What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2022-02-01 · 219 added, 193 removed, 311 unchanged (57% of the section changed)

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

We expanded the scope of The AMES Companies, Inc.

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

("CornellCookson"), respectively.

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

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

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

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.

In our Consumer and Professional Products ("CPP") segment, we expanded the scope of our brands through the acquisition of Hunter Fan Company ("Hunter") on January 24, 2022 and ClosetMaid, LLC ("ClosetMaid") in 2018.

In our Home and Building Products ("HBP") segment, we acquired CornellCookson, Inc.

("CornellCookson"), which has been integrated into Clopay Corporation ("Clopay") in our Home and Building Products ("HBP") segment, creating a leading North American manufacturer and marketer of residential garage doors and sectional commercial doors, and rolling steel doors and grille products under brands that include Clopay, Ideal and CornellCookson.

We established an integrated headquarters for CPP in Orlando, Florida, for our portfolio of leading brands that includes AMES, Hunter, True Temper and ClosetMaid.

CPP is now positioned to fulfill its mission of Bringing Brands Together™ with the leading brands in consumer and professional tools;

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

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

and on April 18, 2022, Griffon entered into a definitive agreement to sell Telephonics to TTM Technologies, Inc.

(NASDAQ:TTMI) ("TTM") for $330,000 in cash.

The transaction is expected to close within the second calendar quarter of 2022, subject to certain closing conditions and regulatory approvals.

Since September 2021, Griffon has 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.

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 contractual purchase price of $845,000, subject to customary post-closing adjustments.

Hunter, part of Griffon's CPP segment, complements and diversifies our portfolio of leading consumer brands and products.

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

a combination of cash on hand and revolver borrowings was used to fund the balance of the purchase price and related acquisition and debt expenditures.

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.

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.

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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:

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) 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;

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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.

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.

At March 31, 2022, $233,039 of revolver capacity was available under Griffon's Credit Agreement and Griffon had cash and equivalents of $122,293.

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

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.

On September 27, 2021, we announced we are exploring strategic alternatives for our DE segment, which consists of our Telephonics subsidiary, and on April 18, 2022, Griffon entered into a definitive agreement to sell Telephonics to TTM for $330,000 in cash.

The transaction is expected to close within the second calendar quarter of 2022.

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

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

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

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

a combination of cash on hand and revolver borrowings was used to fund the balance of the purchase price and related acquisition and debt expenditures.

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

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

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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.

On April 28, 2022, Griffon announced an accelerated timeline and reduced scope for the initiative, which will now be completed by the end of fiscal 2022.

These changes reflect the rapid progress made with the initiative, and reduced investment in facilities expansion and equipment given recent significant increases in construction and equipment costs.

Any remaining expenditures, after the end of fiscal 2022, including those related to the deployment of AMES' global information systems, will be included in the continuing operations of the business.

Future investments in equipment, particularly for automation, will be part of normal-course annual capital expenditures.

This initiative includes three key development areas.

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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.

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.

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

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

When fully implemented and the efficiencies are fully realized, we expect annual cash savings of $25,000 (previously $30,000 to $35,000).

The cost to implement this new business platform, over the duration of the project, will now include one-time charges of approximately $50,000 (previously $65,000) and capital investments of approximately $15,000 (previously $65,000).

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

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

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

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

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

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.

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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 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 U.K.

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Reportable Segments:

Griffon now conducts its operations through two reportable segments:

Griffon 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;

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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%.

Revenue for the quarter ended March 31, 2022 was $779,617 compared to $574,682 in the prior year comparable quarter, an increase of 36%.

Revenue increased at HBP and CPP by 52% and 24%, respectively.

Excluding the Hunter acquisition on January 24, 2022, revenue increased 23% to $708,768.

Hunter contributed $70,849.

Income from continuing operations was $58,571 or $1.10 per share, compared to $18,119, or $0.34 per share, in the prior year quarter.

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– Acquisition costs of $6,708 ($6,146, net of tax, or $0.12 per share);

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

– Proxy expenses of $4,661 ($3,591, net of tax, or $0.07 per share);

– Fair value step-up of acquired inventory sold of $2,701 ($2,007, net of tax, or $0.04 per share);

– Discrete and certain other tax benefits, net, of $693 or $0.01 per share.

