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)
|
x
Yes
|
o
No
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
o
Yes
|
x
No
|
PAGE
|
||
PART
I -
|
FINANCIAL
INFORMATION
(Unaudited)
|
|
Item
1 -
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets at March 31, 2007 and September 30,
2006
|
1
|
|
Condensed
Consolidated Statements of Operations for the Three and Six Months
Ended
March 31, 2007 and 2006
|
3
|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months ended
March 31,
2007 and 2006
|
5
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
Item
2 -
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
9
|
Item
3 -
|
Quantitative
and Qualitative Disclosures about Market Risk
|
13
|
Item
4 -
|
Controls
& Procedures
|
13
|
PART
II -
|
OTHER
INFORMATION
|
|
Item
1 -
|
Legal
Proceedings
|
14
|
Item
1A -
|
Risk
Factors
|
14
|
Item
2 -
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
14
|
Item
3 -
|
Defaults
Upon Senior Securities
|
15
|
Item
4 -
|
Submission
of Matters to a Vote of Security Holders
|
15
|
Item
5 -
|
Other
Information
|
15
|
Item
6 -
|
Exhibits
|
15
|
Signature
|
16
|
March
31,
|
September
30,
|
||||||
2007
|
2006
|
||||||
(Note
1)
|
|||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
34,374,000
|
$
|
22,389,000
|
|||
|
|||||||
Accounts
receivable, less allowance for doubtful
accounts
|
212,484,000
|
247,172,000
|
|||||
|
|||||||
Contract
costs and recognized income not yet
billed
|
74,312,000
|
68,279,000
|
|||||
Inventories
(Note 2)
|
174,426,000
|
165,089,000
|
|||||
Prepaid
expenses and other current assets
|
46,215,000
|
42,075,000
|
|||||
Total
current assets
|
541,811,000
|
545,004,000
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
at
cost, less accumulated depreciation and
amortization of $231,971,000
at March 31, 2007 and $218,090,000 at September 30, 2006 |
235,663,000
|
231,975,000
|
|||||
OTHER
ASSETS:
|
|||||||
Goodwill
|
110,286,000
|
99,540,000
|
|||||
Intangible
assets and other
|
67,894,000
|
51,695,000
|
|||||
178,180,000
|
151,235,000
|
||||||
$
|
955,654,000
|
$
|
928,214,000
|
March
31,
|
September
30,
|
||||||
2007
|
2006
|
||||||
(Note
1)
|
|||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
and notes payable
|
$
|
109,081,000
|
$
|
135,300,000
|
|||
Other
current liabilities
|
85,128,000
|
100,999,000
|
|||||
Total
current liabilities
|
194,209,000
|
236,299,000
|
|||||
LONG-TERM
DEBT (Note 2)
|
251,475,000
|
209,228,000
|
|||||
OTHER
LIABILITIES AND DEFERRED CREDITS
|
77,365,000
|
70,242,000
|
|||||
Total
liabilities and deferred credits
|
523,049,000
|
515,769,000
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
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 41,701,238 shares at March 31, 2007 and 41,628,059 shares at September 30, 2006; 11,876,962 and 11,779,462 shares in treasury at March 31, 2007 and September 30, 2006, respectively |
10,425,000
|
10,407,000
|
|||||
Other
shareholders' equity
|
422,180,000
|
402,038,000
|
|||||
Total
shareholders' equity
|
432,605,000
|
412,445,000
|
|||||
$
|
955,654,000
|
$
|
928,214,000
|
|
THREE
MONTHS ENDED MARCH 31,
|
|||||||||
2007
|
2006
|
|||||||||
Net
sales
|
$
|
387,371,000
|
$
|
366,151,000
|
||||||
Cost
of sales
|
305,853,000
|
275,898,000
|
||||||||
Gross
profit
|
81,518,000
|
90,253,000
|
||||||||
Selling,
general and administrative expenses
|
79,103,000
|
78,710,000
|
||||||||
Income
from operations
|
2,415,000
