Contact: Patrick L. Alesia
Chief Financial Officer
(516) 938-5544
GRIFFON CORPORATION ANNOUNCES OPERATING RESULTS
FOR THE THIRD QUARTER OF FISCAL 2008
JERICHO, NEW YORK, August 7, 2008 - Griffon Corporation (NYSE:GFF) today reported operating results for the third quarter of fiscal 2008, ended June 30, 2008.
Net sales for the third quarter of fiscal 2008 were $322.3 million, compared to $337.2 million in the third quarter of fiscal 2007. Income from continuing operations was $9.4 million, or $.31 per diluted share, for the quarter compared to $6.1 million, or $.20 per diluted share, last year. The income from continuing operations for the third quarter of fiscal 2008 was favorably impacted by a tax benefit of $.1 million, versus a tax expense of $4.1 million in the prior year’s comparable quarter. Loss from discontinued operations was $19.2 million, or $.64 per diluted share, compared to $1.7 million, or $.06 per diluted share, last year. Net loss for the quarter was $9.8 million, or $.33 per diluted share, compared to net income of $4.4 million, or $.14 per diluted share, last year.
In May 2008, the company’s Board of Directors approved a plan to exit all operating activities of the Installation Services segment in 2008. Certain operating units in the Installation Services segment were closed during the second and third quarters, others were sold during the third quarter and the remaining operating units in Las Vegas and Phoenix are expected to be sold in the fourth quarter of fiscal 2008. Results of operations related to substantially all of the operating units of the Installation Services segment from the beginning of each fiscal period presented through June 30, 2008 have been reflected as discontinued operations in the condensed consolidated income statements. Net sales of these operating units were $22.6 million and $61.5 million for the three months ended June 30, 2008 and 2007.
Disposal costs related to the Installation Services segment included in its operating results were $23.3 million and $36.2 million for the three and nine months ended June 30, 2008, respectively. The company presently estimates that it may incur total additional disposal costs of up to $17 million for the remainder of fiscal 2008, of which $5 million to $10 million is estimated to be cash-related.
Telephonics Results
For the quarter ended June 30, 2008, Telephonics generated sales of $88.3 million, a 26.8% decrease from the third quarter of fiscal 2007.
The operating results declined as anticipated as a result of the completion in late fiscal 2007 of substantial contracts with Syracuse Research Corporation (SRC). Excluding the impact of the SRC contracts in the respective third quarter periods, core business sales grew by approximately $24.6 million, or 39%.
Clopay Garage Doors Results
For the quarter ended June 30, 2008, the company’s Garage Doors segment generated sales of $114.7 million, a 7.6% decrease from the third quarter of fiscal 2007.
The company’s Garage Doors segment results were consistent with the sustained downturn in the housing market. We believe that our business was further adversely impacted by weakness in the consumer credit markets. The segment’s management has focused on cost reduction programs including, but not limited to, reductions in force, reducing or eliminating certain sales and marketing programs and consolidating facilities where possible.
Clopay Specialty Plastic Films Results
For the quarter ended June 30, 2008, the company’s Specialty Plastic Films segment generated sales of $121.1 million, a 25.1% increase from the third quarter of fiscal 2007.
Specialty Plastic Films achieved higher sales resulting primarily from a favorable product mix, primarily in North America, the partial pass-through of higher selling prices from rising resin costs, and the impact of foreign exchange, partially offset by lower selling prices to a major customer and lower unit volumes. Operating income increased by $2.6 million as a result of a favorable product mix and the impact of foreign exchange.
Balance Sheet and Capital Expenditures
As previously announced, on June 24, 2008, the company’s subsidiaries, Clopay Building Products Company, Inc. and Clopay Plastic Products Company, Inc., entered into a credit agreement for their domestic operations with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide a five-year, senior secured revolving credit facility of $100 million. Availability under the credit facility is based upon certain eligible accounts receivable, inventory, cash and cash equivalents and property, plant and equipment. Proceeds of a $33 million draw under this facility were primarily used to refinance existing maturing lease obligations.
The company’s total cash balances at the end of the third quarter of fiscal 2008 were $47.0 million. Total debt outstanding at the end of the quarter was $234.7 million, including $130 million of convertible notes. Capital expenditures during the third quarter of fiscal 2008 were $37.3 million.
Conference Call Information
The company will hold a conference call to discuss its results today, August 7, 2008, at 4:30 PM EDT. 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 third quarter earnings teleconference and provide the conference ID number 58333941. A replay of the call will be available from August 7, 2008 at 7:30 PM EDT by dialing 1-800-642-1687 (U.S.) or 1-706-645-9291 (International). The replay access code is 58333941. The replay will be available through August 21, 2008.
