Good day, and welcome to the Griffon Corporation First Quarter Fiscal 2014 Earnings Conference Call. Today's call 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, Brandon. Good afternoon, everyone. With me on the call is Ron Kramer, our Chief Executive Officer. Before we get into the details of the call, there are certain matters I want to bring to your attention. First, our call is being recorded, as Brandon just said, and will be available for playback, the details of which are in our press release issued earlier today and are 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 the factors that could cause actual results to differ from those discussed, you should refer to the cautionary statements contained in today's press release, as well as the risk factors discussed in our various filings with the Securities and Exchange Commission. And finally, some of today's prepared remarks will adjust for those items that affect comparability between reporting periods. And these items are laid out in our non-GAAP reconciliation, which is included in our press release. So with that, I'll turn it over to Ron.

Good afternoon. First quarter was an excellent start to the year. Our results reflect a continued improvement of our operations. Each of our businesses is well positioned for enhanced growth and future profitability. During the quarter, we repurchased 50 million of common stock, and our subsidiary, Ames True Temper, acquired Northcote Pottery, a leading brand in the Australian outdoor planter and decor market. Both transactions are immediately accretive and create shareholder value. Revenue of $453 million increased 7% over the prior-year quarter, and segment adjusted EBITDA of $44 million increased 3% despite a difficult comparable quarter for Telephonics. I'll now comment on each of the operating segments, and then Doug will take you through the financial results in a bit more detail. For Home and Building Products, our revenues totaled $218 million, increasing 15% over the prior-year quarter. Ames' revenue increased 25%, primarily due to improved snow tool sales. Door revenue increased 8%, primarily through improved volume. Segment adjusted EBITDA was $19.1 million, increasing 11% compared to the prior-year quarter. We continue to believe we're in the early stages of a multi-year housing recovery, with new residential construction and repair and remodel levels in the United States improving. This bodes well for both our doors and tool businesses. As housing recovers, relatively small increments of additional revenue will carry significant improvement in profitability for the home and building product segment. Earlier this month, we strengthened our management team with the hiring of Michael Sarrica as President of Ames True Temper. Mike joins us from DRS Network and Imaging, where he served most recently as President. He has extensive experience in operations, manufacturing and innovation and is an excellent hire for us. We're all very excited about the impact he's going to have on the Ames business going forward. Telephonics had…

Thank you, Ron. Consolidated revenue totaled $453 million in the quarter, increasing 77% or $30 million in comparison to the prior year. Home and Building Products led the surge in revenue. Home and Building Products had revenue of $218 million, increasing 15% compared to the prior-year quarter. Ames' revenue increased 25% to $97 million, mainly due to improved snow tool volume that benefited greatly from significant snowfall in the various markets we serve. Door revenue increased 8% to $122 million, mainly because of improved volume. segment adjusted EBITDA was $19.1 million, increasing 11% compared to the prior-year quarter, and the increase resulted primarily from the higher volume at both Ames True Temper and the door business. The operating improvement was partially offset by a decline in Byrd Amendment receipts. Byrd Amendment receipts are anti-dumping compensation from the federal government. And in the prior quarter, we've received $1 million in such reimbursements, while this year, Byrd receipts were not significant. Ames continues to incur manufacturing inefficiencies in connection with its plant consolidation initiative. And as we said before, these inefficiencies are expected to continue until the initiative is complete at the end of calendar 2014. Our manufacturing consolidation plans for Ames remain on schedule and on spending budget. We continue to expect the annual cash savings exceeding $10 million based on current operating levels on completion of this initiative. Telephonics revenue of $96 million was in line with the prior-year quarter. The current quarter saw increased international radar program sales, but the benefit of that improvement was offset by reduced MH-60 Romeo radar sales. Telephonics segment adjusted EBITDA decreased to $12.4 million from the year-ago quarter. The margin was 13% in the quarter compared to 17% in the prior-year quarter, mainly driven by product mix. The prior year also benefited from…

Thanks, Doug. We're executing well on our strategy of improving the operations of each of our segments. This quarter highlights the meaningful progress we've made. Our businesses are well positioned for continued growth and profitability. We have ample resources to invest in these businesses to support their growth and are optimistic about their prospects. We're confident that we can make acquisitions, make investments for organic growth, pursue the return of capital to our shareholders via the quarterly dividends and share repurchases. And as we look out over the next few years, we believe that we can sustain revenue growth, expand our EBITDA margins and significantly increase our EPS. Our common stock is just beginning to reflect the earnings power of our businesses. I'm very pleased with our performance this quarter, and I'm quite confident about our future. With that, operator, we'll take any questions.

[Operator Instructions] And we'll go first to Bob Labick with CJS Securities.

So I guess I'll start with HBP this time. I mean, could you discuss bringing on the new President for Ames like Michael Sarrica, if I'm saying it right? Just some background as to -- did you know him before or did Bob know him before at DRS? What are your goals for him bringing him in, and tell us a little bit about him, please?

