GFF 12-31-2014 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2014
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| 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: 1-06620
GRIFFON CORPORATION
(Exact name of registrant as specified in its charter)
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| | |
DELAWARE | | 11-1893410 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
| | |
712 Fifth Ave, 18th Floor, New York, New York | | 10019 |
(Address of principal executive offices) | | (Zip Code) |
(212) 957-5000
(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 (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. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o | | Accelerated filer | ý |
Non-accelerated filer o | | Smaller reporting company | o |
(Do not check if a smaller reporting company) | | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No
The number of shares of common stock outstanding at December 31, 2014 was 52,432,620.
Griffon Corporation and Subsidiaries
Contents
Part I – Financial Information
Item 1 – Financial Statements
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
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| | | | | | | |
| (Unaudited) | | |
| December 31, 2014 | | September 30, 2014 |
CURRENT ASSETS | | | |
Cash and equivalents | $ | 46,566 |
| | $ | 92,405 |
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Accounts receivable, net of allowances of $7,506 and $7,336 | 237,177 |
| | 258,436 |
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Contract costs and recognized income not yet billed, net of progress payments of $16,985 at both December 31, 2014 and September 30, 2014 | 102,465 |
| | 109,930 |
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Inventories, net | 319,421 |
| | 290,135 |
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Prepaid and other current assets | 58,347 |
| | 62,569 |
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Assets of discontinued operations | 1,622 |
| | 1,624 |
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Total Current Assets | 765,598 |
| | 815,099 |
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PROPERTY, PLANT AND EQUIPMENT, net | 367,182 |
| | 370,565 |
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GOODWILL | 367,091 |
| | 371,846 |
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INTANGIBLE ASSETS, net | 227,834 |
| | 233,623 |
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OTHER ASSETS | 25,849 |
| | 27,102 |
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ASSETS OF DISCONTINUED OPERATIONS | 2,109 |
| | 2,126 |
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Total Assets | $ | 1,755,663 |
| | $ | 1,820,361 |
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| | | |
CURRENT LIABILITIES | |
| | |
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Notes payable and current portion of long-term debt | $ | 6,615 |
| | $ | 7,886 |
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Accounts payable | 201,131 |
| | 218,703 |
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Accrued liabilities | 83,120 |
| | 101,292 |
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Liabilities of discontinued operations | 3,170 |
| | 3,282 |
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Total Current Liabilities | 294,036 |
| | 331,163 |
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LONG-TERM DEBT, net of debt discount of $8,622 and $9,584 | 802,855 |
| | 805,101 |
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OTHER LIABILITIES | 143,365 |
| | 148,240 |
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LIABILITIES OF DISCONTINUED OPERATIONS | 3,542 |
| | 3,830 |
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Total Liabilities | 1,243,798 |
| | 1,288,334 |
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COMMITMENTS AND CONTINGENCIES - See Note 19 |
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SHAREHOLDERS’ EQUITY | |
| | |
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Total Shareholders’ Equity | 511,865 |
| | 532,027 |
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Total Liabilities and Shareholders’ Equity | $ | 1,755,663 |
| | $ | 1,820,361 |
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GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| COMMON STOCK | | CAPITAL IN EXCESS OF PAR VALUE | | RETAINED EARNINGS | | TREASURY SHARES | | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | | DEFERRED COMPENSATION | | |
(in thousands) | SHARES | | PAR VALUE | | | | SHARES | | COST | | | | Total |
Balance at September 30, 2014 | 78,484 |
| | $ | 19,621 |
| | $ | 506,090 |
| | $ | 427,913 |
| | 25,335 |
| | $ | (354,216 | ) | | $ | (30,064 | ) | | $ | (37,317 | ) | | $ | 532,027 |
|
Net income | — |
| | — |
| | — |
| | 7,471 |
| | — |
| | — |
| | — |
| | — |
| | 7,471 |
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Dividend | — |
| | — |
| | — |
| | (1,910 | ) | | — |
| | — |
| | — |
| | — |
| | (1,910 | ) |
Tax effect from exercise/vesting of equity awards, net | — |
| | — |
| | 342 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 342 |
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Amortization of deferred compensation | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 654 |
| | 654 |
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Common stock acquired | — |
| | — |
| | — |
| | — |
| | 1,086 |
| | (13,170 | ) | | — |
| | — |
| | (13,170 | ) |
Stock grants and equity awards, net | 370 |
| | 93 |
| | (93 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
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ESOP allocation of common stock | — |
| | — |
| | 57 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 57 |
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Stock-based compensation | — |
| | — |
| | 2,577 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,577 |
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Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (16,183 | ) | | — |
| | (16,183 | ) |
Balance at December 31, 2014 | 78,854 |
| | $ | 19,714 |
| | $ | 508,973 |
| | $ | 433,474 |
| | 26,421 |
| | $ | (367,386 | ) | | $ | (46,247 | ) | | $ | (36,663 | ) | | $ | 511,865 |
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The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited)
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| | | | | | | |
| Three Months Ended December 31, |
| 2014 | | 2013 |
Revenue | $ | 502,160 |
| | $ | 453,458 |
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Cost of goods and services | 384,171 |
| | 347,955 |
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Gross profit | 117,989 |
| | 105,503 |
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Selling, general and administrative expenses | 93,896 |
| | 87,680 |
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Restructuring and other related charges | — |
| | 842 |
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Total operating expenses | 93,896 |
| | 88,522 |
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| | | |
Income from operations | 24,093 |
| | 16,981 |
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Other income (expense) | |
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Interest expense | (11,754 | ) | | (13,134 | ) |
Interest income | 117 |
| | 33 |
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Other, net | (451 | ) | | 906 |
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Total other expense, net | (12,088 | ) | | (12,195 | ) |
| | | |
Income before taxes | 12,005 |
| | 4,786 |
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Provision for income taxes | 4,534 |
| | 1,550 |
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Net income | $ | 7,471 |
| | $ | 3,236 |
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| | | |
Basic income per common share | $ | 0.16 |
| | $ | 0.06 |
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Weighted-average shares outstanding | 46,310 |
| | 52,754 |
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Diluted income per common share | $ | 0.16 |
| | $ | 0.06 |
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Weighted-average shares outstanding | 48,136 |
| | 54,633 |
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Dividends paid per common share | $ | 0.04 |
| | $ | 0.03 |
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| | | |
Net income | $ | 7,471 |
| | $ | 3,236 |
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Other comprehensive income (loss), net of taxes: | |
| | |
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Foreign currency translation adjustments | (15,500 | ) | | (3,137 | ) |
Pension and other post retirement plans | 353 |
| | 316 |
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Loss on cash flow hedge | (74 | ) | | — |
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Loss on available-for-sale securities | (962 | ) | | — |
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Total other comprehensive income (loss), net of taxes | (16,183 | ) | | (2,821 | ) |
Comprehensive income (loss), net | $ | (8,712 | ) | | $ | 415 |
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The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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| | | | | | | |
| Three Months Ended December 31, |
| 2014 | | 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
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Net income | $ | 7,471 |
| | $ | 3,236 |
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| | | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | |
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| | | |
Depreciation and amortization | 17,260 |
| | 16,793 |
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Stock-based compensation | 2,577 |
| | 1,675 |
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Asset impairment charges - restructuring | — |
| | 109 |
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Provision for losses on accounts receivable | 156 |
| | 185 |
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Amortization of deferred financing costs and debt discounts | 1,634 |
| | 1,606 |
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Deferred income taxes | 1,501 |
| | (239 | ) |
Loss on sale/disposal of assets | 171 |
| | 53 |
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Change in assets and liabilities, net of assets and liabilities acquired: | |
| | |
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Decrease in accounts receivable and contract costs and recognized income not yet billed | 24,824 |
| | 12,835 |
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Increase in inventories | (32,658 | ) | | (33,915 | ) |
Increase in prepaid and other assets | (2,177 | ) | | (1,628 | ) |
Decrease in accounts payable, accrued liabilities and income taxes payable | (30,051 | ) | | (27,532 | ) |
Other changes, net | 1,242 |
| | 543 |
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Net cash used in operating activities | (8,050 | ) | | (26,279 | ) |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | |
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Acquisition of property, plant and equipment | (18,921 | ) | | (17,916 | ) |
Acquired businesses, net of cash acquired | — |
| | (21,781 | ) |
Proceeds from sale of assets | 107 |
| | 224 |
|
Net cash used in investing activities | (18,814 | ) | | (39,473 | ) |
| | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | |
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Dividends paid | (1,910 | ) | | (1,719 | ) |
Purchase of shares for treasury | (13,170 | ) | | (55,189 | ) |
Proceeds from long-term debt | 10,279 |
| | 57,635 |
|
Payments of long-term debt | (11,295 | ) | | (25,246 | ) |
Change in short-term borrowings | (1,201 | ) | | 9,940 |
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Financing costs | (29 | ) | | (681 | ) |
Purchase of ESOP shares | — |
| | (1,591 | ) |
Tax benefit from exercise/vesting of equity awards, net | 342 |
| | 273 |
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Other, net | 102 |
| | 31 |
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Net cash used in financing activities | (16,882 | ) | | (16,547 | ) |
| | | |
CASH FLOWS FROM DISCONTINUED OPERATIONS: | |
| | |
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Net cash used in operating activities | (380 | ) | | (299 | ) |
Net cash used in discontinued operations | (380 | ) | | (299 | ) |
| | | |
Effect of exchange rate changes on cash and equivalents | (1,713 | ) | | (158 | ) |
| | | |
NET DECREASE IN CASH AND EQUIVALENTS | (45,839 | ) | | (82,756 | ) |
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD | 92,405 |
| | 178,130 |
|
CASH AND EQUIVALENTS AT END OF PERIOD | $ | 46,566 |
| | $ | 95,374 |
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The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)
(Unaudited)
(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
About Griffon Corporation
Griffon Corporation (the “Company” or “Griffon”) is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures. Griffon, to further diversify, also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.
