What changed in this filing

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Item 1. Business

2020-11-13 compared with 2019-11-22 · 176 added, 75 removed, 383 unchanged (40% of the section changed)

Griffon Corporation (the “Company” or “Griffon”, "we", "us") is a diversified management and holding company that conducts business through wholly-owned subsidiaries.

The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y.

The Company, founded in 1959, is a Delaware corporation headquartered in New York, N.Y.

and is listed on the New York Stock Exchange (NYSE:GFF).

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As long-term investors, having substantial experience in a variety of industries, our intent is to continue the growth and strengthening of our existing businesses, and to diversify further through investments in our businesses and through acquisitions.

As described in greater detail below, over the past three years, we have undertaken a series of transformative transactions.

This year we integrated our most significant acquisitions into our wholly owned subsidiaries, The AMES Companies, Inc.

("AMES") and Clopay Corporation ("Clopay"), expanding the scope of both AMES and Clopay.

In particular, CornellCookson has been integrated into Clopay, so that our leading company in residential garage doors and sectional commercial doors now includes a leading manufacturer of rolling steel doors and grille products.

Over the past three years, we have undertaken a series of transformative transactions.

We divested our specialty plastics business in 2018 to focus on our core markets and improve our free cash flow conversion.

We expanded the scope of The AMES Companies, Inc.

("AMES") and Clopay Corporation ("Clopay") through the acquisitions of ClosetMaid, LLC ("ClosetMaid") and CornellCookson, Inc.

("CornellCookson"), respectively.

CornellCookson has been integrated into Clopay, so that our leading company in residential garage doors and sectional commercial doors now includes a leading manufacturer of rolling steel doors and grille products.

ClosetMaid was combined with AMES, and we established an integrated headquarters for AMES in Orlando, Florida.

AMES is now positioned to fulfill its mission of Bringing Brands Together™ with the leading brands in home and garage organization, outdoor décor, and lawn, garden and cleaning tools.

As a result of the expanded scope of the AMES and Clopay businesses, we now report each as a separate segment.

Clopay remains in the Home and Building Products segment and AMES now constitutes our new Consumer and Professional Products segment.

As a result of the expanded scope of the AMES and Clopay businesses, in 2019 we began reporting each as a separate segment.

Griffon now reports its operations through three segments.

Clopay remains in the Home and Building Products ("HBP") segment, AMES now constitutes our new Consumer and Professional Products ("CPP") segment and our Defense Electronics segment which continues to consist of Telephonics Corporation.

Impact of COVID-19 on Our Business

The health and safety of our employees, our customers and their families is a high priority for Griffon.

As of the date of this filing, all of Griffon's facilities are fully operational.

We have implemented a variety of new policies and procedures, including additional cleaning, social distancing, staggered shifts and prohibiting or significantly restricting on-site visitors, to minimize the risk to our employees of contracting COVID-19.

We manufacture a substantial majority of the products that we sell, with the majority of our manufacturing activities conducted in the United States.

As a result, we have been able to mitigate the adverse impact of the COVID-19 pandemic on the global supply chain.

During fiscal 2020 and through the date of this filing, all of our businesses have experienced normal or better order patterns compared with the same time period last year, with the exception of HBP's sectional door business, which experienced an 18% decline in orders in April but subsequently rebounded.

Our supply chains have not experienced significant disruption, and at this time we do not anticipate any such significant disruption in the near term.

Although many U.S.

states lifted initial executive orders issued earlier in the year requiring all workers to remain at home unless their work is critical, essential, or life-sustaining, some states and localities have recently put in place new restrictions regarding the operation of many types of businesses, or have tightened up restrictions already in place, in response to the recent worsening of the COVID-19 outbreak.

Regardless, we believe that, based on the various standards published to date, the work our employees are performing are either critical, essential and/or

life-sustaining for the following reasons:

1) Our Defense Electronics segment ("DE") is a defense and national security-related operation supporting the U.S.

Government, with a portion of its business being directly with the U.S.

2) HBP residential and commercial garage doors, rolling steel doors and related products that (a) provide protection and support for the efficient and safe movement of people, goods, and equipment in and out of residential and commercial facilities, (b) help prevent fires from spreading from one location to another, and (c) protect warehouses and homes, and their contents, from damage caused by strong weather events such as hurricanes and tornadoes;

and 3) CPP tools and storage products provide critical support for the national infrastructure including construction, maintenance, manufacturing and natural disaster recovery, and is part of the essential supply base to many of its largest customers including Home Depot, Lowe's and Menards.

