 Lumber. Residential and commercial
garage doors and related products for professional installation are sold
directly to a national network of installation specialists.
Clopay distributes garage doors directly from its manufacturing
facilities and through its network of 43 company-owned distribution centers
throughout the United States and Canada. Under Clopay's "installed sales"
program, consumers purchase garage doors through local retailers and Clopay
manages the installation through professional installing dealers.
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Clopay continues to make substantial capital investments in its
manufacturing facilities and believes that its automated continuous production
plants enable it to produce garage doors cost effectively. Recent acquisitions
have increased the number of manufacturing facilities in this segment.
Consequently, the company is reviewing its manufacturing structure with a view
towards consolidating operations and expects to complete the review and
implement related decisions in fiscal 1998.
Steel garage doors, including insulated doors, are fabricated from
pre-painted, galvanized steel, specially selected for rust resistance and low
maintenance. Wood garage doors are produced from kiln dried lumber and are
constructed for ease of operation and durability. The steel and lumber used in
the manufacturing operations are generally available from a variety of sources.
All products are designed for safe operation and easy specification by
architects and contractors.
The garage door market is characterized by several large national
manufacturers, including Clopay, and many smaller regional and local
manufacturers. Industry consolidation has resulted from the acquisition by
Clopay and others of numerous smaller regional and local manufacturers. Clopay
believes this trend will continue, and anticipates making additional
acquisitions as such opportunities may arise. In addition to price, Clopay
believes that it competes favorably on the basis of diversity of product line,
quality, service and merchandising capability.
SPECIALTY PLASTIC FILMS
Clopay is a leading manufacturer of customized plastic film and
laminates made from plastic resin and non-woven fabrics for use in consumer and
health-care products. Clopay's strategy is to offer technologically advanced
products for use in niche markets to major consumer and health-care product
companies. Clopay believes that its research and development activities and
capital investment in related equipment enable it to efficiently manufacture
products in large volume and meet changing consumer needs. These factors,
together with its technical expertise, allow Clopay to compete favorably in its
markets. Clopay sells its products primarily throughout the United States and
Europe with sales also in Canada, Latin America and the Pacific Rim. In 1996,
Clopay formed a 60%-owned joint venture, headquartered in Germany, to develop
and market laminates and films for use in the infant diaper, health-care and
other markets in Europe, South Africa and the Middle East. During 1997, the
joint venture constructed and began to operate a manufacturing facility in
Germany, the cost of which was approximately $9,000,000. Capital expenditures of
approximately $20 million for the joint venture are anticipated in 1998. This
investment, which is expected to be financed primarily by joint venture
borrowings, relates to an expansion of the European operations to meet
anticipated demand under a multi-year contract entered into with the specialty
plastic films segment's major customer.
Clopay manufactures thin gauge embossed barrier and breathable films and
laminates of plastic film and non-woven fabric to customer specifications for
sale to consumer product and other companies. These products are used primarily
as the backsheet in disposable diapers as well as the moisture barrier in adult
incontinent products and sanitary napkins. These products are differentiated by
strength, barrier and other properties. A substantial portion of the specialty
plastic film sales over the last five years have been to The Procter & Gamble
Company. The loss of this customer would have a material adverse effect on the
Company's business.
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Clopay also manufactures plastic films and laminates for a wide variety
of disposable health-care products including surgical drapes, patient care
underpads and medical garments. These plastic products are also sold for use in
garments worn by workers in hazardous industrial environments.
Clopay manufactures these products on high speed equipment to meet
stringent tolerances. The manufacturing process consists of melting a mixture of
plastic resins (primarily polyolefins) and additives, and forcing this mixture
through a computer controlled die and rollers to produce embossed films. In
addition, the process can involve extruding the melted plastic film directly
onto a non-woven fabric to form a laminate. Through statistical process control
methods, Clopay personnel monitor and control the entire production process. The
plastic resins used in Clopay's products are commodities generally available
from several sources.
Clopay is engaged in several joint efforts with the research and
development departments of its major specialty plastic film customers. Clopay
employs chemists, scientists and engineers at a technical center to study
polymers and manufacturing processes that will assist in the development of its
specialty plastic film products. Clopay's research and development efforts have
resulted in inventions covering embossing patterns, improved processing methods,
product applications and other proprietary technology. Clopay's research and
development costs for this business amounted to approximately $1,800,000,
$1,800,000 and $2,000,000 in 1995, 1996 and 1997, respectively.
ELECTRONIC INFORMATION AND COMMUNICATION SYSTEMS
The Company's wholly-owned subsidiary, Telephonics, is an electronics
systems company specializing in advanced information and communications systems
for government, aerospace, civil, industrial and commercial markets. In recent
years, Telephonics has expanded its customer base with increasing emphasis in
non-military markets. These efforts have resulted in a series of new contract
awards in the transit industry as well as international air traffic control
projects.
Telephonics designs, manufactures and logistically supports maritime
surveillance radars, air traffic management systems, advanced military
communication systems, IFF equipment, transit communication systems, command and
control systems, VLSI/LSI circuits, microwave landing systems and avionics for
commercial airlines. A substantial portion of Telephonics' sales (approximately
50% for 1997) were to agencies of the U.S. Government or to prime contractors or
subcontractors on government, military or aerospace programs. Telephonics'
funded backlog at September 30, 1997 was approximately $182 million as compared
to $78 million at September 30, 1996. The increased backlog is principally
attributable to an order in excess of $114,000,000 to provide aircraft radio
communications and related systems integration for an international customer.
Approximately 36% of the September 30, 1997 backlog is expected to be shipped
within twelve months.
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Some of the major programs in which Telephonics participates include the
following:
<TABLE>
<CAPTION>
Description of
Program Customer Product Purpose
------- -------- ------- -------
<S> <C> <C> <C>
NIMROD 2000 (U.K. Royal British Interior Communications Interior communications
Maritime Patrol Aircraft) Aerospace and Systems Integration and radio systems
C-17 ( U.S. Air Force Cargo Boeing Integrated Radio Centralized digitally
Transport) Management System controlled audio
distribution system
Wireless Intercomm System Wireless communication
system
LAMPS MARK III Lockheed Multi-Mode Radar Upgraded avionics for
(U.S. Navy Antisubmarine/ Martin (MMR) the LAMPS MARK III
Antisurface Helicopter) Intercommunication Helicopter with
and Radio Management maritime surveillance
System radar with identifi-
Identification Friend cation friend or foe
or Foe System (IFF) capability and inter-
communication and
radio management
systems
Joint-STARS (U.S. Air Force Northrop- Distributed Digital Manages all inter-
Airborne Surveillance System) Grumman Intercommunications and communication and
Corporation Radio Control System radio transmissions
Long Island Rail Road Kawasaki Communications, Vehicle Car-borne
Health Monitoring communications for
rail cars
AWACS (U.S. Air Force Airborne Boeing IFF System Upgrade IFF equipment
Warning and Control System) for AWACS aircraft
New York City Transit Bombardier Communications, Vehicle Car-borne
System & Kawasaki Health Monitoring communications for
rail cars
</TABLE>
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Telephonics also designs and produces custom large-scale integrated
circuits, which replace conventional circuits and components with a single
microchip. Telephonics provides integrated circuits to manufacturers of complex
control circuitry for telecommunications signal processing equipment, security
systems, home appliances, automated hand tools, military airborne interior
communication systems, and fast down windows, fuel monitoring and air bag
sensors for automobiles. Telephonics also provides specialized design services
which supplement customers' in-house capabilities.
Telephonics' commercial projects include contracts with Kawasaki,
Bombardier and other rail suppliers under which Telephonics produces
communication equipment which provides passenger and crew interior
communications among train cars, radio communications between the train and the
central control facility, automated voice announcement, passenger information
signage and vehicle performance monitoring systems.
Telephonics is under contract with Boeing to produce passenger and
cabin address intercom systems for the MD-80 and MD-95 aircraft. Headsets,
microphones, earphones and cables manufactured by Telephonics are used in
military and commercial aircraft and ground vehicles, especially in high noise
environments.
Government programs in which Telephonics is involved frequently provide
for purchases under a series of independently priced contracts, each calling for
delivery of a lot, consisting of a portion of the units in the overall program.
Each contract is treated separately and there is no requirement that upon
delivery of the lot which is the subject of one contract, the government must
contract to purchase, or the supplier must contract to sell, additional lots.
Telephonics accounts for its long-term contracts using the
percentage-of-completion method. Under this method, the Company recognizes
revenues and gross profit based upon the costs incurred as a percentage of the
total estimated cost.
Most of Telephonics' production contracts are fixed price, which means
that Telephonics generally bears the risk of cost overruns. In a fixed price
contract, progress payments are received during performance as stages are
reached for which fixed payments are established in the contract.
In accordance with Department of Defense and NASA procedures, all
contracts involving government programs permit the government to terminate the
contract at any time, at its convenience, without cause. In the event of such
termination, Telephonics is entitled to reimbursement for its costs and to
receive a proportionate share of its profits, if any, on the work performed
prior to termination.
Telephonics' staff of approximately 300 engineers and marketing
personnel, many of whom have technical backgrounds, advise government and
commercial planning and design personnel in an attempt to include Telephonics'
products in their programs.
Telephonics competes on the basis of technology, design, price and
performance. The products sold by Telephonics utilize technologies which are
constantly changing. Telephonics' expertise in these technologies enables it to
compete with several major manufacturers of electronic information and
communications systems which have greater financial resources than Telephonics.
Telephonics also competes with several smaller manufacturers of similar
products.
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A major part of Telephonics' product development is performed under
government contracts under which such costs are generally recoverable. Research
and development costs not recoverable under contractual arrangements are charged
to expense as incurred. These costs were approximately $1,600,000, $2,200,000
and $3,300,000 for 1995, 1996 and 1997, respectively.
EMPLOYEES
The Company has approximately 5,000 employees located throughout the
United States and in Europe and Canada at its various plants, warehouses and
offices. Approximately 100 of its employees are covered by collective bargaining
agreements, primarily with affiliates of the AFL-CIO. The Company believes its
relationships with employees are satisfactory.
OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Served as Positions and
Name Age Officer Since Offices
---- --- ------------- -------
<S> <C> <C> <C>
Harvey R. Blau 62 1983 Chairman of the Board
Robert Balemian 58 1976 President
Patrick L. Alesia 49 1979 Vice President and Treasurer
Edward I. Kramer 63 1997 Vice President, Administration
Susan E. Rowland 39 1983 Secretary
</TABLE>
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ITEM TWO - PROPERTIES
The Company occupies approximately 3,300,000 square feet of general
office, factory and warehouse space and showrooms throughout the United States
and in Germany and Canada. The following table sets forth certain information as
to each of the Company's major facilities:
<TABLE>
<CAPTION>
Approximate Owned
Square or
Location Business Segment Primary Use Footage Leased
-------- ---------------- ----------- ------- ------
<S> <C> <C> <C> <C>
Jericho, NY Corporate Headquarters Office 10,000 Leased
Farmingdale, NY Electronic Information Manufacturing 167,000 Owned
and Communication
Systems
Huntington, NY Electronic Information Manufacturing 89,000 Owned
and Communication
Systems
Cincinnati, OH Building Products Office 39,000 Leased
Specialty Plastic Films
Cincinnati, OH Specialty Plastic Films Research and 38,000 Leased
Building Products Development
Aschersleben, Specialty Plastic Films Manufacturing 26,000 Owned
Germany
Augusta, KY Specialty Plastic Films Manufacturing 143,000 Owned
Nashville, TN Specialty Plastic Films Manufacturing 86,000 Leased
Fresno, CA Specialty Plastic Films Manufacturing 37,000 Leased
Russia, OH Building Products Manufacturing 274,000 Leased
Baldwin, WI Building Products Manufacturing 216,000 Leased
Orlando, FL Building Products Manufacturing 196,000 Leased
Chandler, AZ Building Products Manufacturing 79,000 Leased
Nesbitt, MS Building Products Manufacturing 40,000 Owned
Auburn, WA Building Products Manufacturing 123,000 Leased
Tempe, AZ Building Products Manufacturing 145,000 Leased
Cerritos, CA Building Products Manufacturing 93,000 Leased
Commerce, CA Building Products Manufacturing 41,000 Leased
</TABLE>
The Company also leases space for the building products' distribution
centers and installation services locations in numerous facilities throughout
the United States which aggregate approximately 1,450,000 square feet.
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The Company has aggregate minimum annual rental commitments under real
estate leases of approximately $10,000,000. The majority of the leases have
escalation clauses related to increases in real property taxes on the leased
property and some for cost of living adjustments. Certain of the leases have
renewal and purchase options. All plants and equipment of the Company are
believed to be in adequate condition and contain sufficient space for current
needs. Recent acquisitions have increased the number of production facilities in
the building products segment. Consequently, the company is reviewing its
manufacturing structure with a view towards consolidating operations and expects
to complete the review and implement related decisions in fiscal 1998.
ITEM THREE - LEGAL PROCEEDINGS
A. Department of Environmental Conservation with Lightron Corporation.
Lightron, a wholly-owned subsidiary of the Company, once conducted operations
at a location in Peekskill in the Town of Cortland, New York owned by ISC
Properties, Inc., a wholly-owned subsidiary of the Company (the "Peekskill
Site"). ISC Properties, Inc. sold the Peekskill Site in November 1982.
Subsequently, the Company was advised by the New York State Department
of Environmental Conservation ("DEC") that random sampling at the Peekskill Site
and in a creek near the Peekskill Site indicated concentrations of solvents and
other chemicals common to Lightron's prior plating operations. ISC Properties
has entered into a consent order with the DEC to perform a remedial
investigation and prepare a feasibility study.
B. Linke Enterprises of Oregon, Inc. v. Champion Laboratories, Inc. and
Instrument Systems Corporation. In September 1990, a private cost recovery
action under federal and state environmental statutes was commenced in the
United States District Court of the District of Oregon. Plaintiff sought to
recover from the Company response costs in an amount exceeding $250,000 which
the plaintiff allegedly had expended to investigate and remediate an existing
environmental problem at the Site. The Site was previously leased by one of the
Company's former subsidiaries, Sun Battery, Inc., for the period from 1966 to
1971. According to the terms of the settlement agreement which resolved the
action, the Company was obligated to contribute to the plaintiff's remediation
costs the sum of $97,992.87. Champion Laboratories, Inc. also was required to
make a contribution to the plaintiff's remediation costs in the amount of
$49,011.13. In consideration of these contributions, both the Company and
Champion Laboratories, Inc. have been indemnified by the plaintiff against any
further liability with regard to the environmental matter, except to the extent
that either the EPA or the comparable state environmental agency initiates
enforcement proceedings or prosecutes a claim for environmental damages.
In June 1992, the Company was notified pursuant to the settlement
agreement that the State of Oregon had renewed its investigation of the Site and
that such investigation could lead to a final determination that further cleanup
actions will be necessary.
C. Atlantic Richfield Company (ARCO) v. Current Controls, et al. By way
of background, the Atlantic Richfield Company ("ARCO") initially notified the
Company in 1991 that based upon ARCO's investigation of the groundwater at the
Sinclair Refinery Superfund Site in Wellsville, New York, a portion of which
("Operable Unit II") allegedly is owned currently by an indirect, wholly-owned
subsidiary of the Company, ISC Development Corp., the shallow aquifer underlying
the Site was found to be contaminated with various hazardous substances. It is
ARCO's contention that manufacturing operations conducted at ISC Development
Corp.'s premises (which were leased to a third party) may have contributed to
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this contamination, and that as an owner and/or operator, the Company would be
jointly and severally liable as a responsible party for the costs of remediation
under Section 107 of CERCLA.
On or about January 26, 1994, ARCO served the Company with a summons and
complaint in this action pending in the United States District Court for the
Western District of New York. The Company has been named as one of several
defendants whom the plaintiff claims should be held jointly and severally liable
for the costs incurred and to be incurred by ARCO in the remediation and cleanup
of portions of the Sinclair Refinery Superfund Site.
Management believes, based on facts presently known to it, that the
outcome of the litigation proceedings described above will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
ITEM FOUR - SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
ITEM FIVE - MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The company's Common Stock is listed for trading on the New York Stock
Exchange. As of November 1, 1997 there were approximately 16,000 record holders.
The following table shows for the periods indicated the quarterly range in the
high and low sales prices for the company's Common Stock.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
-------------------- ---- ---
<S> <C> <C>
December 31, 1995 $ 9 $ 8
March 31, 1996 10 1/8 8 3/4
June 30, 1996 9 1/2 8 1/8
September 30, 1996 9 7/8 7 1/4
December 31, 1996 12 1/4 9 3/8
March 31, 1997 14 5/8 11 7/8
June 30, 1997 14 7/8 11 7/8
September 30, 1997 16 1/4 14
</TABLE>
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ITEM SIX - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $770,227,000 $655,063,000 $506,116,000 $451,166,000 $401,757,000
============ ============ ============ ============ ============
Income from
continuing
operations $ 33,164,000 $ 28,067,000 $ 23,245,000 $ 29,394,000 $ 26,340,000
============ ============ ============ ============ ============
Per share $ 1.06 $ .88 $ .69 $ .79 $ .69
============ ============ ============ ============ =============
Total assets $384,759,000 $311,169,000 $285,616,000 $293,215,000 $270,270,000
============ ============ ============ ============ ============
Long-term
obligations $ 53,854,000 $ 32,458,000 $ 16,074,000 $ 15,538,000 $ 26,147,000
============ ============ ============ ============ ============
</TABLE>
No dividends on Common Stock were declared or paid during the five years ended
September 30, 1997.
ITEM SEVEN - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for all business segments were $770.2 million, an increase of
$115.2 million or 17.6% over 1996. Net sales of the building products segment
increased by $74.4 million or 18.4% compared to 1996. Acquired companies
accounted for $34.2 million of the sales increase. Higher unit sales of garage
doors resulting from continued strong demand in the residential and related
retail markets, along with sales increases in the installation services business
stemming from geographic expansion and internal growth, aggregated $38.8 million
of the increase. Net sales of the specialty plastic films segment increased by
$36.3 million or 28.5%, principally because of increased unit sales from growth
in new programs for its major customer for the infant diaper market. Net sales
of the electronic information and communication systems segment increased by
$4.4 million or 3.6% compared to last year, principally because of new program
awards and increased funding levels on several programs in the segment's defense
and international business.
Operating income for all business segments was $61.0 million, an
increase of $8.0 million over 1996. Operating income of the building products
segment in 1997 increased by $7.7 million over 1996. Higher garage door unit
sales, growth in the installation services business, earnings of acquired
companies, operating efficiencies and lower raw material costs all contributed
to the increase. Recent acquisitions have increased the number of production
facilities in the building products segment. Consequently, the company is
reviewing its manufacturing structure with a view towards consolidating
operations and expects to complete the review and implement related decisions
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in fiscal 1998. Operating income of the specialty plastic films segment declined
by $.5 million compared to last year. New product development and start-up
costs, increased raw material costs and price competition in the commodity end
of the segment's business were the principal reasons for the decrease. Operating
income of the electronic information and communication systems segment increased
by $.8 million due to the increased sales.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for all business segments were $655.1 million, an increase of
$148.9 million or 29.4% over 1995. Net sales of the building products segment
increased by $105.7 million or 35.3% compared to 1995. Acquired companies
accounted for $80 million of the sales increase, higher unit sales of garage
doors and internal growth in our installation services business accounted for
$21 million, and selling price increases of $5 million accounted for the
remainder. Net sales of the specialty plastic films segment increased by $16.2
million or 14.6% on higher unit sales principally attributable to sales of new
products to its major customer for the infant diaper market. Gains were
partially offset by net lower average selling prices ($5 million) driven by
resin price reductions early in the year. Net sales of the electronic
information and communication systems segment increased by $27.1 million or
28.2% compared to the prior year, principally because of new program awards in
the segment's defense and international business.
Operating income for all business segments was $53.0 million, an
increase of $10.0 million over 1995. Operating income of the building products
segment in 1996 increased by $8.2 million over 1995. The principal reasons for
the increase were higher garage door unit sales, primarily in the second half of
the year because of strengthening in the construction and related retail
markets, internal growth in the installation services business and the earnings
of acquired companies. The increases were partly offset by severe winter weather
conditions and costs to phase out an unprofitable product line. Operating income
of the specialty plastic films segment was approximately the same as in the
prior year. The effect of higher sales was offset by development costs and
manufacturing inefficiencies attributable to new programs and products start-up
costs, and by unstable raw material costs. Operating income of the electronic
information and communication systems segment increased by $1.8 million because
of the increased sales.
Net interest expense increased by $1.4 million compared to 1995 as a
result of borrowings in the first half of the year in connection with
acquisitions and a self-tender offer by the company for 2 million shares of its
Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations for 1997 was $41.3 million, and working
capital was $135.0 million at September 30, 1997.
During 1997, approximately $41 million was used to acquire companies for
the building products business. The acquisitions included a manufacturer and
installer of residential garage doors and related hardware with annual sales of
$80 million whose purchase price of approximately $35 million was financed by
borrowings under an existing credit facility.
Proceeds of approximately $10.5 million were received during 1997 from
the sale and liquidation of the company's synthetic batting business and its
specialty hardware business, which had been reflected as discontinued operations
last year.
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In 1997 the company approved the redemption of its Second Preferred
Stock, Series I at the redemption price of $10.00 plus accrued and unpaid
dividends. Holders of 1,524,429 shares of Second Preferred Stock converted their
shares into an equal number of shares of Common Stock, and 45,165 shares were
redeemed for cash.
In November 1996, the program to purchase the company's capital stock
was increased from 1.5 million shares to 3 million shares. During the year, $4.2
million was used to acquire approximately 310,000 shares of capital stock. Since
1993, approximately 7.8 million shares of Common Stock have been purchased for
$71.6 million under the company's stock repurchase program.
The company rents various real property and equipment through
noncancellable operating leases. Related future minimum lease payments due in
1998 aggregate $18 million and are expected to be funded through operating cash
flows.
