Business Wire | Nov 12, 2020 04:06PM EST

Griffon Corporation Announces Annual and Fourth Quarter Results

Nov. 12, 2020

NEW YORK--(BUSINESS WIRE)--Nov. 12, 2020--Griffon Corporation ("Griffon" or the "Company") (NYSE:GFF) today reported results for the fiscal year and fourth quarter ended September 30, 2020.

Fiscal 2020, revenue totaled $2.4 billion, a 9% increase from the $2.2 billion in the prior year, with organic growth of 8%.

Fiscal 2020, Income from continuing operations totaled $53.4 million, or $1.19 per share, compared to $45.6 million, or $1.06 per share, in the prior year. Current year Adjusted income from continuing operations was $73.0 million, or $1.62 per share compared to $46.3 million, or $1.08 per share, in the prior year, a 50% increase (see the Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations for details).

Fiscal 2020 Adjusted EBITDA from continuing operations totaled $236 million, increasing 18% from the prior year of $200 million. Adjusted EBITDA excluding unallocated amounts (primarily corporate overhead) in 2020 and 2019 of $47 million and $46 million, respectively, totaled $283 million in 2020, increasing 15% from the prior year of $246 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable ("Adjusted EBITDA", a non-GAAP measure).

Fourth quarter revenue of $661 million increased 15% compared to the prior year fourth quarter revenue of $574 million with organic growth of 14%.

Fourth quarter Income from continuing operations totaled $20.1 million, or $0.41 per share, compared to $16.3 million, or $0.37 per share, in the prior year quarter. Current year fourth quarter Adjusted income from continuing operations was $21.5 million, or $0.44 per share compared to $17.3 million, or $0.40 per share, in the prior year fourth quarter, a 10% increase (see the Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations for details).

Fourth quarter Adjusted EBITDA from continuing operations totaled $63 million, increasing 8% from the prior year quarter of $59 million. Adjusted EBITDA excluding unallocated amounts (primarily corporate overhead) in both 2020 and 2019 of $12 million totaled $75 million in 2020, increasing 7% from the prior year of $71 million.

Ronald J. Kramer, Chairman and Chief Executive Officer, commented, "Griffon performed exceptionally well in our fiscal fourth quarter despite the difficult operating conditions caused by the pandemic. Our ongoing efforts to improve operating performance delivered an 8% increase in organic revenue, an 18% increase in EBITDA and a 50% increase in EPS. We are pleased that the momentum we experienced in our businesses before the pandemic continued though the entire fiscal year despite the challenges we all faced. We are very proud of our performance and thankful to our global workforce for their incredible contribution. In addition to our strong operating results, Griffon strengthened its balance sheet through the refinancing of our bonds, extending maturities to 2028, and adding $178 million of cash through a common stock offering. Our financial strength positions us well to both deal with uncertainties and take advantage of opportunities that may present themselves."

Mr. Kramer added, "We continue to evaluate ways to further increase operating efficiency and last month we expanded the AMES next-generation initiative to include AMES' global operations. By adding new geographies and expanding locations, we expect to increase annual cash savings by an additional $30 to $35 million annually. We are relentless in our focus on driving long-term shareholder value and are excited about our future."

Segment Operating Results

Consumer and Professional Products ("CPP")

CPP revenue in 2020 was $1.14 billion, increasing $139 million, or 14% compared to 2019. This was primarily from a 12% increase in volume, due to increased consumer demand for home improvement initiatives across most of our geographic regions supplemented by COVID-19 stay at home orders, favorable price and mix of 1% and an incremental 2% revenue contribution from the Apta acquisition, partially offset by an unfavorable impact of foreign exchange of 1%. Organic growth was 12%.

CPP Adjusted EBITDA for 2020 was $104 million, increasing $13 million, or 15% compared to 2019, primarily driven by increased revenue as noted above, partially offset by increased tariffs, COVID-19 related inefficiencies and direct costs, and an unfavorable foreign exchange impact of 1%. Adjusted EBITDA margin of 9.1% in 2020 remained consistent with the prior year. Direct COVID-19 related expenses totaled approximately $5.0 million for the year.

