GFF - Earnings call transcript Q3 2019

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Operator

Greetings and welcome to the Griffon Corporation Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. Brian Harris, CFO. Mr. you, Thank Harris.

begin. You may

Brian Harris

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

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

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

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

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

Ron Kramer

and everyone. Thanks, welcome,

reflect driven third defense and organic with for our was performance electronics our quarter of execution growing results building reflects team's from through months our for businesses home of excellent contributions solid fiscal Our combination first and the from our and growth products products diversified XX% by nine demand execution XXXX. in continued This a acquisition. and the revenue CornellCookson

year. to the continue expect We trends these balance of for this

to five to calculated flow to and free down results normal our this cash quarter debt from times our our our year our portfolio substantially reshaping helping near covenants. from We We by leverage free integration generating and generated $XX the drive as to million debt EBITDA in in healthy activities. fourth benefits quarter anticipate cycle year-to-date due seasonal cash net half periods our cash the improving of quarter following in second prior the

in was volume to and expansion new multi-year like touching increased market. of to XX% XX% This remains I'd CornellCookson segment $X.XX, $X.XX. period efficiencies, earnings starting XXXX higher capacity to previously share bring operational our project we per adjusted activities million improve minute our with Mountain strategic on on support spend third-quarter Top, Our our track the than growth, announced to year adjusted facility manufacturing integration XXXX work diluted prior our third-quarter $XX to EBITDA products and as a Pennsylvania. increase

from ClosetMaid benefits seeking is Ames, products These resources the of and add new acquisition. the contributions scale teams incremental supply At continue cross-selling businesses the in include working also combining CornellCookson to Clopay pipeline. of leveraging to while increased the the see we and Ames their increased chain. and the sales to opportunities

allocation. capital to Moving

we've free is have flow to to enhanced Our improve our past performance to expect This strategic actions exactly profile. the cash two an ahead. years and continue the led what discussed years in over we

flow free the balance deleverage As below few to cash over and get EBITDA. us half net reduction years a result, sheet generation our debt times allow three our to to will target our of debt of a enhanced adjusted next and

be disciplined are of Additionally, acquisitions highly strategy, and ensuring as aligned would any that drive strategic Griffon part the our long-term we our evaluate approach on continue remain growth. We focused to platforms. acquisition with existing growth in to

of at authorized XX, August earlier dividend XX% of shareholders XXth to consecutive XXXX. to grown This per share the on today, XXXX. annualized quarterly a XX, an and board compound XXXX, payable since As shareholders we announced dividend our record has it X.XX marks September cents paid rate

board under our prioritized stock shares value, existing a is We believe any we've we have not $XX deleveraging. million compelling we our buy remaining quarter, common authorizations. and While this did

segments. it additional Before will our back I Brian, minutes turning spend a comments on couple some to of providing operating

building and home with start Let's products.

foreign which contributions acquisition is by favorable exchange. and driven from unfavorable due mix pricing $XXX to and Third-quarter X% revenue volume to by and XX% growth million the organic increased CornellCookson the partially offset increased

adjusted to $XX.X increased and revenue and increased partially for Segment and by million Ames XX% tariff CBP. increased costs by driven material primarily offset EBITDA

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

are to with including suppliers mitigate our continuing of and price inflation work effects to also the tariffs. customers due We to

turn Telephonics million the year. to million. period to from million defense prior-year third-quarter continuing adjusted of to compared Let's the to increased $X.X $XX.X million electronics. $X.X revenue prior from decreased Segment EBITDA $XX.X in operations

was Book $XXX almost QX from year. backlog X.X sequentially to and from June of to end for one, the the and the million quarter was prior bill at up XXth

our the ahead, confidence our in for Looking business remains high. outlook electronics defense

we for future. opportunities. to our This continues bidding and in support see a an pipeline India Telephonics that healthy supporting subsystems, opportunities return Notably, expectation business a with of and have strong Lockheed's in U.S. increased activity growth and to XXXX excellent our to We will MH-XX helicopter. It's great beyond. continue Greece international and Romeo

it back turn Brian? to Brian on I'll Now, details the for more financials.

Brian Harris

XX% gross than of profit the comparison XX.X% Thanks, increasing quarter. at million Ron. to quarter. compared margin consolidated steady and prior-year revenue more the million prior-year both $XXX of We was in when Gross to reported $XXX

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

As a percentage items sales, of decreased that XX basis year-over-year for points SG&A, to comparability, affect adjusted XX.X%.