Our AMES international facilities are currently fully operational, as they meet the applicable standards in their respective countries.

Griffon believes it has adequate liquidity to invest in its existing businesses and execute its business plan, while managing its capital structure on both a short-term and long-term basis.

In January 2020, Griffon increased total borrowing capacity under its revolving credit facility ("Credit Agreement") by $50,000, to $400,000 (of which $370,275 was available at September 30, 2020), and extended maturity of the facility to 2025.

In addition, the Credit Agreement has a $100,000 accordion feature (subject to lender consent).

In February 2020, Griffon refinanced $850,000 of its $1,000,000 of senior notes due 2022 with new 5.75% senior notes with a maturity of 2028, and in June 2020 refinanced the remaining $150,000 under the same terms and indenture as the $850,000 senior notes due 2028.

In August 2020, we completed a public offering of 8,700,000 shares of our common stock for total net proceeds of $178,165 (the "Public Offering");

a portion of these net proceeds were used to repay outstanding borrowing under our Credit Agreement.

At September 30, 2020 Griffon had cash and equivalents of $218,089.

We will continue to actively monitor the situation and may take further actions that impact our operations as may be required by federal, state or local authorities or that we determine is in the best interests of our employees, customers, suppliers and shareholders.

While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our businesses, results of operations, liquidity or capital resources, we believe it is important to discuss where our company stands today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses.

Business Highlights

On September 5, 2017, Griffon announced the acquisition of ClosetMaid LLC ("ClosetMaid") and the commencement of the strategic alternatives process for Clopay Plastic Products, beginning the transformation of Griffon.

In August 2020 Griffon completed the Public Offering of 8,700,000 shares of our common stock for total net proceeds of $178,165 .

The Company used a portion of the net proceeds to repay outstanding borrowings under its Credit Agreement.

The Company intends to use the remainder of the proceeds for general corporate purposes, including to expand its current business through acquisitions of, or investments in, other businesses or products.

On February 19, 2020, Griffon issued, at par, $850,000 of 5.75% Senior Notes due in 2028 (the “2028 Senior Notes”) and on June 8, 2020 Griffon issued an additional $150,000 of 2028 Senior Notes at 100.25% of par under the same indenture.

Proceeds from the 2028 Senior Notes were used to redeem the $1,000,000 of 5.25% Senior Notes due 2022.

In January 2020, Griffon amended its credit agreement to increase the total amount available for borrowing from $350,000 to $400,000, extend its maturity date from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility (the "Credit Agreement").

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S.

operations, and on November 12, 2020, Griffon announced that CPP is broadening this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S.

First, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Second, certain AMES global operations will be consolidated to optimize facilities footprint and talent.

Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

Expanding the roll-out of the new business platform from our AMES U.S.

operations to include AMES’ global operations will extend the duration of the project by one year, with completion now expected by the end of calendar year 2023.

When fully implemented, these actions will result in annual cash savings of $30,000 to $35,000 (increased from $15,000 to $20,000 ) and a reduction in inventory of $30,000 to $35,000 (increased from $20,000 to $25,000 ), both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $65,000 (increased from $35,000 ) and capital investments of approximately $65,000 (increased from $40,000 ).

The one-time charges are comprised of $46,000 of cash charges, which includes $26,000 of personnel-related costs such as training, severance, and duplicate personnel costs as well as $20,000 of facility and lease exit costs.

The remaining $19,000 of charges are non-cash and are primarily related to asset write-downs.

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading United Kingdom supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden centers for approximately $10,500 (GBP 8,750 ), inclusive of a post-closing working capital adjustment, net of cash acquired.

This acquisition broadens AMES' product offerings in the UK market and increases its in-country operational footprint.

Apta is expected to contribute $15,000 in revenue in the first 12 months after the acquisition.

In June 2018, Clopay acquired CornellCookson, a leading provider of rolling steel service doors, fire doors, and grilles, for an effective purchase price of approximately $170,000.

This transaction strengthened Clopay's strategic portfolio with a line of commercial rolling steel door products to complement Clopay's sectional door offerings in the commercial sector, and expands the Clopay network of professional dealers focused on the commercial market.

CornellCookson generated over $200,000 in revenue in its first full year of operations.

