Document
false--09-30Q220190000050725falseLarge Accelerated Filerfalse317200053000001.00P10YP2YP1YP1YP90DP90DP15DP2Y6408000100250000.070.070.070.07250.0150P5Y8820001764000P12M8820001764000P4YP4YP3YP10Y 0000050725 2018-10-01 2019-03-31 0000050725 2019-04-30 0000050725 2018-09-30 0000050725 2019-03-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2019-01-01 2019-03-31 0000050725 us-gaap:TreasuryStockMember 2018-10-01 2018-12-31 0000050725 2018-10-01 2018-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000050725 us-gaap:RetainedEarningsMember 2018-09-30 0000050725 gff:KelkayMember 2018-10-01 2018-12-31 0000050725 2019-01-01 2019-03-31 0000050725 us-gaap:TreasuryStockMember 2018-12-31 0000050725 us-gaap:TreasuryStockMember 2019-03-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2018-12-31 0000050725 us-gaap:CommonStockMember 2018-12-31 0000050725 us-gaap:TreasuryStockMember 2018-09-30 0000050725 us-gaap:RetainedEarningsMember 2018-10-01 2018-12-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2019-03-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-12-31 0000050725 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000050725 us-gaap:CommonStockMember 2019-03-31 0000050725 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000050725 us-gaap:CommonStockMember 2018-09-30 0000050725 us-gaap:AccountingStandardsUpdate201409Member 2018-10-01 0000050725 us-gaap:CommonStockMember 2018-10-01 2018-12-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-10-01 2018-12-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-10-01 2018-12-31 0000050725 us-gaap:RetainedEarningsMember 2018-12-31 0000050725 gff:KelkayMember 2019-01-01 2019-03-31 0000050725 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000050725 us-gaap:RetainedEarningsMember 2019-03-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000050725 gff:KelkayMember us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2018-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-09-30 0000050725 gff:KelkayMember us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000050725 2018-12-31 0000050725 us-gaap:RetainedEarningsMember 2018-10-01 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000050725 2018-01-01 2018-03-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2017-12-31 0000050725 us-gaap:CommonStockMember 2018-03-31 0000050725 2017-10-01 2017-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 2017-12-31 0000050725 us-gaap:RetainedEarningsMember 2017-09-30 0000050725 us-gaap:RetainedEarningsMember 2017-12-31 0000050725 us-gaap:CommonStockMember 2017-10-01 2017-12-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000050725 us-gaap:TreasuryStockMember 2018-03-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-03-31 0000050725 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0000050725 us-gaap:TreasuryStockMember 2017-09-30 0000050725 2017-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000050725 us-gaap:RetainedEarningsMember 2017-10-01 2017-12-31 0000050725 2017-09-30 0000050725 us-gaap:CommonStockMember 2017-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000050725 us-gaap:TreasuryStockMember 2017-12-31 0000050725 us-gaap:CommonStockMember 2017-09-30 0000050725 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0000050725 2018-03-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0000050725 us-gaap:TreasuryStockMember 2018-01-01 2018-03-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-01-01 2018-03-31 0000050725 us-gaap:TreasuryStockMember 2017-10-01 2017-12-31 0000050725 us-gaap:AdditionalPaidInCapitalMember 2017-09-30 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-09-30 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-01 2017-12-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2017-10-01 2017-12-31 0000050725 us-gaap:DeferredCompensationShareBasedPaymentsMember 2017-09-30 0000050725 us-gaap:RetainedEarningsMember 2018-03-31 0000050725 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000050725 2017-10-01 2018-03-31 0000050725 gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 srt:MinimumMember gff:CanadianDollarForwardContractsMember us-gaap:NondesignatedMember 2018-10-01 2019-03-31 0000050725 us-gaap:FairValueInputsLevel1Member gff:SeniorNotesTwoThousandTwentyTwoMember 2019-03-31 0000050725 gff:CanadianDollarForwardContractsMember us-gaap:NondesignatedMember 2019-03-31 0000050725 gff:CanadianDollarForwardContractsMember us-gaap:FairValueInputsLevel2Member us-gaap:NondesignatedMember us-gaap:OtherIncomeMember 2019-01-01 2019-03-31 0000050725 srt:MaximumMember gff:AustralianDollarForwardContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-10-01 2019-03-31 0000050725 gff:AustralianDollarForwardContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000050725 gff:CanadianDollarForwardContractsMember us-gaap:FairValueInputsLevel2Member us-gaap:NondesignatedMember us-gaap:OtherIncomeMember 2018-10-01 2019-03-31 0000050725 gff:CanadianDollarForwardContractsMember us-gaap:FairValueInputsLevel2Member us-gaap:NondesignatedMember 2018-10-01 2019-03-31 0000050725 gff:AustralianDollarForwardContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-10-01 2019-03-31 0000050725 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-03-31 0000050725 gff:AustralianDollarForwardContractMember 2018-10-01 2019-03-31 0000050725 us-gaap:FairValueInputsLevel2Member 2019-03-31 0000050725 gff:AustralianDollarForwardContractMember 2019-01-01 2019-03-31 0000050725 us-gaap:FairValueInputsLevel2Member us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMember 2019-03-31 0000050725 srt:MinimumMember gff:AustralianDollarForwardContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-10-01 2019-03-31 0000050725 srt:MaximumMember gff:CanadianDollarForwardContractsMember us-gaap:NondesignatedMember 2018-10-01 2019-03-31 0000050725 gff:CanadianDollarForwardContractsMember us-gaap:FairValueInputsLevel2Member us-gaap:NondesignatedMember 2019-01-01 2019-03-31 0000050725 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-09-30 0000050725 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-10-01 0000050725 2018-10-01 0000050725 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2019-01-01 2019-03-31 0000050725 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2019-01-01 2019-03-31 0000050725 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2019-03-31 0000050725 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2019-03-31 0000050725 us-gaap:AccountingStandardsUpdate201409Member us-gaap:RetainedEarningsMember 2018-10-01 0000050725 2019-01-01 2019-03-31 0000050725 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-10-01 2019-03-31 0000050725 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-10-01 2019-03-31 0000050725 2019-10-01 2019-03-31 0000050725 srt:MinimumMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 srt:MaximumMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:ClosetMaidLLCMember 2017-10-02 0000050725 gff:ClosetMaidLLCMember 2017-10-02 2017-10-02 0000050725 gff:CornellCooksonMember 2018-06-04 0000050725 gff:CornellCooksonMember 2018-06-04 2018-06-04 0000050725 gff:HarperBrushWorksMember 2017-11-06 2017-11-06 0000050725 us-gaap:CostOfSalesMember 2017-10-01 2018-03-31 0000050725 gff:KelkayMember 2018-02-13 2018-02-13 0000050725 gff:KelkayMember 2018-02-13 0000050725 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2017-10-01 2018-03-31 0000050725 gff:HarperBrushWorksMember 2017-11-06 0000050725 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-01-01 2018-03-31 0000050725 us-gaap:MachineryAndEquipmentMember 2018-09-30 0000050725 us-gaap:LeaseholdImprovementsMember 2018-09-30 0000050725 us-gaap:LandBuildingsAndImprovementsMember 2019-03-31 0000050725 us-gaap:LeaseholdImprovementsMember 2019-03-31 0000050725 us-gaap:LandBuildingsAndImprovementsMember 2018-09-30 0000050725 us-gaap:MachineryAndEquipmentMember 2019-03-31 0000050725 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-10-01 2019-03-31 0000050725 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-03-31 0000050725 us-gaap:UnpatentedTechnologyMember 2018-09-30 0000050725 us-gaap:UnpatentedTechnologyMember 2018-10-01 2019-03-31 0000050725 us-gaap:CustomerRelationshipsMember 2018-10-01 2019-03-31 0000050725 us-gaap:CustomerRelationshipsMember 2019-03-31 0000050725 us-gaap:UnpatentedTechnologyMember 2019-03-31 0000050725 us-gaap:CustomerRelationshipsMember 2018-09-30 0000050725 gff:TelephonicsMember 2018-09-30 0000050725 gff:HomeAndBuildingProductsMember 2019-03-31 0000050725 gff:TelephonicsMember 2019-03-31 0000050725 gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 gff:HomeAndBuildingProductsMember 2018-09-30 0000050725 gff:OtherLongTermDebtMember 2018-10-01 2019-03-31 0000050725 gff:ForeignTermLoanMember 2018-10-01 2019-03-31 0000050725 gff:ForeignTermLoanMember 2017-10-01 2018-03-31 0000050725 us-gaap:CapitalLeaseObligationsMember 2018-10-01 2019-03-31 0000050725 us-gaap:CapitalLeaseObligationsMember 2017-10-01 2018-03-31 0000050725 gff:OtherLongTermDebtMember 2017-10-01 2018-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2017-10-01 2018-03-31 0000050725 gff:CapitalizedInterestMember 2018-10-01 2019-03-31 0000050725 gff:RealEstateMortgagesLoanMember 2018-10-01 2019-03-31 0000050725 gff:CapitalizedInterestMember 2017-10-01 2018-03-31 0000050725 gff:RealEstateMortgagesLoanMember 2017-10-01 2018-03-31 0000050725 gff:RevolverDue2021Member 2017-10-01 2018-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2018-10-01 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2018-10-01 2019-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2017-10-01 2018-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2018-10-01 2019-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2017-10-01 2018-03-31 0000050725 gff:RevolverDue2021Member 2018-10-01 2019-03-31 0000050725 gff:RealEstateMortgagesLoanMember 2019-01-01 2019-03-31 0000050725 us-gaap:CapitalLeaseObligationsMember 2019-01-01 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2019-01-01 2019-03-31 0000050725 gff:OtherLongTermDebtMember 2019-01-01 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2018-01-01 2018-03-31 0000050725 us-gaap:CapitalLeaseObligationsMember 2018-01-01 2018-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2019-01-01 2019-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2018-01-01 2018-03-31 0000050725 gff:ForeignTermLoanMember 2019-01-01 2019-03-31 0000050725 gff:ForeignTermLoanMember 2018-01-01 2018-03-31 0000050725 gff:OtherLongTermDebtMember 2018-01-01 2018-03-31 0000050725 gff:CapitalizedInterestMember 2018-01-01 2018-03-31 0000050725 gff:RevolverDue2021Member 2019-01-01 2019-03-31 0000050725 gff:CapitalizedInterestMember 2019-01-01 2019-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2019-01-01 2019-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2018-01-01 2018-03-31 0000050725 gff:RevolverDue2021Member 2018-01-01 2018-03-31 0000050725 gff:RealEstateMortgagesLoanMember 2018-01-01 2018-03-31 0000050725 gff:RevolverDue2021Member 2018-09-30 0000050725 us-gaap:ForeignLineOfCreditMember 2019-03-31 0000050725 gff:OtherLongTermDebtMember 2019-03-31 0000050725 us-gaap:CapitalLeaseObligationsMember 2019-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2018-09-30 0000050725 gff:ForeignTermLoanMember 2019-03-31 0000050725 gff:RevolverDue2021Member 2019-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2019-03-31 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2018-09-30 0000050725 us-gaap:CapitalLeaseObligationsMember 2018-09-30 0000050725 gff:OtherLongTermDebtMember 2018-09-30 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2018-09-30 0000050725 gff:ForeignTermLoanMember 2018-09-30 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanDecember2013andMay2014Member 2019-03-31 0000050725 gff:AmesUKMember us-gaap:MortgagesMember 2018-07-01 2018-07-31 0000050725 2016-03-31 0000050725 gff:TroyOhioMember 2019-03-31 0000050725 2016-10-01 2017-09-30 0000050725 gff:InternalLoanMarch2019Member 2018-10-01 2019-03-31 0000050725 gff:ReceivablesPurchaseFacilityMember 2019-03-01 2019-03-31 0000050725 gff:OcalaFloridaMember 2019-03-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMay2014Member 2017-03-01 2017-03-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMay2014Member 2016-07-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:LineofCreditOneMember us-gaap:ForeignLineOfCreditMember 2019-03-31 0000050725 gff:AmesUKMember gff:TermLoanMember 2018-07-31 0000050725 us-gaap:LondonInterbankOfferedRateLIBORMember 2018-07-01 2018-07-31 0000050725 gff:AmesUKMember us-gaap:MortgagesMember 2018-07-31 0000050725 gff:AmesUKMember gff:TermAndMortgageLoanJuly2018Member 2019-03-31 0000050725 gff:AmesUKMember gff:TermLoanMember 2018-07-01 2018-07-31 0000050725 gff:InternalLoanMarch2019Member us-gaap:LondonInterbankOfferedRateLIBORMember 2018-10-01 2019-03-31 0000050725 gff:TermLoanMember 2019-03-31 0000050725 gff:SeniorNotes2022Member us-gaap:SeniorNotesMember 2019-03-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMay2014Member 2016-07-01 2016-07-31 0000050725 gff:RevolverDue2020Member 2016-03-22 0000050725 gff:MulticurrencySubfacilityMember gff:RevolverDue2019Member 2016-03-22 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMay2014Member 2019-03-01 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2017-10-02 0000050725 gff:InternalLoanMarch2019Member 2019-03-31 0000050725 2012-11-01 2012-11-30 0000050725 gff:EmployeeStockOwnershipPlanLoanMember 2016-10-01 2016-10-01 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMay2014Member 2017-09-01 2017-09-30 0000050725 gff:TermLoanDue2019Member us-gaap:MediumTermNotesMember 2016-07-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2014-02-27 0000050725 2015-09-30 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:LineofCreditOneMember us-gaap:ForeignLineOfCreditMember 2016-07-01 2016-07-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanMember 2016-07-31 0000050725 gff:NorthcoteHoldingsPty.LtdMember gff:TermLoanDecember2013andMay2014Member 2016-07-01 2016-07-31 0000050725 us-gaap:RevolvingCreditFacilityMember gff:RevolvingFacilityJune2017Member 2016-12-31 0000050725 gff:SeniorNotes2022Member 2017-10-02 0000050725 gff:SpecialDividendsMember 2018-04-16 2018-04-16 0000050725 gff:SeniorNotes2022Member us-gaap:SeniorNotesMember 2017-10-02 2017-10-02 0000050725 us-gaap:RevolvingCreditFacilityMember 2019-03-31 0000050725 gff:SeniorNotesdue2022May2016AddOnIssuanceMember us-gaap:SeniorNotesMember 2016-05-18 0000050725 gff:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-07-01 2018-07-31 0000050725 gff:AmesUKMember us-gaap:RevolvingCreditFacilityMember 2018-07-31 0000050725 gff:RevolverDue2019Member 2014-02-14 0000050725 gff:LiborRateMember 2016-03-22 2016-03-22 0000050725 gff:BankersAcceptanceRateMember us-gaap:ForeignLineOfCreditMember 2019-03-31 0000050725 gff:SeniorNotesdue2022May2016AddOnIssuanceMember us-gaap:SeniorNotesMember 2019-03-31 0000050725 gff:ReceivablesPurchaseFacilityMember 2019-03-31 0000050725 gff:SeniorNotesdue2022May2016AddOnIssuanceMember us-gaap:SeniorNotesMember 2017-10-02 0000050725 gff:AmesUKMember gff:TermLoanMember 2019-03-31 0000050725 gff:SeniorNotesTwoThousandTwentyTwoMember 2016-05-18 0000050725 gff:TermLoanAugust2016Member 2016-08-01 2016-08-31 0000050725 gff:RevolverDue2019Member 2019-03-31 0000050725 gff:ReceivablesPurchaseFacilityMember 2016-07-01 2016-07-31 0000050725 gff:TermLoanMember 2018-07-31 0000050725 gff:MarginRateMember gff:RevolverDue2019Member 2016-03-22 2016-03-22 0000050725 us-gaap:RevolvingCreditFacilityMember gff:RevolvingFacilityJune2017Member 2016-07-31 0000050725 gff:AmesUKMember us-gaap:MortgagesMember 2019-03-31 0000050725 gff:LiborRateMember us-gaap:ForeignLineOfCreditMember 2019-03-31 0000050725 us-gaap:ForeignLineOfCreditMember 2012-11-01 2012-11-30 0000050725 gff:TermLoan1Member us-gaap:SecuredDebtMember 2018-04-16 2018-04-16 0000050725 us-gaap:RevolvingCreditFacilityMember 2018-07-01 2018-07-31 0000050725 gff:LetterOfCreditSubfacilityMember gff:RevolverDue2019Member 2016-03-22 0000050725 gff:OcalaFloridaMember 2018-10-01 2019-03-31 0000050725 gff:TermLoanAugust2016Member 2016-08-31 0000050725 us-gaap:MortgagesMember 2019-01-01 2019-03-31 0000050725 gff:RestrictedStockandPerformanceSharesMember 2018-10-01 2018-12-31 0000050725 2016-08-03 0000050725 gff:RestrictedStockandRestrictedStockUnitsMember 2018-10-01 2018-12-31 0000050725 us-gaap:RestrictedStockMember 2018-10-01 2018-12-31 0000050725 us-gaap:PerformanceSharesMember 2018-10-01 2018-12-31 0000050725 gff:IncentivePlanMember 2018-01-31 0000050725 gff:IncentivePlanMember 2016-01-29 2016-01-29 0000050725 us-gaap:RestrictedStockMember 2018-10-01 2019-03-31 0000050725 us-gaap:SubsequentEventMember 2019-05-02 2019-05-02 0000050725 gff:IncentivePlanMember 2016-01-29 0000050725 gff:IncentiveStockOptionsMember 2019-03-31 0000050725 srt:MaximumMember us-gaap:RestrictedStockMember us-gaap:ExecutiveOfficerMember 2018-10-01 2018-12-31 0000050725 gff:TwoThousandSixEquityIncentivePlanMember 2019-03-31 0000050725 us-gaap:PerformanceSharesMember 2019-01-01 2019-03-31 0000050725 us-gaap:RestrictedStockMember 2019-01-01 2019-03-31 0000050725 2018-03-07 2018-03-07 0000050725 us-gaap:RestrictedStockMember us-gaap:ExecutiveOfficerMember 2018-10-01 2018-12-31 0000050725 us-gaap:PerformanceSharesMember 2018-01-01 2018-03-31 0000050725 2017-10-01 2018-09-30 0000050725 srt:MinimumMember us-gaap:RestrictedStockMember us-gaap:ExecutiveOfficerMember 2018-10-01 2018-12-31 0000050725 srt:MinimumMember us-gaap:RestrictedStockMember 2018-10-01 2019-03-31 0000050725 srt:MaximumMember us-gaap:RestrictedStockMember 2018-10-01 2019-03-31 0000050725 2018-04-01 2018-06-30 0000050725 2018-07-01 2018-09-30 0000050725 gff:AllOtherCountriesMember 2019-01-01 2019-03-31 0000050725 country:CA 2019-01-01 2019-03-31 0000050725 country:US 2019-01-01 2019-03-31 0000050725 country:AU gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 country:US gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:AllOtherCountriesMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 country:US gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 country:CA gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 srt:EuropeMember 2019-01-01 2019-03-31 0000050725 srt:EuropeMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 country:AU 2019-01-01 2019-03-31 0000050725 country:CA gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:AllOtherCountriesMember gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 country:AU gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 srt:EuropeMember gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:CommercialMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 gff:ResidentialRepairandRemodelMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:ResidentialRepairandRemodelMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:CommercialConstructionMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:UnitedStatesGovernmentMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 gff:CommercialConstructionMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:IndustrialMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:CommercialMember gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:InternationalExcludingNorthAmericaMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 us-gaap:RetailMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:IndustrialMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:InternationalExcludingNorthAmericaMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 us-gaap:RetailMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:UnitedStatesGovernmentMember gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:ResidentialNewConstructionMember gff:HomeAndBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:ResidentialNewConstructionMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:InternationalMember gff:TelephonicsMember 2019-01-01 2019-03-31 0000050725 gff:InternationalMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 gff:AllOtherCountriesMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 country:AU gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 country:CA 2018-10-01 2019-03-31 0000050725 srt:EuropeMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 country:US gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 country:CA gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 gff:AllOtherCountriesMember gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 country:CA gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 country:AU gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 srt:EuropeMember 2018-10-01 2019-03-31 0000050725 country:AU 2018-10-01 2019-03-31 0000050725 country:US 2018-10-01 2019-03-31 0000050725 srt:EuropeMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 country:US gff:HomeAndBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:AllOtherCountriesMember 2018-10-01 2019-03-31 0000050725 us-gaap:OperatingSegmentsMember 2018-09-30 0000050725 us-gaap:OperatingSegmentsMember 2019-03-31 0000050725 us-gaap:CorporateNonSegmentMember 2018-09-30 0000050725 us-gaap:CorporateNonSegmentMember 2019-03-31 0000050725 gff:TelephonicsMember 2017-10-01 2018-03-31 0000050725 us-gaap:OperatingSegmentsMember 2019-01-01 2019-03-31 0000050725 us-gaap:OperatingSegmentsMember 2018-01-01 2018-03-31 0000050725 gff:HomeAndBuildingProductsMember 2018-01-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember us-gaap:SegmentContinuingOperationsMember 2019-01-01 2019-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember us-gaap:SegmentContinuingOperationsMember 2018-10-01 2019-03-31 0000050725 us-gaap:OperatingSegmentsMember 2018-10-01 2019-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember us-gaap:SegmentContinuingOperationsMember 2018-01-01 2018-03-31 0000050725 gff:HomeAndBuildingProductsMember 2017-10-01 2018-03-31 0000050725 us-gaap:OperatingSegmentsMember 2017-10-01 2018-03-31 0000050725 gff:TelephonicsMember 2018-01-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember us-gaap:SegmentContinuingOperationsMember 2017-10-01 2018-03-31 0000050725 us-gaap:CorporateNonSegmentMember 2017-10-01 2018-03-31 0000050725 us-gaap:CorporateNonSegmentMember 2018-10-01 2019-03-31 0000050725 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-03-31 0000050725 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:TelephonicsMember us-gaap:SegmentContinuingOperationsMember 2018-10-01 2019-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:HomeAndBuildingProductsMember us-gaap:SegmentContinuingOperationsMember 2018-10-01 2019-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:TelephonicsMember us-gaap:SegmentContinuingOperationsMember 2019-01-01 2019-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:TelephonicsMember us-gaap:SegmentContinuingOperationsMember 2017-10-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:TelephonicsMember us-gaap:SegmentContinuingOperationsMember 2018-01-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:HomeAndBuildingProductsMember us-gaap:SegmentContinuingOperationsMember 2017-10-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:HomeAndBuildingProductsMember us-gaap:SegmentContinuingOperationsMember 2018-01-01 2018-03-31 0000050725 us-gaap:DefinedBenefitPostretirementLifeInsuranceMember gff:HomeAndBuildingProductsMember us-gaap:SegmentContinuingOperationsMember 2019-01-01 2019-03-31 0000050725 gff:ClopayBuildingProductsMember 2019-01-01 2019-03-31 0000050725 gff:AmesTrueTemperIncMember 2019-01-01 2019-03-31 0000050725 gff:AmesTrueTemperIncMember 2018-10-01 2019-03-31 0000050725 gff:ClopayBuildingProductsMember 2017-10-01 2018-03-31 0000050725 gff:ClopayBuildingProductsMember 2018-10-01 2019-03-31 0000050725 gff:ClopayBuildingProductsMember 2018-01-01 2018-03-31 0000050725 gff:AmesTrueTemperIncMember 2018-01-01 2018-03-31 0000050725 gff:AmesTrueTemperIncMember 2017-10-01 2018-03-31 0000050725 2017-12-31 2017-12-31 0000050725 us-gaap:AccountingStandardsUpdate201707Member 2018-01-01 2018-03-31 0000050725 us-gaap:AccountingStandardsUpdate201707Member 2017-10-01 2018-03-31 0000050725 us-gaap:SegmentDiscontinuedOperationsMember gff:DiscontinuedAndDisposedGroupsMember 2019-03-31 0000050725 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember gff:PPCMember 2018-01-01 2018-03-31 0000050725 gff:InstallationServicesMember 2018-10-01 2019-03-31 0000050725 gff:ClopayServicesCorporationMember 2017-09-30 0000050725 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember gff:PPCMember 2018-02-06 0000050725 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember gff:PPCMember 2017-10-01 2018-03-31 0000050725 us-gaap:SegmentDiscontinuedOperationsMember gff:DiscontinuedAndDisposedGroupsMember 2018-09-30 0000050725 gff:InstallationServicesMember 2017-10-01 2018-03-31 0000050725 srt:MinimumMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 srt:MinimumMember gff:ClopayBuildingProductsMember 2018-10-01 2019-03-31 0000050725 srt:MaximumMember gff:TelephonicsMember 2018-10-01 2019-03-31 0000050725 srt:MaximumMember gff:ClopayBuildingProductsMember 2018-10-01 2019-03-31 0000050725 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0000050725 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-09-30 0000050725 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-31 0000050725 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0000050725 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-03-31 0000050725 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-30 0000050725 2011-02-28 0000050725 2009-04-30 0000050725 srt:GuarantorSubsidiariesMember 2019-03-31 0000050725 srt:ParentCompanyMember 2019-03-31 0000050725 srt:NonGuarantorSubsidiariesMember 2019-03-31 0000050725 srt:ConsolidationEliminationsMember 2019-03-31 0000050725 srt:ConsolidationEliminationsMember 2018-09-30 0000050725 srt:GuarantorSubsidiariesMember 2018-09-30 0000050725 srt:NonGuarantorSubsidiariesMember 2018-09-30 0000050725 srt:ParentCompanyMember 2018-09-30 0000050725 srt:GuarantorSubsidiariesMember 2019-01-01 2019-03-31 0000050725 srt:NonGuarantorSubsidiariesMember 2019-01-01 2019-03-31 0000050725 srt:ConsolidationEliminationsMember 2019-01-01 2019-03-31 0000050725 srt:ParentCompanyMember 2019-01-01 2019-03-31 0000050725 srt:ConsolidationEliminationsMember 2018-01-01 2018-03-31 0000050725 srt:GuarantorSubsidiariesMember 2018-01-01 2018-03-31 0000050725 srt:ParentCompanyMember 2018-01-01 2018-03-31 0000050725 srt:NonGuarantorSubsidiariesMember 2018-01-01 2018-03-31 0000050725 srt:ParentCompanyMember 2018-10-01 2019-03-31 0000050725 srt:GuarantorSubsidiariesMember 2018-10-01 2019-03-31 0000050725 srt:NonGuarantorSubsidiariesMember 2018-10-01 2019-03-31 0000050725 srt:ConsolidationEliminationsMember 2018-10-01 2019-03-31 0000050725 srt:ParentCompanyMember 2017-10-01 2018-03-31 0000050725 srt:GuarantorSubsidiariesMember 2017-10-01 2018-03-31 0000050725 srt:NonGuarantorSubsidiariesMember 2017-10-01 2018-03-31 0000050725 srt:ConsolidationEliminationsMember 2017-10-01 2018-03-31 0000050725 srt:ParentCompanyMember 2017-09-30 0000050725 srt:NonGuarantorSubsidiariesMember 2018-03-31 0000050725 srt:ConsolidationEliminationsMember 2017-09-30 0000050725 srt:NonGuarantorSubsidiariesMember 2017-09-30 0000050725 srt:GuarantorSubsidiariesMember 2017-09-30 0000050725 srt:ParentCompanyMember 2018-03-31 0000050725 srt:GuarantorSubsidiariesMember 2018-03-31 0000050725 srt:ConsolidationEliminationsMember 2018-03-31 iso4217:GBP xbrli:shares iso4217:AUD xbrli:pure iso4217:USD gff:segment iso4217:USD xbrli:shares gff:company gff:option gff:property gff:loan gff:senior_executive iso4217:CAD
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2019

