Griffon Corporation

Consolidated Revenue Increases 1% to $482 million on Continued Plastics Growth

Reports EPS of $0.04 vs. loss of ($0.24) in Year-ago Second Quarter

Expects Continued Revenue Growth and Profitability Improvement in Second Half

NEW YORK--(BUSINESS WIRE)--May. 8, 2012-- Griffon Corporation (NYSE: GFF) today reported results for the second quarter ended March 31, 2012.

Second quarter 2012 revenue totaled $482 million, increasing 1% compared to the 2011 quarter. Clopay Plastics (“Plastics”) drove the consolidated increase with revenue growth of 10%; Telephonics revenue increased 1%; and Home and Building Products (“HBP”) revenue declined 3%.

Second quarter 2012 net income totaled $2.0 million, or $0.04 per share, compared to a loss of $14 million or $0.24 per share, in the prior year quarter.

Ron Kramer, Chief Executive Officer, commented, “We continued to execute well in each of our businesses during the second quarter. Telephonics had strong growth both in its core revenues and its backlog, a performance which reflects on-going demand for its mission-critical defense products and a strong commercial market opportunity. In Plastics, we continued to benefit from initiatives to capture market share and enhance profitability, though a challenging business environment in Europe and Brazil has affected our pace of improvement. Home and Building Products saw continued growth in our doors business and the benefit of the Southern Patio acquisition. While Ames performance was negatively impacted by the extraordinarily warm weather this winter, the business remains capable of generating significantly better results with higher revenue.”

Mr. Kramer continued, “Each of our businesses is positioned appropriately for the current environment, has ample access to both working and strategic capital, and is capable of continued growth and improved profitability. We believe that we will accelerate our consolidated rate of organic revenue growth and make further profitability gains in the second half. We are continuing to focus on driving shareholder value through organic improvement, a disciplined approach to capital investment and, in the longer term, through our ongoing evaluation of additional strategic transactions.”

The second quarter 2011 results included a $26.2 million ($16.8 million, net of tax, or $0.28 per share) charge resulting from the refinancing of the Ames True Temper (“ATT”) acquisition related debt; $3.8 million ($2.5 million, net of tax, or $0.04 per share) of cost of goods related to the sale of inventory recorded at fair value in connection with ATT acquisition accounting; and $1.2 million ($0.8 million, net of tax, or $0.01 per share) of restructuring and related charges associated with the consolidation of the Clopay Building Products (“CBP”) facilities. Excluding these items from the prior year second quarter, adjusted net income would have been $6.1 million, or $0.10 per share, compared to the current quarter’s $2.0 million, or $0.04 per share.

For the current quarter, Segment adjusted EBITDA totaled $40.4 million, decreasing 8% compared to $43.8 million in the prior year quarter. Segment adjusted EBITDA is defined as net income, excluding corporate overhead, interest, taxes, depreciation and amortization, acquisition-related costs, restructuring charges, costs related to the fair value of inventory for acquisitions and the benefit (loss) of debt extinguishment, as applicable.

Segment Operating Results

Telephonics

Revenue in the 2012 quarter increased $0.5 million compared to the prior year quarter. In the current and prior year quarters, revenue included $13.6 million and $19.2 million, respectively, related to the Counter Remote Control Improvised Explosive Device Electronic Warfare 3.1 (“CREW 3.1”) program where Telephonics serves as a contract manufacturer. Excluding CREW 3.1 from both periods, revenue increased 6% over the prior year quarter primarily attributable to Ground Surveillance Radars (“GSR”), Maritime Radars and NETCOM communication products.

Segment adjusted EBITDA in the 2012 quarter was $15.3 million, increasing 19%, benefiting from higher gross profit from program mix, partially offset by higher selling, general and administrative expenses primarily due to the timing of proposal activities.

Contract backlog totaled $434 million at March 31, 2012 compared to $417 million at September 30, 2011, with approximately 69% expected to be filled in the next twelve months.

Plastic Products

Revenue in the 2012 second quarter increased $13.6 million, or 10%, compared to the 2011 quarter, primarily due to higher volume across all regions, partially offset by the impact of translation of European results into a stronger U.S dollar.