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– Restructuring charges of $7,502 ($5,605, net of tax, or $0.11 per share);

– Discrete and certain other tax provisions, net, of $1,417 or $0.03 per share.

Excluding these items from the respective quarterly results, Income from continuing operations would have been $73,118, or $1.37 per share, in the current year quarter compared to $25,141, or $0.47 per share in the prior year quarter.

Revenue for the six months ended March 31, 2022 was $1,371,366 compared to $1,116,205 in the prior year period, an increase of 23%.

Revenue increased at HBP and CPP by 37% and 11%, respectively.

Revenue, excluding the Hunter acquisition, increased 17% to $1,300,517.

Income from continuing operations was $75,476 or $1.41 per share, compared to $43,549, or $0.82 per share, in the prior year period.

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

– Restructuring charges of $6,482 ($4,826, net of tax, or $0.09 per share);

– Acquisition costs of $9,303 ($8,149, net of tax, or $0.15 per share);

– Proxy expenses of $6,952 ($5,359, net of tax, or $0.10 per share);

– Fair value step-up of acquired inventory sold of $2,701 ($2,007, net of tax, or $0.04 per share);

– Discrete and certain other tax benefits, net, of $1,574 or $0.03 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.

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

– Restructuring charges of $10,581 ($7,906, net of tax, or $0.15 per share);

– Discrete and certain other tax provisions, net, of $369 or $0.01 per share.

Excluding these items from the respective periods, Income from continuing operations would have been $94,243, or $1.76 per share in the current year period ended March 31, 2022 compared to $51,824, or $0.97 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.

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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,

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

2022 2021 2022 2021

Income from continuing operations $ 58,571 $ 18,119 $ 75,476 $ 43,549

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Acquisition costs 6,708 — 9,303 —

Proxy contest costs 2,291 —

Proxy expenses 4,661 — 6,952 —

Fair value step-up of acquired inventory sold 2,701 — 2,701 —

Tax impact of above items (3,596) (1,897) (5,097) (2,675)

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

Discrete and certain other tax provisions (benefits), net (693) 1,417 (1,574) 369

Adjusted income from continuing operations $ 73,118 $ 25,141 $ 94,243 $ 51,824

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Acquisition costs 0.12 — 0.15 —

Proxy contest costs 0.03 —

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

Proxy expenses 0.07 — 0.10 —

Fair value step-up of acquired inventory sold 0.04 — 0.04 —

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

Adjusted earnings per common share from continuing operations $ 1.37 $ 0.47 $ 1.76 $ 0.97

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RESULTS OF OPERATIONS

Three months ended December 31, 2021 and 2020

Three and six months ended March 31, 2022 and 2021

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).

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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,

2022 2021 2022 2021

United States $ 264,747 $ 205,368 $ 429,646 $ 388,810

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Depreciation and amortization 11,791 8,620 $ 20,397 $ 16,819

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.

For the quarter ended March 31, 2022, revenue increased $79,141, or 24%, compared to the prior year period primarily resulting from a 21% or $70,849 contribution from the January 24, 2022 Hunter acquisition, and price and mix of 15%, partially offset by an 11% reduction in volume, primarily in the U.S.

due to reduced consumer demand and customer supplier diversification, and an unfavorable impact of foreign exchange of 1%.

For the quarter ended March 31, 2022, Adjusted EBITDA increased 28% to $47,844 compared to $37,423 in the prior year quarter, due to EBITDA of $14,339 from the Hunter acquisition.

Excluding the Hunter contribution, EBITDA of $33,505 decreased 10% primarily due to the unfavorable impact of reduced U.S.

volume and increased material, labor and transportation costs, partially offset by the benefits of price and mix.

For the six months ended March 31, 2022, revenue increased $71,272, or 11%, compared to the prior year period primarily resulting from a 12% or $70,849 contribution from the Hunter acquisition and price and mix of 13%, partially offset by a 13% reduction in volume, primarily in the U.S.

due to reduced consumer demand and customer supplier diversification and an unfavorable impact of foreign exchange of 1%.

For the six months ended March 31, 2022, Adjusted EBITDA decreased 9% to $64,058 compared to $70,136 in the prior year period.

Excluding the Hunter contribution of EBITDA of $14,339, EBITDA of $49,719 decreased 29% primarily due to the unfavorable impact of reduced US volume coupled with the lag in realization of price increases (Q1) and increased material, labor and transportation costs, partially offset by the benefits of price and mix.

