UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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. 29,681,197 shares of Common
Stock as of July 31, 2000.
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
PAGE
----
PART I - FINANCIAL INFORMATION (Unaudited)
---------------------
Condensed Consolidated Balance Sheets at June 30, 2000
and September 30, 1999........................................ 1
Condensed Consolidated Statements of Income for the Three
Months and Nine Months Ended June 30, 2000 and 1999........... 3
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 2000 and 1999...................... 5
Notes to Condensed Consolidated Financial Statements.......... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
Quantitative and Qualitative Disclosure about Market Risk..... 13
PART II - OTHER INFORMATION
-----------------
Item 1: Legal Proceedings .................................... 14
Item 2: Changes in Securities ................................ 14
Item 3: Defaults upon Senior Securities ...................... 14
Item 4: Submission of Matters to a Vote of Security Holders... 14
Item 5: Other Information .................................... 14
Item 6: Exhibits and Reports on Form 8-K ..................... 14
Signature .................................................... 15
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
-------- -------------
(Unaudited) (Note 1)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 24,511,000 $ 21,242,000
Accounts receivable, less allowance for
doubtful accounts 129,687,000 123,008,000
Contract costs and recognized income not
yet billed 76,242,000 65,527,000
Inventories (Note 2) 106,893,000 94,419,000
Prepaid expenses and other current assets 25,723,000 22,832,000
------------ ------------
Total current assets 363,056,000 327,028,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $86,064,000 at
June 30, 2000 and $72,152,000 at
September 30, 1999 147,308,000 134,882,000
OTHER ASSETS 72,877,000 71,530,000
------------ ------------
$583,241,000 $533,440,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
--------- ------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts and notes payable $ 61,411,000 $ 64,540,000
Other current liabilities 79,896,000 73,465,000
------------ ------------
Total current liabilities 141,307,000 138,005,000
------------ ------------
LONG-TERM DEBT 165,348,000 127,652,000
------------ ------------
MINORITY INTEREST AND OTHER 18,723,000 17,562,000
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $.25 per
share, authorized 3,000,000 shares,
no shares issued --- ---
Common Stock, par value $.25 per
share, authorized 85,000,000
shares, issued 31,749,199 shares at
June 30, 2000 and 31,735,349 shares at
September 30, 1999; 2,034,102 and 1,387,402
shares in treasury at June 30, 2000 and
September 30, 1999, respectively 7,937,000 7,934,000
Other shareholders' equity 249,926,000 242,287,000
------------ ------------
Total shareholders' equity 257,863,000 250,221,000
------------ ------------
$583,241,000 $533,440,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
2000 1999
---- ----
<S> <C> <C>
Net Sales $278,719,000 $262,413,000
Cost of sales 207,339,000 197,945,000
------------ ------------
71,380,000 64,468,000
Selling, general and administrative expenses 56,981,000 53,165,000
------------ ------------
14,399,000 11,303,000
------------ ------------
Other income (expense):
Interest expense (3,224,000) (2,076,000)
Interest income 270,000 114,000
Other, net 79,000 (107,000)
------------ ------------
(2,875,000) (2,069,000)
------------ ------------
Income before income taxes 11,524,000 9,234,000
------------ ------------
Provision for income taxes:
Federal 2,771,000 2,757,000
State and foreign 1,838,000 660,000
------------ ------------
4,609,000 3,417,000
------------ ------------
Income before minority interest 6,915,000 5,817,000
Minority interest (667,000) ---
------------ ------------
Net income $ 6,248,000 $ 5,817,000
============ ============
Earnings per share of common stock
(Note 3):
Basic $ .21 $ .19
============ ============
Diluted $ .21 $ .19
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Net sales $818,369,000 $757,330,000
Cost of sales 611,688,000 580,411,000
------------ ------------
206,681,000 176,919,000
Selling, general and administrative expenses 169,763,000 151,603,000
Restructuring charge (Note 6) --- 3,500,000
------------ ------------
36,918,000 21,816,000
------------ ------------
Other income (expense):
Interest expense (8,323,000) (5,627,000)
Interest income 784,000 448,000
Other, net 69,000 43,000
------------ ------------
(7,470,000) (5,136,000)
------------ ------------
Income before income taxes 29,448,000 16,680,000
------------ ------------
Provision for income taxes:
Federal 5,298,000 4,976,000
State and foreign 6,481,000 1,196,000
------------ ------------
11,779,000 6,172,000
------------ ------------
Income before minority interest and cumulative
effect of a change in accounting principle 17,669,000 10,508,000
Minority interest (Note 5) (386,000) ---
------------ ------------
Income before cumulative effect of a change in
accounting principle 17,283,000 10,508,000
