Griffon Corporation (GFF) Q4 2021 Earnings Call Transcript

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Griffon Corporation (GFF 0.33%)
Q4 2021 Earnings Call
Nov 16, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Griffon Corporation Annual and Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions]

I will now turn the conference over to your host, Brian Harris, Chief Financial Officer of Griffon Corporation. Thank you. You may begin.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Thank you, Hillary. Good morning, everyone.

With me on the call is Ron Kramer, our Chairman and Chief Executive Officer. Our call is being recorded and will be available for playback, the details of which are in our press release issued earlier today.

As in the past, our comments will include forward-looking statements about the Company's performance based on our views of Griffon's businesses and the environments in which they operate. Such statements are subject to inherent risks and uncertainties that can change as the world changes; please see the cautionary statements in today's press release and in our various Securities and Exchange Commission filings.

Finally, some of today's remarks will adjust for those items that affect comparability between reporting periods. These items are explained in our non-GAAP reconciliations included in our press release.

Now, I'll turn the call over to Ron.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Thanks, and good morning, everyone.

2021 was a record year for Griffon. We continued to see strong demand in our businesses, driven by a robust housing market and a leading product portfolio in the US and internationally, while effectively navigating a highly dynamic and challenging operating environment. Griffon entered 2021 with significant momentum, reflecting more time spent in and around the house and a renewed appreciation for a lifestyle, including the lawn, garden and the outdoors.

During the course of the year, we continued to see healthy demand, but supply challenges across the global economy emerged and then escalated, creating increasing headwinds for us and the entire global economy, particularly in the second half. Despite these challenges in 2021 inclusive of Telephonics, we generated revenue of $2.5 billion, record segment adjusted EBITDA of $317 million and record adjusted earnings of $1.86 per share. Our businesses also continued to see unprecedented levels of backlog, which bodes well for continued momentum into 2022.

Our record performance this year is a direct result of our being able to realize the benefits of the strategic actions we've taken to strengthen the Company and position ourselves for future growth and increased profitability. Our portfolio repositioning and strategic acquisitions along with the critical investments we made in infrastructure at our CornellCookson commercial door facility in Mountain Top Pennsylvania and our ongoing AMES strategic initiative have put us into a position to capitalize on the consistent strength of the housing market and homeowner activity.

Notwithstanding our record levels of performance, we continued to be impacted by an increasingly difficult global operating environment. COVID is better, but it's not over. Particularly in the second half of this year, labor, transportation and supply chain disruptions, both domestically and internationally affected our ability to meet market demand and disrupted the steady flow of our operations. Our customers affected by these same challenges continued to be desperate for product to restock their shelves and replenish their inventory levels, and have begun working more broadly across their supplier and vendor base to secure the product needed to meet the continued demand in the market given these inefficiencies. This presents both challenges as well as opportunities across the competitive landscape.

We've also taken significant strategic actions this year with the goal of increasing value to our shareholders and enhancing our competitiveness. In September, we announced the exploration of strategic alternatives, including a sale for Telephonics, our Defense Electronics business. Telephonics is a terrific company with a long history of impressive achievement and we are evaluating opportunities to realize the value of the business and focus our resources on areas where we believe we can achieve stronger growth. On the acquisition front, we have an extremely active pipeline of high-quality businesses and we will continue to be optimistic about finding acquisition opportunities that are value enhancing and immediately accretive.

Let's shift to the results for the year and give some more detail around the performance of the segments.

Starting with Consumer and Professional Products, our AMES business. Revenue increased by 8% year-over-year and adjusted EBITDA increased 11%. The increase in revenue benefited from increased volume and favorable price, mix and foreign exchange. AMES saw volume gains in international markets, largely driven by consumer activity catching up after earlier pandemic shutdowns and other demand disruptions. Domestically, US volumes were lower due to the labor, transportation and supply chain disruptions that have been widely reported and commented upon; despite these disruptions consumer demand appears to continue to be healthy. In terms of profitability, increased material cost in the US, coupled with continued lag of price catching up with rapidly rising input costs have been and continued to be headwinds on margins. We expect price and cost to reach parity at the end of our second quarter of 2022.

