What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-01 compared with 2021-07-30 · 264 added, 256 removed, 240 unchanged (68% of the section changed)

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

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

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

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

Also in 2018, we expanded the scope of The AMES Companies, Inc.

We expanded the scope of The AMES Companies, Inc.

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

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

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

Griffon now reports its operations through three segments.

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

On January 24, 2022, Griffon acquired Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a purchase price of approximately $845,000, subject to customary post-closing adjustments.

Hunter will be part of Griffon's CPP segment as it complements and diversifies our portfolio of leading consumer brands and products.

Hunter is expected to contribute approximately $385,000 in revenue in the first twelve months of operation after the acquisition.

The acquisition of Hunter was financed with a new $800,000 seven year Term Loan B facility;

and a combination of cash on hand and revolver borrowings under Griffon's revolving credit facility ("Credit Agreement") was used to fund the balance of the purchase price and related acquisition and debt expenditures.

On September 27, 2021, we announced we are exploring strategic alternatives for our Defense Electronics ("DE") segment, which consists of our Telephonics Corporation subsidiary, including a sale.

As a result, Griffon classified the results of operations of the Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation as held for sale in the consolidated balance sheets.

Accordingly, all references made to results and information in this Quarterly Report on Form 10-Q are to Griffon's continuing operations, unless noted otherwise.

Update of COVID-19 on Our Business

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

In the United States, we manufacture a substantial majority of the products that we sell.

While this helps mitigate the effects of global supplier and transportation disruptions, we are still impacted.

During the nine months ended June 30, 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.

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.

In the United States, we manufacture a substantial majority of the

products that we sell.

While this helps mitigate the effects of global supplier and transportation disruptions, we are still impacted by these disruptions.

Our supply chain has experienced certain disruptions which, together with other factors such as a shortage of labor, has resulted in longer delivery lead times and restricted manufacturing capacity for certain of our products.

Commodity prices have increased during COVID-19 and may continue to increase, and we may not be able to pass off all or any of such price increases to our customers on a timely basis, or at all.

It is difficult to predict whether the supply chain disruptions that impact us will improve, worsen or remain the same in the near term.

Our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above;

might be limited in their production capacity due to complying with restrictions relating to the operation of businesses during the COVID-19 pandemic;

or could suffer their own supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.

During fiscal 2021 and through the date of this filing, all of our businesses have experienced normal or better than pre-pandemic order patterns compared with pre-pandemic levels.

executive orders issued in 2020 which required all workers to remain at home unless their work is critical, essential, or life-sustaining, have been lifted.

Regardless, we believe that, based on the various standards published to date, the work our employees are performing are either critical, essential and/or life-sustaining for the following reasons:

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

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

2) HBP residential and commercial garage doors, rolling steel doors and related products that (a) provide protection and support for the efficient and safe movement of people, goods, and equipment in and out of residential and commercial facilities, (b) help prevent fires from spreading from one location to another, and (c) protect warehouses and homes,

and their contents, from damage caused by strong weather events such as hurricanes and tornadoes;

1) HBP residential and commercial garage doors, rolling steel doors and related products (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 2) 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.

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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 $362,218 was available at June 30, 2021), and extended maturity of the facility to 2025.

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

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

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

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

At June 30, 2021, Griffon had cash and equivalents of $220,697.

At December 31, 2021, $364,633 of revolver capacity was available under Griffon's Credit Agreement and Griffon had cash and equivalents of $151,220.

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.

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Business Highlights

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

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

On January 24, 2022, Griffon acquired Hunter, a market leader in residential ceiling, commercial, and industrial fans, for a purchase price of $845,000, subject to customary post-closing adjustments.

The acquisition of Hunter was financed with a new $800,000 seven year Term Loan B facility;

and a combination of cash on hand and revolver borrowings under Griffon's Credit Agreement was used to fund the balance of the purchase price and related acquisition and debt expenditures.

On September 27, 2022, Griffon announced that it is exploring strategic alternatives for its Defense Electronics business, including a sale.

Griffon believes this will increase long-term value for Griffon shareholders, while creating enhanced growth opportunities for Telephonics.

Telephonics is recognized globally as a leading provider of highly sophisticated intelligence, surveillance and communications solutions that are deployed across a wide range of land, sea and air applications.

Telephonics designs, develops, manufactures and provides logistical support and lifecycle sustainment services to defense, aerospace and commercial customers worldwide.

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

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

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

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

During 2020, Griffon issued, at par, $1,000,000 of 5.75% Senior Notes due in 2028 (the “2028 Senior Notes”).

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

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

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

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

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

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

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

This initiative includes three key development areas.

First, certain AMES U.S.

and 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.

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

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

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

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

We continue to expect the roll-out of the new business platform for our AMES U.S.

and global operations to be completed by the end of calendar year 2023.

When fully implemented, we expect these actions will result in AMES' EBITDA margins improving to 12% plus, excluding the impact of Hunter, with annual cash savings of $30,000 to $35,000 and a reduction in inventory of $30,000 to $35,000, based on fiscal 2020 operating levels.

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

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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.

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

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

In February 2018, we closed on the sale of our Clopay Plastics Products ("Plastics") business to Berry Global, Inc.

("Berry") for approximately $465,000, net of certain post-closing adjustments, thus exiting the specialty plastics industry that the Company had entered when it acquired Clopay Corporation in 1986.

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

This transaction provided immediate liquidity and improved Griffon's cash flow given the historically higher capital needs of the Plastics operations as compared to Griffon’s remaining businesses.

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

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We believe that ClosetMaid is the leading brand in its category, with excellent consumer recognition.

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

ClosetMaid generated over $300,000 in revenue in the first twelve months after the acquisition.

