Doug Wetmore - Chief Financial Officer, Executive Vice President Ron Kramer - Chief Executive Officer, Director.

Seth Yeager - Jefferies Bob Labick - CJS Securities Justin Bergner - Gabelli & Company Philip Volpicelli - Deutsche Bank.

Good day and welcome to the Griffon Corporation fourth quarter and full-year 2014 earnings conference call. Today's call is being recorded. And at this time, I would like to turn the conference over to Doug Wetmore, CFO. Please go ahead, sir..

Thank you, Matt. Good afternoon, everyone. Ron Kramer, our Chief Executive Officer is with me on the call. There are certain matters I want to bring to your attention before we get into the details of the call. First, as Matt mentioned, our call is being recorded 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. Such statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed.

And for additional information concerning those factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements in today's press release as well as the risk factors discussed in our various filings with the Securities and Exchange Commission.

Finally, some of today's prepared remarks will adjust for those items that affect comparability between reporting periods. Those items are laid out in the non-GAAP reconciliations included in our press release. Now I will turn the call over to Ron..

Good afternoon. We finished 2014 strongly and expect more growth in 2015. Our revenues were up 6.4% to $2 billion, the highest revenue in Griffon's history. Topline results were driven by organic growth in all segments and the benefit of AMES acquisition of Cyclone and Northcote during the year.

2014 segment adjusted EBITDA totaled $191 million, an increase of 5.3% year-over-year. Our normalized EPS was up 76% to $0.51 per share, compared to $0.29 per share in the prior-year. Overall, we are very pleased with these results which reflects steady improvement in each of our operating segments.

Our strategies implemented over the past few years are starting to reflect the earnings power of our businesses. I will comment on each of the operating segments and then Doug will take you through the financial results in a bit more detail. Starting with Home & Building Products.

For the full year, our revenues totaled $979 million, an increase of 15% compared to the prior year. AMES revenue increased 20% compared to prior year, reflecting both the improved pot and planter sales in the U.S., increased snow tool sales throughout North America.

Two acquisitions, Northcote acquired in December 2013 and Cyclone acquired in May 2014, accounted about half of AMES sales increase for the year. Our doors revenue increased 9% in 2014, reflecting strong 7% volume growth, augmented by favorable product mix.

For the full year, Home & Building Products segment EBITDA increased 10% to $77.2 million, primarily due to increased volume and favorable mix in doors and the contributions from the acquisitions of Northcote and Cyclone.

These improvements were partially offset by the increased AMES distribution and freight costs incurred as we complete the final stages AMES plant consolidation initiative. We continue to believe we are in the multiyear housing recovery with new residential construction and repair and remodel levels in the United States improving.

This view is being supported by the continued sequential improvement in our door volume through October and so far into November. Our recovery bodes well for both our doors and our tools businesses.

As housing recovers, relatively small increments of additional revenue will carry significant improvement in profitability for the Home & Building Products segment. Telephonics had a very difficult comparison with last year's record performance and we are very pleased with how Telephonics closed 2014.

Its revenue totaled $419 million which was a decrease of 8% from the prior year. The prior year included $33 million of electronic warfare program revenue, in which Telephonics served as a contract manufacturer for which there is no revenue in this current year. So Telephonics core revenue was essentially flat to last year.

Segment adjusted EBITDA for 2014 was $57.5 million, decreasing 9% from the prior year record. The decline was mainly attributable to the absence of the electronic warfare revenue, which reduced gross profit product mix and some increased operating costs.

Notwithstanding the election results this past week, there remains a lot of uncertainty regarding the federal defense budget. We are hopeful that the environment improves with the new Congress. We have consistently stated that we consider Telephonics and the core programs it participates in to be well positioned in an uncertain environment.

Moreover, Telephonics continues take steps to reduce its cost base in uncertain times.