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. Telephonics specializes in aircraft intercommunication systems, wireless communication systems, radars, identification friend or foe products, integrated security systems, air traffic management systems, aerospace electronics, and the performance of threat and radar system analyses. Clopay Building Products Company is a leading manufacturer and marketer of residential 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 www.griffoncorp.com.
| GRIFFON CORPORATION AND SUBSIDIARIES |
| |
| OPERATING HIGHLIGHTS |
| |
| (Unaudited) |
| | | For the Three Months Ended | | For the Nine Months Ended | |
| | | June 30, | | June 30, | |
| | | | | | | | | | |
| PRELIMINARY (IN THOUSANDS) | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | | |
| Net Sales: | | | | | | | | | | | | | |
| Electronic Information and Communication Systems | | $ | 88,251 | | $ | 120,553 | | $ | 262,508 | | $ | 374,567 | |
| Garage Doors | | | 114,657 | | | 124,073 | | | 319,396 | | | 370,618 | |
| Specialty Plastic Films | | | 121,147 | | | 96,848 | | | 342,220 | | | 300,233 | |
| Intersegment eliminations | | | (1,788 | ) | | (4,280 | ) | | (8,484 | ) | | (13,099 | ) |
| | | $ | 322,267 | | $ | 337,194 | | $ | 915,640 | | $ | 1,032,319 | |
| | | | | | | | | | | | | | |
| Operating Income (Loss): | | | | | | | | | | | | | |
| Electronic Information and Communication Systems | | $ | 9,173 | | $ | 9,951 | | $ | 21,795 | | $ | 35,302 | |
| Garage Doors | | | 2,252 | | | 4,506 | | | (8,069 | ) | | 4,027 | |
| Specialty Plastic Films | | | 5,506 | | | 2,857 | | | 15,856 | | | 12,136 | |
| Segment operating income | | | 16,931 | | | 17,314 | | | 29,582 | | | 51,465 | |
| Unallocated amounts | | | (5,524 | ) | | (4,362 | ) | | (16,314 | ) | | (13,405 | ) |
| Interest and other, net | | | (2,123 | ) | | (2,689 | ) | | (6,844 | ) | | (7,313 | ) |
| Income from continuing operations before income taxes | | $ | 9,284 | | $ | 10,263 | | $ | 6,424 | | $ | 30,747 | |
| GRIFFON CORPORATION AND SUBSIDIARIES |
| |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
| | | THREE MONTHS ENDED JUNE 30, | |
| PRELIMINARY | | 2008 | | 2007 | |
| | | | | | |
| Net sales | | $ | 322,267,000 | | $ | 337,194,000 | |
| Cost of sales | | | 248,887,000 | | | 264,236,000 | |
| Gross profit | | | 73,380,000 | | | 72,958,000 | |
| | | | | | | | |
| Selling, general and administrative expenses | | | 62,739,000 | | | 61,045,000 | |
| Restructuring and other related charges | | | 180,000 | | | 79,000 | |
| Total operating expenses | | | 62,919,000 | | | 61,124,000 | |
| Income from operations | | | 10,461,000 | | | 11,834,000 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Interest expense | | | (2,399,000 | ) | | (3,223,000 | ) |
| Interest income | | | 276,000 | | | 534,000 | |
| Other, net | | | 946,000 | | | 1,118,000 | |
| | | | (1,177,000 | ) | | (1,571,000 | ) |
| Income from continuing operations before income taxes | | | 9,284,000 | | | 10,263,000 | |
| Provision (benefit) for income taxes | | | (72,000 | ) | | 4,118,000 | |
| Income from continuing operations before discontinued operations | | | 9,356,000 | | | 6,145,000 | |
| Discontinued operations: | | | | | | | |
| Loss from operations of the discontinued Installation Services business (including a loss on disposal of $23,324,000 for the three-month period ended June 30, 2008) | | | (28,113,000 | ) | | (2,863,000 | ) |
| Income tax benefit | | | (8,957,000 | ) | | (1,115,000 | ) |
| Loss from discontinued operations | | | (19,156,000 | ) | | (1,748,000 | ) |
| Net income (loss) | | $ | (9,800,000 | ) | $ | 4,397,000 | |
| | | | | | | | |
| Basic earnings (loss) per share: | | | | | | | |
| Continuing operations | | $ | .31 | | $ | .21 | |
| Discontinued operations | | | (.64 | ) | | (.06 | ) |
| | | $ | (.33 | ) | $ | .15 | |
| Diluted earnings (loss) per share: | | | | | | | |
| Continuing operations | | $ | .31 | | $ | .20 | |
