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Griffon Corporation Announces First Quarter Operating Results

Posted on: Wednesday, 4 February 2009, 08:33 CST

- Diluted EPS of $.07 in 1Q 2009 versus $.04 loss in 1Q 2008

- Segment adjusted EBITDA of $17.0 million

JERICHO, N.Y., Feb. 4 /PRNewswire-FirstCall/ -- Griffon Corporation (NYSE: GFF) today reported operating results for the first quarter ended December 31, 2008.

First Quarter of Fiscal 2009

Net sales from continuing operations for the first quarter of fiscal 2009 were $302.3 million, compared to $294.8 million in the first quarter of fiscal 2008. Income from continuing operations for the first quarter was $4.3 million, or $.07 per diluted share, compared to $1.5 million, or $.05 per diluted share, last year. Results from discontinued operations for the first quarter were break-even, or nil per diluted share, compared to a loss of $2.9 million, or $.09 per diluted share, last year. Net income for the quarter was $4.3 million, or $.07 per diluted share, compared to a net loss of $1.4 million, or $.04 per diluted share, last year.

In the first quarter of fiscal 2009, the Company recorded a non-cash, pre-tax gain from debt extinguishment of $6.7 million, net of a proportionate write-off of deferred financing costs, associated with the October 2008 purchase of $35.5 million face value of its outstanding 4% convertible notes from certain note holders for $28.4 million.

The Company's segment adjusted EBITDA for the first quarter of 2009 was $17.0 million compared to $21.8 million in 2008. Segment adjusted EBITDA is defined as operating income excluding allocations of corporate overhead, interest, taxes, depreciation and amortization, restructuring charges, goodwill charges and the impact of debt extinguishment.

As a result of the downturn in the residential housing market, in fiscal 2008, the Company exited substantially all of the operating activities of its Installation Services segment. Operating results of substantially all of the Installation Services segment have been reported as discontinued operations in the condensed consolidated financial statements for all periods presented herein, and the Installation Services segment is excluded from segment reporting. The Company is winding down remaining disposal activities in the first half of fiscal 2009 and does not expect to incur significant expenses in the future.

Telephonics Results

For the quarter ended December 31, 2008, Telephonics generated sales of $80.8 million, a 6.5% increase from the first quarter of fiscal 2008.

The sales increase was primarily attributable to growth in the Radar Systems Division driven by increases in the Lamps MMR and ARPDD programs. Last year's first quarter sales were favorably impacted by contracts with the Syracuse Research Corporation (SRC) that were winding down in the latter part of fiscal 2007. Excluding the prior-period sales related to the SRC contracts, core business sales grew by approximately $9.4 million, or 13%. However, operating income decreased $.1 million as a result of decreased gross margin performance attributable to program mix.

Clopay Garage Doors Results

For the quarter ended December 31, 2008, the Company's Garage Doors segment generated sales of $108.8 million, a 3.3% decrease from the first quarter of fiscal 2008. Garage Doors' sales continued to be impacted by weakness in the residential housing and credit markets.

The Garage Doors sales decline was principally due to reduced unit volume, offset partially by higher selling prices to pass through increased material costs and product mix.

Operating loss of the Garage Doors segment increased by approximately $3.0 million compared to last year, primarily as a result of reduced sales volume and associated plant absorption loss, as well as an increased mix of certain higher-priced, but lower-margin, commercial products. The prior-year period was affected by restructuring charges of approximately $1.7 million.

Clopay Specialty Plastic Films Results

For the quarter ended December 31, 2008, the Company's Specialty Plastic Films segment generated sales of $112.7 million, a 5.9% increase from the first quarter of fiscal 2008.

Specialty Plastic Films achieved higher sales principally due to a favorable product mix in North America and the impact of increased selling prices to pass through increased resin costs, partially offset by the unfavorable impact of exchange rates on translated foreign sales. Operating income decreased by $.5 million as the favorable contribution to gross margin from the pass through of resin costs was more than offset by an unfavorable product mix and foreign exchange translation.

Balance Sheet and Capital Expenditures

In September 2008, the Company substantially strengthened its balance sheet by raising $241.3 million in gross proceeds from the sale of its common stock. The transaction was effected through a common stock rights offering, along with an investment by GS Direct, L.L.C., an affiliate of Goldman Sachs. An additional $5.3 million of rights offering proceeds were received in October 2008. The Company intends to use the proceeds for general corporate purposes and to fund its growth.

The Company's total cash and cash equivalents balance at December 31, 2008 was $276.0 million. Total debt outstanding at December 31, 2008 was $199.5 million, including $94.5 million of convertible notes. Capital expenditures were $4.8 million during the first quarter of fiscal 2009.