CPP revenue in the current quarter was $294 million, increasing $72 million, or 32% from the prior year quarter. This was primarily from a 30% increase in volume, due to increased consumer demand for home improvement initiatives across most of our geographic regions supplemented by COVID-19 stay at home orders and an incremental 3% revenue contribution from the Apta acquisition, partially offset by unfavorable mix of 1%. Organic growth in the quarter was 29%.

CPP Adjusted EBITDA in the current quarter was $20 million, increasing $2 million, or 14% from the prior year quarter due to the benefit of increased revenue, partially offset by COVID-19 related expenses. Adjusted EBITDA margin was 6.8% in the fourth quarter of 2020 compared to 7.9% in the prior year quarter, impacted by inefficiencies and direct costs related to COVID-19, facility consolidations and distribution inefficiencies in supplying areas affected by natural disasters. Direct COVID-19 related expenses totaled approximately $2.5 million for the quarter.

Strategic Initiative

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and in October 2020, CPP broadened this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES global operations will be consolidated to optimize facilities footprint and talent. Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include AMES' global operations will extend the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30-$35 million (increased from $15-$20 million) and a reduction in inventory of $30-$35 million (increased from $20-$25 million), both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65 million (increased from $35 million) and capital investments of approximately $65 million (increased from $40 million). The one-time charges are comprised of $46 million of cash charges, which includes $26 million of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20 million of facility and lease exit costs. The remaining $19 million are non-cash charges, primarily related to asset write-downs.

In addition to the growth, efficiency and competitive benefits, the AMES strategic initiative is intended to drive operating margin improvement and increased free cash flow.

In connection with this initiative, during the year ended September 30, 2020, CPP incurred pre-tax restructuring and other related exit costs approximating $13.7 million, comprised of cash charges of approximately $9.0 million ($5.7 million for one-time termination benefits and other personnel-related costs and $3.3 million for facility exit costs) and non-cash, asset-related charges of $4.7 million. Capital expenditures related to the initiative were $6.7 million through the year ended September 30, 2020.

Home and Building Products ("HBP")

HBP revenue in 2020 was $927 million, increasing $54 million, or 6%, compared to 2019, with 4% from volume and 2% from favorable mix and pricing.

HBP Adjusted EBITDA in 2020 was $154 million, increasing $33 million, or 28%, compared to 2019. The favorable variance resulted from the increased revenue noted above and general operational efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs. Adjusted EBITDA margin was 16.6% in 2020 compared to 13.8% in 2019. Direct COVID-19 related expenses totaled approximately $2.0 million in fiscal 2020.

HBP revenue in the current quarter was $257 million, increasing $15 million, or 6% from the prior year quarter, with 4% from volume, and 2% from favorable mix and pricing.

HBP Adjusted EBITDA in the current quarter was $43 million, increasing $8 million, or 23% from the prior year quarter, primarily from the increased revenue noted above and general operational efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs. Adjusted EBITDA margin was 16.7% in the current quarter compared to 14.4% in the prior year quarter. Direct COVID-19 related expenses totaled approximately $0.3 million for the fourth quarter of 2020.

Defense Electronics ("DE")

DE revenue in 2020 was $341 million, increasing $6 million, or 2% compared to 2019, primarily due to increased deliveries and volume on airborne and ground communications systems, as well as airborne surveillance systems, partially offset by reduced volume on Multi-Mode airborne maritime surveillance radar systems.

DE Adjusted EBITDA for 2020 was $25 million, decreasing $10 million, or 28% from 2019, primarily due to program inefficiencies associated with certain radar programs, unfavorable program mix and increased operating expenses primarily due to bid and proposal activities and timing of research and development initiatives, partially offset by program efficiencies within airborne intercommunication surveillance systems. Adjusted EBITDA margin was 7.4% in 2020 compared to 10.5% in the prior year. Direct COVID-19 related expenses totaled approximately $1.0 million in fiscal 2020.

