GRIFFON CORPORATION ANNOUNCES FOURTH QUARTER
OPERATING RESULTS AND 2007 FISCAL YEAR RESULTS
Jericho, New York, November 5, 2007 – Griffon Corporation (NYSE:GFF) today announced operating results for the fourth quarter and fiscal year ended September 30, 2007. Net sales for the fourth quarter were $396,200,000 compared to $482,834,000 for the fourth quarter of fiscal 2006. Pretax income for the quarter was $9,176,000 compared to $29,494,000 for last year's fourth quarter. Net income for the current quarter was $8,962,000 compared to $18,439,000 for the last quarter of 2006. Diluted earnings per share was $.29 for the fourth quarter of fiscal 2007 compared to $.60 in last year's fourth quarter.
The sales decrease in the fourth quarter was primarily attributable to the wind down of the electronic information and communication systems segment’s contract with Syracuse Research Corporation and the decline in revenue in the garage doors and installation services segments, caused by the weak residential housing market. Operating income for these three segments were similarly effected, although somewhat offset by improved operating results for the specialty plastic films segment.
Net sales for the fiscal year ended September 30, 2007 were $1,616,612,000 compared to $1,636,580,000 for fiscal 2006. Pretax income for fiscal 2007 was $31,632,000 compared to $78,698,000 last year. Net income for fiscal 2007 was $22,079,000 compared to last year’s earnings of $51,786,000. Diluted earnings per share was $.71 compared to $1.65 a year earlier.
For the year the decline in operating results was primarily caused by the impact of the weak residential housing market on the building products segments, partially offset by improved operating results in the electronic information and communication systems and specialty plastic films segments.
Cash generated from operations for the year was $65.7 million which funded capital expenditures of $30.3 million, the majority of which was for the specialty plastic films and garage doors segments. The company funded acquisitions of $17.4 million from the proceeds of long-term debt. The company also continued its stock buyback program, using approximately $4.4 million during the year to acquire approximately 208,000 shares of common stock.
Griffon Corporation -
| | l | is a leading manufacturer and marketer of residential, commercial and industrial garage doors sold to professional installing dealers and major home center retail chains; |
| | l | installs and services specialty building products and systems, primarily garage doors, openers, fireplaces and cabinets, for new construction markets through a substantial network of operations located throughout the country; |
| | l | is an international leader in the development and production of embossed and laminated specialty plastic films used in the baby diaper, feminine napkin, adult incontinent, surgical and patient care markets; and |
| | l | develops and manufactures information and communication systems for government and commercial markets worldwide. |
“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 and economic conditions, results of integrating acquired businesses into existing operations, competitive factors and pricing pressures for resin and steel, 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. 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.
OPERATING HIGHLIGHTS
(IN THOUSANDS)
| PRELIMINARY | | | | | | | | | |
| | | For the Three Months Ended September 30, | | For the Years Ended September 30, | |
| | | | | | | | | | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| Net sales: | | | | | | | | | | | | | |
| Garage Doors | | $ | 127,548 | | $ | 145,990 | | $ | 479,543 | | $ | 549,701 | |
| Installation Services | | | 68,898 | | | 88,502 | | | 275,614 | | | 338,731 | |
