Good day and welcome to the Griffon Corporation Fourth Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Harris, Chief Financial Officer. Please go ahead, sir.

Thank you, Tracy. Good morning, everyone. With me on the call is Ron Kramer, our 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 Griffon’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 our 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. Also please be reminded that with the announcement of the Plastics sale transaction, we have classified Plastics as a discontinued operation. Now, I will turn the call over to Ron.

Good morning. Thanks for joining us. Fiscal 2017 has been a transformational year and we are pleased with our results for the fourth quarter and the full year, reflecting the continued strength in our Home & Building Products segment. Telephonics, our defense electronics business, is positioned to benefit from the expected increase in Defense spending in the next few years. Overall, Griffon’s full year revenue increased 3% on a continuing operations basis. Adjusted EBITDA on a continuing basis was $173 million increasing 3% over the prior year. Segment adjusted EBITDA including plastics was $225 million in line with our guidance and an increase of 3% over the prior year. Before turning to my segment level comments, I’d like to provide an update on our process of evaluating strategic alternatives for our Clopay Plastics product segment and on our acquisition of ClosetMaid, along with some color on our capital deployment activities and return of cash to shareholders. Earlier today, we announced that Griffon has entered into a definitive agreement to sell our Clopay Plastics business to Berry Global for $475 million. The transaction is subject to customary closing conditions and is expected to close in the first calendar quarter of 2018. As Brian mentioned in his opening remarks, Plastics is now classified as a discontinued operation. So moving forward, we will be reporting our business in two reportable segments, Home & Building Products, which includes the AMES, Clopay Building Products and ClosetMaid businesses and Telephonics. Expect more in the years to come. The divestiture of Plastics will unlock value for Griffon’s shareholders while providing enhanced opportunities for growth and value creation for Plastics and its customers and employees under Berry’s ownership. After the Plastics transaction closes, we will evaluate the use of proceeds which should provide a substantial amount of liquidity…

Thank you, Ron. I will provide results including and excluding plastics, so that you understand how the business performed in 2017 and provide an indication on how the business will look going forward. Full year 2017 revenue, including Plastics, of $2 billion increased 1.5% over the prior year and segment adjusted EBITDA increased to $225 million or 3% over the prior year. GAAP net income and EPS were $15 million and $0.35, respectively, compared to $30 million and $0.68 respectively in the prior year. Adjusted net income and EPS were $37 million and $0.87, respectively, compared to $37 million and $0.84, respectively, in the prior year. Fourth quarter 2017 revenue, including plastics, of $550 million increased 10% over the prior year and segment adjusted EBITDA increased to $67 million or 11% over the prior year. GAAP net loss and EPS were $12 million and $0.29, respectively, compared to net income of $6 million and $0.13, respectively, in the prior year. Adjusted net income and EPS were $16 million and $0.36, respectively, compared to $12 million and $0.27, respectively, in the prior year quarter. Now, moving to continuing operations results, consolidated full year 2017 revenue increased 3% to $1.5 billion compared to the prior year driven by strong performance in our Home & Building Products segment partially offset by lower sales at Telephonics. Our full year segment adjusted EBITDA was $173 million, an increase of 3% over the prior year period of $168 million again driven by Home & Building Products. Income and EPS from continuing operations were $18 million and $0.41, respectively, compared to $21 million and $0.45, respectively, in the prior year. Full year adjusted income and EPS from continuing operations were $19 million and $0.44, respectively, compared to $19 million and $0.43, respectively, in the prior year. Consolidated…

We have been very busy. This is a great moment for us. Fiscal 2017 and the start of this year has proven to be pivotal for us as we have completed five acquisitions and today announced the divestiture of our plastics business. We continue improving our businesses’ profitability while focusing on delivering shareholder value. As we shift into 2018, we are looking to improve our segment results through sales diversification, efficiency initiatives and refining our operations as we integrate the recent acquisitions. Our expected EBITDA growth in 2018 comes with higher free cash flow, which has us very excited about our future. Finally, I want to thank our employees around the world for their dedication and perseverance in closing out another successful year. And to the employees of Clopay Plastics, we thank you for the many decades of contribution to Griffon. With that operator, we will open it up for questions.

Thank you. [Operator Instructions] And we will go first to Bob Labick with CJS Securities.

Good morning and congratulations on realizing some strong value in plastics.

Thank you, Bob.

Good morning.

