What changed in this filing

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Item 1. Financial Statements

2022-02-01 compared with 2021-07-30 · 334 added, 456 removed, 602 unchanged (57% of the section changed)

8 unchanged sentences

334,040 294,804

Contract assets, net of progress payments of $ 20,821 and $ 24,175

74,341 84,426

Inventories 531,182 472,794

Prepaid and other current assets 75,862 76,009

Assets of discontinued operations held for sale 261,514 273,414

Assets of discontinued operations 583 605

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Current portion of operating lease liabilities 28,932 29,881

Liabilities of discontinued operations held for sale 74,256 80,748

Liabilities of discontinued operations 3,095 3,280

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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2021

For the Three Months Ended December 31, 2021 and 2020

COMMON STOCK CAPITAL IN

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Balance at December 31, 2021 84,488 $ 21,122 $ 605,867 $ 684,557 28,184 $ ( 427,736 ) $ ( 48,728 ) $ ( 22,697 ) $ 812,385

Net income — — — 17,112 — — — — 17,112

Dividend — — — ( 3,217 ) — — — — ( 3,217 )

Amortization of deferred compensation — — — — — — — 609 609

Equity awards granted, net 194 48 ( 48 ) — — — — — —

ESOP allocation of common stock — — 756 — — — — — 756

Stock-based compensation — — 4,349 — — — — — 4,349

Other comprehensive income, net of tax — — — — — — 4,775 — 4,775

Balance at March 31, 2021 84,427 $ 21,106 $ 591,966 $ 646,444 27,743 $ ( 416,402 ) $ ( 54,176 ) $ ( 24,507 ) $ 764,431

Net income — — — 16,707 — — — — 16,707

Dividend — — ( 4,546 ) — — — — ( 4,546 )

Amortization of deferred compensation — — — — — — — 610 610

Equity awards granted, net ( 7 ) ( 2 ) 2 — — — — — —

ESOP allocation of common stock — — 856 — — — — — 856

Stock-based compensation — — 4,544 — — — — — 4,544

Other comprehensive income, net of tax — — — — — — 2,739 — 2,739

Balance at June 30, 2021 84,420 $ 21,104 $ 597,368 $ 658,605 27,743 $ ( 416,402 ) $ ( 51,437 ) $ ( 23,897 ) $ 785,341

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

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2020

COMMON STOCK CAPITAL IN

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Stock-based compensation — — 3,428 — — — — — 3,428

Stock-based consideration — — 239 — — — — — 239

Other comprehensive income, net of tax — — — — — — 13,141 — 13,141

Balance at December 31, 2020 84,233 $ 21,058 $ 586,909 $ 632,549 27,743 $ ( 416,402 ) $ ( 58,951 ) $ ( 25,116 ) 740,047

Net income — — — 895 — — — — 895

Dividend — — — ( 3,422 ) — — — — ( 3,422 )

Shares withheld on employee taxes on vested equity awards — — — — 261 ( 5,721 ) — — ( 5,721 )

Amortization of deferred compensation — — — — — — — 629 629

Equity awards granted, net 784 196 ( 196 ) — — — — — —

ESOP allocation of common stock — — 435 — — — — — 435

Stock-based compensation — — 3,662 — — — — — 3,662

Stock-based consideration — — 117 — — — — — 117

Other comprehensive income, net of tax — — — — — — ( 14,834 ) — ( 14,834 )

Balance at March 31, 2020 83,741 $ 20,935 $ 526,988 $ 573,209 36,310 $ ( 543,787 ) $ ( 73,909 ) $ ( 26,982 ) $ 476,454

Net income — — — 21,831 — — — — 21,831

Dividend — — — ( 3,558 ) — — — — ( 3,558 )

Amortization of deferred compensation — — — — — — — 628 628

Equity awards granted, net ( 6 ) ( 1 ) 1 — — — — — —

ESOP allocation of common stock — — 352 — — — — — 352

Stock-based compensation — — 3,930 — — — — — 3,930

Stock-based consideration — — 116 — — — — — 116

Other comprehensive income, net of tax — — — — — — 8,702 — 8,702

Balance at June 30, 2020 83,735 $ 20,934 $ 531,387 $ 591,482 36,310 $ ( 543,787 ) $ ( 65,207 ) $ ( 26,354 ) $ 508,455

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

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(in thousands, except per share data)

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

Three Months Ended December 31,

Revenue $ 591,749 $ 541,523

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Interest income 33 44

Gain on sale of business — — 5,291 —

Loss from debt extinguishment, net — ( 1,235 ) — ( 7,925 )

Other, net 1,381 357

Total other expense, net ( 14,267 ) ( 15,289 )

Income before taxes 29,073 34,480 96,102 54,360

Income before taxes from continuing operations 24,223 37,138

Provision for income taxes 7,318 11,708

Income from continuing operations $ 16,905 $ 25,430

Discontinued operations:

Income from operations of discontinued operations 3,014 2,031

Provision (benefit) for income taxes 621 ( 2,039 )

Income from discontinued operations 2,393 4,070

Net income $ 19,298 $ 29,500

Basic earnings per common share:

Income from continuing operations $ 0.33 $ 0.50

Income from discontinued operations 0.05 0.08

Basic earnings per common share $ 0.38 $ 0.58

Basic weighted-average shares outstanding 51,178 50,596

Diluted earnings per common share:

Income from continuing operations $ 0.31 $ 0.48

Income from discontinued operations 0.04 0.08

Diluted earnings per common share $ 0.36 $ 0.55

Diluted weighted-average shares outstanding 53,753 53,192

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Change in cash flow hedges ( 1,100 ) ( 688 )

Change in available-for-sale securities ( 17 ) — ( 17 ) —

Total other comprehensive income, net of taxes ( 2,751 ) 13,141

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(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 19,298 $ 29,500

Adjustments to reconcile net income to net cash provided by operating activities:

Net income from discontinued operations ( 2,393 ) ( 4,070 )

Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:

Depreciation and amortization 13,081 12,590

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Amortization of debt discounts and issuance costs 654 680

Loss from debt extinguishment, net — 7,925

Deferred income taxes 2,883 321

Loss (gain) on sale of assets and investments 155 ( 261 )

Gain on sale of business ( 5,291 ) —

(Gain) loss on sale of assets and investments ( 154 ) 174

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

Increase in accounts receivable and contract assets, net ( 9,684 ) ( 81,718 )

(Increase) decrease in inventories ( 100,536 ) 34,518

Increase in prepaid and other assets ( 2,449 ) ( 17,393 )

Increase in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities 13,821 10,536

Increase in accounts receivable ( 53,132 ) ( 40 )

Increase in inventories ( 59,478 ) ( 32,791 )

(Increase) decrease in prepaid and other assets 329 ( 4,901 )

Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 12,204 ) 5,074

Other changes, net 662 1,284

Net cash provided by operating activities 42,019 55,944

Net cash provided by (used in) operating activities - continuing operations ( 84,946 ) 12,315

CASH FLOWS FROM INVESTING ACTIVITIES:

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Acquired businesses, net of cash acquired — ( 2,242 )

