Good day and welcome to the Griffon Corporation First Quarter 2018 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, Julia. 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 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 prior announcement of the Plastics sales transaction, Plastics is classified as a discontinued operation. Now, I will turn the call over to Ron.

Good morning and thanks for joining us today. Before discussing the quarter and the businesses, I'd like to take a moment to remember our chairman, Harvey Blau, who passed away on January 19. With more than 50 years of service, including 25 as CEO of the company, Harvey was instrumental in building Griffon into the company that it is today. He was an extraordinary leader, a trusted friend, and a mentor to the entire Griffon team. He will be greatly missed and we are all committed to build on his legacy. Okay, let's move to the quarter. I'm pleased to report we are off to a strong start to the year as we build on the transformational actions of fiscal 2017. At a consolidated level, our revenue increased 24% from the prior year driven by both the acquisitions and organic growth in our Home & Building products segment, which, as expected was partially offset by reduced revenue at Telephonics. We continue to expect defense orders and revenue to improve throughout the year, particularly in the second half. This morning, I'd like to take a few minutes to walk you through updates to our key strategic actions and then we'll provide comments on our segment performance and outlook before turning the call over to Brian for a closer look at the numbers. Beginning with our recent acquisition of ClosetMaid, I am pleased that performance in our first quarter of ownership was in-line with our expectations, generating $77 million in revenue in the quarter. We view ClosetMaid as an important growth platform for Griffon, and to that end, we are seeing good incremental demand through new customer relationships. In addition, under our management, we have begun implementing operational improvements and cost controls. We completed the post-closing purchase price adjustment process with Emerson,…

Thank you, Ron. First quarter 2018 revenue increased 24% to $437 million, compared to the prior year period of $352 million. Increased revenue in the quarter was driven by strong performance in our Home & Building product segment with both acquisition and organic growth contributing to the increase and partially offset by lower Telephonics revenue. First quarter 2018 segment adjusted EBITDA from continuing operations was $43.7 million, an increase of 9% over the prior year period. Moving to our segment results, Home & Building products first quarter revenue increased 40% to $371 million. AMES revenue increased 16% to $140 million compared to the prior year period of $121 million. The increase was driven by acquisition-related revenue from our Tuscan Path, La Hacienda, Hills and Harper Brush Works acquisitions and increased Canadian snow tools and pot and plant sales. In our doors business, first quarter revenue increased 8% to $154 million. The doors business benefited from favorable mix in pricing. In our ClosetMaid business, first quarter revenue was in-line with our expectations. We continue to expect $300 million of revenue from ClosetMaid in 2018. Home & Building products' first quarter segment adjusted EBITDA increased 24% to $39.5 million, compared to $31.8 million in the prior year period, driven by the increased revenue and continued operational efficiency improvement. Turning to Telephonics, as expected, first quarter segment revenue decreased to $66 million compared to $88 million in the first quarter '17, due to lower maritime surveillance radar and airborne and communication systems revenue. Segment adjusted EBITDA of $4.2 million decreased compared to the prior year period of $8.1 million. At December 31, 2017, backlog was $332 million, compared to $351 million at September 30, 2017. We continue to expect backlog to increase in the second half of the year. Moving back to our…

Thanks. We're off to a good start in fiscal 2018 and we're well positioned to benefit from an improving economy and an improving housing market. We believe that our ongoing efficiency initiatives will enhance our operating margins and the expected increase in U.S. Defense and infrastructure spending will drive incremental growth from profitability, cash flow generation and ultimately shareholder value. There is much for us to be excited about and with the dedication and commitment of our employees around the world, we will continue to build on our success. With that, operator, we will open it up for questions.

Thank you, sir. [Operator Instructions] We will now take our first question from Mr. Bob Labick from CJS Securities. Please go ahead. Your line is open.

Good morning.

Good morning, Bob.

Good morning.

Hi. I wanted to start with ClosetMaid. Obviously as you said, sales are off to a good start. Could you talk, just expand a little bit about the operations now that you have your first look inside and operating it? I think originally, you said margins will likely coming a little lower than HBP average, but over time, you have the opportunity to grow them. How do you feel about the operations now that you've seen them and just expand on your outlook for that, please?

