GFF - Earnings call transcript Q1 2019

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Operator

Greetings, and welcome to the Griffon Corporation First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Officer. Financial Chief Harris, Brian Thank you.

may You begin.

Brian Harris

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

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

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

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

Now the to Ron. I'll call turn over

Ron Kramer

excellent the off double-digit coupled by morning. with We're growth Thanks. our sales to solid and in with Good to driven benefits reshaping portfolio EBITDA an fiscal initiatives. XXXX, demand of underlying start

XX% growth Building revenue organically year. increased segment operations through our EBITDA quarter million adjusted Home XXXX our driven and million, both acquisitions. continuing to to was by to revenue $XXX the from Higher $XX compared Products prior segment, across & XX% First and increased

steady Our with operational improved integration have we and the profitability CornellCookson. efficiency of reflects made progress improvements ClosetMaid and the

in Pennsylvania, as operations, expansion new Top next location its Through state-of-the-art America. demand they're to at well Products production two an for we're XX,XXX-square-foot North for manufacturing years. customer investment launch. continues input know we of XXXX strategic shares, our half strategy, about our improve to Building strategic who our foot capital investments full-scale mitigated have exciting by product dividend, core value, meet Clopay with we location, realizing you higher a directing been support its of businesses, facility, steel along products commercial disciplined more CornellCookson expected pipeline, the increased products product manufacturing North we've shipping as providing of costs products. strong with With square a with hundreds $XX to of our been in doors, offered for about acquisition our the advantageous demand its to an shareholder launch adding us progress. repurchasing business to that rolling make enable than the will from production CornellCookson operating continue within products, is has Clopay enthusiastic Griffon topnotch In respect to Mountain Top, well which expansion of Those commercial this capital activities growth infrastructure new This support proving customers addition of of supporting manufacturing as the announcing CornellCookson Today, professional project which demand, to a and sectional million of have full-rate facilities through sustain including serves equipment its ready to XXX,XXX wave acquisition. a support addition, products making CornellCookson our ready in at to grille rolling and and followed M&A. Eastern addition dozen alongside we which CornellCookson, pricing This our are our leader to To have and Mountain steel these in to expansion commercial which increases our equipment. resulting along will be existing maximize the as the in to to the when our America is increased efficiency, see includes capacity products new be be allocation June launched products opportunistically network. dealers investment and and

project. Steve by We we have and at delivered going and initiatives will have us from high net EBITDA to past, Clopay, led our in outstanding the the our results is no do Lynch track its reduce which across current X.X allow record, they're capital to they've this of debt next years confidence in related to all in as our strategic positive, on to times our doubt The management and executed plan. businesses times strategic few we X.X to execute team's it over leverage outlook

per during share, XX,XXX $XX to our remaining existing dividend common authorizations. our stock Board leaves total us shareholders $XXX,XXX at shares the repurchased of for quarter, million under which return continue we through Finally, our a of policy. cash still We'll to $X.XX

our announced XXth March earlier compound the consecutive XX. XX, to of paid grown per XXXX record dividend rate at it shareholders annualized to on a since share February $X.XXXX authorized This and marked quarterly Board today, an we As shareholders, XX% dividend XXXX. has payable of on

Home financials with driven go in sales related from costs detail. partially and mix, from adjusted Let by the lower EBITDA quarter the growth, more and revenue go due growth XX% its a acquisitions $XXX sales to resulting of pricing, and to Products, volume, Canada, by favorable each bit drivers organic to partially both and and I offset higher Building adverse reduction and storage a me spend by in Start it XX% Australia by increased through of $XX in minutes by a to and offset Brian increased timing. contributions few & tariffs. first and the revenue weather recent segments increased million give driven increased the conditions to organizational Segment through million, before input paced

and products products markets We across from segment, continue served. and realize diversity the to benefits our of to demand see strong our for the

to to the $XXX fiscal increased December EBITDA at prior year of adjusted quarter $X.X Telephonics, the prior million, to $XX increased the million Backlog from first segment revenue million. business, of $XX Electronics end in year. continuing Defense was million million from operations our Turning compared $X.X

contracts note. During Telephonics the quarter, of received two

scope radar Island contract flight Airport is Overall, the helicopters, value-added replacement services. defense we're at underscore for of a First as we was offerings Romeo existing in of NASA's second in surveillance for our Wallops product for These Radar-X, awards the the maritime as and which can MH-XX range electronics systems U.S. its confident secondary entities, the Center. our well surveillance radars upgrade government Navy, business. provide Surveillance outlook

