EX-99.1 2 gffq22016exhibit991.htm EXHIBIT 99.1 Exhibit


        
            
Griffon Corporation Announces Second Quarter Results

NEW YORK, NEW YORK, May 4, 2016 – Griffon Corporation (“Griffon” or the “Company”) (NYSE: GFF) today reported results for the fiscal second quarter ended March 31, 2016.     

Revenue totaled $500.1 million, consistent with the prior year quarter; excluding the impact of foreign currency, revenue increased 2%. Telephonics Corporation ("Telephonics") and Home & Building Products (“HBP”) revenue increased 7% and 6%, respectively, over the prior year quarter, while Clopay Plastic Products Company, Inc. (“PPC”) revenue decreased 17%.

Segment adjusted EBITDA totaled $48.6 million, increasing 9% from the prior year quarter; the impact of foreign currency was not material. Segment adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges and acquisition-related expenses.

Net income totaled $6.1 million, or $0.14 per share, compared to $5.1 million, or $0.11 per share, in the prior year quarter. The impact of foreign currency and discrete tax items was not material.

Ronald J. Kramer, Chief Executive Officer, commented, “We reported strong second-quarter earnings per share growth of 29%.  Our Home and Building Products segment increased its EBITDA by 52% demonstrating the success of our strategic initiatives.  We continue to build our businesses for long-term value enhancement through the expansion of our Clopay door facility in Troy, Ohio and the recently announced $50 million investment in Clopay Plastics Sof-flex® breathable film.  We expect to build on our earnings momentum for the rest of Fiscal 2016 and the future.”

Segment Operating Results
Home & Building Products
Revenue totaled $279.2 million, increasing 6% compared to the prior year quarter. Excluding a 2% unfavorable foreign currency impact, revenue increased 8% compared to the prior year quarter. The AMES Companies, Inc. (“AMES”) revenue increased 4% due to improved U.S. snow tool, garden tool and pot and planter sales; foreign currency was 3% unfavorable. Clopay Building Products Company, Inc. ("CBP") revenue increased 8%, due to increased volume and favorable product mix; foreign currency did not have a material impact on CBP revenue.

Segment adjusted EBITDA was $26.3 million, increasing 52% compared to the prior year quarter, driven by increased sales, operational efficiency improvements and cost control measures at AMES, and increased volume, favorable product mix and decreased material costs at CBP; foreign currency was 3% unfavorable.


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Telephonics
Revenue totaled $105.9 million, increasing 7% from the prior year quarter, due to mobile ground surveillance systems, secured digital intercommunication systems and contract manufacturing of dismounted Electronic Countermeasure systems, partially offset by decreased revenue from certain maritime surveillance radar systems.

Segment adjusted EBITDA was $10.4 million, decreasing 10% from the prior year quarter and margin decreased 190 basis points, driven by the timing of work performed on maritime surveillance radar systems, partially offset by the timing of research and development expenses.

Contract backlog totaled $446 million at March 31, 2016, compared to $442 million at September 30, 2015, with approximately 76% expected to be fulfilled within the next twelve months.

Plastic Products
Revenue totaled $115.0 million, decreasing 17% compared to the prior year quarter, due to reduced volume of 12% driven by lower North American baby care orders, a $5.5 million or 4% unfavorable foreign currency impact, and a 1% unfavorable impact from the pass through of resin costs in customer selling prices. PPC adjusts selling prices based on underlying resin costs on a delayed basis.

Segment adjusted EBITDA was $11.8 million, decreasing 25% from the prior year quarter driven by decreased volume, and the change in the impact of resin pricing pass through of $1.7 million, partially offset by favorable product mix; foreign currency had no material impact on EBITDA for the quarter.

During April 2016, PPC announced a $50 million Sof-flex® breathable film investment which expands breathable film capacity in North America, Europe and Brazil, increases our extrusion and print capacity, and enhances our innovation and technology capabilities. We expect the project to be completed in late calendar 2017.

These investments will allow PPC to maintain and extend its technological advantage and allow us to differentiate ourselves from competitors, while meeting increasing customer demand for lighter, softer, more cost effective and more environmentally friendly products.

In addition, PPC expects to record approximately $5 million in restructuring charges in the third quarter of 2016. The charges are primarily related to headcount reductions at PPC's Dombuhl, Germany facility, other location headcount reductions and for costs related to the shut down of PPC's Turkey facility. The Dombuhl charges are related to an optimization plan that will drive innovation and enhance our industry leading position in printed breathable backsheet. The facility will be transformed into a state of the art hygiene products facility focused on breathable printed film and siliconized products. In conjunction with this effort, our customer base will be streamlined, and we will dispose of old assets and reduce overhead costs, allowing for gains in efficiencies.
  
