GFF - Earnings call transcript Q3 2020

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Operator

Welcome to the Griffon Corporation Third Quarter 2020 Earnings Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Brian Harris, Chief Financial Officer. Please go ahead.

Brian Harris

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

Our recorded our is details earlier call 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

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

Ron. turn will the to over call I Now

Ron Kramer

ahead. trends of renovations, Thanks, continue gardens pandemic. exterior and Building a to benefited as I in afternoon, doing COVID-XX year in such you from home lawns Both will these your the in our closet this in all homes, nature of including times. the position prior already outdoors, everyone. their strength, years pandemic been of We well new enjoyment to existing fiscal businesses and these competitively. projects, unprecedented families March, Griffon to have doors. the customers on and operationally of their believe and entered our investing the enhancing their are the turbulent tending and upgrading the strong results from stay-at-home and garage good hope both their grow

of business I compared home coupled XX% results purchase share Revenues EBITDA year outstanding. by starting were June Plastics per with adjusted the regarding reflection trends to CornellCookson Griffon, ClosetMaid, quarter XX% of that enhanced the are of described. of actions improvement a the earnings XXXX adjusted XXXX with our These strategic taken prior increased Our third and period. increased the and XX%, the by purchase further the disposition in September announcement results the of increased

our the Consumer and Professional Plastics Our as into as growth. flow share Further out us quarter’s over commodity-driven increased XXXX on cash XXXX the flow million. gains $XX branded, period results, year’s of free well business of free million and and pivot this X-month the cash capital-intensive, $XX revenue, Product X-month positioned market cash earnings prior comparable for businesses full year underscoring flow domestically manufactured, builds

performance, our and X.Xx. circulated full our the have our early our and and been As We’ve have top Since leverage safety additional net health local X across to from global health by a be measures reduced our Ensuring as turn well. the employees of this to quarter year result of as those continues and incorporated proactively has employee and debt-to-EBITDA priority. workforce prior safety. guidelines safety implemented national for we March, health authorities customers

directive, been In all facilities. to our weeks employees July directed continue Clopay U.S. work practical, extent and March, these at Mexico, while And segments and permit the our before, was supports businesses This in Each supporting AMES, to provide I of infrastructure. To ensure products and late facilities facilities ClosetMaid, All employee manufacturing Building maintaining manufacturing operational of our Australian were strict and safety the In sales our stay our to X.X June, and at facilities operational the were but are closed protect for In safety protocols operational of Products operations. operations. maintain by ahead Products, of health distribution Consumer since. we resumption Professional to Home anticipated were and U.S., to home. Canadian closed the workers government while measures additional and were Canada facilities of has AMES facility quarter. workplace. facility and UK our all throughout implemented to as CornellCookson includes critical we approximately our which to mentioned all reopen and continue have ClosetMaid and of able employees national these our By there, our our in that have April, early remotely.

Turning to business, are its our our of all U.S. continues Electronics it as to operate national Defense for at the and military provides services maintaining and its critical manufacturing security. telephonics operations sites supporting essential

for Let’s product seasonal In storage and in organizational there major in offerings Professional was and U.K. reopening well. Products, as retailers garden a tools, Australia. third quarter Consumer talk performance. and we the and demand solutions lawn North centers quarter Upon about at saw strong June, strong America and home our across demand for

Our and system supporting implementing includes operations, all facilities our business an and AMES in intelligence e-commerce initiative automation distribution AMES strategic our and capabilities. and integrated remains investing of manufacturing on rationalizing track

completely military prior Our the performed experienced QX certain the to customer quarter prior was funded Products the slightly year. the Home million almost suppliers and year. the sale revenue $XX program QX. was from sectional part Building backlog quarter. Telephonics slightly in revenue slowing increased prior exceeded The offset to garage first which some in during related seen in reduction and commercial to at segment anticipated to in in in the the Martin, year Telephonics compared work Romeo sales quarter the door the in quarter. Lockheed compared quarter. of of our Sales residential MH-XX could bookings uninterrupted and QX, with business sales have later the declined for and deliveries second continued tranche booked door Strong a India, slow Operations