|
11,543,000
|
||||||||
Other
income (expense):
|
||||||||||
Interest
expense
|
(3,052,000
|
)
|
(2,565,000
|
)
|
||||||
Interest
income
|
752,000
|
418,000
|
||||||||
Other,
net (Note 6)
|
582,000
|
2,072,000
|
||||||||
(1,718,000
|
)
|
(75,000
|
)
|
|||||||
Income
before income taxes
|
697,000
|
11,468,000
|
||||||||
Provision
for income taxes (Note 7)
|
442,000
|
4,260,000
|
||||||||
Net
income
|
$
|
255,000
|
$
|
7,208,000
|
||||||
Basic
earnings per share of common stock (Note 3)
|
$
|
.01
|
$
|
.24
|
||||||
Diluted
earnings per share of common stock (Note 3)
|
$
|
.01
|
$
|
.23
|
SIX
MONTHS ENDED MARCH 31,
|
|||||||
2007
|
2006
|
||||||
Net
sales
|
$
|
821,686,000
|
$
|
724,675,000
|
|||
Cost
of sales
|
646,964,000
|
545,253,000
|
|||||
Gross
profit
|
174,722,000
|
179,422,000
|
|||||
Selling,
general and administrative expenses
|
156,243,000
|
153,934,000
|
|||||
Income
from operations
|
18,479,000
|
25,488,000
|
|||||
Other
income (expense):
|
|||||||
Interest
expense
|
(5,996,000
|
)
|
(5,143,000
|
)
|
|||
Interest
income
|
1,372,000
|
908,000
|
|||||
Other,
net (Note 6)
|
1,200,000
|
1,008,000
|
|||||
(3,424,000
|
)
|
(3,227,000
|
)
|
||||
Income
before income taxes
|
15,055,000
|
22,261,000
|
|||||
Provision
for income taxes (Note 7)
|
6,335,000
|
8,277,000
|
|||||
Net
income
|
$
|
8,720,000
|
$
|
13,984,000
|
|||
Basic
earnings per share of common stock (Note 3)
|
$
|
.29
|
$
|
.47
|
|||
Diluted
earnings per share of common stock (Note 3)
|
$
|
.28
|
$
|
.45
|
SIX
MONTHS ENDED MARCH 31,
|
|||||||
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
8,720,000
|
$
|
13,984,000
|
|||
Adjustments
to reconcile net income to net cash
provided by operating activities:
|
|||||||
Depreciation
and amortization
|
19,765,000
|
16,951,000
|
|||||
Stock
based compensation
|
1,303,000
|
870,000
|
|||||
Provision
for losses on accounts receivable
|
734,000
|
816,000
|
|||||
Change
in assets and liabilities, net of assets acquired
and liabilities assumed:
|
|||||||
Decrease
in accounts receivable and contract costs and recognized income
not yet
billed
|
32,828,000
|
812,000
|
|||||
Increase
in inventories
|
(6,658,000
|
)
|
(8,003,000
|
)
|
|||
(Increase)
decrease in prepaid expenses and other assets
|
(1,217,000
|
)
|
257,000
|
||||
Decrease
in accounts payable, accrued liabilities
and income taxes payable
|
(36,989,000
|
)
|
(17,121,000
|
)
|
|||
Other
changes, net
|
861,000
|
(32,000
|
)
|
||||
10,627,000
|
(5,450,000
|
)
|
|||||
Net
cash provided by operating activities
|
19,347,000
|
8,534,000
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Acquisition
of property, plant and equipment
|
(19,477,000
|
)
|
(13,442,000
|
)
|
|||
Acquisition
of minority interest in subsidiary
|
---
|
(1,304,000
|
)
|
||||
Acquired
businesses
|
(17,167,000
|
)
|
---
|
||||
Increase
in equipment lease deposits
|
(1,473,000
|
)
|
(4,463,000
|
)
|
|||
Funds
restricted for capital projects
|
(4,421,000
|
)
|
---
|
||||
Net
cash used in investing activities
|
(42,538,000
|
)
|
(19,209,000
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Purchase
of shares for treasury
|
(2,300,000
|
)
|
(15,573,000
|
)
|
|||
Proceeds
from issuance of long-term debt
|
42,891,000
|
60,000,000
|
|||||
Payments
of long-term debt
|
(482,000
|
)
|
(62,982,000
|
)
|
|||
Decrease
in short-term borrowings
|
(5,625,000
|
)
|
(1,181,000
|
)
|
|||
Exercise
of stock options
|
1,111,000
|
649,000
|
|||||
