GFF - Earnings call transcript Q1 2018

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Operator

Good day and welcome to the Griffon Corporation First Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Harris, Chief Financial Officer. Please go ahead, sir.

Brian Harris

Julia. you, Thank everyone. Good morning, on Executive the Kramer, me is call Chief Officer. our With Ron

is will press Our playback, recorded being call and of today. are earlier the be which in issued our release details for available

world As change in include about the Please of today's company's inherent changes. the are environments views and comments as in based that our operate. businesses risks and forward-looking subject in cautionary Such on statements Exchange statements the performance Griffon's statements past, release the filings. press our the our will and can which Securities uncertainties various see they Commission to in and

non-GAAP remarks a reporting the our press reconciliations Finally, today's will as some reminded between for release. Also, affect periods. please those of discontinued with of are items announcement operation. is be the items prior Plastics classified comparability our included that These that Plastics in adjust in transaction, sales explained

to I Ron. Now, call will turn the over

Ron Kramer

for Good and us thanks morning joining today.

on quarter the I'd including the Harvey a to away and businesses, discussing as more greatly service, was XX building of Harvey be Before XX instrumental take years an on missed chairman, in CEO today. team. and who to legacy. passed mentor than of remember the Blau, are XX. company, like moment trusted his it friend, a With will our He that we extraordinary to January committed is into the Griffon company was and a Griffon build to leader, the He all entire

which, the strong organic both year at expected as XX% a pleased a from move revenue Telephonics. fiscal as we to off report we transformational Building growth segment, start was increased products to acquisitions XXXX. and revenue of prior the driven let's offset level, partially reduced our Home quarter. At & by in our by the to the I'm year consolidated actions to Okay, the build on are

few to revenue provide updates particularly our Brian our a defense half. segment you on turning orders and before I'd the closer We second morning, to over improve to we'll and This key and in a to year, call through we throughout continue at the for outlook then comments ClosetMaid expect minutes acquisition am incremental take walk the look the actions for to $XX strategic our numbers. performance that to demand with relationships. ownership in-line Griffon, first the good ClosetMaid, through with in recent end, as our that I quarter growth important Beginning our million seeing pleased in an platform of We and are in was new view generating customer quarter. expectations, revenue performance of to like

ClosetMaid our the begun price of addition, tax purchase benefits operational in million. we controls. resulted adjustment We improvements in of purchase $XXX the approximately and approximately $XX which a to In price implementing have million to reduction completed process under post-closing $XXX Emerson, cost with million and management, net

cash close the to to business Global of Plastics Clopay week. for the expect We $XXX in million sale on next Berry

shareholders. opportunities flow improve that the Griffon's to return closing the of of of Griffon's the free margins invest the to due on capital Griffon diversify to we pay in positions million in portfolio for from proceeds million reform announced After and November. This sheet, divestiture down will cash the evaluate After Plastics transaction we bill. the increasingly Plastics taxes deleverage of is onto sale range generation. our Plastics transaction, balance use businesses, to benefits The million the We unlocks $XX closes, either us expect cash it of $XX or value growth. million $XX $XX of for Plastics to and to expect we Griffon operating tax a shareholders to

$XXX shares. stock, share. million Since quarter, the per an During did approximately first $XX.XX third capitalization, of total representing a repurchase any at million of worth XX.X average we we've shares of a not the XXXX, of repurchased

held $XX.X increase first per the availability board at has its of marks XX, repurchase an dividend, We quarter per December a of million under our program share As year of over announced we which dividend. prior annual grown compound morning this XX% our dividend authorize XX% Since inception, a $X.XX plan. rate year.

to to will who little segment more turn update detail. a Next, by like I I'd an you Brian through provide before take it over