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to
 
Commission File Number: 1-06620
 
GRIFFON CORPORATION
(Exact name of registrant as specified in its charter) 
DELAWARE
 
11-1893410
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
712 Fifth Ave, 18th Floor, New York, New York
 
10019
(Address of principal executive offices)
 
(Zip Code)
 
(212) 957-5000
(Registrant’s telephone number, including area code)
 
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. ý Yes o No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý

 
Accelerated filer
 o
Non-accelerated filer  o
 
 
Smaller reporting company
o
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

The number of shares of common stock outstanding at April 30, 2019 was 46,800,571.




Griffon Corporation and Subsidiaries
 
Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

Part I – Financial Information
Item 1 – Financial Statements
 
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


(Unaudited)


 
March 31,
2019

September 30,
2018
CURRENT ASSETS
 

 
Cash and equivalents
$
57,979


$
69,758

Accounts receivable, net of allowances of $10,025 and $6,408
344,049


280,509

Contract costs and recognized income not yet billed, net of progress payments of $5,300 and $3,172
83,904


121,803

Inventories
457,071


398,359

Prepaid and other current assets
45,778


42,121

Assets of discontinued operations
324


324

Total Current Assets
989,105


912,874

PROPERTY, PLANT AND EQUIPMENT, net
332,852


342,492

GOODWILL
439,118


439,395

INTANGIBLE ASSETS, net
364,740


370,858

OTHER ASSETS
15,192


16,355

ASSETS OF DISCONTINUED OPERATIONS
2,901


2,916

Total Assets
$
2,143,908


$
2,084,890







CURRENT LIABILITIES
 


 

Notes payable and current portion of long-term debt
$
10,807


$
13,011

Accounts payable
223,188


233,658

Accrued liabilities
120,532


139,192

Liabilities of discontinued operations
11,657


7,210

Total Current Liabilities
366,184


393,071

LONG-TERM DEBT, net
1,206,195


1,108,071

OTHER LIABILITIES
94,938


106,710

LIABILITIES OF DISCONTINUED OPERATIONS
2,307


2,647

Total Liabilities
1,669,624


1,610,499

COMMITMENTS AND CONTINGENCIES - See Note 19





SHAREHOLDERS’ EQUITY
 


 

Total Shareholders’ Equity
474,284


474,391

Total Liabilities and Shareholders’ Equity
$
2,143,908


$
2,084,890


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


1

Table of Contents

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended March 31, 2019
(Unaudited)
 
 
COMMON STOCK
 
CAPITAL IN
EXCESS OF
PAR VALUE
 
RETAINED
EARNINGS
 
TREASURY SHARES
 
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
 
DEFERRED
COMPENSATION
 
 
(in thousands)
SHARES
 
PAR VALUE
 
 
 
SHARES
 
COST
 
 
 
TOTAL
Balance at September 30, 2018
81,520

 
$
20,380

 
$
503,396

 
$
550,523

 
35,846

 
$
(534,830
)
 
$
(34,112
)
 
$
(30,966
)
 
$
474,391

Net income

 

 

 
8,753

 

 

 

 

 
8,753

Cumulative catch-up adjustment related to adoption of ASC 606(1)

 

 

 
(5,673
)
 

 

 

 

 
(5,673
)
Dividend

 

 

 
(3,143
)
 

 

 

 

 
(3,143
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
83

 
(1,058
)
 

 

 
(1,058
)
Amortization of deferred compensation

 

 

 

 

 

 

 
856

 
856

Common stock acquired

 

 

 

 
29

 
(290
)
 

 

 
(290
)
Equity awards granted, net
1,201

 
300

 
(300
)
 

 

 

 

 

 

ESOP allocation of common stock

 

 
(8
)
 

 

 

 

 

 
(8
)
Stock-based compensation

 

 
2,933

 

 

 

 

 

 
2,933

Stock-based consideration

 

 
250

 

 

 

 

 

 
250

Other comprehensive income, net of tax

 

 

 

 

 

 
(5,450
)
 

 
(5,450
)
Balance at December 31, 2018
82,721

 
$
20,680

 
$
506,271

 
$
550,460

 
35,958

 
$
(536,178
)
 
$
(39,562
)
 
$
(30,110
)
 
$
471,561

Net income (loss)
 
 
 
 
 
 
(1,156
)
 
 
 
 
 
 
 
 
 
(1,156
)
Dividend

 

 

 
(3,704
)
 

 

 

 

 
(3,704
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
3

 
(48
)
 

 

 
(48
)
Amortization of deferred compensation

 

 

 

 

 

 

 
507

 
507

Common stock acquired

 

 

 

 
8

 
(82
)
 

 

 
(82
)
Equity awards granted, net
48

 
12

 
(12
)
 









 

ESOP allocation of common stock

 

 
601

 

 

 

 

 

 
601

Stock-based compensation

 

 
3,422

 

 

 

 

 

 
3,422

Stock-based consideration

 

 
303

 

 

 

 

 

 
303

Other comprehensive income, net of tax

 

 

 

 

 

 
2,880

 

 
2,880

Balance at March 31, 2019
82,769

 
$
20,692

 
$
510,585

 
$
545,600

 
35,969

 
$
(536,308
)
 
$
(36,682
)
 
$
(29,603
)
 
$
474,284

(1) See Note 14 - Recent Accounting Pronouncements and Note 3 - Revenue for additional information. 
 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.





2

Table of Contents

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended March 31, 2018
(Unaudited)

 
COMMON STOCK
 
CAPITAL IN
EXCESS OF
PAR VALUE
 
RETAINED
EARNINGS
 
TREASURY SHARES
 
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
 
DEFERRED
COMPENSATION
 
 
(in thousands)
SHARES
 
PAR VALUE
 
 
 
SHARES
 
COST
 
 
 
TOTAL
Balance at September 30, 2017
80,663

 
$
20,166

 
$
487,077

 
$
480,347

 
33,557

 
$
(489,225
)
 
$
(60,481
)
 
$
(39,076
)
 
$
398,808

Net income

 

 

 
30,989

 

 

 

 

 
30,989

Dividend

 

 

 
(2,990
)
 

 

 

 

 
(2,990
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
191

 
(4,332
)
 

 

 
(4,332
)
Amortization of deferred compensation

 

 

 

 

 

 

 
817

 
817

Equity awards granted, net
895

 
223

 
(223
)
 

 

 

 

 

 

ESOP allocation of common stock

 

 
608

 

 

 

 

 

 
608

Stock-based compensation

 

 
2,555

 

 

 

 

 

 
2,555

Other comprehensive income, net of tax

 

 

 

 

 

 
8,358

 

 
8,358

Balance at December 31, 2017
81,558

 
$
20,389

 
$
490,017

 
$
508,346

 
33,748

 
$
(493,557
)
 
$
(52,123
)
 
$
(38,259
)
 
$
434,813

Net income

 

 

 
90,280

 

 

 

 

 
90,280

Dividend

 

 

 
(46,660
)
 

 

 

 

 
(46,660
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
6

 
(114
)
 

 

 
(114
)
Amortization of deferred compensation

 

 

 

 

 

 

 
855

 
855

Common stock acquired

 

 

 

 
1,438

 
(28,415
)
 

 

 
(28,415
)
Equity awards granted, net
(84
)
 
(20
)
 
20

 

 

 

 

 

 

ESOP allocation of common stock

 

 
493

 

 

 

 

 

 
493

Stock-based compensation

 

 
2,365

 

 

 

 

 

 
2,365

Other comprehensive income, net of tax

 

 

 

 

 

 
20,401

 

 
20,401

Balance at March 31, 2018
81,474

 
$
20,369

 
$
492,895

 
$
551,966

 
35,192

 
$
(522,086
)
 
$
(31,722
)
 
$
(37,404
)
 
$
474,018



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



3

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited) 
 
Three Months Ended March 31,

Six Months Ended March 31,
 
2019

2018

2019

2018
Revenue
$
549,633


$
478,560


$
1,060,155


$
915,863

Cost of goods and services
412,129


357,181


779,605


673,705

Gross profit
137,504


121,379


280,550


242,158













Selling, general and administrative expenses
111,783


104,493


225,537


211,117













Income from operations
25,721


16,886


55,013


31,041













Other income (expense)
 


 


 


 

Interest expense
(17,517
)

(16,806
)

(34,046
)

(33,645
)
Interest income
212


762


410


959

Other, net
1,268


2,346


2,272


2,760

Total other expense, net
(16,037
)

(13,698
)

(31,364
)

(29,926
)












Income before taxes from continuing operations
9,684


3,188


23,649


1,115

Provision (benefit) from income taxes
3,194


1,237


8,406


(23,667
)
Income from continuing operations
$
6,490


$
1,951


$
15,243


$
24,782













Discontinued operations:











Income (loss) from operations of discontinued operations
$
(11,000
)
 
$
113,376


(11,000
)

124,842

Provision (benefit) for income taxes
(3,354
)
 
25,047


(3,354
)

28,355

Income (loss) from discontinued operations
$
(7,646
)
 
$
88,329


(7,646
)

96,487

Net income (loss)
$
(1,156
)
 
$
90,280


$
7,597


$
121,269


 
 
 






Income from continuing operations
$
0.16

 
$
0.05


$
0.37


$
0.59

Income (loss) from discontinued operations
(0.19
)
 
2.13


(0.19
)

2.31

Basic earnings per common share
$
(0.03
)
 
$
2.18


$
0.19


$
2.91


 
 
 






Weighted-average shares outstanding
40,949

 
41,477


40,849


41,700


 
 
 






Income from continuing operations
$
0.15

 
$
0.05


$
0.36


$
0.58

Income (loss) from discontinued operations
(0.18
)
 
2.07


(0.18
)

2.24

Diluted earnings per common share
$
(0.03
)
 
$
2.11


$
0.18


$
2.82


 
 
 






Weighted-average shares outstanding
42,832

 
42,765


42,376


43,062


 
 
 






Dividends paid per common share
$
0.0725

 
$
0.0700


$
0.1450


$
0.1400


 
 
 






Net income (loss)
$
(1,156
)
 
$
90,280


$
7,597


$
121,269

Other comprehensive income (loss), net of taxes:
 

 
 


 


 

Foreign currency translation adjustments
2,885

 
19,714


(2,851
)

18,425

Pension and other post retirement plans
184

 
247


368


9,806

Change in cash flow hedges
(189
)
 
440


(87
)

528

Total other comprehensive income (loss), net of taxes
2,880

 
20,401


(2,570
)

28,759

Comprehensive income, net
$
1,724

 
$
110,681


$
5,027


$
150,028

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

4

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended March 31,
 
2019

2018
CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Net income
$
7,597


$
121,269

Net (income) loss from discontinued operations
7,646


(96,487
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 


 

Depreciation and amortization
30,577


26,271

Stock-based compensation
6,355


4,920

Provision (recovery) for losses on accounts receivable
316


(201
)
Amortization of debt discounts and issuance costs
2,841


2,754

Deferred income taxes
(865
)

(23,136
)
Change in assets and liabilities, net of assets and liabilities acquired:
 


 

Increase in accounts receivable and contract costs and recognized income not yet billed
(47,669
)

(16,631
)
Increase in inventories
(37,852
)

(48,295
)
Decrease in prepaid and other assets
2,323


2,613

Decrease in accounts payable, accrued liabilities and income taxes payable
(28,945
)

(21,021
)
Other changes, net
2,670


844

Net cash used in operating activities - continuing operations
(55,006
)

(47,100
)
CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Acquisition of property, plant and equipment
(17,418
)

(21,628
)
Acquired businesses, net of cash acquired
(9,219
)

(246,230
)
Proceeds from sale of business

 
473,977

Insurance proceeds (payments)
(10,604
)
 
8,254

Proceeds from sale of assets
62


454

Investment purchase
(149
)


Net cash provided by (used in) investing activities - continuing operations
(37,328
)

214,827

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Dividends paid
(6,847
)

(5,872
)
Purchase of shares for treasury
(1,478
)

(32,861
)
Proceeds from long-term debt
143,101


347,898

Payments of long-term debt
(48,169
)

(229,941
)
Financing costs
(945
)

(7,451
)
Contingent consideration for acquired businesses
(1,686
)


Other, net
83


126

Net cash provided by financing activities - continuing operations
84,059


71,899

CASH FLOWS FROM DISCONTINUED OPERATIONS:
 


 

Net cash used in operating activities
(3,438
)

(15,080
)
Net cash used in investing activities


(10,762
)
Net cash used in financing activities


(22,541
)






Net cash used in discontinued operations
(3,438
)

(48,383
)
Effect of exchange rate changes on cash and equivalents
(66
)

(2,468
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(11,779
)

188,775

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
69,758


47,681

CASH AND EQUIVALENTS AT END OF PERIOD
$
57,979


$
236,456

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

5

Table of Contents
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)
(Unaudited)
(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)



NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
About Griffon Corporation
 
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).

