What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-04-30 compared with 2021-01-29 · 169 added, 118 removed, 327 unchanged (47% of the section changed)

29 unchanged sentences

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

During the quarter 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.

During the six months ended March 31, 2021 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.

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 2020 calendar 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.

states lifted initial executive orders issued during the 2020 calendar year requiring all workers to remain at home unless their work is critical, essential, or life-sustaining.

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 unchanged sentence

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;

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.

1 unchanged sentence

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 $369,807 was available at December 31, 2020), and extended maturity of the facility to 2025.

In January 2020, Griffon increased total borrowing capacity under its revolving credit facility ("Credit Agreement") by $50,000, to $400,000 (of which $363,068 was available at March 31, 2021), and extended maturity of the facility to 2025.

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

2 unchanged sentences

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

At December 31, 2020 Griffon had cash and equivalents of $233,807.

At March 31, 2021 Griffon had cash and equivalents of $175,564.

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 are in the best interests of our employees, customers, suppliers and shareholders.

19 unchanged sentences

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.

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.

10 unchanged sentences

Other Acquisitions and Dispositions

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.

1 unchanged sentence

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.

(“SEG”) business for $15,000.

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

11 unchanged sentences

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.

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.

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.

Further Information

12 unchanged sentences

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

Revenue for the quarter ended December 31, 2020 was $609,291 compared to $548,438 in the prior year comparable quarter, an increase of approximately 11%, driven by increased revenue at CPP, HBP and DE of 21%, 4% and 3%, respectively.

Revenue for the quarter ended March 31, 2021 was $634,832 compared to $566,350 in the prior year comparable quarter, an increase of 12%;

primarily driven by increased revenue at CPP and HBP of 21% and 16%, respectively, partially offset by reduced revenue at DE of 26%.

Net income was $17,112 or $0.32 per share, compared to $895, or $0.02 per share, in the prior year quarter.

1 unchanged sentence

– Restructuring charges of $7,562 ($5,651, net of tax, or $0.11 per share);

– Gain on sale of Systems Engineering Group ("SEG") business $6,240 ($6,017, net of tax, or $0.11 per share);

– Reduction to gain on sale of Systems Engineering Group ("SEG") business $949 ($766, net of tax, or $0.01 per share);

– Discrete and certain other tax provisions, net, of $1,913 or $0.04 per share.

The prior year quarter results from operations included the following:

– Restructuring charges of $3,104 ($3,005, net of tax, or $0.07 per share);

– Loss from debt extinguishment $6,690 ($5,245, net of tax, or $0.12 per share);

– Acquisition costs of $2,960 ($2,321, net of tax, or $0.05 per share);

– Discrete and certain other tax benefits, net, of $1,413 or $0.03 per share.

The prior quarter results included restructuring charges of $6,434 ($4,148, net of tax, or $0.09 per share) and discrete and certain other tax provisions, net, of $833 or $0.02 per share.

Excluding these items from the respective quarterly results, Net income would have been $25,442, or $0.48 per share, in the current year quarter compared to $10,053, or $0.23 per share in the prior year quarter.

Revenue for the six months ended March 31, 2021 was $1,244,123 compared to $1,114,788 in the prior year period, an increase of 12%;

primarily driven by increased revenue at CPP and HBP of 21% and 9%, respectively, partially offset by reduced revenue at DE of 13%.

Net income was $46,612 or $0.88 per share, compared to $11,507, or $0.26 per share, in the prior year period.

The current year-to-date results from operations included the following:

– Restructuring charges of $18,362 ($13,951, net of tax, or $0.26 per share);

– Gain on sale of Systems Engineering Group ("SEG") business $5,291 ($5,251, net of tax, or $0.10 per share);

– Discrete and certain other tax benefits, net, of $115 or $0.00 per share.

