Press Release

NEW YORK--(BUSINESS WIRE)--May. 7, 2013-- Griffon Corporation (“Griffon” or the “Company”) (NYSE: GFF) today reported results for the fiscal second quarter ended March 31, 2013.

Second quarter revenue totaled $489 million, increasing 1% compared to the prior year quarter. Telephonics and Home and Building Products (“HBP”) revenue increased 7% and 1%, respectively while Clopay Plastics (“Plastics”) revenue decreased 2%, all in comparison to the prior year quarter.

Segment adjusted EBITDA totaled $45.4 million, increasing 13% compared to $40.4 million in the prior year quarter. Segment adjusted EBITDA is defined as net income (loss), excluding interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, and gains (losses) from pension settlement and debt extinguishment, as applicable.

Net loss totaled $0.8 million, or $0.02 per share, compared to net income of $2.0 million, or $0.04 per share, in the prior year quarter. Current quarter results included restructuring costs of $9.3 million ($5.8 million, net of tax, or $0.10 per share) and a discrete tax benefit of $0.3 million, or $0.01 per share. Current quarter adjusted net income was $4.7 million, or $0.08 per share, compared to $2.0 million, or $0.04 per share, in the prior year quarter.

Ronald J. Kramer, Chief Executive Officer, commented, “We are pleased with our performance this quarter which reflects the continued improvement in our businesses. We expect to deliver enhanced operating performance as the global economy recovers.”

Segment Operating Results

Telephonics

Second quarter revenue totaled $121.6 million, increasing 7% compared to the prior year quarter. The current and prior year quarters included $13.2 million and $13.6 million, respectively, of revenue related to electronic warfare programs where Telephonics serves as a contract manufacturer; excluding revenue from these programs, current quarter revenue increased 8% from the prior year quarter primarily due to work performed on Multi-mode Surveillance Radar Solutions contracts.

Second quarter segment adjusted EBITDA was $15.5 million, increasing 1% from the prior year quarter, mainly driven by lower expenditures associated with the timing of research and development (“R&D”) initiatives and proposal efforts, partially offset by the impact of program mix.

Contract backlog totaled a record $477 million at March 31, 2013 compared to $451 million and $434 million at September 30, 2012 and March 31, 2012, respectively, with approximately 71% expected to be filled within the next twelve months.

Plastic Products

Second quarter revenue totaled $141 million, decreasing 2% compared to the prior year quarter. The decrease reflected lower volume (5%), a portion of which was attributable to Plastics exiting certain low margin products, and the unfavorable impact of foreign exchange translation (2%), partially offset by favorable mix (3%) and the pass through of higher resin costs in customer selling prices (2%). Plastics adjusts selling prices, based on underlying resin costs, on a delayed basis.

Second quarter segment adjusted EBITDA was $12.4 million, increasing 35% from the prior year quarter, mainly driven by product mix and continued efficiency improvements, partially offset by a $0.5 million unfavorable impact of higher resin costs which had not yet been reflected in increased selling prices.

Home & Building Products

Second quarter revenue totaled $226 million, increasing 1% compared to the prior year quarter. Ames True Temper’s (“ATT”) revenue increased 2% over the prior year quarter. Clopay Building Products (“CBP”) revenue decreased 2%, mainly due to lower volume partially offset by the benefit of favorable mix.

Second quarter segment adjusted EBITDA was $17.6 million, increasing 11% compared to the prior year quarter, primarily due to favorable mix and improved manufacturing efficiencies at CBP as well as reduced warehouse and distribution costs, and other cost control initiatives at ATT.

Taxes

Griffon’s current quarter effective tax rate was a benefit of 65.7% on the pre-tax loss, compared to a tax rate of 57.4% in the prior year quarter. In both years, the effective rates reflect the impact of permanent differences not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations, all of which are material relative to the level of pretax result. The current quarter benefited $0.3 million primarily from the retroactively extended R&D credit signed into law January 2, 2013. There were no material discrete items in the prior year quarter.

Restructuring

In January 2013, ATT announced its intention to close certain manufacturing facilities, and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. The actions, to be completed by the end of fiscal 2014, will improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production currently performed by third party suppliers, and improve material flow and absorption of fixed costs. Management estimates that, upon completion, these actions will result in annual cash savings exceeding $10 million, based on current operating levels.

ATT anticipates incurring pre-tax restructuring and related exit costs approximating $8.0 million, comprised of cash charges of $4.0 million and non-cash, asset-related charges of $4.0 million. The cash charges will include $3.0 million for personnel-related costs and $1.0 million for facility exit costs. ATT expects $20 million in capital expenditures in connection with this initiative and, to date, has incurred $4.7 million and $6.3 million in restructuring costs and capital expenditures, respectively.

