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, 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. 29,850,097 shares of Common
Stock as of April 28, 2000.
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
PAGE
----
PART I - FINANCIAL INFORMATION (Unaudited)
---------------------
Condensed Consolidated Balance Sheets at March 31, 2000
and September 30, 1999........................................ 1
Condensed Consolidated Statements of Income for the Three
Months and Six Months Ended March 31, 2000 and 1999........... 3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 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>
March 31, September 30,
2000 1999
--------- ------------
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,838,000 $ 21,242,000
Accounts receivable, less allowance for
doubtful accounts 119,997,000 123,008,000
Contract costs and recognized income not
yet billed 69,039,000 65,527,000
Inventories (Note 2) 109,871,000 94,419,000
Prepaid expenses and other current assets 28,625,000 22,832,000
------------ ------------
Total current assets 345,370,000 327,028,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $80,761,000 at
March 31, 2000 and $72,152,000 at
September 30, 1999 142,531,000 134,882,000
OTHER ASSETS 72,217,000 71,530,000
------------ ------------
$560,118,000 $533,440,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------------ ------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts and notes payable $ 58,850,000 $ 64,540,000
Other current liabilities 71,722,000 73,465,000
------------ ------------
Total current liabilities 130,572,000 138,005,000
------------ ------------
LONG-TERM DEBT 159,894,000 127,652,000
------------ ------------
MINORITY INTEREST AND OTHER 17,359,000 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 March 31,
2000 and 31,735,349 shares at
September 30, 1999; 1,899,102 and 1,387,402
shares in treasury at March 31, 2000 and
September 30, 1999, respectively 7,937,000 7,934,000
Other shareholders' equity 244,356,000 242,287,000
------------ ------------
Total shareholders' equity 252,293,000 250,221,000
------------ ------------
$560,118,000 $533,440,000
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net Sales $258,889,000 $236,360,000
Cost of sales 195,440,000 186,035,000
------------ ------------
63,449,000 50,325,000
Selling, general and administrative expenses 57,345,000 49,104,000
Restructuring charge (Note 6) --- 3,500,000
------------ ------------
6,104,000 (2,279,000)
------------ ------------
Other income (expense):
Interest expense (2,744,000) (2,053,000)
Interest income 211,000 273,000
Other, net 3,000 153,000
------------ ------------
(2,530,000) (1,627,000)
------------ ------------
Income (loss) before income taxes 3,574,000 (3,906,000)
------------ ------------
Provision (benefit) for income taxes:
Federal (382,000) (1,155,000)
State and foreign 1,852,000 (290,000)
------------ ------------
1,470,000 (1,445,000)
------------ ------------
Income (loss) before minority interest 2,104,000 (2,461,000)
Minority interest (801,000) ---
------------ ------------
Net income (loss) $ 1,303,000 $ (2,461,000)
============ ============
Earnings (loss) per share of common stock
(Note 3):
Basic $ .04 $ (.08)
============ ============
Diluted $ .04 $ (.08)
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Net sales $539,650,000 $494,917,000
Cost of sales 404,349,000 382,466,000
------------ ------------
135,301,000 112,451,000
Selling, general and administrative expenses 112,782,000 98,438,000
Restructuring charge (Note 6) --- 3,500,000
------------ ------------
22,519,000 10,513,000
------------ ------------
Other income (expense):
Interest expense (5,099,000) (3,551,000)
Interest income 514,000 334,000
Other, net (10,000) 150,000
------------ ------------
(4,595,000) (3,067,000)
------------ ------------
Income before income taxes 17,924,000 7,446,000
------------ ------------
Provision for income taxes:
Federal 2,527,000 2,219,000
State and foreign 4,643,000 536,000
------------ ------------
7,170,000 2,755,000
------------ ------------
Income before minority interest and cumulative
effect of a change in accounting principle 10,754,000 4,691,000
Minority interest (Note 5) 281,000 ---
