OVERVIEW

Net sales from continuing operations for the fiscal year ended September 30, 2008 were $1.27 billion, compared to $1.37 billion in fiscal 2007. Income from continuing operations, which was significantly impacted by a non-cash goodwill write-off taken in the fourth quarter of fiscal 2008 of $12.9 million in the Garage Doors segment, was $.1 million, or nil per diluted share, for the year compared to $28.2 million, or $.84 per diluted share, last year. Loss from discontinued operations for fiscal 2008 was $40.6 million, or $1.24 per diluted share, compared to $6.1 million, or $.19 per diluted share, last year. Net loss for fiscal 2008 was $40.5 million, or $1.24 per diluted share, compared to net income of $22.1 million, or $.65 per diluted share, last year.

The fourth-quarter non-cash goodwill write-off is not tax deductible, resulting in an increase in the Company's effective tax rate from continuing operations for the fiscal year ended September 30, 2008.

In September 2008, the Company received $241.3 million of gross proceeds from the first closing of its rights offering and the closing of the related investments by GS Direct and by the Company's Chief Executive Officer. An additional $5.3 million of rights offering proceeds were received in October 2008 in connection with the second and final closing of the rights offering, after which the rights offering was terminated. The Company intends to use the proceeds for general corporate purposes and to fund future growth.

The Electronic Information and Communications Systems segment was impacted in fiscal 2008 by the anticipated wind down of contract work from the Warlock-Duke program with Syracuse Research Corporation (SRC) in late fiscal 2007. The SRC program contributed revenues of $190.1 million in fiscal 2007, while producing revenues of $18.1 million in fiscal 2008. However, the segment's other programs continue to expand and funded backlog was approximately $335 million at September 30, 2008. Excluding the impact of the SRC contracts in the respective fiscal-year periods, core business sales grew by approximately $66.4 million, or 24%. The Electronic Information and Communications Systems segment was awarded contracts in excess of $400 million for the MH-60 program that are expected to be incrementally funded over the next several years. Based on these contract awards, this program is anticipated to generate revenues at a run rate of approximately $100 million per year for the next several years.

The Company's Garage Doors segment results were impacted by the sustained downturn in the residential housing and credit markets, with sales and operating profits decreasing from the prior-year period. As previously stated, operating results were significantly impacted by the $12.9 million non-cash goodwill write-off. Such goodwill write-off does not affect the Company's cash position, cash flow from operating activities, credit availability or liquidity and will not have any affect on the Company's future operations. The segment continues to be challenged by the trends in market conditions and the outlook for 2009. According to the National Association of Home Builders, current data compared to the prior fiscal year show new home starts down 31%, new home sales down 33% and a 10.4-month supply of new homes. Existing home sales are flat and the inventory of existing homes is is also flat at a 10-month supply. The segment remains committed to retaining its customer base and, where possible, growing market share to offset the shrinking market. Steel costs, a key component of garage doors, rose considerably in fiscal 2008 and adversely impacted results. Selling prices were increased during the fiscal year, partially offsetting rising costs. As a result of the Company's decision to exit the Installation Services business (see below), two Installation Services units were transferred into the Garage Doors segment. All periods presented herein have been recasted to include the operating results of these two units in the Garage Doors segment.

The Specialty Plastic Films segment had increases in sales of 15% and increases in operating profit of 19% in fiscal 2008. The segment's operating results were favorably impacted by growth in its elastics program, resulting in an improved product mix, operational efficiencies in its foreign facilities and favorable foreign currency translation adjustments. These results were unfavorably affected by

significant reductions in pricing to a major customer as a result of continued product alterations and competitive factors, as well as the adverse impact of rising resin costs. Over the past several years, the segment has been successful in diversifying its customer portfolio. In 2009, the segment is optimistic that their progress on cost reduction programs and product mix should result in further improved performance, but expects to be challenged with new product roll-outs.

