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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2019

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to
 
Commission File Number: 1-06620
 
GRIFFON CORPORATION
(Exact name of registrant as specified in its charter) 
DELAWARE
 
11-1893410
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
712 Fifth Ave, 18th Floor, New York, New York
 
10019
(Address of principal executive offices)
 
(Zip Code)
 
(212) 957-5000
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý

 
Accelerated filer
 o
Non-accelerated filer  o
 
 
Smaller reporting company
o
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

The number of shares of common stock outstanding at April 30, 2019 was 46,800,571.




Griffon Corporation and Subsidiaries
 
Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

Part I – Financial Information
Item 1 – Financial Statements
 
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


(Unaudited)


 
March 31,
2019

September 30,
2018
CURRENT ASSETS
 

 
Cash and equivalents
$
57,979


$
69,758

Accounts receivable, net of allowances of $10,025 and $6,408
344,049


280,509

Contract costs and recognized income not yet billed, net of progress payments of $5,300 and $3,172
83,904


121,803

Inventories
457,071


398,359

Prepaid and other current assets
45,778


42,121

Assets of discontinued operations
324


324

Total Current Assets
989,105


912,874

PROPERTY, PLANT AND EQUIPMENT, net
332,852


342,492

GOODWILL
439,118


439,395

INTANGIBLE ASSETS, net
364,740


370,858

OTHER ASSETS
15,192


16,355

ASSETS OF DISCONTINUED OPERATIONS
2,901


2,916

Total Assets
$
2,143,908


$
2,084,890







CURRENT LIABILITIES
 


 

Notes payable and current portion of long-term debt
$
10,807


$
13,011

Accounts payable
223,188


233,658

Accrued liabilities
120,532


139,192

Liabilities of discontinued operations
11,657


7,210

Total Current Liabilities
366,184


393,071

LONG-TERM DEBT, net
1,206,195


1,108,071

OTHER LIABILITIES
94,938


106,710

LIABILITIES OF DISCONTINUED OPERATIONS
2,307


2,647

Total Liabilities
1,669,624


1,610,499

COMMITMENTS AND CONTINGENCIES - See Note 19





SHAREHOLDERS’ EQUITY
 


 

Total Shareholders’ Equity
474,284


474,391

Total Liabilities and Shareholders’ Equity
$
2,143,908


$
2,084,890


The accompanying notes to condensed consolidated financial statements are an integral part of these statements.


1

Table of Contents

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended March 31, 2019
(Unaudited)
 
 
COMMON STOCK
 
CAPITAL IN
EXCESS OF
PAR VALUE
 
RETAINED
EARNINGS
 
TREASURY SHARES
 
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
 
DEFERRED
COMPENSATION
 
 
(in thousands)
SHARES
 
PAR VALUE
 
 
 
SHARES
 
COST
 
 
 
TOTAL
Balance at September 30, 2018
81,520

 
$
20,380

 
$
503,396

 
$
550,523

 
35,846

 
$
(534,830
)
 
$
(34,112
)
 
$
(30,966
)
 
$
474,391

Net income

 

 

 
8,753

 

 

 

 

 
8,753

Cumulative catch-up adjustment related to adoption of ASC 606(1)

 

 

 
(5,673
)
 

 

 

 

 
(5,673
)
Dividend

 

 

 
(3,143
)
 

 

 

 

 
(3,143
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
83

 
(1,058
)
 

 

 
(1,058
)
Amortization of deferred compensation

 

 

 

 

 

 

 
856

 
856

Common stock acquired

 

 

 

 
29

 
(290
)
 

 

 
(290
)
Equity awards granted, net
1,201

 
300

 
(300
)
 

 

 

 

 

 

ESOP allocation of common stock

 

 
(8
)
 

 

 

 

 

 
(8
)
Stock-based compensation

 

 
2,933

 

 

 

 

 

 
2,933

Stock-based consideration

 

 
250

 

 