Yes. So, just starting there and I know that tax legislation may change next year, so we don’t know what you pay in taxes, but what’s roughly, this might be for Brian, a cost basis for plastics so that we can make an estimate of the gain on sale if there is any that you will be paying taxes on?

Sure. So, we will have approximately $85 million to $90 million of taxes to pay on this. The book basis from a GAAP reporting standpoint is roughly $320 million, but that fluctuates of course with time and fluctuations in exchange rates.

Yes. We are hoping for 20% corporate tax which will change that number significantly. We will see what Congress comes out with.

Yes, absolutely. Okay, thank you. And then shifting over, appreciate the big transformation you are making, it’s very exciting. On the ClosetMaid acquisition, can you just give us an update on that? You obviously amended the purchase price, I guess the biggest question is does the small changes that occurs there have any impact on the future expectations and future synergies if you could talk around all that for us please?

Look, we think the combination of ClosetMaid into our company is going to be productive, and be able to both grow revenue and over time take expenses out. So, we are very optimistic that the $300 million run-rate that we are buying the business at has room for growth, but we also believe that this is a business like everything else that we have been able to do across both our Doors business and the AMES business. This is better than 10% EBITDA margin target, though we are very focused near-term on the cost of separating it out of Emerson and including it into our company. So, for the year ahead, we budgeted at a $25 million contribution. We expect it to be significantly higher in the years to come.

Okay, great. And then you touched on this a little, but maybe you could expand upon given the proceeds from plastics and then the investment at ClosetMaid, you still have significant liquidity, you have actually added materially to your liquidity. If you could talk a little bit about what else you see out there? You have made some really nice tuck-in acquisitions in the quarter in HBP. Is it more like that on the horizon? Are there any opportunities in Telephonics? Are there large opportunities you are looking at, maybe just give us a sense in your kind of roadmap for the next year or two, three?

Look, this has been an evolution over the 9 years that I have been CEO of a company. We have been transforming the businesses. We have clearly added around our garage door business to believe in this around the home strategy buying AMES and now buying ClosetMaid and the ongoing tuck-ins that we see for all of those companies really are something that we are excited about. The value proposition for us has been in buying product diversification. And as we go on this international expansion around the Australian businesses and the UK business, we see a number of ways to continue to grow that segment of our company. That’s been an ongoing set of our strategic initiative. Telephonics is going through what we view as a multiyear process of Defense spending bottoming with an increase coming in 2020 and beyond and we are positioning the company to be able to be as profitable as it can be through a down cycle in Defense spending, with the inevitable upturn in intelligence, surveillance and reconnaissance products. The big opportunity for us that the sale of plastic represents, it’s not just the balance sheet strength and liquidity that it’s going to provide. We look at our free cash flow generation and how we look at delivering value for our shareholders over time. The ability for us to generate not just the EBITDA, but EBITDA minus CapEx and to be able to generate free cash flow is significantly enhanced as we exit a business that while it’s an excellent business, we just don’t have the scale that Berry will be able to provide to that business. So, this is one of those opportunities where we see this as incredibly opportunistic for us. And we think it’s a fabulous opportunity for Berry to be able to take the company and bring it to a new level. So we are very excited about what this does for us and the ability for us to invest the capital on our balance sheet into further acquisitions and diversifications remains to be seen, but we are clearly setting that up as how we would like to grow the company in the future.

Perfect. Congratulations, again. Thank you very much.

Thank you.

Thank you.

And we will go next to Justin Bergner with Gabelli & Company.

Hello. Good morning, Ron. Good morning, Brian.

Good morning.

Good morning.

Congrats on a good fourth quarter and getting to the announced sale of Clopay Plastics. I guess my first question was on the sale of Clopay Plastics, I just want to make sure I understood correctly. So you are expecting $85 million to $90 million of cash taxes and if it’s a $320 million book, does that mean that the taxable book gain was lower to create such a high cash tax expected outflow?

Yes, that is exactly correct. Our tax base is lower than our book base.

Okay, great. And then could you – are you able to comment as to whether or not there were any other parties that sort of bid on Clopay Plastics alongside Berry Plastics, I am there are other companies looking at it, but as it relates to the competitive bidding activity?

We have a definitive agreement with Berry. We are very excited about doing this transaction with them.

Okay, understood. Secondly, moving on to the quarter, the strength in Home & Building Products, could you breakout for us how much of the strength in AMES was inorganic and perhaps how much of the strength in garage doors related to the pass-through of steel costs versus volumetric effects?