Turning to Home and Building Products. Our Clopay business saw a record revenue and EBITDA, which increased by 12% and 18%, respectively. The increase in revenue benefited from increased favorable price and mix and increased volume. We saw broad strength across both residential and commercial products throughout the year. Commercial products, in particular, did well with heightened customer interest in the new products developed by CornellCookson, strong performance of core rolling steel product offerings and successful cross-selling of sectional doors through commercial channels. And with an infrastructure bill finally signed, the future looks bright for demand. EBITDA at Clopay benefited from the increased revenue, partially offset by continued price and cost lag, rapidly rising prices for steel, interruptions of supply of raw materials and chemicals, as well as significant shortages in labor continued to create challenges for the business, as evidenced by Clopay's unprecedented levels of backlog.

Turning to Telephonics. We announced the exploration of strategic alternatives for the business on September 27, and are now treating the business as a discontinued operation in our reported results. Lazard, our banker, is actively working on these alternatives, which includes a sale. We expect this process to conclude by the end of our second fiscal quarter ending March 2022. Excluding the contribution of the SEC -- SEG business, which we divested in the first quarter of 2021, Telephonics revenue in 2021 decreased by 15% year-over-year and EBITDA decreased by 15%. Revenue was impacted by reduced volume due to delayed awards in certain programs as well as decreased deliveries. EBITDA was likewise affected by the lower volume as well as by cost growth in surveillance systems, partially offset by favorable program performance in the radar systems and reduced operating expenses resulting from efficiency actions taken last November. We expect increased sale and profit, including strong margin improvement, as the Company enters fiscal 2022.

Turning to our dividend and balance sheet. Our record performance this year reduced our leverage to 2.8 times net debt to EBITDA, which is well below our stated target of 3.5 times and does not include the benefit from the Telephonics strategic process. This balance sheet strength provides us with substantial flexibility to pursue value enhancing and immediately accretive acquisitions, while making strategic investments in our existing businesses. We increased our dividend to $0.09 per share, which marks the 41st consecutive quarterly dividend paid to shareholders. Our dividend has grown at a 17% compound annual growth rate since our dividend program was started.

Separately, each year, we reach out institutional shareholders to discuss their views on a variety of subjects, including our governance practices. Over the past five years, we've refreshed approximately half of our independent directors, adding diversity and relevant expertise to our Board. As we evolve, we are continuing this process. Our Board has adopted two amendments to our Certificate of Incorporation for submission to our shareholders at our 2022 annual meeting. The first amendment will declassify the Board over a three-year transition period after the amendment becomes effective. The second will reduce the percentage of voting power necessary to call a special meeting of shareholders. These amendments will become effective upon the approval of our shareholders at our 2022 annual meeting. Our Board has also undertaken a commitment to further diversify with an objective that, by 2025, 40% of our independent directors will be women or persons of color. These enhancements and refinements to our corporate governance practices will further align our interest with those of our long-term shareholders and contributing to maximizing shareholder value.

Let me turn it over to Brian now for more details regarding Q4's financial results. Brian?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Thank you, Ron.

I'll start by highlighting our fourth quarter consolidated performance on a continuing basis.

Revenue increased by 3% to $570 million.

Segment adjusted EBITDA increased 6% to $67 million, with related margin increasing 30 basis points to 11.7%.

Gross profit on a GAAP basis for the quarter was $156 million, increasing 1% compared to the prior-year quarter. Excluding restructuring-related charges, gross profit was $159 million, increasing 3% compared to the prior-year quarter, with gross margin decreasing 10 basis points to 27.9%.

Fourth quarter GAAP selling, general and administrative expenses were $123 million compared to $117 million in the prior-year quarter. Excluding restructuring-related charges, selling, general and administrative expenses were $120 million or 21% of revenue compared to $116 million or 21% in the prior-year quarter, with the increased dollars primarily driven by distribution, transportation and incentive costs.

Fourth quarter GAAP net income, which includes Telephonics, was $16 million or $0.30 per share compared to the prior-year period of $20 million or $0.41 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $21 million or $0.40 per share compared to the prior year of $22 million or $0.44 per share. Keep in mind, the impact of the August 2020 equity offering on adjusted EPS was approximately $0.04.

Fourth quarter GAAP income from continuing operations was $13 million or $0.23 per share compared to the prior-year period of $21 million or $0.43 per share. Excluding items that affect comparability from both periods, current quarter adjusted net income was $18 million or $0.33 per share compared to the prior year of $17 million or $0.35 per share. The impact of the August 2020 equity offering on adjusted EPS was approximately $0.03.