In March 2018, we announced the combination of the ClosetMaid operations with those of AMES.

ClosetMaid generated over $300,000 in revenue in the first twelve months after the acquisition, and we anticipate the integration with AMES will unlock additional value given the complementary products, customers, warehousing and distribution, manufacturing, and sourcing capabilities of the two businesses.

On September 5, 2017, Griffon announced the acquisition of ClosetMaid and the commencement of the strategic alternatives process for Clopay Plastic Products, beginning the transformation of Griffon.

In October 2017, we acquired ClosetMaid from Emerson Electric Co.

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This transaction provided immediate liquidity and positions the Company to improve its cash flow conversion given the historically higher capital needs of the Plastics operations as compared to Griffon’s remaining businesses.

In March 2018, we announced the combination of the ClosetMaid operations with those of AMES.

In June 2018, Clopay acquired CornellCookson, Inc.

("CornellCookson"), a leading provider of rolling steel service doors, fire doors, and grilles, for an effective purchase price of approximately $170,000.

This transaction strengthened Clopay's strategic portfolio with a line of commercial rolling steel door products to complement Clopay's sectional door offerings in the commercial industry, and expands the Clopay network of professional dealers focused on the commercial market.

CornellCookson generated over $200,000 in revenue in its first full year of operations.

During fiscal 2017 and 2018, Griffon also completed a number of other acquisitions to expand and enhance AMES' global footprint.

In the United Kingdom, Griffon acquired La Hacienda, an outdoor living brand of unique heating and garden décor products, in July 2017, and Kelkay, a manufacturer and distributor of decorative outdoor landscaping, in February 2018.

These two businesses provided AMES with additional brands and a platform for growth in the UK market and give access to leading garden centers, retailers, and grocers in the UK and Ireland.

In Australia, Griffon acquired Hills Home Living, the iconic brand of clotheslines and home products, from Hills Limited (ASX:HIL) in December 2016.

In September 2017, Griffon acquired Tuscan Path, an Australian provider of pots, planters, pavers, decorative stone, and garden décor products.

These acquisitions broadened AMES' outdoor living and lawn and garden business, strengthening AMES’ portfolio of brands and its market position in Australia and New Zealand.

On February 13, 2018, AMES acquired Kelkay, a leading United Kingdom manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the UK and Ireland for approximately $56,118 (GBP 40,452) and contingent consideration of approximately GBP 7,000 , of which approximately GBP 2,200 was earned.

This acquisition broadened AMES' product offerings in the market and increased its in-country operational footprint.

Kelkay contributed approximately $35,000 in revenue in the first twelve months after the acquisition.

In November 2017, Griffon acquired Harper Brush Works, a leading U.S.

manufacturer of cleaning products for professional, home, and industrial use, from Horizon Global (NYSE:HZN).

manufacturer of cleaning products for professional, home, and industrial use, from Horizon Global (NYSE:HZN) for approximately $5,000.

This acquisition expanded the AMES line of long-handle tools in North America to include brooms, brushes, and other cleaning products.

We believe these actions have established a solid foundation for continuing organic growth in sales, profit, and cash generation and bolsters Griffon’s platforms for opportunistic strategic acquisitions.

In the fourth quarter of fiscal 2019, Griffon modified its reportable segment structure to provide investors with improved visibility after a series of portfolio repositioning actions which included the divestiture of the Plastics business, the acquisition of ClosetMaid and its subsequent integration into AMES, and the acquisition of CornellCookson by Clopay.

Griffon now reports its operations through three reportable segments:

the newly formed Consumer and Professional Products segment, which consists of AMES;

Home and Building Products, which consists of Clopay;

and Defense Electronics, which consists of Telephonics Corporation.

Harper, as expected, generated approximately $10,000 in revenue in the first twelve months after the acquisition.

During fiscal 2017, Griffon also completed a number of other acquisitions to expand and enhance AMES' global footprint.

In the United Kingdom, Griffon acquired La Hacienda, an outdoor living brand of unique heating and garden décor products, in July 2017.

The acquisition of La Hacienda, together with the February 2018 acquisition of Kelkay and November 2020 acquisition of Apta, provides AMES with additional brands and a platform for growth in the UK market and access to leading garden centers, retailers, and grocers in the UK and Ireland.

