GFF - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to the Griffon Corporation Fiscal Third Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Harris, Chief Financial Officer. Please go ahead.

Brian Harris

you. Thank everyone. afternoon, Good the Officer. Ron on and our Chief Executive call me Kramer, is Chairman With

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

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

non-GAAP remarks reporting our press reconciliations Finally, today's will some between for release. affect periods. those of are items items comparability our included that These in adjust in explained

over I'll Ron. the Now call to turn

Ronald Kramer

us Good excellent and for afternoon, thanks This was an quarter. today. joining

portfolio segment, in the with XX% $XXX was Building revenue, offset and we reflect Home increase of in in a by benefits increase, The expecting. EBITDA driven by input increase revenue results million in XX% performance which organic Our and to pricing, growth in the segment reduced $XX contribution offset additional to revenue Products our strong from revenue Telephonics, our & were improvement costs. The was driven the by partially million. EBITDA operational a acquisitions adjusted by and reshaping higher partially

categories. the of steps energize cash highly an structure the and in diversified to last flow Plastics with with brands and respective of and the sale portfolio bolt-on a October significant June. the businesses, of have over last and the reshape months XX created the undertaken free February along in operating leading which acquisition their portfolio in Over actions, acquisition profile has ClosetMaid in year, stronger we of attractive AMES our include CornellCookson acquisitions of These made

Clopay. with AMES in currently CornellCookson ClosetMaid We with these and integrating focused businesses, on particular, are

We this warehousing, enhancement opportunities executing, procurement, functions dealers have We're to distribution and context while as have by have working our To and leverage Clopay to to our revenue on businesses to product we're new We've further CornellCookson opportunities. further into products administrative leveraging them. offerings products and enhancing between their cross-selling and customers. into well markets. manufacturing X,XXX over provide improve opportunities doors margins network to increased leading dealer as initiatives are received who our from respective to excited customers integrate offer their new dealers feedback

will us Our the existing These and ClosetMaid cost drive we're and which make CornellCookson resources, leverage efficient. of examples and on efficiencies even and footprint the are to opportunities, just more a working businesses new chain couple basis. our what provide supply on share operational both of

profile free flow to our dividend to our Moving leverage focused execute flexibility using acquisitions giving program. on allocation. improved cash us We're reduce to to continue quarterly bolt-on while on capital and

XXX% We net expenditure expect capital to reduced with significantly a cash flow free income exceed profile. of

XXXX provide earlier board authorizations the total During and under XXXX, of XXXX, repurchased $X.XX of ended XX, on total our million stock of common for common to our our of stock $XX.XX and to update September compound XX% $XX.X steadily August including From payable we've per million since we have discussion. quarterly record share, a dividend to XXXX, board million I'm or for financial by $XX.XX regular X.X in shareholders it annual more Brian million And and the increased our a X going share. At $XX XX, June of segments at before on today existing bit little $XX.XX today, a additional of shares XXXX, a and inception and authorization $X XX, million growth a shares, to June XX, of $XX million over the XX, or announced respectively, we June total approved per our XXXX, of Further, shares authorizations, turning we've for XXXX. repurchased XX.X X million $XXX a earlier our dividend million respectively. $XX rate. board available. months remained per on share XXX,XXX August we

$XX let's growth. to from by increase and the Products. million due offset Building in revenue, Segment start XX% the So partially XX% adjusted acquisitions by million both increased benefits with EBITDA increased organic costs. recent Home Sales & the $XXX improved to to input driven

recovery. We continue housing with steady market to see the multi-year strength housing U.S. the in underlying

Our increased are new business. residential activity, to leading AMES rates while our support and construction commercial and businesses doors homeownership and products well capture positioned ClosetMaid in residential remodel rising

the further economy we continues improve, will As see growth. organic U.S. to

XX% million, Turning to in from continuing and year; year-to-date, operations EBITDA the Telephonics. million prior prospects. revenue Fiscal X% was remain the we've up over over $XXX secured the to Orders year. X% $XX period XX% same last $XX million, in third orders, million. $X to third for totaled the down long-term Telephonics' prior quarter $XX million. of period year Segment We quarter adjusted optimistic compared up was

our more I'll to the continue financials expansion surveillance radar, the or to commercial market-leading friend positions Brian? foe over and commercial and it international, funding from will turn Brian, includes Navy systems sales detail. readiness, systems. bit of building communication see opportunities go the We identification who in transit operational a on U.S. for fleet, communication on maritime through

