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Item 1. Financial Statements

2022-04-29 compared with 2022-02-01 · 385 added, 230 removed, 706 unchanged (47% of the section changed)

40 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three Months Ended December 31, 2021 and 2020

For the Three and Six Months Ended March 31, 2022 and 2021

COMMON STOCK CAPITAL IN

14 unchanged sentences

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 — — — 65,689 — — — — 65,689

Dividend — — — ( 5,352 ) — — — — ( 5,352 )

Amortization of deferred compensation — — — — — — — 591 591

Equity awards granted, net 258 65 ( 7,195 ) — ( 470 ) 7,130 — — —

ESOP allocation of common stock — — 638 — — — — — 638

Stock-based compensation — — 4,314 — — — — — 4,314

Other comprehensive income, net of tax — — — — — — 4,949 — 4,949

Balance at March 31, 2022 84,746 $ 21,187 $ 603,624 $ 744,894 27,714 $ ( 420,606 ) $ ( 43,779 ) $ ( 22,106 ) $ 883,214

COMMON STOCK CAPITAL IN

14 unchanged sentences

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 — — — 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

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

2 unchanged sentences

(in thousands, except per share data)

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2022 2021 2022 2021

Revenue $ 779,617 $ 574,682 $ 1,371,366 $ 1,116,205

12 unchanged sentences

Discontinued operations:

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

Income (loss) from operations of discontinued operations 694 ( 1,341 ) 3,708 690

Provision (benefit) for income taxes ( 6,424 ) ( 334 ) ( 5,803 ) ( 2,373 )

Income from discontinued operations 2,393 4,070

Income (loss) from discontinued operations 7,118 ( 1,007 ) 9,511 3,063

Net income $ 65,689 $ 17,112 $ 84,987 $ 46,612

1 unchanged sentence

Income from continuing operations $ 1.13 $ 0.36 $ 1.47 $ 0.86

Income from discontinued operations 0.05 0.08

Income (loss) from discontinued operations 0.14 ( 0.02 ) 0.18 0.06

Basic earnings per common share $ 1.27 $ 0.34 $ 1.65 $ 0.92

2 unchanged sentences

Income from continuing operations $ 1.10 $ 0.34 $ 1.41 $ 0.82

Income from discontinued operations 0.04 0.08

Income (loss) from discontinued operations 0.13 ( 0.02 ) 0.18 0.06

Diluted earnings per common share $ 1.23 $ 0.32 $ 1.59 $ 0.88

12 unchanged sentences

(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Net income from discontinued operations ( 9,511 ) ( 3,063 )

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

Adjustments to reconcile net income to net cash used in operating activities of continuing operations:

Depreciation and amortization 29,333 25,739

3 unchanged sentences

Amortization of debt discounts and issuance costs 1,566 1,349

Fair value step-up of acquired inventory sold 2,701 —

Deferred income taxes 2,883 2,215

6 unchanged sentences

Other changes, net 525 2,400

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

Net cash used in operating activities - continuing operations ( 172,633 ) ( 44,411 )

CASH FLOWS FROM INVESTING ACTIVITIES:

1 unchanged sentence

Acquired businesses, net of cash acquired ( 851,464 ) ( 2,242 )

Proceeds from sale of investments 575 —

Proceeds (payments) from investments 14,923 ( 2,138 )

Proceeds from the sale of property, plant and equipment 32 82

8 unchanged sentences

Other, net ( 27 ) ( 214 )

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

Net cash provided by ( used) in financing activities - continuing operations 899,924 ( 5,916 )

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

2 unchanged sentences

(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

3 unchanged sentences

Effect of exchange rate changes on cash and equivalents ( 3,513 ) 1,527

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

NET DECREASE IN CASH AND EQUIVALENTS ( 126,360 ) ( 42,525 )

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).

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.

On September 27, 2021, Griffon announced it is exploring strategic alternatives for its Defense Electronics ("DE") segment, which consists of its Telephonics subsidiary, and on April 18, 2022, Griffon entered into a definitive agreement to sell Telephonics to TTM Technologies, Inc.

("TTM") for $ 330,000 in cash.

The transaction is expected to close within the second calendar quarter of 2022.

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.

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

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

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

On 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 contractual purchase price of approximately $ 845,000 , subject to customary post-closing adjustments.

Hunter, which is part of Griffon's Consumer and Professional Products segment, complements and diversifies our portfolio of leading consumer brands and products.