Griffon currently conducts its operations through three reportable segments:
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• | Home & Building Products (“HBP”) consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc. (“CBP”): |
- AMES is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.
- CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.
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• | Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide. |
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• | Clopay Plastic Products Company, Inc. (“Plastics”) is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications. |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2014, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.
The condensed consolidated balance sheet information at September 30, 2014 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2014.
The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, percentage of completion method of accounting, pension assumptions, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, stock based
compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves and the valuation of assets and liabilities of discontinued operations, acquisition assumptions used and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates.
Certain amounts in the prior year have been reclassified to conform to current year presentation.
NOTE 2 – FAIR VALUE MEASUREMENTS
The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit debt is based upon current market rates.
Applicable accounting guidance establishes a fair value hierarchy requiring the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:
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• | Level 1 inputs are measured and recorded at fair value based upon quoted prices in active markets for identical assets. |
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• | Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities. |
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• | Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The fair values of Griffon’s 2022 senior notes and 2017 4% convertible notes approximated $568,500 and $116,375, respectively, on December 31, 2014. Fair values were based upon quoted market prices (level 1 inputs).
Insurance contracts with values of $3,392 at December 31, 2014, are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.
Items Measured at Fair Value on a Recurring Basis
At December 31, 2014, available-for-sale securities, measured at fair value based on quoted prices in active markets for the underlying assets (level 1 inputs), and trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with values of $8,290 ($8,400 cost basis) and $1,320 ($1,000 cost basis), respectively, are included in Prepaid and other current assets on the Consolidated Balance Sheets. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our Consolidated Balance Sheets as a component of Accumulated other comprehensive income (loss) (‘‘AOCI’’). Realized and unrealized gains and losses on trading securities, and realized gains and losses on available-for-sale securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).
In the normal course of business, Griffon’s operations are exposed to the effect of changes in foreign currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. During 2014, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars. At inception, these hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Other comprehensive income (loss) and Prepaid and other current assets until settlement. Upon settlement, gains and losses were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) as Other income. Griffon had $3,940 of Australian
dollar contracts at a weighted average rate of $1.23, which qualified for hedge accounting at December 31, 2014. AOCI included deferred gains of $273 ($178, net of tax) at December 31, 2014.
At December 31, 2014, Griffon had $3,181 of Canadian dollar contracts at a weighted average rate of $1.17. The contracts, which protect Canada operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting and a fair value gain of $93 was recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the quarter ended December 31, 2014. All contracts expire in 16 to 286 days. A loss of $74 was recorded in Other Income during the quarter for all settled contracts.
NOTE 3 – ACQUISITIONS
On May 21, 2014, AMES acquired the Australian Garden and Tools business of Illinois Tool Works, Inc. (“Cyclone”) for approximately $40,000, including a $4,000 working capital adjustment. Cyclone, which was integrated with AMES, offers a full range of quality garden and hand tool products sold under various leading brand names including Cyclone®, Nylex® and Trojan®, designed to meet the requirements of both the Do-it-Yourself and professional trade segments. Selling, General and Administrative ("SG&A") expenses included $2,363 of related acquisition costs recorded in the third and fourth quarters of 2014.
On December 31, 2013, AMES acquired Northcote Pottery (“Northcote”), founded in 1897 and a leading brand in the Australian outdoor planter and decor market, for approximately $22,000. Northcote, which was integrated with AMES, complements Southern Patio, acquired in 2011, and, with Cyclone, adds to AMES’ existing lawn and garden operations in Australia. First quarter 2014 SG&A expenses included $798 of related acquisition costs.
The accounts of the acquired companies, after adjustment to reflect fair market values (level 3 inputs), have been included in the consolidated financial statements from the date of acquisition; in each instance, acquired inventory was not significant. Griffon is in the process of finalizing the initial purchase price allocation for Cyclone as of the date of these financial statements, primarily with respect to the finalization of tax accounts.
The following table summarizes the fair values of the Cyclone and Northcote assets and liabilities as of the date of acquisition:
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| | | | | | | | | |
| Cyclone | Northcote | Total |
Current Assets, net of cash acquired | $ | 21,116 |
| $ | 7,398 |
| $ | 28,514 |
|
PP&E | 488 |
| 1,385 |
| 1,873 |
|
Goodwill | 11,322 |
| 11,254 |
| 22,576 |
|
Amortizable intangible assets | 11,608 |
| 6,098 |
| 17,706 |
|
Indefinite life intangible assets | 3,548 |
| 3,121 |
| 6,669 |
|
Total assets acquired | 48,082 |
| 29,256 |
| 77,338 |
|
Total liabilities assumed | (8,557 | ) | (7,475 | ) | (16,032 | ) |
Net assets acquired | $ | 39,525 |
| $ | 21,781 |
| $ | 61,306 |
|
The amounts assigned to major intangible asset classifications, none of which are tax deductible, for the Cyclone and Northcote acquisitions are as follows:
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| | | | | | | | | |
| Cyclone | Northcote | Total | Amortization Period (Years) |
Goodwill | $ | 11,322 |
| $ | 11,254 |
| 22,576 |
| N/A |
Tradenames | 3,548 |
| 3,121 |
| 6,669 |
| Indefinite |
Customer relationships | 11,608 |
| 6,098 |
| 17,706 |
| 25 |
| $ | 26,478 |
| $ | 20,473 |
| 46,951 |
| |
NOTE 4 – INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out or average) or market.
