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Item 1. Financial Statements

2021-04-30 compared with 2021-01-29 · 278 added, 185 removed, 770 unchanged (38% of the section changed)

40 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three Months Ended December 31, 2020 and 2019

For the Three and Six Months Ended March 31, 2021

COMMON STOCK CAPITAL IN

14 unchanged sentences

Balance at December 31, 2020 84,233 $ 21,058 $ 586,909 $ 632,549 27,743 $ ( 416,402 ) $ ( 58,951 ) $ ( 25,116 ) 740,047

Net income — — — 17,112 — — — — 17,112

Dividend — — — ( 3,217 ) — — — — ( 3,217 )

Amortization of deferred compensation — — — — — — — 609 609

Equity awards granted, net 194 48 ( 48 ) — — — — — —

ESOP allocation of common stock — — 756 — — — — — 756

Stock-based compensation — — 4,349 — — — — — 4,349

Other comprehensive income, net of tax — — — — — — 4,775 — 4,775

Balance at March 31, 2021 84,427 $ 21,106 $ 591,966 $ 646,444 27,743 $ ( 416,402 ) $ ( 54,176 ) $ ( 24,507 ) $ 764,431

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Six Months Ended March 31, 2020

COMMON STOCK CAPITAL IN

15 unchanged sentences

Balance at December 31, 2019 82,957 $ 20,739 $ 522,970 $ 575,736 36,049 $ ( 538,066 ) $ ( 59,075 ) $ ( 27,611 ) $ 494,693

Net income — — — 895 — — — — 895

Dividend — — — ( 3,422 ) — — — — ( 3,422 )

Shares withheld on employee taxes on vested equity awards — — — — 261 ( 5,721 ) — — ( 5,721 )

Amortization of deferred compensation — — — — — — — 629 629

Equity awards granted, net 784 196 ( 196 ) — — — — — —

ESOP allocation of common stock — — 435 — — — — — 435

Stock-based compensation — — 3,662 — — — — — 3,662

Stock-based consideration — — 117 — — — — — 117

Other comprehensive income, net of tax — — — — — — ( 14,834 ) — ( 14,834 )

Balance at March 31, 2020 83,741 $ 20,935 $ 526,988 $ 573,209 36,310 $ ( 543,787 ) $ ( 73,909 ) $ ( 26,982 ) $ 476,454

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

2 unchanged sentences

(in thousands, except per share data)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Revenue $ 634,832 $ 566,350 $ 1,244,123 $ 1,114,788

6 unchanged sentences

Interest income 304 310 349 571

Gain on sale of business 6,240 —

Gain (adjustment) on sale of business ( 949 ) — 5,291 —

Loss from debt extinguishment, net — ( 6,690 ) — ( 6,690 )

Other, net 847 615 806 1,393

19 unchanged sentences

(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 46,612 $ 11,507

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

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

Depreciation and amortization 31,149 31,544

3 unchanged sentences

Amortization of debt discounts and issuance costs 1,349 2,267

Loss from debt extinguishment, net — 6,690

Deferred income taxes 2,334 408

Gain (loss) on sale of assets and investments 174 ( 186 )

Loss (gain) on sale of assets and investments 151 ( 274 )

Gain on sale of business ( 5,291 ) —

Change in assets and liabilities, net of assets and liabilities acquired:

Decrease in accounts receivable and contract assets, net 10,494 2,942

Increase in accounts receivable and contract assets, net ( 47,146 ) ( 61,815 )

Increase in inventories ( 74,186 ) ( 21,262 )

Increase in prepaid and other assets ( 3,517 ) ( 2,269 )

Decrease in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 5,425 ) ( 36,445 )

(Increase) decrease in prepaid and other assets 271 ( 6,005 )

Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 1,470 ) ( 38,053 )

Other changes, net 2,400 560

Net cash provided by (used in) operating activities 20,829 ( 18,169 )

Net cash used in operating activities ( 25,841 ) ( 60,843 )

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Proceeds from sale of business, net 14,725 —

Investment purchases ( 2,138 ) —

Proceeds from the sale of property, plant and equipment 82 290

Other, net 27 —

Net cash provided by (used in) investing activities 1,491 ( 23,519 )

Net cash used in investing activities ( 13,532 ) ( 32,760 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

3 unchanged sentences

Effect of exchange rate changes on cash and equivalents 1,527 ( 2,107 )

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 15,718 ( 7,585 )

NET DECREASE IN CASH AND EQUIVALENTS ( 42,525 ) ( 3,353 )

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 218,089 72,377

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• Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair values of Griffon’s 2028 senior notes approximated $ 1,057,500 on December 31, 2020.

The fair values of Griffon’s 2028 senior notes approximated $ 1,060,000 on March 31, 2021.

Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with values of $ 3,558 at December 31, 2020 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Insurance contracts with values of $ 3,821 at March 31, 2021 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

At December 31, 2020, trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 2,033 ($ 1,000 cost basis), were included in Prepaid and other current assets on the Consolidated Balance Sheets.

At March 31, 2021, trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 2,088 ($ 1,000 cost basis), were included in Prepaid and other current assets on the Consolidated Balance Sheets.

Realized and unrealized gains and losses on trading securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

1 unchanged sentence

To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options.

As of December 31, 2020, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars.

At December 31, 2020, Griffon had $ 40,000 of Australian dollar contracts at a weighted average rate of $ 1.37 which qualified for hedge accounting (level 2 inputs).

As of March 31, 2021, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars.

At March 31, 2021, Griffon had $ 61,000 of Australian dollar contracts at a weighted average rate of $ 1.29 which qualified for hedge accounting (level 2 inputs).

These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Accumulated other comprehensive income (loss) ("AOCI") and Prepaid and other current assets, or Accrued liabilities, until settlement.

Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS").

AOCI included deferred losses of $ 1,688 ($ 1,098 , net of tax) at December 31, 2020 and losses of $ 658 were recorded in COGS during the three months ended December 31, 2020 for all settled contracts.

AOCI included deferred losses of $ 831 ($ 582 , net of tax) at March 31, 2021.

Upon settlement, losses of $ 1,741 and $ 2,399 were recorded in COGS during the three and six months ended March 31, 2021, respectively.

All contracts expire in 30 to 180 days.

At December 31, 2020, Griffon had $ 7,125 Canadian dollar contracts at a weighted average rate of $ 1.35 .

At March 31, 2021, Griffon had $ 7,935 of Canadian dollar contracts at a weighted average rate of $ 1.30 .