Brian Harris

which, compared to $XX for was Gross the period, has quarter ClosetMaid, base Products initially $XX.X decreased margin Thanks, million quarter in Gross margin the Ron. to lower year Home & Building I past, $XXX in million basis primarily the businesses. a third the addition year. in than of have prior the stated compared our prior as due to million profit the XX to points

increase sales. $XXX administrative items $XX primarily the XX.X% the were sales dollar XX.X% excluding or of of quarter expenses, selling, The to affect is that general, of or result year compared the Third comparability, period prior acquisitions. million million of

$X.XX increased or to prior million operations compared or period the XXXX $X.XX Third per $X.X share. $X.X to year of per income million share quarter of from

or from operations of to share. is per $X.XX periods, million continuing $XX.X items year Excluding share $X or period quarter prior comparability current affect million $X.XX the that from per income compared both

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

capital acquisition be we and for subject million. XXXX, completing expect is we million. quarter, approximately depreciation CornellCookson. and $XX expect for and fiscal spending Depreciation work, full approximate $XX $XX to year For us particularly This totaled amortization our accounting to the million amortization to a

million June under facility our in position had debt subject certain a we loan As for revolving in billion cash XXXX, covenants. resulting of $XX of available million to $X.XX borrowing of credit total net billion. We XX, $XXX outstanding had debt and $X.XX

Finally, the full year. regarding our guidance for

businesses. We segment to expect million XXXX continue EBITDA from our of $XXX adjusted base

in $X contribution Therefore, fiscal our segment adjusted from additional is CornellCookson acquisition from an June of date XXXX. $XXX to expect the expected million of now starting X through for the EBITDA We fiscal year. million be our end

Now the call I'll turn back Ron. over to

Ronald Kramer

Brian. Thanks,

Before the few a price not of participate opposite not taking regularly our know, is questions, remarks. who care. make It's that Quite in stock. we the comment equity it's of calls final me let don't markets my these you on to or Those true. the practice

of I'm it about that XX Goldman discuss The was informative deviating Griffon, which our never for would distribution their substantial by for in ago continues our made offering for and and public of the the Goldman Sachs' of was recent to made Griffon I the investment from rights years a and be a shares Goldman us was investor be and company. exercised very been As to norm in be supportive because productive Goldman, registration think their permanent, has affiliate. But to investment expected they shares.

As We public has we shares believe offering, over beneficial, expect and the performance is stock a by excellent believe of available result XX%. the fully the that to of the normalize. stock substantial that reached hands our our market increase as investors, for between longer-term that And common trading. and market the liquidity increased for of number relationship will into price the significantly, more is we our not shares increased migrates adjusted XX% the of in while our the float equity our

Our efforts substantial improvement operating come. this beginning I of the have over in and but the quarter's changed are past significantly yet to improvements a seen year believe the Griffon, results

marked and well leader our highly into where strategic entry for storage additional Products, home the organization, for & now ClosetMaid a Home and of market Building are positioned category purchase we Our growth. believe we

CornellCookson a solutions fuller a our ability an Our us believe acquisition and increase door XXX customers of will to Clopay added our provide We Building position critical of of to share products portfolio commercial market further. to offering dealers to professional our Products. additional

our such of valuations. have home have years products smaller hard these have as which and transactions strengthened These and geographic completed And presence actions our culmination very in provided categories are attractive cleaning completed of a acquisitions, XX we've of We at the number work. strategic us all new markets. with also complementary

this from businesses. to During Griffon focused more builder a time, has decentralized holding of evolved strategic and and buyer a company

we is of We margin operating We're the within have are portfolio. these we success future. our between income and generating to businesses corporate our key of term starting segment and or EBITDA confident see near positioned believe at we the improvement with pleased about expand which X margins goal our well our just talented a the We're fiscal performance the XXXX first this and levels, our team our to optimistic the benefits grow and company I'm net to businesses, both cash of our our excess the To acquired business. the company. continuing together through and to to the existing sum while XX% adjusted of in in can better accomplish and up, quarters capture

strengthened for that, will have operator, with and open long-term drive we'll And it shareholder actions strategic up Our company value. questions. our

Operator

[Operator Instructions].

question with coming CJS first Securities. Bob of is The the Labick line from

Robert Labick

to start wanted with I ClosetMaid.

it sales. growth expect. of don't had uptick seasonal quarters, couple talk will a that's nice the now there? how or part in what a that's quarters X initial you've over opportunities this synergies last But the might if you've could you the obviously, about the and integration's know pose the Just, and of just for learned you going I for

Brian Harris

Sure.