The following table details the components of inventory:
|
| | | | | | | |
| At December 31, 2014 | | At September 30, 2014 |
Raw materials and supplies | $ | 80,395 |
| | $ | 75,560 |
|
Work in process | 76,461 |
| | 67,866 |
|
Finished goods | 162,565 |
| | 146,709 |
|
Total | $ | 319,421 |
| | $ | 290,135 |
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
The following table details the components of property, plant and equipment, net:
|
| | | | | | | |
| At December 31, 2014 | | At September 30, 2014 |
Land, building and building improvements | $ | 125,423 |
| | $ | 127,714 |
|
Machinery and equipment | 723,593 |
| | 720,417 |
|
Leasehold improvements | 44,066 |
| | 42,852 |
|
| 893,082 |
| | 890,983 |
|
Accumulated depreciation and amortization | (525,900 | ) | | (520,418 | ) |
Total | $ | 367,182 |
| | $ | 370,565 |
|
Depreciation and amortization expense for property, plant and equipment was $15,279 and $14,905 for the quarters ended December 31, 2014 and 2013, respectively. Depreciation included in SG&A expenses was $3,170 and $2,842 for the quarters ended December 31, 2014 and 2013, respectively. The remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.
No event or indicator of impairment occurred during the quarter ended December 31, 2014, which would require additional impairment testing of property, plant and equipment.
NOTE 6 – GOODWILL AND OTHER INTANGIBLES
The following table provides changes in the carrying value of goodwill by segment during the quarter ended December 31, 2014:
|
| | | | | | | | | | | |
| At September 30, 2014 |
| Other adjustments including currency translations |
| At December 31, 2014 |
Home & Building Products | $ | 288,396 |
| | $ | (1,524 | ) | | $ | 286,872 |
|
Telephonics | 18,545 |
| | — |
| | 18,545 |
|
Plastics | 64,905 |
| | (3,231 | ) | | 61,674 |
|
Total | $ | 371,846 |
| | $ | (4,755 | ) | | $ | 367,091 |
|
The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:
|
| | | | | | | | | | | | | | | | | |
| At December 31, 2014 | | | | At September 30, 2014 |
| Gross Carrying Amount | | Accumulated Amortization | | Average Life (Years) | | Gross Carrying Amount | | Accumulated Amortization |
Customer relationships | $ | 176,670 |
| | $ | 36,325 |
| | 25 | | $ | 180,282 |
| | $ | 35,280 |
|
Unpatented technology | 6,303 |
| | 3,314 |
| | 13 | | 6,500 |
| | 3,313 |
|
Total amortizable intangible assets | 182,973 |
| | 39,639 |
| | | | 186,782 |
| | 38,593 |
|
Trademarks | 84,500 |
| | — |
| | | | 85,434 |
| | — |
|
Total intangible assets | $ | 267,473 |
| | $ | 39,639 |
| | | | $ | 272,216 |
| | $ | 38,593 |
|
Amortization expense for intangible assets was $1,981 and $1,888 for the quarters ended December 31, 2014 and 2013, respectively.
No event or indicator of impairment occurred during the quarter ended December 31, 2014, which would require impairment testing of long-lived intangible assets including goodwill.
NOTE 7 – INCOME TAXES
The effective tax rate for the quarter ended December 31, 2014 was 37.8% compared to 32.4% in the comparable prior year quarter. The current and prior year tax rates reflect the impact of permanent differences not deductible in determining taxable income, changes in earnings mix between domestic and non-domestic operations, and tax reserves.
The quarter ended December 31, 2014 included a net tax provision of $349 for discrete items resulting primarily from the provision for taxes on repatriation of foreign earnings, partially offset by the benefit of the retroactive extension of the federal R&D credit signed into law December 19, 2014, and release of a valuation allowance. The comparable prior year quarter included $289 of benefits from discrete items primarily resulting from release of previously established reserves for uncertain tax positions on conclusion of tax audits and benefits arising on the filing of tax returns in various jurisdictions.
Excluding discrete items, the effective tax rate for the quarter ended December 31, 2014 was 34.9% compared to 38.4% in the comparable prior year quarter.
NOTE 8 – LONG-TERM DEBT
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2014 | | At September 30, 2014 |
| | Outstanding Balance |
| Original Issuer Discount |
| Balance Sheet |
| Capitalized Fees & Expenses |
| Coupon Interest Rate (1) |
| Outstanding Balance |
| Original Issuer Discount |
| Balance Sheet |
| Capitalized Fees & Expenses |
| Coupon Interest Rate (1) |
Senior notes due 2022 | (a) | 600,000 |
| | — |
| | 600,000 |
| | 9,231 |
| | 5.25 | % | | 600,000 |
| | — |
| | 600,000 |
| | 9,553 |
| | 5.25 | % |
Revolver due 2019 | (a) | 25,000 |
| | — |
| | 25,000 |
| | 1,851 |
| | n/a |
| | 25,000 |
| | — |
| | 25,000 |
| | 2,009 |
| | n/a |
|
Convert. debt due 2017 | (b) | 100,000 |
| | (8,622 | ) | | 91,378 |
| | 923 |
| | 4.00 | % | | 100,000 |
| | (9,584 | ) | | 90,416 |
| | 1,034 |
| | 4.00 | % |
Real estate mortgages | (c) | 16,173 |
| | — |
| | 16,173 |
| | 540 |
| | n/a |
| | 16,388 |
| | — |
| | 16,388 |
| | 576 |
| | n/a |
|
ESOP Loans | (d) | 38,396 |
| | — |
| | 38,396 |
| | 275 |
| | n/a |
| | 38,946 |
| | — |
| | 38,946 |
| | 262 |
| | n/a |
|
Capital lease - real estate | (e) | 8,299 |
| | — |
| | 8,299 |
| | 174 |
| | 5.00 | % | | 8,551 |
| | — |
| | 8,551 |
| | 181 |
| | 5.00 | % |
Non U.S. lines of credit | (f) | 1,945 |
| | — |
| | 1,945 |
| | — |
| | n/a |
| | 3,306 |
| | — |
| | 3,306 |
| | — |
| | n/a |
|
Non U.S. term loans | (f) | 26,442 |
| | — |
| | 26,442 |
| | 133 |
| | n/a |
| | 28,470 |
| | — |
| | 28,470 |
| | 161 |
| | n/a |
|
Other long term debt | (g) | 1,837 |
| | — |
| | 1,837 |
| | 30 |
| | n/a |
| | 1,910 |
| | — |
| | 1,910 |
| | 24 |
| | n/a |
|
Totals | | 818,092 |
| | (8,622 | ) | | 809,470 |
| | $ | 13,157 |
| | |
| | 822,571 |
| | (9,584 | ) | | 812,987 |
| | $ | 13,800 |
| | |
|
less: Current portion | | (6,615 | ) | | — |
| | (6,615 | ) | | |
| | |
| | (7,886 | ) | | — |
| | (7,886 | ) | | |
| | |
|
Long-term debt | | $ | 811,477 |
| | $ | (8,622 | ) | | $ | 802,855 |
| | |
| | |
| | $ | 814,685 |
| | $ | (9,584 | ) | | $ | 805,101 |
| | |
| | |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, 2014 | | Three Months Ended December 31, 2013 |
| | Effective Interest Rate (1) |
| Cash Interest |
| Amort. Debt Discount |
| Amort. Deferred Cost & Other Fees |
| Total Interest Expense |
| Effective Interest Rate (1) |
| Cash Interest |
| Amort. Debt Discount |
| Amort. Deferred Cost & Other Fees |
| Total Interest Expense |
Senior notes due 2018 | (a) | n/a |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 7.4 | % | | $ | 9,797 |
| | $ | — |
| | $ | 406 |
| | $ | 10,203 |
|
Senior notes due 2022 | (a) | 5.4 | % | | 7,875 |
| | — |
| | 322 |
| | 8,197 |
| | n/a |
| | — |
| | — |
| | — |
| | — |
|
Revolver due 2019 | (a) | n/a |
| | 338 |
| | — |
| | 158 |
| | 496 |
| | n/a |
| | 167 |
| | — |
| | 136 |
| | 303 |
|
Convert. debt due 2017 | (b) | 9.0 | % | | 1,000 |
| | 962 |
| | 111 |
| | 2,073 |
| | 9.0 | % | | 1,000 |
| | 883 |
| | 111 |
| | 1,994 |
|
Real estate mortgages | (c) | 3.9 | % | | 124 |
| | — |
| | 36 |
| | 160 |
| | 3.6 | % | | 130 |
| | — |
| | 36 |
| | 166 |
|
ESOP Loans | (d) | 2.8 | % | | 260 |
| | — |
| | 17 |
| | 277 |
| | 2.9 | % | | 152 |
| | — |
| | 2 |
| | 154 |
|
Capital lease - real estate | (e) | 5.3 | % | | 106 |
| | — |
| | 6 |
| | 112 |
| | 5.3 | % | | 119 |
| | — |
| | 6 |
| | 125 |
|
Non U.S. lines of credit | (f) | n/a |
| | 141 |
| | — |
| | — |
| | 141 |
| | n/a |
| | 193 |
| | — |
| | — |
| | 193 |
|
Non U.S. term loans | (f) | n/a |
| | 388 |
| | — |
| | 16 |
| | 404 |
| | n/a |
| | 52 |
| | — |
| | 26 |
| | 78 |
|
Other long term debt | (g) | n/a |
| | 31 |
| | — |
| | — |
| | 31 |
| | n/a |
| | 11 |
| | — |
| | — |
| | 11 |
|
Capitalized interest | | |
| | (143 | ) | | — |
| | 6 |
| | (137 | ) | | |
| | (93 | ) | | — |
| | — |