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

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

quarter. the rate, million tax quarter was prior for to excluding that the year comparability, XX%. affect $XX.X was effective Our spending $XX.X Capital compared items in million

approximate totaled We quarter to million. million. continue the $XX.X for fiscal amortization XXXX Depreciation to and CapEx $XX expect for

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

the half As year a followed the first by use reminder, we second of year. the of in the generally cash cash observe generation half of the in

$XX quarter. the excluding expenses in unallocated million depreciation Corporate were

revenue segment $X.X and we which to EBITDA give billion year $XXX while upside. call, during in only revenue our guidance, bias EBITDA earnings once a adjusted the November Our maintaining million-plus a remains at and of

We includes our XX% the UK the of Telephonics at also continue the to to radars flow tariffs in that exceed to delay for XXX the FY net MH-XXR guidance free of into headwinds announced income Also, related year. India now impact and impact expect XXXX. the the cash contract the business, May, Ames the note we incremental of anticipated for shifting

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

Ron Kramer

which results. progress this in across reflected operating see trends Thanks, the we're and Brian. all quarter's with very I'm we making the our pleased businesses of is

underlying make ability efficiency and will to be long-term value. as generation. on drive and integration to strides see to these we continue our we cash of We supportive work and to and in shareholder confident drive our increased initiatives trends continue our in we're outlook expand businesses The our margins

questions. any for ready we're Operator,

Operator

[Operator Instructions] Our question CJS Rob Securities. sir. first ahead, Labick, is Please, go from

Rob Labick

Thank you and congratulations on quarter. another nice

Ron Kramer

Bob. Thanks

Rob Labick

I you Obviously, potential Xst tariffs your you wanted into increase know to the built tariffs. September as guidance. on well. a Twitter but if tariff don't mentioned start with there's guys I are this on been May afternoon were

tell all, If us you've your forward? it's I know you to chance had could business impact but at not look or going how may a that may quick,

Ron Kramer

note in and to up. t-shirts cost footwear and Though, anticipated. has that going it's of the This be socks immaterial been pipeline to are going and Clearly the everyone's I'll our business.

Rob Labick

I'm glad. Got it. Right.

majority that and even it your You so in everything make a potentially of should for you. an stuff here be advantage regard

bouncing drivers you success growth locations? kind distribution? it Home single-digits. I forward, and of going Building terrific your Can talk been continued between organic it Ames solid key the very about upper going Is please. but talk in Is about new there? want for Products. and gains mid to at organic It's Just Is share categories? It's and the Doors, formula growth. layout existing into it new to

Brian Harris

well moment. had both In at really change volume see for continue see demand market and increases. Sure. we pricing businesses, ClosetMaid, in our as don't other as that products the It's to our We've good just any a share. forward gaining looking mix like are Across and businesses we benefits combination.

Rob Labick

the Great. And very margins, again. on were home products, particularly then building strong

you've think segment about plus I level margins. talked XX%

a expansion a the along goal in growth? about just close step lot quarters of talk Can and that just awfully Is is of or continuum the you getting the XX% margin opportunities? You're now.

Ron Kramer

think the right used you growth. It's I word. of a along the continuum step

ClosetMaid company the run. been and one executing the of the recently. for and investments a business. We've The of long purchase over building business been the year. we first have little that CornellCookson We've Cornell for then made our sale plastics throughout after We have pivot owned the

saw at been we So, a businesses we communicated and their that the X% goal operations. those going EBITDA to running X% to well of the goal set companies that buy has that to both margins and stop. continue first out we that's That was, we improve were and path buying when were

where the business where now were they our getting they from to So, acquisitions prior are. to

give We once a year. guidance

We we're and where feel fit that But businesses good very about them. talk we for all to bought. will about businesses the we opportunities the we going risks together The and revisit fiscal with XXXX. be had quite that well

time, every We and we're best consistent brands in. with that the deliver products essential to category be products have having that we the in margins for to the Over able brands. best the leading are expect

Rob Labick

great. That's much. Okay. very Thank you

Ron Kramer

Thank you.

Operator

ahead, sir. Company. from is question & next Your Julio go Romero, Sidoti Please,

Julio Romero

afternoon, Good Hi. everyone.

