Griffon Corporation (“Griffon” or the “Company”) (NYSE:GFF)
today reported results for the fiscal 2024 first quarter ended
December 31, 2023.
Revenue for the first quarter totaled $643.2 million, a 1%
decrease compared to $649.4 million in the prior year quarter.
Net income totaled $42.2 million, or $0.82 per share, compared
to $48.7 million, or $0.88 per share, in the prior year quarter.
Excluding all items that affect comparability from both periods,
adjusted net income was $55.3 million, or $1.07 per share, in the
current year quarter compared to $47.4 million, or $0.86 per share,
in the prior year quarter. For a reconciliation of net income to
adjusted net income and earnings per share to adjusted earnings per
share, see the attached table.
Adjusted EBITDA for the first quarter was $116.4 million, a 7%
increase from the prior year quarter of $108.6 million. Adjusted
EBITDA, excluding unallocated amounts (primarily corporate
overhead) of $13.9 million in the current quarter and $13.8 million
in the prior year quarter, totaled $130.3 million, increasing 6%
from the prior year of $122.3 million. For a reconciliation and
definition of adjusted EBITDA, a non-GAAP measure, to income before
taxes, see the attached table.
“Fiscal 2024 is off to a good start with the first quarter
highlighted by strong free cash flow of $133 million, continued
solid operating performance at Home and Building Products ("HBP"),
and improved profitability at Consumer and Professional Products
(“CPP”),” said Ronald J. Kramer, Chairman and Chief Executive
Officer. “We are well positioned to meet our financial targets for
the year.”
“Griffon's strong first quarter free cash flow enabled us to
return value to our shareholders through $70 million of share
repurchases while maintaining our net debt to EBITDA leverage. We
will continue to use our free cash flow to drive a capital
allocation strategy that will deliver long term value for our
shareholders."
Segment Operating
Results
Home and Building Products ("HBP")
HBP revenue in the current quarter of $395.8 million was
consistent with the prior year quarter reflecting improved customer
orders, and favorable pricing and mix of 4%, offset by the prior
year volume benefit from elevated backlog.
HBP adjusted EBITDA in the current quarter of $124.7 million was
consistent with the prior year quarter. Adjusted EBITDA reflected
reduced material costs and favorable pricing and mix offset by the
unfavorable impact of reduced volume, noted above, and increased
labor and distribution costs.
Consumer and Professional Products ("CPP")
CPP revenue in the current quarter of $247.4 million decreased
2% compared to the prior year quarter primarily due to decreased
volume driven by reduced consumer demand in North America.
For the current quarter, adjusted EBITDA was $5.5 million,
compared to $(1.8) million in the prior year quarter, an increase
of $7.3 million. The variance to the prior year was primarily due
to decreased North American production costs, partially offset by
the unfavorable impact of the reduced volume noted above.
CPP Global Sourcing Strategy Expansion
In response to market conditions, Griffon announced in May 2023
that CPP is expanding its global sourcing strategy to include long
handle tools, material handling, and wood storage and organization
product lines for the U.S. market.
By transitioning these product lines to an asset-light
structure, CPP’s operations will be better positioned to serve
customers with a more flexible and cost-effective sourcing model
that leverages supplier relationships around the world. These
actions will be essential to CPP achieving 15% EBITDA margins,
while enhancing free cash flow through improved working capital and
significantly lower capital expenditures.
The global sourcing strategy expansion is expected to be
complete by the end of calendar 2024 and remains on budget.
Operations have ceased at Camp Hill and Harrisburg, PA; Fairfield,
IA; and four wood mills. The final facility, in Grantsville, MD, is
expected to close by March 2024.
Taxes
The Company reported pretax income from operations for the
quarter ended December 31, 2023 and 2022, and recognized effective
tax rates of 29.9% and 28.4%, respectively. Excluding all items
that affect comparability, the effective tax rates for the quarters
ended December 31, 2023 and 2022 were 27.9% and 29.1%,
respectively.
Balance Sheet and Capital
Expenditures
At December 31, 2023, the Company had cash and equivalents of
$110.5 million and total debt outstanding of $1.44 billion,
resulting in net debt of $1.33 billion. Leverage, as calculated in
accordance with our credit agreement, was 2.5x net debt to EBITDA
compared to 2.7x at December 31, 2022, and 2.6x at September 30,
2023. Quarter ending December 31, 2023 free cash flow of $132.5
million reflects the solid operating results in the first quarter.