$XX.X million with We to increase innovation products. by Hacienda, the products EBITDA from La product and Home our Tuscan growth. XX% acquisitions as grow initiatives recent of efficiency and XX% outlook Building of start both Let's benefits sales Building increased bolt-on Sales organic improved continue expansion, to the Path, Hills $XXX we on & million, to ClosetMaid, remain Harper for improve the positive through category profitability driven and in revenue. acquisitions. the Home & and and

discussed strength the see but which We have underlying the U.S. housing steady for in time. continue some recovery, to we market multi-year housing with slow

increased to business capture while rising AMES remodeling supports ownership positioned Our doors construction well new is business. home and our rate activity, tool

Home strengths. recent product of to we leverage look ClosetMaid nicely segment complements the as Building Our & acquisition the segment's combined

work year to and our airborne to fiscal mostly compared $XX related particularly sales certain quarter. timing year, first Lower million prior Telephonics, of electronics quarter maritime the in were $XX on to we programs programs. in compared as business, performed surveillance orders had Turning the our to revenue intercommunication system million the and expected defense prior was radar

to includes Department is a funding, warfare The additional while number Telephonics areas. for U.S. on the sales Congress in U.S. existing remains set direct ship to a radars. foreign military significant currently the see defense and military building customers opportunities which business Telephonics continues commercial include Defense reminder, increases sales under surveillance work of increased The that electronics to new sequestration maritime includes of areas business in spending. and supports opportunities of strong budget fleet look electronic border systems, anticipated and of backlog a expected incumbent core half As of made of which international in with healthy outlook The with Navy Brian strategic Telephonics the in second the numbers the commercial transition communications you leads progress new this to year. pipeline little I'll Overall, of market take Telephonics' on Overall, through security let transit our international domestic and mobile exciting this grow systems. position business for more an we've on initiatives a is detail. time all company our of in

Brian Harris

Thank you, Ron.

offset quarter and growth period revenue contributing performance by $XXX prior XXXX compared Building quarter of in driven to in First acquisition with strong partially lower our the revenue. Telephonics increase was the product million, Home increased organic to Increased to XX% $XXX million. the both revenue & year by segment and

EBITDA million, $XX.X year of increase segment over adjusted quarter continuing from X% period. First was operations XXXX an prior the

Works expectations. first mix ClosetMaid acquisitions Brush revenue Harper $XXX in-line our Moving our million. segment quarter The increase was plant and La million. Hills from to quarter driven increased to & revenue revenue XX% $XXX and the AMES in increased was Hacienda, first revenue and In increased business, to quarter compared benefited $XXX doors products tools snow business, pot XX% pricing. The increased our acquisition-related prior year $XXX to Home by results, X% sales. to our Tuscan million favorable and from our with revenue In first period million. business Building Canadian of doors Path,

products' $XXX $XX.X the $XX.X increased & continued million, driven XX% quarter improvement. first We increased continue the in operational adjusted revenue from and ClosetMaid prior million to expect to period, segment revenue in to compared of million EBITDA XXXX. by Building efficiency year Home

at XX, decreased million to period Turning compared compared year due EBITDA million in of to Telephonics, December revenue. backlog maritime lower XX, as the 'XX, to and and $XXX $X.X $XXX Segment million, $XX XXXX, decreased the radar expected, million. segment adjusted XXXX. $XX to At to first revenue $X.X communication airborne of quarter million first quarter prior million was systems to compared surveillance September

the continue expect the We second of half increase to in to year. backlog

for profit our basis the XX prior to back margin consolidated million to $XX.X excluding in level acquisition was impact million $XXX.X compared Moving quarter inventory year the to amortization points Gross first the quarter increased results, XX%. million. of $X.X gross

in from $XX.X benefits income a million before $X.X December The continuing sales million or In year included excluding December XX, the current to operations million benefit tax million period prior XX.X% of million deferred tax revaluation comparability enactment prior quarter rates the comparable ended benefits and $XX on taxes First XXXX, that from effect items of expenses sales. selling Reform of XX.X% respectively. Bill. the liability, $X.X were administrative general compared or of and included the $XXX.X Tax $XX.X certain benefit tax year compared million of a the million of and taxes $X.X the the resulting XX, of net million, quarters quarter to million ending quarter. XXXX a operations quarter before $X.X December on on $XX.X recognized of continuing benefit tax XX, company for year tax XXXX net XXXX, loss a tax The of of

the items other and effective respectively. on these XX.X% XX.X% Excluding normalized tax XX, comparability, 'XX and effect for XXXX December quarters tax the tax and ended rates the items effects were that

