Griffon

Annual Report 2020

27208

Letter to Shareholders

2020 is a year that will always be remembered for the COVID-19 pandemic. Griffon entered fiscal 2020 from

a position of strength both operationally and competitively, with momentum from our strong performance in

2019 as we continued to realize benefits from the ClosetMaid and CornellCookson acquisitions and the

strategic investments we have made in our businesses. None of us could have expected that the second half

of 2020 would be the most challenging operating environment we have ever faced. However, in spite of all of

the challenges, our businesses thrived as our team quickly responded to extraordinary circumstances.

The health and safety of our team is Griffon’s highest priority, and I am proud of and thankful for the

dedication demonstrated by our workforce. At the onset of the pandemic, we reacted immediately and

decisively, sparing no expense in our response to address the risks to our employees. We proactively

implemented measures across our global facilities such as additional cleaning, social distancing, staggered

shifts and prohibiting or significantly restricting on-site visitors. We also incorporated additional guidelines

circulated by local and national authorities. All of our U.S. facilities were deemed essential businesses under

applicable federal, state and local guidelines and operated continuously throughout the entire year.

The strong performance of our businesses continued through the second half of the year, as consumers

organized their living spaces, repaired and upgraded their homes, and spent more time outdoors. Our fiscal

year results reflect these trends, as well as the actions we have taken over the last several years through our

portfolio reshaping. We continued to optimize our businesses, driving increased cash generation, and

remained focused on developing our product portfolios through organic and inorganic growth. In fiscal 2020,

our consolidated revenue from continuing operations increased to $2.4 billion with organic growth of 8%,

Adjusted EBITDA increased 18% to $236 million* and Adjusted EPS increased 50% to $1.62*. These results

highlight the earnings power of our leading global brands and mission critical defense electronics technology.

We expect continued growth in 2021 and beyond as we realize the full

impact of our ongoing margin

improvement initiatives.

Over the past few years Griffon has evolved from an autonomous decentralized holding company to a

highly centralized, focused buyer and builder of businesses. We are excited about the strategic initiatives we

have undertaken to date and the resiliency demonstrated by our businesses during this unprecedented year.

We are just beginning to realize the earnings potential from the growth of our home, landscape and lifestyles

brands, and expect improved performance from our defense business in the coming years.

Our 2020 performance was outstanding while operating during the greatest public health crisis the world

has experienced in a century. We successfully refinanced all significant long-term debt maturities, and we

further strengthened our balance sheet with record cash flow generation and significant proceeds from an

equity offering.

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The tables below summarize our strong performance over the past

five years and present Revenue,

Adjusted EBITDA and Adjusted Earnings Per Share from continuing operations for fiscal years 2016 through

2020 (and therefore exclude contributions from our former Plastics business which we divested in February

2018).

$2,500

$2,250

$2,000

$1,750

$1,500

$1,250

Revenue Growth
($ in millions)

$2,408

$2,209

$1,978

$1,477

$1,525

2016

2017

2018

2019

2020

Fiscal Year

$250

$225

$220

$175

$150

$125

$100

Adjusted EBITDA* Growth
($ in millions)

$236

$200

$168

$128

$131

2016

2017

2018

2019

2020

Fiscal Year

Adjusted EPS* Growth

$1.62

$1.08

$0.76

$0.43

$0.44

2016

2017

2018

2019

2020

Fiscal Year

> CONSUMER AND PROFESSIONAL PRODUCTS

The Consumer and Professional Products segment is composed of The AMES Companies, which serves our

home markets of the United States, Australia, New Zealand, Canada, the United Kingdom, and Ireland. AMES

is the leading North American manufacturer and a global provider of branded consumer and professional

products. The AMES business lines include Home Organization, Lawn and Garden, Outdoor Living, and
Cleaning Tools; with leading brands including ClosetMaid(cid:2), AMES(cid:2), True Temper(cid:2), Razor-Back(cid:2) Professional,
Jackson(cid:2) Professional, Hills(cid:2), Garant(cid:2), Cyclone(cid:2), Nylex(cid:2), Harper(cid:2) and Kelkay(cid:2).

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In 2020, AMES continued to improve its operating performance, driving revenue growth and margin

expansion across our global markets. Fiscal 2020 revenue of $1.14 billion was up 14%, and Adjusted EBITDA

of $104 million* was up 15% over the prior year. AMES grew market share through continued customer

diversification and expansion of product offerings, despite the challenges due to COVID-19 related

inefficiencies and direct costs,

tight

labor and freight markets,

trade policy, and an unfavorable foreign

exchange impact.

During 2020, AMES successfully executed the first year of its multi-year strategic initiative, and in November

we announced the broadening of this initiative from AMES’ U.S. operations to include AMES international

operations. The expanded focus of this initiative leverages the same three key development areas being

executed within our U.S. operations:

to consolidate certain AMES global operations to optimize facilities

footprint and talent, to leverage strategic investments in automation and facilities expansion to increase the

efficiency of our manufacturing and fulfillment operations and support critical e-commerce growth, and to

unify the multiple independent information systems into a single data and analytics platform which will serve

the whole AMES global enterprise.

The AMES(cid:2) brand is the third oldest consumer brand in continuous operation in the United States. Since
1774, AMES tools helped build America, playing a prominent role in shaping the infrastructure and foundation

of

the country. With humble beginnings in a blacksmith’s shop in Massachusetts, AMES’ products built

Revolutionary War ramparts, connected the nation via the Transcontinental Railroad, carved Mount Rushmore,

installed the Statue of Liberty, and travelled into space. Today, AMES has grown into a global company

comprised of a market-leading portfolio of brands and products that are widely recognized and respected by

consumers and professionals worldwide. As we recover from the pandemic, we expect AMES to benefit from

both increased economic stimulus and long overdue infrastructure spending.

HOME AND BUILDING PRODUCTS

The Home and Building Products segment is composed of our Clopay(cid:2) business, the largest manufacturer
and marketer of sectional residential and commercial garage doors and rolling steel doors in North America
Ideal Door(cid:2) and Holmes(cid:2) brands. Clopay leverages its extensive
sold under the Clopay, CornellCookson(cid:2),
including its team of over 2,600 talented associates and
design, manufacturing and logistics capabilities,

52 North American distribution centers, to serve a diverse customer portfolio including major home center

retail chains and a network of over 2,500 professional dealers.

During fiscal 2020, Clopay introduced new innovative products and further integrated CornellCookson into

its operations, all while continuing to provide essential products and services to customers throughout the

COVID-19 pandemic. Fiscal 2020 revenue was $927 million, up 6% over the prior year. Adjusted EBITDA was

$154 million*, up 28% over the prior year period.

Clopay continued to advance its new product initiatives in both the rolling steel and sectional product
categories. Entry Defender(cid:2) and Store Defender™, marketed under the CornellCookson brand, have been

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strongly received by both government agencies and commercial interests as they seek to harden and protect
buildings and structures. SmokeShield™ Elevator, another CornellCookson product, is an innovative life safety
system that allows for both aesthetic architectural design and effective smoke and fire control
in elevator
systems. Clopay also introduced the Bridgeport™ Collection, building on its impressive portfolio of premium
residential products. Bridgeport brings a unique design appeal to both architects and homeowners and has

been received with great

interest. Clopay continues to invest

in new products and has a promising

development pipeline.

Clopay’s culture promotes a commitment to continuous improvement in every facet of its business. Fiscal

2020 brought further integration benefits of the CornellCookson acquisition as leadership talent, operational

efficiency and market opportunities were leveraged over the entire company. The recent infrastructure and

equipment

investment

in CornellCookson’s manufacturing facility in Mountain Top, Pennsylvania was

completed on time and on budget, increasing much needed capacity while enabling efficiency enhancement

and supporting new product initiatives.

The COVID-19 pandemic brought unique challenges to Clopay. The pandemic hit quickly, causing an

immediate lapse in demand, followed rapidly by a surge in demand by institutions, commercial entities and

homeowners. The first priority was to keep all team associates and customers safe. This included curtailing

travel and moving over 600 associates to remote work, minimizing risk for required onsite associates. The

operations team implemented creative measures in the manufacturing and distribution facilities, enabling

associates to safely follow CDC guidelines while meeting customer demand. These efforts and the

commitment of all Clopay associates supported Clopay’s ability to service its customers through the pandemic

and be rewarded with a year of strong growth.

This past year we began to realize our vision from combining the leading sectional door business with the

leading rolling steel company. We see this business gaining momentum in 2021 and beyond with our strong

portfolio of products along with those targeted to be launched in the coming year. Our products, team and

culture, combined with an impressive slate of business tools targeted to help our customers succeed in their

markets, give us confidence in our future growth and profitability.

DEFENSE ELECTRONICS

2020 proved to be a key year for our radar business, with good progress made on the ground-breaking
MOSAIC(cid:2) Active Electronically Scan Array (AESA) technology, and a resurgence of international sales for the
Romeo MH-60 helicopters with an initial order from the government of India. We see a U.S. defense budget

refocused on defense readiness and modernization, driven by a pivot to defense strategies in preparing for

near peer adversaries. Our product portfolio continues to find preference in the marketplace for Intelligence,

Surveillance and Reconnaissance, and during the past year Telephonics was recognized as a Top 100 Global

Defense Supplier by Defense Weekly.

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Fiscal 2020 segment-level sales were $341 million,

increasing $6 million or 2% compared to 2019.

Adjusted EBITDA was $25 million*, decreasing $10 million from 2019, primarily due to program inefficiencies

associated with certain radar programs, unfavorable program mix and increased operating expense associated

with bid and proposal activities. Contract backlog totaled $380 million at September 30, 2020 compared to

$389 million at September 2019, with approximately 67% expected to be fulfilled within the next twelve

months. During the year, Telephonics was awarded several new contracts and received incremental funding

on existing contracts approximating $332 million which translates into a book to bill ratio of approximately 1.0.

Telephonics continues to develop its next generation MOSAIC(cid:2) Active Electronically Scan Array (AESA)
radars and conducted successful flight tests generating important industry interest. In addition, the U.S. Navy

recognized Telephonics’ cutting-edge technical

innovation, awarding Telephonics first place in the United

States Navy’s Marine Air/Ground Task Force, Unmanned Aerial System, Expeditionary (MUX) Airborne Early
Warning (AEW) Payload prize challenge based on its submission of a MOSAIC(cid:2) AESA based radar. To close
out the year, Telephonics completed a highly successful flight demonstration working with the Air Force
Research Labs (AFRL) having installed MOSAIC(cid:2) and flying in over land demonstrations for surveillance. The
results of the demonstrations and collaboration has raised awareness and interest with the U.S. Navy/Marine
Corp and U.S. Air Force. Our MOSAIC(cid:2) product has also been approved for international export, with a
these products continues to grow
significant set of export

licenses. The AESA opportunity pipeline for

significantly.

We have seen increases in demand for MH-60 Romeo helicopters under foreign military sales (FMS) that

are delivered with Telephonics radars and intercommunication systems. In 2020, Telephonics was awarded

the first phase of contract awards to support

the India Navy purchase of 24 Romeo helicopters. Our

communications secure digital

interface (SDI) intercom solutions continue to lead the market with strong

demand and success rate. The identification, friend or foe (IFF) business products are seeing strong demand

both domestically and internationally to supply updated Mode 5 capability.

We are confident in the outlook for Telephonics and our strong position that will drive growth as the pace of

orders increases in 2021 and beyond.

BALANCE SHEET AND LIQUIDITY

During fiscal 2020, we took several steps that significantly strengthened our balance sheet. In January, we

expanded our revolving credit facility to $400 million from $350 million and extended its maturity to 2025. In

February and June, we closed on offerings of $850 million and $150 million of 2028 senior notes, refinancing

all of our 2022 notes.

In August, we completed a secondary offering of 8.7 million shares generating net

proceeds of $178 million, giving us ample liquidity.

We generated $88 million of free cash flow* in 2020 and closed the year at 3.4x net debt to EBITDA,

compared to 4.9x in the prior year. We achieved our goal of deleveraging the business to below 3.5x and are

pleased to have done so in a short time frame under difficult operating conditions. Additionally, fiscal 2020

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marked our ninth consecutive year of paying quarterly dividends to our shareholders, with dividend growth at

a 17% annualized compound rate since fiscal 2012.

Looking forward to fiscal 2021, we remain focused on optimizing our businesses through integration

activities to further enhance margins and drive incremental free cash flow. We have successfully executed on

deleveraging the business and have ample resources to support our growth strategy by investing in our

businesses and executing on value enhancing, accretive acquisition opportunities, while continuing to fund our

dividend program.

BUILDING ON OUR MOMENTUM

As we look ahead to fiscal 2021, we are positioned to build on a strong operational and financial foundation.

We see robust demand in the end markets we serve and have identified new areas to expand our efficiency

initiatives across our businesses to drive top and bottom-line growth. We have the resources to take

advantage of attractive acquisition opportunities, and have demonstrated our ability to successfully integrate,

manage and improve businesses we acquire. We are well positioned to deliver on our commitments to

profitably grow our businesses, drive incremental

improvement

to our balance sheet and maximize

shareholder value through strategic investments and the return of cash to shareholders through regular

quarterly dividends.

Griffon’s outstanding performance in 2020 was made possible by the hard work and dedication of our

7,400 employees. I am proud of all that we have accomplished in fiscal 2020 and I am excited about our

prospects to continue building value and delivering exceptional returns to our shareholders in the future.

Stay healthy. Be well.

Yours sincerely,

Ronald J. Kramer

Chairman and CEO

* For a reconciliation of (a) Adjusted earnings per share from continuing operations and (b) Adjusted EBITDA
to Income before taxes from continuing operations, see the GAAP to Non-GAAP reconciliation at the end of
this annual report. Free cash flow equals operating cash flow of $137 million less capital expenditures of $49
million.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended September 30, 2020
OR

(cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-06620
GRIFFON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

11-1893410
(I.R.S. Employer Identification No.)

712 Fifth Ave, 18th Floor New York New York
(Address of Principal Executive Offices)

10019
(Zip Code)

(Registrant’s telephone number, including area code)

(212) 957-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, $0.25 par value

Trading Symbol(s)

GFF

Name of each exchange
on which registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:3) No (cid:4)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:4) No (cid:3)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:3) No (cid:4)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period
that the registrant was required to submit such files). Yes (cid:3) No (cid:4)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act:

Accelerated filer (cid:4)

Large accelerated filer (cid:3)

Smaller reporting company (cid:4)
Emerging growth company (cid:4)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
to

transition period for complying with any new or revised financial accounting standards provided pursuant
Section 13(a) of the Exchange Act. (cid:4)

Non-accelerated filer (cid:4)

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:3)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3)
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of
the close of business March 31, 2020, the registrant’s most recently completed second quarter, was approximately
$527,000,000. The registrant’s closing price as reported by the New York Stock Exchange-Composite Transactions for
March 31, 2020 was $12.65. The number of the registrant’s outstanding shares was 56,124,504 as of October 31, 2020.

DOCUMENTS INCORPORATED BY REFERENCE:
Part III—(Items 10, 11, 12, 13 and 14). Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A of the Securities Exchange Act
of 1934.

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Special Notes Regarding Forward-Looking Statements

This Annual Report on Form 10-K, especially “Management’s Discussion and Analysis”, contains
certain “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, 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
industries in which Griffon Corporation (the “Company” or
operations, operating improvements,
“Griffon”) operates and the United States and global economies. Statements in this Form 10-K 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. Such forward-looking statements are subject to inherent risks and uncertainties that could
cause actual results to differ materially from those expressed in any forward-looking statements. These
risks and uncertainties include, among others: current economic conditions and uncertainties in the
housing, credit and capital markets; 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; 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 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; increases in the cost or lack of availability of raw materials such as resin, wood
and steel, components or purchased finished goods,
impact on costs or
availability resulting from tariffs; changes in customer demand or loss of a material customer at one of
Griffon’s operating companies; the potential
impact of seasonal variations and uncertain weather
patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a
downgrade in Griffon’s credit ratings; changes in international economic conditions including interest
rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular
third party suppliers and manufacturers to meet customer demands; the relative mix of products and
services offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term
capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as
litigation, regulatory and environmental matters; unfavorable results of government agency contract
audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of
patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon’s
operating companies; and possible terrorist threats and actions and their impact on the global economy;
the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions
in employment and an increase in business and operating facility failures, specifically among our
customers; Griffon’s ability to service and refinance its debt; and the impact of recent and future
legislative and regulatory changes, including, without limitation, changes in tax laws. 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.

including any potential

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(Unless otherwise indicated, any reference to years or year-end refers to the fiscal year ending
September 30 and US dollars and non-US currencies are in thousands, except per share data)

PART I

Item 1. Business

Overview

Griffon Corporation (the “Company” or “Griffon”, “we”, “us”) is a diversified management and
holding company that conducts business through wholly-owned subsidiaries. The Company, founded in
1959, is a Delaware corporation headquartered in New York, N.Y. and is listed on the New York Stock
Exchange (NYSE:GFF).

Business Strategy

We own and operate, and seek to acquire, businesses in multiple industries and geographic markets.
Our objective is to maintain leading positions in the markets we serve by providing innovative, branded
products with superior quality and industry-leading service. We place emphasis on our iconic and well-
respected brands, which helps to differentiate us and our offerings from our competitors and
strengthens our relationship with our customers and those who ultimately use our products.

Through operating a diverse portfolio of businesses, we expect to reduce variability caused by external
factors such as market cyclicality, seasonality, and weather. We achieve diversity by providing various
product offerings and brands through multiple sales and distribution channels and conducting business
across multiple countries which we consider our home markets.

Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their
capital structures. Griffon provides direction and assistance to its subsidiaries in connection with
acquisition and growth opportunities as well as in connection with divestitures. 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. 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
its mission of Bringing Brands Together™ with the leading brands in home and garage
fulfill
organization, outdoor de´ cor, 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.

Impact of COVID-19 on Our Business

The health and safety of our employees, our customers and their families is a high priority for Griffon.
As of the date of this filing, all of Griffon’s facilities are fully operational. We have implemented a
variety of new policies and procedures, including additional cleaning, social distancing, staggered shifts
and prohibiting or significantly restricting on-site visitors, to minimize the risk to our employees of
contracting COVID-19. We manufacture a substantial majority of the products that we sell, with the

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majority of our manufacturing activities conducted in the United States. As a result, we have been able
to mitigate the adverse impact of the COVID-19 pandemic on the global supply chain.

During fiscal 2020 and through the date of this filing, all of our businesses have experienced normal or
better order patterns compared with the same time period last year, with the exception of HBP’s
sectional door business, which experienced an 18% decline in orders in April but subsequently
rebounded. Our supply chains have not experienced significant disruption, and at this time we do not
anticipate any such significant disruption in the near term. Although many U.S. states lifted initial
executive orders issued earlier in the year requiring all workers to remain at home unless their work is
critical, essential, or life-sustaining, some states and localities have recently put in place new restrictions
regarding the operation of many types of businesses, or have tightened up restrictions already in place,
in response to the recent worsening of the COVID-19 outbreak. Regardless, we believe that, based on
the various standards published to date, the work our employees are performing are either critical,
essential and/or life-sustaining for the following reasons: 1) Our Defense Electronics segment (“DE”) is
a defense and national security-related operation supporting the U.S. Government, with a portion of its
business being directly with the U.S. Government; 2) HBP residential and commercial garage doors,
rolling steel doors and related products that (a) provide protection and support for the efficient and safe
movement of people, goods, and equipment in and out of residential and commercial facilities, (b) help
prevent fires from spreading from one location to another, and (c) protect warehouses and homes, and
their contents, from damage caused by strong weather events such as hurricanes and tornadoes; and 3)
CPP tools and storage products provide critical support for the national
infrastructure including
construction, maintenance, manufacturing and natural disaster recovery, and is part of the essential
supply base to many of its largest customers including Home Depot, Lowe’s and Menards. Our AMES
international facilities are currently fully operational, as they meet the applicable standards in their
respective countries.

Griffon believes it has adequate liquidity to invest in its existing businesses and execute its business
plan, while managing its capital structure on both a short-term and long-term basis. In January 2020,
Griffon increased total borrowing capacity under its revolving credit facility (“Credit Agreement”) by
$50,000, to $400,000 (of which $370,275 was available at September 30, 2020), and extended maturity of
the facility to 2025. In addition, the Credit Agreement has a $100,000 accordion feature (subject to
lender consent). In February 2020, Griffon refinanced $850,000 of its $1,000,000 of senior notes due
2022 with new 5.75% senior notes with a maturity of 2028, and in June 2020 refinanced the remaining
$150,000 under the same terms and indenture as the $850,000 senior notes due 2028. In August 2020, we
completed a public offering of 8,700,000 shares of our common stock for total net proceeds of $178,165
(the “Public Offering”); a portion of these net proceeds were used to repay outstanding borrowing
under our Credit Agreement. At September 30, 2020 Griffon had cash and equivalents of $218,089.

We will continue to actively monitor the situation and may take further actions that impact our
operations as may be required by federal, state or local authorities or that we determine is in the best
interests of our employees, customers, suppliers and shareholders. While we are unable to determine or
predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our
businesses, results of operations, liquidity or capital resources, we believe it is important to discuss
where our company stands today, how our response to COVID-19 is progressing and how our
operations and financial condition may change as the fight against COVID-19 progresses.

Business Highlights

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

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100.25% of par under the same indenture. Proceeds from the 2028 Senior Notes were used to redeem
the $1,000,000 of 5.25% Senior Notes due 2022.

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

In November 2019, Griffon announced the development of a next-generation business platform for CPP
to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12,
2020, Griffon announced that CPP is broadening this strategic initiative to include additional North
American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed
within our U.S. operations. First, multiple independent information systems will be unified into a single
data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES
global operations will be consolidated to optimize facilities footprint and talent. Third, strategic
investments in automation and facilities expansion will be made to increase the efficiency of our
manufacturing and fulfillment operations, and support e-commerce growth.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include
AMES’ global operations will extend the duration of the project by one year, with completion now
expected by the end of calendar year 2023. When fully implemented, these actions will result in annual
cash savings of $30,000 to $35,000 (increased from $15,000 to $20,000) and a reduction in inventory of
$30,000 to $35,000 (increased from $20,000 to $25,000), both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-
time charges of approximately $65,000 (increased from $35,000) and capital
investments of
approximately $65,000 (increased from $40,000). The one-time charges are comprised of $46,000 of
cash charges, which includes $26,000 of personnel-related costs such as training, severance, and
duplicate personnel costs as well as $20,000 of facility and lease exit costs. The remaining $19,000 of
charges are non-cash and are primarily related to asset write-downs.

On November 29, 2019, AMES acquired Vatre Group Limited (“Apta”), a leading United Kingdom
supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden
centers for approximately $10,500 (GBP 8,750), inclusive of a post-closing working capital adjustment,
net of cash acquired. This acquisition broadens AMES’ product offerings in the UK market and
increases its in-country operational footprint. Apta is expected to contribute $15,000 in revenue in the
first 12 months after the acquisition.

In June 2018, Clopay acquired CornellCookson, a leading provider of rolling steel service doors, fire
doors, and grilles,
for an effective purchase price of approximately $170,000. This transaction
strengthened Clopay’s strategic portfolio with a line of commercial rolling steel door products to
complement Clopay’s sectional door offerings in the commercial sector, and expands the Clopay
network of professional dealers focused on the commercial market. CornellCookson generated over
$200,000 in revenue in its first full year of operations.

In March 2018, we announced the combination of the ClosetMaid operations with those of AMES.
ClosetMaid generated over $300,000 in revenue in the first twelve months after the acquisition, and we
anticipate the integration with AMES will unlock additional value given the complementary products,
customers, warehousing and distribution, manufacturing, and sourcing capabilities of the two businesses.

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

In October 2017, we acquired ClosetMaid from Emerson Electric Co. (NYSE:EMR) for an effective
purchase price of approximately $165,000. ClosetMaid, founded in 1965, is a leading North American
manufacturer and marketer of wood and wire closet organization, general living storage and wire garage
storage products, and sells to some of the largest home center retail chains, mass merchandisers, and

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direct-to-builder professional installers in North America. We believe that ClosetMaid is the leading
brand in its category, with excellent consumer recognition.

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.

On February 13, 2018, AMES acquired Kelkay, a leading United Kingdom manufacturer and
distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in
the UK and Ireland for approximately $56,118 (GBP 40,452) and contingent consideration of
approximately GBP 7,000, of which approximately GBP 2,200 was earned. This acquisition broadened
AMES’ product offerings in the market and increased its in-country operational footprint. Kelkay
contributed approximately $35,000 in revenue in the first twelve months after the acquisition.

for professional, home, and industrial use,

In November 2017, Griffon acquired Harper Brush Works, a leading U.S. manufacturer of cleaning
products
for
approximately $5,000. This acquisition expanded the AMES line of long-handle tools in North
America to include brooms, brushes, and other cleaning products. Harper, as expected, generated
approximately $10,000 in revenue in the first twelve months after the acquisition.

from Horizon Global

(NYSE:HZN)

During fiscal 2017, Griffon also completed a number of other acquisitions to expand and enhance
AMES’ global footprint. In the United Kingdom, Griffon acquired La Hacienda, an outdoor living
brand of unique heating and garden de´ cor products, in July 2017. The acquisition of La Hacienda,
together with the February 2018 acquisition of Kelkay and November 2020 acquisition of Apta,
provides AMES with additional brands and a platform for growth in the UK market and access to
leading garden centers, retailers, and grocers in the UK and Ireland. In Australia, Griffon acquired Hills
Home Living, the iconic brand of clotheslines and home products, from Hills Limited (ASX:HIL) in
December 2016 and in September 2017, Griffon acquired Tuscan Path, an Australian provider of pots,
planters, pavers, decorative stone, and garden de´ cor products. The Hills and Tuscan Path acquisitions
broadened AMES’ outdoor living and lawn and garden business, strengthening AMES’ portfolio of
brands and its market position in Australia and New Zealand.

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

Further Information

Griffon posts and makes available, free of charge through its website at www.griffon.com, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
well as press releases, as soon as reasonably practicable after such materials are published or filed with
or furnished to the Securities and Exchange Commission (the “SEC”). The information found on
Griffon’s website is not part of this or any other report it files with or furnishes to the SEC.

For information regarding revenue, profit and total assets of each segment, see the Reportable
Segments footnote in the Notes to Consolidated Financial Statements.

Reportable Segments:

Griffon conducts its operations through three reportable segments:

• Consumer and Professional Products (“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,

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and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading
brands including True Temper, AMES, 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. Residential and commercial sectional garage doors are sold through professional
dealers and leading home center retail chains throughout North America under the brands
Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial,
industrial, institutional, and retail use are sold under the CornellCookson brand.

• Defense Electronics 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.

Reportable Segments:

CONSUMER AND PROFESSIONAL PRODUCTS

The CPP segment consists of AMES. Founded in Massachusetts in 1774, AMES has the distinction of
being one of the oldest companies in continuous operation in the United States. Over its long life,
AMES has grown organically and through the acquisition of other leading and historic tool businesses
such as True Temper, Union Tools, and Garant. Today, AMES is the leading manufacturer of
long-handled tools and landscaping products for homeowners and professionals in North America, and
also provides these products in key global markets including Canada, Australia, New Zealand, the
United Kingdom, and Ireland. With the addition of ClosetMaid, AMES is also the leading provider of
wood and wire closet organization, general living storage, and wire garage storage products in the
United States.

Since being acquired by Griffon in 2010, AMES has benefited from strategic acquisitions that have
expanded its product portfolio and geographic presence. The ClosetMaid, Southern Patio, and Harper
Brush Works acquisitions added to AMES’ product categories in North America to include storage and
organization, decorative landscaping, and cleaning products. The acquisitions of Northcote, Cyclone,
Hills, and Tuscan Path in Australia established AMES as a leading supplier of tools and landscaping
categories in the Australian market. As a result of the acquisitions of Kelkay, La Hacienda and Apta,
the United Kingdom and Ireland have become new key markets for AMES products.

AMES has approximately 3,800 employees worldwide.

Brands

AMES’ brands are among the most recognized across its primary product categories in North America,
Australia and the United Kingdom. Its brand portfolio for long-handled tools, outdoor de´ cor, and
landscaping product includes AMES®, True Temper®, Garant®, Harper®, UnionTools®, Westmix™,
Cyclone®, Southern Patio®, Northcote Pottery™, Nylex®, Hills®, Kelkay®, Tuscan Path®, La
Hacienda®, Kelso™, Dynamic Design®™ and Apta®. Contractor-oriented tool brands include Razor-
Back® Professional Tools and Jackson® Professional Tools. AMES’ home organization, general living
storage, and garage storage products are sold primarily under the ClosetMaid® brand.

This strong portfolio of brands enables AMES to build and maintain long-standing relationships with
leading retailers and distributors. In addition, given the breadth of its brand portfolio and product
category depth, AMES is able to offer specific, differentiated branding strategies for key retail
customers. These strategies have focused on enhancement of brand value, with the goal of de-
commoditizing AMES products through the introduction of identity and functionality elements that will
make each top brand unique, attractive and visually recognizable by the consumer. The visual brand
transformation of the AMES® and Razor-Back® brands was completed in 2015, and the True

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Temper® line roll-out was completed in 2016. In addition to the brands listed, AMES also sells private
label branded products, further differentiating AMES in its customer offerings.

Products

AMES manufactures and markets a broad portfolio of long-handled tools, landscaping products, and
home organization products. This portfolio contains many iconic brands and is anchored by five core
tools, outdoor de´ cor and watering, home
product categories:
organization, and cleaning products. As a result of brand portfolio recognition, high product quality,
industry leading service and strong customer relationships, AMES has earned market-leading positions
in its five core product categories. The following is a brief description of AMES’ primary product lines:

seasonal outdoor

tools, project

• Seasonal Outdoor Tools

• Long-Handled Tools: An extensive line of engineered tools including shovels, spades, scoops,
rakes, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks, marketed under
leading brand names including AMES®, True Temper®, UnionTools®, Garant®, Cyclone®
and Kelso™, as well as contractor-oriented brands including Razor-Back® Jackson® and
Darby™.

• Wheelbarrows: AMES designs, develops and manufactures a full line of wheelbarrows and
lawn carts, primarily under the AMES®, True Temper®, Jackson® Professional Tools,
UnionTools®, Garant® and Westmix™ brand names. The products range in size, material
(poly and steel), tray form, tire type, handle length and color based on the needs of
homeowners, landscapers and contractors.

• Snow Tools: A complete line of snow tools is marketed under the True Temper®, Garant®
and Union Tools® brand names. The snow tool line includes shovels, pushers, roof rakes, sled
sleigh shovels, scoops and ice scrapers.

• Pruning: The pruning line is made up of pruners, loppers, shears, and other tools sold primarily

under the True Temper®, Cyclone® and Garant® brand names.

• Project Tools

• Striking Tools: Axes, picks, mattocks, mauls, wood splitters, sledgehammers, pry bars and
repair handles make up the striking tools product line. These products are marketed under the
True Temper®, Cyclone®, Garant®, Jackson® Professional Tools and Razor-Back®
Professional Tools brand names.

• Hand Tools: Hammers, screwdrivers, pliers, adjustable wrenches, handsaws, tape measures,
levels, clamps, and other traditional hand tools make up this product line. These products are
marketed under the Trojan®, Cyclone® and Supercraft® brand names. In addition, gardening
hand tools, such as trowels, cultivators, weeders and other specialty garden hand tools, are
marketed under the AMES® brand name.

• Outdoor De´cor and Watering

• Planters and Lawn Accessories: AMES is a designer, manufacturer and distributor of indoor
and outdoor planters and accessories, sold under the Southern Patio®, Northcote Pottery™,
Tuscan Path, La Hacienda®, Hills®, Kelkay® and Dynamic Design®™ brand names, as well
as various private label brands. The range of planter sizes (from 6 to 32 inches) is available in
various designs, colors and materials.

• Garden Hose and Storage: AMES offers a wide range of manufactured and sourced garden
hoses and hose reels under the AMES®, NeverLeak®, Nylex®, and Hills® brand names.

• Home Organization: AMES designs, manufactures and sells a comprehensive portfolio of wire
and wood shelving, containers, storage cabinets and other closet and home organization

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accessories primarily under the highly-recognized ClosetMaid® brand name and other private
label brands. Wire products include wire shelving and hardware, wire accessories and kitchen
storage products. Wire product brands include Maximum Load®, SuperSlide® and ShelfTrack®.
Wood solutions include closet systems, cube storage, storage furniture and cabinets. Selected
wood product brands include MasterSuite®, Suite Symphony®™, ExpressShelf®, Style+®, and
SpaceCreations®.

• Cleaning Products: AMES offers a full line of cleaning products for professional, home, and
industrial use, including brooms, brushes, squeegees and other cleaning products, primarily under
the Harper® brand.

Customers

AMES sells products throughout North America, Australia, New Zealand and Europe through (1)
home centers, such as The Home Depot, Inc. (“Home Depot”), Lowe’s Companies Inc. (“Lowe’s”),
Rona Inc., Bunnings Warehouse (“Bunnings”) and Woodies (with the average length of the relationship
with these customers being approximately 30 years); (2) mass market, specialty, and hardware retailers
including Wal-Mart Stores
(“Walmart”), Target Corporation (“Target”), Canadian Tire
Corporation, Limited (“Canadian Tire”), Costco Wholesale Corporation (“Costco”), Ace, Do-It-Best
and True Value Company; (3) industrial distributors, such as W.W. Grainger, Inc. and ORS Nasco, and
(4) homebuilders, such as D.R. Horton, KB Home, Lennar and NVR, Inc.

Inc.

Home Depot, Lowe’s and Bunnings are significant customers of AMES. The loss of any of these
customers would have a material adverse effect on the AMES business and on Griffon.

Product Development

AMES product development efforts focus on both new products and product line extensions. AMES
continually improves existing products as well as develops new products to satisfy consumer needs,
expand revenue opportunities, maintain or extend competitive advantages, increase market share and
reduce production costs. Products are developed through in-house industrial design and engineering
staffs to introduce new products and product line extensions that are timely and cost effective.

Sales and Marketing

in the U.S., and by country
AMES’ sales organization is structured by distribution channel
internationally. In the U.S., a dedicated team of sales professionals is provided for each of the large
retail customers. Offices are maintained adjacent to each of the two largest customers’ headquarters,
supported by a shared in-house sales analyst. In addition, sales professionals are assigned to domestic,
the
wholesale and industrial distribution channels. Sales
United Kingdom and Ireland handle sales in each of their respective regions. In Australia, a dedicated
team of sales professionals is provided for the largest retail customer.

located in Canada, Australia,

teams

Raw Materials and Suppliers

AMES’ primary raw material
inputs include resin (primarily polypropylene and high density
polyethylene), wood (particleboard and hardwoods including ash, hickory and poplar logs) and steel
(hot rolled, cold rolled, and wire rod). All raw materials are generally available from a number of
sources. Certain components are purchased, such as heavy forged components and wheelbarrow tires.
Most final assembly is completed internally in order to ensure consistent quality. AMES also sources
some finished goods.

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Competition

The long-handled tools and landscaping product industry is highly competitive and fragmented. Most
competitors consist of small, privately-held companies focusing on a single product category. Some
competitors, such as Fiskars Corporation in the hand tool and pruning tool market and Truper
Herramientas S.A. de C.V.
in the long-handled and garden tool space, compete in various tool
categories. Suncast Corporation competes in the hose reel and accessory market, and more recently in
the long-handled plastic snow shovel category and Swan Hose competes in the garden hose market. In
addition, there is competition from imported or sourced products from China, India and other low-cost
producing countries, particularly in long-handled tools, wheelbarrows, planters, striking tools and
pruning tools.

The home storage and organizational solutions industry is also highly fragmented. AMES, primarily
under the ClosetMaid brands, sells through retail, direct to consumer (e-commerce category) and direct
to installer (building) channels and competes with a significant number of companies across each of
these unique channels. Principal competition for retail wire products is from Newell Brands, Inc.
through their Rubbermaid® product line. FirstService Brands, Inc. sells competing wood solutions
under the brand California Closets®, but does not sell through the retail or direct to consumer
channels. We believe that AMES’ market share in the U.S. is approximately double that of its largest
competitors in the home storage and organizational solutions product category.

AMES differentiates itself and provides the best value to customers through its successful history of
innovation, dependable supply chain and high on-time delivery rates, quality, product performance, and
highly recognized product brands. AMES’ size, depth and breadth of product offering, category
knowledge, research and development (“R&D”) investment, service and its ability to react to sudden
changes in demand from seasonal weather patterns, especially during harsh winter months, are
competitive advantages. Offshore manufacturers lack sufficient product innovation, capacity, proximity
to market and distribution capabilities to service large retailers or to compete in highly seasonal,
weather related product categories.

Manufacturing and Distribution

AMES has a combination of internal and external, and domestic and foreign, manufacturing sources
from which it sources products for sale in the markets it serves. Principal manufacturing facilities
include 644,000 square feet of manufacturing operations in Harrisburg and Camp Hill, Pennsylvania, a
676,000 square foot facility in Ocala, Florida, and a 353,000 square foot manufacturing center in
St. Francois, Quebec, Canada. AMES operates smaller manufacturing facilities, including wood mills, at
several other locations in the United States, and internationally in Reynosa, Mexico; Jiangmen, China;
and Grafton, New South Wales and Wonthaggi, Victoria, both in Australia.

AMES has two principal distribution facilities in the United States, a 1.4 million square foot facility in
Carlisle, Pennsylvania and a 400,000 square foot facility in Reno, Nevada. Finished goods are
transported to these facilities from AMES’ manufacturing sites by both an internal fleet, as well as over
the road trucking and rail. Additionally, light assembly is performed at the Carlisle and Reno locations.
in Ocala, Florida, Chino,
Smaller distribution centers are also strategically located in the U.S.
California, Belle Vernon, Pennsylvania and Pharr, Texas, and internationally in Canada, Australia, the
United Kingdom and Ireland.

HOME AND BUILDING PRODUCTS

The HBP segment consists of Clopay. Founded in 1964 and acquired by Griffon in 1986, Clopay has
grown organically and through acquisitions to become the largest manufacturer and marketer of garage
doors and rolling steel doors in North America. Clopay also manufactures a complete line of entry door
systems uniquely designed to complement its popular residential garage door styles. The majority of
Clopay’s sales come from home remodeling and renovation projects, with the balance from commercial
construction and new residential housing construction. Sales into the home remodeling market are

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driven by the aging of the housing stock, existing home sales activity, and the trends of improving both
home appearance and energy efficiency.

On June 4, 2018, Clopay acquired CornellCookson, a leading U.S. manufacturer and marketer of rolling
steel door and grille products designed for commercial, industrial, institutional and retail use, for
$180,000, excluding certain post-closing adjustments. After taking into account estimated tax benefits
resulting from the transaction, the effective purchase price was $170,000, subject to certain adjustments.
CornellCookson was founded in 1828 as Cornell Iron Works and, in 2008, purchased the Cookson
Company, which was founded in 1938, to form CornellCookson. The acquisition of CornellCookson
expands Clopay’s existing footprint in the commercial door market and strengthens relationships with
professional dealers and installers. Clopay had previously partnered with CornellCookson on customer
solutions for over eight years. Consolidating the companies allows Clopay to broaden its existing
portfolio of brands, products and customers to serve the commercial market more efficiently with
multiple types of doors, and creates additional opportunity to expand our position in adjacent markets.
Similar distribution and product composition between the businesses also allows for potential cost
savings opportunities across distribution networks and through commodity purchasing.

Clopay has approximately 2,600 employees.

Brands

Clopay brings over 50 years of experience and innovation to the residential and sectional garage door
industry, and has over 100 years of experience in the rolling steel industry. Residential and commercial
sectional products are sold under market-leading brands including Clopay®, America’s Favorite Garage
Doors®, Holmes Garage Door Company® and IDEAL Door®. Clopay commercial rolling steel door
brands include Cornell®, Cookson®, CornellCookson® and Clopay®.

Products and Service

Clopay manufactures a broad line of residential sectional garage doors with a variety of options, at
varying prices. Clopay offers garage doors made primarily from steel, plastic composite and wood, and
also sells related products, such as garage door openers manufactured by third parties. Clopay also
offers a complete line of entry door systems uniquely designed to complement its popular residential
garage door styles.

Commercial door products manufactured and marketed by Clopay include rolling steel service doors,
fire doors, shutters, steel security grilles, and room dividers. Clopay also manufactures and markets
commercial sectional doors, which are similar to residential garage doors, but are designed to meet the
more demanding performance specifications of a commercial application.

Customers

Clopay is currently the exclusive supplier of residential garage doors throughout North America to
Home Depot and Menards. The loss of either of these customers would have a material adverse effect
on Clopay and Griffon. Clopay distributes its garage doors directly to customers from its manufacturing
facilities and through its distribution centers located throughout
the U.S. and Canada. These
distribution centers allow Clopay to maintain an inventory of garage doors near installing dealers
and provide quick-ship service to retail and professional dealer customers.

Product Development

Clopay product development efforts focus on both new products and improvements to existing
products. Products are developed through in-house design and engineering staffs.

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Clopay operates technical development centers where its research engineers design and develop new
products and technologies and perform durability and performance testing of new and existing products,
materials and finishes. Clopay continually improves its door offerings through these development
efforts, focusing on characteristics such as strength, design, operating performance and durability, and
energy efficiency. The process engineering teams also work to develop new manufacturing processes
and production techniques aimed at improving manufacturing efficiencies and ensuring quality-made
products.

Sales and Marketing

The Clopay sales and marketing organization supports our customers, consults on new product
development and aggressively markets door solutions, with a primary focus on the North American
market. Clopay maintains a strong promotional presence, in both traditional and digital media.

Clopay customers utilize a proprietary residential door web application, the MyDoor® mobile enabled
app, that guides consumers through an easy to use visualization and pricing program, allowing them to
select the optimal door for their home. For Clopay’s commercial products, Clopay’s Commercial Door
Quoter (CDQ®™) and CornellCookson’s WebGen™ systems are available to assist our professional
dealers streamline their quoting and submittal process for greater productivity and backroom efficiency
improvement.

Raw Materials and Suppliers

The principal raw material used in Clopay’s manufacturing is galvanized steel. Clopay also utilizes
certain hardware components, as well as wood and insulated foam. All raw materials are generally
available from a number of sources.

Competition

The sectional garage door and commercial rolling steel door industry includes several large national
manufacturers and many smaller, regional and local manufacturers. Clopay competes on the basis of
service, quality, price, brand awareness and product design.

Clopay brand names are widely recognized in the building products industry. Clopay believes that it has
earned a reputation among installing dealers and retailers for producing a broad range of innovative,
high-quality doors with industry leading lead times. Clopay’s market position and brand recognition are
key marketing tools for expanding its customer base, leveraging its distribution network and increasing
its market share.

Manufacturing and Distribution

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

On January 31, 2019, Clopay announced a $14,000 investment in facilities infrastructure and equipment
at its rolling steel manufacturing location in Mountain Top, Pennsylvania. This project includes a 95,000
square foot expansion to the already existing 184,000 square foot facility, along with the addition of
the Mountain Top location
state-of-the-art manufacturing equipment. Through this expansion,
improved its manufacturing efficiency and shipping operations, as well as increased manufacturing
capacity to support full-rate production of new and core products. The project was completed at the end
of calendar 2019.

Clopay distributes its products through a wide range of distribution channels, including a national
network of 52 distribution centers with a total of approximately 1,100,000 square feet. Additionally,
products are sold to over 2,500 independent professional installing dealers and to major home center

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retail chains including Home Depot and Menards (with the average length of the relationship with these
customers being greater than 25 years). Clopay maintains strong relationships with its installing dealers
and believes it is the largest supplier of sectional garage doors to the retail and professional installing
channels in North America and the largest supplier of rolling steel door products in North America.
Clopay is currently the exclusive supplier of residential garage doors throughout North America to
Home Depot and Menards.

