Document


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): November 16, 2017

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))

1



Item 2.02.    Results of Operations and Financial Condition.

On November 16, 2017 Griffon Corporation (the “Registrant”) issued a press release announcing the Registrant’s financial results for the fiscal fourth quarter and year ended September 30, 2017. 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 November 16, 2017

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.































2



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/ Brian G. Harris
    Brian G. Harris
Senior Vice President and
Chief Financial Officer    


Date: November 16, 2017


3



Exhibit Index


99.1
Press release, dated November 16, 2017


Exhibit
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11897890&doc=3
 
                         
Griffon Corporation Announces Fourth Quarter and Annual Results

NEW YORK, NEW YORK, November 16, 2017 – Griffon Corporation (“Griffon” or the “Company”) (NYSE:GFF) today reported results for the fourth quarter and fiscal year ended September 30, 2017.     

Earlier today, Griffon announced it entered into a definitive agreement to sell Clopay Plastic Products Company, Inc. ("PPC") to Berry Global Group, Inc. (NYSE:BERY) for $475 million in cash. The transaction is subject to regulatory approval and customary closing conditions, and is expected to close in the first calendar quarter of 2018. Griffon has classified PPC as a discontinued operations and accordingly our continuing operations results include Home and Building Products ("HBP") and Telephonics Corporation ("Telephonics").

On October 2, 2017, Griffon completed the acquisition of ClosetMaid, a market leader of home storage and organization products, for approximately $200 million, or $175 million inclusive of the net present value of tax benefits. ClosetMaid adds to Griffon's HBP segment, complementing and diversifying our portfolio of leading consumer brands and products. ClosetMaid is expected to generate approximately $300 million in revenue in the first twelve months after the acquisition.

Ronald J. Kramer, Chief Executive Officer, commented “2017 has been a transformational year for Griffon. We have significantly grown our HBP segment through the acquisitions of ClosetMaid, Hills, La Hacienda, Tuscan Path and Harper and will unlock value and strengthen our capital position through the divestiture of Clopay Plastics. These strategic initiatives will build on our proven track record of increasing operating margins and improving our financial performance. We are poised to enhance our free cash flow and continue to deliver superior shareholder returns through organic growth and further acquisitions. I am very excited about Griffon's future."

Fourth quarter revenue from continuing operations of $431 million increased 15% compared to the prior year quarter revenue of $374 million. HBP and Telephonics revenue increased 17% and 11%, respectively. Inclusive of PPC, fourth quarter revenue of $550 million increased 10% compared to the prior year quarter of $501 million.

Fourth quarter net loss totaled $12.0 million, or $0.29 per share, compared to net income of $5.5 million, or $0.13 per share, in the prior year quarter. Current quarter results included acquisition costs of $9.6 million ($6.1 million net of tax, or $0.14 per share), Telephonics contract settlement charge of $5.1 million ($3.3 million, net of tax, or $0.08 per share), environmental and warranty reserves totaling $5.7 million ($3.7 million, net of tax, or $0.09 per share) and discrete and certain other tax provisions of $14.5 million or $0.34 per share. The prior year quarter included discrete tax provisions, net of $6.0 million, or $0.14 per share. Excluding these items from both periods, current quarter adjusted net income was $15.7 million, or $0.36 per share increasing 36% from $11.5 million, or $0.27 per share, in the prior year quarter. Income from continuing operations was $4.3 million, or $0.10 per share, compared to $4.1 million, or $0.10 per share, in the prior year quarter. Adjusted income from continuing operations was $12.0 million, or $0.28 per share compared to $6.4 million, or $0.15 per share in the prior year quarter.


1


Fourth quarter Segment adjusted EBITDA from continuing operations totaled $54 million, increasing 13% from the prior year quarter of $47 million. Inclusive of PPC, Segment adjusted EBITDA totaled $67 million, increasing 11% from the prior year quarter of $60 million. Segment adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”, a non-GAAP measure).

