Griffon(US:GFF)2021-07-29 16:00PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2021, show an increase in total assets to $2.55 billion from $2.45 billion at September 30, 2020. For the nine months ended June 30, 2021, the company reported net income of $63.3 million on revenue of $1.89 billion, a significant increase from the $33.3 million net income on $1.75 billion revenue in the prior-year period. Net cash provided by operating activities decreased to $42.0 million from $55.9 million in the prior-year period Condensed Consolidated Balance Sheets The balance sheets show the company's financial position, including assets, liabilities, and shareholders' equity, at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,226,858 | $1,105,874 | | Inventories | $510,309 | $413,825 | | Total Assets | $2,548,663 | $2,448,439 | | Total Current Liabilities | $466,477 | $441,668 | | Long-Term Debt, net | $1,042,612 | $1,037,042 | | Total Liabilities | $1,763,322 | $1,748,288 | | Total Shareholders' Equity | $785,341 | $700,151 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) These statements detail the company's revenues, expenses, and net income or loss over specific reporting periods Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $646,792 | $632,061 | $1,890,915 | $1,746,849 | | Gross Profit | $170,065 | $165,003 | $510,553 | $466,956 | | Income from Operations | $44,486 | $51,494 | $136,590 | $109,182 | | Net Income | $16,707 | $21,831 | $63,319 | $33,338 | | Diluted EPS | $0.31 | $0.50 | $1.19 | $0.76 | Condensed Consolidated Statements of Cash Flows These statements summarize the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,019 | $55,944 | | Net cash used in investing activities | ($26,300) | ($45,073) | | Net cash used in financing activities | ($14,327) | ($9,305) | | Net Decrease in Cash and Equivalents | $2,608 | ($378) | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's business segments, revenue recognition, acquisitions and dispositions, debt structure, restructuring activities, and other key accounting policies. Key events include the acquisition of Quatro Design, the sale of the SEG business, and an ongoing restructuring initiative in the Consumer and Professional Products segment - The company operates through three reportable segments: Consumer and Professional Products (CPP), Home and Building Products (HBP), and Defense Electronics (DE)24 - On June 30, 2021, the company had $375.0 million of remaining performance obligations (backlog), with approximately 66% expected to be recognized as revenue within one year46 - On December 18, 2020, the Defense Electronics segment completed the sale of its SEG business for $15.0 million, resulting in a pre-tax gain of $5.3 million55 - The company is executing a multi-year restructuring of its CPP segment, expected to be completed by the end of calendar 2023, with total one-time charges of approximately $65 million and capital investments of $65 million. This is projected to yield annual cash savings of $30-$35 million116117 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's performance, highlighting an 8% revenue increase for the nine months ended June 30, 2021, driven by strong performance in the Consumer and Professional Products (CPP) and Home and Building Products (HBP) segments. The Defense Electronics (DE) segment saw a revenue decline, partly due to the divestiture of the SEG business. The company is continuing its strategic initiative to restructure the CPP segment to enhance long-term growth and efficiency. Liquidity remains strong, with $220.7 million in cash and $362.2 million available under its revolving credit facility Overview For the nine months ended June 30, 2021, revenue increased 8% to $1.89 billion, and net income nearly doubled to $63.3 million ($1.19 per share) from $33.3 million ($0.76 per share) in the prior year. Excluding restructuring charges, a gain on sale, and other items, adjusted net income for the nine-month period was $78.0 million ($1.46 per share), up from $51.5 million ($1.18 per share) year-over-year Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net income | $63,319 | $33,338 | | Restructuring charges | $22,444 | $11,171 | | Gain on sale of SEG business | ($5,291) | — | | Loss from debt extinguishment | — | $7,925 | | Acquisition costs | — | $2,960 | | Tax impacts & other provisions | ($2,460) | ($3,896) | | Adjusted net income | $78,012 | $51,498 | Results of Operations by Segment For the nine months ended June 30, 2021, Consumer and Professional Products (CPP) revenue grew 12% and Adjusted EBITDA increased 18%. Home and Building Products (HBP) revenue grew 12% with an 18% increase in Adjusted EBITDA. Defense Electronics (DE) revenue decreased 18%, and Adjusted EBITDA fell 7%, impacted by the SEG divestiture and timing of deliveries Segment Performance - Nine Months Ended June 30 (in thousands) | Segment | Revenue 2021 | Revenue 2020 | % Change | Adj. EBITDA 2021 | Adj. EBITDA 2020 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CPP | $947,739 | $844,917 | 12% | $99,524 | $84,068 | 18% | | HBP | $752,684 | $670,374 | 12% | $130,585 | $110,635 | 18% | | DE | $190,492 | $231,558 | (18%) | $11,945 | $12,845 | (7%) | - The Defense Electronics segment backlog was $375.0 million at June 30, 2021, an increase from $341.0 million at June 30, 2020 (excluding SEG backlog). 66% of the current backlog is expected to be fulfilled in the next 12 months216 Liquidity and Capital Resources The company's liquidity position remains strong with cash and equivalents of $220.7 million at June 30, 2021. Net cash from operations was $42.0 million for the nine-month period. Total debt stood at $1.07 billion. The company has a $50 million share repurchase authorization from August 2018, with $58.0 million remaining available under its programs as of June 30, 2021 Capitalization Summary (in thousands) | Metric | June 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Cash and equivalents | $220,697 | $218,089 | | Total debt | $1,071,121 | $1,064,422 | | Debt, net of cash | $850,424 | $846,333 | - As of June 30, 2021, the company had $362.2 million available for borrowing under its $400 million revolving credit facility, which matures in March 2025247 - The company's two largest customers are The Home Depot (17% of consolidated revenue) and the U.S. Government (7% of consolidated revenue) for the nine months ended June 30, 2021241246 Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from changes in interest rates, foreign currency exchange rates, and commodity prices. Interest rate risk is primarily related to variable-rate debt, but a 100 basis point change is not expected to have a material impact. Foreign currency risk exists due to operations in Canada, Australia, the UK, Mexico, and China, but a 10% change in currency values is also not considered material - The company's primary market risks are related to interest rates on variable debt, foreign currency fluctuations from international operations, and commodity prices266 - Management does not believe that a 100 basis point change in interest rates or a 10% change in foreign currency exchange rates would have a material effect on the company's financial position or cash flows267268 Controls and Procedures Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level. There were no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report269 PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, and details on unregistered sales of equity securities and use of proceeds Legal Proceedings The company reported no new material legal proceedings - There are no material legal proceedings to report for the period273 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020 - The company refers to the risk factors disclosed in its Annual Report on Form 10-K for the year ended September 30, 2020, indicating no material changes273 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its equity securities during the three months ended June 30, 2021. As of June 30, 2021, $57.96 million remained available for repurchase under its authorized programs Issuer Purchases of Equity Securities (April 1 - June 30, 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Purchased as Part of Publicly Announced Plans | Maximum Value That May Yet Be Purchased | | :--- | :--- | :--- | :--- | :--- | | April 2021 | — | $— | — | | | May 2021 | — | $— | — | | | June 2021 | — | $— | — | | | Total | — | $— | — | $57,955 |