Griffon currently conducts its operations through two reportable segments:
 
Home & Building Products (“HBP”) segment consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc, (“CBP”):

AMES, founded in 1774, is the leading North American manufacturer and a global provider of branded consumer and professional tools, landscaping products, and outdoor lifestyle solutions. In 2018, we acquired ClosetMaid LLC ("ClosetMaid"), a leader in wood and wire closet organization, general living storage and wire garage storage products for homeowners and professionals.

CBP, since 1964, is a leading manufacturer and marketer of residential and commercial garage doors and sells to professional dealers and some of the largest home center retail chains in North America. In 2018, we acquired CornellCookson, a leading U.S. manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional, and retail use.

Defense Electronics segment consists of 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.

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. As such, they should be read together with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.
 
The condensed consolidated balance sheet information at September 30, 2018 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018.
 
The condensed consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.


6


The preparation of financial statements in conformity with US GAAP 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, percentage of completion method of accounting, pension assumptions, useful lives associated with depreciation and amortization of fixed and intangible assets, warranty reserves, sales incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves and the valuation of assets and liabilities of discontinued operations, acquisition assumptions used 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.
 
Certain amounts in the prior year have been reclassified to conform to current year presentation.

NOTE 2 – FAIR VALUE MEASUREMENTS
 
The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit and variable interest rate 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 and variable rate debt is based upon current market rates.

Applicable accounting guidance establishes a fair value hierarchy requiring 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 values of Griffon’s 2022 senior notes approximated $985,770 on March 31, 2019. Fair values were based upon quoted market prices (level 1 inputs).
 
Insurance contracts with values of $2,481 at March 31, 2019 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.
 
Items Measured at Fair Value on a Recurring Basis

At March 31, 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 $2,825 ($2,233 cost basis), were included in Prepaid and other current assets on the Consolidated Balance Sheets. Realized and unrealized gains and losses on trading securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

In the normal course of business, Griffon’s operations are exposed to the effects 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. As of March 31, 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 US dollars.

At March 31, 2019, Griffon had $8,000 of Australian dollar contracts at a weighted average rate of $1.41 which qualified for hedge accounting (level 2 inputs). These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Accumulated other comprehensive income (loss) ("AOCI") and Prepaid and other current

7



assets, or Accrued liabilities, until settlement. Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS"). AOCI included deferred gains of $549 ($384, net of tax) at March 31, 2019 and a gain of $242 and $934 was recorded in COGS during the three and six months ended March 31, 2019, respectively, for all settled contracts. All contracts expire in 30 to 88 days.

At March 31, 2019, Griffon had $1,460 of Canadian dollar contracts at a weighted average rate of $1.33. The contracts, which protect Canadian operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting. For the three and six months ended March 31, 2019, fair value gains (losses) of $ $18 and $(23) was recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs). Realized gain of $68 and $58 were recorded in Other income during the three and six months ended March 31, 2019, respectively, for all settled contracts. All contracts expire in 29 to 120 days.

NOTE 3 – REVENUE

On October 1, 2018, the Company adopted the requirements of Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective method applied to those contracts that were not completed as of October 1, 2018. The Company’s comparative consolidated results over the prior period have not been adjusted and continue to be reported under previously issued guidance, ASC 605 - Revenue Recognition, which required that revenue was accounted for when the earnings process was complete.

This accounting standard did not materially impact the Company’s revenue recognition practices in our Home and Building Products (“HBP”) Segment, however, it impacted revenue recognition practices in our Defense Electronics Segment. The impact of adopting this accounting standard was not material to the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2019. Under the modified retrospective method, the Company recognized the cumulative effect of initially applying this accounting standard as an adjustment to the opening balance in retained earnings of approximately $5,673 as of October 1, 2018, primarily relating to certain contracts in the Defense Electronics Segment containing provisions for radar and communication products that have an alternative use and / or no right to payment. For these contracts, the Company now recognizes revenue at a point in time, rather than over time as this measure more accurately depicts the transfer of control to the customer relative to the goods or services promised under the contract.

The cumulative effect of the changes made to the Company's Consolidated October 1, 2018 Balance Sheet for the adoption of ASC 606 is as follows:

Balance Sheet
As Reported at September 30, 2018
Adjustments
Balance as of October 1, 2018
CURRENT ASSETS
 
 
 
 
Contract costs and recognized income not yet billed, net of progress payments
$
121,803
 
$
(20,982
)
$
100,821
 
Inventories
398,359
 
22,025
 
420,384
 
Total Current Assets
912,874
 
1,043
 
913,917
 
Total Assets
2,084,890
 
1,043
 
2,085,933
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
233,658
 
8,282
 
241,940
 
Billings in excess of costs (1)
17,559
 
8,282
 
25,841
 
Total Current Liabilities
393,071
 
8,282
 
401,353
 
OTHER LIABILITIES
106,710
 
(1,566
)
105,144
 
Total Liabilities
1,610,499
 
6,716
 
1,617,215
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
Retained Earnings
550,523
 
(5,673
)
544,850
 
Total Shareholders' Equity
474,391
 
(5,673
)
468,718
 
Total Liabilities and Shareholders’ Equity
$
2,084,890
 
$
1,043
 
$
2,085,933
 
(1) Billings in excess of costs is reported in Accounts payable on the Company's Consolidated Balance Sheets.




8



The impact to the Company's Consolidated Statement of Operations for the three and six months ended March 31, 2019 and to the Company's Balance Sheet as of March 31, 2019 was as follows:

 
For the Three Months Ended March 31, 2019
Income Statement
As Reported
Balances Without Adoption of ASC 606
Effect of Adoption Higher/(Lower)
Net sales
$
549,633
 
$
548,053
 
$
1,580
 
Cost of goods and services
412,129
 
410,898
 
1,231
 
Income (loss) before taxes from continuing operations
9,684
 
9,335
 
349
 
Provision (benefit) from income taxes
3,194
 
3,118
 
76
 
Income from continuing operations
6,490
 
6,217
 
273
 

 
For the Six Months Ended March 31, 2019
Income Statement
As Reported
Balances Without Adoption of ASC 606
Effect of Adoption Higher/(Lower)
Net sales
$
1,060,155
 
$
1,053,969
 
$
6,186
 
Cost of goods and services
779,605
 
775,109
 
4,496
 
Income before taxes from continuing operations
23,649
 
21,960
 
1,689
 
Provision (benefit) from income taxes
8,406
 
8,038
 
368
 
Income from continuing operations
15,243
 
13,922
 
1,321
 
 
As of March 31, 2019
Balance Sheet
As Reported
Balances Without Adoption of ASC 606
Effect of Adoption Higher/(Lower)
CURRENT ASSETS
 
 
 
 
Contract costs and recognized income not yet billed, net of progress payments
$
83,904
 
$
98,700
 
$
(14,796
)
Inventories
457,071
 
439,543
 
17,528
 
Total Current Assets
989,105
 
986,373
 
2,732
 
Total Assets
2,143,908
 
2,141,176
 
2,732
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
223,188
 
214,906
 
8,282
 
Billings in excess of costs
28,227
 
19,945
 
8,282
 
Total Current Liabilities
366,184
 
357,902
 
8,282
 
OTHER LIABILITIES
94,938
 
96,136
 
(1,198
)
Total Liabilities
1,669,624
 
1,662,540
 
7,084
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
Retained Earnings
545,600
 
549,952
 
(4,352
)
Total Shareholders' Equity
474,284
 
478,636
 
(4,352
)
Total Liabilities and Shareholders’ Equity
$
2,143,908
 
$
2,141,176
 
$
2,732
 


The Company’s accounting policy has been updated to align with the new standard to recognize revenue when the following criteria are met: 1) Contract with the customer has been identified; 2) Performance obligations in the contract have been identified; 3) Transaction price has been determined; 4) Transaction price has been allocated to the performance obligations; and 5) Revenue is recognized when (or as) performance obligations are satisfied.

See Note 12 - Business Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location.

9



Performance Obligations

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 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 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 are 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.

Over 80% of the Company’s performance obligations are recognized at a point in time that relate to the manufacture and sale of a broad range of products and components within the HBP Segment, and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer. Less than 20% of the Company’s performance obligations are recognized over time or under the percentage-of-completion method relating to prime or subcontractors from contract awards with the U.S. Government, as well as foreign governments and other commercial customers within our Defense Electronics Segment. Sales 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 is an appropriate measure of progress towards satisfaction of performance obligations, as it most accurately depicts the progress of our work and transfer of control to our customers.

Revenue from HBP Segment

A majority of the HBP Segment 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 HBP Segment recognizes 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 majority of the Company’s contracts in the HBP Segment 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 HBP Segment 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. If revenue is recognized for a good before it is shipped and handled, the related shipping and handling costs must be accrued. 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. The Company's policies related to shipping, handling and taxes have not changed with the adoption of ASC 606.

Revenue from Defense Electronics Segment
The Company’s Defense Electronics 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. These contracts are typically long-term in nature, usually greater than one year and do not include a material long-term financing component,

10



either implicitly or explicitly. Revenue and profits from such contracts are recognized under the percentage-of-completion (over time) method of accounting. Revenue and profits on fixed-price contracts that contain engineering as well as production requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract (cost-to-cost method).
Using the cost-to-cost method, revenue is 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. As this 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. For the three and six months ended March 31, 2019, income from operations included net favorable/(unfavorable) catch-up adjustments approximating $(2,800) and $(5,300), respectively. For the three and six months ended March 31, 2018, income from operations included net favorable/(unfavorable) catch up adjustments approximating $(1,800) and $(1,300), 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.
Revenue and profits on cost-reimbursable type contracts are recognized as allowable costs are incurred on the contract at an amount equal to the allowable costs 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. Incentive and award fees on these contracts are recorded as revenue when the criteria under which they are earned are reasonably assured of being met and can be estimated.
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.
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 March 31, 2019 and September 30, 2018 were approximately $7,400 and $12,200, respectively, 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.
Amounts representing contract change orders or claims are included in revenue only when they can be reliably estimated and their realization is probable, and are determined on a percentage-of-completion basis measured by the cost-to-cost method.
Substantially all of Telephonics’ U.S. Government end-user contracts contain a termination for convenience clause, regardless whether 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.
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 March 31, 2019, we had $378,300 of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 73% 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

11



the timing of governmental approvals.
Contract Balances

Contract assets were $83,904 as of March 31, 2019 compared to $121,803 as of September 30, 2018. The $37,899 decrease in our contract assets balance was primarily due to the implementation of ASC 606. Excluding the impact of ASC 606, the decrease 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 costs and recognized income not yet billed, net of progress payments in the Consolidated Balance Sheets. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Contract costs and recognized income not yet billed consists of amounts accounted for under the percentage of completion method of accounting, recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts. Amounts will be invoiced when applicable contract terms, such as the achievement of specified milestones or product delivery, are met. At March 31, 2019 and September 30, 2018, approximately $21,700 and $29,500, respectively, of contract costs and recognized income not yet billed were expected to be collected after one year. As of March 31, 2019 and September 30, 2018, Contract costs and recognized income not yet billed included $700 and $400, respectively, of reserves for contract risk.

Contract liabilities were $28,227 as of March 31, 2019 compared to $17,559 as of September 30, 2018. The $10,668 increase in the contract liabilities balance was primarily due to the implementation of ASC 606. 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 4 – 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 companies are included in Griffon’s consolidated financial statements from the date of acquisition; in each instance, Griffon is in the process of finalizing the initial purchase price allocation unless otherwise noted.

On June 4, 2018, CBP 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 $180,000, excluding the estimated present value of tax benefits, and $12,426 of post-closing adjustments, primarily consisting of a working capital adjustment. The acquisition of CornellCookson substantially expanded CBP’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. There is no other contingent consideration arrangement relative to the acquisition of CornellCookson.

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 a preliminary 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.


12


The calculation of the preliminary purchase price allocation, which is pending finalization of tax-related items and completion of the related final valuation, is as follows:

 
 
Accounts receivable (1)
$
30,400

Inventories (2)
12,336

Property, plant and equipment
49,426

Goodwill
43,183

Intangible assets
67,600

Other current and non-current assets
2,648

Total assets acquired
205,593

 
 
Accounts payable and accrued liabilities
12,507

Long-term liabilities
660

Total liabilities assumed
13,167

Total
$
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 inventory.

The preliminary amounts assigned to goodwill and major intangible asset classifications, all of which are tax deductible, for the CornellCookson acquisition are as follows:
 
 
 
 
Average
Life
(Years)
Goodwill
 
$
43,183

 
N/A
Indefinite-lived intangibles
 
53,500

 
N/A
Definite-lived intangibles
 
14,100

 
12
Total goodwill and intangible assets
 
$
110,783

 
 


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. 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 asset 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 ClosetMaid, a market leader in home storage and organization products, for approximately $185,700, inclusive of certain post-closing adjustments and excluding the present value of net tax benefits 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

13


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.

The calculation of the final purchase price allocation is as follows:

 

Accounts receivable (1)
$
32,234

Inventories (2), (3)
28,411

Property, plant and equipment
47,464

Goodwill
70,159

Intangible assets
74,580

Other current and non-current assets
3,852

Total assets acquired
256,700

 
 
Accounts payable and accrued liabilities
68,251

Long-term liabilities
2,720

Total liabilities assumed
70,971

Total
$
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 $29,079 of gross inventory of which $668 was reserved for obsolete inventory. The fair value of inventory approximated book value acquired.
(3) 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:
 
 
 
 
Average
Life
(Years)
Goodwill
 
$
70,159

 
N/A
Indefinite-lived intangibles
 
47,740

 
N/A
Definite-lived intangibles
 
26,840

 
21
Total goodwill and intangible assets
 
$
144,739

 
 


The Company did not incur any acquisition costs during the three and six months ended March 31, 2019. During the three months ended March 31, 2018, selling, general and administrative expenses ("SG&A") included acquisition costs of $814. During the six months ended March 31, 2018, SG&A and Cost of goods and services included acquisition costs of $2,499 and $1,500, respectively.


14



NOTE 5 – INVENTORIES
 
Inventories are stated at the lower of cost (first-in, first-out or average) or market.
 
The following table details the components of inventory:
 
At March 31, 2019
 
At September 30, 2018
Raw materials and supplies
$
104,767

 
$
97,645

Work in process
112,264

 
83,578

Finished goods
240,040

 
217,136

Total
$
457,071

 
$
398,359


 
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

The following table details the components of property, plant and equipment, net:
 
At March 31, 2019
 
At September 30, 2018
Land, building and building improvements
$
132,334

 
$
130,296

Machinery and equipment
557,351

 
544,875

Leasehold improvements
49,983

 
50,111


739,668

 
725,282

Accumulated depreciation and amortization
(406,816
)
 
(382,790
)
Total
$
332,852

 
$
342,492


Depreciation and amortization expense for property, plant and equipment was $12,980 and $11,530 for the quarters ended March 31, 2019 and 2018, respectively, and $25,647 and $22,232 for the six months ended March 31, 2019 and 2018, respectively. Depreciation included in SG&A expenses was $4,761 and $3,834 for the quarters ended March 31, 2019 and 2018, respectively, and $9,442 and $7,576 for the six months ended March 31, 2019 and 2018, respectively. Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

No event or indicator of impairment occurred during the six months ended March 31, 2019 which would require additional impairment testing of property, plant and equipment.
 
NOTE 7 – GOODWILL AND OTHER INTANGIBLES
 
The following table provides changes in the carrying value of goodwill by segment during the six months ended March 31, 2019:

 
At September 30, 2018

Goodwill from acquisitions

Other
adjustments
including currency
translations

At March 31, 2019
Home & Building Products
$
420,850

 
$
300

 
$
(577
)
 
$
420,573

Telephonics
18,545

 

 

 
18,545

Total
$
439,395

 
$
300

 
$
(577
)
 
$
439,118



15



The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:
 
 
At March 31, 2019
 
 
 
At September 30, 2018
 
Gross Carrying Amount
 
Accumulated
Amortization
 
Average
Life
(Years)
 
Gross Carrying Amount
 
Accumulated
Amortization
Customer relationships & other
$
184,582

 
$
53,771

 
23
 
$
186,031

 
$
49,822

Technology and patents
19,321

 
6,789

 
13
 
19,004

 
6,238

Total amortizable intangible assets
203,903

 
60,560

 
 
 
205,035

 
56,060

Trademarks
221,397

 

 
 
 
221,883

 

Total intangible assets
$
425,300

 
$
60,560

 
 
 
$
426,918

 
$
56,060


 
Amortization expense for intangible assets was $2,512 and $1,783 for the quarters ended March 31, 2019 and 2018, respectively, and $4,930 and $4,039 for the six months ended March 31, 2019 and 2018. Amortization expense for the remainder of 2019 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows: 2019 - $4,400; 2020 - $8,825; 2021 - $8,825; 2022 - $8,825; 2023 - $8,746; 2024 - $8,700; thereafter $95,022.
 
No event or indicator of impairment occurred during the six months ended March 31, 2019 which would require impairment testing of long-lived intangible assets including goodwill.
 
