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 three years, we have undertaken a series of transformative
transactions. We divested our specialty plastics business in 2018 to focus on
our core markets and improve our free cash flow conversion. Also in 2018, 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. As a result of the expanded scope of the AMES and Clopay
businesses, in 2019 we began reporting each as a separate segment. Griffon now
reports its operations through three segments. Clopay remains in the Home and
Building Products ("HBP") segment, AMES now constitutes our new Consumer and
Professional Products ("CPP") segment and our Defense Electronics segment which
continues to consist of Telephonics Corporation.

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

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

Griffon believes it has adequate liquidity to invest in its existing businesses
and execute its business plan, while managing its capital structure on both a
short-term and long-term basis. In January 2020, Griffon increased total
borrowing capacity under its revolving credit facility ("Credit Agreement") by
$50,000, to $400,000 (of which $369,807 was available at December 31, 2020), and
extended maturity of the facility to 2025. In addition, the Credit Agreement has
a $100,000 accordion feature (subject to lender consent). In February 2020,
Griffon refinanced $850,000 of its $1,000,000 of senior notes due 2022 with new
5.75% senior notes with a maturity of 2028, and in June 2020 refinanced the
remaining $150,000 under the same terms and indenture as the $850,000 senior
notes due 2028. In August 2020, we completed a public offering of 8,700,000
shares of our common stock for total net proceeds of $178,165 (the "Public
Offering"); a portion of these net proceeds were used to repay outstanding
borrowing under our Credit Agreement. At December 31, 2020 Griffon had cash and
equivalents of $233,807.

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.

Business Highlights



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

On February 19, 2020, Griffon issued, at par, $850,000 of 5.75% Senior Notes due in 2028 (the "2028 Senior Notes") and on June 8, 2020 Griffon issued an additional $150,000 of 2028 Senior Notes at 100.25% of par under the same indenture. Proceeds from the 2028 Senior Notes were used to redeem the $1,000,000 of 5.25% Senior Notes due 2022.



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

The expanded focus of this initiative leverages the same three key development
areas being executed within our U.S. operations. First, certain AMES 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.

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

The cost to implement this new business platform, over the duration of the
project, will include one-time charges of approximately $65,000 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.

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

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

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

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.

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

Other Acquisitions and Dispositions



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) in cash, subject to
customary final working capital adjustments. The purchase price is subject to
additional contingent consideration of approximately AUD $1,000 (approximately
$760) based on Quatro exceeding certain EBITDA performance targets in the first
year. Quatro is expected to contribute approximately $5,000 in annualized
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, subject to customary
closing net working capital adjustments. SEG provides sophisticated, highly
technical engineering and analytical support to the Missile Defense Agency and
various U.S. military commands. SEG had sales of approximately $7,000 for the
first fiscal quarter ended December 31, 2020 and $31,000 for the fiscal year
ended September 30, 2020.

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading
United Kingdom supplier of innovative garden pottery and associated products
sold to leading UK and Ireland garden centers for approximately $10,500 (GBP
8,750), inclusive of a post-closing working capital adjustment, net of cash
acquired. This acquisition broadens AMES' product offerings in the UK market and
increases its in-country operational footprint. Apta contributed approximately
$20,000 in revenue in the first twelve months after the acquisition.

On February 13, 2018, AMES acquired Kelkay, a leading United Kingdom
manufacturer and distributor of decorative outdoor landscaping products sold to
garden centers, retailers and grocers in the UK and Ireland. 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 U.S. manufacturer of cleaning products for professional, home, and industrial use, from Horizon Global (NYSE:HZN). This acquisition expanded the AMES line of long-handle tools in North America to include brooms, brushes, and other cleaning products.



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
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acquisition of Apta, provides AMES with additional brands and a platform for
growth in the UK market and access to leading garden centers, retailers, and
grocers in the UK and Ireland. In Australia, Griffon acquired Hills Home Living,
the iconic brand of clotheslines and home products, from Hills Limited (ASX:HIL)
in December 2016 and in September 2017, Griffon acquired Tuscan Path, an
Australian provider of pots, planters, pavers, decorative stone, and garden
décor products. The Hills and Tuscan Path acquisitions broadened AMES' outdoor
living and lawn and garden business, strengthening AMES' portfolio of brands and
its market position in Australia and New Zealand.

Further Information



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

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

Reportable Segments:

Griffon currently conducts its operations through three reportable segments:



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

•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.

•DE conducts its operations through Telephonics Corporation, founded in 1933, a
globally recognized leading provider of highly sophisticated intelligence,
surveillance and communications solutions for defense, aerospace and commercial
customers.


OVERVIEW

Revenue for the quarter ended December 31, 2020 was $609,291 compared to
$548,438 in the prior year comparable quarter, an increase of approximately 11%,
driven by increased revenue at CPP, HBP and DE of 21%, 4% and 3%, respectively.
Net income was $29,500 or $0.55 per share, compared to $10,612, or $0.24 per
share, in the prior year quarter. The current year quarter results from
operations included the following:

-  Restructuring charges of $10,800 ($8,300, net of tax, or $0.16 per share);
-  Gain on sale of Systems Engineering Group ("SEG") business $6,240 ($6,017,
net of tax, or $0.11 per share);
- Discrete and certain other tax benefits, net, of $2,028 or $0.04 per share.

The prior quarter results included restructuring charges of $6,434 ($4,148, net
of tax, or $0.09 per share) and discrete and certain other tax provisions, net,
of $833 or $0.02 per share.

Excluding these items from the respective quarterly results, net income would
have been $29,755, or $0.56 per share, in the current year quarter compared to
$15,593, or $0.36 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 Net income to Adjusted net income and Earnings per
share to Adjusted earnings per share:

                                                                           For the Three Months
                                                                            Ended December 31,
                                                                                        2020                 2019
                                                                                              (Unaudited)

Net income                                                                         $    29,500          $    10,612

Adjusting items:
Restructuring charges                                                                   10,800                6,434
Gain on sale of SEG business                                                            (6,240)                   -

Tax impact of above items                                                               (2,277)              (2,286)
Discrete and certain other tax provisions (benefits), net                               (2,028)                 833

Adjusted net income                                                                $    29,755          $    15,593

Diluted earnings per common share

$ 0.55 $ 0.24



Adjusting items, net of tax:
Restructuring charges                                                                     0.16                 0.09
Gain on sale of SEG business                                                             (0.11)                   -

Discrete and certain other tax provisions (benefits), net                                (0.04)                0.02

Adjusted earnings per common share

$ 0.56 $ 0.36



Weighted-average shares outstanding (in thousands)                                      53,192               43,895

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.



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 ended December 31, 2020 and 2019



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 table provided in Note 13 - Business Segments for a reconciliation of Segment Adjusted EBITDA to Income before taxes.


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Consumer and Professional Products
                                                                  For the

Three Months Ended December 31,


                                                                  2020                                 2019
Revenue                                              $   291,042                           $  241,076
Adjusted EBITDA                                           32,713             11.2  %           21,926            9.1  %
Depreciation and amortization                              8,199                                8,231



For the quarter ended December 31, 2020, revenue increased $49,966 or 21%,
compared to the prior year period, primarily due to increased volume of 18%,
driven by continued consumer demand for home improvement initiatives across all
geographies, early U.S. spring orders and expansion of the home organization
product line. Improved revenue also reflected incremental revenue from the Apta
acquisition of 1% and a favorable foreign exchange impact of 2%. Organic growth
was 20% (revenue growth adjusted to exclude acquisitions).

For the quarter ended December 31, 2020, Adjusted EBITDA increased 49% to
$32,713 compared to $21,926 in the prior year period. The favorable variance
resulted primarily from the increased revenue noted above, partially offset by
increased COVID-19 related inefficiencies. For the quarter ended December 31,
2020, EBITDA reflects a favorable foreign exchange impact of 5%.

Segment depreciation and amortization remained consistent with the prior year comparable quarter.



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 is expected to contribute approximately $5,000 in annualized revenue in
the first twelve months under AMES' ownership.

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading
United Kingdom supplier of innovative garden pottery and associated products
sold to leading UK and Ireland garden centers. This acquisition broadens AMES'
product offerings in the UK market and increases its in-country operational
footprint. Apta contributed approximately $20,000 in revenue in the first twelve
months after the acquisition.

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

The expanded focus of this initiative leverages the same three key development
areas being executed within our U.S. operations. First, certain AMES 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.

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

The cost to implement this new business platform, over the duration of the
project, will include one-time charges of approximately $65,000 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 year ended September 30, 2020 and
during the three months ended December 31, 2020, CPP incurred pre-tax
restructuring and related exit costs approximating $13,669 and $3,079,
respectively. Since inception of this initiative, total cumulative charges
totaled $16,748, comprised of cash charges of $11,863 and non-cash,
asset-related charges of $4,885; the cash charges included $5,982 for one-time
termination benefits and other personnel-related costs
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and $5,881 for facility exit costs. During the year ended September, 30, 2020
and during the quarter ended December 31, 2020, capital expenditures of 6,733
and $2,236, 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)
Q1 FY2021 Activity                    (362)                 (2,524)                 (193)             (3,079)                (2,236)
Total cumulative
charges                             (5,982)                 (5,881)               (4,885)            (16,748)                (8,969)
 Estimate to Complete         $     20,018          $       14,119          $     14,115          $   48,252          $      56,031



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Home and Building Products
                                                          For the Three Months Ended December
                                                                          31,
                                                                   2020                       2019
Revenue                                                                           $ 250,481                           $ 241,381
Adjusted EBITDA                                                                      48,369             19.3  %          40,701             16.9  %
Depreciation and amortization                                                         4,341                               4,800

For the quarter ended December 31, 2020, revenue increased $9,100 or 4%, compared to the prior year period, driven by increased volume of 5%, partially offset by unfavorable mix of 1%.



For the quarter ended December 31, 2020, Adjusted EBITDA increased 19% to
$48,369 compared to $40,701 in the prior year period. EBITDA benefited from
increased revenue noted above including volume related benefits on absorption
and operational efficiency improvements, partially offset by COVID-19 related
inefficiencies.

Segment depreciation and amortization decreased $459 from the prior year quarter due to fully depreciated assets.



Defense Electronics
                                                          For the Three Months Ended December
                                                                          31,
                                                                    2020                      2019
Revenue                                                                            $ 67,768                          $ 65,981
Adjusted EBITDA                                                                       5,585             8.2  %          4,475          6.8%
Depreciation and amortization                                                         2,676                             2,644



For the quarter ended December 31, 2020, revenue increased $1,787, or 3%,
compared to the prior year quarter. The increase was due to increased volume for
Naval and Cyber systems driven by multi-mode airborne maritime surveillance
systems, partially offset by timing of work performed on Communication systems
and commercial custom integrated circuits.

For the quarter ended December 31, 2020, Adjusted EBITDA increased $1,110, or
25%, compared to the prior year comparable period, driven by the increase in
revenue and reduced headcount related to the reduction in force during the
current quarter, partially offset by the timing of research and development
expenses.

Segment depreciation and amortization remained consistent with the prior year comparable quarter-to-date period.



On December 18, 2020, DE completed the sale of its SEG business. SEG provides
sophisticated, highly technical engineering and analytical support to the
Missile Defense Agency and various U.S. military commands. 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.

During the three months ended December 31, 2020, DE was awarded several new
contracts and received incremental funding on existing contracts approximating
$85,000. Contract backlog was $388,700 at December 31, 2020 with 66% expected to
be fulfilled in the next 12 months. Backlog was $380,000 at September 30, 2020,
of which approximately $8,500 was related to the SEG business which was sold in
December 2020. 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 $2,120 during current quarter. These
actions reduced headcount by approximately 90 people.

In addition, charges of $5,601 were recorded during the quarter ended December 31, 2020, primarily related to exiting our older weather radar product lines.


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Table of Contents We recorded a pre-tax gain of $6,240 ($6,017, net of tax) during the first fiscal quarter ended December 31, 2020 related to the divestiture of SEG.

Unallocated



For the quarter ended December 31, 2020, unallocated amounts, excluding
depreciation, consisted primarily of corporate overhead costs totaling $12,027
compared to $11,942 in the prior year quarter. The increase in the current
quarter compared to the respective prior year quarter primarily relates to
increases in compensation and incentive costs, partially offset by consulting
fees, travel and administrative office costs.

Segment Depreciation and Amortization

Segment depreciation and amortization decreased $459 for three months ended December 31, 2020 compared to the comparable prior year period primarily due to fully depreciated assets.



Other Income (Expense)

For the quarters ended December 31, 2020 and 2019, Other income (expense) of
$(41) and $778, respectively, includes $(699) and ($376), respectively, of net
currency exchange losses in connection with the translation of receivables and
payables denominated in currencies other than the functional currencies of
Griffon and its subsidiaries, net periodic benefit plan income of $227 and $389,
respectively, as well as $330 and $81, respectively, of net investment income.
Additionally, Other income (expense) also includes a one-time technology
recognition award for $700 in the quarter ended December 31, 2019.

Provision for income taxes
During the quarter ended December 31, 2020, the Company recognized a tax
provision of $9,669 on income before taxes from operations of $39,169, compared
to a tax provision of $6,339 on income before taxes from operations of $16,951
in the comparable prior year quarter. The current year quarter results included
restructuring charges of $10,800 ($8,300, net of tax), gain on sale of SEG
business $6,240 ($6,017, net of tax) and discrete and certain other tax
benefits, net, that affect comparability of $2,028. The prior year quarter
results included restructuring charges of $6,434 ($4,148, net of tax) and
discrete and certain other tax provisions, net, that affect comparability of
$833. Excluding these items, the effective tax rates for the quarters ended
December 31, 2020 and 2019 were 32.0% and 33.3%, respectively.
Stock based compensation
For the quarters ended December 31, 2020 and 2019, stock based compensation
expense, which includes expenses for both restricted stock grants and the ESOP,
totaled $4,208 and $3,982, respectively.

Comprehensive income (loss)



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.

For the quarter ended December 31, 2019, total other comprehensive income, net
of taxes, of $6,841 included a gain of $6,470 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 $672
benefit from pension amortization; and a $301 loss on cash flow hedges.

Discontinued operations



At December 31, 2020, Griffon's assets and liabilities are primarily for the
Installations Services and other discontinued operations primarily related to
insurance claims, income tax and product liability, warranty reserves and
environmental reserves. See Note 16, Discontinued Operations.

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  Table of Contents
LIQUIDITY AND CAPITAL RESOURCES

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

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

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