Ron Kramer

doing? you are How

Julio Romero

Very good.

very good leverage. home on margin piggybacking better last Seeing Just seeing and in question. We're products. the building

some You all? margins quarter called been ex what Can a out quantify try the in the that to material Just at could have impact. curious tariff headwinds. you underlying the and of

Brian Harris

initially amounts. price put we had For increases the significant our price and tariffs, headwinds those set offset to materials the we and had or

tariffs We the XX% that slightly for to $XX May quarter million That the have annualized. out and is has third came will us XX% increased done begun tariff in continue. which to amount the The in unmitigated XXX about so. affect

through our working are process tariffs. with we increases XX% to started actually related and the when that passed We customers already

by We end expect the complete exercise that of year. the to calendar

work price quarter increases. through So, impact some on that those we'll we our in putting from fourth see as

Ron Kramer

whatever mitigate going continue has impact pass and But the on. we is bottom line that to the be, tariffs to will to and policy been will be

Your our be But margins until better. is they're takeaway Without correct. would them, gone, here. they're

Julio Romero

Okay. That's in the price helpful. half. declined Steel first has

you a and it about in talk the inventory maybe you do Can out your half? see first playing about has the affected margins half steel how four turn times price second year. how You declining

Brian Harris

overall Steel is just structure. our of component cost one

labor, up. Overall, things up. are items, down slightly steel other are costs Some are like but our particularly

just it's element. So, one

Julio Romero

back hop you. I'll Helpful. Okay. the queue. in Thank

Ron Kramer

Thank you.

Operator

question a from Research. go have You Justin ahead, Please, sir. Gabelli Bergner,

Justin Bergner

are Yes. Brian. guys? Hi, How you Hi, Ron.

Ron Kramer

well. Doing

Justin Bergner

A questions here. of couple

said came at cash First off, you what flow earlier? was third fast. the me the number quarter bit in free It that a

Brian Harris

$XX million.

Justin Bergner

zero. Six

quick Okay. one. That's a

it was your plus and Or products, Clopay Clopay at in positive legacy negative think more home that positive look I and buildings Ames last a and I quarter. was as Clopay volume per was legacy the Secondly, negative? volume X% on both Ames? basis

Brian Harris

were both They positive.

Justin Bergner

a mix. Okay. And the on elaborate what terms in in mix seeing and Could then improvement? little where more bit capacity of you're you

Brian Harris

product Sure. our It's most really lines. across of

door in retail side On the products benefits of Ames/ClosetMaid the compared continue point in end higher mid and our improvements out with because that and Clopay on we in products And innovation additional the side to selling to and are products. on type the at high-tier improvements slowly entry then side, the mix phasing the continues we to our more brand see sales. they're see garage commercial

Justin Bergner

upside fiscal Okay. year stand of upside? as sort of ClosetMaid things do Are XXXX and With Ames the seeing additional the closer synergies, get to we we and already some that where to there? respect

Ron Kramer

to to long-term laid acquisition growth expense ClosetMaid going the to integration. we do being Couldn't reduction. out where combine happier improvement multi-year drive it a revenue are both with us in and in we what as on is and about being to We're able what for with track be Ames

over to reflect ability to and and to complimentary us But to our flow innovate, we the all we time cash trends So, are growth going we've be. the what real about that in that margins along ability said time. to a We're are that. gives expect the the to platform of of business combined free over businesses business see encouraged the these be take cost continue very out

Justin Bergner

And side or are mainly the broader the are than cost that? they synergies in sourcing

Ron Kramer

well plenty the $XXX a in get going million-plus do goal. getting the margin that that putting time All We've the with X% over. Remember, was were into XX% a there business we as running at We we it, it revenue It over but got bought was margin. revenue we're we'll work of toward of to confident blended to said get business together enhancement our an still both consolidation there. ClosetMaid. Ames

Justin Bergner

question Last helpful. the Okay. business. Thank you. on That's Telephonics

possible You it opportunity despite is the clarified MH-XX for billion of right Is two when it much year that the revenue revenue next guide was of think thinking year. once sort pushing you things into to valid expected India be ago? how to $X.X or to in a XXXX I quarter give that indication us any as a were was about you still

Brian Harris

Yes. It low was in area. the single-digits

Ron Kramer

was what us. next This we're XX. of we we and XX, profile five The next the about of in always over Small what Telephonics just XX, growth, happening good Not see feeling year, very ahead XX. but see about years.