The prior year-to-date results from operations included the following:

– Restructuring charges of $9,538 ($7,153, net of tax, or $0.16 per share);

– Loss from debt extinguishment $6,690 ($5,245, net of tax, or $0.12 per share);

– Acquisition costs of $2,960 ($2,321, net of tax, or $0.05 per share);

– Discrete and certain other tax benefits, net, of $580 or $0.01 per share.

Excluding these items from the respective periods, Net income would have been $55,197, or $1.04 per share in the current year period ended March 31, 2021 compared to $25,646, or $0.59 per share, in the comparable prior year period.

Griffon evaluates performance based on Net income and the related Earnings per share excluding restructuring charges, loss from debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well as other items that may affect comparability, as applicable.

1 unchanged sentence

The following table provides a reconciliation of Net income to Adjusted net income and Earnings per share to Adjusted earnings per share:

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

Net income $ 17,112 $ 895 $ 46,612 $ 11,507

1 unchanged sentence

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

Gain on sale of SEG business (6,240) —

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

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

Acquisition costs — 2,960 — 2,960

Tax impact of above items (2,094) (2,183) (4,371) (4,469)

4 unchanged sentences

Restructuring charges 0.11 0.07 0.26 0.16

Gain on sale of SEG business (0.11) —

(Gain) adjustment on sale of SEG business 0.01 — (0.10) —

Loss from debt extinguishment — 0.12 — 0.12

Acquisition costs — 0.05 — 0.05

Discrete and certain other tax provisions (benefits), net 0.04 (0.03) — (0.01)

4 unchanged sentences

RESULTS OF OPERATIONS

Three months ended December 31, 2020 and 2019

Three and Six months ended March 31, 2021 and 2020

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 (primarily corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure).

2 unchanged sentences

Consumer and Professional Products

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

Revenue $ 331,871 $ 274,912 $ 622,913 $ 515,988

1 unchanged sentence

Depreciation and amortization 8,620 8,222 16,819 16,453

For the quarter ended December 31, 2020, revenue increased $49,966 or 21%, compared to the prior year period, primarily due to increased volume of 18%, driven by continued consumer demand for home improvement initiatives across all geographies, early U.S.

spring orders and expansion of the home organization product line.

Improved revenue also reflected incremental revenue from the Apta acquisition of 1% and a favorable foreign exchange impact of 2%.

Organic growth was 20% (revenue growth adjusted to exclude acquisitions).

For the quarter ended December 31, 2020, Adjusted EBITDA increased 49% to $32,713 compared to $21,926 in the prior year period.

The favorable variance resulted primarily from the increased revenue noted above, partially offset by increased COVID-19 related inefficiencies.

For the quarter ended December 31, 2020, EBITDA reflects a favorable foreign exchange impact of 5%.

Segment depreciation and amortization remained consistent with the prior year comparable quarter.

For the quarter ended March 31, 2021, revenue increased $56,959, or 21%, compared to the prior year period, primarily due to increased volume of 17%, driven by continued consumer demand across all geographies, primarily for outdoor decor, landscaping and home organization products, and a favorable foreign currency impact of 4%.

For the quarter ended March 31, 2021, Adjusted EBITDA increased 50% to $37,423 compared to $25,027 in the prior year quarter.

The favorable variance resulted primarily from the increased revenue noted above and a favorable foreign currency impact of 8%, partially offset by increased distribution and material costs and COVID-19 related inefficiencies.

For the six months ended March 31, 2021, revenue increased $106,925, or 21%, compared to the prior year period, primarily due to increased volume of 17%, driven by increased consumer demand across all geographies and all product categories, and a favorable foreign currency impact of 4%.

For the six months ended March 31, 2021, Adjusted EBITDA increased 49% to $70,136 compared to $46,953 in the prior year period.

The favorable variance resulted primarily from the increased revenue noted above and a favorable currency impact of 6%, partially offset by increased distribution and material costs and COVID-19 related inefficiencies.