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

a combination of cash on hand and revolving credit facility borrowings was used to fund the balance of the purchase price and related acquisition and debt expenditures.

Griffon now conducts its operations through two reportable segments:

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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

GRIFFON CORPORATION AND SUBSIDIARIES

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

products that we sell.

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.

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The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:

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

GRIFFON CORPORATION AND SUBSIDIARIES

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

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

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

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

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

On March 31, 2022, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 945,000 and $ 792,000 , respectively.

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

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.

Insurance contracts with values of $ 4,053 at March 31, 2022 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 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.

At March 31, 2022, 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 $ 995 ($ 1,000 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).

1 unchanged sentence

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

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).

As of March 31, 2022, 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 March 31, 2022, Griffon had $ 46,500 of Australian dollar contracts at a weighted average rate of $ 1.35 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 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.

AOCI included deferred losses of $ 773 ($ 541 , net of tax) at March 31, 2022.

Upon settlement, gains of $ 730 and $ 2,263 were recorded in COGS during the three and six months ended March 31, 2022, respectively.

All contracts expire in 29 to 180 days.

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

At March 31, 2022, Griffon had 48,600 of Chinese Yuan contracts at a weighted average rate of $ 6.52 which qualified for hedge accounting (level 2 inputs).

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

AOCI included deferred gains of $ 1,140 ($ 832 , net of tax) at March 31, 2022.

Upon settlement, gains of $ 654 were recorded in COGS during the six months ended March 31, 2022.

All contracts expire in 7 to 308 days.

At March 31, 2022, Griffon had $ 6,950 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.

For the three and six months ended March 31, 2022, fair value (losses) gains of $( 136 ) and $ 2 , 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 $ 16 and $ 2 were recorded in Other income during the three and six months ended March 31, 2022, respectively for all settled contracts.

All contracts expire in 1 to 380 days.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3 – REVENUE

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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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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

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.

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

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

a combination of cash on hand and revolver borrowings was used to fund the balance of the purchase price and related acquisition and debt expenditures.

Hunter complements and diversifies Griffon's portfolio of leading consumer brands and products.

The goodwill recognized was $ 279,658 , which was assigned to the CPP segment, and is not expected to be deductible for income tax purposes.

The final purchase price allocation, which is expected to be completed in the first quarter of fiscal 2023, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities.

The following unaudited proforma summary from continuing operations presents consolidated information as if the Company acquired Hunter on October 1, 2020:

Proforma For the Three Months Ended March 31, (unaudited) Proforma For the Six Months Ended March 31, (unaudited)

2022 2021 2022 2021

Revenue $ 791,038 $ 673,597 $ 1,461,877 $ 1,277,382

Income from continuing operations 55,151 24,419 75,125 50,514

GRIFFON CORPORATION AND SUBSIDIARIES

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

Griffon did not include any material, nonrecurring proforma adjustments directly attributable to the business combination in the proforma revenue and earnings.

These proforma amounts have been compiled by adding the historical results from continuing operations of Griffon, restated for classifying the results of operations of the Telephonics Corporate business as a discontinued operation, to the historical results of Hunter after applying Griffon’s accounting policies and the following proforma adjustments:

• Additional depreciation and amortization that would have been charged assuming the preliminary fair value adjustments to property, plant, and equipment, and intangible assets had been applied from October 1, 2021.

• Additional interest and related expenses from the new $ 800,000 seven year Term Loan B facility that Griffon used to acquire Hunter Fan.

• The consequential tax effects of the above adjustments using a 21.9 % tax rate for the year ended September 30, 2021.

The calculation of the preliminary purchase price allocation is as follows:

Accounts receivable (1)

Inventories (2)

Other current assets 9,513

Property, plant and equipment 15,007

Operating lease right-of-use assets 12,447

Goodwill 279,658

Intangible assets 606,000

Total assets acquired $ 1,097,526

Accounts payable and accrued liabilities $ 70,768

Current portion of operating lease liabilities 3,323

Deferred tax liability (3)

Long-term operating lease liabilities 9,123

Other long-term liabilities 1,467

Total liabilities assumed $ 246,062

Total net assets acquired $ 851,464

(1) Includes $ 67,201 of gross accounts receivable of which $ 2,599 was not expected to be collected.

The fair value of accounts receivable approximated book value acquired.

(2) Includes $ 113,287 of gross inventory of which $ 2,988 was reserved for obsolete items.

