What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-11-17 compared with 2020-11-13 · 620 added, 955 removed, 1124 unchanged (58% of the section changed)

12 unchanged sentences

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2021 and 2020, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

23 unchanged sentences

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue from Customer Contracts - Defense and Electronics Segment

As described further in note 2 to the consolidated financial statements, the Company’s Defense and Electronics segment earns its revenue as either a prime contractor or subcontractor from contract awards with the U.S.

(1) relate to accounts or disclosures that are material to the financial statements;

and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue from Customer Contracts – Discontinued Defense Electronics Segment

As described further in note 2 to the consolidated financial statements, the Company’s discontinued Defense Electronics segment earns its revenue as either a prime contractor or subcontractor from contract awards with the U.S.

Government, as well as foreign governments and other commercial contracts.

Such contracts are typically long-term in nature and revenue and profits are recognized over time, primarily under fixed-price arrangements, which are determined using the cost-to-cost measure of progress.

Using the cost-to-cost measure of progress, revenue is recorded at amounts equal to the ratio of actual cumulative costs incurred to date, divided by total estimated costs at completion, multiplied by the total estimated contract revenue, less the cumulative revenue recognized in prior periods.

The profit recorded on a contract using this method is equal to the current estimated profit margin multiplied by the cumulative revenue recognized, less the amount of cumulative profit previously recorded for the contract in prior periods.

Such contracts are typically long-term in nature and revenue and profits are recognized over time, primarily under fixed-price arrangements, which are determined using a cost-to-cost method of accounting.

Using the cost-to-cost method, revenue is recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by the total estimated contract revenue, less the cumulative revenue recognized in prior periods.

The profit recorded on a contract using this method is equal to the current estimated total profit margin multiplied by the cumulative revenue recognized, less the amount of cumulative profit previously recorded for the contract in prior periods.

This method relies on substantial use of estimates.

1 unchanged sentence

Due to these aspects, this issue was considered a critical audit matter.

The principal consideration for our determination that segment revenue and gross profit recognition is a critical audit matter is that significant management judgments and estimates are utilized to determine total costs at contract completion and are subject to estimation uncertainty and require significant auditor subjectivity in evaluating those judgments and estimates.

Our audit procedures related to the segment revenue recognition included the following.

The principal consideration for our determination that Defense Electronics revenue and gross profit recognition is a critical audit matter is that significant management judgments and estimates are utilized to determine probable costs at contract completion and are subject to estimation uncertainty and require significant auditor subjectivity in evaluating those judgments and estimates.

Our audit procedures related to Defense Electronics revenue recognition included the following.

We tested the design and operating effectiveness of controls relating to the cost accumulation, cost estimation and revenue recognition processes, including the Company’s ability to develop the estimates utilized in determining costs at completion.

We inspected a selection of contracts;

and evaluated those contracts for appropriate revenue recognition and consideration over key terms and provisions.

We inspected a selection of contracts and evaluated those contracts for appropriate revenue recognition and consideration over key terms and provisions.

We analyzed trends in revenue, costs and margin on all contracts, on a contract-by-contract basis, both year-over-year and since contract inception to assess the historical accuracy of management’s estimates in the final outcomes of projects.

2 unchanged sentences

We also recalculated revenue and gross profit recognized for the year ended September 30, 2021, for a selection of contracts, to test the accuracy of amounts recognized.

Goodwill and Indefinite-Lived Intangible Assets Impairment Assessment

As described further in note 1 and note 6 to the consolidated financial statements, the Company tests goodwill at least annually at the reporting unit level.

Due to the impact of the COVID-19 pandemic on the general deterioration in economic and market conditions, the Company completed an interim goodwill impairment test as of March 31, 2020, in addition to the Company’s annual impairment assessment as of September 30, 2020.

The Company performed the interim impairment testing of goodwill as of March 31, 2020, comparing the fair value of the Company’s reporting units to the respective reporting unit’s carrying value, including goodwill.

The fair value of its reporting units was determined using the income approach methodology, that includes the present value of expected future cash flows and the use of market assumptions specific to the Company’s reporting units.

The Company used prospective financial information to which discount rates were applied to calculate each unit’s fair value.

The implied fair value determined under the income approach was also compared to the marketplace fair value of a comparable industry grouping for reasonableness and further, the fair values were reconciled to the Company’s market capitalization at March 31, 2020.

Similarly to goodwill, the Company tested indefinite-lived intangibles for impairment as of March 31, 2020.

The Company utilized a relief from royalty method to calculate and compare the fair value of the intangible assets to its book value, which includes the use of market assumptions specific to the Company’s reporting units.

With respect to the annual impairment assessment as of September 30, 2020, the Company performed a qualitative assessment to determine whether it was more likely than not that goodwill was impaired as of September 30, 2020.

This qualitative assessment was also used for the annual impairment testing of indefinite-lived intangibles.

We identified the Company’s interim impairment testing of goodwill and indefinite-lived intangible assets (“interim impairment testing”) as a critical audit matter.

The principal considerations for our determination that the interim impairment testing is a critical audit matter are as follows.

The determination of the fair value of reporting units requires management to make significant estimates and assumptions related to forecasts of future cash flows and discount rates.

This requires management to evaluate historical results and expectations of future

operating performance based on relevant information available to them regarding expectations of industry performance, as well as expectations for entity-specific performance.

In addition, determining the discount rate requires management to evaluate the appropriate risk premium based on their judgment of industry and entity-specific risks.

As disclosed by management, changes in these assumptions could have a significant impact on the fair value of the reporting units.

In turn, auditing these judgments and assumptions requires a high degree auditor judgment.

Our audit procedures related to the interim impairment testing included the following:

We tested the design and operating effectiveness of controls relating to the interim impairment testing, including the Company’s ability to develop the estimates utilized in calculating the fair value of each reporting unit and indefinite-lived intangible assets.

Such estimates included prospective financial information, long-term growth rates, discount rates and weighted average cost of capital.

With the assistance of valuation specialists, we evaluated the appropriateness of the valuation methodology utilized and assessed the appropriateness of inputs utilized.

We evaluated the qualifications of those responsible for preparing the calculations of fair values.

We tested the inputs, significant judgments and estimates utilized in performing the annual impairment tests, which included comparing management’s judgments and estimates to industry and market data.

We tested the inputs, significant judgments and estimates, as follows:

a) tested prospective financial information and long-term growth rates by comparing to historical trends and industry expectations, performed a sensitivity analysis over growth rates and assessed management’s historical ability to accurately forecast;

b) tested discounts rates by comparing to historical rates and industry expectations, compared rates to market comparable companies and independently calculated discount rates for comparison to those used by management;

and c) tested weighted average cost of capital by analyzing the implied discount rate and independently calculated a weighted-average discount rate using individual discount rates and compared to the rate utilized by management.

We tested the inputs, significant judgment and estimates in the Company’s reconciliation to its market capitalization.

These included:

a) allocation of unallocated corporate costs, whereby we agreed such costs to historical amounts, analyzed the composition of unallocated costs to assess appropriateness and sensitized the goodwill impairment analysis by allocating certain costs to the reporting units based on their relative fair values;

and b) fair values of each reporting unit as determined in the interim impairment testing and agreed equity values to audited financial information.

/s/ GRANT THORNTON LLP

5 unchanged sentences

(in thousands, except per share data)

At September 30, 2020

At September 30, 2019

At September 30, 2021 At September 30, 2020

CURRENT ASSETS

1 unchanged sentence

Accounts receivable, net of allowances of $ 8,787 and $ 8,178

Contract assets, net of progress payments of $24,175 and $11,259

294,804 278,420

Inventories 472,794 320,188

Prepaid and other current assets 76,009 41,514

Assets of discontinued operations

Assets of discontinued operations held for sale 273,414 245,726

Assets of discontinued operations not held for sale 605 2,091

Total Current Assets 1,366,279 1,106,028

1 unchanged sentence

OPERATING LEASE RIGHT-OF-USE ASSETS 144,598 154,349

GOODWILL 426,148 424,098

INTANGIBLE ASSETS, net 350,025 354,202

OTHER ASSETS 21,589 26,474

ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE — 79,952

ASSETS OF DISCONTINUED OPERATIONS 3,424 6,406

Total Assets $ 2,604,685 $ 2,448,593

CURRENT LIABILITIES

3 unchanged sentences

Current portion of operating lease liabilities 29,881 29,672

Liabilities of discontinued operations held for sale 80,748 81,923

Liabilities of discontinued operations 3,280 3,797

3 unchanged sentences

OTHER LIABILITIES 109,585 121,538

LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR SALE — 10,438

LIABILITIES OF DISCONTINUED OPERATIONS 3,794 7,014

4 unchanged sentences

Common stock, par value $ 0.25 per share, authorized 85,000 shares, issued shares of 84,375 and 83,739 , respectively.

21,094 20,935

Capital in excess of par value 602,181 583,008

Retained earnings 669,998 607,518

Treasury shares, at cost, 27,610 common shares and 35,969 common shares

Treasury shares, at cost, 27,762 common shares and 27,610 common shares, respectively.

( 416,850 ) ( 413,493 )

Accumulated other comprehensive loss ( 45,977 ) ( 72,092 )

8 unchanged sentences

Years Ended September 30,

2021 2020 2019

Revenue $ 2,270,626 $ 2,066,546 $ 1,874,248

Cost of goods and services 1,629,513 1,482,552 1,357,403

Gross profit 641,113 583,994 516,845

Selling, general and administrative expenses 470,530 444,454 408,339

4 unchanged sentences

Loss from debt extinguishment — ( 7,925 ) —

Other, net 3,331 2,885 5,230

Total other income (expense) ( 59,404 ) ( 70,835 ) ( 62,283 )

3 unchanged sentences

Discontinued operations:

Income (loss) from operations of discontinued businesses

Income before tax from discontinued operations 8,897 14,052 14,905

Provision for income taxes 925 3,066 3,088

Income (loss) from discontinued operations

Income from discontinued operations 7,972 10,986 11,817

Net income $ 79,211 $ 53,429 $ 37,287

Basic earnings per common share:

Income from continuing operations $ 1.40 $ 1.00 $ 0.62

Income (loss) from discontinued operations

Income from discontinued operations 0.16 0.26 0.29

Basic earnings per common share $ 1.56 $ 1.25 $ 0.91

Weighted-average shares outstanding 50,830 42,588 40,934

Diluted earnings per common share:

Income from continuing operations $ 1.33 $ 0.94 $ 0.59

Income (loss) from discontinued operations

Income from discontinued operations 0.15 0.24 0.28

Diluted earnings per common share $ 1.48 $ 1.19 $ 0.87

Weighted-average shares outstanding 53,369 45,015 42,888

Net income $ 79,211 $ 53,429 $ 37,287

Other comprehensive income (loss), net of taxes:

9 unchanged sentences

Years Ended September 30,

2021 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

Net (income) loss from discontinued operations

Net income $ 79,211 $ 53,429 $ 37,287

Net income from discontinued operations ( 7,972 ) ( 10,986 ) ( 11,817 )

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

8 unchanged sentences

Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable and contract assets

(Increase) decrease in accounts receivable ( 7,002 ) ( 72,565 ) 13,422

(Increase) decrease in inventories ( 154,515 ) 23,262 ( 31,775 )

7 unchanged sentences

Investment purchases ( 17,211 ) ( 130 ) ( 149 )

Proceeds (payments) from sale of business

Insurance proceeds (payments)

Payments from sale of business — — ( 9,500 )

Insurance payments — — ( 10,604 )

Proceeds from sale of property, plant and equipment 237 352 280

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

Net cash used in investing activities - continuing operations ( 56,167 ) ( 51,477 ) ( 64,061 )

CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS:

7 unchanged sentences

Contingent consideration for acquired businesses — ( 1,733 ) ( 1,686 )

Other, net ( 257 ) ( 15 ) ( 180 )

Net cash provided by (used) in financing activities - continuing operations ( 28,245 ) 68,190 ( 34,976 )

3 unchanged sentences

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities

Net cash provided by operating activities 40,737 26,206 21,489

Net cash provided by (used in) investing activities 6,751 ( 7,387 ) ( 10,492 )

Net cash used in financing activities

Net cash used in discontinued operations

Net cash provided by discontinued operations 47,488 18,819 10,997

Effect of exchange rate changes on cash and equivalents ( 3,544 ) 2,377 313

9 unchanged sentences

(in thousands)

TREASURY SHARES

ACCUMULATED OTHER

COMMON STOCK CAPITAL IN

PAR VALUE RETAINED

EARNINGS TREASURY SHARES ACCUMULATED OTHER

COMPREHENSIVE

INCOME (LOSS)

(in thousands)

INCOME (LOSS) DEFERRED

COMPENSATION Total

(in thousands) SHARES PAR VALUE SHARES COST

Balance at 9/30/2018 81,520 $ 20,380 $ 503,396 $ 550,523 35,846 $ ( 534,830 ) $ ( 34,112 ) $ ( 30,966 ) $ 474,391

Net income (loss)

Net income — — — 37,287 — — — — 37,287

Cumulative catch-up adjustment related to adoption of ASC 606 — — — ( 5,618 ) — — — — ( 5,618 )

Dividends — — — ( 13,676 ) — — — — ( 13,676 )

Shares withheld on employee taxes on vested equity awards — — — — 86 ( 1,106 ) — — ( 1,106 )

7 unchanged sentences

Balance at 9/30/2019 82,775 $ 20,694 $ 519,017 $ 568,516 35,969 $ ( 536,308 ) $ ( 65,916 ) $ ( 28,240 ) $ 477,763

Net income (loss)

Cumulative catch-up adjustment related to adoption of ASC 606

Net income — — — 53,429 — — — — 53,429

Dividends — — — ( 14,427 ) — — — — ( 14,427 )

Shares withheld on employee taxes on vested equity awards — — — — 341 ( 7,479 ) — — ( 7,479 )

Amortization of deferred compensation — — — — — — — 2,515 2,515

Common stock acquired

Common stock issued, net of issuance costs — — 46,900 — ( 8,700 ) 130,294 — — 177,194

Equity awards granted, net 964 241 ( 241 ) — — — — — —

4 unchanged sentences

Balance at 9/30/2020 83,739 $ 20,935 $ 583,008 $ 607,518 27,610 $ ( 413,493 ) $ ( 72,092 ) $ ( 25,725 ) $ 700,151

Net income (loss)

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

COMMON STOCK CAPITAL IN

PAR VALUE RETAINED

EARNINGS TREASURY SHARES ACCUMULATED OTHER

COMPREHENSIVE

INCOME (LOSS) DEFERRED

COMPENSATION Total

(in thousands) SHARES PAR VALUE SHARES COST

Balance at 9/30/2020 83,739 $ 20,935 $ 583,008 $ 607,518 27,610 $ ( 413,493 ) $ ( 72,092 ) $ ( 25,725 ) $ 700,151

Net income — — — 79,211 — — — — 79,211

Dividends — — — ( 16,731 ) — — — — ( 16,731 )

Shares withheld on employee taxes on vested equity awards — — — — 152 ( 3,357 ) — — ( 3,357 )

Amortization of deferred compensation — — — — — — — 2,437 2,437

Common stock issued, net of issuance costs

Equity awards granted, net 636 159 ( 159 ) — — — — — —

ESOP allocation of common stock — — 2,922 — — — — — 2,922

GRIFFON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

Stock-based compensation — — 16,410 — — — — — 16,410

Stock-based consideration

Other comprehensive loss, net of tax

Other comprehensive income, net of tax — — — — — — 26,115 — 26,115

Balance at 9/30/2021 84,375 $ 21,094 $ 602,181 $ 669,998 27,762 $ ( 416,850 ) $ ( 45,977 ) $ ( 23,288 ) $ 807,158

12 unchanged sentences

and is listed on the New York Stock Exchange (NYSE:GFF).

On September 27, 2021, Griffon announced it is exploring strategic alternatives, including a sale, for its Defense Electronics segment, which consists of its Telephonics Corporation subsidiary.

As a result, Griffon classified the results of operations of the Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation as held for sale in the consolidated balance sheets.

Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless specifically noted.

Telephonics is recognized globally as a leading provider of highly sophisticated intelligence, surveillance and communications solutions that are deployed across a wide range of land, sea and air applications.

Telephonics designs, develops, manufactures and provides logistical support and lifecycle sustainment services to defense, aerospace and commercial customers worldwide.

On December 22, 2020, AMES acquired Quatro Design Pty Ltd (“Quatro”), a leading Australian manufacturer and supplier of

glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects.

Quatro is expected

to contribute approximately $ 5,000 in annualized revenue in the first twelve months under AMES' ownership.

In August 2020 Griffon Corporation completed the public offering of 8,700,000 shares of our common stock for total net proceeds of $ 178,165 (the "Public Offering").