Discontinued Operations-Installation Services segment

As a result of the downturn in the residential housing market and the impact on the Installation Services segment, in May 2008, the Company's Board of Directors approved a plan to exit substantially all operating activities of the Installation Services segment in 2008. Certain operating units in the Installation Services segment were closed during the second and third quarters, two units were transferred into the Garage Doors segment (as noted above), others were sold during the third quarter and the remaining operating units in Las Vegas and Phoenix were sold in the fourth quarter of fiscal 2008. Net sales of discontinued operations were $109.4 million, $250.9 million and $308.8 million for the years ended September 30, 2008, 2007 and 2006, respectively. Disposal costs related to the Installation Services segment included in its operating results were $43.1 million for fiscal 2008. The Company is winding down remaining disposal activities in the first half of fiscal 2009 and does not expect to incur significant expenses in the future. Future net cash outflows to satisfy liabilities that were accrued as of September 30, 2008 are estimated to range between $7 million and $8 million. Substantially all of such liabilities are expected to be paid within the next twelve months, and the Installation Services segment is excluded from segment reporting.

RESULTS OF OPERATIONS

Fiscal 2008 Compared to Fiscal 2007

    Operating results from continuing operations (in thousands) by business
segment were as follows:

                                              Net Sales             Operating Profit
                                         2008          2007         2008        2007
    Electronic Information and        $   366,288   $   472,549   $  32,737   $ 45,888
    Communication Systems
    Garage Doors(1)                       435,321       486,606     (17,444 )    7,117
    Specialty Plastic Films               467,696       406,574      20,620     17,263

                                      $ 1,269,305   $ 1,365,729   $  35,913   $ 70,268

Electronic Information and Communication Systems

Net sales of the Electronic Information and Communication Systems segment decreased $106.3 million, or 22.5%, compared to last year. The sales decrease was attributable to the wind down in late fiscal 2007 of substantial contracts with SRC, as anticipated. Partially offsetting this decrease was revenue growth in the segment's core business of $66.4 million, or 23.6%, related to new and expanded programs.

Gross profit of the Electronic Information and Communication Systems segment decreased by $9.3 million compared to last year. However, gross margin percentage increased to 21.5% from 18.7% last year, principally due to a favorable program mix, as the margin on the SRC contracts was lower than the average margin on other contracts. SG&A expenses increased $3.7 million compared to last year and increased, as a percentage of sales, to 12.8% compared to 9.1% last year. The increase in SG&A is primarily due to expenditures associated with product engineering and enhancement, as well as increases in expenses related to certain sales and marketing related efforts. Operating profit of the

Electronic Information and Communication Systems segment decreased $13.2 million, or 28.7%, principally due to the substantial revenue decline attributable to the SRC contracts noted above.

Garage Doors

Net sales of the Garage Doors segment decreased by $51.3 million, or 10.5%, compared to last year primarily due to the effects of the weak residential housing market. The decline in unit sales was partially offset by higher selling prices to pass through rising material and freight costs, a favorable product mix, and a decrease in customer returns and deductions.

Gross profit of the Garage Doors segment decreased by $16.5 million compared to last year. Gross margin percentage, increased to 28.3% from 28.2% last year, primarily due to the operating efficiencies derived from the closure of the Tempe, AZ facility and other headcount and cost reductions, lower customer returns and deductions, partially offset by reduced sales volume and associated plant efficiency loss and lower margins from the businesses transferred from the Installation Services segment. SG&A expenses were approximately $5.0 million lower than last year but, as a percentage of sales, increased to 28.8% from 26.3% last year due to the sales decrease. The operating loss of Garage Doors was further impacted by the write-off of its goodwill of $12.9 million. Operating profit of the Garage Doors segment decreased by $24.6 million compared to last year, resulting in an operating loss.

Specialty Plastic Films

Net sales of the Specialty Plastic Films segment increased $61.1 million, or 15.0%, compared to last year. The increase was principally due to a favorable product mix in North America, the impact of increased selling prices due to the rising cost of resin and the favorable impact of exchange rates on translated foreign sales, partially offset by lower selling prices to a major customer associated with a multi-year contract and lower volumes in Europe.

Gross profit of the Specialty Plastic Films segment increased by $3.8 million, or 6.0%, compared to last year. Gross margin percentage decreased to 14.3% from 15.5% last year. The effect of higher resin costs not fully recovered in increased selling prices and lower unit volumes negatively affected margins, which were partially offset by a favorable product mix in North America and Brazil and manufacturing efficiencies in Europe and Brazil. SG&A expenses were flat from last year and, as a percentage of sales, decreased to 10.3% from 11.9% last year due to the sales increase. Operating profit of the Specialty Plastic Films segment increased $3.4 million, or 19.4%, compared to last year.

