Griffon Corporation (NYSE:GFF) Q3 2023 Earnings Conference Call August 2, 2023 8:30 AM ET Company Participants Ron Kramer - Chairman and CEO Brian Harris - CFO Conference Call Participants Lee Jagoda - CJS Securities Tim Wojs - Baird Julio Romero - Sidoti and Company Noah Merkousko - Stephens Inc Sam Darkatsh - Raymond James Justin Bergner - Gabelli Funds Operator Good morning, and welcome to the Griffon Corporation Fiscal Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only ...

PART I - FINANCIAL INFORMATION [Item 1 – Financial Statements](index=3&type=section&id=Item%201%20%E2%80%93%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Griffon Corporation, including the Balance Sheets, Statements of Shareholders' Equity, Statements of Operations and Comprehensive Income (Loss), and Statements of Cash Flows, along with detailed notes explaining accounting policies, significant transactions, and financial performance for the periods ended June 30, 2023 and September 30, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents Griffon Corporation's financial position, detailing changes in assets, liabilities, and shareholders' equity (in thousands) | (in thousands) | June 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $1,131,238 | $1,214,672 | | **Total Assets** | $2,571,215 | $2,816,474 | | **Total Current Liabilities** | $382,303 | $423,579 | | **Total Liabilities** | $2,235,509 | $2,338,904 | | **Total Shareholders' Equity** | $335,706 | $477,570 | - **Total Assets decreased by $245,259 thousand (8.7%)** from September 30, 2022, to June 30, 2023. **Total Liabilities decreased by $103,395 thousand (4.4%)** in the same period. **Total Shareholders' Equity decreased by $141,864 thousand (29.7%)** from September 30, 2022, to June 30, 2023[9](index=9&type=chunk) [Condensed Consolidated Statement of Shareholders' Equity](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Shareholders'%20Equity) This section details changes in shareholders' equity, highlighting impacts from net income/loss, dividends, and repurchases (in thousands) | (in thousands) | Balance at Sep 30, 2022 | Balance at Jun 30, 2023 | | :--- | :--- | :--- | | **Total Shareholders' Equity** | $477,570 | $335,706 | | Net income (9 months ended Dec 31, 2022) | $48,702 | - | | Net loss (3 months ended Mar 31, 2023) | - | $(62,255) | | Net income (3 months ended Jun 30, 2023) | - | $49,205 | | Dividends (9 months ended Jun 30, 2023) | - | $(121,461) | | Common stock acquired (9 months ended Jun 30, 2023) | - | $(86,009) | - Total Shareholders' Equity **decreased from $477,570 thousand at September 30, 2022, to $335,706 thousand at June 30, 2023**, **primarily due to net losses, significant dividend payments, and common stock repurchases**[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section presents the company's operational performance, including revenue, net income, and earnings per share (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $683,430 | $768,179 | $2,043,798 | $2,139,545 | | **Gross profit** | $274,624 | $260,601 | $702,941 | $687,086 | | **Income from operations** | $102,185 | $103,214 | $117,481 | $244,509 | | **Net income** | $49,205 | $140,287 | $35,652 | $225,274 | | **Basic earnings per common share** | $0.94 | $2.71 | $0.68 | $4.37 | | **Diluted earnings per common share** | $0.90 | $2.60 | $0.65 | $4.19 | | **Dividends paid per common share** | $2.125 | $0.09 | $2.325 | $0.27 | | **Comprehensive income, net** | $49,520 | $126,110 | $50,799 | $213,295 | - **Revenue decreased by 11% for the three months ended June 30, 2023, and by 4% for the nine months ended June 30, 2023, compared to the prior year periods**. Net income saw a **significant decline**, **dropping from $140,287 thousand to $49,205 thousand** for the three-month period and **from $225,274 thousand to $35,652 thousand** for the nine-month period, **largely due to the absence of income from discontinued operations and intangible asset impairment charges in 2023**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities, showing changes in cash (in thousands) | (in thousands) | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities - continuing operations** | $309,003 | $(65,001) | | **Net cash used in investing activities - continuing operations** | $(10,911) | $(574,256) | | **Net cash provided by (used in) financing activities - continuing operations** | $(262,560) | $513,762 | | **Net cash provided by (used in) discontinued operations** | $(2,799) | $24,262 | | **NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS** | $31,606 | $(103,966) | | **CASH AND EQUIVALENTS AT END OF PERIOD** | $151,790 | $144,687 | - **Net cash provided by operating activities from continuing operations significantly improved to $309,003 thousand for the nine months ended June 30, 2023, compared to cash used of $65,001 thousand in the prior year**, **driven by increased cash generation and decreased working capital**. **Cash used in investing activities decreased substantially due to fewer acquisitions** compared to the prior year's Hunter acquisition[19](index=19&type=chunk)[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, significant transactions, and financial components [NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) This note describes Griffon Corporation's diversified business, operating segments, and recent strategic actions - **Griffon Corporation is a diversified management and holding company operating through two reportable segments: Home and Building Products (HBP) and Consumer and Professional Products (CPP)**. **The company completed the sale of its Defense Electronics segment in June 2022, classifying it as a discontinued operation**. **In April 2023, the Board concluded its strategic review, determining