Griffon 8K Announces Operating Results | GFF 3 May 07

GRIFFON CORPORATION ANNOUNCES OPERATING RESULTS

FOR THE SECOND QUARTER OF FISCAL 2007

Jericho, New York, May 3, 2007 - Griffon Corporation (NYSE:GFF) today reported operating results for the second quarter of fiscal 2007. Net sales for the quarter ended March 31, 2007 increased to $387,371,000 up from $366,151,000 for the second quarter of fiscal 2006. Income before income taxes was $697,000 compared to $11,468,000 last year. Net income was $255,000 in the current quarter compared to $7,208,000 last year. Diluted earnings per share for the quarter was $.01 compared to $.23 in last year’s second quarter.

The decline in sales and operating income in our garage door and installation services segments was principally due to declines in sales volume. The Company believes the sales volume decline is principally a result of the slowdown in the new home construction and home resale markets. Higher sales in the Specialty Plastic Films segment primarily reflects higher unit volume in Europe and the impact of foreign exchange partially offset by lower selling prices to our major customer and an unfavorable product mix. The decrease in operating income for Specialty Plastic Films is primarily attributable to the selling price concessions made to our major customer. The increase in sales and operating income of Telephonics, the Company’s electronic information and communication systems segment, was primarily attributable to the Syracuse Research Corporation (SRC) contract and the MH60 program. Total funding for the SRC contract is approaching $345 million with order fulfillment expected in the fourth quarter.

Net sales for the six months ended March 31, 2007 were $821,686,000 compared to $724,675,000 for the first six months of fiscal 2006. Income before income taxes for the six months was $15,055,000 compared to $22,261,000 last year. Net income was $8,720,000 compared to $13,984,000 for the first half of 2006. Diluted earnings per share for the six months was $.28 compared to $.45 last year.

Cash flow used in operations was $14,700,000 for the quarter; capital expenditures were $9,400,000 and funds used to acquire businesses were $17,100,000, all of which were funded by existing cash balances and borrowings under the Company’s revolving credit facility. Also, during the quarter $1,200,000 was used to acquire 50,000 shares of the company's common stock under its buyback program. Additional purchases will be made from time to time, depending on market conditions, at prices deemed appropriate by management or under a Rule 10b5-1 trading plan.

The Company is undertaking various operating actions to address the current challenging market environment in the Building Products segments. The Company has also retained Goldman, Sachs & Co to assist the Company to evaluate the components of our business, our capital structure and other potential strategic alternatives. No decision has been made by the Company to pursue any specific course of action.

Griffon Corporation -

is a leading manufacturer and marketer of residential, commercial and industrial garage doors sold to professional installing dealers and major home center retail chains;

installs and services specialty building products and systems, primarily garage doors, openers, fireplaces and cabinets, for new construction markets through a substantial network of operations located throughout the country;

is an international leader in the development and production of embossed and laminated specialty plastic films used in the baby diaper, feminine napkin, adult incontinent, surgical and patient care markets; and

develops and manufactures information and communication systems for government and commercial markets worldwide.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, 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 release, 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, results of integrating acquired businesses into existing operations, competitive factors and pricing pressures for resin and steel, 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 to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

GRIFFON CORPORATION AND SUBSIDIARIES

OPERATING HIGHLIGHTS

(Unaudited)

(IN THOUSANDS)


PRELIMINARY
	For the Three Months Ended						For the Six Months Ended
	March 31,						March 31,

	2007			2006			2007			2006

Net sales:
Garage Doors	$	105,255		$	121,587		$	233,895		$	264,414
Installation Services		62,276			81,621			139,211			163,775
Specialty Plastic Films		99,730			95,869			203,385			182,042
Electronic Information and Communication Systems		124,164			71,617			254,014			124,298
Intersegment eliminations		(4,054	)		(4,543	)		(8,819	)		(9,854	)
	$	387,371		$	366,151		$	821,686		$	724,675
Operating income (loss):
Garage Doors	$	(4,556	)	$	3,637		$	(543	)	$	17,207
Installation Services		(4,848	)		1,204			(5,741	)		4,014
Specialty Plastic Films		4,939			8,910			9,277			7,274
Electronic Information and Communication Systems		12,430			4,751			25,351			7,718
Segment operating income		7,965			18,502			28,344			36,213
Unallocated amounts		(4,968	)		(4,887	)		(8,665	)		(9,717	)
Interest and other, net		(2,300	)		(2,147	)		(4,624	)		(4,235	)
Income before income taxes	$	697		$	11,468		$	15,055		$	22,261

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)


