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Griffon Corporation Announces Third Quarter ResultsGriffon Corporation ("Griffon" or the "Company") (NYSE:GFF) today reported results for the fiscal third quarter ended June 30, 2015. Revenue totaled $511.7 million, increasing 1% from the prior year quarter; excluding the impact of foreign currency, revenue increased 5%. Telephonics Corporation ("Telephonics") and Home & Building Products ("HBP") revenue increased 13% and 7%, respectively, over the prior year quarter, while Clopay Plastic Products Company, Inc. ("Plastics") revenue decreased 16%. Segment adjusted EBITDA totaled $55.2 million, increasing 11% from the prior year quarter; the impact of foreign currency was not material. 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 and acquisition-related expenses. Net income totaled $10.9 million, or $0.23 per share, compared to $14.5 million, or $0.29 per share, in the prior year quarter. Current quarter results included discrete tax benefits of $0.3 million. The prior year quarter included acquisition costs of $1.6 million ($1.0 million, net of tax or $0.02 per shares), restructuring costs of $0.4 million ($0.2 million, net of tax, or $0.00 per share), impact of debt extinguishment on full year effective tax rate of $(4.4) million or $(0.09) per share and discrete tax benefits of $1.9 million, or $0.04 per share. Excluding these items from both periods, current quarter adjusted net income was $10.6 million, or $0.23 per share, compared to $9.5 million, or $0.19 per share, in the prior year quarter. The impact of foreign currency was not material. Ronald J. Kramer, Chief Executive Officer, commented, "We are pleased to report another quarter of adjusted EPS growth. As we realize the full benefit of our strategic initiatives, we anticipate gaining momentum into our fiscal year end and are optimistic about 2016." Segment Operating Results Home & Building Products Revenue totaled $272.2 million, increasing 7% compared to the prior year quarter, reflecting a 3% contribution from the Cyclone acquisition, partially offset by a 2% unfavorable foreign currency impact. The AMES Companies, Inc. ("AMES") revenue increased 6% due to the inclusion of Cyclone results contributing 6% and increased wheelbarrow sales; foreign currency was 4% unfavorable. Clopay Building Products Company, Inc. ("CBP") revenue increased 8%, primarily due to increased volume contributing 5% with the balance primarily due to product mix; foreign currency was 1% unfavorable. Segment adjusted EBITDA was $25.4 million, increasing 30% compared to the prior year quarter, driven by AMES operational efficiency improvements and cost control measures, a contribution from AMES acquisitions of 10%, and increased volume and favorable mix at CBP; foreign currency was 4% unfavorable. HBP recognized $0.4 million in restructuring and related exit costs for the quarter ended June 30, 2014; such charges primarily related to one-time termination benefits, facility and other personnel costs, and asset impairment charges related to the AMES U.S. plant consolidation initiative undertaken in January 2013 and completed at the end of the 2015 first quarter. There were no such charges in the current year. Management continues to estimate that AMES' initiative will result in annualized cash savings exceeding $10.0 million; realization of expected savings began in the 2015 second quarter. Telephonics Revenue totaled $115.3 million, increasing 13% from the prior year quarter, primarily due to timing of work performed on the Radar System Division Multi-Mode ASW product, partially offset by the timing of awards and work performed on Secure Digital Intercommunications products in Communications and Surveillance Systems. Segment adjusted EBITDA was $15.7 million, increasing 4% from the prior year quarter, primarily due to the increased revenue and reduced operating expenses, offset by the impact of unfavorable program mix. Contract backlog totaled $439 million at June 30, 2015, compared to $494 million at September 30, 2014, with approximately 79% expected to be fulfilled within the next twelve months. Plastic Products Revenue totaled $124.2 million, decreasing 16% compared to the prior year quarter, reflecting an unfavorable foreign currency impact of 9%, a 5% decrease in volume and a 2% unfavorable impact from the pass through of resin costs in customer selling prices. Plastics adjusts selling prices based on underlying resin costs on a delayed basis. Segment adjusted EBITDA was $14.1million, decreasing 6% from the prior year quarter due to the change in the impact of resin pricing pass through of 9% and reduced volume, partially offset by favorable mix. The favorable impact of foreign currency was 5%. Taxes In both the quarter and nine months ended June 30, 2015, the Company reported pretax income compared to pretax income in the prior year quarter and a pretax loss in the prior year nine-month period. The Company recognized tax provisions of 34.7% and 36.3% for the quarter and nine months ended June 30, 2015, respectively, compared to benefits of 12.2% and 38.0%, respectively, in the comparable prior year periods. The current quarter and nine months ended June 30, 2015 included a $0.3 million discrete benefit and $0.2 million discrete provision, respectively. The comparable prior year periods included benefits of $1.9 million and $1.5 million, respectively. In both years, the discrete items arose primarily from the filing of returns, conclusion of tax audits in various jurisdictions and the impact of enacted tax law changes. Excluding discrete items, and for the prior year also excluding the impact from debt extinguishment, the effective tax rates for the quarter and nine months ended June 30, 2015 were 36.3% and 35.7%, respectively, compared to 36.6% and 36.7%, respectively, in the comparable prior year periods. Balance Sheet and Capital Expenditures At June 30, 2015, the Company had cash and equivalents of $46.0 million, total debt outstanding of $840.5 million, net of discounts and deferred costs, and $168 million available for borrowing under its revolving credit facility. Capital expenditures were $16 million in the current quarter. Share Repurchases On May 1, 2014, Griffon's Board of Directors authorized the repurchase of up to $50 million of Griffon's outstanding common stock; on March 20, 2015, an additional $50 million was authorized. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended June 30, 2015, Griffon purchased 1,234,214 shares of common stock under the programs, for a total of $20.6 million or $16.71 per share. At June 30, 2015, $31.7 million remains under existing Board authorizations. From August 2011 to June 30, 2015, Griffon repurchased 15,279,761 shares of its common stock for a total of $179.3 million or $11.74 per share. Conference Call Information The Company will hold a conference call today, July 30, 2015, at 4:30 PM ET. The call can be accessed by dialing 1-888-206-4916 (U.S. participants) or 1-913-312-0698 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 3009566. A replay of the call will be available starting on July 30, 2015 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 3009566. The replay will be available through August 13, 2015. Forward-looking Statements "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: current economic conditions and uncertainties in the housing, credit and capital markets; the Griffon's ability to achieve expected savings from cost control, 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'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; reduced military spending by the government on projects for which Griffon's Telephonics Corporation supplies products, including as a result of continuing budgetary cuts resulting from sequestration and other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost of raw materials such as resin, wood and steel; 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 the 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 could impact margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; 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 Griffon's operating companies; and possible terrorist threats and actions and their impact on the global economy. 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. About Griffon Corporation 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 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 reportable segments:
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 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 (loss) before taxes:
The following is a reconciliation of each segment's operating results to Segment adjusted EBITDA:
Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.
Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, acquisition-related expenses, gains (losses) from debt extinguishment and discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Net income (loss) to adjusted net income and earnings per share to Adjusted earnings per share:
a) In the prior year quarter ended June 30, 2014, the impact of debt extinguishment on the full year effective tax rate was estimated to be a benefit of $4,357 or $0.09 per share, and for the nine months ended June 30, 2014, a provision of $1,491 or $0.03 per share. Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.
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