Griffon(US:GFF)2021-04-29 16:00PART I - FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, market risk, and internal controls Item 1 – Financial Statements This section presents Griffon Corporation's unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, along with detailed notes Condensed Consolidated Balance Sheets As of March 31, 2021, total assets increased to $2.52 billion, driven by current assets, while shareholders' equity grew to $764.4 million | Balance Sheet Items (in thousands) | March 31, 2021 (Unaudited) | September 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,191,740 | $1,105,874 | | Total Assets | $2,524,280 | $2,448,439 | | Total Current Liabilities | $458,575 | $441,668 | | Total Liabilities | $1,759,849 | $1,748,288 | | Total Shareholders' Equity | $764,431 | $700,151 | Condensed Consolidated Statements of Operations Revenue for Q2 2021 increased to $634.8 million with net income rising to $17.1 million, reflecting strong year-over-year growth | Metric (in thousands, except per share) | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $634,832 | $566,350 | $1,244,123 | $1,114,788 | | Gross Profit | $170,316 | $152,032 | $340,488 | $301,953 | | Income from Operations | $43,489 | $25,565 | $92,104 | $57,688 | | Net Income | $17,112 | $895 | $46,612 | $11,507 | | Diluted EPS | $0.32 | $0.02 | $0.88 | $0.26 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $25.8 million for the six months ended March 31, 2021, with reduced cash used in investing activities | Cash Flow Activity (in thousands) | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,841) | $(60,843) | | Net cash used in investing activities | $(13,532) | $(32,760) | | Net cash provided by (used in) financing activities | $(5,916) | $94,351 | | Net Decrease in Cash and Equivalents | $(42,525) | $(3,353) | Notes to Financial Statements Detailed notes explain accounting policies, segment performance, the SEG business sale, goodwill, debt structure, and CPP segment restructuring charges - The company operates through three reportable segments: Consumer and Professional Products (CPP), Home and Building Products (HBP), and Defense Electronics (DE)23 - On December 18, 2020, the Defense Electronics segment completed the sale of its SEG business for $15.0 million, recording a pre-tax gain of $5.3 million55 - The company is implementing a next-generation business platform for its CPP segment, expected to be completed by the end of calendar 2023. The initiative involves one-time charges of approximately $65 million and capital investments of $65 million, with anticipated annual cash savings of $30-$35 million117120121 Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 12% revenue increase driven by strong CPP and HBP segment growth, and details liquidity and strategic initiatives - Q2 2021 revenue increased 12% YoY to $634.8 million, with net income of $17.1 million ($0.32/share) compared to $0.9 million ($0.02/share) in Q2 2020190 - Adjusted net income for Q2 2021 was $25.4 million ($0.48/share), compared to $10.1 million ($0.23/share) in the prior year quarter, excluding items like restructuring charges and gain/loss on business sale191196 - The company's CPP segment is undergoing a major strategic initiative to enhance growth and efficiency, which has been expanded globally and is expected to complete by the end of calendar 2023170172 Results of Operations by Segment Q2 2021 segment performance shows CPP revenue up 21% and HBP revenue up 16%, while Defense Electronics revenue declined 26% | Segment Performance (Q2 2021 vs Q2 2020) | Revenue Growth | Adjusted EBITDA Growth | | :--- | :--- | :--- | | Consumer and Professional Products (CPP) | +21% | +50% | | Home and Building Products (HBP) | +16% | +31% | | Defense Electronics (DE) | -26% | -48% | - The Defense Electronics segment backlog was $353.9 million at March 31, 2021, with 65% expected to be fulfilled within the next 12 months223 Liquidity and Capital Resources The company maintains strong liquidity with $175.6 million in cash and $363.1 million available credit, with total debt at $1.075 billion | Liquidity Metrics (in thousands) | March 31, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Cash and equivalents | $175,564 | $218,089 | | Total debt | $1,074,915 | $1,064,422 | | Debt, net of cash and equivalents | $899,351 | $846,333 | - As of March 31, 2021, the company had $363.1 million available for borrowing under its revolving credit facility, which matures in 2025166254 - Key customer concentration for the six months ended March 31, 2021 included The Home Depot (17% of consolidated revenue) and the U.S. Government (7% of consolidated revenue)248253 Item 3 - Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from interest rates, foreign currency, and commodity prices, but assesses their impact as non-material - Primary market risks include interest rates on variable debt, foreign currency fluctuations (primarily CAD, AUD, GBP), and commodity price changes273 - The company has determined that a 100 basis point change in LIBOR or a 10% change in applicable foreign currencies would not materially impact its financial results or liquidity274275 Item 4 - Controls & Procedures The CEO and CFO concluded that disclosure controls and procedures were effective with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period276 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls277 PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures Item 1 – Legal Proceedings No new material legal proceedings were reported for the period - No material legal proceedings were reported in this section280 Item 1A – Risk Factors No material changes to previously disclosed risk factors were reported - The company refers to its Form 10-K for the fiscal year ended September 30, 2020, for a full discussion of risk factors, indicating no material updates280 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased during the quarter, with $58.0 million remaining available under authorized programs - No shares of common stock were repurchased by the company during the three months ended March 31, 2021281 - As of March 31, 2021, an aggregate of $57,955,000 remained available under the company's authorized stock repurchase programs281 Other Items (3, 4, 5, 6) No defaults, mine safety disclosures, or other material information were reported, with exhibits including SOX certifications - No information was reported for Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), or Item 5 (Other Information)282 - Item 6 lists the exhibits filed with the report, including certifications required by the Sarbanes-Oxley Act of 2002 and XBRL filings283