GRIFFON CORP - Quarter Report: 2006 March (Form 10-Q)

 

 

 

 

 

 

 

 

 

 

 

DELAWARE	11-1893410
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 JERICHO QUADRANGLE, JERICHO, NEW YORK	11753
(Address of principal executive offices)	(Zip 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

xYes           o  No

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer     oAccelerated filer  x   Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes            x  No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 29,761,478 shares of Common Stock as of April 30, 2006.

 

		PAGE
PART I -	FINANCIAL INFORMATION (Unaudited)
Item 1 -	Financial Statements
	Condensed Consolidated Balance Sheets at March 31, 2006 and September 30, 2005		1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2006 and 2005		3
	Condensed Consolidated Statements of Cash Flows for the Six Months ended March 31, 2006 and 2005		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2 -	Management's Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3 -	Quantitative and Qualitative Disclosure about Market Risk		16
Item 4 -	Controls & Procedures		16
PART II -	OTHER INFORMATION
Item 1 -	Legal Proceedings		17
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3 -	Defaults upon Senior Securities		17
Item 4 -	Submission of Matters to a Vote of Security Holders		17
Item 5 -	Other Information		18
Item 6 -	Exhibits		18
	Signature		19

 

 

			March 31, 2006			September 30, 2005
						(Note 1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	31,871,000		$	60,663,000
Accounts receivable, less allowance for doubtful accounts			176,347,000			189,904,000
Contract costs and recognized income not yet billed			55,240,000			43,065,000
Inventories (Note 2)			156,605,000			148,350,000
Prepaid expenses and other current assets			44,478,000			41,227,000
Total current assets			464,541,000			483,209,000
PROPERTY, PLANT AND EQUIPMENT     at cost, less accumulated depreciation and amortization of $202,084,000 at  March 31, 2006 and $186,982,000 at September 30, 2005			214,868,000			216,900,000
OTHER ASSETS:
Goodwill			97,832,000			96,098,000
Intangible assets and other			56,625,000			55,220,000
			154,457,000			151,318,000
		$	833,866,000		$	851,427,000

 

 

 

 

			March 31, 2006			September 30, 2005
LIABILITIES AND SHAREHOLDERS' EQUITY						(Note 1)
CURRENT LIABILITIES:
Accounts and notes payable		$	101,511,000		$	99,159,000
Other current liabilities			86,369,000			110,884,000
Total current liabilities			187,880,000			210,043,000
LONG-TERM DEBT (Note 2)			200,573,000			196,540,000
OTHER LIABILITIES AND DEFERRED CREDITS			82,072,000			82,890,000
Total liabilities and deferred credits			470,525,000			489,473,000
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 41,072,990 shares at March 31, 2006 and 40,741,748 shares at September 30, 2005; 11,314,687 and 10,502,896 shares in treasury at March 31, 2006 and September 30, 2005, respectively			10,268,000			10,186,000
Other shareholders' equity			353,073,000			351,768,000
Total shareholders' equity			363,341,000			361,954,000
		$	833,866,000		$	851,427,000

 

 

 

 

 

			THREE MONTHS ENDED MARCH 31,
			2006			2005
Net sales		$	366,151,000		$	322,473,000
Cost of sales			275,898,000			245,153,000
Gross profit			90,253,000			77,320,000
Selling, general and administrative expenses			78,710,000			69,717,000
Income from operations			11,543,000			7,603,000
Other income (expense):
Interest expense			(2,565,000	)		(2,057,000	)
Interest income			418,000			572,000
Other, net (Note 7)			2,072,000			(17,000	)
			(75,000	)		(1,502,000	)
Income before income taxes			11,468,000			6,101,000
Provision for income taxes			4,260,000			832,000
Income before minority interest			7,208,000			5,269,000
Minority interest			---			(1,125,000	)
Net income		$	7,208,000		$	4,144,000
Basic earnings per share of common stock (Note 3)		$	.24		$	.14
Diluted earnings per share of common stock (Note 3)		$	.23		$	.13

 

 

			SIX MONTHS ENDED MARCH 31,
			2006			2005
Net sales		$	724,675,000		$	662,647,000
Cost of sales			545,253,000			497,035,000
Gross profit			179,422,000			165,612,000
Selling, general and administrative expenses			153,934,000			140,175,000
Income from operations			25,488,000			25,437,000
Other income (expense):
Interest expense			(5,143,000	)		(4,165,000	)
Interest income			908,000			1,155,000
Other, net			1,008,000			1,229,000
			(3,227,000	)		(1,781,000	)
Income before income taxes			22,261,000			23,656,000
Provision for income taxes			8,277,000			7,327,000
Income before minority interest			13,984,000			16,329,000
Minority interest			---			(2,993,000	)
Net income		$	13,984,000		$	13,336,000
Basic earnings per share of common stock (Note 3)		$	.47		$	.45
Diluted earnings per share of common stock (Note 3)		$	.45		$	.43

 

 