In 1997 the company had fixed asset additions of $25.8 million,
including construction and equipment costs of approximately $9 million for its
specialty plastic films joint venture in Germany, and approximately $10 million
to upgrade and enhance strategic business systems. Capital expenditures of
approximately $20 million for the joint venture in Germany are anticipated in
1998. This investment, which is expected to be financed primarily by joint
venture borrowings, relates to an expansion of the European operations to meet
anticipated increased demand under a multi-year contract entered into with the
specialty plastic films segment's major customer. There are no other significant
commitments for future capital expenditures or investments, although it is
likely that cash outflows for business acquisitions, capital expenditures and
leases will continue.
Anticipated cash flows from operations, together with existing cash and
marketable securities, bank lines of credit and lease line availability, should
be adequate to finance presently anticipated working capital and capital
expenditure requirements and to repay long-term debt as it matures.
FORWARD-LOOKING STATEMENTS
The statements contained in this annual report that are not historical
facts are forward-looking statements subject to risks and uncertainties that
could cause actual results to differ materially from those set forth or implied,
including the effect of business and economic conditions; the impact of
competitive products and pricing; capacity and supply constraints or
difficulties; and other risks and uncertainties.
ITEM EIGHT - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company and its subsidiaries and the
report thereon of Arthur Andersen LLP, dated November 5, 1997 are included
herein:
- Report of Independent Public Accountants.
- Consolidated Balance Sheets at September 30, 1997 and 1996.
- Consolidated Statements of Income, Cash Flows and Shareholders'
Equity for the years ended September 30, 1997, 1996, 1995.
- Notes to Consolidated Financial Statements.
12
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Griffon Corporation:
We have audited the accompanying consolidated balance sheets of Griffon
Corporation (a Delaware corporation) and subsidiaries as of September 30, 1997
and 1996 and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended September
30, 1997. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Griffon Corporation and
subsidiaries as of September 30, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements and schedules is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
November 5, 1997
13
<PAGE> 15
GRIFFON CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 15,414,000 $ 17,846,000
Marketable securities (Note 1) 1,379,000 4,297,000
Accounts receivable, less allowance
for doubtful accounts of $6,627,000
in 1997 and $4,519,000 in 1996
(Note 1) 105,050,000 87,113,000
Contract costs and recognized income
not yet billed (Note 1) 40,465,000 33,670,000
Inventories (Note 1) 88,123,000 69,886,000
Prepaid expenses and other current
assets 13,676,000 16,203,000
------------ ------------
Total current assets 264,107,000 229,015,000
------------ ------------
Property, Plant and Equipment, at
cost, net of depreciation and
amortization (Note 1) 77,080,000 55,706,000
------------ ------------
Other Assets:
Costs in excess of fair value of
net assets of businesses acquired,
net (Note 1) 35,948,000 22,834,000
Other 7,624,000 3,614,000
------------ ------------
43,572,000 26,448,000
------------ ------------
$384,759,000 $311,169,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of
long-term debt $ 5,229,000 $ 5,553,000
Accounts payable 50,634,000 42,131,000
Accrued liabilities (Note 1) 65,760,000 52,270,000
Federal income taxes (Note 1) 7,477,000 5,797,000
------------ ------------
Total current liabilities 129,100,000 105,751,000
------------ ------------
Long-Term Debt and Other Liabilities
(Note 2) 53,854,000 32,458,000
------------ ------------
Commitments and Contingencies
(Note 4)
Shareholders' Equity (Note 3):
Preferred stock, par value $.25 per
share, authorized 3,000,000 shares --
Second Preferred Stock, Series I,
authorized 1,950,000 shares,
issued 1,618,844 shares in 1996 --- 405,000
Common stock, par value $.25 per share,
authorized 85,000,000 shares, issued
31,278,830 shares in 1997 and
29,253,848 shares in 1996 7,820,000 7,313,000
Capital in excess of par value 34,564,000 32,764,000
Retained earnings 168,664,000 135,508,000
------------ ------------
211,048,000 175,990,000
Less --
Deferred compensation (2,621,000) (179,000)
Treasury shares, at cost, 603,700
common shares in 1997 and 334,896
common shares in 1996 (6,622,000) (2,851,000)
------------ ------------
Total shareholders' equity 201,805,000 172,960,000
------------ ------------
$384,759,000 $311,169,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
14
<PAGE> 16
GRIFFON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales $770,227,000 $655,063,000 $506,116,000
Cost of sales 571,132,000 489,460,000 368,794,000
------------ ------------ ------------
199,095,000 165,603,000 137,322,000
Selling, general and administrative
expenses 144,663,000 118,085,000 98,684,000
------------ ------------ ------------
54,432,000 47,518,000 38,638,000
------------ ------------ ------------
Other income (expense):
Interest expense (3,475,000) (3,409,000) (2,162,000)
Interest income 1,377,000 1,180,000 1,312,000
Other, net 699,000 668,000 258,000
------------ ------------ ------------
(1,399,000) (1,561,000) (592,000)
------------ ------------ ------------
Income from continuing operations
before income taxes 53,033,000 45,957,000 38,046,000
------------ ------------ ------------
Provision for income taxes (Note 1):
State and foreign 3,102,000 2,663,000 2,366,000
Federal 16,767,000 15,227,000 12,435,000
------------ ------------ ------------
19,869,000 17,890,000 14,801,000
------------ ------------ ------------
Income from continuing operations 33,164,000 28,067,000 23,245,000
------------ ------------ ------------
Discontinued operations, net of income tax effect (Note 5):
Operating income --- 256,000 562,000
Provision for loss on disposal --- (5,500,000) ---
------------ ------------ ------------
--- (5,244,000) 562,000
------------ ------------ ------------
Net income $ 33,164,000 $ 22,823,000 $ 23,807,000
============ ============ ============
Income per share of common stock (Note 1):
Continuing operations $ 1.06 $ .88 $ .69
Discontinued operations --- (.16) .02
------------ ------------ ------------
Net income $ 1.06 $ .72 $ .71
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
15
<PAGE> 17
GRIFFON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,164,000 $ 22,823,000 $ 23,807,000
------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 11,452,000 10,317,000 7,830,000
Provision for losses on accounts
receivable 1,312,000 1,166,000 858,000
Deferred income taxes 2,942,000 (2,557,000) 1,396,000
(Income) loss from discontinued
operations --- 8,244,000 (562,000)
Change in assets and liabilities:
Increase in accounts receivable
and contract costs and recognized
income not yet billed (15,750,000) (13,422,000) (12,059,000)
(Increase) decrease in inventories (21,000) 8,741,000 (6,431,000)
(Increase) decrease in prepaid
expenses and other assets (7,120,000) 1,050,000 (111,000)
Increase (decrease) in accounts
payable, accrued liabilities and
Federal income taxes 12,975,000 1,400,000 (3,205,000)
Other changes, net 2,321,000 (1,092,000) (336,000)
------------ ------------ -----------
Total adjustments 8,111,000 13,847,000 (12,620,000)
------------ ------------ -----------
Net cash provided by operating
activities 41,275,000 36,670,000 11,187,000
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in marketable
securities 2,918,000 7,900,000 17,530,000
Acquisition of property, plant and
equipment (25,793,000) (9,359,000) (7,313,000)
Proceeds from sales of discontinued
operations 10,518,000 --- ---
Acquired businesses (40,953,000) (23,148,000) (7,758,000)
(Increase) decrease in equipment lease
deposits and other (585,000) 2,180,000 (801,000)
------------ ------------ -----------
Net cash provided by (used in)
investing activities (53,895,000) (22,427,000) 1,658,000
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (4,223,000) (21,727,000) (28,233,000)
Proceeds from issuance of long-term
debt 41,183,000 34,000,000 ---
Payments of long-term debt (24,004,000) (16,537,000) (9,528,000)
Increase (decrease) in short-term borrowings (3,968,000) (1,500,000) 6,500,000
Other, net 1,200,000 (289,000) (587,000)
------------ ------------ -----------
Net cash provided by (used in)
financing activities 10,188,000 (6,053,000) (31,848,000)
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,432,000) 8,190,000 (19,003,000)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 17,846,000 9,656,000 28,659,000
------------ ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 15,414,000 $ 17,846,000 $ 9,656,000
============ ============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
16
<PAGE> 18
GRIFFON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended September 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
SECOND PREFERRED CAPITAL IN
STOCK, SERIES I COMMON STOCK EXCESS OF
SHARES PAR VALUE SHARES PAR VALUE PAR VALUE
------ --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Balances, September 30, 1994 1,677,129 $419,000 33,887,739 $8,472,000 $78,614,000
Amortization of deferred
compensation --- --- --- --- ---
Cash dividend on Second
Preferred Stock, Series I
(Note 3) --- --- --- --- ---
Purchase of treasury shares
(Note 3) --- --- --- --- ---
Exercise of stock options
(Note 3) --- --- 236,000 59,000 427,000
Retirement of treasury shares --- --- (3,002,840) (751,000) (26,472,000)
Other (7,592) (2,000) (39,400) (10,000) (420,000)
Net income --- --- --- --- ---
--------- ------- ---------- ---------- -----------
Balances, September 30, 1995 1,669,537 417,000 31,081,499 7,770,000 52,149,000
Amortization of deferred
compensation --- --- --- --- ---
Cash dividend on Second
Preferred Stock, Series I
(Note 3) --- --- --- --- ---
Purchase of treasury shares
(Note 3) --- --- --- --- ---
Exercise of stock options
(Note 3) --- --- 148,750 37,000 364,000
Retirement of treasury shares (17,000) (4,000) (2,000,000) (500,000) (19,649,000)
Other (33,693) (8,000) 23,599 6,000 (100,000)
Net income --- --- --- --- ---
--------- ------- ---------- ---------- -----------
Balances, September 30, 1996 1,618,844 405,000 29,253,848 7,313,000 32,764,000
ESOP purchase of Common Stock
(Note 3) --- --- --- --- ---
Amortization of deferred
compensation --- --- --- --- ---
Conversion of Second
Preferred Stock, Series I
(Note 3) (1,573,679) (394,000) 1,573,679 394,000 ---
Purchase of treasury shares
(Note 3) --- --- --- --- ---
Exercise of stock options
(Note 3) --- --- 443,627 111,000 2,094,000
Retirement of treasury shares (45,165) (11,000) --- --- (441,000)
Other --- --- 7,676 2,000 147,000
Net income --- --- --- --- ---
--------- -------- ---------- ---------- -----------
Balances, September 30, 1997 --- $ --- 31,278,830 $7,820,000 $34,564,000
========= ======== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
RETAINED DEFERRED TREASURY SHARES
EARNINGS COMPENSATION SHARES COST
-------- ------------ ------ ----
<S> <C> <C> <C> <C>
Balances, September 30, 1994 $ 89,711,000 $ 900,000 34,500 $ 267,000
Amortization of deferred
compensation --- (570,000) --- ---
Cash dividend on Second
Preferred Stock, Series I
(Note 3) (417,000) --- --- ---
Purchase of treasury shares
(Note 3) --- --- 3,131,136 28,233,000
Exercise of stock options
(Note 3) --- --- --- ---
Retirement of treasury shares --- --- (3,002,840) (27,223,000)
Other --- 94,000 --- ---
Net income 23,807,000 --- --- ---
------------ ---------- ---------- ----------
Balances, September 30, 1995 113,101,000 424,000 162,796 1,277,000
Amortization of deferred
compensation --- (345,000) --- ---
Cash dividend on Second
Preferred Stock, Series I
(Note 3) (416,000) --- --- ---
Purchase of treasury shares
(Note 3) --- --- 2,189,100 21,727,000
Exercise of stock options
(Note 3) --- --- --- ---
Retirement of treasury shares --- --- (2,017,000) (20,153,000)
Other --- 100,000 --- ---
Net income 22,823,000 --- --- ---
------------ ---------- ---------- ----------
Balances, September 30, 1996 135,508,000 179,000 334,896 2,851,000
ESOP purchase of Common Stock
(Note 3) --- 3,000,000 --- ---
Amortization of deferred
compensation --- (658,000) --- ---
Conversion of Second
Preferred Stock, Series I
(Note 3) --- --- --- ---
Purchase of treasury shares
(Note 3) --- --- 313,969 4,223,000
Exercise of stock options
(Note 3) --- --- --- ---
Retirement of treasury shares --- --- (45,165) (452,000)
Other (8,000) 100,000 --- ---
Net income 33,164,000 --- --- ---
------------ ---------- --------- ----------
Balances, September 30, 1997 $168,664,000 $2,621,000 603,700 $6,622,000
============ ========== ========= ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
17
<PAGE> 19
GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION
The consolidated financial statements include the accounts of Griffon
Corporation and all subsidiaries. All significant intercompany items have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH FLOWS, INVESTMENTS AND CREDIT RISK
Marketable securities consist primarily of U.S. government obligations
and are carried at amortized cost which approximates market. The company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. Cash payments for interest expense were
$3,325,000, $3,372,000 and $2,132,000 in 1997, 1996 and 1995, respectively.