For the full year 2017, revenue from continuing operations totaled $1,525 million, increasing 3% from the prior year. HBP increased 7% and Telephonics decreased 6%, all in comparison to the prior year. Revenue inclusive of PPC totaled $1,986 million increasing 1.5% from the prior year.

For the full year 2017, net income totaled $14.9 million, or $0.35 per share, compared to $30.0 million million, or $0.68 per share, in the prior year. Current year results included acquisition costs of $9.6 million ($6.1 million net of tax, or $0.14 per share), Telephonics contract settlement charges of $5.1 million ($3.3 million, net of tax, or $0.08 per share), environmental and warranty reserves totaling $5.7 million ($3.7 million, net of tax, or $0.09 per share) and discrete and certain other tax provisions of $9.4 million or $0.22 per share. The prior year included restructuring costs of $5.9 million ($4.2 million net of tax, or $0.10 per share) and discrete and certain other tax provisions $2.7 million or $0.06 per share. Excluding these items, current year adjusted net income was $37.4 million, or $0.87 per share, compared to $36.9 million, or $0.84 per share, in the prior year. Income from continuing operations was $17.8 million or $0.41 per share compared to $19.8 million or $0.45 per share in the prior year. Adjusted income from continuing operations was $19.0 million or $0.44 per share compared to $18.9 million or $0.43 per share in the prior year.

For the full year 2017, Segment adjusted EBITDA, inclusive of PPC, totaled $225 million, increasing 3% compared to $218 million in the prior year. Segment adjusted EBITDA from continuing operations totaled $173 million, increasing 3% from the prior year of $168 million.

Segment Operating Results
Home & Building Products
Revenue in the current quarter totaling $287 million increased 17% from the prior year quarter. The AMES Companies, Inc. (“AMES”) revenue increased 17% compared to the prior year quarter, due to increased U.S. garden tool and wheelbarrow sales, improved Canadian snow tool sales, UK market expansion and contribution from the La Hacienda and Hills acquisitions. Clopay Building Products Company, Inc. ("CBP") revenue increased 17%, due to increased volume, pricing, and favorable mix.

Fourth quarter Segment adjusted EBITDA was $34 million, increasing 28% from the prior year quarter due to the benefit of increased sales and favorable product mix, partially offset by increased steel and resin costs.

Revenue in 2017 totaled $1,113 million, increasing 7% from the prior year. AMES revenue increased 6%, primarily due to increased UK market expansion and contributions from the La Hacienda and Hills acquisitions, and increased Canadian snow and lawn tools sales. CBP revenue increased 8% from the prior year period, primarily due to increased volume, pricing and favorable mix.

Segment adjusted EBITDA for 2017 was $127 million, increasing 10% compared to the prior year. The increase was primarily due to the benefit from increased revenue and favorable product mix, partially offset by increased steel and resin costs.


2


On November 6, 2017, AMES acquired Harper Brush Works (“Harper”), a division of Horizon Global, for approximately $5 million. Harper is a leading U.S. manufacturer of cleaning products for professional, home, and industrial use. The acquisition will broaden AMES’ long-handle tool offering in North America to include brooms, brushes, and other cleaning tools and accessories. The acquisition is expected to contribute approximately $10 million in revenue in the first twelve months after the acquisition.

On September 29, 2017, AMES Australia completed the acquisition of Tuscan Landscape Group Pty, Ltd. ("Tuscan Path"), a leading Australian provider of pots, planters, pavers, decorative stone, and garden decor products, for approximately $18 million (AUD 22 million). The acquisition of Tuscan Path broadens AMES' outdoor living and lawn and garden business, and will strengthen AMES' industry leading position in Australia. Tuscan Path is expected to generate approximately AUD 25 million of revenue in the first twelve months after the acquisition.

