Griffon Corporation (“Griffon” or the “Company”) (NYSE:GFF)
today reported results for the fiscal 2023 second quarter ended
March 31, 2023.
Revenue for the second quarter totaled $711.0 million, a 9%
decrease compared to $779.6 million in the prior year quarter.
Adjusting for the period Griffon did not own Hunter Fan Company
("Hunter") in the prior year quarter, organic revenue decreased
12%.
During fiscal 2023 second quarter, Griffon recorded $132.8
million, net of tax, or $2.40 per share, of charges related to
impairment of intangible assets and an expansion of its global
sourcing strategy, both in the Consumer and Professional Products
("CPP") segment. These items, as well as other items that affect
comparability, resulted in a loss from continuing operations of
$62.3 million, or $1.17 per share. Prior year second quarter income
from continuing operations was $58.2 million, or $1.09 per share.
Excluding all items that affect comparability from both periods,
adjusted income from continuing operations was $66.9 million, or
$1.21 per share in the current year quarter compared to $72.7
million, or $1.36 per share in the prior year quarter (see
reconciliation of Income (loss) from continuing operations to
Adjusted income from continuing operations for details).
Adjusted EBITDA from continuing operations for the second
quarter was $136.9 million, a 2% decrease from the prior year
quarter of $139.3 million. Adjusted EBITDA from continuing
operations, excluding unallocated amounts (primarily corporate
overhead) of $14.6 million in the current quarter and $13.1 million
in the prior year quarter, totaled $151.5 million, decreasing 1%
from the prior year of $152.3 million. Adjusted EBITDA is defined
as net income excluding interest income and expense, income taxes,
depreciation and amortization, strategic review, restructuring
charges, non-cash impairment charges, loss on debt extinguishment
and acquisition related expenses, as well as other items that may
affect comparability, as applicable (for a reconciliation of
“Adjusted EBITDA”, a non-GAAP measure, to income (loss) before
taxes from continuing operations, see the attached table).
“Griffon’s financial results through the first half of 2023
exceeded expectations, driven by the performance of our Home and
Building Products ("HBP") segment. HBP’s strong results reflect
growth in commercial volume and favorable pricing and mix. In
addition, we are expanding business development efforts and further
improving productivity as HBP's residential sectional door backlog
and lead times have returned to normal levels,” said Ronald J.
Kramer, Chairman and Chief Executive Officer.
“Our Consumer and Professional Products ("CPP") segment's
performance continues to reflect reduced consumer demand, elevated
customer inventory levels, and an increasing customer focus on
value products,” continued Mr. Kramer. “To address these evolving
market conditions, CPP is expanding its global sourcing strategy to
include certain product categories that are currently manufactured
and sold in the U.S. market. Strategically sourcing these products
will enable us to return these product lines to profitability, and
will enable us to remain competitive in an increasingly price
sensitive marketplace by better managing costs, efficiently meeting
variable demand, and reducing operational complexity. These actions
are a continuation of the evolution of CPP, and positions the
segment to achieve 15% target EBITDA margins, supporting value
creation for our shareholders.
“As a result of our overall strong performance in the first
half, we are raising full-year EBITDA guidance from $500 million to
$525 million. In addition, earlier today we announced a 25%
increase to our regular quarterly dividend, which complements our
previously announced $2.00 per share special dividend and the
increase in our stock buyback authorization to $258 million. These
actions demonstrate our commitment to enhancing both immediate and
long-term value to our shareholders and reflect the confidence
Griffon’s Board and management have in our strategic plan and
outlook.”
Segment Operating
Results
Consumer and Professional Products ("CPP")
CPP revenue in the current quarter of $314.3 million decreased
24% compared to the prior year period due to a 29% reduction in
volume across all channels and geographies driven by reduced
consumer demand, customer supplier diversification in the U.S., and
elevated customer inventory levels, coupled with an unfavorable
foreign exchange impact of 2%. These items were partially offset by
$21.6 million of Hunter revenue, or 5%, for the portion of the
current quarter in which Hunter was not owned by Griffon in the
prior year quarter, as well as price and mix of 2%. Hunter
contributed $76.2 million in the current quarter.
