Griffon Corporation

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Griffon Corporation

100 Jericho Quadrangle
Jericho, New York 11753
U.S.A.
Telephone: (516) 936-6644
Fax: (516) 938-5644
Web site: http://www.griffoncorp.com

Public Company
Incorporated: 1959 as Waldorf Controls Corp.
Employees: 5,400
Sales: $1.03 billion (fiscal 1999)
Stock Exchanges: New York Boston Chicago Philadelphia
Ticker Symbol: GFF
NAIC: 321911 Wood Window and Door Manufacturing; 322221 Coated and Laminated Packaging Paper and Plastics Film Manufacturing; 326199 All Other Plastics Product Manufacturing; 332321 Metal Window and Door Manufacturing; 33429 Other Communications Equipment Manufacturing; 44411 Home Centers; 44419 Other Building Material Dealers; 56179 Other Services to Buildings and Dwellings

Griffon Corporation is a diversified manufacturing company with operations in four business segments: garage doors, installation services, specialty plastic films, and electronic information and communication systems. The company name stands for a mythical beast—half-eagle, half-lion—and symbolizes the combined strength of its varied operations.

Booming Conglomerate: 1959-70

Griffon was founded in 1959 as Waldorf Controls Corp. but took the name Instrument Systems Corp. before the year was out. Located in College Point, Long Island, it made electronic and electromechanical products for military and government markets and was 25 percent-owned by Emerson Radio & Phonograph Corp. Sales and profits picked up after Edward J.Garrett became chairman and president in 1964, and two younger brothers took high executive posts. The Garretts closed deficit-ridden plants and began seeking civilian markets while also successfully seeking government research-and-develop-ment contracts. Sales increased from $7.3 million in fiscal 1964 (the year ended September 30, 1964) to $25.76 million in fiscal 1967. The loss of $170,000 in the former year had been transformed into net income of $1.02 million in the latter.

In 1968 Instrument Systems, now headquartered in Huntington, Long Island, began selling shares on the American Stock Exchange. It now had 18 subsidiaries with plants throughout the United States and Canada. Among its notable acquisitions had been Telephonies Corp. Dating from 1934, this company, purchased in 1961, became the nucleus of the parent corporation’s Electronics Group, which, besides making electronic devices for industry and defense, also produced other electronic equipment, audio equipment, motors, and even teaching machines. The Automotive Group manufactured special purpose trucks and trailers, automotive and hardware tools, and batteries and battery chargers. The Home Products Group made juvenile and outdoor furniture and decorative glassware and giftware. The Packaging Group designed and manufactured plastic packaging, plastic bags, and polystyrene-foam film and sheet materials. The Business Machine Group made calculators and data processors. The Building Products Group produced lighting fixtures and sheet-metal building products.

After receiving a $47 million contract from Boeing, Instrument Systems established a division to develop the technology for a mutliplex entertainment system for airline passengers. This system went into production in 1969 for the Boeing 747 with channels for music and movie audio. The system was also adopted for the Lockheed L-1011 and, later, for the Douglas DC-10. A heavy user of integrated circuits, Instrument Systems created a semiconductor division in 1970 and announced plans to build its own microelectronics manufacturing plant in Huntington. The company’s Phonplex Corp. subsidiary was seeking customers for a proposed computer with voice-response capability.“All it takes is a computer, a push button telephone and a solid-state memory bank of ’phonemes, ’”Edward Garrett told Gene Smith of the New York Times in 1971.

Shedding Unprofitable Divisions: 1974-83

Instrument Systems’ ambitious plans were all but halted as the go-go 1960s turned into the recessionary 1970s. Wall Street soured on conglomerates, and the company’s military business fell victim to budget cutbacks following the end of U.S. participation in the war in Vietnam. Profits peaked at $8.05 million in fiscal 1969 and net sales at $233.25 million in fiscal 1974. The company raised some money by selling one-fifth of its building products group, which became Buildex Inc., to the public. The plastics and packaging divisions—combined into a subsidiary, Plascor Inc., in 1974—were sold in 1976 for $13.3 million.

