GRIFFON CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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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.

Over the past four years, we have undertaken a series of transformative
transactions. We divested our specialty plastics business in 2018 to focus on
our core markets and improve our free cash flow conversion. We expanded the
scope of The AMES Companies, Inc. ("AMES") and Clopay Corporation ("Clopay")
through the acquisitions of ClosetMaid, LLC ("ClosetMaid") and CornellCookson,
Inc. ("CornellCookson"), respectively. CornellCookson has been integrated into
Clopay, so that our leading company in residential garage doors and sectional
commercial doors now includes a leading manufacturer of rolling steel doors and
grille products. ClosetMaid was combined with AMES, and we established an
integrated headquarters for AMES in Orlando, Florida. AMES is now positioned to
fulfill its mission of Bringing Brands Together™ with the leading brands in home
and garage organization, outdoor décor, and lawn, garden and cleaning tools.

On January 24, 2022, Griffon acquired Hunter Fan Company ("Hunter"), a market
leader in residential ceiling, commercial, and industrial fans, from MidOcean
Partners ("MidOcean") for a purchase price of approximately $845,000, subject to
customary post-closing adjustments. Hunter will be part of Griffon's CPP segment
as it complements and diversifies our portfolio of leading consumer brands and
products. Hunter is expected to contribute approximately $385,000 in revenue in
the first twelve months of operation after the acquisition. The acquisition of
Hunter was financed with a new $800,000 seven year Term Loan B facility; and a
combination of cash on hand and revolver borrowings under Griffon's revolving
credit facility ("Credit Agreement") was used to fund the balance of the
purchase price and related acquisition and debt expenditures.

On September 27, 2021, we announced we are exploring strategic alternatives for
our Defense Electronics ("DE") segment, which consists of our Telephonics
Corporation subsidiary, including a sale. As a result, Griffon classified the
results of operations of the Telephonics business as a discontinued operation in
the Consolidated Statements of Operations for all periods presented and
classified the related assets and liabilities associated with the discontinued
operation as held for sale in the consolidated balance sheets. Accordingly, all
references made to results and information in this Quarterly Report on Form 10-Q
are to Griffon's continuing operations, unless noted otherwise.

COVID-19 update on our company

The health and safety of our employees, our customers and their families is a
high priority for Griffon. As of the date of this filing, all of Griffon's
facilities are fully operational. We have implemented a variety of new policies
and procedures, including additional cleaning, social distancing, staggered
shifts and prohibiting or significantly restricting on-site visitors, to
minimize the risk to our employees of contracting COVID-19. In the United
States, we manufacture a substantial majority of the
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products that we sell. While this helps mitigate the effects of global supplier
and transportation disruptions, we are still impacted by these disruptions. Our
supply chain has experienced certain disruptions which, together with other
factors such as a shortage of labor, has resulted in longer delivery lead times
and restricted manufacturing capacity for certain of our products. Commodity
prices have increased during COVID-19 and may continue to increase, and we may
not be able to pass off all or any of such price increases to our customers on a
timely basis, or at all. It is difficult to predict whether the supply chain
disruptions that impact us will improve, worsen or remain the same in the near
term. Our suppliers could be required by government authorities to temporarily
cease operations in accordance with the various restrictions discussed above;
might be limited in their production capacity due to complying with restrictions
relating to the operation of businesses during the COVID-19 pandemic; or could
suffer their own supply chain disruptions, impacting their ability to continue
to supply us with the quantity of materials required by us.

During fiscal 2021 and through the date of this filing, all of our businesses
have experienced normal or better than pre-pandemic order patterns compared with
pre-pandemic levels. U.S. executive orders issued in 2020 which required all
workers to remain at home unless their work is critical, essential, or
life-sustaining, have been lifted. Regardless, we believe that, based on the
various standards published to date, the work our employees are performing are
either critical, essential and/or life-sustaining for the following reasons: 1)
HBP residential and commercial garage doors, rolling steel doors and related
products (a) provide protection and support for the efficient and safe movement
of people, goods, and equipment in and out of residential and commercial
facilities, (b) help prevent fires from spreading from one location to another,
and (c) protect warehouses and homes, and their contents, from damage caused by
strong weather events such as hurricanes and tornadoes; and 2) CPP tools and
storage products provide critical support for the national infrastructure
including construction, maintenance, manufacturing and natural disaster
recovery, and is part of the essential supply base to many of its largest
customers including Home Depot, Lowe's and Menards. Our AMES international
facilities are currently fully operational, as they meet the applicable
standards in their respective countries.

