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Griffon Corporation Announces First Quarter Results

Stocks in this article: GFF

About Griffon Corporation

Griffon Corporation (the “Griffon” or “Company”), 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 www.griffoncorp.com.

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:

GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
(Unaudited)
       
For the Three Months Ended December 31,
2012 2011
REVENUE
Home & Building Products:
ATT $ 77,309 $ 98,741
CBP   112,867     111,647  
Home & Building Products 190,176 210,388
Telephonics 96,050 104,513
Plastics   137,523     136,130  
Total consolidated net sales $ 423,749   $ 451,031  
 
Segment adjusted EBITDA:
Home & Building Products $ 17,239 $ 17,750
Telephonics 16,364 15,690
Plastics   9,319     8,180  
Total Segment adjusted EBITDA 42,922 41,620
Net interest expense (13,079 ) (13,000 )
Segment depreciation and amortization (17,256 ) (15,418 )
Unallocated amounts (7,587 ) (6,335 )
Restructuring charges (1,108 ) (1,795 )
Acquisition costs - (178 )
Loss on pension settlement   (2,142 )   -  
Income before taxes $ 1,750   $ 4,894  
 
Unallocated amounts typically include general corporate expenses not attributable to a reportable segment.

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

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
BY REPORTABLE SEGMENT
(in thousands)
(Unaudited)
       
Three Months Ended December 31,
2012 2011
 
Home & Building Products
Segment operating profit $ 7,271 $ 9,834
Depreciation and amortization 8,860 7,465
Restructuring charges 1,108 273
Acquisition costs   -   178
Segment adjusted EBITDA 17,239 17,750
 
Telephonics
Segment operating profit 14,645 12,515
Depreciation and amortization 1,719 1,653
Restructuring charges   -   1,522
Segment adjusted EBITDA 16,364 15,690
 
Clopay Plastic Products
Segment operating profit 2,642 1,880
Depreciation and amortization   6,677   6,300
Segment adjusted EBITDA 9,319 8,180
 
All segments:
Income from operations - as reported 14,343 17,847
Unallocated amounts 7,587 6,335
Loss on pension settlement 2,142 -
Other, net   486   47
Segment operating profit 24,558 24,229
Depreciation and amortization 17,256 15,418
Restructuring charges 1,108 1,795
Acquisition costs   -   178
Segment adjusted EBITDA $ 42,922 $ 41,620
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
     
 
Three Months Ended December 31,
2012 2011
Revenue $ 423,749 $ 451,031
Cost of goods and services   326,079     348,323  
Gross profit 97,670 102,708
 
Selling, general and administrative expenses 82,219 83,066
Restructuring and other related charges   1,108     1,795  
Total operating expenses   83,327     84,861  
 
Income from operations 14,343 17,847
 
Other income (expense)
Interest expense (13,107 ) (13,063 )
Interest income 28 63
Other, net   486     47  
Total other income (expense)   (12,593 )   (12,953 )
 
Income before taxes 1,750 4,894
Provision for income taxes   1,192     2,407  
Net income $ 558   $ 2,487  
 
Basic earnings per common share $ 0.01   $ 0.04  
 
Weighted-average shares outstanding   55,153     56,025  
 
 
Diluted earnings per common share $ 0.01   $ 0.04  
 
Weighted-average shares outstanding   57,265     57,082  
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
(Unaudited)
At December 31, 2012 At September 30, 2012
 
CURRENT ASSETS
Cash and equivalents $ 150,065 $ 209,654
Accounts receivable, net of allowances of $5,573 and $5,433 237,305 239,857
Contract costs and recognized income not yet billed, net of progress payments of $2,075 and $3,748
74,579 70,777
Inventories, net 268,109 257,868
Prepaid and other current assets 53,582 47,472
Assets of discontinued operations   571   587
Total Current Assets   784,211   826,215
PROPERTY, PLANT AND EQUIPMENT, net 357,419 356,879
GOODWILL 359,294 358,372
INTANGIBLE ASSETS, net 228,574 230,473
OTHER ASSETS 28,550 31,317
ASSETS OF DISCONTINUED OPERATIONS   2,798   2,936
Total Assets $ 1,760,846 $ 1,806,192
     