Taxes
In both the quarter and six months ended March 31, 2016 and 2015, the Company reported pretax income, and recognized tax provisions of 38.0% and 36.6% for the quarter and six months ended March 31, 2016, respectively, compared to 37.5% and 37.7%, respectively, in the comparable prior year periods. Excluding discrete items, the effective tax rates for the six months ended March 31, 2016 and 2015 were 38.2% and 35.2%, respectively. The current and prior year quarters included certain de minimis discrete tax items.


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Balance Sheet and Capital Expenditures
At March 31, 2016, the Company had cash and equivalents of $54.3 million, total debt outstanding of $941.8 million, net of discounts and issuance costs, and $212 million available for borrowing, subject to certain loan covenants, under its revolving credit facility. Capital expenditures were $20.9 million in the current quarter.

On March 22, 2016, the Company amended it revolving credit agreement to increase the maximum borrowing availability from $250 million to $350 million, extend its maturity date from March 2020 to March 2021, and modify certain other provisions of the facility.

Share Repurchases
In each of March and July 2015, Griffon’s Board of Directors authorized the repurchase of up to $50 million of Griffon’s outstanding common stock. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended March 31, 2016, Griffon purchased 1,516,919 shares of common stock under the programs, for a total of $22.7 million or $14.97 per share. At March 31, 2016, $28.0 million remained under existing Board authorizations.

From August 2011 to March 31, 2016, Griffon repurchased 18,700,559 shares of its common stock for a total of $233.1 million or $12.46 per share.

Conference Call Information
The Company will hold a conference call today, May 4, 2016, at 4:30 PM ET.

The call can be accessed by dialing 1-888-505-4328 (U.S. participants) or 1-719-325-2278 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 5838439.

A replay of the call will be available starting on May 4, 2016 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 5838439. The replay will be available through May 18, 2016.

Forward-looking Statements
“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; the Griffon's ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets,

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and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of continuing budgetary cuts resulting from sequestration and other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost of raw materials such as resin, wood and steel; changes in customer demand or loss of a material customer at one of Griffon's operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in the Griffon’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which could impact margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain Griffon’s operating companies; and possible terrorist threats and actions and their impact on the global economy. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company’s Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Griffon Corporation
Griffon Corporation is a diversified management and holding company that conducts business through wholly owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three reportable segments:

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Home & Building Products consists of two companies, AMES and CBP:

•
AMES is a global provider of non-powered landscaping products for homeowners and professionals.

•
CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional dealers and major home center retail chains.

•
Telephonics designs, develops and manufactures high-technology integrated information, communication and sensor system solutions for military and commercial markets worldwide.
•
PPC is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

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For more information on Griffon and its operating subsidiaries, please see the Company’s website at www.griffon.com.

Company Contact:            Investor Relations Contact:        
Brian G. Harris                Michael Callahan            
SVP & Chief Financial Officer        Senior Vice President
Griffon Corporation            ICR Inc.    
(212) 957-5000                (203) 682-8311




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Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), as applicable ("Segment adjusted EBITDA"). Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:

GRIFFON CORPORATION AND SUBSIDIARIES
OPERATING HIGHLIGHTS
(in thousands)
(Unaudited)
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
REVENUE
2016
 
2015
 
2016
 
2015
Home & Building Products:
 

 
 

 
 

 
 

AMES
$
165,847

 
$
159,092

 
$
284,137

 
$
292,202

CBP
113,387

 
104,513

 
256,295

 
243,113

Home & Building Products
279,234

 
263,605

 
540,432

 
535,315

Telephonics
105,874

 
98,687

 
214,911

 
189,345

PPC
114,999

 
137,728

 
238,913

 
277,520

Total consolidated net sales
$
500,107

 
$
500,020

 
$
994,256

 
$
1,002,180

 
 
 
 
 
 
 
 
Segment adjusted EBITDA:
 

 
 

 
 

 
 

Home & Building Products
$
26,338

 
$
17,330

 
$
56,167

 
$
41,800

Telephonics
10,444

 
11,616

 
20,788

 
21,648

PPC
11,781

 
15,764

 
23,566

 
30,315

Total Segment adjusted EBITDA
48,563

 
44,710

 
100,521

 
93,763

Net interest expense
(12,348
)
 
(11,857
)
 
(24,360
)
 
(23,494
)
Segment depreciation and amortization
(16,998
)
 
(17,078
)
 
(33,967
)
 
(34,225
)
Unallocated amounts
(9,379
)
 
(7,580
)
 
(19,007
)
 
(15,844
)
Income before taxes
$
9,838

 
$
8,195

 
$
23,187

 
$
20,200



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The following is a reconciliation of each segment's operating results to Segment adjusted EBITDA:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
BY REPORTABLE SEGMENT
(in thousands)
(Unaudited)
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2016
 
