Griffon Corp (GFF) 2011 Q4 法說會逐字稿

Good day, and welcome to the Griffon Corporation fourth-quarter and full-year 2011 financial results conference call.

As a reminder today's conference is being recorded.

At this time I would like to turn the conference over to Mr.

Doug Wetmore.

Please go ahead, sir.

Thanks, Kevin.

Good afternoon, everybody.

With me on the call is Ron Kramer, our Chief Executive Officer.

Before we get into the details of the call there are a couple of matters I want to bring to your attention.

First I'll note again today that our call is being recorded and will be available for playback.

Details regarding that playback are provided in our press release and they're also available on our website.

Second, during the call we will make certain forward-looking statements about the Company's performance.

Such forward-looking statements are subject to the 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 discussed in our filings with the Securities and Exchange Commission.

Finally, some of today's prepared remarks will exclude those items that affect comparability between reporting periods.

These items are laid out in our non-GAAP reconciliations, which are included in our press release.

Now I'll turn the call over to Ron.

Good afternoon everyone.

I will start with the financial highlights from the fourth quarter.

We had excellent top-line growth this quarter, with consolidated revenues increasing 39% to $485 million.

Every one of our businesses grew.

Home and Building Products revenue increased $92 million, or nearly 90% from the prior-year quarter, mainly due to the inclusion of Ames results.

Our Door business also showed strength, growing by 10% compared to the prior year quarter.

Plastics continues to build its market share, growing 15% compared to the prior year quarter; while Telephonics posted another outstanding quarter with revenues up 23%.

On a pro forma basis, as if Ames True Temper had been included in the prior-year results, current quarter consolidated revenue increased 13% over the prior year comparative.

Quarterly segment adjusted EBITDA was also strong, growing 36% to $41.5 million; even with a significant damper from the temporary issues in Plastics, segment-adjusted EBITDA increased slightly versus last year's pro forma.

Earnings per share in the quarter were $0.06 as compared to a loss of $0.03 in the prior year.

On adjusted pro forma basis, fourth-quarter EPS was $0.07 versus $0.11 last year.

This has been an important year for Griffon.

While the economic environment has been and continues to be challenging, we have accomplished a great deal.

We also believe there is a great deal to come.

We have now fully restructured and repositioned the Doors business, and the Ames acquisition is energizing results for our Home and Building Products business.

In defense, we couldn't be more pleased with how well Telephonics is performing; Intelligence, Surveillance, and Reconnaissance is a tremendously important category, which our robust state of funding continues to show.

Clopay Plastics had a strong fourth quarter, as the business continues to work through their temporary issues impacting segment profitability.

You'll remember from our third-quarter call, Plastics experienced both low absorption and high scrap rates in connection with bringing new production capabilities online in both Germany and Brazil.

While more work remains.

I'm pleased to report substantial progress in both of these operating regions during the quarter.

Moreover, we remain on track to return to a normalized level of profitability by the end of the second quarter of fiscal 2012.

Plastics has increased business with both new and existing customers, and we believe is poised to continue to grow and increase its market share.

Given the revenue growth, Plastics should be our most-improved business in 2012, with significant contribution to our improving consolidated results.

Telephonics saw strength in nearly every product category, with revenue growth of 23% this quarter.

We've benefited from CREW 3.1 sales in this quarter that were markedly higher than the prior year.

Excluding the 3.1 sales from both quarters, Telephonics' core business grew 15% compared to 2010, the same pace as was achieved in the third quarter of this year.

Telephonics' strength derives from its technology leadership position in a variety of categories, and from the continuing demand for its Intelligence, Surveillance, and Reconnaissance equipment.

Telephonics' adjusted EBITDA increased 1% compared to last year.

This result reflects the timing of certain R&D expenditures in the quarter as well as in the effects of product mix.

We have a number of good opportunities to gain strength in the radar and electronics equipment market, and to recapture volume in communications equipment, especially in friend-or-foe identification, where we have strong sales in the quarter just completed.

We're also moving closer to revenues associated with Fire Scout, Northrop's unmanned reconnaissance helicopter, where Telephonics represents approximately 5% of the aircraft content.

