Griffon Corporation (NYSE: GFF) today reported results for the fourth
quarter and fiscal year ended September 30, 2012.
Ron Kramer, Chief Executive Officer, commented "Fourth quarter results
were in-line with our expectations and underscore how well each of our
businesses are operating in this challenging global economic
environment. Specifically, Telephonics had another strong quarter
benefiting in part from a more favorable product mix, achieving
record-level profitability for the year. Clopay Plastics ("Plastics")
continued to show ongoing improvement from the initiatives undertaken to
address manufacturing inefficiencies arising from our capacity
expansions in Germany and Brazil. Home & Building Products ("HBP"),
benefited from our doors business, but customer build up of snow tool
inventory resulting from last year's unusually warm winter contributed
to lower sales at Ames in the quarter."
Fourth quarter revenue totaled $447 million, decreasing 8% compared to
the 2011 quarter. HBP, Telephonics and Plastics revenue decreased 5%,
13% and 6%, respectively, compared to the prior year quarter.
For the current quarter, Segment adjusted EBITDA totaled $37.2 million,
decreasing 10% compared to $41.5 million in the prior year quarter.
Segment adjusted EBITDA is defined as net income, excluding corporate
overhead, interest, taxes, depreciation and amortization,
acquisition-related expenses including the impact from the fair value of
inventory acquired as part of a business combination, restructuring
charges and the gain (loss) from debt extinguishment, as applicable.
Fourth quarter net income totaled $3.4 million, or $0.06 per share,
compared to $3.4 million, or $0.06 per share, in the prior year quarter.
Fourth quarter 2012 results included restructuring and acquisition
costs, net, of $2.1 million, or $0.04 per share, and net discrete tax
benefits of $3.5 million, or $0.06 per share. Fourth quarter 2011
results included restructuring and acquisition costs, net, of $2.1
million, or $0.03 per share, and net discrete tax benefits of $1.3
million, or $0.02 per share. Current quarter adjusted net income was
$2.0 million, or $0.04 per share, compared to $4.2 million, or $0.07 per
share, in the prior year quarter.
For the full year 2012, revenue totaled $1.9 billion, increasing 2%
compared to 2011, driven by HBP and Plastics, which increased 2% and 5%,
respectively. Telephonics revenue decreased 3% compared to 2011 because
of a decline in the Counter Remote Control Improvised Explosive Device
Electronic Warfare 3.1 ("CREW 3.1") program for which Telephonics serves
as a contract manufacturer.
For the year ended September 30, 2012, Segment adjusted EBITDA totaled
$171.0 million, increasing 3% compared to $165.6 million in the prior
For the year ended September 30, 2012, net income was $17.0 million, or
$0.30 per share, compared to a net loss of $7.4 million, or $0.13 per
share, in the prior year. Adjusted income for 2012 was $15.3 million, or
$0.27 per share, compared to $19.9 million, or $0.34 per share, in the
prior year. Results for 2012 included restructuring of $4.7 million
($3.0 million, net of tax, or $0.05 per share) and acquisition costs of
$0.5 million ($0.3 million, net of tax, or $0.01 per share), as well as
discrete tax benefits, net, of $5.1 million, or $0.09 per share. Full
year 2011 results included a charge of $26.2 million ($16.8 million, net
of tax, or $0.29 per share) resulting from the refinancing of Ames True
Temper ("ATT") acquisition-related debt; $15.2 million ($9.8 million,
net of tax, or $0.17 per share) of cost of goods related to the sale of
inventory recorded at fair value in connection with ATT acquisition
accounting; $7.5 million ($4.9 million, net of tax, or $0.08 per share)
of restructuring charges related to the consolidation of Clopay Building
Product ("CBP") facilities, and headcount reductions at Telephonics and
ATT; $0.4 million ($0.3 million net of tax) of Southern Patio ("SP")
acquisition costs; and $4.6 million, or $0.08 per share, of net discrete
Mr. Kramer continued, "While we are prepared for economic conditions to
remain challenging, our businesses are well-positioned for growth and
improved profitability. We remain committed to driving shareholder value
through a range of opportunities including organic improvement, a
disciplined approach to capital investment and, in the longer term, our
ongoing evaluation of additional strategic transactions."
Segment Operating Results
Revenue in the current quarter decreased $18.1 million or 13% compared
to the 2011 quarter. In the current and prior year quarters, revenue
included $1.8 million and $11.3 million, respectively, related to the
CREW 3.1 program. Excluding CREW 3.1 from both quarters, revenue
decreased 7% from the prior year quarter primarily due to timing of
Mobile Surveillance Capability and Integrated Fix Tower awards for
follow-on production, and timing of awards for Ground Surveillance
radars and Firescout, partially offset by LAMPS MMR.