Griffon believes it has adequate liquidity to invest in its existing businesses
and execute its business plan, while managing its capital structure on both a
short-term and long-term basis. At December 31, 2021, $364,633 of revolver
capacity was available under Griffon's Credit Agreement and Griffon had cash and
equivalents of $151,220.

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

Company Highlights

On January 24, 2022, Griffon acquired Hunter, a market leader in residential
ceiling, commercial, and industrial fans, for a purchase price of $845,000,
subject to customary post-closing adjustments. The acquisition of Hunter was
financed with a new $800,000 seven year Term Loan B facility; and a combination
of cash on hand and revolver borrowings under Griffon's Credit Agreement was
used to fund the balance of the purchase price and related acquisition and debt
expenditures.

On September 27, 2022, Griffon announced that it is exploring strategic
alternatives for its Defense Electronics business, including a sale. Griffon
believes this will increase long-term value for Griffon shareholders, while
creating enhanced growth opportunities for Telephonics. Telephonics is
recognized globally as a leading provider of highly sophisticated intelligence,
surveillance and communications solutions that are deployed across a wide range
of land, sea and air applications. Telephonics designs, develops, manufactures
and provides logistical support and lifecycle sustainment services to defense,
aerospace and commercial customers worldwide.

In August 2020 Griffon completed the public offering of 8,700,000 shares of our
common stock for total net proceeds of $178,165. The Company used a portion of
the net proceeds to repay outstanding borrowings under its Credit Agreement. The
Company intends to use the remainder of the proceeds for general corporate
purposes, including to expand its current business through acquisitions of, or
investments in, other businesses or products.

During 2020, Griffon issued, at par, $1,000,000 of 5.75% Senior Notes due in
2028 (the "2028 Senior Notes"). Proceeds from the 2028 Senior Notes were used to
redeem the $1,000,000 of 5.25% Senior Notes due 2022.

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

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

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

We continue to expect the roll-out of the new business platform for our AMES
U.S. and global operations to be completed by the end of calendar year 2023.
When fully implemented, we expect these actions will result in AMES' EBITDA
margins improving to 12% plus, excluding the impact of Hunter, with annual cash
savings of $30,000 to $35,000 and a reduction in inventory of $30,000 to
$35,000, based on fiscal 2020 operating levels.

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

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

In February 2018, we closed on the sale of our Clopay Plastics Products
("Plastics") business to Berry Global, Inc. ("Berry") for approximately
$465,000, net of certain post-closing adjustments, thus exiting the specialty
plastics industry that the Company had entered when it acquired Clopay
Corporation in 1986. This transaction provided immediate liquidity and improved
Griffon's cash flow given the historically higher capital needs of the Plastics
operations as compared to Griffon's remaining businesses.

In October 2017, we acquired ClosetMaid from Emerson Electric Co. (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. We believe that
ClosetMaid is the leading brand in its category, with excellent consumer
recognition. ClosetMaid generated over $300,000 in revenue in the first twelve
months after the acquisition.

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

Other acquisitions and disposals

On December 22, 2020, AMES acquired Quatro Design Pty Ltd ("Quatro"), a leading
Australian manufacturer and supplier of glass fiber reinforced concrete
landscaping products for residential, commercial, and public sector projects for
a purchase price of AUD $3,500 (approximately $2,700). Quatro contributed
approximately $5,000 in revenue in the first twelve months after the
acquisition.

On December 18, 2020, Defense Electronics completed the sale of its Systems
Engineering Group, Inc. ("SEG") business for $15,000. SEG provides
sophisticated, highly technical engineering and analytical support to the U.S.
Missile Defense Agency and various U.S. military commands. SEG had sales of
approximately $7,000 for the first fiscal quarter ended December 31, 2020 and
$31,000 for the fiscal year ended September 30, 2020.

