Griffon(US:GFF)2021-01-28 16:00PART I - FINANCIAL INFORMATION Presents Griffon Corporation's unaudited condensed consolidated financial statements and management's discussion for Q1 FY2021 Item 1 – Financial Statements Presents Griffon Corporation's unaudited condensed consolidated financial statements for Q1 FY2021, covering balance sheets, income, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total assets increased to $2.48 billion as of December 31, 2020, driven by cash and inventories, while liabilities remained stable Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,144,331 | $1,105,874 | | Cash and equivalents | $233,807 | $218,089 | | Inventories | $445,022 | $413,825 | | Total Assets | $2,484,443 | $2,448,439 | | Total Current Liabilities | $446,798 | $441,668 | | Long-Term Debt, net | $1,037,413 | $1,037,042 | | Total Liabilities | $1,744,396 | $1,748,288 | | Total Shareholders' Equity | $740,047 | $700,151 | Condensed Consolidated Statements of Operations Revenue grew 11.1% to $609.3 million and net income more than doubled to $29.5 million for Q1 FY2021, reaching $0.55 diluted EPS Income Statement (in thousands, except per share) | Income Statement (in thousands, except per share) | Q1 2021 (ended Dec 31, 2020) | Q1 2020 (ended Dec 31, 2019) | Change | | :--- | :--- | :--- | :--- | | Revenue | $609,291 | $548,438 | +11.1% | | Gross Profit | $170,172 | $149,921 | +13.5% | | Income from Operations | $48,615 | $32,123 | +51.3% | | Net Income | $29,500 | $10,612 | +178.0% | | Diluted EPS | $0.55 | $0.24 | +129.2% | - The company recorded a pre-tax gain of $6.24 million on the sale of a business during the quarter ended December 31, 202013 Condensed Consolidated Statements of Cash Flows Operating activities generated $20.8 million cash in Q1 FY2021, a significant improvement, with investing activities providing cash from a business sale Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Q1 2021 (ended Dec 31, 2020) | Q1 2020 (ended Dec 31, 2019) | | :--- | :--- | :--- | | Net cash from operating activities | $20,829 | $(18,169) | | Net cash from investing activities | $1,491 | $(23,519) | | Net cash from financing activities | $(9,297) | $34,701 | | Net increase (decrease) in cash | $15,718 | $(7,585) | - Investing activities in Q1 2021 were positively impacted by $15.6 million in net proceeds from the sale of a business14 Notes to Condensed Consolidated Financial Statements Detailed notes cover business segments, revenue recognition, acquisitions, dispositions, restructuring, debt, and key accounting policies - The company operates through three reportable segments: Consumer and Professional Products (CPP), Home and Building Products (HBP), and Defense Electronics (DE)20 - On December 18, 2020, the Defense Electronics segment sold its Systems Engineering Group, Inc. (SEG) business for $15 million, resulting in a pre-tax gain of $6.24 million50 - The company's total backlog of remaining performance obligations was $388.7 million as of December 31, 2020, with approximately 66% expected to be recognized as revenue within one year41 - A strategic initiative for the CPP segment was expanded globally, with expected completion by the end of calendar 2023. The project is estimated to incur one-time charges of $65 million and capital investments of $65 million, aiming for annual cash savings of $30-35 million101103104 Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2021 financial performance, including 11% revenue growth, segment results, strategic actions, and liquidity, noting sufficient capital resources Adjusted Net Income Reconciliation | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net income | $29,500 | $10,612 | | Restructuring charges | $10,800 | $6,434 | | Gain on sale of SEG business | $(6,240) | — | | Tax impacts and discrete items | $(4,305) | $(1,453) | | Adjusted net income | $29,755 | $15,593 | Adjusted EPS Reconciliation | Reconciliation of Diluted EPS to Adjusted EPS | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Diluted EPS | $0.55 | $0.24 | | Restructuring charges | $0.16 | $0.09 | | Gain on sale of SEG business | $(0.11) | — | | Discrete tax items | $(0.04) | $0.02 | | Adjusted EPS | $0.56 | $0.36 | Results of Operations by Segment All three segments reported revenue growth, led by CPP (21%), with Adjusted EBITDA increasing across all segments, notably CPP up 49% Segment Revenue (in thousands) | Segment Revenue (in thousands) | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Consumer and Professional Products | $291,042 | $241,076 | +21% | | Home and Building Products | $250,481 | $241,381 | +4% | | Defense Electronics | $67,768 | $65,981 | +3% | | Total Revenue | $609,291 | $548,438 | +11% | Segment Adjusted EBITDA (in thousands) | Segment Adjusted EBITDA (in thousands) | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Consumer and Professional Products | $32,713 | $21,926 | +49% | | Home and Building Products | $48,369 | $40,701 | +19% | | Defense Electronics | $5,585 | $4,475 | +25% | | Total Segment Adjusted EBITDA | $86,667 | $67,102 | +29% | Liquidity and Capital Resources Liquidity strengthened with cash at $233.8 million and positive operating cash flow, with total debt stable at $1.07 billion, ensuring sufficient funding - As of December 31, 2020, the company had cash and equivalents of $233.8 million and total debt of $1.07 billion213 - The company had $369.8 million available for borrowing under its revolving credit facility as of December 31, 2020144218 - An aggregate of $58.0 million remains available under the Board-authorized share repurchase programs as of December 31, 2020. No shares were repurchased during the quarter208 - A quarterly cash dividend of $0.08 per share was paid during the quarter, and another $0.08 per share dividend was declared in January 2021210211 Item 3 - Quantitative and Qualitative Disclosures about Market Risk Primary market risks include interest rates, foreign currency exchange rates, and commodity prices, with no material impact expected from typical fluctuations - Primary market risks include interest rates on variable-rate debt, foreign currency fluctuations (primarily CAD, AUD, GBP, MXN, CNY), and commodity prices235237 Item 4 - Controls & Procedures CEO and CFO concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2020238 PART II – OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, and other corporate information for the reporting period Item 1 – Legal Proceedings The company reported no new material legal proceedings for the period - There were no material legal proceedings to report for the quarter242 Item 1A – Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year ended September 30, 2020 - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended September 30, 2020, indicating no material changes242 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds No common stock repurchases occurred during the quarter, with $58.0 million remaining available under authorized repurchase programs - No shares were repurchased during the quarter ended December 31, 2020. The remaining authorization under the share repurchase programs is $57,955,000243 Item 5 – Other Information The Annual Meeting of Stockholders on January 28, 2021, resulted in the election of directors, approval of executive compensation, and auditor ratification - At the Annual Meeting on January 28, 2021, stockholders elected all five Class II director nominees, approved the advisory vote on executive compensation, and ratified the appointment of Grant Thornton LLP as the independent auditor for fiscal 2021245246