UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2014
GRIFFON CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 1-06620 11-1893410
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
712 Fifth Avenue, 18th Floor
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
(212) 957-5000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition.
On July 30, 2014 Griffon Corporation (the “Registrant”) issued a press release announcing the Registrant’s financial results for the fiscal third quarter ended June 30, 2014. A copy of the Registrant’s press release is attached hereto as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release, dated July 30, 2014
The information filed as an exhibit to this Form 8-K is being furnished in accordance with Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GRIFFON CORPORATION
By: /s/ Douglas J. Wetmore
Douglas J. Wetmore
Executive Vice President and
Chief Financial Officer
Date: July 30, 2014
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Exhibit Index
99.1 | Press release, dated July 30, 2014 |
Griffon Corporation Announces Third Quarter Results
NEW YORK, NEW YORK, July 30, 2014 – Griffon Corporation (“Griffon” or the “Company”) (NYSE: GFF) today reported results for the fiscal third quarter ended June 30, 2014.
Revenue totaled $505 million, decreasing 1% from the prior year quarter. Home & Building Products (“HBP”) and Clopay Plastics (“Plastics”) revenue increased 6% and 7%, respectively, over the prior year quarter, while Telephonics revenue decreased 21%.
Segment adjusted EBITDA totaled $49.6 million, an increase of 6% over the prior year quarter of $46.8 million. 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 income totaled $14.5 million, or $0.29 per share, compared to $3.6 million, or $0.06 per share, in the prior year quarter. Current quarter results included acquisition costs of $1.6 million ($1.0 million, net of tax or $0.02 per share), restructuring costs of $0.4 million ($0.2 million, net of tax or $0.00 per share), impact of debt extinguishment on full year effective tax rate of $(4.4) million or $(0.09) per share and discrete tax benefits of $1.9 million or $0.04 per share. The prior year quarter included restructuring costs of $1.6 million ($1.0 million, net of tax or $0.02 per share) and discrete tax benefits of $1.5 million or $0.03 per share. Excluding these items from both periods, current quarter adjusted net income was $9.5 million, or $0.19 per share, compared to $3.1 million, or $0.06 per share, in the prior year quarter.
Ronald J. Kramer, Chief Executive Officer, commented, “We are pleased that our efficiency efforts have enabled us to deliver strong earnings this quarter. We are confident that our strategy will result in further growth in both revenue and profitability as the global economic recovery accelerates."
Segment Operating Results
Home & Building Products
Revenue totaled $254 million, increasing 6% compared to the prior year quarter. The Ames Companies' (“Ames”) revenue increased 3% compared to the prior year quarter primarily due to the inclusion of operating results of Northcote and the Australian Garden and Tools division of Illinois Tool Works, Inc. ("Cyclone") from their respective acquisition dates in December 2013 and May 2014, partially offset by decreased North American lawn and hose reel sales due to cold and wet weather conditions. Clopay Building Products ("CBP") revenue increased 8%, primarily due to increased volume and favorable product mix.
Segment adjusted EBITDA was $19.6 million, decreasing 9% compared to the prior year quarter. The decrease was primarily from unfavorable sales mix and manufacturing inefficiencies along with increased distribution and freight costs at Ames and, for both Ames and CBP, the unfavorable impact of foreign currency
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translation of a weaker Canadian dollar, partially offset by the benefit of increased volume and favorable product mix at CBP. Ames continued to experience manufacturing inefficiencies in connection with its plant consolidation initiative, which are expected to continue until the initiative is complete. EBITDA contributions from Northcote and Cyclone were not significant in the quarter.
On May 21, 2014, Ames acquired Cyclone for approximately $40.0 million, including a $4 million working capital adjustment. Cyclone offers a full range of quality garden and hand tool products sold under various leading brand names including Cyclone®, Nylex® and Trojan®, designed to meet the requirements of both the Do-it-Yourself and professional trade segments. Cyclone is expected to generate approximately $65.0 million of annualized revenue. Selling, General and Administrative expenses in the current quarter included $1.6 million of acquisition costs.