services. and today technical government that Telephonics organization systems, is business also and our being products of providing simulation believe which services Navy part technical announcing would Defense SEG U.S. that Defense Electronics segment, Engineering the SEG, benefit that for We advanced agency. Electronics focused systems. a call System a missile core focuses and defense more U.S. we subsidiary We we’re on from is Group, parent on the which within for analysis alternatives evaluating strategic are

of this Center already enhanced in the working to Dahlgren This Naval to while Surface and opportunity those from well is government’s conflict also to cognizant annual process organizational process $XX acquirer. and suitable run of our value million of strong sale with We’ve of standards with started award get called The a that interest and an to shareholders, is SEG that Warfare Griffon for a we’re we’re a $XXX future. the believe recent this incremental such bolstered is Division. for standards. positioning us revenues the Additionally, SEG management approximately million. by near businesses the team done sell better aligns SEG’s OCI timing with business, provide growth

our to sheet. turn balance Let’s

million continued company During senior a our we for work strengthening growth. we an and to In sheet the on to tack-on balance additional as quarter, $XXX positioning issued future notes of the X X due notes X with the in of XXXX billion have in X/X% February notes we a issued XXXX. X/X% now in notes XXXX. maturity $X that our We’ve refinanced X/X% fully June,

As extended also million accordion our to capacity a facility availability its reminder, maturity credit we an feature. XXXX through $XXX to with borrowing of expanded the January, in an by and revolving $XXX million additional of million $XX

any to uncertainty, and all near-term a market continuing established ample to We pandemic while other effects company, the invest have growing the our in of we solid weather have for liquidity and businesses. foundation of

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

look little over some turn closer Brian at it me a numbers. the to for Let Brian? of

Brian Harris

Revenue performance. gross increasing year increased Thank comparison quarter profit start quarter for Normalized XX% million, XX% $XXX you, $XXX over adjusted by the prior million, Ron. the I our consolidated was and will $XX both increased in third year the to quarter. to prior quarter. million, X.X% highlighting EBITDA to

Our to gross basis contracted points XX.X%. margin XX

$XXX were general the related quarter and of strategic $X.X million charges Third AMES to selling, million including administrative initiative. expenses

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

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

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

rate, and million for $XX was $XX year-to-date with in comparability quarter, spending XX.X%. quarter. the in cap amortization third affect third effective Our Capital that million line was totaled was items and XX.X% the quarter, for the prior Depreciation excluding year.

offset was ago, quarter. quarter, AMES facilities Belle the Nebraska residential demand over in of Regarding XX%, inefficiencies increased mix million to June. prior impacted partially to due the the of Products $X the the program increased radar quarter compared for $XX prior sectional and data by tariffs end line over but of $X North general inefficiencies prior systems our COVID-XX-related million driven systems. customer Professional $XX year quarter $XXX in increased million moment improvement Adjusted in garage recovery home June QX, proposal well third the XX%, price COVID-XX-related Australia, compared revenue and were expenses, to segments, to Consumer to XX% $XXX volume year to communication due period, year and in to XX.X% quarter from unfavorable radar decrease was $XX close million X.X% Adjusted revenue mentioned to deliveries year continue in the in the increased strategic compared and during we as which increased down year mix million expect XX%. the X% Adjusted X%. the the year from direct third of prior as a City, Electronics as and over and fourth and quarter. million of unallocated costs. decreased as period in $XX and favorable orders fiscal EBITDA was $XXX revenue XX.X% and quarter in and Year-to-date year quarter, million by Home X% offset compared margin increased continues and we XX.X% expect our the Organic initiative revenue EBITDA and plan $XX to America was prior XX, was and the of The depreciation, from then all a communication by backlog in improvements, and efficiency May the to operating X%, by acquisition excluding volume was in were propelled of impact of Defense was year and quarter benefits prior quarter. XXXX, and on XX% Vernon due increased increased partially by third Pennsylvania primarily margin costs. prior year. quarter. by Falls Apta an Corporate and partially EBITDA incremental the the Building April, offset due to quarter costs. of Adjusted increasing foreign EBITDA backlog million, revenue, had increase EBITDA to by subsequent exchange million, X% Adjusted XX% third of build the Products primarily store revenue quarter million, in growth to to to the prior decreased