For the quarter and six months ended March 31, 2021, segment depreciation and amortization increased $398 and $366, respectively, compared to the prior year comparable periods, due to new assets placed in service.

8 unchanged sentences

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

Second, 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.

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.

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

5 unchanged sentences

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

In connection with this initiative, during the year ended September 30, 2020 and during the three months ended December 31, 2020, CPP incurred pre-tax restructuring and related exit costs approximating $13,669 and $3,079, respectively.

Since inception of this initiative, total cumulative charges totaled $16,748, comprised of cash charges of $11,863 and non-cash, asset-related charges of $4,885;

the cash charges included $5,982 for one-time termination benefits and other personnel-related costs

and $5,881 for facility exit costs.

During the year ended September, 30, 2020 and during the quarter ended December 31, 2020, capital expenditures of 6,733 and $2,236, respectively, were driven by investment in CPP business intelligence systems and e-commerce facility.

In connection with this initiative, during the year ended September 30, 2020 and during the six months ended March 31, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $13,669 and $10,581, respectively.

Since inception of this initiative in fiscal 2020, total cumulative charges totaled $24,250, comprised of cash charges of $16,868 and non-cash, asset-related charges of $7,382;

the cash charges included $6,704 for one-time termination benefits and other personnel-related costs and $10,164 for facility exit costs.

During the year ended September, 30, 2020 and during the six months ended March 31, 2021, capital expenditures of 6,733 and $5,445, respectively, were driven by investment in CPP business intelligence systems and e-commerce facility.

Cash Charges Non-Cash Charges

5 unchanged sentences

Q1 FY2021 Activity (362) (2,524) (193) (3,079) (2,236)

Q2 FY2021 Activity (722) (4,283) (2,497) (7,502) $ (3,209)

Total 2021 restructuring charges (1,084) (6,807) (2,690) (10,581) (5,445)

Total cumulative charges (6,704) (10,164) (7,382) (24,250) (12,178)

1 unchanged sentence

Home and Building Products

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

Revenue $ 242,811 $ 209,829 $ 493,292 $ 451,210

1 unchanged sentence

Depreciation and amortization 4,379 4,668 8,720 9,468

For the quarter ended December 31, 2020, revenue increased $9,100 or 4%, compared to the prior year period, driven by increased volume of 5%, partially offset by unfavorable mix of 1%.

For the quarter ended December 31, 2020, Adjusted EBITDA increased 19% to $48,369 compared to $40,701 in the prior year period.

EBITDA benefited from increased revenue noted above including volume related benefits on absorption and operational efficiency improvements, partially offset by COVID-19 related inefficiencies.

Segment depreciation and amortization decreased $459 from the prior year quarter due to fully depreciated assets.

For the quarter ended March 31, 2021, revenue increased $32,982 or 16%, compared to the prior year period, driven by increased volume.

For the quarter ended March 31, 2021, Adjusted EBITDA increased 31% to $40,060 compared to $30,635 in the prior year period.

EBITDA benefited from increased revenue noted above and volume related benefits on absorption, partially offset by increased material costs and COVID-19 related inefficiencies.

For the six months ended March 31, 2021, revenue increased $42,082 or 9%, compared to the prior year period, driven by increased volume.

For the six months ended March 31, 2021, Adjusted EBITDA increased 24% to $88,429 compared to $71,336 in the prior year period.

The favorable variance resulted from the increased revenue noted above and volume related benefits on absorption, partially offset by COVID-19 related inefficiencies.

For the quarter and six months ended March 31, 2021, segment depreciation and amortization decreased $289 and $748, respectively, compared to the prior year comparable periods, due to fully depreciated assets.

Defense Electronics

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

Revenue $ 60,150 $ 81,609 $ 127,918 $ 147,590

1 unchanged sentence

Depreciation and amortization 2,734 2,676 5,410 5,320

For the quarter ended December 31, 2020, revenue increased $1,787, or 3%, compared to the prior year quarter.