Fire Scout has made tremendous operational advances, and recently completed a very successful six-month deployment aboard the USS Halliburton.

Today the aircraft has flown more than 2,500 hours with the Halliburton, as well as in Libya, Yemen, and Afghanistan.

We continue to believe this will prove to be an important program, and that our revenues during its life will exceed $200 million on this program, with other programs to follow.

Backlog in Telephonics improved to $417 million at year end, compared to $407 million at the end of the prior year.

This is more than 80% of our revenue target for 2012, and it gives us tremendous comfort in our full-year projection for Telephonics.

We do expect order timing to limit backlog growth in the first half of the year, but also expect much stronger order activity in the second half of 2012.

We think the ISR category will remain strong, and that Telephonics has excellent opportunities in fiscal 2012 and beyond.

Finally we are very excited about the pending joint venture between Telephonics and Mahindra & Mahindra in India.

We announced that earlier today.

Telephonics and Mahindra signed a memorandum of understanding, and we expect the joint venture to be formed and that we'll be announcing more in the second quarter of our fiscal 2012.

Mahindra is a $12.5 billion multinational group based in Mumbai, India; the joint venture is being formed to provide the Indian Ministry of Defence and Indian civil aviation sector with radar and surveillance systems, identification friend-or-foe devices, and communication systems.

In addition, the JV intends to provide systems for air traffic management services, homeland security, and other emerging surveillance requirements.

The JV will license technologies from Telephonics for use on a wide range of products that have both defense and civil applications.

It's too early to talk publicly about the potential financial benefits this deal may mean to Telephonics and to Griffon.

We will provide more insight as this venture progresses.

At the present, suffice to say that the defense market in India is an important strategic part of our international plans; and Mahindra is the right company for us to grow with in India.

We couldn't be happier about being in a business relationship with them.

Home and Building Products completed a significant year, both transition and accomplishments.

In the fourth quarter, segment revenue grew 89% to $195 million; and segment adjusted EBITDA increased to $17.5 million from $2.8 million reported in the 2010 fourth quarter.

This growth in both revenue and EBITDA reflects the inclusion of the Ames business and our operating results.

On a pro forma basis, Home and Building Products' fourth-quarter revenue increased $10 million or 5% compared to the prior year quarter, driven mainly by revenue growth in our Doors business.

Also on a pro forma basis, segment adjusted EBITDA grew $4.1 million, with the improvement primarily attributable to favorable product mix and the benefit of cost savings.

There could be no question that 2011 was a challenging year for our Home and Building Products business, most notably Ames.

As many of our customers have also discussed in their earnings announcements, difficult weather made this a very challenging year for the lawn and garden segment.

Rising input costs further aggravated the situation from an operating and profit perspective.

Over time, the weather impact will smooth itself out.

Underneath some of the noise in the Ames business, in the reported results, we believe this is clearly a great business with excellent brands.

There is both organic and acquisition-related growth potential; as an example we are pleased to announce the Southern Patio deal this past quarter.

This is a great fit acquisition, and we think we can make them more efficient and give them new growth opportunities.

We believe that there are other great tuck-in opportunities in a number of categories at increasingly rational valuations for this business as we go forward.

I want to also talk about the great job that our Doors business has done.

Without any recovering in the US housing market, Doors grew to double-digit pace from the fourth quarter, and grew the top-line 4% for the full year.

We now have our restructuring behind us and we are operating increasingly well.

As we've said many times, we are positioned to operate profitably in a no-growth environment, and so the profitability improvement that results from an uptick in volume we believe will be significant.

Across all of our businesses we are continuing to provide growth capital, risk management, and support for operational and strategic planning.

Our major focus now, as you know, is improving the results of our capacity expansion project for our Plastics business.

While we know the situation is disappointing in the short-term, fixing it will take place over the next few quarters.

At that point we should be running at much higher volumes, with peak profitability or better.

We're confident that this Business is improving; with a strong outlook for Telephonics, Clopay Doors now efficient and performing well, and with all the growth opportunities related to Ames, we are ready to deliver increasingly improved financial performance.