Brian Harris

Justin. Actually,

single-digits. Sorry. the would I high I single-digits. low revenue misspoke. the meant in EBITDA be was

Justin Bergner

Okay. Thanks, That's guys. helpful.

Operator

a have Josh Chan, from Please, go question ahead, Baird. We sir.

Josh Chan

quarter. and Good Hi. Ron Good afternoon, Brian.

Brian Harris

you. Thank

Ron Kramer

Hi, Josh.

Josh Chan

on first My Ames. question is Hi.

Could earnings you good which there I you're lot things that the like Is think of and in just you the that up hearing gain talk in about what of cycle. you this companies a inventory mentioned in share? volumes shape the terms the Ames in saw quarter did business? core blame in you weather were

Ron Kramer

profitability Look. weather had It's problems, Clearly, things with were quarter, nowhere we an they are are means or always you if weather. Weather excuse. is others something. we it, the that with The had to to near our at that going either of telling are thrown any control, a We able be we same In in that peak there's that deal us. get business. not whatever fact. our which revenues

Josh Chan

Right.

then this to that from clarify mean that Did right the the want here. I appreciate fully the you a on in quarter? tariff tariff And might be there side, point to a based sure tariff in would just pricing quarter. then with color. say quarter before the say basically is again perspective? make I you place timing to gets that on about temporary earlier, headwind fourth just particular your Brian, normalized everything you've And impact Okay. fourth offset the everything

Brian Harris

Sure.

of just threat me out completely was than were That there Let it earlier the September that, the even down tariffs caused has that pieces. that go to tariffs in those been mitigated. costs at of into that completed break The commodity all original and at in we lag process XXXX that finalization end May, May in on into our passing tariff, announced and The of incremental of end quarter now. price increase. place second is working March. between a were the our on mitigating of tariffs are going There the that XX% it that up

Josh Chan

Right. fourth a is quarter, would bit start the what pricing you're impact cost maybe the in And to impact the can but increase little be that later than saying?

Brian Harris

Correct.

Josh Chan

be you're would growth relative expansion versus would some assume your long-term XXXX is I at just terms margin right. plusses minuses some going know All question I right? of looking the great. to give you want XXXX, Okay. Thanks. framework XXXX, and in expect next last that you kind to of fiscal targets? you see on My into that don't Just preliminarily comment how year in would looking either if at preliminarily

Ron Kramer

The and November. talk year you answer to in is we give we'll guidance about it once a

Josh Chan

for I your tried. time, guys. Thanks All right.

Operator

question [Operator from Please, a go sir. Bank. Casella, We Instructions] Deutsche Andrew have ahead,

Andrew Casella

for Nice quarter. Thanks my guys. Hey, taking question.

talked I the think win you past counter market in share. guys how can of actually you've intuitively about kind tariffs help

up you Just gains far that showing as curious or if seen started potentially market to or any anything numbers? share the if as prospectively in you've see tailwinds

Ron Kramer

and noise to disruptions to them of able mitigate perform related in spite very to pass well whatever been along. We've We to been tariffs. able market continue We've in the them.

continue so. We to expect to do

quite are Take businesses a the Our well. at numbers. look performing

Brian Harris

service based our on that success ability is would to customers. our say our more I

lot worth for that people have and customers. our We that products great is a want on brands

supporting that's our think success. I

Andrew Casella

Okay. you. Thank

were quarter. did When May, immediately, they hit the tariff in raised lag was on impact on again showing it or that rate actual costs for started run the annualized a until the million the up? Just $XX

Brian Harris

There passing of expect increases we'll much year. large started run will the depending price pretty the it that. the The so through in million that, $X in that will $XX I by of unmitigated over pretty we be It the Yes. We'll mitigating us that million the which course and to evenly calendar year. earlier million impact impact, process QX, said be The by QX. end on not as grow immediately. complete to mitigating some quarter and was $X

Andrew Casella

Thanks Okay. Great. so much.

Operator

the questions like time. no at back Kramer turn over Ron There are further to this floor would to I Mr. closing remarks. for

Ron Kramer

feel ending quite Thanks going which and Bye-bye. We up really we'll this Things expect will XX. continue. what a you year be speaking are in Thanks. them be good accomplished finish year, we've November. about well, working to hard And be date, September to and to fiscal lot. we to we'll

Operator

concludes This today's teleconference.

your time. have for you your evening. good Thank this may You participation lines a disconnect at and

Griffon (GFF) 2 Aug 192019 Q3 Earnings call transcript