X.Xx year on prior the one cash availability of covenant. our billion, reflects revolving from the $X.XX Regarding of outstanding as turn And is our XXXX, balance This billion. resulting debt in covenants. of certain leverage debt calculated full million, loan $XX facility June we subject and position sheet, of $X.XX under total period. debt was based had debt-to-EBITDA net to $XXX Borrowing credit million XX, of in a de-leveraging

out because our of companies, have of for the clear of last we were to year full the the picture like outlook, this many other We arising guidance of and unsure fourth quarter, year. COVID-XX effects uncertainties pandemic. impact pandemic now a quarter our of Moving

normally during result, guidance We not XXXX. reinstating As for guidance we that policy. we guidance do return update the give the fiscal plan a and to to our year year, for and are

as the this for in continued was us felt instance. given update provide an an from COVID-XX, resulting However, it we to uncertainty exception appropriate

$XX of QX guidance, are now $X.X year with of expenses that our EBITDA the conservative XXXX adjusted November. higher back XXXX during million-plus before of our for $XX million guidance full million $XXX our our million-plus of and provided for full billion original expense XXXX capital communicated earnings expenses, is outlook, in Further, guidance originally before unallocated interest the fiscal we remaining same $XX these includes the with net amortization, for expenditures, million for year providing even unallocated the EBITDA of approximately overall unallocated November adjusted as revenue and approximately that million all for than $XXX call. Note guidance and for in We expenses. $XX year depreciation

Now to turn I call will the Ron. over back

Ron Kramer

since achieved expansion opportunities the of expect of. much Thanks, margin gratifying. enhanced began value we growth in we – for announced become top companies. of competitively just we’ve short acquired it’s Brian. collectively Further, we is especially offering, customers efficiencies during At line it, increased terms improved of something realization we are time how a Griffon’s providing few discussed at process year-to-date and broader the and this integration product our we through years all all our the very by in repositioning, this to to our performance proud Considering efficiency. the stronger it service levels portfolio of

of We to continue on our a focus growth. and on domestic the believe leading future strong brands our our diversity businesses, the manufacturing emphasis foundation for provides

performance our in Griffon’s believe has what accomplish our repositioned of is following our considerable upside focus excellent, the of and we there the quarter, particular, for and strategy. brings can This businesses. into still potential improving portfolio opportunity performance been

acquisitions portfolio strengthen finding our and markets. home that addition, strategic expand within remain In committed product we our to

our debt-to-EBITDA X.Xx We getting closer are leverage. to net objective of

flow see has further has continue we our improve, to to continue to thank plan. like our and expect cash business closing, execute and free I’d we to as will exceptional their of to importance work and perseverance in leverage will we Our decline In any excellent questions. workforce, appreciate Operator, challenging period. shown deliver We to take our throughout these the results. dedication this order which

Operator

[Operator Certainly. ahead. go first Bob comes Labick Please of question CJS Our from Securities. Instructions]

Bob Labick

congratulations some on Good results. afternoon and terrific

Ron Kramer

Thank you, Bob.

Brian Harris

Bob. Thanks

Bob Labick

Yes.

purchases position particularly So, repeat this do the that’s to products I wanted with do obviously, how think get CPP, there? to become you to you outstanding do increased brands start, last? and do demand, demand long And products how do to your purchases? on how replacement what And focus and need guess you can and you – in just attention to more this fulfill your out

Ron Kramer

strategy of already will our going start of of purchasing we products clearly very are year into that I and of we’re last web are into way strength supported, that’s Well, we’re how COVID. pandemic. for brands And to far and to e-commerce deliberate more be our has as as the brick-and-mortar. that this certainly ahead for moving you – of is well searching been leading going been both the and types us That provide in in demand going ClosetMaid product reminding AMES. and the was was expectations story we we That seeing year around changes a structural the our then And AMES. that The best the story sell. by around ahead it the products good that people every was brands, having buying the fitting sometime that product have

the And us not It’s prospering. So economy in the with there’s recession. time. not surviving, business strategy stay-at-home was unemployment. they’re us lost functioning What’s this an on accelerating. on we’re is things clearly during well even we’re that clearly incredibly working. a trends record It’s are quite difficult that’s yet that And our were not lost happened of only

the of we home, at back been being it. end we doing as question in during that your project of our going had accelerating to we being result for the capability, that this, was And future offerings. Bridgewater of view expand what able into November about have terms was about announced it business. the So working The in product the is company our expand investing in distribution