| Discontinued operations | | | (.64 | ) | | (.06 | ) |
| | | $ | (.33 | ) | $ | .14 | |
| | | | | | | | |
| Weighted-average shares outstanding - basic | | | 30,062,000 | | | 29,977,000 | |
| Weighted-average shares outstanding - diluted | | | 30,261,000 | | | 31,032,000 | |
| GRIFFON CORPORATION AND SUBSIDIARIES |
| |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
| | | NINE MONTHS ENDED JUNE 30, | |
| PRELIMINARY | | 2008 | | 2007 | |
| | | | | | |
| Net sales | | $ | 915,640,000 | | $ | 1,032,319,000 | |
| Cost of sales | | | 720,052,000 | | | 816,574,000 | |
| Gross profit | | | 195,588,000 | | | 215,745,000 | |
| | | | | | | | |
| Selling, general and administrative expenses | | | 182,273,000 | | | 179,900,000 | |
| Restructuring and other related charges | | | 2,572,000 | | | 79,000 | |
| Total operating expenses | | | 184,845,000 | | | 179,979,000 | |
| Income from operations | | | 10,743,000 | | | 35,766,000 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Interest expense | | | (8,600,000 | ) | | (9,219,000 | ) |
| Interest income | | | 1,756,000 | | | 1,906,000 | |
| Other, net | | | 2,525,000 | | | 2,294,000 | |
| | | | (4,319,000 | ) | | (5,019,000 | ) |
| Income from continuing operations before income taxes | | | 6,424,000 | | | 30,747,000 | |
| Provision (benefit) for income taxes | | | (325,000 | ) | | 12,625,000 | |
| Income from continuing operations before discontinued operations | | | 6,749,000 | | | 18,122,000 | |
| Discontinued operations: | | | | | | | |
| Loss from operations of the discontinued Installation Services business (including a loss on disposal of $36,213,000 for the nine-month period ended June 30, 2008) | | |
(52,336,000 | ) | |
(8,292,000 | ) |
| | | | ) | | | ) |
| Loss from discontinued operations | | | (39,273,000 | ) | | (5,005,000 | ) |
| Net income (loss) | | $ | (32,524,000 | ) | $ | 13,117,000 | |
| | | | | | | | |
| Basic earnings (loss) per share: | | | | | | | |
| Continuing operations | | $ | .23 | | $ | .61 | |
| Discontinued operations | | | (1.31 | ) | | (.17 | ) |
| | | $ | (1.08 | ) | $ | .44 | |
| Diluted earnings (loss) per share: | | | | | | | |
| Continuing operations | | $ | .22 | | $ | .58 | |
| Discontinued operations | | | (1.30 | ) | | (.16 | ) |
| | | $ | (1.08 | ) | $ | .42 | |
| | | | | | | | |
| Weighted-average shares outstanding - basic | | | 30,057,000 | | | 29,959,000 | |
| Weighted-average shares outstanding - diluted | | | 30,229,000 | | | 31,089,000 | |
| |
| | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |
| (Unaudited) | |
| | | | | | |
| | | | | | |
| PRELIMINARY | | JUNE 30, | | SEPTEMBER 30, | |
| | | 2008 | | 2007 | |
ASSETS | | | | | |
| | | | | | |
| Current Assets: | | | | | |
| Cash and cash equivalents | | $ | 47,039,000 | | $ | 44,747,000 | |
| Accounts receivable, net | | | 166,141,000 | | | 172,333,000 | |
| Contract costs and recognized income not yet billed | | | 68,050,000 | | | 77,184,000 | |
| Inventories | | | 165,280,000 | | | 143,962,000 | |
| Assets of discontinued operations | | | 16,139,000 | | | 74,301,000 | |
| Prepaid expenses and other current assets | | | 66,427,000 | | | 47,670,000 | |
| Total current assets | | | 529,076,000 | | | 560,197,000 | |
Property, plant and equipment, at cost net of depreciation and amortization | | | 258,953,000 | | | 230,232,000 | |
Costs in excess of fair value of net assets of businesses acquired, net | | | 117,517,000 | | | 108,417,000 | |
| Assets of discontinued operations | | | 5,435,000 | | | 2,194,000 | |
| Intangible and other assets | | | 64,779,000 | | | 58,818,000 | |
| | | $ | 975,760,000 | | $ | 959,858,000 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| Current Liabilities: | | | | | | | |
| Notes payable and current portion of long-term debt | | $ | 2,944,000 | | $ | 3,392,000 | |
| Accounts payable | | | 118,292,000 | | | 99,007,000 | |
| Accrued liabilities | | | 63,650,000 | | | 60,764,000 | |
| Income taxes | | | 1,720,000 | | | 14,153,000 | |