We beyond. don't about pipeline take activity excited opportunities, we're quotes seeing a and to of more? international our future. and growth have through financials the them U.S. bidding, increased a healthy little We're Telephonics Brian, and supports business. in return will that excellent in why expectation you XXXX really It's its an which

Brian Harris

quarter, XX% in year and profit million with comparison Thanks, to Ron. year Beginning to with combination million, first a contributions revenue the increased both XX% the in $XXX of our $XXX consolidated quarter, and performance acquisitions gross to of of brief increased basis by increased recap increase Gross prior a quarter. driven points prior the to organic XX from the compared growth margin XX%,

million general expenses, the to were affect that XX% $XXX up and administrative year, selling, items prior primarily due comparability excluding quarter First from acquisitions.

As a basis XXX XX.X%. percentage was of year-over-year by points SG&A lower sales, to

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

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

facility was $X Our CornellCookson the spending prior that the in million approximately compared year capital in $XX CapEx now million. million, mentioned, fiscal Capital to investment $XX up from our Ron XXXX we of previous mountaintop be expect million that the target $X.X capital rate to million excluding strategic the items tax affect for quarter. Including comparability quarter effective $XX.X spending was XX%.

partially expect offset We Mountain $X to project that $XX million spending million a fiscal by reduction of quarter. totaled be $XX.X related CapEx. in and will other in first the the XXXX, Depreciation Top for million amortization

cash total million borrowing resulting subject had in We loan the to $XXX debt available first outstanding XXXX, $XX net million under Corporate our approximately XX, expenses, December credit of position a excluding billion and $XX.X were of revolving million and of certain had for quarter. in $X.XX in As covenants. we debt unallocated depreciation facility billion. $X.XX

and at billion given plus November call annual $X.X guidance FY'XX revenue. unchanged in Our for remains million our of during $XXX EBITDA earnings

cash free to year. flow exceed the net for expect We income

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

Ron Kramer

the drive flow of cash our I'm very of the generate and acquisitions increase We initiatives, shareholder through margin where all excited first to Griffon consolidation really we'll we're going. well-positioned think XXXX in and which with well, very to continued take will value. about Operator, is long-term doing the our efficiency pleased continue significant performance questions. XXXX. and quarter company we're is fiscal any

Operator

you. Thank

we [Operator One Instructions] conducting We while please for moment will now questions. poll question-and-answer a session. be

with Our line question. the first of CJS Securities. proceed comes question Bob your from with Labick Please

Bob Labick

Good to morning, start nice year. on congratulations the a

Ron Kramer

Bob. Thanks,

Brian Harris

morning. Good

Bob Labick

Maybe and Products, positive kind us the I to so our the you start a margins detail hoping in so, versus was in on wanted and delta of the going to the we of the little Home next Building just the biggest side was in were more I talk through could two drivers thought. and a -- expectations synergies in the going as margin years acquisitions margin. year-over-year, expansion then to you and were bit over get the then little lower grow come particularly

us the where about to see synergies, talk please? and there, So, drivers you margins the

Brian Harris

Sure.

lawn residential garage mostly were business. mix from generated door volume So our the and AMES first, business our and drivers Clopay and garden

still we exceed in margins Our margin business, that With acquisitions the years our would expectations. the track those get our several to our to in are, XX%-plus businesses Their past. ClosetMaid the starting are line with out with X% our well. there, All are next line put the in over for indicated that but we've on CornellCookson performing business to expectations. original

story So in volume result. that a mix the short, and drove it's really

Bob Labick

as you us where you've a an or and there's it stand it terrific. of headwind and work your just Can guess think done if to gotten on raw of that all impacts. I stands, higher impact relates with expected? tariff taken Okay, if update And you give and suppliers or customers, the to as I materials know you've you tariff of care future stuff kind lot where

Ron Kramer

Look, excellent an of we have costs. input mitigating job done

have view last and costs, costs, and affected higher in labor our the input years manufacturing in freight economy; our the costs. company there factors been higher three higher that have Over several in

have at gets ability good a of thrown with market at whatever dealing to We us. with adept more is that example really deal our is team This management just one conditions.

about we'll where it. headed. with businesses excited with dealt whatever these are is continue deal there, we've We're tariff to out So impact

Bob Labick

I could Okay, If sneak last one one great. in.

relates investment can and opportunity the you long start the as revenues you to talk increased and before take should there, how the project guess from in CornellCookson, some market project. about it that I Just getting

Brian Harris

Sure.

see in ramp see towards of 'XX second-half those we start the benefits benefits the the as end of which start through the calendar we'll of 'XX, we'll project, to so will So, to complete come up.

