Griffon Corporation

Greetings and welcome to the Griffin Corporation 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Harris, Senior Vice President, Chief Financial Officer. Thank you. You may begin.

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. As in the past, our comments will include forward-looking statements about the company's performance based on our views of Griffin's businesses and the environments in which they operate. Such statements are subject to inherent risks and uncertainties that can change as the world changes. Please see the cautionary statements in today's press release and in our various securities and exchange commission filings. Finally, from today's remarks, we'll adjust for those items that affect comparability between reporting periods. These items are explained in our non-GAAP reconciliations included in our press release. Now I'll turn the call over to Ron.

Thanks and good afternoon, everyone. Griffin 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've 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 these trends, 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 and to reduce leverage while providing sufficient liquidity to weather any near-term effects of the pandemic or other market uncertainties. To that end, achieving a leverage ratio of 3.5 times was one of our key priorities coming into the year, and we're pleased to have executed on this target as our strong financial performance and free cash flow conversion during the year, coupled with our equity offering, brought our net debt to EBITDA leverage to 3.4 times. At the onset of the COVID-19 pandemic, ensuring the health and safety of our employees and our customers has been and continues to be our top priority. Since early March, we've proactively implemented health and safety measures across all of our global facilities. As local and national authorities have circulated additional guidelines for employee health and safety, we've incorporating those as well. We reacted immediately, decisively, and have spared no expense in dealing with the COVID-19 risk and will continue to do so. All of our facilities are currently operational. However, we continue to be mindful of elevated case counts in Europe and now in the U.S. again. In the previous shutdown, all of our U.S. facilities were deemed essential businesses, and we expect that to continue should another broad shutdown occur. Turning to the market update, our segments beginning with consumer and professional products. We saw a strong fourth quarter demand for seasonal lawn and garden products, tools, storage, and organizational solutions at major retailers and home centers across all of our geographies, U.S., Canada, Australia, U.K., and Ireland. We're excited about the progress we've made in our previously announced AIM strategic initiative. We recently broadened this strategic initiative across all of our AIMS businesses, and it will now include all the North American facilities, AIMS United Kingdom, AIMS Australasia, and our manufacturing facility in China. The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. First, multiple independent information systems will be unified into a single data and analytics platform. which will now serve AIMS globally. Second, certain global operations will be consolidated to optimize facilities footprint and talent. Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations and support our growing e-commerce initiatives. Expanding the rollout of the new business platform beyond AIMS U.S. to include our global operations will extend the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30 to $35 million, which is $15 million more than we planned with the original initiative, and a $30 to $35 million reduction in and inventory, which is $10 million more than we planned in the original initiative. These improvements are based on our fiscal 2020 operating results. Moving to home and building product segment, in 2020, we had strong residential section garage door demand resulting from the same drivers around investing in homes as our consumer and professional product segment. Our commercial door business also had strong demand driven by the benefits of being combined with Clopay. e-commerce warehouse construction, and demand for security products. Telephonics 2020 revenue increased over the prior year, and order demand was strong in the fourth quarter, increasing 22% compared to the prior year fourth quarter. Backlog ended the year at $380 million. We continue to have a good pipeline of opportunities, both domestically and internationally. We also announced today that Telephonics implemented an initiative to improve its operational efficiencies through streamlining its organization and consolidating facilities. Brian will discuss this more as he goes through the financial details. Finally, earlier today, our board authorized an $0.08 per share dividend payable on December 17, 2020, to shareholders of record on November 25, 2020. This marks the 37th consecutive quarterly dividend to shareholders, which has grown at an annualized compound rate of 17% since we initiated it in 2012. We're continuing to focus on managing our cost structure and improving operating efficiencies, strengthening our balance sheet and increasing value to our customers through better service and a broader branded product portfolio. We believe our 2020 results demonstrate we can do that successfully and more to come in 2021. With that, let me turn it over to Brian to take you through a little more detail. Brian?