1 unchanged sentence

The Company intends to use the remainder of the proceeds for general corporate purposes, including to expand its current business through acquisitions of, or investments in, other businesses or products.

On February 19, 2020, Griffon issued, at par, $ 850,000 of 5.75 % Senior Notes due in 2028 (the “2028 Senior Notes”) and on June 8, 2020 Griffon issued an additional $ 150,000 of notes under the same indenture, at 100.25 % of par (collectively, the "2028 Senior Notes").

During 2020, Griffon issued $ 1,000,000 of 5.75 % Senior Notes due in 2028 (the “2028 Senior Notes”) at par.

Proceeds from the 2028 Senior Notes were used to redeem the $ 1,000,000 of 5.25 % Senior Notes due 2022 (the "2022 Senior Notes").

3 unchanged sentences

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S.

First, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Second, certain AMES global operations will be consolidated to optimize facilities footprint and talent.

Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $ 65,000 (increased from $ 35,000 ) and capital investments of approximately $ 65,000 (increased from $ 40,000 ).

First, certain AMES global operations will be consolidated to optimize facilities footprint and talent.

Second, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

Third, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $ 65,000 and capital investments of approximately $ 65,000 .

The one-time charges are comprised of $ 46,000 of cash charges, which includes $ 26,000 of personnel-related costs such as training, severance, and duplicate personnel costs as well as $ 20,000 of facility and lease exit costs.

2 unchanged sentences

and the world.

While Griffon has not incurred significant disruptions to its manufacturing or supply chain thus far, the Company continues to actively monitor the situation and evaluate the nature and extent of the impact of the COVID-19 pandemic on its businesses, consolidated results of operations and financial condition.

Griffon places a high priority on the health and safety of its employees, customers and their families, and has implemented a variety of new policies and procedures, including additional cleaning, social distancing, staggered shifts and prohibiting or significantly restricting on-site visitors, to minimize the risk to its employees of contracting COVID-19.

Although many U.S.

states lifted initial executive orders issued earlier in the year

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

requiring all workers to remain at home unless their work is critical, essential, or life-sustaining, some states and localities have recently put in place new restrictions regarding the operation of many types of businesses, or have tightened up restrictions already in place, in response to the recent worsening of the COVID-19 outbreak.

As of the date of this filing, all of Griffon's facilities are fully operational and the Company’s supply chains have not experienced significant disruption.

Griffon manufactures a substantial majority of its products that it sells, with the majority of manufacturing activities conducted in the United States.

As a result, Griffon has been able to mitigate the adverse impact of the COVID-19 pandemic on the global supply chain.

While Griffon is unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on its businesses, results of operations, liquidity or capital resources, Griffon will continue to actively monitor the situation and may take further actions that impact its operations as may be required by federal, state or local authorities or that it determines is in the best interests of its employees, customers, suppliers and shareholders.

For additional factors to consider, see Part 1, Item 1A, “Risk Factors” in this Form 10-K.

Griffon currently conducts its operations through three reportable segments:

The impact from the rapidly changing U.S.

and global market and economic conditions due to the COVID-19 outbreak is uncertain, with disruptions to the business of our customers and suppliers, which has, and could continue, to impact our business and consolidated results of operations and financial condition.

As of the date of this filing, all of Griffon's facilities are fully operational.

We have implemented a variety of new policies and procedures, including additional cleaning, social distancing, staggered shifts and prohibiting or significantly restricting on-site visitors, to minimize the risk to our employees of contracting COVID-19.

In the United States, we manufacture a substantial majority of the products that we sell.

While this helps mitigate the effects of global supplier and transportation disruptions, we are still impacted and are unable to accurately predict the impact COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to our customers’ and suppliers’ businesses and other factors identified in Part 1, Item 1A, “Risk Factors” in this Form 10-K.

We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

Griffon currently conducts its operations through two reportable segments:

• Consumer and Professional Products ("CPP") conducts its operations through The AMES Companies, Inc.

5 unchanged sentences

Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

Defense Electronics ("DE") conducts its operations through 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.

Consolidation

5 unchanged sentences

Discontinued operations

On November 16, 2017, Griffon announced it entered into a definitive agreement to sell Plastics and on February 6, 2018, completed the sale to Berry for approximately $ 465,000 , net of certain post-closing adjustments.

As a result, Griffon classified the results of operations of the Plastics 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 Plastics unless otherwise noted.

For the years ended September 30, 2021, 2020 and 2019, discontinued operations includes the Telephonics business, and the assets and liabilities of discontinued installations business and other discontinued activities which have been segregated from Griffon's continuing operations primarily related to insurance claims, product liability, warranty and environmental reserves.

See Note 8, Discontinued Operations.

1 unchanged sentence

Certain amounts in prior years have been reclassified to conform to the current year presentation.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

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, sales, profits and loss recognition for performance obligations satisfied over time, assumptions associated with pension benefit obligations and income or expenses, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, assumption associated with stock based compensation valuation, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets and liabilities of discontinued operations, assumptions associated with valuation of acquired assets and assumed liabilities of acquired companies and the accompanying disclosures.

Use of estimates

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 expected loss allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, sales, profits and loss recognition for performance obligations satisfied over time, assumptions associated with pension benefit obligations and income or expenses, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, assumption associated with stock based compensation valuation, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets and liabilities of discontinued operations, assumptions associated with valuation of acquired assets and assumed liabilities of acquired companies and the accompanying disclosures.

These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future.

21 unchanged sentences

Insurance contracts with a value of $ 3,973 at September 30, 2021 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Other current assets on the consolidated balance sheet.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Items Measured at Fair Value on a Recurring Basis

At September 30, 2020 and 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 $ 1,703 ( $ 1,000 cost basis) and $ 1,518 ( $ 1,000 cost basis), respectively, were included in Prepaid and other current assets on the Consolidated Balance Sheets.

At September 30, 2021 and 2020, marketable debt and equity securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 16,044 ($ 15,050 cost basis) and $ 1,703 ($ 1,000 cost basis), respectively, were included in Prepaid and other current assets on the Consolidated Balance Sheets.

In the normal course of business, Griffon’s operations are exposed to the effect of changes in foreign currency exchange rates.

1 unchanged sentence

During 2021 and 2020, 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 USD.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

At September 30, 2021 and 2020, Griffon had $ 20,000 and $ 32,000 of Australian dollar contracts at a weighted average rate of $ 1.27 and $ 1.41 , respectively,which qualified for hedge accounting.

1 unchanged sentence

Upon settlement, gains and losses were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services.

AOCI included deferred losses of $ 168 ( $ 109 , net of tax) and deferred gains of $ 327 ( $ 213 , net of tax) at September 30, 2020 and 2019, respectively.

Upon settlement, gains (losses) of $( 2,163 ) and $ 1,361 were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS") during 2020 and 2019, respectively.

AOCI included deferred gains of $ 1,710 ($ 1,197 , net of tax) and deferred losses of $ 168 ($ 109 , net of tax) at September 30, 2021 and 2020, respectively.

Upon settlement losses of $( 2,204 ) and $( 2,163 ) were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS") during 2021 and 2020, respectively.

Contracts expire in 29 to 90 days .

2 unchanged sentences

dollar based purchases, do not qualify for hedge accounting and fair value gains (losses) of $ 38 and $( 92 ) were recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years ended September 30, 2021 and 2020, respectively.

Realized gains of $ 189 and $ 68 , were recorded in Other income during 2020 and 2019, respectively.

Realized (losses) gains of $( 381 ) and $ 189 , were recorded in Other income during 2021 and 2020, respectively.

Contracts expire in 30 to 360 days .

At September 30, 2020, Griffon had $ 5,400 of Great Britain Pound contracts at a weighted average rate of $ 0.77 .

At September 30, 2021, Griffon did no t have Great Britain Pound contracts outstanding and had $ 5,400 of Great Britain Pound contracts at a weighted average rate of $ 0.77 at September 31, 2020.

These contracts, which protect U.K.

operations from currency fluctuations for U.S.

dollar based purchases, do not qualify for hedge accounting and fair value gains of $ 39 were recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years ended September 30, 2020.

dollar based purchases, do not qualify for hedge accounting;

fair value (losses) gains of $ 30 and $ 39 were recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years ended September 30, 2021 and September 30, 2020.

Realized losses of $ 494 were recorded in Other income during the year ended September 30, 2021.

There were no realized gains or losses recorded for these contracts during the year ended September 30, 2020.

Contracts expire in 2 to 208 days .

Pension plan assets with a fair value of $ 160,523 at September 30, 2021, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs), quoted market prices for similar assets (level 2 inputs) and fair value assumptions for unobservable inputs in which little or no market data exists (level 3).

8 unchanged sentences

Gains and losses arising on remeasurements are recorded within the Consolidated Statement of Operations and Comprehensive Income as a component of Other income (expense).

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Revenue recognition

Effective October 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.

Our statement of operations for the year ended September 30, 2020 and 2019 and our balance sheet as of September 30, 2020 and 2019 are presented under ASC 606, while our statement of operations for the year ended September 30, 2018 is presented under ASC 605, Revenue Recognition.

Under ASC Topic 606, performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC Topic 606.

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting.

A contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and with respect to which payment terms are identified and collectability is probable.

1 unchanged sentence

For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price).

A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when each performance obligation is satisfied.

A majority of the Company’s contracts have a single performance obligation which represents, in most

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

cases, the product being sold to the customer.

To a lesser extent, some contracts include multiple performance obligations such as a product, the related installation, and extended warranty services.

These contracts require judgment in determining the number of performance obligations.

For contracts with multiple performance obligations, judgment is required to determine whether performance obligations specified in these contacts are distinct and should be accounted for as separate revenue transactions for recognition purposes.

In these types of contracts, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available.

The transaction price includes variable consideration, such as discounts and volume rebates, when it is probable that a significant reversal of revenue recognized will not occur.

Variable consideration is determined using either the expected value or the most likely amount of consideration to be received based on historical experience and the specific facts and circumstances at the time of evaluation.

Approximately 86 % of the Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components primarily within the CPP and HBP Segments, and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment.

Approximately 14 % of the Company’s performance obligations are recognized over time and relate to prime or subcontractors from contract awards with the U.S.

Government, as well as foreign governments and other commercial customers within our DE Segment.

Revenue recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period.

We believe that cumulative costs incurred to date as a percentage of estimated total contract costs at completion (cost-to-cost method) is an appropriate measure of progress towards satisfaction of performance obligations recognized over time, as it most accurately depicts the progress of our work and transfer of control to our customers.

The Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components, and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment.

Refer to Note 2 - Revenue for a discussion of our revenue recognition practices for each of our reportable segments.

Accounts receivable, allowance for doubtful accounts and concentrations of credit risk

Accounts receivable, expected loss allowance for doubtful accounts and concentrations of credit risk

Accounts receivable is composed principally of trade accounts receivable, that arise from the sale of goods or services on account, and is stated at historical cost.

A substantial portion of Griffon’s trade receivables are from customers within the CPP and HBP businesses, of which the largest customer is Home Depot, whose financial condition is dependent on the construction and related retail sectors of the economy.

As a percentage of consolidated accounts receivable, U.S.

Government related programs were 9 % and Home Depot was 18 % .

A substantial portion of Griffon’s trade receivables are from Home Depot, whose financial condition is dependent on the construction and related retail sectors of the economy.

As a percentage of consolidated accounts receivable, Home Depot was 19 %.

Griffon performs continuing evaluations of the financial condition of its customers, and although Griffon generally does not require collateral, letters of credit may be required from customers in certain circumstances.

Trade receivables are recorded at the stated amount, less allowance for doubtful accounts and, when appropriate, for customer program reserves and cash discounts.

The allowance represents estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency).

The allowance for doubtful accounts includes amounts for certain customers where a risk of default has been specifically identified, as well as an amount for customer defaults based on a formula when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers.

The provision related to the allowance for doubtful accounts is recorded in Selling, general and administrative ("SG&A") expenses.

Trade receivables are recorded at the stated amount, less expected loss allowance for doubtful accounts and, when appropriate, for customer program reserves and cash discounts.

The expected loss allowance represents estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency).

The expected loss allowance for doubtful accounts includes amounts for certain customers where a risk of default has been specifically identified, as well as an amount for customer defaults based on a formula when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers.

The provision related to the expected loss allowance for doubtful accounts is recorded in Selling, general and administrative ("SG&A") expenses.

The Company writes-off accounts receivable when they are deemed to be uncollectible.

3 unchanged sentences

The Company does not currently have customers or contracts that prescribe specific retainage provisions.

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor and manufacturing overhead costs.

Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated.

In general, HBP produces residential and commercial sectional garage doors, commercial rolling steel door and grille products, and CPP produces long-handled tools and landscaping products, and storage and organizational products, both in response to orders from customers of retailers and dealers or based on expected orders, as applicable.

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

Contract assets

Contract assets consists of amounts accounted for under the cost-to-cost method of accounting, recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts.

Amounts will be invoiced when applicable contract terms, such as the achievement of specified milestones or product delivery, are met.

At September 30, 2020 and 2019, approximately $ 7,500 and $ 13,100 , respectively, of contract assets were expected to be collected after one year.

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor and manufacturing overhead costs.

Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated.

In general, Telephonics sells products in connection with programs authorized and approved under contracts awarded by the U.S.

Government or agencies thereof and in accordance with customer specifications.

HBP produces residential and commercial sectional garage doors, commercial rolling steel door and grille products, and CPP produces long-handled tools and landscaping products, and storage and organizational products, both in response to orders from customers of retailers and dealers or based on expected orders, as applicable.

Property, plant and equipment

17 unchanged sentences

Such events or changes in circumstance include significant deterioration in overall economic conditions, changes in the business climate in which our reporting units operate, a decline in our market capitalization, operating performance indicators, when some portion of a reporting unit is disposed of or classified as held for sale, or when a change in the composition of reporting units occurs for other reasons, such as a change in operating segments.

We had three reporting units at September 30, 2020 and 2019, which are our operating segments.

We use both qualitative and quantitative approaches when testing goodwill and indefinite-lived intangibles for impairment.

We had two reporting units as of September 30, 2021 and three reporting units as of September 30, 2020, which are our operating segments.

The change in reporting units was a result of classifying our Defense Electronics segment as a discontinued operation as of September 30, 2021.We use both qualitative and quantitative approaches when testing goodwill and indefinite-lived intangibles for impairment.

When determining the approach to use, we consider the current facts and circumstances of each reporting unit, as well as the excess of each reporting unit’s estimated fair value over its carrying value based on our most recent quantitative assessment.

In addition, our qualitative approach evaluates

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

industry and market conditions and various events impacting a reporting unit including, but not limited to, macroeconomic conditions, changes in the business environment in which our reporting units operate and other reporting unit specific events and circumstances.

In addition, our qualitative approach evaluates industry and market conditions and various events impacting a reporting unit including, but not limited to, macroeconomic conditions, changes in the business environment in which our reporting units operate and other reporting unit specific events and circumstances.

If, based on the qualitative assessment, we determine that it is more likely than not that the fair value of a reporting unit is greater than its carrying value, then a quantitative assessment is not necessary.

However, if a quantitative assessment is necessary, we use the income approach methodology of valuation that includes the present value of expected future cash flows.

We performed a quantitative annual impairment test as of September 30, 2019, and an interim quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of COVID-19, using discounted future cash flows for each reporting unit, which did not result in impairments to goodwill.

The more significant assumptions used for the interim impairment test as of March 31, 2020 were a five-year cash flow projection and a 3.0 % terminal value to which discount rates between 7.1 % and 9 % were applied to calculate each unit’s fair value.

We performed a quantitative annual impairment test as of September 30, 2019, and a quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of COVID-19, using discounted future cash flows for each reporting unit, which did not result in impairments to goodwill.

The more significant assumptions used for the impairment test as of March 31, 2020 were a five -year cash flow projection and a 3.0 % terminal value to which discount rates between 7.1 % and 9 % were applied to calculate each unit’s fair value.

To substantiate fair values derived from the income approach methodology of valuation, the implied fair value was compared to the marketplace fair value of a comparable industry grouping for reasonableness.

Further, the fair values were reconciled to Griffon’s market capitalization.

We performed a qualitative assessment as of September 30, 2020, as the estimated fair values of each reporting unit significantly exceeded the carrying value based on our most recent quantitative assessment, which was performed as of March 31, 2020.

We performed a qualitative assessment as of September 30, 2021 and 2020, as the estimated fair values of each reporting unit significantly exceeded the carrying value based on our most recent quantitative assessment, which was performed as of March

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Our qualitative assessment determined that indicators that the fair value of each reporting unit was less than the carrying value were not present.

With respect to indefinite-lived intangibles we performed a quantitative annual impairment test as of September 30, 2019, and an interim quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of COVID-19, using a relief from royalty method, which did not result in impairments.