The contracts, which protect Canadian operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting.

For the three months ended December 31, 2020, fair value losses of $ 276 were recorded to Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 59 were recorded in Other income during the three months ended December 31, 2020 for all settled contracts.

For the three and six months ended March 31, 2021, fair value gains of $ 520 and $ 244 , respectively, were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 102 and $ 161 were recorded in Other income during the three and six months ended March 31, 2021, respectively, for all settled contracts.

All contracts expire in 29 to 450 days.

At December 31, 2020, Griffon had $ 8,079 of British Pound dollar contracts at a weighted average rate of $ 0.77 .

At March 31, 2021, Griffon had $ 5,200 of British Pound dollar contracts at a weighted average rate of $ 0.75 .

The contracts, which protect United Kingdom operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting.

For the three months ended December 31, 2020, fair value losses of $ 245 were recorded to Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 70 were recorded in Other income during the three months ended December 31, 2020.

For the three and six months ended March 31, 2021, fair value gains of $ 386 and $ 141 , respectively, were recorded to Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 211 and $ 281 were recorded in Other income during the three and six months ended March 31, 2021, respectively.

All contracts expire in 6 to 104 days.

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Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations.

For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price).

GRIFFON CORPORATION AND SUBSIDIARIES

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(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price).

Approximately 86 % of the Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components primarily within the CPP and HBP Segments, and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment.

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The impact of such adjustments to estimates is made on a cumulative basis in the period when such information has become known.

For the three months ended December 31, 2020 and 2019, income from operations included net unfavorable catch up adjustments approximating $ 1,500 and $ 3,000 , respectively.

For the three and six months ended March 31, 2021, income from operations included net unfavorable catch up adjustments approximating $ 1,423 and $ 3,220 , respectively.

For the three and six months ended March 31, 2020, income from operations included net unfavorable catch up adjustments of $ 2,188 and $ 422 , respectively.

Gross profit is impacted by a variety of factors, including the mix of products, systems and services, production efficiencies, price competition and general economic conditions.

2 unchanged sentences

These provisions had an immaterial impact on Griffon's Consolidated Financial Statements.

The estimated remaining costs to complete loss contracts as of December 31, 2020 and September 30, 2020 were approximately $ 9,000 and $ 10,800 , respectively.

The estimated remaining costs to complete loss contracts as of March 31, 2021 and September 30, 2020 were approximately $ 8,500 and $ 10,800 , respectively.

For a complete explanation of Griffon’s revenue accounting policies, this note should be read in conjunction with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2020.

1 unchanged sentence

Transaction Price Allocated to the Remaining Performance Obligations

On December 31, 2020, we had $ 388,700 of remaining performance obligations, which we also refer to as total backlog.

On March 31, 2021, we had $ 353,870 of remaining performance obligations, which we also refer to as total backlog.

We expect to recognize approximately 65 % of our remaining performance obligations as revenue within one year, with the balance to be completed thereafter.

6 unchanged sentences

Contract Balances

Contract assets were $ 86,260 as of December 31, 2020 compared to $ 84,426 as of September 30, 2020.

The $ 1,834 net increase in our contract assets balance was primarily due to the timing of billings and work performed on naval and cyber programs.

Contract assets were $ 75,000 as of March 31, 2021 compared to $ 84,426 as of September 30, 2020.

The $ 9,426 net decrease in our contract assets balance was primarily due to the timing of billings and work performed in Surveillance programs and decrease associated with the sale of Systems Engineering Group, Inc.

Contract assets primarily relate to the Company's right to consideration for work completed but not billed at the reporting date and are recorded in Contract costs and recognized income not yet billed, net of progress payments in the Consolidated Balance Sheets.

Contract assets are transferred to receivables when the right to consideration becomes unconditional.

Contract costs and recognized income not yet billed consists of amounts accounted for under the percentage of completion method of accounting, and represent recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts.

Amounts will be invoiced when applicable contract terms, such as the achievement of

Contract costs and recognized income not yet billed

GRIFFON CORPORATION AND SUBSIDIARIES

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(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

specified milestones or product delivery, are met.

At December 31, 2020 and September 30, 2020, approximately $ 8,100 and $ 7,500 , respectively, of contract costs and recognized income not yet billed were expected to be collected after one year.

Contract liabilities were $ 25,237 as of December 31, 2020 compared to $ 24,386 as of September 30, 2020.

The $ 851 increase in the contract liabilities balance was primarily due to billings in surveillance programs, partially offset by the recognition of revenue from naval and cyber programs.

consists of amounts accounted for under the percentage of completion method of accounting, and represent recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts.

Amounts will be invoiced when applicable contract terms, such as the achievement of specified milestones or product delivery, are met.

At March 31, 2021 and September 30, 2020, approximately $ 7,700 and $ 7,500 , respectively, of contract costs and recognized income not yet billed were expected to be collected after one year.

Contract liabilities were $ 22,964 as of March 31, 2021 compared to $ 24,386 as of September 30, 2020.

The $ 1,422 decrease in the contract liabilities balance was primarily due to recognition of revenue in Naval & Cyber systems, partially offset by billings in Surveillance and Communications programs.

Contract liabilities relate to advance consideration received from customers for which revenue has not been recognized.

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in each instance, Griffon is in the process of finalizing the initial purchase price allocation unless otherwise noted.

On December 22, 2020, AMES acquired Quatro Design Pty Ltd (“Quatro”), a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects for a purchase price of AUD $ 3,500 (approximately $ 2,700 ) in cash, subject to customary final working capital adjustments.

The purchase price is subject to additional contingent consideration of approximately AUD $ 1,000 (approximately $ 760 ) based on Quatro exceeding certain EBITDA performance targets in the first year.

3 unchanged sentences

The excess of the purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and is deductible for tax purposes.

The purchase price was primarily allocated to goodwill of GBP 3,449 , acquired intangible assets of GBP 3,454 , inventory of GBP 2,914 , accounts receivable and other assets of GBP 2,492 and accounts payable and other accrued liabilities of GBP 3,765 , which was assigned to the CPP segment.

During the three months ended December 31, 2020 and 2019, acquisition costs were de minimis.

On December 18, 2020, Defense Electronics completed the sale of its Systems Engineering Group, Inc.

(“SEG”) business for $ 15,000 , subject to customary closing net working capital adjustments.