For the quarter and six months ended March 31, 2022, segment depreciation and amortization increased $3,171 and $3,578, respectively, compared to the prior year comparable periods, due to 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 contractual purchase price of $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.

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.

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

Strategic Initiative and Restructuring Charges

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.

On April 28, 2022, Griffon announced an accelerated timeline and reduced scope for the initiative, which will now be completed by the end of fiscal 2022.

These changes reflect the rapid progress made with the initiative, and reduced investment in facilities expansion and equipment given recent significant increases in construction and equipment costs.

Any remaining expenditures, after the end of fiscal 2022, including those related to the deployment of AMES' global information systems, will be included in the continuing operations of the business.

Future investments in equipment, particularly for automation, will be part of normal-course annual capital expenditures.

This initiative includes three key development areas.

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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.

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.

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

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.

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

When fully implemented and the efficiencies are fully realized, we expect annual cash savings of $25,000 (previously $30,000 to $35,000).

In connection with this initiative, during the three and six months ended March 31, 2022, CPP incurred pre-tax restructuring and related exit costs approximating $4,766 and $6,482, respectively.

Since inception of this initiative in fiscal 2020, total cumulative charges totaled $41,569, comprised of cash charges of $28,167 and non-cash, asset-related charges of $13,402;

the cash charges included $10,948 for one-time termination benefits and other personnel-related costs and $17,219 for facility exit costs.

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.

Since inception of this initiative in fiscal 2020 and during the six months ended March 31, 2022, capital expenditures of $18,058 and $2,551, respectively, were driven by investment in CPP business intelligence systems and an e-commerce facility.

Cash Charges Non-Cash Charges

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Phase II 14,000 16,000 — 30,000 25,000

Reduction in Scope (9,500) (1,000) (4,500) (15,000) (50,000)

Total Anticipated Charges 16,500 19,000 14,500 50,000 15,000

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Q1 FY2022 Activity (260) (1,167) (289) (1,716) (1,690)

Q2 FY2022 Activity (1,878) (1,122) (1,766) (4,766) (861)

Total cumulative charges (10,948) (17,219) (13,402) (41,569) $ (18,058)

Estimate to Complete $ 16,930 $ 3,903 $ 7,364 $ 28,197 $ 46,403

Estimate to Complete $ 5,552 $ 1,781 $ 1,098 $ 8,431 $ (3,058) (a)

(a) Includes future proceeds from the sale of exited facilities.

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,

2022 2021 2022 2021

Residential $ 211,229 $ 148,060 $ 389,016 $ 302,602

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Depreciation and amortization 4,324 4,379 $ 8,662 $ 8,720

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.

For the quarter ended March 31, 2022, HBP revenue increased $125,794, or 52%, compared to the prior year period due to favorable mix and pricing with increased commercial volume offset by reduced residential volume due to labor and supply chain disruptions.

For the quarter ended March 31, 2022, Adjusted EBITDA increased 161% to $104,474 compared to $40,060 in the prior year period.

EBITDA benefited from the increased revenue noted above, partially offset by increased material, labor and transportation costs.

For the six months ended March 31, 2022, revenue increased $183,889, or 37%, compared to the prior year period, due to favorable mix and pricing of 43% driven by both residential and commercial, partially offset by reduced volume of 6% driven by decreased residential volume due to labor and supply chain disruptions.

For the six months ended March 31, 2022, Adjusted EBITDA increased 82% to $160,771 compared to $88,429 in the prior year period.

The favorable variance resulted from the increased revenue noted above, partially offset by increased material, labor and transportation costs.

For the quarter and six months ended March 31, 2022, segment depreciation and amortization remained consistent with the prior year comparable periods.

For the quarter ended March 31, 2022, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $12,750 compared to $12,104 in the prior year quarter;

for the six months ended March 31, 2022, unallocated amounts totaled $25,707 compared to $24,733 in the prior year period.

The increase in both the current quarter and six month periods, compared to their respective comparable prior year periods, primarily relates to increased medical claims, travel and stock compensation (Q1) expenses.

Proxy expenses

During the three and six months ended March 31, 2022, we incurred $4,661 and $6,952, respectively, of proxy expenses (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.

The proxy contest was completed at the shareholder meeting on February 17, 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.