Sure. Bob Mehmel has -- had a 12-year relationship with Mike Sarrica in his prior life as President of DRS. And we think he is a generalist who has both manufacturing, innovation in his core skill set. We need leadership at Ames that is going to be able to effectuate a very, very complicated manufacturing improvement plan that we're in the process of. And obviously, we don't make changes lightly in our businesses, and we clearly have a point of view that this business can do better. And we think Mike is what we need to be able to effectuate a better growth profile for Ames. We've got very good visibility on our orders. We've got the business executing better than it has, but we think that this is a significant improvement and someone who has a skill set to be able to take the company to the next level.

Okay, great. And then just to the point of the current restructuring program and everything, have you been able to -- obviously, you had fantastic sales, particularly at Ames' sales growth. Have you been able to keep up with the demand based on all the snow and everything, particularly even through January?

Yes.

Yes. Very satisfied customers to date in terms of our ability to respond and service them with the weather, the way it's developed.

All right. Okay. Fantastic. And then jumping over to films. My kind of usual question there, which usually begins with another nice margin improvement in the quarter, so that's great. Your margin right towards that 10%-plus goal. Just remind us what else is necessary, is it just volume now? Or what are the steps that you're going to -- that are going to take you from mid-9s to mid-10s and beyond?

Bob, they're continuing -- as we kind of alluded to on our comments, they're continuing to work on -- continued efficiency improvements, continued reducing of -- the amount of scrap that results from the manufacturing process. And all the while, making sure that we keep our customers satisfied from a customer service perspective.

Okay. And then just moving over to Telephonics. A week or so ago, there was an article in the Wall Street Journal, it's talking about the U.S. government basically giving away 13,000 old MRAPs. I think you guys were on those vehicles in the past. Is that correct?

No, I don't believe so.

Well, we are. It was a small portion.

Okay. I thought it was -- you had your anti-IED stuff through the CRQs [ph] on those. So my question was going to be if it -- if there are any after market orders or if anything was affected by that.

No. Irrelevant to our business.

Okay, good. No problem. And then just -- you alluded to the Fire Scout program in your comments before. Can you give us an update on kind of where the funding stands for that and what the rollout or any visibility you have in to timing from that?

Nothing has changed. It's still -- initial order is funded and we expect it go into production late in fiscal 2014 at a small impact and start to ramp up into 2015 and beyond. So still in its early stages.

Okay, great, great. And then my last question and I'll let others ask. But can you just give us your latest thoughts on -- I know you have an exclusive right, I guess, through the end of this calendar year to repurchase shares from Goldman Sachs should they choose to sell them. Any updates there? Or where do you stand if you would be interested in that?

No updates. And we think the business is performing well, and hopefully, the stock will follow.

We'll go next to Marty Pollack with NWQ Investment Management Company.

If I may, just a couple of questions. One, on the runoff of what seems to be low-margin businesses on the Plastics side, I wonder if -- let's just say you looked at margins, assuming they all were kind of no longer in place. I don't know what that means. You're in the process of exiting all -- a lot of those businesses or you've actually exited all of it, but if let's say, at a point on where you just have a compete exit, so what do you want to do get out of -- what would the -- I mean, what kind of margin would we be saying with the completion of that? That's one question. The second one would be on the CapEx. I'm wondering, if you see where CapEx is coming down in the next few years in a ways, with the hope of, presumably, of maybe still working down the overall debt of the company, so that we'll get significant free cash flow opportunity.

Marty, to -- with respect to your first question, the Plastics, basically, all of that volume was exited by the end of last year's second fiscal quarter, so this quarter coming up. And as I mentioned, as a result of that, we still have a somewhat difficult comparison as we move into our -- the current second quarter from a volume perspective, and very little of it lingered past the second quarter. So at the end of this next quarter, that volume comparison will cease to be a challenge for us. From the CapEx perspective, as I mentioned, we continue to expect to spend about $70 million this year, and that includes the spending for the Ames plant consolidation. While we haven't really fleshed out the budget for next year from a CapEx perspective, as I've said in past calls, we do expect the capital spending to decline to the level below depreciation. And as I said, depreciation this year will be about $64 million. I would expect CapEx next year to begin with a 5 rather than a 6 from an overall spending perspective. Meaning, in the $50 million rather than the $60 million.

I see. So let me just -- back to the comments about Plastics are getting back to the 10% level. I recall, actually, at the peak, let's say, the last peak, I remember EBIT numbers being closer over 8%, suggesting that -- whereas today, I think your own EBIT basis is more like 5%, 5.5%. So is there a lot more run rate to really get to the historical number? Or have things really changed, so that even though you'll get to 10%, the reality is the old number that's perhaps achieved later, somewhere in 2005 or '06, are just a target and not realistic anymore?