that executing the current strategic plan was the best way to maximize shareholder value**[23](index=23&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - **The company acquired Hunter Fan Company in January 2022, integrating it into the CPP segment**. **In August 2023, Griffon amended its credit agreement to increase its revolving credit facility to $500 million and extend its maturity to August 2028**[25](index=25&type=chunk)[28](index=28&type=chunk) [NOTE 2 – FAIR VALUE MEASUREMENTS](index=10&type=section&id=NOTE%202%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note explains fair value measurements for financial instruments, including senior notes, term loans, and derivatives - **Griffon uses fair value measurements for certain financial instruments, primarily its 2028 senior notes and Term Loan B facility, which are based on quoted market prices (Level 1 inputs)**. **The company also uses derivative contracts, such as foreign currency exchange contracts, to manage foreign currency risks, which are classified as Level 2 inputs**[39](index=39&type=chunk)[40](index=40&type=chunk) (in thousands) | (in thousands) | June 30, 2023 | | :--- | :--- | | Fair value of 2028 senior notes | $904,104 | | Fair value of Term Loan B facility | $487,550 | | Australian dollar contracts (hedged) | $18,000 | | Chinese Yuan contracts (hedged) | $55,500 | | Canadian dollar contracts (non-hedged) | $5,800 | [NOTE 3 – REVENUE](index=12&type=section&id=NOTE%203%20%E2%80%93%20REVENUE) This note outlines the company's revenue recognition policies and how revenue is disaggregated by markets and segments - **The Company recognizes revenue when performance obligations are satisfied, typically upon shipment when control, title, and risk of ownership transfer to the customer**. **Revenue is disaggregated by end markets, segments, and geographic location for detailed reporting**[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [NOTE 4 – ACQUISITIONS](index=12&type=section&id=NOTE%204%20%E2%80%93%20ACQUISITIONS) This note details the Hunter Fan Company acquisition, including purchase price, financing, and segment contribution - **On January 24, 2022, Griffon acquired Hunter Fan Company for approximately $845,000 thousand, financed primarily by a new $800,000 thousand Term Loan B facility**. **Hunter contributed $218,105 thousand in revenue and $41,746 thousand in Segment adjusted EBITDA for the nine months ended June 30, 2023**[49](index=49&type=chunk) Hunter Acquisition Purchase Price Allocation (in thousands) | Asset/Liability | Amount | | :--- | :--- | | Total assets acquired | $1,077,006 | | Total liabilities assumed | $225,552 | | Total net assets acquired | $851,454 | | Goodwill | $250,711 | | Indefinite-lived intangibles (Hunter and Casablanca brands) | $356,000 | | Definite-lived intangibles (Customer relationships) | $260,000 | [NOTE 5 – INVENTORIES](index=14&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES) This note details inventory components, showing a decrease in total inventories and a CPP impairment charge Inventory Components (in thousands) | Component | June 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Raw materials and supplies | $160,071 | $173,520 | | Work in process | $34,572 | $50,963 | | Finished goods | $360,315 | $444,710 | | **Total** | **$554,958** | **$669,193** | - **Total inventories decreased by $114,235 thousand (17.1%)** from September 30, 2022, to June 30, 2023. **The CPP segment recorded an inventory impairment charge of $37,100 thousand during the nine months ended June 30, 2023, as part of restructuring activities**[54](index=54&type=chunk) [NOTE 6 – PROPERTY, PLANT AND EQUIPMENT](index=14&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) This note presents net property, plant and equipment, detailing its decrease and associated depreciation Property, Plant and Equipment, net (in thousands) | Component | June 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Land, building and building improvements | $159,689 | $159,693 | | Machinery and equipment | $439,989 | $511,779 | | Leasehold improvements | $36,290 | $35,489 | | Accumulated depreciation and amortization | $(373,345) | $(412,400) | | **Total** | **$262,623** | **$294,561** | - **Net property, plant and equipment decreased by $31,938 thousand (10.8%)** from September 30, 2022, to June 30, 2023. **Depreciation and amortization expense for property, plant and equipment was $10,000 thousand for the quarter and $33,090 thousand for the nine months ended June 30, 2023**[55](index=55&type=chunk) [NOTE 7 – CREDIT LOSSES](index=15&type=section&id=NOTE%207%20%E2%80%93%20CREDIT%20LOSSES) This note explains the company's allowance for credit losses, based on accounts receivable aging and customer condition - **The Company's allowance for credit losses is primarily based on the aging method of accounts receivable and customer financial condition, considering historical, current, and future economic conditions**. **The allowance for credit losses increased slightly from $12,137 thousand at October 1, 2022, to $12,516 thousand at June 30, 2023**[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) Allowance for Credit Losses Roll-forward (in thousands) | Item | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :--- | :--- | :--- | | Beginning Balance, October 1 | $12,137 | $8,787 | | Provision for expected credit losses | $2,732 | $2,430 | | Amounts written off | $(1,916) | $(159) | | Ending Balance, June 30 | $12,516 | $13,541 | [NOTE 8 – GOODWILL AND OTHER INTANGIBLES](index=16&type=section&id=NOTE%208%20%E2%80%93%20GOODWILL%20AND%20OTHER%20INTANGIBLES) This note details changes in goodwill and other intangible assets, including a decrease and an impairment charge - **Goodwill