Corporate and unallocated expenses, excluding depreciation, were $13 million in the quarter compared to $12 million in the prior-year quarter, primarily due to incentive costs.

Our 2021 full-year effective tax rate, excluding items that affect comparability, was 31.7% compared to 33.7% in the prior year.

Capital spending was $12 million in the fourth quarter compared to $11 million in the prior-year quarter. Depreciation and amortization totaled $13.3 million compared to $12.8 million in the prior-year quarter.

Regarding our balance sheet and liquidity, as of September 30, 2021, we had net debt of $797 million, with leverage of 2.8 times calculated based on our debt covenants. This is a 0.6 of a turn reduction from our prior-year fourth quarter. Our cash and equivalents were $249 million and debt outstanding was $1.05 billion. Borrowing availability under the revolving credit facility was $371 million, subject to certain loan covenants.

Regarding guidance, our standard practice has been to provide a forecast of our performance for the coming year and maintain that guidance. At the beginning of our fiscal 2021, we provided initial guidance that reflected our view of the ongoing risks associated with the pandemic and the economic recovery. However, at mid-year, we took the unprecedented step of updating guidance when our performance continued to be well in excess of initial guidance. We are returning to our standard practice and providing guidance for fiscal '22, reflecting what we consider to be reasonable expectations for the year.

On a continuing operating basis, excluding the contribution of Telephonics, we expect revenue of $2.5 billion and segment adjusted EBITDA of $300 million for fiscal '22. Excluding both unallocated costs of $49 million and one-time charges of approximately $15 million related to the AMES initiative. In terms of the phasing of our guidance, we expect significant margin compression in the first half of the year, particularly in the first quarter, as we recover price to offset significantly increased input costs.

Just to dimension [Phonetic] the magnitude of the price increases we have realized and expect to realize, we secured multiple double-digit price increases in '21 and expect to realize additional double-digit price increases in the first half of fiscal '22.

Margins are expected to gradually improve starting in the latter part of our second quarter and will reach more normalized levels by our fourth quarter, reflecting the pass-through of pricing to our customers and expected improvement in labor and transportation availability, along with improving reliability within our supply chain.

Further, our guidance incorporates the sales trends we are seeing as customers are diversifying their supplier base to find available product across a wider array of vendors and suppliers than before. This diversification is resulting in shifts of market share and shelf space across our product categories. Likewise, we are diversifying our own supplier base and focusing our resources on those brands, channels, products and customers we had competitive strength and a good product mix and can maintain healthy margins. This will result in shifts of both sales volume and mix throughout '22 and into '23, as we prioritize our resources to achieve our margin objectives.

Total capital expenditures for fiscal '22 are expected to be $65 million, which includes $25 million supporting the AMES initiative. Depreciation and amortization is expected to be $56 million, of which $9 million is amortization. We expect to generate free cash flow in excess of net income, inclusive of the capital investment and other investments we are making at AMES.

As in prior years, we expect a similar pattern of cash flow with significant cash usage in the first half, followed by strong second half cash generation. As a result of the expected margin compression in the first quarter and the timing of price cost parity expected to be reached in the second half of the year, our first half cash usage, particularly in the first quarter, will exceed historical levels.

We expect net interest expense of approximately $63 million for fiscal '22. Our expected normalized tax rate will be approximately 32%. As is always the case, geographic earnings mix and any legislative action, including new guidance on tax reform matters, may impact rates.

Now, I'll turn the call back over to Ron.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Just as a final comment on '22, we continue to believe that supply chain disruptions, inflationary trends and labor shortages will remain challenges, but the strength of our demand gives us a high degree of confidence in the outlook.

We continue to believe in the strength of our diversified holding company investment and operating-centric model. This year marks the third fiscal year since we repositioned our business through divesting the Plastics business and acquiring ClosetMaid and CornellCookson. These actions have fundamentally strengthened Griffon over the last three years. Our revenue, adjusted EBITDA and adjusted earnings per share have increased at a compound annual growth rate of 11%, 23% and 35%, respectively. Over this period, we generated $224 million in free cash flow, while cutting our leverage in half to 2.8 times. Our announcement of strategic alternatives for Telephonics marks another fundamental shift in our portfolio. We'll realize additional value for shareholders, and this will allow Griffon to redeploy capital toward accretive acquisitions. Our M&A pipeline is active, and we are reviewing exciting opportunities to substantially bolster our existing businesses, as well as considering new opportunities that will further strengthen and diversify us.