Look. Marty, let me comment that from where we were, putting out a 10% EBITDA target 2 years ago, was quite aspirational. We're fully mindful of what peak EBIT margins were in this business. And we're not going to stop until we can find ways to both expand our top line, look for cost savings. So it's pointless to put targets out. What we've said is that this business was in trouble 2 years ago. We took the steps to fix it. It's clear quarter-by-quarter, year-by-year, that it's steady in continual improvement, and we still think we've got plenty of runway to both improve the management's ability to deliver. We have incredible confidence in what Alan Koblin and his team have done, and we think that there's still plenty for them to be able to do to take this business to a higher level of profitability and what we've said, that it's running at today. So hopefully, that gives you the sense of -- we like that -- where this business is positioned. We -- customer positioning gives us visibility with all of our major customers. Europe was looking at the abyss 2 years ago. A year ago was still questionable as to what the macro environment was. We've seen the bottom, we see improvement across the European business and we see steady improvement in Brazil. So this business is in very good shape, and we'll find out what peak margins are sometime in the future. But it's not going to be a 2014 event. We like where it is. As Doug mentioned, CapEx starts to decline, cash flow starts to increase and we've got some real visibility on where we're going here.

[Operator Instructions] And next, will go to Philip Volpicelli with Deutsche Bank.

My questions are regarding acquisition appetite. I know you guys -- I ask this question every time. I'm just hoping to see if there's anything that's imminent and what size you would consider doing in terms of acquisitions.

Sure. I mean, looking -- what we've been doing, and I think that's the road map going forward. Accretive tuck-in, small acquisitions that help our existing businesses are our top priority. And beyond that, it's opportunistic. There's way too much capital chasing assets. And in our case, it's not that we're looking, but don't expect us to be doing anything other than running the businesses we already own significantly better and trying to build free cash flow.

Okay. And then with regard to the share repurchase, you clearly have a lot of authorization left there. Can you give us a sense of what you would expect to spend this year? Is there a range that you would provide?

No. We try to be opportunistic, and we seem to buy it when no one wants it and that's worked well for us. We believe in the value of these businesses. We think the stock is starting to reflect the underlying intrinsic value of the company. And we'll always be looking for opportunities to deploy free cash into our own stock.

Next, will go to Justin Bergner with Gabelli & Company.

I had to hop off the call for 30 seconds, but I just want to -- assuming I heard correctly that EBITDA is forecast to grow 5% the segment level.

Yes, that's correct. It's the same guidance as we established when we first -- when we came out with the full year 2013 results and provided initial guidance for 2014.

Got you. What would allow you to sort of exceed that level outside of, I guess, weather-related drivers?

Justin, it's Ron. We give guidance to try to be helpful for credit investors. And as a long-term equity owner and builder of this business, we look at earnings power for these businesses over time. So the answer to your question of what could help us exceed is obviously a faster pace of a housing recovery and a significant volume increase, more visibility on the -- on resin price decreases. But we're very comfortable, and we have been comfortable, that we give guidance that we aim to try to meet and then to exceed. We're still in the beginning of the recovery of this economy. And it's pointless to try to speculate on where the business is going to go this year. We're running the company to try to build it over time. Each of these businesses are -- we're sensitive to macro forces, many of which have gone against us over the last several years that in the last year, and as this quarter starts to reflect, when we get volume increases, and to be the most encouraging part of this quarter is volume in the door business has picked up. So that revenue increase is the first time that we can point to. And you've heard me say before that we're like the caboose on the housing train. So you're starting to see our volumes increase, our profitability has been increasing quarter-over-quarter for the last several quarters and we see the trends continuing. But any slowdown in the overall economy -- a year ago, we were all talking about sequestration and how bad it was going to be for the defense business. Fortunately, that's off the table, but bad political environment and lack of action in Washington can have a bad effect on our business and the overall economy. For this year, we feel very confident that we've set the target of -- we give guidance once a year, and we gave it as we reported our full year going into 2014. We clearly are ahead of our own internal forecast for the first quarter, but we still have 3 quarters of the year to go. So we're going to keep our guidance right where it is.

Okay. On Plastics, as you lap -- begin to lap the exit of low-margin businesses and potentially benefiting from some market share shifts in the industry, should we begin to see the volumes shift from positive to negative -- I'm sorry, from negative to positive in Plastics?

Absent the impact of the -- exiting those unprofitable businesses in Europe, volume would've increased. But when you're looking at the comparison this year versus last year, in the quarter. So I think...

Okay. And as you -- as some customers sort of market -- as some customer changes take place in the industry potentially, should we see that volume increase further than it would have this quarter, excluding the European exits?

A lot of that depends on continued macroeconomic improvement, as we mentioned. Latin America, there's a lot of, let's say, turbulence in the markets that we serve in Latin America. And I think that the macroeconomic environment in Europe, relative to where we are in the Unites States, is probably not as far along the recovery. So as I mentioned in the comments, the major risks that we perceive for each of the businesses, we have to be mindful of those. But as they said, the volume did increase modestly on a like-for-like basis if you exclude the impact of the European restructuring and portfolio realignment.

And we have no additional questions in our queue at this time. I'll turn it back over to Mr. Kramer for any additional or closing remarks.

Very pleased about where we are. We hope to keep the momentum up, and we'll speak to you after our second quarter. Thank you.

And that does conclude today's call. Thank you, all, for your participation.