| Liabilities of discontinued operations | | | 15,560,000 | | | 17,287,000 | |
| Total current liabilities | | | 202,166,000 | | | 194,603,000 | |
| Long-term debt | | | 231,740,000 | | | 229,438,000 | |
| Other liabilities and deferred credits | | | 71,727,000 | | | 61,929,000 | |
| Liabilities of discontinued operations | | | 10,135,000 | | | 6,949,000 | |
| Shareholders' equity | | | 459,992,000 | | | 466,939,000 | |
| | | $ | 975,760,000 | | $ | 959,858,000 | |
| GRIFFON CORPORATION AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| PRELIMINARY | | NINE MONTHS ENDED JUNE 30, | |
| | | 2008 | | 2007 | |
| CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS: | | | | | |
| Net income (loss) | | $ | (32,524,000 | ) | $ | 13,117,000 | |
| Loss from discontinued operations - net of taxes | | | 39,273,000 | | | 5,005,000 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: | | | | | | | |
| Depreciation and amortization | | | 32,225,000 | | | 29,474,000 | |
| Stock-based compensation | | | 2,012,000 | | | 1,884,000 | |
| Provision for losses on accounts receivable | | | 447,000 | | | 121,000 | |
| Write-off of unamortized deferred financing costs | | | 495,000 | | | --- | |
| Deferred income taxes | | | 874,000 | | | 1,003,000 | |
| Change in assets and liabilities: | | | | | | | |
| Decrease in accounts receivable and contract costs and recognized income not yet billed | | | 17,650,000 | | | 7,165,000 | |
| Increase in inventories | | | (18,746,000 | ) | | (3,446,000 | ) |
| Increase in prepaid expenses and other assets | | | (19,275,000 | ) | | (735,000 | ) |
| Increase (decrease) in accounts payable, accrued liabilities and income taxes payable | | | 29,327,000 | | | (40,504,000 | ) |
| Other changes, net | | | (2,351,000 | ) | | (311,000 | ) |
| | | | 81,931,000 | | | (344,000 | ) |
| Net cash provided by operating activities - continuing operations | | | 49,407,000 | | | 12,773,000 | |
| | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS: | | | | | | | |
| Acquisition of property, plant and equipment | | | (49,101,000 | ) | | (23,027,000 | ) |
| Acquisition of business | | | (1,829,000 | ) | | (817,000 | ) |
| Proceeds from sale of investment | | | 1,000,000 | | | --- | |
| Decrease (increase) in equipment lease deposits | | | 3,235,000 | | | (4,597,000 | ) |
| Funds restricted for capital projects | | | --- | | | (4,471,000 | ) |
| Net cash used in investing activities - continuing operations | | | (46,695,000 | ) | | (32,912,000 | ) |
| | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS: | | | | | | | |
| Purchase of shares for treasury | | | (579,000 | ) | | (3,287,000 | ) |
| Proceeds from issuance of long-term debt | | | 84,600,000 | | | 47,891,000 | |
| Payments of long-term debt | | | (82,130,000 | ) | | (7,449,000 | ) |
| Decrease in short-term borrowings | | | (896,000 | ) | | (6,132,000 | ) |
| Financing costs | | | (1,735,000 | ) | | --- | |
| Exercise of stock options | | | --- | | | 2,563,000 | |
| Tax benefit from exercise of stock options | | | --- | | | 685,000 | |
| Other, net | | | (879,000 | ) | | (1,315,000 | ) |
| Net cash provided by (used in) financing activities - continuing operations | | | (1,619,000 | ) | | 32,956,000 | |
| | | | | | | | |
| CASH FLOWS FROM DISCONTINUED OPERATIONS: | | | | | | | |
| Net cash provided by (used in) operating activities | | | (3,842,000 | ) | | 17,046,000 | |
| Net cash provided by (used in) investing activities | | | 3,928,000 | | | (16,923,000)_ | |
| Net cash provided by discontinued operations | | | 86,000 | | | 123,000 | |
| Effect of exchange rate changes on cash and cash equivalents | | | 1,113,000 | | | 695,000 | |
| | | | | | | | |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | | | 2,292,000 | | | 13,635,000 | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 44,747,000 | | | 22,389,000 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 47,039,000 | | $ | 36,024,000 | |