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

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).

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.

Quatro is expected to contribute approximately $5,000 in annualized revenue in the first twelve months after the acquisition.

Quatro contributed approximately $5,000 in revenue in the first twelve months after the acquisition.

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

(“SEG”) business for $15,000.

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

SEG provides sophisticated, highly technical engineering and analytical support to the U.S.

Missile Defense Agency and various U.S.

military commands.

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.

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

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

Apta contributed approximately $20,000 in revenue in the first twelve months after the acquisition.

On February 13, 2018, AMES acquired Kelkay, a leading United Kingdom manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the UK and Ireland.

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading U.K.

supplier of innovative garden pottery and associated products sold to leading U.K.

and Ireland garden centers for approximately $10,500 (GBP 8,750), inclusive of a post-closing working capital adjustment, net of cash acquired.

This acquisition broadens AMES' product offerings in the U.K.

market and increases its in-country operational footprint.

On February 13, 2018, AMES acquired Kelkay, a leading U.K.

manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the U.K.

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

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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 U.K.

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, Tuscan Path and December, 2020 Quatro 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

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Reportable Segments:

Griffon currently conducts its operations through three reportable segments:

• CPP conducts its operations through AMES.

Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles.

CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

• HBP conducts its operations through Clopay.

Griffon now conducts its operations through two reportable segments:

• Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools;

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid.

• Home and Building Products ("HBP") conducts its operations through Clopay.

Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.

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Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

• 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 June 30, 2021 was $646,792 compared to $632,061 in the prior year comparable quarter, an increase of 2% (4% excluding the prior year revenue of $7,931 related to the Systems Engineering Group (SEG) disposition), primarily driven by increased revenue at HBP of 18%, partially offset by reduced revenue at CPP and DE of 1% and 25%, respectively.

Net income was $16,707 or $0.31 per share, compared to $21,831, or $0.50 per share, in the prior year quarter.

Defense Electronics, classified as a discontinued operation, conducts its operations through Telephonics Corporation ("Telephonics"), 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, 2021 was $591,749 compared to $541,523 in the prior year comparable quarter, an increase of 9%, primarily driven by increased revenue at HBP of 23%, partially offset by reduced revenue at CPP of 3%.

Income from continuing operations was $16,905 or $0.31 per share, compared to $25,430, or $0.48 per share, in the prior year quarter.

The current year quarter results from operations included the following:

– Restructuring charges of $1,716 ($1,330, net of tax, or $0.02 per share);

– Discrete and certain other tax provisions, net, of $2,979 or $0.06 per share.

– Acquisition costs of $2,595 ($2,003, net of tax, or $0.04 per share);

– Proxy contest costs of $2,291 ($1,768, net of tax, or 0.03 per share);

– Discrete and certain other tax benefits, net, of $881 or $0.02 per share.

The prior year quarter results from operations included the following:

– Restructuring charges of $3,079 ($2,301, net of tax, or $0.04 per share);

– Loss from debt extinguishment $1,235 ($969, net of tax, or $0.02 per share);

– Discrete and certain other tax provisions, net, of $1,828 or $0.04 per share.

– Discrete and certain other tax benefits, net, of $1,048 or $0.02 per share.

Excluding these items from the respective quarterly results, Net income would have been $21,125, or $0.39 per share, in the current year quarter compared to $26,683, or $0.50 per share in the prior year quarter.

Revenue for the nine months ended June 30, 2021 was $1,890,915 compared to $1,746,849 in the prior year period, an increase of 8% (9% excluding the current year and prior year revenue of $6,713 and 21,939, respectively, related to the SEG disposition), primarily driven by increased revenue at CPP and HBP of 12% each, partially offset by reduced revenue at DE of 18%.

Net income was $63,319 or $1.19 per share, compared to $33,338, or $0.76 per share, in the prior year period.

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

– Restructuring charges of $22,444 ($17,080, net of tax, or $0.32 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 provisions, net, of $2,864 or $0.05 per share.

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

– Restructuring charges of $11,171 ($8,377, net of tax, or $0.19 per share);

– Loss from debt extinguishment $7,925 ($6,214, net of tax, or $0.14 per share);

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

– Discrete and certain other tax provisions, net, of $1,248 or $0.03 per share.

Excluding these items from the respective periods, Net income would have been $78,012, or $1.46 per share in the current year period ended June 30, 2021 compared to $51,498, or $1.18 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.

Griffon believes this information is useful to investors for the same reason.

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 June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

Net income $ 16,707 $ 21,831 $ 63,319 $ 33,338

The following table provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per share from continuing operations to Adjusted earnings per share from continuing operations:

For the Three Months Ended December 31,

Income from continuing operations $ 16,905 $ 25,430

Adjusting items:

Restructuring charges 1,716 3,079

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

Loss from debt extinguishment — 1,235 — 7,925

Acquisition costs 2,595 —

Proxy contest costs 2,291 —

Tax impact of above items (1,501) (778)

Discrete and certain other tax provisions, net 2,979 1,828 2,864 1,248

Adjusted net income $ 22,815 $ 25,852 $ 78,012 $ 51,498

Diluted earnings per common share $ 0.31 $ 0.50 $ 1.19 $ 0.76

Discrete and certain other tax benefits, net (881) (1,048)

Adjusted income from continuing operations $ 21,125 $ 26,683

Earnings per common share from continuing operations $ 0.31 $ 0.48

Adjusting items, net of tax:

Restructuring charges 0.02 0.04

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

Loss from debt extinguishment — 0.02 — 0.14

Acquisition costs 0.04 —

Discrete and certain other tax provisions, net 0.06 0.04 0.05 0.03

Adjusted earnings per common share $ 0.43 $ 0.59 $ 1.46 $ 1.18

Proxy contest costs 0.03 —

Discrete and certain other tax benefits, net (0.02) (0.02)

Adjusted earnings per common share from continuing operations $ 0.39 $ 0.50

Weighted-average shares outstanding (in thousands) 53,753 53,192

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

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

The tax impact for the above reconciling adjustments from GAAP to non-GAAP Net income and EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments.