And products. rate. the this both investment as will for this those So, capacity give give us more to for needs, space current and us project new as a items much operate allow in well us is and space efficient additional products to our at space

Ron Kramer

And add business. of Strategically, bought in CornellCookson we because what that. saw to door as commercial we the the I'll opportunity

the already well to very long-term, able the good of the free see a the with of business being have period revenues, be unbelievable depths We be and these built commercial We a how side downturn, going repositioned of that in is look the building valuable adjunct we its the to and proven our both and the future. investments that being fits flow and cash We these is benefits more company see natural Clopay we'll grow profitability. over residential it. We over combined a business. businesses what at able business really CornellCookson making excited we improve we enjoy This think as during we're even as time. to in residential long now own, by to

Bob Labick

Thank so you Super. much.

Operator

you. Thank

with proceed comes question next Our Lacayo question. Alvaro line Gabelli. of from your with the Please

Alvaro Lacayo

Good morning.

Ron Kramer

morning. Good

Alvaro Lacayo

the you growth been on Home of will the anything thoughts the more same the macro little could seeing, growth. going Products, of if question context drivers forward, drivers A some volatility organic Building of provide on And & then or detail bit we've maybe changes? on a if be in they're just in if organic maybe what the sort of

Ron Kramer

about So, organic X% guess for quarter. the growth I is the

Brian Harris

That's correct.

Ron Kramer

And So, market market. see very our share, a out ability beneficial. the sentiment we housing still the a broader being economy, there's there, both functioning comment and our ability negative to much around is still run housing to there's the gain as while business is

and around Building positioned remodel and throughout to market, repair new are Home all exposure with a small very businesses We construction. our the and Products home

is So, what products and do really consumer around and spending their people drives spending businesses our well. continue our money to house,

going to in evidence clearly that these trends So year. no or slow see see headlines, this mitigate we while our we the are businesses down

Alvaro Lacayo

around on And X% just versus number? mix organic volume the detail price that

Brian Harris

contributed that than they out volume. specifics, more in mix growth, slightly both break don't to the We

Alvaro Lacayo

Okay, thank you.

Operator

Thank you.

the from with your Wojs Tim comes question proceed Please next question. Our with of line Baird.

Tim Wojs

the Hey, guys, to year. good morning. Nice start

Ron Kramer

you. Thank

Brian Harris

Thanks. morning. Good

Tim Wojs

release some ClosetMaid, and of some comments were the made gotten you just in as there, delays you've that the business… press kind there

Ron Kramer

No, we didn't…

Tim Wojs

I the some due timing volume in storage -- reduced and thought were of organizational delays you said there to orders. storage the

Brian Harris

we it's so to -- year-over-year, of quarter just not timing, knew just -- timing that expected a versus delayed Yes, orders it's be first. the we actually little the actually be in to second that even delayed, into

with So, that it's ahead of just seeing our customers of working and a matter us.

Tim Wojs

of was you there, so in -- guys okay. there course just kind it Okay, business, was nothing normal of

Brian Harris

Yes.

Tim Wojs

contribution facility on facility, could CornellCookson multiyear period, you efficiencies, margin talked what about think think what about? then way And over so that's a of see you just and I of kind that the payback think any facility, we type the to the about or the if

Brian Harris

Sure.

help this help there which to contribute about. well. will be will business. keep margins the products, us on improve new track us XX%-plus better the that to quest us be been will base in our So, And And yes, getting XX%. products, as margin at efficiencies to the talking These that than the we've will

Tim Wojs

just Okay. it price able look if tariff price look confirm looks just and say to tariffs, inflation I at then and you did; and mix that in It quarter. just mix, offset like and at that. and want And maybe then benefits costs to inflation would the you the you the was

Ron Kramer

I think it's obvious.

Brian Harris

that's Yes, right.

Tim Wojs

the then And backlog? on walk adjustment could was accounting that Telephonics, you what Okay. through impacted just

Brian Harris

Sure.

revenue the the recognition them now sorry, time. we've in adopted you revenue products past would be So, guidance. so certain And In you recognize -- they're when they over cost-to-cost, shipped. recognize

and the quarter, from a a million-plus revenue we EBITDA had million-plus benefit in that. benefit So $X $X

for it'll expect total. to immaterial, in be we Over goes, be the year course the up year of and that down immaterial the the and meaning wave as year

Tim Wojs

Okay.

does with that have that's like type going the to accounting So, aerospace? do to commitment through inventory

Brian Harris

term, I'll with familiar say that not frankly, I'm so no.