In the current year, Telephonics eliminated 80 positions, recognized $4.2 million of restructuring costs in connection with the closure of its operations in Sweden, voluntary early retirement plan and a reduction in force aimed at improving efficiency by combining functions and responsibilities.

Our experience suggests that demand and funding for programs in intelligence, surveillance and reconnaissance remain reasonably well funded relative to other areas of the defense business. And Telephonics finished the operating year with a strong order book.

Our funded backlog ended the year at a record $494 million versus $444 million at September 30, 2013. Turning to Plastics.

Revenue totaled $593 million for 2014, increasing 5% compared to the prior year with the increase reflecting a combination of favorable product mix, increased volume as well as the pass-through of increased resin costs in our customer selling prices.

Plastics 2014 segment adjusted EBITDA was $56.3 million, increasing 17% from the prior-year level, mainly driven by the improvements in both volume and mix and continued efficiency improvements. This was an excellent performance on a 5% topline increase.

Plastics team has done an outstanding job over the past three years and we look forward to many more years of success with them. Our expanded capacity has made us a stronger global competitor and is enabling us to service and sustain our industry leadership position.

We have made tremendous progress improving operations and servicing our customers and our goal is to continue to improve our margin beyond this historical standard. Turning for corporate. As I noted before, our adjusted earnings per share growth this year was driven primarily by revenue and operating profit improvement at our segment level.

These improvements are coupled with several corporate actions taken during the year. First, we completed refinancing the company's debt that decreases interest expense by nearly $8 million annually. Moreover in so doing, we extended maturity of the debt through 2022, giving us stable low-cost financing for an extended period of time.

Second, we continue to increase shareholder value through share repurchases. Since 2011 through the end of our fiscal year September 30, 2014, Griffon's repurchased 11.4 million shares of its common stock for $122 million. At September 30, 2014, we had a remaining repurchase authorization of $38.9 million.

Earlier today, our Board declared a regular quarterly cash dividend of $0.04 per share payable on December 23 to shareholders of record at the close on December 3. This dividend represents a 33% increase on our quarterly dividend per share and it reflects our strong belief in the bright future prospects for our company.

The acquisitions we made this year of Northcote and Cyclone to further strengthen AMES' leadership position in lawn and garden tools. With these additions and the coming conclusion of the AMES plant consolidation initiative this current quarter, AMES will be well positioned to provide excellent customer service and improving profitability.

Equally we have invested in plastics, doors and Telephonics, all to position the businesses for growth and continued improved profitability. Overall, I am very pleased to say, we are successfully executing our strategy of steady improvement in each of our operating businesses and each one of them is poised for further growth and success.

Doug will now take you through the quarter in a bit more detail and then I will make few closing remarks and we will open it up for your questions.

Doug?.

Thank you, Ron. Consolidated revenue for the quarter totaled $526 million, an increase of $77 million or 17% compared to the prior-year quarter and revenue increased in each of our operating segments.

Home & Building Products, with quarterly revenue totaling $255 million, led our fourth quarter growth with a 29% increase compared to the $198 million reported in the prior year quarter. AMES quarterly revenue increased 47%.

The inclusion of the operating results of Northcote and Cyclone accounted for a 35% increase with the balance of the growth attributable to increased snow tool sales in advance of the coming winter season. Door revenue increased 17% in the quarter, primarily due to a 12% increased volume, with the balance attributable to favorable product mix.

Doors had a fourth quarter and as Ron previously mentioned, order activity for doors continued to be very strong through October and through the first 10 days of November. EBITDA margin for Home & Building Products was 8.4% of sales compared to 7% of sales in the prior-year quarter.

Fourth quarter segment adjusted EBITDA totaled $21.4 million, increasing 55% compared to the prior-year quarter. Inclusion of the operating results of Northcote and Cyclone, both based in Australia, accounted for 35% of the increase in EBITDA as these businesses moved into the important spring and summer season in the southern hemisphere.