NOTE 8 – INCOME TAXES

During the three months ended March 31, 2019, the Company recognized a tax provision of $3,194 on income before taxes from continuing operations of $9,684, compared to a tax provision of $1,237 on income before taxes from continuing operations of $3,188, in the comparable prior year quarter. The current year included net discrete tax benefits of $97. The prior year quarter results included acquisition costs of $814 ($378, net of tax) and discrete and certain other tax provisions, net, that affect comparability of $368. Excluding these items, the effective tax rates for the quarters ended March 31, 2019 and 2018 were 34.0% and 32.6%, respectively.
During the six months ended March 31, 2019, the Company recognized a tax provision of $8,406 on Income before taxes from continuing operations of $23,649, compared to a tax benefit of $23,667 on Income before taxes from continuing operations of $1,115 in the comparable prior year period. The six month period ended March 31, 2019 included net discrete tax provisions of $370. The six month period ended March 31, 2018 included net discrete tax benefits of $22,650 primarily related to the December 22, 2017 Tax Cuts and Jobs Act ("TCJA") associated with the revaluation of deferred tax liabilities, $3,999 ($2,726 net of tax) of acquisition costs, and $2,614 ($248 net of tax) of charges related to cost of life insurance benefits. Excluding these items, the effective tax rates for the six months ended March 31, 2019 and 2018 were 34.0% and 33.9%, respectively.
On December 22, 2017, the TCJA was signed into law, and, among other changes, reduced the federal statutory tax rate from 35.0% to 21.0%. In accordance with U.S. GAAP for income taxes, as well as SEC Staff Accounting Bulletin No. 118 (“SAB 118”), the Company made a reasonable estimate of the impacts of the TCJA and recorded this estimate in its results for the year ended September 30, 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.





16


NOTE 9 – LONG-TERM DEBT
 
 
 
At March 31, 2019
 
At September 30, 2018
  
 
Outstanding Balance

Original Issuer Premium

Capitalized Fees & Expenses
 
Balance Sheet

Coupon Interest Rate

Outstanding Balance

Original Issuer Premium
 
Capitalized Fees & Expenses
 
Balance Sheet

Coupon Interest Rate
Senior notes due 2022
(a)
$
1,000,000

 
$
1,043

 
$
(11,066
)
 
$
989,977

 
5.25
%
 
$
1,000,000

 
$
1,220

 
$
(12,968
)
 
$
988,252

 
5.25
%
Revolver due 2021
(b)
157,936

 

 
(1,682
)
 
156,254

 
Variable

 
25,000

 

 
(1,413
)
 
23,587

 
Variable

ESOP Loans
(d)

 

 

 

 
Variable

 
34,694

 

 
(186
)
 
34,508

 
Variable

Capital lease - real estate
(e)
5,971

 

 
(68
)
 
5,903

 
5.00
%
 
7,503

 

 
(80
)
 
7,423

 
5.00
%
Non US lines of credit
(f)
17,423

 

 
(8
)
 
17,415

 
Variable

 
7,951

 

 
(16
)
 
7,935

 
Variable

Non US term loans
(f)
42,014

 

 
(182
)
 
41,832

 
Variable

 
53,533

 

 
(148
)
 
53,385

 
Variable

Other long term debt
(g)
5,640

 

 
(19
)
 
5,621

 
Variable

 
6,011

 

 
(19
)
 
5,992

 
Variable

Totals
 
1,228,984

 
1,043

 
(13,025
)
 
1,217,002

 
 

 
1,134,692

 
1,220

 
(14,830
)
 
1,121,082

 
 

less: Current portion
 
(10,807
)
 

 

 
(10,807
)
 
 

 
(13,011
)
 

 

 
(13,011
)
 
 

Long-term debt
 
$
1,218,177

 
$
1,043

 
$
(13,025
)
 
$
1,206,195

 
 

 
$
1,121,681

 
$
1,220

 
$
(14,830
)
 
$
1,108,071

 
 

 
 
Three Months Ended March 31, 2019
 
Three Months Ended March 31, 2018
 
 
Effective Interest Rate (1)

Cash Interest

Amort. Debt
Discount

Amort. Debt Issuance Costs
& Other Fees

Total Interest Expense

Effective Interest Rate (1)

Cash Interest

Amort. Debt
Premium

Amort.
Debt Issuance Costs
& Other Fees

Total Interest Expense
Senior notes due 2022
(a)
5.7
%
 
$
13,125

 
$
66

 
$
951

 
$
14,142

 
5.7
%
 
$
13,125

 
$
68

 
$
943

 
$
14,136

Revolver due 2021
(b)
Variable

 
1,631

 

 
400

 
2,031

 
Variable

 
922

 

 
140

 
1,062

Real estate mortgages
(c)
n/a

 

 

 

 

 
n/a

 
166

 

 
303

 
469

ESOP Loans
(d)
7.2
%
 
449

 

 
155

 
604

 
4.6
%
 
442

 

 
31

 
473

Capital lease - real estate
(e)
5.6
%
 
101

 

 
6

 
107

 
5.5
%
 
327

 

 
7

 
334

Non US lines of credit
(f)
Variable

 
4

 

 
4

 
8

 
Variable

 
4

 

 

 
4

Non US term loans
(f)
Variable

 
449

 

 
26

 
475

 
Variable

 
330

 

 
18

 
348

Other long term debt
(g)
Variable

 
147

 

 
3

 
150

 
Variable

 
114

 

 
1

 
115

Capitalized interest
 
 

 

 

 

 

 
 

 
(135
)
 

 

 
(135
)
Totals
 
 

 
$
15,906

 
$
66

 
$
1,545

 
$
17,517

 
 

 
$
15,295

 
$
68

 
$
1,443

 
$
16,806


(1) n/a = not applicable


17


 
 
Six Months Ended March 31, 2019
 
Six Months Ended March 31, 2018
 
 
Effective Interest Rate (1)
 
Cash Interest
 
Amort. Debt
Discount
 
Amort. Debt Issuance Costs
& Other Fees
 
Total Interest Expense
 
Effective Interest Rate
 
Cash Interest
 
Amort. Debt
Premium
 
Amort.
Debt Issuance Costs
& Other Fees
 
Total Interest Expense
Senior notes due 2022
(a)
5.7
%
 
26,250

 
134

 
1,902

 
28,286

 
5.7
%
 
26,250

 
135

 
1,882

 
28,267

Revolver due 2021
(b)
Variable

 
2,564

 

 
541

 
3,105

 
Variable

 
2,278

 

 
281

 
2,559

Real estate mortgages
(c)
n/a

 

 

 

 

 
n/a

 
351

 

 
320

 
671

ESOP Loans
(d)
6.6
%
 
937

 

 
186

 
1,123

 
4.3
%
 
855

 

 
62

 
917

Capital lease - real estate
(e)
5.5
%
 
216

 

 
12

 
228

 
10.7
%
 
491

 

 
13

 
504

Non US lines of credit
(f)
Variable

 
11

 

 
8

 
19

 
Variable

 
11

 

 
7

 
18

Non US term loans
(f)
Variable

 
897

 

 
53

 
950

 
Variable

 
664

 

 
51

 
715

Other long term debt
(g)
Variable

 
329

 

 
6

 
335

 
Variable

 
229

 

 
3

 
232

Capitalized interest
 
 

 

 

 

 

 
 

 
(238
)
 

 

 
(238
)
Totals
 
 

 
$
31,204

 
$
134

 
$
2,708

 
$
34,046

 
 

 
$
30,891

 
$
135

 
$
2,619

 
$
33,645





18



(a)
On October 2, 2017, in an unregistered offering through a private placement under Rule 144A, Griffon completed the add-on offering of $275,000 principal amount of its 5.25% senior notes due 2022, at 101.00% of par, to Griffon's previously issued $125,000 principal amount of its 5.25% senior notes due 2022, at 98.76% of par, completed on May 18, 2016 and $600,000 5.25% senior notes due 2022, at par, completed on February 27, 2014 (collectively the “Senior Notes”). As of March 31, 2019, outstanding Senior Notes due totaled $1,000,000; interest is payable semi-annually on March 1 and September 1. The net proceeds of the $275,000 add-on offering were used to acquire ClosetMaid with the remaining proceeds used to pay down outstanding loan borrowings under Griffon's Revolving Credit Facility (the "Credit Agreement"). The net proceeds of the previously issued $125,000 add-on offering were used to pay down outstanding revolving loan borrowings under the Credit Agreement.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On February 5, 2018, July 20, 2016 and June 18, 2014, Griffon exchanged all of the $275,000, $125,000 and $600,000 Senior Notes, respectively, for substantially identical Senior Notes registered under the Securities Act via an exchange offer. The fair value of the Senior Notes approximated $985,770 on March 31, 2019 based upon quoted market prices (level 1 inputs). In connection with the issuance and exchange of the $275,000 senior notes, Griffon capitalized $8,472 of underwriting fees and other expenses; this is in addition to the $13,329 capitalized under previously issued $600,000 Senior Notes. All capitalized fees for the Senior Notes will amortize over the term of the notes and, at March 31, 2019, $11,066 remained to be amortized.

(b)
On March 22, 2016, Griffon amended the Credit Agreement to increase the commitments under the credit facility from $250,000 to $350,000, extend its maturity date from March 13, 2020 to March 22, 2021 and modify certain other provisions of the facility. On October 2, 2017 and on May 31, 2018, Griffon amended the Credit Agreement in connection with the ClosetMaid and CornellCookson acquisitions, respectively to, among other things, modify the net leverage covenant. On February 22, 2019, Griffon further amended the Revolving Credit Facility to, among other things, reflect changes in the lending group and certain corresponding changes in various administrative roles under the Revolving Credit Facility, make conforming administrative and technical changes and reflect changes in law. The facility includes a letter of credit sub-facility with a limit of $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, subject to final maturity of the facility or the occurrence of an event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.75% for base rate loans and 2.75% 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 March 31, 2019, under the Credit Agreement, there were $157,936 outstanding borrowings; outstanding standby letters of credit were $16,081; and $175,983 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 amounts of $32,280 and $8,000, respectively, and 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 rate of LIBOR plus 1.50%. The loans were paid off during the year ended September 30, 2018.

(d)
In August 2016, Griffon’s ESOP entered into an agreement that refinanced the existing ESOP loan into a new Term Loan in the amount of $35,092 (the "Agreement"). The Agreement also provided for a Line Note with $10,908 available to purchase shares of Griffon common stock in the open market. During 2017, Griffon's ESOP purchased 621,875 shares of common stock for a total of $10,908 or $17.54 per share, under a borrowing line that has now been fully utilized. On June 30, 2017, the Term Loan and Line Note were combined into a single Term Loan. The Term Loan interest rate was LIBOR plus 2.91%. The Term Loan required quarterly principal payments of $569 and a balloon payment due at maturity. As a result of the special cash dividend of $1.00 per share, paid on April 16, 2018, the outstanding balance of the Term Loan was reduced by $5,705. 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 on its $350,000 credit facility. The internal loan interest rate is fixed at 2.91%, matures in June 2033

19


and requires quarterly payments of principal, currently $569, and interest. The internal loan is secured by shares purchased with the proceeds of the loan. The amount outstanding on the internal loan at March 31, 2019 was $33,556.
  
(e)
Two Griffon subsidiaries have capital leases outstanding for real estate located in Troy, Ohio and Ocala, Florida. The leases mature in 2021 and 2022, respectively, and bear interest at fixed rates of approximately 5.0% and 8.0%, 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. At March 31, 2019, $5,903 was outstanding, net of issuance costs.
 
(f)
In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 ($11,174 as of March 31, 2019) revolving credit facility.  The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (3.79% LIBOR USD and 3.14% Bankers Acceptance Rate CDN as of March 31, 2019). The revolving facility matures in October 2019. Garant is required to maintain a certain minimum equity.  At March 31, 2019, there were no borrowings under the revolving credit facility with CAD 15,000 ($11,174 as of March 31, 2019) available for borrowing.

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries ("Griffon Australia") entered into an AUD 30,000 term loan and an AUD 10,000 revolver. The term loan refinanced two existing term loans and the revolver replaced two existing lines. In December 2016, the amount available under the revolver was increased from AUD 10,000 to AUD 20,000 and, in March 2017 and September 2017, the term loan commitment was increased by AUD 5,000 and AUD 15,000, respectively. In March 2019, the term loan commitment was reduced by AUD $10,000 with proceeds from a receivable purchase agreement in the amount of AUD 10,000. The term loan requires quarterly principal payments of AUD 1,250 plus interest with a balloon payment of AUD 13,375 due upon maturity in March 2022, and accrues interest at Bank Bill Swap Bid Rate “BBSY” plus 1.90% per annum (3.62% at March 31, 2019). As of March 31, 2019, the term loan had an outstanding balance of AUD 28,375 ($20,104 as of March 31, 2019). The revolving facility and receivable purchase facility mature in March 2020, but are renewable upon mutual agreement with the lender. The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.8% and 1.0%, respectively, per annum (3.55% and 2.75%, respectively, at March 31, 2019). At March 31, 2019, the revolver and receivable purchase facilities had outstanding balances of AUD 6,000 and AUD 10,000, respectively ($4,251 and $7,085, respectively, as of March 31, 2019). The revolver, receivable purchase facility and the term loan are all secured by substantially all of the assets of Griffon Australia and its subsidiaries. Griffon Australia is required to maintain a certain minimum equity level and is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

In July 2018, the AMES Companies UK Ltd and its subsidiaries ("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 350 and GBP 83 plus interest, respectively, and have balloon payments due upon maturity, July 2023, of GBP 7,000 and GBP 2,333, respectively. The Term Loan and Mortgage Loans accrue interest at the GBP LIBOR Rate plus 2.25% and 1.8%, respectively (3.10% and 2.65% at March 31, 2019, respectively). The revolving facility matures in July 2019, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.5% (2.25% as of March 31, 2019). As of March 31, 2019, the revolver had an outstanding balance of GBP 4,639 ($6,087 as March 31, 2019) while the term and mortgage loan balances amounted to GBP $16,698 ($21,910 as of March 31, 2019). 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.

(g)
Other long-term debt consists primarily of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of capital leases.
At March 31, 2019, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.


20


NOTE 10 — SHAREHOLDERS’ EQUITY
 
During 2019, the Company paid a quarterly cash dividend of $0.0725 per share in each quarter, totaling $0.145 per share for the six months ended March 31, 2019. During 2018, the Company paid a quarterly cash dividend of $0.07 per share, totaling $0.28 per share for the year. In addition, on March 7, 2018, the Board of Directors declared a special cash dividend of $1.00 per share, totaling $38,073, paid on April 16, 2018 to shareholders of record as of the close of business on March 29, 2018. 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. In March 2019, the ESOP Term Loan was refinanced with a loan from Griffon which was funded with cash and a draw on its $350,000 credit facility, and dividend paid on allocated shares in the ESOP are allocated to participant accounts in the form of additional shares.

On May 2, 2019, the Board of Directors declared a quarterly cash dividend of $0.0725 per share, payable on June 20, 2019 to shareholders of record as of the close of business on May 24, 2019.

Compensation expense for restricted stock is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria. Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years, is recognized using the straight-line attribution method and recorded within SG&A expenses.
 
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. Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, 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. The maximum number of shares of common stock available for award under the Incentive Plan is 3,350,000 (600,000 of which may be issued as incentive stock options), plus (i) any shares reserved for issuance under the 2011 Equity Incentive Plan as of the effective date of the Incentive Plan, and (ii) any shares underlying awards outstanding on such effective date under the 2011 Incentive Plan that are canceled or forfeited. As of March 31, 2019, there were 276,442 shares available for grant.

All grants outstanding under former equity plans will continue under their terms; no additional awards will be granted under such plans.

During the first quarter of 2019, Griffon granted 1,194,538 shares of restricted stock and restricted stock units. This included 666,538 shares of restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of three years, with a total fair value of $8,105, or a weighted average fair value of $12.16 per share. This also included 528,000 shares of restricted stock granted to two senior executives with a vesting period of four years and a two year post-vesting holding period, subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon's common stock. So long as the minimum performance condition is attained, the amount of shares that can vest will range from 384,000 to 528,000. The total fair value of these restricted shares is approximately $3,576, or a weighted average fair value of $6.77. During the second quarter, Griffon granted 62,227 restricted shares, subject to certain performance conditions, with a vesting period of three years and a fair value of $990, or a weighted average fair value of $15.91 per share.

For the quarters ended March 31, 2019 and 2018, stock based compensation expense totaled $3,422 and $2,365, respectively. For the six months ended March 31, 2019 and 2018, stock based compensation expense totaled $6,355 and $4,920, respectively.

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 this share repurchase program, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter and six months ended March 31, 2019, Griffon purchased 8,200 and 37,500 shares, respectively, of common stock under these repurchase programs, for a total of $82 or $9.95 per share, and $372 or $9.92 per share, respectively. As of March 31, 2019, an aggregate of $57,955 remains under Griffon's Board authorized repurchase programs.


21


In addition, during the quarter and six months ended March 31, 2019, 2,714 shares, with a market value of $49 or $17.90 per share, and 85,847 shares, with a market value of $1,059, or $12.34 per share, respectively, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock. During the first quarter ended December 31, 2018, an additional 3,861 shares, with a market value of $47, or $12.16 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.


NOTE 11 – EARNINGS PER SHARE (EPS)
 
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.
 
The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Weighted average shares outstanding - basic
40,949

 
41,477

 
40,849

 
41,700

Incremental shares from stock based compensation
1,883

 
1,288

 
1,527

 
1,362

Weighted average shares outstanding - diluted
42,832

 
42,765

 
42,376

 
43,062

 
 
 
 
 
 
 
 

 


NOTE 12 – BUSINESS SEGMENTS

Griffon’s reportable segments from continuing operations are as follows:

HBP is a global provider of long-handled tools and landscaping products for homeowners and professionals; a leading North American manufacturer and marketer of wood and wire closet organization, general living storage and wire garage storage products to home center retail chains, mass merchandisers, and direct-to builder professional installers; a leading manufacturer and marketer of residential and commercial garage doors to professional dealers and to some of the largest home center retail chains in North America; as well as a leading U.S. manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional, and retail use.

Defense Electronics segment consists of Telephonics, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Clopay Plastics Products Company, Inc. ("PPC") and on February 6, 2018, completed the sale to Berry Global Group, Inc. ("Berry") . As a result, Griffon classified the results of operations of the PPC 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 PPC unless otherwise noted. See Note 15, Discontinued Operations to the Notes of the Financial Statements.

On June 4, 2018, CBP acquired CornellCookson, a leading US manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional and retail use. The accounts, affected for preliminary 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.