Cumulative effect of a change in accounting
principle, net of income taxes (Note 5) (5,290,000) ---
------------ ------------
Net income $ 11,993,000 $ 10,508,000
============ ============
Basic earnings per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .57 $ .35
Cumulative effect of a change in accounting
principle (.17) ---
------------ ------------
$ .40 $ .35
============ ============
Diluted earnings per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .57 $ .34
Cumulative effect of a change in accounting
principle (.17) ---
------------ ------------
$ .40 $ .34
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
--------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,993,000 $10,508,000
----------- -----------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 17,499,000 16,061,000
Minority interest 386,000 ---
Cumulative effect of a change in accounting
principle, net 5,290,000 ---
Provision for losses on accounts receivable 1,959,000 1,659,000
Non-cash asset write-downs from restructuring --- 2,150,000
Change in assets and liabilities:
Increase in accounts receivable and
contract costs and recognized income not
yet billed (19,486,000) (19,378,000)
(Increase) decrease in inventories (8,960,000) 10,581,000
Increase in prepaid expenses and other assets (4,575,000) (4,932,000)
Increase (decrease) in accounts payable, accrued
liabilities and Federal income taxes 5,515,000 (14,083,000)
Other changes, net 2,554,000 20,000
----------- -----------
Total adjustments 182,000 (7,922,000)
----------- -----------
Net cash provided by operating activities 12,175,000 2,586,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (32,908,000) (20,672,000)
Acquired businesses (14,589,000) (20,172,000)
Proceeds from sale of product line --- 4,300,000
Other, net 5,946,000 (1,211,000)
----------- -----------
Net cash used in investing activities (41,551,000) (37,755,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (4,385,000) (319,000)
Proceeds from issuance of long-term debt 44,625,000 34,835,000
Payments of long-term debt (8,659,000) (7,322,000)
Increase in short-term borrowings 2,500,000 4,958,000
Other, net (1,436,000) 128,000
----------- -----------
Net cash provided by financing activities 32,645,000 32,280,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,269,000 (2,889,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,242,000 19,326,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,511,000 $16,437,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
5
<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. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three and nine-month
periods ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the year ending September 30, 2000. The balance sheet at
September 30, 1999 has been derived from the audited financial statements at
that date. 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, 1999.
(2) Inventories -
-----------
Inventories, stated at the lower of cost (first-in, first-out or
average) or market, are comprised of the following:
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
-------- -------------
<S> <C> <C>
Finished goods......................... $ 62,188,000 $ 51,157,000
Work in process........................ 25,205,000 23,405,000
Raw materials and supplies............. 19,500,000 19,857,000
------------ ------------
$106,893,000 $ 94,419,000
============ ============
</TABLE>
(3) Earnings per share -
------------------
Basic EPS is calculated by dividing income by the weighted average
number of shares of common stock outstanding during the period. The weighted
average number of shares of common stock used in determining basic EPS was
29,977,000 and 30,372,000 for the three months ended June 30, 2000 and 1999,
respectively and 30,151,000 and 30,381,000 for the nine months ended June 30,
2000 and 1999, respectively.
Diluted EPS is calculated by dividing income by the weighted average
number of shares of common stock outstanding plus additional common shares that
could be issued in connection with potentially dilutive securities. The weighted
average number of shares of common stock used in determining diluted EPS was
30,173,000 and 30,445,000 for the three months ended June 30, 2000 and 1999,
respectively and 30,330,000 and 30,569,000 for the nine months ended June 30,
2000 and 1999, respectively, and reflects additional shares in connection with
stock option and other stock-based compensation plans (196,000 shares for the
three months ended June 30, 2000, 18,000 shares for the three months ended June
30, 1999, 179,000 shares for the nine months ended June 30, 2000 and 73,000
shares for the nine months ended June 30, 1999).
6
<PAGE>
Options to purchase approximately 5,597,000 and 4,311,000 shares of
common stock were not included in the computation of diluted earnings per share
for the three months ended June 30, 2000 and 1999, respectively, and options to
purchase approximately 4,180,000 and 3,449,000 shares of common stock were not
included in the computation of diluted earnings per share for the nine months
ended June 30, 2000 and 1999, respectively, because the effects would have been
antidilutive.
