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NEW YORK--(BUSINESS WIRE)-- Griffon Corporation (“Griffon” or the “Company”) (NYSE: GFF) today reported results for the fiscal third quarter ended June 30, 2022.
Revenue for the third quarter totaled $768.2 million, a 31% increase compared to the prior year of $584.2 million. Revenue excluding the Hunter acquisition increased 13% to $662.4 million. Hunter contributed $105.8 million.
Income from continuing operations totaled $52.8 million, or $0.98 per share, compared to $14.8 million, or $0.28 per share, in the prior year quarter. Current year third quarter adjusted income from continuing operations was a record $66.5 million, or $1.23 per share, compared to $20.8 million, or $0.39 per share, in the prior year quarter (see reconciliation of Income from continuing operations to Adjusted income from continuing operations for details).
Adjusted EBITDA from continuing operations for the third quarter was $134.8 million, increasing 124% from the prior year quarter of $60.1 million. Adjusted EBITDA from continuing operations, excluding unallocated amounts (primarily corporate overhead) of $13.4 million in the current quarter and $11.5 million in the prior year quarter, totaled $148.2 million, increasing 107% from the prior year of $71.5 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (for a reconciliation of “Adjusted EBITDA”, a non-GAAP measure, to income before taxes from continuing operations, see the attached table).
On June 27, 2022, Griffon closed the sale of Telephonics to TTM Technologies, Inc. (NASDAQ: TTMI) for $330 million in cash, subject to customary post-closing adjustments.
On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction. This process is ongoing and, as previously announced, Griffon does not intend to disclose further developments until its Board approves a specific transaction or otherwise concludes its review of strategic alternatives. Griffon has retained Goldman Sachs & Co. LLC as its financial advisor, and Dechert LLP as its legal counsel to assist in the review process.
Ronald J. Kramer, Chairman and Chief Executive Officer, commented, "We are very pleased with our operating performance this quarter. Griffon’s results highlight the abilities of our strong management teams and global workforce to navigate through a challenging macroeconomic environment while continuing to execute on our plan.
Griffon's third quarter results were driven by strength in the Home and Building Products segment, with favorable price trends partially offset by reduced residential volume. Commercial product performance was particularly strong due to favorable volume and pricing, as we continue to realize benefits from the investments we made in CornellCookson and its integration with Clopay.
Consumer and Professional Products continues to experience reduced volume in the North American and United Kingdom markets due to slowing consumer demand and rebalancing of customer inventory levels, partially offset by price realization and the contribution of the Hunter Fan Company.
The trends experienced in each of our segments through the third quarter are expected to continue for the remainder of the year. We remain on target to achieve our full-year revenue guidance of $2.85 billion with at least $475 million of EBITDA before unallocated costs. Leverage at the end of the year is expected to be below 3.0x net debt to EBITDA.”
Further, acknowledging the legacy of Telephonics, Mr. Kramer said, “Telephonics had been a part of Griffon since 1961. Over the years, the company grew from a provider of radio communication equipment and inflight entertainment systems to a Tier 1 contractor supplying vital defense electronic systems. We are confident that TTM Technologies and Telephonics leadership, along with the dedicated and hardworking Telephonics employees, will continue the company’s long heritage of innovation, engineering, and manufacturing supporting national and global security. We wish them all the best.”
Consumer and Professional Products ("CPP")
CPP revenue in the current quarter totaling $362.6 million increased 12% compared to the prior year period primarily resulting from a 33% or $105.8 million contribution from the Hunter acquisition, and price and mix of 10%, partially offset by a 28% reduction in volume, primarily in North America and the United Kingdom, due to reduced consumer demand and rebalancing of customer inventory levels. Foreign exchange was 3% unfavorable.
For the current quarter, Adjusted EBITDA totaling $28.4 million decreased 3% compared to the prior year. The current quarter included EBITDA of $16.8 million from the Hunter acquisition. Excluding the Hunter contribution, EBITDA decreased 61% primarily due to the unfavorable impact of the reduced North American and United Kingdom volume and increased material, labor and transportation costs, partially offset by the benefits of price and mix. The current quarter included increased demurrage and detention costs, primarily related to COVID and global supply chain disruptions, of approximately $6.5 million, primarily related to Hunter.
Home and Building Products ("HBP")
HBP revenue in the current quarter totaling $405.5 million increased 56% from the prior year period, due to favorable pricing and mix for both residential and commercial products. Increased commercial volume was offset by reduced residential volume due to labor and supply chain disruptions.
HBP Adjusted EBITDA in the current quarter was $119.8 million, increasing 184% compared to the prior year. EBITDA benefited from the increased revenue noted above, partially offset by increased material, labor and transportation costs.
The Company reported pretax income from continuing operations for the quarters ended June 30, 2022 and 2021, respectively, and recognized tax provisions of 30.6% and 44.9%, respectively. Excluding all items that affect comparability, the effective tax rates for the quarters ended June 30, 2022 and 2021 were 28.6% and 32.9%, respectively. The current year-to-date effective tax rate was 30.2% and the rate excluding all items that affect comparability was 28.9%.
Balance Sheet and Capital Expenditures
At June 30, 2022, the Company had cash and equivalents of $144.7 million and total debt outstanding of $1.59 billion, resulting in net debt of $1.44 billion. Leverage, as calculated in accordance with our credit agreement, was 3.2x net debt to EBITDA. Borrowing availability under the revolving credit facility was $289.9 million subject to certain loan covenants. Capital expenditures were $11.5 million for the quarter ended June 30, 2022.
