Griffon Corporation Announces Third Quarter Results

Griffon Corporation Announces Third Quarter Results

NEW YORK--(BUSINESS WIRE)-- Griffon Corporation ("Griffon" or the "Company") (NYS: GFF) today reported results for the fiscal third quarter ended June 30, 2013.

Third quarter revenue totaled $510 million, increasing 6% compared to the prior year quarter. Telephonics and Home and Building Products ("HBP") revenue increased 29% and 1%, respectively while Clopay Plastics ("Plastics") revenue decreased 2%, all in comparison to the prior year quarter.

Segment adjusted EBITDA totaled $46.8 million compared to $51.8 million in the prior year quarter. Segment adjusted EBITDA is defined as net income, excluding interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, and gains (losses) from pension settlement and debt extinguishment, as applicable.

Net income totaled $3.6 million, or $0.06 per share, compared to $9.0 million, or $0.16 per share, in the prior year quarter. Current quarter results included restructuring costs of $1.6 million ($1.0 million, net of tax, or $0.02 per share) and a discrete tax benefit of $1.5 million, or $0.03 per share. The prior year quarter included a discrete tax benefit of $1.6 million or $0.03 per share. Excluding these items from both periods, current quarter adjusted net income was $3.1 million, or $0.06 per share, compared to $7.4 million, or $0.13 per share, in the prior year quarter.

Ronald J. Kramer, Chief Executive Officer, commented, "We are performing well in what continues to be a challenging environment. Our performance was in-line with our expectations for the quarter and consistent with the outlook for the year. We expect to deliver enhanced operating performance as the global economy continues to recover."

Segment Operating Results


Third quarter revenue totaled $130 million, increasing 29% compared to the prior year quarter. The current and prior year quarters included $20.0 million and $2.7 million, respectively, of revenue related to electronic warfare programs where Telephonics serves as a contract manufacturer; excluding revenue from these programs, current quarter revenue increased 12% from the prior year quarter primarily due to work performed on Multi-mode Surveillance Radar contracts.

Third quarter segment adjusted EBITDA was $13.1 million, decreasing 17% from the prior year quarter, mainly driven by product mix, partially offset by lower expenditures associated with the timing of research and development ("R&D") initiatives and proposal efforts. The prior year quarter benefitted from higher gross profit and favorable manufacturing efficiencies, both of which were primarily due to an increased level of Light Airborne Multi-purpose Systems Multi Mode Radar deliveries.

Contract backlog totaled $440 million at June 30, 2013 compared to $451 million and $422 million at September 30, 2012 and June 30, 2012, respectively, with approximately 67% expected to be filled within the next twelve months.

Plastic Products

Third quarter revenue totaled $139 million, decreasing 2% compared to the prior year quarter. The decrease reflected lower volume (5%), a portion of which was attributable to Plastics exiting certain low margin products, partially offset by favorable mix (2%) and the pass through of higher resin costs in customer selling prices (1%). The impact of currency in the quarter was not significant.

Third quarter segment adjusted EBITDA was $12.2 million, increasing 20% from the prior year quarter, driven by product mix, continued efficiency improvements and a $0.5 million favorable resin benefit.

Home & Building Products

Third quarter revenue totaled $241 million, increasing 1% compared to the prior year quarter. Ames True Temper's ("ATT") revenue decreased 2% in comparison to the prior year quarter due to lower demand for lawn and garden tools, driven by cold and wet weather conditions in North America. Clopay Building Products ("CBP") revenue increased 5%, mainly due to improved volume and favorable mix.

Third quarter segment adjusted EBITDA was $21.5 million, decreasing 17% compared to the prior year quarter. The decline resulted primarily from lower ATT revenue, which also affected absorption of manufacturing expenses, partially offset by higher volume and favorable mix at CBP. ATT also had manufacturing inefficiencies in connection with its plant consolidation initiative. These inefficiencies are expected to continue until the initiative is complete in 2014.


The effective tax rates for the quarters ended June 30, 2013 and 2012 were 54.0% and 39.7%, respectively. The rates include discrete benefits in the current and prior year quarter of $1.5 million and $1.6 million respectively, 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 rates for the quarters ended June 30, 2013 and 2012 were 73.1% and 50.5%, respectively. Rates in both periods reflect the impact of permanent differences not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations, all of which are material relative to the level of pretax result.


In January 2013, ATT announced its intention to close certain manufacturing facilities, and consolidate operations primarily into its Camp Hill and Carlisle, PA locations. The actions, to be completed by the end of fiscal 2014, 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. Management estimates that, upon completion, these actions will result in annual cash savings exceeding $10 million, based on current operating levels.