We are brands. believers in

We bought category. are every companies We builders of in product brands.

clearly a is at performance. at AMES efficiencies already this are increased were as set And the same you of we initiative. the what the a quarter in see in what operating demand, We place robust growth early that stages view driving time, very of

been the best sell. going for the and what both our to do and brands doing is product online, we plan exactly building brick-and-mortar that retailers, to in we every So have forward continue supporting

Bob Labick

trough XX And the it. at were of growth and adjusting is over on the how That’s great. as Very kind strategic for the you And margins potential international little the shifting next months look then the of the side? we this said? coming Telephonics, see to – guess, kind Appreciate and on so in see is XX I SEG Telephonics you a alternatives, you light, quarter. Okay. do do to year some helpful. How

Ron Kramer

Yes.

business that out. bottoming. We Telephonics sometime having of talked that view process was the as played have about kind We for

As core but backlog surveillance see an orders, to on COVID demand impact we the reconnaissance timing clearly has continue the we and products, particularly radar expected, of improving. systems, for

up. of to quarter. in in have sale showcase sale been it bought XXXX, is the built expect the what’s We is that itself it The piece SEG we fourth behind of conclusion of about the it for it of Telephonics. it but focus we very things. our improvement nice will And The a to prospectively additional a story. part margin small us, is of of core deleveraging what Telephonics really meaningful should the One, on be story It it three does. be us and allows story

So we a it Telephonics. And to strategy the it’s have is part of harvesting built. of core continuing broader that business It’s gain. our a the of grow

Bob Labick

super. Okay, quarter. again Congrats on the

Ron Kramer

appreciate I it.

Operator

comes Our from of Julio ahead. Please go Company. Sidoti next question & Romero

Julio Romero

Hey, everyone. good afternoon

Ron Kramer

Julio. Hi,

Julio Romero

are little you outdoor you ClosetMaid everyone’s On also you strength indoor kind assume that lawn like garden. on of more well have very you a and some you also us that called cooped lines CPP, diverse out But there, products portfolio granularity and given indoors. leading got a can up are seeing give I know I got have the growth? would done have what

leading lines hoping you could give specific us was growth. So that examples maybe are on I some kind of some that product

Ron Kramer

Sure.

of you it. hit So sort

other course, mostly are pretty product item home we spending side. using as and lawn items. ticket can store points very that something is organization large investing a We speaking, such and not organization and and restaurants, been or to travel at that And that done the their Home and in affordable. the is price seeing They their are or they products people driving, growth generally have both and of we Home online on buy people seen install and fact garden it’s outside, some going And a homes. at of not at type more and things, demand. the either believe, where are demand the home our time in garden, that’s are are it. do-it-yourself that

Julio Romero

CPP, And and that sense maybe in trends maybe Got business in-fill And quarter-to-date? about June? us a give talk maybe in how of are sequential and the it. May performed trend you could rates how

Ron Kramer

time accelerated that last July. the stabilization trends into We continues The of April, the end into we the May, quarter after continue and to went see late was spoke, improving. which happened into

We expect this share that have market gains that the to moving able It’s biggest products. for on to the all focus going of several we provide, clear ours is not just the the but that this talking product. sourced been continue, of distribution, chains and domestic, this support products years that domestically to the manufacturing supply providers about being of we are

market share continue leading go are to market make We in share leading as forward. sure the sell, that we every invest we to product that increased and get the we product, going in are to we brands

Julio Romero

Depot. of think in behavior to side Do line was in growth? a at saw like last customer it there’s door remember April kind garage Got nice didn’t the you dealer quarter, side. on the side, more individuals that hesitancy been the of a since stand I you in or some it. residential retail really want change And a drove that rebound called customer more Home out you

Brian Harris

saw We a correct. in yes, April. decline So

retail-type by Our orders sales with decline in centers, some dealers. home XX%, down being the driven in mostly April were

to saw quite all into As July, on sales period. sales progressed May, are we come through entire and into well. and normal the channels. June And in side And commercial good then accelerating the normalize sales volume those started

Julio Romero

Got it.

of May dealer and in did well kind and June? across-the-board retail So

Brian Harris

July. continuing and May June, into Yes.

