NEW YORK--(BUSINESS WIRE)--Griffon Corporation (NYSE:GFF) today reported results for the first quarter of fiscal 2021 ended December 31, 2020.

Consolidated revenue for the first quarter totaled $609.3 million, an 11% increase compared to the prior year quarter revenue of $548.4 million.

Net income totaled $29.5 million, or $0.55 per share, compared to $10.6 million, or $0.24 per share, in the prior year quarter. Current year adjusted net income was $29.8 million, or $0.56 per share, compared to $15.6 million, or $0.36 per share, in the prior year quarter, a 56% increase (see the reconciliation of Net income to Adjusted net income for details).

Adjusted EBITDA for the first quarter was $74.6 million, increasing 35% from the prior year quarter of $55.2 million. Unallocated amounts (primarily corporate overhead) in the first quarter of 2021 and 2020, were $12.0 million and $11.9 million, respectively. Adjusted EBITDA excluding unallocated amounts totaled $86.7 million in the first quarter of 2021, increasing 29% from the prior year of $67.1 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, 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).

Ronald J. Kramer, Chairman and Chief Executive Officer, commented, "We are pleased with our strong performance in the first quarter of our fiscal year with revenue, adjusted EBITDA and adjusted EPS growth of 11%, 35% and 56%, respectively. Notably, all three operating segments grew revenue, adjusted EBITDA and adjusted EBITDA margin over the prior year first quarter. Our earnings growth and positive free cash flow underscores the significance of our business initiatives and strategic investments over the last several years.”

Mr. Kramer added, “We have the ability to continue to accelerate growth initiatives across each of our segments while pursuing opportunistic acquisitions. Griffon remains well positioned to deliver long-term shareholder value."

Segment Operating Results

Consumer and Professional Products ("CPP")

CPP revenue in the current quarter totaling $291.0 million increased 21% compared to the prior year period, primarily due to increased volume of 18%, driven by continued consumer demand for home improvement initiatives across all geographies, early U.S. spring orders and expansion of the home organization product line. Improved revenue also reflected incremental revenue from the Apta acquisition of 1% and favorable foreign exchange of 2%. Organic growth was 20% (revenue growth adjusted to exclude acquisitions).

CPP Adjusted EBITDA in the first quarter was $32.7 million, increasing 49% from the prior year quarter primarily due to the increased revenue noted above, partially offset by increased COVID-19 related inefficiencies.

Strategic Initiative

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced the broadening of this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, certain AMES global operations will be consolidated to optimize facilities footprint and talent. Second, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth. Third, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include AMES’ global operations will extend the duration of the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30 million to $35 million and a reduction in inventory of $30 million to $35 million, both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65 million and capital investments of approximately $65 million. The one-time charges are comprised of $46 million of cash charges, which includes $26 million of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20 million of facility and lease exit costs. The remaining $19 million of charges are non-cash and are primarily related to asset write-downs.

During the quarters ended December 31, 2020 and 2019, CPP incurred pre-tax restructuring and related exit costs approximating $3.1 million and $6.4 million, respectively. During the quarter ended December 31, 2020, cash charges totaled $2.9 million and non-cash, asset-related charges totaled $0.2 million; the cash charges included $0.4 million for one-time termination benefits and other personnel-related costs and $2.5 million for facility exit costs. During the quarter ended December 31, 2019, CPP incurred pre-tax restructuring and other related exit costs approximating $6.4 million, comprised of cash charges of $2.2 million and non-cash, asset-related charges of $4.2 million; the cash charges included $2.1 million for one-time termination benefits and other personnel-related costs and $0.1 million for facility exit costs.

Home and Building Products ("HBP")

HBP revenue in the current quarter totaling $250.5 million increased 4% from the prior year quarter, driven by increased volume of 5%, partially offset by unfavorable mix of 1%.

HBP Adjusted EBITDA in the current quarter was $48.4 million, increasing 19% compared to the prior year quarter. The favorable variance resulted primarily from the increased revenue noted above including volume related benefits on absorption and operational efficiency improvements, partially offset by COVID-19 related inefficiencies.

Defense Electronics ("DE")

DE revenue in the current quarter totaled $67.8 million, increasing 3% from the prior year quarter. The increase was due to increased volume for Naval and Cyber systems driven by multi-mode airborne maritime surveillance systems, partially offset by timing of work performed on communication systems and commercial custom integrated circuits.

DE Adjusted EBITDA in the current quarter was $5.6 million, increasing 25% from the prior year quarter, driven by the increase in revenue and reduced headcount related to the reduction in force during the current quarter, partially offset by the timing of research and development expenses.

Contract backlog was $388.7 million at December 31, 2020 with 66% expected to be fulfilled in the next 12 months. During the quarter, DE was awarded several new contracts and received incremental funding on existing contracts approximating $85 million, which translates into a book to bill ratio of 1.3; the trailing twelve month book-to-bill ratio was 1.1.

Restructuring and Divestiture

In September 2020, a Voluntary Employee Retirement Plan was initiated, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities. The reduction in force initiative resulted in severance charges of $2.1 million during the current quarter. These actions reduced headcount by approximately 90 people.

In addition, charges of $5.6 million were recorded during the quarter ended December 31, 2020, primarily related to exiting our older weather radar product lines.

On December 18, 2020, DE completed the sale of its System Engineering Group business and recorded a pre-tax gain of $6.2 million.

Taxes

The Company reported pretax income for the quarters ended December 31, 2020 and 2019, respectively, and recognized tax provisions of 24.7% and 37.4%, respectively. Excluding all items that affect comparability, the effective tax rates for the quarters ended December 31, 2020 and 2019 were 32.0% and 33.3%, respectively.

Balance Sheet and Capital Expenditures

At December 31, 2020, the Company had cash and equivalents of $233.8 million and total debt outstanding of $1.05 billion, resulting in a net debt position of $0.8 billion. Borrowing availability under the revolving credit facility was $369.8 million subject to certain loan covenants. Capital expenditures were $11.9 million for the quarter ended December 31, 2020.

Share Repurchases

As of December 31, 2020, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations during the quarter ended December 31, 2020.

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 currently conducts its operations through three reportable segments:

• CPP conducts its operations through AMES. Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

• 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 CornellCookson brand.

• Defense Electronics conducts its operations through Telephonics Corporation, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.