DE revenue in the current quarter totaling $109 million remained consistent with the prior year quarter.

DE Adjusted EBITDA in the current quarter was $12 million, decreasing $6 million from the prior year quarter, primarily due to program inefficiencies associated with certain radar systems and unfavorable program mix. Adjusted EBITDA margin was 11.3% in the fourth quarter of 2020 compared to 16.5% in the prior year quarter. Direct COVID-19 related expenses totaled approximately $0.3 million for the fourth quarter of 2020.

Contract backlog was $380 million at September 30, 2020, compared to $389 million at September 30, 2019, with 67% expected to be fulfilled in the next 12 months. During the year, Telephonics was awarded several new contracts and received incremental funding on existing contracts approximating $332 million, which translates into a book to bill ratio of approximately 1.0.

In September 2020, Telephonics initiated a Voluntary Employee Retirement Plan, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities. The combined actions are expected to incur severance charges of approximately $4.5 million with $2.1 million recognized in the fourth quarter, and the balance to be recognized in the first quarter of 2021. At the conclusion of these actions, headcount is expected to be reduced by approximately 90 people. In addition, during fiscal 2020 Telephonics commenced a facility project to consolidate three Long Island based facilities into two company owned facilities with a total cost of approximately $4.0 million primarily comprised of capital expenditures in 2021.

Taxes

The Company reported pretax income from continuing operations for the years ended September 30, 2020 and 2019 and recognized effective income tax rates of 35.4% and to 36.8%, respectively. Excluding discrete and certain other tax provisions, net and items that affect comparability, the effective tax rates for the years ended September 30, 2020 and 2019 were 32.2% and 34.3%, respectively.

Balance Sheet and Capital Expenditures

At September 30, 2020, the Company had a net debt position of $829 million, with cash and cash equivalents of $218 million and total debt outstanding of $1.05 billion, with $370 million available for borrowing under the revolving credit facility subject to certain loan covenants. Capital expenditures were $49 million for the year ended September 30, 2020.

Equity

In August 2020, Griffon Corporation completed a Public Offering of 8,700,000 shares of its common stock for total net proceeds of $178.2 million. The Company used a portion of the net proceeds to repay $50 million of outstanding borrowings under its Credit Agreement.

As of September 30, 2020, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations in fiscal 2020.

Conference Call Information

The Company will hold a conference call today, November 12, 2020, at 4:30 PM ET.

The call can be accessed by dialing 1-877-407-0792 (U.S. participants) or 1-201-689-8263 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 13713041. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.

A replay of the call will be available starting on Thursday, November 12, 2020 at 7:30 PM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 13713041. The replay will be available through November 26, 2020 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, restructuring, 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 defense budget cuts or other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost or lack of availability of raw materials such as resin, wood and steel, components or purchased finished goods, including the impact from tariffs; 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 impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation, regulatory 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; the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers; Griffon's ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, changes in tax law. 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 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 conducts its operations through three reportable segments:

* Consumer and Professional Products conducts its operations through AMES. Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

* Home and Building Product conducts its operations through Clopay. Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

* Defense Electronics conducts its operations through Telephonics, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

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

Griffon evaluates performance and allocates resources based on operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable ("Adjusted EBITDA", a non-GAAP measure). Griffon believes this information is useful to investors.