The increase was due to increased volume for Naval and Cyber systems driven by multi-mode airborne maritime surveillance systems, partially offset by timing of work performed on Communication systems and commercial custom integrated circuits.

For the quarter ended December 31, 2020, Adjusted EBITDA increased $1,110, or 25%, compared to the prior year comparable period, driven by the increase in revenue and reduced headcount related to the reduction in force during the current quarter, partially offset by the timing of research and development expenses.

Segment depreciation and amortization remained consistent with the prior year comparable quarter-to-date period.

For the quarter ended March 31, 2021, revenue decreased $21,459, or 26%, compared to the prior year quarter.

The prior year results include revenue from the SEG business of $7,460.

Excluding the divestiture of SEG from prior year results, revenue decreased $13,999, or 19%.

The decrease was driven by reduced volume due to the timing of work performed and deliveries on Communication and Surveillance programs.

For the quarter ended March 31, 2021, Adjusted EBITDA decreased $2,028, or 48%, compared to the prior year comparable period, driven by the reduced revenue noted above and cost growth on Surveillance programs, partially offset by the reduced headcount related to the reduction in force that occurred in the first quarter.

For the six months ended March 31, 2021, revenue decreased $19,672, or 13%, compared to the prior year period.

The current and prior year results include revenue from the SEG business of $6,713 and $14,008, respectively.

Excluding the divestiture of SEG from current and prior year results, revenue decreased $12,377, or 9%.

The decline in revenue was driven by reduced volume related to the timing of work performed and deliveries on Communication and Surveillance programs, partially offset by Naval and Cyber systems.

For the six months ended March 31, 2021, Adjusted EBITDA decreased $918, or 11%, compared to the prior year comparable period driven by the reduced revenue noted above, partially offset by the benefit of reduced headcount related to the reduction in force that occurred in the first quarter.

Segment depreciation and amortization remained consistent with the prior year comparable quarter-to-date and year-to-dates periods.

On December 18, 2020, DE completed the sale of its SEG business.

2 unchanged sentences

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.

During the three months ended December 31, 2020, DE was awarded several new contracts and received incremental funding on existing contracts approximating $85,000.

Contract backlog was $388,700 at December 31, 2020 with 66% expected to be fulfilled in the next 12 months.

Backlog was $380,000 at September 30, 2020, of which approximately $8,500 was related to the SEG business which was sold in December 2020.

During the six months ended March 31, 2021, DE was awarded several new contracts and received incremental funding on existing contracts approximating $105,000 (excludes $5,500 of SEG awards).

Contract backlog was $353,870 at March 31, 2021 compared to $320,214 at March 31, 2020 (excludes $11,526 of SEG related backlog) with 65% expected to be fulfilled in the next 12 months.

Backlog was approximately $370,000 at September 30, 2020 (excludes approximately $10,000 of SEG related backlog).

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

1 unchanged sentence

In September 2020, a 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 reduction in force initiative resulted in severance charges of $2,120 during current quarter.

The reduction in force initiative resulted in severance charges of $2,180 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.

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

For the quarter ended December 31, 2020, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $12,027 compared to $11,942 in the prior year quarter.

The increase in the current quarter compared to the respective prior year quarter primarily relates to increases in compensation and incentive costs, partially offset by consulting fees, travel and administrative office costs.

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

DE recorded a pre-tax gain of $5,291 ($5,251, net of tax) during the six months ended March 31, 2021 related to the divestiture of SEG.

For the quarter ended March 31, 2021, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $11,922 compared to $11,947 in the prior year quarter;

for the six months ended March 31, 2021, unallocated amounts totaled $23,949 compared to $23,889 in the prior year period.

The current quarter remained consistent with the prior year comparable quarter.

The increase in the six months compared to the respective prior year period primarily relates to increases in compensation and incentive costs and consulting costs, partially offset by travel and administrative office costs.