For the current quarter, Adjusted EBITDA was $19.6 million,
compared to $47.8 million in the prior year quarter. The variance
to prior year was primarily due to the unfavorable impact of the
reduced volume noted above, and its related impact on manufacturing
and overhead absorption, and increased material costs in Australia
and Canada. This was partially offset by $3.3 million from the
Hunter acquisition for the portion of the current quarter in which
Hunter was not owned by Griffon in the prior year quarter and
reduced discretionary spending. EBITDA reflected an unfavorable
foreign exchange impact of 1%. Hunter contributed $12.2 million in
the current quarter.
CPP Global Sourcing Strategy Expansion
In response to market conditions, Griffon’s CPP segment will
expand its global sourcing strategy to include long handle tools,
material handling, and wood storage and organization product lines
for the U.S. market.
By transitioning these product lines to an asset-light
structure, CPP’s operations will be better positioned to serve
customers with a more flexible and cost-effective sourcing model
that leverages supplier relationships around the world, while
improving its competitive positioning in a post-pandemic
marketplace. These actions will enable CPP to achieve 15% EBITDA
margins, while enhancing free cash flow through improved working
capital and significantly lower capital expenditures.
The global sourcing strategy expansion is expected to be
complete by the end of calendar 2024. Over that period, CPP expects
to reduce its U.S. facility footprint by approximately 1.2 million
square feet, or 30%, and its headcount by approximately 600. The
affected U.S. locations will include Camp Hill and Harrisburg, PA;
Grantsville, MD; Fairfield, IA; and four wood mills.
Implementation of this strategy over the duration of the project
will result in charges of $120 to $130 million, including $50 to
$55 million of cash charges for employee retention and severance,
operational transition, and facility and lease exit costs, and $70
to $75 million of non-cash charges primarily related to asset
write-downs. Capital investment in the range of $3 to $5 million
will also be required. These costs exclude cash proceeds from the
sale of real estate and equipment, which are expected to largely
offset the cash charges, and also exclude inefficiencies due to
duplicative labor costs and absorption impacts during
transition.
In both the quarter and six months ended March 31, 2023, CPP
incurred charges of $78.3 million related to the expansion of its
global sourcing strategy consisting of cash charges of $19.2
million and non-cash, asset-related charges of $59.1 million.
Home and Building Products ("HBP")
HBP revenue in the current quarter of $396.7 million increased
8% from the prior year period, due to favorable pricing and mix of
14% driven by both residential and commercial. Total volume
decreased 6% due to decreased residential volume, partially offset
by increased commercial volume.
HBP Adjusted EBITDA in the current quarter was $131.9 million,
increasing 26% compared to the prior year period. Adjusted EBITDA
benefited from the increased revenue noted above and reduced
material costs, partially offset by increased labor,
transportation, advertising and marketing costs.
Taxes
The Company reported pretax loss from continuing operations for
the quarter ended March 31, 2023 compared to pretax income from
continuing operations for the quarter ended March 31, 2022, and
recognized the effective tax rates of 30.9% and 29.8% for the
quarters ended March 31, 2023 and 2022, respectively. Excluding all
items that affect comparability, the effective tax rates for the
quarters ended March 31, 2023 and 2022 were 29.5% and 28.5%,
respectively.
Balance Sheet and Capital
Expenditures
At March 31, 2023, the Company had cash and equivalents of
$175.6 million and total debt outstanding of $1.51 billion,
resulting in net debt of $1.33 billion. Leverage, as calculated in
accordance with our credit agreement, was 2.5x net debt to EBITDA.
Year-to-date March 31, 2023 free cash flow of $161.6 million
reflects the strong operating results through the first half of
2023. Borrowing availability under the revolving credit facility
was $356.3 million subject to certain loan covenants. Capital
expenditures were $7.1 million for the quarter ended March 31,
2023.
On April 20, 2023, Griffon announced that the Board of Directors
approved an increase of its share repurchase authorization to $258
million from the prior unused authorization as of March 31, 2023 of
$58 million. There were no share repurchases during the quarter
ended March 31, 2023.
2023 Outlook
We now expect 2023 revenue of $2.7 billion (prior $2.95 billion)
reflecting decreased CPP revenue, primarily driven by reduced
consumer demand and ongoing elevated levels of customer inventory,
partially offset by increased HBP revenue driven by commercial
volume increases and improved residential volume expectations.
Adjusted EBITDA in 2023 is now expected to be at least $525
million (prior $500 million), excluding unallocated costs of $56
million, and charges related to the strategic review process of $22
million (prior $16 million) and AMES’s global sourcing expansion.