The purchase price allocation was finalized and allocated to goodwill of GBP 3,449 , acquired intangible assets of GBP 3,454 , inventory of GBP 2,914 , accounts receivable and other assets of GBP 2,492 and accounts payable and other accrued liabilities of GBP 3,765 , which was assigned to the CPP segment.

During the three and six months ended March 31, 2021, acquisition costs were de minimis.

During both the three and six months ended March 31, 2020, the Company incurred acquisition costs of $ 2,960 .

On December 18, 2020, Defense Electronics completed the sale of its SEG business for $ 15,000 .

SEG provides sophisticated, highly technical engineering and analytical support to the Missile Defense Agency and various U.S.

1 unchanged sentence

SEG had sales of approximately $ 7,000 for the first fiscal quarter ended December 31, 2020 and $ 31,000 for the fiscal year ended September 30, 2020.

We recorded a pre-tax gain of $ 6,240 ($ 6,017 , net of tax, or $ 0.11 per share) during the first fiscal quarter ended December 31, 2020 related to the divestiture of SEG.

DE recorded a pre-tax gain of $ 5,291 ($ 5,251 , net of tax, or $ 0.10 per share) related to the divestiture of SEG.

The sale does not represent a strategic shift that will have a major effect on operations and financial results.

6 unchanged sentences

The following table details the components of inventory:

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Raw materials and supplies $ 155,720 $ 146,351

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The following table details the components of property, plant and equipment, net:

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Land, building and building improvements $ 169,081 $ 167,005

4 unchanged sentences

Total $ 341,005 $ 343,964

Depreciation and amortization expense for property, plant and equipment was $ 12,888 and $ 13,432 for the quarters ended December 31, 2020 and 2019, respectively.

Depreciation included in SG&A expenses was $ 4,706 and $ 4,951 for the quarters ended December 31, 2020 and 2019, respectively.

Depreciation and amortization expense for property, plant and equipment was $ 13,450 and $ 13,316 for the quarters ended March 31, 2021 and 2020, respectively, and $ 26,338 and $ 26,748 for the six months ended March 31, 2021 and 2020, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 5,014 and $ 4,910 for the quarters ended March 31, 2021 and 2020, respectively, and $ 9,720 and $ 9,861 for the six months ended March 31, 2021 and 2020, respectively.

Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

Except as described in Note 17, Restructuring Charges, no event or indicator of impairment occurred during the three months ended December 31, 2020 which would require additional impairment testing of property, plant and equipment.

GRIFFON CORPORATION AND SUBSIDIARIES

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Other, primarily foreign currency translation 22

Ending Balance, December 31, 2020 $ 9,022

Ending Balance, March 31, 2021 $ 9,594

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 8 – GOODWILL AND OTHER INTANGIBLES

The following table provides changes in the carrying value of goodwill by segment during the three months ended December 31, 2020:

The following table provides changes in the carrying value of goodwill by segment during the six months ended March 31, 2021:

At September 30, 2020 Business Acquisitions (a) Business Divestitures (b) Foreign

translations adjustments At December 31, 2020

translations adjustments At March 31, 2021

Consumer and Professional Products $ 232,845 $ 1,246 $ — $ 3,287 $ 237,378

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The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Gross Carrying Amount Accumulated

7 unchanged sentences

The gross carrying amount of intangible assets was impacted by approximately $ 5,250 related to foreign currency translation.

Amortization expense for intangible assets was $ 2,378 and $ 2,393 for the quarters ended December 31, 2020 and 2019, respectively.

Amortization expense for intangible assets was $ 2,433 and $ 2,403 for the quarters ended March 31, 2021 and 2020, respectively, and $ 4,811 and $ 4,796 for the six months ended March 31, 2021 and 2020.

Amortization expense for the remainder of 2021 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows:

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The assessment determined that the fair value of the DE reporting unit substantially exceeded its carrying value and no impairment existed.

During the quarter ended December 31, 2020, the Company determined that there were no other triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at December 31, 2020.

During the six months ended March 31, 2021, the Company determined that there were no other triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at March 31, 2021.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 9 – INCOME TAXES

During the quarter ended December 31, 2020, the Company recognized a tax provision of $ 9,669 on income before taxes from operations of $ 39,169 , compared to a tax provision of $ 6,339 on income before taxes from operations of $ 16,951 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 10,800 ($ 8,300 , net of tax), gain on sale of the SEG business of $ 6,240 ($ 6,017 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 2,028 .

The prior year quarter results included restructuring charges of $ 6,434 ($ 4,148 , net of tax) and discrete and certain other tax provisions, net, that affect comparability of $ 833 .

Excluding these items, the effective tax rates for the quarters ended December 31, 2020 and 2019 were 32.0 % and 33.3 %, respectively.

During the quarter ended March 31, 2021, the Company recognized a tax provision of $ 10,748 on income before taxes of $ 27,860 , compared to a tax provision of $ 2,034 on income before taxes of $ 2,929 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 7,562 ($ 5,651 , net of tax), reduction to gain on sale of the SEG business of $ 949 ($ 766 , net of tax) and discrete and certain other tax provisions, net, that affect comparability of $ 1,913 .

The prior year quarter results included restructuring charges of $ 3,104 ($ 3,005 , net of tax), acquisition costs of $ 2,960 ($ 2,321 , net of tax), loss from debt extinguishment of $ 6,690 ($ 5,245 , net of tax) and discrete tax and certain other tax benefits, net, that affect comparability of $ 1,413 .

Excluding these items, the effective tax rates for the quarters ended March 31, 2021 and 2020 were 30.0 % and 35.9 %, respectively.

During the six months ended March 31, 2021, the Company recognized a tax provision of $ 20,417 on Income before taxes of $ 67,029 , compared to a tax provision of $ 8,373 on income before taxes of $ 19,880 in the comparable prior year period.

The six month period ended March 31, 2021 included restructuring charges of $ 18,362 ($ 13,951 , net of tax), gain on sale of the SEG business of $ 5,291 ($ 5,251 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 115 .

The six month period ended March 31, 2020 included restructuring charges of $ 9,538 ($ 7,153 , net of tax), acquisition costs of $ 2,960 ($ 2,321 , net of tax), loss from debt extinguishment of $ 6,690 ($ 5,245 , net of tax) and discrete tax and certain other tax benefits, net, that affect comparability of $ 580 .