RESULTS OF OPERATIONS

Three and Nine months ended June 30, 2021 and 2020

Three months ended December 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).

Griffon believes this information is useful to investors for the same reason.

See table provided in Note 13 - Business Segments for a reconciliation of Segment Adjusted EBITDA to Income before taxes.

See table provided in Note 13 - Business Segments for a reconciliation of Segment Adjusted EBITDA to Income before taxes from continuing operations.

Consumer and Professional Products

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

Revenue $ 324,826 $ 328,929 $ 947,739 $ 844,917

For the Three Months Ended December 31,

United States $ 164,899 $ 183,442

Europe 18,330 13,156

Canada 22,628 22,115

Australia 74,349 69,540

All other countries 2,967 2,789

Total Revenue $ 283,173 $ 291,042

Adjusted EBITDA $ 16,214 5.7 % $ 32,713 11.2 %

Depreciation and amortization $ 8,606 $ 8,199

For the quarter ended June 30, 2021, revenue decreased $4,103, or 1%, compared to the prior year period, due to reduced volume of 9%, primarily in the U.S., due to shipping delays related to availability of transportation, partially offset by favorable mix of 3% and a favorable foreign currency impact of 5%.

For the quarter ended June 30, 2021, Adjusted EBITDA decreased 21% to $29,388 compared to $37,115 in the prior year quarter, primarily due to the decreased revenue noted above, increased distribution and material costs coupled with the lag in realization of price increases, and COVID-19 related inefficiencies.

The current quarter included a favorable foreign currency impact of 4%.

For the nine months ended June 30, 2021, revenue increased $102,822, or 12%, compared to the prior year period, primarily due to increased volume of 8%, driven by increased consumer demand across all geographies, and a favorable foreign currency impact of 4%.

For the nine months ended June 30, 2021, Adjusted EBITDA increased 18% to $99,524 compared to $84,068 in the prior year period.

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

The current year-to-date period included a favorable currency impact of 6%,

For the quarter and nine months ended June 30, 2021, segment depreciation and amortization increased $584 and $950, respectively, compared to the prior year comparable periods, due to new assets placed in service.

For the quarter ended December 31, 2021, revenue decreased $7,869, or 3%, compared to the prior year period, due to reduced volume of 14%, primarily in the U.S.

resulting from labor, transportation and supply chain disruptions, partially offset by increased volume across all international locations, and favorable mix and price of 11%.

For the quarter ended December 31, 2021, Adjusted EBITDA decreased 50% to $16,214 compared to $32,713 in the prior year quarter, due to the decreased volume, increased U.S.

material and transportation costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies, partially offset by increased volume at international locations.

For the quarter ended December 31, 2021, segment depreciation and amortization increased $407 compared to the prior year comparable period, due to the onset of depreciation for new assets placed in service.

On January 24, 2021, Griffon completed the acquisition of Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans for a purchase price of approximately $845,000, subject to customary post-closing adjustments.

Hunter adds to Griffon's CPP segment, complementing and diversifying our portfolio of leading consumer brands and products.

Hunter is expected to contribute approximately $385,000 in revenue in the first twelve months of operation after the acquisition under AMES' ownership.

Quatro is expected to contribute approximately $5,000 in annualized revenue in the first twelve months under AMES' ownership.

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading United Kingdom supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden centers.

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

Apta contributed approximately $20,000 in revenue in the first twelve months after the acquisition.

Quatro contributed approximately $5,000 in revenue in the first twelve months under AMES' ownership.

Strategic Initiative and Restructuring Charges

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

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

This initiative includes three key development areas.

First, certain AMES U.S.

and 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.

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

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

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

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

Third, multiple

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

We continue to expect the roll-out of the new business platform for our AMES U.S.

and global operations to be completed by the end of calendar year 2023.

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

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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 nine months ended June 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $13,669 and $14,663, respectively.

In connection with this initiative, during the three months ended December 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $1,716.

Since inception of this initiative in fiscal 2020, total cumulative charges totaled $36,803, comprised of cash charges of $25,167 and non-cash, asset-related charges of $11,636;

the cash charges included $9,070 for one-time termination benefits and other personnel-related costs and $16,097 for facility exit costs.

During the year ended September, 30, 2020 and during the nine months ended June 30, 2021, capital expenditures of 6,733 and $8,145, respectively, were driven by investment in CPP business intelligence systems and e-commerce facility.

Since inception of this initiative in fiscal 2020 and during the three months ended December 31, 2021, capital expenditures of $18,597 and $3,090, respectively, were driven by investment in CPP business intelligence systems and e-commerce facility.

Cash Charges Non-Cash Charges

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Total 2020 restructuring charges (5,620) (3,357) (4,692) (13,669) (6,733)

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

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

Q3 FY2021 Activity (700) (2,190) (1,192) (4,082) (2,700)

Total 2021 restructuring charges (3,190) (11,573) (6,655) (21,418) (8,774)

Q1 FY2022 Activity $ (260) $ (1,167) $ (289) (1,716) $ (3,090)

Total cumulative charges (9,070) (16,097) (11,636) (36,803) (18,597)

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Home and Building Products

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

Revenue $ 259,392 $ 219,164 $ 752,684 $ 670,374

For the Three Months Ended December 31,

Residential $ 177,787 $ 154,542

Commercial 130,789 95,939

Total Revenue $ 308,576 $ 250,481

Adjusted EBITDA $ 56,297 18.2 % $ 48,369 19.3 %

Depreciation and amortization $ 4,338 $ 4,341

For the quarter ended June 30, 2021, revenue increased $40,228 or 18%, compared to the prior year period, driven by increased volume of 5%, and favorable mix and pricing of 13%.