Conference Call Information

The Company will hold a conference call to discuss its results today, February 4, 2009, at 4:15 PM EST. The conference call can be accessed by dialing 1-800-322-9079 (U.S. participants) or 1-973-582-2717 (International participants). Callers should ask to be connected to Griffon Corporation's first quarter fiscal 2009 teleconference and provide the conference ID number 83067804. A replay of the call will be available from February 4, 2009 at 7:30 PM EST by dialing 1-800-642-1687 (U.S.) or 1-706-645-9291 (International). The replay access code is 83067804. The replay will be available through February 18, 2009.

Forward-looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation statements regarding the Company's financial position, business strategy and the plans and objectives of the Company's management for future operations, are forward-looking statements. When used in this release, words such as "anticipate," "believe," "estimate," "expect," "intend," and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, business, financial market and economic conditions, including, but not limited to, the credit market, the housing market, results of integrating acquired businesses into existing operations, the results of the Company's restructuring and disposal efforts, competitive factors and pricing pressures for resin and steel, and capacity and supply constraints. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company as previously disclosed in the Company's SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

About Griffon Corporation

Griffon Corporation, headquartered in Jericho, New York, is a diversified holding Company consisting of three distinct business segments: Electronic Information and Communication Systems, through Telephonics Corporation; Garage Doors, through Clopay Building Products Company; and Specialty Plastic Films, through Clopay Plastic Products Company.

• Telephonics Corporation's high-technology engineering and manufacturing capabilities provide integrated information, communication and sensor system solutions to military and commercial markets worldwide.
• Clopay Building Products Company is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.
• Clopay Plastic Products Company 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 markets.

For more information on the Company and its operating subsidiaries, please see the Company's website at www.griffoncorp.com.

Contact: Patrick L. Alesia Chief Financial Officer (516) 938-5544

GRIFFON CORPORATION AND SUBSIDIARIES OPERATING HIGHLIGHTS (Unaudited) For the Three Months Ended December 31, PRELIMINARY (in thousands) 2008 2007 Net Sales: Electronic Information and Communication Systems $80,827 $75,860 Garage Doors 108,818 112,544 Specialty Plastic Films 112,689 106,398 $302,334 $294,802 Operating Income (Loss): Electronic Information and Communication Systems $5,378 $5,483 Garage Doors (4,393) (1,375) Specialty Plastic Films 5,536 5,998 Segment operating income 6,521 10,106 Unallocated amounts (4,449) (5,229) Gain from debt extinguishment, net 6,714 - Interest, net (2,278) (2,255) Income from continuing operations before income taxes $6,508 $2,622

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended December 31, PRELIMINARY (in thousands, except per share data) 2008 2007 Net sales $302,334 $294,802 Cost of sales 243,377 230,044 Gross profit 58,957 64,758 Selling, general and administrative expenses 56,528 58,987 Restructuring and other related charges - 1,691 Total operating expenses 56,528 60,678 Income from operations 2,429 4,080 Other income (expense): Interest expense (2,796) (3,136) Interest income 518 881 Gain from early extinguishment of debt 6,714 - Other, net (357) 797 4,079 (1,458) Income from continuing operations before income taxes 6,508 2,622 Provision for income taxes 2,237 1,083 Income from continuing operations before discontinued operations 4,271 1,539 Discontinued operations: Income (loss) from operations of the discontinued Installation Services business 5 (5,015) Provision (benefit) for income taxes 2 (2,121) Income (loss) from discontinued operations 3 (2,894) Net income (loss) $4,274 $(1,355) Basic earnings (loss) per share: Continuing operations $.07 $.05 Discontinued operations - (.09) $.07 $(.04) Diluted earnings (loss) per share: Continuing operations $.07 $.05 Discontinued operations - (.09) $.07 $(.04) Weighted-average shares outstanding - basic 58,853 32,478 Weighted-average shares outstanding - diluted 58,918 32,741

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) PRELIMINARY (in thousands) December 31, September 30, 2008 2008 ASSETS Current Assets: Cash and cash equivalents $276,024 $311,921 Accounts receivable, net 146,595 163,586 Contract costs and recognized income not yet billed 64,194 69,001 Inventories 169,379 167,158 Prepaid expenses and other current assets 54,943 52,430 Assets of discontinued operations 4,793 9,495 Total current assets 715,928 773,591 Property, plant and equipment, at cost, net of depreciation and amortization 228,400 239,003 Costs in excess of fair value of net assets of businesses acquired 88,300 93,782 Intangible assets, net 33,484 34,777 Other assets 23,007 22,067 Assets of discontinued operations 8,816 8,346 $1,097,935 $1,171,566 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term debt $4,594 $2,258 Accounts payable 107,088 129,823 Accrued liabilities 59,816 64,450 Liabilities of discontinued operations 11,849 14,917 Total current liabilities 183,347 211,448 Long-term debt 194,902 230,930 Other liabilities 61,960 59,460 Liabilities of discontinued operations 9,689 10,048 Shareholders' equity 648,037 659,680 $1,097,935 $1,171,566