(4) Business segments -
-----------------
The company's reportable business segments are as follows - Garage Doors
(manufacture and sale of residential and commercial/industrial garage doors, and
related products); Installation Services (sale and installation of building
products primarily for new construction, such as garage doors, garage door
openers, manufactured fireplaces and surrounds, and cabinets); 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, disposable surgical and patient care products and plastic
packaging).
7
<PAGE>
Information on the company's business segments is as follows:
<TABLE>
<CAPTION>
Electronic
Information
and Specialty
Garage Installation Communication Plastic
Doors Services Systems Films Totals
------ ------------ ------------- --------- ------
<S> <C> <C> <C> <C> <C>
Revenues from
external customers -
Three months ended
June 30, 2000 $100,027,000 $ 67,046,000 $ 47,766,000 $ 63,880,000 $278,719,000
June 30, 1999 104,153,000 68,669,000 44,502,000 45,089,000 262,413,000
Nine months ended
June 30, 2000 296,058,000 200,829,000 131,391,000 190,091,000 818,369,000
June 30, 1999 305,999,000 174,263,000 136,626,000 140,442,000 757,330,000
Intersegment revenues -
Three months ended
June 30, 2000 $ 6,784,000 $ 65,000 $ --- $ --- $ 6,849,000
June 30, 1999 6,988,000 240,000 --- --- 7,228,000
Nine months ended
June 30, 2000 22,428,000 319,000 --- --- 22,747,000
June 30, 1999 22,248,000 738,000 --- --- 22,986,000
Segment profit -
Three months ended
June 30, 2000 $ 4,923,000 $ 2,016,000 $ 5,536,000 $ 4,396,000 $ 16,871,000
June 30, 1999 8,198,000 2,256,000 4,067,000 (1,081,000) 13,440,000
Nine months ended
June 30, 2000 12,825,000 5,334,000 13,226,000 12,671,000 44,056,000
June 30, 1999 16,783,000 4,777,000 10,388,000 (312,000) 31,636,000
</TABLE>
Following is a reconciliation of segment profit to amounts reported in the
consolidated financial statements:
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Profit for all segments $ 16,871,000 $ 13,440,000 $ 44,056,000 $ 31,636,000
Unallocated amounts (2,393,000) (2,244,000) (7,069,000) (6,277,000)
Restructuring charge --- --- --- (3,500,000)
Interest expense, net (2,954,000) (1,962,000) (7,539,000) (5,179,000)
------------ ------------ ------------ ------------
Income before income
taxes $ 11,524,000 $ 9,234,000 $ 29,448,000 $ 16,680,000
============ ============ ============ ============
</TABLE>
8
<PAGE>
As a result of an acquisition during the nine months ended June 30,
2000, the electronic information and communication systems segment's assets
increased by approximately $16,000,000, and the garage doors segment's assets
increased by approximately $4.5 million in connection with the purchase of a
previously leased facility.
(5) Start-up costs -
--------------
Effective October 1, 1999 the company adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position No.
98-5 (SOP 98-5), "Reporting on the Costs of Start-Up Activities". SOP 98-5
requires that, at the date of adoption, costs of start-up activities previously
capitalized be written-off as a cumulative effect of a change in accounting
principle, and that after adoption, such costs are to be expensed as incurred.
Consequently, in the first quarter of fiscal 2000, the company's
60%-owned joint venture wrote off costs that were previously capitalized in
connection with the start-up of the venture and the implementation of additional
production capacity. The cumulative effect of this change in accounting
principle is $5,290,000 (net of $3,784,000 income tax effect). The minority
interest's share of the net charge is $2,116,000 and is included as an
offsetting credit in "Minority interest" in the Condensed Consolidated Statement
of Income for the nine months ended June 30, 2000.
(6) Restructuring charge -
--------------------
In March 1999 the company recorded a restructuring charge in connection
with the closing of a garage door manufacturing facility in order to streamline
operations and improve efficiency. Approximately $1,350,000 of restructuring
costs were accrued; through June 30, 2000 approximately $812,000 has been paid
for employee severance and related benefits and $477,000 has been paid for lease
and related costs. The remaining accrual will be paid by September 30, 2000.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
GENERAL
The following information is presented in accordance with related
segment results presented in Note 4 of "Notes to Condensed Consolidated
Financial Statements."