A substantial portion of the company's trade receivables are from
customers of the building products segment whose financial condition is
dependent on the construction and related retail sectors of the economy.
ACCOUNTING FOR LONG-TERM CONTRACTS
The company records sales and gross profits on its long-term contracts
on a percentage-of-completion basis. The company determines sales and gross
profits by (1) relating costs incurred to current estimates of total
manufacturing costs of such contracts or (2) based upon a unit of shipment
basis. General and administrative expenses are expensed as incurred. Revisions
in estimated profits are made in the period in which the circumstances requiring
the revision become known. Provisions are made currently for anticipated losses
on uncompleted contracts.
"Contract costs and recognized income not yet billed" consists of
recoverable costs and accrued profit on long-term contracts for which billings
had not been presented to the customers because the amounts were not billable at
the balance sheet date.
18
<PAGE> 20
INVENTORIES
Inventories, stated at the lower of cost (first-in, first-out or
average) or market, include material, labor and manufacturing overhead costs and
are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Finished goods $ 43,722,000 $ 23,910,000
Work in process 21,228,000 22,706,000
Raw materials and supplies 23,173,000 23,270,000
------------ ------------
$ 88,123,000 $ 69,886,000
============ ============
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Depreciation of property, plant and equipment is provided primarily on
a straight-line basis over the estimated useful lives of the assets.
Leasehold improvements are amortized over the life of the lease or life
of the improvement, whichever is shorter.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Land, buildings and building
improvements $ 28,568,000 $ 25,940,000
Machinery and equipment 93,461,000 66,444,000
Leasehold improvements 8,724,000 8,332,000
------------ ------------
130,753,000 100,716,000
Less--Accumulated
depreciation and
amortization 53,673,000 45,010,000
------------ ------------
$ 77,080,000 $ 55,706,000
============ ============
</TABLE>
ACQUISITIONS AND COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS OF BUSINESSES
ACQUIRED ("GOODWILL")
In July 1997 the company acquired Holmes-Hally Industries, a
manufacturer and installer of residential garage doors and related hardware with
annual sales of approximately $80,000,000. The purchase price of approximately
$35,000,000 was financed through borrowings under existing lines of credit. Also
acquired during 1997 in cash transactions were several other companies involved
in the installation of building products.
In October 1995 the company acquired a manufacturer of heavy rolling
doors, sectional garage doors, grilles and other door products for commercial,
industrial and residential applications. Also acquired was a company involved in
the installation of building products. These businesses were acquired for
approximately $22,000,000 and have annual sales of approximately $80,000,000.
19
<PAGE> 21
The above acquisitions have been accounted for as purchases and
resulted in an increase in goodwill of $14,158,000 in 1997 and $2,310,000 in
1996. Goodwill is being amortized on a straight-line basis over a period of
forty years. At September 30, 1997 and 1996, accumulated amortization of
goodwill was $6,032,000 and $4,988,000, respectively. The operating results of
acquired businesses have been included in the consolidated statements of income
since the dates of acquisition.
INCOME TAXES
The provision for income taxes included in continuing operations is
comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current $16,927,000 $17,447,000 $13,375,000
Deferred 2,942,000 443,000 1,426,000
----------- ----------- -----------
$19,869,000 $17,890,000 $14,801,000
=========== =========== ===========
</TABLE>
The deferred taxes result primarily from differences in the reporting
of depreciation, the allowance for doubtful accounts and other nondeductible
accruals.
Cash payments for income taxes were $15,328,000, $16,525,000 and
$19,882,000 in 1997, 1996 and 1995, respectively.
The following table indicates the significant elements contributing to
the difference between the U.S. Federal statutory tax rate and the company's
effective tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory
tax rate 35.0% 35.0% 35.0%
State and foreign
income taxes 3.8 3.8 4.0
Other (1.3) .1 (.1)
---- ---- ----
Effective tax rate 37.5% 38.9% 38.9%
==== ==== ====
</TABLE>
RESEARCH AND DEVELOPMENT COSTS
Research and development costs not recoverable under contractual
arrangements are charged to expense as incurred. Approximately $7,700,000,
$5,500,000 and $4,400,000 in 1997, 1996 and 1995, respectively, was incurred on
such research and development.
ACCRUED LIABILITIES
At September 30, 1997 and 1996, accrued liabilities included
$17,845,000 and $15,483,000, respectively, for payroll and other employee
benefits.
20
<PAGE> 22
INCOME PER SHARE OF COMMON STOCK
Income per share is calculated using the weighted average number of
shares of Common Stock outstanding during each period, adjusted to reflect the
dilutive effect of shares issuable for common stock equivalents. Shares used in
computing income per share were 31,231,000 in 1997, 31,915,000 in 1996 and
33,629,000 in 1995.
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", which becomes effective for the fiscal year beginning October 1, 1997,
establishes new standards for computing and presenting earnings per share (EPS).
The new standard requires the presentation of basic EPS and diluted EPS. Basic
EPS is calculated by dividing income available to common shareholders by the
weighted average number of shares of common stock outstanding during the period.
Diluted EPS is calculated by dividing income available to common shareholders by
the weighted average number of common shares outstanding adjusted to reflect
potentially dilutive securities. Previously reported EPS amounts must be
restated under the new standard when it becomes effective.
For the years ended September 30, 1997, 1996 and 1995, EPS under the
new standard would have been:
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- ----
<S> <C> <C> <C>
Basic:
Income from continuing
operations $1.12 $.93 $.73
Discontinued operations -- (.18) .02
----- ---- ----
Net income $1.12 $.75 $.75
===== ==== ====
Diluted:
Income from continuing
operations $1.06 $.88 $.69
Discontinued operations -- (.16) .02
----- ---- ----
Net income $1.06 $.72 $.71
===== ==== ====
</TABLE>
2. LONG-TERM DEBT:
The company has a loan agreement with two banks. The agreement, as
amended, provides for up to $80,000,000 of revolving credit through 2000, after
which outstanding borrowings may be converted into a five-year term loan.
Borrowings bear interest at rates (7.1% as of September 30, 1997) based upon
LIBOR or at the prime rate and are secured by the capital stock of certain of
the company's subsidiaries. This credit agreement was utilized to finance
acquisitions (see Note 1) and to finance the purchases of the company's Common
Stock ( see Note 3). As of September 30, 1997, $30,000,000 was outstanding under
this agreement.
The balance of the company's long-term debt outstanding at September 30,
1997 relates primarily to real estate mortgages, with interest rates ranging
from 8.5% to 8.9% and maturities through 2006.
21
<PAGE> 23
The following are the maturities of long-term debt outstanding at
September 30, 1997 for each of the succeeding five years:
<TABLE>
<S> <C> <C>
1998 $3,251,000
1999 4,680,000
2000 2,655,000
2001 9,199,000
2002 7,073,000
</TABLE>
3. SHAREHOLDERS' EQUITY:
During 1997 the company called for redemption its Second Preferred Stock
at the redemption price of $10.00 per share plus accrued and unpaid dividends.
Holders of 1,524,429 shares of Second Preferred Stock converted their shares
into an equal number of shares of Common Stock, and 45,165 shares were redeemed
for cash. In connection with its stock repurchase program, the company acquired
313,969 shares of Common Stock and Second Preferred Stock in 1997 for
$4,223,000, 2,189,100 shares of Common Stock and Second Preferred Stock in 1996
for $21,727,000 and 3,131,136 shares of Common Stock in 1995 for $28,233,000.
The company has an Employee Stock Ownership Plan ("ESOP") which covers
most of the company's nonunion employees. During 1996 the outstanding balance
under the ESOP's prior loan agreement was paid in full. In 1997 the ESOP
borrowed $3,000,000 which was used to purchase equity securities of the company.
The outstanding balance of the loan is guaranteed by the company and is
reflected as a liability in the consolidated balance sheet with a like amount of
deferred compensation recorded as a reduction of shareholders' equity.