Segment Depreciation and Amortization

Segment depreciation and amortization decreased $459 for three months ended December 31, 2020 compared to the comparable prior year period primarily due to fully depreciated assets.

Segment depreciation and amortization increased $167 for the quarter ended March 31, 2021 compared to the comparable prior year quarter, primarily due to depreciation and amortization on new assets placed in service.

Segment depreciation and amortization decreased $292 for the six months ended March 31, 2021 compared to the comparable prior year period, primarily due to fully depreciated assets, partially offset by assets acquired in acquisitions.

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.

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.

Provision for 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 SEG business $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.

Stock based compensation

For the quarters ended December 31, 2020 and 2019, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $4,208 and $3,982, respectively.

For the quarters ended March 31, 2021 and 2020, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $5,293 and $4,320, respectively.

For the six months ended March 31, 2021 and 2020, stock based compensation expense totaled $9,501 and $8,302, respectively.

Comprehensive income (loss)

For the quarter ended December 31, 2020, total other comprehensive income, net of taxes, of $13,141 included a gain of $12,123 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound, and Canadian and Australian Dollars all in comparison to the US Dollar;

a $1,706 benefit from pension amortization;

and a $688 loss on cash flow hedges.

For the quarter ended December 31, 2019, total other comprehensive income, net of taxes, of $6,841 included a gain of $6,470 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound, and Canadian and Australian Dollars all in comparison to the US Dollar;

For the quarter ended March 31, 2021, total other comprehensive income, net of taxes, of $4,775 included a gain of $1,739 from foreign currency translation adjustments primarily due to the strengthening of the British Pound and Canadian Dollar, partially offset by the weakening of the Euro, all in comparison to the US Dollar;

a $1,245 benefit from pension amortization;

and a $301 loss on cash flow hedges.

and a $1,791 gain on cash flow hedges.

For the six months ended March 31, 2021, total other comprehensive income, net of taxes, of $17,916 included a gain of $13,862 from foreign currency translation adjustments primarily due to the strengthening of the British Pound and Canadian and Australian Dollars, all in comparison to the US Dollar;

a $2,951 benefit from pension amortization of actuarial losses;

and a $1,103 gain on cash flow hedges.

For the quarter ended March 31, 2020, total other comprehensive loss, net of taxes, of $14,834 included a loss of $16,471 from foreign currency translation adjustments primarily due to the weakening of the British Pound, and Canadian and Australian Dollars, all in comparison to the US Dollar;

a $669 benefit from pension amortization of actuarial losses;

and a $968 gain on cash flow hedges.

For the six months ended March 31, 2020, total other comprehensive loss, net of taxes, of $7,993, included a loss of $10,001 from foreign currency translation adjustments primarily due to the weakening of the Canadian and Australian Dollars, all in comparison to the US Dollar, a $1,341 benefit from pension amortization of actuarial losses and a $667 gain on cash flow hedges.

Discontinued operations

At December 31, 2020, Griffon's assets and liabilities are primarily for the Installations Services and other discontinued operations primarily related to insurance claims, income tax and product liability, warranty reserves and environmental reserves.

At March 31, 2021, Griffon's assets and liabilities are primarily for the Installations Services and other discontinued operations primarily related to insurance claims, income tax and product liability, warranty reserves and environmental reserves.

See Note 16, Discontinued Operations.

5 unchanged sentences

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

Cash Flows from Operations For the Three Months Ended December 31,

Cash Flows from Operations For the Six Months Ended March 31,

Net Cash Flows Provided by (Used In):

2 unchanged sentences

Financing activities (5,916) 94,351

Cash provided by operating activities for the three months ended December 31, 2020 was $20,829 compared to cash used of $18,169 in the comparable prior year period.

Cash provided by income from operations, adjusted for non-cash expenditures, was partially offset by a net increase in working capital predominately consisting of increased inventory primarily to meet seasonal demands, partially offset by a reduction in accounts receivable.