For the quarter ended June 30, 2021, Adjusted EBITDA increased 7% to $42,156 compared to $39,299 in the prior year period.

EBITDA benefited from increased revenue noted above, partially offset by increased material costs coupled with the lag in realization of price increases, and COVID-19 related inefficiencies.

For the nine months ended June 30, 2021, revenue increased $82,310 or 12%, compared to the prior year period, driven by increased volume of 8%, and favorable mix and pricing of 4%.

For the nine months ended June 30, 2021, Adjusted EBITDA increased 18% to $130,585 compared to $110,635 in the prior year period.

The favorable variance resulted from the increased revenue noted above, partially offset by increased material costs coupled with the lag in realization of price increases, and COVID-19 related inefficiencies.

For the quarter and nine months ended June 30, 2021, segment depreciation and amortization decreased $132 and $880, respectively, compared to the prior year comparable periods, due to fully depreciated assets.

For the quarter ended December 31, 2021, HBP revenue increased $58,095 or 23%, compared to the prior year period, primarily due to favorable mix and pricing of 33% driven by both residential and commercial, partially offset by reduced volume of 10% driven by residential primarily due to labor and supply chain disruptions.

For the quarter ended December 31, 2021, Adjusted EBITDA increased 16% to $56,297 compared to $48,369 in the prior year period.

EBITDA benefited from the increased revenue noted above, partially offset by increased material costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

For the quarter ended December 31, 2021, segment depreciation and amortization remained consistent with the prior year comparable period.

For the quarter ended December 31, 2021, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $12,957 compared to $12,629 in the prior year quarter.

The increase in the current quarter compared to the comparable prior year period primarily relates to increased Employee Stock Ownership Plan and medical claim expenses.

Proxy Contest Costs

During the three months ended December 31, 2021, we incurred $2,291 of proxy contest costs (including legal and advisory fees) in unallocated amounts as a result of a proxy contest initiated by a shareholder during the most recently completed fiscal quarter.

There were no similar costs in the comparable period of the prior year.

Due to the ongoing nature of the proxy contest, we anticipate incurring additional proxy contest and related costs throughout fiscal 2022.

Segment Depreciation and Amortization

Segment depreciation and amortization increased $404 for the quarter ended December 31, 2021 compared to the comparable prior year quarter, primarily due to depreciation and amortization on new assets placed in service.

Other Income (Expense)

For the quarters ended December 31, 2021 and 2020, Other income (expense) of $1,381 and $357, respectively, includes $394 and $699, respectively, of net foreign 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 $948 and $227, respectively, as well as $93 and $330, respectively, of net investment income.

Other income (expense) also includes rental income of $462 in each of the three months ended December 31, 2021 and 2020.

Provision for income taxes

During the quarter ended December 31, 2021, the Company recognized a tax provision of $7,318 on income before taxes from continuing operations of $24,223, compared to a tax provision of $11,708 on income before taxes from continuing operations of $37,138 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $1,716 ($1,330, net of tax), acquisition costs of $2,595 ($2,003, net of tax), proxy contest costs of $2,291 ($1,768, net of tax) and discrete and certain other tax benefits, net, that affect comparability of $881.

The prior year quarter results included restructuring charges of $3,079 ($2,301, net of tax) and discrete and certain other tax benefits, net, that affect comparability of $1,048.

Excluding these items, the effective tax rates for the quarters ended December 31, 2021 and 2020 were 31.5% and 33.7%, respectively.

Stock based compensation

For the quarters ended December 31, 2021 and 2020, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $4,867 and $4,208, respectively.

Comprehensive income (loss)

For the quarter ended December 31, 2021, total other comprehensive income (loss), net of taxes, of $2,751 included a loss of $2,319 from foreign currency translation adjustments primarily due to the weakening of the Euro and British Pound, all in comparison to the US Dollar;

a $668 benefit from pension amortization;

and a $1,100 loss on cash flow hedges.

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.

DISCONTINUED OPERATIONS

Defense Electronics

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Revenue $ 53,993 $ 67,768

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Depreciation and amortization $ — $ 2,676

For the quarter ended June 30, 2021, revenue decreased $21,394, or 25%, compared to the prior year quarter.

For the quarter ended December 31, 2021, DE revenue decreased $13,775 compared to the prior year quarter.

The prior year results include revenue from the SEG business of $6,713.

Excluding the divestiture of SEG from prior year results, revenue decreased $7,062, or 12%.

The decrease was driven by reduced volume due to the timing of deliveries on Communications and Radar systems, partially offset by volume increases on Naval & Cyber Systems.

For the quarter ended June 30, 2021, Adjusted EBITDA of $4,140 remained consistent with the prior year comparable period.

Excluding the divestiture of SEG from the prior year results, Adjusted EBITDA increased 9% primarily due to reduced operating expenses, including the benefit from the first quarter reduction in force, and improved Naval & Cyber Systems program performance, partially offset by cost growth for Radar systems.

For the nine months ended June 30, 2021, revenue decreased $41,066, or 18%, compared to the prior year period.

The current and prior year results include revenue from the SEG business of $6,713 and $21,939, respectively.

Excluding the divestiture of SEG from current and prior year results, revenue decreased $25,840, or 12%.

The decline in revenue was driven by reduced volume related to the timing of work performed and deliveries on Communications, Surveillance and Radar programs, partially offset by increased Naval & Cyber Systems volume.