The company has stock option plans under which options for an aggregate
of 4,500,000 shares of Common Stock may be granted. As of September 30, 1997
options for 769,500 shares remain available for future grants and 4,069,536
shares of Common Stock were reserved for issuance in connection with the option
plans. The plans provide for the granting of options at an exercise price of not
less than 100% of the fair market value per share at date of grant. Options
generally expire ten years after date of grant and become exercisable in
installments as determined by the Board of Directors. Transactions under the
plans are as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at September 30,
1994 1,842,000 $5.36
Granted 713,000 $8.32
Exercised (236,000) $2.00
Terminated (22,250) $7.56
---------
Outstanding at September 30,
1995 2,296,750 $6.60
Granted 618,000 $8.84
Exercised (148,750) $2.70
Terminated (22,000) $8.13
---------
Outstanding at September 30,
1996 2,744,000 $7.30
Granted 776,500 $13.44
Exercised (217,214) $7.36
Terminated (3,250) $8.04
---------
Outstanding at September 30,
1997 3,300,036 $8.74
=========
</TABLE>
22
<PAGE> 24
At September 30, 1997 option groups outstanding and exercisable are as
follows:
<TABLE>
<CAPTION>
Outstanding Options
--------------------------------------
Weighted Weighted
Average Average
Range of Number of Remaining Exercise
Exercise Price Options Life Price
-------------- --------- --------- --------
<S> <C> <C> <C>
$13.50 764,500 9.4 years $13.50
$5.50 to $9.375 2,260,536 7.2 8.01
$1.50 275,000 .6 1.50
</TABLE>
<TABLE>
<CAPTION>
Exercisable Options
------------------------
Weighted
Average
Range of Number of Exercise
Exercise Price Options Price
-------------- --------- --------
<S> <C> <C>
$5.50 to $9.125 1,940,536 $7.88
$1.50 275,000 1.50
</TABLE>
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", became effective for the fiscal year beginning
October 1, 1996, and permits an entity to continue to account for employee
stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued
to Employees", or adopt a fair value based method of accounting for such
compensation. The company has elected to continue to account for stock-based
compensation under Opinion No. 25. Accordingly, no compensation expense has been
recognized in connection with options granted. Had compensation expense for
options granted subsequent to October 1, 1995 under the company's stock option
plans been determined based on the fair value at the date of grant in accordance
with Statement No. 123, the company's net income and net income per share would
have been as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net income:
As reported $33,164,000 $22,823,000
Pro forma 31,099,000 22,209,000
Net income per share:
As reported $1.06 $.72
Pro forma 1.00 .70
</TABLE>
23
<PAGE> 25
The fair value of options granted is estimated on the date of grant using
the Black-Scholes option pricing model. The weighted average fair values of
options granted in fiscal 1997 and 1996 were $6.96 and $4.58, respectively,
based upon the following weighted average assumptions: expected volatility (.372
in 1997 and .397 in 1996), risk-free interest rate (6.40% in 1997 and 5.57% in
1996), expected life (7 years in 1997 and 1996), and expected dividend yield (0%
in 1997 and 1996).
Because the amounts reported above only reflect pro forma compensation
expense for options granted subsequent to October 1, 1995, they are not
necessarily representative of the effect on pro forma operating results
determined under Statement No. 123.
The company has an Outside Director Stock Award Plan (the "Outside
Director Plan"), which was approved by the shareholders in 1994, under which
300,000 shares may be issued to non-employee directors. Annually, each eligible
director is awarded shares of the company's Common Stock having a value of
$10,000 which vests over a three-year period. For shares issued under the
Outside Director Plan, the fair market value of the shares at the date of
issuance will be amortized to compensation expense over the vesting period. The
related deferred compensation has been reflected as a reduction of shareholders'
equity. In 1997, 1996 and 1995, 7,690, 10,740 and 11,630 shares, respectively,
were issued and 259,170 shares are reserved for future issuance under the
Outside Director Plan.
The company has a shareholder rights plan which provides for one right to
be attached to each share of Common Stock. The rights are currently not
exercisable or transferable apart from the Common Stock, and have no voting
power. Under certain circumstances, each right entitles the holder to purchase,
for $34, one one-thousandth of a share of a new series of participating
preferred stock, which is substantially equivalent to one share of Common Stock.
These rights would become exercisable if a person or group acquires 10% or more
of the company's Common Stock or announces a tender offer which would increase
the person's or group's beneficial ownership to 10% or more of the company's
Common Stock, subject to certain exceptions. After a person or group acquires
10% or more of the company's Common Stock, each right (other than those held by
the acquiring party) will entitle the holder to purchase Common Stock having a
market price of two times the exercise price. If the company is acquired in a
merger or other business combination, each exercisable right entitles the holder
to purchase common stock of the acquiring company or an affiliate having a
market price of two times the exercise price of the right. In certain events the
Board of Directors may exchange each right (other than those held by an
acquiring party) for one share of the company's Common Stock or one
one-thousandth of a share of a new series of participating preferred stock. The
rights expire on May 9, 2006, and can be redeemed at $.01 per right at any time
prior to becoming exercisable.
4. COMMITMENTS AND CONTINGENCIES:
The company and its subsidiaries rent real property and equipment under
operating leases expiring at various dates. Most of the real property leases
have escalation clauses related to increases in real property taxes.
24
<PAGE> 26
Future minimum payments under noncancellable operating leases consisted
of the following at September 30, 1997:
<TABLE>
<S> <C>
1998 $18,300,000
1999 13,200,000
2000 8,700,000
2001 5,400,000
2002 2,600,000
Later years 3,700,000
</TABLE>
Rent expense for all operating leases, net of subleases, totalled
approximately $19,800,000, $19,000,000 and $18,100,000 in 1997, 1996 and 1995,
respectively.
The company is subject to various laws and regulations concerning the
environment and is currently participating in administrative or court
proceedings involving several sites under these laws, usually as one of a group
of potentially responsible parties. These proceedings are at a preliminary
stage, and it is impossible to estimate with any certainty the amount of the
liability, if any, of the company alone or in relation to that of any other
responsible parties, or the total cost of remediation and the timing and extent
of remedial actions which may ultimately be required by governmental
authorities.
In view of the inherent difficulty in predicting the outcome of
litigation and governmental proceedings, management cannot state what the
eventual outcome of such litigation and proceedings will be. However, management
believes, based on facts presently known to it, that the outcome of such
litigation and proceedings will not have a material adverse effect on the
company's consolidated financial position or results of operations.
Two officers of the company have employment agreements, as amended, for a
term ending in 2000. The agreements provide for salary and, under certain
conditions, incentive bonuses. The agreements also provide that in the event
there is a change in the control of the company, as defined therein, the
officers have the option to terminate the agreements and receive a lump sum
payment based upon the compensation payable over the balance of the agreements.
As of September 30, 1997, the amount payable in the event of such termination
would be approximately $22,000,000.
5. DISCONTINUED OPERATIONS:
In November 1996, the company announced the sale of its synthetic batting
business and the decision to sell its specialty hardware business. Accordingly,
in fiscal 1996, the company provided for a loss on disposal of $5,500,000 (net
of income tax effect of $3,000,000) and reclassified the financial statements to
reflect the operating results of these businesses as discontinued operations.
During 1997 proceeds of approximately $10,518,000 were received from the sale
and liquidation of these businesses.
25
<PAGE> 27
6. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Quarterly results of operations for the years ended September 30, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
1997 1997 1997 1996
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $234,556,000 $193,120,000 $160,807,000 $181,744,000
Gross profit 62,015,000 50,810,000 40,287,000 45,983,000
Net income 12,379,000 8,882,000 4,383,000 7,520,000
Income per share of
common stock $.40 $.29 $.14 $.24
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
1996 1996 1996 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $193,734,000 $168,857,000 $139,109,000 $153,363,000
Gross profit 49,491,000 43,929,000 33,779,000 38,404,000
Income from continuing
operations 10,581,000 7,860,000 3,794,000 5,832,000
Discontinued operations (5,490,000) 143,000 72,000 31,000
Net income 5,091,000 8,003,000 3,866,000 5,863,000
Income per share of
common stock:
Continuing operations $ .34 $ .25 $ .12 $ .18
Discontinued operations (.18) .01 --- ---
------------ ----------- ------------ ------------
$ .16 $ .26 $ .12 $ .18
============ ============ ============ ============
</TABLE>
Earnings per share are computed independently for each of the quarters
presented, on the basis described in Note 1. The sum of the quarters may not be
equal to the full year earnings per share amounts.
7. BUSINESS SEGMENTS:
The company's principal business segments are as follows -- Building
Products (manufacture, sale and installation of garage doors and other building
products); 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 and disposable surgical and patient
care products).
26
<PAGE> 28
Information on the company's business segments is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales --
Building products $479,211,000 $404,781,000 $299,090,000
Electronic information and
communication systems 127,298,000 122,880,000 95,816,000
Specialty plastic films 163,718,000 127,402,000 111,210,000
------------ ------------ ------------
$770,227,000 $655,063,000 $506,116,000
============ ============ ============
Operating income --
Building products $ 40,708,000 $ 33,051,000 $ 24,866,000
Electronic information and
communication systems 11,785,000 10,959,000 9,145,000
Specialty plastic films 8,541,000 9,035,000 9,006,000
------------ ------------ ------------
Total operating income 61,034,000 53,045,000 43,017,000
General corporate expenses (5,903,000) (4,859,000) (4,121,000)
Interest expense, net (2,098,000) (2,229,000) (850,000)
------------ ------------ ------------
Income from continuing operations
before income taxes $ 53,033,000 $ 45,957,000 $ 38,046,000
============ ============ ============
Identifiable assets --
Building products $201,365,000 $136,429,000 $100,502,000
Electronic information and
communication systems 104,059,000 97,781,000 99,138,000
Specialty plastic films 63,686,000 47,370,000 40,003,000
Corporate 15,649,000 29,589,000 45,973,000
------------ ------------ ------------
$384,759,000 $311,169,000 $285,616,000
============ ============ ============
Capital expenditures --
Building products $ 8,709,000 $ 3,962,000 $ 3,952,000
Electronic information and
communication systems 3,817,000 2,082,000 2,320,000
Specialty plastic films 13,247,000 3,160,000 929,000
Corporate 20,000 155,000 112,000
------------ ------------ ------------
$ 25,793,000 $ 9,359,000 $ 7,313,000
============ ============ ============
Depreciation and amortization --
Building products $ 5,986,000 $ 4,964,000 $ 2,616,000
Electronic information and
communication systems 2,222,000 2,402,000 2,533,000
Specialty plastic films 2,680,000 2,461,000 2,273,000
Corporate 564,000 490,000 408,000
------------ ------------ ------------
$ 11,452,000 $ 10,317,000 $ 7,830,000
============ ============ ============
</TABLE>
Sales to the United States Government and its agencies, either as a
prime contractor or subcontractor, aggregated approximately $65,000,000 for
1997, $69,000,000 for 1996 and $52,000,000 for 1995, all of which are included
in the electronic information and communication systems segment. Sales to a
customer of the specialty plastic films segment were approximately 11%, 7% and
6% of consolidated net sales in 1997, 1996 and 1995, respectively. In 1997 the
company
27
<PAGE> 29
had export sales of approximately $90,000,000, principally to European markets.
Sales between business segments are not material. In computing operating income,
none of the following have been added or deducted -- general corporate expenses,
net interest income or expense and income taxes. Assets by business segment are
those identifiable assets that are used in the company's operations in each
segment. Corporate assets are principally cash, marketable securities and assets
of discontinued operations.
ITEM NINE - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required by Part III is incorporated by reference to
the Company's definitive proxy statement in connection with its Annual Meeting
of Stockholders scheduled to be held in February, 1998, to be filed with the
Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year ended September 30, 1997. Information relating to the
officers of the Registrant appears under Item 1 of this report.
PART IV
ITEM FOURTEEN - EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
The following consolidated financial statements of Griffon Corporation
and subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) 1. Financial Statements
Consolidated Balance Sheets at September 30,
1997 and 1996............................................... 14
Consolidated Statements of Income for the Years
Ended September 30, 1997, 1996 and 1995..................... 15
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1997, 1996 and 1995............... 16
Consolidated Statements of Shareholders' Equity
for the Years Ended September 30, 1997, 1996
and 1995.................................................... 17
Notes to Consolidated Financial Statements....................... 18
</TABLE>
28
<PAGE> 30
Filed Herewith on
Page Number (1)
---------------
(a) 2. Schedule
II Valuation and Qualifying Accounts.................. S-1
(1) Schedules other than those listed are omitted because they are not
applicable or because the information required is included in the
consolidated financial statements.