During the current quarter, BPC completed the consolidation of its Auburn, Washington facility into its Russia, Ohio facility.

During the current quarter, HBP recognized $4.6 million in restructuring costs related to one-time termination benefits and other personnel costs, facility costs and asset impairment charges related to the ATT and BPC plant consolidation initiatives.

In February 2013, Plastics announced a restructuring project, primarily in Europe, with plans to exit low margin business and eliminate approximately 80 positions, resulting in restructuring charges of $4.8 million in the current quarter, primarily for one-time termination benefits and other personnel costs.

Balance Sheet

On March 28, 2013, Griffon amended and increased the amount available under its five-year Revolving Credit Facility from $200 million to $225 million and extended its maturity to March 28, 2018. At March 31, 2013, there were approximately $23 million of outstanding standby letters of credit and no outstanding borrowings.

At March 31, 2013, the Company had cash and equivalents of $117 million, total debt outstanding of $698 million, net of discounts, and $202 million available for borrowing under its revolving credit facility.

Stock Repurchases

During the second quarter, the Company purchased 0.9 million shares of its common stock under an authorized stock repurchase plan, for $10.3 million. At March 31, 2013, the Company had a remaining authorization of $20.7 million. In addition to repurchases under the authorized program, 0.4 million shares, with a market value of $4.5 million, were withheld to settle employee taxes due upon the vesting of restricted stock.

Conference Call Information

The Company will hold a conference call today, May 7, 2013, at 4:30 PM ET.

The call can be accessed by dialing 1-888-437-9366 (U.S. participants) or 1-719-325-2250 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference.

A replay of the call will be available starting on May 7, 2013 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 9255210. The replay will be available through May 21, 2013.

Forward-looking Statements

“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income, earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; the Company’s ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Telephonics Corporation supplies products, including as a result of sequestration which is currently scheduled to take effect in March 2013; increases in the cost of raw materials such as resin and steel; changes in customer demand; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in the Company’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which could impact margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain Griffon’s operating companies; and possible terrorist threats and actions and their impact on the global economy. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Griffon Corporation

Griffon Corporation is a diversified management and holding company that conducts business through wholly owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three segments:

• Home & Building Products consists of two companies, Ames True Temper, Inc. (“ATT”) and Clopay Building Products Company, Inc. (“CBP”):
  
  
  • ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.
  • CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.
• Telephonics Corporation designs, develops and manufactures high-technology, integrated information, communication and sensor system solutions for use in military and commercial markets worldwide.
• Clopay Plastic Products Company, Inc. is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffoncorp.com.

Griffon evaluates performance and allocates resources based on each segment’s operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, and gains (losses) from pension settlement and debt extinguishment, as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment adjusted EBITDA to Income (loss) before taxes:

GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
(Unaudited)
			For the Three Months Ended March 31,								For the Six Months Ended March 31,
REVENUE			2013				2012				2013				2012
	Home & Building Products:
	ATT		$	136,237			$	133,321			$	213,546			$	232,061
	CBP			89,499				91,269				202,366				202,915
	Home & Building Products			225,736				224,590				415,912				434,976
	Telephonics			121,631				113,992				217,681				218,506
	Plastics			141,376				143,849				278,899				279,980
Total consolidated net sales			$	488,743			$	482,431			$	912,492			$	933,462
Segment adjusted EBITDA:
	Home & Building Products		$	17,555			$	15,853			$	34,794			$	33,603
	Telephonics			15,505				15,336				31,869				31,024
	Plastics			12,352				9,164				21,671				17,344
Total Segment adjusted EBITDA				45,412				40,353				88,334				81,971
Net interest expense				(12,909	)			(12,919	)			(25,988	)			(25,919	)
Segment depreciation and amortization				(17,572	)			(16,222	)			(34,828	)			(31,640	)
Unallocated amounts				(7,980	)			(6,453	)			(15,567	)			(12,787	)
Restructuring charges				(9,336	)			-				(10,444	)			(1,795	)
Acquisition costs				-				-				-				(178	)
Loss on pension settlement				-				-				(2,142	)			-
Income (loss) before taxes			$	(2,385	)		$	4,759			$	(635	)		$	9,652