In 1975 the Garretts ran into resistance from recalcitrant shareholders, who repudiated $1.2 million in ten-year, uncollaterized company loans made to them in 1972 to finance their purchases of company stock. The loans, which were interest-free for the first five years, also provoked two stockholder lawsuits. Although these dissidents were seeking to punish management for poor results, ironically repudiation of the loans benefited the Garretts since they had bought company stock at prices that subsequently dropped sharply in the markets. Instrument Systems lost money in fiscal 1976 and 1977.

Edward Garrett suddenly fired his brothers in December 1978 and 33 other executives the following month. A lawsuit—later dropped—charged that Garrett had instituted a “reign of terror” because of a personality change following heart surgery. Instrument Systems, which moved its headquarters from Huntington to nearby Jericho in fiscal 1980, fell victim to the severe recession of 1980-82, losing $41.3 million during this period. Garrett responded by selling nine money-losing divisions and consolidating others. The company also converted debentures into stock five times in order to help reduce long-term debt from $72.2 million to a more manageable $16 million. Garrett died in 1982 and was succeeded as chairman by his son-in-law, Harvey Blau. Robert Balemian became president.

Branching Out Again in the 1980s and 1990s

Instrument Systems emerged from this ordeal leaner but profitable. Leading the way was Telephonies, which in 1981 received a five-year order worth about $100 million to supply the central integrated test system for Rockwell International Corp.’s ?-IB bomber. Telephonies was also developing integrated communications and radio control systems for the Navy’s anti-submarine S-3A aircraft and LAMPS MK III helicopters and a new advanced audio communications system for NASA’s Space Shuttle Orbiter Vehicle. Other businesses that remained under the parent company’s corporate umbrella were the home furnishings and furniture-related operations, a specialty stainless steel hardware unit, and three companies providing aluminum lockboxes and bulk-mail containers to the U.S. Postal Service.

A shrewd acquisition was the 1986 purchase of Cincinnati-based Clopay Corp. in 1986 for about $40 million, including expenses. This company had been founded in 1859 as a wholesaler of paper and allied products and originally incorporated in 1889 as Seinheiser Paper Co. It acquired plastic films in 1952 and garage doors in 1966. By 1992 Clopay was the nation’s leading manufacturer and retail supplier of residential garage doors, and also the leading supplier of plastic liners for diapers, surgical gowns, and drapes, and films and laminates for disposable surgical instruments. Clopay’s operations accounted for 70 percent of the parent company’s $50.1 million in operating income in fiscal 1991.

Telephonies was still Instrument Systems ’ largest business in the late 1980s. It was deriving about half its sales from internal communications systems for U.S. military aircraft and about another third from international operations. A subsidiary was making integrated circuits used by Ford Motor Co. for automatic window controllers in automobiles. Instrument Systems entered another business sector in 1984 when it acquired Oneita Knitting Mills, Inc., a New York company that dated from 1893, for about $15 million. This producer of T-shirts and clothing for newborns was renamed Oneita Industries. Instrument Systems began selling pieces of the business in 1988 and disposed of it entirely in 1993.

Instrument Systems changed its name to Griffon in 1995. Growing in sales each year and solidly profitable, the company was now worth about $9 a share, compared to only $1 a share in 1989. Clopay was now by far the parent company’s largest entity, while Telephonies was reducing its dependence on military projects and soliciting commercial and nondefense governmental business. It retained, however, significant contracts to provide communications equipment for a U.S. military plane known as JSTARS and in 1997 won a contract worth more than $100 million to supply communications equipment to upgrade British Royal Air Force antisubmarine airplanes known as Nimrods. Also in 1997, Telephonies won a $26 million contract to supply wireless communications equipment for 1,080 New York City subway cars.

Key Dates:

1959:: Company is founded as Waldorf Controls, but assumes the name Instrument Systems the same year.
1961:: Instrument Systems acquires Telephonies Corp.
1969:: Sound system for airliners goes into production.
1976:: The company sells its plastics and packaging divisions.
1983:: Nine unprofitable divisions have been sold in three years.
1986:: Instrument Systems purchases Clopay Corp.
1995:: Company name is changed to Griffon.
1997:: Telephonies wins big Royal Air Force contract.
1999:: Making garage doors is Griffon’s chief source of revenue.