Segment depreciation and amortization increased $3,116 and $3,520 for the quarter and six months ended March 31, 2022, respectively, compared to the comparable prior year periods, primarily due to depreciation and amortization on new assets placed in service and assets acquired in acquisitions.

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.

For the quarters ended March 31, 2022 and 2021, Other income (expense) of $1,675 and $1,081, respectively, includes $168 and $320, 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 $1,079 and $227, respectively, as well as $(331) and $55, respectively, of net investment income.

Other income (expense) also includes rental income of $462 in each of the three months ended March 31, 2022 and 2021.

Additionally, it includes royalty income of $616 for the three months ended March 31, 2022.

For the six months ended March 31, 2022 and 2021, Other income (expense) of $3,056 and $1,438, respectively, includes $562 and $(379), 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 $2,027 and $454, respectively, as well as $238 and $386, respectively, of net investment income.

Other income (expense) also includes rental income of $924 in each of the six months ended March 31, 2022 and 2021.

Additionally, it includes royalty income of $616 for the six months ended March 31, 2022.

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.

During the quarter ended March 31, 2022, the Company recognized a tax provision of $24,533 on income before taxes from continuing operations of $83,104, compared to a tax provision of $11,082 on income before taxes from continuing operations of $29,201 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $4,766 ($3,496, net of tax), acquisition costs of $6,708 ($6,146, net of tax), proxy expenses of $4,661 ($3,591, net of tax), fair value step-up of acquired inventory sold of $2,701 ($2,007, net of tax), and discrete and certain other tax benefits, net, that affect comparability of $693.

The prior year quarter results included restructuring charges of $7,502 ($5,605, net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $1,417.

Excluding these items, the effective tax rates for the quarters ended March 31, 2022 and 2021 were 28.3% and 31.5%, respectively.

During the six months ended March 31, 2022, the Company recognized a tax provision of $31,851 on income before taxes of $107,327, compared to a tax provision of $22,790 on income before taxes of $66,339 in the comparable prior year period.

The six month period ended March 31, 2022 included restructuring charges of $6,482 ($4,826, net of tax), acquisition costs of $9,303 ($8,149, net of tax), proxy expenses of $6,952 ($5,359, net of tax), fair value step-up of acquired inventory sold of $2,701 ($2,007, net of tax), and discrete and certain other tax benefits, net, that affect comparability of $1,574.

The six month period ended March 31, 2021 included restructuring charges of $10,581 ($7,906, net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $369.

Excluding these items, the effective tax rates for the six months ended March 31, 2022 and 2021 were 29.0% and 32.6%, 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.

For the quarters ended March 31, 2022 and 2021, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $5,092 and $5,293, respectively.

For the six months ended March 31, 2022 and 2021, stock based compensation expense totaled $9,959 and $9,501, 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;

For the quarter ended March 31, 2022, total other comprehensive income (loss), net of taxes, of $4,949 included a gain of $6,049 from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian Dollar and British Pound, offset by the weakening of the Australian Dollar, all in comparison to the US Dollar;

a $140 benefit from pension amortization;

and a $1,240 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;

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 $1,791 gain on cash flow hedges.

For the six months ended March 31, 2022, total other comprehensive income, net of taxes, of $2,198 included a gain of $3,730 from foreign currency translation adjustments primarily due to the strengthening of the Canadian and Australian Dollars, offset by the weakening of the Euro and the British Pound, all in comparison to the US Dollar;

a $808 benefit from pension amortization of actuarial losses;

and a $2,340 loss 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.

DISCONTINUED OPERATIONS

Defense Electronics

For the Three Months Ended December 31,

Revenue $ 53,993 $ 67,768

Adjusted EBITDA $ 4,472 8.3 % $ 5,585 8.2%

Depreciation and amortization $ — $ 2,676

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 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.

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

military commands.

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.

Restructuring Charges and Divestiture

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 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, 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.

The transaction is expected to close within the second calendar quarter of 2022.

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.

For the quarter ended March 31, 2022, DE revenue decreased 6% to $56,273 from $60,150 compared to the prior year quarter, and Adjusted EBITDA increased by 23% to $2,729 from $2,220.

For the six months ended March 31, 2022, revenue decreased by 14% to $110,266 from $127,918 compared to the prior year period, and Adjusted EBITDA decreased by 8% to $7,201 from $7,805.