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On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading U.K.
supplier of innovative garden pottery and associated products sold to leading
U.K. and Ireland garden centers for approximately $10,500 (GBP 8,750), inclusive
of a post-closing working capital adjustment, net of cash acquired. This
acquisition broadens AMES' product offerings in the U.K. market and increases
its in-country operational footprint.

On February 13, 2018, AMES acquired Kelkay, a leading U.K. manufacturer and
distributor of decorative outdoor landscaping products sold to garden centers,
retailers and grocers in the U.K. and Ireland. This acquisition broadened AMES'
product offerings in the market and increased its in-country operational
footprint.

In November 2017, Griffon acquired Harper Brush Works, a leading we
manufacturer of cleaning products for professional, household and industrial use, of Horizon Global (NYSE:HZN). This acquisition expanded the AMES range of long-handled tools by North America to include brooms, brushes and other cleaning products.

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

Further information

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 more information on revenue, earnings and total assets of each segment, see the footnote Segments to be presented in the notes to the consolidated financial statements.

Reportable Segments:

Griffon now operates through two reportable segments:

•Consumer and Professional Products ("CPP") is a leading North American
manufacturer and a global provider of branded consumer and professional tools;
residential, industrial and commercial fans; home storage and organization
products; and products that enhance indoor and outdoor lifestyles. CPP sells
products globally through a portfolio of leading brands including AMES, since
1774, Hunter, since 1886, True Temper, and ClosetMaid.

•Home and Building Products ("HBP") conducts its operations through Clopay.
Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors
and rolling steel doors in North America. Residential and commercial sectional
garage doors are sold through professional dealers and leading home center
retail chains throughout North America under the brands Clopay, Ideal, and
Holmes. Rolling steel door and grille products designed for commercial,
industrial, institutional, and retail use are sold under the CornellCookson
brand.

Defense Electronics, classified as a discontinued operation, conducts its
operations through Telephonics Corporation ("Telephonics"), founded in 1933, a
globally recognized leading provider of highly sophisticated intelligence,
surveillance and communications solutions for defense, aerospace and commercial
customers.

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Contents

PREVIEW

Revenue for the quarter ended December 31, 2021 was $591,749 compared to
$541,523 in the prior year comparable quarter, an increase of 9%, primarily
driven by increased revenue at HBP of 23%, partially offset by reduced revenue
at CPP of 3%. Income from continuing operations was $16,905 or $0.31 per share,
compared to $25,430, or $0.48 per share, in the prior year quarter.

Operating results for the current year quarter included the following:

– Restructuring charges of $1,716 ($1,330, net of tax, or $0.02 per share); – Acquisition costs of $2,595 ($2,003, net of tax, or $0.04 per share); and – Proxy contest costs of $2,291 ($1,768, net of tax, i.e. 0.03 per share); – Discrete and other net tax advantages of $881 Where $0.02 per share.

Operating results for the prior year quarter included the following:

– Restructuring charges of $3,079 ($2,301, net of tax, or $0.04 per share); – Discrete and other net tax advantages of $1,048 Where $0.02 per share.

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

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

                                                                         For the Three Months
                                                                          Ended December 31,
                                                                                      2021                   2020
                                                                                           (Unaudited)

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

Adjusting items:
Restructuring charges                                                                   1,716                  3,079

Acquisition costs                                                                       2,595                      -

Proxy contest costs                                                                     2,291                      -

Tax impact of above items                                                              (1,501)                  (778)
Discrete and certain other tax benefits, net                                             (881)                (1,048)

Adjusted income from continuing operations                                  

$21,125 $26,683

Earnings per common share from continuing operations                            $        0.31          $        0.48

Adjusting items, net of tax:
Restructuring charges                                                                    0.02                   0.04

Acquisition costs                                                                        0.04                      -

Proxy contest costs                                                                      0.03                      -

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

Adjusted earnings per common share from continuing operations               

$0.39 $0.50

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



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

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

Three months completed December 31, 2021 and 2020

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

See the table provided in Note 13 – Business segments for a reconciliation of segment adjusted EBITDA and pre-tax income from continuing operations.