Balance of the profit improvement was driven by increased volume at AMES and by both volume increase and favorable product mix in the doors business. Partially offsetting the volume benefit, EBITDA was unfavorably impacted by 3% on translation of Canadian Dollar results into the stronger U.S. Dollar.

Also, and as Ron mentioned, in the fourth quarter AMES continued to experience various manufacturing inefficiencies as we work through the final stages of the plant consolidation initiative.

And AMES also continued to experience higher levels of distribution and freight costs as we strive to minimize customer service disruption during this consolidation process.

Having said that, we continue to be on track for completion of this initiative in AMES and expect margin improvement to commence in calendar 2015 as the reorganization initiatives begin to come to a close. We continue to expect annual cash savings exceeding $10 million per year beginning in calendar 2015, based on current operating levels.

In 2014, Home & Building Products recognized $1.9 million in restructuring and related costs, mainly related to one-time termination benefits, facility and other personnel costs, as well as asset impairment charges related to the AMES initiative. Now turning to Telephonics.

Fourth quarter revenue was $116 million, an increase 10% from $105.7 million reported in the prior-year quarter. That improvement year-over-year was driven by increased sales of Romeo Radar products.

Segment adjusted EBITDA for Telephonics was $17.5 million or 15% of sales in the quarter compared to $18.2 million or 17.2% of sales in the prior-year quarter.

The reduced profitability in the quarter was due to a combination of a change in mix against the year ago period as well as variances in expenditures for research and development and bid and proposal activities. The 2013 fourth quarter benefited from very low levels of R&D and bid and proposal costs.

Telephonics EBITDA margin for the full year was 13.7% of sales compared to 13.9% in the prior year.

And again, as Ron mentioned, in the quarter, Telephonics recognized $4.2 million in restructuring costs in connection with the closure of Sweden operations, a voluntary early retirement plan and a reduction in force, both which took place on Long Island, all targeted at improving efficiency by combining functions and responsibilities, the end result of which was the elimination of 80 positions.

Telephonics finished the year with a record backlog of $494 million and approximately 65% of that is expected to be fulfilled in the next 12 months. For the fourth quarter Plastics revenue grew 6% to $154 million against the $145 million in the prior year period.

Quarterly revenue reflected a 5% increase in volume and a 2% pass-through of higher resin costs, partially offset by unfavorable product mix. Regionally sales growth resulted from increased volumes in both North America and Brazil which was partially offset by volume weakness in Europe.

Fourth quarter segment adjusted EBITDA decreased to $12.4 million or 8.1% of sales from $14.3 million or 9.8% of sales in the prior-year quarter.

That EBITDA decrease in the quarter resulted from a combination of the product mix I just mentioned, unfavorable exchange rates, partially offset by the benefits of improved volume and ongoing efficiency initiatives.

R&D expenditures for Plastics in the quarter also increased measurably over the prior-year quarter mainly due to the timing of expenditures. Resin had no significant impact on profitability in the quarter.

For the full year, Plastic segment EBITDA margin increased 100 basis points to 9.5% or $56.3 million from $48.1 million in the prior year and we continue to target full year margins in excess of 10% moving forward. Now moving on to the consolidated income statement.

Consolidated gross profit was $125.6 million representing a margin of 23.9%, which evidences a 30 basis point improvement over the prior-year quarter. Consolidated selling, general and administrative expenses were $101.7 million or approximately 19.3% of sales versus 19.1% in the prior year.

SG&A expense in the current quarter included $800,000 of acquisition costs related to the Cyclone acquisition. Net income from continuing operations was $7.9 million or $0.16 per diluted share, compared to $3.4 million or $0.06 per diluted share in the 2013 quarter.

Current quarter results included the restructuring costs, $2.6 million after tax representing $0.05 per share, the impact of debt extinguishment on our full year effective tax rate of about $1.5 million or $0.03 per share, the acquisition costs I just mentioned which represents about $0.01 per share after tax and discrete tax benefits of $3.1 million or $0.06 per share.