PRELIMINARY
	FOR THE THREE MONTHS ENDED
	MARCH 31,
	2007			2006
Net sales	$	387,371		$	366,151
Cost of sales		305,853			275,898
Gross profit		81,518			90,253

Selling, general and administrative expenses		79,103			78,710
Income from operations		2,415			11,543

Other income (expense):
Interest expense		(3,052	)		(2,565	)
Interest income		752			418
Other, net		582			2,072
		(1,718	)		(75	)
Income before income taxes		697			11,468

Provision (credit) for income taxes:
Federal		(457	)		1,622
State and foreign		899			2,638
		442			4,260

Net income	$	255		$	7,208

Basic earnings per share of common stock:	$	.01		$	.24

Diluted earnings per share of common stock:	$	.01		$	.23
Weighted average number of shares outstanding:
Basic		29,948,000			29,874,000
Diluted		31,166,000			31,103,000

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)


PRELIMINARY
	FOR THE SIX MONTHS ENDED
	MARCH 31,
	2007			2006
Net sales	$	821,686		$	724,675
Cost of sales		646,964			545,253
Gross profit		174,722			179,422

Selling, general and administrative expenses		156,243			153,934
Income from operations		18,479			25,488

Other income (expense):
Interest expense		(5,996	)		(5,143	)
Interest income		1,372			908
Other, net		1,200			1,008
		(3,424	)		(3,227	)
Income before income taxes		15,055			22,261

Provision for income taxes:
Federal		3,999			4,429
State and foreign		2,336			3,848
		6,335			8,277

Net income	$	8,720		$	13,984

Basic earnings per share of common stock:	$	.29		$	.47

Diluted earnings per share of common stock:	$	.28		$	.45
Weighted average number of shares outstanding:
Basic		29,950,000			30,039,000
Diluted		31,117,000			31,302,000

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)


PRELIMINARY
	MARCH 31,		SEPTEMBER 30,
	2007		2006
ASSETS

Current Assets:
Cash and cash equivalents	$	34,374	$	22,389
Accounts receivable, net		212,484		247,172
Contract costs and recognized income not yet billed		74,312		68,279
Inventories		174,426		165,089
Prepaid expenses and other current assets		46,215		42,075
Total current assets		541,811		545,004
Property, plant and equipment, at cost less
depreciation and amortization		235,663		231,975
Goodwill		110,286		99,540
Intangible and other assets		67,894		51,695
	$	955,654	$	928,214


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Notes payable and current portion of long-term debt	$	3,063	$	8,092
Accounts payable		107,155		128,104
Accrued liabilities		72,642		81,672
Income taxes		11,349		18,431
Total current liabilities		194,209		236,299
Long-term debt:
Convertible subordinated notes		130,000		130,000
Other		121,475		79,228
Other liabilities and deferred credits		77,365		70,242
Shareholders' equity		432,605		412,445
	$	955,654	$	928,214

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


PRELIMINARY
	For the Six Months Ended
	March 31,
	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,720		$	13,984
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		19,765			16,951
Stock based compensation		1,303			870
Provision for losses on accounts receivable		734			816
Change in assets and liabilities:
Decrease in accounts receivable and contract
costs and recognized income not yet billed		32,828			812
Increase in inventories		(6,658	)		(8,003	)
(Increase) decrease in prepaid expenses and other assets		(1,217	)		257
Decrease in accounts payable, accrued liabilities
and income taxes payable		(36,989	)		(17,121	)
Other changes, net		861			(32	)
		10,627			(5,450	)
Net cash provided by operating activities		19,347			8,534

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment		(19,477	)		(13,442	)
Acquisition of minority interest in subsidiary		-			(1,304	)
Acquired businesses		(17,167	)		-
Increase in equipment lease deposits		(1,473	)		(4,463	)
Funds restricted for capital projects		(4,421	)		-
Net cash used in investing activities		(42,538	)		(19,209	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares for treasury		(2,300	)		(15,573	)
Proceeds from issuance of long-term debt		42,891			60,000
Payments of long-term debt		(482	)		(62,982	)
Decrease in short-term borrowings		(5,625	)		(1,181	)
Exercise of stock options		1,111			649
Tax benefit from exercise of stock options		278			1,863
Distributions to minority interest		-			(354	)
Other, net		(1,238	)		(607	)
Net cash provided by (used in) financing activities		34,635			(18,185	)

Effect of exchange rate changes on cash and cash equivalents		541			68

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		11,985			(28,792	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		22,389			60,663
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	34,374		$	31,871

Griffon (GFF) 8-KGriffon Corporation Announces Operating Results