Consumer and professional products

                                                             For the Three Months Ended December
                                                                             31,
                                                                      2021                      2020
United States                                                                        $ 164,899                         $ 183,442
Europe                                                                                  18,330                            13,156
Canada                                                                                  22,628                            22,115
Australia                                                                               74,349                            69,540
All other countries                                                                      2,967                             2,789
Total Revenue                                                                        $ 283,173                         $ 291,042
Adjusted EBITDA                                                                      $  16,214            5.7  %       $  32,713            11.2  %
Depreciation and amortization                                                        $   8,606                         $   8,199



For the quarter ended December 31, 2021, revenue decreased $7,869, or 3%,
compared to the prior year period, due to reduced volume of 14%, primarily in
the U.S. resulting from labor, transportation and supply chain disruptions,
partially offset by increased volume across all international locations, and
favorable mix and price of 11%.

For the quarter ended December 31, 2021, Adjusted EBITDA decreased 50% to
$16,214 compared to $32,713 in the prior year quarter, due to the decreased
volume, increased U.S. material and transportation costs coupled with the lag in
realization of price increases and COVID-19 related inefficiencies, partially
offset by increased volume at international locations.

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

On January 24, 2021, Griffon completed the acquisition of Hunter Fan Company
("Hunter"), a market leader in residential ceiling, commercial, and industrial
fans for a purchase price of approximately $845,000, subject to customary
post-closing adjustments. Hunter adds to Griffon's CPP segment, complementing
and diversifying our portfolio of leading consumer brands and products. Hunter
is expected to contribute approximately $385,000 in revenue in the first twelve
months of operation after the acquisition under AMES' ownership.

On December 22, 2020, AMES acquired Quatro Design Pty Ltd ("Quatro"), a leading
Australian manufacturer and supplier of glass fiber reinforced concrete
landscaping products for residential, commercial, and public sector projects.
Quatro contributed approximately $5,000 in revenue in the first twelve months
under AMES' ownership.

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

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

We continue to expect the roll-out of the new business platform for our AMES
U.S. and global operations to be completed by the end of calendar year 2023.
When fully implemented, we expect these actions will result in AMES' EBITDA
margins improving to 12% plus, excluding the impact of Hunter, with annual cash
savings of $30,000 to $35,000 and a reduction in inventory of $30,000 to
$35,000, based on fiscal 2020 operating levels.

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

In connection with this initiative, during the three months ended December 30,
2021, CPP incurred pre-tax restructuring and related exit costs approximating
$1,716. Since inception of this initiative in fiscal 2020, total cumulative
charges totaled $36,803, comprised of cash charges of $25,167 and non-cash,
asset-related charges of $11,636; the cash charges included $9,070 for one-time
termination benefits and other personnel-related costs and $16,097 for facility
exit costs. Since inception of this initiative in fiscal 2020 and during the
three months ended December 31, 2021, capital expenditures of $18,597 and
$3,090, respectively, were driven by investment in CPP business intelligence
systems and e-commerce facility.
                                                                               Non-Cash
                                           Cash Charges                         Charges
                                 Personnel          Facilities, exit         Facility and                                  Capital
                               related costs         costs and other             other                Total             Investments
Phase I                       $     12,000          $        4,000          $     19,000          $   35,000          $      40,000
Phase II                            14,000                  16,000                     -              30,000                 25,000
Total Anticipated
Charges                             26,000                  20,000                19,000              65,000                 65,000

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

Total 2021
restructuring charges               (3,190)                (11,573)               (6,655)            (21,418)                (8,774)
Q1 FY2022 Activity            $       (260)         $       (1,167)         $       (289)             (1,716)         $      (3,090)
Total cumulative
charges                             (9,070)                (16,097)              (11,636)            (36,803)               (18,597)
 Estimate to Complete         $     16,930          $        3,903          $      7,364          $   28,197          $      46,403