(b) Reports on Form 8-K:
Current report on Form 8-K dated July 1, 1997, containing Item 2,
Acquisition or Disposition of Assets, in connection with the
acquisition of Holmes-Hally Industries.
(c) Exhibits:
Exhibit No.
3.1 Restated Certificate of Incorporation (Exhibit 3.1 of Annual
Report on Form 10-K for the year ended September 30, 1995)
3.2 By-laws as amended (Exhibit 3 of Current Report on Form 8-K
dated November 8, 1994)
4.1 Rights Agreement dated as of May 9, 1996 between Registrant
and American Stock Transfer Company (Exhibit 1.1 of Current
Report on Form 8-K dated May 9, 1996)
4.2 Loan Agreement dated June 8, 1995 between the Registrant and
lending institutions (Exhibit 4.2 of Annual Report on Form
10-K for the year ended September 30, 1995)
4.3* Amendment effective as of October 31, 1997 to Loan Agreement
dated June 8, 1995 between the Registrant and lending
institutions
10.1 Employment Agreement dated March 1, 1983 between the
Registrant and Robert Balemian, as amended (Exhibit 10 of
Current Report on Form 8-K dated March 1, 1983, Exhibit 10 of
Current Report on Form 8-K dated March 2, 1983, Exhibit 10(a)
of Current Report on Form 8-K dated March 15, 1984, Exhibit 10
of Current Report on Form 8-K dated May 4, 1987, Exhibit 10(a)
of Current Report on Form 8-K dated February 13, 1989, Exhibit
10 of Current Report on Form 8-K dated February 28, 1990,
Exhibit 10 of Current Report on Form 8-K dated February 25,
1991 and Exhibit 10 of Current Report on Form 8-K dated May
28, 1991)
29
<PAGE> 31
10.2 Employment Agreement dated March 1, 1983 between the
Registrant and Harvey R. Blau, as amended (Exhibit 10 of
Current Report on Form 8-K dated March 1, 1983, Exhibit 10 of
Current Report on Form 8-K dated March 2, 1983, Exhibit 10(b)
of Current Report on Form 8-K dated March 15, 1984, Exhibit 10
of Current Report on Form 8-K dated May 4, 1987, Exhibit 10(a)
of Current Report on Form 8-K dated February 13, 1989, and
Exhibit 10 of Current Report on Form 8-K dated February 28,
1990, Exhibit 10 of Current Report on Form 8-K dated February
25, 1991 and Exhibit 10 of Current Report on Form 8-K dated
May 28, 1991)
10.3 Form of Trust Agreement between the Registrant and U.S. Trust
Company of California, N.A., as Trustee, relating to the
Company's Employee Stock Ownership Plan (Exhibit 10.3 of
Annual Report on Form 10-K for the year ended September 30,
1994)
10.4 1992 Non-Qualified Stock Option Plan (Exhibit 10.10 of Annual
Report on Form 10-K for the year ended September 30, 1993)
10.5 Non-Qualified Stock Option Plan (Exhibit 10.12 of Annual
Report on Form 10-K for the year ended September 30, 1988)
10.6 Form of Indemnification Agreement between the Registrant and
its officers and directors (Exhibit 28 to Current Report on
Form 8-K dated May 3, 1990)
10.7 Outside Director Stock Award Plan (Exhibit 4 of Form S-8
Registration Statement No. 33-52319)
10.8 1995 Stock Option Plan (Exhibit 4 of Form S-8 Registration
Statement No. 33-57683)
10.9 1997 Stock Option Plan (Exhibit 4.2 of Form S-8 Registration
Statement No. 33-21503)
21 The following lists the Company's significant subsidiaries all
of which are wholly-owned by the Company. The names of certain
subsidiaries which do not, when considered in the aggregate
constitute a significant subsidiary, have been omitted.
State of
Name of Subsidiary Incorporation
------------------ -------------
Clopay Corporation Delaware
Telephonics Corporation Delaware
23* Consent of Arthur Andersen LLP
27* Financial Data Schedule (for electronic submission only)
* Filed herewith. All other exhibits are incorporated herein by
reference to the exhibit indicated in the parenthetical references.
30
<PAGE> 32
The following undertakings are incorporated into the Company's
Registration Statements on Form S-8 (Registration Nos. 33-39090, 33-62966,
33-52319, 33-57683 and 33-21503).
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any fact or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
31
<PAGE> 33
(i) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
32
<PAGE> 34
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 8th day of
December, 1997.
GRIFFON CORPORATION
By: /s/ Harvey R. Blau
----------------------
Harvey R. Blau
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 8, 1997 by the following persons
in the capacities indicated:
/s/ Harvey R. Blau Chairman of the Board
- -------------------------- (Principal Executive Officer)
Harvey R. Blau
/s/ Robert Balemian President and Director
- -------------------------- (Principal Operating and Financial Officer)
Robert Balemian
/s/ Patrick L. Alesia Vice President and Treasurer
- -------------------------- (Chief Accounting Officer)
Patrick L. Alesia
/s/ Henry A. Alpert Director
- --------------------------
Henry A. Alpert
/s/ Bertrand M. Bell Director
- --------------------------
Bertrand M. Bell
/s/ Robert Bradley Director
- --------------------------
Robert Bradley
/s/ Abraham M. Buchman Director
- --------------------------
Abraham M. Buchman
/s/ Clarence A. Hill, Jr. Director
- --------------------------
Clarence A. Hill, Jr.
/s/ Ronald J. Kramer Director
- --------------------------
Ronald J. Kramer
/s/ James W. Stansberry Director
- --------------------------
James W. Stansberry
/s/ Martin S. Sussman Director
- --------------------------
Martin S. Sussman
/s/ William H. Waldorf Director
- --------------------------
William H. Waldorf
/s/ Lester L. Wolff Director
- --------------------------
Lester L. Wolff
33
<PAGE> 35
SCHEDULE II
GRIFFON CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Additions Deductions
----------------------- ------------------------
Balance at Charged to Charged to Accounts Balance at
Beginning Profit and Other Written End
Description of Period Loss Accounts Off Other of Period
- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED SEPTEMBER 30, 1997:
Allowance for doubtful accounts $4,519,000 $1,312,000 $1,719,000 (1) $ 923,000 $ --- $6,627,000
========== ========== ========== ========== ========== ==========
FOR THE YEAR ENDED SEPTEMBER 30, 1996:
Allowance for doubtful accounts $3,727,000 $1,166,000 $2,530,000 (1) $2,213,000 $ 691,000 (2) $4,519,000
========== ========== ========== ========== ========== ==========
FOR THE YEAR ENDED SEPTEMBER 30, 1995:
Allowance for doubtful accounts $3,659,000 $ 858,000 $ 311,000 (1) $1,101,000 $ --- $3,727,000
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Principally related to acquired businesses.
(2) Represents reclassification of amounts related to discontinued operations.
S-1
<PAGE> 36
AMENDMENT NO. 2
TO
LOAN AGREEMENT
THIS AMENDMENT, executed November 19, 1997 effective as of
October 31, 1997 ("AMENDMENT NO. 2"), is by and among GRIFFON CORPORATION (the
"BORROWER"), Delaware corporation, FLEET BANK, N.A. (formerly NatWest Bank N.A.)
individually and as collateral agent for the Banks (in its capacity as
Collateral Agent, together with its successors in such capacity, the "COLLATERAL
AGENT"), and THE CHASE MANHATTAN BANK.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Collateral Agent, are
parties to a Loan Agreement dated June 8, 1995 (as heretofore amended, as
amended hereby and as it may from time to time hereafter be amended, the "LOAN
AGREEMENT");
WHEREAS, the Borrower, the Banks and the Collateral Agent
desire to amend the Loan Agreement to (a) increase the Commitments to an
aggregate of Eighty Million Dollars ($80,000,000), (b) extend the Commitment
Termination Date of the revolving facility until May 31, 2000, (c) extend the
Termination Date of the optional term loan until May 31, 2005, (d) reduce the
interest rates applicable to the Loans and (e) provide for certain other changes
therein; and
WHEREAS, capitalized terms used and not defined herein shall
have the meanings specified in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises, the
Borrower, the Banks and the Collateral Agent agree as follows:
ARTICLE I. AMENDMENTS TO LOAN AGREEMENT.
This Amendment No. 2 to Loan Agreement shall be deemed to be
an amendment to the Loan Agreement, and shall not be construed in any way as a
replacement therefor. All of the terms and provisions of this Amendment No. 2,
including, without limitation, the representations and warranties set forth
herein, are hereby incorporated by reference into the Loan Agreement as if such
terms and provisions were set forth in full therein. The Loan Agreement is
hereby amended, effective as of October 31, 1997 but only upon the satisfaction
of the conditions precedent set forth in Article VI hereof, in the following
respects:
-1-
<PAGE> 37
1.1 The preamble to the Loan Agreement is amended to replace the words
"Sixty Million Dollars ($60,000,000)", with the words "Eighty Million Dollars
($80,000,000)".
1.2 Article I, "DEFINITIONS" is amended to restate the following
definitions in their respective entirety as follows:
"CHEMICAL" means The Chase Manhattan Bank in its
capacity as Bank hereunder.
"COMMITMENT TERMINATION DATE" means May 31, 2000.
"TERMINATION DATE" means May 31, 2005.
"NATWEST" means Fleet Bank, N.A. in its capacity as
a Bank hereunder.
1.3 The definition of "APPLICABLE MARGIN" is amended to insert a new
second sentence therein (immediately before the words "The determination") to
read as follows:
Notwithstanding the preceding sentence, for the
period commencing January 15, 1998 and thereafter, "APPLICABLE
MARGIN" means, as at any date of determination thereof, (i) if
the Funded Debt to Cash Flow Ratio is less than 1.00 to 1.00,
then with respect to any Prime Rate Loans, 0%, and with
respect to any Eurodollar Loans, 0.375%; (ii) if the Funded
Debt to Cash Flow Ratio is less than 1.50 to 1.00 but equal to
or greater than 1.00 to 1.00, then with respect to any Prime
Rate Loans, 0%, and with respect to any Eurodollar Loans,
0.625%; (iii) if the Funded Debt to Cash Flow Ratio is less
than 2.50 to 1.00 but equal to or greater than 1.50 to 1.00,
then with respect to any Prime Rate Loans, 0%, and with
respect to any Eurodollar Loans, 1.00%; (iv) if the Funded
Debt to Cash Flow Ratio is less than 3.50 to 1.00 but equal to
or greater than 2.50 to 1.00, then with respect to any Prime
Rate Loans, 0%, and with respect to any Eurodollar Loans,
1.50%; and (v) if the Funded Debt to Cash Flow Ratio is equal
to or greater than 3.50 to 1.00, then with respect to any
Prime Rate Loans,
-2-
<PAGE> 38
0.25%, and with respect to any Eurodollar Loans,
1.75%.
