Press Release
Griffon Corporation Announces Operating Results for the Second Quarter of Fiscal 2008
JERICHO, NEW YORK, May 8, 2008 – Griffon Corporation (NYSE:GFF) today reported operating results for the second quarter of fiscal 2008, ended March 31, 2008.
Net sales for the second quarter of fiscal 2008 were $320.3 million, compared to $369.1 million in the second quarter of fiscal 2007. Loss from continuing operations was $12.8 million, or $.42 per diluted share, for the quarter compared to income from continuing operations of $838,000, or $.03 per diluted share, last year. Loss from discontinued operations was $8.6 million, or $.29 per diluted share, compared to $583,000, or $.02 per diluted share, last year. Net loss for the quarter was $21.4 million, or $.71 per diluted share, compared to net income of $255,000, or $.01 per diluted share, last year.
Certain operating units in the Installation Services segment were closed during the second quarter and the related assets are in the process of being disposed of. Results of operations related to the closed operating units of the Installation Services segment from the beginning of each fiscal period presented through the respective dates of asset disposition have been reflected as discontinued operations in the condensed consolidated income statements. Net sales of these operating units were $8.4 million and $18.2 million for the three months ended March 31, 2008 and 2007, respectively, and $21.3 million and $39.6 million for the six months ended March 31, 2008 and 2007, respectively.
Earlier today, the company’s Board of Directors approved a plan to exit all operating activities of the Installation Services segment in 2008. As a result, the company presently estimates aggregate exit costs, including operating and intangible asset write-offs, to range between $30 million and $40 million for the remainder of 2008, of which $25 million to $35 million is estimated to be non-cash.
During the second quarter of fiscal 2008, the company’s Installation Services and Garage Doors segments incurred charges resulting from restructuring activities of approximately $2.3 million and $.7 million, respectively.
Telephonics Results
For the quarter ended March 31, 2008, Telephonics generated sales of $98.4 million, a 20.8% decrease from the second quarter of fiscal 2007.
The operating results declined as anticipated as a result of the wind-down in late fiscal 2007 of substantial contracts with Syracuse Research Corporation (SRC). Excluding the impact of the SRC contracts in the respective second quarter periods, core business sales grew by approximately $8.2 million, or 11%.
Clopay Garage Doors Results
For the quarter ended March 31, 2008, the company’s Garage Door segment generated sales of $83.8 million, a 20.3% decrease from the second quarter of fiscal 2007.
The company’s Garage Doors segment finished the quarter with results that were consistent with the sustained downturn in the housing market and were further impacted by the seasonal nature of the business. We believe that our market was further adversely impacted by weakness in the consumer credit markets. The segment’s management has been and will continue to focus on significant cost reduction programs including, but not limited to, reductions in force, reducing or eliminating certain sales and marketing programs and consolidating facilities where possible.
Specialty Plastic Films Results
For the quarter ended March 31, 2008, the company’s Specialty Plastic Films segment generated sales of $114.7 million, a 15.0% increase from the second quarter of fiscal 2007.
Specialty Plastic Films achieved higher sales resulting primarily from a favorable product mix and the impact of foreign exchange. However, operating income was unfavorably affected by lower unit volumes and higher resin costs. On average, resin costs in the second quarter increased approximately 31%, 14% and 9% in North America, Germany and Brazil, respectively, compared to last year. It is estimated that the effect of resin cost volatility had a negative impact on the segment’s operating results, when compared to the prior-year quarter, of approximately $5-$6 million.
Installation Services Results
For the quarter ended March 31, 2008, the company’s Installation Services segment generated sales of $26.0 million, a 41.0% decrease from the second quarter of fiscal 2007.
The decline in Installation Services’ sales and operating results was greater than anticipated due to the continuing effect of the weakness in new home construction.
Balance Sheet and Capital Expenditures
The company’s total cash balances at the end of the second quarter of fiscal 2008 were $39.4 million. Total debt outstanding at the end of the quarter was $206.6 million, including $130 million of convertible notes. Capital expenditures during the second quarter of fiscal 2008 were $5.5 million.
As previously announced, on March 31, 2008, Telephonics Corporation, a wholly-owned subsidiary of the company, entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide Telephonics with a five-year, revolving credit facility of $100 million. Commitments under the Credit Agreement may be increased by up to an additional $50 million under certain circumstances. Proceeds of a $50 million draw under this facility, together with internal cash of the company, were used to repay $62.5 million of outstanding debt under the company’s Amended and Restated Credit Agreement, dated as of December 20, 2006, as amended, among the company, Telephonics, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, at which time such Amended and Restated Credit Agreement was terminated.
The company expects to enter into a senior secured credit facility for its other principal wholly-owned subsidiary, Clopay Corporation, in the third quarter.
Conference Call Information
The company will hold a conference call to discuss its results today, May 8, 2008, at 4:30 PM. EDT. The conference call can be accessed by dialing 1-800-322-9079 for US callers or 1-973-582-2717 for international callers. Callers should ask to be connected to Griffon Corporation’s second quarter earnings teleconference and provide the conference ID number 43965215. A replay of the call will be available one hour following the call and can be accessed by dialing 1-800-642-1687 conference code: 43965215. The replay will be available until 5:00 PM EDT on May 22, 2008.
Forward-looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: All statements other than statements of historical fact included in this release, including without limitation statements regarding the company’s financial position, business strategy and the plans and objectives of the company’s management for future operations, are forward-looking statements. When used in this release, words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions, as they relate to the company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the company’s management, as well as assumptions made by and information currently available to the company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, business, financial market and economic conditions, including, but not limited to, the credit market, the housing market, results of integrating acquired businesses into existing operations, the results of the company’s restructuring and disposal efforts, competitive factors and pricing pressures for resin and steel and capacity and supply constraints. Such statements reflect the views of the company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the company as previously disclosed in the company’s Annual Report on Form 10-K for the year ended September 30, 2007 in response to Item 1A to Part I of Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements. The company does not undertake to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
About Griffon Corporation
Griffon Corporation, headquartered in Jericho, New York, is a diversified holding company consisting of four distinct business segments: Electronic Information and Communication Systems, through Telephonics Corporation; Garage Doors, through Clopay Building Products Company; Specialty Plastic Films, through Clopay Plastic Products Company; and Installation Services, through Clopay Service Company. Telephonics Corporation develops and manufactures information and communication systems for government and commercial markets worldwide. Clopay Building Products Company is a leading manufacturer and marketer of residential garage doors to professional installing dealers and major home center retail chains. Clopay Plastic Products is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial markets. Clopay Service Company installs and services specialty building products and systems through a substantial network of operations located throughout the country. For more information on the company and its operating subsidiaries, please see the company's website at www.griffoncorp.com.
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