Increased Adjusted EBITDA expectations reflect strong HBP results
partially offset by the reduced CPP volume noted above, and its
related impact on manufacturing and overhead absorption.
Other guidance remains unchanged for 2023, including free cash
flow to exceed net income, capital expenditures of $50 million,
depreciation of $50 million and amortization of $22 million,
interest expense of $103 million, and a normalized tax rate of
29%.
Conference Call
Information
The Company will hold a conference call today, May 3, 2023, at
8:30 AM ET.
The call can be accessed by dialing 1-888-886-7786 (U.S.
participants) or 1-416-764-8658 (International participants).
Callers should ask to be connected to the Griffon Corporation
teleconference or provide conference ID number 49851739.
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 Wednesday,
May 3, 2023 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: 49851739. The replay will be available through Wednesday,
May 17, 2023 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, the impact of the Hunter Fan
transaction, the 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; Griffon’s ability to achieve expected savings and
improved operational results from cost control, restructuring,
integration and disposal initiatives (including, in particular, the
expanded CPP outsourcing strategy announced in May 2023); 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; increases in the cost or lack of availability of raw
materials such as resin, wood and steel, components or purchased
finished goods, including any potential impact on costs or
availability resulting 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 inflation, 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; 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; possible terrorist threats and actions and their impact
on the global economy; effects of possible IT system failures, data
breaches or cyber-attacks; the impact of COVID-19, or some other
future pandemic, 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 and suppliers; 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
laws. 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 two reportable
segments:
- Consumer and Professional Products (“CPP”) is a leading North
American manufacturer and a global provider of branded consumer and
professional tools; residential, industrial and commercial fans;
home storage and organization products; and products that enhance
indoor and outdoor lifestyles. CPP sells products globally through
a portfolio of leading brands including AMES, since 1774, Hunter,
since 1886, True Temper, and ClosetMaid.
- Home and Building Products ("HBP") 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 Cornell and Cookson brands.
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, strategic
review, non-cash impairment charges, restructuring charges, loss
from 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 operating highlights and a
reconciliation of Adjusted EBITDA to Income (loss) before taxes
from continuing operations:
(in thousands)
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
REVENUE
2023
2022
2023
2022
Consumer and Professional Products
$
314,325
$
411,012
$
567,136
$
694,185
Home and Building Products
396,659
368,605
793,232
677,181
Total revenue
$
710,984
$
779,617
$
1,360,368
$
1,371,366
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
2023
2022
2023
2022
ADJUSTED EBITDA
Consumer and Professional Products
$
19,635
$
47,844
$
17,826
$
64,058
Home and Building Products
131,871
104,474
256,016
160,771
Total Segments
151,506
152,318
273,842
224,829
Unallocated amounts, excluding
depreciation*
(14,630
)
(13,056
)
(28,406
)
(26,319
)
Adjusted EBITDA
136,876
139,262
245,436
198,510
Net interest expense
(24,643
)
(21,376
)
(49,187
)
(37,024
)
Depreciation and amortization
(17,254
)
(16,252
)
(34,367
)
(29,333
)
Gain on sale of building
—
—
10,852
—
Strategic review - retention and other
(6,190
)
—
(14,422
)
—
Proxy expenses
(614
)
(4,661
)
(2,117
)
(6,952
)
Acquisition costs
—
(6,708
)
—
(9,303
)
Restructuring charges
(78,334
)
(4,766
)
(78,334
)
(6,482
)
Intangible asset impairment
(100,000
)
—
(100,000
)
—
Fair value step-up of acquired inventory
sold
—
(2,701
)
—
(2,701
)
Income (loss) before taxes from continuing
operations
$
(90,159
)
$
82,798
$
(22,139
)
$
106,715
* Primarily Corporate Overhead
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
DEPRECIATION and AMORTIZATION
2023
2022
2023
2022
Segment:
Consumer and Professional
Products
$
13,303
$
11,791
$
26,430
$
20,397
Home and Building Products
3,811
4,324
7,657
8,662
Total segment depreciation and
amortization
17,114
16,115
34,087
29,059
Corporate
140
137
280
274
Total consolidated depreciation and
amortization
$
17,254
$
16,252
$
34,367
$
29,333
Griffon believes Free Cash Flow ("FCF", a non-GAAP measure) is a
useful measure for investors because it portrays the Company's
ability to generate cash from operations for purposes such as
repaying debt, funding acquisitions and paying dividends.