Telephonics
Revenue totaled $102 million, decreasing 21% from the prior year quarter. The 2013 quarter included $20.0 million of electronic warfare program ("ICREW") revenue where Telephonics served as a contract manufacturer; there was no such revenue in the current quarter. Excluding revenue from these programs, current quarter revenue decreased 7% from the 2013 quarter, primarily due to reduced airborne and wireless intercommunication systems sales.
Segment adjusted EBITDA was $15.1 million, increasing 15% from the prior year quarter. The increase in comparison to the prior year was attributable to the benefit of favorable program mix, the effect of which more than offset the impact of the ICREW revenue decline, as well as lower expenditures associated with research and development ("R&D") activities and proposal efforts.
Contract backlog totaled $457 million at June 30, 2014 compared to $444 million at September 30, 2013, with approximately 67% expected to be fulfilled within the next twelve months.
Plastic Products
Revenue totaled $149 million, increasing 7% compared to the prior year quarter. The increase reflected the benefit of increased volume (5%), the pass through of increased resin costs in customer selling prices (3%) and favorable foreign exchange translation (1%), partially offset by the impact of unfavorable product mix (2%). Plastics adjusts selling prices based on underlying resin costs on a delayed basis.
Segment adjusted EBITDA was $14.9 million, increasing 23% from the prior year quarter, driven by increased volume and continued operating efficiency improvements. Resin had no material impact on EBITDA for the quarter.
Taxes
The Company reported pretax income for the current quarter and a pretax loss for the nine months ended June 30, 2014, compared to pretax income for the quarter and nine months ended June 30, 2013. The Company recognized tax benefits of 12.2% and 38.0% for the quarter and nine months ended June 30, 2014, respectively, compared to provisions of 54.0% and 53.6%, respectively, in the comparable prior year periods. The current and prior year tax 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, which are material relative to the level of pretax result and the impact of discrete items reported.
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The current quarter and nine months ended June 30, 2014 include $1.9 million and $1.5 million, respectively, of benefits from discrete items. The comparable prior year periods included benefits of $1.5 million and $1.9 million, respectively. In both years, the discrete items resulted primarily from the conclusion of tax audits resulting in the release of previously established reserves for uncertain tax positions, filing of tax returns in various jurisdictions, and the impact of tax law changes enacted, including, in 2013, the benefit of the retroactive extension of the federal R&D credit signed into law January 2, 2013.
Excluding discrete items, the effective tax rates for the quarter and nine months ended June 30, 2014 were a provision of 27.0% and benefit of 26.3%, respectively, compared to provisions of 73.1% and 79.4% in the comparable prior year periods, respectively.
Restructuring
In January 2013, Ames announced its intention to close certain manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. The intended actions, to be completed by the end of calendar 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.
Ames 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. Cash charges will include $2.5 million for personnel-related costs and $1.5 million for facility exit costs. Ames expects $20 million in capital expenditures in connection with this initiative and, to date, has incurred $7.9 million and $15.7 million in restructuring costs and capital expenditures, respectively.
In the third quarter of 2014 and 2013, HBP recognized $0.4 million and $0.9 million, respectively, in restructuring and other related exit costs; such charges primarily related to one-time termination benefits, facility and other personnel costs, and asset impairment charges related to the Ames plant consolidation initiatives. The 2013 period also included charges related to a CBP plant consolidation.
In February 2013, Plastics undertook a restructuring project, primarily in Europe, to exit low margin business and to eliminate approximately 80 positions, resulting in restructuring charges of $4.8 million, primarily related to one-time termination benefits and other personnel costs. The project was completed in 2013.
Balance Sheet and Capital Expenditures
At June 30, 2014, the Company had cash and equivalents of $87 million, total debt outstanding of $809 million, net of discounts, and $180 million available for borrowing under its revolving credit facility. Capital expenditures were $20.0 million in the current quarter.
Stock Repurchases
In the third quarter of 2014, Griffon purchased 750,000 shares of common stock under Board authorized programs, for a total of $8.8 million, or $11.71 per share. Since the resumption of share repurchases in 2011, through June 30, 2014, Griffon has repurchased 10.9 million shares of common stock, for a total of $115 million, or $10.60 per share, inclusive of the $50 million repurchase from an affiliate of Goldman Sachs in December 2013. At June 30, 2014, $45.7 million remained available for repurchases of common stock under Board authorized share purchase programs.
