{"id":520349,"date":"2021-07-29T16:13:14","date_gmt":"2021-07-29T20:13:14","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/griffon-corporation-announces-third-quarter-results\/"},"modified":"2021-07-29T16:13:14","modified_gmt":"2021-07-29T20:13:14","slug":"griffon-corporation-announces-third-quarter-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/griffon-corporation-announces-third-quarter-results\/","title":{"rendered":"Griffon Corporation Announces Third Quarter Results"},"content":{"rendered":"

<\/p>\n

Griffon Corporation Announces Third Quarter Results<\/span><\/b><\/p>\n

NEW YORK–(BUSINESS WIRE<\/a>)–
\nGriffon Corporation (\u201cGriffon\u201d or the \u201cCompany\u201d) (NYSE:GFF) today reported results for the third quarter of fiscal 2021 ended June 30, 2021.\n<\/p>\n

\nConsolidated revenue for the third quarter totaled $646.8 million, a 2% increase compared to the prior year quarter revenue of $632.1 million, or 4% excluding prior year revenue of $7.9 million related to the SEG disposition.\n<\/p>\n

\nNet income totaled $16.7 million, or $0.31 per share, compared to $21.8 million, or $0.50 per share, in the prior year quarter. Current year adjusted net income was $22.8 million, or $0.43 per share, compared to $25.9 million, or $0.59 per share, in the prior year quarter (see reconciliation of Net income to Adjusted net income for details). The current year quarter includes 8.7 million shares of common stock issued in August 2020, which reduced adjusted EPS by approximately $0.08.\n<\/p>\n

\nAdjusted EBITDA for the third quarter was $64.8 million, decreasing 7% from the prior year quarter of $69.5 million. Unallocated amounts excluding depreciation (primarily corporate overhead) in the third quarters of 2021 and 2020 was $10.9 million and $11.1 million, respectively. Adjusted EBITDA excluding unallocated amounts totaled $75.7 million in the third quarter of 2021, decreasing 6% from the prior year of $80.5 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (see reconciliation of Adjusted EBITDA to Income before taxes).\n<\/p>\n

\nRonald J. Kramer, Chairman and Chief Executive Officer, commented, “We are pleased with our results this quarter as our businesses continue to see strong demand and backlog despite a business environment impacted by rapidly rising costs of raw materials, transportation and labor. The Ames Strategic Initiative, coupled with price increases and efficiency programs, remain on track to drive margin expansion and shareholder value.”\n<\/p>\n

Segment Operating Results<\/span><\/b><\/p>\n

Consumer and Professional Products (“CPP”)<\/b><\/p>\n

\nCPP revenue in the current quarter totaling $324.8 million decreased 1% compared to the prior year period due to reduced volume of 9%, primarily in the U.S., due to shipping delays related to availability of transportation, partially offset by favorable mix of 3% and a favorable foreign currency impact of 5%.\n<\/p>\n

\nCPP Adjusted EBITDA in the current quarter was $29.4 million, decreasing 21% from the prior year quarter primarily from decreased revenue noted above, increased distribution and material costs coupled with the lag in realization of price increases, and COVID-19 related inefficiencies. The current quarter included a favorable foreign currency impact of 4%.\n<\/p>\n

Strategic Initiative<\/span><\/p>\n

\nIn November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced the broadening of this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.\n<\/p>\n

\nThe expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, certain AMES global operations will be consolidated to optimize facilities footprint and talent. Second, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth. Third, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.\n<\/p>\n

\nExpanding the roll-out of the new business platform from our AMES U.S. operations to include AMES\u2019 global operations will extend the duration of the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30 million to $35 million and a reduction in inventory of $30 million to $35 million, both based on fiscal 2020 operating levels.\n<\/p>\n

\nThe cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65 million and capital investments of approximately $65 million. The one-time charges are comprised of $46 million of cash charges, which includes $26 million of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20 million of facility and lease exit costs. The remaining $19 million of charges are non-cash and are primarily related to asset write-downs.\n<\/p>\n

\nDuring the nine months ended June 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $14.7 million. These charges were comprised of cash charges of $10.8 million and non-cash, asset-related charges of $3.9 million; the cash charges included $1.8 million for one-time termination benefits and other personnel-related costs and $9.0 million for facility exit costs. Since inception of this initiative in fiscal 2020, total cumulative charges totaled $28.3 million, comprised of cash charges of $19.8 million and non-cash, asset-related charges of $8.6 million; the cash charges included $7.4 million for one-time termination benefits and other personnel-related costs and $12.4 million for facility exit costs. Furthermore, since inception of this initiative, total capital expenditures of $14.8 million were driven by investment in CPP business intelligence systems and e-commerce facility.\n<\/p>\n

Home and Building Products (“HBP”)<\/b><\/p>\n

\nHBP revenue in the current quarter totaling $259.4 million increased 18% from the prior year quarter, driven by increased volume of 5%, and favorable mix and pricing of 13%.\n<\/p>\n