For the nine months ended June 30, 2021, Adjusted EBITDA decreased $900, or 7%, compared to the prior year comparable period.

Excluding the divestiture of SEG from current and prior year results, Adjusted EBITDA decreased 6% primarily driven by the reduced revenue noted above and cost growth on Radar systems, partially offset by improved Naval & Cyber Systems program performance and reduced operating expenses, including the benefit from the first quarter reduction in force.

For the quarter and nine months ended June 30, 2021, segment depreciation and amortization decreased $165 and $75, respectively, compared to the prior year comparable periods, related to the sale of SEG.

The decrease was driven by reduced volume due to the timing of work performed primarily for Surveillance Systems.

For the quarter ended December 31, 2021, DE Adjusted EBITDA decreased $1,113 compared to the prior year comparable period.

The prior year results include Adjusted EBITDA from the SEG business of $412.

Excluding the divestiture of SEG from the prior year results, Adjusted EBITDA decreased 14% primarily due to the reduced revenue noted above, partially offset by favorable program performance.

Depreciation and amortization was excluded from the current year results since DE is classified as a discontinued operation and accordingly, the Company ceased depreciation and amortization in accordance with discontinued operations accounting guidelines.

Depreciation and amortization would have been approximately $2,700 in the quarter ended December 31, 2021.

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

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military commands.

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 nine months ended June 30, 2021, DE was awarded several new contracts and received incremental funding on existing contracts approximating $189,000 (excludes $5,500 of SEG awards).

Contract backlog was $375,039 at June 30, 2021 compared to $341,003 at June 30, 2020 (excludes $9,440 of SEG related backlog) with 66% 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).

During the quarter ended December 31, 2021, DE was awarded several new contracts and received incremental funding on existing contracts approximating $48,000.

Contract backlog was $346,100 at December 31, 2021 compared to $388,700 at December 31, 2020 with 66% expected to be fulfilled in the next 12 months;

backlog was $352,200 at September 30, 2021.

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.

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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 $2,180, recorded in the first quarter, during the nine months ended June 30, 2021.

The reduction in force initiative resulted in severance charges of approximately $2,200, recorded in the first quarter ended December 31, 2020.

These actions reduced headcount by approximately 90 people.

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 nine months ended June 30, 2021 related to the divestiture of SEG.

For the quarter ended June 30, 2021, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $10,924 compared to $11,080 in the prior year quarter;

for the nine months ended June 30, 2021, unallocated amounts totaled $34,873 compared to $34,969 in the prior year period.

The decrease in both the current quarter and nine month periods, compared to their respective comparable prior year periods, primarily relates to decreases in travel and administrative office costs.

Segment Depreciation and Amortization

Segment depreciation and amortization increased $287 for the quarter ended June 30, 2021 compared to the comparable prior year quarter, primarily due to depreciation and amortization on new assets placed in service.

Segment depreciation and amortization for the nine months ended June 30, 2021 remained consistent with the comparable prior year period.

Other Income (Expense)

For the quarters ended June 30, 2021 and 2020, Other income (expense) of $386 and $806, respectively, includes $77 and $72, 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 $226 and $392, respectively, as well as $249 and $499, respectively, of net investment income (loss).

For the nine months ended June 30, 2021 and 2020, Other income (expense) of $1,192 and 2,199 includes $(302) and $441, 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 $680 and $1,170, respectively, as well as $877 and $216, respectively, of net investment income (loss).

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

Provision for income taxes

During the quarter ended June 30, 2021, the Company recognized a tax provision of $12,366 on income before taxes of $29,073, compared to a tax provision of $12,649 on income before taxes of $34,480 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $4,082 ($3,129, net of tax) and discrete and certain other tax provisions, net, that affect comparability of $2,979, primarily due to the impact of UK tax rate changes on deferred liabilities.

The prior year quarter results included restructuring charges of $1,633 ($1,224, net of tax), loss from debt extinguishment of

$1,235 ($969, net of tax) and discrete tax and certain other tax provisions, net, that affect comparability of $1,828.

Excluding these items, the effective tax rates for the quarters ended June 30, 2021 and 2020 were 31.2% and 30.8%, respectively.

During the nine months ended June 30, 2021, the Company recognized a tax provision of $32,783 on Income before taxes of $96,102, compared to a tax provision of $21,022 on income before taxes of $54,360 in the comparable prior year period.

The nine month period ended June 30, 2021 included restructuring charges of $22,444 ($17,080, net of tax), gain on sale of the SEG business of $5,291 ($5,251, net of tax) and discrete and certain other tax provisions, net, that affect comparability of $2,864 primarily due to the impact of UK tax rate changes on deferred liabilities.

The nine month period ended June 30, 2020 included restructuring charges of $11,171 ($8,377, net of tax), acquisition costs of $2,960 ($2,321, net of tax), loss from debt extinguishment of $7,925 ($6,214, net of tax) and discrete tax and certain other tax provisions, net, that affect comparability of $1,248.

Excluding these items, the effective tax rates for the nine months ended June 30, 2021 and 2020 were 31.1% and 32.6%, respectively.

Stock based compensation

For the quarters ended June 30, 2021 and 2020, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $5,591 and $4,507, respectively.

For the nine months ended June 30, 2021 and 2020, stock based compensation expense totaled $15,092 and $12,809, respectively.

Comprehensive income (loss)

For the quarter ended June 30, 2021, total other comprehensive income, net of taxes, of $2,739 included a gain of $1,160 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound and Canadian Dollar, partially offset by the weakening of the Australian Dollar, all in comparison to the US Dollar;

a $1,245 benefit from pension amortization;

and a $351 gain on cash flow hedges.