Excluding these items, the effective tax rates for the six months ended March 31, 2021 and 2020 were 31.1 % and 34.4 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 10 – LONG-TERM DEBT

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Outstanding Balance Original Issuer Premium Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate Outstanding Balance Original Issuer Premium Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate

1 unchanged sentence

Revolver due 2025 (b) 20,622 — ( 1,963 ) 18,659 Variable 12,858 — ( 2,209 ) 10,649 Variable

Finance lease - real estate (d) 16,576 — ( 23 ) 16,553 Variable 17,218 — ( 30 ) 17,188 Variable

Non US lines of credit (e) 664 — ( 28 ) 636 Variable — — ( 30 ) ( 30 ) Variable

Non US term loans (e) 31,165 — ( 150 ) 31,015 Variable 31,086 — ( 160 ) 30,926 Variable

Other long term debt (f) 3,472 — ( 16 ) 3,456 Variable 3,260 — ( 16 ) 3,244 Variable

Finance lease - real estate (c) 15,924 — ( 17 ) 15,907 5.60 % 17,218 — ( 30 ) 17,188 5.60 %

Non US lines of credit (d) 4,405 — ( 24 ) 4,381 Variable — — ( 30 ) ( 30 ) Variable

Non US term loans (d) 29,870 — ( 133 ) 29,737 Variable 31,086 — ( 160 ) 30,926 Variable

Other long term debt (e) 4,094 — ( 16 ) 4,078 Variable 3,260 — ( 16 ) 3,244 Variable

Totals 1,074,915 339 ( 16,482 ) 1,058,772 1,064,422 363 ( 17,821 ) 1,046,964

1 unchanged sentence

Long-term debt $ 1,060,002 $ 339 $ ( 16,482 ) $ 1,043,859 $ 1,054,500 $ 363 $ ( 17,821 ) $ 1,037,042

Three Months Ended December 31, 2020 Three Months Ended December 31, 2019

Effective Interest Rate (1)

Cash Interest Amort.

Discount Amort.

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Effective Interest Rate Cash Interest Amort.

Premium Amort.

Debt Issuance Costs

& Other Fees Total Interest Expense Effective Interest Rate (1)

Cash Interest Amort.

& Other Fees Total Interest Expense Effective Interest Rate Cash Interest Amort.

Premium Amort.

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& Other Fees Total Interest Expense

Senior notes due 2028 (a) 5.4 % $ 14,375 $ — $ 530 $ 14,905 n/a $ — $ — $ — $ —

Senior notes due 2022 (a) n/a — — — — 5.7 % 13,125 67 951 14,143

Senior notes due 2028 (a) 6.0 % $ 14,375 $ 12 $ 505 $ 14,892 6.0 % $ 5,566 $ — $ 135 $ 5,701

Senior notes due 2022 (a) — — — — — 5.7 % 8,040 45 628 8,713

Revolver due 2025 (b) Variable 287 — 122 409 Variable 1,819 — 165 1,984

Finance lease - real estate (d) Variable 232 — 6 238 5.6 % 61 — 6 67

Non US lines of credit (e) Variable 3 — 4 7 Variable 4 — 4 8

Non US term loans (e) Variable 171 — 17 188 Variable 272 — 12 284

Other long term debt (f) Variable 107 — — 107 Variable 160 — — 160

Finance lease - real estate (c) 5.9 % 224 — 7 231 6.1 % 52 — 7 59

Non US lines of credit (d) Variable 4 — 4 8 Variable 3 — 8 11

Non US term loans (d) Variable 163 — 18 181 Variable 292 — 7 299

Other long term debt (e) Variable 115 — 1 116 Variable 132 — — 132

Capitalized interest ( 6 ) — — ( 6 ) ( 28 ) — — ( 28 )

Totals $ 15,162 $ 12 $ 657 $ 15,831 $ 15,876 $ 45 $ 950 $ 16,871

(1) n/a = not applicable

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

Six Months Ended March 31, 2021 Six Months Ended March 31, 2020

Effective Interest Rate Cash Interest Amort.

Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense Effective Interest Rate Cash Interest Amort.

Debt Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 28,750 $ 24 $ 1,023 $ 29,797 6.0 % $ 5,566 $ — $ 135 $ 5,701

Senior notes due 2022 (a) — — — — — 5.7 % 21,165 112 1,579 22,856

Revolver due 2025 (b) Variable 416 — 245 661 Variable 3,201 — 397 3,598

Finance lease - real estate (c) 5.6 % 456 — 13 469 6.0 % 113 — 13 126

Non US lines of credit (d) Variable 7 — 8 15 Variable 7 — 12 19

Non US term loans (d) Variable 334 — 35 369 Variable 564 — 19 583

Other long term debt (e) Variable 222 — 1 223 Variable 292 — — 292

Capitalized interest ( 13 ) — — ( 13 ) ( 93 ) — — ( 93 )

Totals $ 30,172 $ 24 $ 1,325 $ 31,521 $ 30,815 $ 112 $ 2,155 $ 33,082

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

(a) On June 22, 2020, in an unregistered offering through a private placement, Griffon completed the add-on offering of $ 150,000 principal amount of its 5.75 % Senior Notes, at 100.25 % of par, to Griffon's previously issued $ 850,000 principal amount of its 5.75 % Senior Notes, at par, completed on February 19, 2020 (collectively, the “Senior Notes”).

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

As of December 31, 2020, outstanding Senior Notes due totaled $ 1,000,000 ;

As of March 31, 2021, outstanding Senior Notes due totaled $ 1,000,000 ;

interest is payable semi-annually on March 1 and September 1.

1 unchanged sentence

On April 22, 2020 and August 3, 2020, Griffon exchanged substantially all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933, as amended (the "Securities Act"), via an exchange offer.

The fair value of the Senior Notes approximated $ 1,057,500 on December 31, 2020 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $ 16,448 of underwriting fees and other expenses incurred related to the issuance and exchange of the 2028 Senior Notes, which will amortize over the term of the 2028 Senior Notes.

The fair value of the Senior Notes approximated $ 1,060,000 on March 31, 2021 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $ 16,448 of underwriting fees and other expenses incurred related to the issuance and exchange of the 2028 Senior Notes, which is being amortized over the term of the 2028 Senior Notes.

Furthermore, all of the obligations associated with the 2022 Senior Notes were discharged.

10 unchanged sentences

Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors, and a pledge of not greater than 65 % of the equity interest in Griffon’s material, first-tier foreign subsidiaries.

At December 31, 2020, there were $ 13,493 of outstanding borrowings under the Credit Agreement;

At March 31, 2021, there were $ 20,622 of outstanding borrowings under the Credit Agreement;

outstanding standby letters of credit were $ 16,310 ;

and $ 363,068 was available, subject to certain loan covenants, for borrowing at that date.

