Earnings call transcript Q1 2020

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Operator

Greetings and welcome to Griffon Corporation’s First Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions]. Please note that this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Officer. Financial Chief Harris, Brian Thank you, may begin. you

Brian Harris

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

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

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

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

turn Now, over call I’ll Ron. to the

Ron Kramer

transparency off segments everyone. businesses start want improvements provides excellent good three significant of each believe this our positive the We're for and for opportunities we've discussing shareholders our We the highlights and filings. I demonstrating investments undertaken. by to Thanks XXXX. fiscal to strategic of our our the and further public and impacts an the our of year operational by change increased reporting afternoon start enhanced

and Our business, our is Clopay segments primarily inclusive Defense consisting Home are AMES segment, Building Consumer the Electronics is Products which unchanged. business, brand; and of of CornellCookson brand; our our Professional Telephonics, Products, includes and the which ClosetMaid which

so the we're discussing let's new today move results reflect to segmentation, Our this quarter.

the our with year. of happier be start Couldn't fiscal

by EBITDA businesses. This increased to Clopay $XXX X% million. and growth XX.X% driven across $XX to AMES our revenue adjusted our and was quarter increased First million

next November. our businesses. progress and business strategic on of generation competitiveness efficiency, in continue This platform AMES AMES the the in U.S. and AMES We a enhance to growth, multiyear to the investment is announced initiative make ClosetMaid

predict to AMES’ external with decision enable and improved making factors and This lead ability improve faster tracking, business will times. respond platform improve to

and manufacturing the the During we began quarter, facilities. of the distribution rationalization process

to project remain on and make internal We milestones strong our continue progress track. for this

Top, into now Additionally, our our the moved facility we completed expansion the and million has CornellCookson on enable project operations serves and organic expanded This The our us to take advantage brand. of to team is Pennsylvania $XX efficiencies that transitioning space. support operational will manufacturing construction Mountain and market. new increase bring equipment growth, new facility to to improve volume capacity products

radar Challenge was the month, is our MOSAIC our significant provides first customers. development generation and place AESA award currently of under to is value awarded indication an recognition strong the of for Navy in Earlier system. radar Telephonics next at also MUX Telephonics this this business our This innovation Prize the proposition technology U.S. of technical

technology prize this helicopters flight receiving Hawk after shortly feedback radar new Moreover, the testing we initial and positive. U.S. their the with Navy on been began Sea MH-XXS has

parties continue Further, MH-XXR progress our systems the regarding government highly and Indian we see encouraging. discussions the between with to are radar

of pipeline within a us this optimistic on excess a year. highly about Telephonics organic award and for program the see fiscal to $XX to formal expect continue leaving the in basis, million beyond. of through We foreign Overall, this domestic year strong contract growth continues a of and balance opportunities the

Let's turn to allocation. capital

reshaping remained leverage meet same free first report to required enhanced ratio the cash that We driven quarter, and to flow with initiatives. an X.Xx. benefit seasonal cash demands even portfolio from pleased last continue quarter the at to our as I'm profile, in efficiency by our our our usage

to debt on our We working continue EBITDA to towards focus deleveraging, net X.Xx goal.

our of innovative associated our and Ireland operational strengthens U.K. Apta, increasing U.K. the garden Apta supplier footprint a products garden sold in leading diversification of while centers. acquired leading pottery In to the and December product region. offerings, we

We accretive Apta be earnings expect our XXXX. to fiscal in to

term We in and long be in further to are focused both accretive. drive like sourcing and evaluating disciplined We acquisition that immediately bolt-on-acquisitions value our remain strategic enhancing on approach would ensuring Apta growth. any active and are

$X.XXX our annualized Additionally, to record XX, XXth it share dividend This in XXXX. today February XXXX Board we of per has earlier authorized payable March rate XX% grown which marks to XXXX. initiated a dividend on of at on the quarterly consecutive since XX, shareholders an shareholders, compound

now XXXX. lower with which fees. today cost extended amendment reduced The our and Earlier LIBOR credit the we March borrowing amended revolving agreement and announce of reduced extends has facility, until over spread

the million, to and revolver, $XXX Additionally, borrowing substantially quarter the under for available was available approximately loan end subject covenants. $XXX were certain At to million terms other same. amount increased had we the