22


Information on Griffon’s reportable segments from continuing operations is as follows:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
REVENUE
2019
 
2018
 
2019
 
2018
Home & Building Products:
 

 
 

 
 

 
 

AMES
$
287,732

 
$
258,196

 
$
504,206

 
$
474,938

CBP
186,799

 
138,112

 
410,094

 
292,348

Home & Building Products
474,531

 
396,308

 
914,300

 
767,286

Defense Electronics
75,102

 
82,252

 
145,855

 
148,577

Total consolidated net sales
$
549,633

 
$
478,560

 
$
1,060,155

 
$
915,863



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.
The following table presents revenue disaggregated by end market and segment:
 
For the Quarter Ended March 31, 2019
 
For the Six Months Ended March 31, 2019
Residential repair and remodel
$
128,711

 
$
269,236

Retail
162,576

 
275,941

Commercial construction
76,181

 
160,557

Residential new construction
33,892

 
73,716

Industrial
11,416

 
21,174

International excluding North America
61,755

 
113,676

Total Home and Building Products segment
474,531

 
914,300

U.S. Government
46,376

 
91,936

International
23,129

 
45,228

Commercial
5,597

 
8,691

Total Defense Electronics segment
75,102

 
145,855

Total Consolidated Revenue
$
549,633

 
$
1,060,155

The following table presents revenue disaggregated by geography based on the location of the Company's customer:
 
For the Three Months Ended March 31, 2019
Revenue by Geographic Area - Destination
Home & Building Products
 
Defense Electronics
Total
United States
$
380,390

 
$
51,179

$
431,569

Europe
20,372

 
8,490

28,862

Canada
25,828

 
3,058

28,886

Australia
42,016

 
979

42,995

All other countries
5,925

 
11,396

17,321

Consolidated revenue
$
474,531

 
$
75,102

$
549,633




23


 
For the Six Months Ended March 31, 2019
Revenue by Geographic Area - Destination
Home & Building Products
 
Defense Electronics
Total
United States
$
733,133

 
$
99,474

$
832,607

Europe
28,254

 
18,801

47,055

Canada
56,175

 
5,687

61,862

Australia
86,238

 
1,588

87,826

All other countries
10,500

 
20,305

30,805

Consolidated revenue
$
914,300

 
$
145,855

$
1,060,155


The following table reconciles segment operating profit to Income (loss) before taxes from continuing operations:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
INCOME BEFORE TAXES FROM CONTINUING OPERATIONS
2019
 
2018
 
2019
 
2018
Segment operating profit:
 

 
 

 
 

 
 

Home & Building Products
$
36,021

 
$
28,478

 
$
75,566

 
$
56,229

Defense Electronics
2,315

 
1,302

 
4,464

 
2,782

Segment operating profit from continuing operations
38,336

 
29,780

 
80,030

 
59,011

Net interest expense
(17,305
)
 
(16,044
)
 
(33,636
)
 
(32,686
)
Unallocated amounts
(11,347
)
 
(10,541
)
 
(22,745
)
 
(20,977
)
Acquisition costs

 
(7
)
 

 
(1,619
)
Cost of life insurance benefit

 

 

 
(2,614
)
Income before taxes from continuing operations
$
9,684

 
$
3,188

 
$
23,649

 
$
1,115



Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors for the same reason.


24


The following table provides a reconciliation of Segment adjusted EBITDA to Income (loss) before taxes from continuing operations:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Segment adjusted EBITDA:
 

 
 

 
 

 
 

Home & Building Products
$
48,753

 
$
39,789

 
$
100,613

 
$
79,246

Defense Electronics
4,936

 
3,997

 
9,721

 
8,196

Total Segment adjusted EBITDA
53,689

 
43,786

 
110,334

 
87,442

Net interest expense
(17,305
)
 
(16,044
)
 
(33,636
)
 
(32,686
)
Segment depreciation and amortization
(15,353
)
 
(13,199
)
 
(30,304
)
 
(26,051
)
Unallocated amounts
(11,347
)
 
(10,541
)
 
(22,745
)
 
(20,977
)
Acquisition costs

 
(814
)
 

 
(3,999
)
Cost of life insurance benefit

 

 

 
(2,614
)
Income before taxes from continuing operations
$
9,684

 
$
3,188

 
$
23,649

 
$
1,115



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

For the Three Months Ended March 31,

For the Six Months Ended March 31,
DEPRECIATION and AMORTIZATION
2019

2018

2019

2018
Segment:
 

 

 

 
Home & Building Products
$
12,732

 
$
10,504

 
$
25,047

 
$
20,637

Defense Electronics
2,621

 
2,695

 
5,257

 
5,414

Total segment depreciation and amortization
15,353

 
13,199

 
30,304

 
26,051

Corporate
139

 
114

 
273

 
220

Total consolidated depreciation and amortization
$
15,492

 
$
13,313

 
$
30,577

 
$
26,271













CAPITAL EXPENDITURES
 


 


 


 

Segment:
 


 


 


 

Home & Building Products
$
6,330

 
$
8,192

 
$
13,475

 
$
14,850

Defense Electronics
2,499

 
2,442

 
3,733

 
4,385

Total segment
8,829

 
10,634

 
17,208

 
19,235

Corporate
192

 
209

 
210

 
2,393

Total consolidated capital expenditures
$
9,021

 
$
10,843

 
$
17,418

 
$
21,628



25


ASSETS
At March 31, 2019

At September 30, 2018
Segment assets:
 

 
Home & Building Products
$
1,729,199

 
$
1,631,631

Defense Electronics
325,179

 
346,907

Total segment assets
2,054,378

 
1,978,538

Corporate
86,305

 
103,112

Total continuing assets
2,140,683

 
2,081,650

Assets of discontinued operations
3,225

 
3,240

Consolidated total
$
2,143,908

 
$
2,084,890



NOTE 13 – EMPLOYEE BENEFIT PLANS

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changed certain presentation and disclosure requirements for employers that sponsor defined benefit and post-retirement pension plans. The new standard requires the service cost component of the net benefit cost to be in the same line item as other compensation in operating income and the other components of net benefit plan cost, including interest costs, amortization of prior service costs and recognized actuarial costs to be presented outside of operating income on a retrospective basis. The standard was effective for fiscal years beginning after December 15, 2017. The Company adopted the requirements of the standard in the first quarter of 2019 on a retrospective basis reclassifying the other components of the net periodic benefit plan costs from Selling, general and administrative expenses to a non-service expense within Other income (expense). The defined benefit and post-retirement pension plans did not have a service cost component. The Company utilized a practical expedient included in the accounting guidance which allowed the Company to use amounts previously disclosed in its pension and other post-retirement benefits note for the prior period as the estimation basis for applying the required retrospective presentation requirements.

The Company’s non-service cost components of net periodic benefit plan cost was a benefit of $787 and $882 during the three months ended March 31, 2019 and 2018, respectively and $1,574 and $1,764 during the six months ended March 31, 2019 and 2018, respectively. The impact of this adoption resulted in a reclassification to the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended March 31, 2018, in which previously reported selling, general and administrative expenses was increased by $882 and $1,764, respectively, with a corresponding offset to Other income (expense).

The remaining provisions of the standard did not have a material impact on our financial position, results of operations or liquidity.

Defined benefit pension expense (income) was as follows:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Interest cost
$
1,571

 
$
1,407

 
$
3,141

 
$
2,814

Expected return on plan assets
(2,583
)
 
(2,639
)
 
(5,166
)
 
(5,278
)
Amortization:
 

 
 

 
 

 
 

Prior service cost
3

 
4

 
7

 
8

Recognized actuarial loss
222

 
346

 
444

 
692

Net periodic expense (income)
$
(787
)
 
$
(882
)
 
$
(1,574
)
 
$
(1,764
)


As a result of the passing of our Chairman of the Board, who participated in a Supplemental Executive Retirement Plan relating to his tenure as Chief Executive Officer (a position from which he retired in 2008), the pension benefit liability was reduced by $13,715 at December 31, 2017, with the offset, net of tax, recorded in Other Comprehensive Income.

26

Table of Contents
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)
(Unaudited)
(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)



NOTE 14 – RECENT ACCOUNTING PRONOUNCEMENTS
In May 2017, the FASB issued guidance to address the situation when a company modifies the terms of a stock compensation award previously granted to an employee. This guidance is effective, and should be applied prospectively, for fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period. The new guidance is effective for the Company beginning in fiscal 2019. The Company adopted this guidance as of October 1, 2018 and it did not have a material impact on the Company's financial condition, results of operations and related disclosures.
In March 2017, the FASB issued amendments to the Compensation - Retirement Benefits guidance which requires companies to retrospectively present the service cost component of net periodic benefit cost for pension and retiree medical plans along with other compensation costs in operating income and present the other components of net periodic benefit cost below operating income in the income statement. The guidance also allows only the service cost component of net periodic benefit cost to be eligible for capitalization within inventory or fixed assets on a prospective basis. This guidance was effective for fiscal years beginning after December 15, 2017. The Company adopted the requirements of the standard in the first quarter of 2019 on a retrospective basis reclassifying the other components of the net periodic benefit costs from Selling, general and administrative expenses to a non-service expense within Other (income) expense, net. This guidance did not have a material impact on the Company's results of operations. See Note 13 - Employee Benefit Plans for further information on the implementation of this guidance.

In January 2017, the FASB issued guidance that clarifies the definition of a business, which will impact many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The new standard is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods and will be effective for the Company beginning in fiscal 2019. The Company adopted the requirements of the standard in the first quarter of 2019 and it did not have a material impact on the Company's financial condition, results of operations and related disclosures.

In August 2016, the FASB issued guidance on the Statement of Cash Flows Classification of certain cash receipts and cash payments (a consensus of the FASB Emerging Issues Task Force). This guidance addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This guidance will be effective for the Company beginning in fiscal 2019. The Company adopted the requirements of the standard in the first quarter of 2019 and it did not have a material impact on the Company's financial condition, results of operations and cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) which supersedes nearly all existing revenue recognition guidance. Subsequent to the issuance of Topic 606, the FASB clarified the guidance through several ASUs; hereinafter the collection of revenue guidance is referred to as “ASC 606”. The core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On October 1, 2018, the Company adopted ASC 606 using the modified retrospective method for all contracts. Results for reporting periods beginning October 1, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605, Revenue Recognition. The Company recorded a net increase to beginning retained earnings of approximately $5,673 as of October 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to beginning retained earnings primarily related to certain contracts in the Defense Electronics Segment containing provisions for radar and communication products that have an alternative use and/or no right to payment.
The adoption of ASC 606 did not have a material impact on the Company’s Consolidated Condensed Financial Statements as of and for the three month period ended December 31, 2018. See Note 3 - Revenue for additional disclosures required by ASC 606.

27


Issued but not yet effective accounting pronouncements

In February 2018, the FASB issued guidance that allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act (the Tax 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. The new standard is effective for the Company beginning in 2020, 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.
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.

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 October 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect this guidance to have a material impact on the Company's financial condition, results of operations and related disclosures.

In February 2016, the FASB issued guidance on lease accounting requiring lessees to recognize a right-of-use asset and a lease liability for long-term leases. The liability will be equal to the present value of lease payments. This guidance must be applied using a modified retrospective transition approach to all annual and interim periods presented and is effective for the Company beginning in 2020. We are currently evaluating the impact of the guidance 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.


28



NOTE 15 – DISCONTINUED OPERATIONS
 
During the quarter ended March 31, 2019, Griffon recorded an $11,000 charge ($7,646, net of tax) to discontinued operations. The charge consisted primarily of a purchase price adjustment to resolve a claim related to the $475,000 PPC divestiture and included an additional reserve for a legacy environmental matter.

The following amounts summarize the total assets and liabilities of PPC 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 not held for sale in the Condensed Consolidated Balance Sheets:
 
At March 31, 2019
 
At September 30, 2018
Assets of discontinued operations:
 
 
 
Prepaid and other current assets
$
324

 
$
324

Other long-term assets
2,901

 
2,916

Total assets of discontinued operations
$
3,225

 
$
3,240

 
 
 
 
Liabilities of discontinued operations:
 

 
 

Accrued liabilities, current
$
11,657

 
$
7,210

Other long-term liabilities
2,307

 
2,647

Total liabilities of discontinued operations
$
13,964

 
$
9,857



At March 31, 2019, Griffon's assets and liabilities for PPC and Installations Services and other discontinued operations primarily related to the above matter, insurance claims, income tax and product liability, warranty and environmental reserves totaling liabilities of approximately of $13,964.

PPC

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell PPC and on February 6, 2018, completed the sale to Berry for $465,000, net of certain post-closing adjustments. As a result, Griffon classified the results of operations of the PPC 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 PPC unless otherwise noted. PPC 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 PPC, the Company recorded a gain of $117,625 ($86,357, net of tax) during the quarter ended March 31, 2018. The tax computed on the PPC gain is preliminary and is subject to finalization.
  
Summarized results of the Company’s discontinued operations are as follows:
 
 
For the Three Months Ended March 31, 2018
 
For the Six Months Ended March 31, 2018
 
Revenue
 
$
45,832

 
$
166,262

 
Cost of goods and services
 
36,157

 
132,100

 
Gross profit
 
9,675

 
34,162

 
Selling, general and administrative expenses
 
13,995

 
26,103

 
Income (loss) from discontinued operations
 
(4,320
)
 
8,059

 
Other income (expense)
 
 

 
 
 
Gain on sale of business
 
117,625

 
117,625

 
Interest expense, net
 
(95
)
 
(155
)
 
Other, net
 
166

 
(687
)
 
Total other income (expense)
 
117,696

 
116,783

 
Income from operations of discontinued operations
 
$
113,376

 
$
124,842

 


29



Installation Services and Other Discontinued Activities

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all operating activities of its Installation Services segment which sold, installed and serviced garage doors and openers, fireplaces, floor coverings, cabinetry
and a range of related building products, primarily for the new residential housing market. Griffon substantially concluded its remaining disposal activities in 2009.

Installation Services operating results have been reported as discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented; Installation Services is excluded from segment reporting. There was no Installation Services revenue or income for the six months ended March 31, 2019 and 2018.
 
In 2017, Griffon recorded $5,700 of reserves in discontinued operations related to historical environmental remediation efforts and to increase the reserve for homeowner association claims (HOA) related to the Clopay Services Corporation discontinued operations in 2008.

NOTE 16 – OTHER INCOME (EXPENSE)
 
For the quarters ended March 31, 2019 and 2018, Other income (expense) includes $(118) and $217, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $108 and $1,266, respectively, of net investment income.

For the six months ended March 31, 2019 and 2018, Other income (expense) includes $384 and $(219), respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $31 and $1,261, respectively, of net investment income.

Additionally, during the quarters ended March 31, 2019 and 2018, Other income (expense) included net periodic benefit plan income of $787 and $882, respectively. During the six months ended March 31, 2019 and 2018, Other income (expense) included net periodic benefit plan income of $1,574 and $1,764, respectively. Effective October 1, 2018, these benefits amounts are required to be included in other income; in the past these were in Selling, general and administrative expenses, as a result of implementation of the new accounting standard on pensions. All periods have been restated. See Note 13 - Employee Benefit Plans for further information on the implementation of this guidance.


NOTE 17 – WARRANTY LIABILITY
 
Telephonics 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. CBP 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 AMES, CBP and Telephonics 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. AMES offers an express limited warranty for a period of ninety days on all products from the date of original purchase unless otherwise stated on the product or packaging from the date of original purchase.


30


Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Balance, beginning of period
$
9,041

 
$
6,055

 
$
8,174

 
$
6,236

Warranties issued and changes in estimated pre-existing warranties
4,700

 
1,637

 
8,761

 
3,112

Actual warranty costs incurred
(5,730
)
 
(1,434
)
 
(8,924
)
 
(3,926
)
Other warranty liabilities assumed from acquisitions

 

 

 
836

Balance, end of period
$
8,011

 
$
6,258

 
$
8,011

 
$
6,258



NOTE 18 – OTHER COMPREHENSIVE INCOME (LOSS)
 
The amounts recognized in other comprehensive income (loss) were as follows:
 
 
Three Months Ended March 31, 2019
 
Three Months Ended March 31, 2018
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
2,885

 
$

 
$
2,885

 
$
19,714

 
$

 
$
19,714

Pension and other defined benefit plans
201

 
(17
)
 
184

 
376

 
(129
)
 
247

Cash flow hedges
(264
)
 
75

 
(189
)
 
616

 
(176
)
 
440

Total other comprehensive income (loss)
$
2,822

 
$
58

 
$
2,880

 
$
20,706

 
$
(305
)
 
$
20,401

 
Six Months Ended March 31, 2019
 
Six Months Ended March 31, 2018
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
(2,851
)
 
$

 
$
(2,851
)
 
$
18,425

 
$

 
$
18,425

Pension and other defined benefit plans
472

 
(104
)
 
368

 
14,620

 
(4,814
)
 
9,806

Cash flow hedges
(107
)
 
20

 
(87
)
 
746

 
(218
)
 
528

Total other comprehensive income (loss)
$
(2,486
)
 
$
(84
)
 
$
(2,570
)
 
$
33,791

 
$
(5,032
)
 
$
28,759


The components of Accumulated other comprehensive income (loss) are as follows:
 
March 31, 2019
 
September 30, 2018
Foreign currency translation adjustments
$
(25,675
)
 
$
(22,824
)
Pension and other defined benefit plans
(11,391
)
 
(11,759
)
Change in Cash flow hedges
384

 
471

 
$
(36,682
)
 
$
(34,112
)

31



Amounts reclassified from accumulated other comprehensive income (loss) to income were as follows:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
Gain (Loss)
2019
 
2018
 
2019
 
2018
Pension amortization
$
(225
)
 
$
(350
)
 
$
(451
)
 
$
(700
)
Cash flow hedges
310

 
(34
)
 
992

 
(40
)
Removal of PPC foreign currency translation

 
14,866

 

 
14,866

Total gain (loss)
85

 
14,482

 
541

 
14,126

Tax benefit (expense)
(18
)
 
(3,357
)
 
(114
)
 
(3,400
)
Total
$
67

 
$
11,125

 
$
427

 
$
10,726



NOTE 19 — COMMITMENTS AND CONTINGENCIES
 
Legal and environmental

Department of Environmental Conservation of New York State (“DEC”), with ISC Properties, Inc. Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at a location in Peekskill in the Town of Cortlandt, New York (the “Peekskill Site”) owned by ISC Properties, Inc. (“ISC”), a wholly-owned subsidiary of Griffon. ISC sold the Peekskill Site in November 1982.

Subsequently, ISC was advised by the DEC that random sampling at the Peekskill Site and in a creek near the Peekskill Site indicated concentrations of solvents and other chemicals common to Lightron’s prior plating operations. ISC then entered into a consent order with the DEC in 1996 (the “Consent Order”) to perform a remedial investigation and prepare a feasibility study. After completing the initial remedial investigation pursuant to the Consent Order, ISC was required by the DEC, and did accordingly conduct over the next several years, supplemental remedial investigations, including soil vapor investigations, under the Consent Order.

In April 2009, the DEC advised ISC’s representatives 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. With the acceptance of these reports, ISC completed the remedial investigation required under the Consent Order and was authorized, accordingly, by the DEC to conduct the Feasibility Study required by the Consent Order. Pursuant to the requirements of the Consent Order and its obligations thereunder, ISC, without acknowledging any responsibility to perform any remediation at the Site, submitted to the DEC in August 2009, a draft feasibility study which recommended for the soil, groundwater and sediment media, remediation alternatives having a current net capital cost value, in the aggregate, of approximately $5,000.  In February 2011, DEC advised ISC it has accepted and approved the feasibility study. Accordingly, ISC has no further obligations under the consent order.
 
Upon acceptance of the feasibility study, DEC issued a Proposed Remedial Action Plan (“PRAP”) that sets forth the proposed remedy for the site. The PRAP accepted the recommendation contained in the feasibility study for remediation of the soil and groundwater media, but selected a different remediation alternative for the sediment medium. After receiving public comments on the PRAP, the DEC issued a Record of Decision (“ROD”) in June 2011 that set forth the specific remedies selected and responded to public comments. The remedies selected by the DEC in the ROD are the same remedies as those set forth in the PRAP. At the time of adoption of the ROD, the approximate cost of the remedy proposed by DEC in the PRAP was approximately $10,000.
 