Tax
benefit from exercise of stock options
|
278,000
|
1,863,000
|
|||||
Distributions
to minority interest
|
---
|
(354,000
|
)
|
||||
Other,
net
|
(1,238,000
|
)
|
(607,000
|
)
|
|||
Net
cash provided by (used in) financing activities
|
34,635,000
|
(18,185,000
|
)
|
||||
Effect
of exchange rate changes on cash and cash equivalents
|
541,000
|
68,000
|
|||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
11,985,000
|
(28,792,000
|
)
|
||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
22,389,000
|
60,663,000
|
|||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
34,374,000
|
$
|
31,871,000
|
March
31,
|
September
30,
|
||||||
2007
|
2006
|
||||||
Finished
goods
|
$
|
70,578,000
|
$
|
67,230,000
|
|||
Work
in process
|
67,169,000
|
54,590,000
|
|||||
Raw
materials and supplies
|
36,679,000
|
43,269,000
|
|||||
$
|
174,426,000
|
$
|
165,089,000
|
Three
Months Ended March 31,
|
Six
Months Ended March 31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
|
|||||||||||||
Income
available to common stockholders
|
$
|
255,000
|
$
|
7,208,000
|
$
|
8,720,000
|
$
|
13,984,000
|
|||||
|
|||||||||||||
Weighted-average
shares outstanding - basic EPS
|
29,948,000
|
29,874,000
|
29,950,000
|
30,039,000
|
|||||||||
Incremental
shares from stock-based compensation
|
1,136,000
|
1,229,000
|
1,123,000
|
1,263,000
|
|||||||||
Incremental
shares from 4% convertible
notes
|
82,000
|
---
|
44,000
|
---
|
|||||||||
Weighted
average shares outstanding - diluted EPS
|
31,166,000
|
31,103,000
|
31,117,000
|
31,302,000
|
Electronic
|
||||||||||||||||
Information
|
||||||||||||||||
Specialty
|
and
|
|||||||||||||||
Garage
|
Installation
|
Plastic
|
Communication
|
|||||||||||||
Doors
|
Services
|
Films
|
Systems
|
Totals
|
||||||||||||
Revenues
from external
customers -
|
||||||||||||||||
Three months ended | ||||||||||||||||
March
31, 2007
|
$
|
101,216,000
|
$
|
62,261,000
|
$
|
99,730,000
|
$
|
124,164,000
|
$
|
387,371,000
|
||||||
March
31, 2006
|
117,062,000
|
81,603,000
|
95,869,000
|
71,617,000
|
366,151,000
|
|||||||||||
Six months ended | ||||||||||||||||
March
31, 2007
|
$
|
225,105,000
|
$
|
139,182,000
|
$
|
203,385,000
|
$
|
254,014,000
|
$
|
821,686,000
|
||||||
March
31, 2006
|
254,621,000
|
163,714,000
|
182,042,000
|
124,298,000
|
724,675,000
|
|||||||||||
Intersegment
revenues -
|
||||||||||||||||
Three months ended | ||||||||||||||||
March
31, 2007
|
$
|
4,039,000
|
$
|
15,000
|
$
|
---
|
$
|
---
|
$
|
4,054,000
|
||||||
March
31, 2006
|
4,525,000
|
18,000
|
---
|
---
|
4,543,000
|
|||||||||||
Six months ended | ||||||||||||||||
March
31, 2007
|
$
|
8,790,000
|
$
|
29,000
|
$
|
---
|
$
|
---
|
$
|
8,819,000
|
||||||
March
31, 2006
|
9,793,000
|
61,000
|
---
|
---
|
$
|
9,854,000
|
||||||||||
Segment
profit (loss) -
|
||||||||||||||||
Three months ended | ||||||||||||||||
March
31, 2007
|
$
|
(4,556,000
|
)
|
$
|
(4,848,000
|
)
|
$
|
4,939,000
|
$
|
12,430,000
|
$
|
7,965,000
|
||||
March
31, 2006
|
3,637,000
|
1,204,000
|
8,910,000
|
4,751,000
|
18,502,000
|
|||||||||||
Six months ended | ||||||||||||||||
March
31, 2007
|
$
|
(543,000
|
)
|
$
|
(5,741,000
|
)
|
$
|
9,277,000
|
$
|
25,351,000
|
$
|
28,344,000
|
||||
March
31, 2006
|
17,207,000
|
4,014,000
|
7,274,000
|
7,718,000
|
36,213,000
|
Three
Months Ended March 31,
|
Six
Months Ended March 31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Profit
for all segments
|
$
|
7,965,000
|
$
|