With of to our you year. could bank sometime X.XX% $X refinance expect or billion the extension agreement, the notes this us

going that, details Brian results. With I'm the to financial over it to turn for on

Brian Harris

adjusted I’ll increased EBITDA highlighting by comparison quarter in both $XX Ron. $XXX you, prior quarter. to Thank X% year performance. to to start XX% our Revenue first consolidated the and million, million increased

Gross included initiative. profit AMES the was for $XXX and million to charges of million the strategic related quarter $X.X

$XXX this with XX primarily due points decreasing the increasing Excluding basis tariffs. to was over margin profit million, X% gross gross charge, quarter prior year

the First quarter general related administrative million and AMES $XXX a strategic included initiative. $X.X of million selling, expenses to charge

flat $XXX quarter. to Excluding million, prior this were first compared the charge SG&A expenses year essentially

decreased XXX percentage the change adjusted to basis a XX.X%. points of As for sales SG&A

$X.XX $XX.X year million GAAP-net prior quarter of or or million was period $X.XX income per share compared per the share. $X.X First to

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

expenditures million spending comparability prior million Capital year items the excluding compared XX.X%. to $X rate recently for of the with the and products expansion. tax quarter, primarily for increase effective Home facility due to $XX Mountain the was quarter was Top affect completed that Our Building

net and calculated EBITDA based resulting XXXX of our position totaled Depreciation $XX had to $X.XX million a debt million X.Xx XX, amortization $X.XX for cash debt December debt as in as quarter, billion on first total covenants. of of and leverage and $XX outstanding in of the we billion, debt

is we’ve of cash our first year our previously, As period. second noted usage the generation the the cash half period half is and

Consumer increased XX% impact segments, quarter, favorable to unfavorable first and the volume, Regarding prior $XXX to and our price increased offset million over mix, and driven by exchange. Professional quarter X% by foreign year due Products partially revenue

Adjusted the tariffs. favorable EBITDA driven X% quarter was million from increased offset Products on $XX by million first increased to and due X% increased year leverage prior sales by volume, Building $XXX revenue pricing. mix quarter, year to over prior quarter and increasing and the partially Home

quarter. related revenue, $XX current EBITDA year operational Adjusted the prior on over to EBITDA million benefit including to and due Adjusted improved benefits was absorption quarter compared XX.X% the volume quarter prior in XX% margin the efficiencies. to in of increased increased XX% year the

revenue $X.X the the Electronics EBITDA of Defense million. million to the million, to period million was prior $X.X timing of quarter compared compared $XX during period primarily was due first prior $XX orders. Adjusted of to quarter

Our was December trailing a were million. at XX excluding $XX.X and $XXX and XX-month book-to-bill expenses, quarter. million ratio unallocated depreciation Xx in was little Corporate over first backlog the

We X% the excluding which and increase million and of $XX total guidance million are strategic ’XX was year to to both during to compared charges one-time EBITDA call, November our earnings given plus $XXX reiterating FY X% relating revenue cost to AMES XXXX unallocated initiative. our of full

Capital $XX and $XX at remains million, million, $XX expenditures, respectively. million G&A and same interest expense the guidance

of income. to expect in to continue generate free cash flow net excess We

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

Ron Kramer

Thanks.

We flow our to to margins are XXXX. off cash initiatives. fiscal to Griffon through expand positioned of an is continue generate excellent strategic start well to significant and execution

all and where of front excited about long on supportive of a is. opportunities and us see and remain the driving are we about consumer We value in company We healthy intensely term our of shareholder the pleased businesses. really U.S. continue economy that’s we're focused to

operator, questions. take And we’ll that any with

Operator

you. [Operator Thank Instructions].

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

Bob Labick

a Good fiscal start afternoon. on Congratulations to great ’XX.

Ron Kramer

Thank you.