The six months ended March 31, 2021 included $6,713 of revenue and $412 of EBITDA from the SEG business divested in December 2020.

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.

At March 31, 2022, 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.

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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.

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.

Griffon's primary sources of liquidity are cash flows generated from operations, cash on hand and our January 2022 secured $400,000 Credit Agreement.

At March 31, 2022 , $233,039 of revolver capacity was available under the Credit Agreement and we had cash and cash equivalents of $122,293.

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

1 unchanged sentence

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.

As of March 31, 2022, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $53,700.

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.

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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 899,924 (5,916)

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 used in operating activities from continuing operations for the six months ended March 31, 2022 was $172,633 compared to cash used in continuing operations of $44,411 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.

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.

Cash flows used in 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 six months ended March 31, 2022, Griffon used $858,539 in investing activities from continuing operations compared to $22,106 used in the prior year comparable period.

Griffon used $851,464 to acquire Hunter during the six months ended March 31, 2022.

Griffon used $2,242 in the prior year comparable period to acquire Quatro.

Capital expenditures, net of proceeds from the sale of assets, for the six months ended March 31, 2022 totaled $21,998, an increase of $4,245 from the prior year period.

Proceeds from the sale of investments totaled $14,923 during the six months ended March 31, 2022 compared to cash used to purchase investments of $2,138 in the prior year comparable period.

During the six months ended March 31, 2022, cash provided by financing activities from continuing operations totaled $899,924 compared to cash used of $5,916 used in the prior year comparable period.

Cash provided by financing activities in the current period consisted primarily of net proceeds from long-term debt of $937,385, partially offset by financing costs of $16,457, purchases of treasury shares to satisfy vesting of restricted stock of $10,886 and the payment of dividends of $10,091.

Cash used in financing activities in the prior year comparable period consisted primarily of payments of dividends of 8,678 and purchases of treasury shares to satisfy vesting of restricted stock of $2,909, partially offset by net proceeds from long-term debt of $6,456.

During the six months ended March 31, 2022, 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 six months ended March 31, 2022, 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 three months ended December 31, 2021, the Board of Directors approved and paid a quarterly cash dividend of $0.09 per share.

During the six months ended March 31, 2022, the Board of Directors approved and paid two quarterly cash dividends of $0.09 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 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 April 27, 2022, the Board of Directors declared a quarterly cash dividend of $0.09 per share, payable on June 16, 2022 to shareholders of record as of the close of business on May 19, 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 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.

As of March 31, 2022, an aggregate of $57,955 remains under Griffon's Board authorized repurchase programs.

No shares were repurchased during the six months ended March 31, 2022 under these share repurchase programs.

During the six months ended March 31, 2022, cash provided by discontinued operations from operating activities of $9,846 primarily related to DE operations and the settling of certain liabilities and environmental costs associated with the former Installations Services business.

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.

During the six months ended March 31, 2021, Griffon used cash for discontinued operations from operating activities of $17,058 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 11,323 primarily related to net proceeds received of $14,725 from DE's sale of its SEG business less capital expenditures of $6,151.

Cash and Equivalents and Debt December 31, September 30,

Cash and Equivalents and Debt March 31, September 30,

Cash and equivalents $ 122,293 $ 248,653

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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;

As of March 31, 2022, 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 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;

The fair value of the Senior Notes approximated $945,000 on March 31, 2022 based upon quoted market prices (level 1 inputs).

On January 24, 2022, Griffon amended and restated its Revolving Credit Facility (as amended, "Credit Agreement") to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to its current $400,000 revolving credit facility ("Revolver"), and replaced LIBOR with SOFR (Secured Overnight Financing Rate).

The fair value of the Term Loan B facility approximated $792,000 on March 31, 2022 based upon quoted market prices (level 1 inputs).

The Term Loan B contains a SOFR floor of 0.50% and a current spread of 2.75%, for a total current interest rate of 3.25%.

The Original Issue Discount for the Term Loan B was 99.75%.

Additionally, there are two interest rate step-downs tied to achieving decreased secured leverage ratio thresholds.

The Term Loan B facility requires nominal quarterly principal payments equal to 0.25% of the original outstanding principal amount, beginning with the quarter ended June 30, 2022;

potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds starting with the fiscal year ending September 30, 2023;

and a final balloon payment due at maturity.