ATT anticipates incurring pre-tax restructuring and related exit costs approximating $8.0 million, comprised of cash charges of $4.0 million and non-cash, asset-related charges of $4.0 million. The cash charges will include $3.0 million for personnel-related costs and $1.0 million for facility exit costs. ATT expects $20 million in capital expenditures in connection with this initiative and, to date, has incurred $5.4 million and $8.4 million in restructuring costs and capital expenditures, respectively.

During the current quarter, HBP recognized $0.9 million in restructuring costs primarily related to one-time termination benefits and other personnel costs, and facility costs related to the ATT plant consolidation initiative.

In February 2013, Plastics announced a restructuring project, primarily in Europe, to exit low margin business and eliminate approximately 80 positions, resulting in restructuring charges of $4.8 million in the second quarter of this year, primarily for one-time termination benefits and other personnel costs. The project is substantially complete.

During the current quarter, Telephonics recognized $0.8 million in restructuring costs in connection with the termination of a facility lease. The facility was vacated as a result of the headcount reductions and changes in organizational structure Telephonics undertook in the past two years.

Balance Sheet

At June 30, 2013, the Company had cash and equivalents of $126 million, total debt outstanding of $692 million, net of discounts, and $199 million available for borrowing, subject to certain loan covenants, under its revolving credit facility.

Stock Repurchases

During the third quarter, the Company purchased 0.3 million shares of its common stock under an authorized stock repurchase plan, for $3.0 million. At June 30, 2013, the Company had a remaining authorization of $17.7 million.

Conference Call Information

The Company will hold a conference call today, August 6, 2013, at 4:30 PM ET.

The call can be accessed by dialing 1-800-500-0177 (U.S. participants) or 1-719-325-2250 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference.

A replay of the call will be available starting on August 6, 2013 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: 9362205. The replay will be available through August 20, 2013.

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; 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 Telephonics Corporation supplies products, including as a result of sequestration which is currently scheduled to take effect in March 2013; increases in the cost of raw materials such as resin and steel; changes in customer demand; 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 Company'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; 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; 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, 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 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 three segments:

  • Home & Building Products consists of two companies, Ames True Temper, Inc. ("ATT") and Clopay Building Products Company, Inc. ("CBP"):
    • ATT 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.
  • Telephonics Corporation designs, develops and manufactures high-technology, integrated information, communication and sensor system solutions for use in military and commercial markets worldwide.
  • Clopay Plastic Products Company, Inc. 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

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, and gains (losses) from pension settlement and debt extinguishment, as applicable ("Segment adjusted EBITDA"). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:

(in thousands)
For the Three Months EndedFor the Nine Months Ended
June 30,June 30,


 2013  2012  2013  2012 
Home & Building Products:
CBP 112,285  106,910  314,651  309,825 
Home & Building Products240,617237,221656,529672,199
Plastics 139,212  141,909  418,111  421,889 
Total consolidated net sales$509,826 $480,246 $1,422,318 $1,413,709 
Segment adjusted EBITDA:
Home & Building Products$21,478$25,831$56,272$59,434
Plastics 12,161  10,117  33,832  27,462 
Total Segment adjusted EBITDA46,78551,834135,119133,808
Net interest expense(13,137)(12,855)(39,125)(38,775)
Segment depreciation and amortization(17,639)(16,733)(52,467)(48,373)
Unallocated amounts(6,573)(7,253)(22,140)(20,041)
Restructuring charges(1,604)-(12,048)(1,795)
Acquisition costs---(178)
Loss on pension settlement -  -  (2,142) - 
Income before taxes$7,832 $14,993 $7,197 $24,646 

The following is a reconciliation of each segment's operating results to Segment adjusted EBITDA:

(in thousands)
Three months ended June 30,Nine Months Ended June 30,
2013 2012 20132012
Home & Building Products
Segment operating profit$11,549$17,482$22,655$35,412
Depreciation and amortization9,0758,34927,09223,571
Restructuring charges854-6,525273
Acquisition costs - -  - 178
Segment adjusted EBITDA21,47825,83156,27259,434
Segment operating profit10,59214,11338,99040,171
Depreciation and amortization1,8041,7735,2755,219
Restructuring charges 750 -  750 1,522
Segment adjusted EBITDA13,14615,88645,01546,912
Clopay Plastic Products
Segment operating profit5,4013,5068,9597,879
Depreciation and amortization6,7606,61120,10019,583
Restructuring charges - -  4,773 -
Segment adjusted EBITDA12,16110,11733,83227,462
All segments:
Income from operations - as reported20,36228,20244,80762,698
Unallocated amounts6,5737,25322,14020,041
Other, net607(354)1,515723
Loss on pension settlement - -  2,142 -
Segment operating profit27,54235,10170,60483,462
Depreciation and amortization17,63916,73352,46748,373
Restructuring charges1,604-12,0481,795
Acquisition costs - -  - 178
Segment adjusted EBITDA$46,785$51,834 $135,119$133,808


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

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Three Months Ended June 30,Nine Months Ended June 30,
 2013  2012  2013  2012