DEFENSE ELECTRONICS

consists of Telephonics Corporation (“Telephonics”). Founded in 1933,
Defense Electronics
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 2020, approximately 69% of the
segment’s sales were to the U.S. Government and agencies thereof, as a prime or subcontractor, 26% to
international customers and 5% to U.S. commercial customers. Telephonics is headquartered in
Farmingdale, New York and currently has approximately 950 employees.

The U.S. Defense budget for fiscal year (GFY) 2020 was enacted at $722 billion, a 1.3% increase over
the prior year. The Department of Defense (“DoD”) budget request for fiscal year 2021 is in line with
the prior year when excluding natural disaster relief emergency funding enacted in 2020. The 2021
budget request plans for the DoD budget to grow at a compound annual growth rate (“CAGR”) of
1.5% from 2020 through 2025 with continued investments expected in military readiness, modernization,
and innovation.

Internationally, demand is growing due to major system capability upgrades in existing systems and re-
capitalization of aging assets. The U.S. is the largest exporter of defense equipment in the world, and is
expected to remain so for the foreseeable future, with significant increases in defense budgets expected
in countries that have historically imported defense products from the U.S. such as Saudi Arabia, UAE,
Taiwan, Australia, India, South Korea and Japan, among others.

Domestic and international defense market trends bode well for business opportunities for Telephonics
products supporting Imaging and Surveillance Radar Systems, Communications, Surveillance and
Border Surveillance.

Telephonics is organized into six primary business lines: Radar, Naval & Cyber Systems, Surveillance,
Communications, Systems Engineering and Analysis (SEG), and Telephonics Large Scale Integration
(TLSI). In July 2020, we announced that we are exploring strategic options for Telephonics’ SEG
business line, which is approximately $30,000 in sales.

• Radar: Telephonics provides a wide range of high-performing, lightweight and cost-effective
maritime surveillance and weather avoidance radar systems for fixed- and rotary-wing aircraft,
Unmanned Aerial Vehicles (UAVs) and shipboard platforms to the U.S. Government and
numerous
international defense agencies. Telephonics maritime surveillance radars offer
advanced features such as Ground Moving Target Indicator (GMTI), Synthetic Aperture Radar
(SAR), Inverse Synthetic Aperture Radar (ISAR), Automatic Identification System (AIS) and
weather avoidance.

• Naval & Cyber Systems: As a global leader for maritime surveillance radars, Telephonics is the
sole provider of the US Navy’s AN/APS-153 multi-mode radar and the communications suite
within the MH-60R/S multi-mission helicopters. Telephonics is developing the next generation
multi-mode maritime and over-land surveillance AESA radar known as MOSAIC®. Cyber
Systems focuses on ISR aircraft integration design and services with a facility that includes a
7,000 square foot hanger and a Sensitive Compartmented Information Facility (SCIF) capable of
supporting various customer and Government agencies programs.

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• Surveillance: Telephonics is a global leader in Identification Friend or Foe (IFF), Monopulse
Secondary Surveillance Radars (MSSR) and Air Traffic Control (ATC) systems enabling military
and civilian air traffic controllers to effectively identify aircraft and vehicles as friendly.
Telephonics provides both equipment and supporting services required to safely and reliably
control flight operations. These systems are used by the U.S. Army, U.S. Navy, U.S. Air Force,
U.S. Marines, Federal Aviation Administration (“FAA”), NATO and numerous international
defense agencies including those of Japan and South Korea. They have been fielded globally in a
wide range of ground, air and sea-based applications.

• Communications: Telephonics’ advanced wired and wireless communication systems provide the
digital backbone for defense and civil platforms worldwide, including fixed- and rotary-wing
aircraft, lighter-than-air aircraft and ground control shelters. These systems are designed to meet
stringent customer requirements to support adaptability to special missions and communications
protocol requirements. Telephonics’ vehicle-based intercommunications systems deliver tradi-
tional intercom system capabilities while incorporating software-defined features, including an
open architecture for integration into vehicle C4 (command, control, communications and
computing) systems, networked communications gateways and combat vehicles. Commercial
audio products and headsets are utilized worldwide in a wide range of military and civilian
applications,
including audiometric testing and onboard flight entertainment. Telephonics
communications systems are fielded within the U.S. Army, U.S. Navy, U.S. Air Force, U.S.
Marines and numerous international defense agencies. These systems are also sold to aerospace
manufacturers, commercial airlines and audiometric original equipment manufacturers.

• Systems Engineering and Analysis

(SEG): SEG provides

sophisticated, highly technical
engineering and analytic support to customers including the Missile Defense Agency, AEGIS
Ballistic Missile Defense Program, Program Executive Offices for Integrated Warfare Systems
and Ships, U.S. Naval Surface Warfare Centers, Marine Corps System Command and the U.S.
Army Aviation and Missile Command, among others. As a leading provider of combat, radar
and missile systems engineering and analysis, SEG is a key source of systems engineering
expertise for the U.S. integrated air and missile defense initiatives. In addition to government
program offices, SEG works extensively with national laboratories, the Intelligence Community
and prime contractors.

• Telephonics Large Scale Integration (TLSI): TLSI has designed nearly 400 mixed-signal custom
Application Specific Integrated Circuits (ASICs) for customers in the automotive, industrial,
defense/avionics and smart energy markets. TLSI works with its customers’ technical teams,
from the initial ASIC
taking complete responsibility for the ASIC development process,
specification definition through qualification and volume production, to meet the most stringent
customer program requirements. Over 10 million ASICs are shipped every year.

To meet the unique challenges of operating in an increasingly complex industry that is faced with
continued economic and budgetary pressure on U.S. defense procurement, Telephonics has adapted its
core surveillance and communications products, typically used by the U.S. government and its agencies,
to meet the needs of international customers in both defense and commercial markets. Telephonics’ two
largest product lines include maritime surveillance radar and aircraft intercommunication management
systems and as Telephonics continues to concentrate on adjacent markets to grow these product lines
both domestically and internationally, the company remains focused on delivering high-quality products
and services that protect military personnel and civilian interests world-wide.

Telephonics’ leading-edge products and services are well-positioned to address the needs of a fully
integrated and modernized battlefield with an emphasis on providing complete situational awareness to
the warfighter whether on the ground, in the air or at sea, providing timely, secure and accurate
intelligence. Telephonics anticipates that the need for secure, integrated surveillance and communica-
tions capabilities will continue to increase as the U.S. and foreign militaries expand their role in fighting
terrorism both at home and abroad. Telephonics has also invested in design and development of
technologies focused on advanced intelligence and surveillance sensors with applications in both
manned and unmanned systems, as well as border and perimeter security markets.

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Telephonics is a partner in Mahindra Telephonics Integrated Systems, a Joint Venture (JV) with
Mahindra Defense Systems in India. The business is focused on providing the Indian defense and civil
sectors with surveillance, communications and IFF systems. The JV also intends to provide air traffic
management (ATM), border and perimeter security and other surveillance technologies to meet
emerging demands.

Programs and Products

Based on long-established relationships supported by existing contractual arrangements, Telephonics is
a first-tier supplier to prime contractors in the defense industry such as Lockheed Martin Corporation
(“Lockheed Martin”, which includes Sikorsky Aircraft), The Boeing Company (“Boeing”), Northrop
Grumman Corporation (“Northrop Grumman”), Oshkosh Corporation (“Oshkosh”), Airbus Military,
Airbus Helicopters, Leonardo (AgustaWestland) Helicopters, and SAAB (with the average length of
the relationship with these customers being greater than 20 years), and is a prime contractor to the U.S.
Department of Defense and FAA. The significance of each of these customers to Telephonics’ revenue
fluctuates on an annual basis, based on the timing and funding of
the Original Equipment
Manufacturers (“OEM”) contract award, and the technological scope of the work required. Key
products include maritime radars,
identification friend or foe systems, mobile surveillance and
communication systems. The significant contraction and consolidation in the U.S. and international
defense industry provides opportunities for established first-tier suppliers to capitalize on existing
relationships with major prime contractors and to play a larger role in defense systems development and
procurement for the foreseeable future.

Telephonics successfully leveraged its core Surveillance technologies to develop a solution, now fielded
by the FAA as a part of the Common Terminal Digitizer (CTD) program, at numerous air surveillance
radar sites across the United States. Telephonics expects to continue to leverage its technology to
improve the value proposition offered to future FAA radar infrastructure upgrade programs.

Telephonics continues to direct resources towards border surveillance and critical infrastructure security
initiatives. These opportunities represent strategic advances for Telephonics by enabling it to expand its
core technical expertise into the nascent and growing border and perimeter security markets, both in
the U.S. and abroad. With many of these programs, system specifications and operational and test
requirements are challenging, exacerbated by demanding delivery schedules. Telephonics believes that
the technological capabilities these systems encompass will also be able to serve and protect the most
complex borders.

Backlog

The funded backlog for Telephonics approximated $380,000 at September 30, 2020, compared to
$389,300 at September 30, 2019. Approximately 67% of the current backlog is expected to be filled in
the next 12 months.

Backlog is defined as unfilled firm orders for products and services for which funding has been both
authorized and appropriated by the customer or Congress, in the case of U.S. government agencies.
Backlog generally increases with bookings and converts into revenue as we incur costs related to
contractual commitments or the shipment of product. The decrease in backlog was primarily attributed
to the timing of various international contract awards associated with radar and surveillance
opportunities that were not received by the end of the reporting period. Given the nature of our
business and a larger dependency on international customers, our bookings, and therefore our backlog,
is impacted by the longer maturation cycles resulting in delays in the timing and amounts of such
awards, which are subject to numerous factors, including fiscal constraints placed on customer budgets;
political uncertainty; the timing of customer negotiations; and the timing of governmental approvals.

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Customers

The U.S. Government, through prime contractors like Lockheed Martin, Northrop Grumman, Boeing
and Oshkosh, is a significant customer of Telephonics. The loss of the U.S. Government or any of its
prime contractors as a customer could have a material adverse effect on Telephonics’ business.
Notwithstanding the significance of Lockheed Martin, Northrop Grumman and Boeing, Telephonics
sells to a diverse group of other domestic and international defense industry contractors, as well as
others who use Telephonics products for commercial use.

Telephonics participates in a range of long-term defense and non-military government programs, both
in the U.S. and internationally. Telephonics has developed a base of installed products that generate
significant recurring revenue from product enhancements and retrofits, as well as providing spare parts
and customer support. Due to the inherent complexity of these electronic systems, Telephonics believes
that its incumbent status on major platforms provides a competitive advantage in the selection process
for platform upgrades and enhancements. Furthermore, Telephonics believes that its ability to leverage
and apply its advanced technology to new platforms provides a competitive advantage when bidding for
new business.

Research and Development (R&D)

In order to continue to offer affordable and technologically advanced solutions that provide relevant
and required features, Telephonics works closely with prime customers to ensure that there is a future
market for its products by investing R&D funds in desired enhancements. Telephonics continually
updates its core technologies through internally funded R&D while coordinating with customers at the
earliest stages of new program development in an effort to provide solutions well in advance of its
competitors. Internally funded R&D costs include basic and applied research initiatives, development
activities, and other conceptual formulation studies. Telephonics is a technological leader in its core
markets and pursues new growth opportunities by leveraging its systems design and engineering
capabilities, and incumbent position, on key platforms.

In addition to products for defense programs, Telephonics’ technology is also used in commercial
applications such as airborne weather, search and rescue radar, and air traffic management systems.
Telephonics’ reputation for innovative product design and engineering capabilities, especially in the
areas of voice and data communications, radio frequency design, digital signal processing, networking
systems, inverse synthetic aperture radar and analog, and digital and mixed-signal integrated circuits,
will continue to enhance its ability to secure, retain and expand its participation in defense programs
and commercial opportunities.

Telephonics often designs its products to exceed customers’ minimum specifications, providing its
customers with greater performance, flexibility, and value. Telephonics believes that early participation
and communication with its customers in the requirements definition stages of new program
development increases the likelihood that its products will be selected and integrated as part of a
total system solution.

Telephonics is currently investing in an Active Electronically Scanned Array (AESA) based radar
solution to address emerging requirements in the maritime and overland radar markets. Continued
investments in the Surveillance product portfolio are expected to result
in market penetration
opportunities in the ground tactical markets with small form factor passive and active IFF solutions.

Sales and Marketing

Telephonics has technical business development personnel who act as the focal point for its marketing
activities and sales representatives who introduce its products and systems to customers worldwide.

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Competition

Telephonics competes with major manufacturers of electronic information and communication systems,
as well as several smaller manufacturers of similar products. Telephonics endeavors to design high
quality and reliable products with greater performance and flexibility than its competitors while
competing on the basis of technology, innovative solutions, and price.

Manufacturing Facilities

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

Clopay Plastic Products—Discontinued Operations

On February 6, 2018, we completed the sale of our Plastics business to Berry Global Group, Inc. for
approximately $465,000, net of certain post-closing adjustments. As a result, Griffon classified the
results of operations of the Plastics business as discontinued operations in the Consolidated Statements
of Operations for all periods presented and classified the related assets and liabilities associated with
the discontinued operations in the consolidated balance sheets. All results and information presented
exclude Plastics unless otherwise noted. Plastics is a global leader in the development and production of
embossed, laminated and printed specialty plastic films for hygienic, health-care and industrial products
and sells to some of the world’s largest consumer products companies. See Note 7, Discontinued
Operations.

Griffon Corporation

Employees

As of September 30, 2020, Griffon and its subsidiaries employ approximately 7,400 people located
primarily throughout the U.S., Canada, the United Kingdom, Australia, Mexico and China. Generally,
the total number of employees of Griffon and its subsidiaries does not significantly fluctuate throughout
the year. However, acquisition activity or the opening of new branches or lines of business may increase
the number of employees or fluctuations in the level of Griffon’s business activity, which could in turn
require staffing level adjustments in response to actual or anticipated customer demand.

Approximately 200 of these employees are covered by collective bargaining agreements in the U.S.,
with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and
Service Workers International Union (an affiliate of the American Federation of Labor and Congress
of Industrial Organizations), and the United Food & Commercial Workers International Union.
Additionally, approximately 200 employees in Canada are represented by the Trade Union Advisory
Committee. Griffon believes its relationships with its employees are satisfactory.

strictly comply with all applicable state,

In managing its human capital resources, Griffon aims to attract a qualified workforce through an
inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach,
internships and job fairs. Griffon also seeks to retain employees by offering competitive wages, benefits
and training opportunities, as well as promoting a safe and healthy workplace. Griffon and all of its
businesses
laws governing
nondiscrimination in employment in every location in which Griffon and its businesses have facilities.
This applies to all terms and conditions of employment,
including recruiting, hiring, placement,
promotion, termination,
leaves of absence, compensation and training. All
applicants and employees are treated with the same high level of respect regardless of their gender,
ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender
identity, disability or protected veteran status.

local and international

layoff, recall, transfer,

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The COVID-19 pandemic presented unprecedented challenges in many parts of our businesses and
operations, including with respect to our most valuable asset - our people. In response, we developed
and implemented new procedures and protocols to minimize the risk to the health and safety of our
employees while allowing us to continue to operate our facilities and provide high quality products to
our customers on a timely basis. Employees that could work from home were strongly encouraged (and
in some cases, required) to do so in order to minimize the number of employees in our facilities. For
onsite employees, we implemented protocols for social distancing, sanitation and mask-wearing. We
developed systems and purchased new equipment to facilitate the efficient sanitation and disinfection of
all work areas. We reconfigured work processes to allow additional spacing between associates
whenever possible; eliminated seating in common areas of many buildings to allow for appropriate
distancing; staggered shifts and start, stop and break times; and at many facilities we began monitoring
temperatures of all employees entering the facility. We also restricted visitors and pre-screened all
contractors who required access to our facilities. We implemented appreciation award programs for
many of our U.S. employees who continued to work onsite during the pandemic. Throughout the
pandemic, we have consistently been able to meet our customers’ demands for our products, while at
the same time making the necessary investments to ensure that we prioritize the health, safety and
welfare of our employees.

Regulation

Griffon’s operations are subject to various environmental, health, and employee safety laws and
regulations. Griffon believes that
is in material compliance with these laws and regulations.
Historically, compliance with environmental, health, and employee safety laws and regulations have not
materially affected, and are not expected to materially affect, Griffon’s capital expenditures, earnings or
competitive position. Nevertheless, Griffon cannot guarantee that,
it will not incur
additional costs for compliance or that such costs will not be material.

in the future,

it

Telephonics, which sells directly and indirectly to the U.S. government, is subject to certain regulations,
laws and standards set by the U.S. government. Additionally, Telephonics is subject to routine audits
and investigations by U.S. Government Agencies such as the Defense Contract Audit Agency, the
Defense Security Service, with respect to its classified contracts, and other Inspectors General. These
agencies review a contractor’s performance under its contracts, cost structure and compliance with
applicable laws, regulations and standards, including those relating to facility and personnel security
clearances. These agencies also review the adequacy of, and a contractor’s compliance with, its internal
control systems and policies, including the contractor’s management, purchasing, property, estimating,
compensation, and accounting and information systems.

Customers

A small number of customers account for, and are expected to continue to account for, a substantial
portion of Griffon’s consolidated revenue from continuing operations. In 2020:

a. The U.S. Government and its agencies,

through prime and subcontractor relationships,

represented 10% of Griffon’s consolidated revenue and 69% of DE revenue.

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

12% of HBP’s revenue.

No other customer accounted for 10% or more of consolidated revenue. Future operating results will
continue to substantially depend on the success of Griffon’s largest customers and Griffon’s
relationships with them. Orders from these customers are subject to change and may fluctuate
materially. The loss of all or a portion of volume from any one of these customers could have a material
adverse impact on Griffon’s financial results, liquidity and operations.

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Seasonality

Griffon’s revenue and income are generally lowest in our first and fourth quarters ending December 31,
and September 30, respectively, and highest in our second and third quarters ending March 31, and
June 30, respectively, primarily due to the seasonality within the AMES and Clopay businesses. In 2020,
53% of AMES’ sales occurred during the second and third quarters compared to 56% and 57% in 2019
and 2018, respectively. In 2020, as a result of the COVID-19 pandemic, sales orders shifted somewhat
into the third and fourth quarters resulting in revenue increasing in these two quarters to 55% of 2020
sales. Clopay’s business is driven by renovation and construction during warm weather, which is
generally at reduced levels during the winter months, generally in our second quarter. Telephonics
revenue is generally driven by the delivery requirements of its customers; accordingly, Telephonics will
often have increased revenue in the latter half of the year due to the U.S. government’s annual budget
cycle.

Demand for lawn and garden products is influenced by weather, particularly weekend weather during
peak gardening season. AMES’ sales volume can be adversely affected by certain weather patterns such
as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In addition, lack of
snow or lower than average snowfall during the winter season may result in reduced sales of certain
AMES’ products, such as snow shovels and other snow tools. As a result, AMES’ results of operations,
financial results and cash flows could be adversely impacted.

Financial Information About Geographic Areas

Segment and operating results are included in Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations.

For geographic financial
Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data.

see the Reportable Segment

footnote in the Notes

information,

to

Griffon’s non-U.S. businesses are primarily in Canada, Australia, the United Kingdom, Mexico and
China.

Research and Development

Griffon’s businesses are encouraged to improve existing products as well as develop new products to
satisfy customer needs; expand revenue opportunities; maintain or extend competitive advantages;
increase market share and reduce production costs. R&D costs, not recoverable under contractual
arrangements, are charged to expense as incurred.

Intellectual Property

Griffon follows a practice of actively protecting and enforcing its proprietary rights in the U.S. and
throughout the world where Griffon’s products are sold. All intellectual property information presented
in this section is as of September 30, 2020.

Trademarks are of significant importance to Griffon’s AMES and Clopay businesses. With 50 years of
experience and innovation in the garage door industry, and over 100 years of experience in the rolling
steel door industry, Clopay has a significant level of goodwill in its strong family of brands, including:
Clopay®, America’s Favorite Doors®; Holmes Garage Door Company®; IDEAL Door®; and the
Cornell®, Cookson®, and CornellCookson® commercial door brands. Principal global and regional
trademarks used by AMES for its tool and landscape products include AMES®, True Temper®,
Garant®, Harper®, UnionTools®, Westmix™, Cyclone®, Southern Patio®, Northcote Pottery™,
Nylex®, Hills®, Kelkay®, Tuscan Path®, La Hacienda®, Kelso™, and Dynamic Design®, as well as
contractor-oriented brands including Razor-Back® Professional Tools and Jackson® Professional
Tools. Storage and home organization brands within AMES include ClosetMaid®, MasterSuite®, Suite
Symphony®, Cubeicals®, ExpressShelf®, SpaceCreations®, Maximum Load®, SuperSlide® and

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ShelfTrack®. The AMES and Clopay businesses have approximately 1,378 registered trademarks and
approximately 263 pending trademark applications around the world. Griffon’s rights in these
trademarks endure for as long as they are used and registered.

Patents are also important to the AMES and Clopay businesses. Clopay holds approximately 36 issued
patents and 28 pending patent applications in the U.S., as well as approximately 12 and 22
corresponding foreign patents and patent applications, primarily related to garage door system
components and operation. AMES protects its designs and product innovation through the use of
patents, and currently has approximately 322 issued patents and approximately 50 pending patent
applications in the U.S., as well as approximately 280 and 49 corresponding foreign patents and patent
applications, respectively. Design patents are generally valid for fourteen years, and utility patents are
generally valid for twenty years, from the date of filing. Griffon’s patents are in various stages of their
terms of validity.

In the government and defense business, formal
intellectual property rights are of limited value.
Therefore, the Telephonics business tends to hold most of its important intellectual property as trade
secrets, which it protects through the use of contract terms and carefully restricting access to its
technology.

Environmental, Social and Governance

Griffon and its operating companies have taken into account environmental, social and governance
(ESG) considerations in the management of our businesses for years. This year, Griffon formalized its
ESG commitment with a written policy, committing the Company to protecting the environment and
our workers, and to ethical and transparent behavior in our business relationships. This policy can be
found on the Griffon website at www.griffon.com. The new ESG section of our website also provides
details on some of the Company’s efforts and commitments in the environmental, social and governance
areas as well as a statement from Ronald J. Kramer, our Chief Executive Officer, reinforcing
management’s strong support for our ESG efforts.

Griffon has assessed the environmental risk from its operations and has focused its efforts to date on
areas with the potential to have the greatest environmental impact. The company sources sustainable
hardwoods for its various wood products. Where available, we use recycled materials to construct our
products, and we continuously improve our packaging to reduce both volume and environmental
impact. For example, bags used for Ames’ Kelkay aggregate products in the UK are made from plant-
based materials, and not from petroleum. Griffon has made a focused effort to reduce carbon emissions
by reducing electricity and natural gas usage at its operating facilities. Further efforts to reduce our
carbon footprint are underway by considering fuel consumption in the planning of our deliveries and
the selection of delivery contractors and vehicles. Our Clopay business helps its customers reduce their
own carbon footprints by providing garage doors that meet LEED (Leadership in Energy and
large
Environmental Design) building construction standards. While Griffon’s facilities are not
consumers of water, we routinely examine options to reduce water usage or reuse water at our facilities.
Ames used recycled Ames and Closetmaid tools and scrap materials in the construction of the new
Ames and Closetmaid headquarters facility in the Orlando, Florida area. Over the years, Griffon
operating companies have reduced the use of solvents and other chemicals and now rarely generate
hazardous waste of any kind.

Our operating companies are involved in the local communities in which they operate, where we have
chosen to expand production facilities rather than outsource production. We are involved in more than
100 charitable and community organizations, including well known national concerns such as Habitat
for Humanity, Boys and Girls Clubs and the American Cancer Society, as well as local groups such as
garden clubs. Our communities know that they can count on us in a crisis. For example, we routinely
provide products and labor, as well as donations, to crisis relief organizations to help with relief efforts
such as the camp fire effort in California; tornado relief in Dayton Ohio; and Hurricane Sandy relief in
the New York metropolitan area; and we have participated in tool bank disaster services and donated
regularly to the American Red Cross. We manufacture products that save lives, including our radars

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supporting U.S. Coast Guard search and rescue efforts, elevator fire prevention products from Clopay,
and dock door barriers that prevent injuries relating to loading dock operation. With respect to the
COVID-19 pandemic, we are proud of our efforts to keep our facilities safe, which started very early in
the crisis and have been continuously reviewed, upgraded and improved, and have allowed nearly all of
our facilities around the globe to stay open and continue to serve our customers, uninterrupted.

Over the last three years, we have invested nearly four million dollars in capital improvements relating
to employee safety and health. These improvements include major upgrades to our loading and
unloading operations (which had been the source of a significant portion of our worker injuries),
ergonomic improvements, machine guarding and elimination of certain high-risk repetitive jobs. We
have seen significant reductions in both the number and severity of employee injuries in recent years.
Griffon has also invested over one million dollars in improvements to employee welfare facilities, such
as break areas and cafeterias. We view our employees as more than just workers. Through our
Employee Stock Ownership Plan, our U.S. employees own approximately eleven percent of Griffon
stock. Our businesses engage in a variety of outreach programs in the various communities in which we
operate to recruit new employees at all levels. These programs involve high schools and vocational
schools, as well as colleges and universities, and often include internships as a means for potential new
employees to experience what it is like to be part of our team. We also have a variety of onboarding
programs, onsite job training programs, leadership development programs, and tuition reimbursement
and education assistance policies, to further the development and advancement of our employees.

Our operating companies use on-site inspections and specific contractual terms to manage our supply
chain operations to require compliance with environmental and social laws and regulations, as well as
our policies in these areas, including with respect to human rights, child labor, slave labor and unsafe
working conditions. Telephonics requires that its subcontractors and suppliers periodically certify
adherence to various Telephonics’ policies, such as those relating to human trafficking, corporate ethics
and the prohibition of gratuities. All significant Ames suppliers must periodically submit to a Factory
Compliance and Capacity Assessment, which evaluates not only quality control and vendor capabilities,
but assesses to what extent each supplier places an emphasis on environmental, labor and social
considerations in the operation of its business. In China, where Ames both operates a manufacturing
facility and sources materials and products from third parties, Ames has dedicated compliance
personnel who report directly into Ames’ Vice President and General Counsel.

Honesty, transparency, and ethical practices have been ordinary course at Griffon for years, and we
continue to review and upgrade our programs in these areas. Our Code of Business Ethics and Conduct,
to which every employee certifies annually, requires that each and every employee conduct business to
the highest ethical standards. Any acts of bribery are strictly prohibited, as is human trafficking and
activities supporting human trafficking, such as the use of conflicts minerals. The Code prohibits all
business courtesies except for those with an insignificant value, and even then, only under limited
circumstances. Our Corporate Governance Guidelines are published on our website. While the
guidelines require that a majority of directors be independent, currently all of our directors our
independent except our CEO and our President (constituting over 85% of our directors). Griffon has
appointed a lead independent director and has four principal board committees - Audit, Compensation,
Nominating and Corporate Governance, and Finance - each of which has its responsibilities set forth in
a charter available on the Griffon website.

We expect each of our 7,400 employees around the world to work hard to deliver outstanding products
to our customers and to deliver value to our shareholders. And, while doing so, we expect them to
respect and adhere to our environmental, social and governance commitments and policies, and to
make our company a place at which all employees are proud to come to work every day.

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Executive Officers of the Registrant

The following is a current list of Griffon’s executive officers:

Name

Ronald J. Kramer . . . . . . . . .

Age

62

Robert F. Mehmel . . . . . . . .

58

Brian G. Harris . . . . . . . . . . .

51

Seth L. Kaplan . . . . . . . . . . . .

51

Positions Held and Prior Business Experience

Chief Executive Officer since April 2008, Chairman of the Board
since January 2018, Director since 1993, Vice Chairman of the
Board from November 2003 to January 2018. From 2002 through
March 2008, President and a Director of Wynn Resorts, Ltd.
(Nasdaq:WYNN), a developer, owner and operator of destination
casino resorts. From 1999 to 2001, Managing Director at
Dresdner Kleinwort Wasserstein, an investment banking firm,
and its predecessor Wasserstein Perella & Co. Member of the
board of directors of Business Development Corporation of
America.

Director since May 2018, President and Chief Operating Officer
since December 2012. From August 2008 to October 2012,
President and Chief Operating Officer of DRS Technologies
integrated
(“DRS”), a supplier of
(Formerly NYSE:DRS)
products, services and support to military forces,
intelligence
agencies and prime contractors worldwide. From May 2006 to
August 2008, Executive Vice President and Chief Operating
Officer of DRS and from January 2001 to May 2006, Executive
Vice President, Business Operations and Strategy, of DRS.

Senior Vice President and Chief Financial Officer since August
2015. From November 2012 to July 2015, Vice President and
Controller of Griffon. From July 2009 to July 2015, Griffon’s
Chief Accounting Officer. From May 2005 to June 2009,
Assistant Controller of Dover Corporation, a diversified global
manufacturer (NYSE:DOV). Prior to this time, held various
finance and accounting roles with Hearst Argyle Television
(Formerly NYSE:HTV),
Inc.
John Wiley
(NYSE:JW.A) and Arthur Andersen, LLP.

Sons,

and

Senior Vice President, General Counsel and Secretary since May
2010. From July 2008 to May 2010, Assistant General Counsel
and Assistant Secretary at Hexcel Corporation (NYSE:HXL), a
manufacturer of advanced composite materials for space and
defense, commercial aerospace and wind energy applications.
From 2000 to July 2008, Senior Corporate Counsel and Assistant
Secretary at Hexcel. From 1994 to 2000, associate at the law firm
Winthrop, Stimson, Putnam & Roberts (now Pillsbury Winthrop
Shaw Pittman LLP).

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Item 1A. Risk Factors

Griffon’s business, financial condition, operating results and cash flows can be impacted by a number of
factors which could cause Griffon’s actual results to vary materially from recent or anticipated future
results. The risk factors discussed in this section should be carefully considered with all of the
information in this Annual Report on Form 10-K. These risk factors should not be considered the only
risk factors facing Griffon. Additional risks and uncertainties not presently known or that are currently
deemed immaterial may also materially impact Griffon’s business, financial condition, operating results
and cash flows in the future.

In general, Griffon is subject to the same general risks and uncertainties that impact other diverse
manufacturing companies including, but not limited to, general economic,
industry and/or market
conditions and growth rates; impact of natural disasters and pandemics, and their effect on global
markets; possible future terrorist threats and their effect on the worldwide economy; and changes in
laws or accounting rules. Griffon has identified the following specific risks and uncertainties that it
believes have the potential to materially affect its business and financial condition.

Risks Related to Our Business

The COVID-19 outbreak could adversely impact our results of operations.

The future impact of the COVID-19 outbreak and the spread of the pathogen on a global basis could
adversely affect our businesses in a number of respects, although the extent, nature and timing of such
impact cannot be predicted as of the date of this filing. The COVID-19 outbreak has led countries
around the world, as well as most states in the U.S., to implement restrictions from time-to-time relating
to the operation of almost all types of businesses. Within the U.S., the standards vary from state to
state, but typically require all but “critical”, “essential” or “life-sustaining” businesses to close all offices
and facilities. We believe, based on the various standards published to date, that our businesses meet
the requisite standard in all U.S states. We also believe that our businesses meet the applicable
standards to remain open in Canada, the United Kingdom, Ireland and Australia. As of the date of this
filing, all of our manufacturing and distribution facilities in the U.S., Canada, the United Kingdom,
Ireland, Australia and China are operating, although some of them are operating at reduced capacity as
a result of our implementation of procedures designed to prevent the spread of the virus, such as social
distancing and staggered shifts. However, government actions taken based on the changing nature of
the outbreak in the U.S. or in other countries in which we do business, as well as the changing of
standards regarding what type of facilities are permitted to remain open and evolving interpretations of
existing standards, could result in additional closures of Griffon facilities.

To date, our supply chain has not experienced significant disruptions, and at this time we do not
anticipate any such significant disruptions in the near term. However, 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.

If as a result of the COVID-19 outbreak, including a potential resurgence of the virus in the fall and
winter months, governments take additional protective actions, or extend the time period for existing
protective actions, it may have a material adverse impact on Griffon’s businesses and operating results.
This could include additional closures of our facilities of an unknown duration, or the closure of the
facilities of our customers, suppliers, or other vendors in our supply chain. Any disruption of our supply
chain or the businesses of our customers could adversely impact our businesses and results of
operations. The COVID-19 outbreak has recently worsened in many U.S. states, and as a result, certain
states have put in place new restrictions regarding the operation of many types of businesses or have
tightened up restrictions already in place. Many medical experts believe that during the winter, as the
weather gets colder and more people spend time with others indoors, the COVID-19 infection rate will

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worsen. In addition, the widespread public health crisis caused by the COVID-19 outbreak has
adversely impacted the economies and financial markets worldwide, resulting in an economic downturn
that has adversely impacted many businesses, including ours. The extent and duration of the impact on
the global economy and financial markets from the COVID-19 outbreak is difficult to predict, and the
extent to which the COVID-19 outbreak will negatively affect us and the duration of any potential
business disruption is uncertain. The impact to our results will depend to a large extent on future
developments and new information that may emerge regarding the duration and severity of the
COVID-19 outbreak and the actions taken by authorities and other entities to contain the COVID-19
outbreak or treat its impact, and the impact of such actions, all of which are beyond our control. These
potential impacts, while uncertain, could adversely affect our operating results. To the extent the
COVID-19 outbreak adversely affects our businesses, operations, financial condition and operating
results, it may also have the effect of heightening many of the other risks factors such as those relating
to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness,
and our ability to comply with the covenants contained in the agreements that govern our indebtedness,
as described in more detail below.

Current worldwide economic uncertainty and market volatility could adversely affect Griffon’s businesses.

The current worldwide economic uncertainty and market volatility could continue to have an adverse
effect on Griffon during 2021, particularly within the CPP and HBP segments, which is linked to the
U.S. housing and the commercial property markets, and the U.S. economy in general. Purchases of
many CPP and HBP products are discretionary for consumers who are generally more willing to
purchase products during periods in which favorable macroeconomic conditions prevail. Disruptions in
the credit markets have increased the spread between the yields realized on risk-free and higher risk
securities, resulting in illiquidity in parts of the credit markets. These conditions could make it more
difficult to obtain additional credit on favorable terms for investments in current businesses or for
acquisitions, or could render financing unavailable; in addition, while we do not have any near term
debt maturities, if these conditions persist, we may have difficulty refinancing our debt when it comes
due. Griffon is also exposed to certain fundamental economic risks including a decrease in the demand
for the products and services it offers or a higher likelihood of default on its receivables.

Adverse trends and general economic conditions, especially those that relate to construction and
renovation, will impact Griffon’s business.

The CPP and HBP businesses serve residential and commercial construction and renovation, and are
influenced by market conditions that affect these industries. For the year ended September 30, 2020,
approximately 47% and 39% of Griffon’s consolidated revenue was derived from the CPP and HBP
segments, respectively, which was dependent on renovation of existing homes, new home construction,
the U.S.
and commercial non-residential construction, repair and replacement. The strength of
economy, the age of existing home stock, job growth, interest rates, consumer confidence and the
availability of consumer credit, as well as demographic factors such as migration into the U.S. and
migration of the population within the U.S., have an effect on CPP and HBP. To the extent market
conditions for residential or commercial construction and renovation are weaker than expected, this will
likely have an adverse impact on the performance and financial results of the CPP and HBP businesses.

Griffon operates in highly competitive industries and may be unable to compete effectively.

Griffon’s operating companies face intense competition in the markets they serve. Griffon competes
primarily on the basis of technical expertise, product differentiation, quality of products and services,
and price. There are a number of competitors to Griffon, some of which are larger and have greater
resources than Griffon’s operating companies. Griffon’s operating companies may face additional
competition from companies that operate in countries with significantly lower operating costs.

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Many CPP and HBP customers are large mass merchandisers, such as home centers, warehouse clubs,
discount stores, commercial distributors and e-commerce companies. The growing share of the market
represented by these large mass merchandisers, together with changes in consumer shopping patterns,
have contributed to the increase of multi-category retailers and e-commerce companies that have strong
negotiating power with suppliers. Many of these retailers import products directly from foreign
suppliers to source and sell products under their own private label brands to compete with CPP and
HBP products and brands, which puts increasing price pressure on the products of these businesses. In
addition, the intense competition in the retail and e-commerce sectors, combined with the overall
increasingly competitive economic environment, may result in a number of customers experiencing
financial difficulty, or failing in the future. The loss of, or a failure by, one of CPP’s or HBP’s significant
customers could adversely impact our sales and operating cash flows.

To address all of these challenges, CPP and HBP must be able to respond to these competitive
pressures, and the failure to respond effectively could result in a loss of sales, reduced profitability and a
limited ability to recover cost increases through price increases. In addition, there can be no assurance
that Griffon will not encounter increased competition in the future, which could have a material adverse
effect on Griffon’s financial results.

The loss of large customers can harm financial results.

A small number of customers account for, and are expected to continue to account for, a substantial
portion of Griffon’s consolidated revenue. Home Depot, Lowe’s and Bunnings are significant customers
of CPP, and Home Depot and Menards are significant customers of HBP. Home Depot accounted for
approximately 17% of consolidated revenue, 27% of CPP’s revenue and 12% HBP’s revenue for the
year ended September 30, 2020. The U.S. Government and its agencies and subcontractors, including
Lockheed Martin and Boeing, is a significant customer of DE, and together accounts for approximately
10% of consolidated revenue and 69% of DE segment revenue (Lockheed Martin and Boeing each
individually represent less than 10% of consolidated revenue inclusive of such sales to the U.S.
Government). Future operating results will continue to substantially depend on the success of Griffon’s
largest customers, as well as Griffon’s relationships with them. Orders from these customers are subject
to fluctuation and may be reduced materially due to changes in customer needs or other factors. Any
reduction or delay in sales of products to one or more of these customers could significantly reduce
Griffon’s revenue. Griffon’s operating results will also depend on successfully developing relationships
with additional key customers. Griffon cannot assure that its largest customers will be retained or that
additional key customers will be recruited. Also, both CPP and HBP extend credit to its customers,
which exposes it to credit risk. The largest customer accounted for approximately 28%, 6% and 18% of
the net accounts receivable of CPP, HBP and Griffon’s net accounts receivable as of September 30,
2020, respectively. If this customer were to become insolvent or otherwise unable to pay its debts, the
financial condition, results of operations and cash flows of CPP, HBP and Griffon could be adversely
affected.

Reliance on third party suppliers and manufacturers may impair CPP and HBP ability to meet its
customer demands.

CPP and HBP rely on a limited number of domestic and foreign companies to supply components and
manufacture certain of its products. The percentage of CPP and HBP worldwide sourced finished goods
as a percent of revenue approximated 31% and 9%, respectively, in 2020. The percentage of CPP and
HBP’s worldwide sourced components as a percent of cost of goods sold approximated 10% and 17%,
respectively, in 2020. Reliance on third party suppliers and manufacturers may reduce control over the
timing of deliveries and quality of both CPP and HBP products. Reduced product quality or failure to
deliver products timely may jeopardize relationships with certain of CPP’s and HBP’s key customers. In
addition, reliance on third party suppliers or manufacturers may result in the failure to meet CPP and
HBP customer demands. Continued turbulence in the worldwide economy may affect the liquidity and
financial condition of CPP and HBP suppliers. Should any of these parties fail to manufacture sufficient
supply, go out of business or discontinue a particular component, alternative suppliers may not be found

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in a timely manner, if at all. Such events could impact the ability of CPP and HBP to fill orders, which
could have a material adverse effect on customer relationships.

If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact
operating performance.

supply.

CPP and HBP suppliers primarily provide resin, wood, steel and wire rod. Both of these businesses
could experience shortages of raw materials or components for products or be forced to seek alternative
sources of
in supply caused by weather,
transportation, production delays or other factors require raw materials to be secured from sources
other than current suppliers, the terms may not be as favorable as current terms or certain materials
may not be available at all. In recent years, both CPP and HBP have experienced price increases in
steel and plastic resins.

temporary shortages due to disruptions

If

While most key raw materials used in Griffon’s businesses are generally available from numerous
sources, raw materials are subject to price fluctuations. Because raw materials in the aggregate
constitute a significant component of the cost of goods sold, price fluctuations could have a material
adverse effect on Griffon’s results of operations. Griffon’s ability to pass raw material price increases to
customers is limited due to supply arrangements and competitive pricing pressure, and there is generally
a time lag between increased raw material costs and implementation of corresponding price increases
for Griffon’s products. In particular, sharp increases in raw material prices are more difficult to pass
through to customers and may negatively affect short-term financial performance.

CPP is subject to risks from sourcing from international locations, especially China

CPP’s business is global, with products and raw materials sourced from, manufactured in and sold in
multiple countries around the world. There are risks associated with conducting a business that may be
impacted by political and other developments associated with international trade. In this regard, certain
products sold by CPP in the United States and elsewhere are sourced from China; and raw materials
used by CPP may be sourced from China and therefore may have their prices impacted by tariffs
imposed on trade between the United States and China.

The sourcing of CPP finished goods, components and raw materials from China are generally subject to
supply agreements with Chinese companies. China does not have a well-developed, consolidated body
of laws governing agreements with international customers. Enforcement of existing laws or contracts
based on existing law may be uncertain and sporadic, and it may be difficult to obtain swift and
equitable enforcement or to obtain enforcement of a judgment by a court of another jurisdiction. The
relative inexperience of China’s judiciary on matters of international trade in many cases creates
additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and
regulations in China may be subject to government policies reflecting domestic political changes.

Because of the volume of sourcing by CPP from China, the ongoing trade dispute between the U.S. and
China, including the imposition of tariffs on various Chinese imports into the U.S. at various times since
March 2018, represents a continuing risk to CPP revenue and operating performance. The United States
entered into what is described as “Phase 1” trade agreement with China on January 15, 2020, which
reduces some existing tariffs that had been imposed and defers proposed increases of the tariff rate on
an additional $250 billion of Chinese goods from 25% to 30% that had been planned for October 15,
2019, and proposed 15% tariffs on an additional $160 billion of a wide range of goods and materials
imported from China to be effective December 15, 2019. Under the Phase 1 agreement, existing 25%
tariffs previously imposed on $250 billion of Chinese goods will remain in place, while a 15% tariff on
another $120 billion of Chinese goods has been reduced to 7.5%. In response, China has imposed tariffs
on certain U.S. products, some of which are being reduced as part of the Phase 1 agreement. China may
take additional actions if additional U.S. tariffs are reduced or imposed. On May 8, 2020, the two
countries reaffirmed their Phase 1 trade agreement notwithstanding the COVID-19 pandemic. In view
of potential discussions between the Chinese and U.S. governments on a second phase agreement, for

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which discussions only among trade negotiators are currently scheduled, the ultimate level of tariffs, the
ultimate scope of them, and whether or how the proposed additional tariffs will impact our business is
uncertain. The imposition of additional tariffs by the U.S. government on various steel and aluminum
finished goods, as well as a variety of resins, fabrics and wood products could materially affect our
operations. As a result of these tariffs and the fluid nature of ongoing trade negotiations, we intend to
continue to manage our China supply base, which may include raising prices on certain goods. This may
in turn result in reduced sales or the loss of customers and could impact our operating performance.

The continuing political and economic conflicts between U.S. and China have resulted in and may
continue to cause retaliatory policies from both countries, including a recent executive order issued by
the U.S. President eliminating the preferential trade status of Hong Kong in response to China’s action
to impose new security measures and regulation on Hong Kong. We cannot predict what new and
additional retaliatory policies and regulations may be implemented by the Chinese government in
response to U.S. actions, and such policies and regulations may adversely affect our business operations
in China.

CPP and HBP operations are also subject to the effects of international trade agreements and
regulations such as the United States-Mexico-Canada Agreement, and the activities and regulations of
the World Trade Organization. Although these trade agreements generally have positive effects on
trade liberalization, sourcing flexibility and cost of goods by reducing or eliminating the duties and/or
quotas assessed on products manufactured in a particular country, trade agreements can also adversely
affect CPP and HBP businesses. For example, trade agreements can result in setting quotas on products
that may be imported from a particular country into key markets including the U.S., Canada, Australia
and the United Kingdom, or may make it easier for other companies to compete by eliminating
restrictions on products from countries where CPP and HBP competitors source products.