In 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 (the “NPL”). In this letter, the DEC also indicated that it conducted subsequent investigative work that resulted in findings suggesting that the extent of contamination is greater than what was assumed at the time the ROD was issued.  Based on the DEC’s request and on an analysis by a consultant retained by the EPA, the EPA then published a notice in the Federal Register proposing to add the Peekskill Site to the NPL under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

Should the Peekskill Site be added to the NPL, it is uncertain what subsequent action the EPA will take. The EPA may, on its own or through the use of consultants, perform further studies of the site and/or subsequently remediate the site, and in such event would likely seek reimbursement for the costs incurred from potentially responsible parties (“PRPs”). Alternatively, the EPA could enter into negotiations with the PRPs to request that the PRPs perform further studies and/or remediate the site.

32



Griffon does not acknowledge any responsibility to perform any remediation at the Peekskill Site.

Improper Advertisement Claim involving Union Tools® Products.  Beginning in December 2004, a customer of AMES had been named in various litigation matters relating to certain Union Tools products. The plaintiffs in those litigation matters asserted causes of action against the customer of AMES for improper advertisement to end consumers. The allegations suggested that advertisements led the consumers to believe that Union Tools’ hand tools were wholly manufactured within boundaries of the United States.  The complaints asserted various causes of action against the customer of AMES under federal and state law, including common law fraud. At some point, the customer may seek indemnity (including recovery of its legal fees and costs) against AMES for an unspecified amount. Presently, AMES cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against AMES.

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 has entered into an Order on Consent with the New York State Department of Environmental Conservation. While the Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site, AMES is required to perform a remedial investigation of certain portions of the property and to recommend a remediation option. At the conclusion of the remediation phase to the satisfaction of the DEC, the DEC will issue a Certificate of Completion. AMES has performed significant investigative and remedial activities in the last few years under work plans approved by the DEC, and the DEC has approved the final remedial investigation and feasibility study reports. AMES’ recommended remedial option of excavation and offsite disposal of lead contaminated soils, capping of other areas of the site impacted by other metals and performing limited groundwater monitoring was accepted by the DEC in a Record of Decision issued March 1, 2018. The DEC recently approved a final design and implementation work plan. Implementation of the selected remedial alternative is expected to begin in mid-2019. 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.

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.

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.



33


NOTE 20 — CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the domestic assets of Clopay Building Products Company, Inc., Telephonics Corporation, The AMES Companies, Inc., ATT Southern LLC, Clopay Ames True Temper 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 March 31, 2019 and September 30, 2018 and for the three months ended March 31, 2019 and 2018. The financial information may not necessarily be indicative of the results of operations or financial position of the guarantor companies or non-guarantor companies had they 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”) contains 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.


34


CONDENSED CONSOLIDATING BALANCE SHEETS
At March 31, 2019
 
($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and equivalents
$
5,067

 
$
31,858

 
$
21,054

 
$

 
$
57,979

Accounts receivable, net of allowances

 
288,362

 
55,687

 

 
344,049

Contract costs and recognized income not yet billed, net of progress payments

 
82,811

 
1,093

 

 
83,904

Inventories, net

 
389,223

 
67,835

 
13

 
457,071

Prepaid and other current assets
17,735

 
19,910

 
5,761

 
2,372

 
45,778

Assets of discontinued operations

 

 
324

 

 
324

Total Current Assets
22,802

 
812,164

 
151,754

 
2,385

 
989,105

PROPERTY, PLANT AND EQUIPMENT, net
1,005

 
291,449

 
40,398

 

 
332,852

GOODWILL

 
394,056

 
45,062

 

 
439,118

INTANGIBLE ASSETS, net
93

 
278,055

 
86,592

 

 
364,740

INTERCOMPANY RECEIVABLE
122,555

 
679,010

 
66,931

 
(868,496
)
 

EQUITY INVESTMENTS IN SUBSIDIARIES
1,552,035

 
512,201

 
3,045,503

 
(5,109,739
)
 

OTHER ASSETS
7,180

 
16,774

 
(2,079
)
 
(6,683
)
 
15,192

ASSETS OF DISCONTINUED OPERATIONS

 

 
2,901

 

 
2,901

Total Assets
$
1,705,670

 
$
2,983,709

 
$
3,437,062

 
$
(5,982,533
)
 
$
2,143,908

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Notes payable and current portion of long-term debt
$

 
$
3,495

 
$
7,312

 
$

 
$
10,807

Accounts payable and accrued liabilities
17,409

 
292,428

 
31,439

 
2,444

 
343,720

Liabilities of discontinued operations

 

 
11,657

 

 
11,657

Total Current Liabilities
17,409

 
295,923

 
50,408

 
2,444

 
366,184

 
 
 
 
 
 
 
 
 
 
LONG-TERM DEBT, net
1,146,231

 
4,378

 
55,586

 

 
1,206,195

INTERCOMPANY PAYABLES
56,415

 
381,703

 
421,184

 
(859,302
)
 

OTHER LIABILITIES
11,331

 
69,856

 
17,401

 
(3,650
)
 
94,938

LIABILITIES OF DISCONTINUED OPERATIONS

 

 
2,307

 

 
2,307

Total Liabilities
1,231,386

 
751,860

 
546,886

 
(860,508
)
 
1,669,624

SHAREHOLDERS’ EQUITY
474,284

 
2,231,849

 
2,890,176

 
(5,122,025
)
 
474,284

Total Liabilities and Shareholders’ Equity
$
1,705,670

 
$
2,983,709

 
$
3,437,062

 
$
(5,982,533
)
 
$
2,143,908




35


CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2018

($ in thousands)
Parent
Company
 
Guarantor
Companies
 
Non-Guarantor
Companies
 
Elimination
 
Consolidation
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and equivalents
$
15,976

 
$
16,353

 
$
37,429

 
$

 
$
69,758

Accounts receivable, net of allowances

 
234,885

 
69,729

 
(24,105
)
 
280,509

Contract costs and recognized income not yet billed, net of progress payments

 
121,393

 
410

 

 
121,803

Inventories, net

 
332,067

 
66,373

 
(81
)
 
398,359

Prepaid and other current assets
12,179

 
21,313

 
6,168

 
2,461

 
42,121

Assets of discontinued operations

 

 
324

 

 
324

Total Current Assets
28,155

 
726,011

 
180,433

 
(21,725
)
 
912,874

 
 
 
 
 
 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
936

 
299,920

 
41,636

 

 
342,492

GOODWILL
6,646

 
361,507

 
71,242

 

 
439,395

INTANGIBLE ASSETS, net
93

 
293,093

 
77,672

 

 
370,858

INTERCOMPANY RECEIVABLE
56,396

 
314,394

 
(121,445
)
 
(249,345
)
 

EQUITY INVESTMENTS IN SUBSIDIARIES
1,528,932

 
968,330

 
3,347,894

 
(5,845,156
)
 

OTHER ASSETS
8,651

 
15,942

 
374

 
(8,612
)
 
16,355

ASSETS OF DISCONTINUED OPERATIONS

 

 
2,916

 

 
2,916

Total Assets
$
1,629,809

 
$
2,979,197

 
$
3,600,722

 
$
(6,124,838
)
 
$
2,084,890

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Notes payable and current portion of long-term debt
$
2,276

 
$
3,398

 
$
7,337

 
$

 
$
13,011

Accounts payable and accrued liabilities
26,639

 
303,154

 
59,531

 
(16,474
)
 
372,850

Liabilities of discontinued operations

 
(22,327
)
 
29,537

 

 
7,210

Total Current Liabilities
28,915

 
284,225

 
96,405

 
(16,474
)
 
393,071

LONG-TERM DEBT, net
1,044,071

 
6,110

 
57,890

 

 
1,108,071

INTERCOMPANY PAYABLES
66,058

 
(77,760
)
 
263,227

 
(251,525
)
 

OTHER LIABILITIES
16,374

 
73,391

 
20,592

 
(3,647
)
 
106,710

LIABILITIES OF DISCONTINUED OPERATIONS

 

 
2,647

 

 
2,647

Total Liabilities
1,155,418

 
285,966

 
440,761

 
(271,646
)
 
1,610,499

SHAREHOLDERS’ EQUITY
474,391

 
2,693,231

 
3,159,961

 
(5,853,192
)
 
474,391

Total Liabilities and Shareholders’ Equity
$
1,629,809

 
$
2,979,197

 
$
3,600,722

 
$
(6,124,838
)
 
$
2,084,890




36


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2019
 
($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
462,739

 
$
94,285

 
$
(7,391
)
 
$
549,633

Cost of goods and services

 
354,382

 
65,516

 
(7,769
)
 
412,129

Gross profit

 
108,357

 
28,769

 
378

 
137,504

Selling, general and administrative expenses
5,249

 
84,813

 
21,409

 
312

 
111,783

Income (loss) from operations
(5,249
)
 
23,544

 
7,360

 
66

 
25,721

Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(7,328
)
 
(9,128
)
 
(849
)
 

 
(17,305
)
Other, net
(473
)
 
1,129

 
676

 
(64
)
 
1,268

Total other income (expense)
(7,801
)
 
(7,999
)
 
(173
)
 
(64
)
 
(16,037
)
Income (loss) before taxes
(13,050
)
 
15,545

 
7,187

 
2

 
9,684

Provision (benefit) for income taxes
(4,242
)
 
5,292

 
2,142

 
2

 
3,194

Income (loss) before equity in net income of subsidiaries
(8,808
)
 
10,253

 
5,045

 

 
6,490

Equity in net income (loss) of subsidiaries
7,652

 
11,646

 
10,253

 
(29,551
)
 

Income from continuing operations
$
(1,156
)
 
$
21,899

 
$
15,298

 
$
(29,551
)
 
$
6,490

Income from operations of discontinued businesses

 

 
(11,000
)
 

 
(11,000
)
Provision from income taxes

 

 
(3,354
)
 

 
(3,354
)
Income from discontinued operations

 

 
(7,646
)
 

 
(7,646
)
 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
(1,156
)
 
$
21,899

 
$
7,652

 
$
(29,551
)
 
$
(1,156
)
Comprehensive income (loss)
$
1,724

 
$
5,448

 
$
8,736

 
$
(14,184
)
 
$
1,724




37


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2018

($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
397,759

 
$
89,910

 
$
(9,109
)
 
$
478,560

Cost of goods and services

 
305,919

 
60,627

 
(9,365
)
 
357,181

Gross profit

 
91,840

 
29,283

 
256

 
121,379

Selling, general and administrative expenses
5,438

 
65,871

 
33,277

 
(93
)
 
104,493

Income (loss) from operations
(5,438
)
 
25,969

 
(3,994
)
 
349

 
16,886

Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(5,961
)
 
(8,013
)
 
(2,070
)
 

 
(16,044
)
Other, net
697

 
12,149

 
(10,038
)
 
(462
)
 
2,346

Total other income (expense)
(5,264
)
 
4,136

 
(12,108
)
 
(462
)
 
(13,698
)
Income (loss) before taxes
(10,702
)
 
30,105

 
(16,102
)
 
(113
)
 
3,188

Provision (benefit) for income taxes
(10,168
)
 
(10,037
)
 
(6,202
)
 
27,644

 
1,237

Income (loss) before equity in net income of subsidiaries
(534
)
 
40,142

 
(9,900
)
 
(27,757
)
 
1,951

Equity in net income (loss) of subsidiaries
90,814

 
(59,707
)
 
40,140

 
(71,247
)
 

Income (loss) from continuing operations
90,280

 
(19,565
)
 
30,240

 
(99,004
)
 
1,951

Income from operation of discontinued businesses

 
(8,423
)
 
121,799

 

 
113,376

Provision (benefit) from income taxes

 
859

 
24,188

 

 
25,047

Income (loss) from discontinued operations

 
(9,282
)
 
97,611

 

 
88,329

Net Income (loss)
$
90,280

 
$
(28,847
)
 
$
127,851

 
$
(99,004
)
 
$
90,280

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
110,681

 
$
1,444

 
$
123,670

 
$
(125,114
)
 
$
110,681




38


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended March 31, 2019

($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
881,983

 
$
192,525

 
$
(14,353
)
 
$
1,060,155

Cost of goods and services

 
663,479

 
131,218

 
(15,092
)
 
779,605

Gross profit

 
218,504

 
61,307

 
739

 
280,550

 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
10,309

 
169,789

 
45,226

 
213

 
225,537

Income (loss) from operations
(10,309
)
 
48,715

 
16,081

 
526

 
55,013

Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(13,635
)
 
(18,258
)
 
(1,743
)
 

 
(33,636
)
Other, net
(735
)
 
1,816

 
1,717

 
(526
)
 
2,272

Total other income (expense)
(14,370
)
 
(16,442
)
 
(26
)
 
(526
)
 
(31,364
)
Income (loss) before taxes
(24,679
)
 
32,273

 
16,055

 

 
23,649

Provision (benefit) for income taxes
(7,777
)
 
11,266

 
4,917

 

 
8,406

Income (loss) before equity in net income of subsidiaries
(16,902
)
 
21,007

 
11,138

 

 
15,243

Equity in net income (loss) of subsidiaries
24,499

 
17,696

 
21,007

 
(63,202
)
 

Income from continuing operations
$
7,597

 
$
38,703

 
$
32,145

 
$
(63,202
)
 
$
15,243

 
 
 
 
 
 
 
 
 
 
Income from operations of discontinued businesses
$

 
$

 
$
(11,000
)
 
$

 
$
(11,000
)
Provision (benefit) from income taxes

 

 
(3,354
)
 

 
(3,354
)
Income (loss) from discontinued operations
$

 
$

 
$
(7,646
)
 
$

 
$
(7,646
)
Net income (loss)
$
7,597

 
$
38,703

 
$
24,499

 
$
(63,202
)
 
$
7,597

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
5,027

 
$
59,017

 
$
4,185

 
$
(63,202
)
 
$
5,027




39


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended March 31, 2018

($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
749,071

 
$
182,429

 
$
(15,637
)
 
$
915,863

Cost of goods and services

 
568,559

 
121,406

 
(16,260
)
 
673,705

Gross profit

 
180,512

 
61,023

 
623

 
242,158

 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
16,775

 
141,201

 
53,326

 
(185
)
 
211,117

Income (loss) from operations
(16,775
)
 
39,311

 
7,697

 
808

 
31,041

 
 
 
 
 
 
 
 
 
 
Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(12,735
)
 
(14,215
)
 
(5,736
)
 

 
(32,686
)
Other, net
692

 
13,353

 
(10,361
)
 
(924
)
 
2,760

Total other income (expense)
(12,043
)
 
(862
)
 
(16,097
)
 
(924
)
 
(29,926
)
Income (loss) before taxes
(28,818
)
 
38,449

 
(8,400
)
 
(116
)
 
1,115

Provision (benefit) for income taxes
(39,860
)
 
(7,302
)
 
(4,146
)
 
27,641

 
(23,667
)
Income (loss) before equity in net income of subsidiaries
11,042

 
45,751

 
(4,254
)
 
(27,757
)
 
24,782

Equity in net income (loss) of subsidiaries
110,227

 
(60,359
)
 
45,751

 
(95,619
)
 

Income from continuing operations
$
121,269

 
$
(14,608
)
 
$
41,497

 
$
(123,376
)
 
$
24,782

Income from operations of discontinued businesses

 
(2,003
)
 
126,845

 

 
124,842

Provision from income taxes

 
2,918

 
25,437

 

 
28,355

Income from discontinued operations

 
(4,921
)
 
101,408

 

 
96,487

Net income (loss)
$
121,269

 
$
(19,529
)
 
$
142,905

 
$
(123,376
)
 
$
121,269

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
150,028

 
$
24,212

 
$
171,118

 
$
(195,330
)
 
$
150,028




40


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2019

($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Net income (loss)
$
7,597

 
$
38,703

 
$
24,499

 
$
(63,202
)
 
$
7,597

Net (income) loss from discontinued operations

 

 
7,646

 

 
7,646

Net cash provided by (used in) operating activities:
(77,881
)
 
24,130

 
(1,255
)
 

 
(55,006
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Acquisition of property, plant and equipment
(210
)
 
(14,071
)
 
(3,137
)
 

 
(17,418
)
Acquired businesses, net of cash acquired
(9,219
)
 

 

 

 
(9,219
)
Investment purchases
(149
)
 

 

 

 
(149
)
Insurance proceeds (payments)
(10,604
)
 

 

 

 
(10,604
)
Proceeds from sale of assets

 
36

 
26

 

 
62

Net cash provided by investing activities
(20,182
)
 
(14,035
)
 
(3,111
)
 

 
(37,328
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Purchase of shares for treasury
(1,478
)
 

 

 

 
(1,478
)
Proceeds from long-term debt
130,484

 
76

 
12,541

 

 
143,101

Payments of long-term debt
(32,419
)
 
(1,724
)
 
(14,026
)
 

 
(48,169
)
Financing costs
(945
)
 

 

 

 
(945
)
Contingent consideration for acquired businesses

 

 
(1,686
)
 

 
(1,686
)
Dividends paid
(6,847
)
 

 

 

 
(6,847
)
Other, net
(1,641
)
 
7,150

 
(5,426
)
 

 
83

Net cash provided by (used in) financing activities
87,154

 
5,502

 
(8,597
)
 

 
84,059

CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
 

 
 

 
 

Net cash used in discontinued operations

 

 
(3,438
)
 

 
(3,438
)
Effect of exchange rate changes on cash and equivalents

 
(92
)
 
26

 

 
(66
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(10,909
)
 
15,505

 
(16,375
)
 

 
(11,779
)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
15,976

 
16,353

 
37,429

 

 
69,758

CASH AND EQUIVALENTS AT END OF PERIOD
$
5,067

 
$
31,858

 
$
21,054

 
$

 
$
57,979




41


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2018
 
($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Net income (loss)
$
121,269

 
$
(19,529
)
 
$
142,905

 
$
(123,376
)
 
$
121,269

Net (income) loss from discontinued operations

 
4,921

 
(101,408
)
 

 
(96,487
)
Net cash provided by (used in) operating activities:
275,619

 
(360,855
)
 
38,136

 

 
(47,100
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Acquisition of property, plant and equipment
(331
)
 
(16,208
)
 
(5,089
)
 

 
(21,628
)
Acquired businesses, net of cash acquired
(185,729
)
 
(5,076
)
 
(55,425
)
 

 
(246,230
)
Proceeds from sale of business

 
473,977

 

 

 
473,977

Insurance proceeds (payments)
8,254

 

 

 

 
8,254

Proceeds from sale of assets

 
21

 
433

 

 
454

Net cash provided by (used in) investing activities
(177,806
)
 
452,714

 
(60,081
)
 

 
214,827

CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Purchase of shares for treasury
(32,861
)
 

 

 

 
(32,861
)
Proceeds from long-term debt
342,161

 
2,195

 
3,542

 

 
347,898

Payments of long-term debt
(197,322
)
 
(1,613
)
 
(31,006
)
 

 
(229,941
)
Financing costs
(7,451
)
 

 

 

 
(7,451
)
Dividends paid
(5,872
)
 

 

 

 
(5,872
)
Other, net
(22,279
)
 
(40,668
)
 
63,073

 

 
126

Net cash provided by (used in) financing activities
76,376

 
(40,086
)
 
35,609

 

 
71,899

CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
 

 
 

 
 

Net cash used in discontinued operations

 
(36,875
)
 
(11,508
)
 

 
(48,383
)
Effect of exchange rate changes on cash and equivalents

 
(27
)
 
(2,441
)
 

 
(2,468
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
174,189

 
14,871

 
(285
)
 

 
188,775

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
3,240

 
8,066

 
36,375

 

 
47,681

CASH AND EQUIVALENTS AT END OF PERIOD
$
177,429

 
$
22,937

 
$
36,090

 
$

 
$
236,456




42

Table of Contents

(Unless otherwise indicated, US dollars and non US currencies are in thousands, except per share data)

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
BUSINESS

Overview

Griffon Corporation (the “Company”, “Griffon”, "we" or "us") is a diversified management and holding company that conducts business through wholly-owned subsidiaries. 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).
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.

