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BUSINESS SEGMENTS

6 Months Ended

Mar. 31, 2019

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 wood and wire closet organization, general living storage and wire 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 Clopay Plastics Products Company, Inc. ("PPC") and on February 6, 2018, completed the sale to Berry Global Group, Inc. ("Berry") . 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 15, Discontinued Operations to the Notes of the Financial Statements.

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 March 31,				For the Six Months Ended March 31,
REVENUE	2019		2018		2019		2018
Home & Building Products:
AMES	$	287,732	$	258,196	$	504,206	$	474,938
CBP	186,799		138,112		410,094		292,348
Home & Building Products	474,531		396,308		914,300		767,286
Defense Electronics	75,102		82,252		145,855		148,577
Total consolidated net sales	$	549,633	$	478,560	$	1,060,155	$	915,863

Disaggregation of Revenue

Revenue from contracts with customers is disaggregated by end markets, segments and geographic location, as it more accurately depicts the nature and amount of the Company’s revenue.

The following table presents revenue disaggregated by end market and segment:



	For the Quarter Ended March 31, 2019		For the Six Months Ended March 31, 2019
Residential repair and remodel	$	128,711	$	269,236
Retail	162,576		275,941
Commercial construction	76,181		160,557
Residential new construction	33,892		73,716
Industrial	11,416		21,174
International excluding North America	61,755		113,676
Total Home and Building Products segment	474,531		914,300
U.S. Government	46,376		91,936
International	23,129		45,228
Commercial	5,597		8,691
Total Defense Electronics segment	75,102		145,855
Total Consolidated Revenue	$	549,633	$	1,060,155

The following table presents revenue disaggregated by geography based on the location of the Company's customer:



	For the Three Months Ended March 31, 2019
Revenue by Geographic Area - Destination	Home & Building Products		Defense Electronics		Total
United States	$	380,390	$	51,179	$	431,569
Europe	20,372		8,490		28,862
Canada	25,828		3,058		28,886
Australia	42,016		979		42,995
All other countries	5,925		11,396		17,321
Consolidated revenue	$	474,531	$	75,102	$	549,633



	For the Six Months Ended March 31, 2019
Revenue by Geographic Area - Destination	Home & Building Products		Defense Electronics		Total
United States	$	733,133	$	99,474	$	832,607
Europe	28,254		18,801		47,055
Canada	56,175		5,687		61,862
Australia	86,238		1,588		87,826
All other countries	10,500		20,305		30,805
Consolidated revenue	$	914,300	$	145,855	$	1,060,155

The following table reconciles segment operating profit to Income (loss) before taxes from continuing operations:



	For the Three Months Ended March 31,						For the Six Months Ended March 31,
INCOME BEFORE TAXES FROM CONTINUING OPERATIONS	2019			2018			2019			2018
Segment operating profit:
Home & Building Products	$	36,021		$	28,478		$	75,566		$	56,229
Defense Electronics	2,315			1,302			4,464			2,782
Segment operating profit from continuing operations	38,336			29,780			80,030			59,011
Net interest expense	(17,305		)	(16,044		)	(33,636		)	(32,686		)
Unallocated amounts	(11,347		)	(10,541		)	(22,745		)	(20,977		)
Acquisition costs	—			(7		)	—			(1,619		)
Cost of life insurance benefit	—			—			—			(2,614		)
Income before taxes from continuing operations	$	9,684		$	3,188		$	23,649		$	1,115

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 (loss) before taxes from continuing operations:



	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2019			2018			2019			2018
Segment adjusted EBITDA:
Home & Building Products	$	48,753		$	39,789		$	100,613		$	79,246
Defense Electronics	4,936			3,997			9,721			8,196
Total Segment adjusted EBITDA	53,689			43,786			110,334			87,442
Net interest expense	(17,305		)	(16,044		)	(33,636		)	(32,686		)
Segment depreciation and amortization	(15,353		)	(13,199		)	(30,304		)	(26,051		)
Unallocated amounts	(11,347		)	(10,541		)	(22,745		)	(20,977		)
Acquisition costs	—			(814		)	—			(3,999		)
Cost of life insurance benefit	—			—			—			(2,614		)
Income before taxes from continuing operations	$	9,684		$	3,188		$	23,649		$	1,115

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



	For the Three Months Ended March 31,				For the Six Months Ended March 31,
DEPRECIATION and AMORTIZATION	2019		2018		2019		2018
Segment:
Home & Building Products	$	12,732	$	10,504	$	25,047	$	20,637
Defense Electronics	2,621		2,695		5,257		5,414
Total segment depreciation and amortization	15,353		13,199		30,304		26,051
Corporate	139		114		273		220
Total consolidated depreciation and amortization	$	15,492	$	13,313	$	30,577	$	26,271

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	6,330	$	8,192	$	13,475	$	14,850
Defense Electronics	2,499		2,442		3,733		4,385
Total segment	8,829		10,634		17,208		19,235
Corporate	192		209		210		2,393
Total consolidated capital expenditures	$	9,021	$	10,843	$	17,418	$	21,628



ASSETS	At March 31, 2019		At September 30, 2018
Segment assets:
Home & Building Products	$	1,729,199	$	1,631,631
Defense Electronics	325,179		346,907
Total segment assets	2,054,378		1,978,538
Corporate	86,305		103,112
Total continuing assets	2,140,683		2,081,650
Assets of discontinued operations	3,225		3,240
Consolidated total	$	2,143,908	$	2,084,890