Interest Expense

Interest expense decreased by $1 million compared to 2007 principally due to lower levels of outstanding borrowings and lower average borrowing rates during the year.

Provision (benefit) for income taxes

The Company's overall effective tax rate when combining results from continuing and discontinued operations was approximately 30.2%, reported as a net benefit, compared to 30.2%, reported as a net provision, last year. The rate change was principally due to the Company's current-year loss position and the ability to derive benefit from this loss, as well as additional benefit derived from the reversal of certain reserves of approximately $11.4 million in connection with closed tax years and the settlement of certain tax examinations included in the calculation of the tax rate for fiscal 2008. The benefit rate was partially offset by the non-deductability of the goodwill write-off and the inability to utilize certain foreign tax credits related to certain dividends paid by foreign subsidiairies. The prior-year tax provision rate was principally related to differences in the mix of income in lower, foreign tax jurisdictions, partially offset by a benefit derived from closed tax years.

Net sales of the Installation Services' operating units were $109.4 million and $250.9 million for fiscal 2008 and 2007, respectively. Net sales of the Installation Services segment decreased $141.5 attributed to overall weakness in the residential construction market and closure or sale of operating units that resulted from the Company's decision to exit the segment in fiscal 2008. Operating loss of the Installation Services' operating units was $62.4 million and $9.8 million for fiscal 2008 and 2007, respectively.

Fiscal 2007 Compared to Fiscal 2006

    Operating results from continuing operations (in thousands) by business
segment were as follows:

                                              Net Sales             Operating Profit
                                         2007          2006         2007        2006
    Electronic Information and        $   472,549   $   387,437    $ 45,888   $ 39,609
    Communication Systems
    Garage Doors                          486,606       558,925       7,117     42,493
    Specialty Plastic Films               406,574       381,373      17,263     15,450

                                      $ 1,365,729   $ 1,327,735    $ 70,268   $ 97,552

Electronic Information and Communication Systems

Net sales of the Electronic Information and Communication Systems segment increased $85.1 million compared to last year primarily from an SRC contract revenue increase of $47 million and MH-60 program revenue of $31 million.

Gross profit of the Electronic Information and Communication Systems segment increased $13.1 million compared to last year. Gross margin percentage decreased to 18.7% from 19.4% last year, principally due to lower margins on the SRC contract. Selling, general and administrative expenses increased approximately $7 million over last year but, as a percentage of sales, was 9.1% compared to 9.4% last year due to the sales growth. Operating profit of the Electronic Information and Communication Systems segment increased $6.3 million compared to last year.

Garage Doors

Net sales of the Garage Doors segment decreased by $72.3 million compared to 2006. The sales decrease was principally due to lower sales volumes to dealers and retailers, partially offset by higher selling prices that passed on the effect of higher raw material costs to customers, favorable product mix and improved product quality that resulted in decreased customer deductions.

Gross profit of the Garage Doors segment decreased $36.5 million compared to last year. Gross margin percentage was 28.2% in 2007 compared to 30.8% in 2006, reflecting lower sales volume which resulted in less overhead absorption and increased material costs. Selling, general and administrative expenses decreased approximately $1.2 million from 2006, as lower freight and distribution costs were partially offset by costs associated with the closure of a manufacturing facility in Tempe, Arizona and the movement of a production line from Tempe to Troy, Ohio. As a percentage of sales, selling, general and administrative expenses were 26.3% in 2007 compared to 23.5% in 2006. Operating profit of the Garage Doors segment decreased $35.4 million compared to last year.

Specialty Plastic Films

Net sales of the Specialty Plastic Films segment increased $25.2 million compared to last year. The increase reflects higher unit volumes principally related to strong European volume and sales of the new, elastic laminates product in North America, the effect of selling price adjustments to partially pass increased raw material costs to customers, and the impact of a weaker U.S. dollar on translated sales,

offset in part by lower selling prices to the segment's major customer, unfavorable product mix and the timing of development cost reimbursements.