Segment adjusted EBITDA in the 2012 quarter was $13.7 million,
increasing 2% from the prior year quarter, mainly driven by higher gross
profit from a combination of favorable program mix and manufacturing
efficiencies, and lower selling, general and administrative expenses
related to the timing of proposal and research and development
activities. Operating results also benefited from cost reductions
resulting from the voluntary early retirement plan undertaken in the
prior year and other restructuring activities implemented earlier this
Revenue in 2012 decreased $13.9 million or 3% compared to the prior
year. In the current and prior year, revenue included $24.1 million and
$44.3 million, respectively, related to the CREW 3.1 program. Excluding
CREW 3.1 from both years, revenue increased 2% over the prior year
primarily attributable to LAMPS MMR.
Segment adjusted EBITDA for the full year 2012 totaled $60.6 million,
increasing 19% over the prior year, mainly driven by higher gross profit
from a combination of favorable program mix and manufacturing
efficiencies, partially offset by higher selling, general and
administrative expenses primarily due to the timing of proposal and
research and development activities. Operating results also benefited
from cost reductions resulting from the voluntary early retirement plan
undertaken in the prior year and other restructuring activities
implemented earlier this year.
Contract backlog totaled a record $451 million at September 30, 2012
compared to $417 million at September 30, 2011, with approximately 70%
expected to be filled within the next twelve months.
Revenue in the current quarter decreased $8.8 million, or 6%, compared
to the 2011 quarter; a volume increase of 3% and a 1% benefit from
favorable mix were more than offset by the 9% unfavorable impact of
translation of European and Brazilian revenue into a stronger U.S.
dollar. Selling price adjustments due to resin fluctuations reduced
revenue by 1% in the quarter; Plastics adjusts customer selling prices,
based on underlying resin costs, on a delayed basis.
Segment adjusted EBITDA in the 2012 quarter increased $2.0 million, or
19%, compared to the prior year quarter, primarily driven by the
improved volume, favorable mix and continued efficiency improvements on
past capital initiatives, partially offset by a 3% unfavorable impact of
foreign exchange as well as the impact of somewhat higher selling,
general and administrative expenses. The impact of resin was not
material in the quarter.
Revenue in 2012 increased $27.4 million, or 5%, compared to 2011, driven
by a 10% increase in volume. The benefit of the volume growth was
partially offset by a 5% unfavorable impact of translation of European
and Brazilian revenue into a stronger U.S. dollar. Selling price
adjustments due to resin fluctuations did not have a significant impact
on 2012 revenue.
Segment adjusted EBITDA in 2012 increased $2.4 million, or 6%, compared
to the prior year, primarily driven by the higher volume, a $3.7 million
favorable resin impact and efficiency improvement on past capital
initiatives, partially offset by a 2% unfavorable impact of foreign
exchange, product mix and the impact of somewhat higher selling, general
and administrative expenses.
Home & Building Products
Fourth quarter revenue decreased $10.6 million, or 5%, compared to the
prior year quarter. ATT revenue decreased 12% primarily due to lower
snow tool sales. Typically, ATT has strong snow tool sales in the last
fiscal quarter as customers build inventory in anticipation of the
coming snow season; however, excess snow tool inventory remaining at
customers following the record warm weather of the 2011-2012 winter
substantially reduced such sales. The snow tool impact was partially
offset by the inclusion of SP. CBP revenue decreased 1% mainly due to
volume, partially offset by favorable mix.
Segment adjusted EBITDA in the 2012 quarter decreased $6.4 million, or
37%, compared to the prior year quarter. The decrease was driven by the
lower snow volume that also affected ATT plant absorption of
manufacturing expenses in the quarter. The ATT decline was partially
offset by CBP favorable product mix as well as CBP manufacturing
efficiencies, and lower warehouse and distribution costs.
Revenue in 2012 increased $16.8 million, or 2%, compared to the prior
year. ATT revenue was flat with the prior year, mainly because of weak
snow tool sales, driven by the absence of snow throughout much of the
country during the 2011-2012 winter, substantially offset by the
inclusion of SP, acquired in October 2011. CBP revenue increased 4% due
to a combination of favorable mix and higher volume.