During the three months ended December 31, 2020, Griffon's source of cash from investing activities was $1,491 compared to $23,519 used in the prior year comparable period.

Cash used by operating activities for the six months ended March 31, 2021 was $25,841 compared to cash used of $60,843 in the comparable prior year period.

Cash provided by income from operations, adjusted for non-cash expenditures, was more than offset by a net increase in working capital predominately consisting of a net increase in accounts receivable and an increase in inventory, primarily to meet seasonal demands.

During the six months ended March 31, 2021, Griffon's use of cash from investing activities was $13,532 compared to $32,760 used in the prior year comparable period.

On December 18, 2020, DE completed the sale of its SEG business and received net proceeds from the sale of $14,725.

2 unchanged sentences

On November 29, 2019, AMES acquired 100% of the outstanding stock of 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.

Capital expenditures, net of proceeds from the sale of assets, for the three months ended December 31, 2020 totaled $11,873, a decrease of $1,115 from the prior year period.

During the three months ended December 31, 2020, cash used by financing activities from operations totaled $9,297 as compared to $34,701 provided by in the comparable prior year period.

Cash used in financing activities in the current period consisted primarily of net borrowings of long-term debt and payment of dividends.

At December 31, 2020, there were $13,493 in outstanding borrowings under the Credit Agreement, compared to $100,117 in outstanding borrowings at the same date in the prior year.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase of $50,000 of Griffon’s outstanding common stock.

Under these share repurchase programs, the Company may, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions.

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

No shares were repurchased during the quarter ended December 31, 2020 under these share repurchase programs.

During the three months ended December 31, 2020, 133,027 shares, with a market value of $2,774, or $20.85 per share 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.

We had an increase in investments of $2,138.

Capital expenditures, net of proceeds from the sale of assets, for the six months ended March 31, 2021 totaled $23,904, an increase of $1,675 from the prior year period.

During the six months ended March 31, 2021, cash used by financing activities from operations totaled $5,916 as compared to $94,351 provided by in the comparable prior year period.

Cash used in financing activities in the current period consisted primarily of the payment of dividends and purchase of treasury shares to satisfy vesting of restricted stock, partially offset by net borrowings of long-term debt.

During 2020, the Company declared and paid regular cash dividends totaling $0.30 per share, or $0.075 per share each quarter.

During the three months ended December 31, 2020, the Board of Directors approved and paid a quarterly cash dividend of $0.08 per share.

During the six months ended March 31, 2021, the Board of Directors approved and paid two quarterly cash dividend of $0.08 per share each.

The Company currently intends to pay dividends each quarter;

however, payment of dividends is determined by the Board of Directors at its discretion based on various factors, and no assurance can be provided as to the payment of future dividends.

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.

During the three months ended December 31, 2020, COVID-19 has not had a material impact on our operations, and we anticipate our current cash balances, cash flows from operations and sources of liquidity will be sufficient to meet our cash requirements.

Payments related to Telephonics revenue are received in accordance with the terms of development and production subcontracts;

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.

During the six months ended March 31, 2021, 133,027 shares, with a market value of $2,774, or $20.85 per share 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 $20.75 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase of $50,000 of Griffon’s outstanding common stock.

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

No shares were repurchased during the six months ended March 31, 2021 under these share repurchase programs.

During the six months ended March 31, 2021, COVID-19 has not had a material impact on our operations, and we anticipate our current cash balances, cash flows from operations and sources of liquidity will be sufficient to meet our cash requirements.

Payments related to DE revenue are received in accordance with the terms of development and production subcontracts;

certain of such receipts are progress or performance-based payments.

1 unchanged sentence

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

For the three months ended December 31, 2020:

• The United States Government and its agencies, through either prime or subcontractor relationships, represented 8% of Griffon’s consolidated revenue and 70% of Telephonics’ revenue.

For the six months ended March 31, 2021:

• The United States Government and its agencies, through either prime or subcontractor relationships, represented 7% of Griffon’s consolidated revenue and 64% of DE revenue.