Tim Wojs

it Okay. I'll about you talk to later.

And sounds question, in little Clopay I at the and see to last bit. good. over you an trending you How about then storage Okay, mix, the the a do think, maybe talked XX mix last just XX business AMES months?

Brian Harris

in customers. with We improve innovations our have our products our placements been mix with in to and able our

Ron Kramer

XX We months. haven't owned the business for

Brian Harris

now. had we've ClosetMaid, Well, that a year full

Ron Kramer

the be at of a Canada, and the in we able improve We're all products to be in of with a is we Stay into see terms geographies, that efficiency, ClosetMaid. to markets. that of broad Australia, terms to tuned. home U.K. of owned, branded to what ability what improvement expect really This range benefits. integrate good consumer in bought And about of acquisition it's new part already the in be business the products excited for that with and that is being the meeting we have to our and take our of we it beginning able us, all the exceeding it internal able being expectations. our do are going AMES, Very to business

Brian Harris

will to just I our Clopay improvements we continue add, And mix. see our business in in

Operator

Thank you.

is Our with next comes this your from Sood of question. Bank. Hi, the Nishu. Morar Deutsche question for Marius Morar line proceed Marius Please with Nishu

Ron Kramer

is… hear Hello. This Marius me? Can Hi. you Morar

Brian Harris

Morar down steel given outlook Yes. has last a Marius full-year us? that hear you months, cost Could the aluminum your 'XX two have and input come Yes. changed? Quick in for question, bit

Ron Kramer

have moved second Morar those? We on planning question, Are an plant synergies the Okay. you on phase implementation the procurement could maybe or us still rationalization? year. And give and based Marius to in give guidance the you a you my update once

Ron Kramer

in investment All facility that Morar I think you. you right, our stage. CornellCookson thank we the shows into are implementation the Marius

Operator

Thank you.

Andrew question Please next line Our your proceed Deutsche of comes from question. Bank. with the Casella with

Andrew Casella

taking guys. you for Hey, Thank question… the

Ron Kramer

Hi, Andrew.

Andrew Casella

a and - nice quarter.

Ron Kramer

you. Thank

Andrew Casella

little just weaker kind just provided, the cadence you the was and of of I last will at guidance think second-half first guess just about us first-half think the has take through that growth than you're quarter of obviously just first I again in be thinking you of think bit as think I we that when can the the I you just all, revisit think that could year, rate run changed how about about but the the mean you exceeded quarter? coming expectations, kind the throughout I so we out indication

A –Brian Harris

Sure.

higher and will the third quarters. our So, see generally we quarters quarter fourth lower being being QX and our and QX

off So a we to good start. were

have We the year. no remainder the really change through of

Andrew Casella

obviously thoughts Okay, XXXX potentially from here, -- great. a any that you And have question as kind final terming strategies as maturity, sit you we me, around Thanks. just out? of then on just

Ron Kramer

build the flow. cash up Run business,

Andrew Casella

Okay.

Operator

Thank you.

Our of is Elad JPMorgan. Hillman Rehaut Michael next Rehaut. question question. Hi, Please comes from on Hillman proceed the for with Michael with Elad this line your

So, so should the throughout maintained upside same one closer margin real increased which of some is to of wanted guidance? of this quarter I potentially realization of time encouraging, the represent you cadence Building sort your the at how Products, rest be thinking kind margin things year? And really is full-year your a but Home the given just target, could Thanks. and about margin of in the I full-year to the look at this

Brian Harris

the give changed So, and a we we early it, year we guidance year. really in once haven't are

Ron Kramer

long guidance. that a distracted And period feel value, and Home in we good get by don't out segment. are businesses where power play into getting but have company we we like year-to-year are building shareholder are heading, products believe we early We building said of Building & we made, of about Cornell over have really rest we our and to always really this time we time, acquisitions we ClosetMaid both the going that over are our the earnings integrated of the

Operator

you. Thank

end would question-and-answer call the for turn reached over remarks. Kramer of to any back the We session. our like have closing Mr. I to

Ron Kramer

reporting quarter Thank our you, all. May. in to We look forward second

and you thank good-bye. So,

Operator

today's This concludes you. teleconference. Thank

your your may You wonderful disconnect participation, day. lines time. you at for Thank and have this a

Griffon (GFF) 31 Jan 192019 Q1 Earnings call transcript