Proceeds from sale of business, net 14,345 —

Investment purchases ( 4,658 ) —

Proceeds from sale of investments 575 —

Proceeds from the sale of property, plant and equipment 29 53

Other, net — 26

Net cash used in investing activities ( 26,300 ) ( 45,073 )

Net cash used in investing activities - continuing operations ( 9,969 ) ( 11,185 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Other, net ( 28 ) ( 68 )

Net cash used in financing activities ( 14,327 ) ( 9,305 )

Net cash used in financing activities - continuing operations ( 8,612 ) ( 9,297 )

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

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(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities ( 1,669 ) ( 2,899 )

Net cash provided by investing activities 2,749 418

Net cash provided by (used in) discontinued operations 1,080 ( 2,481 )

Net cash provided by operating activities 7,857 7,762

Net cash provided by (used in) investing activities ( 853 ) 14,900

Net cash provided by discontinued operations 7,004 22,662

Effect of exchange rate changes on cash and equivalents ( 910 ) 1,223

NET DECREASE IN CASH AND EQUIVALENTS 2,608 ( 378 )

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ( 97,433 ) 15,718

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 248,653 218,089

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

Griffon currently conducts its operations through three reportable segments:

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

Founded in 1774, AMES is the leading North American manufacturer and a global provider of branded consumer and professional tools and products for home storage and organization, landscaping, and enhancing outdoor lifestyles.

CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

On January 24, 2022, Griffon acquired Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a purchase price of approximately $ 845,000 , subject to customary post-closing adjustments.

Hunter will be part of Griffon's Consumer and Professional Products segment as it complements and diversifies our portfolio of leading consumer brands and products.

The acquisition of Hunter was financed with a new $ 800,000 seven year Term Loan B facility;

and a combination of cash on hand and revolver borrowings under Griffon's revolving credit facility ("Credit Agreement") was used to fund the balance of the purchase price and related acquisition and debt expenditures.

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

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 Quarterly Report on Form 10-Q 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.

Griffon now conducts its operations through two reportable segments:

• Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools;

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid.

• Home and Building Products ("HBP") conducts its operations through Clopay Corporation ("Clopay").

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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.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the U.S.

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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.

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 impacted, 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 II, Item 1A “Risk Factors” in this Form 10-Q.

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

In the United States, we manufacture a substantial majority of the

GRIFFON CORPORATION AND SUBSIDIARIES

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

products that we sell.

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

Basis of Presentation

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These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand.

Significant estimates include allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, 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.

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, 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.

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

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

• Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair values of Griffon’s 2028 senior notes approximated $ 1,061,250 on June 30, 2021.

The fair values of Griffon’s 2028 senior notes approximated $ 1,037,500 on December 31, 2021.

Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with values of $ 3,924 at June 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 Prepaid and other current assets on the Consolidated Balance Sheets.

Insurance contracts with values of $ 4,000 at December 31, 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 Prepaid and other current assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

At June 30, 2021, available-for-sale securities, measured at fair value based on quoted prices in active markets for the underlying assets (level 1 inputs), and trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 1,316 ($ 1,339 cost basis) and $ 2,196 ($ 1,000 cost basis), respectively, were included in Prepaid and other current assets on the Consolidated Balance Sheets.

Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our Consolidated Balance Sheets as a component of AOCI.

Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

At December 31, 2021, 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 $ 15,442 ($ 15,050 cost basis) were included in Prepaid and other current assets on the Consolidated Balance Sheets.

Realized and unrealized gains and losses on marketable debt and equity securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

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

To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options.

As of June 30, 2021, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars.

At June 30, 2021, Griffon had $ 36,000 of Australian dollar contracts at a weighted average rate of $ 1.28 which qualified for hedge accounting (level 2 inputs).

As of December 31, 2021, 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 U.S.

At December 31, 2021, Griffon had $ 21,000 of Australian dollar contracts at a weighted average rate of $ 1.34 which qualified for hedge accounting (level 2 inputs).

These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Accumulated other comprehensive income (loss) ("AOCI") and Prepaid and other current assets, or Accrued liabilities, until settlement.

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

AOCI included deferred losses of $ 1,317 ($ 922 , net of tax) at June 30, 2021.

Upon settlement, losses of $ 413 and $ 2,812 were recorded in COGS during the three and nine months ended June 30, 2021, respectively.

All contracts expire in 1 to 119 days.

At June 30, 2021, Griffon had $ 8,425 of Canadian dollar contracts at a weighted average rate of $ 1.27 .

The contracts, which protect Canadian operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting.

For the three and nine months ended June 30, 2021, fair value (losses) gains of $( 106 ) and $ 138 , respectively, were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 124 and $ 285 were recorded in Other income during the three and nine months ended June 30, 2021, respectively, for all settled contracts.

AOCI included deferred gains of $ 688 ($ 481 , net of tax) at December 31, 2021.

Upon settlement, gains of $ 1,533 were recorded in COGS during the three months ended December 31, 2021.

All contracts expire in 30 to 90 days.

At June 30, 2021, Griffon had $ 950 of British Pound dollar contracts at a weighted average rate of $ 0.75 .

The contracts, which protect United Kingdom operations from currency fluctuations for US dollar based purchases, do not qualify for hedge accounting.

For the three and nine months ended June 30, 2021, fair value (losses) gains of $( 111 ) and $ 30 , respectively, were recorded to Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized losses of $ 224 and $ 505 were recorded in Other income during the three and nine months ended June 30, 2021, respectively.

At December 31, 2021, Griffon had $ 6,675 of Canadian dollar contracts at a weighted average rate of $ 1.25 .

The contracts, which protect Canadian operations from currency fluctuations for U.S.

dollar based purchases, do not qualify for hedge accounting.

For the three months ended December 31, 2021, fair value (losses) gains of $ 134 were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized gains of $ 14 were recorded in Other income during the three months ended December 31, 2021 for all settled contracts.

All contracts expire in 30 to 270 days.

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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

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.

Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations.

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).

GRIFFON CORPORATION AND SUBSIDIARIES

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

are identified and collectability is probable.

Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations.

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.

The majority 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.

Within our discontinued operation, 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.

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.

Accounting for the sales and profits on performance obligations for which progress is measured using the cost-to-cost method relies on the substantial use of estimates;

these projections may be revised throughout the life of a contract.

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.

For the three and nine months ended June 30, 2021, income from operations included net unfavorable catch up adjustments approximating $ 1,131 and $ 4,351 , respectively.

For the three and nine months ended June 30, 2020, income from operations included net unfavorable catch up adjustments of $ 2,805 and $ 3,228 , 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.

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, and is recorded as a reduction to gross margin on the Consolidated Statements of Operations and Comprehensive Income (Loss).

These provisions had an immaterial impact on Griffon's Consolidated Financial Statements.

The estimated remaining costs to complete loss contracts as of June 30, 2021 and September 30, 2020 were approximately $ 12,500 and $ 10,800 , respectively.

For a complete explanation of Griffon’s revenue accounting policies, this note should be read in conjunction with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2021.

