UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 Number: 1-6620
GRIFFON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-1893410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 JERICHO QUADRANGLE, JERICHO, NEW YORK 11753
(Address of principal executive offices) (Zip Code)
(516) 938-5544
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 30,430,000 shares of Common
Stock as of April 30, 1997.
<PAGE>
FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 1997
and September 30, 1996
Condensed Consolidated Statements of Income for the Three
Months and Six Months Ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signature
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1997 1996
----------- -------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,820,000 $ 17,846,000
Marketable securities 1,379,000 4,297,000
Accounts receivable, less allowance
for doubtful accounts 75,030,000 87,113,000
Contract costs and recognized
income not yet billed 29,407,000 33,670,000
Inventories (Note 2) 71,235,000 69,886,000
Prepaid expenses and other current
assets 15,932,000 16,203,000
------------ ------------
Total current assets 211,803,000 229,015,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $49,938,000 at
March 31, 1997 and $45,010,000 at
September 30, 1996 63,277,000 55,706,000
OTHER ASSETS 29,103,000 26,448,000
------------ ------------
$304,183,000 $311,169,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1997 1996
----------- -------------
(Unaudited) (Note 1)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 38,405,000 $ 47,131,000
Other current liabilities 49,388,000 58,620,000
------------ ------------
Total current liabilities 87,793,000 105,751,000
------------ ------------
LONG-TERM DEBT AND OTHER LIABILITIES 32,735,000 31,806,000
------------ ------------
LIABILITY OF EMPLOYEE STOCK OWNERSHIP PLAN 2,250,000 ---
------------ ------------
MINORITY INTEREST IN SUBSIDIARY 1,225,000 652,000
------------ ------------
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, par value $.25 per share,
authorized 3,000,000 shares --
Second Preferred Stock, Series I,
authorized 1,950,000 shares, issued
1,618,844 shares at September 30,
1996 --- 405,000
Common Stock, par value $.25 per share,
authorized 85,000,000 shares, issued
30,892,960 shares at March 31, 1997
and 29,253,848 shares at September 30,
1996, and 474,000 shares and 334,896
shares in treasury at March 31, 1997
and September 30, 1996, respectively 7,723,000 7,313,000
Other shareholders' equity 172,457,000 165,242,000
------------ ------------
Total shareholders' equity 180,180,000 172,960,000
------------ ------------
$304,183,000 $311,169,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
----------- ------------
<S> <C> <C>
Net sales $160,807,000 $139,109,000
Cost of sales 120,520,000 105,330,000
------------ ------------
Gross profit 40,287,000 33,779,000
Selling, general and administrative
expenses 33,010,000 27,168,000
------------ ------------
Income from operations 7,277,000 6,611,000
------------ ------------
Other income (expense):
Interest expense (704,000) (757,000)
Interest income 304,000 279,000
Other, net 80,000 73,000
------------ ------------
(320,000) (405,000)
------------ ------------
Income from continuing operations
before income taxes 6,957,000 6,206,000
------------ ------------
Provision for income taxes:
Federal 2,148,000 2,050,000
State and other 426,000 362,000
------------ ------------
2,574,000 2,412,000
------------ ------------
Income from continuing operations 4,383,000 3,794,000
Operating income of discontinued operations,
net of income tax effect (Note 5) --- 72,000
------------ ------------
Net income $ 4,383,000 $ 3,866,000
============ ============
Net income per share of common stock (Note 3) $ .14 $ .12
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1997 1996
---------- ---------
<S> <C> <C>
Net sales $342,551,000 $292,472,000
Cost of sales 256,281,000 220,289,000
------------ ------------
Gross profit 86,270,000 72,183,000
Selling, general and administrative
expenses 66,267,000 55,617,000
------------ ------------
Income from operations 20,003,000 16,566,000
------------ ------------
Other income (expense):
Interest expense (1,479,000) (1,523,000)
Interest income 627,000 648,000
Other, net 134,000 63,000
------------ ------------
(718,000) (812,000)
------------ ------------
Income from continuing operations
before income taxes 19,285,000 15,754,000
------------ ------------
Provision for income taxes:
Federal 6,210,000 5,167,000
State and other 1,172,000 961,000
------------ ------------
7,382,000 6,128,000
------------ ------------
Income from continuing operations 11,903,000 9,626,000
Operating income of discontinued operations,
net of income tax effect (Note 5) --- 103,000
------------ ------------
Net income $ 11,903,000 $ 9,729,000
============ ============
Net income per share of common stock (Note 3) $ .38 $ .30
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,903,000 $ 9,729,000
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,511,000 4,620,000
Provision for losses on accounts receivable 793,000 547,000
Income from discontinued operations --- (103,000)
Change in assets and liabilities:
Decrease in accounts receivable and contract
costs and recognized income not yet billed 15,824,000 8,259,000
(Increase) decrease in inventories 245,000 (1,850,000)
(Increase) decrease in prepaid expenses and
other assets (920,000) 2,033,000
Decrease in accounts payable and accrued
liabilities (16,278,000) (7,675,000)
Other changes, net 367,000 145,000
------------ ------------
Total adjustments 5,542,000 5,976,000
------------ ------------
Net cash provided by operating activities 17,445,000 15,705,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in marketable securities 2,918,000 8,886,000
Acquisition of property, plant and equipment (12,448,000) (4,249,000)
Acquired businesses (2,232,000) (21,884,000)
Proceeds from sale of discontinued operation 2,771,000 ---
Other, net (112,000) 5,000
------------ ------------
Net cash used in investing activities (9,103,000) (17,242,000)
------------ ------------
</TABLE>
<PAGE>
<TABLE>
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (2,402,000) (21,574,000)
Proceeds from issuance of long-term debt 1,282,000 34,000,000
Payment of long-term debt (3,260,000) (4,269,000)
Decrease in short-term borrowings (2,605,000) (1,000,000)
Other, net (383,000) 101,000
------------ ------------
Net cash provided by (used in) financing
activities (7,368,000) 7,258,000
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 974,000 5,721,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,846,000 9,656,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,820,000 $15,377,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation -
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at September 30, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report to
shareholders for the year ended September 30, 1996.