| Specialty Plastic Films | | | 106,341 | | | 102,085 | | | 406,574 | | | 381,373 | |
| Electronic Information and Communication Systems | | | 97,982 | | | 151,735 | | | 472,549 | | | 387,437 | |
| Intersegment eliminations | | | (4,569 | ) | | (5,478 | ) | | (17,668 | ) | | (20,662 | ) |
| | | $ | 396,200 | | $ | 482,834 | | $ | 1,616,612 | | $ | 1,636,580 | |
| Operating income (loss): | | | | | | | | | | | | | |
| Garage Doors | | $ | 2,935 | | $ | 13,640 | | $ | 6,965 | | $ | 41,171 | |
| Installation Services | | | (1,932 | ) | | 3,021 | | | (10,648 | ) | | 9,238 | |
| Specialty Plastic Films | | | 5,127 | | | 39 | | | 17,263 | | | 15,450 | |
| Electronic Information and Communication Systems | | | 10,587 | | | 19,221 | | | 45,888 | | | 39,609 | |
| Segment operating income | | | 16,717 | | | 35,921 | | | 59,468 | | | 105,468 | |
| Unallocated amounts | | | (4,742 | ) | | (4,099 | ) | | (17,725 | ) | | (18,058 | ) |
| Interest and other, net | | | (2,799 | ) | | (2,328 | ) | | (10,111 | ) | | (8,712 | ) |
| Income before income taxes | | $ | 9,176 | | $ | 29,494 | | $ | 31,632 | | $ | 78,698 | |
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
| PRELIMINARY | | | | | |
| | | For the Three Months Ended September 30, | |
| | | 2007 | | 2006 | |
| Net sales | | $ | 396,200 | | $ | 482,834 | |
| Cost of sales | | | 299,096 | | | 368,780 | |
| Gross profit | | | 97,104 | | | 114,054 | |
| | | | | | | | |
| Selling, general and administrative expenses | | | 85,747 | | | 82,421 | |
| Income from operations | | | 11,357 | | | 31,633 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Interest expense | | | (3,291 | ) | | (2,777 | ) |
| Interest income | | | 492 | | | 449 | |
| Other, net | | | 618 | | | 189 | |
| | | | (2,181 | ) | | (2,139 | ) |
| Income before income taxes | | | 9,176 | | | 29,494 | |
| | | | | | | | |
| Provision for income taxes: | | | | | | | |
| Federal | | | 377 | | | 10,008 | |
| State and foreign | | | (163 | ) | | 1,047 | |
| | | | 214 | | | 11,055 | |
| | | | | | | | |
| Net income | | $ | 8,962 | | $ | 18,439 | |
| | | | | | | | |
| Basic earnings per share of common stock: | | $ | .30 | | $ | .62 | |
| | | | | | | | |
| Diluted earnings per share of common stock: | | $ | .29 | | $ | .60 | |
| Weighted average number of shares outstanding: | | | | | | | |
| Basic | | | 30,055,000 | | | 29,897,000 | |
| Diluted | | | 30,475,000 | | | 30,983,000 | |
GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
| PRELIMINARY | | | | | |
| | | For the Years Ended September 30, | |
| | | 2007 | | 2006 | |
| Net sales | | $ | 1,616,612 | | $ | 1,636,580 | |
| Cost of sales | | | 1,255,181 | | | 1,234,826 | |
| Gross profit | | | 361,431 | | | 401,754 | |
| | | | | | | | |
| Selling, general and administrative expenses | | | 322,653 | | | 316,696 | |
| Income from operations | | | 38,778 | | | 85,058 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Interest expense | | | (12,508 | ) | | (10,492 | ) |
| Interest income | | | 2,397 | | | 1,780 | |
| Other, net | | | 2,965 | | | 2,352 | |
| | | | (7,146 | ) | | (6,360 | ) |
| Income before income taxes | | | 31,632 | | | 78,698 | |
| | | | | | | | |
| Provision for income taxes: | | | | | | | |
| Federal | | | 5,794 | | | 21,135 | |
| State and foreign | | | 3,759 | | | 5,777 | |
| | | | 9,553 | | | 26,912 | |
| | | | | | | | |
| Net income | | $ | 22,079 | | $ | 51,786 | |
| | | | | | | | |
| Basic earnings per share of common stock: | | $ | .74 | | $ | 1.73 | |
| | | | | | | | |
| Diluted earnings per share of common stock: | | $ | .71 | | $ | 1.65 | |
| Weighted average number of shares outstanding: | | | | | | | |
| Basic | | | 29,983,000 | | | 29,968,000 | |
| Diluted | | | 30,935,000 | | | 31,326,000 | |
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
| PRELIMINARY | | | | | |
| | | SEPTEMBER 30, | |
| | | 2007 | | 2006 | |
ASSETS | | | | | |