We performed a qualitative assessment as of September 30, 2020 considering all the above factors and determined that indefinite-lived intangibles fair values were greater than their book values.

In addition, we performed a qualitative assessment as of September 30 2021 of the Defense Electronics discontinued operation goodwill and determined that an indicator that the fair value was less than the carrying value of the business was not present.

With respect to indefinite-lived intangibles we performed a quantitative annual impairment test as of September 30, 2019, and a quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of COVID-19, using a relief from royalty method, neither of which did not result in an impairment.

We performed a qualitative assessment as of September 30, 2021 and 2020 considering all the above factors and determined that indefinite-lived intangibles fair values were greater than their book values.

Long-lived amortizable intangible assets, such as customer relationships and software, and tangible assets, primarily property, plant and equipment, are amortized over their expected useful lives, which involve significant assumptions and estimates.

8 unchanged sentences

The Company applied the modified retrospective approach, whereby the cumulative effect of adoption is recognized as of the date of adoption and comparative prior periods are not retrospectively adjusted.

As a result, upon adoption, we have recognized ROU assets of $ 163,552 and lease liabilities of $ 163,676 associated with our operating leases.

As a result, upon adoption, we recognized ROU assets of $ 163,552 and lease liabilities of $ 163,676 associated with our operating leases.

The standard had no material impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

3 unchanged sentences

We use the implicit rate when readily determinable.

For leases existing as of October 1, 2019, we have elected to use the remaining

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

lease term as of the adoption date in determining the incremental borrowing rate.

For leases existing as of October 1, 2019, we have elected to use the remaining lease term as of the adoption date in determining the incremental borrowing rate.

Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

2 unchanged sentences

Finance leases are included in property, plant, and equipment, net, other accrued liabilities, and other non-current liabilities.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term.

21 unchanged sentences

Research and development costs, shipping and handling costs and advertising costs

Research and development costs not recoverable under contractual arrangements are charged to SG&A expense as incurred and amounted to approximately $ 15,400 in each year ended September 30, 2020, 2019 and 2018.

SG&A expenses include shipping and handling costs of $ 54,500 in 2020 , $ 53,500 in 2019 and $ 41,700 in 2018 and advertising costs, which are expensed as incurred, of $ 19,000 in 2020 , $ 20,000 in 2019 and $ 21,000 in 2018.

Research and development costs are charged to SG&A expense as incurred and amounted to approximately $ 7,000 in 2021 and $ 8,000 in 2020 and 2019.

Total shipping and handling costs were $ 113,700 in 2021, $ 100,135 in 2020 and $ 93,700 in 2019, of which $ 58,100 in 2021, $ 54,500 in 2020 and $ 53,500 in 2019 were included in SG&A.

Advertising costs, which are expensed as incurred in SG&A, was $ 19,000 in 2021, $ 18,000 in 2020 and $ 18,000 in 2019.

GRIFFON CORPORATION

20 unchanged sentences

Our effective date for adoption of this ASU is our fiscal year beginning October 1, 2021 with early adoption permitted.

We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures.

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements and the related disclosures.

New Accounting Standards Implemented

In April 2019, the FASB issued guidance relating to accounting for credit losses on financial instruments, including trade receivables, and derivatives and hedging.

This guidance is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted, and will be effective for the Company beginning in fiscal 2021.

Management does not expect a material impact to the Company’s Consolidated Statements of Operations and Comprehensive Income or Cash Flows.

This guidance was effective for the Company beginning in fiscal 2021.

Adoption of this standard did not have a material impact on our consolidated financial statements and the related disclosures.

In August 2018, the FASB issued guidance which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

This guidance expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and will be effective for the Company beginning in 2021.

We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures.

In August 2018, the FASB issued guidance to clarify disclosure requirements related to defined benefit pension and other post-retirement plans.

The guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and will be effective for the Company beginning in 2022.

We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures.

This guidance was effective for the Company beginning in fiscal 2021.

Adoption of this standard did not have a material impact on our consolidated financial statements and the related disclosures.

In March 2020, the SEC adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X, and affiliates whose securities collateralize securities registered or being registered in Rule 3-16 of Regulation S-X (SEC Release No.

The amendment replaces the requirement to present condensed consolidating financial statements, comprised of balance sheets and statements of operations, comprehensive income and cash flows for all periods presented, with summarized financial information of the guarantor only for the most recently completed fiscal year and any subsequent interim period.

We adopted the amendments to the disclosure

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

New Accounting Standards Implemented

In March 2020, the Financial Accounting Standards Board ("FASB") issued optional guidance for a limited time relating to accounting for the discontinuation of the LIBOR rate also known as reference rate reform.

The amendments in this update provide optional practical expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update are applicable to contract modifications that replace a reference LIBOR rate beginning on March 12, 2020 through December 31, 2022.

The optional expedients primarily apply to the Griffon’s Credit Agreement and Non-U.S.

The optional expedients allow the Company to account for modifications due to reference rate reform by prospectively adjusting the effective interest rate on these agreements.

The Company expects to apply the optional practical expedients and exceptions to modifications of its agreements affected by reference rate reform.

As of September 30, 2020, the Company has not modified its agreements subject to reference rate reform.

In February 2018, the FASB issued guidance that allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act, from accumulated other comprehensive income to retained earnings.

This guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted, and is effective for the Company in fiscal 2020.

Upon adoption of this guidance as of October 1, 2019, based on our evaluation, we elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

The adoption of this standard did not have an impact on the Company's financial condition, results of operations, or cash flow.

In February 2016, FASB issued guidance on lease accounting requiring lessees to recognize a right-of-use asset and a lease liability for long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements.

The Company adopted the requirements of the new standard as of October 1, 2019 and applied the modified retrospective approach, whereby the cumulative effect of adoption is recognized as of the date of adoption and comparative prior periods are not retrospectively adjusted.

As a result, upon adoption, we have recognized right-of-use assets of $ 163,552 and lease liabilities of $ 163,676 associated with our operating leases.

The standard had no material impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

In January 2017, the FASB issued guidance that simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test.

Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill.

This guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those periods and will be effective for the Company beginning in 2021.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

We early adopted this guidance for our annual goodwill impairment testing for the year ended September 30, 2020.

The adoption of this guidance did not have a material impact on the Company's financial condition, results of operations and related disclosures.

requirements during the first quarter of fiscal 2021.

This amendment did not have an impact on our consolidated financial statements as this amendment simplifies the financial disclosures required in our guarantor and non-guarantor financial information.

See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Guarantor Financial Information.

In August 2018, the FASB issued guidance to clarify disclosure requirements related to defined benefit pension and other post-retirement plans.

The guidance is effective for fiscal years ending after December 15, 2020, with early adoption permitted, and was effective for the Company's for the fiscal year ended 2021.

Adoption of this standard did not have a material impact on our consolidated financial statements and the related disclosures.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements, and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

9 unchanged sentences

These contracts require judgment in determining the number of performance obligations.

For contracts with multiple performance obligations, judgment is required to determine whether

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

performance obligations specified in these contacts are distinct and should be accounted for as separate revenue transactions for recognition purposes.

3 unchanged sentences

See Note 18 - Business Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location.

Revenue from CPP and HBP Segments

A majority of CPP's and HBP's revenue is short cycle in nature with shipments occurring within one year from order and does not include a material long-term financing component, implicitly or explicitly.

The Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment.

A majority of the Company's revenue is short cycle in nature with shipments occurring within one year from order and does not include a material long-term financing component, implicitly or explicitly.

Payment terms generally range between 15 to 90 days and vary by the location of the business, the type of products manufactured to be sold and the volume of products sold, among other factors.

The Company’s CPP and HBP Segments recognize revenue from product sales when all factors are met, including when control of a product transfers to the customer upon its shipment, completion of installation, testing, certification or other substantive acceptance required under the contract.

The Company recognizes revenue from product sales when all factors are met, including when control of a product transfers to the customer upon its shipment, completion of installation, testing, certification or other substantive acceptance required under the contract.

Other than standard product warranty provisions, sales arrangements provide for no other significant post-shipment obligations on the Company.

From time-to-time and for certain customers, rebates and other sales incentives, promotional allowances or discounts are offered, typically related to customer purchase volumes, all of which are fixed or determinable and are classified as a reduction of revenue and recorded at the time of sale.

From time-to-time and for certain customers, rebates and other sales incentives,

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

promotional allowances or discounts are offered, typically related to customer purchase volumes, all of which are fixed or determinable and are classified as a reduction of revenue and recorded at the time of sale.

Griffon provides for sales returns and allowances based upon historical returns experience.

The Company includes shipping costs billed to customers in revenue and the related shipping costs in Cost of Goods and Services.

The majority of the Company’s contracts in the CPP and HBP Segments offer assurance-type warranties in connection with the sale of a product to a customer.

The Company includes shipping costs billed to customers in revenue and the related shipping costs in either Cost of Goods and Services or Selling, General and Administrative expenses.

The majority of the Company’s contracts offer assurance-type warranties in connection with the sale of a product to a customer.

Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications.

Such warranties do not represent a separate performance obligation.

Payment terms in the CPP and HBP Segments vary depending on the type and location of the customer and the products or services offered.

Payment terms vary depending on the type and location of the customer and the products or services offered.

Generally, the period between the time revenue is recognized and the time payment is due is not significant.

1 unchanged sentence

Additionally, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (e.g., sales, use, value added, and some excise taxes) are excluded from revenue.

Revenue from Defense Electronics Segment

Approximately 14 % of the Company’s performance obligations are recognized over time and relate to prime or subcontractors from contract awards with the U.S.

Government, as well as foreign governments and other commercial customers within our DE Segment.

Discontinued Operations:

Revenue from Defense Electronics

Performance obligations are recognized over time and relate to prime or subcontractors from contract awards with the U.S.

Government, as well as foreign governments and other commercial customers within DE .

Revenue recognized over time is generally accounted for using an input measure to determine progress completed at the end of the period.

The Company’s DE Segment earns a substantial portion of its revenue as either a prime contractor or subcontractor from contract awards with the U.S.

Government, as well as foreign governments and other commercial customers to design, develop and manufacture highly sophisticated intelligence, surveillance and communications solutions.

These contracts are typically long-term in nature, usually greater than one year, and do not include a material long-term financing component, either implicitly or explicitly.

Revenue and profits from such contracts are recognized over time as work is performed because control of the work in process transfers continuously to the customer.

Government contracts, the continuous transfer of control to the customer

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

is supported by contract clauses that provide for:

Government contracts, the continuous transfer of control to the customer is supported by contract clauses that provide for:

(i) progress or performance-based payments or (ii) the unilateral right of the customer to terminate the contract for convenience, in which case we have the right to receive payment for costs incurred plus a reasonable profit for products and services that do not have alternative use to us.

6 unchanged sentences

Adjustments to estimates for a contract's estimated costs at completion and estimated profit or loss are often required as experience is gained, more information is obtained (even though the scope of work required under the contract may or may not change) and contract modifications occur.

The impact of such adjustments to estimates is made on a cumulative basis in the period when such information has become known.

The 2020, 2019, and 2018 income from operations included net favorable/(unfavorable) catch-up adjustments approximating $( 10,650 ) , $( 4,500 ) and $ 1,400 , respectively.

Gross profit is impacted by a variety of factors, including the mix of products, systems and services, production efficiencies, price competition and general economic conditions.

Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price.

To the extent actual costs vary from the estimates upon which the price was negotiated, more or less profit will be generated, or a loss could be incurred.

Cost-reimbursable type contracts provide for the payment of allowable costs incurred on the contract plus the estimated profit on those costs.

The estimated profit on a cost-reimbursable contract may be fixed or variable based on the contractual fee arrangement.

We provide our products and services under cost-plus-fixed-fee arrangements.

The fixed fee is negotiated at the inception of the contract and that fixed-fee does not vary with actual costs.

For contracts in which anticipated total costs exceed the total expected revenue, an estimated loss is recognized in the period when identifiable.

A provision for the entire amount of the estimated loss is recorded on a cumulative basis.

The estimated remaining costs to complete loss contracts as of September 30, 2020 was $ 10,800 and is recorded as a reduction to gross margin on the Consolidated Statements of Operations and Comprehensive Income (Loss).

This loss had an immaterial impact on Griffon's Consolidated Financial Statements.

Contract modifications routinely occur to account for changes in contract specifications or requirements.

5 unchanged sentences

(US dollars and non-US currencies in thousands, except per share data)

Transaction Price Allocated to the Remaining Performance Obligations

On September 30, 2020, we had $ 380,000 of remaining performance obligations, which we also refer to as total backlog.

We expect to recognize approximately 67 % of our remaining performance obligations as revenue within one year, with the balance to be completed thereafter.

Backlog represents the dollar value of funded orders for which work has not been performed.

Backlog generally increases with bookings, and converts into revenue as we incur costs related to contractual commitments or the shipment of product.

Given the nature of our business and a larger dependency on international customers, our bookings, and therefore our backlog, is impacted by the longer maturation cycles resulting in delays in the timing and amounts of such awards, which are subject to numerous factors, including fiscal constraints placed on customer budgets;

political uncertainty;

the timing of customer negotiations;

and the timing of governmental approvals.

Contract Balances

Contract assets were $ 84,426 as of September 30, 2020 compared to $ 105,111 as of September 30, 2019.

The $ 20,685 decrease in our contract assets balance was primarily due to the timing of billings and work performed on various radar and surveillance programs.

Contract assets primarily relate to the Company's right to consideration for work completed but not billed at the reporting date and are recorded in Contract assets, net of progress payments in the Consolidated Balance Sheets.

Contract assets are transferred to receivables when the right to consideration becomes unconditional.

Contract costs and recognized income not yet billed consists of amounts accounted for under the percentage of completion method of accounting, recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts.

Amounts will be invoiced when applicable contract terms, such as the achievement of specified milestones or product delivery, are met.

At September 30, 2020 and 2019, approximately $ 7,500 and $ 13,100 , respectively, of contract assets were expected to be collected after one year.

Contract liabilities were $ 24,386 as of September 30, 2020 compared to $ 26,259 as of September 30, 2019.

The $ 1,873 decrease in the contract liabilities balance was primarily due to the recognition of revenue primarily from surveillance and airborne maritime surveillance radar programs.

Contract liabilities relate to advance consideration received from customers for which revenue has not been recognized.

The Company often receives cash payments from customers in advance of the Company’s performance resulting in contract liabilities.

These contract liabilities are classified as current on the Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue.

Current contract liabilities are recorded in Accounts payable on the Consolidated Balance Sheets.

Contract liabilities are reduced when the associated revenue from the contract is recognized.

NOTE 3 — ACQUISITIONS

Griffon accounts for acquisitions under the acquisition method, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition using a method substantially similar to the goodwill impairment test methodology (level 3 inputs).

The operating results of the acquired companies are included in Griffon’s consolidated financial statements from the date of acquisition in each instance.

Griffon continually evaluates potential acquisitions that either strategically fit within its portfolio or expand its portfolio into new product lines or adjacent markets.

Griffon has completed a number of acquisitions that have been accounted for as business combinations , in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition and have resulted in the recognition of goodwill .

The operating results of the business acquisitions are included in Griffon’s consolidated financial statements from the date of acquisition;

in each instance, Griffon is in the process of finalizing the initial purchase price allocation unless otherwise noted.

On December 22, 2020, AMES acquired Quatro Design Pty Ltd (“Quatro”), a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects for a purchase price of AUD $ 3,500 (approximately $ 2,700 ) in cash.

The purchase price is subject to additional contingent consideration of approximately AUD $ 1,000 (approximately $ 760 ) based on Quatro exceeding certain EBITDA performance targets in the first year.

The preliminary goodwill and acquired intangibles allocated to this acquisition was AUD $ 1,038 (approximately $ 784 ) and AUD $ 2,755 (approximately $ 2,082 ), respectively, which was assigned to the CPP segment, and is not deductible for income tax purposes.

On November 29, 2019, AMES acquired 100 % of the outstanding stock of Vatre Group Limited ("Apta"), a leading United Kingdom supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden centers for approximately $ 10,500 (GBP 8,750 ), inclusive of a post-closing working capital adjustment, net of cash acquired.

This acquisition broadens AMES' product offerings in the UK market and increases its in-country operational footprint.

The excess of the purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and is deductible for tax purposes.

The purchase price was primarily allocated to goodwill of GBP 3,449 , acquired intangible assets of GBP 3,454 , inventory of GBP 2,914 , accounts receivable and other assets of GBP 2,492 and accounts payable and other accrued liabilities of GBP 3,765 .