(3) Deferred tax liability recorded on intangibles assets.

The amounts assigned to goodwill and major intangible asset classifications for the Hunter acquisition are as follows:

Average Life (Years)

Goodwill $ 279,658 N/A

Indefinite-lived intangibles 356,000 N/A

Definite-lived intangibles 250,000 20

Total goodwill and intangible assets $ 885,658

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 and six months ended March 31, 2022, the Company incurred acquisition costs of $ 6,708 and $ 9,303 , respectively.

During the three and six months ended March 31, 2021, acquisition costs were de minimis.

NOTE 5 – INVENTORIES

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The following table details the components of inventory:

At December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

Raw materials and supplies $ 164,912 $ 133,684

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

At December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

Land, building and building improvements $ 163,567 $ 164,486

4 unchanged sentences

Total $ 304,169 $ 292,622

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.

Depreciation and amortization expense for property, plant and equipment was $ 11,782 and $ 10,742 for the quarters ended March 31, 2022 and 2021, respectively, and $ 22,476 and $ 20,980 for the six months ended March 31, 2022 and 2021, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 4,256 and $ 3,613 for the quarters ended March 31, 2022 and 2021, respectively, and $ 7,656 and $ 6,875 for the six months ended March 31, 2022 and 2021, respectively.

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

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NOTE 7 – CREDIT LOSSES

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

Measurement of Credit Losses on Financial Instruments).

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

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

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

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

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

Six months ended March 31,

Beginning Balance, October 1 $ 8,787 $ 8,178

Accounts receivable, net acquired 2,599 —

Provision for expected credit losses 1,889 1,234

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Other, primarily foreign currency translation 235 23

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

Ending Balance, March 31 $ 13,500 $ 9,274

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 quarter ended December 31, 2021:

At September 30, 2021 Foreign

translations adjustments At December 31, 2021

The following table provides changes in the carrying value of goodwill by segment during the six months ended March 31, 2022:

At September 30, 2021 Hunter Acquisition Foreign

translations adjustments At March 31, 2022

Consumer and Professional Products $ 234,895 $ 279,658 $ 1,717 $ 516,270

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

At December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

Gross Carrying Amount Accumulated

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Total intangible assets $ 1,035,298 $ 85,568 $ 428,258 $ 78,233

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

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

The gross carrying amount of intangible assets was impacted by $ 563 related to foreign currency translation.

Amortization expense for intangible assets was $ 4,470 and $ 2,407 for the quarters ended March 31, 2022 and 2021, respectively, and $ 6,857 and $ 4,759 for the six months ended March 31, 2022 and 2021, respectively.

The increase in intangible assets and amortization is related to the Hunter acquisition.

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 $ 242,638 .

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.

During the six months ended March 31, 2022, 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 March 31, 2022.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 9 – INCOME TAXES

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.

During the quarter ended March 31, 2022, the Company recognized a tax provision of $ 24,533 on income before taxes from continuing operations of $ 83,104 , compared to a tax provision of $ 11,082 on income before taxes from continuing operations of $ 29,201 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 4,766 ($ 3,496 , net of tax), acquisition costs of $ 6,708 ($ 6,146 , net of tax), proxy expenses of $ 4,661 ($ 3,591 , net of tax), fair value step-up of acquired inventory sold of $ 2,701 ($ 2,007 , net of tax), and discrete and certain other tax benefits, net, that affect comparability of $ 693 .

The prior year quarter results included restructuring charges of $ 7,502 ($ 5,605 , net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $ 1,417 .

Excluding these items, the effective tax rates for the quarters ended March 31, 2022 and 2021 were 28.3 % and 31.5 %, respectively.

During the six months ended March 31, 2022, the Company recognized a tax provision of $ 31,851 on income before taxes of $ 107,327 , compared to a tax provision of $ 22,790 on income before taxes of $ 66,339 in the comparable prior year period.

The six month period ended March 31, 2022 included restructuring charges of $ 6,482 ($ 4,826 , net of tax), acquisition costs of $ 9,303 ($ 8,149 , net of tax), proxy expenses of $ 6,952 ($ 5,359 , net of tax), fair value step-up of acquired inventory sold of $ 2,701 ($ 2,007 , net of tax), and discrete and certain other tax benefits, net, that affect comparability of $ 1,574 .

