Griffon Corporation Announces Third Quarter Operating Results

Share Name	Share Symbol	Market	Type
Griffon Corp.	TG:GFF	Tradegate	Ordinary Share

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	0.50	0.71%	71.00	69.50	72.00	70.00	70.00	70.00	124	22:50:16

Griffon (TG:GFF)
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- Segment adjusted EBITDA of $25.8 million - Continuing Operations Diluted EPS of $0.12 JERICHO, N.Y., Aug. 6 /PRNewswire-FirstCall/ -- Griffon Corporation (NYSE: GFF) today reported operating results for the third quarter ended June 30, 2009. Third Quarter of Fiscal 2009 Net sales from continuing operations for the third quarter of fiscal 2009 were $287.4 million, compared to $322.3 million in the third quarter of fiscal 2008. Income from continuing operations for the third quarter was $6.9 million, or $0.12 per diluted share, compared to $9.4 million, or $0.29 per diluted share, last year. Income from discontinued operations for the third quarter was essentially nil, compared to a loss of $19.2 million, or $0.59 per diluted share, last year. Net income for the quarter was $6.9 million, or $0.12 per diluted share, compared to a loss of $9.8 million, or $0.30 per diluted share, last year. The Company's segment adjusted EBITDA for the third quarter of 2009 was $25.8 million compared to $27.9 million in 2008. Segment adjusted EBITDA is defined as operating income excluding corporate overhead, interest, taxes, depreciation and amortization, restructuring 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 former 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 substantially concluded its disposal of the Installation Services segment in the second quarter of fiscal 2009. As announced in June 2009, the Company plans to consolidate facilities in its Clopay Building Products segment, which is scheduled to be completed in early 2011. The consolidation is expected to produce annual cost savings of approximately $10 million. The Company estimates that it will incur pre-tax exit and restructuring costs of approximately $12 million, substantially all of which will be cash charges. In addition, the Company expects to invest approximately $11 million in capital expenditures in order to effectuate the restructuring plan. These charges and expenditures will occur primarily in fiscal 2010 and 2011. In addition to organic growth, part of the Company's overall growth strategy calls for the Company to pursue acquisition and investment opportunities, both within its existing segments and outside of those segments. We regularly examine and explore such opportunities. Telephonics For the quarter ended June 30, 2009, Telephonics generated sales of $94.1 million, a 7% increase from the third quarter of fiscal 2008. The sales increase was primarily attributable to homeland defense and border patrol projects. Segment operating profit increased $0.7 million, or 8%, compared to last year due to a favorable product mix partially offset by increased operating expenses related to research and development and additional administrative expenses to support sales growth. Clopay Building Products For the quarter ended June 30, 2009, Clopay Building Products generated sales of $98.5 million, a 13% decrease from the third quarter of fiscal 2008. Garage Door sales continued to be impacted by weakness in the residential housing and credit markets. The sales decline was principally due to reduced unit volume, offset partially by product mix. Segment operating profit decreased $1.6 million compared to last year, primarily as a result of reduced sales volume and the associated plant absorption loss, partially offset by ongoing cost reduction efforts. Clopay Plastic Products For the quarter ended June 30, 2009, Clopay Plastic Products generated sales of $94.8 million, a 22% decrease from the third quarter of fiscal 2008. The lower sales were principally due to lower volume in our European business, foreign exchange translation and the pass through of lower resin costs. Segment operating profit decreased $0.7 million, or 13%. The 50 basis point margin increase benefited from cost reduction efforts, which were partially offset by the impact of lower volume. Balance Sheet and Capital Expenditures Through a September 2008 common stock rights offering and investment by GS Direct, L.L.C., an affiliate of Goldman Sachs, the Company substantially strengthened its balance sheet by raising an aggregate of $248.6 million in gross proceeds. The Company intends to use the proceeds for general corporate purposes and to fund acquisition and investment opportunities. The Company's total cash and equivalents balance at June 30, 2009 was $289.6 million. Total debt outstanding at June 30, 2009 was $179.8 million, including $79.4 million of convertible notes. Capital expenditures for the third quarter were $8.5 million. In April 2009, the Company purchased $15.1 million face value of the convertible notes from certain noteholders for $14.3 million. The Company recorded a third quarter pre-tax gain of approximately $0.6 million from debt extinguishment, net of a proportionate reduction in the related deferred financing