Doug will now take you through some additional numbers for the quarter and full-year, and then we will be pleased to take your questions.

Thanks Ron.

Consolidated revenue in the quarter increased by 39% to $485 million.

On a pro forma basis, including Ames in the prior-year comparative, revenue increased 13% in the fourth quarter in comparison to the prior-year quarter.

The majority of this growth was driven by our Home and Building Products segment, where revenue reached $195 million; with growth of 89% compared to the prior year quarter as reported.

The growth was predominately due to the Ames acquisition, but our Door business did grow 10% in the quarter.

On a pro forma basis Home and Building Products revenue increased 5% in the fourth quarter this year versus last year.

Telephonics grew by 23% to $140 million in the quarter.

This growth was due to increases nearly across the board, including identification friend-or-foe products, ground surveillance radar, and CREW 3.1 systems.

Excluding the CREW 3.1 revenue, where we are a contract manufacturer, our core Telephonics business grew 15% compared to 2010 quarter, on par with the 15% growth in our core business achieved in our third quarter of fiscal 2011.

Telephonics backlog at the end of the quarter was $417 million, up slightly versus a year ago of $407 million; and we expect a little bit more than 80% of that backlog to be realized in the course of 2012.

15% growth in revenue in Plastics continued to reflect the improved demand and capture of market share following our capacity expansion in that business.

We are on track with our operational and profitability improvement measures undertaken in Plastics, and continue to expect a return to normalized level of profitability by the end of the second quarter 2012.

Consolidated gross profit in the fourth quarter exceeded $105 million, with a margin of 21.7% versus the prior year rate of 21.4% as reported.

On a pro forma basis, including the Ames business in our 2010 numbers, gross margin declined to the 21.7% compared to 24% in the prior-year quarter.

That year-over-year margin decline reflects a number of moving parts, including the inclusion of the Ames business with the resulting increase in commodity costs, increased input costs in our Home and Building Products segment overall, and the temporarily lower margins in the Plastics business.

Consolidated selling, general, and administrative expenses excluding any restructuring charges in the quarter were $83.5 million or 17.2% of sales.

This compares to $73.7 million or 21.2% of sales last year as reported.

A comparable number on a pro forma basis, excluding any costs associated with the Ames transaction but including Ames in that number, would be $85 million or 19.8% of sales.

The improved rate of expense as a percentage of sales was due primarily to scale over corporate expenses, cost savings actions undertaken throughout the Company, and reduced incentive accruals reflecting Griffon and operating segment performances that were below plan.

With respect to the operating profitability of our segments, fourth quarter consolidated segment-adjusted EBITDA grew 36% to $41.5 million, compared to $30.4 million in the year ago quarter as reported.

On a pro forma basis it increased just slightly from the $41 million last year pro forma number.

By segment, Home and Building Products had EBITDA of $17.5 million, versus just $2.8 million in the prior-year quarter, reflecting the Ames acquisition and an improvement in Doors.

The year ago pro forma segment adjusted EBITDA was $13.4 million, so an improvement of about $4.1 million year-over-year versus the pro forma.

Plastics segment-adjusted EBITDA totaled $10.6 million, compared to $14.2 million a year ago, a decline despite the 15% increase in revenues.

As we've discussed, we continue to experience ramp-up in efficiencies on the new equipment, as well as an impact on the lag between the price of resin and net selling prices on our plastics.

In terms of operating efficiency, as expected we saw some improvement in the fourth quarter in comparison to what we reported in the third quarter, and we expect continued improvement in the first two quarters of fiscal 2012, at which time we'll have returned to a normal level of profitability.

Telephonics achieved segment-adjusted EBITDA of $13.4 million, essentially flat with the prior-year quarter notwithstanding the revenue growth.

That is due primarily to the timing of certain research and development expenses, as well as the impact of product mix, most notably the CREW 3.1 revenue.

We expect to leverage the R&D expenditures next year as we grow and sustain related sales.

Consolidated operating income in the quarter rose to $19 million, up from just $400,000 last year; and earnings per share in the quarter was $0.06, versus a loss of $0.03 per share in the year-ago period.