Brian Harris

Bob. Thanks

Bob Labick

AMES so project, the and there the milestones good kind that with the discussed with thing or have in. Obviously, we the us far initial know any initiative. started I three-year been surprises, are what quarter, could start wondering, I bad to of exciting last you and it’s anything next expect. stages want you really you’ve but a tell should dig it's a to you've learned was steps initiative. I of

Brian Harris

a surprises. the facilities working So end the as expect and be It continue couple as continue on we started spring process We’ll will right of it by in the closed planned. those business each and been no now we're system. off of to the expected intelligence to begin year, step implementing there so go, our and we go have really we as will of

Bob Labick

to write talked gave size, enough. opportunity? more you mention radar. Telephonics, then that little Could little if a you I part the And for you bit bit that Telephonics? things. a about maybe you would a great. fast wasn’t you optimistic but know I when Could able very some of us about on AESA talk or international the expand also then think down a it sales you that's And and become little medium-term opportunity Okay, the

Brian Harris

expect to we our that specifically domestically this which year. strong about opportunities both across opportunities see one of see internationally. a allies happen we pipeline lot was a a we We globe continue talking initial so The opportunity yes, plus to $XX fiscal booking were is the with Sure, see internationally. and India, we and million other

lot we other mentioned of was slowly in One successful will radar, start a see as be years. (AESA) about Array we're the the international. sales will the likely It customers, product had off from of and our likely excited the the Scanned Electronically and test Navy, as we then interest in Active initial the technology continue the with about sales On I product. Navy, that we but there, will note, very start a two seeing test

Ron Kramer

one said We But orders, see I’d that business. know we've a fiscal the that Ron. we Telephonics. it's we for add in investments in backlog, cycle ‘XX Bob, thing here, know turned runway that having you both in the ’XX, improving And and now you the five-year made other see is

we is the really changes a So of the feel company coming multi-year XXXX, positioned for defense out like budget sequestration, in expansion.

Bob Labick

know XX.X% margin range obviously new then should but to information, were be me take margins Clopay Can quarter you that's a on liking margin Okay, And going about a going us for we’re the what for of are while get HBP, last little drivers bit the it’s the and talk great. and it, little I used the think particularly a expected and to in terrific. one incremental segmentation forward? Cornell, to – the you

Ron Kramer

the us the we us U.S. as I'll continuing market have show know to in for saying cycle, our the manufacturing, about you level the start business our story is by which reflections well on showing market of help. and volume reductions really of some are housing and cost end housing increases, always that with in businesses but strong commodity accurate not that as going of what's talked know an is you and at being as efficiency

But the business strong. is really

We We to continue is very to a up year. shaping be good growth. think see XXXX

quarter the positive signs one any market. so know but what always it, year into of we lot see very We’re of cautious we’re a us, bring can balance you the about in housing

build The our see on initiatives AMES XX% room more to that we Products, billion the conversation the is it separate really taking has that part margins basis that expansion the margin and $X several the you Consumer to making project plus progress we something you our that been allows under the be years. discussed) to segmentation more than on and that to is than planned. is we're what XXX next over Professional expect AMES goal, revenue about now able showcase for stated “Bridgewater” points of to of out of what's and should The (the

what's up are on, about show company, the in just is So optimistic to what we’re be the going feeling positive. U.S. signs us shaping but for not year all very the economy

Brian Harris

are out we would just Home to in margin XX% the a building we full margin. Building to Products have year add I that annualized there segment, that

so generally I So of being weakest just better and the QX point quarters little cycle quarter, QX QX are being QX wanted in business out. than just that and that regular to with a the the business QX, the strongest

know XX% And that a ultimately generally see our quarters strongest you and QX we and business business, are QX. CPP on margin

Bob Labick

Super! Okay, thank so you much.

Operator

Romero Julio Our state of question. your Sidoti. next question line Please comes from the with

Julio Romero

do in KelKay good product that attracted wanted lines Hey, see you I which How and the that ask business? afternoon. to deal. you Apta fitting about with know to you

Brian Harris

and pots you first our the So deal in planters, UK. of after expands know footprint really pots the planters business our it's global and

$XXX to So million $XX did what business, $XXX million overall just distribution to business point what $XX we’ve like in we I of revenue do built management, where in started to from the using negligible we U.K. to you that under million million, one a Australia is footprint one

and under that Apta one and and be Hacienda managers set they combined now La of geography. for another will KelKay, So adjacency it's are