On June 27, 2022, Griffon prepaid $300 million principal amount of its $800 million Term Loan B credit facility, and during the quarter Griffon repurchased $15.2 million of its 5.75% Senior Notes due 2028 for $14.3 million or 92.2% of par. Subsequent to the end of the quarter, Griffon repurchased $10 million of its 5.75% Senior Notes due 2028 for $9.1 million or 91.25% of par.
As of June 30, 2022, Griffon had $58 million remaining under its Board of Directors authorized share repurchase program. There were no share repurchases under these authorizations during the quarter ended June 30, 2022.
On July 20, 2022, Griffon paid a $2.00 per share special dividend to shareholders of record as of July 8, 2022. The special dividend, combined with the three $0.09 quarterly dividends paid earlier this fiscal year and the $0.09 dividend announced earlier today, will result in total fiscal 2022 dividends paid of $2.36 per share.
Given the ongoing review of strategic alternatives, Griffon will not be hosting a conference call in connection with its third quarter financial results.
“Safe Harbor” 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 “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: the impact of the strategic alternatives review process announced in May 2022; 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 (including, in particular, integration of the Hunter Fan acquisition); 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; increases in the cost or lack of availability of raw materials such as resin, wood and steel, components or purchased finished goods, including any potential impact on costs or availability resulting 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’s businesses; political events that could impact the worldwide economy; a downgrade in Griffon’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 impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory and environmental matters; 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 of Griffon’s operating companies; 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, changes in tax laws. 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. 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.
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 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 conducts its operations through two reportable segments:
For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.
Griffon evaluates performance and allocates resources based on operating results from continuing operations before 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 (“Adjusted EBITDA”, a non-GAAP measure). Griffon believes this information is useful to investors.
The following table provides operating highlights and a reconciliation of Adjusted EBITDA to Income before taxes from continuing operations:
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
Strategic review - retention and other
Fair value step-up of acquired inventory sold
Income before taxes from continuing operations
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
Total segment depreciation and amortization
Total consolidated depreciation and amortization
Griffon believes Free Cash Flow ("FCF", a non-GAAP measure) is a useful measure for investors because it portrays the Company's ability to generate cash from operations for purposes such as repaying debt, funding acquisitions and paying dividends.
The following table provides a reconciliation of Net cash provided by (used in) operating activities to FCF:
For the Nine Months Ended June 30,
Net cash provided by (used in) operating activities
Acquisition of property, plant and equipment
Proceeds from the sale of property, plant and equipment
Free Cash Flow provided by Defense Electronics
The following tables provide a reconciliation of Gross profit and Selling, general and administrative expenses for items that affect comparability for the three and nine month periods ended June 30, 2022 and 2021:
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
Fair value step-up of acquired inventory sold
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
Selling, general and administrative expenses, as reported
Strategic review - retention and other
Selling, general and administrative expenses, as adjusted
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Cost of goods and services
Selling, general and administrative expenses
Income before taxes from continuing operations
Income from operations of discontinued operations
Provision (benefit) for income taxes
Basic earnings per common share:
Basic earnings per common share
Diluted earnings per common share:
Diluted earnings per common share
Dividends paid per common share
Other comprehensive income (loss), net of taxes:
Pension and other post retirement plans
Change in cash flow hedges
Total other comprehensive income (loss), net of taxes
Accounts receivable, net of allowances of $13,541 and $8,787
Prepaid and other current assets
Assets of discontinued operations held for sale
PROPERTY, PLANT AND EQUIPMENT, net
Notes payable and current portion of long-term debt
Current portion of operating lease liabilities
Liabilities of discontinued operations held for sale
Total Liabilities and Shareholders’ Equity
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from discontinued operations
Adjustments to reconcile net income to net cash used in operating activities of continuing operations:
Asset impairment charges - restructuring
Provision for losses on accounts receivable
Amortization of debt discounts and issuance costs
Fair value step-up of acquired inventory sold
(Gain) loss on sale of assets and investments
Change in assets and liabilities, net of assets and liabilities acquired:
(Increase) decrease in prepaid and other assets
Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities
Net cash (used in) provided by operating activities - continuing operations
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment
Acquired businesses, net of cash acquired
Proceeds from sale of business, net
Proceeds from the sale of property, plant and equipment
Net cash used in investing activities - continuing operations
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares for treasury
Net cash provided by (used) in financing activities - continuing operations
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by discontinued operations
Effect of exchange rate changes on cash and equivalents
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND EQUIVALENTS AT END OF PERIOD
Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss from debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable, a non-GAAP measure. Griffon believes this information is useful to investors. The following tables provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per common share from continuing operations, a non-GAAP measure, to Adjusted earnings per common share from continuing operations:
(in thousands, except per share data)
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
Strategic review - retention and other
Fair value step-up of acquired inventory sold
Tax impact of above items
Discrete and certain other tax provisions (benefits), net
Adjusted income from continuing operations
Earnings per common share from continuing operations
Adjusting items, net of tax:
Strategic review - retention and other
Fair value step-up of acquired inventory sold
Discrete and certain other tax provisions (benefits), net
Adjusted earnings per common share from continuing operations
Weighted-average shares outstanding (in thousands)
Note: Due to rounding, the sum of earnings per common share from continuing operations and adjusting items, net of tax, may not equal adjusted earnings per common share from continuing operations.
View source version on businesswire.com: https://www.businesswire.com/news/home/20220727006183/en/
Company Contact: Brian G. Harris SVP & Chief Financial Officer Griffon Corporation (212) 957-5000 [email protected] Investor Relations Contact: Michael Callahan Managing Director ICR Inc. (203) 682-8311
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