The ability of CPP and HBP to import products in a timely and cost-effective manner may also be
affected by conditions at ports or issues that otherwise affect transportation and warehousing providers,
such as port and shipping capacity, labor disputes, severe weather or increased homeland security
requirements in the U.S. and other countries, as well as the potential for increased costs due to currency
exchange fluctuations. These issues could delay importation of products or require CPP and HBP to
locate alternative ports or warehousing providers to avoid disruption to customers. These alternatives
may not be available on short notice or could result in higher transit costs, which could have an adverse
impact on CPP and HBP business and financial condition.

Griffon’s businesses are subject to seasonal variations and the impact of uncertain weather patterns.

Griffon’s revenue and earnings are generally lowest in our first and fourth quarters ending December 31,
and September 30, respectively, and highest in the second and third quarters ending March 31, and
June 30, respectively, primarily due to the seasonality of the AMES business. In 2020, 53% of AMES’
sales occurred during the second and third quarters compared to 56% and 57% in 2019 and 2018,
respectively. In 2020, as a result of the COVID-19 pandemic, sales orders shifted somewhat into the
third and fourth quarters resulting in revenue increasing in these two quarters to 55% of 2020 sales.
Clopay’s business is driven by residential renovation and construction, which occurs more during warm
weather, than during the winter months, and so revenues and earnings of Clopay are generally lower in
the second quarter. Telephonics historically has had higher revenue and earnings in the second half of
Griffon’s fiscal year ending September 30 (although this has not always been the case).

Demand for lawn and garden products is influenced by weather, particularly weekend weather during
the peak gardening season. AMES’ sales volumes could be adversely affected by certain weather
patterns such as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In
addition, lack of snow or lower than average snowfall during the winter season may result in reduced
sales of certain AMES’ products such as snow shovels and other snow tools. As a result, AMES’ results
of operations, financial results and cash flows could be adversely impacted.

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Unionized employees could strike or participate in a work stoppage.

At September 30, 2020, Griffon employed approximately 7,400 people on a full-time basis,
approximately 6% of whom are covered by collective bargaining or similar labor agreements (all
within Telephonics and CPP). If unionized employees engage in a strike or other work stoppage, or if
Griffon is unable to negotiate acceptable extensions of agreements with labor unions, a significant
disruption of operations and increased operating costs could occur. In addition, any renegotiation or
renewal of labor agreements could result in higher wages or benefits paid to unionized employees,
which could increase operating costs and as a result have a material adverse effect on profitability.

Telephonics’ business depends heavily upon government contracts and, therefore, the defense budget.

Telephonics sells products to the U.S. government and its agencies both directly and indirectly as a first-
tier supplier to prime contractors in the defense industry such as Lockheed Martin, Boeing and
Northrop Grumman. In the year ended September 30, 2020, U.S. government contracts and
subcontracts accounted for approximately 10% of Griffon’s consolidated revenue. Contracts involving
the U.S. government may include various risks, including:

• Termination for default or for convenience by the government;

• Reduction or modification in the event of changes in the government’s requirements or

budgetary constraints;

• Increased or unexpected costs, causing losses or reduced profits under contracts where
Telephonics’ prices are fixed, or determinations that certain costs are not allowable under
particular government contracts;

• The failure or inability of the prime contractor to perform its contract under circumstances in

which Telephonics is a subcontractor;

• Failure to observe and comply with government and procurement regulations such that
Telephonics could be suspended or barred from bidding on or receiving awards of new
government contracts;

• The failure of the government to exercise options for additional work provided for in contracts;

• The inherent discretion of government agencies in determining whether Telephonics has

complied with all specifications set forth in a government contract; and

• The government’s right, in certain circumstances, to freely use technology developed under these

contracts.

Telephonics’ U.S. Government end-user contracts contain a termination for convenience clause,
regardless if Telephonics is the prime contractor or the subcontractor. This clause generally entitles
Telephonics, upon a termination for convenience, to receive the purchase price for delivered items,
reimbursement of allowable work-in-process costs, and an allowance for profit. Allowable costs would
include the costs to terminate existing agreements with suppliers.

The programs in which Telephonics participate may extend for several years, and may be funded on an
incremental basis. Decreases in the U.S. defense budget, in particular with respect to programs to which
Telephonics supplies materials, could have a material adverse impact on Telephonics’
financial
conditions, results of operations and cash flows. The U.S. government may not continue to fund
programs to which Telephonics’ development projects apply. Even if funding is continued, Telephonics
may fail to compete successfully to obtain funding pursuant to such programs. Reductions to funding on
existing programs or delays in the funding of new opportunities could affect the timing of revenue
recognition, and impact Telephonics’ and Griffon’s results of operations.

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Telephonics’ business could be adversely affected by a government shutdown

The impact of a government shutdown for any duration could have a material adverse effect on
Telephonics’ revenues, profits and cash flows. Telephonics relies on government personnel to conduct
routine business processes related to the inspection and delivery of products for various programs, to
approve and pay certain billings and invoices, to process export licenses and for other administrative
services that, if disrupted, could have an immediate impact on Telephonics’ business.

Telephonics’ business could be adversely affected by a negative audit by the U.S. Government

As a government contractor, and a subcontractor to government contractors, Telephonics is subject to
audits and investigations by U.S. Government Agencies such as the Defense Contract Audit Agency,
the Defense Security Service, with respect to its classified contracts, other Inspectors General and the
Department of Justice. These agencies review a contractor’s performance under its contracts, its cost
structure and compliance with applicable laws and standards as well as compliance with applicable
regulations, including those relating to facility and personnel security clearances. These agencies also
review the adequacy of, and a contractor’s compliance with, its internal control systems and policies,
including the contractor’s management, purchasing, property, estimating, compensation, and accounting
and information systems. Any costs found to be misclassified or improperly allocated to a specific
contract will not be reimbursed, or must be refunded if already billed and collected. Griffon could incur
significant expenses in complying with audits and subpoenas issued by the government in aid of
inquiries and investigations. If an audit or an investigation uncovers a failure to comply with applicable
laws or regulations, or improper or illegal activities, Telephonics may be subject to civil and criminal
penalties and/or administrative sanctions, which could include contract termination, forfeiture of profit,
suspension of payments, fines, including treble damages, and suspension or prohibition from doing
business with the U.S. Government. In addition, if allegations of impropriety are made, Telephonics and
Griffon could suffer serious harm to their reputation.

Many Telephonics contracts contain performance obligations that require innovative design capabilities,
are technologically complex, or are dependent upon factors not wholly within Telephonics’ control.
Failure to meet these obligations could adversely affect customer relations, future business opportunities,
and overall profitability.

Telephonics designs, develops and manufactures advanced and innovative surveillance and commu-
nication products for a broad range of applications for use in varying environments. As with many of
Telephonics’ programs, system specifications, operational requirements and test requirements are
challenging, exacerbated by the need for quick delivery schedules. Technical problems encountered and
delays in the development or delivery of such products, as well as the inherent discretion involved in
government approval related to compliance with applicable specifications of products supplied under
government contracts, could prevent Telephonics from meeting contractual obligations, which could
subject Telephonics to termination for default. Under a termination for default, the company is entitled
to negotiate payment for undelivered work if the Government requests the transfer of title and delivery
of partially completed supplies and materials. Conversely, if the Government does not make this
request, there is no obligation to reimburse the company for its costs incurred. Telephonics may also be
subject to the repayment of advance and progress payments, if any. Additionally, Telephonics may be
liable to the Government for any of its excess costs incurred in acquiring supplies and services similar to
those terminated for default, and for other damages. Should any of the foregoing events occur, it could
result in a material adverse effect on Griffon’s financial position.

Griffon’s business could be negatively affected by cyber or other security threats or other disruptions.

Griffon and its operating companies are subjected to cyber and other security threats common to U.S.
businesses. As a U.S. defense contractor, Telephonics, in particular, may be the target of cyber security
threats to its information technology infrastructure and unauthorized attempts to gain access to

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sensitive or highly confidential information that could compromise U.S. security. The types of threats
could vary from attacks common to most industries to more advanced and persistent, highly organized
adversaries who target Telephonics because of national security information in its possession.
Individuals and groups of hackers and sophisticated organizations, including organizations sponsored
by foreign countries, may use a wide variety of methods, such as deploying malicious software or
exploiting vulnerabilities in hardware, software, or other infrastructure in order to gain access to our
networks or using social engineering techniques to induce our employees to disclose passwords or other
sensitive information or take other actions to gain access to our data. Inadequate account security
practices may also result
system
administrators may fail to timely remove employee account access when no longer appropriate.
Employees or third parties may also intentionally compromise our systems, security or confidential
information.

to confidential data. For example,

in unauthorized access

If Telephonics is unable to protect sensitive information, its customers or governmental authorities
could question the adequacy of its security processes and procedures and its compliance with evolving
government cyber security requirements for government contractors. Due to the evolving nature of
these security threats, and the increasing difficulty of detecting and defending against them, the risk and
impact of any future incident cannot be predicted.

The costs related to cyber or other security threats or disruptions could be significant. Security events
such as these could adversely affect Griffon’s internal operations, future financial results and reputation,
as well as result in the loss of competitive advantages derived from research and development efforts
and other intellectual property.

Griffon may be unable to implement its acquisition growth strategy, which may result in added expenses
without a commensurate increase in revenue and income, and divert management’s attention.

Making strategic acquisitions is a significant part of Griffon’s growth plans. The ability to successfully
complete acquisitions depends on identifying and acquiring, on acceptable terms, companies that either
complement or enhance currently held businesses or expand Griffon into new profitable businesses,
and, for certain acquisitions, obtaining financing on acceptable terms. Additionally, Griffon must
properly integrate acquired businesses in order to maximize profitability. The competition for
acquisition candidates is intense and Griffon cannot assure that it will successfully identify acquisition
candidates and complete acquisitions at reasonable purchase prices, in a timely manner, or at all.
Further, there is a risk that acquisitions will not be properly integrated into Griffon’s existing structure.
Griffon closed the acquisitions of La Hacienda, Tuscan Path, ClosetMaid and Harper Brush in the
months of July through November 2017, Kelkay in February 2018, CornellCookson in June 2018 and
Apta in November 2019. This integration risk may be exacerbated when numerous acquisitions are
consummated in a short time period.

In implementing an acquisition growth strategy, the following may be encountered:

• Costs associated with incomplete or poorly implemented acquisitions;

• Expenses, delays and difficulties of integrating acquired companies into Griffon’s existing

organization;

• Dilution of the interest of existing stockholders;

• Diversion of management’s attention; or

• Difficulty in obtaining financing on acceptable terms, or at all.

implementation of Griffon’s acquisition growth strategy,

An unsuccessful
including the failure to
properly integrate acquisitions, could have an adverse impact on Griffon’s results of operations, cash
flows and financial condition. We may also incur debt or assume contingent liabilities in connection
with acquisitions, which could impose restrictions on our business operations and harm our operating
results.

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Risks Related to Our Indebtedness

While Griffon’s senior notes, which have limited covenants, are not due until 2028, and while its $400
million revolving line of credit, which is largely undrawn and has greater covenant requirements, does
not mature until 2025, there are potential impacts from Griffon’s use of debt to finance certain of its
activities, especially acquisitions and expansions, as set forth below.

Compliance with restrictions and covenants in Griffon’s debt agreements may limit its ability to take
corporate actions.

The credit agreement entered into by, and, to a lesser extent, the terms of the senior notes issued by,
Griffon each contain covenants that restrict the ability of Griffon and its subsidiaries to, among other
things, incur additional debt, pay dividends, incur liens and make investments, acquisitions, dispositions,
restricted payments and capital expenditures. Under the credit agreement, which is largely undrawn,
Griffon is also required to comply with specific financial ratios and tests. Griffon may not be able to
comply in the future with these covenants or restrictions as a result of events beyond its control, such as
prevailing economic, financial and industry conditions or a change in control of Griffon. If Griffon
defaults in maintaining compliance with the covenants and restrictions in its credit agreement or the
senior notes, its lenders could declare all of the principal and interest amounts outstanding due and
payable and, in the case of the credit agreement, terminate the commitments to extend credit to Griffon
in the future. If Griffon or its subsidiaries are unable to secure credit in the future, its business could be
harmed.

Griffon may be unable to raise additional financing if needed.

Griffon may need to raise additional financing in the future in order to implement its business plan,
refinance debt, or acquire new or complimentary businesses or assets. Any required additional financing
may be unavailable, or only available at unfavorable terms, due to uncertainties in the credit markets. If
Griffon raises additional funds by issuing equity securities, current holders of its common stock may
experience significant ownership interest dilution and the holders of the new securities may have rights
senior to the rights associated with current outstanding common stock.

Griffon’s indebtedness and interest expense could limit cash flow and adversely affect operations and
Griffon’s ability to make full payment on outstanding debt.

Griffon’s indebtedness poses potential risks such as:

• A substantial portion of cash flows from operations could be used to pay principal and interest
thereby reducing the funds available for working capital, capital expenditures,

on debt,
acquisitions, product development and other general corporate purposes;

• Insufficient cash flows from operations may force Griffon to sell assets, or seek additional capital,

which Griffon may not be able to secure on favorable terms, if at all; and

• Its level of indebtedness may make Griffon more vulnerable to economic or industry downturns.

Risk Related to Our Common Stock

Griffon has the ability to issue additional equity securities, which would lead to dilution of issued and
outstanding common stock.

The issuance of additional equity securities or securities convertible into equity securities would result
in dilution to existing stockholders’ equity interests. Griffon is authorized to issue, without stockholder
vote or approval, 3,000,000 shares of preferred stock in one or more series, and has the ability to fix the
rights, preferences, privileges and restrictions of any such series. Any such series of preferred stock

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could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences or other rights superior to the rights of holders of Griffon’s common stock.
While there is no present intention of issuing any such preferred stock, Griffon reserves the right to do
so at any time. In addition, Griffon is authorized to issue, without stockholder approval, up to
85,000,000 shares of common stock, of which 56,129,784 shares, net of treasury shares, were outstanding
as of September 30, 2020. Additionally, Griffon is authorized to issue, without stockholder approval,
securities convertible into either shares of common stock or preferred stock.

General Risk Factors

Each of Griffon’s businesses faces risks related to the disruption of its primary manufacturing facilities.

The manufacturing facilities for each of Griffon’s businesses are concentrated in just a few locations,
and in the case of CPP, some of these locations are abroad in low-cost locations. Any of Griffon’s
manufacturing facilities are subject to disruption for a variety of reasons, such as natural or man-made
disasters, pandemics, terrorist activities, disruptions of information technology resources, and utility
interruptions. Such disruptions may cause delays in shipping products, which could result in the loss of
business or customer trust, adversely affecting Griffon’s businesses and operating results.

Manufacturing capacity constraints or increased manufacturing costs may have a material adverse effect
on Griffon’s business, results of operations, financial condition and cash flows.

Griffon’s current manufacturing resources may be inadequate to meet significantly increased demand
for some of its products. Griffon’s ability to increase its manufacturing capacity depends on many
factors, including the availability of capital, steadily increasing consumer demand, equipment delivery,
construction lead-times, installation, qualification, and permitting and other regulatory requirements.
Increasing capacity through the use of third-party manufacturers may depend on Griffon’s ability to
develop and maintain such relationships and the ability of such third parties to devote additional
capacity to fill its orders.

A lack of sufficient manufacturing capacity to meet demand could cause customer service levels to
decrease, which may negatively affect customer demand for Griffon’s products and customer relations
generally, which in turn could have a material adverse effect on Griffon’s business, results of operations,
financial condition and cash flows. In addition, operating facilities at or near capacity may also increase
production and distribution costs and negatively impact relations with employees or contractors, which
could result in disruptions to operations.

In addition, manufacturing costs may increase significantly and Griffon may not be able to successfully
recover these cost increases with increased pricing to its customers.

If CPP and HBP do not continue to develop and maintain leading brands or realize the anticipated
benefits of advertising and promotion spend, its operating results may suffer.

The ability of CPP and HBP to compete successfully depends in part on the company’s ability to
develop and maintain leading brands so that retail and other customers will need its products to meet
consumer demand. Leading brands allow both CPP and HBP to realize economies of scale in its
operations. The development and maintenance of such brands require significant investment in brand-
building and marketing initiatives. While CPP and HBP plan to continue to increase its expenditures for
advertising and promotion and other brand-building and marketing initiatives over the long term, the
initiatives may not deliver the anticipated results and the results of such initiatives may not cover the
costs of the increased investment.

31

34461

Griffon may be required to record impairment charges for goodwill and indefinite-lived intangible assets.

Griffon is required to assess goodwill and indefinite-lived intangible assets annually for impairment or
on an interim basis if changes in circumstances or the occurrence of events suggest impairment exists. If
impairment testing indicates that the carrying value of reporting units or indefinite-lived intangible
assets exceeds the respective fair value, an impairment charge would be recognized. If goodwill or
indefinite-lived intangible assets were to become impaired, the results of operations could be materially
and adversely affected.

If Griffon’s subcontractors or suppliers fail to perform their obligations, Griffon’s performance and
ability to win future business could be harmed.

Griffon relies on other companies to provide materials, major components and products to fulfill
contractual obligations. Such arrangements may involve subcontracts, teaming arrangements, or supply
agreements with other companies. There is a risk that Griffon may have disputes regarding the quality
and timeliness of work performed. In addition, changes in the economic environment, including defense
budgets and constraints on available financing, may adversely affect the financial stability of Griffon’s
supply chain and their ability to meet their performance requirements or to provide needed supplies on
a timely basis. A disruption or failure of any supplier could have an adverse effect on Griffon’s business
resulting in an impact to profitability, possible termination of a contract,
imposition of fines or
penalties, and harm to Griffon’s reputation impacting its ability to secure future business.

Griffon’s companies must continually improve existing products, design and sell new products and invest
in research and development in order to compete effectively.

The markets for Griffon’s products are characterized by rapid technological change, evolving industry
standards and continuous improvements in products. Due to constant changes in Griffon’s markets,
future success depends on Griffon’s ability to develop new technologies, products, processes and
product applications. Griffon’s long-term success in the competitive retail environment and the
industrial and commercial markets depends on its ability to develop and commercialize a continuing
stream of innovative new products that are appealing to ultimate end users and create demand. New
product development and commercialization efforts, including efforts to enter markets or product
categories in which Griffon has limited or no prior experience, have inherent risks. These risks include
the costs involved, such as development and commercialization, product development or launch delays,
and the failure of new products and line extensions to achieve anticipated levels of market acceptance
or growth in sales or operating income.

Griffon also faces the risk that its competitors will introduce innovative new products that compete with
Griffon’s products. In addition, sales generated by new products could cause a decline in sales of
Griffon’s other existing products. If new product development and commercialization efforts are not
successful, Griffon’s financial results could be adversely affected.

Product and technological developments are accomplished both through internally-funded R&D
projects, as well as through strategic partnerships with customers. Because it is not generally possible to
predict the amount of time required and costs involved in achieving certain R&D objectives, actual
development costs may exceed budgeted amounts and estimated product development schedules may
be extended. Griffon’s financial condition and results of operations may be materially and adversely
affected if:

• Product improvements are not completed on a timely basis;

• New products are not introduced on a timely basis or do not achieve sufficient market

penetration;

• There are budget overruns or delays in R&D efforts; or

32

14428

• New products experience reliability or quality problems, or otherwise do not meet customer

preferences or requirements.

The loss of certain key officers or employees could adversely affect Griffon’s business.

The success of Griffon is materially dependent upon the continued services of certain key officers and
employees. The loss of such key personnel could have a material adverse effect on Griffon’s operating
results or financial condition.

Griffon is exposed to a variety of risks relating to non-U.S. sales and operations, including non-U.S.
economic and political conditions and fluctuations in exchange rates.

Griffon and its companies conduct operations in Canada, Australasia, the United Kingdom, Mexico and
China, and sell their products in many countries around the world. Sales of products through non-U.S.
subsidiaries accounted for approximately 17% of consolidated revenue for the year ended September 30,
2020. These sales could be adversely affected by changes in political and economic conditions, trade
protection measures, such as tariffs, the ability of the Company to enter into industrial cooperation
agreements (offset agreements), differing intellectual property rights and laws and changes in regulatory
requirements that restrict the sales of products or increase costs in such locations. Enforcement of
existing laws in such jurisdictions can be uncertain, and the lack of a sophisticated body of laws can
create various uncertainties,
including with respect to customer and supplier contracts. Currency
fluctuations between the U.S. dollar and the currencies in the non-U.S. regions in which Griffon does
business may also have an impact on future reported financial results.

Griffon’s international sales and operations are subject to applicable laws relating to trade, export
controls and foreign corrupt practices, the violation of which could adversely affect operations. Griffon
is subject to various anti-corruption laws that prohibit improper payments or offers of payments to
foreign governments and their officials for the purpose of obtaining or retaining business. In addition,
Griffon is subject to export controls, laws and regulations such as the Arms Export Control Act, the
International Traffic in Arms Regulation and the Export Administration Regulations, as well as to
economic sanctions, laws and embargoes imposed by various governments or organizations, including
the U.S. and the European Union or member countries. Violations of anti-corruption, export controls
or sanctions laws may result in severe criminal or civil sanctions and penalties, including debarment,
loss of export privileges and loss of authorizations needed to conduct Griffon’s international business,
and could harm the ability to enter into contracts with the U.S. Government. Such violations could also
result in Griffon being subject to other liabilities, which could have a material adverse effect on
Griffon’s business, results of operations and financial condition.

Griffon may not be able to protect its proprietary rights.

Griffon relies on a combination of patent, copyright and trademark laws, common law, trade secrets,
confidentiality and non-disclosure agreements and other contractual provisions to protect proprietary
rights. Such measures do not provide absolute protection and Griffon cannot give assurance that
measures for protecting these proprietary rights are and will be adequate, or that competitors will not
independently develop similar technologies.

Griffon may inadvertently infringe on, or may be accused of infringing on, proprietary rights held by
another party.

Griffon is regularly improving its technology and employing existing technologies in new ways. Though
Griffon takes reasonable precautions to ensure it does not infringe on the rights of others, it is possible
that Griffon may inadvertently infringe on, or be accused of infringing on, proprietary rights held by
others. If Griffon is found to have infringed on the propriety rights held by others, any related litigation

33

58664

or settlement relating to such infringement may have a material effect on Griffon’s business, results of
operations and financial condition.

Griffon is exposed to product liability and warranty claims.

Griffon is subject to product liability and warranty claims in the ordinary course of business, including
with respect to former businesses now included within discontinued operations. These claims relate to
the conformity of its products with required specifications, and to alleged or actual defects in Griffon’s
products (or in end-products in which Griffon’s products were a component part) that cause damage to
property or persons. There can be no assurance that the frequency and severity of product liability
claims brought against Griffon will not increase, which claims can be brought either by an injured
customer of an end product manufacturer who used one of Griffon’s products as a component or by a
direct purchaser. There is also no assurance that the number and value of warranty claims will not
increase as compared to historical claim rates, or that Griffon’s warranty reserve at any particular time
is sufficient. No assurance can be given that indemnification from customers or coverage under
insurance policies will be adequate to cover future product liability claims against Griffon; for example,
product liability insurance typically does not cover claims for punitive damages. Warranty claims are
typically not covered by insurance at all. Product liability insurance can be expensive, difficult to
maintain and may be unobtainable in the future on acceptable terms. The amount and scope of any
insurance coverage may be inadequate if a product liability claim is successfully asserted. Furthermore,
if any significant claims are made, the business and the related financial condition of Griffon may be
adversely affected by negative publicity.

Griffon has been, and may in the future be, subject to claims and liabilities under environmental laws and
regulations.

Griffon’s operations and assets are subject to environmental laws and regulations pertaining to the
discharge of materials into the environment, the handling and disposal of wastes, including solid and
hazardous wastes, and otherwise relating to health, safety and protection of the environment, in the
various jurisdictions in which it operates. Griffon does not expect to make any expenditure with respect
to ongoing compliance with or remediation under these environmental laws and regulations that would
have a material adverse effect on its business, operating results or financial condition. However, the
applicable requirements under environmental laws and regulations may change at any time.

Griffon can incur environmental costs related to sites that are no longer owned or operated, as well as
third-party sites to which hazardous materials are sent. Material expenditures or liabilities may be
incurred in connection with such claims. See the Commitment and Contingencies footnote in the Notes
to Consolidated Financial Statements for further information on environmental contingencies. Based on
facts presently known, the outcome of current environmental matters are not expected to have a
material adverse effect on Griffon’s results of operations and financial condition. However, presently
unknown environmental conditions, changes
laws and regulations or other
unanticipated events may give rise to claims that may involve material expenditures or liabilities.

in environmental

Changes in income tax laws and regulations or exposure to additional
adversely affect profitability.

income tax liabilities could

Griffon is subject to Federal, state and local income taxes in the U.S. and in various taxing jurisdictions
outside the U.S. Tax provisions and liabilities are subject to the allocation of income among various
U.S. and international tax jurisdictions. Griffon’s effective tax rate could be adversely affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in any valuation
allowance for deferred tax assets or the amendment or enactment of tax laws. The amount of income
taxes paid is subject to audits by U.S. Federal, state and local tax authorities, as well as tax authorities
in the taxing jurisdictions outside the U.S. If such audits result in assessments different from recorded

34

99112

income tax liabilities, Griffon’s future financial results may include unfavorable adjustments to its
income tax provision.

Item 1B. Unresolved Staff Comments

None.

35

32015

Item 2. Properties

Griffon occupies approximately 9,500,000 square feet of general office, factory and warehouse space
primarily throughout
the U.S., Canada, Mexico, Australia, United Kingdom and China. For a
description of the encumbrances on certain of these properties, see the Notes Payable, Capitalized
Leases and Long-Term Debt footnote in the Notes to Consolidated Financial Statements. The following
table sets forth certain information related to Griffon’s major facilities:

Location

Business Segment

Primary Use

Approx.
Square
Footage

Owned/
Leased

Lease
End
Year

New York, NY . . . . . . . . . Corporate
Farmingdale, NY . . . . . . . Defense Electronics
Huntington, NY . . . . . . . . Defense Electronics
Huntington, NY . . . . . . . . Defense Electronics
Columbia, MD. . . . . . . . . . Defense Electronics
Elizabeth City, NC. . . . . . Defense Electronics

Headquarters
Manufacturing/R&D
Manufacturing
Manufacturing
Engineering
Manufacturing (Owned),
Repair and Service (Leased)
Manufacturing
Manufacturing
Manufacturing
Manufacturing

Troy, OH . . . . . . . . . . . . . . . Home and Building Products
Russia, OH . . . . . . . . . . . . . Home and Building Products
Mountain Top, PA. . . . . . Home and Building Products
Goodyear, AZ . . . . . . . . . . Home and Building Products
Carlisle, PA. . . . . . . . . . . . . Consumer and Professional Products Manufacturing, Distribution
Reno, NV . . . . . . . . . . . . . . Consumer and Professional Products Manufacturing, Distribution
Camp Hill, PA. . . . . . . . . . Consumer and Professional Products Manufacturing
Harrisburg, PA . . . . . . . . . Consumer and Professional Products Manufacturing
St. Francois, Quebec . . . . Consumer and Professional Products Manufacturing, Distribution
Champion, PA . . . . . . . . . . Consumer and Professional Products Wood Mill
Cork, Ireland . . . . . . . . . . . Consumer and Professional Products Manufacturing, Distribution
Pollington Site, UK . . . . . Consumer and Professional Products Manufacturing, Distribution
Gloucestershire, UK . . . . Consumer and Professional Products Distribution
South Yorkshire, UK . . . Consumer and Professional Products Manufacturing
Kent, UK . . . . . . . . . . . . . . . Consumer and Professional Products Distribution
Australia (various) . . . . . . Consumer and Professional Products 7 Distribution

Quebec, Canada . . . . . . . . Consumer and Professional Products Distribution
Ocala, FL. . . . . . . . . . . . . . . Consumer and Professional Products Manufacturing
Grantsville, MD . . . . . . . . Consumer and Professional Products Manufacturing
Reynosa, MX . . . . . . . . . . . Consumer and Professional Products Manufacturing (owned),

Distribution (leased)

Chino, CA . . . . . . . . . . . . . . Consumer and Professional Products Distribution
Pharr, TX. . . . . . . . . . . . . . . Consumer and Professional Products Distribution
Fairfield, IA . . . . . . . . . . . . Consumer and Professional Products Manufacturing
Guangdong, China . . . . . . Consumer and Professional Products Manufacturing

2021

2025

2021
2025
2039

13,000 Leased
180,000 Owned
90,000 Owned
100,000 Leased
46,000 Leased
46,500 Owned/
Leased
1,230,000 Leased
250,000 Owned
279,000 Owned
163,000 Owned
1,409,000 Leased
400,000 Leased
380,000 Owned
264,000 Owned
353,000 Owned
225,000 Owned
74,000 Owned
115,000 Owned
2022
46,000 Leased
2025
59,000 Leased
2026
32,000 Leased
646,000 Leased 2021–
2027
2021
2030

2035
2022

40,500 Lease
676,000 Leased
155,000 Owned
133,000 Owned/
Leased
202,000 Leased
80,000 Leased
54,000 Leased
211,000 Leased

2023

2021
2022
2021
2022

Griffon also leases approximately 1,200,000 square feet of space for the HBP distribution centers in
numerous facilities throughout the U.S. and in Canada. In addition, Griffon leases approximately
160,000 square feet of office space throughout the U.S. CPP also owns approximately 200,000 square
feet of additional space for operational wood mills in the U.S.

All facilities are generally well maintained and suitable for the operations conducted.

Item 3. Legal Proceedings

Griffon is involved in litigation, investigations and claims arising out of the normal conduct of business,
including those relating to commercial transactions, product liability and warranty claims, environ-
mental, employment, and health and safety matters. Griffon estimates and accrues liabilities resulting

36

40581

from such matters based on a variety of factors, including the stage of the proceeding; potential
settlement value; assessments by internal and external counsel; and assessments by environmental
engineers and consultants of potential environmental liabilities and remediation costs. Such estimates
are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of
the expenditures, which may extend over several years.

While it is impossible to ascertain the ultimate legal and financial liability with respect to certain
contingent liabilities and claims, Griffon believes, based upon examination of currently available
information, experience to date, and advice from legal counsel, that the individual and aggregate
liabilities resulting from the ultimate resolution of
these contingent matters, after taking into
consideration existing insurance coverage and amounts already provided for, will not have a material
adverse impact on consolidated results of operations, financial position or cash flows. Refer to
Note 15—Commitments and Contingent Liabilities for a discussion of the Company’s litigation.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Griffon’s Common Stock is listed for trading on the New York Stock Exchange under the symbol
“GFF”.

Dividends

During 2020, 2019 and 2018, the Company declared and paid dividends totaling $0.30 per share, $0.29
per share and $0.28 per share, respectively. In addition, on March 7, 2018, the Board of Directors
declared a special cash dividend of $1.00 per share, paid on April 16, 2018 to shareholders of record as
of the close of business on March 29, 2018. 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 November 12, 2020, the Board of Directors declared a cash dividend of $0.08 per share, payable on
December 17, 2020 to shareholders of record as of the close of business on November 25, 2020.

Holders

As of October 31, 2020, there were approximately 10,600 holders of Griffon’s Common Stock.

37

17134

Securities Authorized for Issuance Under Equity Compensation Plans

The following sets forth information relating to Griffon’s equity compensation plans as of September 30,
2020:

Plan Category

Equity compensation plans approved by security
holders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity compensation plans not approved by

security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

(b)
Weighted-
average
exercise
price of
outstanding
options, warrants
and rights

(c)
Number of
securities remaining
available for future
issuance under equity
plans (excluding
securities reflected
in column (a))

—

—

$

$

—

—

1,167,172

—

(1) Excludes restricted shares and restricted stock units issued in connection with Griffon’s equity
compensation plans. The total reflected in column (c) includes shares available for grant as any type
of equity award under the Incentive Plan.

Issuer Purchase of Equity Securities

The table below presents shares of Griffon Stock which were acquired by Griffon during the fourth
quarter of 2020:

ISSUER PURCHASES OF EQUITY SECURITIES

(a) Total
Number of
Shares
(or Units)
Purchased

(b) Average
Price Paid
Per Share
(or Unit)

— $
—
—
— $

—
—
—
—

(c) Total Number
of Shares
(or Units)
Purchased as
Part of Publicly
Announced Plans
or Programs (1)

(d) Maximum
Number (or
Approximate Dollar
Value) of Shares
(or Units) That
May Yet Be
Purchased Under
the Plans
or Programs

—
—
—
—

$57,955(1)

Period

July 1–31, 2020 . . . . . . . . . . . . . . . . . .
August 1–31, 2020 . . . . . . . . . . . . . . .
September 1–30, 2020 . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) Shares,

if any, purchased by the Company in open market purchases are pursuant to share
repurchases authorized by the Company’s Board of Directors. On each of August 3, 2016 and
August 1, 2018, the Company’s Board of Directors authorized the repurchase of up to $50,000 of
Griffon common stock; as of September 30, 2020, $57,955 remained available for purchase under
these Board authorized repurchase programs.

38

75526

Performance Graph

The performance graph does not constitute soliciting material, is not deemed filed with the SEC and is
not incorporated by reference in any of Griffon’s filings under the Securities Act of 1933 or the
Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and
irrespective of any general incorporation language in any such filings, except to the extent Griffon
specifically incorporates this performance graph by reference therein.

The following graph sets forth the cumulative total return to Griffon’s stockholders during the five
years ended September 30, 2020, as well as an overall stock market (S&P Small Cap 600 Index) and
Griffon’s peer group index (Dow Jones U.S. Diversified Industrials Index). Assumes $100 was invested
on September 30, 2015, including the reinvestment of dividends, in each category.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Griffon Corporation, the S&P Smallcap 600 Index
and the Dow Jones US Diversified Industrials Index

$250

$200

$150

$100

$50

$0

9/15

9/16

9/17

9/18

9/19

9/20

Griffon Corporation

S&P Smallcap 600

Dow Jones US Diversified Industrials

39

07044

Item 6. Selected Financial Data

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,407,522

2020

For the Years Ended September 30,
2019
2017
2018
(in thousands, except per share amounts)
$1,524,997
$1,977,918
$2,209,289

2016

$1,477,035

Income (loss) before taxes and

discontinued operations . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . .
Income (loss) from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income (loss). . . . . . . . . . . . . . . . . . . . . .

Basic earnings (loss) per share:

Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . .

Weighted average shares outstanding . .

Diluted earnings (loss) per share:

Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . .

Weighted average shares outstanding . .

Cash dividends declared per common

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital expenditures . . . . . . . . . . . . . . . . . . .

Depreciation and amortization . . . . . . . . .

$

$

$

$

$

$

$

$

$

82,757
29,328

$

72,178
26,556

$

33,810
555

$

16,698
(1,085)

$

32,213
12,432

53,429

45,622

33,255

17,783

19,781

—
53,429

1.25
—
1.25

42,588

1.19
—
1.19

45,015

0.30

48,998

62,409

$

$

$

$

$

$

$

$

(8,335)
37,287

92,423
$ 125,678

1.11
(0.20)
0.91

40,934

1.06
(0.20)
0.87

42,888

0.29

45,361

61,848

$

$

$

$

$

$

$

0.81
2.25
3.06

41,005

0.78
2.18
2.96

42,422

1.28

50,138

55,803

$

$

$

$

$

$

$

$

(2,871)
14,912

0.43
(0.07)
0.36

41,005

0.41
(0.07)
0.35

43,011

0.24

34,937

47,878

$

$

$

$

$

$

$

$

10,229
30,010

0.48
0.25
0.73

41,074

0.45
0.23
0.68

44,109

0.20

59,276

46,342

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,456,017

$2,074,939

$2,084,890

$1,873,541

$1,782,096

Current portion of debt . . . . . . . . . . . . . . . .
Long term portion of debt, net . . . . . . . .
Total debt, net . . . . . . . . . . . . . . . . . . . . . . . . .

$

9,922
1,037,042
$1,046,964

$
10,525
1,093,749
$1,104,274

$

13,011
1,108,071
$1,121,082

$

11,078
968,080
$ 979,158

$

13,932
896,946
$ 910,878

Notes:

Results of operations from acquired businesses are included from the date of acquisition. The fair value
of assets and liabilities, inclusive of changes resulting from operating the businesses, are included in the
first period ended after the date of each acquisition, and all periods thereafter.

Excludes results of operations and assets and liabilities of discontinued operations for all periods
presented unless otherwise noted.

2020 includes $15,790 of restructuring charges ($11,865, net of tax, or $0.26 per share); a $7,925 loss
from debt extinguishment ($6,190, net of tax, or $0.14 per share); $2,960 of acquisition costs ($2,306, net
of tax, or $0.05 per share); a benefit from the reversal of contingent consideration related to the Kelkay
acquisition of $1,733 ($1,403, net of tax, or $0.03 per share); and discrete and certain other tax
provisions, net, of $654 or $0.01 per share.

2019 includes a benefit from the reversal of contingent consideration related to the Kelkay acquisition
of $1,646 ($1,333, net of tax, or $0.03 per share) and discrete and certain other tax provisions, net, of
$2,035 or $0.05 per share.

40

53163

2018 includes $7,597 of acquisition related costs ($5,047, net of tax, or $0.12 per share), special dividend
ESOP charges of $3,220 ($2,125, net of tax, or $0.05 per share), $1,205 of secondary equity offering
costs ($795, net of tax, or $0.02 per share), a cost of life insurance benefit of $2,614 ($248, net of tax, or
$0.01 per share) and discrete and certain other tax benefits, net, of $9,384, or $0.22 per share.

2017 includes $9,617 of acquisition related costs ($6,145, net of tax, or $0.14 per share), $5,137 of
contract settlement charges ($3,300, net of tax, or $0.08 per share) and discrete tax benefits, net, of
$8,274, or $0.19 per share.

2016 includes discrete tax benefits, net, of $857 or $0.02 per share.

Due to rounding, the sum of earnings per share of Continuing operations and Discontinued operations
may not equal earnings per share or Net income.

41

78423

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Unless otherwise indicated, all references to years or year-end refers to the fiscal year ending
September 30 and dollars are in thousands, except per share data)

OVERVIEW

The Company

Griffon Corporation (the “Company”, “Griffon”, “we” or “us”) is a diversified management and
holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the
operations of its subsidiaries, allocates resources among them and manages their capital structures.
Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth
opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks
out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive
returns on capital.

The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y. and is
listed on the New York Stock Exchange (NYSE:GFF).

In August 2020 Griffon Corporation completed the public offering of 8,700,000 shares of our common
stock for total net proceeds of $178,165 (the “Public Offering”). 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 and on
June 8, 2020 Griffon issued an additional $150,000 of notes under the same indenture at 100.25% of par
(collectively 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 (the “2022 Senior Notes”).

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

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.

On June 4, 2018, Clopay Corporation (“Clopay”) acquired CornellCookson, Inc. (“CornellCookson”), a
leading US manufacturer and marketer of rolling steel door and grille products designed for
commercial, industrial, institutional and retail use, for an effective purchase price of approximately
$170,000. CornellCookson, as expected, generated over $200,000 in revenue in the first full year of
operations. The accounts, affected for adjustments to reflect fair market values assigned to assets
purchased and liabilities assumed, and results of operations of CornellCookson, are included in the
Company’s consolidated financial statements from the date of acquisition of June 4, 2018. See Note 3,
Acquisitions.

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Clopay Plastic
Products Company, Inc. (“Plastics”) and on February 6, 2018, completed the sale to Berry Global, Inc.
(“Berry”) for approximately $465,000, net of certain post-closing adjustments. As a result, Griffon
classified the results of operations of
the Plastics business as discontinued operations in the
Consolidated Statements of Operations for all periods presented and classified the related assets and
liabilities associated with the discontinued operations in the consolidated balance sheets. All results and
information presented exclude Plastics unless otherwise noted. See Note 7, Discontinued Operations.

42

38855

On October 2, 2017, Griffon acquired ClosetMaid LLC (“ClosetMaid”) for approximately $185,700,
inclusive of post-closing adjustments, or $165,000 net of the estimated present value of tax benefits
resulting from the transaction. ClosetMaid, founded in 1965, is a leading North American manufacturer
and marketer of wood and wire closet organization, general living storage and wire garage storage
products and sells to some of the largest home center retail chains, mass merchandisers, and direct-to-
builder professional installers in North America. ClosetMaid, as expected, generated over $300,000 in
revenue in the first twelve months after the acquisition. The accounts, affected for adjustments to reflect
fair market values assigned to assets purchased and liabilities assumed, and results of operations of
ClosetMaid are included in the Company’s consolidated financial statements from the date of
acquisition of October 2, 2017. See Note 3, Acquisitions.

Impact of COVID-19 on Our Business

The health and safety of our employees, our customers and their families is a high priority for Griffon.
As of the date of this filing, all of Griffon’s facilities are fully operational. We have implemented a
variety of new policies and procedures, including additional cleaning, social distancing, staggered shifts
and prohibiting or significantly restricting on-site visitors, to minimize the risk to our employees of
contracting COVID-19. We manufacture a substantial majority of the products that we sell, with the
majority of our manufacturing activities conducted in the United States. As a result, we have been able
to mitigate the adverse impact of the COVID-19 pandemic on the global supply chain.

During fiscal 2020 and through the date of this filing, all of our businesses have experienced normal or
better order patterns compared with the same time period last year, with the exception of HBP’s
sectional door business, which experienced an 18% decline in orders in April but subsequently
rebounded. Our supply chains have not experienced significant disruption, and at this time we do not
anticipate any such significant disruption in the near term. Although many U.S. states lifted initial
executive orders issued earlier in the year requiring all workers to remain at home unless their work is
critical, essential, or life-sustaining, some states and localities have recently put in place new restrictions
regarding the operation of many types of businesses, or have tightened up restrictions already in place,
in response to the recent worsening of the COVID-19 outbreak. Regardless, we believe that, based on
the various standards published to date, the work our employees are performing are either critical,
essential and/or life-sustaining for the following reasons: 1) Our Defense Electronics segment (“DE”) is
a defense and national security-related operation supporting the U.S. Government, with a portion of its
business being directly with the U.S. Government; 2) HBP residential and commercial garage doors,
rolling steel doors and related products that (a) provide protection and support for the efficient and safe
movement of people, goods, and equipment in and out of residential and commercial facilities, (b) help
prevent fires from spreading from one location to another, and (c) protect warehouses and homes, and
their contents, from damage caused by strong weather events such as hurricanes and tornadoes; and 3)
CPP tools and storage products provide critical support for the national
infrastructure including
construction, maintenance, manufacturing and natural disaster recovery, and is part of the essential
supply base to many of its largest customers including Home Depot, Lowe’s and Menards. Our AMES
international facilities are currently fully operational, as they meet the applicable standards in their
respective countries.

Griffon believes it has adequate liquidity to invest in its existing businesses and execute its business
plan, while managing its capital structure on both a short-term and long-term basis. In January 2020,
Griffon increased total borrowing capacity under its Credit Agreement by $50,000, to $400,000 (of
which $370,275 was available at September 30, 2020), and extended maturity of the facility to 2025. In
addition, the Credit Agreement has a $100,000 accordion feature (subject to lender consent). In
February 2020, Griffon refinanced $850,000 of its $1,000,000 of senior notes due 2022 with new 5.75%
senior notes with a maturity of 2028, and in June 2020 refinanced the remaining $150,000 under the
same terms and indenture as the $850,000 senior notes due 2028. In August 2020, we completed a Public
Offering of 8,700,000 shares of our common stock for total net proceeds of $178,165; a portion of these
net proceeds were used to repay outstanding borrowing under our Credit Agreement. At September 30,
2020 Griffon had cash and equivalents of $218,089.