On July 31, 2017, The AMES Companies, Inc. acquired La Hacienda Limited ("La Hacienda"), a leading United Kingdom outdoor living brand of unique heating and garden decor products, for approximately $11 million (GBP 9 million). The acquisition of La Hacienda broadens AMES' global outdoor living and lawn and garden business and supports AMES' UK expansion strategy. La Hacienda is expected to generate approximately GBP 14 million of revenue in the first twelve months after the acquisition.
Telephonics
Revenue in the current quarter totaled $144 million, increasing 11% from the prior year quarter, primarily due to increased revenue from multi-mode radar ("MMR") and dismounted electronic countermeasure systems.

Fourth quarter Segment adjusted EBITDA was $19 million, decreasing 6% from the prior year quarter, primarily driven by program mix.

Revenue in 2017 totaled $412 million, decreasing 6% compared to the prior year due to decreased multi-mode radar revenue and certain ground surveillance systems, partially offset by favorable performance on electronic countermeasure systems revenue.

Segment adjusted EBITDA for 2017 was $46 million, compared to $53 million in the prior year primarily due to the decrease in revenue, program mix and the impact of revised estimates to complete remaining performance obligations on certain radar and communication programs.

Contract backlog totaled $351 million at September 30, 2017, compared to $420 million at September 30, 2016, with approximately 70% expected to be fulfilled within the next twelve months. The decrease in backlog reflects the timing of various U.S. and international contract awards associated with radar and surveillance opportunities.

Plastic Products
Revenue in the current quarter totaled $119 million, decreasing 6% compared to the prior year quarter, primarily due to reduced volume across all regions of 10%, partially offset by favorable mix of 1%, resin pricing of $1.9 million or 2%, and foreign currency of 1%. PPC adjusts selling prices based on underlying resin costs on a delayed basis.

Segment adjusted EBITDA was $13 million, increasing 1% from the prior year quarter due to improved operations and resin pricing of $1.2 million, being partially offset by reduce volume and unfavorable mix.


3


Revenue in 2017 totaled $461 million, decreasing 4% compared to the prior year, primarily due to unfavorable volume of 4% driven by Europe, partially offset by increased volume in North America and Brazil, as well as unfavorable mix of 2%. These decreases were partially offset by a favorable resin impact of $3,600, or 1% and favorable foreign currency of 1%. PPC adjusts selling prices based on underlying resin costs on a delayed basis.

Segment adjusted EBITDA for 2017 was $53 million, increasing 5% from the prior year primarily due to improved operations, partially offset by reduced volume, unfavorable mix and a resin impact of $2.1 million or 4%.

Taxes
The Company reported pretax income from continuing operations for the years ended September 30, 2017 and 2016 and recognized a tax (benefit) provision of (6.5)% and 38.6%, respectively. The 2017 and 2016 tax rates included $8.3 million and $0.9 million, respectively, of net discrete tax benefits and certain other items. Excluding these tax items and other items that affect comparability, the effective tax rates for the years ended September 30, 2017 and 2016 were 39.8% and 41.3%, respectively.

The tax provisions on all pre-tax income inclusive of discontinued operations for the years ended September 30, 2017 and 2016 resulted in tax rates of 61.7% and 43.6%, respectively. These 2017 and 2016 tax rates included $9.4 million and $2.7 million, respectively, of net discrete tax provisions and certain other tax items. Excluding these tax items and other items that affect comparability, the effective tax rates for the year ended September 30, 2017 and 2016 were 37.0% and 37.5%, respectively.

Balance Sheet and Capital Expenditures
At September 30, 2017, the Company had cash and equivalents of $48 million, total debt outstanding of $979 million, net of discounts and deferred costs, and $192 million available for borrowing under its revolving credit facility. Capital expenditures inclusive of PPC, net of equipment sales, in 2017 were $80 million; capital expenditures from continuing operations were $35 million.

Share Repurchases
In each of July 2015 and August 2016, Griffon's Board of Directors authorized the repurchase of up to $50 million of Griffon's outstanding common stock. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During 2017, Griffon purchased an aggregate of 129,000 shares of common stock for a total of $2.2 million or $17.06 per share. At September 30, 2017, $49.4 million in the aggregate remains under the July 2015 and August 2016 Board authorized repurchase programs.