The prior year quarter had $1.2 million of restructuring costs representing $800,000 after tax or $0.01 per share and discrete tax benefits of $1.5 million or $0.03 per share.

Excluding these items, current quarter adjusted income from continuing operations was $6.4 million or $0.13 per share, compared to $5.7 million or $0.10 per share in the prior-year quarter, 30% increase. As I mentioned before, the reconciliation of GAAP results and EPS to the adjusted results is included in our press release.

In terms of income taxes, there was a lot of noise. During the course of the current year, primarily as a result of the debt refinancing, we reported a pretax loss for the year ended September 30, 2014 compared to pretax income in the prior year period. In 2014, we had a benefit of 96.9% compared to a provision of 52.6% in 2013.

Now let me try to make a little bit sense of that. First of all, we have the net discrete benefits of $4.6 million this year and $325,000 last year.

Those results from the release of established tax reserves for uncertain tax positions on conclusion of audits, the filing of tax returns in various tax jurisdictions and tax basis review and adjustment for the impact of tax law changes enacted during 2014.

The 2013 benefit also reflected net benefits resulting from various tax planning initiatives undertaken in prior years and the retroactive extension of the federal R&D credit that was signed into law on January 2, 2013.

Excluding all those discrete items, the 2014 rate would have been a benefit of 15.1% and the 2013 rate would have been a provision of 54.9%.

Now we have dealt with a couple of other permit differences for the past few years, they are not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations, all of which are material relative to the level of pretax results.

Excluding all the discrete items and the impact of the debt refinancing on our full year results, effective tax rate for 2014 approximated 38%, consistent with our prior guidance. In terms of our effective tax rate in 2015, I currently expect the rate to range between 36% and 38%, excluding any discrete period adjustments.

Geographic earnings mix will impact the rate somewhat and the rate may also vary significantly in the event of any legislative action with respect to the U.S. federal corporate tax rate. Capital spending in the current quarter was $22 million. For the full year, spending was $77 million, somewhat higher than our previously communicated expectations.

The increase in spending in the last quarter of the year is more reflective of timing of expenditures. There were no new projects undertaken in the quarter that have not been contemplated in our previous guidance. Looking forward we estimate total capital spending in 2015 to approximate $80 million.

Depreciation and amortization was $17.4 million in the current quarter and $67.4 million for the full year. In 2015, we expect depreciation to be in the range of $60 million and amortization of about $8 million.

At September 30, 2014, we had $92 million in cash and total debt outstanding net of discount of $813 million, resulting in a net debt position of $721 million. We have about $181 million available for borrowing under our revolving credit facility.

With respect to our guidance for fiscal 2015 revenue, we expect Home & Building Products to grow in the mid-single digits, benefiting from inclusion of Cyclone and Northcote for those portions of the year that we did not have them in the 2014 year. Plastics is expected to grow in the low single digits.

And Telephonics is also expected to grow in the low single digits. In providing this guidance, we are mindful of the many risks that may affect those results. First, as we have seen over the last couple years, AMES is most subject to the weather that can dramatically affect point-of-sale at many of our customers and directly impact our revenue.

We continue to contemplate a gradual recovery in housing including repair and renovation of existing housing stock which should benefit our Home & Building Products segment. While Telephonics backlog is solid, the future of the U.S.

Department of Defense budget remains uncertain and it's difficult to forecast the time required to develop international opportunities in Telephonics business.

And finally, plastics guidance is most susceptible to variation due to a combination of resin pricing and foreign currency, as well as keeping in mind that half of our business is in Europe and Latin America.

In both locations macroeconomic conditions remain uncertain and that's further aggravated by the fact that both the Euro and the Brazilian Real have weakened considerably in the last several months in comparison to actual exchange rates used in fiscal 2014.

Now based on the revenue expectations outlined, we expect our segment adjusted EBITDA to be $200 million or better, representing a 5% or better increase over 2014 results.