43

74411

We will continue to actively monitor the situation and may take further actions that impact our
operations as may be required by federal, state or local authorities or that we determine is in the best
interests of our employees, customers, suppliers and shareholders. While we are unable to determine or
predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our
businesses, results of operations, liquidity or capital resources, we believe it is important to discuss
where our company stands today, how our response to COVID-19 is progressing and how our
operations and financial condition may change as the fight against COVID-19 progresses.

Griffon conducts its operations through three reportable segments:

• Consumer and Professional Products (“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. CPP revenue was 47%, 45%, and 48%
of Griffon’s consolidated revenue in 2020, 2019 and 2018, respectively.

• 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. Residential and commercial sectional garage doors are sold through professional
dealers and leading home center retail chains throughout North America under the brands
Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial,
industrial, institutional, and retail use are sold under the CornellCookson brand. HBP revenue
was 39%, 40% and 35% of Griffon’s consolidated revenue in 2020, 2019 and 2018, respectively.

• Defense Electronics 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.
Telephonics’ revenue was 14%, 15% and 17% of Griffon’s consolidated revenue in 2020, 2019
and 2018, respectively.

CONSOLIDATED RESULTS OF OPERATIONS

2020 Compared to 2019

Revenue from continuing operations for the year ended September 30, 2020 of $2,407,522 increased 9%
compared to $2,209,289 in the year ended September 30, 2019, primarily driven by increased consumer
demand for home improvement projects at both CPP and HBP, and increased revenue at DE. Organic
growth was 8%.

Gross profit for 2020 was $641,426 compared to $583,474 in 2019, with gross margin as a percent of sales
(“gross margin”) of 26.6% in 2020, compared to 26.4% in 2019. In 2020, Gross profit included
restructuring charges of $4,159. Excluding restructuring charges in 2020, Gross profit would have been
$645,586 or 26.8% of revenue compared to $583,474 or 26.4% in the prior year.

Selling, general and administrative (“SG&A”) expenses from continuing operations in 2020 of $486,398
increased 9% from 2019 of $447,163. The 2020 SG&A expenses included restructuring charges of
$11,630, acquisition costs of $2,960 and the reversal of contingent consideration related to the Kelkay
acquisition of $1,733. The 2019 SG&A expenses include income from the reversal of contingent
consideration related to the Kelkay acquisition of $1,646. Excluding these items from both periods, the
2020 SG&A expenses would have been $473,541, or 19.7% of revenue compared to $448,809 or 20.3%,
with the increase in expenses primarily due to the Apta acquisition and increased management
incentives, partially offset by COVID-19 related reduced travel expenses.

Interest expense from continuing operations in 2020 of $66,544 decreased 2% compared to 2019 of
$68,066, primarily as a result of decreased outstanding borrowings and variable interest rates on our
Revolving Credit Facility.

44

46495

Other income (expense) from continuing operations of $1,445 and $3,127 in 2020 and 2019, respectively,
includes $915 and $438, respectively, of net currency exchange transaction losses from receivables and
payables held in non-functional currencies, $184 and $(40), respectively, of net gains or (losses) on
investments, and $1,559 and $3,148, respectively, of net periodic benefit plan income. Additionally, in
2020, Other income (expense) also includes a one-time technology recognition award for $700.

Griffon reported pretax income from continuing operations for 2020 of $82,757 compared to $72,178 for
2019. In 2020, the Company recognized an effective income tax rate of 35.4% compared to 36.8% in
2019. The 2020 tax rate included $654 of discrete and certain other tax provisions, net, and other items
that affect comparability, as listed below. The 2019 tax rate included $2,035 of discrete and certain other
tax provisions, net. Excluding the discrete and certain other tax provisions, net, and other items that
affect comparability, as listed below, the effective income tax rates for 2020 and 2019 were 32.2% and
34.3%, respectively. These rates reflect the impact of tax reserves and changes in earnings mix between
U.S. and non-U.S. operations.

Income from continuing operations for 2020 was $53,429, or $1.19 per share, compared to $45,622, or
$1.06 per share in 2019. The 2020 income from continuing operations included the following:

– Restructuring charges of $15,790 ($11,865, net of tax, or $0.26 per share);

– Loss from debt extinguishment $7,925 ($6,190, net of tax, or $0.14 per share);

– Acquisition costs of $2,960 ($2,306, net of tax, or $0.05 per share); and

– Acquisition contingent consideration benefit of $1,733 ($1,403, net of tax, or $0.03 per share);

and

– Discrete and certain other tax provision, net, of $654 or $0.01 per share.

The 2019 Income from continuing operations included a benefit from the reversal of contingent
consideration related to the Kelkay acquisition of $1,646 ($1,333, net of tax, or $0.03 per share) and
discrete and certain other tax provisions, net, of $2,035 or $0.05 per share.

Excluding these items from both reporting periods, 2020 Income from continuing operations would
have been $73,041, or $1.62 per share compared to $46,324, or $1.08 per share, in 2019.

2019 Compared to 2018

Revenue from continuing operations for the year ended September 30, 2019 was $2,209,289, compared
to $1,977,918 in the year ended September 30, 2018, an increase of 12%, primarily driven by increased
revenue at CPP and HBP from both recent acquisitions and organic growth, and increased revenue at
Defense Electronics. Organic growth was 5%. Gross profit for 2019 was $583,474 compared to $511,318
in 2018, with gross margin of 26.4% in 2019, compared to 25.9% in 2018.

SG&A expenses from continuing operations in 2019 of $447,163 increased 7% from 2018 of $418,517.
The 2019 SG&A expenses include income from the reversal of contingent consideration related to the
Kelkay acquisition of $1,646. The 2018 SG&A expenses included acquisition costs of $6,097, special
dividend ESOP charges of $3,220, cost of a life insurance benefit of $2,614 and secondary offering costs
of $1,205. Excluding these items from both periods the 2019 SG&A expenses increased 11% over 2018
primarily related to the June 4, 2018 acquisition of CornellCookson and increased distribution and
related freight costs at HBP due to increased sales volume. SG&A for 2019, as a percent of revenue,
was 20.3% compared to 20.5% in 2018, excluding the items detailed above.

Interest expense from continuing operations in 2019 of $68,066 increased 4% compared to 2018 of
$65,568, primarily as a result of increased outstanding borrowings and interest rates on our Revolving
Credit Facility.

Other income (expense) from continuing operations of $3,127 in 2019 and $4,880 in 2018, includes $438
and $200, respectively, of currency exchange transaction losses from receivables and payables held in

45

38219

non-functional currencies, and $(40) and $1,184, respectively, of net gains or (losses) on investments.
Additionally, Other income (expense) included net periodic benefit plan income of $3,148 and $3,649 in
2019 and 2018, respectively.

Griffon reported pretax income from continuing operations for 2019 of $72,178 compared to $33,810 for
2018. In 2019, the Company recognized an effective income tax rate of 36.8% compared to 1.6% in
2018. The 2019 tax rate included $2,035 of discrete and certain other tax provisions, net. The 2018 tax
rate included $9,384 of discrete and certain other tax benefits, net, primarily from the revaluation of
deferred tax liabilities and the provisional amount recorded for the IRC section 965 transition tax on
the untaxed foreign earnings net of foreign tax credits, related to the TCJA.

Excluding the discrete and certain other tax benefits, net, and certain other items from continuing
operations, as listed below, the effective tax rates for 2019 and 2018 were 34.3% and 33.8%,
respectively. These rates reflect the impact of tax reserves and changes in earnings mix between U.S.
and non-U.S. operations.

Income from continuing operations for 2019 was $45,622, or $1.06 per share, compared to $33,255, or
$0.78 per share in 2018.

The 2019 Income from continuing operations included a benefit from the reversal of contingent
consideration related to the Kelkay acquisition of $1,646 ($1,333, net of tax, or $0.03 per share) and
discrete and certain other tax provisions, net, of $2,035 or $0.05 per share.

The 2018 income from continuing operations included the following:

– Acquisition costs of $7,597 ($5,047, net of tax, or $0.12 per share);

– Special dividend ESOP charges of $3,220 ($2,125, net tax, or $0.05);

– Secondary equity offering costs of $1,205 ($795, net tax, or $0.02);

– Cost of life insurance benefit of $2,614 ($248, net tax, or $0.01); and

– Discrete and certain other tax benefits, net, of $9,384 or $0.22 per share, primarily from the
revaluation of deferred tax liabilities and the provisional amount recorded for the IRC
section 965 transition tax on the untaxed foreign earnings net of foreign tax credits related to
the TCJA.

Excluding these items from both reporting periods, 2019 Income from continuing operations would
have been $46,324, or $1.08 per share compared to $32,086, or $0.76 per share, in 2018.

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring
charges, loss on debt extinguishment, acquisition related expenses, discrete and certain other tax items,
as well other items that may affect comparability, as applicable. Griffon believes this information is
useful to investors for the same reason.

46

44532

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

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(Unaudited)

For the Years Ended September 30,
2019

2020

2018

Income from continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . .

$53,429

$45,622

$33,255

Adjusting items:

Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition contingent consideration . . . . . . . . . . . . . . . . . . . .
Special dividend ESOP charges . . . . . . . . . . . . . . . . . . . . . . . . .
Secondary equity offering costs . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of life insurance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax impact of above items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discrete and other certain tax provisions (benefits) . . . . .
Adjusted income from continuing operations . . . . . . . . . . . . . . . .

Earnings per common share from continuing operations. . . . .
Adjusting items, net of tax:

Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition contingent consideration . . . . . . . . . . . . . . . . . . . .
Special dividend ESOP charges . . . . . . . . . . . . . . . . . . . . . . . . .
Secondary equity offering costs . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of life insurance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discrete and other certain tax provisions (benefits) . . . . .
Adjusted earnings per share from continuing operations. . . . .

15,790
7,925
2,960
(1,733)
—
—
—
(5,984)
654
$73,041

$

1.19

0.26
0.14
0.05
(0.03)
—
—
—
0.01
1.62

$

—
—
—
(1,646)
—
—
—
313
2,035
$46,324

—
—
7,597
—
3,220
1,205
2,614
(6,421)
(9,384)
$32,086

1.06

$

0.78

—
(0.03)
—
—
—
0.05
1.08

0.12
—
0.05
0.02
0.01
(0.22)
0.76

$

Weighted-average shares outstanding (in thousands). . . . . . . . .

45,015

42,888

42,422

REPORTABLE SEGMENTS

Griffon evaluates performance and allocates resources based on each segment’s operating results from
continuing operations 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 19—Reportable Segments, for a reconciliation of Segment Adjusted
EBITDA to Income before taxes from continuing operations.

47

12486

For the Years Ended September 30,
2019

2020

2018

$1,139,233
$ 104,053 9.1% $

32,788

$1,000,608

$953,612

90,677 9.1% $ 77,061 8.1%
32,289

30,816

Consumer and Professional Products

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .

2020 Compared to 2019

CPP revenue in 2020 increased $138,625, or 14%, compared to 2019, primarily from a 12% increase in
volume, due to increased consumer demand for home improvement initiatives across most of our
geographic regions supplemented by COVID-19 stay at home orders, favorable price and mix of 1%
and an incremental 2% revenue contribution from the Apta acquisition, partially offset by an
unfavorable impact of foreign exchange of 1%. Organic growth was 12%.

CPP Adjusted EBITDA in 2020 increased $13,376 or 15% to $104,053 compared to $90,677 in 2019.
The favorable variance resulted primarily from the increased revenue noted above, partially offset by
increased tariffs, COVID-19 related inefficiencies and direct costs, and an unfavorable foreign exchange
impact of 1%.

Direct COVID-19 related expenses totaled approximately $5,000 in 2020.

Segment depreciation and amortization increased $499 from the comparable prior year period primarily
due to the onset of depreciation for new assets placed in service.

On November 29, 2019, AMES acquired Vatre Group Limited (“Apta”), a leading United Kingdom
supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden
centers for approximately $10,500 (GBP 8,750), inclusive of a post-closing working capital adjustment,
net of cash acquired. This acquisition broadens AMES’ product offerings in the UK market and
increases its in-country operational footprint. Apta is expected to contribute $15,000 in revenue in the
first 12 months after the acquisition.

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.

The expanded focus of this initiative leverages the same three key development areas being executed
within our U.S. operations. First, multiple independent information systems will be unified into a single
data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES
global operations will be consolidated to optimize facilities footprint and talent. Third, strategic
investments in automation and facilities expansion will be made to increase the efficiency of our
manufacturing and fulfillment operations, and support e-commerce growth.

Expanding the roll-out of the new business platform from our AMES U.S. operations to include
AMES’ global operations will extend the duration of the project by one year, with completion now
expected by the end of calendar year 2023. When fully implemented, these actions will result in annual
cash savings of $30,000 to $35,000 (increased from $15,000 to $20,000) and a reduction in inventory of
$30,000 to $35,000 (increased from $20,000 to $25,000), both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-
investments of
time charges of approximately $65,000 (increased from $35,000) and capital
approximately $65,000 (increased from $40,000). The one-time charges are comprised of $46,000 of
cash charges, which includes $26,000 of personnel-related costs such as training, severance, and

48

11338

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.

In connection with this initiative, during the year ended September 30, 2020 CPP incurred pre-tax
restructuring and related exit costs approximating $13,669, comprised of cash charges of $8,977 and non-
cash, asset-related charges of $4,692; the cash charges included $5,620 for one-time termination benefits
and other personnel-related costs and $3,357 for facility exit costs. During the year ended September 30,
2020, capital expenditures of $6,733 were driven by investment in CPP business intelligence systems and
e-commerce facility.

Domestic Expansion . . . . . . . . . . . . . . . . . . . . . . . .
Global Expansion. . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Anticipated Charges . . . . . . . . . . . . . . . . . .
Total 2020 restructuring charges . . . . . . . . . . . .

Cash Charges

Personnel
related costs

$12,000
14,000

26,000
(5,620)

Facilities,
exit costs
and other

$ 4,000
16,000

20,000
(3,357)

Non-Cash
Charges

Facility and
other

$19,000
—

19,000
(4,692)

Total

$ 35,000
30,000

65,000
(13,669)

Capital
Investments

$40,000
25,000

65,000
(6,733)

Estimate to Complete . . . . . . . . . . . . . . . . . . . . . .

$20,380

$16,643

$14,308

$ 51,331

$58,267

2019 Compared to 2018

CPP revenue in 2019 increased $46,996, or 5%, compared to 2018, driven by increased revenue from
pricing and mix of 3% and volume of 4%, partially offset by a 2% unfavorable impact due to foreign
exchange.

CPP Adjusted EBITDA in 2019 was $90,677 compared to $77,061 in 2018, primarily driven by the
increased revenue as noted above, partially offset by increased material and tariff costs. Depreciation
and amortization increased $1,473 from 2018, primarily from acquisitions.

2018 Acquisitions

On February 13, 2018, AMES acquired Kelkay, a leading United Kingdom manufacturer and
distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in
the UK and Ireland for approximately $56,118 (GBP 40,452) and contingent consideration of
approximately GBP 7,000, of which approximately GBP 2,200 was earned. This acquisition broadened
AMES’ product offerings in the market and increased its in-country operational footprint. Kelkay
contributed approximately $35,000 in revenue in the first twelve months after the acquisition.

On November 6, 2017, AMES acquired Harper Brush Works (“Harper”), a division of Horizon Global,
for approximately $5,000. Harper is a leading U.S. manufacturer of cleaning products for professional,
home, and industrial use. The acquisition will broaden AMES’ long-handle tool offering in North
America to include brooms, brushes, and other cleaning tools and accessories. Harper, as expected,
generated approximately $10,000 in revenue in the first twelve months after the acquisition.

On October 2, 2017, Griffon completed the acquisition of ClosetMaid, a market leader of home storage
and organization products,
inclusive of post-closing adjustments, or
$165,000 net of the estimated present value of tax benefits resulting from the transaction. ClosetMaid
adds to Griffon’s Home and Building Products segment, complementing and diversifying Griffon’s
portfolio of leading consumer brands and products. ClosetMaid, as expected, generated over $300,000 in
revenue in the first twelve months after the acquisition.

for approximately $185,700,

49

96365

For the Years Ended September 30,
2019

2020

2018

$927,313
$153,631 16.6% $120,161 13.8% $100,339 14.4%

$697,969

$873,640

18,361

18,334

13,717

Home and Building Products

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .

2020 Compared to 2019

HBP revenue in 2020 increased $53,673, or 6%, compared to 2019, with 4% from volume and 2% from
favorable mix and pricing.

HBP Adjusted EBITDA in 2020 increased 33,470, or 28% to $153,631 compared to $120,161 in 2019,
The favorable variance resulted from the increased revenue noted above and general operational
efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs. Direct
COVID-19 related expenses totaled approximately $2,000 in 2020.

Depreciation and amortization remained consistent with the prior year.

On January 31, 2019, Clopay announced a $14,000 investment in facilities infrastructure and equipment
at its rolling steel manufacturing location in Mountain Top, Pennsylvania. This project includes a 95,000
square foot expansion to the already existing 184,000 square foot facility, along with the addition of
the Mountain Top location
state-of-the-art manufacturing equipment. Through this expansion,
improved its manufacturing efficiency and shipping operations, as well as increased manufacturing
capacity to support full-rate production of new and core products. The project was completed at the end
of calendar 2019.

2019 Compared to 2018

HBP revenue in 2019 increased $175,671, or 25%, compared to 2018, with 19% due to the acquisition of
CornellCookson, 5% from favorable mix and pricing and 1% from increased volume. Organic growth
was 6%. CornellCookson revenue was $202,742.

HBP Adjusted EBITDA in 2019 increased 20% to $120,161 compared to $100,339 in 2018, primarily
driven by the increased revenue as noted above, partially offset by increased material and tariff costs.
Depreciation and amortization increased $4,617 from 2018, primarily from acquisitions.

2018 Acquisition

On June 4, 2018, Clopay completed the acquisition of CornellCookson, a leading US manufacturer and
marketer of rolling steel door and grille products designed for commercial, industrial, institutional and
retail use, for $180,000, excluding certain post-closing adjustments primarily related to working capital.
After taking into account the net of the estimated present value of tax benefits resulting from the
transaction, the effective purchase price is approximately $170,000. The acquisition of CornellCookson
substantially expanded Clopay’s non-residential product offerings, and added an established
professional dealer network focused on rolling steel door and grille products for commercial, industrial,
institutional and retail use. CornellCookson, as expected, generated over $200,000 in revenue in the first
full year of operations.

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87099

For the Years Ended September 30,
2019

2018

2020

$340,976
$ 25,228 7.4% $ 35,104 10.5% $ 36,063 11.1%

$335,041

$326,337

10,645

10,667

10,801

Defense Electronics

Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .

2020 Compared to 2019

DE revenue in 2020 increased $5,935, or 2%, compared to 2019, primarily due to increased deliveries
and increased volume on airborne and ground communications systems as well as airborne surveillance
systems, partially offset by reduced volume on Multi-Mode airborne maritime surveillance radar
systems.

DE Adjusted EBITDA in 2020 decreased $9,876, or 28% to $25,228, compared to $35,104 in 2019,
primarily due to program inefficiencies associated with certain radar programs, unfavorable program
mix and increased operating expenses primarily due to bid and proposal activities and timing of
research and development
initiatives, partially offset by program efficiencies within airborne
intercommunication surveillance systems.

Direct COVID-19 related expenses totaled approximately $1,000 in 2020.

Segment depreciation and amortization remained consistent with the prior year period.

During 2020, DE was awarded new contracts and incremental
funding on existing contracts
approximating $331,700. Contract backlog was $380,000 at September 30, 2020 with 67% expected to
be fulfilled in the next 12 months; backlog was $389,300 at September 30, 2019. Backlog is defined as
unfilled firm orders for products and services for which funding has been both authorized and
appropriated by the customer or Congress, in the case of U.S. government agencies.

2019 Compared to 2018

DE revenue in 2019 increased $8,704, or 3%, compared to 2018, primarily due to increased volume of
ground and airborne maritime surveillance radars, partially offset by Multi-Mode airborne maritime
surveillance systems.

DE Adjusted EBITDA in 2019 decreased $959, or 3%, compared to 2018, primarily due to unfavorable
mix and efficiencies associated with Multi-Mode maritime surveillance systems, partially offset by
reduced operating expenses.

Restructuring

In September 2020, Telephonics initiated a Voluntary Employee Retirement Plan, which was
subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining
functions and responsibilities. The combined actions are expected to incur severance charges of
approximately $4,500, with $2,120 recognized in the fourth quarter, and the balance to be recognized in
the first quarter of 2021. At the conclusion of these actions, headcount is expected to be reduced by
approximately 90 people. In addition, during fiscal 2020 Telephonics commenced a facility project to
consolidate three Long Island based facilities into two company owned facilities with a total cost of
approximately $4.0 million primarily comprised of capital expenditures in 2021.

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71895

Unallocated Amounts

For 2020, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs,
totaled $47,013 compared to $46,302 in 2019, with the increase primarily due to compensation and
incentive costs.

For 2019, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs,
totaled $46,302 compared to $45,343 in 2018, with the increase primarily due to compensation, incentive
and relocation costs.

Depreciation and Amortization

Depreciation and amortization of $62,409 in 2020 compared to $61,848 in 2019; the increase was
primarily due to depreciation for new assets placed in service.

Depreciation and amortization of $61,848 in 2019 compared to $55,803 in 2018; the increase was
primarily due to depreciation and amortization on assets acquired in acquisitions.

Comprehensive Income (Loss)

During 2020, total other comprehensive income (loss), net of taxes, of $(6,176) included a gain of $5,601
from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian,
British and Australian currencies, all in comparison to the U.S. Dollar; a $11,784 loss from Pension and
other post-retirement benefits, primarily associated with a decrease in the assumed discount rate
compared to 2019; and a $7 gain on cash flow hedges.

During 2019, total other comprehensive income (loss), net of taxes, of $(31,804) included a loss of
$8,460 from foreign currency translation adjustments primarily due to the weakening of the Euro,
Canadian, British and Australian currencies, all in comparison to the U.S. Dollar; a $23,055 loss from
Pension and other post-retirement benefits, primarily associated with a decrease in the assumed
discount rate compared to 2018; and a $289 loss on cash flow hedges.

DISCONTINUED OPERATIONS

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Plastics and on
February 6, 2018, completed the sale to Berry for approximately $465,000, net of certain post-closing
adjustments. As a result, Griffon classified the results of operations of the Plastics business as
discontinued operations in the Consolidated Statements of Operations for all periods presented and
classified the related assets and liabilities associated with the discontinued operations in the
consolidated balance sheets. All results and information presented exclude Plastics unless otherwise
noted. Plastics is a global leader in the development and production of embossed, laminated and printed
specialty plastic films for hygienic, health-care and industrial products and sells to some of the world’s
largest consumer products companies.

During 2019, Griffon recorded an $11,050 charge ($8,335, net of tax) to discontinued operations. The
charge consisted primarily of a purchase price adjustment to resolve a claim related to the $465,000
Plastics divestiture and included an additional reserve for a legacy environmental matter.

At September 30, 2020 and 2019, Griffon’s liabilities for discontinued operations primarily related to
insurance claims, income taxes and product liability, warranty and environmental reserves totaling
liabilities of approximately $10,811 and $7,664, respectively. See Note 7, Discontinued Operations.

LIQUIDITY AND CAPITAL RESOURCES

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 include cash flows from operating

52

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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.

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

Years Ended
September 30,

2020

2019

(in thousands)

Cash Flows from Continuing Operations
Net Cash Flows Provided By (Used In):

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$137,029
(59,307)
68,190

$113,958
(74,553)
(34,976)

Cash provided by operating activities from continuing operations for 2020 was $137,029 compared to
$113,958 in 2019. Cash provided by income from continuing operations, adjusted for non-cash
expenditures, was offset by a net increase in working capital, primarily driven by increased accounts
receivable and prepaid and other current assets, partially offset by decreases in inventory and increases
in accrued liabilities.

During 2020, Griffon used $59,307 in investing activities from continuing operations compared to
$74,553 in 2019. Payments for acquired businesses totaled $10,531 in 2020 compared to $9,219 in 2019.
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. Payments for acquired businesses in the prior year consisted
solely of a final purchase price adjustment for CornellCookson. Payments in the prior year comparable
period also included $9,500 related to a purchase price adjustment to resolve a claim related to the
$465,000 PPC divestiture and an insurance payment of $10,604 pertaining to the settlement of a certain
life insurance benefit. In 2020, capital expenditures, net, totaled $48,646 compared to $45,081 in 2019.

Cash provided by financing activities from continuing operations in 2020 totaled $68,190 compared to
cash used in 2019 of $34,976. In August 2020, Griffon Corporation 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. At September 30,
2020, there were $12,858 in outstanding borrowings under the Credit Agreement, compared to $50,000
in outstanding borrowings at the same date in 2019. Additionally, on June 22, 2020, Griffon completed
an add-on offering through a private placement of $150,000 aggregate 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. Proceeds from the Senior Notes were used to
redeem the $1,000,000 of 2022 Senior Notes. Cash provided by financing activities in the current period
also included financing payments of $17,384 primarily associated with the redemption of the $1,000,000
of 2022 Senior Notes; and the amendment and extension of the Company’s revolving credit facility
which increased the maximum borrowing availability from $350,000 to $400,000 and extended its
maturity date from March 22, 2021 to March 22, 2025.

During the year ended September, 30, 2020, COVID-19 did not had a material
impact on our
operations, and we anticipate our current cash balances, cash flows from operations and sources of
liquidity including proceeds received from the August 2020 Public Offering will be sufficient to meet
our cash requirements for the foreseeable future.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase
of up to $50,000 of Griffon’s outstanding common stock. Under these share repurchase programs, the
Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately
negotiated transactions. During 2020, Griffon did not purchase any shares of common stock under these

53

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repurchase programs. At September 30, 2020, $57,955 remains under Griffon’s Board authorized
repurchase programs.

During 2020, 340,775 shares, with a market value of $7,409, or $21.74 per share, were withheld to settle
employee taxes due upon the vesting of restricted stock and were added to treasury stock. Furthermore,
during 2020, an additional 3,307 shares, with a market value of $70, or $21.22 per share, were withheld
from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon
vesting.

During 2020, the Board of Directors approved four quarterly cash dividends each for $0.0750 per share,
totaling $0.30. On November 12, 2020, the Board of Directors declared a cash dividend of $0.08 per
share, payable on December 17, 2020 to shareholders of record as of the close of business on
November 25, 2020.

As of September 30, 2020, the amount of cash, cash equivalents and marketable securities held by
foreign subsidiaries was $55,000. 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).

Payments related to Telephonics 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. In 2020:

a. The U.S. Government and its agencies,

through prime and subcontractor relationships,

represented 10% of Griffon’s consolidated revenue and 69% of DE revenue.

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

12% of HBP’s revenue.

No other customer exceeded 10% or more of consolidated revenue. Future operating results will
continue to substantially depend on the success of Griffon’s largest customers and our relationships with
them. Orders from these customers are subject to change and may fluctuate materially. The loss of all
or a portion of volume from any one of these customers could have a material adverse impact on
Griffon’s liquidity and operations.

At September 30, 2020, Griffon had debt, net of cash and equivalents, as follows:

At September 30,
2020

At September 30,
2019

(in thousands)

Cash and Equivalents and Debt
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes payables and current portion of long-term

debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net of current maturities . . . . . . . . .
Debt discount and issuance costs . . . . . . . . . . . . . . . . . .

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 218,089

$

72,377

9,922
1,037,042
17,458

1,064,422

10,525
1,093,749
9,857

1,114,131

Debt, net of cash and equivalents . . . . . . . . . . . . . . . . .

$ 846,333

$1,041,754

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 of par, completed on
February 19, 2020. Proceeds from the Senior Notes were used to redeem the $1,000,000 of 5.25% 2022

54

96404

Senior Notes. As of September 30, 2020, outstanding 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 2028 Senior Notes approximated $1,040,000 on September 30, 2020 based
upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $16,448 of underwriting fees and other
expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over
the term of such notes, and, at September 30, 2020, $15,376 remained to be amortized. 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 5.25% $1,000,000 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 Credit Agreement to increase the maximum borrowing
availability from $350,000 to $400,000, extend its maturity from March 22, 2021 to March 22, 2025 and
modify certain other provisions of the facility. The facility includes a letter of credit sub-facility with a
limit of $100,000 (increased from $50,000); and a multi-currency sub-facility of $100,000. The Credit
Agreement provides for same day borrowings of base rate loans.

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 0.75% for base rate loans and 1.75%
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. 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 September 30, 2020, under the Credit
Agreement, there were $12,858 in outstanding borrowings; outstanding standby letters of credit were
$16,867; and $370,275 was available, subject to certain loan covenants, for borrowing at that date.

At September 30, 2020, Griffon and its subsidiaries were in compliance with the terms and covenants of
its credit and loan agreements. Net Debt to EBITDA (Leverage), as calculated in accordance with the
definition in the Credit Agreement, was 3.4x at September 30, 2020.

In August 2016 and as amended on June 30, 2017, Griffon’s ESOP entered into a Term Loan with a
bank (the “ESOP Agreement”). The Term Loan interest rate was LIBOR plus 3.00%. The Term Loan
required quarterly principal payments of $569 with a balloon payment due at maturity. The Term Loan
was secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of
Griffon assets (which ranked pari passu with the lien granted on such assets under the Credit
Agreement) and was guaranteed by Griffon. On March 13, 2019, the ESOP Term Loan was refinanced
with an internal loan from Griffon which was funded with cash and a draw under its Credit Agreement.
The internal loan interest rate is fixed at 2.91%, matures in June 2033 and requires quarterly payments
of principal, currently $635, and interest. The internal loan is secured by shares purchased with the
proceeds of the loan. The amount outstanding on the internal loan at September 30, 2020 was $29,878.

Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and
Ocala, Florida. The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of
approximately 5.0% and 5.6%, respectively. The Troy, Ohio lease is secured by a mortgage on the real
estate and is guaranteed by Griffon. The Ocala, Florida lease contains two five-year renewal options.

55

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As of September 30, 2020, $17,188 was outstanding, net of issuance costs. Refer to Note 22—Leases for
further details.

In November 2012, Garant G.P. (“Garant”), a Griffon wholly owned subsidiary, entered into a CAD
15,000 ($11,210 as of September 30, 2020) revolving credit facility. The facility accrues interest at
LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.44% LIBOR USD
and 1.55% Bankers Acceptance Rate CDN as of September 30, 2020). The revolving facility matures in
October 2022. Garant is required to maintain a certain minimum equity. As of September 30, 2020,
there were no borrowings under the revolving credit facility with CAD 15,000 ($11,210 as of September
30, 2020) available for borrowing.

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (“Griffon Australia”)
entered into an AUD 29,625 term loan, AUD 20,000 revolver and AUD 10,000 receivable purchase
facility agreement; the agreement was amended in March 2019. As amended, 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 (2.09% at September 30, 2020). During the year ended September 30, 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 September 30, 2020, the term loan had an outstanding balance of AUD 15,875 ($11,287 as of
September 30, 2020). 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 (2.04% and 1.49%,
respectively, at September 30, 2020). At September 30, 2020, there were no balances outstanding under
the revolver and the receivable purchase facility. The revolver, receivable purchase facility and 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.

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 loan accrue interest at the GBP LIBOR Rate plus 2.25% and
1.8%, respectively (2.30% and 1.85% at September 30, 2020, respectively). The revolving facility
matures in May 2021, but is renewable upon mutual agreement with the lender, and accrues interest at
the Bank of England Base Rate plus 1.5% (1.85% as of September 30, 2020). As of September 30, 2020,
the revolver had no outstanding balance while the term and mortgage loan balances amounted to GBP
15,398 ($19,799 as of September 30, 2020). 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.

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

During 2020, Griffon used cash for discontinued operations from operating activities of $2,577,
primarily related insurance claims, warranty and environmental reserves.

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Contractual Obligations

At September 30, 2020, payments to be made pursuant to significant contractual obligations are as
follows:

Long-term debt(a) . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . .
Purchase obligations(b) . . . . . . . . . . . . . .
Capital expenditures. . . . . . . . . . . . . . . .
Supplemental & post-retirement

benefits(c). . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions(d) . . . . . . . . . . .
Total obligations . . . . . . . . . . . . . . .

Payments Due by Period

Total

$1,064,422
403,062
204,590
387,148
3,154

Less Than
1 Year

$

9,922
63,172
38,411
377,388
3,154

1-3 Years

3-5 Years

(in thousands)

$ 28,791
125,520
58,885
9,748
—

$ 16,358
123,889
35,391
12
—

More than
5 Years

$1,009,351
90,481
71,903
—
—

Other

$ —
—
—
—
—

13,704
883
$2,076,963

1,891
—
$493,938

3,466
—
$226,410

2,993
—
$178,643

5,354

—
— 883
$883

$1,177,089

(a) Included in long-term debt are finance leases of: $4,282 (less than 1 year), $5,070 (1-3 years), $4,193

(3-5 years) and $9,850 (more than 5 years).

(b) Purchase obligations are generally for the purchase of goods and services in the ordinary course of
business. Griffon uses blanket purchase orders to communicate expected requirements to certain
vendors. Purchase obligations reflect those purchase orders in which the commitment is considered
to be firm. Purchase obligations that extend beyond 2020 are principally related to long-term
contracts received from customers of Telephonics.

(c) Griffon funds required payouts under its non-qualified supplemental defined benefit plan from its

general assets and the expected payments are included in each period, as applicable.

(d) Due to the uncertainty of the potential settlement of future uncertain tax positions, management is
unable to estimate the timing of related payments, if any, that will be made subsequent to 2020.
These amounts do not include any potential indirect benefits resulting from deductions or credits for
payments made to other jurisdictions.

Off-Balance Sheet Arrangements

Except for operating leases and purchase obligations as disclosed herein, Griffon is not a party to any
off-balance sheet arrangements.

Off-Set Agreements

Telephonics may enter into industrial cooperation agreements, sometimes referred to as offset
agreements, as a condition to obtaining orders for its products and services from customers in foreign
countries. These agreements promote investment
in the applicable country, and Telephonics’
obligations under these agreements may be satisfied through activities that do not require Griffon to
use its cash, including transferring technology, providing manufacturing and other consulting support.
The obligations under these agreements may also be satisfied through the use of cash for such activities
as purchasing supplies from in-country vendors, setting up support centers, research and development
investments, acquisitions, and building or leasing facilities for in-country operations, if applicable. The
amount of the offset requirement is determined by contract value awarded and negotiated percentages
with customers. At September 30, 2020, Telephonics had outstanding offset agreements approximating
$27,000, primarily related to its Radar Systems division, some of which extend through 2029. Offset
programs usually extend over several years and in some cases provide for penalties in the event

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Telephonics fails to perform in accordance with contract requirements. Historically, Telephonics has not
been required to pay any such penalties and as of September 30, 2020, no such penalties are estimable
or probable.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of Griffon’s consolidated financial statements in conformity with accounting principles
generally accepted in the U.S. of America (“GAAP”) requires the use of estimates, assumptions,
judgments and subjective interpretations of accounting principles that have an impact on assets,
liabilities, revenue and expenses. These estimates can also affect supplemental information contained in
public disclosures of Griffon,
including information regarding contingencies, risk and its financial
condition. These estimates, assumptions and judgments are evaluated on an ongoing basis and based on
historical experience, current conditions and various other assumptions, and form the basis for
estimating the carrying values of assets and liabilities, as well as identifying and assessing the accounting
for commitments and contingencies. Actual results may materially differ from these
treatment
estimates.

An estimate is considered to be critical if it is subjective and if changes in the estimate using different
assumptions would result in a material impact on Griffon’s financial position or results of operations.
The following have been identified as the most critical accounting policies and estimates:

Revenue Recognition

Effective October 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic 606,
Revenue from Contracts with Customers. Our statement of operations for the year ended September 30,
2020 and 2019 and our balance sheet as of September 30, 2020 and 2019 are presented under ASC 606,
while our statement of operations for the year ended September 30, 2018 is presented under ASC 605,
Revenue Recognition.

Under ASC Topic 606, performance obligation is a promise in a contract to transfer a distinct good or
service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC
Topic 606. A contract with a customer is an agreement which both parties have approved, that creates
enforceable rights and obligations, has commercial substance and with respect to which payment terms
are identified and collectability is probable. Once the Company has entered into a contract or purchase
order, it is evaluated to identify performance obligations. For each performance obligation, revenue is
recognized when control of the promised products is transferred to the customer, or services are
satisfied under the contract or purchase order,
in an amount that reflects the consideration the
Company expects to be entitled to in exchange for those products or services (the transaction price).

A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue when each performance obligation is satisfied. A majority of the Company’s contracts have a
single performance obligation which represents, in most cases, the product being sold to the customer.
To a lesser extent, some contracts include multiple performance obligations such as a product, the
related installation, and extended warranty services. These contracts require judgment in determining
the number of performance obligations. For contracts with multiple performance obligations, judgment
is required to determine whether performance obligations specified in these contacts are distinct and
should be accounted for as separate revenue transactions for recognition purposes. In these types of
contracts, the Company allocates the total transaction price to each performance obligation in an
amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. The Company uses an observable price to determine the
stand-alone selling price for separate performance obligations or a cost plus margin approach when one
is not available. The transaction price includes variable consideration, such as discounts and volume
rebates, when it is probable that a significant reversal of revenue recognized will not occur. Variable
consideration is determined using either the expected value or the most likely amount of consideration

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to be received based on historical experience and the specific facts and circumstances at the time of
evaluation.

Revenue from CPP and HBP Segments

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

A majority of CPP’s and HBP’s revenue is short cycle in nature with shipments occurring within one
year from order and does not include a material long-term financing component, implicitly or explicitly.
Payment terms generally range between 15 to 90 days and vary by the location of the business, the type
of products manufactured to be sold and the volume of products sold, among other factors.

The Company’s CPP and HBP Segments recognize revenue from product sales when all factors are
met, including when control of a product transfers to the customer upon its shipment, completion of
installation, testing, certification or other substantive acceptance required under the contract. Other
than standard product warranty provisions, sales arrangements provide for no other significant post-
shipment obligations on the Company. From time-to-time and for certain customers, rebates and other
sales incentives, promotional allowances or discounts are offered, typically related to customer purchase
volumes, all of which are fixed or determinable and are classified as a reduction of revenue and
recorded at the time of sale. Griffon provides for sales returns and allowances based upon historical
returns experience. The Company includes shipping costs billed to customers in revenue and the related
shipping costs in Cost of Goods and Services.

The majority of the Company’s contracts in the CPP and HBP Segments offer assurance-type
warranties in connection with the sale of a product to a customer. Assurance-type warranties provide a
customer with assurance that the related product will function as the parties intended because it
complies with agreed-upon specifications. Such warranties do not represent a separate performance
obligation.

Payment terms in the CPP and HBP Segments vary depending on the type and location of the customer
and the products or services offered. Generally, the period between the time revenue is recognized and
the time payment is due is not significant. Shipping and handling charges are not considered a separate
performance obligation. Additionally, all taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing transaction and collected from a customer
(e.g., sales, use, value added, and some excise taxes) are excluded from revenue.

Revenue from Defense Electronics Segment

Approximately 14% of the Company’s performance obligations are recognized over time and relate to
prime or subcontractors from contract awards with the U.S. Government, as well as foreign
governments and other commercial customers within our DE Segment. Revenue recognized over time
is generally accounted for using an input measure to determine progress completed at the end of the
period. We believe that cumulative costs incurred to date as a percentage of estimated total contract
costs at completion (cost-to-cost method) is an appropriate measure of progress towards satisfaction of
performance obligations recognized over time, as it most accurately depicts the progress of our work
and transfer of control to our customers.

The Company’s DE Segment earns a substantial portion of its revenue as either a prime contractor or
subcontractor from contract awards with the U.S. Government, as well as foreign governments and
other commercial customers to design, develop and manufacture highly sophisticated intelligence,
surveillance and communications solutions. These contracts are typically long-term in nature, usually
greater than one year, and do not include a material long-term financing component, either implicitly or
explicitly. Revenue and profits from such contracts are recognized over time as work is performed

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because control of the work in process transfers continuously to the customer. For U.S. Government
contracts, the continuous transfer of control to the customer is supported by contract clauses that
provide for: (i) progress or performance-based payments or (ii) the unilateral right of the customer to
terminate the contract for convenience, in which case we have the right to receive payment for costs
incurred plus a reasonable profit for products and services that do not have alternative use to us.
Foreign government and certain commercial contracts contain similar termination for convenience
clauses, or we have a legally enforceable right to receive payment for costs incurred and a reasonable
profit for product or services that do not have alternative use to us. Revenue and profits on fixed-price
and cost-plus contracts that include performance obligations satisfied over time are recorded at amounts
equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion,
multiplied by the total estimated contract revenue, less the cumulative revenue recognized in prior
periods. The profit recorded on a contract using this method is equal to the current estimated total
profit margin multiplied by the cumulative revenue recognized, less the amount of cumulative profit
previously recorded for the contract in prior periods.

Accounting for the sales and profits on performance obligations for which progress is measured using
the cost-to-cost method relies on the substantial use of estimates, these projections may be revised
throughout the life of a contract. Components of this formula and ratio that may be estimated include
gross profit margin and total costs at completion. The cost performance and estimates to complete long-
term contracts are reviewed, at a minimum, on a quarterly basis, as well as when information becomes
available that would necessitate a review of the current estimate. Adjustments to estimates for a
contract’s estimated costs at completion and estimated profit or loss are often required as experience is
gained, more information is obtained (even though the scope of work required under the contract may
or may not change) and contract modifications occur. The impact of such adjustments to estimates is
made on a cumulative basis in the period when such information has become known. The 2020, 2019,
and 2018 income from operations
favorable/(unfavorable) catch-up adjustments
approximating $(10,650), $(4,500) and $1,400, respectively. Gross profit is impacted by a variety of
factors, including the mix of products, systems and services, production efficiencies, price competition
and general economic conditions.

included net

Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined
price. To the extent actual costs vary from the estimates upon which the price was negotiated, more or
less profit will be generated, or a loss could be incurred.

Cost-reimbursable type contracts provide for the payment of allowable costs incurred on the contract
plus the estimated profit on those costs. We provide our products and services under cost-plus-fixed-fee
arrangements. The fixed fee is negotiated at the inception of the contract and that fixed-fee does not
vary with actual costs.

For contracts in which anticipated total costs exceed the total expected revenue, an estimated loss is
recognized in the period when identifiable. A provision for the entire amount of the estimated loss is
recorded on a cumulative basis. The estimated remaining costs to complete loss contracts as of
September 30, 2020 was $10,800 and is recorded as a reduction to gross margin on the Consolidated
Statements of Operations and Comprehensive Income (Loss). This loss had an immaterial impact on
Griffon’s Consolidated Financial Statements.

routinely occur

Contract modifications
specifications or
requirements. Depending on the nature of the modification, we consider whether to account for the
modification as an adjustment to the existing contract or as a separate contract. Contract modifications
for goods or services that are not distinct are accounted for as part of the existing contract on a
cumulative catch-up basis.

for changes

in contract

to account

From time to time, Telephonics may combine contracts if they are negotiated together, have specific
requirements to combine, or are otherwise closely related.

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Inventories

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor
and manufacturing overhead costs.

Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated.
In general, Telephonics sells products in connection with programs authorized and approved under
contracts awarded by the U.S. Government or agencies thereof, and in accordance with customer
specifications. HBP produces residential and commercial sectional garage doors, commercial rolling
steel door and grille products, and CPP produces long-handled tools and landscaping products, and
storage and organizational products, both in response to orders from customers of retailers and dealers
or based on expected orders, as applicable.

Warranty Accruals

Direct customer and end-user warranties are provided on certain products. These warranties cover
manufacturing defects that would prevent the product from performing in line with its intended and
marketed use. The terms of such warranties vary by product line and generally provide for the repair or
replacement of the defective product. Warranty claims data is collected and analyzed with a focus on
the historical amount of claims, the products involved, the amount of time between the warranty claims
and the products’ respective sales and the amount of current sales. Based on such analysis, warranty
accruals are recorded as an increase to cost of sales and regularly reviewed for adequacy.

