Good day, everyone, and welcome to the Griffon Corporation Fourth Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Doug Wetmore, Chief Financial Officer. Please go ahead.

Thank you, operator, and good afternoon, everybody. With me on the call is Ron Kramer, our Chief Executive Officer. Before we get into the call details, there are certain matters I want to bring to your attention. First, our call is being recorded and will be available for playback, the details of which are in our press release issued today, and they're also available on our website. Second, during our call, we may make certain forward-looking statements about the company's performance. And such statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in today's press release, as well as the risk factors that we discuss in our various filings with the SEC. Finally, some of today's prepared remarks will adjust for those items that affect comparability between reporting periods. These items are laid out in our non-GAAP reconciliations, which are also included in our press release. And now, I'll turn the call over to Ron.

Good afternoon. We had a very good year. Consolidated revenue was $1.9 billion, 1% increase over the prior year. Segment adjusted EBITDA was $181 million, increasing 6% over the prior year. Our results reflect steady improvement within each of our segments. Our businesses are well positioned for continued long-term growth. I'll comment on each of the operating segments, and then Doug will go through the financial results in a bit more detail. And then we'll open it up for questions at the end. Let's start with Telephonics. We had a record year in spite of all the challenges from an uncertain budget and Washington fiscal problems, Telephonics has delivered exceptional results. For the full year, Telephonics revenues increased 3% compared to the prior year with core revenue, which excludes sales associated with electronic warfare programs where Telephonics acts as a contract manufacturer, increasing 1%. Telephonics had record EBITDA of $63.2 million and margin of 13.9% compared to $60.6 million and a margin of 13.7% last year. Joe Battaglia and his team have done an excellent job managing their business in an unprecedented challenging business environment. With all the uncertainties regarding the federal budget, it remains unclear as to what ultimately happens to defense spending in the next few years. While not immune from the impact of defense department budgetary constraints, our core programs remain well positioned in an uncertain environment. Moreover, Telephonics has been anticipating and planning for the impact of sequestration since the summer of 2011. Telephonics has become more efficient and will continue to do so to adapt its business to changing market conditions. Our funded backlog remains strong, ending the year at $444 million compared to $451 million last year. With this funded backlog, we have good visibility for the upcoming year. Telephonics celebrated its 80th birthday…

Thanks, Ron. For the quarter, consolidated revenue totaled $449 million, essentially in line with the prior year quarter. And segment adjusted EBITDA was $46 million, increasing 24% compared to the prior year quarter. Starting with Telephonics, revenue decreased 13% compared to the prior year quarter. Comparison with the prior year was made difficult by the 2012 quarter benefiting from an accelerated delivery schedule for light airborne multi-purpose systems Multi Mode Radar. The prior year's quarter revenue also included $2 million related to the electronic warfare programs where we serve as a contract manufacturer, and there were no such revenue in the current quarter. The overall impact on that was not material to the reported results. Core revenue decreased 12% from the prior year quarter. Telephonics segment adjusted EBITDA increased 33% to $18.2 million from the year-ago quarter. EBITDA margin was 17.2% compared to 11.2% in the prior year quarter with favorable product mix, combined with the benefit of lower R&D and bid and proposal expenditures being the key drivers to the profitability improvement. Plastics revenue totaled $145 million in the quarter, increasing 3% compared to the prior year quarter. The Plastics increase reflected 4% favorable product mix, partially offset by the impact of 1% lower volume, a portion of which was attributable to Plastics exiting certain low-margin products, as we announced earlier this year. The revenue impacts from currency and resin were not significant in the quarter. Fourth quarter Plastics EBITDA was $14.3 million, increasing 14% from the prior year quarter, driven by the favorable product mix and continued efficiency improvements. These benefits were partially offset by the impact of the modest volume decline, I mentioned, in an unfavorable resin effect of $2.7 million. Remember, Plastics adjust customer selling prices based on underlying resin costs on a delayed basis. Our…

Thanks, Doug. Our results reflect our disciplined focus on operating improvement initiatives in each of our businesses. Our company is well positioned for enhanced profitability as the global economy continues to recover. We continue our work to drive incremental shareholder value through organic growth, strategic acquisitions, share repurchases and dividends. We believe that over the long run, our businesses have room to grow and improve profitability. We have ample resources to invest in these businesses, to support their growth, and are optimistic about their prospects. We're pleased with our performance this year. And as we look out over the next few years, we believe that we can grow revenue, expand our EBITDA margins and significantly increase our earnings per share. With that, operator, we'll open it up for questions.

[Operator Instructions] And your first question will come from Bob Labick with CJS Securities.

I wanted to start with Films, getting very close to that 10% goal. Can you just talk about the steps you have -- what you've taken, we kind of know, but review those and what you have to do on a go forward basis to get to 10% and plus in 2014 or beyond?

Well, look, I think it's a number of initiatives that have been ongoing over the last 2 years in terms of improving efficiency in Brazil and in Germany and continuing to meet demand in North America. We've become a better manufacturer. We are always going to have resin impact. And as you know, that has been a headwind in this year, where we've absorbed $7 million plus in this year alone. And there is a pass-through, but the business has become more efficient. The customer relations remain quite strong. We think we're being positioned competitively to take market share, and we're going to continue to run the business. I've said it previously that our management has done an outstanding job. Alan Koblin came into the company almost 2 years ago. We've added new management, we've had an increased focus on our innovation and technology. So the business is quite well positioned. And in terms of margin, we'll -- our goal has been to get to 10% or better. We're clearly working towards that. This is an excellent quarter, and we believe it's part of an excellent outlook for the business going forward.

