Business Wire | Nov 16, 2021 08:04AM EST

Griffon Corporation Announces Annual and Fourth Quarter Results

Nov. 16, 2021

NEW YORK--(BUSINESS WIRE)--Nov. 16, 2021--Griffon Corporation ("Griffon" or the "Company") (NYSE:GFF) today reported results for the fiscal year and fourth quarter ended September 30, 2021.

On September 27, 2021, Griffon announced it is exploring strategic alternatives, including a sale, for its Defense Electronics ("DE") segment, which conducts its operations through Telephonics Corporation ("Telephonics"). As a result, Griffon classified Telephonics 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.

Revenue for Fiscal 2021 totaled $2.3 billion, a 10% increase compared to the $2.1 billion in the prior year. Including DE, revenue totaled $2.5 billion, a 6% increase compared to the $2.4 billion in the prior year.

Fiscal 2021 Net income totaled $79.2 million, or $1.48 per share, compared to $53.4 million, or $1.19 per share, in the prior year. Current year adjusted net income increased 36% to $99.2 million, or $1.86 per share, compared to $73.0 million, or $1.62 per share in the prior year. Income from continuing operations totaled $71.2 million, or $1.33 per share, compared to $42.4 million, or $0.94 per share, in the prior year. Current year adjusted income from continuing operations increased 50% to $90.6 million, or $1.70 per share, compared to $60.6 million, or $1.35 per share, in the prior year (see the Reconciliations of Net income to Adjusted net income and Income from Continuing Operations to Adjusted Income from Continuing Operations for details). The impact on adjusted earnings per share and adjusted earnings per share from continuing operations from the 8.7 million shares of common stock issued in August 2020 was approximately $0.32 and $0.30, respectively.

Adjusted EBITDA from continuing operations for Fiscal 2021 totaled $248 million, increasing 18% from the prior year of $209 million. Adjusted EBITDA from continuing operations excluding unallocated amounts (primarily corporate overhead) of $49 million in 2021 and $48 million in 2020, totaled $297 million in 2021, increasing 15% from the prior year of $258 million. Including DE, Adjusted EBITDA, excluding unallocated amounts, totaled $317 million, increasing 12% from the prior year of $283 million. Adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, 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).

Revenue for the fourth quarter totaled $570 million, increasing 3% from $551 million in the prior year. Including DE, revenue totaled $651 million, a 1% decrease compared to the prior year of $661 million.

Fourth quarter Net income totaled $15.9 million, or $0.30 per share, compared to $20.1 million, or $0.41 per share, in the prior year. Current quarter adjusted net income was $21.2 million, or $0.40 per share, compared to $21.5 million, or $0.44 per share in the prior year. Income from continuing operations totaled $12.6 million, or $0.23 per share, compared to $20.9 million, or $0.43 per share, in the prior year quarter. Current year fourth quarter Adjusted income from continuing operations was $17.7 million, or $0.33 per share compared to $17.2 million, or $0.35 per share, in the prior year fourth quarter (see the Reconciliations of Net income to Adjusted net income and Income from Continuing Operations to Adjusted Income from Continuing Operations for details). The impact on adjusted earnings per share and adjusted earnings per share from continuing operations from the 8.7 million shares of common stock issued in August 2020 was approximately $0.04 and $0.03, respectively.

Adjusted EBITDA from continuing operations for the fourth quarter totaled $53 million, increasing 5% from the prior year quarter of $51 million. Adjusted EBITDA from continuing operations, excluding unallocated amounts (primarily corporate overhead) of $13 million in 2021 and $12 million in 2020, totaled $67 million in 2021, increasing 6% from the prior year quarter of $63 million. Including DE, Adjusted EBITDA, excluding unallocated amounts, totaled $75 million, in line with the prior year.

Ronald J. Kramer, Chairman and Chief Executive Officer, commented "This was a record year for Griffon. We continued to see strong demand in our businesses driven by a robust housing market and our leading global product portfolio, while effectively navigating a highly dynamic and challenging operating environment.

Since the sale of our Plastics business and the purchase of ClosetMaid and CornellCookson, all in 2018, we have fundamentally strengthened Griffon. Over the last three years, our revenue, Adjusted EBITDA and adjusted earnings per share have increased at a compound annual growth rate of 11%, 23% and 35%, respectively. Most importantly over this period, we've generated $224 million in free cash flow and cut our leverage in half to 2.8 times."

Mr. Kramer continued, "We are very pleased with our progress creating long-term shareholder value and we expect significant additional benefits to come as we execute on our strategic initiatives to improve margins. Additionally, we are well positioned to take advantage of our balance sheet firepower to invest in our businesses and capitalize on acquisition opportunities, which we expect will be further bolstered after the completion of our Telephonics strategic alternative process. We are very excited about the future of Griffon."