As Ron mentioned adjusted pro forma earnings per share in the fourth quarter were $0.07 versus $0.11 last year.

And that decline in operating results in our Plastics business was the primary cause of the decline this quarter versus the prior year quarter.

These are all broken out in our press release, but the adjusted earnings per share excludes certain restructuring costs and in 2010 the one-time acquisition costs incurred in connection with acquiring Ames True Temper.

The consolidation of the Door manufacturing facilities which we announced in June of 2009, was completed in 2011; in total we incurred pretax exit and restructuring costs of $9 million, substantially all of which were cash charges, including $3.6 million in 2011.

Ames True Temper recognized $900,000 in restructuring costs primarily related to termination benefits, reducing administrative headcount by 25 people; and Telephonics implemented a voluntary early retirement plan as well as some additional headcount being taken out by a reduction in force, with the overall impact of reducing headcount by 75 employees.

I'll just turn to a couple matters we want to emphasize with respect to the full year.

Consolidated revenue for the full year 2011 grew 41% compared to the prior year, to $1.8 billion, driven by growth in each segment, but primarily by the addition of Ames in the Home and Building Products group.

On a pro forma basis including Ames in the prior year comparative, revenue increased a little bit more than 5% for the full year 2011.

Home and Building Products revenue increased $450 million or 116%, compared to the prior year, primarily due to the acquisition of Ames True Temper.

On a pro forma basis, as if Ames True Temper had been purchased on October 1, 2009, revenue increased just about 1% compared to the prior year.

Segment adjusted EBITDA in 2011 for Home and Building Products was $77 million compared to $19.4 million in 2010, with the increase being driven by the inclusion of Ames True Temper.

On a pro forma basis, the year ago segment adjusted EBITDA was $91.6 million.

The decrease in the current year compared to the prior year pro forma is generally due to the combination of higher input costs and lower volume that resulted from the weather and tough economic conditions this year, along with the decrease of approximately $3 million of Byrd Amendment, anti-dumping compensation, which we talked about earlier this year.

For Telephonics, revenue in 2011 increased $20.8 million or 5% compared to 2010, primarily due to increases in radar and electronic systems, partially offset by a decrease in communication systems.

Excluding the sales of CREW 3.1, where Telephonics is the contract manufacturer, our core business grew 6% compared to the full year 2010, excellent growth in a difficult budgetary environment.

And for the full year, Telephonics segment-adjusted EBITDA increased nearly $5 million or 10%, mainly driven by the growth in revenues.

For Plastics, revenue in 2011 increased to $536 million, an increase of nearly $66 million or 14% compared to last year, driven by volume growth of about 6% to 7%, further augmented by the pass-through of higher resin costs, which represented about 5%, and the translation of European results into a weaker US dollar, which was between 2% and 3%.

Plastics segment-adjusted EBITDA in 2011 decreased $5.2 million compared to the prior year despite the revenue growth, due to the start-up inefficiencies that we've seen in the second half of this year.

Overall, segment-adjusted EBITDA totaled $166 million, increasing 53% compared to the $108 million last year.

Pro forma segment-adjusted EBITDA for 2010 was $180.6 million.

Reasons for the decline in EBITDA in the current year compared to the 2010 pro forma results were the impact of a lower volume, higher and higher input costs, and the Byrd Amendment, anti-dumping compensation at Ames True Temper, and the Plastics inefficiency and scrap issues.

These declines were partially offset by the strong performance of Telephonics.

For 2011 our loss from continuing operations was $7.4 million or $0.13 a share, compared to $9.5 million or $0.16 per share income in the prior-year.

Let me just repeat what the non-recurring charges and adjustments that need to be taken into account in our impacting comparability.

In 2011 we had $26 million of cost associated with the prepayment and refinancing of debt; $15 million of increased cost of goods sold, related to inventory write-up associated with the Ames True Temper acquisition accounting; as well as $8 million of restructuring charges and acquisition costs.

We also booked $4.5 million of net discrete tax benefits.