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Conference Call Information
The Company will hold a conference call today, July 30, 2014, at 4:30 PM ET.
The call can be accessed by dialing 1-888-708-5710 (U.S. participants) or 1-913-312-0402 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference.
A replay of the call will be available starting on July 30, 2014 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: 1158367. The replay will be available through August 13, 2014.
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 Griffon’s Telephonics Corporation supplies products, including as a result of sequestration at such time as the budgetary cuts mandated by sequestration begin to take effect; 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.
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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, The Ames Companies, Inc. (“Ames”) and Clopay Building Products Company, Inc. (“CBP”): |
• | Ames 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. |
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For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffoncorp.com.
Company Contact: Investor Relations Contact:
Douglas J. Wetmore Michael Callahan
EVP & Chief Financial Officer Senior Vice President
Griffon Corporation ICR Inc.
(212) 957-5000 (203) 682-8311
712 Fifth Avenue, 18th Floor
New York, NY 10019
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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 EBTIDA to Income (loss) before taxes:
GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
(Unaudited)
For the Three Months Ended June 30, | For the Nine Months Ended June 30, | ||||||||||||||
REVENUE | 2014 | 2013 | 2014 | 2013 | |||||||||||
Home & Building Products: | |||||||||||||||
Ames | $ | 132,179 | $ | 128,332 | $ | 389,492 | $ | 341,878 | |||||||
CBP | 121,814 | 112,285 | 334,494 | 314,651 | |||||||||||
Home & Building Products | 253,993 | 240,617 | 723,986 | 656,529 | |||||||||||
Telephonics | 102,446 | 129,997 | 302,656 | 347,678 | |||||||||||
Plastics | 148,600 | 139,212 | 439,542 | 418,111 | |||||||||||
Total consolidated net sales | $ | 505,039 | $ | 509,826 | $ | 1,466,184 | $ | 1,422,318 | |||||||
Segment adjusted EBITDA: | |||||||||||||||
Home & Building Products | $ | 19,596 | $ | 21,478 | $ | 55,787 | $ | 56,272 | |||||||
Telephonics | 15,087 | 13,146 | 40,018 | 45,015 | |||||||||||
Plastics | 14,922 | 12,161 | 43,881 | 33,832 | |||||||||||
Total Segment adjusted EBITDA | 49,605 | 46,785 | 139,686 | 135,119 | |||||||||||
Net interest expense | (11,541 | ) | (13,137 | ) | (37,003 | ) | (39,125 | ) | |||||||
Segment depreciation and amortization | (16,691 | ) | (17,639 | ) | (49,723 | ) | (52,467 | ) | |||||||
Unallocated amounts | (6,521 | ) | (6,573 | ) | (22,895 | ) | (22,140 | ) | |||||||
Loss from debt extinguishment, net | — | — | (38,890 | ) | — | ||||||||||
Restructuring charges | (358 | ) | (1,604 | ) | (1,892 | ) | (12,048 | ) | |||||||
Acquisition costs | (1,600 | ) | — | (2,398 | ) | — | |||||||||
Loss on pension settlement | — | — | — | (2,142 | ) | ||||||||||
Income (loss) before taxes | $ | 12,894 | $ | 7,832 | $ | (13,115 | ) | $ | 7,197 | ||||||
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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 June 30, | Nine Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Home & Building Products | |||||||||||||||
Segment operating profit | $ | 9,747 | $ | 11,549 | $ | 27,958 | $ | 22,655 | |||||||
Depreciation and amortization | 7,891 | 9,075 | 23,539 | 27,092 | |||||||||||