See Note 13 - Business Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location.

Transaction Price Allocated to the Remaining Performance Obligations

On June 30, 2021, we had $ 375,039 of remaining performance obligations, which we also refer to as total backlog.

We expect to recognize approximately 66 % 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 $ 74,341 as of June 30, 2021 compared to $ 84,426 as of September 30, 2020.

The $ 10,085 net decrease in our contract assets balance was primarily due to the timing of billings and work performed in Communications and Surveillance

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

programs and decrease associated with the sale of Systems Engineering Group, Inc.

("SEG"), partially offset by timing of work performed on Naval & Cyber Systems.

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 costs and recognized income not yet billed, 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, and represent 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 June 30, 2021 and September 30, 2020, approximately $ 9,600 and $ 7,500 , respectively, of contract costs and recognized income not yet billed were expected to be collected after one year.

Contract liabilities were $ 23,757 as of June 30, 2021 compared to $ 24,386 as of September 30, 2020.

The $ 629 decrease in the contract liabilities balance was primarily due to recognition of revenue in Naval & Cyber systems, partially offset by billings in Surveillance and Communications 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 4 – ACQUISITIONS AND DISPOSITIONS

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;

NOTE 4 – ACQUISITIONS

Griffon continually evaluates potential acquisitions that 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 allocation was finalized and 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 , which was assigned to the CPP segment.

During the three and nine months ended June 30, 2021, acquisition costs were de minimis.

During the nine months ended June 30, 2020, the Company incurred acquisition costs of $ 2,960 .

The Company did no t incur acquisition costs in the three months ended June 30, 2020.

On January 24, 2022, Griffon completed the acquisition of Hunter, a market leader in residential ceiling, commercial, and industrial fans, for a purchase price of approximately $ 845,000 , subject to customary post-closing adjustments.

Hunter will be part of Griffon's CPP segment as it complements and diversifies our portfolio of leading consumer brands and products.

As a result of the timing of this acquisition, all information required by the accounting guidance for business combinations, including certain pro forma information, is not disclosed.

We will provide preliminary purchase price allocation information as well as other required disclosures in our Quarterly Report on Form 10-Q for the quarter ending March 31, 2022.

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 net purchase price of AUD $ 3,500 (approximately $ 2,700 ) in cash.

The final purchase price allocated to goodwill and acquired intangibles 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.

During the three months ended December 31, 2021, the Company incurred acquisition costs of $ 2,595 .

During the three months ended December 31, 2020, acquisition costs were de minimis.

GRIFFON CORPORATION AND SUBSIDIARIES

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

On December 18, 2020, Defense Electronics completed the sale of its SEG business for $ 15,000 .

SEG provides sophisticated, highly technical engineering and analytical support to the Missile Defense Agency and various U.S.

military commands.

SEG had sales of approximately $ 7,000 for the first fiscal quarter ended December 31, 2020 and $ 31,000 for the fiscal year ended September 30, 2020.

DE recorded a pre-tax gain of $ 5,291 ($ 5,251 , net of tax, or $ 0.10 per share) related to the divestiture of SEG.

The sale does not represent a strategic shift that will have a major effect on operations and financial results.

NOTE 5 – INVENTORIES

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The following table details the components of inventory:

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Raw materials and supplies $ 151,292 $ 133,684

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The following table details the components of property, plant and equipment, net:

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Land, building and building improvements $ 163,841 $ 164,486

4 unchanged sentences

Total $ 290,552 $ 292,622

Depreciation and amortization expense for property, plant and equipment was $ 13,371 and $ 13,142 for the quarters ended June 30, 2021 and 2020, respectively, and $ 39,709 and $ 39,890 for the nine months ended June 30, 2021 and 2020, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 5,044 and $ 4,852 for the quarters ended June 30, 2021 and 2020, respectively, and $ 14,764 and $ 14,713 for the nine months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization expense for property, plant and equipment was $ 10,694 and $ 10,238 for the quarters ended December 31, 2021 and 2020, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 3,400 and $ 3,262 for the quarters ended December 31, 2021 and 2020.

Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

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Other, primarily foreign currency translation ( 35 ) 64

Ending Balance, June 30, 2021 $ 9,542

Ending Balance, December 31 $ 9,787 $ 8,699

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 8 – GOODWILL AND OTHER INTANGIBLES

The following table provides changes in the carrying value of goodwill by segment during the nine months ended June 30, 2021:

At September 30, 2020 Business Acquisitions (a) Business Divestitures (b) Foreign

translations adjustments At June 30, 2021

The following table provides changes in the carrying value of goodwill by segment during the quarter ended December 31, 2021:

At September 30, 2021 Foreign

translations adjustments At December 31, 2021

Consumer and Professional Products $ 234,895 $ 535 $ 235,430

Home and Building Products 191,253 — 191,253

Defense Electronics 18,545 — ( 811 ) — 17,734

Total $ 426,148 $ 535 $ 426,683

(a) The increase in the CPP segment was due to the acquisition of Quatro.

(b) The decrease in the DE segment was due to the divestiture of SEG.

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

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Gross Carrying Amount Accumulated

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The gross carrying amount of intangible assets was impacted by approximately $ 800 related to foreign currency translation.

Amortization expense for intangible assets was $ 2,435 and $ 2,381 for the quarters ended June 30, 2021 and 2020, respectively, and $ 7,246 and $ 7,177 for the nine months ended June 30, 2021 and 2020.

Amortization expense for intangible assets was $ 2,387 and $ 2,352 for the quarters ended December 31, 2021 and 2020, respectively.

Amortization expense for the remainder of 2022 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows:

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thereafter $ 64,982 .

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

The 2020 impairment testing resulted in all three reporting units having fair values substantially in excess of their carrying values.

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.

In connection with the sale of the SEG business, the Company assessed the remaining DE reporting unit for impairment.

The assessment determined that the fair value of the DE reporting unit substantially exceeded its carrying value and no impairment existed.

During the nine months ended June 30, 2021, the Company determined that there were no other triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at June 30, 2021.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the three months ended December 31, 2021, the Company determined that there were no triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at December 31, 2021.

NOTE 9 – INCOME TAXES

During the quarter ended June 30, 2021, the Company recognized a tax provision of $ 12,366 on Income before taxes of $ 29,073 , compared to a tax provision of $ 12,649 on Income before taxes of $ 34,480 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 4,082 ($ 3,129 , net of tax) and discrete and certain other tax provisions, net, that affect comparability of $ 2,979 , primarily due to the impact of UK tax rate changes on deferred liabilities.

The prior year quarter results included restructuring charges of $ 1,633 ($ 1,224 , net of tax), loss from debt extinguishment of $ 1,235 ($ 969 , net of tax) and discrete tax and certain other tax provisions, net, that affect comparability of $ 1,828 .

Excluding these items, the effective tax rates for the quarters ended June 30, 2021 and 2020 were 31.2 % and 30.8 %, respectively.

During the nine months ended June 30, 2021, the Company recognized a tax provision of $ 32,783 on Income before taxes of $ 96,102 , compared to a tax provision of $ 21,022 on Income before taxes of $ 54,360 in the comparable prior year period.