All of these items had the net effect of reducing our reported earnings per share by $0.47, and excluding these items our adjusted income from continuing operations is $19.9 million, with EPS of $0.34 per share.

And just to go through the impact in 2010, we had a couple items as well.

We had about $9.8 million of Ames True Temper acquisition costs that were expensed, $5.3 million of restructuring and debt refinancing costs, and we also had $2.3 million of net discrete tax benefits.

The net effect of these items reduced our reported earnings per share by $0.15 per share; and excluding those items, our adjusted income from continuing operations was $18.3 million or $0.31 per share.

Now, admittedly we had a wildly fluctuating effective tax rate in the current year.

Our effective tax rate for continuing operations for 2011 was a benefit of 48%, compared to a provision of 31.2% in the prior-year.

The 2011 rate reflected net discrete benefits of $4.6 million, primarily related to some tax planning initiatives.

The 2010 rate reflected net discrete tax benefits of $2.3 million, primarily related to the resolution of certain foreign and domestic income tax audits.

Excluding those discrete tax items from both years, the 2011 income tax benefit would have been 16.4% and the 2010 tax provision would have been about 48%.

Both 2011 and 2010 were also impacted by some permanent differences, associated with non-deductible expenses, the most significant of which was the non-deductible transaction costs in 2010 associated with the Ames True Temper acquisition.

And excluding all the discrete items and the other period items I just mentioned, the effective tax rate for continuing operations would have been a benefit of about 25% in 2011, compared to a provision of 38% in 2010.

What we've seen is that geographic earnings mix can significantly impact our consolidated effective rate.

Currently we expect our fiscal 2012 rate to approximate 42% to 44%.

And we'll update that rate as the 2012 year unfolds.

Our capital spending in 2011 totaled just under $83 million after considering about $5 million of investment subsidies that we received, directly connected to those expenditures.

We currently expect 2012 capital spending will be in the range of $65 million to $70 million.

Depreciation this past year was about $53 million, and we expect depreciation in 2012 to be about $63 million, increasing directly as a result of the current-year capital spending.

After 2012 the capital spending will tail off to more normalized levels; and also for those modeling, I should mention amortization expense in the current year was about $8 million and is expected to be about that same amount in fiscal 2012.

With respect to our year-end balance sheet, we ended the quarter with $243 million in cash and total debt outstanding of $713 million, resulting in a net debt position of $470 million.

Additionally, about $180 million of our $200 million revolving line of credit was undrawn.

The balance represents utilization due to outstanding letters of credit that we have issued.

As we look to 2012 we currently expect consolidated revenue to be in the range of $1.9 billion to $2 billion, a growth rate in the mid to high single digits over the reported revenue for 2011.

Compared to 2011 we expect Home and Building Products revenue to benefit from a resumption of growth at Ames, as well as the addition of Southern Patio, while Clopay doors is expected to increase in the low single digits.

Telephonics is expected to produce a low to mid single-digit rate of growth, while we currently expect Plastics to continue to grow at a mid to high single-digit rate.

In the case of Plastics, revenue will fluctuate depending upon resin prices as well as currency.

We expect that segment-adjusted EBITDA will be in the range of the $180 million to $190 million, compared to the $166 million reported for 2011.

Remember, the segment-adjusted EBITDA excludes Corporate expenses, which should -- Corporate and other expenses are expected to increase somewhat from the reduced levels in 2011, but be pretty much in line with the actual results reported for fiscal 2010, or about $26 million.

Corporate expense includes all equity compensation for the Company which is non-cash, and that will be about $9 million during fiscal 2012.

With that I will turn the call back over to Ron.

Thanks, Doug.

We are operating well in a very challenging economic environment.

We've postured ourselves to operate without a recovery in the economy, including the housing market and a defense budget that is likely to be under significant cutbacks.

These are difficult times and they may very well stay that way.

By incorporating that into our planning, we have become increasingly tough competitors; and we think we've positioned our businesses to have a very good year in 2012 and beyond.

Telephonics is growing nicely.

Home and Building Products should grow both organically and through acquisitions.