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

GRIFFON CORPORATION AND SUBSIDIARIES

OPERATING HIGHLIGHTS

(in thousands)

(Unaudited) For the Three Months For the Year Ended Ended September 30, September 30,

REVENUE 2020 2019 2020 2019



Consumer and $ 294,316 $ 222,692 $ 1,139,233 $ 1,000,608 Professional Products

Home and Building 256,939 242,025 927,313 873,640 Products

Defense Electronics 109,418 109,447 340,976 335,041

Total consolidated $ 660,673 $ 574,164 $ 2,407,522 $ 2,209,289 net sales



ADJUSTED EBITDA

Consumer and $ 19,985 $ 17,526 $ 104,053 $ 90,677 Professional Products

Home and Building 42,996 34,878 153,631 120,161 Products

Defense Electronics 12,383 18,103 25,228 35,104

Total 75,364 70,507 282,912 245,942

Unallocated amounts,excluding (12,044 ) (11,797 ) (47,013 ) (46,302 )depreciation*

Adjusted EBITDA 63,320 58,710 235,899 199,640

Net interest expense (16,695 ) (16,537 ) (65,791 ) (67,260 )

Depreciation and (15,342 ) (15,676 ) (62,409 ) (61,848 )amortization

Restructuring charges (4,619 ) - (15,790 ) -

Loss from debt - - (7,925 ) - extinguishment

Acquisitioncontingent 1,733 1,646 1,733 1,646 consideration

Acquisition costs - - (2,960 ) -

Income before taxesfrom continuing $ 28,397 $ 28,143 $ 82,757 $ 72,178 operations

* Primarily CorporateOverhead

For the Three Months Ended September 30,

For the Year Ended September 30,

DEPRECIATION and AMORTIZATION

2020

2019

2020

2019

Segment:

Consumer and Professional Products

$

8,138

$

8,141

$

32,788

$

32,289

Home and Building Products

4,386

4,651

18,361

18,334

Defense Electronics

2,659

2,741

10,645

10,667

Total segment depreciation and amortization

15,183

15,533

61,794

61,290

Corporate

159

143

615

558

Total consolidated depreciation and amortization

$

15,342

$

15,676

$

62,409

$

61,848

For the Three Months For the Year Ended Ended September 30, September 30,

DEPRECIATION and AMORTIZATION 2020 2019 2020 2019

Segment:

Consumer and Professional $ 8,138 $ 8,141 $ 32,788 $ 32,289 Products

Home and Building Products 4,386 4,651 18,361 18,334

Defense Electronics 2,659 2,741 10,645 10,667

Total segment depreciation 15,183 15,533 61,794 61,290 and amortization

Corporate 159 143 615 558

Total consolidated $ 15,342 $ 15,676 $ 62,409 $ 61,848 depreciation and amortization

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(in thousands, except per share data)

(Unaudited) Three Months Ended September 30,

Twelve Months Ended September 30,

2020

2019

2020

2019

Revenue

$

660,673

$

574,164

$

2,407,522

$

2,209,289

Cost of goods and services

486,203

415,706

1,766,096

1,625,815

Gross profit

174,470

158,458

641,426

583,474

Selling, general and administrative expenses

128,624

113,654

486,398

447,163

Income from continuing operations

45,846

44,804

155,028

136,311

Other income (expense)

Interest expense

(16,737

)

(16,732

)

(66,544

)

(68,066

)

Interest income

42

195

753

806

Loss from debt extinguishment, net

-

-

(7,925

)

-

Other, net

(754

)

(124

)

1,445

3,127

Total other expense, net

(17,449

)

(16,661

)

(72,271

)

(64,133

)

Income before taxes from continuing operations

28,397

28,143

82,757

72,178

Provision for income taxes

8,306

11,892

29,328

26,556

Income from continuing operations

$

20,091

$

16,251

$

53,429

$

45,622

Discontinued operations:

Income from operations of discontinued businesses

-

(50

)

-

(11,050

)

Provision from income taxes

-

106

-

(2,715

)

Income (loss) from discontinued operations

-

(156

)

-

(8,335

)

Net income (loss)

$

20,091

$

16,095

$

53,429

$

37,287

Income from continuing operations

$

0.44

$

0.40

$

1.25

$

1.11

Income (loss) from discontinued operations

-

-

-

(0.20

)

