Griffon Corporation Announces First Quarter Results
NEW YORK--(BUSINESS WIRE)--Jan 31, 2019--Griffon Corporation (NYSE:GFF) (the “Company” or “Griffon”) today reported results for the first fiscal quarter ended December 31, 2018.
Consolidated revenue was $510.5 million, an increase of 17% from the prior year quarter. Home & Building Products (“HBP”) and Defense Electronics (“Telephonics”) revenue increased 19% and 7%, respectively, compared to the prior year quarter.
Income from continuing operations was $8.8 million, or $0.21 per share, compared to $22.8 million, or $0.53 per share, in the prior year quarter. The current year quarter results included discrete tax provisions, net, of $0.5 million or $0.01 per share. The prior year quarter results included acquisition costs of $3.2 million ($2.3 million, net of tax, or $0.05 per share); cost of life insurance benefit of $2.6 million ($0.2 million, net tax, or $0.01 per share); and discrete and certain other tax benefits, net, for certain items which affect comparability of $23.0 million or $0.53 per share. Excluding these items from the respective quarterly results, income from continuing operations is $9.2 million, or $0.22 per share, compared to $2.4 million, or $0.06 per share, in the prior year quarter.
Segment adjusted EBITDA was $56.6 million, an increase of 30% from the prior year quarter primarily driven by HBP revenue growth. Segment adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization and unallocated amounts (mainly corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable.
Ronald J. Kramer, Chairman and CEO, commented, “This quarter was an excellent start to our fiscal 2019. We have made significant progress integrating our newly acquired companies, ClosetMaid and CornellCookson. Our strategic plan is delivering enhanced operating performance and will guide our efforts in coming years.”
Kramer added, “The diversity of our leading brands and businesses positions us to accelerate growth in revenue, free cash flow and earnings per share. The agility of our management team and versatile operating plan continues to produce solid financial results even in uncertain market conditions. We are pleased with our strong results and are optimistic about our outlook this year.”
Segment Operating Results
Home & Building Products
Revenue was $439.8 million, an increase of 19% when compared to the prior year quarter. Clopay Building Products Company, Inc. (“CBP”) benefited from the acquisition of CornellCookson on June 4, 2018, which delivered approximately $51.0 million of revenue, as well as from favorable mix, pricing and volume. At The AMES Companies, Inc. (“AMES”), increased U.S. revenue driven by lawn and garden volume was offset by decreased non U.S. lawn and garden volume, mainly due to adverse weather conditions, and reduced storage and organization volume due to timing of orders. Organic growth was 5%.
Segment adjusted EBITDA was $51.9 million, an increase of 31% compared to the prior year quarter driven by the increased revenue as noted above, partially offset by increased input costs and tariffs.
Revenue was $70.8 million, an increase of 7% from the prior year quarter, primarily due to a $4.6 million benefit from the adoption of revenue recognition guidance effective October 1, 2018. Additionally, increased airborne surveillance radar and wireless intercommunication systems revenue was offset by reduced dismounted Electronic Countermeasure system volume. The impact of the revenue recognition guidance is expected to be immaterial on the full year results.
Segment adjusted EBITDA was $4.8 million compared to $4.2 million in the prior year quarter due to the increased revenue, partially offset by unfavorable program mix and the impact of revised estimates to complete remaining performance obligations on certain radar and airborne intercommunication systems. Segment adjusted EBITDA also benefited from the adoption of revenue recognition guidance effective October 1, 2018 by approximately $1.3 million. The impact of this revenue recognition guidance is expected to be immaterial on the full year results.
Contract backlog was $367 million at December 31, 2018, compared to $374 million at September 30, 2018, restated for the adoption of revenue recognition guidance effective October 1, 2018, with approximately 70% expected to be fulfilled within the next twelve months. During the quarter, Telephonics was awarded several new contracts and received incremental funding on existing contracts approximating $63.3 million.
In the quarter ended December 31, 2018, the Company recognized a tax provision of $5.2 million on Income before taxes from continuing operations of $14.0 million, compared to a tax benefit of $(24.9) million on a Loss before taxes from continuing operations of $(2.1) million in the comparable prior year quarter. Excluding all items that affect comparability, the effective tax rates for the quarters ended December 31, 2018 and 2017 were 34.0% and 35.4%, respectively.
In August 2016 and 2018, Griffon’s Board of Directors authorized the repurchase of up to $50 million of Griffon’s outstanding common stock. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the three months ended December 31, 2018, Griffon purchased 29,300 shares of common stock under these repurchase programs, for a total of $0.3 million or $9.91 per share. At December 31, 2018, $58.0 million remained under existing Board authorizations.
Balance Sheet and Capital Expenditures
At December 31, 2018, the Company had cash and equivalents of $82 million, total debt outstanding of $1,155 million, net of discounts and issuance costs, resulting in a net debt position of $1,073 million. $277.8 million was available for borrowing under the revolving credit facility, subject to certain loan covenants. Capital expenditures were $8.4 million in the current quarter.
Conference Call Information
The Company will hold a conference call today, January 31, 2019, at 8:30 AM ET.
The call can be accessed by dialing 1-877-407-0792 (U.S. participants) or 1-201-689-8263 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 13686798. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.
A replay of the call will be available starting on Thursday, January 31, 2019 at 11:30 AM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 13686798. The replay will be available through Thursday, February 14, 2019 at 11:59 PM ET.
“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; the Griffon’s ability to achieve expected savings from cost control, restructuring, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of defense budget cuts and other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost or lack of availability of raw materials such as resin, wood and steel components or purchased finished goods, including any potential impact on costs or availability resulting from tariffs; changes in customer demand or loss of a material customer at one of Griffon’s operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in the Griffon’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which could impact margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain Griffon’s operating companies; possible terrorist threats and actions and their impact on the global economy; Griffon’s ability to service and refinance its debt, and the impact of recent and future legislative and regulatory changes, including, without limitation, the Tax Cuts and Jobs Act. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
About Griffon Corporation
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. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.
Griffon currently conducts its operations through two reportable segments:Home & Building Products segment consists of two companies, AMES and CBP: AMES, founded in 1774, is the leading North American manufacturer and a global provider of branded consumer and professional tools, landscaping products, and outdoor lifestyle solutions. In 2018, we acquired ClosetMaid, a leader in wood and wire closet organization, general living storage and wire garage storage products for homeowners and professionals. CBP, since 1964, is a leading manufacturer and marketer of residential and commercial garage doors and sells to professional dealers and some of the largest home center retail chains in North America. In 2018, we acquired CornellCookson, a leading U.S. manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional, and retail use. Defense Electronics segment consists of Telephonics Corporation, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.
For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.
Griffon evaluates performance and allocates resources based on each segment’s operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”, a non-GAAP measure). Griffon believes this information is useful to investors.
The following table provides a reconciliation of Segment adjusted EBITDA to Income (loss) before taxes from continuing operations:
The following is a reconciliation of each segment’s operating results to Segment adjusted EBITDA from continuing operations:
Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.
Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss on debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well as other items that may affect comparability, as applicable. Griffon believes this information is useful to investors for the same reason. The following table provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and earnings per share from continuing operations to Adjusted earnings per share from continuing operations:
Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.
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Brian G. Harris
SVP & Chief Financial Officer
Investor Relations Contact:
Senior Vice President
KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: MANUFACTURING OTHER MANUFACTURING DEFENSE OTHER DEFENSE CONSTRUCTION & PROPERTY COMMERCIAL BUILDING & REAL ESTATE RESIDENTIAL BUILDING & REAL ESTATE OTHER CONSTRUCTION & PROPERTY
SOURCE: Griffon Corporation
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