The nine month period ended June 30, 2021 included restructuring charges of $ 22,444 ($ 17,080 , net of tax), gain on sale of the SEG business of $ 5,291 ($ 5,251 , net of tax) and discrete and certain other tax provisions, net, that affect comparability of $ 2,864 , primarily due to the impact of UK tax rate changes on deferred liabilities.

The nine month period ended June 30, 2020 included restructuring charges of $ 11,171 ($ 8,377 , net of tax), acquisition costs of $ 2,960 ($ 2,321 , net of tax), loss from debt extinguishment of $ 7,925 ($ 6,214 , net of tax) and discrete tax and certain other tax provisions, net, that affect comparability of $ 1,248 .

Excluding these items, the effective tax rates for the nine months ended June 30, 2021 and 2020 were 31.1 % and 32.6 %, respectively.

During the quarter ended December 31, 2021, the Company recognized a tax provision of $ 7,318 on income before taxes from continuing operations of $ 24,223 , compared to a tax provision of $ 11,708 on income before taxes from continuing operations of $ 37,138 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 1,716 ($ 1,330 , net of tax), acquisition costs of $ 2,595 ($ 2,003 , net of tax), proxy contest costs of $ 2,291 ($ 1,768 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 881 .

The prior year quarter results included restructuring charges of $ 3,079 ($ 2,301 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 1,048 .

Excluding these items, the effective tax rates for the quarters ended December 31, 2021 and 2020 were 31.5 % and 33.7 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 10 – LONG-TERM DEBT

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Outstanding Balance Original Issuer Premium Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate Outstanding Balance Original Issuer Premium Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate

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Revolver due 2025 (b) 19,859 — ( 1,595 ) 18,264 Variable 13,483 — ( 1,718 ) 11,765 Variable

Finance lease - real estate (c) 15,265 — ( 11 ) 15,254 5.60 % 17,218 — ( 30 ) 17,188 5.60 %

Finance lease - real estate (c) 14,083 — — 14,083 Variable 14,594 — ( 4 ) 14,590 Variable

Non US lines of credit (d) 6,533 — ( 13 ) 6,520 Variable 3,012 — ( 17 ) 2,995 Variable

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Long-term debt $ 1,051,921 $ 302 $ ( 14,468 ) $ 1,037,755 $ 1,048,020 $ 315 $ ( 15,138 ) $ 1,033,197

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Three Months Ended December 31, 2021 Three Months Ended December 31, 2020

Effective Interest Rate Cash Interest Amort.

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Senior notes due 2028 (a) 5.9 % $ 14,375 $ ( 12 ) $ 518 $ 14,881 5.9 % $ 14,375 $ — $ 530 $ 14,905

Senior notes due 2022 (a) — — — — — 5.7 % 1,960 11 155 2,126

Revolver due 2025 (b) Variable 261 — 122 383 Variable 129 — 123 252

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

Nine Months Ended June 30, 2021 Nine Months Ended June 30, 2020

Effective Interest Rate Cash Interest Amort.

Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense Effective Interest Rate Cash Interest Amort.

Debt Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 43,125 $ ( 35 ) $ 1,566 $ 44,656 5.9 % $ 17,785 $ — $ 412 $ 18,197

Senior notes due 2022 (a) — — — — — 5.7 % 23,125 123 1,734 24,982

Revolver due 2025 (b) Variable 760 — 368 1,128 Variable 4,798 — 531 5,329

Finance lease - real estate (c) 5.8 % 671 — 19 690 6.1 % 146 — 19 165

Non US lines of credit (d) Variable 11 — 12 23 Variable 11 — 11 22

Non US term loans (d) Variable 503 — 53 556 Variable 786 — 40 826

Other long term debt (e) Variable 329 — 1 330 Variable 394 — 1 395

Capitalized interest ( 13 ) — — ( 13 ) ( 109 ) — — ( 109 )

Totals $ 45,386 $ ( 35 ) $ 2,019 $ 47,370 $ 46,936 $ 123 $ 2,748 $ 49,807

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(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, at 100.25 % of par, to Griffon's previously issued $ 850,000 principal amount of its 5.75 % Senior Notes, at 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 % 2022 senior notes.

As of June 30, 2021, outstanding Senior Notes due totaled $ 1,000,000 ;

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

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

As of December 31, 2021, outstanding Senior Notes due totaled $ 1,000,000 ;

interest is payable semi-annually on March 1 and September 1.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.

On April 22, 2020 and August 3, 2020, Griffon exchanged substantially all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933, as amended (the "Securities Act"), via an exchange offer.

The fair value of the Senior Notes approximated $ 1,061,250 on June 30, 2021 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $ 16,448 of underwriting fees and other expenses incurred related to the issuance and exchange of the 2028 Senior Notes, which is being amortized over the term of the 2028 Senior Notes.

Furthermore, all of the obligations associated with the 2022 Senior Notes were discharged.

Additionally, Griffon recognized a $ 7,925 loss on the early extinguishment of debt of the $ 1,000,000 principal amount of 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.

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

The Senior Notes were registered under the Securities Act of 1933, as amended (the "Securities Act") via an exchange offer.

The fair value of the Senior Notes approximated $ 1,037,500 on December 31, 2021 based upon quoted market prices (level 1 inputs).

(b) On December 9, 2021, Griffon amended its revolving credit facility (as amended, the "Credit Agreement") to replace the GBP LIBOR benchmark rate with Sterling Overnight Index Average ("SONIA").

The Credit Agreement's maximum borrowing availability is $ 400,000 and the revolving credit facility matures on March 22, 2025.

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

2 unchanged sentences

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

Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance.

Current margins are 0.50 % for base rate loans and 1.50 % for LIBOR loans.

Interest is payable on borrowings at either a LIBOR, SONIA or base rate benchmark rate, plus an applicable margin, which adjusts based on financial performance.

Current margins are 0.50 % for base rate loans, 1.50 % for LIBOR loans and 1.50 % for SONIA loans.

The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants, and events of default.

1 unchanged sentence

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.

At June 30, 2021, there were $ 20,775 of outstanding borrowings under the Credit Agreement;

At December 31, 2021, there were $ 19,859 of outstanding borrowings under the Credit Agreement;

outstanding standby letters of credit were $ 15,508 ;

and $ 364,633 was available, subject to certain loan covenants, for borrowing at that date.

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 lease matures in 2025, and bears interest at a fixed rate of approximately 5.6 %.

During the period ended December 31, 2021, the financing lease on the Troy, Ohio location expired.

The lease bore interest at a rate of approximately 5.0 %, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease.

Griffon exercised the one dollar buy out option in November 2021.

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

At June 30, 2021, $ 15,254 was outstanding, net of issuance costs.

At December 31, 2021, $ 14,083 was outstanding, net of issuance costs.

Refer to Note 21- Leases for further details.

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 12,126 as of June 30, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.40 % LIBOR USD and 1.48 % Bankers Acceptance Rate CDN as of June 30, 2021).