Recent Highlights

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

In February 2018, we closed on the sale of our Clopay Plastics Products ("PPC") business to Berry Global, Inc. ("Berry") for $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 PPC operations as compared to Griffon’s remaining businesses.

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 direct-to-builder professional installers in North America.

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

In June 2018, Clopay Building Products Company, Inc. ("CBP") acquired CornellCookson, Inc. ("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 CBP's strategic portfolio with a line of commercial rolling steel door products to complement the existing CBP sectional door offerings in the commercial industry, and expands the CBP network of professional dealers focused on the commercial market. CornellCookson is expected to contribute approximately $200,000 in annual sales to Griffon’s Home and Building Products Segment.


43

Table of Contents

During the past two fiscal years 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 décor products, in July 2017, and Kelkay, a manufacturer and distributor of decorative outdoor landscaping, in February 2018. These two businesses provided AMES with a platform for growth in the UK market and give 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 the first quarter of our fiscal 2017. In September 2017, Griffon acquired Tuscan Path, an Australian provider of pots, planters, pavers, decorative stone, and garden décor products. These acquisitions broadened AMES' outdoor living and lawn and garden business, strengthening AMES’ market position in Australia and New Zealand.

In November 2017, Griffon acquired Harper Brush Works, a leading U.S. manufacturer of cleaning products for professional, home, and industrial use, from Horizon Global (NYSE:HZN). This acquisition expanded the AMES line of long-handle tools in North America to include brooms, brushes, and other cleaning products.

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

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 currently conducts its operations through two reportable segments:
 
Home & Building Products (“HBP”) segment consists of two companies, AMES and CBP:

AMES, founded in 1774, is the leading North American manufacturer and a global provider of branded consumer and professional tools, landscaping products, and outdoor lifestyle solutions. In 2018, we acquired ClosetMaid, a leader in wood and wire closet organization, general living storage and wire garage storage products for homeowners and professionals.

CBP, since 1964, is a leading manufacturer and marketer of residential and commercial garage doors and sells to professional dealers and some of the largest home center retail chains in North America. In 2018, we acquired CornellCookson, a leading U.S. manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional, and retail use.

Defense Electronics segment consists of 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.




44

Table of Contents

OVERVIEW
 
Revenue for the quarter ended March 31, 2019 was $549,633 compared to $478,560 in the prior year quarter, an increase of approximately 15%, primarily driven by increased revenue at Home & Building Products, from both recent acquisitions and organic growth, partially offset by decreased revenue at Telephonics. Organic growth was 5%. Income from continuing operations was $6,490 or $0.15 per share, compared to $1,951 or $0.05 per share, in the prior year quarter. The current quarter results from continuing operations included discrete and certain other tax benefits, net, of $(97) or $0.00 per share. The prior year quarter results from continuing operations included acquisition costs of $814 ($378, net of tax, or $0.01 per share) and discrete and certain other tax provisions, net, of $368 or $0.01 per share.

Excluding these items from the respective quarterly results, Income from continuing operations would have been $6,393 or $0.15 per share in the current quarter compared to $2,697 or $0.06 per share in the prior year quarter.

Revenue for the six months ended March 31, 2019 was $1,060,155 compared to $915,863 in the prior year period, an increase of 16%, primarily driven by increased revenue at Home & Building Products from both recent acquisitions and organic growth, partially offset by decreased revenue at Telephonics. Organic growth was 5%. Income from continuing operations was $15,243 or $0.36 per share, compared to $24,782 or $0.58 per share, in the prior year period. The current year-to-date results from continuing operations included discrete and certain other tax provisions, net, of $370 or $0.01 per share. The prior year-to-date results from continuing operations included the following:

–    Acquisition costs of $3,999 ($2,726, net tax, or $0.06);
–    Cost of life insurance benefit of $2,614 ($248, net tax, or $0.01); and
Discrete and certain other tax benefits, net, of $22,650 or $0.53 per share, primarily from the revaluation of deferred tax liabilities related to the December 22, 2017 Tax Cuts and Jobs Act ("TCJA").

Excluding these items from the respective periods, Income from continuing operations would have been $15,613 or $0.37 per share in the current year period ended March 31, 2019 compared to $5,106 or $0.12 per share in the comparable prior year period.


45

Table of Contents

Griffon evaluates performance based on Income from Continuing operations and the related Earnings per share excluding restructuring charges, loss on debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well as other items that may affect comparability, as applicable. Griffon believes this information is useful to investors for the same reason. The following table provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per share from continuing operations to Adjusted earnings per share from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(Unaudited) 
 
For the Three Months Ended March 31,

For the Six Months Ended March 31,
 
2019

2018

2019

2018
Income from continuing operations
$
6,490


$
1,951


$
15,243


$
24,782













Adjusting items, net of tax:
 


 


 


 

Acquisition costs


378




2,726

Cost of life insurance benefit






248

Discrete and certain other tax provisions (benefits)
(97
)

368


370


(22,650
)












Adjusted income from continuing operations
$
6,393


$
2,697


$
15,613


$
5,106













Diluted earnings per common share from continuing operations
$
0.15


$
0.05


$
0.36


$
0.58













Adjusting items, net of tax:
 


 


 


 

Acquisition costs


0.01




0.06

Cost of life insurance benefit






0.01

Discrete and certain other tax provisions (benefits)


0.01


0.01


(0.53
)












Adjusted earnings per common share from continuing operations
$
0.15


$
0.06


$
0.37


$
0.12













Weighted-average shares outstanding (in thousands)
42,832


42,765


42,376


43,062

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

46

Table of Contents

RESULTS OF CONTINUING OPERATIONS
 
Three and Six months ended March 31, 2019 and 2018
 
Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, and unallocated amounts (mainly 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”). Griffon believes this information is useful to investors for the same reason. The following table provides a reconciliation of Segment operating profit from continuing operations to Income before taxes from continuing operations:

 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Segment operating profit:
 

 

 

 
Home & Building Products
$
36,021

 
$
28,478

 
$
75,566

 
$
56,229

Telephonics
2,315

 
1,302

 
4,464

 
2,782

Segment operating profit from continuing operations
38,336

 
29,780

 
80,030

 
59,011

Net interest expense
(17,305
)
 
(16,044
)
 
(33,636
)
 
(32,686
)
Unallocated amounts
(11,347
)
 
(10,541
)
 
(22,745
)
 
(20,977
)
Acquisition costs

 
(7
)
 

 
(1,619
)
Cost of life insurance benefit

 

 

 
(2,614
)
Income before taxes from continuing operations
$
9,684

 
$
3,188

 
$
23,649

 
$
1,115

 
The following table provides a reconciliation of Segment adjusted EBITDA from continuing operations to Income before taxes from continuing operations:
 
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Segment adjusted EBITDA:
 

 
 

 
 

 
 

Home & Building Products
$
48,753

 
$
39,789

 
$
100,613

 
$
79,246

Defense Electronics
4,936

 
3,997

 
9,721

 
8,196

Total Segment adjusted EBITDA
53,689

 
43,786

 
110,334

 
87,442

Net interest expense
(17,305
)
 
(16,044
)
 
(33,636
)
 
(32,686
)
Segment depreciation and amortization
(15,353
)
 
(13,199
)
 
(30,304
)
 
(26,051
)
Unallocated amounts
(11,347
)
 
(10,541
)
 
(22,745
)
 
(20,977
)
Acquisition costs

 
(814
)
 

 
(3,999
)
Cost of life insurance benefit

 

 

 
(2,614
)
Income before taxes from continuing operations
$
9,684

 
$
3,188

 
$
23,649

 
$
1,115




47

Table of Contents

Home & Building Products
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Revenue:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

AMES
$
287,732

 
 

 
$
258,196

 
 

 
$
504,206

 
 

 
$
474,938

 
 

CBP
186,799

 
 

 
138,112

 
 

 
410,094

 
 

 
292,348

 
 

Home & Building Products
$
474,531

 
 

 
$
396,308

 
 

 
$
914,300

 
 

 
$
767,286

 
 

Segment operating profit
$
36,021

 
7.6
%
 
$
28,478

 
7.2
%
 
$
75,566

 
8.3
%
 
$
56,229

 
7.3
%
Depreciation and amortization
12,732

 
 

 
10,504

 
 

 
25,047

 
 

 
20,637

 
 

Acquisition costs

 
 

 
807

 
 

 

 
 

 
2,380

 
 

Segment adjusted EBITDA
$
48,753

 
10.3
%
 
$
39,789

 
10.0
%
 
$
100,613

 
11.0
%
 
$
79,246

 
10.3
%

For the quarter ended March 31, 2019, revenue increased $78,223 or 20%, compared to the prior year period. CBP benefited from the acquisition of CornellCookson on June 4, 2018, which delivered approximately $48,100 of revenue, as well as from favorable pricing, partially offset by unfavorable volume and mix. At AMES, favorable weather conditions drove increases in U.S. lawn and garden products, and the launch of new product programs drove increased revenue for U.S. pots and planters and for wire storage and organization. These increases also were supplemented at AMES Australia as previously delayed orders materialized in the quarter. Organic growth was 8%.

For the quarter ended March 31, 2019, Segment operating profit increased 26% to $36,021 compared to $28,478 in the prior year period. Excluding the impact of acquisition related costs from the prior year period, Segment operating profit increased 23%. Increased revenue, partially offset by increased material and tariff costs at both AMES and CBP, as well as unfavorable volume and mix at CBP, drove the favorable variance. Segment depreciation and amortization increased $2,228 from the prior year period primarily from acquisitions.

For the six months ended March 31, 2019, revenue increased $147,014 or 19%, compared to the prior year period. CBP benefited from the acquisition of CornellCookson, which delivered approximately $97,500 of revenue, as well as from favorable mix and pricing. At AMES, increased revenue for U.S. snow tools and lawn and garden products, as well as the launch of new product programs for U.S. pots and planters and for wire storage and organization, drove the favorable variance. Organic growth was 6%.

For the six months ended March 31, 2019, Segment operating profit increased 34% to $75,566 compared to $56,229 in the prior year period. Excluding the impact of acquisition related costs from the prior year period, Segment operating profit would have increased 29%, primarily driven by the increased revenue as noted above, partially offset by increased material and tariff costs at both AMES and CBP. Segment depreciation and amortization increased $4,410 from the prior year period primarily from acquisitions.

On January 31, 2019, CBP announced a $14,000 investment in facilities infrastructure and equipment at its CornellCookson location in Mountain Top, Pennsylvania.  This project includes a 90,000 square foot expansion to the already existing 184,000 square foot facility, along with the addition of state of the art manufacturing equipment.  Through this expansion, the CornellCookson Mountain Top location will improve its manufacturing efficiency and shipping operations, as well as increase manufacturing capacity to support full-rate production of new and core products. The project is expected to be completed by the end of calendar 2019.
Prior year's acquisitions

On June 4, 2018, CBP 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 CBP’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 is expected to generate approximately $200,000 in revenue in the first full year of operations.

48

Table of Contents


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), subject to contingent consideration of up to GBP 7,000. 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, 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 in home storage and organization products, 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 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.

Defense Electronics  
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Revenue
$
75,102

 
 

 
$
82,252

 
 

 
$
145,855

 
 

 
$
148,577

 
 
Segment operating profit
$
2,315

 
3.1
%
 
$
1,302

 
1.6
%
 
$
4,464

 
3.1
%
 
$
2,782

 
1.9%
Depreciation and amortization
2,621

 
 

 
2,695

 
 

 
5,257

 
 

 
5,414

 
 
Segment adjusted EBITDA
$
4,936

 
6.6
%
 
$
3,997

 
4.9
%
 
$
9,721

 
6.7
%
 
$
8,196

 
5.5%
 
For the quarter ended March 31, 2019, revenue decreased $7,150 or 9% compared to the prior year quarter, primarily due to decreased maritime surveillance radar revenue offset in part by a $1,600 benefit from the adoption of revenue recognition guidance effective October 1, 2018. The impact from the adoption of the revenue recognition guidance is expected to be immaterial to full year results.

For the quarter ended March 31, 2019, Segment operating profit increased $1,013 compared to the prior year quarter, driven by reduced operating expenses and timing of research and development initiatives. The impact from the adoption of revenue recognition guidance effective October 1, 2018 was not material. The impact from the adoption of the revenue recognition guidance is expected to be immaterial to full year results.

For the six months ended March 31, 2019, revenue decreased $2,722 or 2% compared to the prior year period due to reduced ground and maritime surveillance radar and electronic countermeasure system revenue, partially offset by a $6,200 benefit from the adoption of revenue recognition guidance effective October 1, 2018.

For the six months ended March 31, 2019, Segment operating profit increased $1,682 compared to the prior year period due to reduced operating expenses and timing of research and development initiatives, partially offset by the impact of revised estimates to complete remaining performance obligations across various contracts. Segment operating profit also benefited from the adoption of revenue recognition guidance effective October 1, 2018, by approximately $1,700.

During the six months ended March 31, 2019, Telephonics was awarded several new contracts and received incremental funding on existing contracts approximating $150,000. Contract backlog was $378,300 at March 31, 2019, with 73% expected to be fulfilled in the next 12 months. Backlog, restated for the adoption of revenue recognition guidance on October 1, 2018, was $374,200 at September 30, 2018. 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 US government agencies.

49

Table of Contents


Unallocated
 
For the quarter ended March 31, 2019, unallocated amounts totaled $11,347 compared to $10,541 in the prior year quarter; for the six months ended March 31, 2019, unallocated amounts totaled $22,745 compared to $20,977 in the prior year period. The increase in the current quarter and six months compared to the respective prior year periods primarily relates to compensation and incentive costs.

Segment Depreciation and Amortization
 
Segment depreciation and amortization increased $2,154 and $4,253 for the quarter and six months ended March 31, 2019, respectively, compared to the comparable prior year period, primarily due to depreciation and amortization on assets acquired in acquisitions.

Other Income (Expense)

For the quarters ended March 31, 2019 and 2018, Other income (expense) includes $(118) and $217, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $108 and $1,266, respectively, of net investment income.

For the six months ended March 31, 2019 and 2018, Other income (expense) includes $384 and $(219), respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $31 and $1,261, respectively, of net investment income.

Additionally, during the quarters ended March 31, 2019 and 2018, Other income (expense) included net periodic benefit plan income of $787 and $882, respectively. During the six months ended March 31, 2019 and 2018, Other income (expense) included net periodic benefit plan income of $1,574 and $1,764, respectively. Effective October 1, 2018, these benefits amounts are required to be included in other income; in the past these were in Selling, general and administrative expenses, as a result of implementation of the new accounting standard on pensions. All periods have been restated. See Note 13 - Employee Benefit Plans for further information on the implementation of this guidance.

Provision for income taxes
During the three months ended March 31, 2019, the Company recognized a tax provision of $3,194 on income before taxes from continuing operations of $9,684, compared to a tax provision of $1,237 on income before taxes from continuing operations of $3,188, in the comparable prior year quarter. The current year quarter included net discrete tax benefits of $97. The prior year quarter results included acquisition costs of $814 ($378, net of tax) and discrete and certain other tax provisions, net, that affect comparability of $368. Excluding these items, the effective tax rates for the quarters ended March 31, 2019 and 2018 34.0% and 32.6%, respectively.
During the six months ended March 31, 2019, the Company recognized a tax provision of $8,406 on Income before taxes from continuing operations of $23,649, compared to a tax benefit of $23,667 on Income before taxes from continuing operations of $1,115 in the comparable prior year period. The six month period ended March 31, 2019 included net discrete tax provisions of $370. The six month period ended March 31, 2018 included net discrete tax benefits of $22,650 primarily related to the December 22, 2017 Tax Cuts and Jobs Act ("TCJA") associated with the revaluation of deferred tax liabilities, $3,999 ($2,726 net of tax) of acquisition costs, and $2,614 ($248 net of tax) of charges related to cost of life insurance benefits. Excluding these items, the effective tax rates for the six months ended March 31, 2019 and 2018 were 34.0% and 33.9%, respectively.
On December 22, 2017, the TCJA was signed into law, and, among other changes, reduced the federal statutory tax rate from 35.0% to 21.0%. In accordance with U.S. GAAP for income taxes, as well as SEC Staff Accounting Bulletin No. 118 (“SAB 118”), the Company made a reasonable estimate of the impacts of the TCJA and recorded this estimate in its results for the year ended September 30, 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.
Stock based compensation
 
For the quarters ended March 31, 2019 and 2018, stock based compensation expense totaled $3,422 and $2,365, respectively. For the six months ended March 31, 2019 and 2018, stock based compensation expense totaled $6,355 and $4,920, respectively.


50

Table of Contents

Comprehensive income (loss)
 
For the quarter ended March 31, 2019, total other comprehensive income, net of taxes, of $2,880, included a gain of $2,885 from foreign currency translation adjustments primarily due to the strengthening of the British Pound and Canadian Dollar, partially offset by the weakening of the Euro, all in comparison to the US Dollar, a $184 benefit from pension amortization of actuarial losses and a $189 loss on cash flow hedges.

For the six months ended March 31, 2019, total other comprehensive loss, net of taxes, of $2,570, included a loss of $2,851 from foreign currency translation adjustments primarily due to the weakening of the Euro and the Canadian and Australian Dollars, all in comparison to the US Dollar, a $368 benefit from pension amortization of actuarial losses and a $87 loss on cash flow hedges.

For the quarter ended March 31, 2018, total other comprehensive income, net of taxes, of $20,401, included a gain of $14,866
related to removal of PPC’s foreign currency translation loss, which was considered in the gain on disposal of discontinued
operations, a gain of $4,848 from foreign currency translation adjustments primarily due to the strengthening of the Euro and
British Pound, offset by the weakening of the Canadian and Australian Dollars, all in comparison to the US Dollar, a $247 benefit from pension amortization of actuarial losses and a $440 gain on cash flow hedges.

For the six months ended March 31, 2018, total other comprehensive income, net of taxes, of $28,759 included a gain of $14,866 related to removal of PPC’s foreign currency translation loss, which was considered in the gain on disposal of discontinued operations, a gain of $3,559 from foreign currency translation adjustments primarily due to the strengthening of the Euro and British Pound, offset by the weakening of the Canadian and Australian Dollars, all in comparison to the US Dollar, a $9,806 benefit from pension amortization of actuarial losses and a $528 gain on cash flow hedges.

Discontinued operations
During the quarter ended March 31, 2019, Griffon recorded an $11,000 charge ($7,646, net of tax) to discontinued operations. The charge consisted primarily of a purchase price adjustment to resolve a claim related to the $475,000 PPC divestiture and included an additional reserve for a legacy environmental matter.

At March 31, 2019, Griffon's assets and liabilities for PPC and Installations Services and other discontinued operations primarily related to the above matter, insurance claims, income tax and product liability, warranty and environmental reserves totaling liabilities of approximately of $13,964.

Plastic Products Company

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell PPC and on February 6, 2018, completed the sale to Berry for $465,000, net of certain post-closing adjustments. As a result, Griffon classified the results of operations of the PPC 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 PPC unless otherwise noted. PPC 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 15, Discontinued Operations.