On June 4, 2018, Clopay completed the acquisition of 100 % of the outstanding stock of CornellCookson, a leading US manufacturer and marketer of rolling steel door and grille products designed for commercial, industrial, institutional and retail use, for approximately $ 180,000 , excluding the estimated present value of tax benefits, and $ 12,426 of post-closing adjustments, primarily consisting of a working capital adjustment.

CornellCookson revenue in 2018 was $ 66,654 .

The acquisition of CornellCookson substantially expanded Clopay’s non-residential product offerings, and added an established professional dealer network focused on rolling steel door and grille products for commercial, industrial, institutional and retail use.

CornellCookson’s accounts, affected for adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations are included in the Company’s consolidated financial statements from the date of acquisition.

The Company has recorded an allocation of the purchase price to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair market values (level 3 inputs) at the acquisition date.

The excess of the purchase price over the fair value of the net tangible and intangible assets was recorded as goodwill and is deductible for tax purposes.

Goodwill recognized at the acquisition date represents the other intangible benefits that the Company will derive from the ownership of CornellCookson, however, such intangible benefits do not meet the criteria for recognition of separately identifiable intangible assets.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

The calculation of the purchase price allocation is as follows:

Accounts receivable (1)

Inventories (2)

Property, plant and equipment

Intangible assets

Other current and non-current assets

Total assets acquired

Accounts payable and accrued liabilities

Long-term liabilities

Total liabilities assumed

(1) Includes $ 30,818 of gross accounts receivable of which $ 418 was not expected to be collected.

The fair value of accounts receivable approximated book value acquired.

(2) Includes $ 13,434 of gross inventory of which $ 1,098 was reserved for obsolete items.

The amounts assigned to goodwill and major intangible asset classifications, all of which are tax deductible, for the CornellCookson acquisition are as follows:

Indefinite-lived intangibles

Definite-lived intangibles

Total goodwill and intangible assets

On February 13, 2018, AMES acquired 100 % of the outstanding stock of Kelkay Limited ("Kelkay"), a leading United Kingdom manufacturer and distributor of decorative outdoor landscaping products sold to garden centers, retailers and grocers in the UK and Ireland for $ 56,118 (GBP 40,452 ), subject to contingent consideration of up to GBP 7,000 , of which approximately GBP 2,200 was earned.

This acquisition broadened AMES' product offerings in the market and increased its in-country operational footprint.

The purchase price was primarily allocated to tradenames of GBP 19,000 , customer related intangibles of GBP 6,640 , accounts receivable and inventory of GBP 8,894 and fixed assets and land of GBP 8,241 .

On November 6, 2017, AMES acquired substantially all of the assets of Harper Brush Works ("Harper"), a division of Horizon Global, for $ 4,383 , inclusive of post-closing adjustments.

Harper is a leading U.S.

manufacturer of cleaning products for professional, home, and industrial use.

The acquisition expanded AMES’ long-handled tool offering in North America to include brooms, brushes, and other cleaning tools and accessories.

The purchase price was primarily allocated to intangible assets of $ 2,300 , inventory and accounts receivable of $ 3,900 and fixed assets of $ 900 .

On October 2, 2017, Griffon Corporation completed the acquisition of 100 % of the outstanding equity interests of ClosetMaid, a market leader of home storage and organization products, for approximately $ 185,700 , inclusive of certain post-closing adjustments and excluding the present value of net tax benefits resulting from the transaction.

The acquisition of ClosetMaid expanded Griffon’s Home and Building Products segment into the highly complementary home storage and organization category with a leading brand and product portfolio.

ClosetMaid's accounts, affected for adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s consolidated financial statements from the date of acquisition.

The excess of the purchase price

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

over the fair value of the net tangible and intangible assets was recorded as goodwill and is deductible for tax purposes.

Goodwill recognized at the acquisition date represents the other intangible benefits that the Company will derive from the ownership of ClosetMaid, however, such intangible benefits do not meet the criteria for recognition of separately identifiable intangible assets.

The calculation of the purchase price allocation is as follows:

Accounts receivable (1)

Inventories (2)

Property, plant and equipment

Intangible assets

Other current and non-current assets

Total assets acquired

Accounts payable and accrued liabilities

Long-term liabilities

Total liabilities assumed

(1) Includes $ 32,956 of gross accounts receivable of which $ 722 was not expected to be collected.

The fair value of accounts receivable approximated book value acquired.

(2) Includes $ 1,500 in inventory basis step-up, which was charged to cost of goods sold over the inventory turns of the acquired entity.

The amounts assigned to goodwill and major intangible asset classifications, all of which are tax deductible, for the ClosetMaid acquisition are as follows:

Indefinite-lived intangibles

Definite-lived intangibles

Total goodwill and intangible assets

This acquisition broadens AMES' product offerings in the U.K.

market and increases its in-country operational footprint.

The purchase price was finalized and goodwill of GBP 3,449 and acquired intangible assets of GBP 3,454 , was assigned to the CPP segment and is deductible for tax purposes.

The purchase price was also allocated to inventory of GBP 2,914 , accounts receivable and other assets of GBP 2,492 and accounts payable and other accrued liabilities of GBP 3,765 ,

During the year ended September 30, 2021, acquisition related costs were de minimis.

During the year ended September 30, 2020, SG&A included acquisition costs of $ 2,960 .

There were no acquisition-related costs in 2019.

In 2018, SG&A and Cost of goods and services included $ 6,097 and $ 1,500 of acquisition-related costs, respectively..

NOTE 4 — INVENTORIES

5 unchanged sentences

Finished goods 290,579 171,481

Total $ 472,794 $ 320,188

GRIFFON CORPORATION

8 unchanged sentences

Leasehold improvements 39,913 38,435

724,509 696,667

Accumulated depreciation and amortization ( 431,887 ) ( 399,583 )

Total $ 292,622 $ 297,084

Except as described in Note 10, Restructuring Charges, no event or indicator of impairment occurred during the year ended September 30, 2021 which would require additional impairment testing of property, plant and equipment.

NOTE 6 – CREDIT LOSSES

Effective October 1, 2020, the Company adopted accounting guidance related to accounting for credit losses on financial instruments, including trade receivables (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments).

The guidance requires companies to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.

The Company is exposed to credit losses primarily through sales of products and services.

Trade receivables are recorded at their stated amount, less allowances for discounts, doubtful accounts and returns.

The Company’s expected loss allowance methodology for trade receivables is primarily based on the aging method of the accounts receivables balances and the financial condition of its customers.

The allowances represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency), discounts related to early payment of accounts receivables by customers and estimates for returns.

The allowance for doubtful accounts includes amounts for certain customers in which a risk of default has been specifically identified, as well as an amount for customer defaults, based on a formula, when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers.

Allowance for discounts and returns are recorded as a reduction of revenue and the provision related to the allowance for doubtful accounts is recorded in SG&A expenses.

The Company also considers current and expected future economic and market conditions, such as the COVID-19 pandemic, when determining any estimate of credit losses.

Generally, estimates used to determine the allowance are based on assessment of anticipated payment and all other historical, current and future information that is reasonably available.

All accounts receivable amounts are expected to be collected in less than one year.

Based on a review of the Company's policies and procedures across all segments, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions, Griffon determined that its method to determine credit losses and the amount of its allowances for bad debts is in accordance with this guidance in all material respects.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected:

Beginning Balance, October 1, 2020 $ 8,178

Provision for expected credit losses 795

Amounts written off charged against the allowance ( 393 )

Other, primarily foreign currency translation 207

Ending Balance, September 30, 2021 $ 8,787

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

NOTE 7 — GOODWILL AND OTHER INTANGIBLES

Griffon usually performs its annual goodwill impairment testing in the fourth quarter of each year.

In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred which would require interim impairment testing.

Given the general deterioration in economic and market conditions surrounding the COVID-19 pandemic, the Company considered the impact that the COVID-19 pandemic may have on its near and long-term forecasts and completed an interim impairment test as of March 31, 2020.

The Company determined that there was no impairment to either its goodwill or indefinite-lived intangible assets at March 31, 2020.

As of September 30, 2020 , the Company performed a qualitative assessment and determined it was not more likely than not that the fair value of any of its reporting units or its indefinite-lived intangible assets was less than their carrying values.

Based upon the results of the annual impairment qualitative review, it was determined that the fair value of each reporting unit substantially exceeded the carrying value of the assets, as performed under step one, and no impairment existed.

See Note 1, Description of Business and Summary of Significant Accounting Policies, for a description of the Company's goodwill and indefinite-lived intangible impairment testing methodology.

Griffon had two reporting units at September 30, 2021 and three reporting units at September 30, 2020, which are our operating segments.

The change in reporting units was a result of classifying the Defense Electronics segment as a discontinued operation as of September 30, 2021.

Refer to Note 1, for additional information on the Company's Goodwill and Goodwill and indefinite-lived intangibles annual impairment testing.

The following table provides changes in carrying value of goodwill by segment through the year ended September 30, 2021:

At September 30,

Goodwill from acquisitions

Reallocation of Goodwill (1)

Foreign currency translation adjustments

At September 30,

Goodwill from acquisitions

Foreign currency translation adjustments

At September 30,

2019 Goodwill from acquisitions (a) Foreign currency translation adjustments At September 30,

2020 Goodwill from acquisitions (a) Foreign currency translation adjustments At September 30,

Consumer and Professional Products $ 227,269 $ 4,451 $ 1,125 $ 232,845 $ 784 $ 1,266 $ 234,895

Home and Building Products 191,253 — — 191,253 — — 191,253

Defense Electronics

(1) In accordance with the guidance set forth in ASC 350, and in connection with the modification of the Company's reportable segment structure, using a relative fair value approach, the Company reallocated $ 148,076 of goodwill between the CPP and HBP segments.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Total $ 418,522 $ 4,451 $ 1,125 $ 424,098 $ 784 $ 1,266 $ 426,148

(a) The increase in the CPP segment was due to the acquisitions of Apta in 2020 and Quatro in 2021.

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:

At September 30, 2020

At September 30, 2019

Gross Carrying Amount

Accumulated Amortization

Gross Carrying

Accumulated Amortization

At September 30, 2021 At September 30, 2020

Gross Carrying Amount Accumulated Amortization Average

(Years) Gross Carrying

Amount Accumulated Amortization

Customer relationships & other $ 187,732 $ 75,794 23 $ 184,699 $ 65,417

1 unchanged sentence

Total amortizable intangible assets 201,161 78,233 198,202 68,050

Trademarks 227,097 — 224,050 —

Total intangible assets $ 428,258 $ 78,233 $ 422,252 $ 68,050

The gross carrying amount of intangible assets was impacted by $ 3,924 related to foreign currency translation.

Amortization expense for intangible assets subject to amortization was $ 9,561 , $ 9,486 and $ 9,393 in 2021, 2020 and 2019, respectively.

5 unchanged sentences

thereafter - $ 76,864 .

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

NOTE 8 — DISCONTINUED OPERATIONS

In accordance with ASC 205-20 Presentation of Financial Statements:

Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component of an entity meets the criteria in paragraph 205-20-45-10.

In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations.

At the same time, the results of all discontinued operations , less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.

Defense Electronics (DE or Telephonics)

The following amounts related to Telephonics have been segregated from Griffon's continuing operations and are reported as discontinued operations:

For the Year Ended September 30,

2021 2020 2019

Revenue $ 271,060 $ 340,976 $ 335,041

Cost of goods and services 232,075 285,022 269,890

Gross profit 38,985 55,954 65,151

Selling, general and administrative expenses 35,532 42,314 39,194

Income from discontinued operations 3,453 13,640 25,957

Other income (expense)

Gain on sale of business 5,291 — —

Interest income, net 117 4 253

Other, net 36 408 ( 255 )

Total other income (expense) 5,444 412 ( 2 )

Income from discontinued operations before tax $ 8,897 $ 14,052 $ 25,955

The gain on sale of business relates to the divestiture of the SEG business on December 18, 2020, SEG had sales of approximately $ 6,713 , $ 31,758 , and $ 27,450 for the years ended 2021, 2020 and 2019.

Income from discontinued operations includes severance charges of approximately $ 4,300 , with $ 2,100 recognized in fiscal 2020, and the remaining $ 2,200 recognized in fiscal 2021.

In September 2020, the DE Voluntary Employee Retirement Plan was initiated, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities.

These actions reduced headcount by approximately 90 people.

Income from discontinued operations includes charges of $ 5,601 recorded in fiscal 2021 primarily related to exiting our older weather radar product lines.

The following amounts related to Telephonics have been segregated from Griffon's continuing operations and are reported as assets and liabilities of discontinued operations held for sale in the consolidated balance sheets:

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

At September 30, At September 30,

CURRENT ASSETS

Accounts receivable, net 42,020 62,127

Contract assets, net of progress payments 72,983 84,426

Inventories 83,970 93,637

Prepaid and other current assets 4,409 5,536

PROPERTY, PLANT AND EQUIPMENT, net 45,371 46,880

OPERATING LEASE RIGHT-OF-USE ASSETS 1,167 7,278

GOODWILL 17,734 18,545

INTANGIBLE ASSETS, net 131 826

OTHER ASSETS 5,629 6,423

Total Assets Held for Sale $ 273,414 $ 325,678

CURRENT LIABILITIES

Accounts payable 60,486 59,724

Accrued liabilities 15,153 20,023

Current portion of operating lease liabilities 287 2,176

LONG-TERM OPERATING LEASE LIABILITIES 867 5,466

OTHER LIABILITIES 3,955 4,972

Total Liabilities Held for Sale $ 80,748 $ 92,361

Installation Services and Other Discontinued Activities

During 2019, Griffon recorded an $ 11,050 charge ($ 8,335 , net of tax) to discontinued operations.

The charge consisted primarily of a purchase price adjustment to resolve a claim related to the Plastics divestiture and included an additional reserve for a legacy environmental matter.

The following amounts summarize the total assets and liabilities of Plastics and Installation Services and other discontinued activities which have been segregated from Griffon’s continuing operations and are reported as assets and liabilities of discontinued operations in the consolidated balance sheets:

The following amounts summarize the total assets and liabilities of Installation Services and other discontinued activities which have been segregated from Griffon’s continuing operations and are reported as assets and liabilities of discontinued operations in the consolidated balance sheets:

At September 30,

8 unchanged sentences

Total liabilities of discontinued operations $ 7,074 $ 10,811

At September 30, 2020 , Griffon’s liabilities for Plastics, Installations Services and other discontinued operations primarily related to insurance claims, income taxes and product liability, warranty and environmental reserves totaling liabilities of approximately $ 10,811 .

The increase in assets and liabilities were primarily associated with insurance claims receivable and payable.

Plastics 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.

In connection with the sale of Plastics, the Company recorded a $ 9,500 post-closing adjustment ( $ 7,085 , net of tax) during 2019 and recorded

At September 30, 2021, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, income taxes and product liability, warranty and environmental reserves totaling liabilities of approximately $ 7,074 .

The decrease in assets and liabilities were primarily associated with insurance claims receivable and payable.

There was no reported revenue in 2021, 2020 and 2019.

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

a gain on sale of $ 112,964 ( $ 81,041 , net of tax) during 2018.

The following amounts related to the Plastics segment have been segregated from Griffon's continuing operations and are reported as discontinued operations:

For the Year Ended September 30,

Cost of goods and services

Selling, general and administrative expenses

Restructuring charges

Total operating expenses

Income from discontinued operations

Other income (expense)

Gain on sale of business

Interest expense, net

Total other income (expense)

Income from operations of discontinued operations

Installation Services and Other Discontinued Activities

There was no reported revenue in 2020, 2019 and 2018.

NOTE 9 — ACCRUED LIABILITIES

2 unchanged sentences

2021 At September 30,

Compensation $ 76,781 $ 73,262

Interest 4,156 4,371

Warranties and rebates 11,709 14,112

Insurance 10,462 9,552

Rent, utilities and freight 11,212 8,816

2 unchanged sentences

Restructuring 682 845

Other 13,678 10,676

Total $ 145,101 $ 143,971

NOTE 10 – RESTRUCTURING CHARGES

In September 2020, Telephonics initiated a Voluntary Employee Retirement Plan, which was subsequently followed by a reduction in force in November 2020, to improve efficiencies by combining functions and responsibilities.

The combined actions are expected to incur severance charges of approximately $ 4,500 , with $ 2,120 recognized in the fourth quarter, and the balance to be recognized in the first quarter of 2021.

At the conclusion of these actions, headcount is expected to be reduced by approximately 90 people.

In addition, during fiscal 2020 Telephonics commenced a facility project to consolidate three Long Island based facilities into two company owned facilities with a total cost of approximately $ 4.0 million primarily comprised of capital expenditures in 2021.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

In November 2019, Griffon announced the development of a next-generation business platform for CPP to enhance the growth, efficiency, and competitiveness of its U.S.