costs. Conference Call Information The Company will hold a conference call to discuss its results today, August 6, 2009, at 4:30 PM ET. The conference call can be accessed by dialing (800) 322-9079 (U.S. participants) or (973) 582-2717 (International participants). Callers should ask to be connected to Griffon Corporation's third quarter fiscal 2009 teleconference and provide the conference ID number 22569921. A replay of the call will be available from August 6, 2009 at 7:30 PM ET by dialing (800) 642-1687 (U.S.) or (706) 645-9291 (International). The replay access code is 22569921. The replay will be available through August 20, 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: Telephonics Corporation, Clopay Building Products Company and Clopay Plastic Products Company. -- Telephonics' high-technology engineering and manufacturing capabilities provide integrated information, communication and sensor system solutions to military and commercial markets worldwide. -- Clopay Building Products 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 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/. PRELIMINARY GRIFFON CORPORATION AND SUBSIDIARIES OPERATING HIGHLIGHTS (Unaudited) Three Months Ended Nine Months Ended (in thousands) June 30, June 30, ---------------------------- ---------------- ------------------- 2009 2008 2009 2008 ------- ------- ------- ------- NET SALES --------- Telephonics $94,126 $88,251 $271,520 $262,508 Clopay Building Products 98,497 112,869 286,566 310,912 Clopay Plastic Products 94,762 121,147 307,720 342,220 ------- ------- ------- ------- Total consolidated net sales $287,385 $322,267 $865,806 $915,640 ======= ======= ======= ======= INCOME (LOSS) FROM CONTINUING OPERATIONS ------------------------------ Segment operating profit (loss): Telephonics $9,908 $9,173 $23,538 $21,795 Clopay Building Products 639 2,252 (15,595) (8,069) Clopay Plastic Products 4,780 5,506 16,894 15,856 ------- ------- ------- ------- Total segment operating profit 15,327 16,931 24,837 29,582 Unallocated amounts (6,281) (5,335) (15,489) (15,692) Gain from debt extinguishment, net 646 - 7,360 - ------- ------- ------- ------- Net interest expense (1,814) (2,312) (6,780) (7,466) ------- ------- ------- ------- Income from continuing operations before provision for income taxes and discontinued operations $7,878 $9,284 $9,928 $6,424 ======= ======= ======= ======= Unallocated amounts typically include general corporate expenses not attributable to any reportable segment. PRELIMINARY GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, 2009 2008 2009 2008 ------- ------- ------- ------- Net sales $287,385 $322,267 $865,806 $915,640 Cost of sales 221,099 248,887 686,588 720,052 ------- ------- ------- ------- Gross profit 66,286 73,380 179,218 195,588 Selling and administrative expenses 58,376 62,550 170,449 181,651 Restructuring and other related charges 38 180 38 2,572 ------- ------- ------- ------- Total operating expenses 58,414 62,730 170,487 184,223 Income from operations 7,872 10,650 8,731 11,365 Other income (expense) Interest expense (2,157) (2,588) (7,790) (9,222) Interest income 343 276 1,010 1,756 Gain from debt extinguishment, net 646 - 7,360 - Other, net 1,174 946 617 2,525 ------- ------- ------- ------- Total other income (expense) 6 (1,366) 1,197 (4,941) ------- ------- ------- ------- Income before taxes and discontinued operations 7,878 9,284 9,928 6,424 Provision (benefit) for income taxes 986 (72) 268 (325) ------- ------- ------- ------- Income before discontinued operations 6,892 9,356 9,660 6,749 Discontinued operations: Income (loss) from operations of the discontinued Installation Services business 4 (28,113) 1,055 (52,336) Provision (benefit) for income taxes (45) (8,957) 354 (13,063) ------- ------- ------- ------- Income (loss) from discontinued operations 49 (19,156) 701 (39,273) ------- ------- ------- ------- Net Income (loss) $6,941 $(9,800) $10,361 $(32,524) ======= ======= ======= ======= Basic earnings (loss) per common share: Income from continuing operations $0.12 $0.29 $0.17 $0.21 Income (loss) from discontinued operations 0.00 (0.59) 0.01 (1.21) Net income (loss) 0.12 (0.30) 0.18 (1.00) Weighted-average shares outstanding 58,700 32,490 58,673 32,485 ======= ======= ======= ======= Diluted earnings (loss) per common share: Income from continuing operations $0.12 $0.29 $0.17 $0.21 Income (loss) from discontinued operations 0.00 (0.59) 0.01 (1.21) Net income (loss) 0.12 (0.30) 0.18 (1.00) Weighted-average shares outstanding 59,097 32,689 58,862 32,657 ======= ======= ======= ======= PRELIMINARY GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) At June 30, 2009 At September 30, 2008 ---------------- ---------------- CURRENT ASSETS Cash and equivalents $289,563 $311,921 Accounts receivable, net of allowances of $5,012 and $5,609 153,799 163,586 Contract costs and recognized income not yet billed 62,972 69,001 Inventories, net 150,333 167,158 Prepaid and other current assets 36,030 52,430 Assets of discontinued operations 4,384 9,495 ---------- ---------- Total Current Assets 697,081 773,591 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, net 