For the nine months ended June 30, 2021, total other comprehensive income, net of taxes, of $20,655 included a gain of $15,022 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound, Canadian and Australian Dollars, all in comparison to the US Dollar;

a $4,196 benefit from pension amortization of actuarial losses;

and a $1,454 gain on cash flow hedges.

For the quarter ended June 30, 2020, total other comprehensive income, net of taxes, of $8,702 included income of $9,508 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 $1,139 benefit from pension amortization of actuarial losses;

and a $1,945 loss on cash flow hedges.

For the nine months ended June 30, 2020, total other comprehensive income, net of taxes, of $709, included a loss of $493 from foreign currency translation adjustments primarily due to the weakening of the Canadian Dollar, partially offset by the strengthening of the Euro, British Pound and Australian Dollar currencies, all in comparison to the US Dollar, a $2,480 benefit from pension amortization of actuarial losses and a $1,278 loss on cash flow hedges.

Discontinued operations

At June 30, 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.

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

DE recorded a pre-tax gain of $6,240 ($6,017, net of tax) during the three months ended December 31, 2020 related to the divestiture of SEG.

Other Discontinued Operations

At December 31, 2021, Griffon's other discontinued assets and liabilities are primarily related to insurance claims, product liability, warranty reserves, environmental reserves and related income taxes.

See Note 16, Discontinued Operations.

LIQUIDITY AND CAPITAL RESOURCES

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.

Griffon's primary sources of liquidity are cash flows generated from operations, cash on hand and our January 2020 five-year secured $400,000 Credit Agreement.

At December 31, 2021, $364,633 of revolver capacity was available under the Credit Agreement and we had cash and cash equivalents of $151,220.

Management assesses Griffon’s liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities.

Significant factors affecting liquidity are:

cash flows from operating activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital under satisfactory terms.

Griffon believes it has sufficient liquidity available to invest in its existing businesses and execute strategic acquisitions, while managing its capital structure on both a short-term and long-term basis.

Significant factors affecting liquidity include cash flows from operating activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital under satisfactory terms.

Griffon believes it has sufficient liquidity available to invest in existing businesses and strategic acquisitions while managing its capital structure on both a short-term and long-term basis.

As of December 31, 2021, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $66,600.

Our intent is to permanently reinvest these funds outside the U.S., and we do not currently anticipate that we will need funds generated from foreign operations to fund our domestic operations.

In the event we determine that funds from foreign operations are needed to fund operations in the U.S., we will be required to accrue and pay U.S.

taxes to repatriate these funds (unless applicable U.S.

taxes have already been paid).

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

Cash Flows from Operations For the Nine months ended June 30,

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

Net Cash Flows Provided by (Used In):

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Financing activities (8,612) (9,297)

Cash provided by operating activities for the nine months ended June 30, 2021 was $42,019 compared to $55,944 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 primarily related to a net increase in inventory.

During the nine months ended June 30, 2021, Griffon's use of cash from investing activities was $26,300 compared to $45,073 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 $14,345.

Payments for acquired businesses totaled $2,242 compared to $10,531 in the prior year comparable period.

Cash used in operating activities from continuing operations for the three months ended December 31, 2021 was $84,946 compared to cash provided by continuing operations of $12,315 in the comparable prior year period.

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

Cash flows from investing activities from continuing operations is primarily comprised of capital expenditures and business acquisitions as well as proceeds from the sale of businesses, investments and property, plant and equipment.

During the three months ended December 31, 2021, Griffon used $9,969 in investing activities from continuing operations compared to $11,185 used in the prior year comparable period.

Capital expenditures, net of proceeds from the sale of assets, for the three months ended December 31, 2021 totaled $10,544, an increase of $1,575 from the prior year period.

There were no payments for acquired businesses in the current period compared to $2,242 in the prior year comparable period.

On December 22, 2020, AMES acquired Quatro, a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects.

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.

We had an increase in investments of $4,658.

Capital expenditures, net of proceeds from the sale of assets, for the nine months ended June 30, 2021 totaled $33,773, a decrease of $639 from the prior year period.

During the nine months ended June 30, 2021, cash used by financing activities from operations totaled $14,327 compared to $9,305 in the prior year comparable 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 the nine months ended June 30, 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 nine months ended June 30, 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.

Proceeds from the sale of investments totaled $575 in the current year period.

During the three months ended December 31, 2021, cash used by financing activities from continuing operations totaled $8,612 compared to $9,297 used in the prior year comparable period.

Cash used in financing activities in the current period consisted primarily of the purchase of treasury shares to satisfy vesting of restricted stock of $10,886 and the payment of dividends of $5,260, partially offset by net proceeds from long-term debt of $8,315.

Cash used in financing activities in the prior year comparable period consisted primarily of payments of dividends of 4,422, purchases of treasury shares to satisfy vesting of restricted stock of $2,909 and net repayments of long-term debt of $1,329.

During the three months ended December 31, 2021, 421,860 shares, with a market value of $10,742, or $25.46 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, 2021, an additional 5,480 shares, with a market value of $144, or $26.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

During 2021, the Company declared and paid regular cash dividends totaling $0.32 per share, or $0.08 per share each quarter.

During the nine months ended June 30, 2021, the Board of Directors approved and paid three quarterly cash dividend of $0.08 per share each.

During the three months ended December 31, 2021, the Board of Directors approved and paid a quarterly cash dividend of $0.09 per share.

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 July 29, 2021, the Board of Directors declared a quarterly cash dividend of $0.08 per share, payable on September 16, 2021 to shareholders of record as of the close of business on August 19, 2021.