Stock-based Compensation

Griffon has issued stock-based compensation to certain employees, officers and directors in the form of
restricted stock and restricted stock units.

Compensation expense for restricted stock and restricted stock units is recognized ratably over the
required service period based on the fair value of the grant, calculated as the number of shares or units
granted multiplied by the stock price on the date of grant, and for performance shares or units, the
likelihood of achieving the performance criteria. For certain restricted stock grants with a performance
metric related to Griffon’s stock price, the company performs a valuation as of the date of grant and
recognizes the expense over the vesting period. The Company recognizes forfeitures as they occur.

Allowances for Discount, Doubtful Account and Returns

Trade receivables are recorded at their stated amount, less allowances for discounts, doubtful accounts
and returns. The allowances represent estimated uncollectible receivables associated with potential
customer defaults on contractual obligations (usually due to customers’ potential insolvency), discounts
related to early payment of accounts receivables by customers and estimates for returns. The allowance
for doubtful accounts includes amounts for certain customers in which a risk of default has been
specifically identified, as well as an amount for customer defaults, based on a formula, when it is
determined the risk of some default is probable and estimable, but cannot yet be associated with
specific customers. Allowance for discounts and returns are recorded as a reduction of revenue and the
provision related to the allowance for doubtful accounts is recorded in SG&A expenses.

Acquisitions

Acquired businesses are accounted for using the acquisition method of accounting which requires,
among other things, that most assets acquired and liabilities assumed be recognized at their fair values
as of the acquisition date and that the fair value of acquired in-process research and development be
recorded on the balance sheet. Related transaction costs are expensed as incurred. Any excess of the
purchase price over the assigned values of the net assets acquired is recorded as goodwill.

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Goodwill, Long-Lived Intangible and Tangible Assets, and Impairment

Griffon has significant intangible and tangible long-lived assets on its balance sheet that includes
goodwill and other intangible assets related to acquisitions. Goodwill represents the excess of the cost
of net assets acquired in business combinations over the fair value of the identifiable tangible and
intangible assets acquired and liabilities assumed in a business combination. We review goodwill and
indefinite-lived intangibles for impairment at least annually in the fourth quarter, or more frequently
whenever events or circumstances change that would more likely than not reduce the fair value of a
reporting unit below the carrying amount. Such events or changes in circumstance include significant
deterioration in overall economic conditions, changes in the business climate in which our reporting
units operate, a decline in our market capitalization, operating performance indicators, when some
portion of a reporting unit is disposed of or classified as held for sale, or when a change in the
composition of reporting units occurs for other reasons, such as a change in operating segments.

We had three reporting units at September 30, 2020 and 2019, which are our operating segments. We
use both qualitative and quantitative approaches when testing goodwill and indefinite-lived intangibles
for impairment. When determining the approach to use, we consider the current facts and circumstances
of each reporting unit, as well as the excess of each reporting unit’s estimated fair value over its
carrying value based on our most recent quantitative assessment. In addition, our qualitative approach
evaluates industry and market conditions and various events impacting a reporting unit including, but
not limited to, macroeconomic conditions, changes in the business environment in which our reporting
units operate and other reporting unit specific events and circumstances. If, based on the qualitative
assessment, we determine that it is more likely than not that the fair value of a reporting unit is greater
than its carrying value, then a quantitative assessment is not necessary. However, if a quantitative
assessment is necessary, we use the income approach methodology of valuation that includes the
present value of expected future cash flows.

We performed a quantitative annual
impairment test as of September 30, 2019, and an interim
quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of
COVID-19, using discounted future cash flows for each reporting unit, which did not result in
impairments to goodwill. The more significant assumptions used for the interim impairment test as of
March 31, 2020 were a five-year cash flow projection and a 3.0% terminal value to which discount rates
between 7.1% and 9.0% were applied to calculate each unit’s fair value. To substantiate fair values
derived from the income approach methodology of valuation, the implied fair value was compared to
the marketplace fair value of a comparable industry grouping for reasonableness. Further, the fair
values were reconciled to Griffon’s market capitalization.

We performed a qualitative assessment as of September 30, 2020, as the estimated fair values of each
reporting unit significantly exceeded the carrying value based on our most recent quantitative
assessment, which was performed as of March 31, 2020. Our qualitative assessment determined that
indicators that the fair value of each reporting unit was less than the carrying value were not present.

With respect to indefinite-lived intangibles we performed a quantitative annual impairment test as of
September 30, 2019, and an interim quantitative impairment test as of March 31, 2020, to assess the
impact of the global outbreak of COVID-19, using a relief from royalty method, neither of which
resulted in an impairment. We performed a qualitative assessment as of September 30, 2020 considering
all the above factors and determined that indefinite-lived intangibles fair values were greater than their
book values.

Long-lived amortizable intangible assets, such as customer relationships and software, and tangible
assets, primarily property, plant and equipment, are amortized over their expected useful lives, which
involve significant assumptions and estimates. Long-lived intangible and tangible assets are tested for
impairment by comparing estimated future undiscounted cash flows to the carrying value of the asset
when an impairment indicator, such as change in business, customer loss or obsolete technology, exists.

Fair value estimates are based on assumptions believed to be reasonable at the time, but such
assumptions are subject to inherent uncertainty. Actual results may differ materially from those

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estimates. Any changes in key assumptions or management judgment with respect to a reporting unit or
its prospects, which may result from a decline in Griffon’s stock price, a change in market conditions,
market trends,
interest rates or other factors outside of Griffon’s control, or significant under-
performance relative to historical or projected future operating results, could result in a significantly
different estimate of the fair value of Griffon’s reporting units, which could result in an impairment
charge in the future.

Leases

On October 1, 2019, the Company adopted the Accounting Standards Codifications (“ASC”) Topic 842,
Leases, which requires the recording of operating lease Right-of-Use (“ROU”) assets and operating
lease liabilities. Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease
liabilities and the corresponding assets were already recorded in the balance sheet under the previous
guidance, ASC Topic 840. The Company has elected the package of practical expedients permitted
under the transition guidance within the new standard, which among other things, allows us to carry
forward the historical lease classification. We also elected a practical expedient to determine the
reasonably certain lease term.

The Company applied the modified retrospective approach, whereby the cumulative effect of adoption
is recognized as of the date of adoption and comparative prior periods are not retrospectively adjusted.
As a result, upon adoption, we have recognized ROU assets of $163,552 and lease liabilities of $163,676
associated with our operating leases. The standard had no material impact to retained earnings or on
our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are
recognized at the lease commencement date based on the present value of lease payments over the
lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing
rate based on the information available at the commencement date in determining the present value of
lease payments. We use the implicit rate when readily determinable. For leases existing as of October 1,
2019, we have elected to use the remaining lease term as of the adoption date in determining the
incremental borrowing rate. Our determination of the lease term may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option.

The Company determines if an arrangement is a lease at inception. The ROU assets and short and
long-term liabilities associated with our operating leases are shown as separate line items on our
Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, net, other
accrued liabilities, and other non-current liabilities.

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis
over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on
a straight-line basis over the remaining lease term, along with recognition of interest expense associated
with accretion of the lease liability. For leases with a lease term of 12 months or less (a “Short-term”
lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not
recognized on the Consolidated Balance Sheets. Variable lease cost for both operating and finance
leases, if any, is recognized as incurred. The Company has lease agreements that contain both lease and
non-lease components. For real estate leases, we account for lease components together with non-lease
components (e.g., common-area maintenance).

Restructuring Reserves

From time to time, Griffon will establish restructuring reserves at an operation. These reserves, for both
termination and facility related exit costs, require the use of estimates. Though Griffon believes the
estimates made are reasonable, they could differ materially from the actual costs.

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Income Taxes

Griffon’s effective tax rate is based on income, statutory tax rates and tax planning opportunities
available in the various jurisdictions in which Griffon operates. For interim financial reporting, the
annual tax rate is estimated based on projected taxable income for the full year, and a quarterly income
tax provision is recorded in accordance with the anticipated annual rate. As the year progresses, the
annual tax rate is refined as new information becomes available, including year-to-date financial results.
This process often results in changes to the effective tax rate throughout the year. Significant judgment
is required in determining the effective tax rate and in evaluating tax positions.

Deferred tax assets and liabilities are recognized based on the differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent
items to be used as a tax deduction or credit in future tax returns for which a tax benefit has been
recorded in the income statement. The Company assesses whether a valuation allowance should be
established against its deferred tax assets based on consideration of all available evidence, both positive
and negative, using a more likely than not standard. This assessment considers, among other matters,
the nature, frequency and severity of recent losses; a forecast of future profitability; the duration of
statutory carryback and carryforward periods; the Company’s experience with tax attributes expiring
unused; and tax planning alternatives. The likelihood that the deferred tax asset balance will be
recovered from future taxable income is assessed at least quarterly, and the valuation allowance, if any,
is adjusted accordingly.

Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more
likely than not that the position will be sustained upon examination by a taxing authority. For a tax
position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the
largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate
settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted
periodically due to changing circumstances, such as the progress of tax audits, case law developments
and new or emerging legislation. Such adjustments are recognized in the period in which they are
identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax
benefits and subsequent adjustments as considered appropriate by management. A number of years
may elapse before a particular matter for which Griffon has recorded a liability related to an
unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits
varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution
of any particular tax matter, Griffon believes its liability for unrecognized tax benefits is adequate.
Favorable resolution of an unrecognized tax benefit could be recognized as a reduction in Griffon’s tax
provision and effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized
tax benefit could increase the tax provision and effective tax rate and may require the use of cash in the
period of resolution. The liability for unrecognized tax benefits is generally presented as non-current.
However, if it is anticipated that a cash settlement will occur within one year, that portion of the
liability is presented as current. Interest and penalties recognized on the liability for unrecognized tax
benefits is recorded as income tax expense.

Pension Benefits

Griffon sponsors defined and supplemental benefit pension plans for certain active and retired
employees. Annual amounts relating to these plans are recorded based on actuarial projections, which
include various actuarial assumptions, including discount rates, assumed rates of return, compensation
increases and turnover rates. The actuarial assumptions used to determine pension liabilities, assets and
expense are reviewed annually and modified based on current economic conditions and trends. The
expected return on plan assets is determined based on the nature of the plans’
investments and
expectations for long-term rates of return. The discount rate used to measure obligations is based on a
corporate bond spot-rate yield curve that matches projected future benefit payments, with the
appropriate spot rate applicable to the timing of the projected future benefit payments. Assumptions
used in determining Griffon’s obligations under the defined benefit pension plans are believed to be
reasonable, based on experience and advice from independent actuaries; however, differences in actual

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experience or changes in the assumptions may materially affect Griffon’s financial position or results of
operations.

All of the defined benefit plans are frozen and have ceased accruing benefits.

New Accounting Standards

For a discussion of the new accounting standards impacting the Company, see Note 1 to the
Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

Griffon’s exposure to market risk for changes in interest rates relates primarily to variable interest rate
debt and investments in cash and equivalents.

The revolving credit facility and certain other of Griffon’s credit facilities have a LIBOR- and
EURIBOR- based variable interest rate. Due to the current and expected level of borrowings under
these facilities, a 100 basis point change in LIBOR or EURIBOR would not have a material impact on
Griffon’s results of operations or liquidity.

Foreign Exchange

Griffon conducts business in various non-U.S. countries, primarily in Canada, Australia, United
Kingdom, Ireland, New Zealand and China; therefore, changes in the value of the currencies of these
countries affect the financial position and cash flows when translated into U.S. Dollars. Griffon has
generally accepted the exposure to exchange rate movements relative to its non-U.S. operations.
Griffon may, from time to time, hedge its currency risk exposures. A change of 10% or less in the value
of all applicable foreign currencies would not have a material effect on Griffon’s financial position and
cash flows.

Item 8. Financial Statements and Supplementary Data

The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP
are included herein:

(cid:4) Report of Independent Registered Public Accounting Firm.

(cid:4) Consolidated Balance Sheets at September 30, 2020 and 2019.

(cid:4) Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended

September 30, 2020, 2019 and 2018.

(cid:4) Consolidated Statements of Cash Flows for the years ended September 30, 2020, 2019 and 2018.

(cid:4) Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2020, 2019

and 2018.

(cid:4) Notes to Consolidated Financial Statements.

(cid:4) Schedule II—Valuation and Qualifying Account.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Griffon Corporation

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware
corporation) and subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related
consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows
for each of the three years in the period ended September 30, 2020, and the related notes and financial
statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).
We also have audited the Company’s internal control over financial reporting as of September 30, 2020,
based on criteria established in the 2013 Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of September 30, 2020 and 2019, and the results of its operations
and its cash flows for each of the three years in the period ended September 30, 2020 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework
issued by COSO.

Basis for opinions

The Company’s management is responsible for these financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements
and an opinion on the Company’s internal control over financial reporting based on our audits. We are
a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud, and whether effective internal control
over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for

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external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing a separate opinion on the
critical audit matters or on the accounts or disclosures to which they relate.

Revenue from Customer Contracts—Defense and Electronics Segment

As described further in note 2 to the consolidated financial statements, the Company’s Defense and
Electronics segment earns its revenue as either a prime contractor or subcontractor from contract
awards with the U.S. Government, as well as foreign governments and other commercial contracts. Such
contracts are typically long-term in nature and revenue and profits are recognized over time, primarily
under fixed-price arrangements, which are determined using the cost-to-cost measure of progress. Using
the cost-to-cost measure of progress, revenue is recorded at amounts equal to the ratio of actual
cumulative costs incurred to date, divided by total estimated costs at completion, multiplied by the total
estimated contract revenue,
less the cumulative revenue recognized in prior periods. The profit
recorded on a contract using this method is equal to the current estimated profit margin multiplied by
the cumulative revenue recognized, less the amount of cumulative profit previously recorded for the
contract in prior periods. This method relies on substantial use of estimates. These estimations require
the Company to have effective cost estimation processes, forecasting, and revenue and expense
reporting. Due to these aspects, this issue was considered a critical audit matter.

The principal consideration for our determination that segment revenue and gross profit recognition is a
critical audit matter is that significant management judgments and estimates are utilized to determine
total costs at contract completion and are subject to estimation uncertainty and require significant
auditor subjectivity in evaluating those judgments and estimates.

Our audit procedures related to the segment revenue recognition included the following. We tested the
design and operating effectiveness of controls relating to the cost accumulation, cost estimation and
revenue recognition processes, including the Company’s ability to develop the estimates utilized in
determining costs at completion. We inspected a selection of contracts; and evaluated those contracts
for appropriate revenue recognition and consideration over key terms and provisions. We analyzed
trends in revenue, costs and margin on all contracts, on a contract-by-contract basis, both year-over-year
and since contract inception to assess the historical accuracy of management’s estimates in the final
outcomes of projects. We assessed the appropriateness of adjustments to estimates on a cumulative
basis for the year ended September 30, 2020 and their impact on the financial statements. We tested the
cost accumulation process by obtaining and inspecting underlying documents for a sample of labor,

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material costs and overhead and agreeing to amounts recorded by the Company. We also recalculated
revenue and gross profit recognized for the year ended September 30, 2020, for a selection of contracts,
to test the accuracy of amounts recognized.

Goodwill and Indefinite-Lived Intangible Assets Impairment Assessment

As described further in note 1 and note 6 to the consolidated financial statements, the Company tests
goodwill at least annually at the reporting unit level. Due to the impact of the COVID-19 pandemic on
the general deterioration in economic and market conditions, the Company completed an interim
goodwill impairment test as of March 31, 2020, in addition to the Company’s annual impairment
assessment as of September 30, 2020. The Company performed the interim impairment testing of
goodwill as of March 31, 2020, comparing the fair value of the Company’s reporting units to the
respective reporting unit’s carrying value, including goodwill. The fair value of its reporting units was
determined using the income approach methodology, that includes the present value of expected future
cash flows and the use of market assumptions specific to the Company’s reporting units. The Company
used prospective financial information to which discount rates were applied to calculate each unit’s fair
value. The implied fair value determined under the income approach was also compared to the
marketplace fair value of a comparable industry grouping for reasonableness and further, the fair values
were reconciled to the Company’s market capitalization at March 31, 2020. Similarly to goodwill, the
Company tested indefinite-lived intangibles for impairment as of March 31, 2020. The Company utilized
a relief from royalty method to calculate and compare the fair value of the intangible assets to its book
value, which includes the use of market assumptions specific to the Company’s reporting units. With
respect to the annual impairment assessment as of September 30, 2020, the Company performed a
qualitative assessment to determine whether it was more likely than not that goodwill was impaired as
of September 30, 2020. This qualitative assessment was also used for the annual impairment testing of
indefinite-lived intangibles. We identified the Company’s interim impairment testing of goodwill and
indefinite-lived intangible assets (“interim impairment testing”) as a critical audit matter.

requires management

The principal considerations for our determination that the interim impairment testing is a critical audit
matter are as follows. The determination of the fair value of reporting units requires management to
make significant estimates and assumptions related to forecasts of future cash flows and discount rates.
future operating
This
performance based on relevant information available to them regarding expectations of industry
performance, as well as expectations for entity-specific performance. In addition, determining the
discount rate requires management to evaluate the appropriate risk premium based on their judgment
of industry and entity-specific risks. As disclosed by management, changes in these assumptions could
have a significant impact on the fair value of the reporting units. In turn, auditing these judgments and
assumptions requires a high degree auditor judgment.

results and expectations of

to evaluate historical

Our audit procedures related to the interim impairment testing included the following: We tested the
design and operating effectiveness of controls relating to the interim impairment testing, including the
Company’s ability to develop the estimates utilized in calculating the fair value of each reporting unit
and indefinite-lived intangible assets. Such estimates included prospective financial information, long-
term growth rates, discount rates and weighted average cost of capital. With the assistance of valuation
specialists, we evaluated the appropriateness of the valuation methodology utilized and assessed the
appropriateness of inputs utilized. We evaluated the qualifications of those responsible for preparing
the calculations of fair values. We tested the inputs, significant judgments and estimates utilized in
performing the annual
impairment tests, which included comparing management’s judgments and
estimates to industry and market data. We tested the inputs, significant judgments and estimates, as
follows: a) tested prospective financial
information and long-term growth rates by comparing to
historical trends and industry expectations, performed a sensitivity analysis over growth rates and
assessed management’s historical ability to accurately forecast; b) tested discounts rates by comparing to
historical rates and industry expectations, compared rates to market comparable companies and
independently calculated discount rates for comparison to those used by management; and c) tested
weighted average cost of capital by analyzing the implied discount rate and independently calculated a
weighted-average discount rate using individual discount rates and compared to the rate utilized by

68

69264

management. We tested the inputs, significant judgment and estimates in the Company’s reconciliation
to its market capitalization. These included: a) allocation of unallocated corporate costs, whereby we
agreed such costs to historical amounts, analyzed the composition of unallocated costs to assess
appropriateness and sensitized the goodwill impairment analysis by allocating certain costs to the
reporting units based on their relative fair values; and b) fair values of each reporting unit as
determined in the interim impairment testing and agreed equity values to audited financial information.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2006.
New York, New York
November 12, 2020

69

81251

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

CURRENT ASSETS

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $17,758 and $7,881. . .
Contract assets, net of progress payments of $24,175 and

$11,259 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTY, PLANT AND EQUIPMENT, net . . . . . . . . . . . . . . . . . . . .
OPERATING LEASE RIGHT-OF-USE ASSETS . . . . . . . . . . . . . . . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . .

At September 30,
2020

At September 30,
2019

$ 218,089
348,124

$

72,377
264,450

84,426
413,825
46,897
2,091

1,113,452
343,964
161,627
442,643
355,028
32,897
6,406

105,111
442,121
40,799
321

925,179
337,326
—
437,067
356,639
15,840
2,888

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,456,017

$2,074,939

CURRENT LIABILITIES

Notes payable and current portion of long-term debt . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LONG-TERM DEBT, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LONG-TERM OPERATING LEASE LIABILITIES . . . . . . . . . . . . . . .
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES OF DISCONTINUED OPERATIONS . . . . . . . . . . . . . .

Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COMMITMENTS AND CONTINGENCIES – See Note 14
SHAREHOLDERS’ EQUITY

Preferred stock, par value $0.25 per share, authorized 3,000

shares, no shares issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, par value $0.25 per share, authorized 85,000

shares, issued shares of 83,739 and 82,775, respectively. . . . . . .
Capital in excess of par value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost, 27,610 common shares and 35,969

common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

9,922
232,107
171,572
31,848
3,797

449,246
1,037,042
136,054
126,510
7,014

1,755,866

—

20,935
583,008
607,518

(413,493)
(72,092)
(25,725)
700,151

$

10,525
250,576
124,665
—
4,333

390,099
1,093,749
—
109,997
3,331

1,597,176

—

20,694
519,017
568,516

(536,308)
(65,916)
(28,240)
477,763

Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . .

$2,456,017

$2,074,939

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

70

83966

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(in thousands, except per share data)

Years Ended September 30,
2019

2020

2018

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,407,522
1,766,096

$2,209,289
1,625,815

$1,977,918
1,466,600

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before taxes from continuing operations . . . . . . . . . . . . . . . .
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:

Income (loss) from operations of discontinued businesses . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued operations. . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations . . . . . . . . . . . . . . . .
Basic earnings per common share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .

641,426
486,398

155,028

(66,544)
753
(7,925)
1,445

(72,271)

82,757
29,328

583,474
447,163

136,311

(68,066)
806
—
3,127

(64,133)

72,178
26,556

511,318
418,517

92,801

(65,568)
1,697
—
4,880

(58,991)

33,810
555

$

53,429

$

45,622

$

33,255

—
—

—

53,429

1.25
—
1.25

42,588

1.19
—
1.19

(11,050)
(2,715)

(8,335)

119,981
27,558

92,423

37,287

$ 125,678

1.11
(0.20)
0.91

40,934

1.06
(0.20)
0.87

$

$

$

$

0.81
2.25
3.06

41,005

0.78
2.18
2.96

$

$

$

$

$

$

$

$

$

$

Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,015

42,888

42,422

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . .
Pension and other post retirement plans . . . . . . . . . . . . . . . . . . .
Gain (loss) on cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive income (loss), net of taxes . . . . . . . . . .

$

53,429

$

37,287

$ 125,678

5,601
(11,784)
7

(6,176)

(8,460)
(23,055)
(289)

(31,804)

9,403
16,381
585

26,369

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

47,253

$

5,483

$ 152,047

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

71

04903

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended September 30,
2020
2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING

OPERATIONS:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities

$

53,429
—

$ 37,287
8,335

$ 125,678
(92,423)

of continuing operations:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charges - restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for losses on accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs and debt discounts . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain)/ loss on sale/disposal of assets and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable and contract assets. . . . . . . . . . . . . . . . .
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in accounts payable, accrued liabilities and income taxes payable . . . .
Other changes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities - continuing operations . . . . . . . . . . .

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING

OPERATIONS:

Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired business, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds (payments) from sale of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance proceeds (payments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities - continuing operations . .

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING

OPERATIONS:

62,409
17,580
4,692
1,332
3,661
7,925
2,095
(287)

(62,366)
34,080
(13,582)
25,044
1,017
137,029

(48,998)
(10,531)
(130)
—
—
352
(59,307)

61,848
15,914
—
535
5,393
—
(2,222)
(179)

8,279
(24,938)
(4,285)
7,638
353
113,958

(45,361)
(9,219)
(149)
(9,500)
(10,604)
280
(74,553)

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration for acquired businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used) in financing activities - continuing operations .

178,165
(14,529)
(7,479)
1,240,080
(1,308,915)
—
(17,384)
(1,733)
(15)
68,190

—
(13,676)
(1,478)
201,748
(218,248)
(366)
(1,090)
(1,686)
(180)
(34,976)

55,803
19,610
—
96
5,219
—
(17,633)
290

2,681
(52,122)
(2,285)
11,078
2,200
58,192

(50,138)
(430,932)
—
474,727
8,254
663
2,574

—
(49,797)
(45,605)
443,058
(300,993)
144
(7,793)
—
51
39,065

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCREASE IN CASH AND EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . .
CASH AND EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

(3,021)
444
—
(2,577)
2,377
145,712
72,377
218,089

(2,123)
—
—
(2,123)
313
2,619
69,758
$ 72,377

(45,624)
(10,762)
(22,541)
(78,927)
1,173
22,077
47,681
$ 69,758

63,139
21,016

$ 63,334
25,339

$ 59,793
32,140

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

72

17668

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)

Common Stock
Par
Value

Shares

Capital in
Excess of
Par Value

Retained
Earnings

Treasury Shares

(in thousands)
Balance at 9/30/2017 . . . . . 80,663 $20,166 $487,077 $480,347 33,557 $(489,225)
—
—
Net income (loss). . . . . . . .
Dividends. . . . . . . . . . . . . . . .
—
—
Shares withheld on

— 125,678
— (55,502)

—
—

—
—

Shares

Cost

Accumulated
Other
Comprehensive
Income (Loss)

Deferred
Compensation

Total

$(60,481)
—
—

$(39,076)
—
—

$398,808
125,678
(55,502)

employee taxes on
vested equity awards . .
Amortization of deferred
compensation. . . . . . . . . .
Common stock acquired .
Equity awards granted,

net . . . . . . . . . . . . . . . . . . . .

ESOP allocation of

common stock . . . . . . . . .

Stock-based

compensation. . . . . . . . . .

Stock-based

consideration . . . . . . . . . .

Other comprehensive

loss, net of tax . . . . . . . .

—
Balance at 9/30/2018 . . . . . 81,520
Net income (loss). . . . . . . .
—
Cumulative catch-up

adjustment related to
adoption of ASC 606. .
Dividends. . . . . . . . . . . . . . . .
Shares withheld on

employee taxes on
vested equity awards . .
Amortization of deferred
compensation. . . . . . . . . .
Common stock acquired .
Equity awards granted,

net . . . . . . . . . . . . . . . . . . . .

ESOP allocation of

common stock . . . . . . . . .

Stock-based

compensation. . . . . . . . . .

Stock-based

consideration . . . . . . . . . .

Other comprehensive

—
—

—

—
—

1,255

—

—

—

loss, net of tax . . . . . . . .

—
Balance at 9/30/2019 . . . . . 82,775
—
Net income (loss). . . . . . . .
Dividends. . . . . . . . . . . . . . . .
—
Shares withheld on

employee taxes on
vested equity awards . .
Amortization of deferred
compensation. . . . . . . . . .

Common stock issued,

net of issuance costs. . .

Equity awards granted,

net . . . . . . . . . . . . . . . . . . . .

ESOP allocation of

common stock . . . . . . . . .

Stock-based

compensation. . . . . . . . . .

Stock-based

consideration . . . . . . . . . .

Other comprehensive

—
20,380
—

—
—

—

—
—

314

—

—

—
—

857

—

—

—

—

—
—

214

—

—

—
—

(214)

4,756

— 10,078

—

1,699

—

200

(4,495)

—
—
— 2,089

—
(41,110)

—

—

—

—

—

—

—

—

—

—

—

—

—

—
—

—

—

—

—

—

(4,495)

8,110
—

8,110
(41,110)

—

—

—

—

—

4,756

10,078

1,699

—
503,396

—

—
550,523 35,846
—

— 37,287

—
(534,830)
—

26,369
(34,112)
—

—
(30,966)
—

26,369
474,391
37,287

— (5,618)
— (13,676)

—

—
—

(314)

1,512

— 13,285

—

1,138

—

—
—

—

—

—

—

—
—

86

—
37

—

—

—

—

—
—

(1,106)

—
(372)

—

—

—

—

—
—

—

—
—

—

—

—

—

—
—

—

2,726
—

—

—

—

—

(5,618)
(13,676)

(1,106)

2,726
(372)

—

1,512

13,285

1,138

—
20,694
—
—

—
519,017

—

—
568,516 35,969
—
—

— 53,429
— (14,427)

—
(536,308)
—
—

(31,804)
(65,916)
—
—

—
(28,240)
—
—

(31,804)
477,763
53,429
(14,427)

—

—

—

964

—

—

—

—

—

—

—

—

—

341

—

(7,479)

—

— 46,900

— (8,700)

130,294

241

—

(241)

1,985

— 14,702

—

645

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(7,479)

2,515

2,515

—

—

—

—

—

177,194

—

1,985

14,702

645

loss, net of tax . . . . . . . .

—
Balance at 9/30/2020 . . . . . 83,739

—
20,935

—
583,008

—

—
607,518 27,610

—
(413,493)

(6,176)
(72,092)

—
(25,725)

(6,176)
700,151

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

73

28364

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)

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

NOTE 1—DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Description of business

Griffon Corporation (the “Company”, “Griffon”, “we” or “us”) is a diversified management and
holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the
operations of its subsidiaries, allocates resources among them and manages their capital structures.
Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth
opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks
out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive
returns on capital.

The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y. and is
listed on the New York Stock Exchange (NYSE:GFF).

In August 2020 Griffon Corporation completed the public offering of 8,700,000 shares of our common
stock for total net proceeds of $178,165 (the “Public Offering”). 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 notes under the same
indenture, at 100.25% of par (collectively, 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 (the “2022 Senior Notes”).

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

In November 2019, Griffon announced the development of a next-generation business platform for CPP
to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12,
2020, Griffon announced that CPP is broadening this strategic initiative to include additional North
American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

The expanded focus of this initiative leverages the same three key development areas being executed
within our U.S. operations. First, multiple independent information systems will be unified into a single
data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES
global operations will be consolidated to optimize facilities footprint and talent. Third, strategic
investments in automation and facilities expansion will be made to increase the efficiency of our
manufacturing and fulfillment operations, and support e-commerce growth.

The cost to implement this new business platform, over the duration of the project, will include one-
time charges of approximately $65,000 (increased from $35,000) and capital
investments of
approximately $65,000 (increased from $40,000). The one-time charges are comprised of $46,000 of
cash charges, which includes $26,000 of personnel-related costs such as training, severance, and
duplicate personnel costs as well as $20,000 of facility and lease exit costs. The remaining $19,000 of
charges are non-cash and are primarily related to asset write-downs.

74

13105

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which
continues to spread throughout the U.S. and the world. While Griffon has not incurred significant
disruptions to its manufacturing or supply chain thus far, the Company continues to actively monitor the
situation and evaluate the nature and extent of the impact of the COVID-19 pandemic on its
businesses, consolidated results of operations and financial condition. Griffon places a high priority on
the health and safety of its employees, customers and their families, and has implemented a variety of
including additional cleaning, social distancing, staggered shifts and
new policies and procedures,
prohibiting or significantly restricting on-site visitors, to minimize the risk to its employees of
contracting COVID-19. Although many U.S. states lifted initial executive orders issued earlier in the
year requiring all workers to remain at home unless their work is critical, essential, or life-sustaining,
some states and localities have recently put in place new restrictions regarding the operation of many
types of businesses, or have tightened up restrictions already in place,
in response to the recent
worsening of the COVID-19 outbreak. As of the date of this filing, all of Griffon’s facilities are fully
operational and the Company’s supply chains have not experienced significant disruption. Griffon
manufactures a substantial majority of its products that it sells, with the majority of manufacturing
activities conducted in the United States. As a result, Griffon has been able to mitigate the adverse
impact of the COVID-19 pandemic on the global supply chain. While Griffon is unable to determine or
predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on its
businesses, results of operations, liquidity or capital resources, Griffon will continue to actively monitor
the situation and may take further actions that impact its operations as may be required by federal,
state or local authorities or that it determines is in the best interests of its employees, customers,
suppliers and shareholders. For additional factors to consider, see Part 1, Item 1A, “Risk Factors” in
this Form 10-K.

Griffon currently conducts its operations through three reportable segments:

Inc.

(“AMES”). Founded in 1774, AMES is

• Consumer and Professional Products (“CPP”) conducts its operations through The AMES
the leading North American
Companies,
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.

• 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. Residential and commercial sectional garage doors are sold through professional
dealers and leading home center retail chains throughout North America under the brands
Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial,
industrial, institutional, and retail use are sold under the CornellCookson brand.

• Defense Electronics (“DE”) conducts its operations through Telephonics Corporation (“Tele-
phonics”), founded in 1933, a globally recognized leading provider of highly sophisticated
intelligence, surveillance and communications solutions for defense, aerospace and commercial
customers.

Consolidation

The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation. The results of operations of acquired
businesses are included from the dates of acquisitions.

75

35570

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Earnings per share

Due to rounding, the sum of earnings per share may not equal earnings per share of Net income.

Discontinued operations

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Plastics and on
February 6, 2018, completed the sale to Berry for approximately $465,000, net of certain post-closing
adjustments. As a result, Griffon classified the results of operations of the Plastics business as
discontinued operations in the Consolidated Statements of Operations for all periods presented and
classified the related assets and liabilities associated with the discontinued operations in the
consolidated balance sheets. All results and information presented exclude Plastics unless otherwise
noted. See Note 7, Discontinued Operations.

Reclassifications

Certain amounts in prior years have been reclassified to conform to the current year presentation.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the reporting periods. These
estimates may be adjusted due to changes in economic, industry or customer financial conditions, as
well as changes in technology or demand. Significant estimates include allowances for doubtful accounts
receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill
and intangible assets, sales, profits and loss recognition for performance obligations satisfied over time,
assumptions associated with pension benefit obligations and income or expenses, useful lives associated
with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive
income taxes and tax
accruals, assumption associated with stock based compensation valuation,
valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets
and liabilities of discontinued operations, assumptions associated with valuation of acquired assets and
assumed liabilities of acquired companies and the accompanying disclosures. These estimates are based
on management’s best knowledge of current events and actions Griffon may undertake in the future.
Actual results may ultimately differ from these estimates.

Cash and equivalents

Griffon considers all highly liquid investments purchased with an initial maturity of three months or less
to be cash equivalents. Cash equivalents primarily consist of overnight commercial paper, highly-rated
liquid money market funds backed by U.S. Treasury securities and U.S. Agency securities, as well as
insured bank deposits. Griffon had cash in non-U.S. bank accounts of approximately $55,000 and
$34,200 at September 30, 2020 and 2019, respectively. Substantially all U.S. cash and equivalents are in
excess of FDIC insured limits. Griffon regularly evaluates the financial stability of all institutions and
funds that hold its cash and equivalents.

76

12977

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Fair value of financial instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts and notes payable and
revolving credit debt approximate fair value due to either the short-term nature of such instruments or
the fact that the interest rate of the revolving credit debt is based upon current market rates.

The fair value hierarchy, as outlined in the applicable accounting guidance, establishes a fair value
hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument’s categorization within the
hierarchy is based on the lowest level of input that is significant to the fair value measurement. The
accounting guidance establishes three levels of inputs that may be used to measure fair value, as
follows:

• Level 1 inputs are measured and recorded at fair value based upon quoted prices in active

markets for identical assets.

• Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices in active markets for similar assets and liabilities, quoted prices for
identical or similar assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of
assets or liabilities.

• Level 3 inputs are unobservable inputs in which little or no market data exists, therefore

requiring an entity to develop its own assumptions.

The fair value of Griffon’s 2028 Senior Notes approximated $1,040,000, on September 30, 2020. Fair
values were based upon quoted market prices (level 1 inputs).

Insurance contracts with a value of $3,436 at September 30, 2020 are measured and recorded at fair
value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in
Other current assets on the consolidated balance sheet.

Items Measured at Fair Value on a Recurring Basis

At September 30, 2020 and 2019, trading securities, measured at fair value based on quoted prices in
active markets for similar assets (level 2 inputs), with a fair value of $1,703 ($1,000 cost basis) and
$1,518 ($1,000 cost basis), respectively, were included in Prepaid and other current assets on the
Consolidated Balance Sheets.

In the normal course of business, Griffon’s operations are exposed to the effect of changes in foreign
currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts
such as foreign currency exchange contracts, including forwards and options. During 2020 and 2019,
Griffon entered into several such contracts in order to lock into a foreign currency rate for planned
settlements of trade and inter-company liabilities payable in USD.

At September 30, 2020 and 2019, Griffon had $32,000 and $14,000 of Australian dollar contracts at a
weighted average rate of $1.41 and $1.48, respectively, which qualified for hedge accounting. These
hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair
value deferred and recorded in Other comprehensive income (loss) and Prepaid and other current
assets, or Accrued liabilities, until settlement. Upon settlement, gains and losses were recognized in the
Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and
services. AOCI included deferred losses of $168 ($109, net of tax) and deferred gains of $327 ($213, net
of tax) at September 30, 2020 and 2019, respectively. Upon settlement, gains (losses) of $(2,163) and

77

91519

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

$1,361 were recognized in the Consolidated Statements of Operations and Comprehensive Income
(Loss) in Cost of goods and services (“COGS”) during 2020 and 2019, respectively. Contracts expire in
30 to 146 days.

At September 30, 2020 and 2019, Griffon had $7,900 and $3,500, respectively, of Canadian dollar
contracts at a weighted average rate of $1.33 and $1.32. These contracts, which protect Canadian
operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge
accounting and fair value gains (losses) of $(92) and $14 were recorded in Other assets and to Other
income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years
ended September 30, 2020 and 2019, respectively. Realized gains of $189 and $68, were recorded in
Other income during 2020 and 2019, respectively. Contracts expire in 30 to 360 days.

At September 30, 2020, Griffon had $5,400 of Great Britain Pound contracts at a weighted average rate
of $0.77. These contracts, which protect U.K. operations from currency fluctuations for U.S. dollar
based purchases, do not qualify for hedge accounting and fair value gains of $39 were recorded in Other
assets and to Other income for the outstanding contracts, based on similar contract values (level 2
inputs), for the years ended September 30, 2020. There were no realized gains or losses recorded for
these contracts during the year ended September 30, 2020. Contracts expire in 2 to 208 days.

Pension plan assets with a fair value of $147,145 at September 30, 2020, are measured and recorded at
fair value based upon quoted prices in active markets for identical assets (level 1 inputs), quoted market
prices for similar assets (level 2 inputs) and fair value assumptions for unobservable inputs in which
little or no market data exists (level 3).

Non-U.S. currency translation

Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have
been translated at year-end exchange rates and profit and loss accounts have been translated using
weighted average exchange rates. Adjustments resulting from currency translation have been recorded
in the equity section of the balance sheet in AOCI as cumulative translation adjustments. Cumulative
translation adjustments were gains (losses) of $5,601 and $(8,460) for 2020 and 2019, respectively. As of
September 30, 2020 and 2019, the foreign currency translation components of Accumulated other
comprehensive loss were $25,683 and $31,284, respectively. Assets and liabilities of an entity that are
denominated in currencies other than that entity’s functional currency are re-measured into the
functional currency using period end exchange rates, or historical rates where applicable to certain
balances. Gains and losses arising on remeasurements are recorded within the Consolidated Statement
of Operations and Comprehensive Income as a component of Other income (expense).

Revenue recognition

Effective October 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic
606, Revenue from Contracts with Customers. Our statement of operations for the year ended
September 30, 2020 and 2019 and our balance sheet as of September 30, 2020 and 2019 are presented
under ASC 606, while our statement of operations for the year ended September 30, 2018 is presented
under ASC 605, Revenue Recognition.

Under ASC Topic 606, performance obligation is a promise in a contract to transfer a distinct good or
service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC
Topic 606. A contract with a customer is an agreement which both parties have approved, that creates
enforceable rights and obligations, has commercial substance and with respect to which payment terms
are identified and collectability is probable. Once the Company has entered into a contract or purchase

78

86718

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue when each performance obligation is satisfied. A majority of the Company’s contracts have a
single performance obligation which represents, in most cases, the product being sold to the customer.
To a lesser extent, some contracts include multiple performance obligations such as a product, the
related installation, and extended warranty services. These contracts require judgment in determining
the number of performance obligations. For contracts with multiple performance obligations, judgment
is required to determine whether performance obligations specified in these contacts are distinct and
should be accounted for as separate revenue transactions for recognition purposes. In these types of
contracts, the Company allocates the total transaction price to each performance obligation in an
amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. The Company uses an observable price to determine the
stand-alone selling price for separate performance obligations or a cost plus margin approach when one
is not available. The transaction price includes variable consideration, such as discounts and volume
rebates, when it is probable that a significant reversal of revenue recognized will not occur. Variable
consideration is determined using either the expected value or the most likely amount of consideration
to be received based on historical experience and the specific facts and circumstances at the time of
evaluation.

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

Approximately 14% of the Company’s performance obligations are recognized over time and relate to
prime or subcontractors from contract awards with the U.S. Government, as well as foreign
governments and other commercial customers within our DE Segment. Revenue recognized over time
are generally accounted for using an input measure to determine progress completed at the end of the
period. We believe that cumulative costs incurred to date as a percentage of estimated total contract
costs at completion (cost-to-cost method) is an appropriate measure of progress towards satisfaction of
performance obligations recognized over time, as it most accurately depicts the progress of our work
and transfer of control to our customers.

Refer to Note 2—Revenue for a discussion of our revenue recognition practices for each of our
reportable segments.

Accounts receivable, allowance for doubtful accounts and concentrations of credit risk

Accounts receivable is composed principally of trade accounts receivable, that arise from the sale of
goods or services on account, and is stated at historical cost. A substantial portion of Griffon’s trade
receivables are from customers within the CPP and HBP businesses, of which the largest customer is
Home Depot, whose financial condition is dependent on the construction and related retail sectors of
the economy. As a percentage of consolidated accounts receivable, U.S. Government related programs
were 9% and Home Depot was 18%. Griffon performs continuing evaluations of the financial condition
of its customers, and although Griffon generally does not require collateral, letters of credit may be
required from customers in certain circumstances.

79

87879

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Trade receivables are recorded at the stated amount, less allowance for doubtful accounts and, when
appropriate, for customer program reserves and cash discounts. The allowance represents estimated
uncollectible receivables associated with potential customer defaults on contractual obligations (usually
due to customers’ potential insolvency). The allowance for doubtful accounts includes amounts for
certain customers where a risk of default has been specifically identified, as well as an amount for
customer defaults based on a formula when it is determined the risk of some default is probable and
estimable, but cannot yet be associated with specific customers. The provision related to the allowance
for doubtful accounts is recorded in Selling, general and administrative (“SG&A”) expenses. The
Company writes-off accounts receivable when they are deemed to be uncollectible.

Customer program reserves and cash discounts are netted against accounts receivable when it is
customer practice to reduce invoices for these amounts. The amounts netted against accounts receivable
in 2020 and 2019 were $27,607 and $17,322, respectively.

All accounts receivable amounts are expected to be collected in less than one year.

The Company does not currently have customers or contracts that prescribe specific retainage
provisions.

Contract assets

Contract assets consists of amounts accounted for under the cost-to-cost method of accounting,
recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term
contracts. Amounts will be invoiced when applicable contract terms, such as the achievement of
specified milestones or product delivery, are met. At September 30, 2020 and 2019, approximately
$7,500 and $13,100, respectively, of contract assets were expected to be collected after one year.

Inventories

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor
and manufacturing overhead costs.

Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated.
In general, Telephonics sells products in connection with programs authorized and approved under
contracts awarded by the U.S. Government or agencies thereof and in accordance with customer
specifications. HBP produces residential and commercial sectional garage doors, commercial rolling
steel door and grille products, and CPP produces long-handled tools and landscaping products, and
storage and organizational products, both in response to orders from customers of retailers and dealers
or based on expected orders, as applicable.

Property, plant and equipment

Property, plant and equipment includes the historical cost of land, buildings, equipment and significant
improvements to existing plant and equipment or, in the case of acquisitions, a fair market value
appraisal of such assets completed at the time of acquisition. Expenditures for maintenance, repairs and
minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of,
the related cost and accumulated depreciation is removed from the respective accounts and the gain or
loss is recognized. No event or indicator of impairment occurred during the three years ended
testing of property, plant and
September 30, 2020, which would require additional
equipment.

impairment

80

85758

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Depreciation expense, which includes amortization of assets under capital leases, was $52,819, $51,926
and $46,733 in 2020, 2019 and 2018, respectively, and was calculated on a straight-line basis over the
estimated useful lives of the assets. Depreciation included in SG&A expenses was $19,656, $19,026 and
$16,306 in 2020, 2019 and 2018, respectively. The remaining components of depreciation, attributable to
manufacturing operations, are included in Cost of goods and services. Estimated useful
lives for
property, plant and equipment are as follows: buildings and building improvements, 25 to 40 years;
machinery and equipment, 2 to 15 years; and leasehold improvements, over the term of the lease or life
of the improvement, whichever is shorter.