(c) On March 13, 2019, Griffon's Employee Stock Ownership Plan entered into an agreement that refinanced a term loan with a bank with an internal loan from Griffon.

The internal loan interest rate is fixed at 2.91 %, matures in June 2033 and requires quarterly payments of principal, currently $ 635 , and interest.

The internal loan is secured by shares purchased with the proceeds of the loan.

The amount outstanding on the internal loan at December 31, 2020 was $ 29,243 .

(d) Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala, Florida.

The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of approximately 5.0 % and 5.6 %, respectively.

1 unchanged sentence

The Ocala, Florida lease contains two five -year renewal options.

At December 31, 2020, $ 16,553 was outstanding, net of issuance costs.

At March 31, 2021, $ 15,907 was outstanding, net of issuance costs.

Refer to Note 21- Leases for further details.

(d) In November 2012, Garant G.P.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,894 as of March 31, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.41 % LIBOR USD and 1.47 % Bankers Acceptance Rate CDN as of March 31, 2021).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

At March 31, 2021, there were no borrowings under the revolving credit facility with CAD 15,000 ($ 11,894 as of March 31, 2021) available for borrowing.

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

(e) In November 2012, Garant G.P.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,703 as of December 31, 2020) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.44 % LIBOR USD and 1.52 % Bankers Acceptance Rate CDN as of December 31, 2020).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

At December 31, 2020, there were no borrowings under the revolving credit facility with CAD 15,000 ($ 11,703 as of December 31, 2020) available for borrowing.

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") entered into an AUD 29,625 term loan, AUD 20,000 revolver and AUD 10,000 receivable purchase facility agreement.

The term loan requires quarterly principal payments of AUD 1,250 plus interest with a balloon payment of AUD 9,625 due upon maturity in March 2022, and accrues interest at Bank Bill Swap Bid Rate “BBSY” plus 1.95 % per annum ( 2.01 % at December 31, 2020).

During the quarter ended December 31, 2020, the term loan balance was reduced by AUD 5,000 , from AUD 23,375 to AUD 18,375 with proceeds from an AUD 5,000 increase in the commitment of the receivables purchase line from AUD 10,000 to AUD 15,000 .

As of December 31, 2020, the term loan had an outstanding balance of AUD 14,625 ($ 11,121 as of December 31, 2020).

During fiscal 2020, the term loan balance was reduced by AUD 5,000 , from AUD 23,375 to AUD 18,375 with proceeds from an AUD 5,000 increase in the commitment of the receivables purchase line from AUD 10,000 to AUD 15,000 .

As of March 31, 2021, the term loan had an outstanding balance of AUD 13,375 ($ 10,192 as of March 31, 2021).

The revolving facility and receivable purchase facility mature in March 2022, but are renewable upon mutual agreement with the lender.

The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.9 % and 1.35 %, respectively, per annum ( 1.97 % and 1.41 %, respectively, at December 31, 2020).

At December 31, 2020, there were no balances outstanding under the revolver and the receivable purchase facility.

The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.9 % and 1.35 %, respectively, per annum ( 1.98 % and 1.41 %, respectively, at March 31, 2021).

At March 31, 2021, there were no balances outstanding under the revolver and the receivable purchase facility.

The revolver, receivable purchase facility and the term loan are all secured by substantially all of the assets of Griffon Australia and its subsidiaries.

2 unchanged sentences

The term loan and mortgage loan require quarterly principal payments of GBP 438 and GBP 105 plus interest, respectively, and have balloon payments due upon maturity, July 2023, of GBP 7,088 and GBP 2,349 , respectively.

The Term Loan and Mortgage Loans accrue interest at the GBP LIBOR Rate plus 2.25 % and 1.8 %, respectively ( 2.27 % and 1.82 % at December 31, 2020, respectively).

The revolving facility matures in May 2021, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.5 % ( 1.60 % as of December 31, 2020).

As of December 31, 2020, the revolver had an outstanding balance of GBP $ 492 ($ 664 as of December 31, 2020) while the term and mortgage loan balances amounted to GBP 14,855 ($ 20,044 as of December 31, 2020).

The Term Loan and Mortgage Loans each accrue interest at the GBP LIBOR Rate plus 1.8 % ( 1.85 % at March 31, 2021).

The revolving facility matures in May 2021, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.5 % ( 1.60 % as of March 31, 2021).

As of March 31, 2021, the revolver had an outstanding balance of GBP $ 3,204 ($ 4,405 as of March 31, 2021) while the term and mortgage loan balances amounted to GBP 14,313 ($ 19,678 as of March 31, 2021).

The revolver and the term loan are both secured by substantially all of the assets of AMES UK and its subsidiaries.

1 unchanged sentence

An invoice discounting arrangement was canceled and replaced by the above loan facilities.

(f) Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of finance leases.

At December 31, 2020, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

(e) Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of finance leases.

On March 13, 2019, Griffon's Employee Stock Ownership Plan entered into an agreement that refinanced a term loan with a bank with an internal loan from Griffon.

The internal loan interest rate is fixed at 2.91 %, matures in June 2033 and requires quarterly payments of principal, currently $ 635 , and interest.

The internal loan is secured by shares purchased with the proceeds of the loan.

The amount outstanding on the internal loan at March 31, 2021 was $ 28,608 .

At March 31, 2021, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

NOTE 11 — SHAREHOLDERS’ EQUITY

During 2021, the Company paid a quarterly cash dividend of $ 0.08 per share.

During 2021, the Company paid a quarterly cash dividend of $ 0.08 per share in each quarter, totaling $ 0.16 per share for the six months ended March 31, 2021.

During 2020, the Company paid a quarterly cash dividend of $ 0.075 per share, totaling $ 0.30 per share for the year.

1 unchanged sentence

such dividends will be released upon vesting of the underlying restricted shares.

On January 27, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.08 per share, payable on March 18, 2021 to shareholders of record as of the close of business on February 18, 2021.

On April 29, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.08 per share, payable on June 17, 2021 to shareholders of record as of the close of business on May 20, 2021.

Compensation expense for restricted stock and restricted stock units is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria.

Compensation expense for restricted stock granted to two senior executives is calculated as the maximum number of shares granted, upon achieving certain performance criteria,

Compensation expense for restricted stock granted to two senior executives is calculated as the maximum number of shares granted, upon achieving certain performance criteria, multiplied by the stock price as valued by a Monte Carlo Simulation Model.