On January 31, 2022, the Board of Directors declared a quarterly cash dividend of $0.09 per share, payable on March 23, 2022 to shareholders of record as of the close of business on February 23, 2022.

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 June 30, 2021, an aggregate of $57,955 remains under Griffon's Board authorized repurchase programs.

No shares were repurchased during the nine months ended June 30, 2021 under these share repurchase programs.

During the nine months ended June 30, 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.

With respect to CPP and HBP, there have been no material adverse impacts on payment for sales.

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 nine months ended June 30, 2021:

• The United States Government and its agencies, through either prime or subcontractor relationships, represented 7% of Griffon’s consolidated revenue and 67% of DE revenue.

• The Home Depot represented 17% of Griffon’s consolidated revenue, 25% of CPP's revenue and 11% of HBP’s revenue.

No other customer exceeded 10% of consolidated revenue.

Future operating results will continue to depend substantially on the success of Griffon’s largest customers and our ongoing relationships with them.

Orders from these customers are subject to change and may fluctuate materially.

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 June 30, September 30,

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

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

During the three months ended December 31, 2021, cash provided by discontinued operations from operating activities of $7,004 primarily related to DE operations and the settling of certain liabilities and environmental costs associated with the Installations Services.

Cash provided by discontinued operations from investing activities related to DE operations capital expenditures.

During the three months ended December 31, 2020, Griffon used cash for discontinued operations from operating activities of $7,762 primarily related to DE operations and the settling of certain liabilities and environmental costs associated with other discontinued operations.

Cash provided by discontinued operations from investing activities of 14,900 primarily related to net proceeds received of $15,580 from DE's sale of its SEG business less capital expenditures of $2,904.

Cash and Equivalents and Debt December 31, September 30,

Cash and equivalents $ 151,220 $ 248,653

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Debt, net of cash and equivalents $ 916,376 $ 811,853

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 June 30, 2021, outstanding Senior Notes due totaled $1,000,000;

During 2020, Griffon issued, at par, $1,000,000 of 5.75% Senior Notes due in 2028 (the “2028 Senior Notes”).

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

As of December 31, 2021, the outstanding 5.75% Senior Notes due totaled $1,000,000;

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

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.

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 $1,061,250 on June 30, 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.

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

Additionally, Griffon recognized a $7,925 loss on the early extinguishment of debt of the $1,000,000 principal amount of 2022 Senior Notes, comprised primarily of the write-off of $6,725 of remaining deferred financing fees, $607 of tender offer net premium expense and $593 of redemption interest expense.

On January 30, 2020, Griffon amended its revolving credit facility (as amended, the "Credit Agreement") to increase the maximum borrowing availability from $350,000 to $400,000, and extend its maturity date from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions and are registered under the Securities Act.

The fair value of the Senior Notes approximated $1,037,500 on December 31, 2021 based upon quoted market prices (level 1 inputs).

In connection with the issuance of Senior Notes, Griffon capitalized $16,448 of underwriting fees and other expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over the term of such notes, and, at December 31, 2021, $12,775 remained to be amortized.

On December 9, 2021 Griffon amended its revolving credit facility (as amended, the "Credit Agreement") to replace the GBP LIBOR benchmark rate with Sterling Overnight Index Average ("SONIA").

The Credit Agreement's maximum borrowing availability is $400,000 and the revolving credit facility matures on March 22, 2025.

The facility includes a letter of credit sub-facility with a limit of $100,000;

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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.

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.

The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments and investments.

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

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

The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments

and investments.

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 June 30, 2021, there were $20,775 of outstanding borrowings under the Credit Agreement;

At December 31, 2021, there were $19,859 of outstanding borrowings under the Credit Agreement;

outstanding standby letters of credit were $15,508;

and $364,633 was available, subject to certain loan covenants, for borrowing at that date.

Two of Griffon's subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala, Florida.

The leases mature in November 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 real estate, which is guaranteed by Griffon, and has a one dollar buyout at the end of the lease.

Griffon has one finance lease outstanding for real estate located in Ocala, Florida.

The lease matures in 2025, and bears interest at a fixed rate of approximately 5.6%.

During the period ended December 31, 2021, the financing lease on the Troy, Ohio location expired.The lease bore interest at a rate of approximately 5.0%, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease.

Griffon exercised the one dollar buy out option in November 2021.

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

At June 30, 2021, $15,254 was outstanding, net of issuance costs.

At December 31, 2021, $14,083 was outstanding, net of issuance costs.

In November 2012, Garant G.P.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($12,126 as of June 30, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.40% LIBOR USD and 1.48% Bankers Acceptance Rate CDN as of June 30, 2021).

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($11,708 as of December 31, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.40% LIBOR USD and 1.53% Bankers Acceptance Rate CDN as of December 31, 2021).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

At June 30, 2021, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($12,126 as of June 30, 2021) available.

At December 31, 2021, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($11,708 as of December 31, 2021) available.

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 June 30, 2021).

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 June 30, 2021, the term loan had an outstanding balance of AUD 12,125 ($9,131 as of June 30, 2021).

As of December 31, 2021, the term loan had an outstanding balance of AUD 9,625 ($6,965 as of December 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 (1.98% and 1.41%, respectively, at June 30, 2021).

At June 30, 2021, 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 (2.01% and 1.42%, respectively, at December 31, 2021).

At December 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.

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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 each accrue interest at the GBP LIBOR Rate plus 1.8%, (1.86% at June 30, 2021).

The revolving facility accrues interest at the Bank of England Base Rate plus 1.8% (1.90% as of June 30, 2021) and was renewed in June 2021.

The Term Loan and Mortgage Loans each accrue interest at the GBP LIBOR Rate plus 1.80%, (1.99% at December 31, 2021).