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,708 as of December 31, 2021) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.40 % LIBOR USD and 1.53 % Bankers Acceptance Rate CDN as of December 31, 2021).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

At June 30, 2021, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 12,126 as of June 30, 2021) available.

At December 31, 2021, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,708 as of December 31, 2021) available.

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

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 ( 2.02 % at December 31, 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

GRIFFON CORPORATION AND SUBSIDIARIES

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

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 June 30, 2021, the term loan had an outstanding balance of AUD 12,125 ($ 9,131 as of June 30, 2021).

from AUD 10,000 to AUD 15,000 .

As of December 31, 2021, the term loan had an outstanding balance of AUD 9,625 ($ 6,965 as of December 31, 2021).

The revolving facility and receivable purchase facility mature in March 2022, but are renewable upon mutual agreement with the lender.

The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.9 % and 1.35 %, respectively, per annum ( 1.98 % and 1.41 %, respectively, at June 30, 2021).

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

The revolving facility and receivable purchase facility accrue interest at BBSY plus 1.9 % and 1.35 %, respectively, per annum ( 2.01 % and 1.42 %, respectively, at December 31, 2021).

At December 31, 2021, there were no balances outstanding under the revolver and the receivable purchase facility.

The revolver, receivable purchase facility and the 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 Loans each accrue interest at the GBP LIBOR Rate plus 1.8 % ( 1.86 % at June 30, 2021).

The revolving facility accrues interest at the Bank of England Base Rate plus 1.8 % ( 1.90 % as of June 30, 2021) and was renewed in June 2021.

The Term Loan and Mortgage Loans each accrue interest at the GBP LIBOR Rate plus 1.80 % ( 1.99 % at December 31, 2021).

Effective, in January 2022, the Term Loan and Mortgage Loan were amended to replace GBP LIBOR with SONIA.

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25 % ( 3.50 % as of December 31, 2021) and was renewed in June 2021.

The revolving credit facility matures in April 2022, but it is renewable upon mutual agreement with the lender.

As of June 30, 2021, the revolver had an outstanding balance of GBP $ 2,073 ($ 2,871 as of June 30, 2021) while the term and mortgage loan balances amounted to GBP 13,771 ($ 19,073 as of June 30, 2021).

As of December 31, 2021, the revolver had an outstanding balance of GBP 4,935 ($ 6,533 as of December 31, 2021) while the term and mortgage loan balances amounted to GBP 12,687 ($ 16,796 as of December 31, 2021).

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

2 unchanged sentences

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

On March 13, 2019, Griffon's Employee Stock Ownership Plan entered into an agreement that refinanced a term loan with a bank with an internal loan from Griffon.

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 June 30, 2021 was $ 27,988 .

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

Additionally, on January 24, 2022, in connection with the Hunter acquisition, Griffon amended and restated the Credit Agreement to provide for a new $ 800,000 seven year Term Loan B facility with initial pricing of the Secured Overnight Financing Rate floor of 50 basis points plus a spread of 275 basis points, for a total initial interest rate of 325 basis points.

The Original Issue Discount was 99.75 %.

Additionally, there are “step-down” features for the rate tied to achieving lower leverage ratio levels.

The Term Loan B facility requires quarterly payments equal to 0.25 % of the outstanding principal amount, with a balloon payment due at maturity.

Term Loan B borrowings may generally be repaid without penalty but may not be reborrowed.

The Term Loan B facility is subject to the same affirmative and negative covenants that apply to the revolving credit facility, but is not subject to any financial maintenance tests.

Term Loan B borrowings are secured by the same collateral package as borrowings under the revolving credit facility.

At December 31, 2021, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

NOTE 11 — SHAREHOLDERS’ EQUITY

During 2021, the Company paid a quarterly cash dividend of $ 0.08 per share in each quarter, totaling $ 0.24 per share for the nine months ended June 30, 2021.

During the three months ended December 31, 2021, the Company paid a quarterly cash dividend of $ 0.09 per share.

During 2021, the Company paid a quarterly cash dividend of $ 0.08 per share, totaling $ 0.32 per share for the year.

1 unchanged sentence

such dividends will be released upon vesting of the underlying restricted shares.

On July 29, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.08 per share, payable on September 16, 2021 to shareholders of record as of the close of business on August 19, 2021.

On January 31, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.09 per share, payable on March 23, 2022 to shareholders of record as of the close of business on February 23, 2022.

On January 29, 2016, shareholders approved the Griffon Corporation 2016 Equity Incentive Plan ("Incentive Plan") under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, restricted stock units, deferred shares and other stock-based awards may be granted.

On January 31, 2018, shareholders approved Amendment No.

1 to the Incentive Plan pursuant to which, among other things, 1,000,000 shares were added to the Incentive Plan;

and on January 30, 2020, shareholders approved Amendment No.

2 to the Incentive Plan, pursuant to which 1,700,000

1 to the Incentive Plan pursuant to which, among other things, 1,000,000 shares were added to the Incentive

GRIFFON CORPORATION AND SUBSIDIARIES

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

shares were added to the Incentive Plan.

and on January 30, 2020, shareholders approved Amendment No.

2 to the Incentive Plan, pursuant to which 1,700,000 shares were added to the Incentive Plan.

A proposal to approve an Amended and Restated 2016 Equity Incentive Plan which includes, among other things, the addition of 1,200,000 shares to the Incentive Plan, is included in Griffon’s Proxy Statement dated December 30, 2021 related to the 2022 Annual Meeting of Shareholders, scheduled to be held on February 17, 2022.

If shareholders approve this proposal, 1,200,000 shares will be added to the Incentive Plan as of the date of the 2022 Annual Meeting of Shareholders.

Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, generally expire ten years after the date of grant and are granted at an exercise price of not less than 100 % of the fair market value at the date of grant.

The maximum number of shares of common stock available for award under the Incentive Plan is 5,050,000 ( 600,000 of which may be issued as incentive stock options), plus (i) any shares reserved for issuance under the 2011 Equity Incentive Plan as of the effective date of the Incentive Plan, and (ii) any shares underlying awards outstanding on such effective date under the 2011 Incentive Plan that are canceled or forfeited.

As of June 30, 2021, there were 443,820 shares available for grant.

As of December 31, 2021, there were 378,905 shares available for grant.

Compensation expense for restricted stock and 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 granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria.

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This included 218,162 restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of three years , with a total fair value of $ 6,285 , or a weighted average fair value of $ 28.81 per share.

Furthermore, this included 284,813 restricted stock awards granted to five executives, with vesting periods of three years and a total fair value of $ 5,913 or a weighted average fair value of $ 20.76 per share.

During the second quarter of 2021, Griffon granted 731,282 shares of restricted stock to six executives.

This included 203,282 shares of restricted stock to four executives, subject to certain performance conditions, with vesting periods ranging from 34 months to 60 months, with a total fair value of $ 4,923 , or a weighted average fair value of $ 24.22 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 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.

During the third quarter of 2021, no grants were issued.

Furthermore, this included an 18,811 restricted stock award granted to one executive, with a vesting period of three years and a total fair value of $ 507 or a weighted average fair value of $ 26.97 per share.