In Plastics they have managed to create a very good growth in revenue, and we think that they will overcome the ramp-up inefficiencies over the next few quarters.

Fortunately, one upside to this operating environment is our superior access to an ability to deploy strategic and operating capital.

Our businesses are getting what they need to grow and achieve their growth objectives.

We also continue to have the ability to do sizable acquisitions to reinforce that growth, in addition to the tuck-in acquisitions.

Finally, we believe we can continue to invest and grow our businesses, while at the same time buying back stock opportunistically, and commencing paying a dividend.

We are announced earlier today that our Board has declared a regular quarterly cash dividend of $0.02 per share, with the first dividend payable on December 27, 2011 to the shareholders of record as of the close of business November 29, 2011.

The quarterly rate represents an annualized dividend of $0.08 per share, which equates to a yield of approximately 1%.

We also bought $20 million of stock this year in our ESOP, and $1.5 million shares this quarter since we announced our expanded buyback program in August.

Our businesses are well-positioned, our balance sheet remains strong.

We are confident that we can make the proper investments for organic growth, pursue additional acquisitions and return value to our shareholders through dividends and stock repurchases.

We remain committed to enhancing value for our shareholders.

And with that we'll open it up and take your questions.

(Operator Instructions) Philip Volpicelli, Deutsche Bank.

My first question is with regard to Ames True Temper.

I understand you guys typically go through a line review process with some of your larger customers around this point of the year.

Can you give us any update on how those negotiations are going?

Are you -- are you confident you will be able to possibly increase price to offset some of the raw material pressure you've felt?

There are a couple questions in there.

Let me give you -- we're very well-positioned in our line reviews going into 2012 and at some level we're confident about the outlook going forward.

Having said that let's put in perspective that the consumer economy is still fragile.

And while commodity costs have been increasing our ability to pass along those costs is really a function of the end consumer.

It is our view that until the unemployment situation starts to repair itself which can only happen as the housing markets start to repair themselves, it is going to be very difficult to pass through increased cost.

We have maintained and we have increased market share in our Business and that is the most important positioning for us.

We believe that we are well positioned with our customers.

We will try to continue to win every piece of business that's up for review.

We are dominant in each of the categories that we participate in.

And we're going to continue to do that; at some point commodity prices will come our way, at some point we'll be able to pass through increased prices.

Our expectation is that margins will remain basically the same going into 2012 as they've looked like in 2011.

Great.

Very helpful.

And then in the Plastics business I understand that the goal is by second-quarter 2012 that you will have that up to the level that you want, but are you starting to see improvements?

I'm just trying to get a sense of this.

Is this going to be a one-step function change or if it's a gradual improvement month-over-month?

We have seen week-over-week, month-over-month improvements as our equipment has come online.

Our volumes clearly indicate that we have been able to deliver increasing amounts of our products to our customers.

This is a margin -- this is not a mystery that the top-line growth is there.

The margins clearly do not reflect the normalized level of profitability.

We have seen that growth and we expect to continue to see it.

We think we are conservative in getting our expectation but this is something that we believe is well within our control.

Okay.

And then going to Telephonics Ron, I think I heard you say that the Fire Scout program will be $200 million of revenue for the Company, for Griffon, over the life of the program.

One, is that accurate?

And two, what would be the life of the program?

I think we believe that the initial orders to us for that program which go into production at the back end of our 2012 year will represent and I think we said 5% of the value of the initial program.

Beyond Fire Scout, there's Fire Brand, there's Fire-X, there is a number of additional robotics programs and I'd just point out to you that this is a fundamental shift in technology and our expectation is that we are a seasoned value added supplier and that this is the beginning of what could be a very long life essential hardware.

When you go back and you look at some of the programs that Telephonics is on like the LAMPS program and even going back to the C-17 program, we have been on that program since 1970.

So when you are on programs that go into large scale production and you can deliver on a cost-effective high technology solution which is what Telephonics has done we hope that this is going to be something that goes on for a very long time.

This is just the initial part of the order book that we see visibly.

And as we have said we only count in our backlog things that are funded and going into production within the next 12 months.