Julio Romero

the modeled in in and I Got cadence kind It’s mean the a you $XX on over – should $X expecting out in little it, run million rate quarter. did and next the think we spread of that of I expect items had period one-time than restructuring kind higher kind costs about what maybe for of quarters. still that XX I or you’re so you guys. that three-year maybe over the million to

Brian Harris

period. The Sure, three is the no expense year $XX problem. for million

of expense $XX year You million. expect that for full year should equal roughly be chunks each to

plus minus Nothing the of So will occurred. this somewhere be million year $X range. particular that balance in

facilities had moving and charges related got start it. Just we've some on we to able we were and to

Julio Romero

it. Thank you. in the hop start Got to queue. Great back I’ll year.

Ron Kramer

Thank you.

Brian Harris

Thank you.

Operator

comes with Gabelli. next line of with Please question. Bergner your the question Justin from Our proceed

Justin Bergner

Good Ron. afternoon, Brian. Good afternoon,

Ron Kramer

Justin. Hi

Brian Harris

Hi Justin.

Justin Bergner

average your Is Home provide of business can the print quarter sort the X% detail an the related acceleration? weather was volume of reporting the for of volume comp all & real explain September combined acceleration like in this quarter, looks more at acceleration? calendar products mean lapped Buildings market know that there there any sort related, old some looking end it on would under you I you way what the volume increase X% versus is or that anything related,

Brian Harris

continue market for to specifically market in good general, those volume what but there us a in is share we seeing seeing are gain increases. you're we So out

outperforming both and the our Home and AMES side the business So and and we Building are of & ClosetMaid business commercial AMES market, across we that believe that’s both it. Products residential the includes and and

Justin Bergner

what guess two about I reported then mix last average the X%, you And it’s you the price with element, reporting know Okay. segments, I new quarter. if consistent

changed dynamic that that mix versus components So guess within of is the price constant, sort X%? relatively I but has all at

Brian Harris

No, contribution both. there this mixed it's quarter Actually from focus price. is little a than more

type we categories. improve better to know best the are the in continue of and We product you selling, and

that investing AMES and &and a in door. products On improve see to come we element out to nicer, a ClosetMaid continue people very with strong people is to and residential continue side, and we on investing to Building Home the very investing on their a brand in then It's side a are home. important side, nicer homes in, Products the a

home recent do door that side of we A side, are tool on very end is is generally other door pro, came and very out one one the a element on the survey says garage two of and improve higher focused the to number the the which entry benefits the your focused are AMES can the look we is and you product.

Justin Bergner

my to professional on products. was was weather Back volume and X% of volume arrangements, going Okay. in initial that related mix in question quarter there the with the consumer anything

Brian Harris

related. weather particular in not No,

Justin Bergner

allocation, versus terms the appetite three any in of over down. your debt of Capital have last for months, six you to changed acquisitions know Okay. your pay priorities

Ron Kramer

about is mean much have us. The No. the acquisitions buyer, hard a time a pay who's we finding you capital by is always definition reality is pay business can know I hunt we is that that willing being assets full topical we for can a disciplined meet the that acquisition our price. and there value own too the chasing for very we things price, highest because improve, standards, to

XX you, digest the last I'll years. So been six remind acquisitions made has in our that the we we've bought strategy companies to and

The acquisitions. that are has Transactions us being come that has when been unpredictable along. to there's they So the and if in tuck-in our you for expect something in as reality value pipeline. should always

big really door but will it that and for and the now the grow CornellCookson be, the as was hoped to us, build So acquisitions every to going which be business have diversify turning you good able business be commercial door business, we bit both hopefully for as residential decades. is to already out had leading know to what leading was we

to AMES and ClosetMaid be just created with it's reflected. opportunities beginning the are us The for consolidate that acquisition to

deleveraging So value and see this the far we value, our while a bought story for stock, done, from we about us Apta, markets standpoint will be you that we go think down is the back we in haven’t the stock are of us types in going reality deleveraging be more and are we've We far to rewarded our tuck-ins and better still smaller that's from forward. in the see deals, more we is, quarter how things credit should thinking but an benefit standpoint that and M&A but see. in equity the of compelling and continue