18,502,000
|
$
|
28,344,000
|
$
|
36,213,000
|
|||||
Unallocated
amounts
|
(4,968,000
|
)
|
(4,887,000
|
)
|
(8,665,000
|
)
|
(9,717,000
|
)
|
|||||
Interest
and other, net
|
(2,300,000
|
)
|
(2,147,000
|
)
|
(4,624,000
|
)
|
(4,235,000
|
)
|
|||||
Income
before income taxes
|
$
|
697,000
|
$
|
11,468,000
|
$
|
15,055,000
|
$
|
22,261,000
|
Three
Months Ended March 31,
|
Six
Months Ended March 31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Service
cost
|
$
|
312,000
|
$
|
339,000
|
$
|
624,000
|
$
|
678,000
|
|||||
Interest
cost
|
932,000
|
864,000
|
1,864,000
|
1,728,000
|
|||||||||
Expected
return on plan assets
|
(449,000
|
)
|
(374,000
|
)
|
(898,000
|
)
|
(748,000
|
)
|
|||||
Amortization
of net actuarial loss
|
628,000
|
750,000
|
1,256,000
|
1,500,000
|
|||||||||
Amortization
of prior service cost
|
80,000
|
80,000
|
160,000
|
160,000
|
|||||||||
$
|
1,503,000
|
$
|
1,659,000
|
$
|
3,006,000
|
$
|
3,318,000
|
Segment
|
|||||||||||||
Operating
|
|||||||||||||
Net
Sales
|
Profit
(loss)
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Garage
Doors
|
$
|
105,255
|
$
|
121,587
|
$
|
(4,556
|
)
|
$
|
3,637
|
||||
Installation
services
|
62,276
|
81,621
|
(4,848
|
)
|
1,204
|
||||||||
Specialty
plastic films
|
99,730
|
95,869
|
4,939
|
8,910
|
|||||||||
Electronic
information and communication
systems
|
124,164
|
71,617
|
12,430
|
4,751
|
|||||||||
Intersegment
revenues
|
(4,054
|
)
|
(4,543
|
)
|
---
|
---
|
|||||||
$
|
387,371
|
$
|
366,151
|
$
|
7,965
|
$
|
18,502
|
Segment
|
|||||||||||||
Operating
|
|||||||||||||
Net
Sales
|
Profit
(loss)
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Garage
Doors
|
$
|
233,895
|
$
|
264,414
|
$
|
(543
|
)
|
$
|
17,207
|
||||
Installation
services
|
139,211
|
163,775
|
(5,741
|
)
|
4,014
|
||||||||
Specialty
plastic films
|
203,385
|
182,042
|
9,277
|
7,274
|
|||||||||
Electronic
information and communication systems
|
254,014
|
124,298
|
25,351
|
7,718
|
|||||||||
Intersegment
revenues
|
(8,819
|
)
|
(9,854
|
)
|
---
|
---
|
|||||||
$
|
821,686
|
$
|
724,675
|
$
|
28,344
|
$
|
36,213
|
Item
1
|
Legal
Proceedings
|
None
|
|
Item
1A
|
Risk
Factors
|
The
risk factor disclosed in the company’s report on Form 10-K for the year
ended September 30, 2006 titled Trends
in the housing sector and in general economic conditions will
directly
impact our business
has been deleted and amended as follows:
|
|
Our
businesses in the garage door and the installation industries
are
influenced by market conditions for new home construction and
renovation
of existing homes. For the year ended September 30, 2006,
approximately 53% of our total net sales were related to new
home
construction and renovation of existing homes. Trends in the
housing
sector directly affect our financial performance. Accordingly,
the
strength of the U.S. economy, the age of existing home stock,
job growth,
interest rates, consumer confidence and the availability of consumer
credit, as well as demographic factors such as the migration
into the
United States and migration of the population within the United
States
have an effect on our business. In that respect, the recent downturn
in
the housing market has had an adverse effect on the operating
results of
our garage door and installation services segments. For the three
months
ended March 31, 2007, we incurred operating losses of $4,556,000
in garage
doors and $4,848,000 in installation
services.