CURRENT LIABILITIES

 

 

Notes payable and current portion of long-term debt $ 19,081 $ 17,703
Accounts payable 132,799 141,704
Accrued liabilities 80,886 110,337
Liabilities of discontinued operations   2,084   3,639
Total Current Liabilities   234,850   273,383
LONG-TERM DEBT, net of debt discount of $15,797 and $16,607 679,538 681,907
OTHER LIABILITIES 186,860 193,107
LIABILITIES OF DISCONTINUED OPERATIONS   3,395   3,643
Liabilities of discontinued operations

 

  1,104,643     1,152,040
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Total Shareholders' Equity   656,203   654,152
Total Liabilities and Shareholders' Equity

 

$ 1,760,846 $ 1,806,192
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
     
Three Months Ended December 31,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 558 $ 2,487
 
Adjustments to reconcile net income to
net cash used in operating activities:
 
Depreciation and amortization 17,357 15,515
Stock-based compensation 2,960 2,257
Provision for losses on accounts receivable 206 569
Amortization/write-off of deferred financing costs and debt discounts 1,539 1,505
Deferred income taxes 458 (141 )
Gain on sale/disposal of assets (733 ) (44 )
Change in assets and liabilities, net of assets and liabilities acquired:
(Increase) decrease in accounts receivable and contract costs and recognized income not yet billed
(529 ) 8,067
Increase in inventories (9,800 ) (30,318 )
Decrease in prepaid and other assets 3,625 4
Decrease in accounts payable, accrued liabilities and income taxes payable
(50,165 ) (14,582 )
Other changes, net   2,022     838  
Net cash used in operating activities (32,502 ) (13,843 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (17,288 ) (19,892 )
Acquired business, net of cash acquired - (22,432 )
Proceeds from sale of assets   1,055     61  
Net cash used in investing activities (16,233 ) (42,263 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,464 ) (1,184 )
Purchase of shares for treasury (7,336 ) (2,351 )
Proceeds from issuance of long-term debt 303 -
Payments of long-term debt (4,062 ) (6,826 )
Change in short-term borrowings 1,643 -
Financing costs - (4 )
Tax effect from exercise/vesting of equity awards, net 150 834
Other, net   184     (14 )
Net cash used in financing activities (10,582 ) (9,545 )
 
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities   (463 )   (277 )
Net cash used in discontinued operations (463 ) (277 )
 
Effect of exchange rate changes on cash and equivalents   191     257  
 
NET DECREASE IN CASH AND EQUIVALENTS (59,589 ) (65,671 )
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD   209,654     243,029  
CASH AND EQUIVALENTS AT END OF PERIOD $ 150,065   $ 177,358  

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, acquisition-related expenses, gains (losses) from pension settlement and debt extinguishment, and discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Earnings per share and Net income to Adjusted earnings per share and Adjusted net income:

GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF INCOME TO ADJUSTED INCOME (in thousands, except per share data) (Unaudited)

 
      For the Three Months Ended December 31,
2012   2011
 
Net income $ 558 $ 2,487
 
Adjusting items, net of tax:
Restructuring and related 720 1,167
Acquisition costs - 116
Loss on pension settlement 1,392 -
Discrete tax benefits   (55 )   -
 
Adjusted net income $ 2,615   $ 3,770
 
Earnings per common share $ 0.01 $ 0.04
 
Adjusting items, net of tax:
Restructuring 0.01 0.02
Acquisition costs - 0.00
Loss on pension settlement 0.02 -
Discrete tax benefits (0.00 ) -
 
Adjusted earnings per share $ 0.05   $ 0.07
 
Weighted-average shares outstanding (in thousands)   57,265     57,082




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