Justin Bergner

I or on of material that you an of until something we way just a you're sort and side, going anything wait of after a election that coming is have do to take and Telephonics the approach up little mean given Okay, the one bit to there are likely see kind another election? that or

Ron Kramer

Telephonics We the business there have and to business. love the defense a initiative a strategic multiyear, gem, grow is we

intention have acquisitions be it, we of it We find uneconomic. of multiples tend you every wish know to to that can it. continuing build to completely it I make compliment and those grow

that back next to in where revenues we'll several was to it the take and So both business years. profitability continue over

is an multiple We've been and in business the it. that in for want incumbent long build essential, that and see come you keep very like a it's business time platforms. lots know of Presidents long for we’ve position on business a go, you know very to that We time; we're

Justin Bergner

taking thanks for Okay, my questions.

Ron Kramer

Thank you.

Operator

Instructions]. [Operator

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

Tim Wojs

Nice afternoon. good guys, job. Hey

Ron Kramer

Tim. Thanks

Brian Harris

you How are doing?

Tim Wojs

that’s some There good. snow out thanks. is here, so good Good,

if guess your just today curious can non-res months relative benchmark your expectations. about color the and And you of opportunity market in you bit little right was maybe then just and to secondly, now, the just of that’s kind are seeing backlogs. now where the XX the activity what that maybe internal I in overall add how CornellCookson, for what of on curious I to thing a kind relative to are performed you maybe terms order was Ron close business So synergy either of now

Ron Kramer

in not and doing telling to what So, to was Clopay you of would of that that yeah able been by to was CornellCookson business for we opportunity them, together were we together be in I'll already expand the unique lead was you always two complementary just doing accomplish, cultures things door know we commercial the us some already start but business. have something a putting diversification were wanted and that that to synergies. fact thought the with we we it the

dealer We all for network the to and to on products the and was being be side, broader leverage the in on to everything Cornell. are be jobs see first to is invest and more purchasing the to from to and obvious but sales able beginning more us that, footprint to marketing commercial all to get far offer our the step trying to able bid things, that, about by rationalized. do the discussion And of going physical able

road completed so and about quite the the ahead the it the expanded are both overhead in to able we fixed business. us of expansion leverage facility, expansion both we ultimately as the of margin is CornellCookson Clopay optimistic and We volume, just December,

Brian to to that? add want you

Brian Harris

add XXX business added side before that. dealers in CornellCookson. we not did just would we that the bought We to Yeah, I when either have

dealer opportunity with now not commercial vice is process actually some the started Clopay they one Clopay dealing of to in opportunity product did us had product the we’ve over have versa, changing the and buy a that starting but we the and so front already. So is have products, customer, and dealers who begun because like where CornellCookson have commercial

a In to the commercial see section, we continue good volume.

seeing not are there. weakness We

Tim Wojs

expansion ClosetMaid is getting – and great. there. just it garage when space? think some Okay, or I you attractive of opportunities into the then about guess And important how the with

Ron Kramer

It's opportunistic.

something it’s it organization, should it's to on know You or a if stay reflective plans, basis out garage tuned. in so current anybody's all national be projected that going not at figure us,

Tim Wojs

are the Okay, then to okay know there the would perfect. just or know refinancing you you notes, your of the time And on think kind current of the about relative how kind you how in terms line you you just know of about facility? debt Ron that talked markets

Ron Kramer

market. We about always back opportunistic coming the to are

and back, You know come time should is what By excellent are company be appropriate you sometime expecting. is this the all the credit appearances markets at you in available shape. know the but and year up we’ll

Tim Wojs

on great. Well quarter luck Okay, the to and the first congrats year. of good the okay, here rest

Ron Kramer

you. you Yeah and we're appreciate it. very say Thank pleased about what

Operator

over question-and-answer and gentlemen, the Mr. floor of we Ladies like I Kramer closing remarks. for end turn reached Ron our to have any to session would and back the

Ron Kramer

and we forward in you all to reporting May. Thank look

Operator

teleconference. This concludes today’s

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

Ron Kramer

Thank you.

Griffon (GFF) 31 Jan 202020 Q1 Earnings call transcript