Restructuring charges | 358 | 854 | 1,892 | 6,525 | |||||||||||
Acquisition costs | 1,600 | — | 2,398 | — | |||||||||||
Segment adjusted EBITDA | 19,596 | 21,478 | 55,787 | 56,272 | |||||||||||
Telephonics | |||||||||||||||
Segment operating profit | 13,134 | 10,592 | 34,463 | 38,990 | |||||||||||
Depreciation and amortization | 1,953 | 1,804 | 5,555 | 5,275 | |||||||||||
Restructuring charges | — | 750 | — | 750 | |||||||||||
Segment adjusted EBITDA | 15,087 | 13,146 | 40,018 | 45,015 | |||||||||||
Clopay Plastic Products | |||||||||||||||
Segment operating profit | 8,075 | 5,401 | 23,252 | 8,959 | |||||||||||
Depreciation and amortization | 6,847 | 6,760 | 20,629 | 20,100 | |||||||||||
Restructuring charges | — | — | — | 4,773 | |||||||||||
Segment adjusted EBITDA | 14,922 | 12,161 | 43,881 | 33,832 | |||||||||||
All segments: | |||||||||||||||
Income from operations - as reported | 21,814 | 20,362 | 58,468 | 44,807 | |||||||||||
Unallocated amounts | 6,521 | 6,573 | 22,895 | 22,140 | |||||||||||
Other, net | 2,621 | 607 | 4,310 | 1,515 | |||||||||||
Loss on pension settlement | — | — | — | 2,142 | |||||||||||
Segment operating profit | 30,956 | 27,542 | 85,673 | 70,604 | |||||||||||
Depreciation and amortization | 16,691 | 17,639 | 49,723 | 52,467 | |||||||||||
Restructuring charges | 358 | 1,604 | 1,892 | 12,048 | |||||||||||
Acquisition costs | 1,600 | — | 2,398 | — | |||||||||||
Segment adjusted EBITDA | $ | 49,605 | $ | 46,785 | $ | 139,686 | $ | 135,119 | |||||||
Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.
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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenue | $ | 505,039 | $ | 509,826 | $ | 1,466,184 | $ | 1,422,318 | |||||||
Cost of goods and services | 386,732 | 401,515 | 1,132,387 | 1,110,840 | |||||||||||
Gross profit | 118,307 | 108,311 | 333,797 | 311,478 | |||||||||||
Selling, general and administrative expenses | 96,135 | 86,345 | 273,437 | 254,623 | |||||||||||
Restructuring and other related charges | 358 | 1,604 | 1,892 | 12,048 | |||||||||||
Total operating expenses | 96,493 | 87,949 | 275,329 | 266,671 | |||||||||||
Income from operations | 21,814 | 20,362 | 58,468 | 44,807 | |||||||||||
Other income (expense) | |||||||||||||||
Interest expense | (11,661 | ) | (13,279 | ) | (37,184 | ) | (39,446 | ) | |||||||
Interest income | 120 | 142 | 181 | 321 | |||||||||||
Loss from debt extinguishment, net | — | — | (38,890 | ) | — | ||||||||||
Other, net | 2,621 | 607 | 4,310 | 1,515 | |||||||||||
Total other expense, net | (8,920 | ) | (12,530 | ) | (71,583 | ) | (37,610 | ) | |||||||
Income (loss) before taxes | 12,894 | 7,832 | (13,115 | ) | 7,197 | ||||||||||
Provision (benefit) for income taxes | (1,570 | ) | 4,229 | (4,990 | ) | 3,855 | |||||||||
Net income (loss) | $ | 14,464 | $ | 3,603 | $ | (8,125 | ) | $ | 3,342 | ||||||
Basic income (loss) per common share | $ | 0.30 | $ | 0.07 | $ | (0.16 | ) | $ | 0.06 | ||||||
Weighted-average shares outstanding | 48,370 | 54,265 | 50,038 | 54,588 | |||||||||||
Diluted income (loss) per common share | $ | 0.29 | $ | 0.06 | $ | (0.16 | ) | $ | 0.06 | ||||||
Weighted-average shares outstanding | 49,836 | 56,204 | 50,038 | 56,735 | |||||||||||
Net income (loss) | $ | 14,464 | $ | 3,603 | $ | (8,125 | ) | $ | 3,342 | ||||||
Other comprehensive income (loss), net of taxes: | |||||||||||||||
Foreign currency translation adjustments | 2,809 | (7,884 | ) | 896 | (10,805 | ) | |||||||||
Pension and other post retirement plans | 317 | 490 | 1,732 | 4,839 | |||||||||||
Gain (loss) on cash flow hedge | — | (158 | ) | — | 13 | ||||||||||
