Griffon Reports First Quarter Results
Feb 04, 2013 (Close-Up Media via COMTEX) --
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Griffon Corp. reported results for the fiscal first quarter ended December 31.
Ron Kramer, Chief Executive Officer, commented, "Our first quarter results reflect the continued improvement in our operations as the global economy slowly recovers. Telephonics' strong performance benefited from manufacturing efficiencies and favorable product mix. Clopay Plastics ("Plastics") continued its ongoing improvement from initiatives undertaken to address manufacturing inefficiencies arising from our capacity expansions in Germany and Brazil. Home and Building Products ("HBP") benefited from enhanced profitability from Clopay Building Products ("CBP"), while Ames True Temper ("ATT") suffered from a lack of snow and resultant lower snow tool revenue."
In a release dated January 30, the Company noted that the first quarter revenue totaled $424 million, decreasing 6 percent compared to the prior year quarter. Plastics revenue increased 1 percent, while HBP and Telephonics revenue decreased 10 percent and 8 percent, respectively, compared to the prior year quarter.
Segment adjusted EBITDA totaled $42.9 million, increasing 3 percent compared to $41.6 million in the prior year quarter. Segment adjusted EBITDA is defined as net income, excluding 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.
Net income totaled $0.6 million, or $0.01 per share, compared to $2.5 million, or $0.04 per share, in the prior year quarter. Current quarter results included restructuring of $1.1 million ($0.7 million, net of tax, or $0.01 per share) and a loss on pension settlement of $2.1 million ($1.4 million, net of tax, or $0.02 per share). The prior year quarter results included restructuring and acquisition costs of $2.0 million ($1.3 million, net of tax, or $0.02 per share). Current quarter adjusted net income was $2.6 million, or $0.05 per share, compared to $3.8 million, or $0.07 per share, in the prior year quarter.
ATT will close certain of its manufacturing facilities, and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. The actions, to be completed by the end of fiscal 2014, will improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production currently performed by third party suppliers, and improve material flow and absorption of fixed costs. Management estimates that, upon completion, these actions will result in annual cash savings exceeding $10 million, based on current operating levels.
ATT anticipates it will incur pre-tax restructuring and related exit costs of $8.0 million, comprised of cash charges of $4.0 million and asset-related charges of $4.0 million; the cash charges will include $3.0 million for personnel-related costs and $1.0 million for facility exit costs. The Company expects $20.0 million in capital expenditures in connection with this initiative.
HBP recognized $1.1 million and $0.3 million in restructuring and other related charges in the current and prior year quarters, respectively, related primarily to one-time termination benefits and other personnel costs; current year charges relate primarily to ATT's plant consolidation initiative.
Kramer continued, "The strategic initiative at ATT builds upon the core strength of its brands. We expect to achieve higher long-term profitability through our plant consolidation. The focus in our businesses is upon operational execution. Each of our businesses is poised for growth and improved profitability as the economic recovery accelerates. We remain committed to increasing shareholder value through organic growth, a disciplined approach to capital investment, and our ongoing evaluation of strategic acquisitions."
First quarter revenue totaled $96.0 million, decreasing 8 percent compared to the prior year quarter. The prior year quarter included $5.9 million of revenue related to the Counter Remote Control Improvised Explosive Device Electronic Warfare 3.1 ("CREW 3.1") program where Telephonics serves as a contract manufacturer; there was no CREW 3.1 revenue in the current quarter. Excluding CREW 3.1, current quarter revenue decreased 3 percent from the prior year quarter primarily due to lower shipments of Advanced Radar Surveillance Systems ("ARSS"), partially offset by increases in Romeo Radar and Secure Digital Intercommunications ("SDI") revenue.
First quarter segment adjusted EBITDA was $16.4 million, increasing 4 percent from the prior year quarter, mainly driven by improved gross profit from favorable program mix and manufacturing efficiencies. Telephonics profitability also benefited from cost reductions previously implemented. In 2012 and 2011, Telephonics recognized $3.8 and $3.0, respectively, of restructuring charges in connection with two discrete voluntary early retirement plans and other costs related to changes in organizational structure and facilities; such charges were primarily personnel-related, reducing headcount by 185 employees over the two-year period. In the prior year first quarter, Telephonics recognized $1.5 million of restructuring and other related charges, primarily for one-time termination benefits and other personnel costs.
Contract backlog totaled a record $467 million at December 31, compared to $451 million at September 30, and $380 at December 31, 2011, with approximately 70 percent expected to be filled within the next twelve months.
The Company also noted, first quarter revenue totaled $137.5 million, increasing 1 percent compared to the prior year quarter; a volume increase of 7 percent was partially offset by a 4 percent unfavorable impact of translation of European and Brazilian local currency revenue into a stronger U.S. dollar, and a 2 percent unfavorable mix impact. The current quarter revenue impact from fluctuations in resin costs was not material; Plastics adjusts selling prices, based on underlying resin costs, on a delayed basis.
First quarter segment adjusted EBITDA was $9.3 million, increasing 14 percent from the prior year quarter, mainly driven by improved volume and continued efficiency improvements made on past capital initiatives, partially offset by a $4.8 million unfavorable impact of higher resin costs.
First quarter revenue totaled $190.2 million, decreasing 10 percent compared to the prior year quarter. ATT revenue decreased 22 percent due to lack of snow and resultant reduced sales of snow tools. Retail customers continue to hold high levels of snow tool inventory carried over from last year, further affecting snow tool sales. CBP revenue increased 1 percent, mainly due to favorable mix.
First quarter segment adjusted EBITDA was $17.2 million, decreasing 3 percent compared to the prior year quarter, primarily due to lower snow tool revenue. The impact of snow was partially offset by reduced ATT warehouse and distribution costs, other cost control initiatives and an increase of $0.9 million in Byrd Amendment receipts (anti-dumping compensation from the U.S. government); favorable product mix and manufacturing efficiencies at CBP also contributed to segment adjusted EBITDA.
Griffon's current quarter effective tax rate was 68.1 percent compared to 49.2 percent in the prior year quarter. In both years, the effective rates reflect the impact of permanent differences not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations. There were no material discrete items in the current or prior year quarters.
Current quarter selling, general and administrative expenses included a $2.1 million, non-cash, pension settlement loss resulting from the lump-sum buyout of certain participant balances in the Company's defined benefit plan. The buyouts, funded by the pension plan, reduced the Company's net pension liability by $3.5 million.
At December 30, the Company had cash and equivalents of $150 million, total debt outstanding of $699 million, net of discounts, and $179 million available for borrowing under its revolving credit facility.
During the first quarter, the Company purchased 0.7 million shares of its common stock under an authorized stock repurchase plan, for $7.3 million. At December 31, the Company had a remaining authorization of $31.0 million.
Griffon Corp. (the "Griffon" or "Company"), is a management and holding company that conducts business through subsidiaries.
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