Installation Services and Other Discontinued Activities

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all operating activities of its Installation Services segment which sold, installed and serviced garage doors and openers, fireplaces, floor coverings, cabinetry and a range of related building products, primarily for the new residential housing market. Operating results of substantially this entire segment have been reported as discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented; Installation Services is excluded from segment reporting.

Griffon substantially concluded remaining disposal activities in 2009. There was no revenue or income from the Installation Services’ business for the six months ended March 31, 2019 and 2018.


51

Table of Contents

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 are: cash flows from operating activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital under satisfactory terms. Griffon believes it has sufficient liquidity available to invest in its existing businesses and execute strategic acquisitions, while managing its capital structure on both a short-term and long-term basis.

The following table is derived from the Condensed Consolidated Statements of Cash Flows:
Cash Flows from Continuing Operations
For the Six Months Ended March 31,
(in thousands)
2019
 
2018
Net Cash Flows Provided by (Used In):
 

 
 

Operating activities
$
(55,006
)
 
$
(47,100
)
Investing activities
(37,328
)
 
214,827

Financing activities
84,059

 
71,899


Cash used in the operating activities of continuing operations for the six months ended March 31, 2019 was $55,006 compared to the $47,100 used in the prior year period. Cash provided by income of continuing operations, adjusted for non-cash expenditures, was offset by a net increase in working capital consisting of a net increase in accounts receivable and contract costs and recognized income not yet billed, increased inventory and a decrease in accounts payable.

During the six months ended March 31, 2019, Griffon used $37,328 of cash in investing activities from continuing operations compared to $214,827 provided by investing activities in the prior year comparable period. Payments for acquired businesses totaled $9,219 compared to $246,230 in the prior year comparable period. Payments for acquired businesses in the current year consisted of a final working capital adjustment for CornellCookson. Payments for acquired businesses in the prior year were made to consummate the October 2, 2017 acquisition of ClosetMaid for approximately $185,700, inclusive of post-closing adjustments, or $165,000 net of the estimated present value of tax benefits under the current tax law. Additionally, on November 6, 2017, AMES acquired Harper for approximately $5,000, excluding certain post-closing adjustments, and on February 13, 2018, AMES acquired Kelkay for approximately $56,118 (GBP 40,452) subject to contingent consideration of up to GBP 7,000. The prior year Proceeds from sale of business resulted from the sale of PPC. Insurance payments and proceeds of $10,604 and $8,254, respectively, in the current and prior year periods, respectively, pertain to the settlement of a certain life insurance benefit. The prior year period insurance proceeds were reclassified from operating activities to investing activities to comply with accounting guidance on the Statement of Cash Flows classification of certain cash receipts and cash payments. Capital expenditures for the six months ended March 31, 2019 totaled $17,418, a decrease of $4,210 from the prior year period.

During the six months ended March 31, 2019, cash provided by financing activities from continuing operations totaled $84,059 as compared to the $71,899 provided in the comparable prior year period. Cash provided by financing activities from continuing operations in the current year period consisted primarily of net borrowings of long term debt, partially offset by payments of dividends. Cash provided by financing activities from continuing operations in the comparable prior year period included an add-on offering of $275,000 aggregate principal amount of 5.25% senior notes due 2022, which was completed on October 2, 2017, the proceeds of which were used to purchase ClosetMaid, as well as for general corporate purposes (including reducing the outstanding balance of Griffon's Revolving Credit Facility (the "Credit Agreement")). At March 31, 2019, there were $157,936 in outstanding borrowings under the Credit Agreement, compared to $14,896 in outstanding borrowings at the same date in the prior year.

During the six months ended March 31, 2019, the Board of Directors approved two quarterly cash dividends of $0.0725 per share each. On May 2, 2019, the Board of Directors declared a quarterly cash dividend of $0.0725 per share, payable on June 20, 2019 to shareholders of record as of the close of business on May 24, 2019.

On 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, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter and six months ended March 31, 2019, Griffon purchased 8,200 and 37,500 shares, respectively, of common stock under these repurchase programs, for a total of $82 or $9.95 per share, and $372 or $9.92 per share, respectively. As of March 31, 2019, an aggregate of $57,955 remains under Griffon's Board authorized repurchase programs.
 

52

Table of Contents

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 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 from continuing operations. For the six months ended March 31, 2019:
 
The United States Government and its agencies, through either prime or subcontractor relationships, represented 9% of Griffon’s consolidated revenue and 63% of Telephonics’ revenue.
The Home Depot represented 17% of Griffon’s consolidated revenue and 20% of HBP’s revenue.

No other customer exceeded 10% of consolidated revenue. Future operating results will continue to depend substantially on the success of Griffon’s largest customers and our ongoing relationships with them. Orders from these customers are subject to change and may fluctuate materially. The loss of all or a portion of the volume from any one of these customers could have a material adverse impact on Griffon’s liquidity and results of operations.
Cash and Equivalents and Debt
March 31,
 
September 30,
(in thousands)
2019
 
2018
Cash and equivalents
$
57,979

 
$
69,758

Notes payables and current portion of long-term debt
10,807

 
13,011

Long-term debt, net of current maturities
1,206,195

 
1,108,071

Debt discount/premium and issuance costs
11,982

 
13,610

Total debt
1,228,984

 
1,134,692

Debt, net of cash and equivalents
$
1,171,005

 
$
1,064,934

 
On October 2, 2017, in an unregistered offering through a private placement under Rule 144A, Griffon completed the add-on offering of $275,000 principal amount of its 5.25% senior notes due 2022, at 101.00% of par, to Griffon's previously issued $125,000 principal amount of its 5.25% senior notes due 2022, at 98.76% of par, completed on May 18, 2016 and $600,000 5.25% senior notes due 2022, at par, completed on February 27, 2014 (collectively the “Senior Notes”). As of March 31, 2019, outstanding Senior Notes due totaled $1,000,000; interest is payable semi-annually on March 1 and September 1. The net proceeds of the $275,000 add-on offering were used to acquire ClosetMaid with the remaining proceeds used to pay down outstanding loan borrowings under the Credit Agreement. The net proceeds of the previously issued $125,000 add-on offering were used to pay down outstanding revolving loan borrowings under the Credit Agreement.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On February 5, 2018, July 20, 2016 and June 18, 2014, Griffon exchanged all of the $275,000, $125,000 and $600,000 Senior Notes, respectively, for substantially identical Senior Notes registered under the Securities Act via an exchange offer. The fair value of the Senior Notes approximated $985,770 on March 31, 2019 based upon quoted market prices (level 1 inputs). In connection with the issuance and exchange of the $275,000 senior notes, Griffon capitalized $8,472 of underwriting fees and other expenses; this is in addition to the $13,329 capitalized under previously issued $600,000 Senior Notes. All capitalized fees for the Senior Notes will amortize over the term of the notes and, at March 31, 2019, $11,066 remained to be amortized.

On March 22, 2016, Griffon amended and restated the Credit Agreement to increase the commitments under the credit facility from $250,000 to $350,000, extend its maturity from March 13, 2020 to March 22, 2021, and modify certain other provisions of the facility. On October 2, 2017 and on May 31, 2018, Griffon amended the Credit Agreement in connection with the ClosetMaid and the CornellCookson acquisitions, respectively to, among other things, modify the net leverage covenant. On February 22, 2019, Griffon further amended the Revolving Credit Facility to, among other things, reflect changes in the lending group and certain corresponding changes in various administrative roles under the Revolving Credit Facility, make conforming administrative and technical changes and reflect changes in law. The facility includes a letter of credit sub-facility with a limit of $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, subject to final maturity of the facility or the occurrence of an event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.75% for base rate loans and 2.75% 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

53

Table of Contents

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 March 31, 2019, under the Credit Agreement, there were $157,936 outstanding borrowings; outstanding standby letters of credit were $16,081; and $175,983 was available, subject to certain loan covenants, for borrowing at that date.

In September 2015 and March 2016, Griffon entered into mortgage loans in the amounts of $32,280 and $8,000, respectively, and 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 rate of LIBOR plus 1.50%. The loans were paid off during the year ended September 30, 2018.

In August 2016, Griffon’s ESOP entered into an agreement that refinanced the existing ESOP loan into a new Term Loan in the amount of $35,092 (the "Agreement"). The Agreement also provided for a Line Note with $10,908 available to purchase shares of Griffon common stock in the open market. During 2017, Griffon's ESOP purchased 621,875 shares of common stock for a total of $10,908 or $17.54 per share, under a borrowing line that has now been fully utilized. On June 30, 2017, the Term Loan and Line Note were combined into a single Term Loan. The Term Loan interest rate was LIBOR plus 2.91%. The Term Loan required quarterly principal payments of $569 and a balloon payment due at maturity. As a result of the special cash dividend of $1.00 per share, paid on April 16, 2018, the outstanding balance of the Term Loan was reduced by $5,705. 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 on its $350,000 credit facility. The internal loan interest rate is fixed at 2.91%, matures in June 2033 and requires quarterly payments of principal, currently $569, and interest. The internal loan is secured by shares purchased with the proceeds of the loan. The amount outstanding on the internal loan at March 31, 2019 was $33,556.

Two of Griffon's subsidiaries have capital leases outstanding for real estate located in Troy, Ohio and Ocala, Florida. The leases mature in 2021 and 2022, respectively, and bear interest at fixed rates of approximately 5.0% and 8.0%, respectively. The Troy, Ohio lease is secured by a mortgage on the underlying real estate and is guaranteed by Griffon. The Ocala, Florida lease contains two five-year renewal options. At March 31, 2019, $5,903 was outstanding, net of issuance costs.

In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 ($11,174 as of March 31, 2019) revolving credit facility. The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (3.79% LIBOR USD and 3.14% Bankers Acceptance Rate CDN as of March 31, 2019). The revolving facility matures in October 2019. Garant is required to maintain a certain minimum equity.  At March 31, 2019, there were no borrowings under the revolving credit facility with CAD 15,000 ($11,174 as of March 31, 2019) available for borrowing.

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries ("Griffon Australia") entered into an AUD 30,000 term loan and an AUD 10,000 revolver. The term loan refinanced two existing term loans and the revolver replaced two existing lines. In December 2016, the amount available under the revolver was increased from AUD 10,000 to AUD 20,000 and, in March 2017 and September 2017, the term loan commitment was increased by AUD 5,000 and AUD 15,000, respectively. In March 2019, the term loan commitment was reduced by AUD 10,000 with proceeds from a receivable purchase agreement in the amount of AUD 10,000. The term loan requires quarterly principal payments of AUD 1,250 plus interest with a balloon payment of AUD 13,375 due upon maturity in March 2022, and accrues interest at Bank Bill Swap Bid Rate “BBSY” plus 1.90% per annum (3.62% at March 31, 2019). As of March 31, 2019, the term loan had an outstanding balance of AUD 28,375 ($20,104 as of March 31, 2019). The revolving facility and receivable purchase facility mature in March 2020, but are renewable upon mutual agreement with the lender. The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.8% and 1.0%, respectively, per annum (3.55% and 2.75%, respectively, at March 31, 2019). At March 31, 2019, the revolver and receivable purchase facilities had outstanding balances of AUD 6,000 and AUD 10,000, respectively ($4,251 and $7,085, respectively, as of March 31, 2019). The revolver, receivable purchase facility and the term loan are all secured by substantially all of the assets of Griffon Australia and its subsidiaries. Griffon Australia is required to maintain a certain minimum equity level and is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

In July 2018, the AMES Companies UK Ltd and its subsidiaries ("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 350 and GBP 83 plus interest, respectively, and have balloon payments due upon maturity, July 2023, of GBP 7,000 and GBP 2,333, respectively. The Term Loan and Mortgage Loans accrue interest at the GBP LIBOR Rate plus 2.25% and 1.8%, respectively (3.10% and 2.65% at March 31, 2019, respectively). The revolving facility matures in July 2019, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.5% (2.25% as of March 31, 2019). As of March 31, 2019, the revolver had an outstanding balance of GBP 4,639 ($6,087 as March 31, 2019) while the term and mortgage

54

Table of Contents

loan balances amounted to GBP 16,698 ($21,910 as of March 31, 2019). 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 consists primarily of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of capital leases.

At March 31, 2019, 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 5.7x at March 31, 2019.

On 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, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter and six months ended March 31, 2019, Griffon purchased 8,200 and 37,500 shares, respectively, of common stock under these repurchase programs, for a total of $82 or $9.95 per share, and $372 or $9.92 per share, respectively. As of March 31, 2019, an aggregate of $57,955 remains under Griffon's Board authorized repurchase programs.

In addition, during the quarter and six months ended March 31, 2019, $2,714 shares, with a market value of $49 or $17.90 per share, and 85,847 shares, with a market value of $1,059, or $12.34 per share, respectively, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock. During the first quarter ended December 31, 2018, an additional 3,861 shares, with a market value of $47, or $12.16 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

On November 17, 2011, the Company began declaring quarterly dividends. During 2018, the Company declared and paid regular cash dividends totaling $0.28 per share. In addition, on March 7, 2018, the Board of Directors declared a special cash dividend of $1.00 per share paid in April 2018. During the six months ended March 31, 2019, the Board of Directors approved two quarterly cash dividends of $0.0725 per share each. The Company currently intends to pay dividends each quarter; however, payment of dividends is determined by the Board of Directors at its discretion based on various factors, and no assurance can be provided as to the payment of future dividends.

On May 2, 2019, the Board of Directors declared a quarterly cash dividend of $0.0725 per share, payable on June 20, 2019 to shareholders of record as of the close of business on May 24, 2019.

During the six months ended March 31, 2019, Griffon used cash for discontinued operations from operating activities of $3,438 primarily related to retention bonus payments for previous PPC employees and certain legal and consulting payments related to the sale of PPC. During the six months ended March 31, 2018, Griffon used cash for discontinued operations from operating, investing and financing activities of $48,383 primarily related to PPC operations and capital expenditures, as well as the repayment of outstanding debt upon the sale of PPC.
 
CRITICAL ACCOUNTING POLICIES

The preparation of Griffon’s consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 treatment for commitments and contingencies. Actual results may materially differ from these estimates. There have been no changes in Griffon’s critical accounting policies from September 30, 2018.

Griffon’s significant accounting policies and procedures are explained in the Management Discussion and Analysis section in the Annual Report on Form 10-K for the year ended September 30, 2018. In the selection of the critical accounting policies, the objective is to properly reflect the financial position and results of operations for each reporting period in a consistent manner that can be understood by the reader of the financial statements. Griffon considers an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on the financial position or results of operations of Griffon.


55



RECENT ACCOUNTING PRONOUNCEMENTS

The FASB issues, from time to time, new financial accounting standards, staff positions and emerging issues task force consensus. See the Notes to Condensed Consolidated Financial Statements for a discussion of these matters.

FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, especially “Management’s Discussion and Analysis”, contains certain “forward-looking statements” within the meaning of the Securities Act, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies. Statements in this Form 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. 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, including any potential 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; possible terrorist threats and actions and their impact on the global economy; Griffon's ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, the TCJA. Additional important factors that could cause the statements made in this Quarterly Report on Form 10-Q or the actual results of operations or financial condition of Griffon to differ are discussed under the caption “Item 1A. Risk Factors” and “Special Notes Regarding Forward-Looking Statements” in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018. 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.

Item 3 - Quantitative and Qualitative Disclosure About Market Risk
 
Griffon’s business’ activities necessitate the management of various financial and market risks, including those related to changes in interest rates, foreign currency rates and commodity prices.
 
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 Credit Agreement and certain other of Griffon’s credit facilities have a LIBOR-based variable interest rate. Due to the current and expected level of borrowings under these facilities, a 100 basis point change in LIBOR would not have a material impact on Griffon’s results of operations or liquidity.


56



Foreign Exchange
 
Griffon conducts business in various non-US countries, primarily in Canada, Australia, United Kingdom, Mexico and China; therefore, changes in the value of the currencies of these countries affect Griffon's financial position and cash flows when translated into US Dollars. Griffon has generally accepted the exposure to exchange rate movements relative to its non-US 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 4 - Controls and Procedures
 
Under the supervision and with the participation of Griffon’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), Griffon’s disclosure controls and procedures, as defined by Exchange Act Rule 13a-15(e) and 15d-15(e), were evaluated as of the end of the period covered by this report. Based on that evaluation, Griffon’s CEO and CFO concluded that Griffon’s disclosure controls and procedures were effective at the reasonable assurance level.

Griffon is continuing to integrate CornellCookson into its existing control procedures. Such integration may lead Griffon to modify certain controls for future periods, but Griffon does not expect changes, if any, to significantly affect its internal control over financial reporting.

During the period covered by this report, there were no changes in Griffon’s internal control over financial reporting which materially affected, or are reasonably likely to materially affect, Griffon’s internal control over financial reporting.
 
Limitations on the Effectiveness of Controls
 
Griffon believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within a company have been detected. Griffon’s disclosure controls and procedures, as defined by Exchange Act Rule 13a-15(e) and 15d-15(e), are designed to provide reasonable assurance of achieving their objectives.
 

57

Table of Contents

PART II - OTHER INFORMATION

Item 1    Legal Proceedings
None

Item 1A    Risk Factors

In addition to the other information set forth in this report, carefully consider the factors discussed in Item 1A to Part I in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018, which could materially affect Griffon’s business, financial condition or future results. The risks described in Griffon’s Annual Report on Form 10-K are not the only risks facing Griffon. Additional risks and uncertainties not currently known to Griffon or that Griffon currently deems to be immaterial also may materially adversely affect Griffon’s business, financial condition and/or operating results.

Item 2    Unregistered Sales of Equity Securities and Use of Proceeds

(c)    ISSUER PURCHASES OF EQUITY SECURITIES
Period
(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(1)
January 1 - 31, 2019
8,200

(1)
 
$
9.95

 
8,200

 
 

February 1 - 28, 2019

 
 

 

 
 

March 1 - 31, 2019
2,714

(2)
 
17.90

 

 
 

Total
10,914

 
 
$
11.93

 
8,200

 
$
57,955

1.
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 March 31, 2019, an aggregate of $57,955 remained available for the purchase of Griffon common stock under these repurchase programs. Amount consists of shares purchased by the Company in open market purchases pursuant to such Board authorized stock repurchase program.

2.
Shares acquired by the Company from holders of restricted stock upon vesting of the restricted stock, to satisfy tax-withholding obligations of the holders.

Item 3    Defaults Upon Senior Securities
None

Item 4    Mine Safety Disclosures
None

Item 5    Other Information
None


58

Table of Contents

Item 6
Exhibits
 
 
 
 
10.1

 
 
31.1
 
 
31.2
 
 
32
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Calculation Document
 
 
101.DEF
XBRL Taxonomy Extension Definitions Document
 
 
101.LAB
XBRL Taxonomy Extension Labels Document
 
 
101.PRE
XBRL Taxonomy Extension Presentations Document
 
 
*
Indicates a management contract or compensatory plan or arrangement.

59

Table of Contents

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
GRIFFON CORPORATION
 
 
 
 
 
/s/ Brian G. Harris
 
 
Brian G. Harris
 
 
Senior Vice President and Chief Financial Officer
 
 
(Principal Financial Officer)
 
 
 
 
 
/s/ W. Christopher Durborow
 
 
W. Christopher Durborow
 
 
Vice President, Controller and Chief Accounting Officer
 
 
(Principal Accounting Officer)
 
 
Date: May 2, 2019


60