Segment Operating Results

Consumer and Professional Products ("CPP")

CPP revenue in 2021 was $1.23 billion, increasing $90 million, or 8% compared to 2020 due to increased volume (3%) driven by increased consumer demand across all international geographies, partially offset by reduced volume in the U.S. due to labor, transportation and supply chain disruptions. Revenue also benefited from favorable price and mix (1%), and a favorable impact from foreign exchange (4%).

CPP Adjusted EBITDA for 2021 was $116 million, increasing $12 million, or 11% compared to 2020. The favorable variance resulted primarily from the increased revenue noted above and a favorable foreign exchange impact (5%), partially offset by increased U.S. material and transportation costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

CPP revenue in the current quarter was $282 million, decreasing $13 million, or 4% from the prior year quarter due to a decrease in volume (10%) driven by U.S. labor, transportation and supply chain disruptions, as well as reduced volume in Australia, partially offset by increased volume in both the U.K. and Canada. Revenue also benefited from favorable price and mix (4%), and a favorable impact from foreign exchange (2%).

CPP Adjusted EBITDA in the current quarter was $16 million, a decrease of $4 million from the prior year quarter due to reduced revenue noted above and increased U.S. material and transportation costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies. The current quarter included a favorable currency impact (3%).

CPP Strategic Initiative

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S. operations, and on November 12, 2020, Griffon announced that CPP is broadening this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China. The expanded focus of this initiative leverages the same three key development areas being executed within our U.S. operations. The three key development areas are:

* To consolidate AMES global operations to optimize facilities footprint and talent. * To make strategic investments in automation and facilities expansion to increase the efficiency of our manufacturing and fulfillment operations and support e-commerce growth. * To unify independent information systems into a single data and analytics platform, which will serve the whole AMES global enterprise. Expanding the roll-out of the new business platform from our AMES U.S. operations to include AMES' global operations will extend the duration of the project by one year, with completion now expected by the end of calendar year 2023. When fully implemented, these actions will result in annual cash savings of $30 million to $35 million and a reduction in inventory of $30 million to $35 million both based on fiscal 2020 operating levels.

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

In connection with this initiative, during the years ended September 30, 2021 and 2020, CPP incurred pre-tax restructuring and related exit costs approximating $21.4 million and $13.7 million, respectively. Since inception of this initiative in 2020, total cumulative charges totaled $35.1 million, comprised of cash charges of $23.7 million and non-cash, asset-related charges of $11.3 million; the cash charges included $8.8 million for one-time termination benefits and other personnel-related costs and $14.9 million for facility exit costs. During the years ended September, 30, 2021 and 2020, capital expenditures of $8.8 million and $6.7 million, respectively, were driven by investment in CPP business intelligence systems and an e-commerce facility.

Home and Building Products ("HBP")

HBP revenue in 2021 was $1,041 million, increasing $114 million, or 12%, compared to 2020, primarily due to favorable mix and pricing (8%) driven by both residential and commercial, and increased volume (4%) equally driven by both residential and commercial.

HBP Adjusted EBITDA in 2021 was $181 million, increasing $27 million, or 18%, compared to 2020. 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.

HBP revenue in the current quarter was $288 million, increasing $31 million, or 12% from the prior year quarter, due to increased pricing and favorable mix (18%) driven by both residential and commercial, partially offset by reduced volume (6%) primarily from residential products due to labor and supply chain disruptions.

HBP Adjusted EBITDA in the current quarter was $50 million, increasing $7 million, or 17% from the prior year quarter, primarily 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.

Defense Electronics ("DE") - Discontinued Operations

DE revenue in 2021 was $271 million, decreasing $70 million, or 21% compared to 2020. The current and prior year results include revenue from the SEG business of $7 million and $32 million, respectively. Excluding SEG from both years, revenue decreased $45 million, or 15%. The decrease was driven by reduced volume due to delayed awards for Surveillance Systems and decreased deliveries for Communications Systems, partially offset by increased Radar Systems volume.

DE Adjusted EBITDA for 2021 was $20 million, decreasing $5 million, or 19% from 2020. The current and prior year results include Adjusted EBITDA from the SEG business of $0.4 million and $1.5 million, respectively. Excluding SEG from both years, Adjusted EBITDA decreased $3.7 million, or 15%. The decrease was due to the reduced revenue noted above, and cost growth primarily for Surveillance Systems, partially offset by favorable program performance for Radar Systems and reduced operating expenses.

DE revenue in the current quarter was $81 million, decreasing $29 million, or 26% from the prior year quarter. The prior year results include revenue from the SEG business of $10 million. Excluding SEG from the prior year results, revenue decreased $19 million, or 19%. The decrease was driven by reduced volume due to delayed Surveillance Systems awards and deliveries on Communications Systems, partially offset by increased Radar Systems volume.