Segment adjusted EBITDA in 2012 decreased $6.7 million, or 9%, compared
to the prior year, driven mainly by the decline in snow volume at ATT;
the ATT volume decline was partially offset by the inclusion of SP as
well as improved CBP profitability driven by increased volume, favorable
mix, and lower warehouse and distribution costs.
Griffon's effective tax rate for 2012 was 22.5% compared to a benefit of
48.2% in 2011. The 2012 rate reflected net discrete benefits of $5.1
million primarily from the release of previously established reserves
for uncertain tax positions on conclusion of various tax audits, and
benefits related to various tax planning initiatives. The 2011 rate
reflected net discrete benefits of $4.6 million primarily from tax
planning related to unremitted foreign earnings. Excluding discrete tax
items, the 2012 rate would have been 45.8%, and the 2011 benefit would
have been 16.4%. In both years, the effective rates reflect the impact
of permanent differences not deductible in determining taxable income,
mainly limited deductibility of restricted stock, as well as the impact
of tax reserves and changes in earnings mix between domestic and
In 2012 and 2011, respectively, Telephonics recognized $3.8 and $3.0
million of restructuring charges in connection with two discrete
voluntary early retirement plans and other restructuring costs related
to changes in its organizational structure; such charges were
personnel-related, reducing headcount by 185 employees.
In both 2012 and 2011, ATT recognized $0.9 million in restructuring
costs primarily related to termination benefits, reducing headcount by
The consolidation of the CBP manufacturing facilities plan, announced in
June 2009, was completed in 2011. In completing the consolidation plan,
CBP incurred total pre-tax exit and restructuring costs of $9.0 million,
substantially all of which were cash charges, and had $10.4 million of
related capital expenditures. The restructuring costs were $3.6 million
in 2011, $4.2 million in 2010 and $1.2 million in 2009.
Balance Sheet and Capital Expenditures
At September 30, 2012, the Company had cash and equivalents of $210
million, total debt outstanding of $700 million, net of discounts, and
$178 million available for borrowing under its revolving credit
facility. Capital expenditures were $68.9 million in 2012. The Company
expects capital spending of $60 to $65 million for 2013.
During 2012, the Company purchased 1.2 million shares of its common
stock under an authorized stock repurchase plan, for $10.4 million, of
which 486,000 shares were purchased in the fourth quarter, for $4.7
million. At September 30, 2012, the Company had a remaining
authorization of $38.3 million. During 2011, the Company's Employee
Stock Ownership Plan purchased 1.9 million shares for a total of $20.0
million and the Company purchased 1.5 million shares for a total of
$12.4 million under authorized repurchase plans.
Conference Call Information
The Company will hold a conference call today, November 13, 2012, at
4:30 PM ET.
The call can be accessed by dialing 1-800-231-9012 (U.S. participants)
or 1-719-457-2619 (International participants). Callers should ask to be
connected to the Griffon Corporation teleconference.
A replay of the call will be available starting on November 13, 2012 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: 4942707. The
replay will be available through November 27, 2012.
"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 supplied
products; 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,
including as a result of sequestration which is currently scheduled to
take effect in January 2013; 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 (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. In order to further diversify,
Griffon also seeks out, evaluates and, when appropriate, will acquire
additional businesses that offer potentially attractive returns on
Griffon currently conducts its operations through three segments:
For more information on Griffon and its operating subsidiaries, please
see the Company's website at www.griffoncorp.com.
Griffon evaluates performance and allocates resources based on each
segments' operating results before interest income or expense, income
taxes, depreciation and amortization, gain (loss) from debt
extinguishment, unallocated amounts, restructuring charges and
acquisition-related expenses including the impact from the fair value of
inventory acquired as part of a business combination ("Segment Adjusted
EBITDA"). Griffon believes this information is useful to investors.
The following table provides a reconciliation of Segment Adjusted EBITDA
to Income (loss) before taxes:
The following is a reconciliation of each segment's operating results to
Segment Adjusted EBITDA:
net of progress payments of $3,748 and $9,697
Notes payable and current portion of long-term debt
Liabilities of discontinued operations
Total Current Liabilities
COMMITMENTS AND CONTINGENCIES
Total Liabilities and Shareholders' Equity
Griffon evaluates performance based on Earnings per share and Net income
(loss) excluding restructuring charges, gain (loss) from debt
extinguishment, discrete tax items and acquisition-related expenses
including the impact from the fair value of inventory acquired as part
of a business combination. Griffon believes this information is useful
to investors. The following table provides a reconciliation of Earnings
(loss) per share and Net income (loss) to Adjusted earnings per share
and Adjusted net income:
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