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 December 31, 1996
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. 28,993,948 shares of Common
Stock as of January 31, 1997.
FORM 10-Q
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CONTENTS
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PART I - FINANCIAL INFORMATION (Unaudited)
Condensed Consolidated Balance Sheets at December 31, 1996
and September 30, 1996
Condensed Consolidated Statements of Income for the Three
Months Ended December 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended December 31, 1996 and 1995
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
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1996
------------ -------------
(Unaudited) (Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 24,650,000 $ 17,846,000
Marketable securities 2,367,000 4,297,000
Accounts receivable, less allowance
for doubtful accounts 82,589,000 87,113,000
Contract costs and recognized
income not yet billed 31,694,000 33,670,000
Inventories (Note 2) 69,597,000 69,886,000
Prepaid expenses and other current
assets 15,440,000 16,203,000
------------ ------------
Total current assets 226,337,000 229,015,000
PROPERTY, PLANT AND EQUIPMENT
at cost, less accumulated depreciation
and amortization of $47,472,000 at
December 31, 1996 and $45,010,000 at
September 30, 1996 57,310,000 55,706,000
OTHER ASSETS 30,231,000 26,448,000
------------ ------------
$313,878,000 $311,169,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1996
------------ -------------
(Unaudited) (Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 39,768,000 $ 47,131,000
Other current liabilities 57,903,000 58,620,000
------------ ------------
Total current liabilities 97,671,000 105,751,000
------------ ------------
LONG-TERM DEBT AND OTHER LIABILITIES 35,044,000 31,806,000
------------ ------------
LIABILITY OF EMPLOYEE STOCK OWNERSHIP PLAN 2,375,000 ---
------------ ------------
MINORITY INTEREST IN SUBSIDIARY 1,270,000 652,000
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.25 per share,
authorized 3,000,000 shares --
Second Preferred Stock, Series I,
authorized 1,950,000 shares, issued
1,571,294 shares at December 31, 1996
and 1,618,844 shares at September 30,
1996 (liquidation value $15,713,000
and $16,188,000, respectively) 393,000 405,000
Common Stock, par value $.25 per share,
authorized 85,000,000 shares, issued
29,302,645 shares at December 31, 1996
and 29,253,848 shares at September 30,
1996, and 334,896 shares in treasury at
December 31, 1996 and September 30, 1996 7,326,000 7,313,000
Other shareholders' equity 169,799,000 165,242,000
------------ ------------
Total shareholders' equity 177,518,000 172,960,000
------------ ------------
$313,878,000 $311,169,000
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1996 1995
------------ ------------
Net sales $181,744,000 $153,363,000
Cost of sales 135,761,000 114,959,000
------------ ------------
Gross profit 45,983,000 38,404,000
Selling, general and administrative
expenses 33,257,000 28,449,000
------------ ------------
Income from operations 12,726,000 9,955,000
------------ ------------
Other income (expense):
Interest expense (775,000) (766,000)
Interest income 323,000 369,000
Other, net 54,000 (10,000)
------------ ------------
(398,000) (407,000)
------------ ------------
Income from continuing operations
before income taxes 12,328,000 9,548,000
------------ ------------
Provision for income taxes:
Federal 4,062,000 3,117,000
State and other 746,000 599,000
------------ ------------
4,808,000 3,716,000
------------ ------------
Income from continuing operations 7,520,000 5,832,000
Operating income of discontinued operations,
net of income tax effect --- 31,000
------------ ------------
Net income $ 7,520,000 $ 5,863,000
============ ============
Net income per share of common stock (Note 3) $ .24 $ .18
============ ============
See notes to condensed consolidated financial statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,520,000 $ 5,863,000
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,749,000 2,257,000
Provision for losses on accounts receivable 522,000 239,000
Income from discontinued operations --- (31,000)
Change in assets and liabilities:
Decrease in accounts receivable and contract
costs and recognized income not yet billed 5,978,000 8,814,000
(Increase) decrease in inventories 1,535,000 (488,000)
(Increase) decrease in prepaid expenses and other
assets (1,800,000) 504,000
Increase (decrease) in accounts payable and accrued
liabilities (6,355,000) 591,000
Other changes, net (626,000) 279,000
----------- -----------
Total adjustments 2,003,000 12,165,000
----------- -----------
Net cash provided by operating activities 9,523,000 18,028,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in marketable securities 1,931,000 6,903,000
Acquisition of property, plant and equipment (4,043,000) (1,256,000)
Acquired businesses (1,320,000) (21,884,000)
Proceeds from sale of discontinued operation 2,771,000 ---
Other, net 562,000 (315,000)
----------- -----------
Net cash used in investing activities (99,000) (16,552,000)
----------- -----------
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1996 1995
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CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares --- (862,000)
Proceeds from issuance of long-term debt --- 19,000,000
Payment of long-term debt (129,000) (2,135,000)
Decrease in short-term borrowings (2,500,000) (1,000,000)
Other, net 9,000 28,000
----------- -----------
Net cash provided by (used in) financing
activities (2,620,000) 15,031,000
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,804,000 16,507,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,846,000 9,656,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,650,000 $26,163,000
=========== ===========
See notes to condensed consolidated financial statements.
