Griffon Corporation (NYSE:GFF) Q4 2019 Earnings Conference Call - Final Transcript

Nov 14, 2019 • 04:30 pm ET


Griffon Corporation (NYSE:GFF) Q4 2019 Earnings Conference Call - Final Transcript


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Ronald J. Kramer

a US manufacturer of US products. Deploying the latest manufacturing and distribution automation, keeps us competitive in the face of global competition, and it provides a solid foundation supporting the high-mix, fast-flow operational activity necessary for our customer channels, including the growing e-commerce channel. This strategic initiative is expected to be completed by the end of calendar 2022. When fully-implemented, we expect annualized cash savings of $15 million to $20 million, and a reduction in inventory of $20 million to $25 million. To execute on this strategic initiative, we will invest approximately $40 million in capital and incur approximately $35 million of cash and non-cash charges, as onetime expenses. In addition to the growth, efficiency and competitive benefits, this initiative is intended to enhance our operating margins and expand our free cash flow.

Moving to CornellCookson. Our previously announced $14 million Mountain Top, Pennsylvania facility expansion, remains on track to be completed at the end of this calendar year. This project will increase our manufacturing capacity to support volume growth, improve operational efficiencies and bring new products to market. Let us move to the capital allocation story. Griffon's free cash flow profile has benefited from solid operating performance and the strategic actions taken to reshape the portfolio and integrate the acquisitions that we've made. This has enabled us to make substantial progress, towards deleveraging our balance sheet, as we work towards our 3.5 times net debt-to-EBITDA.

We continue to maintain ample flexibility to source and evaluate strategic bolt-on acquisitions to drive long-term growth. We remain disciplined in our approach and are focused on ensuring that any acquisition would be value-enhancing and immediately accretive. As we announced earlier today, our Board authorized a $0.075 per share dividend, payable on December 19, 2019, to shareholders of record on November 27, 2019. This marks the eighth consecutive-year of increasing the dividends paid to shareholders, which has grown at an annualized compound rate of 18%, since initiated in 2012.

Before turning it over to Brian, I will provide some additional comments on each of our operating segments. Let us start with Home & Building products. Full-year revenue increased 13% to $1.9 billion, driven by favorable mix and pricing, increased volume and the contribution of the CornellCookson acquisition, offset somewhat by the unfavorable foreign exchange. For full fiscal-year 2019, sales grew organically by 6%. Despite the uncertain global macro-economic backdrop affecting our home markets, we continue to see steady demand for our products across the segment and are realizing benefits from our market and product diversity.

Adjusted EBITDA for the year grew 19% to $211 million, driven by increased revenue and efficiency initiatives, along with the contribution from the CornellCookson acquisition. EBITDA margin of 11.2% improved by 50 basis points year-over-year, reflecting steady progress towards our 12%-plus EBITDA goal.

Turning to Telephonics, our Defense Electronics business returned to growth with full-year revenue increasing 3% to $335 million. Adjusted EBITDA from the continuing operation was $35 million compared to $36 million in the prior year. This