uptick sales the is seasonal. So more

and generally, particularly to We quarter for fourth back well have in quarter school. uptick the third fourth as

results us out March, it's see come announced that into integration having really beginning. 'XX. the integrated that coming will So meeting And then benefit the far, our that of expectations in and is and be in we'll 'XX. just into of fruition We

Ronald Kramer

we it's the will be growth. Bob, that add drive happier and AMES ClosetMaid Ron. prospects together how about couldn't incremental I'll for

strategic believe that wonderful really and still addition this businesses revenue two grow of us. ability and improve we combination are both for to a So margins and the ahead AMES, was those the of

Robert Labick

been side, Okay. of a Great. couple the Cornell And obviously, on it's months.

I your Previously, that. were You a bit. conservative think being guidance little did just include not you to increase

think you how initial question, working and that's the same So impressions and two in out. months opportunities

Brian Harris

expectations. Sure. Similarly, our it's meeting

We to have we Clopay, opportunities started month And benefits ahead also off revenue the look well June And businesses. of CornellCookson of us are the things that was several as then continuing will at two for and cost benefits over between from not but ClosetMaid the see we quarters carefully July. into see only mentioning, into again, dealer and lot into for the a integrate Ron network continue AMES, there next those we enhancing leverage companies. as

Robert Labick

Home impact then with talk And about as ability then, can Products. a material just you through what coming out? there, I that the you How think bit seeing purchasing raw do little great. a see of to Building ability you greater your & playing your of your Home thinking all relates & then it Okay, and that cost, also Building to to mentioned you're in about And power tariffs, pass scale bundle Products?

Ronald Kramer

into going to guidance set issues labor back number to there, to pressures, higher were how there are us, cost, out A were that been Those and higher things three Those for we fiscal but year. things cost. during obvious going were this no fiscal were surprise higher which the all input saying well, of of all year. playing cost XXXX, we've freight us

and year, to sorts continued steel market. them point, Products, the clearly to bigger things our particularly of manufacturer. much be each exactly to are way. of steady, be us housing well absorb And going We're question by in products, that the like consumer input going there's see Higher the other of that's doing that the doing businesses Building pass pressure we every increased how is to them through to is with. we're is this recovery positioned markets is We ultimately, to to that absolutely scale topical. continue your The products believe in, slow, able believe a but those matters. ability which costs what & we And We be along of all extraordinarily U.S. we're something the be to wood, to are going costs. involved happen expect the and buyer in a going Home the

tariffs, a that. have are manufacturer, clearly American-made buying costs, people they We're while U.S. We it input of goods. so the hopeful benefit increases of additional

remains to the head affect we seen. and as all to are the this what are running We're So well there. out businesses to see, we noise have be businesses going improving, that keep we that all the to be continue things us keep been. our From as watching on are our strong, down and going

Robert Labick

one And for me. great. last then Okay,

a a period, little the about second past. have And is of cash the cash, the flow. case the with cash you do seasonality the of year And been as know new that like of half cash typically, flows? obviously Just composition of I in it's can your the talk fiscal Is or you businesses, expectation will and strong uses the still looked flow QX now? strong a

Brian Harris

Overall, on generation remain will pattern quarters. has and the little QX same pattern continue. overall, QX steadier coming our CornellCookson cash but Yes. being flow, bit the cash a that with will

Operator

Instructions]. with next Julio question The line Romero from comes the [Operator of Sidoti.

Julio Romero

Just a a You order number nice you talk about quick Can Telephonics? there. one. had

if on of backlog still you segment any and year. the up the Just totality second and that of revenue commentary in the half expect

Brian Harris

a and backlog is we're at bottom of internationally. revenue of half both the in opportunity There's us lot and see The It's as our in we'll of the with that of and It's the surveillance in see and business We very your continue of what in That us, opportunity and we now do lot question, here the in nature. communication a maritime turn of story. second turn right ahead see earnings we part company into the 'XX, second we and long-cycle see look cycle. We the we'll same its our to by see the particularly into backlog of a products, year. converting yes, 'XX. -- a it U.S. part, we're increasing as up company. into lot that interest ahead optimistic products, And currently, that for lower around. of

Julio Romero

Got it.

this For quarter? this particular quarter, revenue any did CornellCookson contribution have

Brian Harris

did. it Yes. Yes,

rate. So at they're run running that

less call said or million. for they're the year, $XX.X we and So million more $XXX that, running X/XX it of

Julio Romero

it. Got Got it.