1 unchanged sentence

The expanded focus of this initiative leverages the same three key development areas being executed within our U.S.

First, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Second, certain AMES global operations will be consolidated to optimize facilities footprint and talent.

Third, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

The cost to implement this new business platform, over the five years duration of the project, will include approximately $ 65,000 (increased from $ 35,000 ) of one-time charges and approximately $ 65,000 (increased from $ 40,000 ) in capital investments.

First, certain AMES global operations will be consolidated to optimize facilities footprint and talent.

Second, strategic investments in automation and facilities expansion will be made to increase the efficiency of our manufacturing and fulfillment operations, and support e-commerce growth.

Third, multiple independent information systems will be unified into a single data and analytics platform, which will serve the whole AMES global enterprise.

Expanding the roll-out of the new business platform from our AMES U.S.

operations to include AMES’ global operations will extend the duration of the project by one year , with completion now expected by the end of calendar year 2023.

When fully implemented, these actions will result in annual cash savings of $ 30,000 to $ 35,000 and a reduction in inventory of $ 30,000 to $ 35,000 both based on fiscal 2020 operating levels.

The cost to implement this new business platform, over the duration of the project, will include one-time charges of approximately $ 65,000 and capital investments of approximately $ 65,000 .

The remaining $ 19,000 of charges are non-cash and are primarily related to asset write-downs.

The remaining $ 19,000 of charges are non-cash and are primarily related to asset

In the year ended September 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 21,418 .

For the year ended September 30, 2020, cash charges totaled $ 8,977 and non-cash, asset-related charges totaled $ 4,692 ;

Cash charges totaled $ 14,763 and non-cash, asset-related charges totaled $ 6,655 ;

the cash charges included $ 3,190 for one-time termination benefits and other personnel-related costs and $ 11,573 for facility and lease exit costs primarily driven by the consolidation of distribution facilities and system optimization.

Non-cash charges of $ 6,655 predominantly related to inventory of $ 4,158 that have no recoverable value, and a $ 1,882 impairment charge related to machinery and equipment that have no recoverable value at one of the Company's owned manufacturing locations.

In the year ended September 30, 2020, CPP incurred pre-tax restructuring and related exit costs approximating $ 13,669 .

Cash charges totaled $ 8,977 and non-cash, asset-related charges totaled $ 4,692 ;

the cash charges included $ 5,620 for one-time termination benefits and other personnel-related costs and $ 3,357 for facility exit costs.

Non-cash charges included a $ 1,968 impairment charge related to a facility’s operating lease as well as $ 671 of leasehold improvements made to the leased facility and $ 304 of inventory that have no recoverable value, and a $ 1,749 impairment charge related to machinery and equipment that have no recoverable value at one of the Company's owned manufacturing locations.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Since inception of this initiative in fiscal 2020, total cumulative charges totaled $ 35,087 , comprised of cash charges of $ 23,740 and non-cash, asset-related charges of $ 11,347 ;

the cash charges included $ 8,810 for one-time termination benefits and other personnel-related costs and $ 14,930 for facility exit costs.

As a result of these transactions, headcount was reduced by 400 .

A summary of the restructuring and other related charges included in Cost of goods and services and Selling, general and administrative expenses in the Company's Consolidated Statements of Operations were as follows:

For the Year Ended September 30, 2020

For the Year Ended

September 30, 2021 September 30, 2020

Cost of goods and services $ 7,923 $ 4,159

1 unchanged sentence

Total restructuring charges $ 21,418 $ 13,669

For the Year Ended September 30, 2020

For the Year Ended

September 30, 2021 September 30, 2020

Personnel related costs $ 3,190 $ 5,620

1 unchanged sentence

Non-cash facility and other 6,655 4,692

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Total $ 21,418 $ 13,669

The following table summarizes the accrued liabilities of the Company's restructuring actions:

Cash Charges Cash Charges Non Cash Charges

Personnel related costs Facilities &

Exit Costs Facility and Other Costs Total

Accrued liability at September 30, 2019 $ — $ — $ — $ —

Charges 5,620 3,357 4,692 13,669

Payments ( 5,039 ) ( 3,093 ) — ( 8,132 )

Non-cash charges (1)

Personnel related costs

Facility and Other Costs

— $ — ( 4,692 ) ( 4,692 )

Accrued liability at September 30, 2020 $ 581 $ 264 $ — $ 845

Charges 3,190 11,573 6,655 21,418

Payments ( 3,353 ) ( 11,573 ) — ( 14,926 )

Non-cash charges (1)

— ( 6,655 ) ( 6,655 )

Accrued liability at September 30, 2021 $ 418 $ 264 $ — $ 682

1 unchanged sentence

NOTE 11 – WARRANTY LIABILITY

DE offers warranties against product defects for periods generally ranging from one to two years , depending on the specific product and terms of the customer purchase agreement.

CPP and HBP also offers warranties against product defects for periods generally ranging from one to ten years, with limited lifetime warranties on certain door models.

Typical warranties require CPP, HBP and DE to repair or replace the defective products during the warranty period at no cost to the customer.

CPP and HBP offer warranties against product defects for periods generally ranging from one to ten years, with limited lifetime warranties on certain door models.

Typical warranties require CPP and HBP to repair or replace the defective products during the warranty period at no cost to the customer.

At the time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical experience, and periodically assesses its warranty obligations and adjusts the liability as necessary.

CPP offers an express limited warranty for a period of ninety days on all products from the date of the original purchase unless otherwise stated on the product or packaging from the date of original purchase.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:

7 unchanged sentences

At September 30, 2021

Capitalized Fees & Expenses

Balance Original

Premium Capitalized Fees & Expenses Balance

Interest Rate

Senior notes due 2028

Revolver due 2025

Finance lease - real estate

lines of credit

Other long term debt

Senior notes due 2028 (a) $ 1,000,000 $ 315 $ ( 13,293 ) $ 987,022 5.75 %

Revolver due 2025 (b) 13,483 — ( 1,718 ) 11,765 Variable

Finance lease - real estate (c) 14,594 — ( 4 ) 14,590 Variable

lines of credit (d) 3,012 — ( 17 ) 2,995 Variable

term loans (d) 25,684 — ( 91 ) 25,593 Variable

Other long term debt (e) 3,733 — ( 15 ) 3,718 Variable

Totals 1,060,506 315 ( 15,138 ) 1,045,683

Current portion ( 12,486 ) — — ( 12,486 )

Long-term debt $ 1,048,020 $ 315 $ ( 15,138 ) $ 1,033,197

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

At September 30, 2020

Balance Original

Premium Capitalized

Expenses Balance

Interest Rate

Senior notes due 2022

Revolver due 2021

Finance lease - real estate

lines of credit

Other long term debt

Senior notes due 2028 (a) $ 1,000,000 $ 363 $ ( 15,376 ) $ 984,987 5.75 %

Revolver due 2025 (b) 12,858 — ( 2,209 ) 10,649 Variable

Finance lease - real estate (c) 17,218 — ( 30 ) 17,188 Variable

lines of credit (d) — — ( 30 ) ( 30 ) Variable

term loans (f) 31,086 — ( 160 ) 30,926 Variable

Other long term debt (g) 3,260 — ( 16 ) 3,244 Variable

Totals 1,064,422 363 ( 17,821 ) 1,046,964

Current portion ( 9,922 ) — — ( 9,922 )

Long-term debt $ 1,054,500 $ 363 $ ( 17,821 ) $ 1,037,042

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Interest expense consists of the following for 2021, 2020 and 2019.

Year Ended September 30, 2021

Interest Rate

Cash Interest

Interest Rate Cash Interest Amort.

Premium Amort.

Deferred Cost

Total Interest

Senior notes due 2028

Senior notes due 2022

Revolver due 2025

Finance lease - real estate

lines of credit

Other long term debt

& Other Fees Total Interest

Senior notes due 2028 (a) 5.95 % $ 57,500 $ ( 48 ) $ 2,084 $ 59,536

Revolver due 2025 (b) Variable 1,078 — 491 1,569

Finance lease - real estate (c) 5.65 % 875 — 25 900

lines of credit (d) Variable 15 — 15 30

term loans (d) Variable 655 — 71 726

Other long term debt (e) Variable 443 — 2 445

Capitalized interest ( 31 ) — — ( 31 )

Totals $ 60,535 $ ( 48 ) $ 2,688 $ 63,175

Year Ended September 30, 2020

Interest Rate

Cash Interest

Interest Rate Cash Interest Amort.

Discount Amort.

Deferred Cost

Total Interest

Senior notes due 2022

Revolver due 2025

Finance lease - real estate

lines of credit

Other long term debt

& Other Fees Total Interest

Senior notes due 2028 (a) 5.90 % $ 32,511 $ — $ 1,072 $ 33,583

Senior notes due 2022 (a) 5.67 % $ 22,816 $ 122 $ 1,735 $ 24,673

Revolver due 2025 (b) Variable 5,866 — 635 6,501

Finance lease - real estate (c) 4.45 % 386 — 25 411

lines of credit (d) Variable 12 — 15 27

term loans (d) Variable 975 — 55 1,030

Other long term debt (e) Variable 445 — 2 447

Capitalized interest ( 128 ) — — ( 128 )

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Totals $ 62,883 $ 122 $ 3,539 $ 66,544

Year Ended September 30, 2019

Interest Rate

Cash Interest

Interest Rate Cash Interest Amort.

Debt Discount Amort.

Deferred Cost

Total Interest

Senior notes due 2022

Revolver due 2025

Real estate mortgages

Finance lease - real estate

lines of credit

Other long term debt

& Other Fees Total Interest

Senior notes due 2022 (a) 5.66 % $ 52,500 $ 270 $ 3,803 $ 56,573

Revolver due 2025 (b) Variable 6,998 — 980 7,978

Finance lease - real estate (c) 6.7 % 372 — 25 397

lines of credit (d) Variable 19 — 15 34

term loans (d) Variable 1,592 — 109 1,701

Other long term debt (e) Variable 640 — 5 645

ESOP Loans (f) 6.3 % 937 — 186 1,123

Capitalized interest ( 139 ) — — ( 139 )

Totals $ 62,919 $ 270 $ 5,123 $ 68,312

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Minimum payments under debt agreements for the next five years are as follows:

$ 16,724 in 2022, $ 17,267 in 2023, $ 1,888 in 2024, $ 15,296 in 2025, $ 1,892 in 2026 and $ 1,007,439 thereafter.

On June 22, 2020, in an unregistered offering through a private placement, Griffon completed the add-on offering of $ 150,000 principal amount of its 5.75 % senior notes due 2028, at 100.25 % of par, to Griffon's previously issued $ 850,000 principal amount of its 5.75 % senior notes due 2028, at of par, completed on February 19, 2020 (collectively, the "Senior Notes").

(a) On June 22, 2020, in an unregistered offering through a private placement, Griffon completed the add-on offering of $ 150,000 principal amount of its 5.75 % senior notes due 2028, at 100.25 % of par, to Griffon's previously issued $ 850,000 principal amount of its 5.75 % senior notes due 2028, at of par, completed on February 19, 2020 (collectively, the "Senior Notes").

Proceeds from the Senior Notes were used to redeem the $ 1,000,000 of 5.25 % senior notes due 2022 (the "2022 Senior Notes").

7 unchanged sentences

Additionally, Griffon recognized a $ 7,925 loss on the early extinguishment of debt of the 2022 Senior Notes, comprised primarily of the write-off of $ 6,725 of remaining deferred financing fees, $ 607 of tender offer net premium expense and $ 593 of redemption interest expense.

On January 30, 2020, Griffon amended its Credit Agreement to increase the maximum borrowing availability from $ 350,000 to $ 400,000 , extend its maturity from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility.

The facility includes a letter of credit sub-facility with a limit of $ 100,000 (increased from $ 50,000 );

(b) On January 30, 2020, Griffon amended its Credit Agreement to increase the maximum borrowing availability from $ 350,000 to $ 400,000 , extend its maturity from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility.

The facility includes a letter of credit sub-facility with a limit of $ 100,000 ;

and a multi-currency sub-facility of $ 200,000 ;

The Credit Agreement provides for same day borrowings of base rate loans.

and contains a customary accordion feature that permits the Company to request, subject to each lender's consent, an increase in the maximum aggregate amount that can be borrowed up to an additional $ 100,000 .

Borrowings under the Credit Agreement may be repaid and re-borrowed at any time.

3 unchanged sentences

The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments and investments.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors, and a pledge of not greater than 65 % of the equity interest in Griffon’s material, first-tier foreign subsidiaries.

2 unchanged sentences

and $ 370,927 was available, subject to certain loan covenants, for borrowing at that date.

In September 2015 and March 2016, Griffon entered into mortgage loans in the amount of $ 32,280 and $ 8,000 , respectively, that were due to mature in September 2025 and April 2018, respectively.

The mortgage loans were secured and collateralized by four properties occupied by Griffon's subsidiaries and were guaranteed by Griffon.

The loans had an interest at a rate of LIBOR plus 1.50 % .

The loans were paid off during 2018.

In August 2016 and as amended on June 30, 2017, Griffon’s ESOP entered into a Term Loan with a bank (the "ESOP Agreement").

The Term Loan interest rate was LIBOR plus 3.00 % .

The Term Loan required quarterly principal payments of $ 569 with a balloon payment due at maturity.

The Term Loan was secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of Griffon assets (which ranked pari passu with the lien granted on such assets under the Credit Agreement) and was guaranteed by Griffon.

On March 13, 2019, the ESOP Term Loan was refinanced with an internal loan from Griffon which was funded with cash and a draw under its Credit Agreement.

The internal loan interest rate is fixed at 2.91 % , matures in June 2033 and requires quarterly payments of principal, currently $ 635 , and interest.

The internal loan is secured by shares purchased with the proceeds of the loan.

The amount outstanding on the internal loan at September 30, 2020 was $ 29,878 .

Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala, Florida.

The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of approximately 5.0 % and 5.6 % , respectively.

The Troy, Ohio lease is secured by a mortgage on the real estate and is guaranteed by Griffon.

The leases mature in November 2021 and 2025, respectively, and bear interest at fixed rates of approximately 5.0 % and 5.6 %, respectively.

The Troy, Ohio lease is secured by a mortgage on the real estate, which is guaranteed by Griffon, and has a one dollar buyout at the end of the lease in the first fiscal quarter of 2022.

The Ocala, Florida lease contains two five -year renewal options.

1 unchanged sentence

Refer to Note 21 - Leases for further details.

In November 2012, Garant G.P.

(d) In November 2012, Garant G.P.

(“Garant”), a Griffon subsidiary, entered into a CAD 15,000 ($ 11,798 as of September 30, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.44 % LIBOR USD and 1.55 % Bankers Acceptance Rate CDN as of September 30, 2020 ).

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.38 % LIBOR USD and 1.51 % Bankers Acceptance Rate CDN as of September 30, 2021 and September 29, 2021, respectively).

The revolving facility matures in October 2022.

1 unchanged sentence

As of September 30, 2021, there were no borrowings under the revolving credit facility with CAD 15,000 ($ 11,798 as of September 30, 2021) available for borrowing.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

In July 2016, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries ("Griffon Australia") entered into an AUD 29,625 term loan, AUD 20,000 revolver and AUD 10,000 receivable purchase facility agreement.

the agreement was amended in March 2019.

As amended, the term loan requires quarterly principal payments of AUD 1,250 plus interest with a balloon payment of AUD 9,625 due upon maturity in March 2022, and accrues interest at Bank Bill Swap Bid Rate “BBSY” plus 1.95 % per annum ( 2.09 % at September 30, 2020 ).

During the year ended September 30, 2020, the term loan balance was reduced by AUD 5,000 from AUD 23,375 to AUD 18,375 with proceeds from an AUD 5,000 increase in the commitment of the receivables purchase line from AUD 10,000 to AUD 15,000 .

The term loan requires quarterly principal payments of AUD 1,250 plus interest with a balloon payment of AUD 9,625 due upon maturity in March 2022, and accrues interest at Bank Bill Swap Bid Rate “BBSY” plus 1.95 % per annum ( 2.01 % at September 30, 2021).

During fiscal 2020, the term loan balance was reduced by AUD 5,000 from AUD 23,375 to AUD 18,375 with proceeds from an AUD 5,000 increase in the commitment of the receivables purchase line from AUD 10,000 to AUD 15,000 .

As of September 30, 2021, the term loan had an outstanding balance of AUD 10,875 ($ 7,847 as of September 30, 2021).

1 unchanged sentence

The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.9 % and 1.35 %, respectively, per annum ( 1.97 % and 1.41 %, respectively, at September 30, 2021).

At September 30, 2020, there were no balances outstanding under the revolver and the receivable purchase facility.

At September 30, 2021, there were no borrowings outstanding under the revolver and the receivable purchase facility.