 

 

 

 
250

Other comprehensive income, net of tax

 

 

 

 

 

 
(5,450
)
 

 
(5,450
)
Balance at December 31, 2018
82,721

 
$
20,680

 
$
506,271

 
$
550,460

 
35,958

 
$
(536,178
)
 
$
(39,562
)
 
$
(30,110
)
 
$
471,561

Net income (loss)
 
 
 
 
 
 
(1,156
)
 
 
 
 
 
 
 
 
 
(1,156
)
Dividend

 

 

 
(3,704
)
 

 

 

 

 
(3,704
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
3

 
(48
)
 

 

 
(48
)
Amortization of deferred compensation

 

 

 

 

 

 

 
507

 
507

Common stock acquired

 

 

 

 
8

 
(82
)
 

 

 
(82
)
Equity awards granted, net
48

 
12

 
(12
)
 









 

ESOP allocation of common stock

 

 
601

 

 

 

 

 

 
601

Stock-based compensation

 

 
3,422

 

 

 

 

 

 
3,422

Stock-based consideration

 

 
303

 

 

 

 

 

 
303

Other comprehensive income, net of tax

 

 

 

 

 

 
2,880

 

 
2,880

Balance at March 31, 2019
82,769

 
$
20,692

 
$
510,585

 
$
545,600

 
35,969

 
$
(536,308
)
 
$
(36,682
)
 
$
(29,603
)
 
$
474,284

(1) See Note 14 - Recent Accounting Pronouncements and Note 3 - Revenue for additional information. 
 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.





2

Table of Contents

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended March 31, 2018
(Unaudited)

 
COMMON STOCK
 
CAPITAL IN
EXCESS OF
PAR VALUE
 
RETAINED
EARNINGS
 
TREASURY SHARES
 
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
 
DEFERRED
COMPENSATION
 
 
(in thousands)
SHARES
 
PAR VALUE
 
 
 
SHARES
 
COST
 
 
 
TOTAL
Balance at September 30, 2017
80,663

 
$
20,166

 
$
487,077

 
$
480,347

 
33,557

 
$
(489,225
)
 
$
(60,481
)
 
$
(39,076
)
 
$
398,808

Net income

 

 

 
30,989

 

 

 

 

 
30,989

Dividend

 

 

 
(2,990
)
 

 

 

 

 
(2,990
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
191

 
(4,332
)
 

 

 
(4,332
)
Amortization of deferred compensation

 

 

 

 

 

 

 
817

 
817

Equity awards granted, net
895

 
223

 
(223
)
 

 

 

 

 

 

ESOP allocation of common stock

 

 
608

 

 

 

 

 

 
608

Stock-based compensation

 

 
2,555

 

 

 

 

 

 
2,555

Other comprehensive income, net of tax

 

 

 

 

 

 
8,358

 

 
8,358

Balance at December 31, 2017
81,558

 
$
20,389

 
$
490,017

 
$
508,346

 
33,748

 
$
(493,557
)
 
$
(52,123
)
 
$
(38,259
)
 
$
434,813

Net income

 

 

 
90,280

 

 

 

 

 
90,280

Dividend

 

 

 
(46,660
)
 

 

 

 

 
(46,660
)
Shares withheld on employee taxes on vested equity awards

 

 

 

 
6

 
(114
)
 

 

 
(114
)
Amortization of deferred compensation

 

 

 

 

 

 

 
855

 
855

Common stock acquired

 

 

 

 
1,438

 
(28,415
)
 

 

 
(28,415
)
Equity awards granted, net
(84
)
 
(20
)
 
20

 

 

 

 

 

 

ESOP allocation of common stock

 

 
493

 

 

 

 

 

 
493

Stock-based compensation

 

 
2,365

 

 

 

 

 

 
2,365

Other comprehensive income, net of tax

 

 

 

 

 

 
20,401

 

 
20,401

Balance at March 31, 2018
81,474

 
$
20,369

 
$
492,895

 
$
551,966

 
35,192

 
$
(522,086
)
 
$
(31,722
)
 
$
(37,404
)
 
$
474,018



The accompanying notes to condensed consolidated financial statements are an integral part of these statements.