------------ ------------
Income before cumulative effect of a change in
accounting principle 11,035,000 4,691,000
Cumulative effect of a change in accounting
principle, net of income taxes (Note 5) (5,290,000) ---
------------ ------------
Net income $ 5,745,000 $ 4,691,000
============ ============
Basic earnings per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .36 $ .15
Cumulative effect of a change in accounting
principle (.17) ---
------------ ------------
$ .19 $ .15
============ ============
Diluted earnings per share of common stock (Note 3):
Income before cumulative effect of a change in
accounting principle $ .36 $ .15
Cumulative effect of a change in accounting
principle (.17) ---
------------ ------------
$ .19 $ .15
============ =============
<FN>
See notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
GRIFFON CORPORATION AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,745,000 $ 4,691,000
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,437,000 10,506,000
Minority interest (281,000) ---
Cumulative effect of a change in accounting
principle, net 5,290,000 ---
Provision for losses on accounts receivable 1,235,000 1,223,000
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 (2,762,000) (4,991,000)
(Increase) decrease in inventories (12,371,000) 6,854,000
Increase in prepaid expenses and other assets (6,123,000) (4,381,000)
Decrease in accounts payable, accrued
liabilities and federal income taxes (1,874,000) (20,903,000)
Other changes, net 1,707,000 165,000
----------- -----------
Total adjustments (3,742,000) (9,377,000)
----------- -----------
Net cash provided by (used in) operating
activities 2,003,000 (4,686,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (22,687,000) (14,614,000)
Acquired businesses (12,112,000) (20,172,000)
Proceeds from sale of product line --- 4,300,000
Other, net 4,578,000 420,000
----------- -----------
Net cash used in investing activities (30,221,000) (30,066,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares (3,620,000) (298,000)
Proceeds from issuance of long-term debt 34,000,000 34,835,000
Payments of long-term debt (6,665,000) (5,053,000)
Increase in short-term borrowings 2,500,000 4,314,000
Other, net (1,401,000) 130,000
----------- -----------
Net cash provided by financing activities 24,814,000 33,928,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,404,000) (824,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,242,000 19,326,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $17,838,000 $18,502,000
=========== ===========
<FN>
See notes to condensed 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. 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, 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>
March 31, September 30,
2000 1999
------------ ------------
<S> <C> <C>
Finished goods......................... $ 60,129,000 $ 51,157,000
Work in process........................ 27,465,000 23,405,000
Raw materials and supplies............. 22,277,000 19,857,000
------------ ------------
$109,871,000 $ 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 30,010,000
and 30,395,000 for the three months ended March 31, 2000 and 1999, respectively
and 30,238,000 and 30,386,000 for the six months ended March 31, 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
30,190,000 and 30,395,000 for the three months ended March 31, 2000 and 1999,
respectively and 30,409,000 and 30,631,000 for the six months ended March 31,
2000 and 1999, respectively, and reflects additional shares in connection with
stock option and other stock-based compensation plans (180,000 shares for the
three months ended March 31, 2000, 171,000 shares for the six months ended March
31, 2000 and 245,000 shares for the six months ended March 31, 1999).
<PAGE>
Options to purchase approximately 4,195,000 and 5,297,000 shares of common
stock were not included in the computation of diluted earnings per share for the
three months ended March 31, 2000 and 1999, respectively, and options to
purchase approximately 4,195,000 and 3,018,000 shares of common stock were not
included in the computation of diluted earnings per share for the six months
ended March 31, 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).