Total other comprehensive income (loss), net of taxes | 3,126 | (7,552 | ) | 2,628 | (5,953 | ) | |||||||||
Comprehensive income (loss), net | $ | 17,590 | $ | (3,949 | ) | $ | (5,497 | ) | $ | (2,611 | ) | ||||
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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited) At June 30, 2014 | At September 30, 2013 | |||||||
CURRENT ASSETS | ||||||||
Cash and equivalents | $ | 87,437 | $ | 178,130 | ||||
Accounts receivable, net of allowances of $7,176 and $6,136 | 269,669 | 256,215 | ||||||
Contract costs and recognized income not yet billed, net of progress payments of $16,985 and $6,941 | 104,877 | 109,828 | ||||||
Inventories, net | 278,462 | 230,120 | ||||||
Prepaid and other current assets | 74,290 | 48,903 | ||||||
Assets of discontinued operations | 1,209 | 1,214 | ||||||
Total Current Assets | 815,944 | 824,410 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | 365,376 | 353,593 | ||||||
GOODWILL | 381,315 | 357,730 | ||||||
INTANGIBLE ASSETS, net | 235,092 | 221,391 | ||||||
OTHER ASSETS | 30,491 | 28,580 | ||||||
ASSETS OF DISCONTINUED OPERATIONS | 3,032 | 3,075 | ||||||
Total Assets | $ | 1,831,250 | $ | 1,788,779 | ||||
CURRENT LIABILITIES | ||||||||
Notes payable and current portion of long-term debt | $ | 11,886 | $ | 10,768 | ||||
Accounts payable | 181,052 | 163,610 | ||||||
Accrued liabilities | 103,721 | 106,743 | ||||||
Liabilities of discontinued operations | 2,959 | 3,288 | ||||||
Total Current Liabilities | 299,618 | 284,409 | ||||||
LONG-TERM DEBT, net of debt discount of $10,532 and $13,246 | 797,180 | 678,487 | ||||||
OTHER LIABILITIES | 162,103 | 170,675 | ||||||
LIABILITIES OF DISCONTINUED OPERATIONS | 4,008 | 4,744 | ||||||
Total Liabilities | 1,262,909 | 1,138,315 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Total Shareholders’ Equity | 568,341 | 650,464 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 1,831,250 | $ | 1,788,779 | ||||
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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended June 30, | ||||||||
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (8,125 | ) | $ | 3,342 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 50,027 | 52,787 | ||||||
Stock-based compensation | 8,133 | 9,327 | ||||||
Asset impairment charges - restructuring | 191 | 3,122 | ||||||
Provision for losses on accounts receivable | 420 | 824 | ||||||
Amortization of deferred financing costs and debt discounts | 4,789 | 4,651 | ||||||
Loss from debt extinguishment, net | 38,890 | — | ||||||
Deferred income taxes | (314 | ) | (897 | ) | ||||
(Gain) loss on sale/disposal of assets | 78 | (788 | ) | |||||
Change in assets and liabilities, net of assets and liabilities acquired: | ||||||||
(Increase) decrease in accounts receivable and contract costs and recognized income not yet billed | 7,443 | (81,381 | ) | |||||
(Increase) decrease in inventories | (33,195 | ) | 36,588 | |||||
(Increase) decrease in prepaid and other assets | (3,439 | ) | 2,890 | |||||
Decrease in accounts payable, accrued liabilities and income taxes payable | (15,754 | ) | (28,767 | ) | ||||
Other changes, net | 712 | 856 | ||||||
Net cash provided by operating activities | 49,856 | 2,554 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Acquisition of property, plant and equipment | (54,859 | ) | (45,886 | ) | ||||
Acquired businesses, net of cash acquired | (62,306 | ) | — | |||||
Proceeds from sale of assets | 491 | 1,326 | ||||||
Investment purchases | (8,402 | ) | — | |||||