The following is a reconciliation of each segment’s operating results to Segment adjusted EBITDA:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
BY REPORTABLE SEGMENT
(in thousands)
(Unaudited)
				Three months ended March 31,							Six Months Ended March 31,
				2013			2012				2013			2012
Home & Building Products
	Segment operating profit			$	3,835		$	8,096			$	11,106		$	17,930
		Depreciation and amortization			9,157			7,757				18,017			15,222
		Restructuring charges			4,563			-				5,671			273
		Acquisition costs			-			-				-			178
	Segment adjusted EBITDA				17,555			15,853				34,794			33,603
Telephonics
	Segment operating profit				13,753			13,543				28,398			26,056
		Depreciation and amortization			1,752			1,793				3,471			3,446
		Restructuring charges			-			-				-			1,522
	Segment adjusted EBITDA				15,505			15,336				31,869			31,024
Clopay Plastic Products
	Segment operating profit				916			2,492				3,558			4,372
		Depreciation and amortization			6,663			6,672				13,340			12,972
		Restructuring charges			4,773			-				4,773			-
	Segment adjusted EBITDA				12,352			9,164				21,671			17,344
All segments:
	Income from operations - as reported				10,102			16,649				24,445			34,495
		Unallocated amounts			7,980			6,453				15,567			12,787
		Other, net			422			1,029				908			1,076
		Loss on pension settlement			-			-				2,142			-
	Segment operating profit				18,504			24,131				43,062			48,358
		Depreciation and amortization			17,572			16,222				34,828			31,640
		Restructuring charges			9,336			-				10,444			1,795
		Acquisition costs			-			-				-			178
	Segment adjusted EBITDA			$	45,412		$	40,353			$	88,334		$	81,971
		Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(LOSS)
(in thousands, except per share data)
(Unaudited)
				Three Months Ended March 31,								Six Months Ended March 31,
				2013				2012				2013				2012
Revenue				$	488,743			$	482,431			$	912,492			$	933,462
Cost of goods and services					383,246				379,630				709,325				727,953
	Gross profit				105,497				102,801				203,167				205,509
Selling, general and administrative expenses					86,059				86,152				168,278				169,219
Restructuring and other related charges					9,336				-				10,444				1,795
	Total operating expenses				95,395				86,152				178,722				171,014
	Income from operations				10,102				16,649				24,445				34,495
Other income (expense)
	Interest expense				(13,060	)			(13,005	)			(26,167	)			(26,068	)
	Interest income				151				86				179				149
	Other, net				422				1,029				908				1,076
		Total other income (expense)			(12,487	)			(11,890	)			(25,080	)			(24,843	)
Income (loss) before taxes					(2,385	)			4,759				(635	)			9,652
Provision (benefit) for income taxes					(1,566	)			2,732				(374	)			5,139
Net income (loss)				$	(819	)		$	2,027			$	(261	)		$	4,513
Basic earnings (loss) per common share				$	(0.02	)		$	0.04			$	(0.00	)		$	0.08
Weighted-average shares outstanding					54,345				56,037				54,749				56,031
Diluted earnings (loss) per common share				$	(0.02	)		$	0.04			$	(0.00	)		$	0.08
Weighted-average shares outstanding					54,345				57,380				54,749				57,228
Net income (loss)				$	(819	)		$	2,027			$	(261	)		$	4,513
Other comprehensive income (loss), net of taxes:
	Foreign currency translation adjustments				(5,924	)			9,620				(2,921	)			5,048
	Pension amortization				489				523				4,349				1,040
	Gain on cash flow hedge				171				-				171				-
Total other comprehensive income (loss), net of taxes					(5,264	)			10,143				1,599				6,088
Comprehensive income (loss)				$	(6,083	)		$	12,170			$	1,338			$	10,601

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
				(Unaudited)
				At March 31, 2013				At September 30, 2012
CURRENT ASSETS
	Cash and equivalents			$	116,922			$	209,654
	Accounts receivable, net of allowances of $5,538 and $5,433				302,281				239,857
	Contract costs and recognized income not yet billed, net of progress payments of $3,199 and $3,748
					95,039				70,777
	Inventories, net				257,047				257,868
	Prepaid and other current assets				54,911				47,472
	Assets of discontinued operations				556				587
	Total Current Assets				826,756				826,215
PROPERTY, PLANT AND EQUIPMENT, net					350,832				356,879
GOODWILL					358,334				358,372
INTANGIBLE ASSETS, net					225,162				230,473
OTHER ASSETS					28,060				31,317
ASSETS OF DISCONTINUED OPERATIONS					2,665				2,936
	Total Assets			$	1,791,809			$	1,806,192
CURRENT LIABILITIES
	Notes payable and current portion of long-term debt			$	19,522			$	17,703
	Accounts payable				160,738				141,704
	Accrued liabilities				105,573				110,337
	Liabilities of discontinued operations				1,954				3,639
	Total Current Liabilities				287,787				273,383
LONG-TERM DEBT, net of debt discount of $14,962 and $16,607					678,773				681,907
OTHER LIABILITIES					184,344				193,107
LIABILITIES OF DISCONTINUED OPERATIONS					3,110				3,643
	Total Liabilities				1,154,014				1,152,040
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
	Total Shareholders' Equity				637,795				654,152
	Total Liabilities and Shareholders' Equity			$	1,791,809			$	1,806,192