Ron Kramer

of our warehouse transformation. I was a just And retail the that provide up. security commercial is going to The that growth. called CornellCookson grow The to make business unrest leverage, the that of the the we days through was business see warehouse, manufacturer we of the on. to bought will view, in integration actually gratifying security of are of CornellCookson. continue trends around Clopay early that’s We us business. building the to to about manufacturer. of of has the gives Defender trending as the that our reflection on business, Obviously, other going go that the show leading was But stay-at-home country that is demand are the already well. series of part is residentially rolling spurred Owning at We and leading talked are going ability side had level a steel going civil the part May, that a Series, residential The of the continue which continues from see into to in April business. very the doors and the point recovery a we doors, to it’s, as business

Julio Romero

nice job, in hop Great. everyone. back I queue. Very the will

Ron Kramer

appreciate Thanks. We it.

Brian Harris

Take care. Thanks.

Operator

Tim Instructions] question next ahead. [Operator Our from Wojs of Baird. comes Please go

Tim Wojs

afternoon. Good job. gentlemen. Nice Hey,

Brian Harris

Thanks, Tim.

Ron Kramer

are you? How Tom. Thanks,

Tim Wojs

categories Good, characterize Thanks. CPP. of good. tight to you question, I are demand some just would May just July. curious June in on and guess How of We and level the my terms in into particularly pretty inventory, normal? that in of of kind the channel hearing are first relative

some am So characterize just categories? would your how I inventories your partners’ channel of within curious you

Ron Kramer

think I that…

Brian Harris

to over you. – So I speak actually didn’t we have mean

demand our discussed. for actually already So we good products we as seen have

able been service our well. have We to very customers

benefited capability really Our has compared others. us domestic manufacturing to

needs when home to able any products, Home it. or are retailer provide other it sensor to Depot So or when them we needs

continue inventory our adequate to to So provide those we adequate have manufacturing capability and products.

Ron Kramer

to to that general, is that of expect more. continue. trend we And we are in across trend see, to Lowe’s ordering we the inventory retailers the Hardwares, remember, the they boxes. This – are to National think, I major that we Home all Menards, that from levels and the a continue seeing big service Depot

Tim Wojs

the are of there? guys through of process you you ahead could And or the kind kind okay. about track any at where you quarter impact timing? just think on strategic had Okay, initiatives, the on the of you then Or talk the And has pandemic on are there? as just

Ron Kramer

are... think we I

Brian Harris

on be the planned, on going Things down it’s pandemic. to as slowed on time. plan. Nothing are track. continue a from budget, Yes, on has X-year We

Tim Wojs

was flow seen? you And great. Okay, strength have have quarter also fourth the really you then think maybe flow cash pretty How the we good quarter a the should good. in quarter? performance about Should the free demand just free given cash in

Brian Harris

Yes.

second QX So generation increase year, QX half and to the month, just that’s to our cash we is that cash we of fourth our quarter. I And quarters, ended into our flow should cash strongest the flow continue expect our say.

Tim Wojs

Okay, great. Nice work on the quarter and do work on the rest of the year.

Brian Harris

Thanks, Tim.

Operator

the to question-and-answer would to session. conference concludes any for back This I remarks. Kramer like Ron turn over the closing

Ron Kramer

all. Stay Thank well. be you Bye-bye. safe,

Operator

conference This today’s concludes call.

your disconnect for may You lines. day. and you pleasant a Thank participating have

Griffon (GFF) 2 Aug 202020 Q3 Earnings call transcript