The revolver, receivable purchase facility and term loan are all secured by substantially all of the assets of Griffon Australia and its subsidiaries.

2 unchanged sentences

The term loan and mortgage loan require quarterly principal payments of GBP 438 and GBP 105 plus interest, respectively, and have balloon payments due upon maturity, July 2023, of GBP 7,088 and GBP 2,349 , respectively.

The term loan and mortgage loan accrue interest at the GBP LIBOR Rate plus 2.25 % and 1.8 % , respectively ( 2.30 % and 1.85 % at September 30, 2020, respectively).

The revolving facility matures in May 2021, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 1.5 % ( 1.85 % as of September 30, 2020).

As of September 30, 2020, the revolver had no outstanding balance while the term and mortgage

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

loan balances amounted to GBP 15,398 ( $ 19,799 as of September 30, 2020).

The term loan and mortgage loan accrue interest at the GBP LIBOR Rate plus 1.8 % ( 1.85 % at September 30, 2021, respectively).

The revolving facility matures in June 2022, but is renewable upon mutual agreement with the lender, and accrues interest at the Bank of England Base Rate plus 3.25 % ( 3.35 % as of September 30, 2021).

As of September 30, 2021, the revolver had an outstanding balance of GBP 2,234 ($ 3,012 as of September 30, 2021), while the term and mortgage loan balances amounted to GBP 13,229 ($ 17,837 as of September 30, 2021).

The revolver and the term loan are both secured by substantially all of the assets of AMES UK and its subsidiaries.

1 unchanged sentence

An invoice discounting arrangement was canceled and replaced by the above loan facilities.

(g) Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of capital leases.

(g) Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development Authority, with the balance consisting of financing leases.

(f) In August 2016 and as amended on June 30, 2017, Griffon’s ESOP entered into a Term Loan with a bank (the "ESOP Agreement").

The Term Loan interest rate was LIBOR plus 3.00 %.

The Term Loan required quarterly principal payments of $ 569 with a balloon payment due at maturity.

On March 13, 2019, the ESOP Term Loan was refinanced with an internal loan from Griffon which was funded with cash and a draw under its Credit Agreement.

The internal loan interest rate is fixed at 2.91 %, matures in June 2033 and requires quarterly payments of principal, currently $ 620 , and interest.

The internal loan is secured by shares purchased with the proceeds of the loan.

The amount outstanding on the internal loan at September 30, 2021 was $ 27,368 .

At September 30, 2021, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

NOTE 13 – EMPLOYEE BENEFIT PLANS

29 unchanged sentences

Defined Benefits for the Years Ended

September 30,

Supplemental Benefits for the Years

September 30, Supplemental Benefits for the Years

Ended September 30,

2021 2020 2019 2021 2020 2019

Net periodic (benefits) costs:

6 unchanged sentences

The tax benefits in 2021, 2020 and 2019 for the amortization of pension costs in Other comprehensive income (loss) were $ 270 , $ 878 and $ 221 , respectively.

The estimated net actuarial loss and prior service cost that will be amortized from AOCI into Net periodic pension cost during 2021 is $ 6,277 and $ 15 , respectively.

The weighted-average assumptions used in determining the net periodic (benefits) costs were as follows:

Defined Benefits for the Years Ended

September 30,

Supplemental Benefits for the Years

September 30, Supplemental Benefits for the Years

Ended September 30,

2021 2020 2019 2021 2020 2019

Discount rate 2.30 % 2.92 % 4.10 % 1.69 % 2.64 % 3.99 %

5 unchanged sentences

Defined Benefits at

September 30,

Supplemental Benefits at

September 30, Supplemental Benefits at

September 30,

2021 2020 2021 2020

Change in benefit obligation:

22 unchanged sentences

Information for plans with accumulated benefit obligations in excess of plan assets:

ABO $ 170,505 $ 183,003 $ 14,775 $ 16,070

PBO 170,505 183,003 14,775 16,070

Fair value of plan assets 160,523 147,145 — —

Actuarial gains as of September 30, 2021 were primarily the result of the actual return on assets versus the expected return on assets.

Actuarial gains also resulted from the increase in the discount rate and the change in the mortality assumption for valuing the Projected Benefit Obligation.

Actuarial losses as of September 30, 2020 were primarily the result of the decrease in the discount rate.

The weighted-average assumptions used in determining the benefit obligations were as follows:

Defined Benefits at

September 30,

Supplemental Benefits at

September 30, Supplemental Benefits at

September 30,

2021 2020 2021 2020

Weighted average discount rate 2.58 % 2.30 % 1.94 % 1.69 %

3 unchanged sentences

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:

For the years ending September 30,

Supplemental Benefits

For the years ending September 30, Defined

Benefits Supplemental Benefits

2022 $ 10,909 $ 1,884

2023 10,902 1,765

2024 10,876 1,641

2025 10,803 1,513

2026 10,789 1,383

2027 through 2031 51,669 4,965

7 unchanged sentences

At September 30,

2021 2020 Target

Cash and equivalents 1.2 % 0.4 % — %

Equity securities 52.5 % 48.5 % 63.0 %

Fixed income 26.9 % 31.9 % 37.0 %

Other 19.4 % 19.2 % — %

Total 100.0 % 100.0 % 100.0 %

The following is a description of the valuation methodologies used for plan assets measured at fair value:

14 unchanged sentences

The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset category:

At September 30, 2020

Quoted Prices in

At September 30, 2021 Quoted Prices in

Active Markets for

Identical Assets

Significant Other

(Level 1) Significant Other

Observable Inputs

(Level 2) Significant

(Level 3) Total

Cash and equivalents $ 1,867 $ — $ — $ 1,867

5 unchanged sentences

Other Securities 2,379 160 — 2,539

Subtotal $ 121,655 $ 27,297 $ 11,286 $ 160,238

Accrued income and plan receivables 285

At September 30, 2019

Quoted Prices in

Total $ 160,523

At September 30, 2020 Quoted Prices in

Active Markets for

Identical Assets

Significant Other

(Level 1) Significant Other

Observable Inputs

(Level 2) Significant

(Level 3) Total

Cash and equivalents $ 600 $ — $ — $ 600

5 unchanged sentences

Other Securities 2,488 163 — 2,651

Subtotal $ 105,929 $ 26,888 $ 9,362 $ 142,179

Accrued income and plan receivables 4,966

Total $ 147,145

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

The following table represents level 3 significant unobservable inputs for the years ended September 30, 2021 and 2020:

6 unchanged sentences

As of September 30, 2021 $ 11,286

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Griffon has an ESOP that covers substantially all domestic employees.

4 unchanged sentences

Dividends paid on shares held in participant accounts are utilized to allocate shares from the aggregate number of shares to be released, equal in value to those dividends, based on the closing price of Griffon common stock on the dividend payment date.

Compensation expense under the ESOP was $ 2,878 in 2020 , $ 2,629 in 2019 and $ 9,532 in 2018, including an impact of $ 2,588 from the April 2018 special dividend.

Compensation expense under the ESOP was $ 3,678 in 2021, $ 2,878 in 2020 and $ 2,629 in 2019.

The cost of the shares held by the ESOP and not yet allocated to employees is reported as a reduction of Shareholders’ Equity.

4 unchanged sentences

Unallocated shares 1,852,492 2,058,187

Total 5,174,847 5,359,635

NOTE 14 – INCOME TAXES

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (“TCJA”), which significantly changed U.S.

The TCJA lowered the Company’s U.S.

statutory federal income tax rate from 35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on previously deferred foreign income.

The TCJA also created a new minimum tax on certain foreign earnings, for which the Company has elected to record as a current period expense when incurred.

The Company computed its income tax expense for the September 30, 2018 fiscal year using a blended Federal Tax Rate of 24.5 % .

The 21% Federal Tax Rate applies to the fiscal year ended September 30, 2019 and each year thereafter.

In accordance with U.S.

GAAP for income taxes, as well as SAB 118, the Company made a reasonable estimate of the impacts of the TCJA for the year ended September 30, 2018 and recorded a $ 20,587 benefit on the revaluation of deferred tax liabilities as a provisional amount for the re-measurement of deferred tax assets and liabilities, as well as an amount for deductible executive compensation expense, both of which have been reflected in the tax provision for 2018.

SAB 118 allows for a measurement period of up to one year from the date of enactment to complete the Company’s accounting for the impacts of the TCJA.

Our analysis under SAB 118 was completed in December 2018 and resulted in no material adjustments to the provision amounts recorded as of September 30, 2018.

Income taxes have been based on the following components of Income before taxes from continuing operations:

For the Years Ended September 30,

2021 2020 2019

Domestic $ 57,059 $ 28,530 $ 23,437

54,120 40,175 22,786

$ 111,179 $ 68,705 $ 46,223

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non US currencies in thousands, except per share data)

The Company recorded a provisional transition tax charge of $ 13,100 net of foreign tax credits for fiscal year 2018.

The Company ultimately incurred a transition tax charge of $ 12,699 .

Under the TCJA, the Company elected to pay the transition tax interest-free over eight years and at September 30, 2020 has $ 8,344 remaining on this liability.

During fiscal 2020, the U.S.

federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, contains numerous income tax provisions.

The Company evaluated the impact of the legislation and determined that while there was an impact on the timing of certain tax payments, there is no material impact on the Company’s consolidated financial statements or related disclosures

Income taxes have been based on the following components of Income before taxes from continuing operations:

For the Years Ended September 30,

Provision (benefit) for income taxes on income was comprised of the following from continuing operations:

For the Years Ended September 30,

2021 2020 2019

Current $ 26,177 $ 24,140 $ 26,218

Deferred 13,763 2,122 ( 5,465 )

Total $ 39,940 $ 26,262 $ 20,753

Federal $ 14,577 $ 7,897 $ 8,973

State and local 7,132 7,223 5,499

18,231 11,142 6,281

Total provision $ 39,940 $ 26,262 $ 20,753

Differences between the effective income tax rate applied to Income and the U.S.

Federal income statutory rate from continuing operations were as follows:

Differences between the effective income tax rate applied to Income before taxes from continuing operations and the U.S.

Federal income statutory rate were as follows:

For the Years Ended September 30,

Federal income tax provision (benefit) rate

2021 2020 2019

Federal income tax provision rate 21.0 % 21.0 % 21.0 %

State and local taxes, net of Federal benefit 4.7 % 7.8 % 9.1 %

1 unchanged sentence

Change in tax contingency reserves 0.2 % 0.2 % ( 1.1 ) %

Impact of federal rate change on deferred tax balances

Impact of foreign rate change on deferred tax balances 2.8 % — % — %

Tax Reform-Repatriation of Foreign Earnings and GILTI 0.4 % 0.3 % 1.6 %

5 unchanged sentences

Share based compensation ( 2.0 ) % — % 0.6 %

Other 1.1 % ( 0.8 ) % ( 2.1 ) %

Effective tax provision (benefit) rate 35.9 % 38.2 % 44.9 %

13 unchanged sentences

Net operating loss 10,706 9,618

Tax credits 7,198 7,031

Capital loss carryback 2,533 2,205

Other reserves and accruals 7,474 6,094

102,464 111,646

Valuation allowance ( 10,425 ) ( 9,824 )

4 unchanged sentences

Right-of-use assets ( 38,511 ) ( 41,747 )

Other ( 1,232 ) ( 634 )

Total deferred tax liabilities ( 140,145 ) ( 134,604 )

Net deferred tax liabilities $ ( 48,106 ) $ ( 32,782 )

During the year ended September 30, 2020, the Company adopted ASU 2016-02 relating to Leases (Topic 842).

Deferred tax assets and liabilities were recorded relating to the lease liabilities and the right of use assets recognized under this new standard.

The Company adopted this update under the modified retrospective approach which required no adjustment to a prior period.

At September 30, 2020 the corresponding deferred tax asset and liabilities were $ 43,045 and $ 41,747 , respectively.

In 2020, the decrease in the valuation allowance of $ 999 is primarily the result of the expiration of foreign tax credits, partially offset by the generation and usage or non-usage of foreign tax credit generated during the year.

The components of the net deferred tax liability, by balance sheet account, were as follows:

At September 30,

Other assets $ 323 $ 614

Other liabilities ( 49,289 ) ( 34,356 )

1 unchanged sentence

Net deferred liability $ ( 48,106 ) $ ( 32,782 )

In 2021, the increase in the valuation allowance of $ 601 is primarily the result of foreign net operating losses and generation of state tax credits which will not be recognized, partially offset by the expiration of foreign tax credits during the year.

In 2020, the decrease in valuation allowance of $ 999 is primarily due to the expiration of foreign tax credits during the year.

At both September 30, 2021 and 2020, Griffon has a policy election to indefinitely reinvest the undistributed earnings of foreign subsidiaries with operations outside the U.S.

4 unchanged sentences

from the foreign entities.

In the event these earnings are later remitted to the U.S., any estimated withholding tax on remittance of those earnings is expected to be immaterial to the income tax provision.

The Company continues to reinvest the undistributed earnings of its foreign subsidiaries and may be subject to additional foreign withholding taxes and U.S.

state income taxes if it reverses its indefinite reinvestment assertion in the future.

Outside basis differences were impractical to account for at this time and are currently considered as being permanent in duration.

GRIFFON CORPORATION

4 unchanged sentences

tax purposes.

At September 30, 2019 , Griffon had loss carryforwards for U.S.

and non-U.S tax purposes of $ 5,419 and $ 7,413 , respectively.

loss carryforwards are available for carryforward indefinitely.

At September 30, 2020 and 2019 , Griffon had interest expense carryforwards of $ 0 and $ 25,000 , respectively.

The interest expense carryforward was utilized in September 30, 2020.

At September 30, 2020, Griffon had no loss carryforwards for U.S.

tax purposes and $ 9,671 for non-U.S.

tax purposes.

loss carryforwards expire in varying amounts beginning in 2027 to indefinite carryfoward.

At September 30, 2021 and 2020, Griffon had state and local loss carryforwards of $ 139,894 and $ 124,191 , respectively, which expire in varying amounts through 2040.

1 unchanged sentence

At September 30, 2021 and 2020, Griffon had capital loss carryovers for U.S.

tax purposes of $ 10,500 and $ 9,524 , respectively, generated in the September 30, 2019 tax year.

The carryover is available for three-year carryback or five-year carryforward.

tax purposes of $ 10,327 and $ 10,500 , respectively, which expire in varying amounts through 2026.

The losses were generated in September 30, 2021 and September 30, 2019 tax years.

The carryovers are available for three-year carryback or five-year carryforward periods.

We believe it is more likely than not that the benefit from certain federal and state tax attributes will not be realized.

16 unchanged sentences

Additions based on tax positions related to prior years 20

Reductions based on tax positions related to prior years ( 3 )

Lapse of Statutes ( 23 )

2 unchanged sentences

Additions based on tax positions related to prior years 24

Reductions based on tax positions related to prior years

Lapse of Statutes ( 7 )

Settlements —

Balance at September 30, 2021 $ 4,377

9 unchanged sentences

During 2021, 2020 and 2019, the Company declared and paid cash dividends totaling $ 0.32 per share, $ 0.30 per share and $ 0.29 per share, respectively.

In addition, on March 7, 2018, the Board of Directors declared a special cash dividend of $ 1.00 per share, totaling $ 38,073 and paid on April 16, 2018 to shareholders of record as of the close of business on March 29, 2018.

The Company currently intends to pay dividends each quarter;

19 unchanged sentences

As of September 30, 2021, 488,376 shares were available for grant.

Compensation expense for restricted stock and restricted stock units ("RSUs") is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares (or RSUs) granted multiplied by the stock price on date of grant, and for performance shares (or performance RSUs), the likelihood of achieving the performance criteria.

Compensation expense for restricted stock, including restricted stock units, is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares or units granted multiplied by the stock price on date of grant, and for performance shares, including performance units, the likelihood of achieving the performance criteria.

The Company recognizes forfeitures as they occur.

Compensation expense for restricted stock granted to two senior executives is calculated as the maximum number of shares granted, upon achieving certain performance criteria, multiplied by the stock price as valued by a Monte Carlo Simulation Model.

2 unchanged sentences

For the Years Ended September 30,

2021 2020 2019

Restricted stock $ 16,410 $ 14,702 $ 13,285

ESOP 3,678 2,878 2,629

Total stock based compensation $ 20,088 $ 17,580 $ 15,914

2 unchanged sentences

(US dollars and non-US currencies in thousands, except per share data)

In 2018, the ESOP compensation expense includes dividends paid on allocated shares in connection with the special cash dividend as mentioned above, of $ 1.00 per share paid on April 16, 2018 to shareholders of record as of the close of business on March 29, 2018.