At December 31, 2023, borrowing availability under the revolving
credit facility was $465.5 million subject to certain loan
covenants. Capital expenditures, net, were $13.5 million for the
quarter ended December 31, 2023.
Share Repurchases
Share repurchases during the quarter ended December 31, 2023
totaled 1.6 million shares of common stock, for a total of $69.6
million, or an average of $42.61 per share. Since last April and
through December 31, 2023, share repurchases totaled 5.8 million
shares of common stock or 10.1% of the outstanding shares, for a
total of $220.4 million or an average of $38.15 per share, As of
December 31, 2023, $237.5 million remained under the Board
authorized share repurchase programs.
Conference Call
Information
The Company will hold a conference call today, February 7, 2024,
at 8:30 AM ET.
The call can be accessed by dialing 1-877-407-0792 (U.S.
participants) or 1-201-689-8263 (International participants).
Callers should ask to be connected to the Griffon Corporation
teleconference or provide conference ID number 13743734.
Participants are encouraged to dial-in at least 10 minutes before
the scheduled start time.
A replay of the call will be available starting on Wednesday,
February 7, 2024 at 11:30 AM ET by dialing 1-844-512-2921 (U.S.) or
1-412-317-6671 (International), and entering the conference ID
number: 13743734. The replay will be available through Wednesday,
February 21, 2024 at 11:59 PM ET.
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, the impact of the Hunter Fan
transaction, the industries in which Griffon Corporation (the
“Company” or “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,” "achieves", “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; Griffon’s ability to achieve expected savings and
improved operational results from cost control, restructuring,
integration and disposal initiatives (including, in particular, the
expanded CPP outsourcing strategy announced in May 2023); 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; increases in the cost or lack of availability of raw
materials such as steel, resin and wood, 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 or military conflicts that could impact the
worldwide economy; a downgrade in Griffon’s credit ratings; changes
in international economic conditions including inflation, 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; effects of possible IT system failures, data
breaches or cyber-attacks; the impact of COVID-19, or some other
future pandemic, 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.
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 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:
- Home and Building Products ("HBP") conducts its operations
through Clopay. Founded in 1964, Clopay is the largest manufacturer
and marketer of garage doors and rolling steel doors in North
America. Residential and commercial sectional garage doors are sold
through professional dealers and leading home center retail chains
throughout North America under the brands Clopay, Ideal, and
Holmes. Rolling steel door and grille products designed for
commercial, industrial, institutional, and retail use are sold
under the Cornell and Cookson brands.
- Consumer and Professional Products (“CPP”) is a leading global
provider of branded consumer and professional tools; residential,
industrial and commercial fans; home storage and organization
products; and products that enhance indoor and outdoor lifestyles.
CPP sells products globally through a portfolio of leading brands
including AMES, since 1774, Hunter, since 1886, True Temper, and
ClosetMaid.
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
segment adjusted EBITDA and adjusted EBITDA, non-GAAP measures,
which is defined as income before taxes from operations, excluding
interest income and expense, depreciation and amortization,
strategic review charges, non-cash impairment charges,
restructuring charges, gain/loss from debt extinguishment and
acquisition related expenses, as well as other items that may
affect comparability, as applicable. Segment adjusted EBITDA also
excludes unallocated amounts, mainly corporate overhead. Griffon
believes this information is useful to investors.
The following table provides operating highlights and a
reconciliation of segment adjusted EBITDA and adjusted EBITDA to
income before taxes:
(in thousands)
For the Three Months Ended
December 31,
REVENUE
2023
2022
Home and Building Products
$
395,791
$
396,573
Consumer and Professional Products
247,362
252,811
Total revenue
$
643,153
$
649,384
For the Three Months Ended
December 31,
2023
2022
ADJUSTED EBITDA
Home and Building Products
$
124,719
$
124,145
Consumer and Professional Products
5,539
(1,809
)
Segment adjusted EBITDA
130,258
122,336
Unallocated amounts, excluding
depreciation*
(13,907
)
(13,776
)
Adjusted EBITDA
116,351
108,560
Net interest expense
(24,875
)
(24,544
)
Depreciation and amortization
(14,823
)
(17,113
)
Restructuring charges
(12,400
)
—
Gain on sale of building
547
10,852
Strategic review - retention and other
(4,658
)
(8,232
)
Proxy expenses
—
(1,503
)
Income before taxes
$
60,142
$
68,020
* Primarily Corporate Overhead
For the Three Months Ended
December 31,
DEPRECIATION and
AMORTIZATION
2023
2022
Segment:
Home and Building Products
$
3,633
$
3,846
Consumer and Professional Products
11,057
13,127
Total segment depreciation and
amortization
14,690
16,973
Corporate
133
140
Total consolidated depreciation and
amortization
$
14,823
$
17,113
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 Three Months Ended
December 31,
(in thousands)
2023
2022
Net cash provided by operating
activities
$
146,058
$
75,480
Acquisition of property, plant and
equipment
(14,330
)
(4,726
)
Proceeds from the sale of property, plant
and equipment
787
11,815
FCF
$
132,515
$
82,569
The following tables provide a reconciliation of gross profit
and selling, general and administrative expenses for items that
affect comparability for the three months ended December 31, 2023
and 2022:
(in thousands)
For the Three Months Ended
December 31,
2023
2022
Gross profit, as reported
$
236,641
$
233,825
% of revenue
36.8
%
36.0
%
Adjusting items:
Restructuring charges(1)
11,646
—
Gross profit, as adjusted
$
248,287
$
233,825
% of revenue
38.6
%
36.0
%
(1) For the quarter ended December 31,
2023 restructuring charges relates to the CPP global sourcing
expansion.