| | | | | | |
| Current Assets: | | | | | | | |
| Cash and cash equivalents | | $ | 44,747 | | $ | 22,389 | |
| Accounts receivable, net | | | 210,340 | | | 247,172 | |
| Contract costs and recognized income not yet billed | | | 77,184 | | | 68,279 | |
| Inventories | | | 161,775 | | | 165,089 | |
| Prepaid expenses and other current assets | | | 50,889 | | | 42,075 | |
| Total current assets | | | 544,935 | | | 545,004 | |
Property, plant and equipment, at cost less depreciation and amortization | | | 233,449 | | | 231,975 | |
| Goodwill | | | 114,756 | | | 99,540 | |
| Intangible and other assets | | | 66,718 | | | 51,695 | |
| | | $ | 959,858 | | $ | 928,214 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| Current Liabilities: | | | | | | | |
| Notes payable and current portion of long-term debt | | $ | 3,392 | | $ | 8,092 | |
| Accounts payable | | | 105,324 | | | 128,104 | |
| Accrued liabilities | | | 79,001 | | | 81,672 | |
| Income taxes | | | 14,153 | | | 18,431 | |
| Total current liabilities | | | 201,870 | | | 236,299 | |
| Long-term debt: | | | | | | | |
| Convertible subordinated notes | | | 130,000 | | | 130,000 | |
| Other | | | 99,438 | | | 79,228 | |
| Other liabilities and deferred credits | | | 61,611 | | | 70,242 | |
| Shareholders' equity | | | 466,939 | | | 412,445 | |
| | | $ | 959,858 | | $ | 928,214 | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| PRELIMINARY | | | |
| | | For the Years Ended September 30, | |
| | | 2007 | | 2006 | |
| | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
| Net income | | $ | 22,079 | | $ | 51,786 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| Depreciation and amortization | | | 42,014 | | | 35,100 | |
| Stock based compensation | | | 2,412 | | | 1,711 | |
| Provision for losses on accounts receivable | | | 2,955 | | | 1,792 | |
| Deferred income taxes | | | (5,708 | ) | | (4,012 | ) |
| Change in assets and liabilities: | | | | | | | |
(Increase) decrease in accounts receivable and contract costs and recognized income not yet billed | | | 31,933 | | | (79,799 | ) |
| (Increase) decrease in inventories | | | 7,748 | | | (15,624 | ) |
| (Increase) decrease in prepaid expenses and other assets | | | (1,278 | ) | | 722 | |
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable | | | (36,281 | ) | | 25,090 | |
| Other changes, net | | | (213 | ) | | (482 | ) |
| | | | 43,582 | | | (35,502 | ) |
| Net cash provided by operating activities | | | 65,661 | | | 16,284 | |
| | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
| Acquisition of property, plant and equipment | | | (30,321 | ) | | (42,107 | ) |
| Acquired businesses | | | (17,418 | ) | | (1,304 | ) |
| Increase in equipment lease deposits | | | (6,092 | ) | | (1,988 | ) |
| Funds restricted for capital projects | | | (4,521 | ) | | - | |
| Net cash used in investing activities | | | (58,352 | ) | | (45,399 | ) |
| | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
| Purchase of shares for treasury | | | (4,355 | ) | | (19,811 | ) |
| Proceeds from issuance of long-term debt | | | 47,891 | | | 74,000 | |
| Payments of long-term debt | | | (27,650 | ) | | (69,892 | ) |
| Decrease in short-term borrowings | | | (5,834 | ) | | (398 | ) |
| Exercise of stock options | | | 2,588 | | | 2,639 | |
| Tax benefit from exercise of stock options | | | 1,346 | | | 4,136 | |
| Distributions to minority interest | | | - | | | (354 | ) |
| Other, net | | | 271 | | | (179 | ) |
| Net cash provided by (used in) financing activities | | | 14,257 | | | (9,859 | ) |
| | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | 792 | | | 700 | |
| | | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | 22,358 | | | (38,274 | ) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 22,389 | | | 60,663 | |
| CASH AND CASH EQUIVALENTS AT END OF YEAR | | $ | 44,747 | | $ | 22,389 | |