| | (93 | ) |
Totals | | |
| | $ | 10,120 |
| | $ | 962 |
| | $ | 672 |
| | $ | 11,754 |
| | |
| | $ | 11,528 |
| | $ | 883 |
| | $ | 723 |
| | $ | 13,134 |
|
(1) not applicable = n/a
| |
(a) | On February 27, 2014, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $600,000 of 5.25% Senior Notes due 2022 (“Senior Notes”); interest is payable semi-annually on March 1 and September 1, starting September 1, 2014. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a call and tender offer premium of $31,530 and to make interest payments of $16,716, with the balance used to pay a portion of the related transaction fees and expenses. In connection with the issuance of the Senior Notes, all obligations under the $550,000 of 7.125% senior notes due 2018 were discharged. |
The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On June 18, 2014, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 via an exchange offer. The fair value of the Senior Notes approximated $568,500 on September 30, 2014 based upon quoted market prices (level 1 inputs).
In connection with these transactions, Griffon capitalized $10,313 of underwriting fees and other expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over the term of such notes. Griffon recognized a loss on the early extinguishment of debt on the 7.125% senior notes aggregating $38,890, comprised of the $31,530 tender offer premium, the write-off of $6,574 of remaining deferred financing fees and $786 of prepaid interest on defeased notes.
On February 14, 2014, Griffon amended its $225,000 Revolving Credit Facility (“Credit Agreement”) to extend its maturity date from March 28, 2018 to March 28, 2019, and to amend certain financial maintenance and negative covenants to improve Griffon's financial and operating flexibility. The facility includes a letter of credit sub-facility with a limit of $60,000, a multi-currency sub-facility of $50,000 and a swing line sub-facility with a limit of $30,000. Borrowings under the Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the occurrence of a default or an event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.25% for base rate loans and 2.25% for LIBOR loans. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants and events of default. The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens and make restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors and a pledge of not greater than 65% of the equity interest in each of Griffon’s material, first-tier foreign subsidiaries (except that a lien on the assets of Griffon's material domestic subsidiaries securing a limited amount of the debt under the credit agreement relating to Griffon's Employee Stock Ownership Plan ranks pari passu with the lien granted on such assets under the Credit Agreement; see footnote (d) below). At December 31, 2014, outstanding borrowings and standby letters of credit were $25,000 and $19,285, respectively, under the Credit Agreement; $180,715 was available for borrowing at that date.
| |
(b) | On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The current conversion rate of the 2017 Notes is 68.6238 shares of Griffon’s common stock per $1 principal amount of notes, corresponding to a conversion price of $14.57 per share. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion; (ii) the 42nd trading day prior to maturity of the notes; and (iii) such time as the cumulative adjustment equals or exceeds 1%. As of December 31, 2014, aggregate dividends since the last conversion price adjustment of $0.10 per share would have resulted in an adjustment to the conversion ratio of approximately 0.84%. At both December 31, 2014 and 2013, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720. The fair value of the 2017 Notes approximated $116,375 on December 31, 2014 based upon quoted market prices (level 1 inputs). |
| |
(c) | On October 21, 2013, Griffon refinanced two real estate mortgages to secure loans totaling $17,175. The loans mature in October 2018, are collateralized by the related properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 2.75%. |
| |
(d) | In December 2013, Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into an agreement that refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098 (the "Agreement"). The Agreement also provided for a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market. In July 2014, Griffon's ESOP entered into an amendment to the existing Agreement which provided an additional $10,000 Line Note available to purchase shares in the |
open market. During 2014, the Line Notes were combined with the Term Loan to form one new Term Loan. The Term Loan bears interest at LIBOR plus 2.38% or the lender’s prime rate, at Griffon’s option. The Term Loan requires quarterly principal payments of $506, with a balloon payment of approximately $30,137 due at maturity on December 31, 2018. During 2014, 1,591,117 shares of Griffon common stock, for a total of $20,000 or $12.57 per share, were purchased with proceeds from the Line Notes. During the first quarter of 2015, no shares of Griffon's common stock were purchased. As of December 31, 2014, $38,396 was outstanding under the Term Loan. The Term Loan is secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of Griffon assets (which lien ranks pari passu with the lien granted on such assets under the Credit Agreement) and is guaranteed by Griffon.
| |
(e) | In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon. |
| |
(f) | In November 2010, Clopay Europe GmbH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The term loan was paid off in December 2013 and the revolver had no borrowings outstanding at December 31, 2014. The revolving facility matures in November 2015 and is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 2.20% per annum (2.28% at December 31, 2014). Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. |
Clopay do Brazil maintains lines of credit of $4,800. Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% (16.80% at December 31, 2014). At December 31, 2014 there was $1,945 borrowed under the lines. Clopay Plastic Products Company, Inc. guarantees the loan and lines.
In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 revolving credit facility. The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.55% LIBOR USD and 2.56% Bankers Acceptance Rate CDN as of December 31, 2014). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity. At December 31, 2014, there were no borrowings under the revolving credit facility with CAD $15,000 available.
| |
(g) | In December 2013 and May 2014, Northcote Holdings Pty Ltd entered into two unsecured term loans in the outstanding amounts of AUD $12,500 and AUD $20,000, respectively. The AUD $12,500 term loan requires quarterly interest payments with principal due upon maturity in December 2016. The AUD $20,000 term loan requires quarterly principal payments of $625 beginning in August 2015, with a balloon payment due upon maturity in May 2017. The loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.5% at December 31, 2014 for each loan). As of December 31, 2014, Griffon had an outstanding combined balance of $26,442 on the term loans. |
Subsidiaries of Northcote Holdings Pty Ltd also maintain two lines of credit of AUD $3,000 and AUD $5,000 which accrue interest at BBSY plus 2.25% per annum (5.00% at December 31, 2014) and 2.50% per annum (5.25% at December 31, 2014), respectively. At December 31, 2014, there were no outstanding borrowings under the lines. Griffon guarantees the term loans and the AUD $3,000 line of credit; the assets of a subsidiary of Northcote Holdings Pty Ltd secures the AUD $5,000 line of credit.
| |
(h) | Other long-term debt primarily consists of capital leases. |
At December 31, 2014, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.