(in thousands)
For the Three Months Ended
December 31,
2023
2022
Selling, general and administrative
expenses, as reported
$
152,803
$
152,720
% of revenue
23.8
%
23.5
%
Adjusting items:
Restructuring charges(1)
(754
)
—
Proxy expenses
—
(1,503
)
Strategic review - retention and other
(4,658
)
(8,232
)
Selling, general and administrative
expenses, as adjusted
$
147,391
$
142,985
% of revenue
22.9
%
22.0
%
(1) For the quarter ended December 31,
2023 restructuring charges relates to the CPP global sourcing
expansion.
GRIFFON CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per
share data) (Unaudited)
Three Months Ended December
31,
2023
2022
Revenue
$
643,153
$
649,384
Cost of goods and services
406,512
415,559
Gross profit
236,641
233,825
Selling, general and administrative
expenses
152,803
152,720
Income from operations
83,838
81,105
Other income (expense)
Interest expense
(25,299
)
(24,648
)
Interest income
424
104
Gain on sale of building
547
10,852
Other, net
632
607
Total other expense, net
(23,696
)
(13,085
)
Income before taxes
60,142
68,020
Provision for income taxes
17,965
19,318
Net income
$
42,177
$
48,702
Basic earnings per common share
$
0.86
$
0.93
Basic weighted-average shares
outstanding
48,784
52,579
Diluted earnings per common share
$
0.82
$
0.88
Diluted weighted-average shares
outstanding
51,467
55,298
Dividends paid per common share
$
0.15
$
0.10
Net income
$
42,177
$
48,702
Other comprehensive income (loss), net of
taxes:
Foreign currency translation
adjustments
10,238
11,937
Pension and other post retirement
plans
532
862
Change in cash flow hedges
(295
)
(580
)
Total other comprehensive income, net of
taxes
10,475
12,219
Comprehensive income, net
$
52,652
$
60,921
GRIFFON CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
December 31,
2023
September 30,
2023
CURRENT ASSETS
Cash and equivalents
$
110,546
$
102,889
Accounts receivable, net of allowances of
$11,985 and $11,264
299,594
312,432
Inventories
478,609
507,130
Prepaid and other current assets
57,863
57,139
Assets held for sale
15,010
—
Assets of discontinued operations
984
1,001
Total Current Assets
962,606
980,591
PROPERTY, PLANT AND EQUIPMENT,
net
269,129
279,218
OPERATING LEASE RIGHT-OF-USE
ASSETS
176,100
169,942
GOODWILL
327,864
327,864
INTANGIBLE ASSETS, net
632,111
635,243
OTHER ASSETS
21,365
21,731
ASSETS OF DISCONTINUED
OPERATIONS
4,138
4,290
Total Assets
$
2,393,313
$
2,418,879
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt
$
9,274
$
9,625
Accounts payable
154,018
116,646
Accrued liabilities
190,096
193,098
Current portion of operating lease
liabilities
34,075
32,632
Liabilities of discontinued operations
4,216
7,148
Total Current Liabilities
391,679
359,149
LONG-TERM DEBT, net
1,430,235
1,459,904
LONG-TERM OPERATING LEASE
LIABILITIES
152,343
147,224
OTHER LIABILITIES
129,547
132,708
LIABILITIES OF DISCONTINUED
OPERATIONS
4,487
4,650
Total Liabilities
2,108,291
2,103,635
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity
285,022
315,244
Total Liabilities and Shareholders’
Equity
$
2,393,313
$
2,418,879
GRIFFON CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (in thousands) (Unaudited)
Three Months Ended December
31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
42,177
$
48,702
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
14,823
17,113
Stock-based compensation
6,417
6,742
Asset impairment charges -
restructuring
8,482
—
Provision for losses on accounts
receivable
562
482
Amortization of debt discounts and
issuance costs
1,056
1,023
Gain on sale of assets and investments
(550
)
(10,923
)
Change in assets and liabilities:
Decrease in accounts receivable
14,491
13,689
Decrease in inventories
24,623
22,931
(Increase) decrease in prepaid and other
assets
(3,631
)
100
Increase (decrease) in accounts payable,