Compensation cost related to stock-based awards

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

multiplied by the stock price as valued by a Monte Carlo Simulation Model.

Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years , is recognized using the straight-line attribution method and recorded within SG&A expenses.

with graded vesting, generally over a period of three to four years , is recognized using the straight-line attribution method and recorded within SG&A expenses.

On January 29, 2016, shareholders approved the Griffon Corporation 2016 Equity Incentive Plan ("Incentive Plan") under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, restricted stock units, deferred shares and other stock-based awards may be granted.

5 unchanged sentences

The maximum number of shares of common stock available for award under the Incentive Plan is 5,050,000 ( 600,000 of which may be issued as incentive stock options), plus (i) any shares reserved for issuance under the 2011 Equity Incentive Plan as of the effective date of the Incentive Plan, and (ii) any shares underlying awards outstanding on such effective date under the 2011 Incentive Plan that are canceled or forfeited.

As of December 31, 2020, there were 684,982 shares available for grant.

As of March 31, 2021, there were 437,276 shares available for grant.

During the first quarter of 2021, Griffon granted 511,624 shares of restricted stock and restricted stock units.

1 unchanged sentence

Furthermore, this included 284,813 restricted stock awards granted to five executives, with vesting periods of three years and a total fair value of $ 5,913 or a weighted average fair value of $ 20.76 per share.

On January 27, 2021, Griffon granted 580,704 shares of restricted stock.

This included 52,704 shares of restricted stock to two executives, subject to certain performance conditions, with a vesting period of 34 months, with a total fair value of $ 1,150 , or a weighted average fair value of $ 21.82 per share.

During the second quarter of 2021, Griffon granted 731,282 shares of restricted stock to six executives.

This included 203,282 shares of restricted stock to four executives, subject to certain performance conditions, with vesting periods ranging from 34 months to 60 months, with a total fair value of $ 4,923 , or a weighted average fair value of $ 24.22 per share.

This also included 528,000 shares of restricted stock granted to two senior executives with a vesting period of four years and a two -year post-vesting holding period, subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon's common stock.

1 unchanged sentence

The total fair value of these restricted shares using the Monte Carlo Simulation model is approximately $ 7,824 , or a weighted average fair value of $ 14.82 per share.

On January 28, 2021, Griffon granted 44,424 restricted shares to the non-employee directors of Griffon with a vesting period of three years and a fair value of $ 1,080 , or a weighted average fair value of $ 24.31 per share.

Additionally, Griffon granted 44,424 restricted shares to the non-employee directors of Griffon with a vesting period of three years and a fair value of $ 1,080 , or a weighted average fair value of $ 24.31 per share.

The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Restricted stock $ 4,349 $ 3,662 $ 7,777 $ 6,812

ESOP 944 658 1,724 1,490

Total stock based compensation $ 5,293 $ 4,320 $ 9,501 $ 8,302

1 unchanged sentence

Under this share repurchase program, 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 December 31, 2020, Griffon did not purchase any shares of common stock under these repurchase programs.

As of December 31, 2020, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

During the quarter ended December 31, 2020, 133,027 shares, with a market value of $ 2,774 , or $ 20.85 per share, respectively, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the three months ended December 31, 2020, an additional 6,507 shares, with a market value of $ 135 , or $ 20.75 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

During the six months ended March 31, 2021, Griffon did not purchase any shares of common stock under these repurchase programs.

As of March 31, 2021, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

During the second quarter ended March 31, 2021, no shares were withheld to settle employee taxes due upon the vesting of restricted stock.

During the six months ended March 31, 2021, 133,027 shares, with a market value of $ 2,774 , or $ 20.85 per share, respectively, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the six months ended March 31, 2021, an additional 6,507 shares, with a market value of $ 135 , or

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

$ 20.75 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

NOTE 12 – EARNINGS PER SHARE (EPS)

2 unchanged sentences

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Common shares outstanding 56,684 47,431 56,684 47,431

15 unchanged sentences

• DE conducts its operations through Telephonics, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

Information on Griffon’s reportable segments is as follows:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

REVENUE 2021 2020 2021 2020

3 unchanged sentences

Total consolidated net sales $ 634,832 $ 566,350 $ 1,244,123 $ 1,114,788

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

Disaggregation of Revenue

1 unchanged sentence

The following table presents revenue disaggregated by end market and segment:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Residential repair and remodel $ 50,560 $ 40,505 $ 96,160 $ 75,595

18 unchanged sentences

The following table presents revenue disaggregated by geography based on the location of the Company's customer:

For the Three Months Ended December 31,

For the Three Months Ended March 31,

CPP HBP DE Total CPP HBP DE Total

5 unchanged sentences

Consolidated revenue $ 331,871 $ 242,811 $ 60,150 $ 634,832 $ 274,912 $ 209,829 $ 81,609 $ 566,350

For the Six Months Ended March 31,

CPP HBP DE Total CPP HBP DE Total

United States $ 388,810 $ 467,486 $ 81,544 $ 937,840 $ 351,570 $ 426,010 $ 101,214 $ 878,794

Europe 52,121 41 12,696 64,858 31,342 28 15,865 47,235

Canada 43,893 21,285 3,754 68,932 35,296 19,120 6,783 61,199

Australia 133,231 — 441 133,672 93,260 — 795 94,055

All other countries 4,858 4,480 29,483 38,821 4,520 6,052 22,933 33,505

Consolidated revenue $ 622,913 $ 493,292 $ 127,918 $ 1,244,123 $ 515,988 $ 451,210 $ 147,590 $ 1,114,788

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), restructuring charges, loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”).