Since August 2011 through September 30, 2017, Griffon repurchased 20,429,298 shares of its common stock, for a total of $262 million or $12.81 per share.

Conference Call Information
The Company will hold a conference call today, November 16, 2017, at 8:30 AM ET.

The call can be accessed by dialing 1-800-239-9838 (U.S. participants) or 1-323-794-2551 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 3213047.


4


A replay of the call will be available starting on Thursday, November 16, 2017 at 11:30 AM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 3213047. The replay will be available through Thursday, November 30, 2017 at 11:59 PM ET.

Forward-looking Statements
“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which 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; Griffon'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 defense budget cuts or other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost of raw materials such as resin, wood and steel; changes in customer demand or loss of a material customer at one of Griffon's operating companies; 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 Griffon’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 and environmental matters; 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 of 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. Griffon 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.


5


Griffon currently conducts its operations through two reportable segments:

Home & Building Products consists of three companies, The AMES Companies, Inc. ("AMES"), Clopay Building Products Company, Inc. ("CBP") and ClosetMaid LLC ("ClosetMaid"):

AMES, founded in 1774, is the leading U.S. manufacturer and a global provider of long-handled tools and landscaping products for homeowners and professionals.

CBP, since 1964, is a leading manufacturer and marketer of residential and commercial garage doors and sells to professional dealers and some of the largest home center retail chains in North America.

ClosetMaid, founded in 1965, is a leading North American manufacturer and marketer of closet organization, home storage, and garage storage products and sells to some of the largest home center retail chains, mass merchandisers, and direct-to-guilder professional installers.

Telephonics, founded in 1933, is recognized globally as a leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.
Classified as a discontinued operation, Clopay Plastic Products Company, Inc., incorporated in 1934, is a global leader in the development and production of embossed, laminated and printed specialty plastic films for hygienic, health-care and industrial products and sells to some of the world's largest consumer products companies.


6


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

Company Contact:            Investor Relations Contact:        
Brian G. Harris                Michael Callahan            
SVP & Chief Financial Officer        Senior Vice President
Griffon Corporation            ICR Inc.    
(212) 957-5000                (203) 682-8311




7


Griffon evaluates performance and allocates resources based on each segment's operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”, a non-GAAP measure). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
 
(Unaudited)
For the Three Months Ended September 30,
 
For the Twelve Months Ended September 30,
REVENUE
2017
 
2016
 
2017
 
2016
Home & Building Products:
 

 
 

 
 

 
 

AMES
$
125,506

 
$
107,638

 
$
545,269

 
$
513,973

CBP
161,564

 
137,713

 
568,001

 
527,370

Home & Building Products
287,070

 
245,351

 
1,113,270

 
1,041,343

Telephonics
143,729

 
129,014

 
411,727

 
435,692

Plastics
118,928

 
126,340

 
460,914

 
480,126

Total
549,727

 
500,705

 
1,985,911

 
1,957,161

Less: Plastics
(118,928
)
 
(126,340
)
 
(460,914
)
 
(480,126
)
Total revenue
$
430,799

 
$
374,365

 
$
1,524,997

 
$
1,477,035

 
 
 
 
 
 
 
 
Home & Building Products
$
34,260

 
$
26,700

 
$
126,766

 
$
114,949

Telephonics
19,253

 
20,472

 
45,931

 
53,385

Plastics
13,108

 
12,925

 
52,760

 
50,079

Total Segment adjusted EBITDA
66,621

 
60,097

 
225,457

 
218,413

Less: EBITDA from discontinued operations
13,108

 
12,925

 
52,760

 
50,079

Total Segment adjusted EBITDA from continuing operations
53,513

 
47,172

 
172,697

 
168,334

Net interest expense
(12,793
)
 
(13,339
)
 
(51,449
)
 
(49,877
)
Segment depreciation and amortization
(11,396
)
 
(12,018
)
 
(47,398
)
 
(45,851
)
Unallocated amounts
(11,019
)
 