In Australia, Griffon acquired Hills Home Living, the iconic brand of clotheslines and home products, from Hills Limited (ASX:HIL) in December 2016 and in September 2017, Griffon acquired Tuscan Path, an Australian provider of pots, planters, pavers, decorative stone, and garden décor products.

The Hills and Tuscan Path acquisitions broadened AMES' outdoor living and lawn and garden business, strengthening AMES’ portfolio of brands and its market position in Australia and New Zealand.

We believe these actions have established a solid foundation for continuing organic growth in sales, profit, and cash generation and bolster Griffon’s platforms for opportunistic strategic acquisitions.

Further Information

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Reportable Segments:

Griffon currently conducts its operations through three reportable segments:

Griffon conducts its operations through three reportable segments:

Consumer and Professional Products ("CPP") conducts its operations through AMES.

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The acquisitions of Northcote, Cyclone, Hills, and Tuscan Path in Australia established AMES as a leading supplier of tools and landscaping categories in the Australian market.

As a result of the acquisitions of Kelkay and La Hacienda, the United Kingdom and Ireland has become a new key market for AMES products.

As a result of the acquisitions of Kelkay, La Hacienda and Apta, the United Kingdom and Ireland have become new key markets for AMES products.

AMES has approximately 3,800 employees worldwide.

AMES' brands are among the most recognized across its primary product categories in North America, Australia and the United Kingdom.

Its brand portfolio for long-handled tools , outdoor décor, and landscaping product includes AMES®, True Temper®, Garant®, Harper®, UnionTools®, Westmix™, Cyclone®, Southern Patio®, Northcote Pottery™, Nylex®, Hills®, Kelkay®, Tuscan Path®, La Hacienda®, Kelso™, and Dynamic Design®™.

Contractor-oriented tool brands include Razor-Back® Professional Tools and Jackson® Professional Tools.

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Offshore manufacturers lack sufficient product innovation, capacity, proximity to market and distribution capabilities to service large retailers or to compete in highly seasonal, weather related product categories.

Manufacturing & Distribution

Manufacturing and Distribution

AMES has a combination of internal and external, and domestic and foreign, manufacturing sources from which it sources products for sale in the markets it serves.

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Francois, Quebec, Canada.

AMES operates smaller manufacturing facilities at several other locations in the United States, and internationally in Reynosa, Mexico;

AMES operates smaller manufacturing facilities, including wood mills, at several other locations in the United States, and internationally in Reynosa, Mexico;

Jiangmen, China;

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Clopay also offers a complete line of entry door systems uniquely designed to complement its popular residential garage door styles.

Commercial door products manufactured and marketed by Clopay include rolling steel service doors, fire doors, and shutters, steel security grilles, and room dividers.

Commercial door products manufactured and marketed by Clopay include rolling steel service doors, fire doors, shutters, steel security grilles, and room dividers.

Clopay also manufactures and markets commercial sectional doors, which are similar to residential garage doors, but are designed to meet the more demanding performance specifications of a commercial application.

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Clopay's market position and brand recognition are key marketing tools for expanding its customer base, leveraging its distribution network and increasing its market share.

Manufacturing

Manufacturing and Distribution

Clopay's principal manufacturing facilities include 1,480,000 square feet in Troy and Russia, Ohio, 279,000 square feet in Mountain Top, Pennsylvania and 163,000 square feet in Goodyear, Arizona.

On January 31, 2019, Clopay announced a $14,000 investment in facilities infrastructure and equipment at its rolling steel manufacturing location in Mountain Top, Pennsylvania.

This project includes a 95,000 square foot expansion to the already existing 184,000 square foot facility, along with the addition of state-of-the-art manufacturing equipment.

Through this expansion, the Mountain Top location will improve its manufacturing efficiency and shipping operations, as well as increase manufacturing capacity to support full-rate production of new and core products.

The project is expected to be completed by the end of calendar 2019.

Clopay distributes its products through a wide range of distribution channels, including a national network of 51 distribution centers.

Through this expansion, the Mountain Top location improved its manufacturing efficiency and shipping operations, as well as increased manufacturing capacity to support full-rate production of new and core products.

The project was completed at the end of calendar 2019.

Clopay distributes its products through a wide range of distribution channels, including a national network of 52 distribution centers with a total of approximately 1,100,000 square feet.

Additionally, products are sold to over 2,500 independent professional installing dealers and to major home center retail chains including Home Depot and Menards (with the average length of the relationship with these customers being greater than 25 years).