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Home and Building Products
                                                          For the Three Months Ended December
                                                                          31,
                                                                   2021                       2020
Residential                                                                       $ 177,787                          $ 154,542
Commercial                                                                          130,789                             95,939
Total Revenue                                                                     $ 308,576                          $ 250,481
Adjusted EBITDA                                                                   $  56,297            18.2  %       $  48,369            19.3  %
Depreciation and amortization                                                     $   4,338                          $   4,341



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

For the quarter ended December 31, 2021, Adjusted EBITDA increased 16% to
$56,297 compared to $48,369 in the prior year period. EBITDA benefited from the
increased revenue noted above, partially offset by increased material costs
coupled with the lag in realization of price increases and COVID-19 related
inefficiencies.
For the quarter ended December 31, 2021, segment depreciation and amortization
remained consistent with the prior year comparable period.

Unallocated

For the quarter ended December 31, 2021, the unallocated amounts, excluding amortization, consisted mainly of head office overheads totaling $12,957
compared to $12,629 during the quarter of the previous year. The increase in the current quarter compared to the comparable period of the previous year is mainly related to the increase in the employee share ownership plan and medical expenses.

Proxy Contest Costs

During the three months ended December 31, 2021, we incurred $2,291 of proxy
contest costs (including legal and advisory fees) in unallocated amounts as a
result of a proxy contest initiated by a shareholder during the most recently
completed fiscal quarter. There were no similar costs in the comparable period
of the prior year. Due to the ongoing nature of the proxy contest, we anticipate
incurring additional proxy contest and related costs throughout fiscal 2022.

Sectoral depreciation and amortization

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

Other income (expenses)

For the quarters ended December 31, 2021 and 2020, Other income (expense) of
$1,381 and $357, respectively, includes $394 and $699, respectively, of net
foreign currency exchange losses in connection with the translation of
receivables and payables denominated in currencies other than the functional
currencies of Griffon and its subsidiaries, net periodic benefit plan income of
$948 and $227, respectively, as well as $93 and $330, respectively, of net
investment income. Other income (expense) also includes rental income of $462 in
each of the three months ended December 31, 2021 and 2020.

Provision for income taxes

During the quarter ended December 31, 2021, the Company recognized a tax
provision of $7,318 on income before taxes from continuing operations of
$24,223, compared to a tax provision of $11,708 on income before taxes from
continuing operations of $37,138 in the comparable prior year quarter. The
current year quarter results included restructuring charges of $1,716 ($1,330,
net of tax), acquisition costs of $2,595 ($2,003, net of tax), proxy contest
costs of $2,291 ($1,768, net of tax) and discrete and certain other tax
benefits, net, that affect comparability of $881. The prior year quarter results
included restructuring charges of $3,079 ($2,301, net of tax) and discrete and
certain other tax benefits, net, that affect comparability of $1,048. Excluding
these items, the effective tax rates for the quarters ended December 31, 2021
and 2020 were 31.5% and 33.7%, respectively.
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Stock based compensation
For the quarters ended December 31, 2021 and 2020, stock based compensation
expense, which includes expenses for both restricted stock grants and the ESOP,
totaled $4,867 and $4,208, respectively.

Comprehensive income (loss)

For the quarter ended December 31, 2021, total other comprehensive income
(loss), net of taxes, of $2,751 included a loss of $2,319 from foreign currency
translation adjustments primarily due to the weakening of the Euro and British
Pound, all in comparison to the US Dollar; a $668 benefit from pension
amortization; and a $1,100 loss on cash flow hedges.

For the quarter ended December 31, 2020, total other comprehensive income, net
of taxes, of $13,141 included a gain of $12,123 from foreign currency
translation adjustments primarily due to the strengthening of the Euro, British
Pound, and Canadian and Australian Dollars all in comparison to the US Dollar; a
$1,706 benefit from pension amortization; and a $688 loss on cash flow hedges.