XX% enacted Cuts territorial earnings U.S. from act global Jobs a the the legislation tax regime regime. moves as Act. the commonly to taxation Regarding and rate comprehensive government U.S. reform, tax and federal a on U.S. reduces modified tax Tax This referred corporation to

years ending rate will year has fiscal fiscal of resulting Griffon of the the September in, lower to rate. reform phased of federal in tax end, balance Griffon tax the statutory XX reflect the XXXX. be for XX% As Subsequent tax will impacts will XX, the a assess the XXXX. year fiscal fiscal continue rate September U.S. through federal XX.X%

compared prior share. year was operations share $X from quarter First $X.XX income million continuing or the per period to or $X.XX diluted of $XX.X per million

both per that of operations Excluding was the both items continuing in-line certain million affect income other $X.X with items are or prior and current year periods, results. adjusted $X.XX from from quarter which comparability share, tax

to sheet. our over Moving balance

prior $X.X First of was to year quarter $XX.X capital the level compared spending million million.

we 'XX, approximately and amortization million. $XX in quarter be $XX fiscal expect was Depreciation first the XXXX spending million. to of For capital

$X.XX As net of debt position loan in of revolving XX, Plastics outstanding had subject million $XX million for billion. credit $XXX resulting proceeds is to from the December the We available borrowing had debt facility, XXXX, total covenants. of billion, before cash in and certain under divestiture. This $X.XX a we

on EBITDA Home on providing this comments. cost guidance, AMES, back turn the products, budgets call housing we we XXXX expect & million. his of to U.S. adjusted closing In commodity $XXX over weather market Defense of mindful segment I'll products. are EBITDA, Building on impacts the Telephonics, and risks exchange for to Building and Regarding Home of Ron to foreign & of Department continue the now and

Ron Kramer

U.S. cash off will employees commitment positioned for from the ultimately our operator, success. generation that value. Defense believe and operating excited growth and is an ongoing fiscal XXXX well in shareholder of and about margins incremental to a and our There with continue We're the questions. Thanks. will around economy initiatives dedication that, to world, market. spending profitability, start we open our efficiency we're flow benefit for much improving enhance We drive infrastructure be housing to from expected an us and good up build in With and improving to will it increase on our we and the will

Operator

sir. Bob [Operator Securities. Mr. from now We you, Instructions] Thank will take ahead. CJS Labick question first Please go from our

Your open. line is

Bob Labick

morning. Good

Ron Kramer

Good morning, Bob.

Brian Harris

Good morning.

Bob Labick

about sales and Hi. look than will about outlook your HBP now do a time, them. margins wanted little have lower that I but likely How Obviously the just little you've ClosetMaid. you expand feel first that inside with have said talk, bit a on start now originally, operations you you good to just seen operating as think operations that, and coming you start. expand it? are I for them Could you off grow said, you average, your to opportunity a the please? to over the

Ron Kramer

as of reductions that cost pleased business. it across HBP. of opportunities, both well Very revenue with initial all the impressions our creates as Believe

a level, expect coming than in said So, XX% the ultimately of margin said the we approximately better a margins better fully think that business expected better XX% expected the million than Home that believe Point of being over Building be EBIT and EBITDA we we we to X% our that year $XX & and $XXX blended million business period revenue this EBITDA than product over ClosetMaid years. about that XX% be we've years. level the have to while is business margin first at we in I at EBITDA a ownership segment, and