The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Restricted stock $ 3,890 $ 3,428

ESOP 1,047 577 2,771 2,067

Total stock based compensation $ 4,867 $ 4,208

1 unchanged sentence

Under this share repurchase program, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions.

During the nine months ended June 30, 2021, Griffon did not purchase any shares of common stock under these repurchase programs.

As of June 30, 2021, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

During the third quarter ended June 30, 2021, no shares were withheld to settle employee taxes due upon the vesting of restricted stock.

During the nine months ended June 30, 2021, 133,027 shares, with a market value of $ 2,774 , or $ 20.85 per

During the three months ended December 31, 2021, Griffon did not purchase any shares of common stock under these repurchase programs.

As of December 31, 2021, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

During the three months ended December 31, 2021, 421,860 shares, with a market value of $ 10,742 , or $ 25.46 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the three months ended December 31, 2021, an additional 5,480 shares, with a market value of $ 144 , or $ 26.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

GRIFFON CORPORATION AND SUBSIDIARIES

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

share, respectively, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the nine months ended June 30, 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.

NOTE 12 – EARNINGS PER SHARE (EPS)

2 unchanged sentences

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

Three Months Ended December 31,

Common shares outstanding 56,304 56,490

6 unchanged sentences

NOTE 13 – BUSINESS SEGMENTS

Griffon reports its operations through three reportable segments, as follows:

• CPP conducts its operations through AMES.

CPP sells products globally through a portfolio of leading brands including True Temper, AMES, and ClosetMaid.

• HBP conducts its operations through Clopay.

Griffon reports its operations through two reportable segments, as follows:

• Consumer and Professional Products (“CPP”) is a leading North American manufacturer and a global provider of branded consumer and professional tools;

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid.

• Home and Building Products ("HBP") conducts its operations through Clopay.

Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.

1 unchanged sentence

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

• DE conducts its operations through Telephonics, founded in 1933, a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions for defense, aerospace and commercial customers.

On September 27, 2021, Griffon announced it is exploring strategic alternatives for its Defense Electronics segment, which conducts its operations through Telephonics Corporation ("Telephonics"), including a sale.

Accordingly, all references made to results and information in this Quarterly Report on Form 10-Q 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.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

Information on Griffon’s reportable segments is as follows:

For the Three Months Ended June 30, For the Nine Months Ended June 30,

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

For the Three Months Ended December 31,

REVENUE 2021 2020

2 unchanged sentences

Defense Electronics 53,993 67,768

Total consolidated net sales $ 646,792 $ 632,061 $ 1,890,915 $ 1,746,849

Subtotal 645,742 609,291

Defense Electronics ( 53,993 ) ( 67,768 )

Total revenue $ 591,749 $ 541,523

Disaggregation of Revenue

1 unchanged sentence

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

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Residential repair and remodel $ 38,759 $ 45,600

8 unchanged sentences

Total Home and Building Products 308,576 250,481

Government 45,275 54,802 127,644 151,126

International 15,141 24,779 53,533 68,333

Commercial 2,158 4,387 9,315 12,099

Total Defense Electronics 62,574 83,968 190,492 231,558

Total Consolidated Revenue $ 591,749 $ 541,523

3 unchanged sentences

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

For the Three Months Ended June 30,

CPP HBP DE Total CPP HBP DE Total

United States $ 206,809 $ 246,268 $ 37,192 $ 490,269 $ 232,544 $ 209,222 $ 56,294 $ 498,060

Europe 43,767 31 6,908 50,706 29,267 81 8,636 37,984

Canada 20,547 10,724 1,719 32,990 18,231 7,729 3,012 28,972

Australia 51,437 — 207 51,644 47,614 — 1,012 48,626

All other countries 2,266 2,369 16,548 21,183 1,273 2,132 15,014 18,419

Consolidated revenue $ 324,826 $ 259,392 $ 62,574 $ 646,792 $ 328,929 $ 219,164 $ 83,968 $ 632,061

For the Nine Months Ended June 30,

CPP HBP DE Total CPP HBP DE Total

For the Three Months Ended December 31,

CPP HBP Total CPP HBP Total

United States $ 164,899 $ 294,576 $ 459,475 $ 183,442 $ 236,531 $ 419,973

6 unchanged sentences

Griffon believes this information is useful to investors for the same reason.

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes from continuing operations:

For the Three Months Ended December 31,

Segment adjusted EBITDA:

2 unchanged sentences

Defense Electronics 4,472 5,585

Subtotal 76,983 86,667

Defense Electronics ( 4,472 ) ( 5,585 )

Segment adjusted EBITDA 72,511 81,082

3 unchanged sentences

Depreciation and amortization ( 13,081 ) ( 12,590 )

Loss from debt extinguishment — ( 1,235 ) — ( 7,925 )

Restructuring charges ( 1,716 ) ( 3,079 )

Acquisition costs ( 2,595 ) —

Gain on sale of SEG business — — 5,291 —

Income before taxes $ 29,073 $ 34,480 $ 96,102 $ 54,360

Proxy contest costs ( 2,291 ) —

Income before taxes from continuing operations $ 24,223 $ 37,138

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

For the Three Months Ended June 30, For the Nine Months Ended June 30,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months Ended December 31,

DEPRECIATION and AMORTIZATION 2021 2020

2 unchanged sentences

Defense Electronics — 2,676

Subtotal 12,944 15,216

Defense Electronics — ( 2,676 )

Total segment depreciation and amortization 12,944 12,540

5 unchanged sentences

Defense Electronics 853 2,904

Subtotal 11,332 11,926

Defense Electronics ( 853 ) ( 2,904 )

Total segment 10,479 9,022

1 unchanged sentence

Total consolidated capital expenditures $ 10,573 $ 9,022

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

ASSETS At June 30, 2021 At September 30, 2020

ASSETS At December 31, 2021 At September 30, 2021

Segment assets:

1 unchanged sentence

Home and Building Products 686,009 666,422

Defense Electronics 280,195 329,128

Total segment assets 2,129,536 2,044,040

1 unchanged sentence

Total continuing assets 2,317,271 2,327,242

Assets of discontinued operations 4,302 8,497

Discontinued operations - held for sale 261,514 273,414

Other discontinued operations 3,958 4,029

Consolidated total $ 2,582,743 $ 2,604,685

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 14 – EMPLOYEE BENEFIT PLANS

Defined benefit pension expense (income) included in Other Income (Expense), net was as follows:

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

Three Months Ended December 31,

Interest cost $ 796 $ 744

1 unchanged sentence

Amortization:

Prior service cost — 3 — 11

Recognized actuarial loss 845 1,573

2 unchanged sentences

Issued but not yet effective accounting pronouncements

In August 2018, the Financial Accounting Standards Board ("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 is effective for the Company in our fiscal year beginning in October 1, 2021.

We are currently evaluating the effects that the adoption of this guidance will have on our related pension disclosures.

In December 2019, the FASB issued guidance on simplifying the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications.

Our effective date for adoption of this Accounting Standards Update ("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.

In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU No.