2015
 
2016
 
2015
Home & Building Products
 
 
 
 
 
 
 
Segment operating profit
$
17,810

 
$
8,651

 
$
38,969

 
$
25,020

Depreciation and amortization
8,528

 
8,679

 
17,198

 
16,780

Segment adjusted EBITDA
26,338

 
17,330

 
56,167

 
41,800

 
 
 
 
 
 
 
 
Telephonics
 
 
 
 
 
 
 
Segment operating profit
7,875

 
9,114

 
15,688

 
16,631

Depreciation and amortization
2,569

 
2,502

 
5,100

 
5,017

Segment adjusted EBITDA
10,444

 
11,616

 
20,788

 
21,648

 
 
 
 
 
 
 
 
Clopay Plastic Products
 
 
 
 
 
 
 
Segment operating profit
5,880

 
9,867

 
11,897

 
17,887

Depreciation and amortization
5,901

 
5,897

 
11,669

 
12,428

Segment adjusted EBITDA
11,781

 
15,764

 
23,566

 
30,315

 
 
 
 
 
 
 
 
All segments:
 
 
 
 
 
 
 
Income from operations - as reported
22,571

 
20,809

 
47,377

 
44,902

Unallocated amounts
9,379

 
7,580

 
19,007

 
15,844

Other, net
(385
)
 
(757
)
 
170

 
(1,208
)
Segment operating profit
31,565

 
27,632

 
66,554

 
59,538

Depreciation and amortization
16,998

 
17,078

 
33,967

 
34,225

Segment adjusted EBITDA
$
48,563

 
$
44,710

 
$
100,521

 
$
93,763


Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.

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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2016
 
2015
 
2016
 
2015
Revenue
$
500,107

 
$
500,020

 
$
994,256

 
$
1,002,180

Cost of goods and services
385,950

 
385,645

 
763,994

 
769,816

Gross profit
114,157

 
114,375

 
230,262

 
232,364

Selling, general and administrative expenses
91,586

 
93,566

 
182,885

 
187,462

Income from operations
22,571

 
20,809

 
47,377

 
44,902

Other income (expense)
 

 
 

 
 

 
 

Interest expense
(12,392
)
 
(12,012
)
 
(24,415
)
 
(23,766
)
Interest income
44

 
155

 
55

 
272

Other, net
(385
)
 
(757
)
 
170

 
(1,208
)
Total other expense, net
(12,733
)
 
(12,614
)
 
(24,190
)
 
(24,702
)
Income before taxes
9,838

 
8,195

 
23,187

 
20,200

Provision for income taxes
3,743

 
3,073

 
8,496

 
7,607

Net income
$
6,095

 
$
5,122

 
$
14,691

 
$
12,593

Basic income per common share
$
0.15

 
$
0.11

 
$
0.35

 
$
0.27

Weighted-average shares outstanding
41,426

 
45,349

 
41,697

 
45,829

Diluted income per common share
$
0.14

 
$
0.11

 
$
0.33

 
$
0.26

Weighted-average shares outstanding
43,891

 
47,669

 
44,727

 
47,682

Net income
$
6,095

 
$
5,122

 
$
14,691

 
$
12,593

Other comprehensive income (loss), net of taxes:
 

 
 

 
 

 
 

Foreign currency translation adjustments
13,683

 
(30,384
)
 
10,334

 
(45,884
)
Pension and other post retirement plans
386

 
353

 
772

 
706

Change in cash flow hedges
(1,649
)
 
(80
)
 
(2,664
)
 
(154
)
Change in available-for-sale securities
—

 
92

 
—

 
(870
)
Total other comprehensive income (loss), net of taxes
12,420

 
(30,019
)
 
8,442

 
(46,202
)
Comprehensive income (loss), net
$
18,515

 
$
(24,897
)
 
$
23,133

 
$
(33,609
)

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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
(Unaudited)
At March 31, 2016
 
At September 30, 2015
 
CURRENT ASSETS
 
 
 
 
Cash and equivalents
$
54,282

 
$
52,001

 
Accounts receivable, net of allowances of $6,311 and $5,342
261,161

 
218,755

 
Contract costs and recognized income not yet billed, net of progress payments of $15,273 and $16,467
108,480

 
103,895

 
Inventories, net
311,567

 
325,809

 
Prepaid and other current assets
53,022

 
55,086

 
Assets of discontinued operations
1,325

 
1,316

 
Total Current Assets
789,837

 
756,862

 
PROPERTY, PLANT AND EQUIPMENT, net
386,109

 
379,972

 
GOODWILL
360,094

 
356,241

 
INTANGIBLE ASSETS, net
214,733

 
213,837

 
OTHER ASSETS
25,482

 
22,346

 
ASSETS OF DISCONTINUED OPERATIONS
2,259

 
2,175

 
Total Assets
$
1,778,514

 
$
1,731,433

 
 