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
					Six Months Ended March 31,
					2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)					$	(261	)		$	4,513
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization						35,038				31,836
Stock-based compensation						6,298				4,908
Fixed asset impairment charges - restructuring						3,122				-
Provision for losses on accounts receivable						440				611
Amortization/write-off of deferred financing costs and debt discounts						3,102				3,021
Deferred income taxes						(592	)			(807	)
(Gain) loss on sale/disposal of assets						(801	)			29
Change in assets and liabilities, net of assets and liabilities acquired:
	Increase in accounts receivable and contract costs and recognized income not yet billed
						(87,531	)			(14,648	)
	(Increase) decrease in inventories					90				(17,003	)
	Decrease in prepaid and other assets					411				905
	Increase (decrease) in accounts payable, accrued liabilities and income taxes payable
						7,080				(19,482	)
	Other changes, net					(379	)			3,909
	Net cash used in operating activities					(33,983	)			(2,208	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisition of property, plant and equipment					(30,995	)			(40,205	)
	Acquired business, net of cash acquired					-				(22,432	)
	Proceeds from sale of assets					1,216				195
	Net cash used in investing activities					(29,779	)			(62,442	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Dividends paid					(2,938	)			(2,374	)
	Purchase of shares for treasury					(22,109	)			(2,350	)
	Proceeds from issuance of long-term debt					303				4,000
	Payments of long-term debt					(5,400	)			(10,398	)
	Change in short-term borrowings					2,157				(3,331	)
	Financing costs					(759	)			(4	)
	Tax effect from exercise/vesting of equity awards, net					150				834
	Other, net					242				(29	)
	Net cash used in financing activities					(28,354	)			(13,652	)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
	Net cash used in operating activities					(478	)			(764	)
	Net cash used in discontinued operations					(478	)			(764	)
Effect of exchange rate changes on cash and equivalents						(138	)			916
NET DECREASE IN CASH AND EQUIVALENTS						(92,732	)			(78,150	)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD						209,654				243,029
CASH AND EQUIVALENTS AT END OF PERIOD					$	116,922			$	164,879

Griffon evaluates performance based on Earnings (loss) per share and Net income (loss) excluding restructuring charges, acquisition-related expenses, gains (losses) from pension settlement and debt extinguishment, and discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Earnings (loss) per share and Net income (loss) to Adjusted earnings per share and Adjusted net income:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) TO ADJUSTED INCOME
(in thousands, except per share data)
(Unaudited)
				For the Three Months Ended March 31,								For the Six Months Ended March 31,
				2013				2012				2013				2012
Net income (loss)				$	(819	)		$	2,027			$	(261	)		$	4,513
Adjusting items, net of tax:
	Restructuring and related				5,788				-				6,508				1,167
	Acquisition costs				-				-				-				116
	Loss on pension settlement				-				-				1,392				-
	Discrete tax benefits				(309	)			-				(364	)			-
Adjusted net income				$	4,660			$	2,027			$	7,275			$	5,796
Earnings (loss) per common share				$	(0.02	)		$	0.04			$	(0.00	)		$	0.08
Adjusting items, net of tax:
	Restructuring				0.10				-				0.11				0.02
	Acquisition costs				-				-				-				0.00
	Loss on pension settlement				-				-				0.02				-
	Discrete tax benefits				(0.01	)			-				(0.01	)			-
Adjusted earnings per share				$	0.08			$	0.04			$	0.13			$	0.10
Weighted-average shares outstanding on loss					54,345								54,749
Weighted-average shares outstanding on income					56,766				57,380				57,008				57,228

Source: Griffon Corporation

Griffon Corporation
Douglas J. Wetmore
Chief Financial Officer
212-957-5000
or
Investor Relations
ICR Inc.
Anthony Gerstein
Senior Vice President
646-277-1242