Capitalized interest costs included in Property, plant and equipment were $2,520, $2,925 and $2,896 for
the years ended September 30, 2020, 2019 and 2018, respectively. The original cost of fully-depreciated
property, plant and equipment remaining in use at September 30, 2020 was approximately $262,255.

Goodwill and indefinite-lived intangibles

Griffon has significant intangible and tangible long-lived assets on its balance sheet that includes
goodwill and other intangible assets related to acquisitions. Goodwill represents the excess of the cost
of net assets acquired in business combinations over the fair value of the identifiable tangible and
intangible assets acquired and liabilities assumed in a business combination. We review goodwill and
indefinite-lived intangibles for impairment at least annually in the fourth quarter, or more frequently
whenever events or circumstances change that would more likely than not reduce the fair value of a
reporting unit below the carrying amount. Such events or changes in circumstance include significant
deterioration in overall economic conditions, changes in the business climate in which our reporting
units operate, a decline in our market capitalization, operating performance indicators, when some
portion of a reporting unit is disposed of or classified as held for sale, or when a change in the
composition of reporting units occurs for other reasons, such as a change in operating segments.

We had three reporting units at September 30, 2020 and 2019, which are our operating segments. We
use both qualitative and quantitative approaches when testing goodwill and indefinite-lived intangibles
for impairment. When determining the approach to use, we consider the current facts and circumstances
of each reporting unit, as well as the excess of each reporting unit’s estimated fair value over its
carrying value based on our most recent quantitative assessment. In addition, our qualitative approach
evaluates industry and market conditions and various events impacting a reporting unit including, but
not limited to, macroeconomic conditions, changes in the business environment in which our reporting
units operate and other reporting unit specific events and circumstances. If, based on the qualitative
assessment, we determine that it is more likely than not that the fair value of a reporting unit is greater
than its carrying value, then a quantitative assessment is not necessary. However, if a quantitative
assessment is necessary, we use the income approach methodology of valuation that includes the
present value of expected future cash flows.

impairment test as of September 30, 2019, and an interim
We performed a quantitative annual
quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of
COVID-19, using discounted future cash flows for each reporting unit, which did not result in
impairments to goodwill. The more significant assumptions used for the interim impairment test as of
March 31, 2020 were a five-year cash flow projection and a 3.0% terminal value to which discount rates
between 7.1% and 9% were applied to calculate each unit’s fair value. To substantiate fair values
derived from the income approach methodology of valuation, the implied fair value was compared to
the marketplace fair value of a comparable industry grouping for reasonableness. Further, the fair
values were reconciled to Griffon’s market capitalization.

We performed a qualitative assessment as of September 30, 2020, as the estimated fair values of each
reporting unit significantly exceeded the carrying value based on our most recent quantitative

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

assessment, which was performed as of March 31, 2020. Our qualitative assessment determined that
indicators that the fair value of each reporting unit was less than the carrying value were not present.

With respect to indefinite-lived intangibles we performed a quantitative annual impairment test as of
September 30, 2019, and an interim quantitative impairment test as of March 31, 2020, to assess the
impact of the global outbreak of COVID-19, using a relief from royalty method, which did not result in
impairments. We performed a qualitative assessment as of September 30, 2020 considering all the above
factors and determined that indefinite-lived intangibles fair values were greater than their book values.

Long-lived amortizable intangible assets, such as customer relationships and software, and tangible
assets, primarily property, plant and equipment, are amortized over their expected useful lives, which
involve significant assumptions and estimates. Long-lived intangible and tangible assets are tested for
impairment by comparing estimated future undiscounted cash flows to the carrying value of the asset
when an impairment indicator, such as change in business, customer loss or obsolete technology, exists.

Fair value estimates are based on assumptions believed to be reasonable at the time, but such
assumptions are subject to inherent uncertainty. Actual results may differ materially from those
estimates. Any changes in key assumptions or management judgment with respect to a reporting unit or
its prospects, which may result from a decline in Griffon’s stock price, a change in market conditions,
interest rates or other factors outside of Griffon’s control, or significant under-
market trends,
performance relative to historical or projected future operating results, could result in a significantly
different estimate of the fair value of Griffon’s reporting units, which could result in an impairment
charge in the future.

Leases

On October 1, 2019, the Company adopted the Accounting Standards Codifications (“ASC”) Topic 842,
Leases, which requires the recording of operating lease Right-of-Use (“ROU”) assets and operating
lease liabilities. Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease
liabilities and the corresponding assets were already recorded in the balance sheet under the previous
guidance, ASC Topic 840. The Company has elected the package of practical expedients permitted
under the transition guidance within the new standard, which among other things, allows us to carry
forward the historical lease classification. We also elected a practical expedient to determine the
reasonably certain lease term.

The Company applied the modified retrospective approach, whereby the cumulative effect of adoption
is recognized as of the date of adoption and comparative prior periods are not retrospectively adjusted.
As a result, upon adoption, we have recognized ROU assets of $163,552 and lease liabilities of $163,676
associated with our operating leases. The standard had no material impact to retained earnings or on
our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are
recognized at the lease commencement date based on the present value of lease payments over the
lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing
rate based on the information available at the commencement date in determining the present value of
lease payments. We use the implicit rate when readily determinable. For leases existing as of October 1,
2019, we have elected to use the remaining lease term as of the adoption date in determining the
incremental borrowing rate. Our determination of the lease term may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The Company determines if an arrangement is a lease at inception. The ROU assets and short and
long-term liabilities associated with our operating leases are shown as separate line items on our
Condensed Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment,
net, other accrued liabilities, and other non-current liabilities.

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis
over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on
a straight-line basis over the remaining lease term, along with recognition of interest expense associated
with accretion of the lease liability. For leases with a lease term of 12 months or less (a “Short-term”
lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not
recognized on the Condensed Consolidated Balance Sheets. Variable lease cost for both operating and
finance leases, if any, is recognized as incurred. The Company has lease agreements that contain both
lease and non-lease components. For real estate leases, we account for lease components together with
non-lease components (e.g., common-area maintenance).

Definite-lived long-lived assets

Amortizable intangible assets are carried at cost less accumulated amortization. For financial reporting
purposes, definite-lived intangible assets are amortized on a straight-line basis over their useful lives,
generally eight to twenty-five years. Long-lived assets and certain identifiable intangible assets to be
held and used are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. Determination of recoverability is based on
an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual
disposition.

There were no indicators of impairment during the three years ending September 30, 2020.

Income taxes

We are subject to Federal, state and local income taxes in the U.S. and in various taxing jurisdictions
outside the U.S. We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or tax returns in accordance
with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates
in effect for the year in which the differences are expected to reverse.

We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected
to be realized. Deferred tax assets are reduced by a valuation allowance if, based on the weight of
available evidence, it is more likely than not that some portion or all of the deferred tax assets will not
be realized. Both positive and negative evidence are considered in forming our judgment as to whether
a valuation allowance is appropriate, and more weight is given to evidence that can be objectively
verified. Valuation allowances are reassessed whenever there are changes in circumstances that may
cause a change in judgment.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial
statement recognition of tax positions taken or expected to be taken in a tax return. We record, as
needed, a liability for the difference between the benefit recognized for financial statement purposes
and the tax position taken or expected to be taken on our tax return. To the extent that our assessment
of such tax positions changes, the change in estimate is recorded in the period in which the
determination is made.

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Research and development costs, shipping and handling costs and advertising costs

Research and development costs not recoverable under contractual arrangements are charged to SG&A
expense as incurred and amounted to approximately $15,400 in each year ended September 30, 2020,
2019 and 2018.

SG&A expenses include shipping and handling costs of $54,500 in 2020, $53,500 in 2019 and $41,700 in
2018 and advertising costs, which are expensed as incurred, of $19,000 in 2020, $20,000 in 2019 and
$21,000 in 2018.

Risk, retention and insurance

Griffon’s property and casualty insurance programs contain various deductibles that, based on Griffon’s
experience, are reasonable and customary for a company of its size and risk profile. Griffon generally
maintains deductibles for claims and liabilities related primarily to workers’ compensation, general,
product and automobile liability as well as property damage and business interruption losses resulting
from certain events. Griffon does not consider any of the deductibles to represent a material risk to
Griffon. Griffon accrues for claim exposures that are probable of occurrence and can be reasonably
estimated. Insurance is maintained to transfer risk beyond the level of self-retention and provides
protection on both an individual claim and annual aggregate basis.

Pension benefits

Griffon sponsors defined and supplemental benefit pension plans for certain retired employees. Annual
amounts relating to these plans are recorded based on actuarial projections, which include various
actuarial assumptions, including discount rates, assumed rates of return, compensation increases and
turnover rates. Actuarial assumptions used to determine pension liabilities, assets and expense are
reviewed annually and modified based on current economic conditions and trends. The expected return
on plan assets is determined based on the nature of the plan’s investments and expectations for long-
term rates of return. The discount rate used to measure obligations is based on a corporate bond spot-
rate yield curve that matches projected future benefit payments, with the appropriate spot rate
applicable to the timing of the projected future benefit payments. Assumptions used in determining
Griffon’s obligations under the defined benefit pension plans are believed to be reasonable, based on
experience and advice from independent actuaries; however, differences in actual experience or changes
in assumptions may materially impact Griffon’s financial position or results of operations.

All of the defined benefit plans are frozen and have ceased accruing benefits.

The Company’s non-service cost components of net periodic benefit plan cost was a benefit of $1,559,
$3,148 and $3,649 during 2020, 2019, and 2018 respectively.

Issued but not yet effective accounting pronouncements

In December 2019, the FASB issued guidance on simplifying the accounting for income taxes by
clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a
step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the
effective tax rate computation, among other clarifications. Our effective date for adoption of this ASU
is our fiscal year beginning October 1, 2021 with early adoption permitted. We are currently evaluating
the effects that the adoption of this guidance will have on our consolidated financial statements and the
related disclosures.

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

the FASB issued guidance relating to accounting for credit

In April 2019,
losses on financial
instruments, including trade receivables, and derivatives and hedging. This guidance is effective for all
entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years,
with early adoption permitted, and will be effective for the Company beginning in fiscal 2021.
Management does not expect a material
impact to the Company’s Consolidated Statements of
Operations and Comprehensive Income or Cash Flows.

In August 2018, the FASB issued guidance which modifies the disclosures on fair value measurements
by removing the requirement to disclose the amount and reasons for transfers between Level 1 and
Level 2 of the fair value hierarchy and the policy for timing of such transfers. This guidance expands the
disclosure requirements for Level 3 fair value measurements, primarily focused on changes in
unrealized gains and losses included in other comprehensive income (loss). This guidance is effective for
fiscal years beginning after December 15, 2019, with early adoption permitted, and will be effective for
the Company beginning in 2021. We are currently evaluating the effects that the adoption of this
guidance will have on our consolidated financial statements and the related disclosures.

In August 2018, the FASB issued guidance to clarify disclosure requirements related to defined benefit
pension and other post-retirement plans. The guidance is effective for fiscal years beginning after
December 15, 2020, with early adoption permitted, and will be effective for the Company beginning in
2022. We are currently evaluating the effects that the adoption of this guidance will have on our
consolidated financial statements and the related disclosures.

New Accounting Standards Implemented

In March 2020, the Financial Accounting Standards Board (“FASB”) issued optional guidance for a
limited time relating to accounting for the discontinuation of the LIBOR rate also known as reference
rate reform. The amendments in this update provide optional practical expedients and exceptions for
applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference
rate reform if certain criteria are met. The amendments in this update are applicable to contract
modifications that replace a reference LIBOR rate beginning on March 12, 2020 through December 31,
2022. The optional expedients primarily apply to the Griffon’s Credit Agreement and Non-U.S. Term
Loans. The optional expedients allow the Company to account for modifications due to reference rate
reform by prospectively adjusting the effective interest rate on these agreements. The Company expects
to apply the optional practical expedients and exceptions to modifications of its agreements affected by
reference rate reform. As of September 30, 2020, the Company has not modified its agreements subject
to reference rate reform.

In February 2018, the FASB issued guidance that allows companies to reclassify stranded tax effects
resulting from the 2017 Tax Cuts and Jobs Act, from accumulated other comprehensive income to
retained earnings. This guidance is effective for all entities for fiscal years beginning after December 15,
2018, and interim periods within those fiscal years, with early adoption permitted, and is effective for
the Company in fiscal 2020. Upon adoption of this guidance as of October 1, 2019, based on our
evaluation, we elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from
accumulated other comprehensive income to retained earnings. The adoption of this standard did not
have an impact on the Company’s financial condition, results of operations, or cash flow.

In February 2016, FASB issued guidance on lease accounting requiring lessees to recognize a right-of-
use asset and a lease liability for long-term leases and to disclose additional quantitative and qualitative
information about leasing arrangements. The Company adopted the requirements of the new standard
as of October 1, 2019 and applied the modified retrospective approach, whereby the cumulative effect
of adoption is recognized as of
the date of adoption and comparative prior periods are not
retrospectively adjusted. As a result, upon adoption, we have recognized right-of-use assets of $163,552

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

and lease liabilities of $163,676 associated with our operating leases. The standard had no material
impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements
of Cash Flows.

In January 2017, the FASB issued guidance that simplifies how an entity is required to test goodwill for
impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill
impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying
amount of that goodwill. This guidance is effective for annual periods beginning after December 15,
2019, including interim periods within those periods and will be effective for the Company beginning in
2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing
dates after January 1, 2017. We early adopted this guidance for our annual goodwill impairment testing
for the year ended September 30, 2020. The adoption of this guidance did not have a material impact on
the Company’s financial condition, results of operations and related disclosures.

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

NOTE 2—REVENUE

The Company recognizes revenue when performance obligations identified under the terms of contracts
with its customers are satisfied. A performance obligation is a promise in a contract to transfer a distinct
good or service, or a bundle of goods or services, to the customer, and is the unit of accounting. A
contract with a customer is an agreement which both parties have approved, that creates enforceable
rights and obligations, has commercial substance and with respect to which payment terms are
identified and collectability is probable. Once the Company has entered into a contract or purchase
order, it is evaluated to identify performance obligations. For each performance obligation, revenue is
recognized when control of the promised products is transferred to the customer, or services are
satisfied under the contract or purchase order,
in an amount that reflects the consideration the
Company expects to be entitled to in exchange for those products or services (the transaction price).

A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue when each performance obligation is satisfied. A majority of the Company’s contracts have a
single performance obligation which represents, in most cases, the product being sold to the customer.
To a lesser extent, some contracts include multiple performance obligations such as a product, the
related installation, and extended warranty services. These contracts require judgment in determining
the number of performance obligations. For contracts with multiple performance obligations, judgment
is required to determine whether performance obligations specified in these contacts are distinct and
should be accounted for as separate revenue transactions for recognition purposes. In these types of
contracts, the Company allocates the total transaction price to each performance obligation in an
amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. The Company uses an observable price to determine the
stand-alone selling price for separate performance obligations or a cost plus margin approach when one
is not available. The transaction price includes variable consideration, such as discounts and volume
rebates, when it is probable that a significant reversal of revenue recognized will not occur. Variable
consideration is determined using either the expected value or the most likely amount of consideration
to be received based on historical experience and the specific facts and circumstances at the time of
evaluation.

See Note 19—Business Segments for revenue from contracts with customers disaggregated by end
markets, segments and geographic location.

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Revenue from CPP and HBP Segments

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

A majority of CPP’s and HBP’s revenue is short cycle in nature with shipments occurring within one
year from order and does not include a material long-term financing component, implicitly or explicitly.
Payment terms generally range between 15 to 90 days and vary by the location of the business, the type
of products manufactured to be sold and the volume of products sold, among other factors.

The Company’s CPP and HBP Segments recognize revenue from product sales when all factors are
met, including when control of a product transfers to the customer upon its shipment, completion of
installation, testing, certification or other substantive acceptance required under the contract. Other
than standard product warranty provisions, sales arrangements provide for no other significant post-
shipment obligations on the Company. From time-to-time and for certain customers, rebates and other
sales incentives, promotional allowances or discounts are offered, typically related to customer purchase
volumes, all of which are fixed or determinable and are classified as a reduction of revenue and
recorded at the time of sale. Griffon provides for sales returns and allowances based upon historical
returns experience. The Company includes shipping costs billed to customers in revenue and the related
shipping costs in Cost of Goods and Services.

The majority of the Company’s contracts in the CPP and HBP Segments offer assurance-type
warranties in connection with the sale of a product to a customer. Assurance-type warranties provide a
customer with assurance that the related product will function as the parties intended because it
complies with agreed-upon specifications. Such warranties do not represent a separate performance
obligation.

Payment terms in the CPP and HBP Segments vary depending on the type and location of the customer
and the products or services offered. Generally, the period between the time revenue is recognized and
the time payment is due is not significant. Shipping and handling charges are not considered a separate
performance obligation. Additionally, all taxes assessed by a governmental authority that are both
imposed on and concurrent with a specific revenue-producing transaction and collected from a customer
(e.g., sales, use, value added, and some excise taxes) are excluded from revenue.

Revenue from Defense Electronics Segment

Approximately 14% of the Company’s performance obligations are recognized over time and relate to
prime or subcontractors from contract awards with the U.S. Government, as well as foreign
governments and other commercial customers within our DE Segment. Revenue recognized over time
is generally accounted for using an input measure to determine progress completed at the end of the
period. We believe that cumulative costs incurred to date as a percentage of estimated total contract
costs at completion (cost-to-cost method) is an appropriate measure of progress towards satisfaction of
performance obligations recognized over time, as it most accurately depicts the progress of our work
and transfer of control to our customers.

The Company’s DE Segment earns a substantial portion of its revenue as either a prime contractor or
subcontractor from contract awards with the U.S. Government, as well as foreign governments and
other commercial customers to design, develop and manufacture highly sophisticated intelligence,
surveillance and communications solutions. These contracts are typically long-term in nature, usually
greater than one year, and do not include a material long-term financing component, either implicitly or

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

explicitly. Revenue and profits from such contracts are recognized over time as work is performed
because control of the work in process transfers continuously to the customer. For U.S. Government
contracts, the continuous transfer of control to the customer is supported by contract clauses that
provide for: (i) progress or performance-based payments or (ii) the unilateral right of the customer to
terminate the contract for convenience, in which case we have the right to receive payment for costs
incurred plus a reasonable profit for products and services that do not have alternative use to us.
Foreign government and certain commercial contracts contain similar termination for convenience
clauses, or we have a legally enforceable right to receive payment for costs incurred and a reasonable
profit for product or services that do not have alternative use to us. Revenue and profits on fixed-price
and cost-plus contracts that include performance obligations satisfied over time are recorded at amounts
equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion,
multiplied by the total estimated contract revenue, less the cumulative revenue recognized in prior
periods. The profit recorded on a contract using this method is equal to the current estimated total
profit margin multiplied by the cumulative revenue recognized, less the amount of cumulative profit
previously recorded for the contract in prior periods.

Accounting for the sales and profits on performance obligations for which progress is measured using
the cost-to-cost method relies on the substantial use of estimates, these projections may be revised
throughout the life of a contract. Components of this formula and ratio that may be estimated include
gross profit margin and total costs at completion. The cost performance and estimates to complete long-
term contracts are reviewed, at a minimum, on a quarterly basis, as well as when information becomes
available that would necessitate a review of the current estimate. Adjustments to estimates for a
contract’s estimated costs at completion and estimated profit or loss are often required as experience is
gained, more information is obtained (even though the scope of work required under the contract may
or may not change) and contract modifications occur. The impact of such adjustments to estimates is
made on a cumulative basis in the period when such information has become known. The 2020, 2019,
and 2018 income from operations
favorable/(unfavorable) catch-up adjustments
approximating $(10,650), $(4,500) and $1,400, respectively. Gross profit is impacted by a variety of
factors, including the mix of products, systems and services, production efficiencies, price competition
and general economic conditions.

included net

Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined
price. To the extent actual costs vary from the estimates upon which the price was negotiated, more or
less profit will be generated, or a loss could be incurred.

Cost-reimbursable type contracts provide for the payment of allowable costs incurred on the contract
plus the estimated profit on those costs. The estimated profit on a cost-reimbursable contract may be
fixed or variable based on the contractual fee arrangement. We provide our products and services under
cost-plus-fixed-fee arrangements. The fixed fee is negotiated at the inception of the contract and that
fixed-fee does not vary with actual costs.

For contracts in which anticipated total costs exceed the total expected revenue, an estimated loss is
recognized in the period when identifiable. A provision for the entire amount of the estimated loss is
recorded on a cumulative basis. The estimated remaining costs to complete loss contracts as of
September 30, 2020 was $10,800 and is recorded as a reduction to gross margin on the Consolidated
Statements of Operations and Comprehensive Income (Loss). This loss had an immaterial impact on
Griffon’s Consolidated Financial Statements.

Contract modifications
specifications or
requirements. Depending on the nature of the modification, we consider whether to account for the
modification as an adjustment to the existing contract or as a separate contract. Contract modifications

routinely occur

for changes

in contract

to account

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

for goods or services that are not distinct are accounted for as part of the existing contract on a
cumulative catch-up basis.

From time to time, Telephonics may combine contracts if they are negotiated together, have specific
requirements to combine, or are otherwise closely related.

Transaction Price Allocated to the Remaining Performance Obligations

On September 30, 2020, we had $380,000 of remaining performance obligations, which we also refer to
as total backlog. We expect to recognize approximately 67% of our remaining performance obligations
as revenue within one year, with the balance to be completed thereafter.

Backlog represents the dollar value of funded orders for which work has not been performed. Backlog
generally increases with bookings, and converts into revenue as we incur costs related to contractual
commitments or the shipment of product. Given the nature of our business and a larger dependency on
international customers, our bookings, and therefore our backlog, is impacted by the longer maturation
cycles resulting in delays in the timing and amounts of such awards, which are subject to numerous
factors, including fiscal constraints placed on customer budgets; political uncertainty; the timing of
customer negotiations; and the timing of governmental approvals.

Contract Balances

Contract assets were $84,426 as of September 30, 2020 compared to $105,111 as of September 30, 2019.
The $20,685 decrease in our contract assets balance was primarily due to the timing of billings and work
performed on various radar and surveillance programs. Contract assets primarily relate to the
Company’s right to consideration for work completed but not billed at the reporting date and are
recorded in Contract assets, net of progress payments in the Consolidated Balance Sheets. Contract
assets are transferred to receivables when the right to consideration becomes unconditional. Contract
costs and recognized income not yet billed consists of amounts accounted for under the percentage of
completion method of accounting, recoverable costs and accrued profit that cannot yet be invoiced
under the terms of certain long-term contracts. Amounts will be invoiced when applicable contract
terms, such as the achievement of specified milestones or product delivery, are met. At September 30,
2020 and 2019, approximately $7,500 and $13,100, respectively, of contract assets were expected to be
collected after one year.

Contract liabilities were $24,386 as of September 30, 2020 compared to $26,259 as of September 30,
2019. The $1,873 decrease in the contract liabilities balance was primarily due to the recognition of
revenue primarily from surveillance and airborne maritime surveillance radar programs. Contract
liabilities relate to advance consideration received from customers for which revenue has not been
recognized. The Company often receives cash payments from customers in advance of the Company’s
performance resulting in contract liabilities. These contract liabilities are classified as current on the
Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue.
Current contract liabilities are recorded in Accounts payable on the Consolidated Balance Sheets.
Contract liabilities are reduced when the associated revenue from the contract is recognized.

NOTE 3—ACQUISITIONS

Griffon accounts for acquisitions under the acquisition method, in which assets acquired and liabilities
assumed are recorded at fair value as of the date of acquisition using a method substantially similar to
the goodwill impairment test methodology (level 3 inputs). The operating results of the acquired

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

companies are included in Griffon’s consolidated financial statements from the date of acquisition in
each instance.

On November 29, 2019, AMES acquired 100% of the outstanding stock of 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. The excess of the
purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and
is deductible for tax purposes. The purchase price was primarily allocated to goodwill of GBP 3,449,
acquired intangible assets of GBP 3,454, inventory of GBP 2,914, accounts receivable and other assets
of GBP 2,492 and accounts payable and other accrued liabilities of GBP 3,765.

On June 4, 2018, Clopay completed the acquisition of 100% of
the outstanding stock of
CornellCookson, a leading US manufacturer and marketer of rolling steel door and grille products
designed for commercial, industrial, institutional and retail use, for approximately $180,000, excluding
the estimated present value of tax benefits, and $12,426 of post-closing adjustments, primarily consisting
of a working capital adjustment. CornellCookson revenue in 2018 was $66,654. The acquisition of
CornellCookson substantially expanded Clopay’s non-residential product offerings, and added an
established professional dealer network focused on rolling steel door and grille products for
commercial, industrial, institutional and retail use.

CornellCookson’s accounts, affected for adjustments to reflect fair market values assigned to assets
purchased and liabilities assumed, and results of operations are included in the Company’s consolidated
financial statements from the date of acquisition. The Company has recorded an allocation of the
purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities
assumed based on their fair market values (level 3 inputs) at the acquisition date. The excess of the
purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and
is deductible for tax purposes. Goodwill recognized at the acquisition date represents the other
intangible benefits that the Company will derive from the ownership of CornellCookson, however, such
intangible benefits do not meet the criteria for recognition of separately identifiable intangible assets.

The calculation of the purchase price allocation is as follows:

Accounts receivable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and non-current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,400
12,336
49,426
43,183
67,600
2,648

205,593
12,507
660

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,167
$192,426

(1) Includes $30,818 of gross accounts receivable of which $418 was not expected to be collected. The

fair value of accounts receivable approximated book value acquired.

(2) Includes $13,434 of gross inventory of which $1,098 was reserved for obsolete items.

90

92632

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The amounts assigned to goodwill and major intangible asset classifications, all of which are tax
deductible, for the CornellCookson acquisition are as follows:

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definite-lived intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,183 N/A
53,500 N/A
14,100

12

Total goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .

$110,783

Average
Life (Years)

On February 13, 2018, AMES acquired 100% of the outstanding stock of Kelkay Limited (“Kelkay”), a
leading United Kingdom manufacturer and distributor of decorative outdoor landscaping products sold
to garden centers, retailers and grocers in the UK and Ireland for $56,118 (GBP 40,452), subject to
contingent consideration of up to GBP 7,000, of which approximately GBP 2,200 was earned. This
acquisition broadened AMES’ product offerings in the market and increased its in-country operational
footprint. The purchase price was primarily allocated to tradenames of GBP 19,000, customer related
intangibles of GBP 6,640, accounts receivable and inventory of GBP 8,894 and fixed assets and land of
GBP 8,241.

On November 6, 2017, AMES acquired substantially all of the assets of Harper Brush Works
(“Harper”), a division of Horizon Global, for $4,383, inclusive of post-closing adjustments. Harper is a
leading U.S. manufacturer of cleaning products for professional, home, and industrial use. The
acquisition expanded AMES’ long-handled tool offering in North America to include brooms, brushes,
and other cleaning tools and accessories. The purchase price was primarily allocated to intangible assets
of $2,300, inventory and accounts receivable of $3,900 and fixed assets of $900.

On October 2, 2017, Griffon Corporation completed the acquisition of 100% of the outstanding equity
interests of ClosetMaid, a market leader of home storage and organization products, for approximately
$185,700,
inclusive of certain post-closing adjustments and excluding the present value of net tax
benefits resulting from the transaction. The acquisition of ClosetMaid expanded Griffon’s Home and
Building Products segment into the highly complementary home storage and organization category with
a leading brand and product portfolio.

ClosetMaid’s accounts, affected for adjustments to reflect fair market values assigned to assets
purchased and liabilities assumed, and results of operations, are included in the Company’s consolidated
financial statements from the date of acquisition. The Company has recorded an allocation of the
purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities
assumed based on their fair market values (level 3 inputs) at the acquisition date. The excess of the
purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and
is deductible for tax purposes. Goodwill recognized at the acquisition date represents the other
intangible benefits that the Company will derive from the ownership of ClosetMaid, however, such
intangible benefits do not meet the criteria for recognition of separately identifiable intangible assets.

91

16127

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The calculation of the purchase price allocation is as follows:

Accounts receivable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and non-current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 32,234
28,411
47,464
70,159
74,580
3,852

256,700
68,251
2,720

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70,971
$185,729

(1) Includes $32,956 of gross accounts receivable of which $722 was not expected to be collected. The

fair value of accounts receivable approximated book value acquired.

(2) Includes $1,500 in inventory basis step-up, which was charged to cost of goods sold over the

inventory turns of the acquired entity.

The amounts assigned to goodwill and major intangible asset classifications, all of which are tax
deductible, for the ClosetMaid acquisition are as follows:

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definite-lived intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70,159 N/A
47,740 N/A
26,840
$144,739

21

Average
Life (Years)

During the year ended September 30, 2020, SG&A included acquisition costs of $2,960. There were no
acquisition-related costs in 2019. In 2018, SG&A and Cost of goods and services included $6,097 and
$1,500 of acquisition-related costs, respectively..

NOTE 4—INVENTORIES

The following table details the components of inventory:

Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . .
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$135,083
81,624
197,118

$413,825

$121,791
93,830
226,500

$442,121

At September 30,
2020

At September 30,
2019

92

24844

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 5—PROPERTY, PLANT AND EQUIPMENT

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

Land, building and building improvements . . . . . . . .
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation and amortization. . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2020

At September 30,
2019

$ 167,005
595,126
53,386
815,517
(471,553)

$ 343,964

$ 133,036
580,698
49,808
763,542
(426,216)

$ 337,326

Except as described in Note 9, Restructuring Charges, no event or indicator of impairment occurred
during the year ended September 30, 2020 which would require additional impairment testing of
property, plant and equipment.

NOTE 6—GOODWILL AND OTHER INTANGIBLES

Griffon usually performs its annual goodwill impairment testing in the fourth quarter of each year. In
addition to the annual impairment test, the Company is required to regularly assess whether a triggering
event has occurred which would require interim impairment testing. Given the general deterioration in
economic and market conditions surrounding the COVID-19 pandemic, the Company considered the
impact that the COVID-19 pandemic may have on its near and long-term forecasts and completed an
interim impairment test as of March 31, 2020. The Company determined that there was no impairment
to either its goodwill or indefinite-lived intangible assets at March 31, 2020. As of September 30, 2020,
the Company performed a qualitative assessment and determined it was not more likely than not that
the fair value of any of its reporting units or its indefinite-lived intangible assets was less than their
carrying values. Based upon the results of the annual impairment qualitative review, it was determined
that the fair value of each reporting unit substantially exceeded the carrying value of the assets, as
performed under step one, and no impairment existed. See Note 1, Description of Business and
the Company’s goodwill and
Summary of Significant Accounting Policies,
indefinite-lived intangible impairment testing methodology.

for a description of

The following table provides changes in carrying value of goodwill by segment through the year ended
September 30, 2020:

At
September 30,
2018

Goodwill
from
acquisitions

Reallocation
of Goodwill(1)

Foreign
currency
translation
adjustments

At
September 30,
2019

Goodwill
from
acquisitions

Foreign
currency
translation
adjustments

At
September 30,
2020

Consumer and

Professional Products . . .

$378,046

$ —

$(148,076)

$(2,701)

$227,269

$4,451

$1,125

$232,845

Home and Building

Products . . . . . . . . . . . . . . . .
Defense Electronics. . . . . . .

42,804
18,545

300
—

148,076
—

73
—

191,253
18,545

—
—

—
—

191,253
18,545

Total . . . . . . . . . . . . . . . . .

$439,395

$300

$

— $(2,628)

$437,067

$4,451

$1,125

$442,643

(1) In accordance with the guidance set forth in ASC 350, and in connection with the modification of the
the Company

Company’s reportable segment structure, using a relative fair value approach,
reallocated $148,076 of goodwill between the CPP and HBP segments.

93

52814

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

At September 30, 2020
Gross
Carrying
Amount

Accumulated
Amortization

Customer relationships & other. . . . . . . . . . . . .
Unpatented technology . . . . . . . . . . . . . . . . . . . . .
Total amortizable intangible assets . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets. . . . . . . . . . . . . . . . . .

$185,940
19,464

205,404
224,640
$430,044

$66,656
8,360

75,016
—
$75,016

Average
Life
(Years)

23
13

At September 30, 2019
Gross
Carrying
Amount

Accumulated
Amortization

$183,515
19,167

202,682
219,069
$421,751

$57,783
7,329

65,112
—
$65,112

Amortization expense for intangible assets subject to amortization was $9,590, $9,922 and $9,070 in
2020, 2019 and 2018, respectively. Amortization expense for each of the next five years and thereafter,
based on current intangible balances and classifications, is estimated as follows: 2021 - $9,443; 2022 -
$9,436; 2023 - $9,357; 2024 - $9,331 and 2025 - $9,331; thereafter - $83,490.

NOTE 7—DISCONTINUED OPERATIONS

During 2019, Griffon recorded an $11,050 charge ($8,335, net of tax) to discontinued operations. The
charge consisted primarily of a purchase price adjustment to resolve a claim related to the $465,000
Plastics divestiture and included an additional reserve for a legacy environmental matter.

The following amounts summarize the total assets and liabilities of Plastics and Installation Services and
other discontinued activities which have been segregated from Griffon’s continuing operations and are
reported as assets and liabilities of discontinued operations in the consolidated balance sheets:

At September 30,
2020

At September 30,
2019

Assets of discontinued operations:

Prepaid and other current assets. . . . . . . . . . . . . .
Other long-term assets. . . . . . . . . . . . . . . . . . . . . . . .

Total assets of discontinued operations. . . . . . . . . . . .

Liabilities of discontinued operations:

Accrued liabilities, current . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . .

Total liabilities of discontinued operations . . . .

$ 2,091
6,406

$ 8,497

$ 3,797
7,014

$10,811

$ 321
2,888

$3,209

$4,333
3,331

$7,664

At September 30, 2020, Griffon’s liabilities for Plastics, Installations Services and other discontinued
operations primarily related to insurance claims, income taxes and product liability, warranty and
environmental reserves totaling liabilities of approximately $10,811. The increase in assets and liabilities
were primarily associated with insurance claims receivable and payable.

Plastics

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Plastics and on
February 6, 2018, completed the sale to Berry for approximately $465,000, net of certain post-closing
adjustments. As a result, Griffon classified the results of operations of the Plastics business as
discontinued operations in the Consolidated Statements of Operations for all periods presented and

94

41464

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

classified the related assets and liabilities associated with the discontinued operations in the
consolidated balance sheets. Plastics is a global leader in the development and production of embossed,
laminated and printed specialty plastic films for hygienic, health-care and industrial products and sells
to some of the world’s largest consumer products companies. In connection with the sale of Plastics, the
Company recorded a $9,500 post-closing adjustment ($7,085, net of tax) during 2019 and recorded a
gain on sale of $112,964 ($81,041, net of tax) during 2018. The following amounts related to the Plastics
segment have been segregated from Griffon’s continuing operations and are reported as discontinued
operations:

For the Year Ended
September 30,

2019

2018

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $166,262
— 132,100

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense)
Gain on sale of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
9,500
—

9,500
(9,500)

34,162
26,303
—

26,303
7,859

— 112,964
(155)
—
(687)
—

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations of discontinued operations . . . . . . . . . . . . . . . . . .

— 112,122
$(9,500) $119,981

Installation Services and Other Discontinued Activities

There was no reported revenue in 2020, 2019 and 2018.

NOTE 8—ACCRUED LIABILITIES

The following table details the components of accrued liabilities:

At September 30,
2020

At September 30,
2019

Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties and rebates. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent, utilities and freight. . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising. . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 83,308
4,371
18,687
10,997
8,816
14,707
7,968
2,965
19,753

$171,572

$ 61,639
4,501
13,171
11,996
5,326
7,814
4,417
—
15,801

$124,665

95

92731

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 9—RESTRUCTURING CHARGES

In September 2020, Telephonics initiated a Voluntary Employee Retirement Plan, which was
subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining
functions and responsibilities. The combined actions are expected to incur severance charges of
approximately $4,500, with $2,120 recognized in the fourth quarter, and the balance to be recognized in
the first quarter of 2021. At the conclusion of these actions, headcount is expected to be reduced by
approximately 90 people. In addition, during fiscal 2020 Telephonics commenced a facility project to
consolidate three Long Island based facilities into two company owned facilities with a total cost of
approximately $4.0 million primarily comprised of capital expenditures in 2021.

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. operations. First, multiple independent information systems will be unified into a single
data and analytics platform, which will serve the whole AMES global enterprise. Second, certain AMES
global operations will be consolidated to optimize facilities footprint and talent. Third, strategic
investments in automation and facilities expansion will be made to increase the efficiency of our
manufacturing and fulfillment operations, and support e-commerce growth.

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

In the year ended September 30, 2020, CPP incurred pre-tax restructuring and related exit costs
approximating $13,669. For the year ended September 30, 2020, cash charges totaled $8,977 and non-
cash, asset-related charges totaled $4,692; the cash charges included $5,620 for one-time termination
benefits and other personnel-related costs and $3,357 for facility exit costs. Non-cash charges included a
$1,968 impairment charge related to a facility’s operating lease as well as $671 of
leasehold
improvements made to the leased facility and $304 of inventory that have no recoverable value, and a
$1,749 impairment charge related to machinery and equipment that have no recoverable value at one of
the Company’s owned manufacturing locations. As a result of these transactions, headcount was
reduced by 167.

96

23807

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

For the Year Ended
September 30, 2020

Cost of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .

Total restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Personnel related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facilities, exit costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash facility and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,159
11,630

$15,789

$ 7,740
3,357
4,692

$15,789

The following table summarizes the accrued liabilities of the Company’s restructuring actions:

Cash
Charges
Personnel
related costs

Cash
Charges
Facilities &
Exit Costs

Non Cash
Charges
Facility and
Other Costs

Total

Accrued liability at September 30, 2019. . . . . . .
Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges(1) . . . . . . . . . . . . . . . . . . . . . . .
Accrued liability at September 30, 2020. . . . . . .

$ —
7,740
(5,039)
—

$ 2,701

$ —
3,357
(3,093)
$ —

$

264

$ — $ —
15,789
(8,132)
(4,692)

4,692
—
(4,692)

$ — $ 2,965

(1) Non-cash charges in Facility and Other Costs primarily represent the non-cash write-off of certain

long-lived assets in connection with certain facility closures.

NOTE 10—WARRANTY LIABILITY

DE offers warranties against product defects for periods generally ranging from one to two years,
depending on the specific product and terms of the customer purchase agreement. CPP and HBP also
offers warranties against product defects for periods generally ranging from one to ten years, with
limited lifetime warranties on certain door models. Typical warranties require CPP, HBP and DE to
repair or replace the defective products during the warranty period at no cost to the customer. At the
time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical
experience, and periodically assesses its warranty obligations and adjusts the liability as necessary. CPP
offers an express limited warranty for a period of ninety days on all products from the date of the
original purchase unless otherwise stated on the product or packaging from the date of original
purchase.

97

77902

Coupon
Interest
Rate

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties issued and changes in estimated pre-existing

warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual warranty costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended
September 30,

2020

2019

$ 7,894

$ 8,174

20,474
(17,525)

16,938
(17,218)

Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10,843

$ 7,894

NOTE 11—LONG-TERM DEBT

Debt at September 30, 2020 and 2019 consisted of the following:

At September 30, 2020
Capitalized
Fees &
Expenses

Original
Issuer
Premium

Balance
Sheet

$363
—
—
—
—
—

363
—
$363

$(15,376) $ 984,987

5.75%

(2,209)
(30)
(30)
(160)
(16)

10,649 Variable
17,188 Variable
(30) Variable
30,926 Variable
3,244 Variable

(17,821)
—

1,046,964
(9,922)
$(17,821) $1,037,042

At September 30, 2019
Capitalized
Fees &
Expenses

Original
Issuer
Premium

Balance
Sheet

Coupon
Interest
Rate

$867
—
—
—
—
—
867
—

$867

$ (9,175) $ 991,692

5.25%

(1,243)
(55)
(45)
(188)
(18)
(10,724)
—

48,757 Variable

4,333

5.00%

17,531 Variable
36,789 Variable
5,172 Variable

1,104,274
(10,525)

$(10,724) $1,093,749

Senior notes due 2028 . . . . . . . . . . . . . . .
Revolver due 2025. . . . . . . . . . . . . . . . . . .
Finance lease—real estate . . . . . . . . . . .
Non U.S. lines of credit . . . . . . . . . . . . .
Non U.S. term loans. . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . .

Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
less: Current portion . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . .

Senior notes due 2022 . . . . . . . . . . . . . . .
Revolver due 2021. . . . . . . . . . . . . . . . . . .
Finance lease—real estate . . . . . . . . . . .
Non U.S. lines of credit . . . . . . . . . . . . .
Non U.S. term loans. . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . .
Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
less: Current portion . . . . . . . . . . . . . . . . .

Long-term debt . . . . . . . . . . . . . . . . . . . . . .

(a)

(b)

(e)

(f)

(f)

(g)

(a)

(b)

(e)

(f)

(f)

(g)

Outstanding
Balance

$1,000,000
12,858
17,218
—
31,086
3,260

1,064,422
(9,922)
$1,054,500

Outstanding
Balance

$1,000,000
50,000
4,388
17,576
36,977
5,190
1,114,131
(10,525)

$1,103,606

98

41776

Total
Interest
Expense

$33,583
$24,673
6,501
411
27
1,030
447
(128)

$66,544

Total
Interest
Expense

$56,573
7,978
1,123
397
34
1,701
645
(385)
$68,066

Total
Interest
Expense

$56,573
4,283
1,926
669
606
49
1,510
501
(549)

$65,568

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Interest expense consists of the following for 2020, 2019 and 2018.

Year Ended September 30, 2020

Effective
Interest
Rate

Cash
Interest

Amort.
Debt
Premium

Amort.
Deferred
Cost &
Other Fees

Senior notes due 2028 . . . . . . . . . . . . . . . . . . .
Senior notes due 2022 . . . . . . . . . . . . . . . . . . .
Revolver due 2025 . . . . . . . . . . . . . . . . . . . . . . .
Finance lease—real estate. . . . . . . . . . . . . . . .
Non U.S. lines of credit. . . . . . . . . . . . . . . . . .
Non U.S. term loans . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b) Variable
(e) Variable
(f) Variable
(f) Variable
(g) Variable

5.90% $32,511
5.67% $22,816
5,866
386
12
975
445
(128)

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$62,883

$ —
$122
—
—
—
—
—
—

$122

$1,072
$1,735
635
25
15
55
2
—

$3,539

Senior notes due 2022 . . . . . . . . . . . . . . . . . . .
Revolver due 2025 . . . . . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease—real estate. . . . . . . . . . . . . . . .
Non U.S. lines of credit. . . . . . . . . . . . . . . . . .
Non U.S. term loan . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Senior notes due 2022 . . . . . . . . . . . . . . . . . . .
Revolver due 2025 . . . . . . . . . . . . . . . . . . . . . . .
Real estate mortgages. . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease—real estate. . . . . . . . . . . . . . . .
Non U.S. lines of credit. . . . . . . . . . . . . . . . . .
Non U.S. term loan . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30, 2019

Effective
Interest
Rate

Cash
Interest

Amort.
Debt
Premium

Amort.
Deferred
Cost &
Other Fees

(a)

(b) Variable
(d)

(e) Variable
(f) Variable
(f) Variable
(g) Variable

6.3%

5.66% $52,500
6,998
937
372
19
1,592
640
(385)
$62,673

$270
—
—
—
—
—
—
—
$270

$3,803
980
186
25
15
109
5
—
$5,123

Year Ended September 30, 2018

Effective
Interest
Rate

Cash
Interest

Amort.
Debt
Premium

Amort.
Deferred
Cost &
Other Fees

(a)

(d)

(b) Variable
(c)

(e) Variable
(f) Variable
(f) Variable
(g) Variable

5.66% $52,500
3,718
6.3% 1,802
349
3.3%
581
34
1,420
494
(549)

$270
—
—
—
—
—
—
—
—

$270

$3,803
565
124
320
25
15
90
7
—

$4,949

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$60,349

Minimum payments under debt agreements for the next five years are as follows: $9,922 in 2021,
$12,667 in 2022, $16,124 in 2023, $1,730 in 2024, $14,628 in 2025 and $1,009,351 thereafter.