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended December 31, PRELIMINARY (in thousands) 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS: Net income (loss) $4,274 $(1,355) Loss (income) from discontinued operations (3) 2,894 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities of continuing operations: Depreciation and amortization 10,553 10,370 Stock-based compensation 814 624 Recovery of losses on accounts receivable (346) (17) Amortization of deferred financing costs 726 222 Gain from debt extinguishment, net (6,714) - Deferred income taxes (376) 412 Change in assets and liabilities: Decrease in accounts receivable and contract costs and recognized income not yet billed 20,190 36,799 Increase in inventories (2,934) (4,208) Increase in prepaid expenses and other assets (1,341) (5,047) Increase (decrease) in accounts payable, accrued liabilities and income taxes payable (27,402) 1,492 Other changes, net (2,267) (1,211) (9,100) 42,330 Net cash (used in) provided by operating activities - continuing operations (4,826) 40,975 CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS: Acquisition of property, plant and equipment (4,831) (6,445) Acquired businesses - (1,750) Proceeds from sale of investment - 1,000 Decrease (increase) in equipment lease deposits (231) 4,332 Net cash used in investing activities - continuing operations (5,062) (2,863) CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS: Proceeds from issuance of shares from rights offering 5,274 - Purchase of shares for treasury - (579) Proceeds from issuance of long-term debt 4,908 - Payments of long-term debt (33,761) (13,818) Increase in short-term borrowings 2,021 787 Financing costs (93) - Purchase of ESOP shares (4,370) - Other, net 419 177 Net cash used in financing activities - continuing operations (25,602) (13,433) CASH FLOWS FROM DISCONTINUED OPERATIONS: Net cash provided by (used in) operating activities (323) 181 Net cash used in investing activities - (95) Net cash provided by (used in) discontinued operations (323) 86 Effect of exchange rate changes on cash and cash equivalents (84) 240 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (35,897) 25,005 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 311,921 44,747 CASH AND CASH EQUIVALENTS AT END OF PERIOD $276,024 $69,752

GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES SEGMENT OPERATING INCOME AND SEGMENT ADJUSTED EBITDA (Unaudited) The following is a reconciliation of operating income, which is a GAAP measure of our operating results, to segment operating income and segment adjusted EBITDA. Management believes that the presentation of segment operating income and segment adjusted EBITDA is appropriate to provide additional information about the Company's reportable segments. Segment operating income and segment adjusted EBITDA are not presentations made in accordance with GAAP, are not measures of financial performance or condition, liquidity or profitability of the Company, and should not be considered as an alternative to (1) net income, operating income or any other performance measures determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, segment operating income and segment adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments, capital expenditures and debt service requirements. For the Three Months Ended December 31, PRELIMINARY (in thousands) 2008 2007 Operating income - as reported $2,429 $4,080 Corporate and related charges 4,449 5,229 Other income (expense) (357) 797 Segment operating income 6,521 10,106 Depreciation and amortization 10,482 10,296 Restructuring charges - 1,691 Segment adjusted EBITDA $17,003 $22,093

GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES SEGMENT ADJUSTED EBITDA - BY REPORTABLE SEGMENT (Unaudited) For the Three Months Ended December 31, PRELIMINARY (in thousands) 2008 2007 Electronic Information and Communication Systems: Segment operating income $5,378 $5,483 Depreciation and amortization 1,487 1,453 Segment adjusted EBITDA $6,865 $6,936 Garage Doors: Segment operating income $(4,393) $(1,375) Depreciation and amortization 3,232 3,259 Restructuring charges - 1,691 Segment adjusted EBITDA $(1,161) $3,575 Specialty Plastic Films: Segment operating income $5,536 $5,998 Depreciation and amortization 5,763 5,584 Segment adjusted EBITDA $11,299 $11,582 All segments: Segment operating income $6,521 $10,106 Depreciation and amortization 10,482 10,296 Restructuring charges - 1,691 Segment adjusted EBITDA $17,003 $22,093

SOURCE Griffon Corporation

Source: PR Newswire

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