\nHBP Adjusted EBITDA in the current quarter was $42.2 million, increasing 7% compared to the prior year quarter. EBITDA benefited from increased revenue noted above, partially offset by increased material costs, coupled with the lag in realization of price increases, and COVID-19 related inefficiencies.\n<\/p>\n

Defense Electronics (“DE”)<\/b><\/p>\n

\nDE revenue in the current quarter totaled $62.6 million, decreasing 25% from the prior year quarter. The prior year results include revenue from the SEG business of $7.9 million. Excluding the divestiture of SEG from prior year results, revenue decreased $13.5 million, or 18%. The decrease was driven by reduced volume due to the timing of deliveries on Communications and Radar systems, partially offset by volume increases on Naval & Cyber Systems.\n<\/p>\n

\nDE Adjusted EBITDA in the current quarter was $4.1 million, remaining consistent with the prior year quarter. Excluding the divestiture of SEG from the prior year results, Adjusted EBITDA increased 9% primarily due to reduced operating expenses, including the benefit from first quarter cost reductions, and improved Naval & Cyber Systems program performance, partially offset by cost growth for Radar systems.\n<\/p>\n

\nContract backlog was $375.0 million at June 30, 2021 compared to $341.0 million at June 30, 2020 (excludes $9.4 million of SEG related backlog) with 66% expected to be fulfilled in the next 12 months. Backlog was approximately $370.0 million at September 30, 2020 (excludes approximately $10.0 million of SEG related backlog). During the current quarter and year-to-date periods, DE was awarded several new contracts and received incremental funding on existing contracts approximating $84 million and $189 million (excludes $5.5 million of SEG awards from the first quarter), respectively; the trailing twelve-month book-to-bill ratio was 1.1x.\n<\/p>\n

Taxes<\/span><\/b><\/p>\n

\nThe Company reported pretax income for the quarters ended June 30, 2021 and 2020, respectively, and recognized tax provisions of 42.5% and 36.7%, respectively. Excluding all items that affect comparability, the effective tax rates for the quarters ended June 30, 2021 and 2020 were 31.2% and 30.8%, respectively. The current year-to-date effective tax rate was 34.1% and the rate excluding items that affect comparability was 31.1%.\n<\/p>\n

Balance Sheet and Capital Expenditures<\/span><\/b><\/p>\n

\nAt June 30, 2021, the Company had cash and equivalents of $220.7 million and total debt outstanding of $1.06 billion, resulting in net debt of $834.9 million. Leverage, as calculated in accordance with our credit agreement, was 2.9 times EBITDA. Borrowing availability under the revolving credit facility was $362.2 million subject to certain loan covenants. Capital expenditures were $9.9 million for the quarter ended June 30, 2021.\n<\/p>\n

Share Repurchases<\/span><\/b><\/p>\n

\nAs of June 30, 2021, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations during the quarter ended June 30, 2021.\n<\/p>\n

Conference Call Information<\/span><\/b><\/p>\n

\nThe Company will hold a conference call today, July 29, 2021, at 4:30 PM ET.\n<\/p>\n

\nThe call can be accessed by dialing 1-855-327-6837 (U.S. participants) or 1-631-891-4304 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 10015789. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.\n<\/p>\n

\nA replay of the call will be available starting on Thursday, July 29, 2021 at 7:30 PM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 10015789. The replay will be available through Thursday, August 12, 2021 at 11:59 PM ET.\n<\/p>\n

Forward-looking Statements<\/span><\/b><\/p>\n

\n\u201cSafe Harbor\u201d 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 \u201cforward-looking statements\u201d and may be indicated by words or phrases such as \u201canticipates,\u201d \u201csupports,\u201d \u201cplans,\u201d \u201cprojects,\u201d \u201cexpects,\u201d \u201cbelieves,\u201d \u201cshould,\u201d \u201cwould,\u201d \u201ccould,\u201d \u201chope,\u201d \u201cforecast,\u201d \u201cmanagement is of the opinion,\u201d \u201cmay,\u201d \u201cwill,\u201d \u201cestimates,\u201d \u201cintends,\u201d \u201cexplores,\u201d \u201copportunities,\u201d 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; 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\u2019s operating companies; the ability of Griffon\u2019s 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 or 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 the impact 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\u2019s businesses; political events that could impact the worldwide economy; a downgrade in Griffon\u2019s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon\u2019s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon\u2019s businesses, which impacts 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\u2019s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon\u2019s operating companies; and possible terrorist threats and actions and their impact on the global economy; the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers and suppliers; Griffon’s ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, tax law changes 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\u2019s 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.\n<\/p>\n

About Griffon Corporation<\/span><\/b><\/p>\n

\nGriffon 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 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.\n<\/p>\n

\nGriffon currently conducts its operations through three reportable segments:\n<\/p>\n