Sure. I don’t have the exact stats in front of me at the moment. The acquisitions perhaps put a 1 point or 1.5 point on the revenue line. As far as steel costs I don’t have those numbers in front of me, I will have to get back to you, but there was an impact from them.

Okay. The acquisitions were 100 to 150 basis points for the segment than it would probably be around 300 basis points for AMES in particular?

I am sorry – I gave you the on AMES number.

It was only 100 to 150 basis points. The organic impact was around 15%. Okay, great. And then just finally looking to the guidance for the September 2018 fiscal year, if I back out the $300 million of ClosetMaid revenue, it looks like you are projecting about 3% growth for the legacy Home & Building Products businesses. I just want to make sure that was correct. And if that is the case and if Telephonics revenue sets decline 10%, how does sort of that flattish sort of legacy revenue picture translate into $10 million of EBITDA growth?

Sure. So, first the organic meaning before the acquisitions growth is about 2% to 3%, with the acquisitions, excluding ClosetMaid, you have another 2% to 3% and then you have ClosetMaid, so just to clarify that. Second, it’s really a matter of leverage. As these businesses increase sales, we are able to use our existing footprints to leverage and improve margin and earnings. In addition, we continue to innovate on products, which are at higher price points and better profit.

Okay. And would you expect the Telephonics EBITDA profile to sort of be flattish against the declining revenue, but maybe higher mix or how should we think about the Telephonics EBITDA for the coming fiscal year?

You will see improved margin in the coming year on that lower revenue. So yes, EBITDA will be plus, minus in the same range we saw in 2017.

Yes, which Justin speaks to the efficiency initiatives that we have already undertaken and as I have said, we are very optimistic about where Telephonics is heading, but 2018 and 2019 are going to be transitional years and the backlog numbers reflect the decline in Defense spending. We see that picking up. I can’t tell you when it’s going to actually happen, because it’s entirely dependent on budgetary resolutions that at the moment, while there has been lots of talk over the last year about increased Defense spending, infrastructure spending, lower taxes, none of those things have happened.

In addition, I would just say we have obviously – not obviously, we have not lost any business o any platforms. In addition, we anticipate being able to keep the historical margins that we have had with good management and good program mix on the lower revenue.

Great. Thanks for taking my questions.

Thanks, Justin.

[Operator Instructions] And we will go next to Andrew Casella with Deutsche Bank.

Hi, guys. Thanks for taking my question and congrats on the quarter and the sale. Just wanted to go back to I guess the proceeds and how you are kind of thinking about that. So you are going to get $475 in gross, $90 million of cash leakage that leaves you about 385. So, I think during the bond deal, you have kind of said you are hoping to pay down the revolver a little bit, I know the K is not filed, so if you could just remind us again what’s drawn on the revolver and then how you are kind of thinking about allocating that 385 between all the different priorities you have laid out in prepared remarks?

Sure. So, the revolver balance at year end, I believe is about $144 million post year-end with the proceeds from the bond offering we used $60 or $70 million I don’t recall the exact number to pay down the revolver and it goes from there. So assume the revolver goes to zero.

Okay, great. And then and as far as how you are going to deploy the remainder of the cash, can you walk us through that? I mean, I know the bonds are currently callable, but just kind of priorities there?

We are going to continue to look for opportunities to grow the company, invest our capital into operating businesses. We have no current intentions of de-leveraging, but we will see what the future holds for us.

Alright, thanks. And then the next question can you talk us through a little bit about the storms if you guys had any tailwinds or headwinds that you would call out in any of the numbers and then how you are kind of thinking about commodity inflation on the resin and steel and lumber side?

Sure. So, for our businesses, we didn’t have any significant impact from the hurricanes. AMES does benefit somewhat with cleanup for wheelbarrows, rakes and shovels and things like that. As far as resin and steel, I can’t predict the future. We have a structure that can handle the current prices and if prices increase we will certainly consider that in our pricing to customers as we have in the past.

Okay. Thanks, again and congrats.

Thank you.

Thank you.

There are no additional questions in the queue. At this time, I would like to turn the call back to Ron for any additional or closing remarks.

Thank you. This has been terrific year and we are very excited about making 2018 as big a success as 2017 and to the new directions that we might be able to take from the sale of the plastics business. Thank you, all.

This does conclude today’s conference. We thank you for your participation. You may now disconnect.