Griffon Corporation

Good morning, ladies and gentlemen, and welcome to the Griffin Corporation Fiscal Second Quarter of 2023 Earnings Conference Call. At this time, our lines are in lesson alley mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 3rd, 2023. I would now like to turn the conference over to Mr. Brian Harris, Chief Financial Officer. Please go ahead, sir.

Thank you, Enos. Good morning, 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, some of today's remarks will 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 Rob.

Thanks, Brian. Good morning, everyone, and thanks for joining us. This is the first earnings call we've hosted since we initiated our strategic alternative review process, so we have a lot to discuss. Let me start by commenting on our strategic review process and its conclusion before reviewing our operating results, expectations for the year, and go-forward strategy. We publicly announced the commencement of this process in May of 2022, but actually the process began even earlier in January of 2022 when we formed our Committee on Strategic Considerations and engaged our advisors Goldman Sachs and Deckert. The Committee on Strategic Considerations, which was comprised solely of independent members of our board, was given the mandate to work with our advisors to evaluate a comprehensive range of strategic alternatives to maximize shareholder value, including a possible sale, merger, divestiture, or recapitalization. Over the remainder of 2022 and into 2023, Griffin and its advisors thoroughly explored many types of strategic alternatives, and engage with a wide variety of potential counterparties with the goal of finding strategic alternatives that would provide compelling value for Griffin shareholders. After extensive review and deliberation, the Griffin Board unanimously concluded that none of these alternatives which we explored appropriately valued Griffin's strong operating performance and growth prospects. And as a result, the Board unanimously determined that continuing to focus on executing our strategic plan is the best approach for maximizing shareholder value at this time. Our decision is a reflection of our board's confidence in Griffin's outlook and strategy. Due to the confidential nature of the process, we cannot disclose specific details regarding options explored or negotiations conducted. What I can tell you, however, is that the duration of this process over a year from initiation to conclusion is an indicator of how comprehensive the process was during a period of rapidly changing economic and financing conditions. With the process now concluded, we continue to believe that there is a fundamental disconnect between our share price and the intrinsic value of our businesses. And we are committed to taking a series of actions to provide additional value to our shareholders. Further, I want to be clear that while we are no longer proactively exploring strategic alternatives, we will continue to be open to and will consider all opportunities to enhance shareholder value. Let me turn to the operating results. Griffin's performance through the first half of 2023 has exceeded our expectations. Our results were driven by the performance of our home and building product segment, HBP, which continued to see growth in commercial volume and favorable price and mix across all products and channels. Residential volume decreased year over year, what was better than expected. The HBB team, led by Vic Weldon, has been able to address the sectional door backlog that built up over the past two years. The factory is now operating with normalized backlog and lead times. This is great news as it frees up the HBP team to focus its attention on further improving productivity. It also allows the team to expand business development efforts that were previously slowed down as a result of our larger backlog and longer lead times. The team is now intensifying their efforts to capture additional residential and commercial business by expanding marketing efforts and leveraging our leading positions in sectional and rolling steel product offerings. These efforts are complemented by a portfolio of innovative product offerings that are being positively received by customers. I want to thank the HBP team for their extraordinary performance and ongoing commitment to building this fabulous business. Performance of the consumer and professional products business continues to reflect the difficult retail market conditions in which we are operating. All CPP channels and geographies are being affected by reduced consumer demand and elevated customer inventory levels. The situation has been particularly challenging in the U.S. lawn and garden and storage and organizational markets, where we have seen customer-supplier diversification drive shifts in buying decisions which in some instances has exacerbated weakness in consumer demand. The combination of reduced volumes and unfavorable manufacturing and overhead absorption has impacted operating leverage to the point that some of CPP's U.S. product lines have become unprofitable. To address these evolving market conditions, CPP is expanding its global sourcing strategy to include long-handled tools, material handling, and wood storage and organization product lines that are currently manufactured in the United States for sale in the United States. The CPP team will leverage its extensive global sourcing experience and capability to effectively manage this transition by utilizing an asset like structure, CPP's U.S. operations, will be better positioned to serve customers with a more flexible and cost-effective global sourcing model, enabling it to manage costs and efficiently meet variable demand and to enhance future profitability. These actions will enable CPP to continue providing high-quality products, leveraging our iconic brands while strengthening our competitive positioning, with industry-leading distribution and service that our customers and consumers expect. In addition, these actions are a continuation of the evolution of CPP, positioning the segment to achieve targeted EBITDA margins of 15% and generating substantial additional value for our shareholders. Let's turn to guidance for the year. Our overall strong performance in the first half has exceeded our expectation. As a result, we are raising our full-year segment EBITDA guidance to at least $525 million from the previous guidance of $500 million. Also, earlier today, the Griffin Board announced a 25% increase to our regular quarterly dividend. This is in addition to the $2 per share special dividend and the increase in our share buyback authorization to $258 million that was approved by our board two weeks ago. These actions demonstrate our commitment to enhancing both immediate and long-term value to our shareholders and reflect the confidence Griffin's board and management have in our strategic plan and outlook. Let me turn it over to Brian to go through some of the financials.