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Griffon Corporation Announces First Quarter Results

Dépèche transmise le 3 février 2011 par Business Wire

NEW YORK--(BUSINESS WIRE)--Griffon Corporation (NYSE: GFF) today reported financial results for the first fiscal quarter ended December 31, 2010.

“We are pleased to have started our new year with strong growth. We see positive trends developing in each of our business segments. Telephonics shows excellent bookings, Plastics is growing quickly with improving margins, and our Home and Buildings Products business is performing well in a continued difficult economic environment.”

Results reflect the inclusion of Ames True Temper, Inc. (“ATT”) for the first time. On September 30, 2010, Griffon acquired ATT, a global provider of non-powered lawn and garden tools, wheelbarrows and other outdoor products to the retail and professional markets. ATT has been combined with Clopay Building Products (“CBP”), the largest manufacturer and marketer of residential garage doors and a leading manufacturer of commercial sectional doors in the United States, in a newly formed segment: Home & Building Products (“HBP”)

For the quarter, consolidated revenue totaled $414 million, increasing 36% in comparison to the prior year quarter. Revenue growth was driven mainly by the HBP segment, with the addition of ATT, augmented by 5% higher revenue from garage doors, and 16% revenue growth in Plastics. Telephonics revenue declined 5% in comparison to the prior year quarter.

On a pro forma basis, prepared as if ATT was purchased on October 1, 2009, first quarter revenue of $414 million increased 5% in comparison to $396 million in the prior year quarter; revenue growth was driven by revenue increases of 16% and 4% in Plastics and HBP, respectively, partially offset by lower revenue at Telephonics.

For the quarter, Griffon reported a net loss of $1.7 million or $0.03 per share compared to income of $4.3 million or $0.07 per share in the prior year quarter. Current results included $11.4 million ($7.4 million, net of tax, or $0.12 per share) of cost related to the sale of inventory that was recorded at fair value in connection with acquisition accounting for ATT, as well as $1.4 million ($0.9 million, net of tax, or $0.02 per share) of restructuring expenses and a discrete tax benefit of $0.3 million or $0.01 per share. The prior year quarter included $1.0 million ($0.7 million, net of tax, or $0.01 per share) of restructuring expenses and a discrete tax benefit of $0.4 million ($0.01 per share). Excluding these items from both reporting periods, current quarter income would have been $6.3 million or $0.11 per share, compared to $4.4 million or $0.07 per share in the prior year quarter, an increase of 43% and 44%, respectively. Income from discontinued operations was not material in either quarter.

On a pro forma basis, prepared as if ATT was purchased on October 1, 2009, the current quarter net loss from continuing operations of $1.7 million or $0.03 per share should be compared to income of $6.2 million or $0.10 per share in the prior year quarter. Adjusting these results for the same items discussed above, the current year income from continuing operations of $6.3 million or $0.11 per share should be compared to $6.6 million or $0.11 per share in the prior year quarter.

Segment adjusted EBITDA totaled $40 million in the current quarter, increasing 59% compared to $25 million reported in the prior year quarter. On a pro forma basis, Segment adjusted EBITDA totaled $40 million in both the current and prior year quarters. Segment adjusted EBITDA is defined as income from continuing operations, excluding corporate overhead, interest, taxes, depreciation and amortization, restructuring charges, acquisition-related costs and the benefit (loss) of debt extinguishment, as applicable.

Ron Kramer, Chief Executive Officer, commented, “We are pleased to have started our new year with strong growth. We see positive trends developing in each of our business segments. Telephonics shows excellent bookings, Plastics is growing quickly with improving margins, and our Home and Buildings Products business is performing well in a continued difficult economic environment.”

Mr. Kramer continued, “In addition to maximizing the growth opportunities we have in our existing businesses, we continue to search for additional acquisition opportunities. Our operating platforms are efficient and capable and our balance sheet remains strong. We continue to expect to have opportunities to deploy additional strategic capital to leverage this position and create significant, incremental value for our shareholders.”