<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
------ ------------ ------------- --------- ------
Revenues from
external customers -
<S> <C> <C> <C> <C> <C>
Three months ended
March 31, 2000 $ 84,941,000 $ 65,099,000 $ 43,479,000 $ 65,370,000 $258,889,000
March 31, 1999 86,142,000 55,115,000 50,088,000 45,015,000 236,360,000
Six months ended
March 31, 2000 196,031,000 133,783,000 83,625,000 126,211,000 539,650,000
March 31, 1999 201,844,000 105,596,000 92,124,000 95,353,000 494,917,000
Intersegment revenues -
Three months ended
March 31, 2000 $ 6,879,000 $ 85,000 $ --- $ --- $ 6,964,000
March 31, 1999 7,005,000 157,000 --- --- 7,162,000
Six months ended
March 31, 2000 15,644,000 254,000 --- --- 15,898,000
March 31, 1999 15,262,000 496,000 --- --- 15,758,000
Segment profit -
Three months ended
March 31, 2000 $ (78,000) $ 936,000 $ 3,939,000 $ 3,617,000 $ 8,414,000
March 31, 1999 23,000 707,000 3,372,000 (900,000) 3,202,000
Six months ended
March 31, 2000 7,902,000 3,318,000 7,690,000 8,275,000 27,185,000
March 31, 1999 8,585,000 2,521,000 6,321,000 769,000 18,196,000
</TABLE>
Following is a reconciliation of segment profit to amounts reported in the
consolidated financial statements:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Profit for all segments $ 8,414,000 $ 3,202,000 $27,185,000 $ 18,196,000
Unallocated amounts (2,307,000) (1,828,000) (4,676,000) (4,033,000)
Restructuring charge --- (3,500,000) --- (3,500,000)
Interest expense, net (2,533,000) (1,780,000) (4,585,000) (3,217,000)
----------- ------------ ----------- ------------
Income (loss) before income
taxes $ 3,574,000 $ (3,906,000) $17,924,000 $ 7,446,000
=========== ============ =========== ============
</TABLE>
<PAGE>
As a result of an acquisition during the six months ended March 31, 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 accompanying Condensed Consolidated Statements of
Income.
(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 March 31, 2000 approximately $777,000 has been paid
for employee severance and related benefits and $328,000 has been paid for lease
and related costs. The remaining accrual will be paid by September 30, 2000.
<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 March 31, 2000
- ---------------------------------
Net sales were $258.9 million for the three-month period ended March 31,
2000, an increase of $22.5 million or 9.5%.
Net sales for the garage doors segment were $91.8 million, a decrease of
$1.3 million or 1.4% compared to last year. Unit volume of residential garage
doors increased compared to last year's quarter, offset by the effect of price
competition, lower unit sales of commercial doors and by the sale in fiscal 1999
of a commercial product line that had net sales of approximately $3 million in
the second quarter of fiscal 1999.
Net sales for the specialty plastic films segment were $65.4 million, an
increase of $20.4 million or 45.2% 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 $43.5 million, a decrease of $6.6 million or 13.2% compared to last year.
The decrease in sales was principally due to delays in anticipated orders on
international radar programs and lower revenues in the second quarter of 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 $65.2 million, an
increase of $9.9 million or 17.9% compared to last year. The increase was
primarily due to the inclusion for the entire second quarter of fiscal 2000 of a
company which was acquired during the second quarter of fiscal 1999.
Operating income for all business segments for the three months ended March
31, 2000 was $8.4 million, an increase of $5.2 million or 162.8% compared to
last year. The increase was principally due to substantial volume-driven
improvement in specialty plastic films' European joint venture and related
manufacturing efficiencies.
<PAGE>
Operating results for the garage doors segment was approximately the same
as last year. Increased profitability due to favorable product mix in
residential doors, lower raw material costs and manufacturing efficiencies was
offset by higher operating costs to support the segment's standing as the
exclusive supplier of residential garage doors to The Home Depot in the United
States and Canada. The segment also experienced unprofitable operations in a
commercial door product line and competitive pricing.
Operating income for specialty plastic films was $3.6 million compared to a
loss of $.9 million last year. The substantial increase in net sales of the
segment's European joint venture and resultant manufacturing efficiencies due to
higher unit volume was the principal reason for the improvement in operating
income.
Operating income for the electronic information and communication systems
segment was $3.9 million, an increase of $.6 million or 16.8% compared to last
year. Profitability improved due 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 of the installation services segment was $.9 million, an
increase of $.2 million compared to last year. The increase was principally due
to the inclusion of earnings of an acquired company for the entire second
quarter of fiscal 2000, partly offset by higher distribution and labor costs
from expanded product offerings.
Net interest expense increased by $.8 million principally due to higher
levels of outstanding debt from acquisitions in 1999 and 2000.