(10,358
)
 
(42,398
)
 
(40,393
)
Acquisition costs
(9,617
)
 

 
(9,617
)
 

Contract settlement charges
(5,137
)
 

 
(5,137
)
 

Income before taxes from continuing operations
$
3,551

 
$
11,457

 
$
16,698

 
$
32,213



8


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)
For the Three Months Ended September 30,
 
For the Twelve Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Home & Building Products
 
 
 
 
 
 
 
Segment operating profit
$
24,834

 
$
17,512

 
$
89,495

 
$
79,682

Depreciation and amortization
8,702

 
9,188

 
36,547

 
35,267

Acquisition costs
724

 

 
724

 

Segment adjusted EBITDA
34,260

 
26,700

 
126,766

 
114,949

 
 
 
 
 
 
 
 
Telephonics
 
 
 
 
 
 
 
Segment operating profit
11,422

 
17,642

 
29,943

 
42,801

Depreciation and amortization
2,694

 
2,830

 
10,851

 
10,584

Contract settlement charges
5,137

 

 
5,137

 

Segment adjusted EBITDA
19,253

 
20,472

 
45,931

 
53,385

 
 
 
 
 
 
 
 
Clopay Plastic Products
 
 
 
 
 
 
 
Segment operating profit
5,663

 
6,744

 
25,291

 
20,313

Depreciation and amortization
7,445

 
6,181

 
27,469

 
23,866

Restructuring charges

 

 

 
5,900

Segment adjusted EBITDA
13,108

 
12,925

 
52,760

 
50,079

 
 
 
 
 
 
 
 
All segments including Clopay Plastic Products:
 
 
 
 
 
 
 
Income from operations - as reported
16,645

 
31,553

 
91,308

 
103,507

Unallocated amounts
24,919

 
9,889

 
54,243

 
38,521

Other, net
354

 
456

 
(822
)
 
768

Segment operating profit
41,918

 
41,898

 
144,729

 
142,796

Depreciation and amortization
18,842

 
18,199

 
74,867

 
69,717

Acquisition costs
724

 

 
724

 

Contract settlement charges
5,137

 

 
5,137

 

Restructuring charges

 

 

 
5,900

Segment adjusted EBITDA
$
66,621

 
$
60,097

 
$
225,457

 
$
218,413

 
 
 
 
 
 
 
 













9



GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
FROM CONTINUING OPERATIONS
(in thousands)

 
(Unaudited)
For the Three Months Ended September 30,
 
For the Twelve Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
All segments excluding Clopay Plastic Products:
 
 
 
 
 
 
 
Income from continuing operations - as reported
16,803

 
24,372

 
69,027

 
82,340

Unallocated amounts
11,019

 
10,358

 
42,398

 
40,393

Other, net
(459
)
 
424

 
(880
)
 
(250
)
Corporate acquisition costs
8,893

 

 
8,893

 

Segment operating profit from continuing operations
36,256

 
35,154

 
119,438

 
122,483

Depreciation and amortization
11,396

 
12,018

 
47,398

 
45,851

Acquisition costs
724

 
 
 
724

 
 
Contract settlement charges
5,137

 

 
5,137

 

Segment adjusted EBITDA from continuing operations
$
53,513

 
$
47,172

 
$
172,697

 
$
168,334


Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.


10


GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)

 
(Unaudited)
Three Months Ended September 30,
 
Years Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
430,799

 
$
374,365

 
$
1,524,997

 
$
1,477,035

Cost of goods and services
316,279

 
270,054

 
1,116,881

 
1,076,342

Gross profit
114,520

 
104,311

 
408,116

 
400,693

Selling, general and administrative expenses
97,717

 
79,938

 
339,089

 
318,353

Income from continuing operations
16,803

 
24,373

 
69,027

 
82,340

Other income (expense)
 
 
 
 
 

 
 

Interest expense
(12,819
)
 
(13,348
)
 
(51,513
)
 
(49,943
)
Interest income
26

 
8

 
64

 
66

Other, net
(459
)
 