A summary of restricted stock activity, inclusive of restricted stock units, for 2021 is as follows:

Weighted Average

Shares Weighted Average

Grant- Date Fair Value

Unvested at September 30, 2020 3,685,590 $ 14.30

Granted 1,287,330 19.61

Vested ( 498,333 ) 21.33

Forfeited ( 608,534 ) 16.40

Unvested at September 30, 2021 3,866,053 15.32

2 unchanged sentences

At September 30, 2021, a total of approximately 4,354,429 shares of Griffon’s authorized Common Stock were reserved for issuance in connection with stock compensation plans.

During 2020, Griffon granted 1,061,624 shares of restricted stock and restricted stock units.

This included 348,280 shares of restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of approximately three years , with a total fair value of $ 7,446 , or a weighted average fair value of $ 21.38 per share.

This also included 53,344 of restricted shares granted to non-employee directors of Griffon with a vesting period of three years and a fair value of $ 1,170 , or a weighted average fair value of $ 21.93 per share.

Furthermore, this included 660,000 shares of restricted stock granted to two senior executives with a vesting period of four years and a two year post-vesting holding period, subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon's common stock.

During 2021, Griffon granted 1,242,906 shares of restricted stock and restricted stock units to its employees.

This included 226,811 restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of three years , with a total fair value of $ 5,500 , or a weighted average fair value of $ 24.25 per share.

Furthermore, this included 488,095 restricted stock awards granted to six executives, with vesting periods ranging from 34 months to 60 months, with a total fair value of $ 10,836 , or a weighted average fair value of $ 22.20 per share.

This also included 528,000 shares of restricted stock granted to two senior executives with a vesting period of four years and a two year post-vesting holding period, subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon's common stock.

So long as the minimum performance condition is attained, the amount of shares that can vest will range from 384,000 to 528,000 .

The Monte Carlo Simulation model was chosen to value the two senior executive awards;

The total fair value of these restricted shares using the Monte Carlo Simulation model is approximately $ 9,534 , or a weighted average fair value of $ 14.45 .

The total fair value of these restricted shares using the Monte Carlo Simulation model is approximately $ 7,824 , or a weighted average fair value of $ 14.82 per share.

Additionally, Griffon granted 44,424 restricted shares to the non-employee directors of Griffon with a vesting period of three years and a fair value of $ 1,080 , or a weighted average fair value of $ 24.31 per share.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase of up to $ 50,000 of Griffon’s outstanding common stock.

5 unchanged sentences

Furthermore, during 2021, an additional 6,507 shares, with a market value of $ 135 , or $ 20.75 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

On June 19, 2018, GS Direct, L.L.C., an affiliate of Goldman Sachs & Co.

("GS Direct") completed an underwritten secondary offering to sell 5,583,375 shares of Griffon's common stock, inclusive of the underwriters’ 30-day option to purchase additional shares.

GS Direct’s original 10,000,000 share investment was in 2008;

following the closing of the offering, GS Direct no longer owns any shares of Griffon.

GRIFFON CORPORATION

2 unchanged sentences

NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES

Griffon rents real property and equipment under operating leases expiring at various dates.

Most of the real property leases have escalation clauses related to increases in real property taxes.

Additionally, two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala, Florida.

The leases mature in 2021 and 2025, respectively.

The Ocala, Florida lease contains two five-year renewal options.

Griffon also has various finance equipment leases.

Refer to Note 22 - Leases for further information.

Aggregate future maturities of lease payments for operating leases and finance leases as of September 30, 2020 are as follows (in thousands):

Operating Leases

Finance Leases

Total lease payments

Imputed Interest

Present value of lease liabilities

Purchase Commitments

3 unchanged sentences

Amounts purchased under such commitments were $ 235,148 , $ 142,044 and $ 143,523 for the years ended September 30, 2021, 2020 and 2019, respectively.

Purchase obligations that extend beyond 2020 are principally related to long-term contracts received from customers of Telephonics.

Aggregate future minimum purchase obligations at September 30, 2021 are $ 255,661 in 2021, $ 38,581 in 2022, $ 0 in 2023, $ 0 in 2024 and $ 0 in 2025.

1 unchanged sentence

Peekskill Site.

Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at a location in the Town of Cortlandt, New York, just outside the city of Peekskill, New York (the “Peekskill Site”) owned by ISC Properties, Inc.

(“ISCP”), a wholly-owned subsidiary of Griffon.

(“ISCP”), a wholly-owned subsidiary of Griffon, for approximately three years.

ISCP sold the Peekskill Site in November 1982.

Subsequently, ISCP was advised by the Department of Environmental Conservation of New York State (the "DEC") that sampling at the Peekskill Site and in a creek near the Peekskill Site indicated concentrations of solvents and other chemicals common to prior plating operations by a Lightron subsidiary.

In 1996, ISCP entered into a consent order with the DEC (the “Consent Order”), pursuant to which ISCP was required to perform a remedial investigation and prepare a feasibility study (the “Feasibility Study”).

After completing the initial remedial investigation, ISCP conducted supplemental remedial investigations over the next several years, including soil vapor investigations, as required by the Consent Order.

In April 2009, the DEC advised ISCP that both the DEC and the New York State Department of Health had reviewed and accepted an August 2007 Remedial Investigation Report and an Additional Data Collection Summary Report dated January 30, 2009.

ISCP submitted to the DEC a draft Feasibility Study which was accepted and approved by the DEC in February 2011.

ISCP satisfied its obligations under the Consent Order when DEC approved the Remedial Investigation and Feasibility Study for the Peekskill Site.

In June 2011 the DEC issued a Record of Decision that set forth a Remedial Action Plan for the Peekskill Site that identified the specific remedies selected and responded to public comments.

The cost of the remedy proposed by DEC in its Remedial Action Plan was approximately $ 10,000 .

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Following issuance of the Remedial Action Plan, the DEC implemented a portion of its plan, and also performed additional investigation for the presence of metals in soils and sediments downstream from the Peekskill Site.

During this investigation metals were found to be present in sediments further downstream from the Peekskill site than previously detected.

In August 2018, the DEC sent a letter to the United States Environmental Protection Agency (the “EPA”), in which the DEC requested that the Peekskill Site be nominated by the EPA for inclusion on the National Priorities List under CERCLA (the “NPL”).

Based on the DEC’s request and an analysis by a consultant retained by the EPA, on May 15, 2019 the EPA added the Peekskill Site to the NPL and has since announced that it is performing a Remedial Investigation/Feasibility Study.

On August 25, 2020, the EPA send a letter to several parties, including Lightron and ISCP, requesting that each such party inform the EPA as to whether it would be willing to enter into discussions regarding implementation of a Remedial Investigation/Feasibility Study (“RI/FS”).

The EPA also sent a request for information to each party under Section 104(e) of CERCLA.

On May 15, 2019 the United States Environmental Protection Agency ("EPA") added the Peekskill Site to the National Priorities List under CERCLA and has since announced that it is performing a Remedial Investigation/Feasibility Study ("RI/FS").

On August 25, 2020, the EPA sent a letter to several parties, including Lightron and ISCP, requesting that each such party inform the EPA as to whether it would be willing to enter into discussions regarding implementation of the RI/FS.

The EPA also sent a request for information under Section 104(e) of CERCLA to each party.

Lightron and ISCP have informed the EPA that they are willing to participate in discussions regarding implementation of the RI/FS.

6 unchanged sentences

Griffon does not acknowledge any responsibility to perform any investigation or remediation at the Peekskill Site.

One of Griffon’s insurers is defending Lightron, ISCP and Griffon subject to a reservation of rights.

Union Fork and Hoe, Frankfort, NY site.

The former Union Fork and Hoe property in Frankfort NY was acquired by AMES in 2006 as part of a larger acquisition, and has historic site contamination involving chlorinated solvents, petroleum hydrocarbons and metals.

The former Union Fork and Hoe property in Frankfort, New York was acquired by AMES in 2006 as part of a larger acquisition, and has historic site contamination involving chlorinated solvents, petroleum hydrocarbons and metals.

AMES entered into an Order on Consent with the New York State Department of Environmental Conservation (“DEC”).

While the Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site, the Order required AMES to perform a remedial investigation of certain portions of the property and to recommend a remediation option.

In 2018, Ames submitted a Feasibility Study recommending excavation of shallow soils for lead, arsenic and hydrocarbons in addition to deeper excavation for lead.

DEC approved the selection of this remedy in 2019 by issuing a Record of Decision (“ROD”).

Beginning in late 2019 and through June 2020, Ames completed the remediation required by the ROD and filed a Construction Completion Report, a Site Management Plan and an environmental easement with the DEC.

While Ames was implementing the remediation required by the ROD, the DEC requested additional investigation of a small area on the site and of an area adjacent to the site perimeter.

Ames investigated the on-site area and has submitted a workplan to remediate the limited contamination found as a result of this investigation.

Ames has also submitted a workplan to investigate the areas adjacent to the site perimeter.

AMES has a number of defenses to liability in this matter, including its rights under a previous Consent Judgment entered into between the DEC and a predecessor of AMES relating to the site.

In 2011, remediation of chlorinated solvents in the groundwater was completed to the satisfaction of DEC.

In June 2020, AMES completed the remediation required by the Record of Decision issued by DEC in 2019 ("ROD") and filed a Construction Completion Report, a Site Management Plan and an environmental easement with DEC.

While AMES was implementing the remediation required by the ROD, DEC requested additional investigation of a small area on the site and of an area adjacent to the site perimeter.

AMES investigated the on-site area and has completed remediation of that small area under a workplan approved by DEC.

AMES also completed a workplan approved by DEC to investigate the areas adjacent to the site perimeter.

AMES has a number of defenses to liability in this matter, including its rights under a previous Consent Judgment entered into between DEC and a predecessor of AMES relating to the site.

AMES’ insurer has accepted AMES’ claim for a substantial portion of the costs incurred and to be incurred for both the on-site and off-site activities.

Government investigations and claims

Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit and review by various agencies and instrumentalities of the United States government, including among others, the Defense Contract Audit Agency, the Defense Criminal Investigative Service, and the Department of Justice which has responsibility for asserting claims on behalf of the U.S.

In general, departments and agencies of the U.S.

Government have the authority to investigate various transactions and operations of Griffon, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages.

Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S.

Government contracts or the loss of export privileges for a company or an operating division or subdivision.

Suspension or debarment could have a material adverse effect on Telephonics because of its reliance on government contracts.

GRIFFON CORPORATION

10 unchanged sentences

The following table is a reconciliation of the share amounts (in thousands) used in computing basic and diluted EPS for 2021, 2020 and 2019:

2021 2020 2019

Common shares outstanding 56,613 56,130 46,806

7 unchanged sentences

Shares of the ESOP that have been allocated to employee accounts are treated as outstanding in determining earnings per share.

NOTE 17 – RELATED PARTIES

On September 5, 2017, Griffon entered into an engagement letter with Goldman Sachs & Co.

("Goldman Sachs") pursuant to which Goldman Sachs agreed to act as Griffon’s financial advisor in connection with the exploration of strategic alternatives for Plastics.

On November 15, 2017, Griffon signed an agreement to sell Plastics for approximately $ 465,000 to Berry.

Under the terms of the engagement letter, upon the closing of the transaction a customary advisory fee was paid by Griffon to Goldman Sachs.

Goldman Sachs acted as a joint lead manager and as an initial purchaser in connection with Griffon’s add-on offering of $ 275,000 aggregate principal amount of 5.25 % senior notes due 2022 that closed on October 2, 2017, and received a customary fee upon closing of the offering.

On June 19, 2018, GS Direct completed an underwritten secondary offering to sell 5,583,375 shares of Griffon's common stock, inclusive of the underwriters' 30-day option to purchase additional shares.

GS Direct's initial 10,000,000 share investment was in 2008;

following the closing of the offering, GS Direct no longer owns any shares of Griffon.

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

NOTE 18 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly results of continuing operations for 2020 and 2019 were as follows:

Quarter ended

Income from continuing operations

December 31, 2019

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2018

March 31, 2019

June 30, 2019

September 30, 2019

Notes to Quarterly Financial Information (unaudited):

Earnings (loss) per share are computed independently for each quarter and year presented;

as such the sum of the quarters may not be equal to the full year amounts.

2020 Net income, and the related per share earnings, included, net of tax, restructuring charges of $ 4,148 , $ 3,005 , $ 1,224 and $ 3,488 for the first, second, third and fourth quarters, respectively, acquisition costs of $ 2,321 for the second quarter, loss from debt extinguishment $ 5,245 and $ 969 for the second and third quarters, respectively, benefit from the reversal of contingent consideration related to the Kelkay acquisition of $ 1,403 for the fourth quarter.

The fourth quarter also includes a $ 15 and $ 24 tax benefit for acquisition costs and loss from debt extinguishment, respectively.

2019 Net income, and the related per share earnings, included, net of tax, a benefit from the reversal of contingent consideration related to the Kelkay acquisition of $ 1,333 for the fourth quarter.

NOTE 18 — REPORTABLE SEGMENTS

Griffon conducts its operations through three reportable segments from continuing operations, as follows:

Griffon conducts its operations through two reportable segments, as follows:

• Consumer and Professional Products ("CPP") conducts its operations through AMES.

5 unchanged sentences

Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the CornellCookson brand.

Defense Electronics conducts its operations through 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.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

On September 27, 2021, Griffon announced it is exploring strategic alternatives, including a sale, for its Defense Electronics segment, which conducts its operations through Telephonics Corporation ("Telephonics").

Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless specifically noted.

Telephonics, founded in 1933, is a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions that are deployed across a wide range of land, sea and air applications.

Telephonics designs, develops, manufactures and provides logistical support and lifecycle sustainment services to defense, aerospace and commercial customers worldwide.

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

For the Years Ended September 30,

REVENUE 2021 2020 2019

Consumer and Professional Products $ 1,229,518 $ 1,139,233 $ 1,000,608

1 unchanged sentence

Defense Electronics 271,060 340,976 $ 335,041

Total consolidated net sales

Subtotal $ 2,541,686 $ 2,407,522 $ 2,209,289

Defense Electronics ( 271,060 ) ( 340,976 ) ( 335,041 )

Total revenue $ 2,270,626 $ 2,066,546 $ 1,874,248

Griffon evaluates performance and allocates resources based on each segment's operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (primarily 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”).

The following table provides a reconciliation of Segment Adjusted EBITDA to Income before taxes and discontinued operations:

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

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

For the Years Ended September 30,

2021 2020 2019

Segment Adjusted EBITDA:

2 unchanged sentences

Defense Electronics 20,486 25,228 35,104

Subtotal 317,174 282,912 245,942

Defense Electronics ( 20,486 ) ( 25,228 ) ( 35,104 )

Segment Adjusted EBITDA 296,688 257,684 210,838

7 unchanged sentences

Acquisition costs — ( 2,960 ) —

Special dividend charges

Cost of life insurance benefit

Secondary equity offering costs

Income before taxes from continuing operations $ 111,179 $ 68,705 $ 46,223

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

For the Years Ended September 30,

3 unchanged sentences

Defense Electronics 10,762 10,645 10,667

Subtotal 62,565 61,794 61,290

Defense Electronics ( 10,762 ) ( 10,645 ) ( 10,667 )

Total segment depreciation and amortization 51,803 51,149 50,623

Corporate 499 951 894

Total consolidated depreciation and amortization $ 52,302 $ 52,100 $ 51,517

3 unchanged sentences

Defense Electronics 10,343 7,830 10,492

Subtotal 47,256 48,650 44,818

Defense Electronics ( 10,343 ) ( 7,830 ) ( 10,492 )

Total segment 36,913 40,820 34,326

Corporate 38 348 543

Total consolidated capital expenditures $ 36,951 $ 41,168 $ 34,869

At September 30, 2020

At September 30, 2019

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

ASSETS At September 30, 2021 At September 30, 2020

Segment assets:

1 unchanged sentence

Home and Building Products 666,422 606,785

Defense Electronics

Total segment assets 2,044,040 1,861,912

Corporate 283,202 252,506

Total continuing assets 2,327,242 2,114,418

Assets of discontinued operations

Discontinued operations - held for sale 273,414 325,678

Other discontinued operations 4,029 8,497

Consolidated total $ 2,604,685 $ 2,448,593

4 unchanged sentences

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.