In forecasting this level of profitability, we are giving consideration to certain long-term initiatives that we have underway, most notably in Telephonics, but in all of the businesses. That will impact operating results for the next few years, but which we expect will yield significant benefits in the years to come.

Corporate and unallocated expenses are expected to approximate $34 million, including all equity compensation for the company in 2015. That equity comp will be in the range of $12 million to $13 million and we will continue to update this guidance as the new fiscal year progresses. With that, I will turn the call back over to Ron..

Thanks. We are very pleased with our results for 2014 and are encouraged to see our efforts to improve efficiency driving earnings growth. We are entering 2015 on a solid foundation from the work we have done over the past five years.

We expect continued improvements in both revenues and earnings in the years ahead as we continue to drive efficiency across the company.

We are committed to shareholder value creation and are confident that we can make investments for organic growth, pursue additional acquisitions and continue to return value to our shareholders via our dividend and share repurchase programs. We are very optimistic about our prospects. And with that, operator, we will open it up for questions..

[Operator Instructions]. We will take a question from Seth Yeager with Jefferies..

Hi, good afternoon..

Hi, Seth..

Very nice quarter. Can you talk a little bit further about the strong unit volumes within the door segment? Definitely above what I had modeled.

Can you just sort of remind us the exposure there for new construction versus replacement activity or any sort of one-off things, any restocking, maybe, that you guys saw?.

Well, we continue to believe that we are in the early stages of a housing recovery and our performance is much about the management of the business than it is about the recovery in the market.

We have positioned this company over the last several years through plant consolidation to be able to take advantage of what we knew to be a repair and remodel driven business. And while new home construction is helpful to us, we skew much more to the repair and remodel through both our big-box relationships and through our dealer network.

So this is about a business that's taken costs out, has increased market share and we believe that any increase in the housing market which we continue to believe is ahead of us, is going to benefit both the repair and remodel and the new home side of that business.

Seth, long-term, over the last decade or longer, repair and renovate has represented about 70% of the residential business and the balance being new construction..

Got it and that's what I thought. What's interesting is, when you look at the Census Bureau data, it tends to imply that R&R has been down pretty dramatically. And I would suspect that this is relatively on average big-ticket items. So it seems like that certainly isn't the case for you guys.

You are still seeing pretty strong organic underlying growth there..

We are seeing both good organic growth as well as market share gains..

Got it. Okay. Thanks for the details for your outlook on 2015. One question I had was around the ongoing AMES restructuring. The last three or four quarters, you have used the same sort of language in your filings around the expectation of $10 million of cost saves on current operating levels.

Given that those operating levels are higher today than they were when you first started that initiative, what upside do you see for those savings as you look into 2015 as, I mean, $10 million seems a little bit conservative to me? Is that fair to say?.

Well, look, we try to be conservative in how we view this and let's be realistic about how fragile the recovery in the U.S. economy has been. We give guidance to be helpful for investors to understand the trends and most importantly, we try to get give guidance from in an EBITDA standpoint for credit investors.

We believe that the earnings power of these businesses is substantially beyond their current performance. The Home & Building Products segment on a blended margin basis between our doors and our AMES business should achieve a 10% or better EBITDA target some time in the foreseeable future. Exactly when that happens, we couldn't not tell you.

What we are certain of, and if you go back and look at the history of where we were with our doors business when we went through this plant consolidation and restructuring initiative, is that when you build on the success of some of these initiatives, over time margins improve.

And we knew we had issues to deal with in AMES manufacturing footprint, which we addressed over a period of years. We addressed a management issue that we felt was going to reposition the company for further growth. We feel like we are in a very strong position going forward to achieve increased profitability.

And exactly where the margin improvements top out, I am not sure but it's certainly ahead of us. And we want to continue to give guidance that's going to be helpful.

But quarter-over-quarter, year-over-year, we are going to be impacted by everything from weather to the economy and we would rather be in a position of meeting or exceeding than disappointing..