424

 
(880
)
 
(250
)
Total other income (expense)
(13,252
)
 
(12,916
)
 
(52,329
)
 
(50,127
)
Income before taxes from continuing operations
3,551

 
11,457

 
16,698

 
32,213

Provision (benefit) for income taxes
(786
)
 
7,359

 
(1,085
)
 
12,432

Income from continuing operations
$
4,337

 
$
4,098

 
$
17,783

 
$
19,781

Discontinued operations:
 
 
 
 
 

 
 

Income from operations of discontinued businesses
637

 
6,761

 
22,276

 
20,952

Provision from income taxes
16,924

 
5,328

 
25,147

 
10,723

Income (loss) from discontinued operations
(16,287
)
 
1,433

 
(2,871
)
 
10,229

Net income (loss)
$
(11,950
)
 
$
5,531

 
$
14,912

 
$
30,010

 
 
 
 
 
 
 
 
Income from continuing operations
$
0.10

 
$
0.10

 
$
0.43

 
$
0.48

Income from discontinued operations
(0.39
)
 
0.04

 
(0.07
)
 
0.25

Basic earnings per common share
$
(0.29
)
 
$
0.14

 
$
0.36

 
$
0.73

 
 
 
 
 
 
 
 
Weighted-average shares outstanding
41,726

 
40,343

 
41,005

 
41,074

 
 
 
 
 
 
 
 
Income from continuing operations
$
0.10

 
$
0.10

 
$
0.41

 
$
0.45

Income from discontinued operations
(0.39
)
 
0.03

 
(0.07
)
 
0.23

Diluted earnings per common share
$
(0.29
)
 
$
0.13

 
$
0.35

 
$
0.68

 
 
 
 
 
 
 
 
Weighted-average shares outstanding
41,726

 
42,784

 
43,011

 
44,109

 
 
 
 
 
 
 
 
Net income (loss)
$
(11,950
)
 
$
5,531

 
$
14,912

 
$
30,010

Other comprehensive income (loss), net of taxes:
 

 
 

 
 

 
 

Foreign currency translation adjustments
9,323

 
6,154

 
10,667

 
17,284

Pension and other post-retirement plans
7,941

 
(6,809
)
 
9,573

 
(5,651
)
Gain (loss) on cash flow hedge
89

 
(309
)
 
890

 
(1,686
)
Total other comprehensive income (loss), net of taxes
17,353

 
(964
)
 
21,130

 
9,947

Comprehensive income (loss), net
$
5,403

 
$
4,567

 
$
36,042

 
$
39,957



11


GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
At September 30, 2017
 
At September 30, 2016
CURRENT ASSETS
 

 
 

Cash and equivalents
$
47,681

 
$
72,553

Accounts receivable, net of allowances of $5,966 and $4,692
208,229

 
184,339

Contract costs and recognized income not yet billed, net of progress payments of $4,407 and $8,001
131,662

 
126,961

Inventories, net
299,437

 
261,317

Prepaid and other current assets
40,067

 
23,429

Assets of discontinued operations held for sale
370,724

 
112,139

Assets of discontinued operations not held for sale
329

 
219

Total Current Assets
1,098,129

 
780,957

PROPERTY, PLANT AND EQUIPMENT, net
232,135

 
236,905

GOODWILL
319,139

 
306,163

INTANGIBLE ASSETS, net
205,127

 
197,949

OTHER ASSETS
16,051

 
7,569

ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE

 
250,585

ASSETS OF DISCONTINUED OPERATIONS NOT HELD FOR SALE
2,960

 
1,968

Total Assets
$
1,873,541

 
$
1,782,096

CURRENT LIABILITIES
 

 
 