(a) On June 22, 2020, in an unregistered offering through a private placement, Griffon completed the
add-on offering of $150,000 principal amount of its 5.75% senior notes due 2028, at 100.25% of par,

99

17481

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

to Griffon’s previously issued $850,000 principal amount of its 5.75% senior notes due 2028, at of
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% senior notes due 2022 (the “2022 Senior
Notes”). As of September 30, 2020, outstanding 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 2028 Senior Notes approximated $1,040,000 on September 30,
2020 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $16,448 of underwriting fees and other
expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over
the term of such notes, and, at September 30, 2020, $15,376 remained to be amortized. 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 5.25% $1,000,000 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.

(b) On January 30, 2020, Griffon amended its Credit Agreement to increase the maximum borrowing
availability from $350,000 to $400,000, extend its maturity from March 22, 2021 to March 22, 2025
and modify certain other provisions of the facility. The facility includes a letter of credit sub-facility
with a limit of $100,000 (increased from $50,000); and a multi-currency sub-facility of $100,000. The
Credit Agreement provides for same day borrowings of base rate loans.

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 0.75% for base rate loans and
1.75% 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. 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 September 30,
2020, under the Credit Agreement, there were $12,858 in outstanding borrowings; outstanding
standby letters of credit were $16,867; and $370,275 was available, subject to certain loan covenants,
for borrowing at that date.

(c) In September 2015 and March 2016, Griffon entered into mortgage loans in the amount of $32,280
and $8,000, respectively, that were due to mature in September 2025 and April 2018, respectively.
The mortgage loans were secured and collateralized by four properties occupied by Griffon’s
subsidiaries and were guaranteed by Griffon. The loans had an interest at a rate of LIBOR plus
1.50%. The loans were paid off during 2018.

(d) In August 2016 and as amended on June 30, 2017, Griffon’s ESOP entered into a Term Loan with a
bank (the “ESOP Agreement”). The Term Loan interest rate was LIBOR plus 3.00%. The Term
Loan required quarterly principal payments of $569 with a balloon payment due at maturity. The
Term Loan was secured by shares purchased with the proceeds of the loan and with a lien on a
specific amount of Griffon assets (which ranked pari passu with the lien granted on such assets under

100

13738

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

the Credit Agreement) and was guaranteed by Griffon. On March 13, 2019, the ESOP Term Loan
was refinanced with an internal loan from Griffon which was funded with cash and a draw under its
Credit Agreement. The internal loan interest rate is fixed at 2.91%, matures in June 2033 and
requires quarterly payments of principal, currently $635, and interest. The internal loan is secured by
shares purchased with the proceeds of the loan. The amount outstanding on the internal loan at
September 30, 2020 was $29,878.

(e) Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and
Ocala, Florida. The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of
approximately 5.0% and 5.6%, respectively. The Troy, Ohio lease is secured by a mortgage on the
real estate and is guaranteed by Griffon. The Ocala, Florida lease contains two five-year renewal
options. As of September 30, 2020, $17,188 was outstanding, net of issuance costs. Refer to
Note 22—Leases for further details.

(f) In November 2012, Garant G.P. (“Garant”), a Griffon subsidiary, entered into a CAD 15,000
($11,210 as of September 30, 2020) revolving credit facility. The facility accrues interest at LIBOR
(USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.44% LIBOR USD and
1.55% Bankers Acceptance Rate CDN as of September 30, 2020). The revolving facility matures in
October 2022. Garant is required to maintain a certain minimum equity. As of September 30, 2020,
there were no borrowings under the revolving credit facility with CAD 15,000 ($11,210 as of
September 30, 2020) available for borrowing.

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (“Griffon
Australia”) entered into an AUD 29,625 term loan, AUD 20,000 revolver and AUD 10,000
receivable purchase facility agreement; the agreement was amended in March 2019. As amended, 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 (2.09% at September 30, 2020). During the year ended
September 30, 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 September 30, 2020, the term loan had an
outstanding balance of AUD 15,875 ($11,287 as of September 30, 2020). 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 (2.04% and 1.49%, respectively, at September 30, 2020). At
September 30, 2020, there were no balances outstanding under the revolver and the receivable
purchase facility. The revolver, receivable purchase facility and 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.

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 loan accrue interest at the GBP LIBOR Rate plus 2.25%
and 1.8%, respectively (2.30% and 1.85% at September 30, 2020, respectively). The revolving facility
matures in May 2021, but is renewable upon mutual agreement with the lender, and accrues interest
at the Bank of England Base Rate plus 1.5% (1.85% as of September 30, 2020). As of September 30,
2020, the revolver had no outstanding balance while the term and mortgage loan balances amounted
to GBP 15,398 ($19,799 as of September 30, 2020). 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

101

15405

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

maximum leverage ratio and a minimum fixed charges cover ratio. An invoice discounting
arrangement was canceled and replaced by the above loan facilities.

(g) Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development

Authority, with the balance consisting of capital leases.

At September 30, 2020, Griffon and its subsidiaries were in compliance with the terms and covenants of
its credit and loan agreements.

NOTE 12—EMPLOYEE BENEFIT PLANS

Griffon offers defined contribution plans to most of its U.S. employees. In addition to employee
contributions
to the plans, Griffon makes contributions based upon various percentages of
compensation and/or employee contributions, which were $11,956 in 2020, $11,788 in 2019 and
$11,053 in 2018.

The Company also provides healthcare and life insurance benefits for certain groups of retirees through
several plans. For certain employees, the benefits are at fixed amounts per retiree and are partially
contributory by the retiree. The post-retirement benefit obligation was $1,833 and $1,852 as of
September 30, 2020 and 2019. The accumulated other comprehensive income (loss) for these plans was
$(196) and ($146) as of September 30, 2020 and 2019, respectively, and the 2020 and 2019 benefit
expense was $46 and $50, respectively. It is the Company’s practice to fund these benefits as incurred.

Griffon also has qualified and non-qualified defined benefit plans covering certain employees with
benefits based on years of service and employee compensation. Over time, these amounts will be
recognized as part of net periodic pension costs in the Consolidated Statements of Operations and
Comprehensive Income (Loss).

Griffon is responsible for overseeing the management of the investments of the qualified defined
benefit plan and uses the services of an investment manager to manage these assets based on agreed
upon risk profiles. The primary objective of the qualified defined benefit plan is to secure participant
retirement benefits. As such, the key objective in this plan’s financial management is to promote
stability and, to the extent appropriate, growth in the funded status. Financial objectives are established
in conjunction with a review of current and projected plan financial requirements. The fair values of a
majority of the plan assets were determined by the plans’ trustee using quoted market prices for
identical instruments (level 1 inputs) as of September 30, 2020 and 2019. The fair value of various other
investments was determined by the plan’s trustee using direct observable market corroborated inputs,
including quoted market prices for similar assets (level 2 inputs). A small amount of plan assets are
invested in private equity which consist primarily of investments in private companies which are valued
using the net asset values provided by the underlying private investment companies as a practical
expedient (level 3 inputs).

The Clopay AMES Pension Plan and the AMES supplemental executive retirement plan are frozen to
new entrants and participants in the plans no longer accrue benefits.

The Company’s non-service cost components of net periodic benefit plan cost was a benefit of $1,559,
$3,148 and $3,649 during 2020, 2019, and 2018 respectively.

Griffon uses judgment to establish the assumptions used in determining the future liability of the plan,
as well as the investment returns on the plan assets. The expected return on assets assumption used for
pension expense was developed through analysis of historical market returns, current market conditions
and past experience of plan investments. The long-term rate of return assumption represents the
expected average rate of earnings on the funds invested, or to be invested, to provide for the benefits

102

75977

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

included in the benefit obligations. The assumption is based on several factors including historical
market index returns, the anticipated long-term asset allocation of plan assets and the historical return.
The discount rate assumption is determined by developing a yield curve based on high quality bonds
with maturities matching the plans’ expected benefit payment stream. The plans’ expected cash flows
are then discounted by the resulting year-by-year spot rates. A 10% change in the discount rate or
return on assets would not have a material effect on the financial statements of Griffon.

Net periodic costs (benefits) were as follows:

Defined Benefits for the Years
Ended September 30,
2019

2018

2020

Supplemental Benefits for the
Years Ended September 30,
2020
2018
2019

Net periodic (benefits) costs:
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . .
Amortization of:

$ 4,267
(10,343)

$ 5,778
(10,331)

$ 5,084
(10,736)

$335
—

Prior service costs . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . .

—
3,769

—
630

—
755

14
399

$503
—

14
258

$ 544
—

14
628

Total net periodic (benefits) costs . . . . . . .

$ (2,307)

$ (3,923)

$ (4,897)

$748

$775

$1,186

The tax benefits in 2020, 2019 and 2018 for the amortization of pension costs in Other comprehensive
income (loss) were $878, $221 and $342, respectively.

The estimated net actuarial loss and prior service cost that will be amortized from AOCI into Net
periodic pension cost during 2021 is $6,277 and $15, respectively.

The weighted-average assumptions used in determining the net periodic (benefits) costs were as follows:

Defined Benefits for the Years
Ended September 30,
2019

2020

2018

Supplemental Benefits for the
Years Ended September 30,
2019

2018

2020

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on assets. . . . . . . . . . . . . . . . .

2.92% 4.10%
7.00% 7.00%

3.64%
7.25%

2.64%
—%

3.99% 3.18%
—%

—%

103

14361

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Plan assets and benefit obligation of the defined and supplemental benefit plans were as follows:

Defined Benefits at
September 30,

Supplemental Benefits at
September 30,

2020

2019

2020

2019

Change in benefit obligation:
Benefit obligation at beginning of fiscal year . . . . . . . . . . . . . . $177,797 $161,328 $ 16,180
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
335
(1,939)
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,494
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,267
(10,747)
11,686

5,778
(10,790)
21,481

$ 15,718
503
(1,942)
1,901

Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . . . .

183,003

177,797

16,070

16,180

Change in plan assets:
Fair value of plan assets at beginning of fiscal year. . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145,610
4,261
8,021
(10,747)

150,680
2,606
3,114
(10,790)

—
—
1,939
(1,939)

Fair value of plan assets at end of fiscal year. . . . . . . . . . . . . .
—
Projected benefit obligation in excess of plan assets . . . . . . . $ (35,858) $ (32,187) $(16,070)

147,145

145,610

Amounts recognized in the statement of financial position

consist of:

Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other liabilities (long-term) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net actuarial losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $

(35,858)
(35,858)

61,666
—
(12,950)

— $ (1,891)
(14,179)
(16,070)

(32,187)
(32,187)

47,663
—
(17,098)

7,700
—
(1,617)

Total Accumulated other comprehensive loss, net of tax . .
6,083
Net amount recognized at September 30, . . . . . . . . . . . . . . . . . . $ 12,858 $ (1,622) $ (9,987)

30,565

48,716

—
—
1,942
(1,942)

—
$(16,180)

$ (1,906)
(14,279)
(16,185)

6,609
14
(2,374)

4,249

$(11,936)

Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . $183,003 $177,797 $ 16,070

$ 16,180

Information for plans with accumulated benefit

obligations in excess of plan assets:

ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $183,003 $177,797 $ 16,070
16,070
PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

177,797
145,610

183,003
147,145

$ 16,180
16,180
—

The weighted-average assumptions used in determining the benefit obligations were as follows:

Weighted average discount rate. . . . . . . . . . . . . . . . . . . . .

Defined Benefits at
September 30,

Supplemental
Benefits at
September 30,

2020

2.30%

2019

2020

2.92% 1.69%

2019

2.64%

104

64941

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:

For the years ending September 30,

Defined
Benefits

Supplemental
Benefits

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 through 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,006
10,964
10,945
10,892
10,809
52,390

$1,891
1,787
1,679
1,556
1,437
5,354

During 2021, Griffon expects to contribute $1,891 in payments related to Supplemental Benefits that
will be funded from the general assets of Griffon. Griffon expects to contribute $2,764 to the Defined
Benefit plan in 2021.

The Clopay AMES Plan is covered by the Pension Protection Act of 2006. The Adjusted Funding
Target Attainment Percent for the plan as of January 1, 2020 was 93.7%. Since the plan was in excess of
the 80% funding threshold there were no plan restrictions. The expected level of 2021 catch up
contributions is $2,107.

The actual and weighted-average asset allocation for qualified benefit plans were as follows:

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2020
2019

Target

—%
0.4% 1.9%
48.5% 49.9% 63.0%
31.9% 29.4% 37.0%
—%
19.2% 18.8%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0% 100.0% 100.0%

The following is a description of the valuation methodologies used for plan assets measured at fair
value:

Government and agency securities—When quoted market prices are available in an active market, the
investments are classified as Level 1. When quoted market prices are not available in an active market,
the investments are classified as Level 2.

Equity securities—The fair values reflect the closing price reported on a major market where the
individual mutual fund securities are traded in equity securities. These investments are classified within
Level 1 of the valuation hierarchy.

Debt securities—The fair values are based on a compilation of primarily observable market information
or a broker quote in a non-active market where the individual mutual fund securities are invested in
debt securities. These investments are classified within Level 1 and Level 2 of the valuation hierarchy.

Commingled funds—The fair values are determined using NAV provided by the administrator of the
fund. The NAV is based on the value of the underlying assets owned by the trust/entity, minus its
liabilities, and then divided by the number of shares outstanding. These investments are generally
classified within Level 2 or 3, as appropriate, of the valuation hierarchy and can be liquidated on
demand.

Interest in limited partnerships and hedge funds—One limited partnership investment is a private equity
fund and the fair value is determined by the fund managers based on the net asset values provided by

105

00491

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

the underlying private investment companies as a practical expedient. These investments are classified
within Level 2 of the valuation hierarchy.

The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset
category:

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

At September 30, 2020

Cash and equivalents . . . . . . . . . . . . . . . . . . . . .
Government agency securities . . . . . . . . . . . .
Debt instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Commingled funds . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships and hedge fund

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . .

$

600
33,675
179
68,987
—

—
2,488

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,929

Accrued income and plan receivables. . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30, 2019

Cash and equivalents . . . . . . . . . . . . . . . . . . . . .
Government and agency securities . . . . . . . .
Debt instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Commingled funds . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships and hedge fund

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,791
28,297
182
72,517
—

—
1,913

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,700

Accrued income and plan receivables. . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —
6,136
2,722
—
—

17,867
163

$26,888

$ —
9,119
2,996
—
—

18,569
159

$30,843

$9,362

$142,179

$ —
—
—
—
9,362

—
—

$ —
—
—
—
8,776

—
—

$

Total

600
39,811
2,901
68,987
9,362

17,867
2,651

4,966

$147,145

Total

$ 2,791
37,416
3,178
72,517
8,776

18,569
2,072

$8,776

$145,319

291
$145,610

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

The following table represents level 3 significant unobservable inputs for the years ended September 30,
2020 and 2019:

Significant
Unobservable
Inputs
(Level 3)

As of October 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, issuances and settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, issuances and settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —
7,695
1,081
8,776
—
586

$9,362

106

68746

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Griffon has an ESOP that covers substantially all domestic employees. All U.S. employees of Griffon,
who are not members of a collective bargaining unit, automatically become eligible to participate in the
plan on the October 1st following completion of one qualifying year of service (as defined in the plan).
Securities are allocated to participants’
individual accounts based on the proportion of each
participant’s aggregate compensation (not to exceed $285 for the plan year ended September 30,
2020), to the total of all participants’ compensation. Shares of the ESOP which have been allocated to
employee accounts are charged to expense based on the fair value of the shares transferred and are
treated as outstanding in determining earnings per share. Dividends paid on shares held by the ESOP
are used to offset debt service on ESOP Loans. Dividends paid on shares held in participant accounts
are utilized to allocate shares from the aggregate number of shares to be released, equal in value to
those dividends, based on the closing price of Griffon common stock on the dividend payment date.
Compensation expense under the ESOP was $2,878 in 2020, $2,629 in 2019 and $9,532 in 2018, including
an impact of $2,588 from the April 2018 special dividend. The cost of the shares held by the ESOP and
not yet allocated to employees is reported as a reduction of Shareholders’ Equity. The fair value of the
unallocated ESOP shares as of September 30, 2020 and 2019 based on the closing stock price of
Griffon’s stock was $40,217 and $47,378, respectively. The ESOP shares were as follows:

Allocated shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,301,448
2,058,187

3,209,069
2,259,308

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,359,635

5,468,377

At September 30,
2020
2019

NOTE 13—INCOME TAXES

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“TCJA”), which significantly
changed U.S. tax law. The TCJA lowered the Company’s U.S. statutory federal income tax rate from
35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on previously
deferred foreign income. The TCJA also created a new minimum tax on certain foreign earnings, for
which the Company has elected to record as a current period expense when incurred.

The Company computed its income tax expense for the September 30, 2018 fiscal year using a blended
Federal Tax Rate of 24.5%. The 21% Federal Tax Rate applies to the fiscal year ended September 30,
2019 and each year thereafter.

In accordance with U.S. GAAP for income taxes, as well as SAB 118, the Company made a reasonable
estimate of the impacts of the TCJA for the year ended September 30, 2018 and recorded a $20,587
benefit on the revaluation of deferred tax liabilities as a provisional amount for the re-measurement of
deferred tax assets and liabilities, as well as an amount for deductible executive compensation expense,
both of which have been reflected in the tax provision for 2018. SAB 118 allows for a measurement
period of up to one year from the date of enactment to complete the Company’s accounting for the
impacts of the TCJA. Our analysis under SAB 118 was completed in December 2018 and resulted in no
material adjustments to the provision amounts recorded as of September 30, 2018.

The Company recorded a provisional transition tax charge of $13,100 net of foreign tax credits for fiscal
year 2018. The Company ultimately incurred a transition tax charge of $12,699. Under the TCJA, the
Company elected to pay the transition tax interest-free over eight years and at September 30, 2020 has
$8,344 remaining on this liability.

During fiscal 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”). The CARES Act is an emergency economic stimulus package in

107

08391

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

response to the coronavirus outbreak which, among other things, contains numerous income tax
provisions. The Company evaluated the impact of the legislation and determined that while there was
an impact on the timing of certain tax payments, there is no material impact on the Company’s
consolidated financial statements or related disclosures

Income taxes have been based on the following components of Income before taxes from continuing
operations:

For the Years Ended September 30,
2019

2020

2018

Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42,634
40,123

$82,757

$49,723
22,455

$72,178

$ 4,942
28,868

$33,810

Provision (benefit) for income taxes on income was comprised of the following from continuing
operations:

For the Years Ended September 30,
2019

2020

2018

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,233
2,095

$29,328

$10,978
7,331
11,019

$29,328

$28,778
(2,222)

$ 18,188
(17,633)

$26,556

$

555

$14,160
6,187
6,209

$26,556

$(12,714)
5,175
8,094

$

555

Differences between the effective income tax rate applied to Income and the U.S. Federal income
statutory rate from continuing operations were as follows:

For the Years Ended
September 30,
2019

2020

21.0%
6.6%

2.0%
(0.7)%

2018

24.5%
10.2%

3.6%
(0.6)%

—% (60.0)%

1.0%
3.3%
3.1%
5.2%

61.6%
13.4%
(5.2)%
6.4%
(4.7)% (39.4)%
(3.8)%
(9.1)%

0.4%
(0.4)%

36.8%

1.6%

U.S. Federal income tax provision (benefit) rate .
State and local taxes, net of Federal benefit . . . . .
Non-U.S. taxes—foreign permanent items and

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in tax contingency reserves . . . . . . . . . . . . . .
Impact of federal rate change on deferred tax

balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax Reform-Repatriation of Foreign Earnings

and GILTI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . .
Other non-deductible/non-taxable items, net . . . . .
Non-deductible officer’s compensation . . . . . . . . . . .
Research and U.S. foreign tax credits . . . . . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effective tax provision (benefit) rate . . . . . . . .

21.0%
6.0%

3.3%
0.1%

—%

—%
(1.5)%
1.4%
4.4%
1.4%
—%
(0.7)%

35.4%

108

78253

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as
follows:

Deferred tax assets:

Bad debt reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation (equity compensation and

defined benefit plans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carryback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves and accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:

Goodwill and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2020
2019

$

3,980
9,371

$ 1,980
8,361

18,904
5,499
1,918
3,981
43,045
9,618
7,031
2,205
—
6,094

16,544
5,186
1,873
2,896
—
11,077
9,373
2,000
5,250
3,738

111,646
(9,824)

68,278
(10,823)

101,822

57,455

(44,051)
(48,172)
(41,747)
(634)
(134,604)

(42,477)
(43,996)
—
(1,096)
(87,569)

Net deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (32,782) $(30,114)

During the year ended September 30, 2020, the Company adopted ASU 2016-02 relating to Leases
(Topic 842). Deferred tax assets and liabilities were recorded relating to the lease liabilities and the
right of use assets recognized under this new standard. The Company adopted this update under the
modified retrospective approach which required no adjustment to a prior period. At September 30, 2020
the corresponding deferred tax asset and liabilities were $43,045 and $41,747, respectively.

In 2020, the decrease in the valuation allowance of $999 is primarily the result of the expiration of
foreign tax credits, partially offset by the generation and usage or non-usage of foreign tax credit
generated during the year.

The components of the net deferred tax liability, by balance sheet account, were as follows:

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . .

614
$
(34,008)
612

137
$
(31,141)
890

Net deferred liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(32,782) $(30,114)

At September 30,
2020
2019

At both September 30, 2020 and 2019, Griffon has a policy election to indefinitely reinvest the
undistributed earnings of foreign subsidiaries with operations outside the U.S. As of September 30,

109

49926

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

2020, we have approximately $100,102 of unremitted earnings of non-U.S. subsidiaries. The Company
generates substantial cash flow in the U.S. and does not have a current need for the cash to be returned
to the U.S. from the foreign entities. In the event these earnings are later remitted to the U.S., any
estimated withholding tax on remittance of those earnings is expected to be immaterial to the income
tax provision.

At September 30, 2020, Griffon had no loss carryforwards for U.S. tax purposes and $9,671 for non-U.S.
tax purposes. At September 30, 2019, Griffon had loss carryforwards for U.S. and non-U.S tax purposes
of $5,419 and $7,413, respectively. The non-U.S. loss carryforwards are available for carryforward
indefinitely.

At September 30, 2020 and 2019, Griffon had interest expense carryforwards of $0 and $25,000,
respectively. The interest expense carryforward was utilized in September 30, 2020.

At September 30, 2020 and 2019, Griffon had state and local loss carryforwards of $124,191 and
$127,354, respectively, which expire in varying amounts through 2039.

At September 30, 2020 and 2019, Griffon had federal tax credit carryforwards of $5,954 and $8,948,
respectively, which expire in varying amounts through 2035.

At September 30, 2020 and 2019, Griffon had capital loss carryovers for U.S. tax purposes of $10,500
and $9,524, respectively, generated in the September 30, 2019 tax year. The carryover is available for
three-year carryback or five-year carryforward.

We believe it is more likely than not that the benefit from certain federal and state tax attributes will
not be realized. In recognition of this risk, we have provided a valuation allowance as of September 30,
2020 and 2019 of $9,824 and $10,823, respectively, on the deferred tax assets. As it becomes probable
that the benefits of these attributes will be realized, the reversal of valuation allowance will be
recognized as a reduction of income tax expense.

If certain substantial changes in Griffon’s ownership occur, there would be an annual limitation on the
amount of carryforward(s) that can be utilized.

Griffon files U.S. Federal, state and local tax returns, as well as applicable returns in Canada, Australia,
U.K. and other non-U.S. jurisdictions. Griffon’s U.S. Federal income tax returns are no longer subject
to income tax examination for years before 2015. Griffon’s major U.S. state and other non-U.S.
jurisdictions are no longer subject to income tax examinations for years before 2013. Various U.S. state
and statutory tax audits are currently underway.

The following is a roll forward of unrecognized tax benefits:

Balance at September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . .
Additions based on tax positions related to prior years. . . . . . . . . . . . . . . . . . . . .
Lapse of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . .
Additions based on tax positions related to prior years. . . . . . . . . . . . . . . . . . . . .
Reductions based on tax positions related to prior years . . . . . . . . . . . . . . . . . . .
Lapse of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,519
117
(559)
(16)
4,061
125
20
(3)
(23)

Balance at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,180

110

38500

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is $909.
Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in
income tax expense. At September 30, 2020 and 2019, the combined amount of accrued interest and
penalties related to tax positions taken or to be taken on Griffon’s tax returns and recorded as part of
the reserves for uncertain tax positions was $77 and $66, respectively. Griffon cannot reasonably
estimate the extent to which existing liabilities for uncertain tax positions may increase or decrease
within the next twelve months as a result of the progression of ongoing tax audits or other events.
Griffon believes that it has adequately provided for all open tax years by tax jurisdiction.

NOTE 14—STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION

During 2020, 2019 and 2018, the Company declared and paid cash dividends totaling $0.30 per share,
$0.29 per share and $0.28 per share, respectively. In addition, on March 7, 2018, the Board of Directors
declared a special cash dividend of $1.00 per share, totaling $38,073 and paid on April 16, 2018 to
shareholders of record as of the close of business on March 29, 2018. 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. Dividends paid on shares in the ESOP were used to offset ESOP loan payments and
recorded as a reduction of debt service payments and compensation expense. A dividend payable was
established for the holders of restricted shares; such dividends will be released upon vesting of the
underlying restricted shares. At September, 30, 2020, accrued dividends were $3,535.

On November 12, 2020, the Board of Directors declared a cash dividend of $0.08 per share, payable on
December 17, 2020 to shareholders of record as of the close of business on November 25, 2020.

On August 18, 2020, the Company sold 8,000,000 shares of our common stock at a price of $21.50 per
share through a public equity offering, for a total net proceeds of $163,830, net of underwriting
discounts, commissions and offering expenses. In addition, on August 21, 2020, pursuant to the exercise
by the underwriters of their overallotment option, the underwriters purchased an additional 700,000
shares of common stock from the Company at a price of $21.50, resulting in additional net proceeds to
the Company of $14,335. In total, the Company sold 8,700,000 shares of common stock at a price of
$21.50 for a total net proceeds of $178,165. The Company used a portion of the net proceeds to
temporarily repay outstanding borrowings under its Credit Agreement. The Company intends to use the
remainder of the proceeds for working capital and general corporate purposes, including to expand its
current business through acquisitions of, or investments in, other businesses or products.

On January 29, 2016, shareholders approved the Griffon Corporation 2016 Equity Incentive Plan
(“Incentive Plan”) under which awards of performance shares, performance units, stock options, stock
appreciation rights, restricted shares, restricted stock units, deferred shares and other stock-based
awards may be granted. On January 31, 2018, shareholders approved Amendment No. 1 to the
Incentive Plan pursuant to which, among other things, 1,000,000 shares were added to the Incentive
Plan; and on January 30, 2020, shareholders approved Amendment No. 2 to the Incentive Plan,
pursuant to which 1,700,000 shares were added to the Incentive Plan. Options granted under the
Incentive Plan may be either “incentive stock options” or nonqualified stock options, which generally
expire ten years after the date of grant and are granted at an exercise price of not less than 100% of the
fair market value at the date of grant. As of September 30, 2020, there are no stock options outstanding.
The maximum number of shares of common stock available for award under the Incentive Plan is
5,050,000 (600,000 of which may be issued as incentive stock options), plus (i) any shares reserved for
issuance under the 2011 Equity Incentive Plan as of the effective date of the Incentive Plan, and (ii) any
shares of underlying awards outstanding on such effective date under the 2011 Incentive Plan that are
canceled or forfeited. As of September 30, 2020, 1,167,172 shares were available for grant.

111

21437

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Compensation expense for restricted stock and restricted stock units (“RSUs”) is recognized ratably
over the required service period based on the fair value of the grant, calculated as the number of shares
(or RSUs) granted multiplied by the stock price on date of grant, and for performance shares (or
performance RSUs), the likelihood of achieving the performance criteria. Compensation expense for
restricted stock granted to two senior executives is calculated as the maximum number of shares
granted, upon achieving certain performance criteria, multiplied by the stock price as valued by a
Monte Carlo Simulation Model. Compensation cost related to stock-based awards with graded vesting,
generally over a period of three to four years, is recognized using the straight-line attribution method
and recorded within Selling, general and administrative expenses.

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

For the Years Ended September 30,
2019

2020

2018

Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock based compensation. . . . . . . . . . . . . . . . . . . . .

$14,702
2,878
$17,580

$13,285
2,629
$15,914

$10,078
9,532
$19,610

In 2018, the ESOP compensation expense includes dividends paid on allocated shares in connection
with the special cash dividend as mentioned above, of $1.00 per share paid on April 16, 2018 to
shareholders of record as of the close of business on March 29, 2018.

A summary of restricted stock activity, inclusive of restricted stock units, for 2020 is as follows:

Unvested at September 30, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at September 30, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Grant-Date
Fair Value

$12.96
17.10
21.51
15.35
14.30

Shares

3,713,573
1,061,624
(831,748)
(257,859)
3,685,590

The fair value of restricted stock which vested during 2020, 2019, and 2018 was $17,889, $4,748 and
$11,216, respectively.

Unrecognized compensation expense related to non-vested shares of restricted stock was $22,340 at
September 30, 2020 and will be recognized over a weighted average vesting period of 2.3 years.

At September 30, 2020, a total of approximately 4,852,762 shares of Griffon’s authorized Common
Stock were reserved for issuance in connection with stock compensation plans.

During 2020, Griffon granted 1,061,624 shares of restricted stock and restricted stock units. This
included 348,280 shares of restricted stock and restricted stock units, subject to certain performance
conditions, with vesting periods of approximately three years, with a total fair value of $7,446, or a
weighted average fair value of $21.38 per share. This also included 53,344 of restricted shares granted to
non-employee directors of Griffon with a vesting period of three years and a fair value of $1,170, or a
weighted average fair value of $21.93 per share. Furthermore, this included 660,000 shares of restricted
stock granted to two senior executives with a vesting period of four years and a two year post-vesting
holding period, subject to the achievement of certain absolute and relative performance conditions
relating to the price of Griffon’s common stock. So long as the minimum performance condition is

112

65241

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

attained, the amount of shares that can vest will range from 480,000 to 660,000. The Monte Carlo
Simulation model was chosen to value the two senior executive awards; The total fair value of these
restricted shares using the Monte Carlo Simulation model is approximately $9,534, or a weighted
average fair value of $14.45.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase
of up to $50,000 of Griffon’s outstanding common stock. Under these share repurchase programs, the
Company may purchase shares of its common stock, depending upon market conditions, in open market
or privately negotiated transactions,
including pursuant to a 10b5-1 plan. Shares repurchased are
recorded at cost. During 2020, Griffon did not purchase shares of common stock under these repurchase
programs. At September 30, 2020 an aggregate of $57,955 remains under Griffon’s Board authorized
repurchase authorizations.

During the year ended September 30, 2020, 340,775 shares, with a market value of $7,409, or $21.74 per
share, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added
to treasury stock. Furthermore, during 2020, an additional 3,307 shares, with a market value of $70, or
$21.22 per share, were withheld from common stock issued upon the vesting of restricted stock units to
settle employee taxes due upon vesting.

On June 19, 2018, GS Direct, L.L.C., an affiliate of Goldman Sachs & Co. (“GS Direct”) completed an
underwritten secondary offering to sell 5,583,375 shares of Griffon’s common stock, inclusive of the
underwriters’ 30-day option to purchase additional shares. GS Direct’s original 10,000,000 share
investment was in 2008; following the closing of the offering, GS Direct no longer owns any shares of
Griffon.

NOTE 15—COMMITMENTS AND CONTINGENT LIABILITIES

Leases

Griffon rents real property and equipment under operating leases expiring at various dates. Most of the
real property leases have escalation clauses related to increases in real property taxes. Additionally, two
Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala,
Florida. The leases mature in 2021 and 2025, respectively. The Ocala, Florida lease contains two five-
year renewal options. Griffon also has various finance equipment leases. Refer to Note 22—Leases for
further information.

Aggregate future maturities of
September 30, 2020 are as follows (in thousands):

lease payments for operating leases and finance leases as of

2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Imputed Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Leases

Finance
Leases

$ 38,411
33,286
25,599
19,057
16,334
71,903
204,590
(36,688)

$ 4,282
2,695
2,375
2,119
2,074
9,850
23,395
(4,704)

Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$167,902

$18,691

113

30615

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Purchase Commitments

Purchase obligations are generally for the purchase of goods and services in the ordinary course of
business. Griffon uses blanket purchase orders to communicate expected requirements to certain
vendors. Purchase obligations reflect those purchase orders where the commitment is considered to be
firm. Amounts purchased under such commitments were $239,365, $226,026 and $209,924 for the years
ended September 30, 2020, 2019 and 2018, respectively. Purchase obligations that extend beyond 2020
are principally related to long-term contracts received from customers of Telephonics. Aggregate future
minimum purchase obligations at September 30, 2020 are $377,388 in 2021, $9,748 in 2022, $12 in 2023,
$0 in 2024 and $0 in 2025.

Legal and environmental

Peekskill Site. Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once
conducted operations at a location in the Town of Cortlandt, New York, just outside the city of
Peekskill, New York (the “Peekskill Site”) owned by ISC Properties, Inc. (“ISCP”), a wholly-owned
subsidiary of Griffon. ISCP sold the Peekskill Site in November 1982.

Subsequently, ISCP was advised by the Department of Environmental Conservation of New York State
(the “DEC”) that sampling at the Peekskill Site and in a creek near the Peekskill Site indicated
concentrations of solvents and other chemicals common to prior plating operations by a Lightron
subsidiary. In 1996, ISCP entered into a consent order with the DEC (the “Consent Order”), pursuant
to which ISCP was required to perform a remedial investigation and prepare a feasibility study (the
“Feasibility Study”). After completing the initial remedial investigation, ISCP conducted supplemental
remedial investigations over the next several years, including soil vapor investigations, as required by
the Consent Order.

In April 2009, the DEC advised ISCP that both the DEC and the New York State Department of
Health had reviewed and accepted an August 2007 Remedial Investigation Report and an Additional
Data Collection Summary Report dated January 30, 2009. ISCP submitted to the DEC a draft
Feasibility Study which was accepted and approved by the DEC in February 2011. ISCP satisfied its
obligations under the Consent Order when DEC approved the Remedial Investigation and Feasibility
Study for the Peekskill Site. In June 2011 the DEC issued a Record of Decision that set forth a
Remedial Action Plan for the Peekskill Site that identified the specific remedies selected and responded
to public comments. The cost of the remedy proposed by DEC in its Remedial Action Plan was
approximately $10,000.

Following issuance of the Remedial Action Plan, the DEC implemented a portion of its plan, and also
performed additional investigation for the presence of metals in soils and sediments downstream from
the Peekskill Site. During this investigation metals were found to be present in sediments further
downstream from the Peekskill site than previously detected.

In August 2018, the DEC sent a letter to the United States Environmental Protection Agency (the
“EPA”), in which the DEC requested that the Peekskill Site be nominated by the EPA for inclusion on
the National Priorities List under CERCLA (the “NPL”). Based on the DEC’s request and an analysis
by a consultant retained by the EPA, on May 15, 2019 the EPA added the Peekskill Site to the NPL
and has since announced that it is performing a Remedial Investigation/Feasibility Study. On August 25,
2020, the EPA send a letter to several parties, including Lightron and ISCP, requesting that each such
party inform the EPA as to whether it would be willing to enter into discussions regarding
implementation of a Remedial Investigation/Feasibility Study (“RI/FS”). The EPA also sent a request
for information to each party under Section 104(e) of CERCLA. Lightron and ISCP have informed the
EPA that they are willing to participate in discussions regarding implementation of the RI/FS. Lightron

114

20365

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

and ISCP have also submitted responses to certain items contained in the Section 104(e) information
request, with additional responses to follow. The current owner of the property, which acquired the
Peekskill Site from ISCP in 1982 and has no relationship with Lightron or ISCP, has also informed the
EPA that it is willing to discuss implementation of the RI/FS, and has also received, and submitted
certain information in response to, a Section 104(e) information request. The EPA may decide to
implement the RI/FS, on its own or through the use of consultants, may reach agreement with one or
more parties to perform the RI/FS, or may offer to negotiate with one or more parties to accept a
settlement addressing the potential liability of such parties for investigation and/or remediation at the
Peekskill Site. Should the EPA implement the RI/FS, or perform further studies and/or subsequently
remediate the site, without first reaching agreement with one or more relevant parties, the EPA would
likely seek reimbursement for the costs incurred from such parties.

Lightron has not engaged in any operations in over three decades. ISCP functioned solely as a real
estate holding company, and has not held any real property in over three decades. Griffon does not
acknowledge any responsibility to perform any investigation or remediation at the Peekskill Site.

Union Fork and Hoe, Frankfort, NY site. The former Union Fork and Hoe property in Frankfort NY
was acquired by AMES in 2006 as part of a larger acquisition, and has historic site contamination
involving chlorinated solvents, petroleum hydrocarbons and metals. AMES entered into an Order on
Consent with the New York State Department of Environmental Conservation (“DEC”). While the
Order is without admission or finding of liability or acknowledgment that there has been a release of
hazardous substances at the site, the Order required Ames to perform a remedial investigation of
certain portions of the property and to recommend a remediation option. In 2018, Ames submitted a
Feasibility Study recommending excavation of shallow soils for lead, arsenic and hydrocarbons in
addition to deeper excavation for lead. DEC approved the selection of this remedy in 2019 by issuing a
Record of Decision (“ROD”). Beginning in late 2019 and through June 2020, Ames completed the
remediation required by the ROD and filed a Construction Completion Report, a Site Management
Plan and an environmental easement with the DEC. While Ames was implementing the remediation
required by the ROD, the DEC requested additional investigation of a small area on the site and of an
area adjacent to the site perimeter. Ames investigated the on-site area and has submitted a workplan to
remediate the limited contamination found as a result of this investigation. Ames has also submitted a
workplan to investigate the areas adjacent to the site perimeter. AMES has a number of defenses to
liability in this matter, including its rights under a previous Consent Judgment entered into between the
DEC and a predecessor of AMES relating to the site. Ames’ insurer has accepted Ames’ claim for a
substantial portion of the costs incurred and to be incurred for both the on-site and off-site activities.

U.S. Government investigations and claims

Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit
and review by various agencies and instrumentalities of the United States government, including among
others, the Defense Contract Audit Agency, the Defense Criminal Investigative Service, and the
Department of Justice which has responsibility for asserting claims on behalf of the U.S. Government.

In general, departments and agencies of the U.S. Government have the authority to investigate various
transactions and operations of Griffon, and the results of such investigations may lead to administrative,
civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or
compensatory or treble damages. U.S. Government regulations provide that certain findings against a
contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of
export privileges for a company or an operating division or subdivision. Suspension or debarment could
have a material adverse effect on Telephonics because of its reliance on government contracts.

115

98506

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

General legal

Griffon is subject to various laws and regulations relating to the protection of the environment and is a
party to legal proceedings arising in the ordinary course of business. Management believes, based on
facts presently known to it, that the resolution of the matters above and such other matters will not
have a material adverse effect on Griffon’s consolidated financial position, results of operations or cash
flows.

NOTE 16—EARNINGS PER SHARE

Basic EPS (and diluted EPS in periods when a loss exists) was calculated by dividing income available
to common shareholders by the weighted average number of shares of common stock outstanding
during the period. Diluted EPS was calculated by dividing income available to common shareholders by
the weighted average number of shares of common stock outstanding plus additional common shares
that could be issued in connection with stock based compensation. In August 2020, Griffon Corporation
completed the Public Offering of 8,700,000 shares of our common stock at a price of $21.50 per share.
Total proceeds, net of fees, were $178,165.

The following table is a reconciliation of the share amounts (in thousands) used in computing basic and
diluted EPS for 2020, 2019 and 2018:

Common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated ESOP shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of weighted average shares . . . . . . . . . . . . . . . . . . . . . . .

Weighted average shares outstanding—basic. . . . . . . . . . . . . .
Incremental shares from stock based compensation. . . . . . .

2020

2019

2018

56,130
(2,058)
(3,556)
(7,928)

42,588
2,427

46,806
(2,259)
(3,420)
(193)

40,934
1,954

45,675
(2,477)
(2,522)
329

41,005
1,417

Weighted average shares outstanding—diluted. . . . . . . . . . . .

45,015

42,888

42,422

Anti-dilutive shares were not material. Shares of the ESOP that have been allocated to employee
accounts are treated as outstanding in determining earnings per share.

NOTE 17—RELATED PARTIES

On September 5, 2017, Griffon entered into an engagement letter with Goldman Sachs & Co.
(“Goldman Sachs”) pursuant to which Goldman Sachs agreed to act as Griffon’s financial advisor in
connection with the exploration of strategic alternatives for Plastics. On November 15, 2017, Griffon
signed an agreement to sell Plastics for approximately $465,000 to Berry. Under the terms of the
engagement letter, upon the closing of the transaction a customary advisory fee was paid by Griffon to
Goldman Sachs.

Goldman Sachs acted as a joint lead manager and as an initial purchaser in connection with Griffon’s
add-on offering of $275,000 aggregate principal amount of 5.25% senior notes due 2022 that closed on
October 2, 2017, and received a customary fee upon closing of the offering.

On June 19, 2018, GS Direct completed an underwritten secondary offering to sell 5,583,375 shares of
Griffon’s common stock, inclusive of the underwriters’ 30-day option to purchase additional shares. GS
Direct’s initial 10,000,000 share investment was in 2008; following the closing of the offering, GS Direct
no longer owns any shares of Griffon.

116

60521

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 18—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly results of continuing operations for 2020 and 2019 were as follows:

Quarter ended

Revenue

Gross Profit

Income from
continuing
operations

Per Share
—Basic

Per Share
—Diluted

2020
December 31, 2019. . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . .

2019
December 31, 2018. . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . .

$ 548,438
566,350
632,061
660,673

$149,921
152,032
165,003
174,470

$2,407,522

$641,426

$ 510,522
549,633
574,970
574,164

$139,780
133,537
151,699
158,458

$2,209,289

$583,474

$10,612
895
21,831
20,091

$53,429

$ 8,753
6,490
14,128
16,251

$45,622

$0.26
0.02
0.52
0.44

$1.25

$0.21
0.16
0.34
0.40

$1.11

$0.24
0.02
0.50
0.41

$1.19

$0.21
0.15
0.33
0.37

$1.06

Notes to Quarterly Financial Information (unaudited):

• Earnings (loss) per share are computed independently for each quarter and year presented; as

such the sum of the quarters may not be equal to the full year amounts.

• 2020 Net income, and the related per share earnings, included, net of tax, restructuring charges
of $4,148, $3,005, $1,224 and $3,488 for the first, second, third and fourth quarters, respectively,
acquisition costs of $2,321 for the second quarter, loss from debt extinguishment $5,245 and $969
for the second and third quarters, respectively, benefit
from the reversal of contingent
consideration related to the Kelkay acquisition of $1,403 for the fourth quarter. The fourth
quarter also includes a $15 and $24 tax benefit for acquisition costs and loss from debt
extinguishment, respectively.

• 2019 Net income, and the related per share earnings, included, net of tax, a benefit from the
reversal of contingent consideration related to the Kelkay acquisition of $1,333 for the fourth
quarter.

NOTE 19—REPORTABLE SEGMENTS

Griffon conducts its operations through three reportable segments from continuing operations, as
follows:

• Consumer and Professional Products (“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.