For the Year Ended September 30, 2020

For the Year Ended September 30, 2019

For the Year Ended September 30, 2021 For the Year Ended September 30, 2020 For the Year Ended September 30, 2019

Residential repair and remodel $ 185,896 $ 173,859 $ 140,369

Retail 577,839 575,947 528,279

Residential new construction 50,437 59,907 58,709

Industrial 43,411 40,285 45,129

International excluding North America 371,935 289,235 228,122

4 unchanged sentences

Total Home and Building Products 1,041,108 927,313 873,640

International

Total Defense Electronics

Total Consolidated Revenue

Total Revenue $ 2,270,626 $ 2,066,546 $ 1,874,248

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

For the Year Ended September 30, 2021

Revenue by Geographic Area - Destination

Consumer and Professional Products

Home and Building Products

Defense Electronics

Revenue by Geographic Area - Destination Consumer and Professional Products Home and Building Products Total

United States $ 766,150 $ 986,925 $ 1,753,075

Europe 123,607 72 123,679

Canada 85,676 44,661 130,337

Australia 244,674 — 244,674

All other countries 9,411 9,450 18,861

Consolidated revenue

Total Revenue $ 1,229,518 $ 1,041,108 $ 2,270,626

For the Year Ended September 30, 2020

Revenue by Geographic Area - Destination

Consumer and Professional Products

Home and Building Products

Defense Electronics

Revenue by Geographic Area - Destination Consumer and Professional Products Home and Building Products Total

United States $ 769,100 $ 877,115 $ 1,646,215

Europe 85,339 130 85,469

Canada 74,072 38,662 112,734

Australia 203,012 — 203,012

All other countries 7,710 11,406 19,116

Consolidated revenue

As a percentage of segment revenue, CPP sales to The Home Depot approximated 27 % , 28 % and 29 % in 2020 , 2019 and 2018 , respectively;

HBP sales to The Home Depot approximated 12 % , 13 % and 16 % in 2020 , 2019 and 2018 , respectively;

Total Revenue $ 1,139,233 $ 927,313 $ 2,066,546

GRIFFON CORPORATION

1 unchanged sentence

(US dollars and non-US currencies in thousands, except per share data)

aggregate sales to the United States Government and its agencies approximated 69 % , 63 % and 62 % in 2020 , 2019 and 2018 , respectively.

As a percentage of Griffon's consolidated revenue from continuing operations, CPP sales to The Home Depot approximated 13 % , in both 2020 and 2019, and 14 % in 2018;

HBP sales to The Home Depot approximated 5 % in both 2020 and 2019, and 6 % in 2018;

and DE aggregate sales to the United States Government and its agencies approximated 9 % in 2020, and 10 % in both 2019 and 2018.

For the Year Ended September 30, 2019

Revenue by Geographic Area - Destination Consumer and Professional Products Home and Building Products Total

United States $ 690,772 $ 820,396 $ 1,511,168

Europe 63,284 109 63,393

Canada 72,327 39,472 111,799

Australia 165,291 16 165,307

All other countries 8,934 13,647 22,581

Total Revenue $ 1,000,608 $ 873,640 $ 1,874,248

As a percentage of segment revenue, CPP sales to The Home Depot approximated 26 %, 27 % and 28 % in 2021, 2020 and 2019, respectively;

HBP sales to The Home Depot approximated 10 %, 12 % and 13 % in 2021, 2020 and 2019, respectively.

As a percentage of Griffon's consolidated revenue, CPP sales to The Home Depot approximated 14 % in 2021, and approximated 13 % in both 2020 and 2019;

HBP sales to The Home Depot approximated 5 % in 2021, 2020 and 2019.

NOTE 19 – OTHER INCOME (EXPENSE)

For the year ended September 30, 2021, 2020 and 2019, Other income (expense) from continuing operations of $ 3,331 , $ 2,885 and $ 5,230 , respectively, includes $ 81 , $ 915 and $ 438 , respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $ 283 , $ 184 and $( 40 ), respectively, of net gains or (losses) on investments, and $ 907 and $ 1,559 and $ 3,148 , respectively, of net periodic benefit plan income.

Additionally, in 2020 , Other income (expense) also includes a one-time technology recognition award for $ 700 .

Other income (expense) also includes rental income of $ 1,848 in 2021, 2020 and 2019.

NOTE 20 - OTHER COMPREHENSIVE INCOME (LOSS)

1 unchanged sentence

Years Ended September 30,

2021 2020 2019

Pre-tax Tax Net of tax Pre-tax Tax Net of tax Pre-tax Tax Net of tax

Foreign currency translation adjustments $ 6,433 $ — $ 6,433 $ 5,601 $ — $ 5,601 $ ( 8,460 ) $ — $ ( 8,460 )

7 unchanged sentences

Cash flow hedge 2,075 189

Total $ ( 45,977 ) $ ( 72,092 )

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

Total comprehensive income (loss) were as follows:

For the Years Ended September 30,

2021 2020 2019

Net income $ 79,211 $ 53,429 $ 37,287

Other comprehensive income (loss), net of taxes 26,115 ( 6,176 ) ( 31,804 )

Comprehensive income (loss) $ 105,326 $ 47,253 $ 5,483

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Amounts reclassified from accumulated other comprehensive income (loss) to income (loss) were as follows:

For the Years Ended September 30,

Gain (Loss) 2021 2020 2019

Pension amortization $ ( 6,292 ) $ ( 4,182 ) $ ( 902 )

1 unchanged sentence

Total before tax ( 8,496 ) ( 6,345 ) 459

Tax 1,784 1,332 ( 96 )

Net of tax $ ( 6,712 ) $ ( 5,013 ) $ 363

NOTE 21 — LEASES

2 unchanged sentences

As a result, upon adoption, we have recognized ROU assets of $ 163,552 and lease liabilities of $ 163,676 associated with our operating leases.

As a result, upon adoption, we recognized ROU assets of $ 163,552 and lease liabilities of $ 163,676 associated with our operating leases.

The standard had no material impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

4 unchanged sentences

Finance leases are included in property, plant, and equipment, net, other accrued liabilities, and other non-current liabilities.

The Company's finance leases are immaterial.

ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment.

17 unchanged sentences

Components of operating lease costs are as follows:

For the Year Ended September 30, 2020

For the Year Ended

September 30, 2021 September 30, 2020

$ 38,362 $ 36,155

Variable (a), (b)

Short-term (b)

Total $ 50,145 $ 48,803

(a) Primarily related to common-area maintenance and property taxes.

(b) Not recorded on the balance sheet.

Fixed rent expense for all operating leases totaled approximately $ 37,068 and $ 35,726 in 2019 and 2018, respectively.

Fixed rent expense for all operating leases totaled approximately $ 34,816 in 2019.

Supplemental cash flow information were as follows:

For the Year Ended September 30, 2020

For the Year Ended

September 30, 2021 September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Financing cash flows from finance leases 3,815 4,122

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Total $ 47,259 $ 52,263

Supplemental Condensed Consolidated Balance Sheet information related to leases were as follows:

At September 30, 2020

At September 30, 2021 At September 30, 2020

Operating Leases:

8 unchanged sentences

Property, plant and equipment, net (1)

$ 16,466 $ 18,774

Lease Liabilities:

2 unchanged sentences

Total financing lease liabilities $ 16,467 $ 18,691

(1) Finance lease assets are recorded net of accumulated depreciation of $ 2,383 .

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non-US currencies in thousands, except per share data)

(1) For the years ended September 30, 2021 and 2020, finance lease assets are recorded net of accumulated depreciation of $ 6,136 and $ 2,383 , respectively.

Two Griffon subsidiaries have finance leases outstanding for real estate located in Troy, Ohio and Ocala, Florida.

The leases mature in 2021 and 2025, respectively, and bear interest at fixed rates of approximately 5.0 % and 5.6 % , respectively.

The Troy, Ohio lease is secured by a mortgage on the real estate and is guaranteed by Griffon.

The leases mature in November 2021 and 2025, respectively, and bear interest at fixed rates of approximately 5.0 % and 5.6 %, respectively.

The Troy, Ohio lease is secured by a mortgage on the real estate, which is guaranteed by Griffon, and has a one dollar buyout at the end of the lease.

The Ocala, Florida lease contains two five -year renewal options.

1 unchanged sentence

The remaining lease liability balance relates to finance equipment leases.

Finance leases included in the consolidated balance sheet at September 30, 2019 , under Property, plant and equipment, net totaled $ 6,546 .

In 2019 and 2018, Depreciation expense was $ 3,967 , and $ 3,514 , respectively.

The aggregate future maturities of lease payments for operating leases and finance leases as of September 30, 2021 are as follows (in thousands):

Operating Leases

Finance Leases

Operating Leases Finance Leases

2022 $ 36,109 $ 3,174

2023 28,715 2,850

2024 21,545 2,281

2025 19,274 2,119

2026 13,165 2,106

2027 63,921 7,777

Total lease payments 182,729 20,307

1 unchanged sentence

Present value of lease liabilities $ 149,196 $ 16,467

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

Average lease terms and discount rates were as follows:

September 30, 2020

September 30, 2021 September 30, 2020

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance Leases 5.48 % 5.51 %

NOTE 23 – CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, by Clopay Corporation, Telephonics Corporation, The AMES Companies, Inc., ATT Southern LLC, Clopay Ames Holding Corp., ClosetMaid, LLC, CornellCookson, LLC and Cornell Real Estate Holdings, LLC.

all of which are indirectly 100 % owned by Griffon.

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are condensed consolidating financial information as of September 30, 2020 and 2019, and for the years ended September 30, 2020 , 2019 and 2018.

The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities.

The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly owned subsidiaries accounted for under the equity method.

The indenture relating to the Senior Notes (the “Indenture”) contain terms providing that, under certain limited circumstances, a guarantor will be released from its obligations to guarantee the Senior Notes.

These circumstances include (i) a sale of at least a majority of the stock, or all or substantially all the assets, of the subsidiary guarantor as permitted by the Indenture;

(ii) a public equity offering of a subsidiary guarantor that qualifies as a “Minority Business” as defined in the Indenture (generally, a business the EBITDA of which constitutes less than 50% of the segment adjusted EBITDA of the Company for the most recently ended four fiscal quarters), and that meets certain other specified conditions as set forth in the Indenture;

(iii) the designation of a guarantor as an “unrestricted subsidiary” as defined in the Indenture, in compliance with the terms of the Indenture;

(iv) Griffon exercising its right to defease the Senior Notes, or to otherwise discharge its obligations under the Indenture, in each case in accordance with the terms of the Indenture;

and (v) upon obtaining the requisite consent of the holders of the Senior Notes.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS

At September 30, 2020

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

CURRENT ASSETS

Cash and equivalents

Accounts receivable, net of allowances

Contract assets, net of progress payments

Prepaid and other current assets

Assets of discontinued operations

Total Current Assets

PROPERTY, PLANT AND EQUIPMENT, net

OPERATING LEASE RIGHT-OF-USE ASSETS

INTANGIBLE ASSETS, net

INTERCOMPANY RECEIVABLE

EQUITY INVESTMENTS IN SUBSIDIARIES

ASSETS OF DISCONTINUED OPERATIONS

CURRENT LIABILITIES

Notes payable and current portion of long-term debt

Accounts payable and accrued liabilities

Current portion of operating lease liabilities

Liabilities of discontinued operations

Total Current Liabilities

LONG-TERM DEBT, net

LONG-TERM OPERATING LEASE LIABILITIES

INTERCOMPANY PAYABLES

OTHER LIABILITIES

LIABILITIES OF DISCONTINUED OPERATIONS

Total Liabilities

SHAREHOLDERS’ EQUITY

Total Liabilities and Shareholders’ Equity

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS

At September 30, 2019

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

CURRENT ASSETS

Cash and equivalents

Accounts receivable, net of allowances

Contract assets, net of progress payments

Inventories, net

Prepaid and other current assets

Assets of discontinued operations

Total Current Assets

PROPERTY, PLANT AND EQUIPMENT, net

INTANGIBLE ASSETS, net

INTERCOMPANY RECEIVABLE

EQUITY INVESTMENTS IN SUBSIDIARIES

ASSETS OF DISCONTINUED OPERATIONS

CURRENT LIABILITIES

Notes payable and current portion of long-term debt

Accounts payable and accrued liabilities

Liabilities of discontinued operations

Total Current Liabilities

LONG-TERM DEBT, net

INTERCOMPANY PAYABLES

OTHER LIABILITIES

LIABILITIES OF DISCONTINUED OPERATIONS

Total Liabilities

SHAREHOLDERS’ EQUITY

Total Liabilities and Shareholders’ Equity

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Year Ended September 30, 2020

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

Cost of goods and services

Selling, general and administrative expenses

Income (loss) from operations

Other income (expense)

Interest income (expense), net

Loss on extinguishment of debt

Total other income (expense)

Income (loss) before taxes

Provision (benefit) for income taxes

Income (loss) before equity in net income of subsidiaries

Equity in net income (loss) of subsidiaries

Net income (loss)

Comprehensive income (loss)

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Year Ended September 30, 2019

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

Cost of goods and services

Selling, general and administrative expenses

Income (loss) from operations

Other income (expense)

Interest income (expense), net

Total other income (expense)

Income (loss) before taxes

Provision (benefit) for income taxes

Income (loss) before equity in net income of subsidiaries

Equity in net income (loss) of subsidiaries

Income (loss) from continuing operations

Income (loss) from operations of discontinued businesses

Provision (benefit) from income taxes

Income (loss) from discontinued operations

Net Income (loss)

Comprehensive income (loss)

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Year Ended September 30, 2018

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

Cost of goods and services

Selling, general and administrative expenses

Income (loss) from operations

Other income (expense)

Interest income (expense), net

Total other income (expense)

Income (loss) before taxes from continuing operations

Provision (benefit) for income taxes

Income (loss) before equity in net income of subsidiaries

Equity in net income (loss) of subsidiaries

Income (loss) from continuing operations

Income from operations of discontinued businesses

Provision (benefit) from income taxes

Loss from discontinued operations

Net income (loss)

Comprehensive income (loss)

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year Ended September 30, 2020

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment

Acquired business, net of cash acquired

Proceeds from sale of assets

Investment purchases

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

Purchase of shares for treasury

Proceeds from long-term debt

Payments of long-term debt

Financing costs

Acquisition costs

Dividends paid

Net cash provided by (used in) financing activities

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in discontinued operations

Effect of exchange rate changes on cash and equivalents

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND EQUIVALENTS AT END OF PERIOD

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year Ended September 30, 2019

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Net (income) loss from discontinued operations

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment

Acquired business, net of cash acquired

Proceeds from sale of business

Insurance payments

Proceeds from sale of assets

Investment purchases

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of shares for treasury

Proceeds from long-term debt

Payments of long-term debt

Change in short-term borrowings

Financing costs

Contingent consideration for acquired businesses

Dividends paid

Net cash provided by (used in) financing activities

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in discontinued operations

Effect of exchange rate changes on cash and equivalents

NET INCREASE IN CASH AND EQUIVALENTS

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND EQUIVALENTS AT END OF PERIOD

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year Ended September 30, 2018

Parent Company

Guarantor Companies

Non-Guarantor Companies

Consolidation

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Net income (loss) from discontinued operations

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment

Acquired business, net of cash acquired

Proceeds from sale of business

Insurance proceeds

Proceeds from sale of property, plant and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of shares for treasury

Proceeds from long-term debt

Payments of long-term debt

Change in short-term borrowings

Financing costs

Purchase of ESOP shares

Dividends paid

Net cash provided by (used in) financing activities

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash provided by (used in) discontinued operations

Effect of exchange rate changes on cash and equivalents

NET DECREASE IN CASH AND EQUIVALENTS

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND EQUIVALENTS AT END OF PERIOD

NOTE 22 – SUBSEQUENT EVENTS

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(US dollars and non US currencies in thousands, except per share data)

On November 15, 2021, the Board of Directors declared a cash dividend of $ 0.09 per share, payable on December 16, 2021 to shareholders of record as of the close of business on November 29, 2021.

5 unchanged sentences

(in thousands)

Description Balance at

Year Additions Reductions Other Balance at

FOR THE YEAR ENDED SEPTEMBER 30, 2021

Allowance for Doubtful Accounts $ 8,178 $ 795 $ ( 393 ) $ 207 $ 8,787

Sales returns and allowances

Inventory valuation $ 18,903 $ 24,400 $ ( 12,099 ) $ 401 $ 31,605

2 unchanged sentences

Allowance for Doubtful Accounts $ 7,588 $ 5,175 $ ( 4,584 ) $ ( 1 ) $ 8,178

Sales returns and allowances

Inventory valuation $ 15,218 $ 6,771 $ ( 3,412 ) $ 326 $ 18,903

2 unchanged sentences

Allowance for Doubtful Accounts

Sales returns and allowances

Allowance for Doubtful Accounts $ 6,115 $ 6,253 $ ( 4,799 ) $ 19 $ 7,588

Inventory valuation $ 15,940 $ 1,947 $ ( 2,614 ) $ ( 55 ) $ 15,218

Deferred tax valuation allowance $ 8,520 $ 2,303 $ — $ — $ 10,823

For the year ended September 30, 2018, Other primarily consists of opening balances of reserves assumed from acquisitions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data