Basic earnings (loss) per common share

$

0.44

$

0.39

$

1.25

$

0.91

Weighted-average shares outstanding

45,903

41,071

42,588

40,934

Income from continuing operations

$

0.41

$

0.37

$

1.19

$

1.06

Income (loss) from discontinued operations

-

-

-

(0.20

)

Diluted income (loss) per common share

$

0.41

$

0.37

$

1.19

$

0.87

Weighted-average shares outstanding

48,526

43,540

45,015

42,888

Net income (loss)

$

20,091

$

16,095

$

53,429

$

37,287

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments

6,094

(4,517

)

5,601

(8,460

)

Pension and other post retirement plans

(14,264

)

(23,607

)

(11,784

)

(23,055

)

Gain (loss) on cash flow hedge

1,285

(75

)

7

(289

)

Total other comprehensive income (loss), net of taxes

(6,885

)

(28,199

)

(6,176

)

(31,804

)

Comprehensive income (loss), net

$

13,206

$

(12,104

)

$

47,253

$

5,483

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(in thousands, except per share data)

(Unaudited) Twelve Months Ended Three Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue $ 660,673 $ 574,164 $ 2,407,522 $ 2,209,289

Cost of goods and 486,203 415,706 1,766,096 1,625,815 services

Gross profit 174,470 158,458 641,426 583,474

Selling, general andadministrative 128,624 113,654 486,398 447,163 expenses

Income from 45,846 44,804 155,028 136,311 continuing operations



Other income (expense)

Interest expense (16,737 ) (16,732 ) (66,544 ) (68,066 )

Interest income 42 195 753 806

Loss from debt - - (7,925 ) - extinguishment, net

Other, net (754 ) (124 ) 1,445 3,127

Total other expense, (17,449 ) (16,661 ) (72,271 ) (64,133 )net



Income before taxesfrom continuing 28,397 28,143 82,757 72,178 operations

Provision for income 8,306 11,892 29,328 26,556 taxes

Income from $ 20,091 $ 16,251 $ 53,429 $ 45,622 continuing operations



Discontinued operations:

Income fromoperations of - (50 ) - (11,050 )discontinuedbusinesses

Provision from income - 106 - (2,715 )taxes

Income (loss) fromdiscontinued - (156 ) - (8,335 )operations

Net income (loss) $ 20,091 $ 16,095 $ 53,429 $ 37,287



Income from $ 0.44 $ 0.40 $ 1.25 $ 1.11 continuing operations

Income (loss) fromdiscontinued - - - (0.20 )operations

Basic earnings (loss) $ 0.44 $ 0.39 $ 1.25 $ 0.91 per common share

Weighted-average 45,903 41,071 42,588 40,934 shares outstanding



Income from $ 0.41 $ 0.37 $ 1.19 $ 1.06 continuing operations

Income (loss) fromdiscontinued - - - (0.20 )operations

Diluted income (loss) $ 0.41 $ 0.37 $ 1.19 $ 0.87 per common share

Weighted-average 48,526 43,540 45,015 42,888 shares outstanding



Net income (loss) $ 20,091 $ 16,095 $ 53,429 $ 37,287

Other comprehensiveincome (loss), net of taxes:

Foreign currencytranslation 6,094 (4,517 ) 5,601 (8,460 )adjustments

Pension and other (14,264 ) (23,607 ) (11,784 ) (23,055 )post retirement plans

Gain (loss) on cash 1,285 (75 ) 7 (289 )flow hedge

Total othercomprehensive income (6,885 ) (28,199 ) (6,176 ) (31,804 )(loss), net of taxes