DE Adjusted EBITDA in the current quarter was $9 million, decreasing $4 million, or 31% from the prior year quarter. The prior year results include Adjusted EBITDA from the SEG business of $0.9 million. Excluding SEG from the prior year results, Adjusted EBITDA decreased $3 million, or 26%. The decrease was primarily driven by the reduced revenue noted above.

Contract backlog was $352 million at September 30, 2021, compared to $370 million at September 30, 2020 (excludes approximately $10 million of SEG related backlog), with 62% expected to be fulfilled in the next 12 months. The decrease in backlog is primarily due to awards delayed until 2022. During the year, Telephonics was awarded several new contracts and received incremental funding on existing contracts approximating $247 million (excludes $5.5 million of SEG awards), which translates into a book to bill ratio of 0.93.

Taxes

The Company reported Income before tax from continuing operations for the years ended September 30, 2021 and 2020 and recognized effective income tax rates of 35.9% and to 38.2%, respectively. Excluding discrete and certain other tax provisions, net and items that affect comparability, the effective tax rates for the years ended September 30, 2021 and 2020 were 31.7% and 33.7%, respectively.

Balance Sheet and Capital Expenditures

At September 30, 2021, the Company had a net debt position of $797 million, with cash and cash equivalents of $249 million and total debt outstanding of $1.05 billion, with $371 million available for borrowing under the revolving credit facility subject to certain loan covenants. Leverage, as calculated in accordance with our credit agreement, was 2.8 times EBITDA. Capital expenditures were $37 million for the year ended September 30, 2021.

In August 2020, Griffon Corporation completed a Public Offering of 8.7 million shares of its common stock for total net proceeds of $178.2 million.

As of September 30, 2021, Griffon had $58 million remaining under its Board of Directors authorized repurchase program. There were no purchases under these authorizations in fiscal 2021.

Corporate Governance

Each year we reach out to institutional shareholders to discuss their views on a variety of subjects, including our governance practices. Over the past five years, we have refreshed approximately half of our independent directors, adding diversity and relevant expertise to our Board. As we evolve, we are continuing this process. Our Board has adopted two amendments to our Certificate of Incorporation for submission to our shareholders at our 2022 annual meeting. The first amendment will declassify the Board over a three-year transition period after the amendment becomes effective. The second will reduce the percentage of voting power necessary to call a special meeting of shareholders. These amendments will become effective upon the approval of our shareholders at our 2022 annual meeting.

Our Board has also undertaken a commitment to further diversify with an objective that, by 2025, 40% of our independent directors will be women or persons of color.

These enhancements and refinements to our corporate governance practices will further align our interests with those of our shareholders and contribute to maximizing long term shareholder value.

Conference Call Information

The Company will hold a conference call today, November 16, 2021, at 9:00 AM ET.

The call can be accessed by dialing 1-877-407-0792 (U.S. participants) or 1-201-689-8263 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 13724401. Participants are encouraged to dial-in at least 10 minutes before the scheduled start time.

A replay of the call will be available starting on Tuesday, November 16, 2021 at 12:00 PM ET by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering the conference ID number: 13724401. The replay will be available through Tuesday, November 30, 2021 at 11:59 PM ET.

Forward-looking Statements

"Safe Harbor" Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies 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 the impact 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; our strategy, future operations, prospects and the plans of our businesses, including the exploration of strategic alternatives for Telephonics Corporation; Griffon's ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon's operating companies; and possible terrorist threats and actions and their impact on the global economy; the impact of COVID-19 on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business and operating facility failures, specifically among our customers and suppliers; Griffon's ability to service and refinance its debt; and the impact of recent and future legislative and regulatory changes, including, without limitation, changes in tax law. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company's Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Important Additional Information Regarding Proxy Solicitation

Griffon intends to file a proxy statement and associated WHITE proxy card with the U.S. Securities and Exchange Commission (the "SEC") in connection with the solicitation of proxies for Griffon's 2022 Annual Meeting (the "Proxy Statement"). Griffon, its directors and certain of its executive officers will be participants in the solicitation of proxies from shareholders in respect of the 2022 Annual Meeting. Information regarding the names of Griffon's directors and executive officers and their respective interests in Griffon by security holdings or otherwise is set forth in Griffon's proxy statement for the 2021 Annual Meeting of Shareholders, filed with the SEC on December 16, 2020. To the extent holdings of such participants in Griffon's securities have changed since the amounts set forth in the 2021 proxy statement, such changes have been reflected on Statements of Change in Ownership on Form 4 or Annual Statement of Changes in Beneficial Ownership on Form 5 filed with the SEC. Details concerning the nominees of Griffon's Board of Directors for election at the 2022 Annual Meeting will be included in the Proxy Statement. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SHAREHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR FURNISHED TO THE SEC, INCLUDING THE COMPANY'S DEFINITIVE PROXY STATEMENT AND ACCOMPANYING WHITE PROXY CARD, AND ANY SUPPLEMENTS THERETO, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and shareholders will be able to obtain a copy of the definitive Proxy Statement and other relevant documents filed by Griffon with the SEC free of charge from the SEC's website, www.sec.gov., or by directing a request by mail to Griffon Corporation, Attention: Corporate Secretary, at 712 Fifth Avenue, New York, NY 10019, or by visiting the investor relations section of Griffon's website, www.griffon.com.

About Griffon Corporation

Griffon Corporation 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 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.

Griffon conducts its operations through two reportable segments:

* Consumer and Professional Products conducts its operations through AMES. Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

* Home and Building Product 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.

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

For more information on Griffon and its operating subsidiaries, please see the Company's website at www.griffon.com.

Griffon evaluates performance and allocates resources based on operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, 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.

The following table provides a reconciliation of Adjusted EBITDA to Income before taxes from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIESOPERATING HIGHLIGHTS(in thousands)

(Unaudited) For the Year Ended For the Three Months Ended September 30, September 30,

REVENUE 2021 2020 2021 2020



Consumer andProfessional $ 281,779 $ 294,316 $ 1,229,518 $ 1,139,233 Products

Home and Building 288,424 256,939 1,041,108 927,313 Products

Defense Electronics 80,568 109,418 271,060 340,976

Subtotal $ 650,771 $ 660,673 $ 2,541,686 $ 2,407,522

Less: Defense (80,568 ) (109,418 ) (271,060 ) (340,976 )Electronics

Total revenue $ 570,203 $ 551,255 $ 2,270,626 $ 2,066,546



ADJUSTED EBITDA

Consumer andProfessional $ 16,149 $ 19,985 $ 115,673 $ 104,053 Products

Home and Building 50,430 42,996 181,015 153,631 Products

Defense Electronics 8,541 12,383 20,486 25,228

Subtotal 75,120 75,364 317,174 282,912

Less: Defense (8,541 ) (12,383 ) (20,486 ) (25,228 )Electronics

Total Segments 66,579 62,981 296,688 257,684

Unallocated amounts,excluding (13,162 ) (12,216 ) (49,054 ) (48,262 )depreciation*

Adjusted EBITDA 53,417 50,765 247,634 209,422

Net interest expense (15,762 ) (16,695 ) (62,735 ) (65,795 )

Depreciation and (13,258 ) (12,767 ) (52,302 ) (52,100 )amortization

Restructuring (6,756 ) (2,499 ) (21,418 ) (13,670 )charges

Loss from debt - - - (7,925 )extinguishment

Acquisitioncontingent - 1,733 - 1,733 consideration

Acquisition costs - - - (2,960 )

Income before taxesfrom continuing $ 17,641 $ 20,537 $ 111,179 $ 68,705 operations

* Primarily Corporate Overhead

For the Three Months For the Year Ended Ended September 30, September 30,

DEPRECIATION and AMORTIZATION 2021 2020 2021 2020

Segment:

Consumer and Professional $ 8,833 $ 8,138 $ 34,433 $ 32,788 Products

Home and Building Products 4,275 4,386 17,370 18,361

Defense Electronics 2,851 2,911 10,762 10,645

Total 15,959 15,435 62,565 61,794

Less: Defense Electronics (2,851) (2,911) (10,762) (10,645)

Total segment depreciation 13,108 12,524 51,803 51,149 and amortization

Corporate 150 243 499 951

Total consolidated $ 13,258 $ 12,767 $ 52,302 $ 52,100 depreciation and amortization

Griffon believes Free Cash Flow ("FCF", a non-GAAP measure) is a useful measure for investors because it portrays the Company's ability to generate cash from operations for purposes such as repaying debt, funding acquisitions and paying dividends.

The following table provides a reconciliation of Net cash used in operating activities to FCF:

Year Ended September 30,

(in thousands) 2021 2020

Net cash provided by operating activities from $ 71,032 $ 107,803 continuing operations

Acquisition of property, plant and equipment (36,951) (41,168)

Proceeds from the sale of property, plant and equipment 237 352

Free Cash Flow provided by Defense Electronics 32,159 21,397

FCF $ 66,477 $ 88,384

The following tables provide a reconciliation of Gross profit and Selling, general and administrative expenses for items that affect comparability for the three and twelve month periods ended September 30, 2021 and 2020:

For the Three Months For the Twelve Months(in thousands) Ended Ended September 30, September 30,

2021 2020 2021 2020

Gross Profit, as $ 155,869 $ 154,212 $ 641,113 $ 583,994 reported

% of revenue 27.3 % 28.0 % 28.2 % 28.3 %

Adjusting items:

Restructuring charges 3,350 63 7,923 4,159

Gross Profit, as $ 159,219 $ 154,275 $ 649,036 $ 588,153 adjusted

% of revenue 27.9 % 28.0 % 28.6 % 28.5 %

(in thousands)

For the Three Months Ended September 30,

For the For the Twelve Months Ended September 30,

2021

2020

2021

2020

Selling, general and administrative expenses, as reported

123,466

116,726

470,530

444,454

% of revenue

21.7

%

21.2

%

20.7

%

21.5

%

Adjusting items:

Restructuring charges

(3,406)

(2,435)

(13,495)

(9,510)

Acquisition costs

-

-

-

(2,960)

Acquisition contingent consideration

-

1,733

-

1,733

Selling, general and administrative expenses, as adjusted

$

120,060

$

116,024

$

457,035

$

433,717

% of revenue

21.1

%

21.0

%

20.1

%

21.0

%

For the Three Months For the For the Twelve(in thousands) Ended Months Ended September 30, September 30,

2021 2020 2021 2020

Selling, general andadministrative expenses, 123,466 116,726 470,530 444,454 as reported

% of revenue 21.7 % 21.2 % 20.7 % 21.5 %

Adjusting items:

Restructuring charges (3,406) (2,435) (13,495) (9,510)

Acquisition costs - - - (2,960)

Acquisition contingent - 1,733 - 1,733 consideration

Selling, general andadministrative expenses, $ 120,060 $ 116,024 $ 457,035 $ 433,717 as adjusted

% of revenue 21.1 % 21.0 % 20.1 % 21.0 %

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

(Unaudited) Three Months Ended September 30,

Twelve Months Ended September 30,

2021

2020

2021

2020

Revenue

$

570,203

$

551,255

$

2,270,626

$

2,066,546

Cost of goods and services

414,334

397,043

1,629,513

1,482,552

Gross profit

155,869

154,212

641,113

583,994

Selling, general and administrative expenses

123,466

116,726

470,530

444,454

Income from continuing operations

32,403

37,486

170,583

139,540

Other income (expense)

Interest expense

(15,805)

(16,737)

(63,175)

(66,544)

Interest income

43

42

440

749

Loss from debt extinguishment, net

-

-

-

(7,925)

Other, net

1,000

(254)

3,331

2,885

Total other expense, net

(14,762)

(16,949)

(59,404)

(70,835)

Income before taxes from continuing operations

17,641

20,537

111,179

68,705

Provision (benefit) for income taxes

5,072

(341)

39,940

26,262

Income from continuing operations

$

12,569

$

20,878

$

71,239

$

42,443

Discontinued operations:

Income before taxes from operations of discontinued businesses

6,332

7,859

8,897

14,052

Provision from income taxes

3,010

8,646

925

3,066

Income (loss) from discontinued operations

3,322

(787)

7,972

10,986

Net income

$

15,891

$

20,091

$

79,211

$

53,429

Basic earnings per common share:

Income from continuing operations

$

0.25

$

0.45

$

1.40

$

1.00

Income (loss) from discontinued operations

0.07

(0.02)

0.16

0.26

Basic earnings per common share

$

0.31

$

0.44

$

1.56

$

1.25

Weighted-average shares outstanding

50,981

45,903

50,830

42,588

Diluted earnings per common share:

Income from continuing operations

$

0.23

$

0.43

$

1.33

$

0.94

Income (loss) from discontinued operations

0.06

(0.02)

0.15

0.24

Diluted income per common share

$

0.30

$

0.41

$

1.48

$

1.19

Weighted-average shares outstanding

53,560

48,526

53,369

45,015

Net income

$

15,891

$

20,091

$

79,211

$

53,429

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments

(8,589)

6,094

6,433

5,601

Pension and other post retirement plans

13,600

(14,264)

17,796

(11,784)

Gain on cash flow hedge

449

1,285

1,886

7

Total other comprehensive income (loss), net of taxes

5,460

(6,885)

26,115

(6,176)

Comprehensive income (loss), net

$

21,351

$

13,206

$

105,326

$

47,253

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

(Unaudited) Twelve Months Ended Three Months Ended September 30, September 30,

2021 2020 2021 2020

Revenue $ 570,203 $ 551,255 $ 2,270,626 $ 2,066,546

Cost of goods and 414,334 397,043 1,629,513 1,482,552 services

Gross profit 155,869 154,212 641,113 583,994



Selling, general andadministrative 123,466 116,726 470,530 444,454 expenses



Income from 32,403 37,486 170,583 139,540 continuing operations



Other income (expense)

Interest expense (15,805) (16,737) (63,175) (66,544)

Interest income 43 42 440 749

Loss from debt - - - (7,925) extinguishment, net

Other, net 1,000 (254) 3,331 2,885

Total other expense, (14,762) (16,949) (59,404) (70,835) net



Income before taxesfrom continuing 17,641 20,537 111,179 68,705 operations

Provision (benefit) 5,072 (341) 39,940 26,262 for income taxes

Income from $ 12,569 $ 20,878 $ 71,239 $ 42,443 continuing operations



Discontinued operations:

Income before taxesfrom operations of 6,332 7,859 8,897 14,052 discontinuedbusinesses

Provision from income 3,010 8,646 925 3,066 taxes

Income (loss) fromdiscontinued 3,322 (787) 7,972 10,986 operations

Net income $ 15,891 $ 20,091 $ 79,211 $ 53,429



Basic earnings per common share:

Income from $ 0.25 $ 0.45 $ 1.40 $ 1.00 continuing operations

Income (loss) fromdiscontinued 0.07 (0.02) 0.16 0.26 operations

Basic earnings per $ 0.31 $ 0.44 $ 1.56 $ 1.25 common share

Weighted-average 50,981 45,903 50,830 42,588 shares outstanding



Diluted earnings per common share:

Income from $ 0.23 $ 0.43 $ 1.33 $ 0.94 continuing operations

Income (loss) fromdiscontinued 0.06 (0.02) 0.15 0.24 operations

Diluted income per $ 0.30 $ 0.41 $ 1.48 $ 1.19 common share

Weighted-average 53,560 48,526 53,369 45,015 shares outstanding



Net income $ 15,891 $ 20,091 $ 79,211 $ 53,429

Other comprehensiveincome (loss), net of taxes:

Foreign currencytranslation (8,589) 6,094 6,433 5,601 adjustments

Pension and other 13,600 (14,264) 17,796 (11,784) post retirement plans

Gain on cash flow 449 1,285 1,886 7 hedge

Total othercomprehensive income 5,460 (6,885) 26,115 (6,176) (loss), net of taxes

Comprehensive income $ 21,351 $ 13,206 $ 105,326 $ 47,253 (loss), net

GRIFFON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

At September 30, 2021

At September 30, 2020

CURRENT ASSETS

Cash and equivalents

$

248,653

$

218,089

Accounts receivable, net of allowances of $8,787 and $8,178

294,804

278,420

Inventories

472,794

320,188

Prepaid and other current assets

76,009

41,514

Assets of discontinued operations held for sale

273,414

245,726

Assets of discontinued operations not held for sale

605

2,091

Total Current Assets

1,366,279

1,106,028

PROPERTY, PLANT AND EQUIPMENT, net

292,622

297,084

OPERATING LEASE RIGHT-OF-USE ASSETS

144,598

154,349

GOODWILL

426,148

424,098

INTANGIBLE ASSETS, net

350,025

354,202

OTHER ASSETS

21,589

26,474

ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE

-

79,952

ASSETS OF DISCONTINUED OPERATIONS

3,424

6,406

Total Assets

$

2,604,685

$

2,448,593

CURRENT LIABILITIES

Notes payable and current portion of long-term debt

$

12,486

$

9,922

Accounts payable

260,140

172,537

Accrued liabilities

145,101

143,971

Current portion of operating lease liabilities

29,881

29,672

Liabilities of discontinued operations held for sale

80,748

81,923

Liabilities of discontinued operations

3,280

3,797

Total Current Liabilities

531,636

441,822

LONG-TERM DEBT, net

1,033,197

1,037,042

LONG-TERM OPERATING LEASE LIABILITIES

119,315

130,588

OTHER LIABILITIES

109,585

121,538

LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR SALE

-

10,438

LIABILITIES OF DISCONTINUED OPERATIONS

3,794

7,014

Total Liabilities

1,797,527

1,748,442

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock, par value $0.25 per share, authorized 3,000 shares, no shares issued

-

-

Common stock, par value $0.25 per share, authorized 85,000 shares, issued shares of 84,375 and 83,739, respectively.

21,094

20,935

Capital in excess of par value

602,181

583,008

Retained earnings

669,998

607,518

Treasury shares, at cost, 27,762 common shares and 27,610 common shares, respectively.

(416,850)

(413,493)

Accumulated other comprehensive loss

(45,977)

(72,092)

Deferred compensation

(23,288)

(25,725)

Total Shareholders' Equity

807,158

700,151

Total Liabilities and Shareholders' Equity

$

2,604,685

$

2,448,593

GRIFFON CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)

At September At September 30, 30, 2021 2020

CURRENT ASSETS

Cash and equivalents $ 248,653 $ 218,089

Accounts receivable, net of allowances of $8,787 294,804 278,420 and $8,178

Inventories 472,794 320,188

Prepaid and other current assets 76,009 41,514

Assets of discontinued operations held for sale 273,414 245,726

Assets of discontinued operations not held for 605 2,091 sale

Total Current Assets 1,366,279 1,106,028

PROPERTY, PLANT AND EQUIPMENT, net 292,622 297,084

OPERATING LEASE RIGHT-OF-USE ASSETS 144,598 154,349

GOODWILL 426,148 424,098

INTANGIBLE ASSETS, net 350,025 354,202

OTHER ASSETS 21,589 26,474

ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE - 79,952

ASSETS OF DISCONTINUED OPERATIONS 3,424 6,406

Total Assets $ 2,604,685 $ 2,448,593

CURRENT LIABILITIES

Notes payable and current portion of long-term $ 12,486 $ 9,922 debt

Accounts payable 260,140 172,537

Accrued liabilities 145,101 143,971

Current portion of operating lease liabilities 29,881 29,672

Liabilities of discontinued operations held for 80,748 81,923 sale

Liabilities of discontinued operations 3,280 3,797

Total Current Liabilities 531,636 441,822

LONG-TERM DEBT, net 1,033,197 1,037,042

LONG-TERM OPERATING LEASE LIABILITIES 119,315 130,588

OTHER LIABILITIES 109,585 121,538

LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR - 10,438 SALE

LIABILITIES OF DISCONTINUED OPERATIONS 3,794 7,014

Total Liabilities 1,797,527 1,748,442

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock, par value $0.25 per share, - - authorized 3,000 shares, no shares issued

Common stock, par value $0.25 per share,authorized 85,000 shares, issued shares of 84,375 21,094 20,935 and 83,739, respectively.

Capital in excess of par value 602,181 583,008

Retained earnings 669,998 607,518

Treasury shares, at cost, 27,762 common shares (416,850) (413,493) and 27,610 common shares, respectively.

Accumulated other comprehensive loss (45,977) (72,092)

Deferred compensation (23,288) (25,725)

Total Shareholders' Equity 807,158 700,151

Total Liabilities and Shareholders' Equity $ 2,604,685 $ 2,448,593

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

Years Ended September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

Net income

$

79,211

$

53,429

Net income from discontinued operations

(7,972)

(10,986)

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

Depreciation and amortization

52,302

52,100

Stock-based compensation

20,088

17,580

Asset impairment charges - restructuring

6,655

4,692

Provision for losses on accounts receivable

501

1,332

Amortization of deferred financing costs and debt discounts

2,640

3,661

Loss from debt extinguishment

-

7,925

Deferred income tax

13,763

2,122

(Gain)/ loss on sale/disposal of assets and investments

231

(287)

Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable

(7,002)

(72,565)

(Increase) decrease in inventories

(150,857)

23,262

Increase in prepaid and other assets

(9,598)

(15,878)

Increase in accounts payable, accrued liabilities and income taxes payable

69,236

40,399

Other changes, net

1,834

1,017

Net cash provided by operating activities - continuing operations

71,032

107,803

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:

Acquisition of property, plant and equipment

(36,951)

(41,168)

Acquired business, net of cash acquired

(2,242)

(10,531)

Investment purchases

(17,211)

(130)

Proceeds from sale of property, plant and equipment

237

352

Net cash used in investing activities - continuing operations

(56,167)

(51,477)

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:

Proceeds from issuance of common stock

-

178,165

Dividends paid

(17,139)

(14,529)

Purchase of shares for treasury

(3,357)

(7,479)

Proceeds from long-term debt

20,912

1,240,080

Payments of long-term debt

(27,833)

(1,308,915)

Change in short-term borrowings

-

-

Financing costs

(571)

(17,384)

Contingent consideration for acquired businesses

-

(1,733)

Other, net

(257)

(15)

Net cash provided by (used) in financing activities - continuing operations

(28,245)

68,190

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash provided by operating activities

40,737

26,206

Net cash provided by (used in) investing activities

6,751

(7,387)

Net cash provided by discontinued operations

47,488

18,819

Effect of exchange rate changes on cash and equivalents

(3,544)

2,377

NET INCREASE IN CASH AND EQUIVALENTS

30,564

145,712

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

218,089

72,377

CASH AND EQUIVALENTS AT END OF PERIOD

$

248,653

$

218,089

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

$

60,781

$

63,139

Cash paid for taxes

41,216

21,016

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

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

Years Ended September 30,

2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

Net income $ 79,211 $ 53,429

Net income from discontinued operations (7,972) (10,986)

Adjustments to reconcile net income to net cashprovided by operating activities of continuing operations:

Depreciation and amortization 52,302 52,100

Stock-based compensation 20,088 17,580

Asset impairment charges - restructuring 6,655 4,692

Provision for losses on accounts receivable 501 1,332

Amortization of deferred financing costs and debt 2,640 3,661 discounts

Loss from debt extinguishment - 7,925

Deferred income tax 13,763 2,122

(Gain)/ loss on sale/disposal of assets and 231 (287) investments

Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable (7,002) (72,565)

(Increase) decrease in inventories (150,857) 23,262

Increase in prepaid and other assets (9,598) (15,878)

Increase in accounts payable, accrued liabilities 69,236 40,399 and income taxes payable

Other changes, net 1,834 1,017

Net cash provided by operating activities - 71,032 107,803 continuing operations

CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:

Acquisition of property, plant and equipment (36,951) (41,168)

Acquired business, net of cash acquired (2,242) (10,531)

Investment purchases (17,211) (130)

Proceeds from sale of property, plant and 237 352 equipment

Net cash used in investing activities - (56,167) (51,477) continuing operations

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:

Proceeds from issuance of common stock - 178,165

Dividends paid (17,139) (14,529)

Purchase of shares for treasury (3,357) (7,479)

Proceeds from long-term debt 20,912 1,240,080

Payments of long-term debt (27,833) (1,308,915)

Change in short-term borrowings - -

Financing costs (571) (17,384)

Contingent consideration for acquired businesses - (1,733)

Other, net (257) (15)

Net cash provided by (used) in financing (28,245) 68,190 activities - continuing operations



CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash provided by operating activities 40,737 26,206

Net cash provided by (used in) investing 6,751 (7,387) activities

Net cash provided by discontinued operations 47,488 18,819

Effect of exchange rate changes on cash and (3,544) 2,377 equivalents

NET INCREASE IN CASH AND EQUIVALENTS 30,564 145,712

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 218,089 72,377

CASH AND EQUIVALENTS AT END OF PERIOD $ 248,653 $ 218,089

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest $ 60,781 $ 63,139

Cash paid for taxes 41,216 21,016

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

GRIFFON CORPORATION AND SUBSIDIARIESRECONCILIATION OF INCOME FROM CONTINUING OPERATIONSTO ADJUSTED INCOME FROM CONTINUING OPERATIONS(in thousands, except per share data)

For the Three Months For the Years Ended Ended September 30, September 30,

2021 2020 2021 2020

Income from continuing $ 12,569 $ 20,878 $ 71,239 $ 42,443 operations

Adjusting items:

Restructuring charges 6,756 2,499 21,418 13,670

Loss from debt extinguishment - - - 7,925

Acquisition costs - - - 2,960

Acquisition contingent - (1,733) - (1,733) consideration

Tax impact of above items (1,659) (440) (5,287) (5,584)

Discrete and other certain 26 (4,005) 3,245 965 tax (benefits) provisions

Adjusted income from $ 17,692 $ 17,199 $ 90,615 $ 60,646 continuing operations



Earnings per common share $ 0.23 $ 0.43 $ 1.33 $ 0.94 from continuing operations



Adjusting items, net of tax:

Restructuring charges 0.10 0.04 0.30 0.23

Loss from debt extinguishment - - - 0.14

Acquisition costs - - - 0.05

Acquisition contingent - (0.03) - (0.03) consideration

Discrete and other certain - (0.08) 0.06 0.02 tax (benefits) provisions

Adjusted earnings per share $ 0.33 $ 0.35 $ 1.70 $ 1.35 from continuing operations

Weighted-average shares 53,560 48,526 53,369 45,015 outstanding (in thousands)

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.

GRIFFON CORPORATION AND SUBSIDIARIESRECONCILIATION OF NET INCOMETO ADJUSTED NET INCOME(in thousands, except per share data)

For the Three Months For the Years Ended Ended September 30, September 30,

2021 2020 2021 2020

Net income $ 15,891 $ 20,091 $ 79,211 $ 53,429

Adjusting items:

Restructuring charges 6,756 4,619 29,200 15,790

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

Loss from debt extinguishment - - - 7,925

Acquisition costs - - - 2,960

Acquisition contingent - (1,733) - (1,733) consideration

Tax impact of above items (1,851) (840) (7,175) (5,984)

Discrete and other certain 392 (595) 3,255 654 tax provisions (benefits)

Adjusted net income $ 21,188 $ 21,542 $ 99,200 $ 73,041



Earnings per common share $ 0.30 $ 0.41 $ 1.48 $ 1.19



Adjusting items, net of tax:

Restructuring charges 0.09 0.07 0.41 0.26

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

Loss from debt extinguishment - - - 0.14

Acquisition costs - - - 0.05

Acquisition contingent - (0.03) - (0.03) consideration

Discrete and other certain 0.01 (0.01) 0.06 0.01 tax provisions (benefits)

Adjusted earnings per share $ 0.40 $ 0.44 $ 1.86 $ 1.62

Weighted-average shares 53,560 48,526 53,369 45,015 outstanding (in thousands)



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.

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CONTACT: Company: Brian G. Harris SVP & Chief Financial Officer Griffon Corporation (212) 957-5000 Investor Relations: Michael Callahan Managing Director ICR Inc. (203) 682-8311