decreased from $335,790 thousand at September 30, 2022, to $327,864 thousand at June 30, 2023**, **primarily due to the final allocation of the Hunter acquisition purchase price**. **An intangible asset impairment charge of $100,000 thousand was recorded for CPP's indefinite-lived intangible assets during the second quarter ended March 31, 2023**, **driven by decreased sales and consumer demand**[63](index=63&type=chunk)[64](index=64&type=chunk) Goodwill by Segment (in thousands) | Segment | September 30, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Consumer and Professional Products | $144,537 | $136,611 | | Home and Building Products | $191,253 | $191,253 | | **Total** | **$335,790** | **$327,864** | Intangible Assets (in thousands) | Class | June 30, 2023 Gross Carrying Amount | September 30, 2022 Gross Carrying Amount | | :--- | :--- | :--- | | Customer relationships & other | $444,602 | $442,085 | | Technology and patents | $15,178 | $14,326 | | Trademarks | $303,421 | $399,668 | | **Total intangible assets** | **$763,201** | **$856,079** | [NOTE 9 – INCOME TAXES](index=17&type=section&id=NOTE%209%20%E2%80%93%20INCOME%20TAXES) This note outlines the effective tax rate for continuing operations and significant tax impacts from various events - **The effective tax rate for continuing operations, excluding certain discrete items, was 28.1% for the quarter and 28.9% for the nine months ended June 30, 2023**. **This compares to 28.6% and 28.9% for the respective prior year periods**. **The nine months ended June 30, 2023, included significant tax impacts from** a gain on sale of building, strategic review costs, restructuring charges, special dividend ESOP charges, and intangible asset impairment charges[66](index=66&type=chunk)[67](index=67&type=chunk) Income Tax Provision (in thousands) | Period | Income Before Taxes | Tax Provision | | :--- | :--- | :--- | | Three Months Ended June 30, 2023 | $78,453 | $29,248 | | Three Months Ended June 30, 2022 | $76,050 | $23,268 | | Nine Months Ended June 30, 2023 | $56,314 | $20,662 | | Nine Months Ended June 30, 2022 | $182,765 | $55,119 | [NOTE 10 – LONG-TERM DEBT](index=18&type=section&id=NOTE%2010%20%E2%80%93%20LONG-TERM%20DEBT) This note details the company's long-term debt, including a decrease, credit agreement amendment, and interest expense Long-Term Debt (in thousands) | Debt Type | June 30, 2023 Outstanding Balance | September 30, 2022 Outstanding Balance | | :--- | :--- | :--- | | Senior notes due 2028 | $974,775 | $974,775 | | Term Loan B due 2029 | $490,000 | $496,000 | | Revolver due 2025 | $86,705 | $97,328 | | Finance lease - real estate | $12,056 | $13,091 | | **Total Long-Term Debt, net** | **$1,536,415** | **$1,560,998** | - **Total long-term debt, net, decreased by $24,583 thousand (1.6%)** from September 30, 2022, to June 30, 2023. The company amended its Credit Agreement in August 2023, **increasing the revolving credit facility to $500 million and extending its maturity to August 2028**. **The Term Loan B facility requires quarterly principal payments of $2,000 thousand and has a variable interest rate (7.64% as of June 30, 2023)**[69](index=69&type=chunk)[74](index=74&type=chunk)[76](index=76&type=chunk) Total Interest Expense (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $25,641 | $24,022 | | Nine Months Ended June 30, | $75,168 | $61,111 | [NOTE 11 — SHAREHOLDERS' EQUITY AND EQUITY COMPENSATION](index=22&type=section&id=NOTE%2011%20%E2%80%94%20SHAREHOLDERS'%20EQUITY%20AND%20EQUITY%20COMPENSATION) This note covers shareholders' equity, detailing special dividends, share repurchases, and stock compensation - **Griffon paid a special cash dividend of $2.00 per share in May 2023, in addition to regular quarterly dividends**. **The Board approved a $200,000 thousand increase to its share repurchase program in April 2023, leading to the purchase of 2,541,932 shares for $85,361 thousand during the nine months ended June 30, 2023**[83](index=83&type=chunk)[91](index=91&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $15,252 | $6,019 | | Nine Months Ended June 30, | $28,587 | $15,978 | [NOTE 12 – EARNINGS PER SHARE (EPS)](index=23&type=section&id=NOTE%2012%20%E2%80%93%20EARNINGS%20PER%20SHARE%20(EPS)) This note presents basic and diluted earnings per share, highlighting a decrease due to lower net income Earnings Per Share (EPS) (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.94 | $2.71 | $0.68 | $4.37 | | Diluted EPS | $0.90 | $2.60 | $0.65 | $4.19 | | Basic weighted-average shares outstanding | 52,304 | 51,734 | 52,640 | 51,527 | | Diluted weighted-average shares outstanding | 54,602 | 53,914 | 55,087 | 53,704 | - Basic and diluted EPS from continuing operations decreased for both the three and nine months ended June 30, 2023, compared to the prior year, **primarily due to lower net income from continuing operations and the absence of income from discontinued operations**[17](index=17&type=chunk) [NOTE 13 – BUSINESS SEGMENTS](index=24&type=section&id=NOTE%2013%20%E2%80%93%20BUSINESS%20SEGMENTS) This note details financial performance for the Home and Building Products and Consumer and Professional Products segments - **Griffon operates through two segments: Home and Building Products (HBP) and Consumer and Professional Products (CPP)**. **HBP is a leading manufacturer of garage doors, while CPP provides consumer and professional tools, fans, and home storage products**[99](index=99&type=chunk) Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Home and Building Products | $401,142 | $405,545 | $1,194,374 | $1,082,726 | | Consumer and Professional Products | $282,288 | $362,634 | $849,424 | $1,056,819 | | **Total Revenue** | **$683,430** | **$768,179** | **$2,043,798** | **$2,139,545** | Segment