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
(c)
|
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
|
Period
|
Total
Number of
Shares Purchased(1) |
Average
Price Paid per
Share
|
Total
Number of Shares
Purchased as part of Publicly Announced Plans or Programs |
Maximum
Number of Shares
that May Yet Be Purchased Under the Plans or Programs at Month End |
|||||
January
1 - 31
|
---
|
---
|
---
|
1,567,995
|
|||||
February
1 - 28
|
50,000
|
23.45
|
50,000
|
1,517,995
|
|||||
March
1 - 31
|
---
|
---
|
---
|
1,517,995
|
|||||
Total
|
50,000
|
50,000
|
(1)
The company’s stock buyback program has been in effect since 1993, under
which a total of approximately 17 million shares have been purchased
for
$231 million. The unused authorization is 1.5 million shares.
There is no
time limit on the repurchases to be made under the
plan.
|
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 2, 2007.
|
|
(b) Four
directors were elected at the Annual Meeting to serve until
the Annual
Meeting of Stockholders in 2010. The names of these directors
and votes
cast in favor of their election and shares withheld are as
follows:
|
Name
|
Votes
For
|
Votes
Withheld
|
||
Henry
A. Alpert
|
26,164,124
|
2,067,457
|
||
Blaine
V. Fogg
|
26,910,843
|
1,320,738
|
||
Rear
Admiral Clarence A. Hill, Jr.
|
25,770,323
|
2,461,258
|
||
William
H. Waldorf
|
24,469,201
|
2,761,880
|
Bertrand
M. Bell
|
Harvey
R. Blau
|
Rear
Admiral Robert G. Harrison
|
Ronald
J. Kramer
|
Martin
S. Sussman
|
General
Donald J. Kutyna
|
Joseph
J. Whalen
|
Lieutenant
General James W. Stansberry
|
Lester
L. Wolff
|
(c) No
other matters were
voted upon at the Annual Meeting.
|
|
(d) Not
applicable.
|
|
Item
5
|
Other
Information
|
None
|
|
Item
6
|
Exhibits
|
Exhibit
31.1 - Certification pursuant to Rules 13a-14(a) as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Exhibit
31.2 - Certification pursuant to Rules 13a-14(a) as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act 2002.
|
|
Exhibit
32 - Certifications pursuant to 18 U.S.C. Section 1350 as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
GRIFFON CORPORATION | ||
|
|
|
By /s/ Eric Edelstein | ||
Eric Edelstein |
||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer) | ||
Date: May 10, 2007 | ||
Exhibit
31.1 -
|
Certification
pursuant to Rules 13a-14(a) as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
Exhibit
31.2 -
|
Certification
pursuant to Rules 13a-14(a) as adopted pursuant to Section
302 of the
Sarbanes-Oxley Act 2002.
|
Exhibit
32 -
|
Certifications
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of
2002.
|