Griffon Corporation
Q4 2020 Earnings Call Transcript

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  • Operator:
    Greetings and welcome to the Griffon Corporation's Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Harris, Senior Vice President and Chief Financial Officer. Thank you. You may begin.
  • Brian Harris:
    Thank you, Maria. Good afternoon, everyone. With me on the call is Ron Kramer, our Chairman and Chief Executive Officer. Our call is being recorded and will be available for playback, the details of which are in our press release issued earlier today.
  • Ronald Kramer:
    Thanks, and good afternoon, everyone. Griffon entered this year from a position of strength both operationally and competitively. Our 2018 pivot out of the capital intensive commodity driven Plastics business and continued focus on branded domestically manufactured products set the stage for strong revenue, earnings and cash flow growth. We have also captured additional market share as we continue to realize synergies across our businesses, innovate new products, maintain our exceptional product quality and deliver superior service to our customers. Our businesses were performing well before the pandemic and the performance of our product portfolio has continued to show strength throughout this unprecedented year as consumers organized their living spaces, repaired and upgraded their homes and spent more time outdoors. Our strong fourth quarter and fiscal year results reflect the strengths as well as the actions we've taken over the last several years through our portfolio reshaping. We finished the year with revenue up 9%. Adjusted EBITDA up 18% and adjusted EPS up 50% compared to the prior year results. We also generated strong free cash flow of $88 million in 2020 compared to $69 million in 2019. We continue to see consumers investing in home projects, such as closet renovations, tending to their lawns and gardens, enhancing their enjoyment of the outdoors, and upgrading the exterior of their homes, including their garage doors. We took action this year to fortify our already strong balance sheet. In August we completed a public offering of 8.7 million shares of common stock with net proceeds of $178 million. This equity offering, coupled with extending maturities on our unsecured bonds to 2028 and our credit facility to 2025, will help us execute on our growth strategy and continue to invest in our businesses and to reduce leverage while providing sufficient liquidity to weather any near-term effects of the pandemic or other market uncertainties.
  • Brian Harris:
    Thank you, Ron. I'll start by highlighting our fourth quarter consolidated performance. Revenue increased 15% to $661 million and adjusted EBITDA increased 8% to $63,000 both in comparison to the prior year quarter. Normalized gross profit for the quarter was $175 million, increasing 10% over the prior year quarter. Our gross margin contracted 118 basis points to 26.4%. Fourth quarter normalized selling, general and administrative expenses were $126 million or 19% of revenue compared to $115 million or 20.1% in the prior year fourth quarter. Fourth quarter GAAP income from continuing operations is $20.1 million or $0.41 per share compared to the prior year period of $16 million or $0.37 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income from continuing operations was $22 million or $0.44 per share compared to the prior year of $17 million or $0.40 per share.
  • Ronald Kramer:
    Thanks, Brian. Griffon’s 2020 total year performance is something we are proud of, considering how much has been achieved in just a few years since we began the portfolio repositioning, and then adding the impact to the disruptions from the COVID-19 pandemic in 2020. We expected the portfolio actions would provide opportunities for top line growth and margin expansion through the realization of efficiencies during the integration process of our acquired companies. Further, we expect it to become stronger competitively by providing increased value to our customers in terms of our broader product offerings, improved service levels, and enhanced efficiency. Our results for 2020 are consistent with achieving those opportunities. Total year revenues grew 9%. Adjusted EBITDA increased 18%, and earnings per share increased 50%. Free cash flow totaled $88 million, and we strengthened our financial position, through better cash performance and paying down debt, achieving our net debt to EBITDA leverage goal was September 30, 2020 leverage of 3.4 times. We continue to believe the diversity of our businesses, our emphasis on domestic manufacturing, and our focus on leading brands provides a strong foundation for growth and a competitive advantage. We have made progress, but we know there is still considerable opportunity for improving the performance of all of our existing businesses. In addition, we remain committed to finding strategic acquisitions that expand and strengthen our product portfolio within each of our home markets. In closing, I'd like to thank our workforce, which has shown exceptional dedication and perseverance throughout this challenging period. We appreciate the importance of their work in order to deliver these excellent results. We know we will continue to face obstacles and are monitoring any new developments on COVID-19, but we are committed to the safety and welfare of our 7,400 employees, as well as our customers and all of our communities. With that operator, we're happy to take any questions.
  • Operator:
    Our first question is from Bob Labick with CJS Securities. Please proceed with your question.
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    Our next question is with Julio Romero with Sidoti & Co. Please proceed with your question.
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    Our next question is from Josh Chan with Baird. Please proceed with your question.
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    Our next question is with Justin Bergner from G Research. Please proceed with your question.
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    Our next question is with Keith Hughes with Truist. Please proceed with your question.
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    Our next question is with Trey Grooms with Stephens. Please proceed with your question.
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  • Operator:
    We have reached the end of our question-and-answer session. I would like to turn the floor back over to Ron Kramer, Chief Executive Officer for concluding comments.
  • Ronald Kramer:
    Thank you. Take care, stay safe, be well. We look forward to following up with you in January. Bye-bye.
  • Operator:
    This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.

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