No, I appreciate that. And just last one from me.

What opportunities are you seeing in the acquisition pipeline? And with the low growth relative to your other segments and somewhat uncertain government outlook for Telephonics, is that a business that you would consider divesting? Or what's the longer term thoughts around that particular segment? Thank you..

We like each of the businesses, each of the segments we are in and we are always looking to do tuck-in acquisitions around those businesses. And our growth plans have always been to look for opportunistic growth through acquisition.

The reality of today's marketplace and where we have positioned Griffon over the last several years is to get the operating performance of each of the businesses that we own into much better shape, all of which is reflected in our results in 2014 and beyond.

And we are very happy to continue to run the businesses we own and grow them and expect that we have got some tailwinds behind us in the economy and in each of the operating strategies. So we are very happy with our portfolio of companies and we hope to add to it over time..

All right, great. Thanks a lot. Good luck..

Thank you..

We will take a question from Bob Labick with CJS Securities..

Good afternoon. Congratulations on the quarter and year..

Thanks, Bob..

Thanks, Bob..

Just wanted to talk a little bit more about AMES to start. Obviously, a very strong quarter and really good results coming out of the tuck-ins, the acquisitions you made.

Can you give us a sense of the organic expectations for next year as well as some of the incremental contribution you might be expecting from those acquisitions? And then also have you filled out Australia now? I mean you seem to have a pretty good critical mass there.

Are there more opportunities for acquisitions there?.

Bob, let me touch on the numbers for 2015, and then Ron can talk to the acquisition part of the question. At the present time, obviously, we said that the Cyclone business on an annualized basis was, I don't have it in front of me, but I think it was $60 million of revenue and Northcote was somewhere in the range of $25 million to $30 million.

So on a full-year basis, let's say round numbers, adding to a $100 million. And we have had Northcote for now three quarters and we have had Cyclone for just a little over one quarter or so, four months.

So if kind of work it out, you can certainly see the impact of it in the reported numbers and Northcote and Cyclone accounted for 35% of a 47% increase, but it does speak to pretty good volume at 12% growth and we counted on that strong performance in pots and planters and then the snow load in for the coming winter season.

So I think basically you are looking at, in this environment, take into account the incremental effective of Cyclone and Northcote, you are probably looking at low to mid-single digit growth organically for AMES in North America.

And that will be subject to the normal impacts of weather and the usual things we have experienced over the last couple of years..

And so Bob, I would add to it from an acquisition standpoint, look we have been very successful building out the AMES business through Southern Patio, through Northcote, through Cyclone and we have a confidence level that the leadership team, Mike Sarrica has come into the AMES business, he is in his first year there.

He is had a tremendous impact on repositioning and getting both costs out of the business and the growth prospects for this company and the acquisition prospects where we expect business to grow organically and we are going to always look for tuck-in acquisitions like what we have done over the past couple of years.

There seem to be an unlimited number of smaller tuck-ins that we can do and for 2015, our plan is to integrate what we have already done and execute, improve that we can improve operating margins, get to a much higher level of performance throughout all of our companies, but very excited about where we have AMES positioned going into this year..

Okay, terrific and then just jumping over to films. You have done a very good job for the year with the 100 basis point increase in margins. Obviously the quarter had a little mix going against it. Can you just tell us about the opportunities? You said you are still targeting above 10% on an annual basis going forward.

But can you talk about, I guess, geographically where the opportunities lie and what it will take to keep improving margins?.

Yes. I would say North American business continues to do quite well. We have improved significantly our German business, but we think there is more opportunity there. And our Brazil business, which have been a problem is now trending up.

So we continue to have growth outside of the United States, and we continue to have opportunities within the United States. We think the 10% EBITDA operating margin is well within our site and we are optimistic about the prospects of where Alan Koblin and his team have positioned the company.

So we have come a tremendous way from where we were two years ago, the year-over-year, the quarter-over-quarter improvement.