3

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited) 
 
Three Months Ended March 31,

Six Months Ended March 31,
 
2019

2018

2019

2018
Revenue
$
549,633


$
478,560


$
1,060,155


$
915,863

Cost of goods and services
412,129


357,181


779,605


673,705

Gross profit
137,504


121,379


280,550


242,158













Selling, general and administrative expenses
111,783


104,493


225,537


211,117













Income from operations
25,721


16,886


55,013


31,041













Other income (expense)
 


 


 


 

Interest expense
(17,517
)

(16,806
)

(34,046
)

(33,645
)
Interest income
212


762


410


959

Other, net
1,268


2,346


2,272


2,760

Total other expense, net
(16,037
)

(13,698
)

(31,364
)

(29,926
)












Income before taxes from continuing operations
9,684


3,188


23,649


1,115

Provision (benefit) from income taxes
3,194


1,237


8,406


(23,667
)
Income from continuing operations
$
6,490


$
1,951


$
15,243


$
24,782













Discontinued operations:











Income (loss) from operations of discontinued operations
$
(11,000
)
 
$
113,376


(11,000
)

124,842

Provision (benefit) for income taxes
(3,354
)
 
25,047


(3,354
)

28,355

Income (loss) from discontinued operations
$
(7,646
)
 
$
88,329


(7,646
)

96,487

Net income (loss)
$
(1,156
)
 
$
90,280


$
7,597


$
121,269


 
 
 






Income from continuing operations
$
0.16

 
$
0.05


$
0.37


$
0.59

Income (loss) from discontinued operations
(0.19
)
 
2.13


(0.19
)

2.31

Basic earnings per common share
$
(0.03
)
 
$
2.18


$
0.19


$
2.91


 
 
 






Weighted-average shares outstanding
40,949

 
41,477


40,849


41,700


 
 
 






Income from continuing operations
$
0.15

 
$
0.05


$
0.36


$
0.58

Income (loss) from discontinued operations
(0.18
)
 
2.07


(0.18
)

2.24

Diluted earnings per common share
$
(0.03
)
 
$
2.11


$
0.18


$
2.82


 
 
 






Weighted-average shares outstanding
42,832

 
42,765


42,376


43,062


 
 
 






Dividends paid per common share
$
0.0725

 
$
0.0700


$
0.1450


$
0.1400


 
 
 






Net income (loss)
$
(1,156
)
 
$
90,280


$
7,597


$
121,269

Other comprehensive income (loss), net of taxes:
 

 
 


 


 

Foreign currency translation adjustments
2,885

 
19,714


(2,851
)

18,425

Pension and other post retirement plans
184

 
247


368


9,806

Change in cash flow hedges
(189
)
 
440


(87
)

528

Total other comprehensive income (loss), net of taxes
2,880

 
20,401


(2,570
)

28,759

Comprehensive income, net
$
1,724

 
$
110,681


$
5,027


$
150,028

 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

4

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended March 31,
 
2019

2018
CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Net income
$
7,597


$
121,269

Net (income) loss from discontinued operations
7,646


(96,487
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 


 

Depreciation and amortization
30,577


26,271

Stock-based compensation
6,355


4,920

Provision (recovery) for losses on accounts receivable
316


(201
)
Amortization of debt discounts and issuance costs
2,841


2,754

Deferred income taxes
(865
)

(23,136
)
Change in assets and liabilities, net of assets and liabilities acquired:
 


 

Increase in accounts receivable and contract costs and recognized income not yet billed
(47,669
)

(16,631
)
Increase in inventories
(37,852
)

(48,295
)
Decrease in prepaid and other assets
2,323


2,613

Decrease in accounts payable, accrued liabilities and income taxes payable
(28,945
)