1.4 Clause (i) of the first proviso of the definition of "PERMITTED
ACQUISITION", is amended to read, in its entirety, as follows:
(i) the aggregate Permitted Acquisition Purchase
Price of all such Permitted Acquisitions during the term of
this Agreement from and after October 1, 1997 does not exceed
(a) Two Hundred Million Dollars ($200,000,000) in the
aggregate, and (b) after excluding the value of any capital
stock issued by the Borrower in connection with any Permitted
Acquisition, One Hundred Million Dollars ($100,000,000) in the
aggregate,
1.5 Subsection (c) of the definition of "PERMITTED ACQUISITION" is
amended to change the period at the conclusion thereof to a semi-colon and to
insert immediately thereafter the following:
provided, however, that so long as (i) Clopay remains a
wholly-owned direct subsidiary of the Borrower and all of the issued and
outstanding capital stock of Clopay remains subject to a first priority security
interest in favor of the Collateral Agent, Clopay shall not be obligated to
pledge, or cause the pledge of, the capital stock of any of its direct or
indirect wholly-owned subsidiaries; and (ii) Telephonic remains a wholly-owned
direct subsidiary of the Borrower and all of the issued and outstanding capital
stock of Telephonics remains subject to a first priority security interest in
favor of the Collateral Agent, Telephonics shall not be obligated to pledge, or
cause the pledge of, the capital stock of any of its direct or indirect
wholly-owned subsidiaries.
1.6 Subsection 2.5(a), "REPAYMENT OF PRINCIPAL OF LOANS", is amended to
change the reference to "September 1, 1998" to read "September 1, 2000".
1.7 Section 2.23, "Security", is amended to restate subsections (B) and
(C) thereof to read in their entireties as follows:
-3-
<PAGE> 39
(B) Grant to the Collateral Agent for the ratable benefit of
the Banks a first Lien on, and pledge to the Collateral Agent for the ratable
benefit of the Banks, all of the issued and outstanding shares of the capital
stock of Clopay at such time as is required by Section 6.13 hereof by the
execution and delivery to the Collateral Agent of an amendment to the Pledge
Agreement, in form and substance satisfactory to the Banks;
(C) Grant, or cause each of its Subsidiaries to grant, to the
Collateral Agent for the ratable benefit of the Banks, all of the issued and
outstanding shares of the capital stock of any Eligible Business acquired after
the date hereof in a Permitted Acquisition, provided that the foregoing terms of
this subsection (C) in respect of Subsidiaries of Clopay and of Telephonics
shall be subject to the terms of the proviso at the conclusion of subsection (c)
of the definition of "Permitted Acquisition";
1.8 Section 3.5, "PROPERTIES, PRIORITY OF LIENS", is amended to delete
the words "that is executing a Security Document".
1.9 Section 6.9, "FINANCIAL COVENANTS", is amended (a) to amend and
restate subsection (b) to read in its entirety as follows:
(b) Tangible Net Worth not less than $108,000,000.
and (b) to replace the amount "4.00" appearing in subsection (c) thereof with
the amount "5.50", and (c) to restate subsection (d) thereof to read, in its
entirety, as follows:
(d) The ratio of (i) Unsubordinated Liabilities of
the Borrower and its Subsidiaries to (ii) the sum of Tangible
Net Worth plus Subordinated Debt of the Borrower and its
Subsidiaries at not more than, during the period (A) June 8,
1995, to December 30, 1998, 2.15 to 1.00, (B) December 31,
1998 to December 30, 1999, 1.75 to 1.00, and (C) December 31,
1999, and thereafter, 1.50 to 1.00.
1.10 Subsection 7.2(f), "LIENS", is amended for purposes of
clarification to insert immediately before the words "provided that" the
following:
-4-
<PAGE> 40
which Liens are of the type otherwise permitted under
subsections 7.2(a), (c), (d) and (e) hereof.
1.11 The signature pages to the Loan Agreement executed by the Banks
are deemed modified to read as set forth on the signature pages annexed hereto
as Schedule 1.
ARTICLE II. INCREASES IN COMMITMENTS.
2.1 As of the Effective Date (as hereinafter defined), but
effective as of October 31, 1997 the Commitment of each of the Banks shall be
increased from the amounts set forth, with respect to each Bank, on the
signature pages of the Loan Agreement to the respective amounts set forth
opposite the name of each of the Banks on Schedule 1 annexed hereto.
2.2 In order to evidence the Loans made by each of the Banks
under the Commitments as amended hereby, the Borrower shall execute and deliver
to each of the Banks a new note substantially in the form attached to the Loan
Agreement as Exhibit A-1 or A-2, as applicable, reflecting the Commitment of
each Bank respectively as amended hereby, dated October 31, 1997 and otherwise
duly completed (collectively, the above-described promissory notes are referred
to as the "SUBSTITUTE NOTES"). Upon execution and delivery by the Borrower of
the Substitute Notes, the Banks shall cause each of the Notes being replaced by
a Substitute Note to be marked "Replaced by New Note", and returned to the
Borrower.
ARTICLE III. AMENDMENTS TO PLEDGE AGREEMENT.
3.1 The Pledge Agreement executed by the Borrower is amended
by amending and restating Schedule A annexed thereto to read in its entirety as
set forth on Schedule 2 annexed hereto.
ARTICLE IV. REPRESENTATION AND WARRANTIES.
The Borrower represents and warrants as follows:
4.1 The Borrower and each Subsidiary is duly organized and
validly existing under the laws of its state of organization and has the power
to own its assets and to transact the business in which it is presently engaged
and in which it proposes to be engaged.
-5-
<PAGE> 41
4.2 The Borrower and each Subsidiary is in good standing in
its state of incorporation and in each state in which it is qualified to do
business. There are no jurisdictions in which the character of the properties
owned by the Borrower and or Subsidiary or in which the transaction of the
business of the Borrower or any Subsidiary as now conducted requires or will
require the Borrower or any Subsidiary to qualify to do business, except
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the collateral or on the business, operations, financial
condition, or properties of the Borrower or any Subsidiary on a consolidated
basis.
4.3 The Borrower and each Loan Party has the power to execute
and deliver this Amendment No. 2 and the Substitute Notes and any other Loan
Documents executed or delivered in connection herewith or therewith and to
perform the Loan Agreement, as amended hereby, the Substitute Notes and any
other Loan Documents executed or delivered in connection herewith or therewith,
and the Borrower and each other Loan Party has taken all necessary action,
corporate or otherwise, to authorize the execution and delivery of this
Amendment No. 2 and the Substitute Notes and the performance of the Loan
Agreement, as amended hereby, the Substitute Notes and any other Loan Documents
executed or delivered in connection herewith or therewith. No consent or
approval of any Person (including, without limitation, any stockholder of the
Borrower or any other Loan Party), no consent or approval of any landlord or
mortgagee, no waiver of any Lien or right of distraint or other similar right
and no consent, license, approval, authorization or declaration of any
governmental authority, bureau or agency, is or will be required in connection
with the execution or delivery by the Borrower or any other Loan Party of this
Amendment No. 2 or the Substitute Notes or any other Loan Document or the
performance by the Borrower or any other Loan Party, or the validity,
enforcement or priority, of the Loan Agreement as amended hereby or the
Substitute Notes or any other Loan Document.
4.4 The execution and delivery by the Borrower and each other
Loan Party of this Amendment No. 2, the Substitute Notes and any other Loan
Documents in connection herewith or therewith, as applicable, and performance by
it hereunder and thereunder does not and will not violate any provision of law,
and does not and will not conflict with or result in a breach of any order,
writ, injunction, ordinance, resolution, decree, or other similar document or
instrument of any court or governmental authority,
-6-
<PAGE> 42
bureau or agency, domestic or foreign, or any certificate of incorporation or
by-laws of the Borrower or any Subsidiary or create (with or without the giving
of notice or lapse of time, or both) a default under or breach of any agreement,
instrument, documents, bond, note or indenture to which the Borrower or any
Subsidiary is a party, or by which it is bound or any of its properties or
assets is affected, or result in the imposition of any Lien of any nature
whatsoever upon any of the properties or assets owned by or used in connection
with the business of the Borrower or any other Loan Party, except for the Liens
created and granted pursuant to the Security Documents or otherwise permitted
under the Loan Agreement.
4.5 This Amendment No. 2, the Substitute Notes, the Loan
Agreement as amended hereby and each other Loan Document executed or delivered
in connection herewith or therewith have been duly executed and delivered by the
Borrower and each other Loan Party executing any Loan Document and each
constitutes the valid and legally binding obligation of the Borrower and each
such other Loan Party, enforceable in accordance with its terms, except that the
remedy of specific performance and other equitable remedies are subject to
judicial discretion and except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now
or hereafter in effect, relating to or affecting the enforcement of creditors'
rights generally.
4.6 The Liens granted pursuant to the Security Documents
continue to constitute first priority perfected Liens and secure, without
limitation, the Obligations under the Loan Agreement as amended by this
Amendment No. 2 and under the Substitute Notes whether or not so stated in the
Security Documents. The term "Obligations" as used in the Security Documents (or
any other term used therein to refer to the Indebtedness, liabilities and
obligations of the Borrower to the Banks) includes, without limitation,
Indebtedness, liabilities and obligations to the Banks and the Collateral under
the Loan Agreement as amended by this Amendment No. 2.
ARTICLE V. ACKNOWLEDGMENTS AND CONFIRMATIONS.
5.1 The Borrower and each other Loan Party (if any) executing
any Loan Document acknowledges and confirms to the Banks and the Collateral
Agent that (a) the liens and security interests
-7-
<PAGE> 43
granted pursuant to the Loan Agreement and pursuant to the Loan Documents
covering the grant of security interests (collectively, the "SECURITY
DOCUMENTS") secure, without limitation, the Obligations of the Borrower to the
Banks and the Collateral Agent under the Loan Agreement, as amended hereby, and
under the Substitute Notes, whether or not so stated in such Security Documents,
and (b) the term "OBLIGATIONS" as used in such Security Documents (or any other
term used therein to describe or refer to the indebtedness, liabilities and
obligations of the Borrower to Lenders and the Collateral Agent) includes,
without limitation, the indebtedness, liabilities and obligations of Borrower
under the Substitute Notes.
ARTICLE VI. CONDITIONS PRECEDENT.
The effectiveness of this Amendment No. 2 shall be subject to
the fulfillment by the Borrower, in a manner satisfactory to the Collateral
Agent and the Banks, of all of the conditions precedent set forth in this
Article VI, and the date on which all such conditions shall have been fulfilled
to the satisfaction of the Collateral Agent and the Banks, and this Amendment
No. 2 shall have become effective, shall be herein called the "EFFECTIVE DATE":
6.1 The Borrower shall have:
(a) executed and delivered to the Collateral
Agent this Amendment No. 2 and each Bank shall have executed and delivered this
Amendment No. 2;
(b) executed and delivered to each Bank its
Substitute Note;
(c) delivered to the Collateral Agent the
certificate of incorporation of the Borrower certified by the Secretary of State
of its state of incorporation;
(d) delivered to the Collateral Agent the bylaws
of the Borrower certified by its secretary or assistant secretary;
(e) paid to Fleet Bank, N.A. a fee equal to
Thirty-Six Thousand Dollars ($36,000.00) and paid to The Chase Manhattan Bank a
fee of Twenty-Four Thousand Dollars ($24,000.00), which fees
-8-
<PAGE> 44
shall be deemed to be a "Fee" under the Loan Agreement for all purposes thereof
and of the Security Documents;
(f) paid all fees and expenses of counsel to the
Collateral Agent incurred in connection herewith; and
(g) otherwise complied in all respects with the
terms hereof and of any other agreement, document, instrument or other writing
to be delivered by the Borrower in connection herewith.