There is always going to be some variability in this business based on FX and resin costs, which as you know, is a three to four month pass-through, but the operating efficiency of the company is markedly improved from where it was and its growth prospects are be a very much ahead of it, but growth in this business comes with capital expenditures and we are always evaluating putting money to work in the business versus other alternatives and we are excited about where we have got the management team, where we have got the strategy and the proof is in continued operating performance..

Thank you, and going to on the Telephonics side, you obviously address the budget uncertainty at the DoD. I know that's nearly three quarters, or nearly three quarters of the business on that side.

Could you talk a little bit about the growth opportunities outside the DoD? Be it the small FAA announcement you made, or some international opportunities or what you are looking for there?.

Yes. We continue to believe that part of Telephonics growth has to be by doing the diversification to both commercial business as well as international business, but both of which take time and we believe that are part of its strategic plan.

We are investing in the business significantly to be able to position our technology to be ahead of our competition.

Our Indian joint venture, we are optimistic about with the new guidelines there and hope to make some progress on both our ownership structure there as well as our ability to move that business into a revenue generating and ultimately profit creating business opportunity. But the internationalization for Telephonics takes time.

We are excited about where the company is and it's got a good core backlog in its existing businesses and these are all the things that are topical within Telephonics and its dialogue with Griffon on an ongoing basis as to how to grow the business.

So we are very focused and we are hopeful that FAA, Custom and Border Patrol, international sales are all part of our future..

Okay, great and then last one for me. Just you touched on it a moment ago, but the CapEx budget for next year, I think you said it was $80 million dollars.

Can you just, with the AMES restructuring winding down, can you tell you us the focus of the CapEx budget for the coming year?.

Well, Bob, you know, it's a budget, first of all, and everything is still subject to a very detailed scrutiny on an individual project basis. So it's a number that we put out there and then we will have to update that as the year goes on, but AMES will continue to, above and beyond, the plant consolidation initiative.

There is some additional capital that we have there to further improve efficiency. And then you have got some ongoing investment in plastics as well as building products. So we rounded it up. But we keep you posted as the year progresses and again every project is subject to a very detailed review.

And I would make the overriding comment that investing capital back into the businesses is what positioned the business for as we think about it long-term growth and what the capital that we have committed to the door business has absolutely come home to show us increased performance. The AMES business is similar.

Telephonics over a period of years, we continue to believe capital spending leads to the growth and keeping ahead of the technology curve. And our plastics business, we have rationalized a capital spending program that needed to be rationalized.

So putting money into the businesses and getting our management teams focused on return on invested capital is a priority and an ongoing goal for us. So we try to put out what we expect CapEx budget is today and we expect to get returns on capital spending..

Okay. Thank you very much..

[Operator Instructions]. At this time, we will move to Justin Bergner with Gabelli & Company..

Good afternoon, Ron. Good afternoon, Doug. A nice quarter..

Thank you..

My first question just, you rifled off some of the parts of your guidance a little bit quickly and I was just wondering if you could remind us, the depreciation and amortization and the unallocated corporate overhead in the coming fiscal year?.

Yes. Depreciation and amortization is not going to vary much from the current year. It's $67.4 million or $67.5 in the current year and it's going to be about $68 million next year. That's depreciation and amortization combined. The amortization component of that is $8 million. Okay. I am sorry.

What were the other aspects you wanted to know?.

The unallocated..

The unallocated, it's going to be in the range of $34 million. $33 million to $34 million. And that includes $12 million to $13 million of equity compensation. The equity compensation for all of the business unit which is retained at corporate..

Okay. That's very helpful.

And then with respect to Home & Building Products, was the guidance for mid single-digit reported revenue growth for that segment in the current fiscal year?.

Yes. And quite frankly, in a ballpark, it's probably about 50% organic growth and 50% incremental due to the acquisitions..

Okay.