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Telephonics is headquartered in Farmingdale, New York and currently has approximately 950 employees.

defense budget for government fiscal year (GFY) 2020 is set at $718 billion with the President's defense budget request including major growth to most mission areas.

This represents a $33 billion, or 5% increase over the GFY 2019 defense budget

of $685 billion.

Budgets through GFY 2024 increase with a compound annual growth rate ("CAGR") of approximately 1% over the GFY 2020 baseline budget level.

Defense budget for fiscal year (GFY) 2020 was enacted at $722 billion, a 1.3% increase over the prior year.

The Department of Defense ("DoD") budget request for fiscal year 2021 is in line with the prior year when excluding natural disaster relief emergency

funding enacted in 2020.

The 2021 budget request plans for the DoD budget to grow at a compound annual growth rate (“CAGR”) of 1.5% from 2020 through 2025 with continued investments expected in military readiness, modernization, and innovation.

Internationally, demand is growing due to major system capability upgrades in existing systems and re-capitalization of aging assets.

Industry reports indicate global defense spending to grow with a CAGR of about 3.5% over the 2016-2026 periods.

is the largest exporter of defense equipment in the world, and is expected to remain so for the foreseeable future, with significant increases in defense budgets expected in countries that have historically imported defense products from the U.S.

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Radar, Naval & Cyber Systems, Surveillance, Communications, Systems Engineering and Analysis (SEG), and Telephonics Large Scale Integration (TLSI).

In July 2020, we announced that we are exploring strategic options for Telephonics’ SEG business line, which is approximately $30,000 in sales.

Telephonics provides a wide range of high-performing, lightweight and cost-effective maritime surveillance and weather avoidance radar systems for fixed- and rotary-wing aircraft, Unmanned Aerial Vehicles (UAVs) and shipboard platforms to the U.S.

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Naval & Cyber Systems:

As today’s global leader for maritime surveillance radars, Telephonics is the sole provider of the US Navy’s AN/APS-153 multi-mode radar and the communications suite within the MH-60R/S multi-mission helicopters.

With a laser focus on tomorrow, Telephonics is developing the next generation multi-mode maritime and over-land surveillance AESA radar known as Telephonics MOSAIC ® .

Cyber Systems focuses on ISR aircraft integration design and services with a facility that includes a 7,000 square foot hanger and a Sensitive Compartmented Information Facility (SCIF) capable of supporting various customer and Government agencies “black” programs.

As a global leader for maritime surveillance radars, Telephonics is the sole provider of the US Navy’s AN/APS-153 multi-mode radar and the communications suite within the MH-60R/S multi-mission helicopters.

Telephonics is developing the next generation multi-mode maritime and over-land surveillance AESA radar known as MOSAIC ® .

Surveillance:

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Commercial audio products and headsets are utilized worldwide in a wide range of military and civilian applications, including audiometric testing and onboard flight entertainment.

Advanced transit communications systems deliver high-quality audio communications and critical travel information, enhancing passenger safety, as well as train crew intelligibility and operational efficiency.

Telephonics communications systems are fielded within the U.S.

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Telephonics believes that the technological capabilities these systems encompass will also be able to serve and protect the most complex borders.

The funded backlog for Telephonics approximated $389,300 at September 30, 2019 , compared to $374,200 at September 30, 2018 (restated for the adoption of revenue recognition guidance on October 1, 2018).

Approximately 72% of the current backlog is expected to be filled during 2020 .

Backlog represents the dollar value of funded orders for which work has not been performed.

The funded backlog for Telephonics approximated $380,000 at September 30, 2020 , compared to $389,300 at September 30, 2019 .

Approximately 67% of the current backlog is expected to be filled in the next 12 months.

Backlog is defined as unfilled firm orders for products and services for which funding has been both authorized and appropriated by the customer or Congress, in the case of U.S.

government agencies.

Backlog generally increases with bookings and converts into revenue as we incur costs related to contractual commitments or the shipment of product.

The decrease in backlog was primarily attributed to the timing of various international contract awards associated with radar and surveillance opportunities that were not received by the end of the reporting period.

Given the nature of our business and a larger dependency on international customers, our bookings, and therefore our backlog, is impacted by the longer maturation cycles resulting in

delays in the timing and amounts of such awards, which are subject to numerous factors, including fiscal constraints placed on customer budgets;

Given the nature of our business and a larger dependency on international customers, our bookings, and therefore our backlog, is impacted by the longer maturation cycles resulting in delays in the timing

and amounts of such awards, which are subject to numerous factors, including fiscal constraints placed on customer budgets;

political uncertainty;

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Continued investments in the Surveillance product portfolio are expected to result in market penetration opportunities in the ground tactical markets with small form factor passive and active IFF solutions.

In addition, development of SkySearch-2020, a next generation Mode S Beacon system, is expected to enable Telephonics to continue pursuing FAA opportunities that align with its core competencies and technologies.

Investments in the Communications Systems business line are focused on supporting pilot effectiveness initiatives by addressing cognitive overload conditions through innovative adaptive aural processing algorithms.

Sales and Marketing

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Manufacturing Facilities

Telephonics’ facilities are located in the U.S., primarily in New York.

Telephonics also maintains a Technical Support Services Center in Elizabeth City, North Carolina, which supports aircraft integration and upgrade activities in addition to providing support services to customers.

Telephonics’ manufacturing facilities are located in the U.S., with significant facilities located in New York and North Carolina.

Clopay Plastic Products - Discontinued Operations

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As of September 30, 2020, Griffon and its subsidiaries employ approximately 7,400 people located primarily throughout the U.S., Canada, the United Kingdom, Australia, Mexico and China.

Generally, the total number of employees of Griffon and its subsidiaries does not significantly fluctuate throughout the year.

However, acquisition activity or the opening of new branches or lines of business may increase the number of employees or fluctuations in the level of Griffon's business activity, which could in turn require staffing level adjustments in response to actual or anticipated customer demand.

Approximately 200 of these employees are covered by collective bargaining agreements in the U.S., with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (an affiliate of the American Federation of Labor and Congress of Industrial Organizations), and the United Food & Commercial Workers International Union.

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Griffon believes its relationships with its employees are satisfactory.

Generally, the total number of employees of Griffon and its subsidiaries does not significantly fluctuate throughout the year.

In managing its human capital resources, Griffon aims to attract a qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, internships and job fairs.

Griffon also seeks to retain employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace.

Griffon and all of its businesses strictly comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which Griffon and its businesses have facilities.

This applies to all terms and conditions of employment, including recruiting, hiring, placement, promotion, termination, layoff, recall, transfer, leaves of absence, compensation and training.

All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status.

The COVID-19 pandemic presented unprecedented challenges in many parts of our businesses and operations, including with respect to our most valuable asset - our people.

In response, we developed and implemented new procedures and protocols to minimize the risk to the health and safety of our employees while allowing us to continue to operate our facilities and provide high quality products to our customers on a timely basis.

Employees that could work from home were strongly encouraged (and in some cases, required) to do so in order to minimize the number of employees in our facilities.

For onsite employees, we implemented protocols for social distancing, sanitation and mask-wearing.

We developed systems and purchased new equipment to facilitate the efficient sanitation and disinfection of all work areas.

We reconfigured work processes to allow additional spacing between associates whenever possible;

eliminated seating in common areas of many buildings to allow for appropriate distancing;

staggered shifts and start, stop and break times;

and at many facilities we began monitoring temperatures of all employees entering the facility.

We also restricted visitors and pre-screened all contractors who required access to our facilities.

We implemented appreciation award programs for many of our U.S.

employees who continued to work onsite during the pandemic.

Throughout the pandemic, we have consistently been able to meet our customers’ demands for our products, while at the same time making the necessary investments to ensure that we prioritize the health, safety and welfare of our employees.

Griffon’s operations are subject to various environmental, health, and employee safety laws and regulations.

Griffon believes that it is in material compliance with these laws and regulations.

Historically, compliance with environmental laws has not materially affected, and is not expected to materially affect, Griffon’s capital expenditures, earnings or competitive position.

Historically, compliance with environmental, health, and employee safety laws and regulations have not materially affected, and are not expected to materially affect, Griffon’s capital expenditures, earnings or competitive position.

Nevertheless, Griffon cannot guarantee that, in the future, it will not incur additional costs for compliance or that such costs will not be material.

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A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue from continuing operations.

Government and its agencies, through prime and subcontractor relationships, represented 10% of Griffon’s consolidated revenue and 63% of Defense Electronics' revenue.

Government and its agencies, through prime and subcontractor relationships, represented 10% of Griffon’s consolidated revenue and 69% of DE revenue.

Home Depot represented 17% of Griffon’s consolidated revenue, 27% of CPP's revenue and 12% of HBP's revenue.

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Griffon’s revenue and income are generally lowest in our first and fourth quarters ending December 31, and September 30, respectively, and highest in our second and third quarters ending March 31, and June 30, respectively, primarily due to the seasonality within the AMES and Clopay businesses.

In 2019, 56% of AMES' sales occurred during the second and third quarters compared to 55% in 2018 and 2017.

In 2020, 53% of AMES' sales occurred during the second and third quarters compared to 56% and 57% in 2019 and 2018, respectively.

In 2020, as a result of the COVID-19 pandemic, sales orders shifted somewhat into the third and fourth quarters resulting in revenue increasing in these two quarters to 55% of 2020 sales.

Clopay’s business is driven by renovation and construction during warm weather, which is generally at reduced levels during the winter months, generally in our second quarter.

Defense Electronics revenue is generally driven by the delivery requirements of its customers, accordingly, Defense Electronics will often have increased revenue in the latter half of the year due to the U.S.

Telephonics revenue is generally driven by the delivery requirements of its customers;

accordingly, Telephonics will often have increased revenue in the latter half of the year due to the U.S.

government's annual budget cycle.

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AMES protects its designs and product innovation through the use of patents, and currently has approximately 322 issued patents and approximately 50 pending patent applications in the U.S., as well as approximately 280 and 49 corresponding foreign patents and patent applications, respectively.

Design patents are generally

valid for fourteen years, and utility patents are generally valid for twenty years, from the date of filing.

Design patents are generally valid for fourteen years, and utility patents are generally valid for twenty years, from the date of filing.

Griffon's patents are in various stages of their terms of validity.

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Environmental, Social and Governance

We take into account environmental considerations in the management of our businesses.

For example, our newly constructed headquarters for AMES is largely constructed from recycled materials, much of which was scrap material from the manufacture of our products.

ClosetMaid’s wire shelving is manufactured from recycled steel.

Clopay’s garage doors feature energy saving insulation.

Across our facilities, we have installed energy efficient lighting systems that reduce our carbon footprint.

We divested our plastic film business that had the most environmentally controversial issues in connection with the disposal of the diapers and products that incorporated those films.

We are committed to the communities in which our facilities are located.

To that end, we have invested in, expanded and continue to expand many of our facilities rather than outsource production.

As a result we have created economically productive opportunities for employment for the residents of many of these communities.

We also have a broad based employee stock ownership plan ("ESOP") in which the vast majority (over 90%) of our U.S.

full-time employees participate (at no cost to them), which aligns the economic interests of these employees with our shareholders and provides these employees with a meaningful ownership stake in our Company.

As of September 30, 2019, the shares held in the ESOP represented approximately 12% of our outstanding common stock.

Griffon and its operating companies have taken into account environmental, social and governance (ESG) considerations in the management of our businesses for years.

This year, Griffon formalized its ESG commitment with a written policy, committing the Company to protecting the environment and our workers, and to ethical and transparent behavior in our business relationships.

This policy can be found on the Griffon website at www.griffon.com .

The new ESG section of our website also provides details on some of the Company’s efforts and commitments in the environmental, social and governance areas as well as a statement from Ronald J.

Kramer, our Chief Executive Officer, reinforcing management’s strong support for our ESG efforts.

Griffon has assessed the environmental risk from its operations and has focused its efforts to date on areas with the potential to have the greatest environmental impact.

The company sources sustainable hardwoods for its various wood products.

Where available, we use recycled materials to construct our products, and we continuously improve our packaging to reduce both volume and environmental impact.

For example, bags used for Ames’ Kelkay aggregate products in the UK are made from plant-based materials, and not from petroleum.

Griffon has made a focused effort to reduce carbon emissions by reducing electricity and natural gas usage at its operating facilities.

Further efforts to reduce our carbon footprint are underway by considering fuel consumption in the planning of our deliveries and the selection of delivery contractors and vehicles.

Our Clopay business helps its customers reduce their own carbon footprints by providing garage doors that meet LEED (Leadership in Energy and Environmental Design) building construction standards.

While Griffon’s facilities are not large consumers of water, we routinely examine options to reduce water usage or reuse water at our facilities.

Ames used recycled Ames and Closetmaid tools and scrap materials in the construction of the new Ames and Closetmaid headquarters facility in the Orlando, Florida area.

Over the years, Griffon operating companies have reduced the use of solvents and other chemicals and now rarely generate hazardous waste of any kind.

Our operating companies are involved in the local communities in which they operate, where we have chosen to expand production facilities rather than outsource production.

We are involved in more than 100 charitable and community organizations, including well known national concerns such as Habitat for Humanity, Boys and Girls Clubs and the American Cancer Society, as well as local groups such as garden clubs.

Our communities know that they can count on us in a crisis.

For example, we routinely provide products and labor, as well as donations, to crisis relief organizations to help with relief efforts such as the camp fire effort in California;

tornado relief in Dayton Ohio;

and Hurricane Sandy relief in the New York metropolitan area;

and we have participated in tool bank disaster services and donated regularly to the American Red Cross.

We manufacture products that save lives, including

our radars supporting U.S.

Coast Guard search and rescue efforts, elevator fire prevention products from Clopay, and dock door barriers that prevent injuries relating to loading dock operation.

With respect to the COVID-19 pandemic, we are proud of our efforts to keep our facilities safe, which started very early in the crisis and have been continuously reviewed, upgraded and improved, and have allowed nearly all of our facilities around the globe to stay open and continue to serve our customers, uninterrupted.

Over the last three years, we have invested nearly four million dollars in capital improvements relating to employee safety and health.

These improvements include major upgrades to our loading and unloading operations (which had been the source of a significant portion of our worker injuries), ergonomic improvements, machine guarding and elimination of certain high-risk repetitive jobs.

We have seen significant reductions in both the number and severity of employee injuries in recent years.

Griffon has also invested over one million dollars in improvements to employee welfare facilities, such as break areas and cafeterias.

We view our employees as more than just workers.

Through our Employee Stock Ownership Plan, our U.S.

employees own approximately eleven percent of Griffon stock.

Our businesses engage in a variety of outreach programs in the various communities in which we operate to recruit new employees at all levels.

These programs involve high schools and vocational schools, as well as colleges and universities, and often include internships as a means for potential new employees to experience what it is like to be part of our team.

We also have a variety of onboarding programs, onsite job training programs, leadership development programs, and tuition reimbursement and education assistance policies, to further the development and advancement of our employees.

Our operating companies use on-site inspections and specific contractual terms to manage our supply chain operations to require compliance with environmental and social laws and regulations, as well as our policies in these areas, including with respect to human rights, child labor, slave labor and unsafe working conditions.

Telephonics requires that its subcontractors and suppliers periodically certify adherence to various Telephonics’ policies, such as those relating to human trafficking, corporate ethics and the prohibition of gratuities.

All significant Ames suppliers must periodically submit to a Factory Compliance and Capacity Assessment, which evaluates not only quality control and vendor capabilities, but assesses to what extent each supplier places an emphasis on environmental, labor and social considerations in the operation of its business.

In China, where Ames both operates a manufacturing facility and sources materials and products from third parties, Ames has dedicated compliance personnel who report directly into Ames’ Vice President and General Counsel.

Honesty, transparency, and ethical practices have been ordinary course at Griffon for years, and we continue to review and upgrade our programs in these areas.

Our Code of Business Ethics and Conduct, to which every employee certifies annually, requires that each and every employee conduct business to the highest ethical standards.

Any acts of bribery are strictly prohibited, as is human trafficking and activities supporting human trafficking, such as the use of conflicts minerals.

The Code prohibits all business courtesies except for those with an insignificant value, and even then, only under limited circumstances.

Our Corporate Governance Guidelines are published on our website.

While the guidelines require that a majority of directors be independent, currently all of our directors our independent except our CEO and our President (constituting over 85% of our directors).

Griffon has appointed a lead independent director and has four principal board committees - Audit, Compensation, Nominating and Corporate Governance, and Finance - each of which has its responsibilities set forth in a charter available on the Griffon website.

We expect each of our 7,400 employees around the world to work hard to deliver outstanding products to our customers and to deliver value to our shareholders.

And, while doing so, we expect them to respect and adhere to our environmental, social and governance commitments and policies, and to make our company a place at which all employees are proud to come to work every day.

Executive Officers of the Registrant

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Item 1. Business