6.2 The Borrower shall have:
(a) complied in all respects with its obligations
under Section 5.11(2) of the Loan Agreement to the extent not theretofore
complied with in respect of Permitted Acquisitions consummated after the
date of the Loan Agreement;
(b) delivered to the Collateral Agent all of the
capital stock required to be pledged to the Collateral Agent pursuant to the
terms of subsection (c) of the definition of "Permitted Acquisition", together
with undated stock powers executed in blank and proxies relating thereto;
(c) delivered to the Banks the documents referred
to in subsection (c)(3) of the definition of "Permitted Acquisition",
including, without limitation, certified certificates of incorporation, by-laws,
good standing certificates, and if any such Subsidiary is pledging stock, a
Pledge Agreement duly executed by each such Subsidiary, incumbency certificates,
certified resolutions and lien searches in appropriate jurisdictions as
determined by the Banks;
(d) delivered to the Collateral Agent undated
stock powers endorsed in blank and proxies in respect of the capital stock of
Clopay pledged pursuant to the Pledge Agreement executed by the Borrower.
6.3 The Collateral Agent shall have received, on or before the
Effective Date, the following, each in form and substance satisfactory to the
Collateral Agent:
-9-
<PAGE> 45
(a) a long-form good standing certificate as of
a date not more than twenty days prior to the date hereof with regard to the
Borrower from the Secretary of State of Delaware;
(b) copies of the resolutions adopted by the
Borrower's Board of Directors, certified by an authorized officer thereof,
authorizing the execution, delivery and performance by the Borrower of this
Amendment No. 2 and the Substitute Notes; and
(c) a certificate of an authorized officer of the
Borrower, certifying the names and true signatures of the officer authorized to
sign this Amendment No. 2 and the Substitute Notes and, together with evidence
of the incumbency of such authorized officer; and
(d) an opinion of counsel to the Borrower and
its Subsidiaries, in form and substance satisfactory to the Banks.
6.4 (a) The representations and warranties contained herein
and each other agreement, instrument, certificate or other writing delivered to
the Collateral Agent or any Bank pursuant hereto or to the Loan Agreement shall
be correct on and as of the Effective Date after giving effect to this Amendment
No. 2 as though made on and as of the Effective Date (and as though all
references to the Notes were to the Substitute Notes) except to the extent
modified hereby, and (b) no Default or Event of Default shall have occurred and
be continuing on the date hereof or on the Effective Date or would result from
the taking effect of this Amendment No. 2;
and the Collateral Agent shall have received a Compliance Certificate dated the
Effective Date certifying that the conditions set forth in this Article VI shall
have been satisfied.
6.5 All legal matters incident to this Amendment No. 2
and the Loan Agreement shall be reasonably satisfactory to the
Collateral Agent and counsel to the Collateral Agent.
ARTICLE VII. MISCELLANEOUS.
7.1 The Loan Agreement and the other agreements to which
the Borrower is a party delivered in connection herewith or with
-10-
<PAGE> 46
the Loan Agreement are, and shall continue to be, in full force and effect, and
are hereby ratified and confirmed in all respects, except that on and after the
Effective Date (a) all references in the Loan Agreement to "this Agreement",
"hereto", "hereof", "hereunder" or words of like import referring to the Loan
Agreement shall mean the Loan Agreement as amended hereby, (b) all references in
the Loan Agreement, the Security Documents or any other agreement, instrument or
document executed and delivered in connection therewith to (i) the "Loan
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Loan Agreement shall mean the Loan Agreement as amended hereby, and (ii)
the "Loans" (or any other term or terms used in any of such documents to
describe or refer to Loans made by the Banks to the Borrower under the Loan
Agreement) shall be deemed to refer to Loans made by the Banks to the Borrower
pursuant to the Loan Agreement as amended hereby; and (iii) the "Notes" (or any
other term or terms used in any of such documents to describe or refer to the
promissory notes made by the Borrower in favor of the Banks) shall be deemed to
refer to the Substitute Notes.
7.2 The Loan Agreement, the Security Documents and all
agreements, instruments and documents executed and delivered in connection with
any of the foregoing shall each be deemed amended hereby to the extent
necessary, if any, to give effect to the provisions of this Amendment No. 2.
Except as so amended hereby, the Loan Agreement and the other Loan Documents
shall remain in full force and effect in accordance with their respective terms.
The execution and delivery of this Amendment No. 2 by the Borrower, each Bank
and the Collateral Agent shall not waive or be deemed to waive any default which
has occurred or which may be occurring in respect of the Loan Agreement. All of
the terms and provisions of this Amendment No. 2 are hereby incorporated by
reference into the Loan Agreement as if such terms and provisions were set forth
in full therein.
7.3 This Amendment No. 2 may be executed in counterparts
by the parties hereto, and each such counterpart shall be considered an
original, and all such counterparts shall constitute one and the same
instrument.
7.4 THIS AMENDMENT NO. 2 SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS), AND THE OBLIGATIONS, RIGHTS
-11-
<PAGE> 47
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
-12-
<PAGE> 48
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 2 to the Loan Agreement to be duly executed as of the date first
above written.
GRIFFON CORPORATION,
as Borrower
By Robert Balemian
-------------------------------------
Name: Robert Balemian
Title: President
FLEET BANK, N.A.
(formerly NatWest Bank N.A.),
as Collateral Agent and a Bank
By Christopher Mendelsohn
-------------------------------------
Name: Christopher Mendelsohn
Title: Vice President
THE CHASE MANHATTAN BANK
(formerly Chemical Bank),
as a Bank
By Barbara G. Bertschi
-------------------------------------
Name: Barbara G. Bertschi
Title: Vice President
<PAGE> 49
EXHIBIT INDEX
Exhibit No.
3.1 Restated Certificate of Incorporation (Exhibit 3.1 of Annual
Report on Form 10-K for the year ended September 30, 1995)
3.2 By-laws as amended (Exhibit 3 of Current Report on Form 8-K
dated November 8, 1994)
4.1 Rights Agreement dated as of May 9, 1996 between Registrant
and American Stock Transfer Company (Exhibit 1.1 of Current
Report on Form 8-K dated May 9, 1996)
4.2 Loan Agreement dated June 8, 1995 between the Registrant and
lending institutions (Exhibit 4.2 of Annual Report on Form
10-K for the year ended September 30, 1995)
4.3* Amendment effective as of October 31, 1997 to Loan Agreement
dated June 8, 1995 between the Registrant and lending
institutions
10.1 Employment Agreement dated March 1, 1983 between the
Registrant and Robert Balemian, as amended (Exhibit 10 of
Current Report on Form 8-K dated March 1, 1983, Exhibit 10 of
Current Report on Form 8-K dated March 2, 1983, Exhibit 10(a)
of Current Report on Form 8-K dated March 15, 1984, Exhibit 10
of Current Report on Form 8-K dated May 4, 1987, Exhibit 10(a)
of Current Report on Form 8-K dated February 13, 1989, Exhibit
10 of Current Report on Form 8-K dated February 28, 1990,
Exhibit 10 of Current Report on Form 8-K dated February 25,
1991 and Exhibit 10 of Current Report on Form 8-K dated May
28, 1991)
<PAGE> 50
10.2 Employment Agreement dated March 1, 1983 between the
Registrant and Harvey R. Blau, as amended (Exhibit 10 of
Current Report on Form 8-K dated March 1, 1983, Exhibit 10 of
Current Report on Form 8-K dated March 2, 1983, Exhibit 10(b)
of Current Report on Form 8-K dated March 15, 1984, Exhibit 10
of Current Report on Form 8-K dated May 4, 1987, Exhibit 10(a)
of Current Report on Form 8-K dated February 13, 1989, and
Exhibit 10 of Current Report on Form 8-K dated February 28,
1990, Exhibit 10 of Current Report on Form 8-K dated February
25, 1991 and Exhibit 10 of Current Report on Form 8-K dated
May 28, 1991)
10.3 Form of Trust Agreement between the Registrant and U.S. Trust
Company of California, N.A., as Trustee, relating to the
Company's Employee Stock Ownership Plan (Exhibit 10.3 of
Annual Report on Form 10-K for the year ended September 30,
1994)
10.4 1992 Non-Qualified Stock Option Plan (Exhibit 10.10 of Annual
Report on Form 10-K for the year ended September 30, 1993)
10.5 Non-Qualified Stock Option Plan (Exhibit 10.12 of Annual
Report on Form 10-K for the year ended September 30, 1988)
10.6 Form of Indemnification Agreement between the Registrant and
its officers and directors (Exhibit 28 to Current Report on
Form 8-K dated May 3, 1990)
10.7 Outside Director Stock Award Plan (Exhibit 4 of Form S-8
Registration Statement No. 33-52319)
10.8 1995 Stock Option Plan (Exhibit 4 of Form S-8 Registration
Statement No. 33-57683)
10.9 1997 Stock Option Plan (Exhibit 4.2 of Form S-8 Registration
Statement No. 33-21503)
21 The following lists the Company's significant subsidiaries all
of which are wholly-owned by the Company. The names of certain
subsidiaries which do not, when considered in the aggregate
constitute a significant subsidiary, have been omitted.
State of
Name of Subsidiary Incorporation
------------------ -------------
Clopay Corporation Delaware
Telephonics Corporation Delaware
23* Consent of Arthur Andersen LLP
27* Financial Data Schedule (for electronic submission only)
* Filed herewith. All other exhibits are incorporated herein by
reference to the exhibit indicated in the parenthetical references.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, dated November 5, 1997, included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (Nos. 33-39090, 33-62966,
33-52319, 33-57683 and 33-21503).
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,414,000
<SECURITIES> 1,379,000
<RECEIVABLES> 152,142,000
<ALLOWANCES> 6,627,000
<INVENTORY> 88,123,000
<CURRENT-ASSETS> 264,107,000
<PP&E> 130,753,000
<DEPRECIATION> 53,673,000
<TOTAL-ASSETS> 384,759,000
<CURRENT-LIABILITIES> 129,100,000
<BONDS> 52,863,000
0
0
<COMMON> 7,820,000
<OTHER-SE> 193,985,000
<TOTAL-LIABILITY-AND-EQUITY> 384,759,000
<SALES> 770,227,000
<TOTAL-REVENUES> 770,227,000
<CGS> 571,132,000
<TOTAL-COSTS> 571,132,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,312,000
<INTEREST-EXPENSE> 3,475,000
<INCOME-PRETAX> 53,033,000
<INCOME-TAX> 19,869,000
<INCOME-CONTINUING> 33,164,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,164,000
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 0
</TABLE>