Comprehensive income $ 13,206 $ (12,104 ) $ 47,253 $ 5,483 (loss), net

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

At September 30, 2020

At September 30, 2019

CURRENT ASSETS

Cash and equivalents

$

218,089

$

72,377

Accounts receivable, net of allowances of $17,758 and $7,881

348,124

264,450

Contract assets, net of progress payments of $24,175 and $11,259

84,426

105,111

Inventories

413,825

442,121

Prepaid and other current assets

46,897

40,799

Assets of discontinued operations

2,091

321

Total Current Assets

1,113,452

925,179

PROPERTY, PLANT AND EQUIPMENT, net

343,964

337,326

OPERATING LEASE RIGHT-OF-USE ASSETS

161,627

-

GOODWILL

442,643

437,067

INTANGIBLE ASSETS, net

355,028

356,639

OTHER ASSETS

32,897

15,840

ASSETS OF DISCONTINUED OPERATIONS

6,406

2,888

Total Assets

$

2,456,017

$

2,074,939

CURRENT LIABILITIES

Notes payable and current portion of long-term debt

$

9,922

$

10,525

Accounts payable

232,107

250,576

Accrued liabilities

171,572

124,665

Current portion of operating lease liabilities

31,848

-

Liabilities of discontinued operations

3,797

4,333

Total Current Liabilities

449,246

390,099

LONG-TERM DEBT, net

1,037,042

1,093,749

LONG-TERM OPERATING LEASE LIABILITIES

136,054

-

OTHER LIABILITIES

126,510

109,997

LIABILITIES OF DISCONTINUED OPERATIONS

7,014

3,331

Total Liabilities

1,755,866

1,597,176

COMMITMENTS AND CONTINGENCIES - See Note 14

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 shares of 83,739 and 82,775, respectively.

20,935

20,694

Capital in excess of par value

583,008

519,017

Retained earnings

607,518

568,516

Treasury shares, at cost, 27,610 common shares and 35,969 common shares

(413,493

)

(536,308

)

Accumulated other comprehensive loss

(72,092

)

(65,916

)

Deferred compensation

(25,725

)

(28,240

)

Total Shareholders' Equity

700,151

477,763

Total Liabilities and Shareholders' Equity

$

2,456,017

$

2,074,939

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

At September At September 30, 30, 2020 2019

CURRENT ASSETS

Cash and equivalents $ 218,089 $ 72,377

Accounts receivable, net of allowances of $17,758 348,124 264,450 and $7,881

Contract assets, net of progress payments of 84,426 105,111 $24,175 and $11,259

Inventories 413,825 442,121

Prepaid and other current assets 46,897 40,799

Assets of discontinued operations 2,091 321

Total Current Assets 1,113,452 925,179

PROPERTY, PLANT AND EQUIPMENT, net 343,964 337,326

OPERATING LEASE RIGHT-OF-USE ASSETS 161,627 -

GOODWILL 442,643 437,067

INTANGIBLE ASSETS, net 355,028 356,639

OTHER ASSETS 32,897 15,840

ASSETS OF DISCONTINUED OPERATIONS 6,406 2,888

Total Assets $ 2,456,017 $ 2,074,939

CURRENT LIABILITIES

Notes payable and current portion of long-term $ 9,922 $ 10,525 debt

Accounts payable 232,107 250,576

Accrued liabilities 171,572 124,665

Current portion of operating lease liabilities 31,848 -

Liabilities of discontinued operations 3,797 4,333

Total Current Liabilities 449,246 390,099

LONG-TERM DEBT, net 1,037,042 1,093,749

LONG-TERM OPERATING LEASE LIABILITIES 136,054 -

OTHER LIABILITIES 126,510 109,997

LIABILITIES OF DISCONTINUED OPERATIONS 7,014 3,331

Total Liabilities 1,755,866 1,597,176

COMMITMENTS AND CONTINGENCIES - See Note 14

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 shares of 83,739 20,935 20,694 and 82,775, respectively.