(2) Inventories -
Inventories, stated at the lower of cost (first-in, first-out or average)
or market, are comprised of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
------------ -------------
<S> <C> <C>
Finished goods . . . . . . . . . . $26,669,000 $23,910,000
Work in process . . . . . . . . . 21,411,000 22,706,000
Raw materials and supplies . . . . 23,155,000 23,270,000
----------- -----------
$71,235,000 $69,886,000
=========== ===========
</TABLE>
(3) Net Income Per Share -
Net income per share is calculated using the weighted average number of
shares of common stock, and where dilutive, common stock equivalents outstanding
during each period. Shares used in computing per share results were 31,295,000
and 32,563,000 for the three months ended March 31, 1997 and 1996, respectively
and 31,267,000 and 32,830,000 for the six months ended March 31, 1997 and 1996,
respectively.
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 three months
ended March 31, 1997 and 1996, basic EPS were $.15 per share and $.12 per share,
<PAGE>
respectively, and diluted EPS were $.14 per share and $.12 per share,
respectively. For the six months ended March 31, 1997 and 1996, basic EPS were
$.41 per share and $.31 per share, respectively, and diluted EPS were $.38 per
share and $.30 per share, respectively. Basic EPS amounts calculated for periods
including and subsequent to March 31, 1997 will be affected by the February 1997
conversion of substantially all of the Second Preferred Stock, Series I into
Common Stock (see Note 4), and the inclusion of the newly issued shares of
common stock in basic EPS calculations.
(4) Shareholders' Equity -
On February 6, 1997 the company's Board of Directors approved the
redemption of the company's Second Preferred Stock, Series I. The redemption
price of $10.17 consisted of $10.00 plus accrued and unpaid dividends to the
redemption date, March 10, 1997. Holders of 1,524,429 shares of Second Preferred
Stock converted their shares into 1,524,429 shares of Common Stock, and 45,165
shares of Second Preferred Stock were redeemed.
(5) Discontinued Operations -
Subsequent to March 31, 1997 the company completed, in a cash transaction,
the sale of its specialty hardware business which had been reflected as a
discontinued operation last year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997
-----------------------------------
Net sales were $160.8 million for the three-month period ended March 31,
1997, an increase of $21.7 million or 15.6% over last year.
Net sales of the building products business were $91.4 million, an increase
of $12.0 million or 15.1% over last year, primarily attributable to higher unit
sales ($7.0 million) due to strong demand in construction and related retail
markets as well as continued internal growth in our service business ($4.7
million). Net sales of the specialty plastic films business were $40.7 million,
an increase of $8.1 million or 25.0% over last year. Increased unit sales ($5.6
million), primarily attributable to products for its major customer in the
infant diaper market, was the principal reason for the increase. Net sales of
the electronic information and communication systems business were $28.7
million, an increase of $1.6 million or 5.9%.
Income from operations for the three-month period ended March 31, 1997 was
$7.3 million, an increase of $.7 million or 10.1% compared to last year.
Operating income of the building products business, in what has historically
been its weakest quarter, increased approximately $1.3 million compared to last
year, principally due to the sales growth, continued production efficiencies and
lower raw material costs. Operating income of the specialty plastic films
segment declined by $.6 million for the quarter compared to last year, but
improved significantly over the first quarter of fiscal 1997. As expected,
margins in this segment were lower than last year due to development and
start-up costs associated with new programs and increased raw material costs.
