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Articles 

Griffon Corp. Reports Operating Results (10-K)

November 18, 2010 | About:

Griffon Corp. (NYSE:GFF) filed Annual Report for the period ended 2010-09-30.

Griffon Corp. has a market cap of $770.9 million; its shares were traded at around $12.5 with a P/E ratio of 30.5 and P/S ratio of 0.7. GFF is in the portfolios of Mario Gabelli of GAMCO Investors, Richard Pzena of Pzena Investment Management LLC, NWQ Managers of NWQ Investment Management Co, Jim Simons of Renaissance Technologies LLC, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the close of business March 31, 2010, the registrant's most recently completed second quarter, was approximately $553,000,000. The registrant's closing price as reported by the New York Stock Exchange-Composite Transactions for March 31, 2010 was $12.46.

Telephonics Corporation ("Telephonics") designs, develops and manufactures high-technology integrated information, communication and sensor system solutions for use in military and commercial markets worldwide. Telephonics' revenue was 34% of Griffon's consolidated revenue in 2010, 32% in 2009 and 29% in 2008. Home & Building Products consists of two companies: Clopay Building Products Company ("CBP") is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains. CBP's revenue was 30% of Griffon's consolidated revenue in 2010, 33% in 2009 and 34% in 2008. Ames True Temper, Inc. ("ATT"), acquired by Griffon on September 30, 2010, is a global provider of non-powered landscaping products that make work easier for homeowners and professionals. Due to the acquisition of ATT occurring on September 30, 2010, none of ATT's 2010 results of operations were included in Griffon's year end results. ATT's 2010 pro forma revenue was $444 million, or 26% of Griffon's pro forma 2010 revenue of $1.7 billion (unaudited), giving affect to the acquisition of ATT as if it had occurred on October 1, 2009. Clopay Plastic Products Company ("Plastics") 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. Plastics' revenue was 36% of Griffon's consolidated revenue in 2010, 35% in 2009 and 37% in 2008. (Unless otherwise indicated, any reference to years or year-end refers to the fiscal year ending September 30)

In connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. ("Clopay Ames"), a wholly-owned subsidiary of Griffon, entered into a $375 million secured term loan facility ("Term Loan") and a new $125 million asset based lending facility ("New ABL"). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25 million drawn under the New ABL, and $168 million of Griffon cash. ATT's previous outstanding debt has been

In December 2009, Griffon issued $100 million principal amount of 4% Convertible Subordinated Notes due 2017 (the "2017 Notes") at an initial conversion ratio of 67.0799 shares of Griffon common stock per $1,000 principal amount of the 2017 Notes, corresponding to an initial conversion price of approximately $14.91 per share.

As a result of its performance on a prior manufacturing contract with Syracuse Research Corporation, Telephonics received a subcontract award from Sierra Nevada Corporation for both production and support of counter-IED devices which resulted in $46 million of revenue in 2010 and $11 million of revenue in 2009.

As part of its cost structure review, in June 2009, Griffon announced plans to consolidate facilities in its CBP segment. These actions are scheduled to be completed in early calendar 2011, consistent with the plan. CBP estimates it will incur pre-tax exit and restructuring costs approximating $11 million, substantially all of which will be cash charges; charges include $2 million for one-time termination benefits and other personnel costs, $1 million for excess facilities and related costs, and $8 million for other exit costs, primarily in connection with production realignment. CBP expects approximately $11 million in capital expenditures in order to effectuate the restructuring plan. CBP spent $4.2 million and $7.3 million in 2010 for the restructuring plan and related capital expenditures, respectively, and since inception through September 30, 2010, has spent $5.4 million and $9.3 million of restructuring and related capital expenditures to-date for the plan, respectively.

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About the author:

10qk
Charlie Tian, Ph.D., is the founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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