(21,021
)
Other changes, net
2,670


844

Net cash used in operating activities - continuing operations
(55,006
)

(47,100
)
CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Acquisition of property, plant and equipment
(17,418
)

(21,628
)
Acquired businesses, net of cash acquired
(9,219
)

(246,230
)
Proceeds from sale of business

 
473,977

Insurance proceeds (payments)
(10,604
)
 
8,254

Proceeds from sale of assets
62


454

Investment purchase
(149
)


Net cash provided by (used in) investing activities - continuing operations
(37,328
)

214,827

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:
 


 

Dividends paid
(6,847
)

(5,872
)
Purchase of shares for treasury
(1,478
)

(32,861
)
Proceeds from long-term debt
143,101


347,898

Payments of long-term debt
(48,169
)

(229,941
)
Financing costs
(945
)

(7,451
)
Contingent consideration for acquired businesses
(1,686
)


Other, net
83


126

Net cash provided by financing activities - continuing operations
84,059


71,899

CASH FLOWS FROM DISCONTINUED OPERATIONS:
 


 

Net cash used in operating activities
(3,438
)

(15,080
)
Net cash used in investing activities


(10,762
)
Net cash used in financing activities


(22,541
)






Net cash used in discontinued operations
(3,438
)

(48,383
)
Effect of exchange rate changes on cash and equivalents
(66
)

(2,468
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(11,779
)

188,775

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
69,758


47,681

CASH AND EQUIVALENTS AT END OF PERIOD
$
57,979


$
236,456

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

5

Table of Contents
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)
(Unaudited)
(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)



NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
About Griffon Corporation
 
Griffon Corporation (the “Company”, “Griffon”, "we" or "us") 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 in connection with 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.

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).

Griffon currently conducts its operations through two reportable segments:
 
Home & Building Products (“HBP”) segment consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc, (“CBP”):

AMES, founded in 1774, is the leading North American manufacturer and a global provider of branded consumer and professional tools, landscaping products, and outdoor lifestyle solutions. In 2018, we acquired ClosetMaid LLC ("ClosetMaid"), a leader in wood and wire closet organization, general living storage and wire garage storage products for homeowners and professionals.

CBP, since 1964, is a leading manufacturer and marketer of residential and commercial garage doors and sells to professional dealers and some of the largest home center retail chains in North America. In 2018, we acquired CornellCookson, 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 Corporation ("Telephonics"), founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. As such, they should be read together with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.
 
The condensed consolidated balance sheet information at September 30, 2018 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2018.
 
The condensed consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.


6


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, percentage of completion method of accounting, pension assumptions, useful lives associated with depreciation and amortization of fixed and intangible assets, warranty reserves, sales incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves and the valuation of assets and liabilities of discontinued operations, acquisition assumptions used and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates.
 
Certain amounts in the prior year have been reclassified to conform to current year presentation.

NOTE 2 – FAIR VALUE MEASUREMENTS
 
The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit and variable interest rate debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit and variable rate debt is based upon current market rates.

Applicable accounting guidance establishes a fair value hierarchy requiring the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:

Level 1 inputs are measured and recorded at fair value based upon quoted prices in active markets for identical assets.

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
 
The fair values of Griffon’s 2022 senior notes approximated $985,770 on March 31, 2019. Fair values were based upon quoted market prices (level 1 inputs).
 
Insurance contracts with values of $2,481 at March 31, 2019 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.
 
Items Measured at Fair Value on a Recurring Basis

At March 31, 2019, trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $2,825 ($2,233 cost basis), were included in Prepaid and other current assets on the Consolidated Balance Sheets. Realized and unrealized gains and losses on trading securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

In the normal course of business, Griffon’s operations are exposed to the effects of changes in foreign currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. As of March 31, 2019, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars.

