Griffon Corporation Announces First Quarter Operating Results

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



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 http://www.griffoncorp.com/.

  Contact: Patrick L. Alesia
  Chief Financial Officer
  [phone]


                     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


DATASOURCE: Griffon Corporation



CONTACT:  Patrick L. Alesia, Chief Financial Officer, [phone]



Web Site:  http://www.griffoncorp.com/ 

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