NOTE 9 — SHAREHOLDERS’ EQUITY
During the first quarter of 2015, the Board of Directors approved a quarterly cash dividend of $0.04 per share, paid on December 23, 2014 to shareholders of record as of close of business on December 3, 2014. During 2014, the Board of Directors approved and paid quarterly cash dividends of $0.03 per share, totaling $0.12 per share for the year. Dividends paid on allocated shares in the ESOP were used to pay down the ESOP loan and recorded as a reduction in expense. A dividend payable was established for the holders of restricted shares; such dividends will be released upon vesting of the underlying restricted shares.
On January 29, 2015, the Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on March 26, 2015 to shareholders of record as of the close of business on February 26, 2015.
Compensation expense for restricted stock is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria. Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years, is recognized using the straight-line attribution method and recorded within SG&A expenses.
In February 2011, shareholders approved the Griffon Corporation 2011 Equity Incentive Plan ("Incentive Plan") under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, deferred shares and other stock-based awards may be granted. On January 30, 2014, shareholders approved an amendment and restatement of the Incentive Plan, which, among other things, added 1,200,000 shares to the Incentive Plan. Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, generally expire ten years after the date of grant and are granted at an exercise price of not less than 100% of the fair market value at the date of grant. The maximum number of shares of common stock available for award under the Incentive Plan is 4,200,000 (600,000 of which may be issued as incentive stock options), plus any shares underlying awards outstanding on the effective date of the Incentive Plan under the 2006 Incentive Plan that are subsequently canceled or forfeited. As of December 31, 2014, 615,644 shares were available for grant.
All grants outstanding under the Griffon Corporation 2001 Stock Option Plan, 2006 Equity Incentive Plan and Outside Director Stock Award Plan will continue under their terms; no additional awards will be granted under such plans.
During the first quarter of 2015, Griffon granted 462,032 restricted stock awards with vesting periods of three years, 458,016 of which are also subject to certain performance conditions, with a total fair value of $5,775, or a weighted average fair value of $12.50 per share.
For the quarters ended December 31, 2014 and 2013, stock based compensation expense totaled $2,577 and $1,675, respectively.
During the quarter ended December 31, 2014, 61,399 shares, with a market value of $780 or $12.70 per share, were withheld to settle employee taxes due to the vesting of restricted stock and were added to treasury.
In May 2014, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under the program, the Company may purchase shares, depending upon market conditions, in open market, including pursuant to a 10b5-1 plan, or privately negotiated transactions. During the quarter ended December 31, 2014, Griffon purchased 1,025,041 shares of common stock under the May 2014 program, for a total of $12,286 or $11.99 per share. As of December 31, 2014, $26,574 remains under the May 2014 authorization.
Since August 2011, through the first quarter of 2015, Griffon has repurchased 8,019,903 shares of common stock, for a total of $84,483 or $10.53 per share, under Board authorized programs.
In addition to the Board authorized repurchase programs, on December 10, 2013, Griffon repurchased 4,444,444 shares of its common stock for $50,000 from GS Direct, L.L.C. (“GS Direct”), an affiliate of The Goldman Sachs Group, Inc. The repurchase was effected in a private transaction at a per share price of $11.25, an approximate 9.2% discount to the stock’s closing price on November 12, 2013, the day before announcement of the transaction. After closing the transaction, GS Direct continued to hold approximately 5.56 million shares (approximately 10% of the shares outstanding at such time) of Griffon’s common stock. Subject to certain exceptions, if GS Direct intends to sell its remaining shares of Griffon common stock at any time prior to December 31, 2015, it will first negotiate in good faith to sell such shares to the Company.
NOTE 10 – EARNINGS PER SHARE (EPS)
Basic EPS (and diluted EPS in periods when a loss exists) was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with stock based compensation. The 2017 Notes were anti-dilutive due to the conversion price being greater than the weighted-average stock price during the periods presented.
The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:
|
| | | | | | |
| Three Months Ended December 31, | |
| 2014 | | 2013 | |
Weighted average shares outstanding - basic | 46,310 |
| | 52,754 |
| |
Incremental shares from stock based compensation | 1,826 |
| | 1,879 |
| |
| | | | |
Weighted average shares outstanding - diluted | 48,136 |
| | 54,633 |
| |
| | | | |
Anti-dilutive options excluded from diluted EPS computation | 582 |
| | 710 |
| |
Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash, and as such, the potential issuance of shares related to the principal amount of the 2017 Notes does not affect diluted shares.
NOTE 11 – BUSINESS SEGMENTS
Griffon’s reportable segments are as follows:
| |
• | HBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains, as well as a global provider of non-powered landscaping products that make work easier for homeowners and professionals. |
| |
• | Telephonics develops, designs and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide. |
| |
• | Plastics is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications. |
Information on Griffon’s reportable segments is as follows:
|
| | | | | | | | |
| For the Three Months Ended December 31, | |
REVENUE | 2014 | | 2013 | |
Home & Building Products: | |
| | |
| |
AMES | $ | 133,110 |
| | $ | 96,608 |
| |
CBP | 138,600 |
| | 121,842 |
| |
Home & Building Products | 271,710 |
| | 218,450 |
| |
Telephonics | 90,658 |
| | 96,025 |
| |
Plastics | 139,792 |
| | 138,983 |
| |
Total consolidated net sales | $ | 502,160 |
| | $ | 453,458 |
| |
The following table reconciles segment operating profit to income before taxes:
|
| | | | | | | | |
| For the Three Months Ended December 31, | |
INCOME (LOSS) BEFORE TAXES | 2014 | | 2013 | |
Segment operating profit: | |
| | |
| |
Home & Building Products | $ | 16,369 |
| | $ | 9,393 |
| |
Telephonics | 7,517 |
| | 10,652 |
| |
Plastics | 8,020 |
| | 5,825 |
| |
Total segment operating profit | 31,906 |
| | 25,870 |
| |
Net interest expense | (11,637 | ) | | (13,101 | ) | |
Unallocated amounts | (8,264 | ) | | (7,983 | ) | |
Income before taxes | $ | 12,005 |
| | $ | 4,786 |
| |
Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors for the same reason.
The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:
|
| | | | | | | | |
| For the Three Months Ended December 31, | |
| 2014 | | 2013 | |
Segment adjusted EBITDA: | |
| | |
| |
Home & Building Products | $ | 24,470 |
| | $ | 19,067 |
| |
Telephonics | 10,032 |
| | 12,396 |
| |
Plastics | 14,551 |
| | 12,743 |
| |
Total Segment adjusted EBITDA | 49,053 |
| | 44,206 |
| |
Net interest expense | (11,637 | ) | | (13,101 | ) | |
Segment depreciation and amortization | (17,147 | ) | | (16,696 | ) | |
Unallocated amounts | (8,264 | ) | | (7,983 | ) | |
Restructuring charges | — |
| | (842 | ) | |
Acquisition costs | — |
| | (798 | ) | |
Income before taxes | $ | 12,005 |
| | $ | 4,786 |
| |
Unallocated amounts typically include general corporate expenses not attributable to a reportable segment.