The following table provides a reconciliation of Net cash
provided by (used in) operating activities to FCF:
For the Six Months Ended March
31,
(in thousands)
2023
2022
Net cash provided by (used in) operating
activities
$
161,636
$
(173,373
)
Acquisition of property, plant and
equipment
(11,837
)
(22,030
)
Proceeds from the sale of property, plant
and equipment
11,834
32
FCF
$
161,633
$
(195,371
)
The following tables provide a reconciliation of Gross profit
and Selling, general and administrative expenses for items that
affect comparability for the three and six month periods ended
March 31, 2023 and 2022:
(in thousands)
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
2023
2022
2023
2022
Gross Profit, as reported
$
194,492
$
260,643
$
428,317
$
426,485
% of revenue
27.4
%
33.4
%
31.5
%
31.1
%
Adjusting items:
Restructuring charges(1)
74,645
2,455
74,645
2,777
Fair value step-up of acquired
inventory sold
—
2,701
—
2,701
Gross Profit, as adjusted
$
269,137
$
265,799
$
502,962
$
431,963
% of revenue
37.9
%
34.1
%
37.0
%
31.5
%
(1) For the quarter and six months ended
March 31, 2023 restructuring charges relates to the CPP global
sourcing expansion.
(in thousands)
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
2023
2022
2023
2022
Selling, general and administrative
expenses, as reported
$
260,301
$
157,838
$
413,021
$
285,190
% of revenue
36.6
%
20.2
%
30.4
%
20.8
%
Adjusting items:
Restructuring charges(1)
(3,689
)
(2,311
)
(3,689
)
(3,705
)
Intangible asset impairment
(100,000
)
—
(100,000
)
—
Acquisition costs
—
(6,708
)
—
(9,303
)
Proxy expenses
(614
)
(4,661
)
(2,117
)
(6,952
)
Strategic review - retention and other
(6,190
)
—
(14,422
)
—
Selling, general and administrative
expenses, as adjusted
$
149,808
$
144,158
$
292,793
$
265,230
% of revenue
21.1
%
18.5
%
21.5
%
19.3
%
(1) For the quarter and six months ended
March 31, 2023 restructuring charges relates to the CPP global
sourcing expansion.
GRIFFON CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended March
31,
Six Months Ended March
31,
2023
2022
2023
2022
Revenue
$
710,984
$
779,617
$
1,360,368
$
1,371,366
Cost of goods and services
516,492
518,974
932,051
944,881
Gross profit
194,492
260,643
428,317
426,485
Selling, general and administrative
expenses
160,301
157,838
313,021
285,190
Intangible asset impairment
100,000
—
100,000
—
Total operating expenses
260,301
157,838
413,021
285,190
Income (loss) from operations
(65,809
)
102,805
15,296
141,295
Other income (expense)
Interest expense
(24,879
)
(21,408
)
(49,527
)
(37,089
)
Interest income
236
32
340
65
Gain on sale of building
—
—
10,852
—
Other, net
293
1,369
900
2,444
Total other expense, net
(24,350
)
(20,007
)
(37,435
)
(34,580
)
Income (loss) before taxes from continuing
operations
(90,159
)
82,798
(22,139
)
106,715
Provision (benefit) for income taxes
(27,904
)
24,638
(8,586
)
31,851
Income (loss) from continuing
operations
$
(62,255
)
$
58,160
$
(13,553
)
$
74,864
Discontinued operations:
Income from operations of discontinued
operations
—
1,000
—
4,320
Provision (benefit) for income taxes
—
(6,529
)
—
(5,803
)
Income from discontinued operations
—
7,529
—
10,123
Net income (loss)
$
(62,255
)
$
65,689
$
(13,553
)
$
84,987
Basic earnings per common share:
Income (loss) from continuing
operations
$
(1.17
)
$
1.13
$
(0.26
)
$
1.46
Income from discontinued operations
—
0.15
—
0.20
Basic earnings (loss) per common share
$
(1.17
)
$
1.27
$
(0.26
)
$
1.65
Basic weighted-average shares
outstanding
53,038
51,668
52,809
51,423
Diluted earnings per common share:
Income (loss) from continuing
operations
$
(1.17
)
$
1.09
$
(0.26
)
$
1.40
Income from discontinued operations
—
0.14
—
0.19
Diluted earnings (loss) per common
share
$
(1.17
)
$
1.23
$
(0.26
)
$
1.59
Diluted weighted-average shares
outstanding
53,038
53,430
52,809
53,602
Dividends paid per common share
$
0.10
$
0.09
$
0.20
$
0.18
Net income (loss)
$
(62,255
)
$
65,689
$
(13,553
)
$
84,987
Other comprehensive income (loss), net of
taxes:
Foreign currency translation
adjustments
334
6,049
12,271
3,730
Pension and other post retirement
plans
746
140
1,608
808
Change in cash flow hedges
1,533
(1,240
)
953
(2,340
)
Total other comprehensive income (loss),
net of taxes
2,613
4,949
14,832
2,198
Comprehensive income (loss), net
$
(59,642
)
$
70,638
$
1,279
$
87,185
GRIFFON CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(Unaudited)
March 31, 2023
September 30,
2022
CURRENT ASSETS
Cash and equivalents
$
175,592
$
120,184
Accounts receivable, net of allowances of
$13,255 and $12,137
386,119
361,653
Inventories
574,086
669,193
Prepaid and other current assets
77,769
62,453
Assets of discontinued operations
1,004
1,189
Total Current Assets
1,214,570
1,214,672
PROPERTY, PLANT AND EQUIPMENT,
net
262,394
294,561
OPERATING LEASE RIGHT-OF-USE
ASSETS
175,095
183,398
GOODWILL
327,864
335,790
INTANGIBLE ASSETS, net
655,911
761,914
OTHER ASSETS
20,134
21,553
ASSETS OF DISCONTINUED
OPERATIONS
4,188
4,586
Total Assets
$
2,660,156
$
2,816,474
CURRENT LIABILITIES
Notes payable and current portion of
long-term debt
$
15,720
$
12,653
Accounts payable
159,198
194,793
Accrued liabilities
169,386
171,797
Current portion of operating lease
liabilities
29,889
31,680
Liabilities of discontinued operations
7,460
12,656
Total Current Liabilities
381,653
423,579
LONG-TERM DEBT, net
1,491,564
1,560,998
LONG-TERM OPERATING LEASE
LIABILITIES
155,018
159,414
OTHER LIABILITIES
157,890
190,651
LIABILITIES OF DISCONTINUED
OPERATIONS
5,720
4,262
Total Liabilities
2,191,845
2,338,904
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity
468,311
477,570
Total Liabilities and Shareholders’
Equity
$
2,660,156
$
2,816,474
GRIFFON CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended March
31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(13,553
)
$
84,987
Net income from discontinued
operations
—
(10,123
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities of
continuing operations:
Depreciation and amortization
34,367
29,333
Stock-based compensation
13,335
9,959
Intangible asset impairments
100,000
—
Asset impairment charges -
restructuring
59,118
806
Provision for losses on accounts
receivable
343
578
Amortization of debt discounts and
issuance costs
2,045
1,566
Fair value step-up of acquired inventory
sold
—
2,701
Deferred income tax provision
(benefit)
(25,744
)
2,883
Gain on sale of assets and investments
(10,852
)
(118
)
Change in assets and liabilities, net of
assets and liabilities acquired:
Increase in accounts receivable
(19,431
)
(177,347
)
(Increase) decrease in inventories
64,582
(106,534
)
Increase in prepaid and other assets
3,451
6,063
Decrease in accounts payable, accrued
liabilities, income taxes payable and operating lease
liabilities
(51,409
)
(18,652
)
Other changes, net
5,384
525
Net cash provided by (used in) operating
activities - continuing operations
161,636
(173,373
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and
equipment
(11,837
)
(22,030
)
Acquired businesses, net of cash
acquired
—
(851,464
)
Payments related to sale of
Telephonics
(2,568
)
—
Proceeds from investments
—
14,923
Proceeds from the sale of property, plant
and equipment
11,834
32
Net cash used in investing activities -
continuing operations
(2,571
)
(858,539
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid
(12,824
)
(10,091
)
Purchase of shares for treasury
(12,989
)
(10,886
)
Proceeds from long-term debt
45,419
975,291
Payments of long-term debt
(119,110
)
(37,906
)
Financing costs
—
(16,457
)
Other, net
(127
)
(27
)
Net cash provided by ( used in) financing
activities - continuing operations
(99,631
)
899,924
GRIFFON CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS - continued
(in thousands)
(Unaudited)
Six Months Ended March
31,
2023
2022
CASH FLOWS FROM DISCONTINUED
OPERATIONS:
Net cash provided by (used in) operating
activities
(2,598
)
10,586
Net cash used in investing activities
—
(1,445
)
Net cash provided by (used in)
discontinued operations
(2,598
)
9,141