		SIX MONTHS ENDED MARCH 31,
		2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	13,984,000		$	13,336,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			16,951,000			15,272,000
Minority interest			---			2,993,000
Provision for losses on accounts receivable			816,000			867,000
Change in assets and liabilities:
Decrease in accounts receivable and contract costs and recognized income not yet billed			812,000			18,537,000
(Increase) decrease in inventories			(8,003,000	)		4,467,000
Decrease in prepaid expenses and other assets			257,000			2,497,000
Decrease in accounts payable, accrued liabilities and income taxes			(17,121,000	)		(27,040,000	)
Other changes, net			838,000			3,586,000
Total adjustments			(5,450,000	)		21,179,000
Net cash provided by operating activities			8,534,000			34,515,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment			(13,442,000	)		(22,533,000	)
Acquisition of minority interest in subsidiary			(1,304,000	)		(3,883,000	)
Acquired businesses			---			(9,235,000	)
(Increase) decrease in equipment lease deposits			(4,463,000	)		3,314,000
Net cash used in investing activities			(19,209,000	)		(32,337,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares for treasury			(15,573,000	)		(7,946,000	)
Proceeds from borrowings under long-term debt arrangements			60,000,000			7,778,000
Payments of long-term debt			(62,982,000	)		(9,040,000	)
Payment of debt issuance costs			(607,000	)		---
Decrease in short-term borrowings			(1,181,000	)		(44,000	)
Distributions to minority interest			(354,000	)		(988,000	)
Exercise of stock options			649,000			4,137,000
Tax benefit from exercise of stock options			1,863,000			---
Net cash used in financing activities			(18,185,000	)		(6,103,000	)
Effect of exchange rates on cash and cash equivalents			68,000			533,000
NET DECREASE IN CASH AND CASH EQUIVALENTS			(28,792,000	)		(3,392,000	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			60,663,000			88,047,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	31,871,000		$	84,655,000

 

 

			March 31,			September 30,
			2006			2005
Finished goods		$	56,646,000		$	52,908,000
Work in process			57,346,000			58,908,000
Raw materials and supplies			42,613,000			36,534,000
		$	156,605,000		$	148,350,000

 

			Three Months			Six Months
Net income, as reported		$	4,144,000		$	13,336,000
Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(1,854,000	)		(2,375,000	)
Pro forma net income		$	2,290,000		$	10,961,000
Earnings per share:
Basic - as reported		$	.14		$	.45
Basic - pro forma		$	.08		$	.37
Diluted - as reported		$	.13		$	.43
Diluted - pro forma		$	.07		$	.35

 

 

 

 

 

 

			Three Months Ended March 31,						Six Months Ended March 31,
			2006			2005			2006			2005
Profit for all segments		$	18,502,000		$	11,653,000		$	36,213,000		$	34,713,000
Unallocated amounts			(4,887,000	)		(4,067,000	)		(9,717,000	)		(8,047,000	)
Interest expense, net			(2,147,000	)		(1,485,000	)		(4,235,000	)		(3,010,000	)
Income before income taxes		$	11,468,000		$	6,101,000		$	22,261,000		$	23,656,000

 

			Three Months Ended March 31,						Six Months Ended March 31,
			2006			2005			2006			2005
Service cost		$	339,000		$	392,000		$	678,000		$	784,000
Interest cost			864,000			753,000			1,728,000			1,506,000
Expected return on plan assets			(374,000	)		(321,000	)		(748,000	)		(642,000	)
Amortization of net actuarial loss			538,000			301,000			1,076,000			602,000
Amortization of prior service cost			2,000			2,000			4,000			4,000
Amortization of transition obligation			290,000			223,000			580,000			446,000
		$	1,659,000		$	1,350,000		$	3,318,000		$	2,700,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1	Legal Proceedings
	None
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 (2)
January 1 - 31			145,000		$	23.88			145,000			1,868,495
February 1 - 28			80,000			23.10			80,000			1,788,495
March 1 - 31			---			---			---			1,788,495
Total			225,000						225,000

 

(1) The company’s stock buyback program has been in effect since 1993, under which a total of approximately 16.8 million shares have been purchased for $224.6 million. The unused authorization is 1.8 million shares. There is no time limit on the repurchases to be made under the plan.
(2) In November 2005, the company announced that its Board of Directors approved the entry into a Rule 10b5-1 trading plan with a broker to facilitate the repurchase of its shares of common stock under its stock buyback program. During January and February 2006, the company purchased 195,000 shares under a Rule 10b5-1 plan. Such 10b5-1 plan terminated in February 2006 in accordance with its terms. Therefore, no additional shares may be purchased pursuant to that plan. However, under prior authorizations from the Board of Directors, management may enter into additional Rule 10b5-1 trading plans to facilitate stock repurchases without further announcement.

 

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 3, 2006.
	(b) Not applicable
	(c)(i) Four directors were elected at the Annual Meeting to serve until the Annual Meeting of Stockholders in 2009. The names of these directors and votes cast in favor of their election and shares withheld are as follows:

 

Name			Votes For			Votes Withheld
Harvey R. Blau			24,853,859			1,900,068
Ronald J. Kramer			24,840,163			1,913,764
General Donald J. Kutyna			25,898,317			855,610
Lt. Gen. James W. Stansberry			24,849,343			1,904,584

 

 (ii) The company’s 2006 Equity Incentive Plan was approved at the Annual Meeting as follows:

 

 

Votes For	Votes Against	Shares Abstained	Broker Non-Votes
17,112,038	4,654,467	115,604	4,871,818

 

 

 

Votes For	Votes Against	Shares Abstained	Broker Non-Votes
23,951,639	2,667,079	135,207	-

 

 

 

 

Item 5	Other Information
	None
Item 6	Exhibits
	Exhibit 10.1 - Griffon Corporation 2006 Equity Incentive Plan (incorporated by reference to Griffon Corporation’s current report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2006).
	Exhibit 10.2 - Griffon Corporation 2006 Performance Bonus Plan (incorporated by reference to Griffon Corporation’s current report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2006).
	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)