|
| | | | | | | | |
| For the Three Months Ended December 31, |
|
DEPRECIATION and AMORTIZATION | 2014 |
| 2013 |
|
Segment: | |
| |
|
Home & Building Products | $ | 8,101 |
| | $ | 8,034 |
| |
Telephonics | 2,515 |
| | 1,744 |
| |
Plastics | 6,531 |
| | 6,918 |
| |
Total segment depreciation and amortization | 17,147 |
| | 16,696 |
| |
Corporate | 113 |
| | 97 |
| |
Total consolidated depreciation and amortization | $ | 17,260 |
| | $ | 16,793 |
| |
|
|
|
|
|
|
|
CAPITAL EXPENDITURES | |
|
| |
|
|
Segment: | |
|
| |
|
|
Home & Building Products | $ | 10,261 |
| | $ | 8,468 |
| |
Telephonics | 969 |
| | 3,367 |
| |
Plastics | 7,679 |
| | 5,760 |
| |
Total segment | 18,909 |
| | 17,595 |
| |
Corporate | 12 |
| | 321 |
| |
Total consolidated capital expenditures | $ | 18,921 |
| | $ | 17,916 |
| |
|
| | | | | | | |
ASSETS | At December 31, 2014 |
| At September 30, 2014 |
Segment assets: | |
| |
Home & Building Products | $ | 1,054,456 |
| | $ | 1,030,005 |
|
Telephonics | 291,818 |
| | 319,327 |
|
Plastics | 380,274 |
| | 389,464 |
|
Total segment assets | 1,726,548 |
| | 1,738,796 |
|
Corporate | 25,384 |
| | 77,814 |
|
Total continuing assets | 1,751,932 |
| | 1,816,610 |
|
Assets of discontinued operations | 3,731 |
| | 3,751 |
|
Consolidated total | $ | 1,755,663 |
| | $ | 1,820,361 |
|
NOTE 12 – DEFINED BENEFIT PENSION EXPENSE
Defined benefit pension expense (income) was as follows:
|
| | | | | | | |
| Three Months Ended December 31, |
| 2014 | | 2013 |
Service cost | $ | — |
| | $ | 45 |
|
Interest cost | 2,207 |
| | 2,500 |
|
Expected return on plan assets | (2,932 | ) | | (2,885 | ) |
Amortization: | |
| | |
|
Prior service cost | 4 |
| | 4 |
|
Recognized actuarial loss | 541 |
| | 489 |
|
Loss on pension settlement | — |
| | — |
|
Net periodic expense (income) | $ | (180 | ) | | $ | 153 |
|
NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS
In July 2013, the FASB issued new accounting guidance requiring an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss or tax credit carryforward, except for instances when the carryforward is not available to settle any additional income taxes and an entity does not intend to use the deferred tax benefit for these purposes. In these circumstances, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This standard was effective for fiscal years beginning after December 15, 2013, and accordingly, the Company adopted this guidance effective October 1, 2014. Adoption of this standard did not have a significant impact on the Company's consolidated financial statements.
In April 2014, the FASB issued guidance changing the requirements for reporting discontinued operations where a disposal of a component of an entity or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when either classified as held for sale, or disposed of by sale or otherwise disposed. The amendment also requires enhanced disclosures about the discontinued operation and disclosure information for other significant dispositions. This guidance is effective for the Company beginning in 2015. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.
In May 2014, the FASB issued guidance on revenue from contracts with customers. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved, in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance permits the use of either the retrospective or cumulative effect transition method and is effective for the Company beginning in 2017; early adoption is not permitted. We have not yet selected a transition method and are currently evaluating the impact of the guidance on the Company's financial condition, results of operations and related disclosures.
In August 2014, the FASB issued guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern and related footnote disclosures. Management will be required to evaluate, at each reporting period, whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective prospectively for annual and interim reporting periods beginning in 2017; implementation of this guidance is not expected to have a material effect on the Company’s financial condition or results of operations.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements, and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 14 – DISCONTINUED OPERATIONS
The following amounts related to the Installation Services segment, discontinued in 2008, and other businesses discontinued several years ago, which have been segregated from Griffon’s continuing operations, and are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets:
|
| | | | | | | |
| At December 31, 2014 |
| At September 30, 2014 |
Assets of discontinued operations: | |
|
| |
|
Prepaid and other current assets | $ | 1,622 |
| | $ | 1,624 |
|
Other long-term assets | 2,109 |
| | 2,126 |
|
Total assets of discontinued operations | $ | 3,731 |
| | $ | 3,750 |
|
| | | |
Liabilities of discontinued operations: | |
| | |
|
Accrued liabilities, current | $ | 3,170 |
| | $ | 3,282 |
|
Other long-term liabilities | 3,542 |
| | 3,830 |
|
Total liabilities of discontinued operations | $ | 6,712 |
| | $ | 7,112 |
|
There was no Installation Services revenue or income for the quarter ended December 31, 2014 or 2013.
NOTE 15 – RESTRUCTURING AND OTHER RELATED CHARGES
In September 2014, Telephonics recognized $4,244 in restructuring costs in connection with the closure of its Swedish facility and restructuring of operations, a voluntary early retirement plan and a reduction in force aimed at improving efficiency by combining functions and responsibilities, resulting in the elimination of 80 positions.
In January 2013, AMES undertook to close certain of its U.S. manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. These actions, completed this quarter, will improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production currently performed by third party suppliers, and improve material flow and absorption of fixed costs. AMES incurred pre-tax restructuring and related exit costs approximating $7,941, comprised of cash charges of $4,016 and non-cash, asset-related charges of $3,925; the cash charges included $2,622 for one-time termination benefits and other personnel-related costs and $1,394 for facility exit costs and had $19,964 of capital expenditures.
HBP recognized $842 in restructuring and other related exit costs for the quarter ended December 31, 2013; such charges primarily related to one-time termination benefits, facility and other personnel costs, and asset impairment charges related to the AMES plant consolidation initiatives. There were no restructuring charges in the current quarter.
A summary of the restructuring and other related charges included in the line item “Restructuring and other related charges” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) were recognized as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Workforce Reduction | | Facilities & Exit Costs | | Other Related Costs | | Non-cash Facility and Other | | Total |
Amounts incurred in: | |
|
| |
|
| |
|
| |
|
| |
|
Quarter ended December 31, 2013 | $ | 638 |
| | $ | 95 |
| | $ | 109 |
| | $ | — |
| | $ | 842 |
|
The activity in the restructuring accrual recorded in accrued liabilities consisted of the following:
|
| | | | |
| Workforce Reduction | |
Accrued liability at September 30, 2014 | $ | 5,228 |
| |
Payments | (2,118 | ) | |
Accrued liability at December 31, 2014 | $ | 3,110 |
| |
NOTE 16 – OTHER EXPENSE
For the quarters ended December 31, 2014 and 2013, Other income (expense) included $(540) and $242, respectively, of net currency exchange (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $46 and $112, respectively, of net investment income.
NOTE 17 – WARRANTY LIABILITY
Telephonics offers warranties against product defects for periods generally ranging from one to two years, depending on the specific product and terms of the customer purchase agreement. Typical warranties require Telephonics to repair or replace the defective products during the warranty period at no cost to the customer. At the time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical experience, and periodically assesses its warranty obligations and adjusts the liability as necessary. AMES offers an express limited warranty for a period of ninety days on all products from the date of original purchase unless otherwise stated on the product or packaging.
Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:
|
| | | | | | | |
| Three Months Ended December 31, |
| 2014 | | 2013 |
Balance, beginning of period | $ | 4,935 |
| | $ | 6,649 |
|
Warranties issued and changes in estimated pre-existing warranties | 948 |
| | 966 |
|
Actual warranty costs incurred | (975 | ) | | (686 | ) |
Balance, end of period | $ | 4,908 |
| | $ | 6,929 |
|
NOTE 18 – OTHER COMPREHENSIVE INCOME (LOSS)
The amounts recognized in other comprehensive income (loss) were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2014 |
| Three Months Ended December 31, 2013 |
| Pre-tax | | Tax | | Net of tax | | Pre-tax | | Tax | | Net of tax |
Foreign currency translation adjustments | $ | (15,500 | ) | | $ | — |
| | $ | (15,500 | ) | | $ | (3,137 | ) | | $ | — |
| | $ | (3,137 | ) |
Pension and other defined benefit plans | 545 |
| | (192 | ) | | 353 |
| | 493 |
| | (177 | ) | | 316 |
|
Loss on cash flow hedge | (113 | ) | | 39 |
| | (74 | ) | | — |
| | — |
| | — |
|
Available-for-sale securities | $ | (1,515 | ) | | $ | 553 |
| | $ | (962 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
Total other comprehensive income (loss) | $ | (16,583 | ) | | $ | 400 |
| | $ | (16,183 | ) | | $ | (2,644 | ) | | $ | (177 | ) | | $ | (2,821 | ) |
The components of Accumulated other comprehensive income (loss) are as follows:
|
| | | | | | | |
| December 31, 2014 | | September 30, 2014 |
Foreign currency translation adjustments | $ | (19,320 | ) | | $ | (3,820 | ) |
Pension and other defined benefit plans | (27,012 | ) | | (27,366 | ) |
Gain on cash flow hedge | 178 |
| | 252 |
|
Available-for-sale securities | (93 | ) | | 870 |
|
| $ | (46,247 | ) | | $ | (30,064 | ) |
Total comprehensive income (loss) were as follows:
|
| | | | | | | |
| For the Three Months Ended December 31, |
| 2014 | | 2013 |
Net income | $ | 7,471 |
| | $ | 3,236 |
|
Other comprehensive income (loss), net of taxes | (16,183 | ) | | (2,821 | ) |
Comprehensive income (loss) | $ | (8,712 | ) | | $ | 415 |
|
Amounts reclassified from accumulated other comprehensive income (loss) to income (loss) were as follows:
|
| | | | | | | |
| For the Three Months Ended December 31, |
| 2014 | | 2013 |
Pension amortization | 545 |
| | 493 |
|
Tax | (192 | ) | | (177 | ) |
Net of tax | $ | 353 |
| | $ | 316 |
|
NOTE 19 — COMMITMENTS AND CONTINGENCIES
Legal and environmental
Department of Environmental Conservation of New York State (“DEC”), with ISC Properties, Inc. Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at a location in Peekskill in the Town of Cortlandt, New York (the “Peekskill Site”) owned by ISC Properties, Inc. (“ISC”), a wholly-owned subsidiary of Griffon. ISC sold the Peekskill Site in November 1982.
Subsequently, Griffon was advised by the DEC that random sampling at the Peekskill Site and in a creek near the Peekskill Site indicated concentrations of solvents and other chemicals common to Lightron’s prior plating operations. ISC then entered into a consent order with the DEC in 1996 (the “Consent Order”) to perform a remedial investigation and prepare a feasibility study. After completing the initial remedial investigation pursuant to the Consent Order, ISC was required by the DEC, and did accordingly conduct over the next several years, supplemental remedial investigations, including soil vapor investigations, under the Consent Order.
In April 2009, the DEC advised ISC’s representatives that both the DEC and the New York State Department of Health had reviewed and accepted an August 2007 Remedial Investigation Report and an Additional Data Collection Summary Report dated January 30, 2009. With the acceptance of these reports, ISC completed the remedial investigation required under the Consent Order and was authorized, accordingly, by the DEC to conduct the Feasibility Study required by the Consent Order. Pursuant to the requirements of the Consent Order and its obligations thereunder, ISC, without acknowledging any responsibility to perform any remediation at the Site, submitted to the DEC in August 2009, a draft feasibility study which recommended for the soil, groundwater and sediment medias, remediation alternatives having a current net capital cost value, in the aggregate, of approximately $5,000. In February 2011, DEC advised ISC it has accepted and approved the feasibility study. Accordingly, ISC has no further obligations under the consent order.
Upon acceptance of the feasibility study, DEC issued a Proposed Remedial Action Plan (“PRAP”) that sets forth the proposed remedy for the site. The PRAP accepted the recommendation contained in the feasibility study for remediation of the soil and groundwater medias, but selected a different remediation alternative for the sediment medium. The approximate cost and the current net capital cost value of the remedy proposed by DEC in the PRAP is approximately $10,000. After receiving public comments on the PRAP, the DEC issued a Record of Decision (“ROD”) that set forth the specific remedies selected and responded to public comments. The remedies selected by the DEC in the ROD are the same remedies as those set forth in the PRAP.
It is now expected that DEC will enter into negotiations with potentially responsible parties to request they undertake performance of the remedies selected in the ROD, and if such parties do not agree to implement such remedies, then the State may use State Superfund money to remediate the Peekskill site and seek recovery of costs from such parties. Griffon does not acknowledge any responsibility to perform any remediation at the Peekskill Site.
Improper Advertisement Claim involving Union Tools® Products. Since December 2004, a customer of AMES has been named in various litigation matters relating to certain Union Tools products. The plaintiffs in those litigation matters have asserted causes of action against the customer of AMES for improper advertisement to end consumers. The allegations suggest that advertisements led the consumers to believe that Union Tools’ hand tools were wholly manufactured within boundaries of the United States. The complaints assert various causes of action against the customer of AMES under federal and state law, including common law fraud. At some point, likely once the litigation against the customer of AMES ends, the customer may seek indemnity (including recovery of its legal fees and costs) against AMES for an unspecified amount. Presently, AMES cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against AMES.
Department of Environmental Conservation of New York State, regarding Frankfort, NY site. During fiscal 2009, an underground fuel tank with surrounding soil contamination was discovered at the Frankfort, N.Y. site, which is the result of historical facility
operations prior to AMES’ ownership. While AMES was actively working with the DEC and the New York State Department of Health to define remediation requirements relative to the underground fuel tank, the DEC took the position that AMES was responsible to remediate other types of contamination on the site. After negotiations with the DEC, on August 15, 2011, AMES executed an Order on Consent with the DEC. The Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site. Importantly, the Order does not waive any rights that AMES has under a 1991 Consent Judgment entered into between the DEC and a predecessor of AMES relating to the site. The Order requires that AMES identify areas of concern at the site, and formulate a strategy to investigate and remedy both on and off site conditions in compliance with applicable environmental law. At the conclusion of the remedy phase of the remediation to the satisfaction of the DEC, the DEC will issue a Certificate of Completion. On August 1, 2012, a fire occurred during the course of demolition of certain structures at the Frankfort, NY site, requiring cleanup and additional remediation under the oversight of the DEC, which work has been substantially completed. AMES has performed significant additional investigative and remedial activities in the last few years under work plans approved by the DEC and has submitted a remedial investigative report to the DEC, which the DEC accepted in draft form. In September 2014, AMES submitted an addendum to the remedial investigation report to the DEC and in December 2014 submitted a Final Remedial Investigation Report to DEC. DEC expects to schedule a Public Comment Meeting in late 2015.
U.S. Government investigations and claims
Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit and review by various agencies and instrumentalities of the United States government, including among others, the Defense Contract Audit Agency (“DCAA”), the Defense Criminal Investigative Service (“DCIS”), and the Department of Justice ("DOJ") which has responsibility for asserting claims on behalf of the U.S. government. In addition to ongoing audits, pursuant to an administrative subpoena Griffon is currently providing information to the U.S. Department of Defense Office of the Inspector General and the DOJ. No claim has been asserted against Griffon in connection with this matter, and Griffon is unaware of any material financial exposure in connection with the inquiry.
In general, departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of Griffon, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have material adverse effect on Telephonics because of its reliance on government contracts.
General legal
Griffon is subject to various laws and regulations relating to the protection of the environment and is a party to legal proceedings arising in the ordinary course of business. Management believes, based on facts presently known to it, that the resolution of the matters above and such other matters will not have a material adverse effect on Griffon’s consolidated financial position, results of operations or cash flows.