1 unchanged sentence

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

For the Three Months Ended December 31,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Segment adjusted EBITDA:

7 unchanged sentences

Depreciation and amortization ( 15,883 ) ( 15,719 ) ( 31,149 ) ( 31,544 )

Loss from debt extinguishment — ( 6,690 ) — ( 6,690 )

Restructuring charges ( 7,562 ) ( 3,104 ) ( 18,362 ) ( 9,538 )

Gain on sale of SEG business 6,240 —

Acquisition costs — ( 2,960 ) — ( 2,960 )

Gain (adjustment) on sale of SEG business ( 949 ) — 5,291 —

Income before taxes $ 27,860 $ 2,929 $ 67,029 $ 19,880

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

DEPRECIATION and AMORTIZATION 2021 2020 2021 2020

12 unchanged sentences

Total consolidated capital expenditures $ 12,060 $ 9,347 $ 23,986 $ 22,519

ASSETS At December 31, 2020 At September 30, 2020

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

ASSETS At March 31, 2021 At September 30, 2020

Segment assets:

9 unchanged sentences

Defined benefit pension expense (income) included in Other Income (Expense), net was as follows:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Interest cost $ 745 $ 1,151 $ 1,489 $ 2,302

4 unchanged sentences

Net periodic expense (income) $ ( 227 ) $ ( 389 ) $ ( 454 ) $ ( 778 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 15 – RECENT ACCOUNTING PRONOUNCEMENTS

11 unchanged sentences

In August 2018, the FASB issued guidance which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

This guidance expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This guidance expands the disclosure requirements for Level 3 fair value measurements,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This guidance is effective for the Company beginning in fiscal 2021.

2 unchanged sentences

The amendment replaces the requirement to present condensed consolidating financial statements, comprised of balance sheets and statements of operations, comprehensive income and cash flows for all periods presented, with summarized financial information of the guarantor only for the most recently completed fiscal year and any subsequent interim period.

We adopted the amendments to the disclosure requirements during the quarter ended December 31, 2020.

We adopted the amendments to the disclosure requirements during the first quarter of fiscal 2021.

This amendment did not have an impact on our consolidated financial statements as this amendment simplifies the financial disclosures required in our guarantor and non-guarantor financial information.

1 unchanged sentence

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements, and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 16 – DISCONTINUED OPERATIONS

The following amounts summarize the total assets and liabilities related to the Installation Services and other discontinued activities which have been segregated from Griffon’s continuing operations, and are reported as assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets:

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Assets of discontinued operations:

6 unchanged sentences

Total liabilities of discontinued operations $ 11,015 $ 10,811

At December 31, 2020, Griffon's assets and liabilities consist primarily of insurance claims, income tax, product liability, and warranty and environmental reserves.

At March 31, 2021, Griffon's assets and liabilities consist primarily of insurance claims, income tax, product liability, and warranty and environmental reserves.

NOTE 17 – RESTRUCTURING CHARGES

5 unchanged sentences

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

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

4 unchanged sentences

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

During the quarters ended December 31, 2020 and 2019, CPP incurred pre-tax restructuring and related exit costs approximating $ 3,079 and $ 6,434 , respectively.

During the quarter ended December 31, 2020, cash charges totaled $ 2,886 non-cash and asset-related charges totaled $ 193 ;

the cash charges included $ 362 for one-time termination benefits and other personnel-related costs and $ 2,524 for facility exit costs.

During the quarter ended December 31, 2019, cash charges totaled $ 2,274 and non-cash, asset-related charges totaled $ 4,160 ;

In the quarter and six months ended March 31, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 7,502 and $ 10,581 , respectively.

During the six months ended March 31, 2021, cash charges totaled $ 7,891 and non-cash, asset-related charges totaled $ 2,690 ;

the cash charges included $ 1,084 for one-time termination benefits and other personnel-related costs and $ 6,807 for facility and lease exit costs primarily driven by the consolidation of distribution facilities.

Non-cash charges of $ 2,690 predominantly related to inventory that have no recoverable value.

During the six months ended March 31, 2021, headcount was reduced by 65 .

In the quarter and six months ended March 31, 2020, CPP incurred pre-tax restructuring and related exit costs approximating $ 3,104 and $ 9,538 , respectively.

During the six months ended March 31, 2020, cash charges totaled $ 4,846 and non-cash, asset-related charges totaled $ 4,692 ;

the cash charges included $ 3,792 for one-time termination benefits and other personnel-related costs and $ 1,054 for facility exit costs.

Non-cash charges included a $ 1,740 impairment charge related to a facility's operating lease as well as $ 671 of leasehold improvements made to the leased facility that have no

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

recoverable value, and a $ 1,749 impairment charge related to machinery and equipment that have no recoverable value at one of the Company's owned manufacturing locations.

During the quarter ended December 31, 2020, headcount was reduced by 61 .

Non-cash charges included a $ 1,968 impairment charge related to a facility's operating lease as well as $ 671 of leasehold improvements made to the leased facility and $ 304 of inventory that have no recoverable value, and a $ 1,749 impairment charge related to machinery and equipment that have no recoverable value at one of the Company's owned manufacturing locations.

In September 2020, the DE Voluntary Employee Retirement Plan was initiated, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities.

The combined actions resulted in severance charges of approximately $ 4,240 , with $ 2,120 recognized in the fourth quarter of fiscal 2020, and the remaining $ 2,120 was recognized during the quarter ended December 31, 2020.

The combined actions resulted in severance charges of approximately $ 4,300 , with $ 2,120 recognized in the fourth quarter of fiscal 2020, and the remaining $ 2,180 was recognized during the six months ended March 31, 2021.

These actions reduced headcount by approximately 90 people.

In addition, charges of $ 5,601 were recorded during the quarter ended December 31, 2020, primarily related to exiting our older weather radar product lines.

A summary of the restructuring and other related charges included in Cost of goods and services and Selling, general and administrative expenses in the Company's Condensed Consolidated Statements of Operations were as follows:

For the Three Months Ended December 31,

A summary of the restructuring and other related charges included in Cost of goods and services and SG&A expenses in the Company's Condensed Consolidated Statements of Operations were as follows:

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Cost of goods and services $ 3,337 $ 1,353 $ 9,762 $ 4,076

1 unchanged sentence

Total restructuring charges $ 7,562 $ 3,104 $ 18,362 $ 9,538

For the Three Months Ended December 31,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Personnel related costs $ 782 $ 1,658 $ 3,264 $ 3,792

8 unchanged sentences

Q1 Restructuring charges 2,482 2,524 5,794 10,800

Cash payments ( 1,598 ) ( 2,534 ) — ( 4,132 )

Non-cash charges — — ( 5,794 ) ( 5,794 )

Q1 Cash payments ( 1,598 ) ( 2,534 ) — ( 4,132 )

Q1 Non-cash charges — — ( 5,794 ) ( 5,794 )

Accrued liability at December 31, 2020 $ 3,585 $ 254 $ — $ 3,839

Q2 Restructuring charges 782 4,283 2,497 7,562

Q2 Cash payments ( 3,840 ) ( 4,273 ) — ( 8,113 )

Q2 Non-cash charges — — ( 2,497 ) ( 2,497 )

Accrued liability at March 31, 2021 $ 527 $ 264 $ — $ 791

NOTE 18 – OTHER INCOME (EXPENSE)

For the quarters ended December 31, 2020 and 2019, Other income (expense) of $( 41 ) and $ 778 , respectively, includes $( 699 ) and ($ 376 ), respectively, of net currency exchange losses in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 227 and $ 389 , respectively, as well as $ 330 and $ 81 , respectively, of net investment income.