Adjusted EBITDA (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Home and Building Products | $134,330 | $119,847 | $390,346 | $280,618 | | Consumer and Professional Products | $18,265 | $28,373 | $36,091 | $92,431 | | **Total Segment Adjusted EBITDA** | **$152,595** | **$148,220** | **$426,437** | **$373,049** | - **HBP revenue decreased 1% for the quarter but increased 10% for the nine months ended June 30, 2023**, with adjusted EBITDA **increasing 12% and 39% respectively**. CPP revenue **decreased 22% for the quarter and 20% for the nine months**, with adjusted EBITDA **decreasing 36% and 61% respectively**, **primarily due to reduced volume and elevated customer inventory levels**[97](index=97&type=chunk)[105](index=105&type=chunk) [NOTE 14 – EMPLOYEE BENEFIT PLANS](index=27&type=section&id=NOTE%2014%20%E2%80%93%20EMPLOYEE%20BENEFIT%20PLANS) This note outlines the company's employee benefit plans, specifically detailing the net periodic pension expense Defined Benefit Pension Expense (Income) (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Interest cost | $1,826 | $943 | $5,477 | $2,650 | | Expected return on plan assets | $(2,553) | $(2,905) | $(7,660) | $(8,329) | | Amortization: Recognized actuarial loss | $944 | $844 | $2,833 | $2,534 | | **Net periodic expense (income)** | **$217** | **$(1,118)** | **$650** | **$(3,145)** | - **The company reported a net periodic pension expense of $217 thousand for the three months and $650 thousand for the nine months ended June 30, 2023, shifting from net income in the prior year periods**[109](index=109&type=chunk) [NOTE 15 – RECENT ACCOUNTING PRONOUNCEMENTS](index=27&type=section&id=NOTE%2015%20%E2%80%93%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note discusses the adoption of new accounting pronouncements, noting no material impact on financial statements - **The company adopted ASU No. 2021-08, Business Combinations (Topic 805); Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, effective fiscal 2023, which did not have a material impact on its financial statements**[110](index=110&type=chunk) [NOTE 16 – DISCONTINUED OPERATIONS](index=28&type=section&id=NOTE%2016%20%E2%80%93%20DISCONTINUED%20OPERATIONS) This note details the sale of the Defense Electronics segment and remaining assets and liabilities - **Griffon completed the sale of its Defense Electronics segment (Telephonics) in June 2022 for $330,000 thousand, classifying its results as discontinued operations**. **The company recorded a gain of $107,517 thousand from the sale in fiscal 2022**[113](index=113&type=chunk) Income from Discontinued Operations (Telephonics) (in thousands) | Item | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | $50,795 | $161,061 | | Income from discontinued operations before taxes | $113,457 | $117,777 | | Income from discontinued operations | $87,505 | $97,628 | Assets and Liabilities of Discontinued Operations (in thousands) | Item | June 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Total assets of discontinued operations | $5,125 | $5,775 | | Total liabilities of discontinued operations | $12,910 | $16,918 | [NOTE 17 – RESTRUCTURING CHARGES](index=29&type=section&id=NOTE%2017%20%E2%80%93%20RESTRUCTURING%20CHARGES) This note outlines CPP's global sourcing strategy, detailing estimated and incurred restructuring charges and impairment - **In May 2023, CPP announced an expansion of its global sourcing strategy, transitioning to an asset-light structure for certain product lines**. **This initiative is expected to be completed by the end of calendar 2024, reducing facility footprint by 1.2 million square feet (15%) and headcount by approximately 600**[118](index=118&type=chunk)[119](index=119&type=chunk) - **Total charges for this strategy are estimated at $120,000 thousand to $130,000 thousand, including $50,000 thousand to $55,000 thousand in cash charges and $70,000 thousand to $75,000 thousand in non-cash charges**. **For the nine months ended June 30, 2023, CPP incurred $82,196 thousand in pre-tax restructuring and related exit costs, including a $37,100 thousand inventory impairment charge**[120](index=120&type=chunk) Restructuring and Other Related Charges (in thousands) | Item | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cost of goods and services | $1,777 | $76,422 | | Selling, general and administrative expenses | $2,085 | $5,774 | | **Total restructuring charges** | **$3,862** | **$82,196** | Accrued Liability at June 30, 2023 (in thousands) | Item | Amount | | :--- | :--- | | Personnel related costs | $9,773 | | Facilities & Exit Costs | $6,837 | | **Total Accrued Liability** | **$16,610** | [NOTE 18 – OTHER INCOME (EXPENSE)](index=32&type=section&id=NOTE%2018%20%E2%80%93%20OTHER%20INCOME%20(EXPENSE)) This note presents other income and expense, highlighting a decrease influenced by benefit plan and currency fluctuations Other Income (Expense), net (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net currency exchange gains (losses) | $590 | $265 | $492 | $(297) | | Net periodic benefit plan income (expense) | $(217) | $1,118 | $(650) | $3,145 | | Net investment income (loss) | $336 | $(91) | $444 | $(328) | | Royalty income | $438 | $828 | $1,463 | $1,444 | | **Total Other income (expense)** | **$1,475** | **$2,084** | **$2,375** | **$4,528** | - **Total other income (expense) decreased for both the three and nine months ended June 30, 2023, compared to the prior year periods**. **Key changes include a shift from net periodic benefit plan income to expense and fluctuations in net currency exchange gains/losses**[131](index=131&type=chunk)[132](index=132&type=chunk) [NOTE 19 – WARRANTY LIABILITY](index=32&type=section&id=NOTE%2019%20%E2%80%93%20WARRANTY%20LIABILITY) This note