• 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. Residential and commercial sectional garage doors are sold through professional

117

75352

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

dealers and leading home center retail chains throughout North America under the brands
Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial,
industrial, institutional, and retail use are sold under the CornellCookson brand.

• Defense Electronics 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.

Information on Griffon’s reportable segments from continuing operations is as follows:

For the Years Ended September 30,
2020
2018
2019

Revenue

Consumer and Professional Products . . . . .
Home and Building Products . . . . . . . . . . . .
Defense Electronics . . . . . . . . . . . . . . . . . . . . . .
Total consolidated net sales . . . . . . . . . . . . . . . . . .

$1,139,233
927,313
340,976
$2,407,522

$1,000,608
873,640
335,041
$2,209,289

$ 953,612
697,969
326,337
$1,977,918

Griffon evaluates performance and allocates resources based on each segment’s operating results from
continuing operations 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
(“Segment Adjusted EBITDA”).

The following table provides a reconciliation of Segment Adjusted EBITDA to Income before taxes
and discontinued operations:

For the Years Ended September 30,
2019

2020

2018

Segment Adjusted EBITDA:

Consumer and Professional Products . . . . . . . . . .
Home and Building Products. . . . . . . . . . . . . . . . . .
Defense Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . .

$104,053
153,631
25,228

$ 90,677
120,161
35,104

$ 77,061
100,339
36,063

Segment Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . .
Unallocated amounts, excluding depreciation . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment . . . . . . . . . . . . . . . . . . . .
Acquisition contingent consideration. . . . . . . . . . . . . . .
Acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special dividend charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of life insurance benefit . . . . . . . . . . . . . . . . . . . . . .
Secondary equity offering costs . . . . . . . . . . . . . . . . . . . .

282,912
(47,013)
235,899
(65,791)
(62,409)
(15,790)
(7,925)
1,733
(2,960)
—
—
—

245,942
(46,302)
199,640
(67,260)
(61,848)
—
—
1,646
—
—
—
—

213,463
(45,343)
168,120
(63,871)
(55,803)
—
—
—
(7,597)
(3,220)
(2,614)
(1,205)

Income before taxes from continuing operations. . .

$ 82,757

$ 72,178

$ 33,810

118

13461

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

For the Years Ended September 30,
2019

2020

2018

Depreciation and Amortization
Segment:

Consumer and Professional Products . . . . . . . . . . .
Home and Building Products . . . . . . . . . . . . . . . . . . .
Defense Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment depreciation and amortization . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated depreciation and amortization . . .

$32,788
18,361
10,645

61,794
615
$62,409

$32,289
18,334
10,667

61,290
558
$61,848

$30,816
13,717
10,801

55,334
469
$55,803

Capital Expenditures
Segment:

Consumer and Professional Products . . . . . . . . . . .
Home and Building Products . . . . . . . . . . . . . . . . . . .
Defense Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23,321
17,499
7,830
48,650
348

$17,828
16,498
10,492
44,818
543

$23,040
13,547
10,941
47,528
2,610

Total consolidated capital expenditures . . . . . . . . . . . . .

$48,998

$45,361

$50,138

At September 30,
2020

At September 30,
2019

Assets
Segment assets:

Consumer and Professional Products . . . . . . . . . . .
Home and Building Products . . . . . . . . . . . . . . . . . . .
Defense Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total continuing assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . .

$1,262,705
606,785
329,128

2,198,618
248,902
2,447,520
8,497

$1,070,510
571,216
347,575

1,989,301
82,429
2,071,730
3,209

Consolidated total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,456,017

$2,074,939

Disaggregation of Revenue

Revenue from contracts with customers is disaggregated by end markets, segments and geographic
location, as it more accurately depicts the nature and amount of the Company’s revenue.

119

72828

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

For the Year Ended
September 30, 2020

For the Year Ended
September 30, 2019

Residential repair and remodel . . . . . . . . . . . . . . .
Retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential new construction . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International excluding North America . . . . . . .
Total Consumer and Professional Products . . .
Residential repair and remodel . . . . . . . . . . . . . . .
Commercial construction. . . . . . . . . . . . . . . . . . . . . .
Residential new construction . . . . . . . . . . . . . . . . .
Total Home and Building Products . . . . . . . . . . .
U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Defense Electronics . . . . . . . . . . . . . . . . . . . .
Total Consolidated Revenue . . . . . . . . . . . . . . . . . .

$ 173,859
575,947
59,907
40,285
289,235
1,139,233

467,112
354,916
105,285

927,313

222,537
100,623
17,816

340,976

$ 140,369
528,279
58,709
45,129
228,122
1,000,608

439,287
335,339
99,014

873,640

211,405
105,705
17,931

335,041

$2,407,522

$2,209,289

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

For the Year Ended September 30, 2020

Consumer and
Professional
Products

Home and
Building
Products

Defense
Electronics

Total

Revenue by Geographic Area—Destination

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 769,100
85,339
74,072
203,012
7,710

$877,115
130
38,662
—
11,406

$234,382
38,353
12,043
1,882
54,316

$1,880,597
123,822
124,777
204,894
73,432

Consolidated revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,139,233

$927,313

$340,976

$2,407,522

For the Year Ended September 30, 2019

Consumer and
Professional
Products

Home and
Building
Products

Defense
Electronics

Total

Revenue by Geographic Area—Destination

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 690,772
63,284
72,327
165,291
8,934
$1,000,608

$820,396
109
39,472
16
13,647
$873,640

$226,095
36,915
10,568
3,712
57,751
$335,041

$1,737,263
100,308
122,367
169,019
80,332
$2,209,289

As a percentage of segment revenue, CPP sales to The Home Depot approximated 27%, 28% and 29%
in 2020, 2019 and 2018, respectively; HBP sales to The Home Depot approximated 12%, 13% and 16%
in 2020, 2019 and 2018, respectively; and DE aggregate sales to the United States Government and its
agencies approximated 69%, 63% and 62% in 2020, 2019 and 2018, respectively.

120

15104

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

As a percentage of Griffon’s consolidated revenue from continuing operations, CPP sales to The Home
Depot approximated 13%, in both 2020 and 2019, and 14% in 2018; HBP sales to The Home Depot
approximated 5% in both 2020 and 2019, and 6% in 2018; and DE aggregate sales to the United States
Government and its agencies approximated 9% in 2020, and 10% in both 2019 and 2018.

NOTE 20—OTHER INCOME (EXPENSE)

For the year ended September 30, 2020, 2019 and 2018, Other income (expense) from continuing
operations of $1,445, $3,127 and $4,880, respectively, includes $915, $438 and $200, respectively, of net
currency exchange transaction losses from receivables and payables held in non-functional currencies,
$184, $(40) and $1,184, respectively, of net gains or (losses) on investments, and $1,559 and $3,148 and
$3,649, respectively, of net periodic benefit plan income. Additionally, in 2020, Other income (expense)
also includes a one-time technology recognition award for $700.

NOTE 21—OTHER COMPREHENSIVE INCOME (LOSS)

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

2020

Years Ended September 30,
2019

2018

Pre-tax

Tax

Net of
tax

Pre-tax

Tax

Net of
tax

Pre-tax

Tax

Net of
tax

Foreign currency
translation
adjustments. . . . . . $ 5,601 $ — $ 5,601 $ (8,460) $ — $ (8,460) $ 9,403 $ — $ 9,403

Pension and other
defined benefit
plans . . . . . . . . . . . .
Cash flow hedge . . .
Total other

(14,955) 3,171
(3)

10

(11,784)
7

(30,581) 7,526
124

(413)

(23,055) 24,081
900

(289)

(7,700) 16,381
585

(315)

comprehensive
income (loss) . . . . $ (9,344) $3,168 $ (6,176) $(39,454) $7,650 $(31,804) $34,384 $(8,015) $26,369

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

Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other defined benefit plans . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(46,598)
189

$(25,683) $(31,284)
(34,814)
182
$(72,092) $(65,916)

At September 30,
2020
2019

Total comprehensive income (loss) were as follows:

For the Years Ended September 30,
2019

2020

2018

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of taxes. . . .
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . .

$53,429
(6,176)
$47,253

$ 37,287
(31,804)
$ 5,483

$125,678
26,369
$152,047

121

73988

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

For the Years Ended September 30,
2019

2020

2018

Gain (Loss)
Pension amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(4,182)
(2,163)

(6,345)
1,332

$ (902)
1,361

$(1,397)
657

459
(96)

(740)
155

Net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(5,013)

$ 363

$ (585)

NOTE 22—LEASES

In February 2016, the FASB issued an Accounting Standards Update (ASU 2016-02) related to the
accounting and financial statement presentation for leases. This new guidance requires a lessee to
recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet, with an election to
exempt leases with a term of twelve months or less. The Company adopted the requirements of the new
standard as of October 1, 2019 and applied the modified retrospective approach, whereby the
cumulative effect of adoption is recognized as of the date of adoption and comparative prior periods are
not retrospectively adjusted. As a result, upon adoption, we have recognized ROU assets of $163,552
and lease liabilities of $163,676 associated with our operating leases. The standard had no material
impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements
of Cash Flows. The Company has elected the package of practical expedients permitted under the
transition guidance within the new standard, which among other things, allows us to carry forward the
historical lease classification. We also elected a practical expedient to determine the reasonably certain
lease term.

The Company determines if an arrangement is a lease at inception. The ROU assets and short and
long-term liabilities associated with our operating leases are shown as separate line items on our
Condensed Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment,
net, other accrued liabilities, and other non-current liabilities. The Company’s finance leases are
immaterial. ROU assets, along with any other related long-lived assets, are periodically evaluated for
impairment. In connection with the Company’s restructuring activities, during the year ended
September 30, 2020, a $1,968 impairment charge was recorded related to a facility’s operating lease
as well as $671 and of leasehold improvements made to the leased facility that have no recoverable
value. See Note 9, Restructuring Charges.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are
recognized at the lease commencement date based on the present value of lease payments over the
lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing
rate based on the information available at the commencement date in determining the present value of
lease payments. We use the implicit rate when readily determinable. For leases existing as of October 1,
2019, we have elected to use the remaining lease term as of the adoption date in determining the
incremental borrowing rate. Our determination of the lease term may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option.

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis
over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on
a straight-line basis over the remaining lease term, along with recognition of interest expense associated

122

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GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

with accretion of the lease liability. For leases with a lease term of 12 months or less (a “Short-term”
lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not
recognized on the Condensed Consolidated Balance Sheets. Variable lease cost for both operating and
finance leases, if any, is recognized as incurred. The Company has lease agreements that contain both
lease and non-lease components. For real estate leases, we account for lease components together with
non-lease components (e.g., common-area maintenance). Components of operating lease costs are as
follows:

Fixed(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable(a), (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,554
7,822
5,606
$51,982

For the Year Ended
September 30, 2020

(a) Primarily related to common-area maintenance and property taxes.

(b) Not recorded on the balance sheet.

Fixed rent expense for all operating leases totaled approximately $37,068 and $35,726 in 2019 and 2018,
respectively.

Supplemental cash flow information were as follows:

Cash paid for amounts included in the measurement of lease

liabilities:

Operating cash flows from operating leases. . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$48,141
4,122
$52,263

For the Year Ended
September 30, 2020

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

At September 30,
2020

Operating Leases:
Right of use assets:

Operating right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$161,627

Lease Liabilities:
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . .
Long-term operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31,848
136,054

$167,902

Finance Leases:
Right of use assets:

Property, plant and equipment, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 18,774

Lease Liabilities:

Notes payable and current portion of long-term debt . . . . . . . . . .
Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total financing lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,352
15,339

$ 18,691

123

44957

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

(1) Finance lease assets are recorded net of accumulated depreciation of $2,383.

Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and
Ocala, Florida. The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of
approximately 5.0% and 5.6%, respectively. The Troy, Ohio lease is secured by a mortgage on the real
estate and is guaranteed by Griffon. The Ocala, Florida lease contains two five-year renewal options.
As of September 30, 2020 and 2019, $17,188 and $4,333, respectively, was outstanding, net of issuance
costs. The remaining lease liability balance relates to finance equipment leases.

Finance leases included in the consolidated balance sheet at September 30, 2019, under Property, plant
and equipment, net totaled $6,546. In 2019 and 2018, Depreciation expense was $3,967, and $3,514,
respectively.

The aggregate future maturities of lease payments for operating leases and finance leases as of
September 30, 2020 are as follows (in thousands):

2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Imputed Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Leases

Finance
Leases

$ 38,411
33,286
25,599
19,057
16,334
71,903
204,590
(36,688)

$ 4,282
2,695
2,375
2,119
2,074
9,850
23,395
(4,704)

Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$167,902

$18,691

Average lease terms and discount rates were as follows:

Weighted-average remaining lease term (years)
Operating Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate
Operating Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 30,
2020

8.3
8.5

4.38%
5.51%

124

35573

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 23—CONSOLIDATING GUARANTOR AND NON-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 condensed consolidating financial
information as of September 30, 2020 and 2019, and for the years ended September 30, 2020, 2019
and 2018. The financial information may not necessarily be indicative of results of operations or
financial position had the guarantor companies or non-guarantor companies operated as independent
entities. The guarantor companies and the non-guarantor companies include the consolidated financial
results of their wholly owned subsidiaries accounted for under the equity method.

The indenture relating to the Senior Notes (the “Indenture”) contain terms providing that, under
certain limited circumstances, a guarantor will be released from its obligations to guarantee the Senior
Notes. These circumstances include (i) a sale of at least a majority of the stock, or all or substantially all
the assets, of the subsidiary guarantor as permitted by the Indenture; (ii) a public equity offering of a
subsidiary guarantor that qualifies as a “Minority Business” as defined in the Indenture (generally, a
business the EBITDA of which constitutes less than 50% of the segment adjusted EBITDA of the
Company for the most recently ended four fiscal quarters), and that meets certain other specified
conditions as set forth in the Indenture; (iii) the designation of a guarantor as an “unrestricted
subsidiary” as defined in the Indenture, in compliance with the terms of the Indenture; (iv) Griffon
exercising its right to defease the Senior Notes, or to otherwise discharge its obligations under the
Indenture, in each case in accordance with the terms of the Indenture; and (v) upon obtaining the
requisite consent of the holders of the Senior Notes.

125

86081

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2020

CURRENT ASSETS

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,353 $
Accounts receivable, net of allowances . . . . . . . . .
Contract assets, net of progress payments. . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . .

— 293,943
—
80,572
— 347,473
25,974
—

14,650
—

35,685 $

57,051 $
54,181
3,854
66,352
6,273
2,091

— $ 218,089
348,124
—
84,426
—
413,825
—
46,897
—
2,091
—

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . .
PROPERTY, PLANT AND EQUIPMENT, net . . . .
OPERATING LEASE RIGHT-OF-USE ASSETS . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY RECEIVABLE . . . . . . . . . . . . . . . .
EQUITY INVESTMENTS IN SUBSIDIARIES . . . .
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED OPERATIONS . . . .

140,003
1,182
9,209

783,647
296,082
129,813
— 377,060
217,317
93
704,415
568,124
784,644
1,724,821
25,953
12,585
—
—

189,802
46,700
22,605
65,583
137,618
257,013
3,176,855
(5,641)
6,406

— 1,113,452
343,964
—
161,627
—
442,643
—
355,028
—
—
(1,529,552)
—
(5,686,320)
32,897
—
6,406
—

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,456,017 $3,318,931 $3,896,941 $(7,215,872) $2,456,017

CURRENT LIABILITIES

Notes payable and current portion of long-term

debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

— $

2,855 $

Accounts payable and accrued liabilities . . . . . . . .
Current portion of operating lease liabilities . . . .
Liabilities of discontinued operations . . . . . . . . . . .

Total Current Liabilities. . . . . . . . . . . . . . . . . . . .
LONG-TERM DEBT, net . . . . . . . . . . . . . . . . . . . . . . . . . .
LONG-TERM OPERATING LEASE

LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY PAYABLES . . . . . . . . . . . . . . . . . . .
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES OF DISCONTINUED

OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,281
1,849
—

39,130
995,636

8,415
683,076
29,609

276,580
24,436
—

303,871
15,992

110,061
397,846
85,731

7,067 $
89,818
5,563
3,797

106,245
25,414

— $
—
—
—

9,922
403,679
31,848
3,797

—
449,246
— 1,037,042

17,578
459,599
11,170

—
(1,540,521)
—

136,054
—
126,510

—

—

7,014

—

7,014

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . .

1,755,866
700,151

913,501
2,405,430

627,020
3,269,921

(1,540,521)
(5,675,351)

1,755,866
700,151

Total Liabilities and Shareholders’ Equity . . . . . . $2,456,017 $3,318,931 $3,896,941 $(7,215,872) $2,456,017

126

61347

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2019

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

CURRENT ASSETS

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances . . . . . . . .
Contract assets, net of progress payments . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets. . . . . . . . . . . . . . .
Assets of discontinued operations. . . . . . . . . . . . . .

1,649

25,217
— 225,870
— 104,109
— 372,581
25,610
—

8,238
—

45,511
38,580
1,002
69,540
6,951
321

—
—
—
—
—
—

Total Current Assets . . . . . . . . . . . . . . . . . . . . . .
PROPERTY, PLANT AND EQUIPMENT, net . . .
GOODWILL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net. . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY RECEIVABLE . . . . . . . . . . . . . . .
EQUITY INVESTMENTS IN SUBSIDIARIES . . .
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED OPERATIONS. . .

9,887
1,184

753,387
289,282
— 375,734
224,275
93
881,110
5,834
581,438
1,628,031
10,010
8,182
—
—

161,905
46,860
61,333
132,271
75,684
3,233,038
(2,352)
2,888

—
—
—
—
(962,628)
(5,442,507)
—
—

72,377
264,450
105,111
442,121
40,799
321

925,179
337,326
437,067
356,639
—
—
15,840
2,888

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,653,211

3,115,236

3,711,627

(6,405,135)

2,074,939

CURRENT LIABILITIES

Notes payable and current portion of long-

term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . .
Liabilities of discontinued operations . . . . . . . . . .

Total Current Liabilities . . . . . . . . . . . . . . . . . .
LONG-TERM DEBT, net . . . . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY PAYABLES . . . . . . . . . . . . . . . . . .
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES OF DISCONTINUED

OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
41,796
—

41,796
1,040,449
71,634
21,569

3,075
265,055
—

268,130
3,119
466,792
73,411

7,450
68,390
4,333

80,173
50,181
444,557
15,017

—
—
—

10,525
375,241
4,333

390,099
—
— 1,093,749
—
109,997

(982,983)
—

—

—

3,331

—

3,331

Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . .

1,175,448
477,763

811,452
2,303,784

593,259
3,118,368

(982,983)
(5,422,152)

1,597,176
477,763

Total Liabilities and Shareholders’ Equity . . . . .

1,653,211

3,115,236

3,711,627

(6,405,135)

2,074,939

127

35737

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
For the Year Ended September 30, 2020

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods and services . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . .

— $1,938,972 $507,621 $ (39,071) $2,407,522
1,766,096
— 1,450,924
641,426
— 488,048
486,398
357,901

(40,524)
1,453
(370)

355,696
151,925
103,991

24,876

Income (loss) from operations . . . . . . . . . . . .

(24,876)

130,147

47,934

1,823

155,028

Other income (expense)

Interest income (expense), net . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . .
Income (loss) before taxes. . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . .

Income (loss) before equity in net income of

(27,129)
(7,925)
(523)

(35,577)
(60,453)
(11,907)

(38,301)
—
(7,946)

(46,247)
83,900
25,445

(361)
—
11,762

11,401
59,335
15,788

—
—
(1,848)

(1,848)
(25)
2

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income (loss) of subsidiaries . . . .
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,429 $ 101,960 $102,002 $(203,962) $

(27)
(203,935)

(48,546)
101,975

58,455
43,505

43,547
58,455

(65,791)
(7,925)
1,445

(72,271)
82,757
29,328

53,429
—
53,429

Comprehensive income (loss). . . . . . . . . . . . . . . . . . $ 47,253 $ 101,960 $102,002 $(203,962) $

47,253

128

32668

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
For the Year Ended September 30, 2019

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods and services. . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . .

— $1,808,824 $437,542 $ (37,077) $2,209,289
1,625,815
— 1,353,663
583,474
— 455,161
447,163
327,306

(38,555)
1,478
(370)

310,707
126,835
97,661

22,566

Income (loss) from operations. . . . . . . . . . . . .

(22,566)

127,855

29,174

1,848

136,311

Other income (expense)

Interest income (expense), net . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(27,883)
(778)

(39,288)
(17,699)

Total other income (expense). . . . . . . . .

(28,661)

(56,987)

Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . .

(51,227)
(7,425)

Income (loss) before equity in net income of

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income (loss) of subsidiaries. . . . .
Income (loss) from continuing operations . . . . . .

Income (loss) from operations of

discontinued businesses . . . . . . . . . . . . . . . . .
Provision (benefit) from income taxes. . . . .
Income (loss) from discontinued operations. . . .

(43,802)
81,089
37,287

—
—
—

(89)
23,452

23,363

52,537
13,447

—
(1,848)

(1,848)

—
—

39,090
50,334
89,424

—
(175,726)
(175,726)

70,868
20,534

50,334
44,303
94,637

— (11,050)
— (2,715)
— (8,335)

—
—
—

(67,260)
3,127

(64,133)

72,178
26,556

45,622
—
45,622

(11,050)
(2,715)
(8,335)

Net Income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,287 $

94,637 $ 81,089 $(175,726) $

37,287

Comprehensive income (loss) . . . . . . . . . . . . . . . . . . $ 5,483 $

87,851 $ 87,875 $(175,726) $

5,483

129

35612

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
For the Year Ended September 30, 2018

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods and services. . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses .

— $1,638,792 $ 367,149 $ (28,023) $1,977,918
1,466,600
— 1,250,261
511,318
388,531
—
418,517
290,475
37,540

(29,348)
1,325
(370)

245,687
121,462
90,872

Income (loss) from operations. . . . . . . . . . .

(37,540)

98,056

30,590

1,695

92,801

Other income (expense)

Interest income (expense), net . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23,911)
(7,666)

(31,913)
125,531

(8,047)
(111,248)

Total other income (expense). . . . . . .

(31,577)

93,618

(119,295)

—
(1,737)

(1,737)

(63,871)
4,880

(58,991)

Income (loss) before taxes from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . .

Income (loss) before equity in net income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income (loss) of subsidiaries . . .

Income (loss) from continuing operations . . . .
Income from operations of discontinued

businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) from income taxes . . . . . . .

Loss from discontinued operations . . . . . . . . . . .

(69,117)
(17,692)

191,674
9,546

(88,705)
8,743

(42)
(42)

(51,425)
177,103

125,678

182,128
(151,864)

(97,448)
182,128

—
(207,367)

30,264

84,680

(207,367)

—
—

—

119,981
27,558

92,423

—
—

—

—
—

—

33,810
555

33,255
—

33,255

119,981
27,558

92,423

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,678 $ 122,687 $ 84,680 $(207,367) $ 125,678

Comprehensive income (loss) . . . . . . . . . . . . . . . . $152,047 $ 143,936 $ 81,389 $(225,325) $ 152,047

130

13812

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2020

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss). . . . . . . . . . . . . . . . . . . . . . .

$

53,429

$101,960

$102,002

$(203,962) $

53,429

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

Net cash provided by operating

activities . . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . .

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . .
Investment purchases . . . . . . . . . . . . . .

Net cash used in investing

activities . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM FINANCING

ACTIVITIES:

Proceeds from issuance of common
stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares for treasury . . . .
Proceeds from long-term debt. . . . . .
Payments of long-term debt. . . . . . . .
Financing costs. . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in)

financing activities . . . . . . . . . . . . .

CASH FLOWS FROM

DISCONTINUED OPERATIONS:
Net cash used in discontinued

operations . . . . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on

cash and equivalents . . . . . . . . . . . . . . . . .

NET INCREASE (DECREASE) IN

CASH AND EQUIVALENTS. . . . . . .

CASH AND EQUIVALENTS AT

BEGINNING OF PERIOD. . . . . . . . . .

CASH AND EQUIVALENTS AT

23,114

55,353

58,562

—

137,029

(348)

(42,268)

(6,382)

—
—
(130)

— (10,531)
7
—

345
—

(478)

(41,923)

(16,906)

178,165
(7,479)
1,234,723
(1,272,688)
(17,384)
—
(14,529)
260

—
—
—
(3,421)
—
—
—
580

—
—
5,357
(32,806)
—
(1,733)
—
(855)

—

—
—
—

—

(48,998)

(10,531)
352
(130)

(59,307)

178,165
—
(7,479)
—
—
1,240,080
— (1,308,915)
(17,384)
—
—
(1,733)
(14,529)
—
(15)
—

101,068

(2,841)

(30,037)

—

68,190

—

—

—

(2,577)

(121)

2,498

123,704

10,468

11,540

1,649

25,217

45,511

—

—

—

—

(2,577)

2,377

145,712

72,377

END OF PERIOD. . . . . . . . . . . . . . . . . . .

$

125,353

$ 35,685

$ 57,051

$

— $

218,089

131

01024

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2019

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37,287

$ 94,637

$ 81,089

$(175,726) $ 37,287

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies Elimination Consolidation

Net (income) loss from discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

8,335

Net cash provided by (used in)

operating activities . . . . . . . . . . . . . . . . . . .

42,159

41,992

29,807

CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .

(542)

(38,872)

(5,947)

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business . . . . . . . . .
Insurance payments . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . .
Investment purchases . . . . . . . . . . . . . . . . . .

Net cash provided by (used in)

investing activities . . . . . . . . . . . . . . . . .

CASH FLOWS FROM FINANCING

ACTIVITIES:

(9,219)
(9,500)
(10,604)
—
(149)

—
—
—
254
—

—
—
—
26
—

(30,014)

(38,618)

(5,921)

Purchase of shares for treasury . . . . . . . .
Proceeds from long-term debt. . . . . . . . . .
Payments of long-term debt . . . . . . . . . . . .
Change in short-term borrowings . . . . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration for acquired

businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,478)
163,297
(173,345)
—
(1,090)

—
(13,676)
(180)

—
—
(2,973)
(366)
—

—
—
8,830

—
38,451
(41,930)
—
—

(1,686)
—
(8,830)

Net cash provided by (used in)

financing activities . . . . . . . . . . . . . . . . .
CASH FLOWS FROM DISCONTINUED

OPERATIONS:

Net cash used in discontinued operations . . .
Effect of exchange rate changes on cash

and equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . .

NET INCREASE IN CASH AND

EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .

CASH AND EQUIVALENTS AT

(26,472)

5,491

(13,995)

—

—

—

(1)

(2,123)

314

(14,327)

8,864

8,082

BEGINNING OF PERIOD. . . . . . . . . . . . . .

15,976

16,353

37,429

—

—

—

—
—
—
—
—

—

8,335

113,958

(45,361)

(9,219)
(9,500)
(10,604)
280
(149)

(74,553)

(1,478)
—
201,748
—
— (218,248)
—
(366)
(1,090)
—

—
—
—

—

—

—

—

—

(1,686)
(13,676)
(180)

(34,976)

(2,123)

313

2,619

69,758

CASH AND EQUIVALENTS AT END

OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,649

$ 25,217

$ 45,511

$

— $ 72,377

132

54151

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2018

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$ 125,678

$ 122,687

$ 84,680

$(207,367)

$ 125,678

Net income (loss) from discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in)

—

(92,423)

—

—

(92,423)

operating activities . . . . . . . . . . . . . . . .

381,417

(405,174)

108,981

(27,032)

58,192

CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . .

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business . . . . . .
Insurance proceeds . . . . . . . . . . . . . . . . . .
Proceeds from sale of property,

plant and equipment . . . . . . . . . . . . . .
Net cash used in investing

activities . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM FINANCING

ACTIVITIES:

Purchase of shares for treasury. . . . . .
Proceeds from long-term debt . . . . . . .
Payments of long-term debt . . . . . . . . .
Change in short-term borrowings. . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . .
Purchase of ESOP shares . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in)

financing activities . . . . . . . . . . . . . .

CASH FLOWS FROM

DISCONTINUED OPERATIONS:
Net cash provided by (used in)

discontinued operations . . . . . . . . . . .
Effect of exchange rate changes on cash
and equivalents . . . . . . . . . . . . . . . . . . . . . . . .

NET DECREASE IN CASH AND

(544)

(41,531)

(8,063)

(368,936)
—
8,254

(4,843)
474,727
—

(57,153)
—
—

—

62

601

(361,226)

428,415

(64,615)

—

—
—
—

—

—

(45,605)
411,623
(269,478)
—
(7,793)
—
(49,797)
(46,405)

—
2,125
(5,403)
144
—
—
—
4,733

—
29,310
(26,112)
—
—
—
—
14,691

—
—
—
—
—
—
—
27,032

(50,138)

(430,932)
474,727
8,254

663

2,574

(45,605)
443,058
(300,993)
144
(7,793)
—
(49,797)
51

(7,455)

1,599

17,889

27,032

39,065

—

—

(16,394)

(62,533)

(159)

1,332

—

—

—

—

(78,927)

1,173

22,077

47,681

EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . .

12,736

8,287

1,054

CASH AND EQUIVALENTS AT

BEGINNING OF PERIOD . . . . . . . . . . .

3,240

8,066

36,375

CASH AND EQUIVALENTS AT

END OF PERIOD . . . . . . . . . . . . . . . . . . . .

$ 15,976

$ 16,353

$ 37,429

$

— $ 69,758

133

09473

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 24—SUBSEQUENT EVENTS

On November 12, 2020, the Board of Directors declared a cash dividend of $0.08 per share, payable on
December 17, 2020 to shareholders of record as of the close of business on November 25, 2020. Griffon
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.

*****

134

45362

SCHEDULE II

GRIFFON CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended September 30, 2020, 2019 and 2018
(in thousands)

Description

Balance at
Beginning of
Year

Recorded to
Cost and
Expense

Accounts
Written Off,
net

Other (1)

Balance at
End of Year

FOR THE YEAR ENDED SEPTEMBER 30, 2020
Allowance for Doubtful Accounts

Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances . . . . . . . . . . . .

$ 1,881
6,000

$ 7,881

Inventory valuation . . . . . . . . . . . . . . . . . . . . .

$26,169

$ 2,231
12,163

$14,394

$10,542

(255)
(4,261)

$(4,516)

$(3,412)

Deferred tax valuation allowance . . . . . . .

$10,823

$ (999)

$ —

$

$

(1)
—

(1)

$ 325

$ —

$ 3,856
13,902

$17,758

$33,624

$ 9,824

FOR THE YEAR ENDED SEPTEMBER 30, 2019
Allowance for Doubtful Accounts

Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances . . . . . . . . . . . .

$ 1,824
4,584

$ 6,408

Inventory valuation . . . . . . . . . . . . . . . . . . . . .

$26,065

Deferred tax valuation allowance . . . . . . .

$ 8,520

FOR THE YEAR ENDED SEPTEMBER 30, 2018
Allowance for Doubtful Accounts

$

464
5,790

$ 6,254

$ 2,774

$ 2,303

$ (425)
(4,374)

$(4,799)

$

$

18
—

18

$ 1,881
6,000

$ 7,881

$(2,614)

$ (56)

$26,169

$ —

$ —

$10,823

Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances . . . . . . . . . . . .

$ 1,109
4,857

$ 5,966

$

(40)
4,088

$ 4,048

Inventory valuation . . . . . . . . . . . . . . . . . . . . .

$16,419

$ 1,924

$
11
(4,760)

$(4,749)

$ (306)

Deferred tax valuation allowance . . . . . . .

$17,466

$ (8,946)

$ —

$ 744
399

$1,143

$8,028

$ —

$ 1,824
4,584

$ 6,408

$26,065

$ 8,520

Note (1): For the year ended September 30, 2018, Other primarily consists of opening balances of
reserves assumed from acquisitions.

135

65259

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation and Disclosure Controls and Procedures

Griffon’s management, with the participation of its Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of the design and operation of Griffon’s disclosure controls
and procedures, as defined by Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered
by this report, Griffon’s disclosure controls and procedures were effective to ensure that information
required to be disclosed by Griffon in the reports that it files or submits under the Exchange Act are
recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and
forms and such information is accumulated and communicated to management as appropriate to allow
timely decisions regarding required disclosures.

SEC guidance permits the exclusion of an evaluation of the effectiveness of a registrant’s disclosure
controls and procedures as they relate to the internal control over financial reporting for an acquired
business during the first year following such acquisition. Management’s evaluation and conclusion as to
the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of
September 30, 2020.

Management’s Report on Internal Control over Financial Reporting

Griffon’s management is responsible for establishing and maintaining adequate internal control over
financial reporting. Griffon’s internal control over financial reporting is a process designed under the
supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of Griffon’s financial statements for
external reporting in accordance with accounting principles generally accepted in the United States of
America. Management evaluates the effectiveness of Griffon’s internal control over financial reporting
using the criteria set forth by the 2013 Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework. Management, under the supervision
and with the participation of Griffon’s Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of Griffon’s internal control over financial reporting as of September 30, 2020 and
concluded that it is effective.

Griffon’s independent registered public accounting firm, Grant Thornton LLP, has audited the
effectiveness of Griffon’s internal control over financial reporting as of September 30, 2020, and has
expressed an unqualified opinion in their report which appears in this Annual Report on Form 10-K.

Changes in Internal Controls

There were no changes in Griffon’s internal control over financial reporting identified in connection
with the evaluation referred to above that occurred during the fourth quarter of the year ended
September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the
registrant’s internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Griffon’s internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in

136

64837

accordance with generally accepted accounting principles. Griffon’s internal control over financial
reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of Griffon’s assets;

(ii) provide reasonable assurance that
statements

transactions are recorded as necessary to permit
preparation of
in accordance with generally accepted accounting
principles, and that Griffon’s receipts and expenditures are being made only in accordance
with authorizations of Griffon’s management and directors; and

financial

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Griffon’s assets that could have a material effect on the
financial statements.

Management, including Griffon’s Chief Executive Officer and Chief Financial Officer, does not expect
that Griffon’s internal controls will prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can
provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Also, any evaluation of the effectiveness of controls in future periods is subject to the risk that those
internal controls may become inadequate because of changes in business conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Item 9B. Other Information

None.

PART III

The information required by Part III: Item 10, Directors, Executive Officers and Corporate Governance
(with respect to directors and corporate governance); Item 11, Executive Compensation; Item 12,
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters;
Item 13, Certain Relationships and Related Transactions, and Director Independence; and Item 14,
Principal Accountant Fees and Services, is included in and incorporated by reference to Griffon’s
definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held
in January, 2021, to be filed with the Securities and Exchange Commission within 120 days following
the end of Griffon’s fiscal year ended September 30, 2020. Information required by Part III, Item 10,
relating to the executive officers of the Registrant, appears under Item 1 of this report.

137

02575

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Griffon has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the
12th day of November 2020.

GRIFFON CORPORATION

By: /s/ RONALD J. KRAMER

Ronald J. Kramer,
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
on November 12, 2020 by the following persons on behalf of the Registrant in the capacities indicated:

/s/ RONALD J. KRAMER

Chairman of the Board and Chief Executive Officer

Ronald J. Kramer

(Principal Executive Officer)

/s/ ROBERT F. MEHMEL

President, Chief Operating Officer and Director

Robert F. Mehmel

/s/ BRIAN G. HARRIS

Brian G. Harris

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/ W. CHRISTOPHER DURBOROW

Vice President and Chief Accounting Officer

W. Christopher Durborow

(Principal Accounting Officer)

/s/ HENRY A. ALPERT

Director

Henry A. Alpert

/s/ JEROME L. COBEN

Jerome L. Coben

Director

/s/ THOMAS J. BROSIG

Director

Thomas J. Brosig

/s/ LOUIS J. GRABOWSKY

Director

Louis J. Grabowsky

/s/ ROBERT G. HARRISON

Director

Robert G. Harrison

/s/ LACY M. JOHNSON

Lacy M. Johnson

Director

/s/ VICTOR EUGENE RENUART

Director

Victor Eugene Renuart

/s/ JAMES W. SIGHT

James W. Sight

Director

/s/ KEVIN F. SULLIVAN

Director

Kevin F. Sullivan

/s/ SAMANTA HEGEDUS STEWART

Director

Samanta Hegedus Stewart

/s/ CHERYL L. TURNBULL

Director

Cheryl L. Turnbull

/s/ WILLIAM H. WALDORF

Director

William H. Waldorf

138

02061

Exhibit 31.1

I, Ronald J. Kramer, certify that:

Certification

1. I have reviewed this annual report on Form 10-K of Griffon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of

the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2020

/s/ RONALD J. KRAMER

Ronald J. Kramer
Chief Executive Officer
(Principal Executive Officer)

05659

Exhibit 31.2

I, Brian G. Harris, certify that:

Certification

1. I have reviewed this annual report on Form 10-K of Griffon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of

the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2020

/s/ BRIAN G. HARRIS

Brian G. Harris
Chief Financial Officer
(Principal Financial Officer)

80303

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of Griffon Corporation (the “Company”) for the
period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), Ronald J. Kramer, as Chief Executive Officer of Griffon, and Brian G. Harris,
as Chief Financial Officer of Griffon, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their
knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial

condition and results of operations of Griffon.

/s/ RONALD J. KRAMER

Name: Ronald J. Kramer
Title:

Chief Executive Officer
(Principal Executive Officer)

Date: November 12, 2020

/s/ BRIAN G. HARRIS

Name: Brian G. Harris
Title:

Chief Financial Officer
(Principal Financial Officer)

Date: November 12, 2020

A signed original of this written statement required by Section 906 has been provided to Griffon
Corporation and will be retained by Griffon Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.

GAAP TO NON-GAAP RECONCILIATION

For the Years Ended September 30,
2018

2017

2019

2020

81869

2016

Earnings per common share from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.19

1.06

$ 0.78

$ 0.41

$ 0.45

Adjusting items, net of tax:

Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment. . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition contingent consideration . . . . . . . . . . . . . .
Special dividend ESOP charges . . . . . . . . . . . . . . . . . . .
Secondary equity offering costs . . . . . . . . . . . . . . . . . . .
Cost of life insurance benefit. . . . . . . . . . . . . . . . . . . . . .
Contract settlement charges . . . . . . . . . . . . . . . . . . . . . . .
Discrete and other certain tax provisions

(benefits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.26
0.14
0.05
(0.03)
—
—
—
—

—
—
—
(0.03)
—
—
—
—

—
—
0.12
—
0.05
0.02
0.01
—

—
—
0.14
—
—
—
—
0.08

—
—
—
—
—
—
—
—

0.01

0.05

(0.22)

(0.19)

(0.02)

Adjusted earnings per share from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.62

1.08

$ 0.76

$ 0.44

$ 0.43

2020

For the Years Ended September 30,
2018
(in thousands)

2017

2019

2016

Segment Adjusted EBITDA:

Consumer and Professional Products. . . . . .
Home and Building Products . . . . . . . . . . . . .
Defense Electronics. . . . . . . . . . . . . . . . . . . . . . .

$104,053
153,631
25,228

$ 90,677
120,161
35,104

$ 77,061
100,339
36,063

$ 45,002
81,764
45,931

$ 35,842
79,107
53,385

Segment Adjusted EBITDA. . . . . . . . . . . . . . . . . . .
Unallocated amounts, excluding depreciation . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment . . . . . . . . . . . . . . . .
Acquisition contingent consideration . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special dividend charges. . . . . . . . . . . . . . . . . . . . . . .
Cost of life insurance benefit . . . . . . . . . . . . . . . . . .
Secondary equity offering costs. . . . . . . . . . . . . . . .
Contract settlement charges . . . . . . . . . . . . . . . . . . .

Income before taxes from continuing

282,912
(47,013)
235,899
(65,791)
(62,409)
(15,790)
(7,925)
1,733
(2,960)
—
—
—
—

245,942
(46,302)
199,640
(67,260)
(61,848)
—
—
1,646
—
—
—
—
—

213,463
(45,343)
168,120
(63,871)
(55,803)
—
—
—
(7,597)
(3,220)
(2,614)
(1,205)
—

172,697
(41,918)
130,779
(51,449)
(47,878)
—
—
—
(9,617)
—
—
—
(5,137)

168,334
(39,902)
128,432
(49,877)
(46,342)
—
—
—
—
—
—
—
—

operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 82,757

$ 72,178

$ 33,810

$ 16,698

$ 32,213

60888

C O M P A N Y P R O F I L E

CONSUMER AND PROFESSIONAL PRODUCTS
The AMES Companies, founded in 1774, 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.

AMES sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid. More
information is available at www.ames.com and www.closetmaid.com.

HOME AND BUILDING PRODUCTS

Clopay Corporation, since 1964,

is the largest manufacturer and marketer of garage doors and rolling steel doors in North

America. Sectional garage doors are sold to residential and commercial customers through professional dealers and leading home
center retail chains throughout North America under the Clopay, Ideal, and Holmes brands. Rolling steel door and grille products

designed for commercial,

industrial,

institutional, and retail use are sold under the CornellCookson brand. More information is

available at www.clopay.com and www.cornellcookson.com.

Telephonics, founded in 1933,

is a globally recognized leading provider of highly sophisticated intelligence, surveillance and

DEFENSE ELECTRONICS

communications solutions for defense, aerospace and commercial customers.
More information is available at www.telephonics.com.

DIRECTORS
Henry A. Alpert
President, Spartan Petroleum Corp.
(petroleum distributor/real estate)
Thomas J. Brosig
Retired Executive
Jerome L. Coben
Partner (Ret.)
Skadden, Arps, Slate, Meagher and Flom LLP
Louis J. Grabowsky
Co-Founder and Principal, Juniper Capital
Management
Rear Admiral Robert G. Harrison
USN (Ret.)
Lacy M. Johnson
Partner
Ice Miller LLP
Ronald J. Kramer
Chairman of the Board and
Chief Executive Officer
Robert F. Mehmel
President and Chief Operating Officer
General Victor Eugene Renuart
USAF (Ret.)
President, The Renuart Group, LLC
(defense consulting firm)
James W. Sight
Private Investor
Samanta Hegedus Stewart
Senior Vice President and
Head of Investor Relations,
Endeavor
Kevin F. Sullivan
Managing Director
MidOcean Credit Partners

Cheryl L. Turnbull
Senior Director — New Ventures and Venture
Capital, The Ohio State University
William H. Waldorf
President, Landmark Capital, LLC
(investments)

OFFICERS
Ronald J. Kramer
Chairman of the Board and
Chief Executive Officer
Robert F. Mehmel
President and
Chief Operating Officer
Brian G. Harris
Senior Vice President and
Chief Financial Officer
Seth L. Kaplan
Senior Vice President,
General Counsel and Secretary
Michael A. Sarrica
Senior Vice President, Operations
W. Christopher Durborow
Vice President and
Chief Accounting Officer
Michael W. Hansen
Vice President, Corporate Strategy
and Development
Denise A. Lueders
Vice President, Taxation
Thomas D. Gibbons
Vice President and Treasurer
Tracy J.I. Fitzgerald
Vice President, Internal Audit

Independent Registered Public
Accountants
Grant Thornton LLP
Stock Listing
The company’s Common Stock is listed on
the New York Stock Exchange (NYSE)
under the symbol GFF.
Registrar and Transfer Agent
American Stock Transfer &
Trust Company
Additional copies of
this report will be
furnished to shareholders upon written
request to the company at:
Griffon Corporation
Attn. Secretary
712 Fifth Avenue, 18th Floor
New York, New York 10019

Website
www.griffon.com

to

its

Griffon Corporation has
included as
on
Annual
exhibits
Report
Form 10-K for fiscal year 2020 filed with
the SEC certifications of Griffon’s Chief
Executive Officer and Chief Financial Officer
certifying the quality of
the company’s
Chief
public
Executive Officer has also submitted to
the NYSE a certification that he is not aware
of any violations by Griffon of the NYSE
corporate governance listing standards.

disclosures.

Griffon’s

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