Capital in excess of par value 583,008 519,017

Retained earnings 607,518 568,516

Treasury shares, at cost, 27,610 common shares (413,493 ) (536,308 )and 35,969 common shares

Accumulated other comprehensive loss (72,092 ) (65,916 )

Deferred compensation (25,725 ) (28,240 )

Total Shareholders' Equity 700,151 477,763

Total Liabilities and Shareholders' Equity $ 2,456,017 $ 2,074,939

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended September 30,

2020

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

Net income

$

53,429

$

37,287

$

125,678

Net (income) loss from discontinued operations

-

8,335

(92,423

)

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

Depreciation and amortization

62,409

61,848

55,803

Stock-based compensation

17,580

15,914

19,610

Asset impairment charges - restructuring

4,692

-

-

Provision for losses on accounts receivable

1,332

535

96

Amortization of deferred financing costs and debt discounts

3,661

5,393

5,219

Loss from debt extinguishment

7,925

-

-

Deferred income tax

2,095

(2,222

)

(17,633

)

(Gain)/ loss on sale/disposal of assets and investments

(287

)

(179

)

290

Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable and contract assets

(62,366

)

8,279

2,681

(Increase) decrease in inventories

34,080

(24,938

)

(52,122

)

Increase in prepaid and other assets

(13,582

)

(4,285

)

(2,285

)

Increase in accounts payable, accrued liabilities and income taxes payable

25,044

7,638

11,078

Other changes, net

1,017

353

2,200

Net cash provided by operating activities - continuing operations

137,029

113,958

58,192

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:

Acquisition of property, plant and equipment

(48,998

)

(45,361

)

(50,138

)

Acquired business, net of cash acquired

(10,531

)

(9,219

)

(430,932

)

Investment purchases

(130

)

(149

)

-

Proceeds (payments) from sale of business

-

(9,500

)

474,727

Insurance proceeds (payments)

-

(10,604

)

8,254

Proceeds from sale of property, plant and equipment

352

280

663

Net cash provided by (used in) investing activities - continuing operations

(59,307

)

(74,553

)

2,574

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:

Proceeds from issuance of common stock

178,165

-

-

Dividends paid

(14,529

)

(13,676

)

(49,797

)

Purchase of shares for treasury

(7,479

)

(1,478

)

(45,605

)

Proceeds from long-term debt

1,240,080

201,748

443,058

Payments of long-term debt

(1,308,915

)

(218,248

)

(300,993

)

Change in short-term borrowings

-

(366

)

144

Financing costs

(17,384

)

(1,090

)

(7,793

)

Contingent consideration for acquired businesses

(1,733

)

(1,686

)

-

Other, net

(15

)

(180

)

51

Net cash provided by (used) in financing activities - continuing operations

68,190

(34,976

)

39,065

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities

(3,021

)

(2,123

)

(45,624

)

Net cash provided by (used in) investing activities

444

-

(10,762

)

Net cash used in financing activities

-

-

(22,541

)

Net cash used in discontinued operations

(2,577

)

(2,123

)

(78,927

)

Effect of exchange rate changes on cash and equivalents

2,377

313

1,173

NET INCREASE IN CASH AND EQUIVALENTS

145,712

2,619

22,077

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

72,377

69,758

47,681

CASH AND EQUIVALENTS AT END OF PERIOD

$

218,089

$

72,377

$

69,758

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

$

63,139

$

63,334

$

59,793

Cash paid for taxes

21,016

25,339

32,140

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:

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended September 30,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

Net income $ 53,429 $ 37,287 $ 125,678

Net (income) loss from discontinued - 8,335 (92,423 )operations

Adjustments to reconcile net income tonet cash provided by operating activities of continuing operations:

Depreciation and amortization 62,409 61,848 55,803

Stock-based compensation 17,580 15,914 19,610

Asset impairment charges - 4,692 - - restructuring

Provision for losses on accounts 1,332 535 96 receivable

Amortization of deferred financing 3,661 5,393 5,219 costs and debt discounts

Loss from debt extinguishment 7,925 - -

Deferred income tax 2,095 (2,222 ) (17,633 )