details the company's warranty liability, estimated based on historical experience, and its increase - **Griffon offers product warranties ranging from one to ten years, with some limited lifetime warranties**. **The warranty liability is estimated based on historical experience**. **The current portion of warranty liability was $21,698 thousand at June 30, 2023, up from $16,786 thousand at September 30, 2022**[133](index=133&type=chunk) Changes in Warranty Liability (in thousands) | Item | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Balance, beginning of period | $21,341 | $18,026 | | Warranties issued and changes in estimated pre-existing warranties | $4,999 | $16,079 | | Actual warranty costs incurred | $(3,402) | $(11,167) | | **Balance, end of period** | **$22,938** | **$22,938** | [NOTE 20 – OTHER COMPREHENSIVE INCOME (LOSS)](index=33&type=section&id=NOTE%2020%20%E2%80%93%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note presents other comprehensive income (loss), showing significant improvement driven by favorable foreign currency Total Other Comprehensive Income (Loss), net of taxes (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Foreign currency translation adjustments | $2,309 | $(17,823) | $14,580 | $(14,093) | | Pension and other post retirement plans | $747 | $1,196 | $2,355 | $2,004 | | Change in cash flow hedges | $(2,741) | $2,450 | $(1,788) | $110 | | **Total other comprehensive income (loss)** | **$315** | **$(14,177)** | **$15,147** | **$(11,979)** | - **Total other comprehensive income (loss) significantly improved from a loss of $14,177 thousand in Q3 2022 to a gain of $315 thousand in Q3 2023**, **primarily driven by favorable foreign currency translation adjustments due to the strengthening of the Euro, British Pound, and Canadian Dollar**[135](index=135&type=chunk) [NOTE 21 — LEASES](index=33&type=section&id=NOTE%2021%20%E2%80%94%20LEASES) This note details the company's operating lease arrangements, including right-of-use assets, liabilities, and payments - **The company recognizes right-of-use (ROU) assets and lease liabilities for operating leases, with fixed lease payments recognized straight-line over the lease term**. **The weighted-average remaining lease term for operating leases is 8.1 years, with a weighted-average discount rate of 5.84% as of June 30, 2023**[136](index=136&type=chunk)[139](index=139&type=chunk)[145](index=145&type=chunk) Operating Lease Liabilities (in thousands) | Item | June 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Operating right-of-use assets | $174,187 | $183,398 | | Current portion of operating lease liabilities | $29,637 | $31,680 | | Long-term operating lease liabilities | $154,608 | $159,414 | | **Total operating lease liabilities** | **$184,245** | **$191,094** | Aggregate Future Maturities of Lease Payments (in thousands) | Year | Operating Leases | Finance Leases | | :--- | :--- | :--- | | 2023 (remaining) | $10,405 | $660 | | 2024 | $38,331 | $2,380 | | 2025 | $35,672 | $2,199 | | Thereafter | $149,477 | $7,842 | | **Total lease payments** | **$234,588** | **$15,159** | [NOTE 22 — COMMITMENTS AND CONTINGENCIES](index=36&type=section&id=NOTE%2022%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's legal and environmental commitments and contingencies, with no material adverse effect expected - **Griffon is involved in legal and environmental proceedings, including the Peekskill Site (chlorinated solvents and metals contamination) and the Memphis, TN site (PCB contamination)**. **For the Peekskill Site, an RI/FS is underway, with an insurer covering costs**. **For the Memphis site, liability is probable, and Hunter has notified a former owner who may share liability**[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - **Management believes that the resolution of these matters will not have a material adverse effect on Griffon's consolidated financial position, results of operations, or cash flows**[154](index=154&type=chunk) [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202%20%E2%80%93%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Griffon's business strategy, recent transformative transactions, and a detailed analysis of its financial performance, liquidity, and capital resources for the three and nine months ended June 30, 2023 and 2022. It highlights segment-specific results, restructuring initiatives, and key financial metrics [BUSINESS](index=38&type=section&id=BUSINESS) This section describes Griffon's diversified business strategy, recent transformative transactions, and CPP sourcing initiative - **Griffon Corporation is a diversified management and holding company focused on acquiring and operating businesses in multiple industries and geographic markets, emphasizing innovative, branded products with superior quality and service**. **The company aims to reduce variability through a diverse portfolio of product offerings, sales channels, and international presence**[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - **Recent transformative transactions include the divestiture of specialty plastics (2018), acquisition of CornellCookson (2018) for HBP, and acquisitions of Hunter Fan Company (2022) and ClosetMaid (2018) for CPP**. **The Defense Electronics segment was sold in June 2022**. **In April 2023, the Board concluded its strategic review, opting to continue executing the company's strategic plan**[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - **In May 2023, CPP announced an expansion of its global sourcing strategy to transition to an asset-light structure for certain product lines, aiming for 15% EBITDA margins, improved working capital, and lower capital expenditures**. **This strategy involves reducing facility footprint by 1.2 