accrued liabilities, income taxes payable and operating lease
liabilities
36,491
(26,333
)
Other changes, net
1,117
1,954
Net cash provided by operating
activities
146,058
75,480
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and
equipment
(14,330
)
(4,726
)
Payments related to sale of business
—
(2,568
)
Proceeds from the sale of property, plant
and equipment
787
11,815
Net cash provided by (used in) investing
activities
(13,543
)
4,521
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid
(9,965
)
(7,126
)
Purchase of shares for treasury
(81,449
)
(12,735
)
Proceeds from long-term debt
31,500
29,823
Payments of long-term debt
(63,860
)
(87,539
)
Financing costs
(114
)
(744
)
Other, net
(59
)
(42
)
Net cash used in financing activities
(123,947
)
(78,363
)
GRIFFON CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- continued (in thousands) (Unaudited)
Three Months Ended December
31,
2023
2022
CASH FLOWS FROM DISCONTINUED
OPERATIONS:
Net cash used in operating activities
(2,926
)
(1,953
)
Net cash used in discontinued
operations
(2,926
)
(1,953
)
Effect of exchange rate changes on cash
and equivalents
2,015
689
NET INCREASE IN CASH AND EQUIVALENTS
7,657
374
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD
102,889
120,184
CASH AND EQUIVALENTS AT END OF PERIOD
$
110,546
$
120,558
Griffon evaluates performance based on adjusted net income and
the related adjusted earnings per share, which excludes
restructuring charges, gain/loss from debt extinguishment,
acquisition related expenses, discrete and certain other tax items,
as well other items that may affect comparability, as applicable,
non-GAAP measures. Griffon believes this information is useful to
investors. The following tables provides a reconciliation of net
income to adjusted net income and earnings per common share to
adjusted earnings per common share:
(in thousands, except per share
data)
For the Three Months Ended
December 31,
2023
2022
Net income
$
42,177
$
48,702
Adjusting items:
Restructuring charges(1)
12,400
—
Gain on sale of building
(547
)
(10,852
)
Strategic review - retention and other
4,658
8,232
Proxy expenses
—
1,503
Tax impact of above items(2)
(4,204
)
169
Discrete and certain other tax provisions
(benefits), net(3)
783
(333
)
Adjusted net income
$
55,267
$
47,421
Earnings per common share
$
0.82
$
0.88
Adjusting items, net of tax:
Restructuring charges(1)
0.18
—
Gain on sale of building
(0.01
)
(0.15
)
Strategic review - retention and other
0.07
0.11
Proxy expenses
—
0.02
Discrete and certain other tax provisions
(benefits), net(3)
0.02
(0.01
)
Adjusted earnings per common share
$
1.07
$
0.86
Diluted weighted-average shares
outstanding (in thousands)
51,467
55,298
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.
(1) For the quarter ended December 31, 2023, restructuring
charges relate to the CPP global sourcing expansion, of which
$11,646 is included in Cost of goods and services and $754 is
included in SG&A.
(2) The tax impact for the above reconciling adjustments from
GAAP to non-GAAP net income and EPS is determined by comparing the
Company's tax provision, including the reconciling adjustments, to
the tax provision excluding such adjustments.
(3) Discrete and certain other tax provisions (benefits)
primarily relate to the impact of a rate differential between
statutory and annual effective tax rate on items impacting the
quarter.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206541681/en/
Company Contact Brian G. Harris SVP
& Chief Financial Officer Griffon Corporation (212) 957-5000
IR@griffon.com
Investor Relations Contact Michael
Callahan Managing Director ICR Inc. (203) 682-8311
Griffon (NYSE:GFF)
Historical Stock Chart
From Apr 2024 to May 2024
Griffon (NYSE:GFF)
Historical Stock Chart
From May 2023 to May 2024