RESULTS OF OPERATIONS
Three months ended June 30, 2000
--------------------------------
Net sales were $278.7 million for the three-month period ended June 30,
2000, an increase of $16.3 million or 6.2%.
Net sales for the garage doors segment were $106.8 million, a decrease
of $4.3 million or 3.9% compared to last year. Unit sales volume of residential
and commercial garage doors decreased by approximately 10% and 7%, respectively,
partly offset by improved product mix in certain residential and commercial
lines, compared to last year.
Net sales for the specialty plastic films segment were $63.9 million, an
increase of $18.8 million or 41.7% compared to last year. Higher unit sales
volume ($10.8 million) at Finotech, the segment's European joint venture, and in
the segment's domestic operations ($4.8 million) were the principal reasons for
the increase.
Net sales for the electronic information and communication systems
segment were $47.8 million, an increase of $3.3 million or 7.3% compared to last
year. The increase in sales was principally due to an acquired search and
weather radar business.
Net sales for the installation services segment were $67.1 million, a
decrease of $1.8 million or 2.6% compared to last year. The decline was
primarily due to decreased demand due to softer housing markets.
Operating income for all business segments for the three months ended
June 30, 2000 was $16.9 million, an increase of $3.4 million or 25.5% compared
to last year. The increase was principally in specialty plastic films due to
volume-driven improvement and related manufacturing efficiencies in the European
joint venture and from improved profitability in the segment's domestic
operations.
Operating income for the garage doors segment was $4.9 million, a
decrease of $3.3 million or 39.9% compared to last year. Profitability was
adversely impacted by the sales decrease, increased raw material costs and by
higher operating costs to support the segment's anticipated expansion of sales
to the retail distribution channel. The segment also experienced a loss from a
commercial door product line for which strategic alternatives are being
explored.
Operating income for specialty plastic films was $4.4 million compared
to a loss of $1.1 million last year. Increased unit sales volume and resultant
manufacturing efficiencies in the segment's European joint venture, unit sales
increases in its domestic operations including sales of new, more profitable
products, partly offset by increased raw material costs, were the principal
reasons for the improvement in operating income.
10
<PAGE>
Operating income for the electronic information and communication
systems segment was $5.5 million, an increase of $1.5 million or 36.1% compared
to last year. Profitability improved primarily from higher aggregate margins on
certain programs which have transitioned from development to production and from
earnings of the acquired search and weather radar business, partly offset by
increased bid and proposal expenditures.
Operating income for the installation services segment was $2.0 million,
a decrease of $.2 million or 10.6% compared to last year. The decrease was
principally due to the sales decline and higher distribution and labor costs
from expanded product offerings.
Net interest expense increased by $1.0 million principally due to higher
levels of outstanding debt from acquisitions in 1999 and 2000.
Nine months ended June 30, 2000
-------------------------------
Net sales were $818.4 million for the nine-month period ended June 30,
2000, an increase of $61.0 million or 8.1%.
Net sales for the garage doors segment were $318.5 million, a decrease
of $9.8 million or 3.0% compared to last year. The decrease was principally due
to unit volume decreases in sales of residential and commercial garage doors by
approximately 4% and 17%, respectively, and the effect of the sale last year of
a commercial product line that had net sales of approximately $7 million in the
first half of fiscal 1999.
Net sales for the specialty plastic films segment were $190.1 million,
an increase of $49.6 million or 35.4% compared to last year. Substantially
higher unit sales volume at Finotech, the segment's European joint venture was
the principal reason for the increase.
Net sales for the electronic information and communication systems
segment were $131.4 million, a decrease of $5.2 million or 3.8% compared to last
year. The decrease in sales was principally due to delays in anticipated orders
on international radar programs and lower revenues in fiscal 2000 on programs
that were in development in 1999 but have not yet fully transitioned to
production, partly offset by sales of an acquired search and weather radar
business.
Net sales for the installation services segment were $201.1 million, an
increase of $26.1 million or 14.9% compared to last year. The increase was
principally due to the inclusion in fiscal 2000 nine month operating results of
a company which was acquired during the second quarter of fiscal 1999 and
internal growth from expanded product offerings, partly offset by the impact of
softer housing markets.
Operating income for all business segments for the nine months ended
June 30, 2000 was $44.1 million, an increase of $12.4 million or 39.3% compared
to last year. The increase was principally due to increased unit volume in
specialty plastic films' European joint venture and related manufacturing
efficiencies and increased margins in electronic information and communication
systems, partly offset by reduced profitability in the garage doors segment.