million square feet and headcount by approximately 600 by the end of calendar 2024**[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [OVERVIEW](index=42&type=section&id=OVERVIEW) This section provides a high-level summary of financial performance, highlighting revenue, income, and operational improvements Key Financial Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $683,430 | $768,179 | $2,043,798 | $2,139,545 | | Income from continuing operations | $49,205 | $52,782 | $35,652 | $127,646 | | Diluted EPS from continuing operations | $0.90 | $0.98 | $0.65 | $2.38 | | Adjusted income from continuing operations | $70,304 | $66,497 | $184,661 | $160,128 | | Adjusted diluted EPS from continuing operations | $1.29 | $1.23 | $3.35 | $2.98 | - **Revenue decreased by 11% for the three months ended June 30, 2023, and by 4% for the nine months ended June 30, 2023, compared to the prior year periods**, **primarily due to a 20% decrease in CPP revenue**, partially offset by a **10% increase in HBP revenue**. **Income from continuing operations decreased significantly due to strategic review costs, restructuring charges, intangible asset impairment, and special dividend ESOP charges in 2023**[190](index=190&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - **Excluding these adjusting items, adjusted income from continuing operations increased by 5.7% for the quarter and 15.3% for the nine months ended June 30, 2023, demonstrating underlying operational improvement**[191](index=191&type=chunk)[193](index=193&type=chunk) [RESULTS OF OPERATIONS](index=45&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the financial results of operations, detailing segment performance, unallocated costs, taxes, and compensation [Home and Building Products](index=45&type=section&id=Home%20and%20Building%20Products) This section details the Home and Building Products segment's performance, including revenue changes and increased EBITDA HBP Segment Performance (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $401,142 | $405,545 | $1,194,374 | $1,082,726 | | Adjusted EBITDA | $134,330 (33.5% margin) | $119,847 (29.6% margin) | $390,346 (32.7% margin) | $280,618 (25.9% margin) | | Depreciation and amortization | $3,868 | $4,116 | $11,525 | $12,778 | - **HBP revenue decreased 1% for the quarter due to reduced residential volume, but increased 10% for the nine months due to favorable mix and pricing**. **Adjusted EBITDA increased 12% for the quarter and 39% for the nine months, benefiting from reduced material costs and increased revenue**[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) [Consumer and Professional Products](index=46&type=section&id=Consumer%20and%20Professional%20Products) This section details the Consumer and Professional Products segment's performance, highlighting revenue and EBITDA decreases CPP Segment Performance (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $282,288 | $362,634 | $849,424 | $1,056,819 | | Adjusted EBITDA | $18,265 (6.5% margin) | $28,373 (7.8% margin) | $36,091 (4.2% margin) | $92,431 (8.7% margin) | | Depreciation and amortization | $11,661 | $13,434 | $38,091 | $33,831 | - CPP revenue **decreased 22% for the quarter and 20% for the nine months ended June 30, 2023**, **primarily due to reduced volume across all channels and geographies, driven by lower consumer demand and elevated customer inventory levels**. Adjusted EBITDA **decreased 36% for the quarter and 61% for the nine months**, **impacted by reduced volume and manufacturing absorption**[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - **The CPP segment is expanding its global sourcing strategy to transition to an asset-light structure, aiming for 15% EBITDA margins and enhanced free cash flow**. This involves **reducing its U.S. facility footprint by 30% (1.2 million sq ft) and headcount by approximately 600 by the end of calendar 2024**[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) [Unallocated](index=47&type=section&id=Unallocated) This section discusses unallocated corporate overhead costs, noting an increase primarily due to compensation and medical claims - **Unallocated corporate overhead costs, excluding depreciation, increased to $13,982 thousand for the quarter and $42,388 thousand for the nine months ended June 30, 2023, compared to $13,405 thousand and $39,724 thousand in the prior year periods**, **mainly due to increased incentive and equity compensation, medical claims, and travel expenses**[220](index=220&type=chunk) [Proxy expenses](index=47&type=section&id=Proxy%20expenses) This section details proxy expenses, including costs related to a shareholder settlement, showing a decrease from prior year Proxy Expenses (in thousands, net of tax) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $435 | $0 | | Nine Months Ended June 30, | $2,059 | $5,359 | - **Proxy expenses for the nine months ended June 30, 2023, totaled $2,685 thousand ($2,059 thousand net of tax)**, **related to a shareholder settlement**. **This is a decrease from $6,952 thousand** in the prior year period, which was **due to a proxy contest**[193](index=193&type=chunk)[194](index=194&type=chunk)[221](index=221&type=chunk) [Segment Depreciation and Amortization](index=48&type=section&id=Segment%20Depreciation%20and%20Amortization) This section analyzes segment depreciation and amortization, noting a quarterly decrease and a nine-month increase Total Segment Depreciation and Amortization (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $15,529 | $17,550 | | Nine Months Ended June 30, | $49,616 | $46,609 | - **Segment depreciation and amortization decreased by $2,021 thousand** for the quarter ended June 30, 2023, **due to fully depreciated assets and asset write-downs from CPP's