In closing, I'd like to thank our entire global workforce, which has shown exceptional dedication and perseverance through another challenging year. We appreciate the importance of their work in order to deliver these excellent results. We remain excited about our future.

Operator, we're happy to take any questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question is from Bob Labick of CJS Securities. Please proceed with your question.

Lee Jagoda -- CJS Securities -- Analyst

Hi. It's actually Lee Jagoda for Bob this morning. Good morning, Ron and Brian.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Good morning, Lee.

Lee Jagoda -- CJS Securities -- Analyst

So, just starting with your guidance and the margin guidance specifically, are you assuming that the current headwinds and pricing and cost environment is sort of state [Phonetic] from here until when we recover? Or are you assuming continued increasing headwinds offset by continued increasing pricing to get to your equilibrium midyear next year?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Yeah. We clearly see the first half of the year as being more difficult than the second half of the year. The pace of inflationary input costs, supply chain disruptions will hit us worst in the first quarter, better in the second quarter, we'll reach price parity toward the end of the second quarter, and we expect to get back to margins that we were enjoying before the second half of 2021.

Brian, you want to add to that?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

I'd just add to that, we expect particular pressure in the first quarter of the year as we're working on the price increases that will start to take hold in the second quarter.

Lee Jagoda -- CJS Securities -- Analyst

Got it. And then just as a follow-up, thinking about your balance sheet and M&A, given the low current leverage and the likelihood that Telephonics process leads to a deleveraging transaction, it appears you'll have plenty of firepower to go out and find acquisitions. Ron, can you comment on any particular areas of focus, potential transaction sizes, and whether the multiples out there in the market makes sense to you from a purchase standpoint?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

We commented in our last conference call that things had slowed down and that was really a reflection of what was happening in the Delta variant when -- what we saw and correctly stepped away. We have been more active this quarter than we've been in the history of the Company. We see targets, both big and small, that are complementary to the businesses, particularly around the AMES business and the Clopay business. You're correct that our balance sheet provide significance between our revolver, cash on balance sheet and our proven ability to take leverage up and deploy it effectively, plus the expected outcome of the Telephonics strategic process, we have well over $1 billion of buying power, and you should expect that we are actively looking at deploying it into value-enhancing, immediately accretive transactions. When we have more to announce, obviously, we will.

Operator

Our next question is from Josh Chan of Baird. Please proceed with your question.

Josh Chan -- Baird -- Analyst

Hi, good morning, Ron and Brian.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning, Josh.

Josh Chan -- Baird -- Analyst

Good morning. I guess, on your guidance comments, you mentioned it's sort of a significant margin impact in Q1. I was just wondering if there is any way to sort of quantify that at this limit, any kind of future surprises? But then maybe more importantly, do you think you're past the worst of labor and supply chain issues at this point even as you deal with the price/cost dynamic?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

So, we expect over the course of the year, starting in the second quarter, margins will start to get back to normal and will get more normal in the second half of the year and into the fourth quarter. Our guidance assumes that the supply chain and labor constraints will start to ease in the back half of the year. The first quarter, we are still working on getting the latest set of price increases through. Until they are through, there will be significant pressure on that margin, and starting in the second quarter, it will start to -- that trends back to normal.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Yeah. It's our view that that's not just us, that's what's happening across the entire economy, and that this wave of input costs, supply chain disruptions is going to be crashing into people throughout the balance of calendar year '21, which for us is our first fiscal quarter, at the end of calendar year companies, and reset progressing into '22. And again, the demand side is certain and if anything, we think there is potential upside in what we see in trends in the consumer and housing, and then throw the infrastructure potential on top of it. Having said that, the inflationary trends that have gone on, you can pass along price immediately, but we have passed along significant double-digit price increases and believe that in the second quarter of this year, we will achieve parity on those existing cost structures, which will drive improved margins for the balance of 2022.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

I would just add, actually, in addition, if you look back last year in Q1, we had very good margins. AMES was about 11% and Clopay was 19%. One, sort of to point out the difficult or more difficult comps through the prior year Q1 and two, to point out the earnings power of our businesses once we get back to normalized state of affairs.