sure. So just to make wanted

for I the said you -- $X for your full your You $XXX the throughout year Kelkay guidance, guidance also guess million base, from million CornellCookson. year. acquired from had

be $XXX that'll year your would that would So guidance? of Kelkay? million Or full inclusive incremental be to any Kelkay,

Brian Harris

$XXX million The Kelkay. includes

Operator

is Next the Company. with Bergner of & line Justin question Gabelli from

Justin Bergner

that versus more Building down you in Anything there break be in could maybe of helpful. volume? bit of sort of you can And the organic help would & Home just growth add XX% Products a for sort us of price AMES versus terms Clopay,

Brian Harris

and a AMES was in seeing XX% based our price AMES' XX% and around with gone factor Building organic. have input was opposed where to cost increasing of across And we volume Products nice we've saw to those, customers what out both on price we're We Clopay. our growth gotten increases. both Sure. organic

it's combination a all So of those.

Ronald Kramer

And for they U.S. and during followed the to pattern quarter, only AMES a it, the Justin, U.K. thing, a I'd other both the add weather

Justin Bergner

helped? that And

Ronald Kramer

Oh, no.

Brian Harris

No.

Ronald Kramer

fact volatility but an able us. U.K. U.S. of with grow. a excuse, is No. the be weather the absorbed and and some we still significant Again, It's in to not weather

Justin Bergner

there. Okay. My bad

and margin of $XXX of like you'll that revenue EBITDA of a change. Secondly, gate X on the months sort that seeing pretty the $X out annual for million CornellCookson, of sort be seems healthy million of versus

tracking are margins them? line the you Or are the also of of, date? to margins ahead where in expected tracking Sort

Brian Harris

in line. No, in margin range. it's is about be in so -- $X past tracking months. think at X I that margin, -- We've We'll there X% it's we've got million on that $XXX out put million it's the

Ronald Kramer

we expect over acquisition able gets that the margins now, it. as blended this it's tracking And improve of Building is our time. business be we'll time of business. into Home a & to it steadily And that, Clopay, continue the expect to But fully to improve integrated we at as to Products the

Justin Bergner

of there segment the expect given EBITDA of strong the a a adjusted any think close of as speaking about you bit sort should that to of to? prior up million sort more your Was that end discussion, little just midpoint Okay. to Or optimistically number third of quarter? $XXX still we CornellCookson sort

Ronald Kramer

say give the We really, investors. I'll to as a set, in order for Justin. beginning always you've heard me the do guidance year, Well, level year we once this, say, it and credit at of

investors, the so a year. nor change capability, to earnings our $X of to not It equity positive has that million quarter. going peak our the guidance For we're practice. acquired We the nowhere Cornell we're the near impact guidance during year for

So expect from you guidance our of we should as million use these are businesses, ahead us. $XXX that days best earnings still power million plus within our us. $X And fully

Justin Bergner

That's And the of parts or business looks were during sort little that outlook where there helpful. the just a bit less quarter Okay. sanguine? lastly, of any the disappointed

Ronald Kramer

Well, any bottoming, measured us X this I'd years, in is Telephonics heard this not that talk say quarter. as that in you've the quarters is something is a and but business about

incumbent. to efficiency into operating We're than think to to to from be of money the benefits the see to slow which beyond start the of we that and done just XXXX XXXX continue things that all It's and our flowing we've take going more products. Telephonics. see we the flow defense defense sell. standpoint that it's an the products will see will we us XXXX budget, that want continued and to on the still share through leader of we We're So dollars pace market still the

isn't make that's in, programs, for can't defense sales. of technology, move in what's into of is new the in of a comment, Telephonics of going business, turn it. slow. anything we're on hands their U.S. of the not get one potential we're them to this period overall Telephonics terms any we very disappointed their So this excited comment, is about in terms faster. and economy and the over in to terms We're in the the be the just beneficiaries But started of is international an clock going December the of core years, And budget to get going while that

going planning for to the So future. on as the at Telephonics continue we look business in what's

we on XXXX that that I'll so And a the into start get quarter-to-quarter basis, to see all turn I get a don't beyond conversation. and turn fully profits, that's expect when disappointed, excited into backlogs and I orders,

Operator

time, back management remarks. turn I'll this At to the floor closing for

Brian Harris

us, look speaking of to joining end the year. for the forward and Thanks at you we to

Ronald Kramer

bye. Bye,

Operator

today's for your will you teleconference. This conclude participation. Thank

may disconnect You time. your now lines this at

Griffon (GFF) 1 Aug 182018 Q3 Earnings call transcript