In 1996 Clopay formed Finotech, a joint venture with German-based Corovin GmbH, to manufacture specialty plastic film and laminate products in Europe. Clopay took a 60 percent stake in the company. Clopay also acquired Böhme Verpackungsfolien GmbH & Co., a German manufacturer of plastic packaging and specialty films, in 1998. Griffon sold the specialty hardware portion of its business in 1997. That year it acquired Holmes-Hally Industries, a manufacturer and installer of residential garage doors and related hardware, for about $35 million. Holmes-Hally had annual sales of approximately $80 million at this time.

Griffon continued to increase its sales in the late 1990s, surpassing the $1 billion mark in fiscal 1999. Net income remained over $20 million—as it had in every year since 1991—although dropping from the record of $33.2 million in 1997. The company’s stock was, however, in 1999 trading at about half the $17 a share reached in late 1997 and early 1998. Some analysts suggested that a company like Griffon, with three widely different product lines, was hard for investors to assess. While perhaps true, company officials were quick to point out the underlying logic of such a strategy.“It’s worked for us,”Blau told James Bernstein of Newsday in 1997.“If one of our divisions has a slight growth problem, the other takes over. The key to our business style is independent management. We do not have layers of management and guys running around with clipboards.”Griffon bought back 20 percent of its outstanding shares between 1993 and 1996.

Griffon in 1999

In 1999 Griffon’s Garage Doors segment was designing and manufacturing garage doors for use in the residential and commercial building markets. The Installation Services segment was selling, installing, and servicing garage doors, garage-door openers, manufactured fireplaces, floor coverings, cabinetry, and a range of related building products, primarily for the residential housing markets. The Specialty Plastic Films segment was developing, producing, and selling plastic films and film laminates for use in infant diapers, adult incontinence products, feminine hygiene products, and disposable surgical and patient-care products. The Electronic Information and Communication Systems segment was designing, manufacturing, and providing logistical support for communication and radar systems, information and command and control systems, and custom mixed-signal large-scale integration circuits.

Company-owned Telephonies manufacturing plants were located in Farmingdale and Huntington, Long Island. Manufacturing plants for films were in Nashville; Augusta, Maine; Fresno, California; and Aschersleben and Dombuhl, Germany. Plants for garage doors were in Los Angeles; Nesbit, Maine; Russia, Ohio; Auburn, Washington; and Baldwin, Wisconsin. A plant for garage doors and installation service was in Tempe, Arizona. Company headquarters remained in Jericho.

Of Griffon’s $1.03 billion in revenues from external customers in fiscal 1999, garage doors accounted for 41 percent, installation services for 23 percent, specialty plastic films for 19 percent, and electronic information and communication systems for 17 percent. In terms of geographical area, the United States accounted for 81 percent, Germany for six percent, the United Kingdom for four percent, and others for nine percent. Of Griffon’s operating profit of $57.8 million, garage doors accounted for 49 percent, electronic information and communication systems for 27 percent, specialty plastic films for 13 percent, and installation services for 11 percent. Net income was $20.2 million. Griffon had a long-term debt of $135.3 million at the end of fiscal 1999. KMR Corp. owned 8.8 percent of the stock and Blau 6.9 percent at the end of the calendar year.

Principal Subsidiaries

Clopay Corp.; Holmes-Hally Industries; Lightron Corporation; Standard-Keil Industries, Inc.; Telephonies Corp.

Principal Operating Units

Electronic Information and Communication Systems; Garage Doors; Installation Services; Specialty Plastic Films.

Principal Competitors

Anderson Corporation; General American Door Co.; Harris Corporation; Honeywell Inc.; Industrial Coatings Group Inc.; Lockheed Martin Corporation; Morgan Products Ltd.; Northrup Grumman Corporation; Overhead Door Corporation; Raytheon Company; Tomkins Industries Inc.; Woodgrain Millworks Inc.