Effective, in January 2022, the Term Loan and Mortgage Loan were amended to replace GBP LIBOR with SONIA.

The revolving facility accrues interest at the Bank of England Base Rate plus 3.3% (3.50% as of December 31, 2021) and was renewed in June 2021.

The revolving credit facility matures in April 2022, but it is renewable upon mutual agreement with the lender.

As of June 30, 2021, the revolver had an outstanding balance of GBP $2,073 ($2,871 as of June 30, 2021) while the term and mortgage loan balances amounted to GBP 13,771 ($19,073 as of June 30, 2021).

As of December 31, 2021, the revolver had an outstanding balance of GBP $4,935 ($6,533 as of December 31, 2021) while the term and mortgage loan balances amounted to GBP 12,687 ($16,796 as of December 31, 2021).

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

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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 $620, and interest.

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

The amount outstanding on the internal loan at June 30, 2021 was $27,988.

Additionally, on January 24, 2022, in connection with the Hunter acquisition, Griffon amended and restated the Credit Agreement to provide for a new $800,000 seven year Term Loan B facility with initial pricing of the Secured Overnight Financing Rate ("SOFR") floor of 50 basis points plus a spread of 275 basis points, for a total interest rate of 325 basis points.

The Original Issue Discount ("OID") was 99.75%.

Additionally, there are “step-down” features for the rate tied to achieving lower leverage ratio levels.

The Term Loan B facility requires quarterly payments equal to 0.25% of the outstanding principal amount, with a balloon payment due at maturity.

Term Loan B borrowings may generally be repaid without penalty but may not be reborrowed.

The Term Loan B facility is subject to the same affirmative and negative covenants that apply to the revolving credit facility, but is not subject to any financial maintenance tests.

Term Loan B borrowings are secured by the same collateral package as borrowings under the revolving credit facility.

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

At June 30, 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 2.9x at June 30, 2021.

During the nine months ended June 30, 2021, cash provided by discontinued operations from operating activities of $1,080 primarily related to insurance proceeds received, partially offset by the settling of certain liabilities and environmental costs associated with the Installations Services.

During the nine months ended June 30, 2020, Griffon used cash for discontinued operations from operating activities of $2,481 primarily related to the settling of certain liabilities and environmental costs associated with the Plastics business and Installations Services.

At December 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 3.3x at December 31, 2021.

Capital Resource Requirements

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

The project is expected to be completed by the end of calendar year 2023.

For additional information, see CPP results of operations reportable segment discussion.

Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $1,000,000 payable in 2028 and related annual interest payments of approximately $57,500.

As noted above, Griffon entered into a new $800,000 seven year Term Loan B facility with initial pricing of SOFR floor of 50 basis points plus a spread of 275 basis points, for a total interest rate of 325 basis points.

The OID was 99.75%.

The Term Loan B facility requires quarterly payments equal to 0.25% of the outstanding principal amount, with a balloon payment due at maturity.

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, 2021, The Home Depot represented 14% of Griffon’s consolidated revenue, 21% of CPP's revenue and 8% of HBP’s revenue.

No other customer exceeded 10% of consolidated revenue.

Future operating results will continue to depend substantially on the success of Griffon’s largest customers and our ongoing relationships with them.

Orders from these customers are subject to change and may fluctuate materially.

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.

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 June 30, 2021 and September 30, 2020 and for the three and nine months ended June 30, 2021 and for the year ended September 30, 2020.

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by Clopay Corporation, Telephonics Corporation, The AMES Companies, Inc., 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, 2021 and September 30, 2021 and for the three months ended December 31, 2021 and for the year ended September 30, 2021.

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

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Summarized Statements of Operations and Comprehensive Income (Loss)

For the Nine Months Ended For the Year Ended

June 30, 2021 September 30, 2020

For the Three Months Ended For the Year Ended

December 31, 2021 September 30, 2021

Parent Company Guarantor Companies Parent Company Guarantor Companies

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Summarized Balance Sheet Information

For the Nine Months Ended For the Year Ended

June 30, 2021 September 30, 2020

For the Three Months Ended For the Year Ended

December 31, 2021 September 30, 2021

Parent Company Guarantor Companies Parent Company Guarantor Companies

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This Quarterly Report on Form 10-Q, especially “Management’s Discussion and Analysis”, contains certain “forward-looking statements” within the meaning of the Securities Act, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.

Such statements relate to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies.

Such statements relate to, among other things, income (loss), earnings, cash flows,

revenue, changes in operations, operating improvements, the impact of the Hunter Fan transaction, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies.

Statements in this Form 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases.

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Griffon’s ability to achieve expected savings from cost control, restructuring, integration and disposal initiatives;

the ability to identify and successfully consummate and integrate value-adding acquisition opportunities;

the ability to identify and successfully consummate, and integrate, value-adding acquisition opportunities (including, in particular, integration of the Hunter Fan acquisition);

increasing competition and pricing pressures in the markets served by Griffon’s operating companies;

the ability of Griffon’s operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations;

reduced military spending by the government on projects for which Telephonics supplies products, including as a result of defense budget cuts or other government actions;

reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of defense budget cuts or other government actions;

the ability of the federal government to fund and conduct its operations;

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unforeseen developments in contingencies, such as litigation, regulatory and environmental matters;

unfavorable results of government agency contract audits of Telephonics;

unfavorable results of government agency contract audits of Telephonics Corporation;

our strategy, future operations, prospects and the plans of our businesses, including the exploration of strategic alternatives for Telephonics Corporation;

Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights;

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Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company's Securities and Exchange Commission filings.

Readers are cautioned not to place undue reliance on these forward-looking statements.

These forward-looking statements speak only as of the date made.

Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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