NOTE 20 — CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the domestic assets of Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation, The AMES Companies, Inc., AMES Southern, Inc. and Clopay Ames True Temper Holding, Corp., all of which are indirectly 100% owned by Griffon. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below are condensed consolidating financial information as of December 31, 2014 and September 30, 2014 and for the three months ended December 31, 2014 and 2013. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly-owned subsidiaries accounted for under the equity method.
The indenture relating to the Senior Notes (the “Indenture”) contains terms providing that, under certain limited circumstances, a guarantor will be released from its obligations to guarantee the Senior Notes. These circumstances include (i) a sale of at least a majority of the stock, or all or substantially all the assets, of the subsidiary guarantor as permitted by the Indenture; (ii) a public equity offering of a subsidiary guarantor that qualifies as a “Minority Business” as defined in the Indenture (generally, a business the EBITDA of which constitutes less than 50% of the segment adjusted EBITDA of the Company for the most recently ended four fiscal quarters), and that meets certain other specified conditions as set forth in the Indenture; (iii) the designation of a guarantor as an “unrestricted subsidiary” as defined in the Indenture, in compliance with the terms of the Indenture; (iv) Griffon exercising its right to defease the Senior Notes, or to otherwise discharge its obligations under the Indenture, in each case in accordance with the terms of the Indenture; and (v) upon obtaining the requisite consent of the holders of the Senior Notes.
CONDENSED CONSOLIDATING BALANCE SHEETS
At December 31, 2014
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Guarantor Companies | | Non-Guarantor Companies | | Elimination | | Consolidation |
CURRENT ASSETS | |
| | |
| | |
| | |
| | |
|
Cash and equivalents | $ | 3,288 |
| | $ | 6,519 |
| | $ | 36,759 |
| | $ | — |
| | $ | 46,566 |
|
Accounts receivable, net of allowances | — |
| | 206,253 |
| | 65,467 |
| | (34,543 | ) | | 237,177 |
|
Contract costs and recognized income not yet billed, net of progress payments | — |
| | 101,956 |
| | 509 |
| | — |
| | 102,465 |
|
Inventories, net | — |
| | 255,361 |
| | 64,060 |
| | — |
| | 319,421 |
|
Prepaid and other current assets | 2,673 |
| | 26,616 |
| | 18,151 |
| | 10,907 |
| | 58,347 |
|
Assets of discontinued operations | — |
| | — |
| | 1,622 |
| | — |
| | 1,622 |
|
Total Current Assets | 5,961 |
| | 596,705 |
| | 186,568 |
| | (23,636 | ) | | 765,598 |
|
PROPERTY, PLANT AND EQUIPMENT, net | 1,243 |
| | 270,853 |
| | 95,086 |
| | — |
| | 367,182 |
|
GOODWILL | — |
| | 284,875 |
| | 82,216 |
| | — |
| | 367,091 |
|
INTANGIBLE ASSETS, net | — |
| | 155,659 |
| | 72,175 |
| | — |
| | 227,834 |
|
INTERCOMPANY RECEIVABLE | 543,487 |
| | 953,581 |
| | 185,836 |
| | (1,682,904 | ) | | — |
|
EQUITY INVESTMENTS IN SUBSIDIARIES | 767,088 |
| | 660,465 |
| | 1,771,532 |
| | (3,199,085 | ) | | — |
|
OTHER ASSETS | 40,910 |
| | 53,921 |
| | 6,231 |
| | (75,213 | ) | | 25,849 |
|
ASSETS OF DISCONTINUED OPERATIONS | — |
| | — |
| | 2,109 |
| | — |
| | 2,109 |
|
Total Assets | $ | 1,358,689 |
| | $ | 2,976,059 |
| | $ | 2,401,753 |
| | $ | (4,980,838 | ) | | $ | 1,755,663 |
|
CURRENT LIABILITIES | |
| | |
| | |
| | |
| | |
|
Notes payable and current portion of long-term debt | $ | 2,202 |
| | $ | 1,145 |
| | $ | 3,268 |
| | $ | — |
| | $ | 6,615 |
|
Accounts payable and accrued liabilities | 31,281 |
| | 204,058 |
| | 77,422 |
| | (28,510 | ) | | 284,251 |
|
Liabilities of discontinued operations | — |
| | — |
| | 3,170 |
| | — |
| | 3,170 |
|
Total Current Liabilities | 33,483 |
| | 205,203 |
| | 83,860 |
| | (28,510 | ) | | 294,036 |
|
| | | | | | | | | |
LONG-TERM DEBT, net of debt discounts | 752,572 |
| | 7,372 |
| | 42,911 |
| | — |
| | 802,855 |
|
INTERCOMPANY PAYABLES | 21,700 |
| | 905,636 |
| | 707,633 |
| | (1,634,969 | ) | | — |
|
OTHER LIABILITIES | 39,069 |
| | 150,096 |
| | 25,745 |
| | (71,545 | ) | | 143,365 |
|
LIABILITIES OF DISCONTINUED OPERATIONS | — |
| | — |
| | 3,542 |
| | — |
| | 3,542 |
|
Total Liabilities | 846,824 |
| | 1,268,307 |
| | 863,691 |
| | (1,735,024 | ) | | 1,243,798 |
|
SHAREHOLDERS’ EQUITY | 511,865 |
| | 1,707,752 |
| | 1,538,062 |
| | (3,245,814 | ) | | 511,865 |
|
Total Liabilities and Shareholders’ Equity | $ | 1,358,689 |
| | $ | 2,976,059 |
| | $ | 2,401,753 |
| | $ | (4,980,838 | ) | | $ | 1,755,663 |
|
CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2014
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Guarantor Companies | | Non-Guarantor Companies | | Elimination | | Consolidation |
CURRENT ASSETS | |
| | |
| | |
| | |
| | |
|
Cash and equivalents | $ | 6,813 |
| | $ | 31,522 |
| | $ | 54,070 |
| | $ | — |
| | $ | 92,405 |
|
Accounts receivable, net of allowances | — |
| | 213,922 |
| | 77,218 |
| | (32,704 | ) | | 258,436 |
|
Contract costs and recognized income not yet billed, net of progress payments | — |
| | 109,804 |
| | 126 |
| | — |
| | 109,930 |
|
Inventories, net | — |
| | 219,326 |
| | 70,537 |
| | 272 |
| | 290,135 |
|
Prepaid and other current assets | 4,366 |
| | 26,319 |
| | 17,101 |
| | 14,783 |
| | 62,569 |
|
Assets of discontinued operations | — |
| | — |
| | 1,624 |
| | — |
| | 1,624 |
|
Total Current Assets | 11,179 |
| | 600,893 |
| | 220,676 |
| | (17,649 | ) | | 815,099 |
|
| | | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT, net | 1,327 |
| | 270,519 |
| | 98,643 |
| | 76 |
| | 370,565 |
|
GOODWILL | — |
| | 284,875 |
| | 86,971 |
| | — |
| | 371,846 |
|
INTANGIBLE ASSETS, net | — |
| | 156,772 |
| | 76,851 |
| | — |
| | 233,623 |
|
INTERCOMPANY RECEIVABLE | 540,080 |
| | 892,433 |
| | 213,733 |
| | (1,646,246 | ) | | — |
|
EQUITY INVESTMENTS IN SUBSIDIARIES | 780,600 |
| | 662,403 |
| | 1,782,406 |
| | (3,225,409 | ) | | — |
|
OTHER ASSETS | 41,680 |
| | 53,896 |
| | 6,739 |
| | (75,213 | ) | | 27,102 |
|
ASSETS OF DISCONTINUED OPERATIONS | — |
| | — |
| | 2,126 |
| | — |
| | 2,126 |
|
Total Assets | $ | 1,374,866 |
| | $ | 2,921,791 |
| | $ | 2,488,145 |
| | $ | (4,964,441 | ) | | $ | 1,820,361 |
|
CURRENT LIABILITIES | |
| | |
| | |
|