I guess, if I do the math though, won't the acquisition sort of add about $50 million in the coming fiscal year, which would leave the organic portion at a pretty negligible level? Or is my math some off on that?.

You are not far off, but as I said, it's a budget and I said it's approximately 50% organic and 50% incremental due to the acquisitions..

Okay and then on the CapEx side, as we look out sort of a couple years down the road, is that $80 million figure still sort of an above run rate or above normal figure that we should expect to come down in future years? Or is it something that we should think about as a level going forward after [indiscernible]?.

No.

If you look historically over time, and obviously it's changed a little bit because of the AMES acquisition a couple of years ago and some of the changes in plastics, but historically Griffon, over a five or six year period, the CapEx always pretty much averaged out equal to depreciation over that same period of time, but some of our capital initiatives are lumpy.

But it's most notable in plastics, because when you make a significant plastics investment, it is significant one point in time. But I think you will probably see CapEx maybe stay at this level for the next year or two and then you should see a period of somewhat lower capital activity..

And enhanced growth as a result of the capital spending. So to Doug's point, particularly to the plastics business, when you make CapEx commitments there, the returns on those capital commitments are measured over years not over quarters.

And you know when this is a business that we believe you have to be committed to and you have to continue to invest in and ultimately the value creation proposition comes from our goal of making the businesses operate as efficiently as possible and to generate as much free cash flow as possible over time.

But the goal of getting CapEx matched up to depreciation and amortization is a good benchmark to think through..

Thank you and just one more question.

On the Telephonics side of the business, could you maybe talk about the portion of your backlog that has been pushed out into the future in terms of when you expect to realize it? Like what types of programs or products does that non-current portion relate to?.

We have seen over the last couple of years the percentage to be realized in the next 12 months has come down from 72% or 73%, down to the current estimate of 65%. Some of it has to do with international. Sometimes it takes a little bit longer. Some of it has to do with the best information we have, based on DoD spending expectation.

So it's an expectation that will be fulfilled within the next 12 months. But invariably it's going to flex a little bit from that 65%. It could be north or it could be south.

But I think the very positive thing, the Telephonics should be very proud about is the record backlog in a time when there is very challenging spending overall worsening with a record backlog..

Okay, thank you. Good luck in the coming year..

Thank you..

Thank you..

We will take a question from Philip Volpicelli with Deutsche Bank..

Good afternoon..

Hi, Phil..

I was just wondering if you could give us a framework on how you guys determine the level of the dividend and how that's going to progress over time as the earnings continue to grow with the tailwinds on your back?.

Look, we have had a consistent policy since we initiated dividends that as the businesses continue to produce more cash flow, we are going to look to continue to evaluate our dividend policy.

And we are not targeting any specific dividend level other than when we see our business can afford to both buy back stock, invest in the business and pay dividends, we will continue to evaluate and adjust it appropriately..

Okay..

Phil, just from your perspective, though, the dividend increase offset by the impact of the shares of we purchase during the course of the year, the impact of the dividend increases a little bit over $1 million in terms of our cash flow..

Okay, great, and then as you look at the balance sheet, obviously you guys have done a good job with tuck-in acquisitions and continuing to seek them, how much cash would you say is excess cash on the balance sheet that you will be willing to apply to acquisitions in 20151?.

We don't think of it that way. And when we have an acquisition, we will figure out how to finance it..

Okay, that's great, and then with regard to the revolver, it's due in 2016.

Any thoughts of extending that? Or is that something that you will address next year?.

No. We extended it already..

Sorry. My mistake..

When we did the refinancing in March, it was extended one additional year. I think it goes out to 2017..

Okay, great. Thank you..

Okay. Thank you. All right..

Thanks..

And that will conclude the question-and-answer session. At this time, I will turn things over to Ron Kramer for closing remarks..

We had a very good 2014 and we expect to have a continued successful growth into 2015. So we will look forward to speaking to you in January. Thank you..

That does conclude today's conference call. Thank you all for your participation..