Segment Operating Results

Home & Building Products

For the quarter, revenue totaled $198 million compared to $100 million reported in the prior year quarter, driven by the inclusion of ATT results as well as revenue growth at CBP. On a pro forma basis, prepared as if ATT was purchased on October 1, 2009, current quarter HBP revenue increased 4% in comparison to $191 million in the prior year quarter. For the quarter, both ATT and CBP revenue increased approximately 4%, driven mainly by volume.

For the quarter, Segment adjusted EBITDA was $17.5 million, compared to $10.5 million reported in the prior year quarter; the increase was mainly driven by the inclusion of ATT results. This result excludes $11.4 million of cost related to the sale of inventory that was recorded at fair value in connection with acquisition accounting for ATT. On a pro forma basis, prepared as if ATT was purchased on October 1, 2009, current quarter Segment adjusted EBITDA decreased approximately 30% in comparison to the prior year quarter, driven by a combination of higher input costs and lower ATT receipts under the Byrd amendment (anti-dumping compensation from the US government).

Telephonics

For the quarter, revenue totaled $98 million, a decrease of 5% compared to the prior year quarter, primarily due to the reduced rate of production on the C-17 program.

For the quarter, Segment adjusted EBITDA totaled $12.4 million, an increase of $3.8 million or 44%, compared to the prior year; segment operating margin increased 430 basis points compared to the prior year quarter. The improved profitability was driven by favorable program mix, as well as a decline in selling, general and administrative expenses (“SG&A”). SG&A expenses in the prior year quarter were impacted by the timing of somewhat higher research expenditures and additional expense to support sales growth as Telephonics pursued new business in the Unmanned Aerial Vehicle and Air Traffic Management markets.

Contract backlog totaled $424 million at December 31, 2010 compared to $376 million at December 31, 2009, with approximately 73% expected to be filled in the next twelve months.

Plastic Products

First quarter revenue increased 16% to $118 million compared to $102 million in the prior year quarter, driven by volume growth in all geographic regions and the benefit from the pass through of higher resin costs in customer selling prices, partially offset by the negative impact from foreign currency translation.

Segment adjusted EBITDA for the 2011 quarter increased 64% to $9.8 million compared to $6.0 million in the prior year’s first quarter, driven by the revenue growth and, in particular, by an improved operating performance in Europe.

Balance Sheet and Capital Expenditures

Cash and equivalents as of December 31, 2010 totaled $138 million and total debt outstanding was $539 million. Capital expenditures in the first quarter were $18 million. Griffon continues to expect capital spending in 2011 will approximate $50 - $60 million.

Conference Call Information

The Company will hold a conference call today, February 3, 2011, at 4:30 PM ET.

The call can be accessed by dialing 1-877-407-4018 (U.S. participants) or 1-201-689-8471 (International participants). Callers should ask to be connected to Griffon Corporation’s teleconference.

A replay of the call will be available starting on February 3, 2011 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 366168. The replay will be available through February 17, 2011.

Forward-looking Statements

“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income, earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “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 Company’s ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities, including the acquisition of Ames True Temper; 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; the government reduces military spending on projects supplied by Telephonics Corporation; increases in cost of raw materials such as resin and steel; changes in customer demand; political events that could impact the worldwide economy; a downgrade in the Company’s credit ratings; international economic conditions including interest rate and currency exchange fluctuations; the relative mix of products and services which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies such as litigation; unfavorable results of government agency contract audits of Telephonics Corporation; protection and validity of patent and other intellectual property rights; the cyclical nature of the business of certain Griffon operating companies; and possible terrorist threats and actions, and their impact on the global economy. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company 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. The Company 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 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 also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital to further diversify itself.

Griffon currently conducts its operations through Ames True Temper (“ATT”), Clopay Building Products (“CBP”), Telephonics Corporation (“Telephonics”) and Clopay Plastic Products Company (“Plastics”). CBP and ATT comprise the Home & Building Products operating segment.

  • Home & Building Products 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 designs, develops and manufactures high-technology, integrated information, communication and sensor system solutions for use in 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.

For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffoncorp.com.

GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
 
               
For the Three Months Ended December 31,
2010 2009

REVENUE

Home & Building Products $ 198,263 $ 99,522
Telephonics 98,279 103,619
Clopay Plastic Products   117,860     102,016  
Total consolidated net sales $ 414,402   $ 305,157  
 

INCOME (LOSS) BEFORE TAXES AND DISCONTINUED OPERATIONS

Segment operating profit (loss):
Home & Building Products * $ (1,623 ) $ 6,861
Telephonics 10,693 6,995
Clopay Plastic Products   4,142     361  
Total segment operating profit 13,212 14,217
Unallocated amounts (5,106 ) (6,281 )
Loss from debt extinguishment, net - (18 )
Net interest expense   (11,154 )   (2,908 )
 
Income (loss) before taxes and discontinued operations $ (3,048 ) $ 5,010  
 

* Includes $11,364 of costs related to the sale of acquired inventory that was recorded at fair value
in connection with acquisition accounting for ATT.

 

*Unallocated amounts typically include general corporate expenses not attributable to any reportable
segment.

 
GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
            (Unaudited)  

At December 31,
2010

At September 30,
2010

 
CURRENT ASSETS
Cash and equivalents $ 138,407 $ 169,802
Accounts receivable, net of allowances of $6,410 and $6,581 224,277 252,029
Contract costs and recognized income not yet billed,
net of progress payments of $4,105 and $1,423 60,813 63,155
Inventories, net 282,096 268,801
Prepaid and other current assets 61,387 55,782
Assets of discontinued operations   1,538   1,079
Total Current Assets   768,518   810,648
PROPERTY, PLANT AND EQUIPMENT, net 320,726 314,926
GOODWILL 356,966 357,221
INTANGIBLE ASSETS, net 229,675 233,011
OTHER ASSETS 28,895 27,907
ASSETS OF DISCONTINUED OPERATIONS   5,088   5,803
Total Assets $ 1,709,868 $ 1,749,516
 
CURRENT LIABILITIES

 

 

Notes payable and current portion of long-term debt $ 24,862 $ 20,901
Accounts payable 176,461 185,165
Accrued liabilities 77,319 124,700
Liabilities of discontinued operations   4,388   4,289
Total Current Liabilities   283,030   335,055
LONG-TERM DEBT, net of debt discount of $29,626 and $30,650 513,880 503,935
OTHER LIABILITIES 194,318 191,365
LIABILITIES OF DISCONTINUED OPERATIONS   7,358   8,446
Total Liabilities   998,586   1,038,801
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Total Shareholders' Equity   711,282   710,715
Total Liabilities and Shareholders' Equity $ 1,709,868 $ 1,749,516
 
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
                 
 
Three Months Ended December 31,
2010 2009
Revenue $ 414,402 $ 305,157
Cost of goods and services   326,543     234,876  
Gross profit 87,859 70,281
 
Selling, general and administrative expenses 80,445 61,961
Restructuring and other related charges   1,393     1,011  
Total operating expenses   81,838     62,972  
 
Income from operations 6,021 7,309
 
Other income (expense)
Interest expense (11,223 ) (2,970 )
Interest income 69 62
Loss from debt extinguishment, net - (18 )
Other, net   2,085     627  
Total other income (expense)   (9,069 )   (2,299 )
 
Income (loss) before taxes and discontinued operations (3,048 ) 5,010
Provision (benefit) for income taxes   (1,368 )   830  
Income (loss) from continuing operations (1,680 ) 4,180
 
Discontinued operations:
Income from operations of the
discontinued Installation Services business - 170
Provision for income taxes   -     59  
Income from discontinued operations   -     111  
Net income (loss) $ (1,680 ) $ 4,291  
 
Basic earnings (loss) per common share:
Income (loss) from continuing operations $ (0.03 ) $ 0.07
Income from discontinued operations 0.00 0.00
Net income (loss) (0.03 ) 0.07
 
Weighted-average shares outstanding   59,274     58,836  
 
Diluted earnings (loss) per common share:
Income (loss) from continuing operations $ (0.03 ) $ 0.07
Income from discontinued operations 0.00 0.00
Net income (loss) (0.03 ) 0.07
 
Weighted-average shares outstanding   59,274     59,599  
 
 

Note: Due to rounding, the sum of earnings per share of Continuing operations and Discontinued
operations may not equal earnings per share of Net Income (Loss).

 
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
        Three Months Ended December 31,
2010   2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,680 ) $ 4,291
 
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:

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