Effect of exchange rate changes on cash
and equivalents
(1,428
)
(3,513
)
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS
55,408
(126,360
)
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD
120,184
248,653
CASH AND EQUIVALENTS AT END OF PERIOD
$
175,592
$
122,293
Griffon evaluates performance based on Earnings (loss) per share
and Net income (loss) excluding restructuring charges, loss from
debt extinguishment, acquisition related expenses, discrete and
certain other tax items, as well other items that may affect
comparability, as applicable, a non-GAAP measure. 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 (loss) per
common share from continuing operations, a non-GAAP measure, to
Adjusted earnings (loss) per common share from continuing
operations:
(in thousands, except per share
data)
For the Three Months Ended
March 31,
For the Six Months Ended March
31,
2023
2022
2023
2022
Income (loss) from continuing
operations
$
(62,255
)
$
58,160
$
(13,553
)
$
74,864
Adjusting items:
Restructuring charges(1)
78,334
4,766
78,334
6,482
Intangible asset impairment
100,000
—
100,000
—
Gain on sale of building
—
—
(10,852
)
—
Acquisition costs
—
6,708
—
9,303
Strategic review - retention and other
6,190
—
14,422
—
Proxy expenses
614
4,661
2,117
6,952
Fair value step-up of acquired inventory
sold(2)
—
2,701
—
2,701
Tax impact of above items(3)
(47,224
)
(3,596
)
(47,055
)
(5,097
)
Discrete and certain other tax benefits,
net(4)
(8,723
)
(683
)
(9,056
)
(1,574
)
Adjusted income from continuing
operations
$
66,936
$
72,717
$
114,357
$
93,631
Earnings (loss) per common share from
continuing operations
$
(1.17
)
$
1.09
$
(0.26
)
$
1.40
Adjusting items, net of tax:
Anti-dilutive share impact(5)
0.05
—
0.02
—
Restructuring charges(1)
1.06
0.07
1.06
0.09
Intangible asset impairment
1.34
—
1.34
—
Gain on sale of building
—
—
(0.15
)
—
Acquisition costs
—
0.12
—
0.15
Strategic review - retention and other
0.08
—
0.20
—
Proxy expenses
0.01
0.07
0.03
0.10
Fair value step-up of acquired inventory
sold
—
0.04
—
0.04
Discrete and certain other tax benefits,
net(4)
(0.16
)
(0.01
)
(0.16
)
(0.03
)
Adjusted earnings per common share from
continuing operations
$
1.21
$
1.36
$
2.07
$
1.75
Weighted-average shares outstanding (in
thousands)
53,038
51,668
52,809
51,423
Diluted weighted-average shares
outstanding (in thousands)(5)
55,364
53,430
55,334
53,602
Note: Due to rounding, the sum of earnings per common share from
continuing operations and adjusting items, net of tax, may not
equal adjusted earnings per common share from continuing
operations.
(1) For the quarter and six months ended March 31, 2023,
restructuring charges relates to the CPP global sourcing expansion,
of which $74,645 is included in Cost of goods and services and
$3,689 is included in SG&A.
(2) The fair value step-up of acquired inventory sold is
included in Cost of goods and services.
(3) The tax impact for the above reconciling adjustments from
GAAP to non-GAAP Net income and EPS is determined by comparing the
Company's tax provision, including the reconciling adjustments, to
the tax provision excluding such adjustments.
(4) Discrete and certain other tax benefits primarily relate to
the impact of a rate differential between statutory and annual
effective tax rate on items impacting the quarter.
(5) Loss from continuing operations is calculated using basic
shares on the face of the income statement. Per share impact of
using diluted shares represents the impact of converting from the
basic shares used in calculating earnings per share from the Loss
from continuing operations to the diluted shares used in
calculating earnings per share from the adjusted income from
continuing operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005400/en/
Company Brian G. Harris SVP & Chief Financial Officer
Griffon Corporation (212) 957-5000 IR@griffon.com
Investor Relations Michael Callahan Managing Director ICR Inc.
(203) 682-8311
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