Gross profit of the Specialty Plastic Films segment decreased $2.8 million compared to last year. Gross margin percentage decreased to 15.5% from 17.2% last year primarily due to the lower selling prices to the segments major customer. The decrease in gross profit was primarily attributable to lower selling prices to the segment's major customer, partially offset by higher unit sales volume, the impact of resin price and cost fluctuations, the weaker U.S. dollar and its impact on foreign sales, profit contribution of new products and lower operational expenses. Selling, general and administrative expenses decreased $4 million compared to last year principally due to the elimination of start-up costs related to the Brazilian facility and lower costs due to a reduction in force at the end of 2006. As a percentage of sales, selling, general and administrative expenses were 11.9% in 2007 compared to 13.7% last year. Operating profit of the Specialty Plastic Films segment increased $1.8 million compared to last year.

Interest Expense

Interest expense increased by $2 million compared to 2006 principally due to higher levels of outstanding borrowings throughout the year.

Provision for income taxes

The provision for income taxes from continuing operations for the fiscal year ended September 30, 2007 reflects a rate that is lower than the statutory United States and applicable foreign tax rates primarily due to a reversal of approximately $1.4 million of estimated income tax liabilities in connection with closed tax years and a statutory tax rate change in Germany that caused an adjustment in the valuation of net deferred tax liabilities of approximately $1 million.

Discontinued operations-Installation Services

Net sales of the Installation Services operating units were $250.9 million and $308.8 million for fiscal 2007 and 2006, respectively. Net sales of the Installation Services segment decreased $57.9 million compared to last year. The lower sales was primarily attributed to decreased revenue in the Las Vegas and Atlanta markets resulting from a decline in flooring, fireplace, garage door and appliance installations sales offset by cabinet sale gains attributable to the cabinet installation Company acquisition.

Gross profit of the Installation Services segment decreased $14.2 million compared to last year, reflecting lower unit volumes. Gross margin percentage increased to 29.7% from 29.2% last year due to improved sales mix and higher margins from the cabinet installation company acquisition. Selling, general and administrative expenses increased approximately $3.6 million due primarily to expenses from the cabinet installation company acquisition and additional bad debt expense due to increased risk in accounts receivable related to the impact of the general market decline. As a percentage of sales, selling, general and administrative expenses were 33.6% in 2007 compared to 26.1% in 2006. Operating profit (loss) of the Installation Services segment was $(9.8) million and $9.6 million for fiscal 2007 and 2006, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows generated by continuing operations for fiscal 2008 were $86.0 million compared to $59.7 million last year. Working capital increased to $562.1 million at September 30, 2008 compared to $354.2 million last year, primarily as a result of proceeds from the rights offering concluded in September 2008. Operating cash flows from continuing operations were principally the result of decreased accounts receivable and increased accounts payable, partially offset by increased inventories and increased prepaid expenses and other current assets.

During fiscal 2008, the Company provided cash from financing activities of continuing operations of $231.4 million. Financing cash flows primarily relate to net cash proceeds received of $234.2 million provided from the issuance of shares of common stock pursuant to a rights offering (see below). Uses of cash included treasury stock purchases of $579,000 to acquire 40,900 shares of the Company's common stock. Approximately 1.4 million shares of common stock are available for purchase pursuant to the Company's stock buyback program and additional purchases, including pursuant to a 10b5-1 plan, may be made, depending upon market conditions and other factors, at prices deemed appropriate by management.

In August 2008, the Company's Board of Directors authorized a 20 million share common stock rights offering to its shareholders in order to raise equity capital for general corporate purposes and to fund future growth. The rights had an exercise price of $8.50 per share. In conjunction with the rights offering, GS Direct agreed to back stop the rights offering by purchasing, on the same terms, any and all shares not subscribed through the exercise of rights. GS Direct also agreed to purchase additional shares of common stock at the rights offering price if it did not acquire a minimum of 10 million shares of common stock as a result of its back stop commitment. In September 2008, the Company received $241.3 million of gross proceeds from the first closing of its rights offering and the closing of the related investments by GS Direct and by Ronald Kramer, the Company's Chief Executive Officer. An additional $5.3 million of rights offering proceeds were received in October 2008 in connection with the second and final closing of the rights offering, after which the rights offering was terminated.