restructuring**. **For the nine months, it increased by $3,007 thousand**, **primarily due to a full period of Hunter assets, partially offset by asset write-downs**[106](index=106&type=chunk)[223](index=223&type=chunk) [Other Income (Expense)](index=48&type=section&id=Other%20Income%20(Expense)) This section details other income and expense, highlighting a decrease influenced by benefit plan and currency fluctuations Other Income (Expense), net (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net currency exchange gains (losses) | $590 | $265 | $492 | $(297) | | Net periodic benefit plan income (expense) | $(217) | $1,118 | $(650) | $3,145 | | Net investment income (loss) | $336 | $(91) | $444 | $(328) | | Royalty income | $438 | $828 | $1,463 | $1,444 | | **Total Other income (expense)** | **$1,475** | **$2,084** | **$2,375** | **$4,528** | - **Total other income (expense) decreased for both the three and nine months ended June 30, 2023, compared to the prior year periods**, **influenced by shifts in net periodic benefit plan income/expense and currency exchange fluctuations**[224](index=224&type=chunk)[225](index=225&type=chunk) [Provision for income taxes](index=48&type=section&id=Provision%20for%20income%20taxes) This section outlines the income tax provision, detailing the effective tax rate and significant tax impacts from various events Income Tax Provision (in thousands) | Period | Income Before Taxes | Tax Provision | | :--- | :--- | :--- | | Three Months Ended June 30, 2023 | $78,453 | $29,248 | | Three Months Ended June 30, 2022 | $76,050 | $23,268 | | Nine Months Ended June 30, 2023 | $56,314 | $20,662 | | Nine Months Ended June 30, 2022 | $182,765 | $55,119 | - The effective tax rate, excluding discrete items, **was 28.1% for the quarter and 28.9% for the nine months ended June 30, 2023**. The nine-month period in 2023 **included significant tax impacts from** a building sale gain, strategic review costs, restructuring, ESOP charges, and intangible asset impairment[226](index=226&type=chunk)[227](index=227&type=chunk) [Stock-based compensation](index=48&type=section&id=Stock-based%20compensation) This section details stock-based compensation expense, noting a significant increase due to higher costs for restricted stock and ESOP Total Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $15,252 | $6,019 | | Nine Months Ended June 30, | $28,587 | $15,978 | - **Stock-based compensation expense significantly increased for both the three and nine months ended June 30, 2023, compared to the prior year periods**, **reflecting higher expenses for restricted stock grants and the ESOP**[228](index=228&type=chunk) [Comprehensive income (loss)](index=49&type=section&id=Comprehensive%20income%20(loss)) This section presents comprehensive income (loss), showing significant improvement driven by favorable foreign currency translation Total Other Comprehensive Income (Loss), net of taxes (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Foreign currency translation adjustments | $2,309 | $(17,823) | $14,580 | $(14,093) | | Pension and other post retirement plans | $747 | $1,196 | $2,355 | $2,004 | | Change in cash flow hedges | $(2,741) | $2,450 | $(1,788) | $110 | | **Total other comprehensive income (loss)** | **$315** | **$(14,177)** | **$15,147** | **$(11,979)** | - **Total other comprehensive income (loss) significantly improved from a loss of $14,177 thousand in Q3 2022 to a gain of $315 thousand in Q3 2023**, **primarily driven by favorable foreign currency translation adjustments due to the strengthening of the Euro, British Pound, and Canadian Dollar**[229

Griffon Corporation (NYSE:GFF) Q2 2023 Earnings Conference Call May 3, 2023 8:30 AM ET Company Participants Ron Kramer - Chairman and CEO Brian Harris - CFO Conference Call Participants Bob Labick - CJS Securities Tim Wojs - Baird Noah Merkousko - Stephens Sam Darkatsh - Raymond James Operator Good morning, ladies and gentlemen, and welcome to the Griffon Corporation Fiscal Second Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 3, 2023. I would no ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-06620 GRIFFON CORPORATION (Exact name of registrant as specified in its charter) | Delaware | 11-1893410 | | --- | --- | | (State or other jurisd ...

WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-06620 GRIFFON CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION (Exact name of registrant as specified in its charter) | Delaware | 11-1893410 | | --- | --- | | (State or other jur ...

UNITED STATES ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 Commission File Number: 1-06620 GRIFFON CORPORATION (Exact name of registrant as specified in its charter) | Delaware | | | 11-1893410 | | --- | --- | --- | --- | | (Stat ...

Griffon Corporation (NYSE:GFF) Q2 2022 Earnings Conference Call April 28, 2022 8:30 AM ET Company Participants Ron Kramer – Chairman and Chief Executive Officer Brian Harris – Chief Financial Officer Conference Call Participants Bob Labick – CJS Securities Julio Romero – Sidoti and Company Justin Bergner – Gabelli Funds Operator Greetings and welcome to Griffon Corporation Second Quarter 2022, Earnings Conference Call. As a reminder our participants are on listen-only mode. A question and answer session wil ...

Griffon Corporation (NYSE:GFF) Q1 2022 Earnings Conference Call February 1, 2022 8:30 AM ET Company Participants Brian Harris - CFO Ron Kramer - Chairman and CEO Bob Mehmel - President and COO Conference Call Participants Bob Labick - CJS Securities Josh Chan - Baird Julio Romero - Sidoti & Company Justin Bergner - Gabelli Funds Noah Merkousko - Stephens Operator Hello and welcome to the Griffon Corporation First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode ...