 
 
 
 
CURRENT LIABILITIES
 

 
 

 
Notes payable and current portion of long-term debt
$
19,217

 
$
16,593

 
Accounts payable
161,737

 
199,811

 
Accrued liabilities
98,889

 
104,997

 
Liabilities of discontinued operations
1,924

 
2,229

 
Total Current Liabilities
281,767

 
323,630

 
LONG-TERM DEBT, net
922,563

 
826,976

 
OTHER LIABILITIES
145,583

 
146,923

 
LIABILITIES OF DISCONTINUED OPERATIONS
3,220

 
3,379

 
Total Liabilities
1,353,133

 
1,300,908

 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
SHAREHOLDERS’ EQUITY
 

 
 

 
Total Shareholders’ Equity
425,381

 
430,525

 
Total Liabilities and Shareholders’ Equity
$
1,778,514

 
$
1,731,433

 
 
 
 
 
 



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GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended March 31,
 
 
2016
 
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
Net income
$
14,691

 
$
12,593

 
Adjustments to reconcile net income to net cash used in operating activities:
 

 
 

 
Depreciation and amortization
34,202

 
34,453

 
Stock-based compensation
5,555

 
5,372

 
Provision for losses on accounts receivable
(13
)
 
242

 
Amortization of debt discounts and issuance costs
3,384

 
3,265

 
Deferred income taxes
1,537

 
1,282

 
Gain on sale of assets and investments
(255
)
 
(315
)
 
Change in assets and liabilities, net of assets and liabilities acquired:
 

 
 

 
Increase in accounts receivable and contract costs and recognized income not yet billed
(43,751
)
 
(23,424
)
 
Decrease (increase) in inventories
17,617

 
(39,252
)
 
Decrease in prepaid and other assets
2,220

 
754

 
Decrease in accounts payable, accrued liabilities and income taxes payable
(42,632
)
 
(40,244
)
 
Other changes, net
2,037

 
2,223

 
Net cash used in operating activities
(5,408
)
 
(43,051
)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
Acquisition of property, plant and equipment
(45,952
)
 
(39,713
)
 
Acquired businesses, net of cash acquired
(4,470
)
 
—

 
Proceeds from sale of assets
868

 
177

 
Investment sales
715

 
8,891

 
Net cash used in investing activities
(48,839
)
 
(30,645
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
Proceeds from issuance of common stock
—

 
285

 
Dividends paid
(4,508
)
 
(3,911
)
 
Purchase of shares for treasury
(33,640
)
 
(37,577
)
 
Proceeds from long-term debt
139,604

 
99,556

 
Payments of long-term debt
(46,323
)
 
(29,425
)
 
Change in short-term borrowings
(191
)
 
(572
)
 
Financing costs
(1,120
)
 
(590
)
 
Tax benefit from exercise/vesting of equity awards, net
2,291

 
345

 
Other, net
208

 
95

 
Net cash provided by financing activities
56,321

 
28,206

 
CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
Net cash used in operating activities
(578
)
 
(545
)
 
Net cash used in discontinued operations
(578
)
 
(545
)
 
Effect of exchange rate changes on cash and equivalents
785

 
(3,768
)
 
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
2,281

 
(49,803
)
 
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
52,001

 
92,405

 
CASH AND EQUIVALENTS AT END OF PERIOD
$
54,282

 
$
42,602

 
 
 
 
 
 

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Griffon evaluates performance based on Earnings per share and Net income excluding discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Net income to adjusted net income and earnings per share to Adjusted earnings per share:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(in thousands, except per share data)
(Unaudited)
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2016
 
2015
 
2016
 
2015
Net income
$
6,095

 
$
5,122

 
$
14,691

 
$
12,593

 
 
 
 
 
 
 
 
Adjusting items, net of tax:
 

 
 

 
 

 
 

Discrete tax provisions (benefits)
43

 
145

 
(356
)
 
494

 
 
 
 
 
 
 
 
Adjusted net income
$
6,138

 
$
5,267

 
$
14,335

 
$
13,087

 
 
 
 
 
 
 
 
Diluted income per common share
$
0.14

 
$
0.11

 
$
0.33

 
$
0.26

 
 
 
 
 
 
 
 
Adjusting items, net of tax:
 

 
 

 
 

 
 

Discrete tax provisions (benefits)
—

 
—

 
(0.01
)
 
0.01

 
 
 
 
 
 
 
 
Adjusted earnings per common share
$
0.14

 
$
0.11

 
$
0.32

 
$
0.27

 
 
 
 
 
 
 
 
Weighted-average shares outstanding (in thousands)
43,891

 
47,669

 
44,727

 
47,682

 
 
 
 
 
 
 
 

Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

    

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