We think that what we talk about with the Fire Scout program will not start to impact our funded backlog until 2013 and beyond.

So even with a difficult defense headline budget we have a fair degree of visibility of what we see happening in our Business going into 2012.

Tim Quillin, Stephens.

With regards to the Plastics business I understand there are some factors that would cause some variability around that.

But is there anything in the $150 million of revenue that you did in the fourth quarter that is unusual or unsustainable or where should we expect that business to be bouncing around in 2012?

Tim, that really -- the result reflects pretty strong volume growth.

Obviously currency and so forth benefits as well but we expect it to continue to grow as I said this next year in the mid-to high single-digits.

I wouldn't characterize Q4 as anomalous.

More along the lines of saying reflecting the market share that we picked up earlier this year that we are now able to serve with our capacity expansion.

Right.

That makes sense.

$150 million annualized would be 12% growth.

So I think your guidance assumes some kind of backing off of that number.

I'm just trying to figure out what factors contribute to that.

The euro has already weakened from where we were in the fourth quarter of the fiscal year.

And resin has already come down a little bit from where it was in the fourth quarter.

So trying to guesstimate what that is.

So we will continue to update as the year progresses but really the main driver for the growth on the long-term is the volume and the market share that we've picked up.

Sure.

And do you have an estimate of what currency contributed in the fourth quarter?

Yes.

It was very close to what it was for the full year.

Currency was about 5% in the fourth quarter but volume was about between 8% and 9% and the resin effect was fairly nominal, it was between 2% and 3%.

Okay great thank you.

And then on Ames True Temper, I guess first of all do you have an estimate of what revenue we might expect from Southern Patio and just in general do you have a sense of how weather impacted the business in fiscal '11.

Tim, it's Ron.

There are two points.

Southern was $40 million of revenue trailing.

We expected to be higher than that projected into 2012.

So combined with the growth in the Ames business it should show a nice organic growth for that combined business.

Weather significantly impacted us this year but as we bought this business for the long-term, there is going to be good weather years and there's going to be bad weather years.

This was an exceptionally bad weather year for lawn and garden.

It was also an exceptionally bad year for snow.

So we're the largest snow shovel manufacturer in the US and it was a very good snow season for much of the Northeast.

We're the largest snow shovel manufacturer in Canada under the Garant brand and we have had two record low snowfalls in Canada over the last two years.

We like an early and long snow season.

That certainly has started early this year in this October.

So we are going to have a weather pattern that is going to have an impact this year.

It had a significant impact.

And I would rather not get into saying what's normal then just we're going to be expecting there to be times where we get the benefit.

You shouldn't over congratulate us when that happens and there's years like this year where things were negatively affected and we shouldn't be overly penalized for it.

It is a very good stable business that generates free cash flow and the way I think about the business is that in a year where we had increased commodity costs, we had no growth in the consumer economy, we had a bizarre weather pattern, we still generated over $56 million of EBITDA from the Ames part of the business.

Right.

I like owning this business and I like it better combined with our Clopay doors business and having a Home and Building Products segment under one common leadership is something that I think we are very well positioned that there will be a recovery in this country and when that happens we think that the organic growth of that business increased profitability and go back to southern if we can continue to tuck in acquisitions at very attractive valuations that are cash flow accretive, create continued product diversification with our customer.

We think that this is going to be a very strong business for us for a very long time.

That makes sense.

If things are bad, we'll blame the weather.

If things are good, we'll congratulate management though.

Sounds good Tim.

On Telephonics first of all could you tell us how much CREW contributed in dollar terms in 2011 and what you expect in that program for 2012?

And then maybe just in general what the timing of revenue, it tends to be pretty lumpy in terms of shipment timing and what the timing of revenue you expect in '12 is.

Tim this is -- and this will be included in the 10-K which will be available after the close of business tomorrow.

But 2011 we had just a little bit over $44 million of CREW sales.

2010 there was just a little bit over $46 million of CREW sales.

So pretty close year-on-year and if you take that out that is where we arrived at the 6% growth in the core business for Telephonics.

You're right about the lumpiness.