DISCONTINUED OPERATIONS

Defense Electronics
                                                                For the

Three months completed the 31st of December,

                                                                                         2021                           2020
Revenue                                                                                                                $     53,993             $     67,768
Adjusted EBITDA                                                                                                        $      4,472      8.3  % $      5,585          8.2%
Depreciation and amortization                                                                                          $          -             $      2,676



For the quarter ended December 31, 2021, DE revenue decreased $13,775 compared
to the prior year quarter. The prior year results include revenue from the SEG
business of $6,713. Excluding the divestiture of SEG from prior year results,
revenue decreased $7,062, or 12%. The decrease was driven by reduced volume due
to the timing of work performed primarily for Surveillance Systems.

For the quarter ended December 31, 2021, DE Adjusted EBITDA decreased $1,113
compared to the prior year comparable period. The prior year results include
Adjusted EBITDA from the SEG business of $412. Excluding the divestiture of SEG
from the prior year results, Adjusted EBITDA decreased 14% primarily due to the
reduced revenue noted above, partially offset by favorable program performance.

Depreciation and amortization was excluded from the current year results since
DE is classified as a discontinued operation and accordingly, the Company ceased
depreciation and amortization in accordance with discontinued operations
accounting guidelines. Depreciation and amortization would have been
approximately $2,700 in the quarter ended December 31, 2021.

At December 18, 2020, DE has completed the sale of its SEG business. SEG provides sophisticated and highly technical engineering and analytical support to the
Missile Defense Agency and miscellaneous we military commands.

During the quarter ended December 31, 2021, DE was awarded several new contracts
and received incremental funding on existing contracts approximating $48,000.
Contract backlog was $346,100 at December 31, 2021 compared to $388,700 at
December 31, 2020 with 66% expected to be fulfilled in the next 12 months;
backlog was $352,200 at September 30, 2021. Backlog is defined as unfilled firm
orders for products and services for which funding has been both authorized and
appropriated by the customer, or by Congress, in the case of US government
agencies.


Restructuring Charges and Divestiture
In September 2020, a Voluntary Employee Retirement Plan was initiated, which was
subsequently followed by a reduction in force in November 2020, to improve
efficiencies by combining functions and responsibilities. The reduction in force
initiative resulted in severance charges of approximately $2,200, recorded in
the first quarter ended December 31, 2020. These actions reduced headcount by
approximately 90 people.

In addition, in the first quarter ended December 31, 2020, restructuring charges
of $5,601 were recorded primarily related to exiting our older weather radar
product lines.
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DE recorded a pre-tax gain of $6,240 ($6,017, net of tax) during the three months ended December 31, 2020 related to the sale of SEG.

Other discontinued operations

At December 31, 2021, Griffon's other discontinued assets and liabilities are
primarily related to insurance claims, product liability, warranty reserves,
environmental reserves and related income taxes. See Note 16, Discontinued
Operations.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Griffon believes it has adequate liquidity to invest in its existing businesses
and execute its business plan, while managing its capital structure on both a
short-term and long-term basis. Griffon's primary sources of liquidity are cash
flows generated from operations, cash on hand and our January 2020 five-year
secured $400,000 Credit Agreement. At December 31, 2021, $364,633 of revolver
capacity was available under the Credit Agreement and we had cash and cash
equivalents of $151,220.

Management assesses Griffon's liquidity in terms of its ability to generate cash
to fund its operating, investing and financing activities. Significant factors
affecting liquidity include cash flows from operating activities, capital
expenditures, acquisitions, dispositions, bank lines of credit and the ability
to attract long-term capital under satisfactory terms. Griffon believes it has
sufficient liquidity available to invest in existing businesses and strategic
acquisitions while managing its capital structure on both a short-term and
long-term basis.

As of December 31, 2021, the amount of cash, cash equivalents and marketable
securities held by foreign subsidiaries was $66,600. Our intent is to
permanently reinvest these funds outside the U.S., and we do not currently
anticipate that we will need funds generated from foreign operations to fund our
domestic operations. In the event we determine that funds from foreign
operations are needed to fund operations in the U.S., we will be required to
accrue and pay U.S. taxes to repatriate these funds (unless applicable U.S.
taxes have already been paid).

The following table is derived from the condensed consolidated statements of cash flows:

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