Notes payable and current portion of long-term debt
$
11,078

 
$
13,932

Accounts payable
183,951

 
148,130

Accrued liabilities
83,258

 
84,059

Liabilities of discontinued operations held for sale
84,450

 
70,458

Liabilities of discontinued operations not held for sale
8,342

 
1,684

Total Current Liabilities
371,079

 
318,263

LONG-TERM DEBT, net
968,080

 
896,946

OTHER LIABILITIES
132,537

 
123,163

LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR SALE

 
31,071

LIABILITIES OF DISCONTINUED OPERATIONS NOT HELD FOR SALE
3,037

 
1,706

Total Liabilities
1,474,733

 
1,371,149

COMMITMENTS AND CONTINGENCIES
 
 
 
SHAREHOLDERS’ EQUITY
 

 
 

Preferred stock, par value $0.25 per share, authorized 3,000 shares, no shares issued

 

Common stock, par value $0.25 per share, authorized 85,000 shares, issued 80,663 shares and 79,966 shares
20,166

 
19,992

Capital in excess of par value
487,077

 
529,980

Retained earnings
480,347

 
475,760

Treasury shares, at cost, 33,557 common shares and 34,797 common shares
(489,225
)
 
(501,866
)
Accumulated other comprehensive loss
(60,481
)
 
(81,241
)
Deferred compensation
(39,076
)
 
(31,678
)
Total Shareholders’ Equity
398,808

 
410,947

Total Liabilities and Shareholders’ Equity
$
1,873,541

 
$
1,782,096


12

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


 
Years Ended September 30,
 
2017
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:
 

 
 

 
 

Net income
$
14,912

 
$
30,010

 
$
34,289

Net (income) from discontinued operations
2,871

 
(10,229
)
 
(21,995
)
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 

 
 

 
 

Depreciation and amortization
47,878

 
46,342

 
45,834

Stock-based compensation
8,090

 
10,136

 
11,110

Provision for losses on accounts receivable
271

 
351

 
60

Amortization of deferred financing costs and debt discounts
4,511

 
7,321

 
6,982

Deferred income tax
2,341

 
6,044

 
3,674

Gain on sale/disposal of assets and investments
(126
)
 
(319
)
 
(338
)
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
(19,131
)
 
(35,933
)
 
22,375

(Increase) decrease in inventories
(29,299
)
 
16,103

 
(41,604
)
(Increase) decrease in prepaid and other assets
(4,781
)
 
1,462

 
(2,019
)
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable
17,541

 
4,829

 
(27,071
)
Other changes, net
4,073

 
4,001

 
559

Net cash provided by operating activities - continuing operations
49,151

 
80,118

 
31,856

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:
 

 
 

 
 

Acquisition of property, plant and equipment
(34,937
)
 
(59,276
)
 
(46,308
)
Acquired business, net of cash acquired
(34,719
)
 
(4,470
)
 
(2,225
)
Investment sales (purchases)
(1,824
)
 
715

 
8,891

Proceeds from sale of property, plant and equipment
143

 
770

 
203

Net cash used in investing activities - continuing operations
(71,337
)
 
(62,261
)
 
(39,439
)
CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:
 

 
 

 
 

Proceeds from issuance of common stock

 

 
371

Dividends paid
(10,325
)
 
(8,798
)
 
(7,654
)
Purchase of shares for treasury
(15,841
)
 
(65,307
)
 
(82,343
)
Proceeds from long-term debt
233,443

 
302,362

 
203,216

Payments of long-term debt
(170,454
)
 
(208,514
)
 
(187,735
)
Share premium payment on settled debt
(24,997
)
 

 

Financing costs
(1,548
)
 
(4,384
)
 
(888
)
Purchase of ESOP shares
(10,908
)
 

 

Tax effect from exercise/vesting of equity awards, net

 

 
345

Other, net
(70
)
 
55

 
347

Net cash provided by (used) in financing activities - continuing operations
(700
)
 
15,414

 
(74,341
)

13

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Years Ended September 30,
 
2017
 
2016
 
2015
 
 
 
 
 
 
CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
 

Net cash provided by operating activities
47,193

 
24,264

 
43,362

Net cash used in investing activities
(45,075
)
 
(31,343
)
 
