BUSINESS SEGMENTS

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

•

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


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

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell PPC and on February 6, 2018, completed the sale to Berry for $475,000 in cash, subject to certain post-closing adjustments. As a result, Griffon classified the results of operations of the PPC business as discontinued operations in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operations in the consolidated balance sheets. All results and information presented exclude PPC unless otherwise noted. 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.

On June 4, 2018, CBP acquired CornellCookson, a leading US manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional and retail use. The accounts, affected for preliminary adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations of CornellCookson, are included in the Company’s consolidated financial statements from the date of acquisition.

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



	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
REVENUE	2018		2017		2018		2017
Home & Building Products:
AMES	$	180,834	$	136,132	$	503,744	$	419,763
ClosetMaid	81,564		—		233,592		—
CBP	177,723		140,349		470,071		406,437
Home & Building Products	440,121		276,481		1,207,407		826,200
Telephonics	76,429		81,633		225,006		267,998
Total consolidated net sales	$	516,550	$	358,114	$	1,432,413	$	1,094,198

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



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
INCOME BEFORE TAXES FROM CONTINUING OPERATIONS	2018			2017			2018			2017
Segment operating profit:
Home & Building Products	$	38,753		$	23,708		$	94,982		$	64,661
Telephonics	6,084			4,114			8,866			18,521
Segment operating profit from continuing operations	44,837			27,822			103,848			83,182
Net interest expense	(15,796		)	(12,662		)	(48,482		)	(38,656		)
Unallocated amounts	(12,016		)	(10,613		)	(32,993		)	(31,379		)
Acquisition costs	(3,598		)	—			(5,217		)	—
Special dividend ESOP charges	(3,220		)	—			(3,220		)	—
Secondary equity offering costs	(1,205		)				(1,205		)
Cost of life insurance benefit	—			—			(2,614		)	—
Income before taxes from continuing operations	$	9,002		$	4,547		$	10,117		$	13,147

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 June 30,						For the Nine Months Ended June 30,
	2018			2017			2018			2017
Segment adjusted EBITDA:
Home & Building Products	$	50,004		$	33,134		$	129,250		$	92,506
Telephonics	8,760			6,784			16,956			26,678
Total Segment adjusted EBITDA	58,764			39,918			146,206			119,184
Net interest expense	(15,796		)	(12,662		)	(48,482		)	(38,656		)
Segment depreciation and amortization	(13,927		)	(12,096		)	(39,978		)	(36,002		)
Unallocated amounts	(12,016		)	(10,613		)	(32,993		)	(31,379		)
Acquisition costs	(3,598		)	—			(7,597		)	—
Special dividend ESOP charges	(3,220		)	—			(3,220		)	—
Secondary equity offering costs	(1,205		)	—			(1,205		)	—
Cost of life insurance benefit	—			—			(2,614		)	—
Income before taxes from continuing operations	$	9,002		$	4,547		$	10,117		$	13,147

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



	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
DEPRECIATION and AMORTIZATION	2018		2017		2018		2017
Segment:
Home & Building Products	$	11,251	$	9,426	$	31,888	$	27,845
Telephonics	2,676		2,670		8,090		8,157
Total segment depreciation and amortization	13,927		12,096		39,978		36,002
Corporate	120		125		340		354
Total consolidated depreciation and amortization	$	14,047	$	12,221	$	40,318	$	36,356

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	9,761	$	5,853	$	24,611	$	16,012
Telephonics	1,632		1,161		6,017		4,274
Total segment	11,393		7,014		30,628		20,286
Corporate	127		23		2,520		2,289
Total consolidated capital expenditures	$	11,520	$	7,037	$	33,148	$	22,575



ASSETS	At June 30, 2018		At September 30, 2017
Segment assets:
Home & Building Products	$	1,660,665	$	1,084,103
Telephonics	337,352		343,445
Total segment assets	1,998,017		1,427,548
Corporate	100,378		71,980
Total continuing assets	2,098,395		1,499,528
Assets of discontinued operations	3,256		374,013
Consolidated total	$	2,101,651	$	1,873,541