(Gain)/ loss on sale/disposal of assets (287 ) (179 ) 290 and investments

Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts (62,366 ) 8,279 2,681 receivable and contract assets

(Increase) decrease in inventories 34,080 (24,938 ) (52,122 )

Increase in prepaid and other assets (13,582 ) (4,285 ) (2,285 )

Increase in accounts payable, accrued 25,044 7,638 11,078 liabilities and income taxes payable

Other changes, net 1,017 353 2,200

Net cash provided by operating 137,029 113,958 58,192 activities - continuing operations

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:

Acquisition of property, plant and (48,998 ) (45,361 ) (50,138 )equipment

Acquired business, net of cash acquired (10,531 ) (9,219 ) (430,932 )

Investment purchases (130 ) (149 ) -

Proceeds (payments) from sale of - (9,500 ) 474,727 business

Insurance proceeds (payments) - (10,604 ) 8,254

Proceeds from sale of property, plant 352 280 663 and equipment

Net cash provided by (used in)investing activities - continuing (59,307 ) (74,553 ) 2,574 operations

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:

Proceeds from issuance of common stock 178,165 - -

Dividends paid (14,529 ) (13,676 ) (49,797 )

Purchase of shares for treasury (7,479 ) (1,478 ) (45,605 )

Proceeds from long-term debt 1,240,080 201,748 443,058

Payments of long-term debt (1,308,915 ) (218,248 ) (300,993 )

Change in short-term borrowings - (366 ) 144

Financing costs (17,384 ) (1,090 ) (7,793 )

Contingent consideration for acquired (1,733 ) (1,686 ) - businesses

Other, net (15 ) (180 ) 51

Net cash provided by (used) infinancing activities - continuing 68,190 (34,976 ) 39,065 operations

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities (3,021 ) (2,123 ) (45,624 )

Net cash provided by (used in) 444 - (10,762 )investing activities

Net cash used in financing activities - - (22,541 )

Net cash used in discontinued (2,577 ) (2,123 ) (78,927 )operations

Effect of exchange rate changes on cash 2,377 313 1,173 and equivalents

NET INCREASE IN CASH AND EQUIVALENTS 145,712 2,619 22,077

CASH AND EQUIVALENTS AT BEGINNING OF 72,377 69,758 47,681 PERIOD

CASH AND EQUIVALENTS AT END OF PERIOD $ 218,089 $ 72,377 $ 69,758

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest $ 63,139 $ 63,334 $ 59,793

Cash paid for taxes 21,016 25,339 32,140

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:

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 For the Twelve Months Ended September 30, Ended September 30,

2020 2019 2020 2019

Income from continuing $ 20,091 $ 16,251 $ 53,429 $ 45,622 operations

Adjusting items:

Restructuring charges 4,619 - 15,790 -

Loss from debt extinguishment - - 7,925 -

Acquisition costs - - 2,960 -

Acquisition contingent (1,733 ) (1,646 ) (1,733 ) (1,646 )consideration

Tax impact of above items (840 ) 313 (5,984 ) 313

Discrete and other certain (594 ) 2,334 654 2,035 tax (benefits) provisions

Adjusted income from $ 21,543 $ 17,252 $ 73,041 $ 46,324 continuing operations



Earnings per common share $ 0.41 $ 0.37 $ 1.19 $ 1.06 from continuing operations



Adjusting items, net of tax:

Restructuring charges 0.07 - 0.26 -

Loss from debt extinguishment - - 0.14 -

Acquisition costs - - 0.05 -

Acquisition contingent (0.03 ) (0.03 ) (0.03 ) (0.03 )consideration

Discrete and other certain (0.01 ) 0.05 0.01 0.05 tax (benefits) provisions

Adjusted earnings per share $ 0.44 $ 0.40 $ 1.62 $ 1.08 from continuing operations

Weighted-average shares 48,526 43,540 45,015 42,888 outstanding (in thousands)

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006067/en/

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