In June 2008, Clopay Building Products Company, Inc. ("BPC") and Clopay Plastic Products Company, Inc. ("PPC"), each a wholly-owned subsidiary of the Company, entered into a credit agreement for their domestic operations with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide a five-year, senior secured revolving credit facility of $100 million (the "Clopay Credit Agreement"). Availability under the credit facility is based upon certain eligible accounts receivable, inventory, cash and cash equivalents and property, plant and equipment. Commitments under the Clopay Credit Agreement may be increased by up to an additional $50 million under certain circumstances. Borrowings under the Clopay Credit Agreement bear interest at rates based upon LIBOR or the prime rate and are collateralized by the stock and assets of BPC and PPC and the stock of their subsidiaries. The Clopay Credit Agreement contains certain restrictive and financial covenants, certain of which are only subject to compliance if borrowing availability falls below a certain level. Upon the occurrence of certain events of default specified in the Clopay Credit Agreement, amounts due under the agreement may be declared immediately due and payable. Proceeds of a $33 million initial draw under this facility were primarily used to finance existing maturing lease obligations. At September 30, 2008, $33.9 million was outstanding under the Clopay Credit Agreement and approximately $42.9 million was available for borrowing. BPC and PPC were in compliance with all of their financial covenants under the Clopay Credit Agreement at September 30, 2008.

In March 2008, Telephonics Corporation ("Telephonics"), a wholly-owned subsidiary of the Company, entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide a five-year, revolving credit facility of $100 million (the "Telephonics Credit Agreement"). Commitments under the Telephonics Credit Agreement may be increased by up to an additional $50 million under certain circumstances. Borrowings under the Telephonics Credit Agreement bear interest at rates based upon LIBOR or the prime rate and are collateralized by the stock and assets of Telephonics and the stock of Telephonics' subsidiaries pursuant to a Guarantee and Collateral Agreement made by Gritel Holding Co., Inc., a subsidiary of the Company newly-formed at the time and the parent of Telephonics, and Telephonics in favor of the lenders. The Telephonics Credit Agreement contains

certain restrictive and financial covenants. Upon the occurrence of certain events of default specified in the Telephonics Credit Agreement, amounts due under the Telephonics Credit Agreement may be declared immediately due and payable. Proceeds of a $50 million initial draw under this facility, together with internal cash of the Company, were used to repay $62.5 million of outstanding debt under the Company's Amended and Restated Credit Agreement, dated as of December 20, 2006, as amended, among the Company, Telephonics, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, at which time such Amended and Restated Credit Agreement was terminated. At September 30, 2008, $44.5 million was outstanding under the Telephonics Credit Agreement and approximately $51.5 million was available for borrowing. Telephonics was in compliance with all of its financial covenants under the Telephonics Credit Agreement at September 30, 2008.

The Telephonics Credit Agreement and the Clopay Credit Agreement include various sublimits for standby letters of credit. At September 30, 2008, there were approximately $17 million of aggregate standby letters of credit outstanding under these credit facilities. These credit agreements limit dividends and advances that these subsidiaries may pay to the parent Company. The agreements permit the payment of income taxes, overhead and expenses, with dividends or advances in excess of these amounts being limited based on (a) with respect to the Clopay Credit Agreement, maintaining certain minimum availability under the loan agreement or (b) with respect to the Telephonics Credit Agreement, compliance with certain conditions and limited to an annual maximum.

At September 30, 2008, the Company had $130 million outstanding of 4% convertible subordinated notes due 2023 (the "Notes"). Holders of the Notes may require the Company to repurchase all or a portion of their Notes on July 18, 2010, 2013 and 2018, as well as upon a change in control. If our common stock price is below the conversion price of the debenture on the earliest of these dates, we anticipate that noteholders will require us to repurchase their outstanding notes. In October 2008, the Company purchased $35.5 million face value of the Notes from certain Noteholders for $28.4 million. This will result in a pre-tax gain from the early extinguishment of debt of approximately $7 million in the first quarter of fiscal 2009. Such $35.5 million face value of the Notes has remained classified as long-term debt in the accompanying consolidated balance sheet at September 30, 2008.

The Company's Employee Stock Ownership Plan ("ESOP") has a loan agreement guaranteed by the Company, the proceeds of which were used to purchase equity securities of the Company. The loan bears interest at rates based upon the prime rate or LIBOR In addition, the ESOP had a $5 million line of credit that expired on October 31, 2008. In September 2008, $630,000 was drawn under the ESOP line of credit to purchase equity securities associated with the rights offering and . . .