Six months ended March 31, 2000
- -------------------------------
Net sales were $539.7 million for the six-month period ended March 31,
2000, an increase of $44.7 million or 9.0%.
Net sales for the garage doors segment were $211.7 million, a decrease of
$5.4 million or 2.5% compared to last year. Unit volume of residential garage
doors increased compared to last year's first half, offset by the effect of
price competition, lower unit sales of commercial doors and by 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 $126.2 million, an
increase of $30.9 million or 32.4% compared to last year. Substantially higher
unit sales volume at Finotech, the segment's European joint venture was the
principal reason for the increase.
<PAGE>
Net sales for the electronic information and communication systems segment
were $83.6 million, a decrease of $8.5 million or 9.2% compared to last year.
The decrease in sales was principally due to delays in anticipated orders on
international radar programs and lower revenues in the first half of 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 $134.0 million, an
increase of $27.9 million or 26.3% compared to last year. The increase was due
to the inclusion in the first six months of fiscal 2000 of a company which was
acquired during the second quarter of fiscal 1999, and internal growth from
expanded product offerings.
Operating income for all business segments for the six months ended March
31, 2000 was $27.2 million, an increase of $9.0 million or 49.4% 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.
Operating income for the garage doors segment was $7.9 million, a decrease
of $.7 million or 8.0% compared to last year. Increased profitability due to
favorable product mix in residential doors, lower raw material costs and
manufacturing efficiencies was offset by higher operating costs to support the
segment's expansion of sales to retail channels. Unprofitable operations in a
commercial door product line and competitive pricing also contributed to the
segment's reduced operating results for the first half of fiscal 2000.
Operating income for specialty plastic films was $8.3 million, an increase
of $7.5 million compared to last year. The increase in net sales of the
segment's European joint venture and resultant manufacturing efficiencies due to
higher unit volume was the principal reason for the improvement in operating
income.
Operating income for the electronic information and communication systems
segment was $7.7 million, an increase of $1.4 million or 21.7% 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 $3.3 million, an
increase of $.8 million compared to last year. The increase was principally due
to the inclusion of earnings of an acquired company, partly offset by higher
distribution and labor costs from expanded product offerings.
Net interest expense increased by $1.4 million principally due to higher
levels of outstanding debt from acquisitions in 1999 and 2000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operations for the six months ended March 31, 2000
improved to $2.0 million compared to cash used by operations of $4.7 million
last year, principally due to increased earnings. Working capital increased to
$214.8 million at March 31, 2000. The increase was principally due to higher
inventory requirements in connection with expansion of the garage door segment's
retail business and with expanded product offerings in the installation services
segment.
During the six months ended March 31, 2000 net cash used in investing
activities was approximately $30.2 million. The company had capital expenditures
of approximately $22.7 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 third
quarter of fiscal 2000.
Net cash provided by financing activities during the six months ended March
31, 2000 was approximately $24.8 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 512,000 shares of its Common Stock for approximately $3.6 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, 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.
<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)
<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: May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,838,000
<SECURITIES> 0
<RECEIVABLES> 198,791,000
<ALLOWANCES> 9,755,000
<INVENTORY> 109,871,000
<CURRENT-ASSETS> 345,370,000
<PP&E> 223,292,000
<DEPRECIATION> 80,761,000
<TOTAL-ASSETS> 560,118,000
<CURRENT-LIABILITIES> 130,572,000
<BONDS> 159,894,000
0
0
<COMMON> 7,937,000
<OTHER-SE> 244,356,000
<TOTAL-LIABILITY-AND-EQUITY> 560,118,000
<SALES> 539,650,000
<TOTAL-REVENUES> 539,650,000
<CGS> 404,349,000
<TOTAL-COSTS> 404,349,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,235,000
<INTEREST-EXPENSE> 5,099,000
<INCOME-PRETAX> 17,924,000
<INCOME-TAX> 7,170,000
<INCOME-CONTINUING> 11,035,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (5,290,000)
<NET-INCOME> 5,745,000
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