Josh Chan -- Baird -- Analyst

That's good color on that. Yeah, thank you both for that. I guess my follow-up, you talked also about some shifts in terms of customer purchases as they diversify and maybe you diversify as well. It seems like there is some meaningful shifts kind of going on. So, could you kind of provide more color on that? And where are some of the opportunities and maybe challenges for you relative to these?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Sure. So, these mostly applied to our CPP business, our AMES business. And our customers are who are, as we've said, desperate for inventory had been looking for other options to fill their shelves. This will have some puts and takes between our customers, as all customers are looking for other suppliers. This actually, both an opportunity -- it's a bit of an opportunity for us to focus on our brands and our customers that are strong and will help us protect our margins over the long term. So, this is not unusual. We've seen historically shifts between customers and this is just another trend or another ups and down trend or that type of shift.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

And ultimately, we believe branded products matter and we'll continue to invest in our brand and deliver the best product at the better or best price point that -- and deliver a value proposition for the consumer.

Operator

Our next question is from Julio Romero of Sidoti and Company. Please proceed with your question.

Julio Romero -- Sidoti and Company -- Analyst

Hey, good morning, Ron and Brian. Thanks for taking the questions.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Good morning.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning.

Julio Romero -- Sidoti and Company -- Analyst

So, on the CPP segment, did you see any alleviation to transportation costs or transportation bottlenecks as you progressed throughout the quarter? Or would you say that maybe the transportation side may be getting worse as you progressed? And then secondly, when might you expect to see some relief on the transportation front?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Yeah. So, we're expecting to see relief really in the second half of fiscal '22. And I think that's general, not just we'll see it, but the overall economy will see it. We saw continued difficult supply chain disruptions, labor disruptions in transportation. Hopefully, they have peaked. We expect them to continue through at least the first half of our year. But as we said, we'll be having price increases that will go out through the first quarter and start to take hold in the second quarter, setting ourselves up for the second half of the year when, again, we expect some of those disruptions to alleviate.

Julio Romero -- Sidoti and Company -- Analyst

Got it. And I guess for my follow-up, I appreciate the commentary in regards to Lee's question earlier about looking at businesses complementary to your current portfolio of AMES and HBP. And assuming your geographic footprint stays the same, I guess, circling back to the other prepared commentary about the dynamic environment creating opportunities, could you speak at all to the potential for balance sheet deployment to allow you to play offense in regards to your current markets and your around the home strategy?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

We are actively engaged in looking to deploy the balance sheet strength that we have and that we will have as a result of the Telephonics strategic process to be complementary, value-enhancing and immediately accretive.

Operator

Our next question is from Justin Bergner of Gabelli Funds. Please proceed with your question.

Justin Bergner -- Gabelli Funds -- Analyst

Good morning, Ron, and good morning, Brian.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning, Justin.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Good morning.

Justin Bergner -- Gabelli Funds -- Analyst

My first question relates to the comment about customers looking to diversify suppliers, I guess, in an environment of tight supply. Sort of what are you seeing on the ground, maybe just a little bit more anecdotal, that's prompting you to sort of speak to that on today's call? And is that something that is implicit at all in your 2022 guidance, or is that more just something that you're thinking about longer term?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Yeah, our guidance absolutely reflects that dynamic. Our customers, as I said before, just to clarify, they are seeking an adjustment for inventory. We will use and leverage our brands, our US manufacturing ability, our distribution ability and the highly competitive products that we have to focus on better margin mix. That's the best I can put.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Yeah. The goal for us is you to have a mix that leads to better margins. And in this desperation of filling shelves, we see opportunities to align our businesses to allow that to happen.

Justin Bergner -- Gabelli Funds -- Analyst

Got it. And then my follow-up question was on guidance. First of all, if you could just reiterate the capex number? And then, the revenue guide for $2.5 billion for continuing ops, does that sort of assume positive volume? And can you sort of quantify what sort of positive volume range is implicit in that guide?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Sure. So, the capex was $65 million, $25 million of which relates to the AMES initiative, just to tick that off. Regarding volume, on overall, volume -- well, actually on the Home and Building Product side, with our large backlog, volume will -- should be positive. We're expecting to be positive, and that's just baked into our guidance. On the CPP side, particularly with the supply chain constraints, we expect volume to be down over the course of the year, but we expect overall to be improving in the second half of the year. However, price overall will be up and, therefore, our higher revenue guidance.

Operator

Our next question is from Trey Grooms of Stephens. Please proceed with your question.