Net cash used in investing activities | (125,076 | ) | (44,560 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of common stock | 584 | — | ||||||
Dividends paid | (4,841 | ) | (4,384 | ) | ||||
Purchase of shares for treasury | (72,518 | ) | (25,689 | ) | ||||
Proceeds from long-term debt | 682,913 | 303 | ||||||
Payments of long-term debt | (602,134 | ) | (12,842 | ) | ||||
Change in short-term borrowings | 3,138 | 2,408 | ||||||
Financing costs | (10,928 | ) | (759 | ) | ||||
Purchase of ESOP shares | (10,000 | ) | — | |||||
Tax benefit from exercise/vesting of equity awards, net | 273 | 150 | ||||||
Other, net | 194 | 261 | ||||||
Net cash used in financing activities | (13,319 | ) | (40,552 | ) | ||||
CASH FLOWS FROM DISCONTINUED OPERATIONS: | ||||||||
Net cash used in operating activities | (1,018 | ) | (486 | ) | ||||
Net cash used in discontinued operations | (1,018 | ) | (486 | ) | ||||
Effect of exchange rate changes on cash and equivalents | (1,136 | ) | (506 | ) | ||||
NET DECREASE IN CASH AND EQUIVALENTS | (90,693 | ) | (83,550 | ) | ||||
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD | 178,130 | 209,654 | ||||||
CASH AND EQUIVALENTS AT END OF PERIOD | $ | 87,437 | $ | 126,104 | ||||
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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 Net income (loss) to adjusted net income and earnings (loss) per share to Adjusted earnings per share:
GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME
(in thousands, except per share data)
(Unaudited)
For the Three Months Ended June 30, | For the Nine Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income (loss) | $ | 14,464 | $ | 3,603 | $ | (8,125 | ) | $ | 3,342 | ||||||
Adjusting items, net of tax: | |||||||||||||||
Loss from debt extinguishment, net | — | — | 24,964 | — | |||||||||||
Restructuring charges | 222 | 994 | 1,173 | 7,502 | |||||||||||
Acquisition costs | 992 | — | 1,487 | — | |||||||||||
Loss on pension settlement | — | — | — | 1,392 | |||||||||||
Extinguishment impact on period tax rate (a) | (4,357 | ) | — | 1,491 | — | ||||||||||
Discrete tax benefits | (1,860 | ) | (1,495 | ) | (1,540 | ) | (1,859 | ) | |||||||
Adjusted net income | $ | 9,461 | $ | 3,102 | $ | 19,450 | $ | 10,377 | |||||||
Diluted income (loss) per common share | $ | 0.29 | $ | 0.06 | (0.16 | ) | $ | 0.06 | |||||||
Adjusting items, net of tax: | |||||||||||||||
Loss from debt extinguishment, net | — | — | 0.50 | — | |||||||||||
Restructuring charges | — | 0.02 | 0.02 | 0.13 | |||||||||||
Acquisition costs | 0.02 | — | 0.03 | — | |||||||||||
Loss on pension settlement | — | — | — | 0.02 | |||||||||||
Extinguishment impact on period tax rate (a) | (0.09 | ) | — | 0.03 | — | ||||||||||
Discrete tax benefits | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | |||||||
Adjusted earnings per common share | $ | 0.19 | $ | 0.06 | 0.39 | $ | 0.18 | ||||||||
Weighted-average shares outstanding (in thousands) | 49,836 | 56,204 | 50,038 | 56,735 | |||||||||||
a) Prior to refinancing the debt and resultant loss on debt extinguishment, the Company anticipated its full year 2014 effective tax rate to approximate 40%. As a result of the loss from debt extinguishment, the Company anticipates it will now incur a pretax loss for the full year 2014, and recognize a corresponding tax benefit at an effective rate approximating 23.1%. In the current quarter, the impact of debt extinguishment on the full year effective tax rate was estimated to be a benefit of $4,357 or $0.09 per share, and for the nine months ending June 30, 2014 a provision of $1,491 or $0.03 per share.
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