Financial Data and Key Metrics Changes - Griffon Corporation achieved record revenue of $2.5 billion in 2021, with record segment adjusted EBITDA of $317 million and adjusted earnings of $1.86 per share [7][19] - For Q4 2021, revenue increased by 3% to $570 million, and segment adjusted EBITDA increased by 6% to $67 million, with a margin increase of 30 basis points to 11.7% [22][23] - GAAP net income for Q4 was $16 million or $0.30 per share, compared to $20 million or $0.41 per share in the prior year [25][26] Business Line Data and Key Metrics Changes - Consumer and Professional Products (AMES) revenue increased by 8% year-over-year, with adjusted EBITDA up 11% [12] - Home & Building Products (Clopay) saw record revenue and EBITDA, increasing by 12% and 18% respectively, driven by strong demand in both residential and commercial products [14][15] - Telephonics revenue decreased by 15% year-over-year, with EBITDA also down by 15%, impacted by reduced volume and delayed awards [17] Market Data and Key Metrics Changes - The company reported unprecedented levels of backlog, indicating strong demand moving into 2022 [7][10] - Labor, transportation, and supply chain disruptions have created challenges, particularly in the second half of 2021, affecting the ability to meet market demand [10][12] Company Strategy and Development Direction - The company is exploring strategic alternatives for Telephonics, including a potential sale, to focus resources on areas with stronger growth potential [11] - Griffon is actively pursuing acquisitions that are value-enhancing and immediately accretive, with a robust pipeline of potential targets [11][40] - The company aims to capitalize on the strength of the housing market and homeowner activity through strategic investments and portfolio repositioning [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand strength despite ongoing supply chain disruptions and inflationary pressures [38][39] - The company anticipates significant margin compression in the first half of fiscal 2022, with expectations of recovery in the latter half [32][51] - Management highlighted the importance of diversifying the supplier base to adapt to changing market dynamics [33][60] Other Important Information - The company reduced its leverage to 2.8 times net debt to EBITDA, below its target of 3.5 times, providing flexibility for acquisitions [18][19] - A dividend increase to $0.09 per share was announced, marking the 41st consecutive quarterly dividend [19] Q&A Session Summary Question: Guidance and Margin Expectations - Management expects the first half of the year to be more challenging due to inflationary input costs and supply chain disruptions, with price parity anticipated by the end of the second quarter [45][46] Question: Balance Sheet and M&A Focus - The company has significant buying power exceeding $1 billion and is actively looking for complementary acquisitions, particularly in the AMES and Clopay businesses [47][48] Question: Transportation Costs and Supply Chain Relief - Management expects relief from transportation and supply chain disruptions in the second half of fiscal 2022, with ongoing challenges anticipated in the first half [56] Question: Customer Diversification and Inventory Needs - Customers are diversifying their supplier base due to inventory shortages, which presents both opportunities and challenges for the company [53][60] Question: Long-term EBITDA Margins for HBP - Management believes the Clopay business has strong growth potential, with expectations for increased volume and improved margins in the long term [66]

Financial Data and Key Metrics Changes - Revenue increased by 2% year-over-year to $647 million, or 4% when excluding the SEG divestiture [5][18] - Adjusted EBITDA decreased by 7% to $65 million, while adjusted EBITDA margins increased by 100 basis points to 10% [18] - GAAP net income was $17 million, or $0.31 per share, compared to $22 million, or $0.50 per share in the prior year [21] - Adjusted net income was $23 million, or $0.43 per share, compared to $26 million, or $0.59 per share in the prior year [21] - Cash and equivalents stood at $221 million, with net debt of $835 million and leverage of 2.9 times, marking a 1.5 turn improvement from the prior year [15][23] Business Line Data and Key Metrics Changes - In the Consumer Professional Products (CPP) segment, robust demand was noted, although shipping delays impacted US revenue and EBITDA [11] - The Home and Building Products (HBP) segment saw strong demand for residential and commercial door products, with sales increasing due to higher volume and favorable pricing [12] - Defense Electronics revenue decreased due to reduced volume from timing of deliveries, but EBITDA increased due to reduced operating expenses [13] Market Data and Key Metrics Changes - Backlog increased to $375 million from $341 million year-over-year, with a trailing 12-month book-to-bill ratio of 1.1 times [14] - The housing market and consumer spending remained strong, supporting demand across product categories [6][25] Company Strategy and Development Direction - The AMES strategic initiative aims to consolidate operations, increase automation, and support e-commerce growth, expected to improve margins by the end of 2023 [8] - The company anticipates annual cash savings of $30 million to $35 million and inventory reductions of the same magnitude from the AMES initiative [9] - The company is focused on improving margins and capitalizing on acquisition opportunities while maintaining a strong balance sheet [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand trends across all segments despite challenges from cost inflation and supply chain disruptions [26][25] - The company is closely monitoring the COVID-19 Delta variant and adjusting operations as necessary to ensure employee safety [10] - Management reiterated full-year guidance, expecting over $2.5 billion in revenue and $320 million in adjusted EBITDA [25] Other Important Information - The company declared a quarterly dividend of $0.08 per share, marking the 40th consecutive quarterly dividend [16] - The company has generated $212 million in free cash flow over the past three years and reduced leverage significantly [28] Q&A Session Summary Question: Raw material and transportation headwinds - Management acknowledged the impact of rising raw material costs and transportation delays, indicating a lag in passing through price increases [34][35] Question: M&A environment and capital allocation - Management noted that while capital is abundant, competition has driven up asset prices, and they are focused on improving existing operations rather than rushing into acquisitions [37][39] Question: Demand trends in DIY products - Management reported strong backlog levels, indicating continued demand despite signs of slowing in DIY products [43] Question: New product launches in HBP segment - New product launches in the HBP segment have been well received, contributing positively to sales [44] Question: Shipping delays and backlog - Management confirmed that shipping delays have pushed some revenue to later dates but demand remains strong across segments [51][52] Question: Pricing strength in HBP segment - Pricing strength in the HBP segment was attributed to passing through rising input costs and a favorable product mix [56] Question: Commercial growth in HBP - Management indicated strong growth in the commercial side of the HBP business, with expectations for further growth if an infrastructure bill is passed [62][63]