Noah Merkousko -- Stephens -- Analyst

Thanks, and good morning. This is actually Noah Merkousko on for Trey Grooms.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning, Noah.

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Good morning.

Noah Merkousko -- Stephens -- Analyst

So, I wanted to talk a little bit about the HBP EBITDA margins and how you're thinking about those long term. I mean those continue to look very impressive, and I think you've been outpacing your longer-term guidance there. So, just kind of help us frame up what that looks like and maybe what's baked into '22 guidance for that segment?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

I'll remind you, we're the largest residential and now with the integration of CornellCookson, the largest commercial door business, this is our first year that we've broken $1 billion in revenue. And we think the future of the Clopay business is extraordinarily bright, both the repair and remodel market for residential, the commercial and industrial, as we continue to rebuild America, the opportunities for us on the commercial side of the business are likely to be even a faster pace of growth than the residential business.

The Company is in extraordinarily good shape competitively. It is an efficient manufacturer. Our best long-term margin days are ahead of us. Short term, same story. Steel prices are up, transportation disruption ongoing, bottleneck issues on component pieces. So, the targets for margins for the year continue to be consistent what they were for this year. The pace of how we get there, we expect first half of the year to be lower than the second half. But most importantly, we see volume increasing, unprecedented levels of backlog in the Clopay business, and our ability to execute on that gives us visibility on '22. But longer term, to your point, we see the best margin days ahead of us.

Noah Merkousko -- Stephens -- Analyst

Thanks. That's helpful. And then just on a follow-up. I think you mentioned the infrastructure bill potentially having a positive impact on that HBP business. I'm assuming that's probably not going to be until 2023, but can you kind of frame up how you're thinking about how that might impact demand?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

10 years ago, the phrase shovel-ready was making the rounds, and we've said for 10 years, we've got the shovels. The impact over the next 10 years from a bill that, when you separate the politics, this is the largest infrastructure bill that's gotten passed in the United States since the Eisenhower administration. We think that we are going to be a beneficiary on both the AMES side of our business, and specifically to your question on the commercial side, CornellCookson is an architectural designer for institutional government facilities. So, when you're building bridges and roads and rails, and you're improving that underlying municipal state and federal infrastructure, there will be a number of opportunities for us to sell commercial rolling steel doors, grates, security products, all of which comes from a more robust federal spending plan. So, we feel that exactly -- that's not a '22 conversation, that's a next five-year conversation; once it kicks in, and it won't kick in until '23.

Operator

[Operator Instructions] Our next question is from Sam Darkatsh of Raymond James. Please proceed with your question.

Sam Darkatsh -- Raymond James -- Analyst

Good morning, Ron. Good morning, Brian. How are you?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Good morning.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Good morning. Doing well.

Sam Darkatsh -- Raymond James -- Analyst

Just -- most of my questions have been asked and answered, just a couple of clarifying housekeeping items. Just so we could get a sense of what possible tax leakage might be on a transaction of Telephonics since it's a legacy business, can you remind us what the cost basis of the business for you?

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Sure. So, we don't expect significant tax leakage. I don't believe we publicly said what the cost basis is, but I would just not expect a significant amount of tax leakage.

Sam Darkatsh -- Raymond James -- Analyst

Okay. And then the second question, the decision to use not only proceeds, but existing liquidity for acquisitions as opposed to share repurchase, can we infer from that, Ron, that the acquisitions that you're contemplating would be more accretive post synergy than share repo would be?

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

We still have a $58 million unused authorization. We didn't buy any stock this quarter. We're very busy focused on things that can significantly grow the business, complement our acquisition. So, I won't rule out that we won't buy stock in the future.

Operator

We have reached the end of the question-and-answer session. And I will now turn the call back over to Ron Kramer for closing remarks.

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Thank you all. We had an excellent year, and we're hard at work to make '22 everything we think it can be. Our future is very bright. Thanks very much.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Brian G. Harris -- Senior Vice President and Chief Financial Officer

Ronald J. Kramer -- Chairman of the Board and Chief Executive Officer

Lee Jagoda -- CJS Securities -- Analyst

Josh Chan -- Baird -- Analyst

Julio Romero -- Sidoti and Company -- Analyst

Justin Bergner -- Gabelli Funds -- Analyst

Noah Merkousko -- Stephens -- Analyst

Sam Darkatsh -- Raymond James -- Analyst

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