At March 31, 2019, Griffon had $8,000 of Australian dollar contracts at a weighted average rate of $1.41 which qualified for hedge accounting (level 2 inputs). These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Accumulated other comprehensive income (loss) ("AOCI") and Prepaid and other current

7



assets, or Accrued liabilities, until settlement. Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS"). AOCI included deferred gains of $549 ($384, net of tax) at March 31, 2019 and a gain of $242 and $934 was recorded in COGS during the three and six months ended March 31, 2019, respectively, for all settled contracts. All contracts expire in 30 to 88 days.

At March 31, 2019, Griffon had $1,460 of Canadian dollar contracts at a weighted average rate of $1.33. The contracts, which protect Canadian operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting. For the three and six months ended March 31, 2019, fair value gains (losses) of $ $18 and $(23) was recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs). Realized gain of $68 and $58 were recorded in Other income during the three and six months ended March 31, 2019, respectively, for all settled contracts. All contracts expire in 29 to 120 days.

NOTE 3 – REVENUE

On October 1, 2018, the Company adopted the requirements of Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective method applied to those contracts that were not completed as of October 1, 2018. The Company’s comparative consolidated results over the prior period have not been adjusted and continue to be reported under previously issued guidance, ASC 605 - Revenue Recognition, which required that revenue was accounted for when the earnings process was complete.

This accounting standard did not materially impact the Company’s revenue recognition practices in our Home and Building Products (“HBP”) Segment, however, it impacted revenue recognition practices in our Defense Electronics Segment. The impact of adopting this accounting standard was not material to the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2019. Under the modified retrospective method, the Company recognized the cumulative effect of initially applying this accounting standard as an adjustment to the opening balance in retained earnings of approximately $5,673 as of October 1, 2018, primarily relating to certain contracts in the Defense Electronics Segment containing provisions for radar and communication products that have an alternative use and / or no right to payment. For these contracts, the Company now recognizes revenue at a point in time, rather than over time as this measure more accurately depicts the transfer of control to the customer relative to the goods or services promised under the contract.

The cumulative effect of the changes made to the Company's Consolidated October 1, 2018 Balance Sheet for the adoption of ASC 606 is as follows:

Balance Sheet
As Reported at September 30, 2018
Adjustments
Balance as of October 1, 2018
CURRENT ASSETS
 
 
 
 
Contract costs and recognized income not yet billed, net of progress payments
$
121,803
 
$
(20,982
)
$
100,821
 
Inventories
398,359
 
22,025
 
420,384
 
Total Current Assets
912,874
 
1,043
 
913,917
 
Total Assets
2,084,890
 
1,043
 
2,085,933
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
233,658
 
8,282
 
241,940
 
Billings in excess of costs (1)
17,559
 
8,282
 
25,841
 
Total Current Liabilities
393,071
 
8,282
 
401,353
 
OTHER LIABILITIES
106,710
 
(1,566
)
105,144
 
Total Liabilities
1,610,499
 
6,716
 
1,617,215
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
Retained Earnings
550,523
 
(5,673
)
544,850
 
Total Shareholders' Equity
474,391
 
(5,673
)
468,718
 
Total Liabilities and Shareholders’ Equity
$
2,084,890
 
$
1,043
 
$
2,085,933
 
(1) Billings in excess of costs is reported in Accounts payable on the Company's Consolidated Balance Sheets.




8



The impact to the Company's Consolidated Statement of Operations for the three and six months ended March 31, 2019 and to the Company's Balance Sheet as of March 31, 2019 was as follows:

 
For the Three Months Ended March 31, 2019
Income Statement
As Reported
Balances Without Adoption of ASC 606
Effect of Adoption Higher/(Lower)
Net sales
$
549,633
 
$
548,053
 
$
1,580
 
Cost of goods and services
412,129
 
410,898
 
1,231
 
Income (loss) before taxes from continuing operations
9,684
 
9,335
 
349
 
Provision (benefit) from income taxes
3,194