2021-08, Business Combinations (Topic 805);

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

This new guidance affects all entities that enter into a business combination within the scope of ASC 805-10.

Under this new guidance, the acquirer should determine what contract assets and/or liabilities it would have recorded under ASC 606 (Revenue Guidance) as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquirer.

Under current U.S.

GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value.

This update is effective for the Company beginning in fiscal 2023.

Early adoption is permitted.

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 the Company beginning in fiscal 2021.

This guidance became effective for the Company beginning in fiscal 2022.

We adopted the recognition of non-income taxes on the modified retrospective basis.

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,

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 was effective for the Company in our fiscal year beginning in October 1, 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.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

This guidance is 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 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.

NOTE 16 – 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 a discontinued operation:

For the Quarter Ended December 31,

Revenue $ 53,993 $ 67,768

Cost of goods and services 40,961 62,101

Gross profit 13,032 5,667

Selling, general and administrative expenses 10,020 9,942

Income (loss) from discontinued operations 3,012 ( 4,275 )

Other income (expense)

Gain on sale of business — 6,240

Other, net 2 66

Total other income (expense) 2 6,306

Income from discontinued operations before taxes $ 3,014 $ 2,031

Provision (benefit) for income taxes 621 ( 2,039 )

Income from discontinued operations $ 2,393 $ 4,070

During the three months ended December 31, 2021, Income from discontinued operations includes $ 1,792 of costs associated with consulting and stay bonuses.

Depreciation and amortization was excluded from the current year results since DE is classified as a discontinued operation and, accordingly, the Company ceased depreciation and amortization in accordance with discontinued operations accounting guidelines.

Depreciation and amortization would have been approximately $ 2,700 in the quarter ended December 31, 2021.

The gain on sale of business relates to the divestiture of the SEG business on December 18, 2020;

SEG had sales of $ 6,713 in the quarter ended December 31, 2020.

In September 2020, a 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.

The reduction in force initiative resulted in severance charges of approximately $ 2,200 , recorded in the first quarter ended December 31, 2020.

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 older weather radar product lines.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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:

At December 31, At September 30,

CURRENT ASSETS

Accounts receivable, net 32,642 42,020

Contract assets, net of progress payments 69,043 72,983

Inventories 84,796 83,970

Prepaid and other current assets 4,363 4,409

PROPERTY, PLANT AND EQUIPMENT, net 46,205 45,371

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

GOODWILL 17,734 17,734

INTANGIBLE ASSETS, net 131 131

OTHER ASSETS 5,433 5,629

Total Assets Held for Sale $ 261,514 $ 273,414

CURRENT LIABILITIES

Accounts payable 55,661 60,486

Accrued liabilities 15,547 15,153

Current portion of operating lease liabilities 221 287

LONG-TERM OPERATING LEASE LIABILITIES 817 867

OTHER LIABILITIES 2,010 3,955

Total Liabilities Held for Sale $ 74,256 $ 80,748

Installation Services and Other Discontinued Activities

The following amounts summarize the total assets and liabilities related to the 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 Condensed Consolidated Balance Sheets:

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Assets of discontinued operations:

6 unchanged sentences

Total liabilities of discontinued operations $ 6,835 $ 7,074

At June 30, 2021, Griffon's assets and liabilities consist primarily of insurance claims, income tax, product liability, and warranty and environmental reserves.

At December 31, 2021 and September 30, 2021, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, warranty and environmental reserves totaling liabilities of approximately $ 6,835 and $ 7,074 , respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

There was no reported revenue in the quarters ended December 31 2021 and 2020.

NOTE 17 – RESTRUCTURING CHARGES

1 unchanged sentence

operations, and on November 12, 2020, Griffon announced that CPP is broadening this strategic initiative to include additional North American facilities, the AMES UK and Australia businesses, and a manufacturing facility in China.

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

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

This initiative includes three key development areas.

First, certain AMES U.S.

and 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 AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

We continue to expect the roll-out of the new business platform for our AMES U.S.

and global operations to be completed by the end of calendar year 2023.

When fully implemented, we expect these actions will result in AMES' EBITDA margins improving to 12 % plus, excluding the impact of Hunter, with annual cash savings of $ 30,000 to $ 35,000 and a reduction in inventory of $ 30,000 to $ 35,000 , 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 .

1 unchanged sentence

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

In the quarter and nine months ended June 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 4,082 and $ 14,663 , respectively.

During the nine months ended June 30, 2021, cash charges totaled $ 10,781 and non-cash, asset-related charges totaled $ 3,882 ;

the cash charges included $ 1,784 for one-time termination benefits and other personnel-related costs and $ 8,997 for facility and lease exit costs primarily driven by the consolidation of distribution facilities.

Non-cash charges of $ 3,882 predominantly related to inventory that have no recoverable value.

During the nine months ended June 30, 2021, headcount was reduced by 65 .

In the quarter and nine months ended June 30, 2020, CPP incurred pre-tax restructuring and related exit costs approximating $ 1,633 and $ 11,171 , respectively.

During the nine months ended June 30, 2020, cash charges totaled $ 6,479 and non-cash, asset-related charges totaled $ 4,692 ;

During the quarters ended December 31, 2021 and 2020, CPP incurred pre-tax restructuring and related exit costs approximating $ 1,716 and $ 3,079 , respectively.

During the quarter ended December 31, 2021, cash charges totaled $ 1,427 and non-cash, asset-related charges totaled $ 289 ;

the cash charges included $ 260 for one-time termination benefits and other personnel-related costs and $ 1,167 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.

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.

The combined actions resulted in severance charges of approximately $ 4,300 , with $ 2,120 recognized in the fourth quarter of fiscal 2020, and the remaining $ 2,180 was recognized during the nine months ended June 30, 2021.

These actions reduced headcount by approximately 90 people.

In addition, charges of $ 5,601 were recorded during the quarter ended December 31, 2020, primarily related to exiting our older weather radar product lines.

During the quarter ended December 31, 2020, cash charges totaled $ 2,886 and non-cash and asset-related charges totaled $ 193 ;

the cash charges included $ 362 for one-time termination benefits and other personnel-related costs and $ 2,524 for facility exit costs.

During the quarter ended December 31, 2021, there was no headcount reduction.

A summary of the restructuring and other related charges included in Cost of goods and services and SG&A expenses in the Company's Condensed Consolidated Statements of Operations were as follows:

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Cost of goods and services $ 322 $ 541

1 unchanged sentence

Total restructuring charges $ 1,716 $ 3,079

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Personnel related costs $ 260 $ 362

2 unchanged sentences

Total $ 1,716 $ 3,079

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

7 unchanged sentences

Accrued liability at December 31, 2021 $ 403 $ 264 $ — $ 667

Q2 Restructuring charges 782 4,283 2,497 7,562

Q2 Cash payments ( 3,840 ) ( 4,273 ) — ( 8,113 )

Q2 Non-cash charges — — ( 2,497 ) ( 2,497 )

Accrued liability at March 31, 2021 $ 527 $ 264 $ — $ 791

Q3 Restructuring charges 700 2,190 1,192 4,082

Q3 Cash payments ( 799 ) ( 2,190 ) — ( 2,989 )

Q3 Non-cash charges — — ( 1,192 ) ( 1,192 )

Accrued liability at June 30, 2021 $ 428 $ 264 $ — $ 692

NOTE 18 – OTHER INCOME (EXPENSE)

For the quarters ended June 30, 2021 and 2020, Other income (expense) of $ 386 and $ 806 , respectively, includes $ 77 and $ 72 , respectively, of net currency exchange gains in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 226 and $ 392 , respectively, as well as $ 249 and $ 499 , respectively, of net investment income (loss).