There was about a little bit over $11 million in the current quarter, the fourth quarter 2011.

The prior-year quarter had just under $3 million of CREW 3.1 sales.

So carving that out of both periods is when you come up with the 15% growth in our core business.

I don't have the preceding three quarters of this year in front of me; if it's really important for you to get that information I can take that out and make it available to anybody that has an interest in that.

Just in general what do you expect in fiscal '12 in terms of CREW revenue and should we just kind of expect lumpiness, continued lumpiness in revenues in Telephonics in 2012?

It is a reduced amount.

We don't have it handy.

I think the easiest thing to do is we will always call it out because it is not part of our core business.

And we are in essence a contract manufacturer so we will always point that out if revenue includes -- the only thing I'm aware of right now for 2012 is mainly some spare parts and so forth.

So fairly nominal.

Look, we have made money doing that.

We hope to continue and we've always tried to break out what the core business is outside of that, and our expectations in 2012 is that we don't predict timing of CREW 3.1 but the history has been it comes in, it's lumpy, but it is very profitable when it happens.

Right.

And then just lastly do you expect to take any additional restructuring charges in 2012?

No, not at the present.

We completed a mega plan which was the big one and Building Products that we talked about and the other actions at both Ames True Temper and Telephonics were one time.

And those folks have already left the employer, soon to leave the employ of the Company and at the present time I don't envision it anymore.

Got it.

All right.

Thanks guys.

Marty Pollock, NWQ Investment Management.

Just following up on the Telephonics, I'm just wondering when you add back the restructuring, clearly the margins were and performance was in line.

But given that you had significantly higher revenues for the CREW, just wondering adjusting for that the margins would have been lower on the core business, presumably right because you're booking some profits on that CREW.

Just wondering what would be adjusted margins excluding also the impact on the -- on earnings from that CREW so basically core for core.

Marty I think the major impact in the current quarter was the increased R&D expenditures that I mentioned in my comments.

So that essentially would be the difference primarily and that would have been--?

As Tim just noted earlier that the CREW 3.1 is lumpy.

Some of our R&D expenditures and business development expenditures are equally lumpy and they come at a discrete quarter or maybe a discrete six months rather than spread evenly over a fiscal year.

Okay.

And if I may just on the door business itself.

What type of profitability do you expect, I mean what kind of return to profitability here in terms of type of margin do you think you will see specifically in the door side?

Of the business itself.

Marty it is Ron.

I would say to you it is far too early to come up with what's normal in a housing market that from where we are sitting it is bottomed but is not recovering and that we have done extraordinarily well of maintaining market share and in maintaining our unit volumes.

So we are on -- on the door business have been operating at something around a 5% EBITDA margin.

We have tremendous operating leverage in that business now in terms of being able to get an increased level of revenue and increased profitability.

But our outlook for 2012 is, is that while we think housing has bottomed, we don't think it is going to be improving.

And so we don't see any significant increased profitability out of that segment until there is a recovery in the housing market which leads to increased new home construction.

So when you look at our Business over a three-year period we went from a business that was 70% new home, 30% repair and remodel at almost $600 million run rate to what is now a $400 million business that is 30% new home, 70% repair and remodel.

And when it was a $600 million business a 10% EBITDA margin in a multi-plant highly energized housing market with 2 million starts a year it was a 10% margin business.

We are very happy that we've been able to manage this business for the last three years and not lose money in housing.

We are making money but it is too early to say what's normal.

It is clearly going to be more than 5%.

I hope it gets back to a 10% level.

If it does, we are going to be generating significant free cash and when combined with the Ames business which is a higher margin business and a higher growth business for us, achieving a segment that is more than a $1 billion in revenue and a blended multiple better than 10% is a realistic goal for us.

Okay.

Thank you.

(Operator Instructions) And gentlemen at this time it appears we have no additional questions.

Thank you.

As I said I think we have achieved a lot this year.

We look forward to being able to execute on our plan, our focus is on continuing to deliver value.

Thank you very much.

And ladies and gentleman that does conclude today's call.

We do appreciate everyone's participation.