Segment adjusted EBITDA in the 2012 quarter decreased $2.1 million compared to the prior year quarter, primarily driven by previously disclosed start up costs related to expanded capacity initiatives in both Germany and Brazil; in both operations, such start up costs have included higher than normal levels of scrap. There have been no significant disruptions in customer service in connection with the scaling up of production of the newly installed assets. Improvements in operations in the newly expanded locations are progressing and the Company expects that Plastics will continue to trend towards normal efficiency levels during the second half of fiscal 2012.

Home & Building Products

Revenue in the 2012 quarter decreased $7.7 million, or 3%, compared to the prior year quarter driven mainly by lower volume. For the 2012 quarter, ATT revenue decreased 8% primarily due to weak sales of snow tools, driven by the absence of snow throughout much of the country, partially offset by the inclusion of Southern Patio, acquired in October 2011. The increase in CBP revenue was mainly the result of favorable mix and higher volume.

Segment adjusted EBITDA in the 2012 quarter was $15.9 million compared to $19.6 million in the prior year quarter. The decrease was driven by the lower ATT volume combined with the impact of higher fuel and material costs, partially offset by the inclusion of Southern Patio’s operating profit in the current period’s results and improved production efficiencies.

Taxes

The tax rate for the current quarter was a provision of 57.4 %, compared to a 32.2% benefit in the prior year quarter. The prior year benefit arose on the pretax loss for the quarter, which arose mainly in connection with the debt refinancing, completed in March 2011. The current year rate reflects the impact of permanent differences that are not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and a change in earnings mix. There were no discrete period items in the current quarter.

Balance Sheet and Capital Expenditures

At March 31, 2012, the Company had cash and equivalents of $165 million, total debt outstanding of $705 million, net of discounts, and $180 million available for borrowing under its revolving credit facility. Capital expenditures were $20.3 million in the second quarter; the Company expects capital spending of $65 to $70 million for 2012 with lower expenditures in 2013.

Conference Call Information

The Company will hold a conference call today, May 8, 2012, at 4:30 PM ET.

The call can be accessed by dialing 1-888-298-3511 (U.S. participants) or 1-719-325-2133 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference.

A replay of the call will be available starting on May 8, 2012 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 3643834. The replay will be available through May 22, 2012.

Forward-looking Statements

“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income, earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; the Company’s ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets and to anticipate and meet customer demands for new products and product enhancements and innovations; a reduction in government military spending on projects supplied by Telephonics Corporation; increases in cost of raw materials such as resin and steel; changes in customer demand; political events that could impact the worldwide economy; a downgrade in the Company’s credit ratings; international economic conditions including interest rate and currency exchange fluctuations; the relative mix of products and services which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies such as litigation; unfavorable results of government agency contract audits of Telephonics Corporation; protection and validity of patent and other intellectual property rights; the cyclical nature of the business of certain Griffon operating companies; weather patterns; and possible terrorist threats and actions, and their impact on the global economy. 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 Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Griffon Corporation

Griffon Corporation (the “Company” or “Griffon”), 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 in connection with 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 segments:

• Home & Building Products consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building Products (“CBP”):
  • ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.
  • CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.
• Telephonics Corporation designs, develops and manufactures high-technology, integrated information, communication and sensor system solutions for use in military and commercial markets worldwide.
• Clopay Plastic Products Company 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 applications.

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

Griffon evaluates performance and allocates resources based on each segments’ operating results before interest income or expense, income taxes, depreciation and amortization, gain (losses) from debt extinguishment, unallocated amounts, restructuring charges, acquisition costs and costs related to the fair value of inventory for acquisitions (“Segment Adjusted EBITDA”). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes:

Griffon evaluates performance based on Earnings per share and Net income (loss) excluding restructuring charges, loss from debt extinguishment, discrete tax items, acquisition costs and costs related to the fair value of inventory for acquisitions. Griffon believes this information is useful to investors. The following table provides a reconciliation of Earnings (loss) per share and Net income (loss) to Adjusted earnings per share and Adjusted net income:

Note: Due to rounding, the sum of earnings (loss) per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

Source: Griffon Corporation

Griffon Corporation
Douglas J. Wetmore, 212-957-5000
Chief Financial Officer
or
Investor Relations:
ICR Inc.
Anthony Gerstein, 646-277-1242
Senior Vice President