For the nine months ended June 30, 2021 and 2020, Other income (expense) of $ 1,192 and 2,199 includes $( 302 ) and $ 441 , respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 680 and $ 1,170 , respectively, as well as $ 877 and $ 216 , respectively, of net investment income (loss).

Additionally, in the prior year period, Other income (expense) also included a one-time technology recognition award for $ 700 .

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the quarters ended December 31, 2021 and 2020, Other income (expense) of $ 1,381 and $ 357 , respectively, includes $ 394 and $ 699 , respectively, of net currency exchange losses in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 948 and $ 227 , respectively, as well as $ 93 and $ 330 , respectively, of net investment income.

Other income (expense) also includes rental income of $ 462 in each of the three months ended December 31, 2021 and 2020.

NOTE 19 – 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 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, 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.

1 unchanged sentence

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

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

Three Months Ended December 31,

Balance, beginning of period $ 7,818 $ 6,268

7 unchanged sentences

The amounts recognized in other comprehensive income (loss) were as follows:

For the Three Months Ended June 30,

Pre-tax Tax Net of tax Pre-tax Tax Net of tax

Foreign currency translation adjustments $ 1,160 $ — $ 1,160 $ 9,508 $ — $ 9,508

Pension and other defined benefit plans 1,576 ( 331 ) 1,245 1,443 ( 304 ) 1,139

Cash flow hedges 501 ( 150 ) 351 ( 2,779 ) 834 ( 1,945 )

Available-for-sale securities ( 23 ) 6 ( 17 ) — — —

Total other comprehensive income (loss) $ 3,214 $ ( 475 ) $ 2,739 $ 8,172 $ 530 $ 8,702

For the Nine Months Ended June 30,

For the Three Months Ended December31,

Pre-tax Tax Net of tax Pre-tax Tax Net of tax

2 unchanged sentences

Cash flow hedges ( 1,571 ) 471 ( 1,100 ) ( 983 ) 295 ( 688 )

Available-for-sale securities ( 23 ) $ 6 ( 17 ) — — —

Total other comprehensive income (loss) $ ( 3,044 ) $ 293 $ ( 2,751 ) $ 13,290 $ ( 149 ) $ 13,141

The components of Accumulated other comprehensive income (loss) are as follows:

At June 30, 2021 At September 30, 2020

At December 31, 2021 At September 30, 2021

Foreign currency translation adjustments $ ( 21,569 ) $ ( 19,250 )

1 unchanged sentence

Change in Cash flow hedges 975 2,075

Available-for-sale securities ( 17 ) —

$ ( 48,728 ) $ ( 45,977 )

Amounts reclassified from accumulated other comprehensive income (loss) to income were as follows:

For the Three Months Ended June 30, For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Gain (Loss) 2021 2020

4 unchanged sentences

Total $ 544 $ ( 1,762 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 21 — LEASES

7 unchanged sentences

ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

Lease payments primarily include rent and insurance costs (lease components).

The Company's leases also include non-lease components such as real estate taxes and common-area maintenance costs.

The Company elected the practical expedient to account for lease and non-lease components as a single component.

In certain of the Company's leases, the non-lease components are variable and in accordance with the standard are therefore excluded from lease payments to determine the ROU asset.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

lease payments.

We use the implicit rate when readily determinable.

2 unchanged sentences

For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability.

For leases with a lease term of 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Condensed Consolidated Balance Sheets.

Variable lease cost for both operating and finance leases, if any, is recognized as incurred.

The Company has lease agreements that contain both lease and non-lease components.

For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).

Components of operating lease costs are as follows:

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2021 2020 2021 2020

For the Three Months Ended December 31,

Fixed $ 9,747 $ 9,491

Variable (a), (b)

3,012 2,032 6,146 5,608

Short-term (b)

933 1,280 3,100 4,103

Total $ 12,948 $ 12,455

1 unchanged sentence

(b) Not recorded on the balance sheet.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information were as follows:

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Total $ 11,597 $ 11,412

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental Condensed Consolidated Balance Sheet information related to leases were as follows:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Operating Leases:

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Total financing lease liabilities $ 15,928 $ 16,467

(1) Finance lease assets are recorded net of accumulated depreciation of $ 5,258 and $ 2,383 as of June 30, 2021 and September 30, 2020, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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.

(1) Finance lease assets are recorded net of accumulated depreciation of $ 3,961 and $ 6,136 as of December 31, 2021 and September 30, 2021, respectively.

Griffon has one finance lease outstanding for real estate located in Ocala, Florida.

The lease matures in 2025, and bears interest at a fixed rate of approximately 5.6 %.

During the period ended December 31, 2021, the financing lease on the Troy, Ohio location expired.

The lease bore interest at a rate of approximately 5.0 %, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease.

Griffon exercised the one dollar buy out option in November 2021.

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

As of June 30, 2021 and September 30, 2020, $ 15,254 and $ 17,188 , respectively, was outstanding, net of issuance costs.

The remaining lease liability balance relates to finance equipment leases.

The aggregate future maturities of lease payments for operating leases and finance leases as of June 30, 2021 are as follows (in thousands):

At December 31, 2021, $ 14,083 was outstanding, net of issuance costs.

The aggregate future maturities of lease payments for operating leases and finance leases as of December 31, 2021 are as follows (in thousands):

Operating Leases Finance Leases

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Present value of lease liabilities $ 146,121 $ 15,928

(a) Excluding the nine months ended June 30, 2021.

Average lease terms and discount rates at June 30, 2021 were as follows:

(a) Excluding the three months ended December 31, 2021.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Average lease terms and discount rates at December 31, 2021 were as follows:

Weighted-average remaining lease term (years)

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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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

“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 .

Following issuance of the Remedial Action Plan, the DEC implemented a portion of its plan, and 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.

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").

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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.

3 unchanged sentences

In 2011, remediation of chlorinated solvents in the groundwater was completed to the satisfaction of DEC.

In 2018, AMES submitted a Feasibility Study recommending that the remaining soil contamination involving metals and petroleum be covered, excavated and removed to a licensed off-site location or placed under a cover on-site.

DEC approved the selection of this remedy in 2019 by issuing a Record of Decision (“ROD”).

In 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 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.

At the request of DEC, AMES has also submitted (and DEC has approved) a workplan to investigate the areas adjacent to the site perimeter.

The workplan is expected to be completed by October 1, 2021.

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.

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

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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.

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.

General legal

3 unchanged sentences

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-Q

Item 1. Financial Statements