Bob Labick

you you and obviously patrol in border then three-year you? potential the backlog, Telephonics, latest are expect aren't Okay, great. maybe it just that drivers you the up then backlog or the things And there in there half impact the on pick said a back just military about this two outlook of spending please. period, pickup the year. or that could talk visibility to for over on how other that and And Can

Ron Kramer

years. Telephonics fiscal We part the is XX of that has the to we we've on and surveillance, of under than entirely again, budgetary's few we I'll other policy that's believe we've you, the have the political more and the something cycle over Telephonics five-year some into outlook we're build electronic these in of the border it this build measured of ships helicopters, cycle. decline mobile to – for and cycles seen, the Yes. been a put operating The that at sequestration of year-over-year. to coming we've about takes foreign we're The often of term, border constrained. have of believe If going us transition terms of The back so current the programs, quarter-over-quarter in is seem patrol beneficiary into be that's backlog of are funding U.S. see put for for is to and we over to a them helicopters, amount administration, We defense. backlog bottom coming improves over flows going for debate that years number is remind defense go in an that fourth revenue the which both the part being a us and strong a larger a near issue. Telephonics the third to to but importantly that over see been be getting the has on ships, government as up but improvement. spigot backlog have providing process quite of point the when to capital talking much a of company seen our where border backlog and is been ultimately it. related issue security, believe this – a purchase five and military industry. money years more of beneficiary for equipment believe of our under radars out then the In the To you current order we've years, still the cycle been where we solution and and when to of expect, in we quarter in been we number flows, domestically to sales be particularly year custom outlook building

Bob Labick

the Thanks. Great. on receive Very And to call, and expecting the million helpful. the obviously then $XXX from have cash. over you're in mentioned proceeds you'll sale you earlier Plastic

recently. consumer a that touched with assets balance I hoping bit We've it, You sheet? companies divesting about little a you but could expand the opportunities number of on seen was

the So, you're in? can you thought talk leg? come capital if third looking that's current you're about a about on complementary What's assets if for processes redeploying that or for to looking

Ron Kramer

of to we're them to that that in to the Griffon the for to and receive tied is next that capital me to operate really of acquisitions, complementary What out redeploying well-positioned in by businesses capital new on working We and improve really businesses either Home them think in platform tidal perfectly grow likely entirely year. is there excited big, we're there unpredictable. chasing our to and as own that value to to we big the able looking busy ability actionable grow businesses. higher them in happy continue our small. and something over coming capital the always interesting Griffon find so tuck we're us to Building growth, the to a very is capital products to up We're & compete table we're opportunities. of market you find to an heard added higher and clearly creating We're We or say our some are is addition for bring acquisitions there. going are be about around the very are already assets value reference be The wave into leg this, is see you've stool. assets We and the timing within

Bob Labick

right, thank you All Great. very much.

Operator

We'll Thank line question from open. you. go now Please our next ahead, from your is Instructions] Clark take [Operator Alcentra. Orsky

Clark Orsky

Yes. didn't comment made I Because Thanks. that a an margin gross hear. one-time a to Brian, you about you've impact. restate that? sounded like impact Could it

Brian Harris

Sure.

turns then and As part after inventory rules as the through in acquisition and inventory of part the impact that of our the was first $X.X accounting, of million a cost quarter. gross acquisition up an – went of that as sales occur turns

million $X.X calculating So, that I removed margin. in gross the

Clark Orsky

was there period? prior Then thanks. impact Okay, the in comparable no

Brian Harris

not. was There

Clark Orsky

Okay. take that you your calculation? out EBITDA Do in

Brian Harris

Correct.

Clark Orsky

Okay, And balance? what great. Thanks. was revolver the

Brian Harris

$XXX about was It million.

Clark Orsky

you. Perfect. Thank

Operator

are in Thank you. queue. no There further questions the

Ron Kramer

Thank Okay. you.

Operator

your concludes you ladies for you. and conference today's Thank Thank call. gentlemen. This participation,

now disconnect. may You

Griffon (GFF) 31 Jan 182018 Q1 Earnings call transcript