(27,180
)
Net cash provided by (used in) financing activities
(4,268
)
 
(6,526
)
 
29,490

Net cash provided by (used in) discontinued operations
(2,150
)
 
(13,605
)
 
45,672

Effect of exchange rate changes on cash and equivalents
164

 
886

 
(4,152
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(24,872
)
 
20,552

 
(40,404
)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
72,553

 
52,001

 
92,405

CASH AND EQUIVALENTS AT END OF PERIOD
$
47,681

 
$
72,553

 
$
52,001

Supplemental Disclosure of Cash Flow Information:
 

 
 

 
 

Cash paid for interest
$
48,137

 
$
43,208

 
$
41,269

Cash paid for taxes
20,998

 
3,431

 
16,446



14


Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss on debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable. Griffon believes this information is useful to investors. The following tables provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per common share from continuing operations to Adjusted earnings per common share from continuing operations, as well as, Net income to Adjusted net income and Earnings per common share to Adjusted earnings per common share:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(in thousands, except per share data)


 
For the Three Months Ended September 30,
 
For the Years Ended September 30,
 
2017
 
2016
 
2017
 
2016
Income from continuing operations
$
4,337

 
$
4,098

 
$
17,783

 
$
19,781

Adjusting items, net of tax:
 
 
 
 
 

 
 

Acquisition costs
6,145

 

 
6,145

 

Contract settlement charges
3,300

 

 
3,300

 

Discrete tax provisions (benefits)
(1,769
)
 
2,294

 
(8,274
)
 
(857
)
Adjusted income from continuing operations
$
12,013

 
$
6,392

 
$
18,954

 
$
18,924

 
 
 
 
 
 
 
 
Earnings per common share from continuing operations
$
0.10

 
$
0.10

 
$
0.41

 
$
0.45

 
 
 
 
 
 
 
 
Adjusting items, net of tax:
 
 
 
 
 

 
 

Acquisition costs
0.14

 

 
0.14

 

Contract settlement charges
0.08

 

 
0.08

 

Discrete tax provisions (benefits)
(0.04
)
 
0.05

 
(0.19
)
 
(0.02
)
Adjusted earnings per share from continuing operations
$
0.28

 
$
0.15

 
$
0.44

 
$
0.43

Weighted-average shares outstanding (in thousands)
43,237

 
42,784

 
43,011

 
44,109













15



GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME
TO ADJUSTED NET INCOME
(in thousands, except per share data)

 
For the Three Months Ended September 30,
 
For the Years Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss)
$
(11,950
)
 
$
5,531

 
$
14,912

 
$
30,010

Adjusting items, net of tax:
 

 
 

 
 

 
 

Acquisition costs
6,145

 

 
6,145

 

Contract settlement charges
3,300

 

 
3,300

 

Environmental and warranty reserves
3,703

 
 
 
3,703

 
 
Restructuring

 

 

 
4,247

Discrete tax provisions
14,509

 
5,982

 
9,385

 
2,658

Adjusted net income
$
15,707

 
$
11,513

 
$
37,445

 
$
36,915

 
 
 
 
 
 
 
 
Earnings (loss) per common share (1)
$
(0.29
)
 
$
0.13

 
$
0.35

 
$
0.68

 
 
 
 
 
 
 
 
Adjusting items, net of tax:
 

 
 

 
 

 
 

Acquisition costs
0.14

 

 
0.14

 

Contract settlement charges
0.08

 

 
0.08

 

Environmental and warranty reserves
0.09

 
 
 
0.09

 
 
Restructuring

 

 

 
0.10

Discrete tax provisions
0.34

 
0.14

 
0.22

 
0.06

Adjusted earnings per share
$
0.36

 
$
0.27

 
$
0.87

 
$
0.84

 
 
 
 
 
 
 
 
Weighted-average shares outstanding (in thousands)
43,237

 
42,784

 
43,011

 
44,109

 
 
 
 
 
 
 
 
(1) On basic weighted average shares outstanding of 41,726.

Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

    

16