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-month period ended December 31, 1996 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:
December 31, September 30,
1996 1996
----------- ------------
Finished goods . . . . . . . . . . $26,804,000 $23,910,000
Work in process . . . . . . . . . 20,577,000 22,706,000
Raw materials and supplies . . . . 22,216,000 23,270,000
----------- ------------
$69,597,000 $69,886,000
=========== ============
(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 31,240,000
and 33,097,000 for the three months ended December 31, 1996 and 1995,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales were $181.7 million for the three-month period ended December
31, 1996, an increase of $28.4 million or 18.5% over last year.
Net sales of the building products business were $116.2 million, an
increase of $17.8 million or 18.0% over last year. Higher garage door units
sales ($6.4 million) due to stronger construction and related retail markets,
internal growth in the service business ($3.3 million) and the effect of
acquired companies ($6.6 million) were the principal reasons for the increase.
Net sales of the specialty plastic films business were $39.1 million, an
increase of $7.4 million or 23.2% over last year. Increased unit sales ($7.2
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 $26.5 million, an
increase of $3.3 million or 14.1% over last year due to increased funding levels
on several programs and higher demand for its integrated circuit products.
Income from operations for the three-month period ended December 31, 1996
was $12.7 million, an increase of $2.8 million or 27.8% over last year.
Operating income of the building products business increased approximately $4.0
million compared to last year principally due to the sales growth, lower raw
material costs and manufacturing efficiencies. Operating income of the
specialty plastic films segment declined $1.6 million compared to last year.
The decrease was principally due to development and start-up costs associated
with new products and raw material cost increases in excess of selling price
increases. The reduced earnings in the specialty plastic films segment are
expected to continue through the beginning of the year with improvement
anticipated toward the latter 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 operation increased by $.4 million due to the increased sales.
LIQUIDITY AND CAPTIAL RESOURCES
Cash flow provided by operations for the quarter was $9.5 million and
working capital was $128.7 million at December 31, 1996.
During the quarter the company had capital expenditures of $4.0 million
including continuing construction and equipment costs of $2.0 million for its
60%-owned specialty plastic films joint venture in Germany. Proceeds of $2.8
million were received from the sale of the company's synthetic batting business
which had been reflected as a discontinued operation last year.
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.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
There are no material changes in the information previously reported
under this item.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
27 -- Financial Data Schedule (for electronic submission only)
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: February 3, 1997
----------------
5
3-MOS
SEP-30-1997
DEC-31-1996
24,650,000
2,367,000
119,260,000
4,977,000
69,597,000
226,337,000
104,782,000
47,472,000
313,878,000
97,671,000
37,419,000
0
393,000
7,326,000
169,799,000
313,878,000
181,744,000
181,744,000
135,761,000
135,761,000
0
522,000
775,000
12,328,000
4,808,000
7,520,000
0
0
0
7,520,000
.24
0