Term Loan B borrowings may generally be repaid without penalty but may not be re-borrowed.

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

Term Loan B borrowings are secured by the same collateral as the Revolver.

In connection with this amendment, Griffon capitalized $15,466 of underwriting fees and other expenses incurred, which are being amortized over the term of the loan.

At March 31, 2022, $15,235 remained to be amortized.

The Revolver's maximum borrowing availability is $400,000 and it matures on March 22, 2025.

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

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.

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

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

In addition, on December 9, 2021, Griffon replaced the Revolver GBP LIBOR benchmark rate with a Sterling Overnight Index Average ("SONIA").

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

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

Current margins are 1.00% for base rate loans, 2.00% for SOFR loans and 2.00% for SONIA loans.

The Revolver 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.

Both the Revolver and Term Loan B 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 March 31, 2022, there were $153,146 of outstanding borrowings under the Revolver;

outstanding standby letters of credit were $13,815;

2 unchanged sentences

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

At March 31, 2022, $13,757 was outstanding, net of issuance costs.

During the period ended March 31, 2022, 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 buyout option in November 2021.

In November 2012, Garant G.P.

(“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).

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($12,018 as of March 31, 2022) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.75% LIBOR USD and 2.38% Bankers Acceptance Rate CDN as of March 31, 2022).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

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 (2.02% at December 31, 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 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 (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.

Griffon Australia is required to maintain a certain minimum equity level and is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

At March 31, 2022, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($12,018 as of March 31, 2022) available.

On March 30, 2022, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 18,375 term loan, AUD 20,000 revolver and AUD 15,000 receivable purchase facility agreement that was entered into in July 2016 and further amended in fiscal 2020.

Griffon Australia paid in full and canceled the term loan in the amount of AUD 9,625 and canceled the AUD 20,000 revolver.

The amendment refinanced the existing AUD 15,000 receivable purchase facility.

The receivable purchase facility matures in March 2023, but is renewable upon mutual agreement with the lender.

The receivable purchase facility accrues interest at BBSY (Bank Bill Sap Rate) plus 1.25%, respectively, per annum (1.31% at March 31, 2022).

At March 31, 2022, there was no balance outstanding under the receivable purchase facility with AUD 15,000 ($11,273 as of March 31, 2022) available.

The receivable purchase facility is secured by substantially all of the assets of Griffon Australia and its subsidiaries.

In July 2018, The AMES Companies UK Ltd and its subsidiaries (collectively, "AMES UK") entered into a GBP 14,000 term loan, GBP 4,000 mortgage loan and GBP 5,000 revolver.

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 1.80%, (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 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 Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.92% (2.61% at March 31, 2022).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25% (4.00% as of March 31, 2022) and was renewed in June 2021.

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

As of March 31, 2022, the revolver had an outstanding balance of GBP 2,827 ($3,713 as of March 31, 2022) while the term and mortgage loan balances amounted to GBP 12,145 ($15,948 as of March 31, 2022).

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

AMES UK is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

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

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.

On February 14, 2022, AMES UK entered into a $8,500 trade facility agreement.

The trade facility has a maximum loan period of 135 days and is due on June 29, 2022.

The trade facility accrues interest at the Mid-point of the FED Target Range plus 2.50% (2.88% as of March 31, 2022).

The trade facility had an outstanding balance of $8,000 as of March 31, 2022.

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, 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.

At March 31, 2022, 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 4.4x at March 31, 2022.

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.

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

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.

For the six months ended March 31, 2022, The Home Depot represented 13% of Griffon’s consolidated revenue, 19% of CPP's revenue and 8% of HBP’s revenue.

No other customer exceeded 10% of consolidated revenue.

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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., 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.

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, AMES Hunter Holdings Corporation, Hunter Fan Company, 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 March 31, 2022 and September 30, 2021 and for the six months ended March 31, 2022 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 Three Months Ended For the Year Ended

December 31, 2021 September 30, 2021

For the Six Months Ended For the Year Ended

March 31, 2022 September 30, 2021

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, 2021 September 30, 2021

For the Six Months Ended For the Year Ended

March 31, 2022 September 30, 2021

Parent Company Guarantor Companies Parent Company Guarantor Companies

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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;

our strategy, future operations, prospects and the plans of our businesses, including the closing of the disposition of Telephonics Corporation;

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

15 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