Very pleased with all of our initial impressions of the business. Believe that it creates both revenue opportunities, as well as cost reductions across HBP. So, while we've said that we expected margins in the first year of ownership to be better than 8% at the ClosetMaid level and I think we have said about approximately $300 million in revenue and that we expected $25 million at the EBITDA level, we believe that this is a better than 10% EBITDA margin business and ultimately a 10% EBIT business over a period of years. Point being that our blended Home & Building product segment, we fully expect to be better than 12% EBITDA margin business over the coming years.

Okay, great. And then on Telephonics, obviously you said that you expect the backlog to pick up in the back half of this year. Can you just talk about the visibility there for the pickup and then other things that maybe are potential drivers that aren't in backlog, latest on border patrol or military spending and how it could impact you? And just the outlook there over a two or three-year period, please.

Yes. I'll remind you, Telephonics has been part of this company for over 50 years, so we've seen more than a few cycles in defense. The current cycle that we're in is entirely an issue related to fiscal policy coming out of the U.S. government and the transition of building up – our military has been something that we've been talking about under the current administration, but you have to go back to – we've been operating under sequestration for over five years and the amount of capital that's getting put into purchase of equipment is still constrained. We believe that Telephonics is going to be a beneficiary when the budgetary's spigot ultimately flows into the border defense industry. In order to build these ships, it takes a number of years. To build the helicopters, backlog them and then to put the radars on the helicopters, backlog of the ships is measured over a five-year cycle. We see Telephonics as being at the bottom of the revenue cycle backlog decline that we've seen, we believe improves quarter-over-quarter and year-over-year. The outlook that we have on some of the other programs, custom and border patrol where we believe we are part of the solution for border security, in terms of providing electronic mobile surveillance, but again, that's quite often a much larger political debate and funding issue. If and when money flows, we believe we're going to be a beneficiary of it. The outlook for us both domestically is strong and more importantly near term, the foreign sales which have been in process for us over a number of years seem to be coming to the point where we expect, particularly in our third and fourth quarter of this year to see backlog improvement.

Great. Very helpful. Thanks. And then you mentioned obviously earlier on the call, you're expecting to receive the proceeds from the Plastic sale and you'll have over $400 million in cash. You touched on it, but I was hoping you could expand a little bit about the opportunities with that balance sheet? We've seen a number of consumer companies divesting assets recently. So, can you talk about if you're looking for complementary assets or if you're looking for a third leg? What's the current thought processes on redeploying that capital that's about to come in?

We're very busy working on acquisitions, big and small. The timing of them are always unpredictable. We clearly are looking to grow Griffon by redeploying the capital that we're going to receive into higher growth, higher value creating opportunities. We're really excited about the platform of our own businesses. We see complementary tuck in acquisitions to continue around Home & Building products and as you reference there is some really interesting assets that are likely to be coming up in the market over the next year. We think we're very well-positioned to compete for them and our value added is capital and you've heard me say this, there is a tidal wave of capital chasing assets out there. What we bring to the table in addition to capital is our ability to operate businesses and improve them so we're perfectly happy to find something that is big, actionable and for us to be able to grow Griffon either within the businesses that we're already in or find an entirely new leg tied to the stool.

Great. All right, thank you very much.

Thank you. [Operator Instructions] We'll now take our next question from Clark Orsky from Alcentra. Please go ahead, your line is open.

Yes. Thanks. Brian, you've made a comment about an impact to gross margin that I didn't hear. Could you restate that? Because it sounded like a one-time impact.

Sure. As part of acquisition accounting, a gross up of inventory as part of the rules and then that turns as the first inventory turns occur after an acquisition – that impact was $1.5 million and went through our cost of sales in the quarter. So, I removed that $1.5 million in calculating the gross margin.

Okay, thanks. Then there was no comparable impact in the prior period?

There was not.

Okay. Do you take that out in your EBITDA calculation?

Correct.

Okay, great. Thanks. And what was the revolver balance?

It was about $148 million.

Perfect. Thank you.

Thank you. There are no further questions in the queue.

Okay. Thank you.