Okay, great that's helpful. And then, more specifically, one of your competitors recently announced some lost business in North America from a major personal care customer. It seems like that customer is shaking up some of its suppliers. I know it's a sensitive topic, so I don't know how much you can comment, but I guess, a, did you lose business, win business, not impacted or are there any other comments you can make in that regard?

We have increased market share and have won business.

Okay, great. And then in Europe, obviously there's been a lot of moving on there too. You've exited some lower profit business, Kimberly-Clark has exited that. What's the market looking like there? What's the outlook for the next couple of years?

I would say that we're cautiously optimistic that Europe has turned the corner from where it was 3 years ago. It is a marked improvement from where it was 2 years ago. It's -- w were staring down an abyss. It's steady improvement, and we think that some of the competitive factors has swung our way where we are positioned for further gains in both product and profitability.

Terrific. Moving on to the HBP. Can you comment a little bit about the customer inventory levels. I know in the past there's been such crazy weather that it's impacted various quarters along the way. So are we at a more normalized level now that we should see solid sell-through to be more normal, or where do we stand there?

Bob, most immediate is probably the snow tool business. And I think for that, as we mentioned on our second quarter call, our thought was that the major customers had eaten through a substantial portion of the inventory that I'd say lingered because of the weak snow season in 2012, 2013. So that bodes well for us from a stocking perspective. As I said in my comments, the fourth quarter did have a benefit of some stronger snow tool sales and that's really load in. But we'll only be able to tell once February and March comes by what the winter really proved to be, and whether that leads to restocking. So it's kind of wait and see. I think the other areas -- we never have gained that much insight into the complete view of the customers' inventory levels, but I think some of those that have been focusing on reducing their inventory levels have done a substantial portion of that, and we should see more normalized or stabilized reorder patterns moving forward.

Okay, great. Jumping over to the Telephonics. It almost seems like a broken record in a good way, margins, again, well above long-term averages. I wonder if you could talk a little bit, expand a little bit on the drivers there, and where do you see those settling out over the next few years?

If you could tell us what the Defense budget is going to be for 2014 and 2015, it would be easier to answer the question. We clearly positioned this company several years ago, seeing that there was going to be budgetary pressure and that we needed to be ahead of the curve and not reacting to what's now obvious that there's budgetary pressure. So sequestration is a terrible idea. We're hopeful that our government comes to a better answer. But we have to prepare the business, and have prepared the business, to operate under those types of draconian budgetary cuts. Telephonics is extraordinarily focused on its core business of intelligent, surveillance, reconnaissance products, radar-based systems. It is a leader from a technology standpoint. It's a battle-ready, proven, and most importantly, it has its relationship with its key customers intact. And the business, as I said, we've owned it for 80 years, we'd like it to be here for the next 80 years. It's an extraordinarily well-run company and whatever the budgetary environment that we have to operate it in, we're going to try to make it as efficient as possible. The result of that is has been increasing margins over a period of years. And over the last several years, we've grown single-digit top line, and our EBITDA is expanded substantially. We're going to continue to try to build backlogs. Some of our best products are still ahead of us. Fire Scout, in particular, is still a funded go project that we don't see coming into our stream. We ended this year with backlog nearly where we ended last year, so we've got clear visibility for 2014. We think this business is going to continue to perform as well as it can in the budgetary constraints that it's operating in.

[Operator Instructions] We'll go next to Philip Volpicelli with Deutsche Bank.

My questions with regard to the capital structure. Pro forma, the Goldman Sachs buyback about $128 million of cash and your bonds become callable in April of 2014. Can you talk a little bit about how you see the cap structure developing? Are there any acquisitions out there that you're considering? And what your thoughts are with regard to those items?

Sure. Let me answer it, that we clearly believe we have the liquidity to both buy back stock and continue to grow the company. Tuck-in acquisitions are things that are immediately actionable for us, things that we are looking at. The ability for us to come back to the capital markets is an important consideration for us and how we've managed the capital structure. We've been buying back stock in the company, as advertised since 2011. This was a unique opportunity for us to buy back in one bite a substantial amount of stock. And at the same time, maintain our fiscal discipline in terms of leverage ratios and our commitments to both our bank and bondholders.

Okay. And does it make sense to have any kind of prepayable debt in the press structure? Are you controlling having the bonds that just have the call dates?

Clearly, we have the bonds. We redid our bank facility earlier this year. And we'll always look at opportunistic ways to enhance our liquidity based on acquisitions and based on other opportunities. But we're very comfortable with our leverage ratio, improving operating performance and free cash flow generation, as we look at both into 2014 and beyond.

[Operator Instructions] And with no further questions, I'll turn the call back to Ron Kramer for any additional or closing remarks.

Thank you very much. It's been an excellent year and we look forward to reporting increased performance in the year to come.

Ladies and gentlemen, that will conclude today's conference. Thank you again for your participation. You may now disconnect.