The segment's operational improvement during the second quarter was due to the
higher volume and increased manufacturing efficiencies. It is expected that
there will be continued improvement in the last half of 1997 as the new programs
coming onstream generate additional volume increases and related start-up costs
become less significant. Operating income of the electronic information and
communication systems business for the quarter was approximately the same as in
the prior year.
Six Months Ended March 31, 1997
- -------------------------------
Net sales were $342.6 million for the six-month period ended March 31,
1997, an increase of $50.1 million or 17.1% over last year.
Net sales of the building products business were $207.6 million, an
increase of $29.7 million or 16.7% over last year, primarily due to unit sales
increases ($15.2 million), the service business' internal growth ($7.9 million)
and acquired businesses ($6.6 million). Net sales of the specialty plastic films
business were $79.7 million, an increase of $15.5 million or 24.1% over last
year. The increase is due to higher unit sales ($13.8 million), primarily
attributable to products for its major customer in the infant diaper market. Net
sales of the electronic information and communication systems business were
$55.3 million, an increase of $4.9 million or 9.7% compared to last year,
principally due to increased funding levels on several programs and higher
demand for its integrated circuit products.
<PAGE>
Income from operations for the six-month period ended March 31, 1997 was
$20.0 million, an increase of $3.4 million or 20.7% compared to last year.
Operating income of the building products business increased approximately $5.3
million compared to last year, for the reasons discussed above. Operating income
of the specialty plastic films business decreased by $2.2 million compared to
last year, the majority of such reduction occurring in the first quarter, due to
the reasons discussed above. Operating income of the electronic information and
communication systems business increased by $.4 million due primarily to the
sales increase in the first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations for the six months was $17.4 million, and
working capital was $124.0 million at March 31, 1997.
During the six months the company had fixed asset additions of $12.4
million, including $5 million to upgrade and enhance strategic business systems
and construction and equipment costs of $4 million for its 60%-owned specialty
plastic films joint venture in Germany. Proceeds of approximately $3 million
were received from the sale and liquidation of the company's synthetic batting
business which had been reflected as a discontinued operation last year.
On February 6, 1997 the company's Board of Directors approved the
redemption of the company's Second Preferred Stock, Series I. The redemption
price of $10.17 consisted of $10.00 plus accrued and unpaid dividends to the
redemption date, March 10, 1997. Holders of 1,524,429 shares of Second Preferred
Stock converted their shares into 1,524,429 shares of Common Stock, and 45,165
shares of Second Preferred Stock were redeemed.
Anticipated cash flows from operations, together with existing cash and
marketable securities 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.
The statements contained in this report which are not historical facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements, including the effect of business and
economic conditions; the impact of competitive products and pricing; capacity
and supply constraints or difficulties; product development, commercialization
or technological difficulties; and other risks and uncertainties.
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
There are no material changes in the information previously reported
under this item.
Item 2 Changes in Securities
---------------------
None
Item 3 Defaults upon Senior Securities
-------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Registrant held its Annual Meeting of Stockholders on February 6,
1997.
(b) Not applicable
(c)(i) Four directors were elected at the Annual Meeting to serve until the
Annual Meeting of Stockholders in 2000. The names of these directors
and votes cast in favor of their election and shares withheld are as
follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Robert Balemian 23,470,198 2,676,310
Harvey R. Blau 23,486,484 2,678,024
Ronald J. Kramer 23,470,877 2,675,631
Lieutenant General
James W. Stansberry (Ret.) 23,468,083 2,678,425
</TABLE>
(ii) In addition to the election of directors, the stockholders approved a
proposal to adopt a 1997 Stock Option Plan; 20,408,086 shares were
voted in favor of this proposal, 1,935,668 shares against and 285,050
shares abstained.
Item 5 Other Information
-----------------
None
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
27 -- Financial Data Schedule (for electronic submission only)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRIFFON CORPORATION
By: Robert Balemian
----------------------
Robert Balemian
President
(Principal Financial Officer)
Date: May 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
condensed consolidated financial statements for the period ended
March 31, 1997 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,820,000
<SECURITIES> 1,379,000
<RECEIVABLES> 109,819,000
<ALLOWANCES> 5,382,000
<INVENTORY> 71,235,000
<CURRENT-ASSETS> 211,803,000
<PP&E> 113,215,000
<DEPRECIATION> 49,938,000
<TOTAL-ASSETS> 304,183,000
<CURRENT-LIABILITIES> 87,793,000
<BONDS> 34,985,000
0
0
<COMMON> 7,723,000
<OTHER-SE> 172,457,000
<TOTAL-LIABILITY-AND-EQUITY> 304,183,000
<SALES> 342,551,000
<TOTAL-REVENUES> 342,551,000
<CGS> 256,281,000
<TOTAL-COSTS> 256,281,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 793,000
<INTEREST-EXPENSE> 1,479,000
<INCOME-PRETAX> 19,285,000
<INCOME-TAX> 7,382,000
<INCOME-CONTINUING> 11,903,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,903,000
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