230,867 239,003 GOODWILL 93,094 93,782 INTANGIBLE ASSETS, net 32,949 34,777 OTHER ASSETS 24,276 22,067 ASSETS OF DISCONTINUED OPERATIONS 9,011 8,346 ---------- ---------- Total Assets $1,087,278 $1,171,566 ========== ========== CURRENT LIABILITIES Notes payable and current portion of long-term debt $2,084 $2,258 Accounts payable 99,515 129,823 Accrued liabilities 63,167 64,450 Liabilities of discontinued operations 5,252 14,917 ---------- ---------- Total Current Liabilities 170,018 211,448 ---------- ---------- LONG-TERM DEBT 177,739 230,930 OTHER LIABILITIES 61,552 59,460 LIABILITIES OF DISCONTINUED OPERATIONS 9,096 10,048 ---------- ---------- Total Liabilities 418,405 511,886 ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Total Shareholders' Equity 668,873 659,680 ---------- ---------- Total Liabilities and Shareholders' Equity $1,087,278 $1,171,566 ========== ========== PRELIMINARY GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended June 30, 2009 2008 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $10,361 $(32,524) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss (income) from discontinued operations (701) 39,273 Depreciation and amortization 31,404 31,602 Stock-based compensation 3,042 2,012 Provision for losses on account receivable 646 447 Amortization/write-off of deferred financing costs 1,426 1,118 Gain from debt extinguishment, net (7,360) - Deferred income taxes (548) 874 Change in assets and liabilities: Decrease in accounts receivable and contract costs and recognized income not yet billed 14,785 17,650 Decrease (increase) in inventories 16,412 (18,746) Decrease (increase) in prepaid and other assets 14,647 (18,231) Increase (decrease) in accounts payable, accrued liabilities and income taxes payable (42,299) 29,327 Other changes, net 511 (3,260) -------- -------- 31,965 82,066 -------- -------- Net cash provided by operating activities 42,326 49,542 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property, plant and equipment (20,563) (49,101) Acquired businesses - (1,829) Proceeds from sale of investment - 1,000 Decrease (increase) in equipment lease deposits (330) 3,235 -------- -------- Net cash used in investing activities (20,893) (46,695) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares from rights offering 7,257 - Purchase of shares for treasury - (579) Proceeds from issuance of long-term debt 10,879 84,600 Payments of long-term debt (56,191) (82,130) Decrease in short-term borrowings (796) (896) Financing costs (559) (2,779) Purchase of ESOP shares (4,370) - Tax benefit from vesting of restricted stock - 909 Other, net 465 (879) -------- -------- Net cash used in financing activities (43,315) (1,754) -------- -------- CASH FLOWS FROM DISCONTINUED OPERATIONS: Net cash used in discontinued operations (1,111) (3,842) Net cash provided by investing activities - 3,928 -------- -------- Net cash provided by (used in) discontinued operations (1,111) 86 -------- -------- Effect of exchange rate changes on cash and cash equivalents 635 1,113 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,358) 2,292 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 311,921 44,747 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $289,563 $47,039 ======== ======== PRELIMINARY 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. GRIFFON CORPORATION AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES SEGMENT ADJUSTED EBITDA - BY REPORTABLE SEGMENT (Unaudited) Three Months Nine Months (in thousands) Ended June 30, Ended June 30, --------------------------------- --------------- --------------- 2009 2008 2009 2008 ------- ------- ------- ------- Telephonics Segment operating income $9,908 $9,173 $23,538 $21,795 Depreciation and amortization 1,620 1,712 4,650 4,630 ------- ------- ------- ------- Segment adjusted EBITDA 11,528 10,885 28,188 26,425 Clopay Building Products Segment operating income (loss) 639 2,252 (15,595) (8,069) Depreciation and amortization 3,546 3,331 10,032 9,811 Restructuring charges 38 180 38 2,572 ------- ------- ------- ------- Segment adjusted EBITDA 4,223 5,763 (5,525) 4,314 Clopay Plastic Products Segment operating income 4,780 5,506 16,894 15,856 Depreciation and amortization 5,239 5,770 16,248 16,940 ------- ------- ------- ------- Segment adjusted EBITDA 10,019 11,276 33,142 32,796 All segments: Income from operations - as reported 7,872 10,650 8,731 11,365 Unallocated amounts 6,281 5,335 15,489 15,692 Other, net 1,174 946 617 2,525 ------- ------- ------- ------- Segment operating income 15,327 16,931 24,837 29,582 Depreciation and amortization 10,405 10,813 30,930 31,381 Restructuring charges 38 180 38 2,572 ------- ------- ------- ------- Segment adjusted EBITDA $25,770 $27,924 $55,805 $63,535 ======= ======= ======= ======= Unallocated amounts typically include general corporate expenses not attributable to any reportable segment. Contact: Patrick L. Alesia Chief Financial Officer (516) 938-5544 DATASOURCE: Griffon Corporation CONTACT: Patrick L. Alesia, Chief Financial Officer, +1-516-938-5544 Web Site: http://www.griffoncorp.com/

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GFF Griffon Corp.