• The Home Depot represented 17% of Griffon’s consolidated revenue, 24% of CPP's revenue and 11% of HBP’s revenue.

3 unchanged sentences

The loss of all or a portion of the volume from any one of these customers could have a material adverse impact on Griffon’s liquidity and results of operations.

Cash and Equivalents and Debt December 31, September 30,

Cash and Equivalents and Debt March 31, September 30,

Cash and equivalents $ 175,564 $ 218,089

6 unchanged sentences

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).

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 will amortize over the term of the 2028 Senior Notes.

4 unchanged sentences

a multi-currency sub-facility of $200,000;

and contains a customary accordion feature that permits us to request,

subject to each lender's consent, an increase in the maximum aggregate amount that can be borrowed by up to an additional $100,000.

and contains a customary accordion feature that permits us to request, subject to each lender's consent, an increase in the maximum aggregate amount that can be borrowed by up to an additional $100,000.

Borrowings under the Credit Agreement may be repaid and re-borrowed at any time.

Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance.

Current margins are 0.50% for base rate loans and 1.50% for LIBOR loans.

margins are 0.50% for base rate loans and 1.50% for LIBOR loans.

The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants, and events of default.

1 unchanged sentence

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, under the Credit Agreement 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.

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.

Two of Griffon's 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.

The Troy, Ohio lease is secured by a mortgage on the underlying real estate and is guaranteed by Griffon.

The Troy, Ohio lease is secured by a mortgage on the real estate and is guaranteed by Griffon.

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.

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).

(“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 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.

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.

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 June 2021, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.50% (1.60% as of December 31, 2020).

As of December 31, 2020, the revolver had no outstanding balance 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.

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.

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

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

Gross Debt to EBITDA (Leverage), as calculated in accordance with the definition in the Credit Agreement, was 3.1x at December 31, 2020.

During the three months ended December 31, 2020 and 2019, Griffon used cash for discontinued operations from operating activities of $1,472 and $606, respectively, primarily related to the settling of certain liabilities and environmental costs associated with the Plastics business and Installations Services.

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

Gross Debt to EBITDA (Leverage), as calculated in accordance with the definition in the Credit Agreement, was 3.1x at March 31, 2021.

During the six months ended March 31, 2021, cash provided by discontinued operations from operating activities of $1,237 primarily related to insurance proceeds received, partially offset by the settling of certain liabilities and environmental costs associated with the Installations Services.

During the six months ended March 31, 2020, Griffon used cash for discontinued operations from operating activities of $1,994 primarily related to the settling of certain liabilities and environmental costs associated with the Plastics business and Installations Services.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by Clopay Corporation, Telephonics Corporation, The AMES Companies, Inc., ATT Southern LLC, Clopay Ames Holding Corp., ClosetMaid LLC, CornellCookson, LLC and Cornell Real Estate Holdings, LLC, all of which are indirectly 100% owned by Griffon.

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of December 31, 2020 and September 30, 2020 and for the three months ended December 31, 2020 and for the year ended September 30, 2020.

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of March 31, 2021 and September 30, 2020 and for the three and six months ended March 31, 2021 and for the year ended September 30, 2020.

All intercompany balances and transactions between subsidiaries under Parent and subsidiaries under the Guarantor have been eliminated.

10 unchanged sentences

Summarized Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended For the Year Ended

December 31, 2020 September 30, 2020

For the Six Months Ended For the Year Ended

March 31, 2021 September 30, 2020

Parent Company Guarantor Companies Parent Company Guarantor Companies

5 unchanged sentences

Summarized Balance Sheet Information

For the Three Months Ended For the Year Ended

December 31, 2020 September 30, 2020

For the Six Months Ended For the Year Ended

March 31, 2021 September 30, 2020

Parent Company Guarantor Companies Parent Company Guarantor Companies

55 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 2. Management’s Discussion and Analysis