Additionally, Other income (expense) also includes a one-time technology recognition award for $ 700 in the quarter ended December 31, 2019.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

For the quarters ended March 31, 2021 and 2020, Other income (expense) of $ 847 and $ 615 , respectively, includes $ 320 and $ 745 , respectively, of net currency exchange gains in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 227 and $ 389 , respectively, as well as $ 55 and $( 230 ), respectively, of net investment income (loss).

For the six months ended March 31, 2021 and 2020, Other income (expense) of $ 806 and 1,393 includes $( 379 ) and $ 369 , respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 454 and $ 778 , respectively, as well as $ 386 and $( 149 ), respectively, of net investment income (loss).

Additionally, Other income (expense) also includes a one-time technology recognition award for $ 700 .

NOTE 19 – WARRANTY LIABILITY

4 unchanged sentences

CPP offers an express limited warranty for a period of ninety days on all products from the date of original purchase unless otherwise stated on the product or packaging from the date of original purchase.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Balance, beginning of period $ 10,834 $ 7,344 $ 10,843 $ 7,894

4 unchanged sentences

The amounts recognized in other comprehensive income (loss) were as follows:

For the Three Months Ended December 31,

For the Three Months Ended March 31,

Pre-tax Tax Net of tax Pre-tax Tax Net of tax

3 unchanged sentences

Total other comprehensive income (loss) $ 5,883 $ ( 1,108 ) $ 4,775 $ ( 14,241 ) $ ( 593 ) $ ( 14,834 )

For the Six Months Ended March 31,

Pre-tax Tax Net of tax Pre-tax Tax Net of tax

Foreign currency translation adjustments $ 13,862 $ — $ 13,862 $ ( 10,001 ) $ — $ ( 10,001 )

Pension and other defined benefit plans 3,735 ( 784 ) 2,951 1,694 ( 353 ) 1,341

Cash flow hedges 1,576 ( 473 ) 1,103 953 ( 286 ) 667

Total other comprehensive income (loss) $ 19,173 $ ( 1,257 ) $ 17,916 $ ( 7,354 ) $ ( 639 ) $ ( 7,993 )

The components of Accumulated other comprehensive income (loss) are as follows:

At December 31, 2020 At September 30, 2020

At March 31, 2021 At September 30, 2020

Foreign currency translation adjustments $ ( 11,821 ) $ ( 25,683 )

7 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (loss) to income were as follows:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

Gain (Loss) 2021 2020 2021 2020

23 unchanged sentences

Components of operating lease costs are as follows:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2021 2020 2021 2020

Fixed $ 9,970 $ 9,187 $ 20,010 $ 18,739

Variable (a), (b)

2,087 1,823 4,134 3,576

Short-term (b)

1,053 1,393 2,167 2,823

Total $ 13,110 $ 12,403 $ 26,311 $ 25,138

6 unchanged sentences

Supplemental cash flow information were as follows:

For the Three Months Ended December 31,

For the Six Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

Supplemental Condensed Consolidated Balance Sheet information related to leases were as follows:

At December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

Operating Leases:

12 unchanged sentences

Total financing lease liabilities $ 18,060 $ 18,691

(1) Finance lease assets are recorded net of accumulated depreciation of $ 3,319 .

(1) Finance lease assets are recorded net of accumulated depreciation of $ 4,296 and $ 2,383 as of March 31, 2021 and September 30, 2020, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

6 unchanged sentences

The Ocala, Florida lease contains two five -year renewal options.

As of December 31, 2020 and September 30, 2020, $ 16,553 and $ 17,188 , respectively, was outstanding, net of issuance costs.

As of March 31, 2021 and September 30, 2020, $ 15,907 and $ 17,188 , respectively, was outstanding, net of issuance costs.

The remaining lease liability balance relates to finance equipment leases.

The aggregate future maturities of lease payments for operating leases and finance leases as of December 31, 2020 are as follows (in thousands):

The aggregate future maturities of lease payments for operating leases and finance leases as of March 31, 2021 are as follows (in thousands):

Operating Leases Finance Leases

9 unchanged sentences

Present value of lease liabilities $ 159,399 $ 18,060

(a) Excluding the three months ended December 31, 2020

Average lease terms and discount rates at December 31, 2020 were as follows:

(a) Excluding the six months ended March 31, 2021.

Average lease terms and discount rates at March 31, 2021 were as follows:

Weighted-average remaining lease term (years)

40 unchanged sentences

While the Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site, the Order required Ames to perform a remedial investigation of certain portions of the property and to recommend a remediation option.

In 2018, Ames submitted a Feasibility Study recommending excavation of shallow soils for lead, arsenic and hydrocarbons in addition to deeper excavation for lead.

In 2011, remediation of chlorinated solvents in the groundwater was completed to the satisfaction of DEC.

In 2018, Ames submitted a Feasibility Study recommending that the remaining soil contamination involving metals and petroleum be covered, excavated and removed to a licensed off-site location or placed under a cover on-site.

DEC approved the selection of this remedy in 2019 by issuing a Record of Decision (“ROD”).

Beginning in late 2019 and through June 2020, Ames completed the remediation required by the ROD and filed a Construction Completion Report, a Site Management Plan and an environmental easement with DEC.

In June 2020, Ames completed the remediation required by the ROD and filed a Construction Completion Report, a Site Management Plan and an environmental easement with DEC.

While Ames was implementing the remediation required by the ROD, DEC requested additional investigation of a small area on the site and of an area adjacent to the site perimeter.

Ames investigated the on-site area and has initiated limited remediation under a workplan approved by DEC.

AMES expects to complete this limited remediation by February 2021.

Ames has also submitted a workplan to investigate the areas adjacent to the site perimeter.

Ames investigated the on-site area and has completed remediation of that small area under a workplan approved by DEC.

At the request of DEC, Ames has also submitted a workplan to investigate the areas adjacent to the site perimeter.

AMES has a number of defenses to liability in this matter, including its rights under a previous Consent Judgment entered into between DEC and a predecessor of AMES relating to the site.

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements