BUSINESS SEGMENTS

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

•

HBP is a leading manufacturer and marketer of residential and commercial garage doors to professional dealers and to some of the largest home center retail chains in North America; a global provider of long-handled tools and landscaping products for homeowners and professionals; and a leading North American manufacturer and marketer of closet organization, home storage, and garage storage products to home center retail chains, mass merchandisers, and direct-to builder professional installers.


•	Telephonics is recognized globally as a leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

On September 5, 2017, Griffon announced it would explore strategic alternatives for PPC and on November 15, 2017, announced it entered into a definitive agreement to sell PPC to Berry for $475 million in cash. The transaction is subject to regulatory approval and customary closing conditions, and is expected to close in the first quarter of calendar 2018. As a result, Griffon classified the results of operations of the PPC business as discontinued operations in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operations as held for sale in the consolidated balance sheets; all results and information presented exclude PPC unless otherwise noted. PPC is a global leader in the development and production of embossed, laminated and printed specialty plastic films for hygienic, health-care and industrial products and sells to some of the world's largest consumer products companies. See Note 14, Discontinued Operations to the Notes of the Financial Statements.

On October 2, 2017, Griffon acquired ClosetMaid. ClosetMaid, founded in 1965, is a leading North American manufacturer and marketer of closet organization, home storage, and 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. The accounts of ClosetMaid, affected for preliminary adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, are included in the Company’s consolidated financial statements from the date of acquisition of October 2, 2017. ClosetMaid is part of the HBP segment. For the quarter ended December 31, 2017, ClosetMaid's income from operations before taxes was $677,575.

Information on Griffon’s reportable segments from continuing operations is as follows:



	For the Three Months Ended December 31,
REVENUE	2017		2016
Home & Building Products:
AMES	$	139,982	$	120,724
CBP	154,236		143,460
ClosetMaid	76,760		—
Home & Building Products	370,978		264,184
Telephonics	66,325		88,093
Total consolidated net sales	$	437,303	$	352,277

The following table reconciles segment operating profit to income before taxes from continuing operations:



	For the Three Months Ended December 31,
INCOME BEFORE TAXES FROM CONTINUING OPERATIONS	2017			2016
Segment operating profit:
Home & Building Products	$	27,751		$	22,640
Telephonics	1,480			5,391
Segment operating profit from continuing operations	29,231			28,031
Net interest expense	(16,642		)	(13,289		)
Unallocated amounts	(10,436		)	(10,311		)
Acquisition costs	(1,612		)	—
Cost of life insurance benefit	(2,614		)	—
Income (loss) before taxes from continuing operations	$	(2,073	)	$	4,431

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

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



	For the Three Months Ended December 31,
	2017			2016
Segment adjusted EBITDA:
Home & Building Products	$	39,457		$	31,807
Telephonics	4,199			8,108
Total Segment adjusted EBITDA	43,656			39,915
Net interest expense	(16,642		)	(13,289		)
Segment depreciation and amortization	(12,852		)	(11,884		)
Unallocated amounts	(10,436		)	(10,311		)
Acquisition costs	(3,185		)	—
Cost of life insurance benefit	(2,614		)	—
Income (loss) before taxes from continuing operations	$	(2,073	)	$	4,431

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



	For the Three Months Ended December 31,
DEPRECIATION and AMORTIZATION	2017		2016
Segment:
Home & Building Products	$	10,133	$	9,167
Telephonics	2,719		2,717
Total segment depreciation and amortization	12,852		11,884
Corporate	106		104
Total consolidated depreciation and amortization	$	12,958	$	11,988

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	6,658	$	6,391
Telephonics	1,943		1,296
Total segment	8,601		7,687
Corporate	2,184		3
Total consolidated capital expenditures	$	10,785	$	7,690



ASSETS	At December 31, 2017		At September 30, 2017
Segment assets:
Home & Building Products	$	1,345,467	$	1,084,103
Telephonics	325,766		343,445
Total segment assets	1,671,233		1,427,548
Corporate	128,727		71,980
Total continuing assets	1,799,960		1,499,528
Assets of discontinued operations	380,555		374,013
Consolidated total	$	2,180,515	$	1,873,541