Operating income for the garage doors segment was $12.8 million, a
decrease of $4.0 million or 23.6% compared to last year. Increased profitability
due to favorable product mix and manufacturing efficiencies was offset by the
effect of the sales decrease, higher operating costs to support the segment's
11
<PAGE>
anticipated expansion of sales to the retail distribution channel and increased
distribution costs. Unprofitable operations in a commercial door product line
and competitive pricing also contributed to the segment's reduced operating
results for the nine months.
Operating income for specialty plastic films was $12.7 million compared
to a loss of $.3 million last year. Higher unit sales volume of the segment's
European joint venture and resultant manufacturing efficiencies and improving
domestic operations during the third quarter of fiscal 2000 were the principal
reasons for the increase in operating income.
Operating income for the electronic information and communication
systems segment was $13.2 million, an increase of $2.8 million or 27.3% compared
to last year. The increase in operating income reflects improved profitability
on certain programs that have transitioned from development to production and
earnings of the acquired search and weather radar business, partly offset by
increased bid and proposal expenditures.
Operating income of the installation services segment was $5.3 million,
an increase of $.6 million or 11.7% compared to last year. The increase was
principally due to the earnings of an acquired company, partly offset by higher
distribution and labor costs from expanded product offerings.
Net interest expense increased by $2.4 million principally due to higher
levels of outstanding debt from acquisitions in 1999 and 2000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash flow provided by operations for the nine months ended June 30, 2000
improved to $12.2 million compared to $2.6 million last year, principally due to
increased earnings. Working capital increased to $221.7 million at June 30,
2000. The increase was principally due to higher working capital requirements in
connection with anticipated expansion of the garage door segment's sales to the
retail distribution channel, expected higher contract costs and recognized
income not yet billed in the electronic information and communication systems
segment and from expanded product offerings in the installation services
segment.
During the nine months ended June 30, 2000 net cash used in investing
activities was approximately $41.6 million. The company had capital expenditures
of approximately $32.9 million, principally made in connection with increasing
production capacity and with the purchase of a previously leased garage door
manufacturing facility for approximately $4.5 million. Also, the electronic
information and communication systems segment acquired a search and weather
radar business for approximately $16 million, of which $12 million was financed
under bank credit lines with the balance expected to be paid during the
remainder of fiscal 2000.
Net cash provided by financing activities during the nine months ended
June 30, 2000 was approximately $32.6 million. Borrowings under bank credit
lines were used to finance an acquisition, capital expenditures and working
capital requirements. Also, since September 30, 1999 the company has purchased
approximately 647,000 shares of its Common Stock for approximately $4.4 million,
and increased its stock buyback program from 1,500,000 shares to 3,000,000
shares. Additional purchases will be made from time-to-time, depending upon
market conditions, at prices deemed appropriate by management.
Anticipated cash flows from operations, together with existing cash,
12
<PAGE>
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
All statements other than statements of historical fact included in this
report, including without limitation statements regarding the company's
financial position, business strategy, and the plans and objectives of the
company's management for future operations, are forward-looking statements. When
used in this report, words such as "anticipate", "believe", "estimate",
"expect", "intend" and similar expressions, as they relate to the company or its
management, identify forward- looking statements. Such forward-looking
statements are based on the beliefs of the company's management, as well as
assumptions made by and information currently available to the company's
management. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors, including but not
limited to, business and economic conditions, competitive factors and pricing
pressures, capacity and supply constraints. Such statements reflect the views of
the company with respect to future events and are subject to these and other
risks, uncertainties and assumptions relating to the operations, results of
operations, growth strategy and liquidity of the company. Readers are cautioned
not to place undue reliance on these forward-looking statements. The company
does not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect future events or circumstances or to
reflect the occurrence of unanticipated events.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
Management does not believe that there are any material market risk
exposures with respect to derivative or other financial instruments that are
required to be disclosed.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
None
Item 2 Changes in Securities
---------------------
None
Item 3 Defaults upon Senior Securities
-------------------------------
None
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 Other Information
-----------------
None
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
27 -- Financial Data Schedule (for electronic submission only)
14
<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 /s/ Robert Balemian
----------------------------
Robert Balemian
President
(Principal Financial Officer)
Date: August 8, 2000