The six month period ended March 31, 2021 included restructuring charges of $ 10,581 ($ 7,906 , net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $ 369 .

Excluding these items, the effective tax rates for the six months ended March 31, 2022 and 2021 were 29.0 % and 32.6 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 10 – LONG-TERM DEBT

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

At March 31, 2022 At September 30, 2021

Outstanding Balance Original Issuer Premium/(Discount) Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate Outstanding Balance Original Issuer Premium/(Discount) Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate

Senior notes due 2028 (a) $ 1,000,000 $ 290 ( 12,257 ) $ 988,033 5.75 % $ 1,000,000 $ 315 $ ( 13,293 ) $ 987,022 5.75 %

Term Loan B 2029 (b) 800,000 ( 1,970 ) ( 15,235 ) 782,795 Variable — — — — — n/a

Revolver due 2025 (b) 153,146 — ( 1,473 ) 151,673 Variable 13,483 — ( 1,718 ) 11,765 Variable

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Long-term debt $ 1,972,445 $ ( 1,680 ) $ ( 29,040 ) $ 1,941,725 $ 1,048,020 $ 315 $ ( 15,138 ) $ 1,033,197

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Effective Interest Rate Cash Interest Amort.

Debt (Premium)/Discount Amort.

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

Premium Amort.

Debt Issuance Costs

& Other Fees Total Interest Expense Effective Interest Rate Cash Interest Amort.

& Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 14,375 $ ( 12 ) $ 518 $ 14,881 6.0 % $ 14,375 $ ( 12 ) $ 529 $ 14,892

Term Loan B due 2029 (b) 3.4 % 4,767 30 232 5,029 n/a — — — —

Revolver due 2025 (b) Variable 990 — 123 1,113 Variable 287 — 122 409

Finance lease - real estate (c) 5.6 % 192 — — 192 5.9 % 224 — 7 231

Non US lines of credit (d) Variable 7 — 3 10 Variable 4 — 4 8

Non US term loans (d) Variable 185 — 18 203 Variable 163 — 18 181

Other long term debt (e) Variable 61 — — 61 Variable 115 — 1 116

Capitalized interest ( 81 ) — — ( 81 ) ( 6 ) — — ( 6 )

Totals $ 20,496 $ 18 $ 894 $ 21,408 $ 15,162 $ ( 12 ) $ 681 $ 15,831

Six Months Ended March 31, 2022 Six Months Ended March 31, 2021

Effective Interest Rate Cash Interest Amort.

Debt (Premium)/Discount Amort.

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

Premium Amort.

2 unchanged sentences

Senior notes due 2028 (a) 6.0 % $ 28,750 $ ( 24 ) $ 1,036 $ 29,762 6.0 % $ 28,750 $ ( 24 ) $ 1,071 $ 29,797

Term Loan B due 2029 (b) 3.4 % 4,767 30 232 5,029 n/a — — — —

Revolver due 2025 (b) Variable 1,251 — 245 1,496 Variable 416 — 245 661

9 unchanged sentences

(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 ;

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

As of March 31, 2022, outstanding 2028 Senior Notes due totaled $ 1,000,000 ;

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

1 unchanged sentence

The 2028 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).

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 such notes, and at December 31, 2021, $ 12,775 remained to be amortized.

(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 ;

The fair value of the 2028 Senior Notes approximated $ 945,000 on March 31, 2022 based upon quoted market prices (level 1 inputs).

(b) On January 24, 2022, Griffon amended and restated its Revolving Credit Facility (as amended, "Credit Agreement") to provide for a new $ 800,000 Term Loan B facility, due January 24, 2029, in addition to its current $ 400,000 revolving credit facility ("Revolver"), and replaced LIBOR with SOFR (Secured Overnight Financing Rate).

The fair value of the Term Loan B facility approximated $ 792,000 on March 31, 2022 based upon quoted market prices (level 1 inputs).

The Term Loan B contains a SOFR floor of 0.50 % and a current spread of 2.75 %, for a total current interest rate of 3.25 %.

The Original Issue Discount for the Term Loan B was 99.75 %.

Additionally, there are two interest rate step-downs tied to achieving decreased secured leverage ratio thresholds.

The Term Loan B facility requires nominal quarterly principal payments equal to 0.25 % of the original outstanding principal amount, beginning with the quarter ended June 30, 2022;

potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds starting with the fiscal year ending September 30, 2023;

and a final balloon payment due at maturity.

Term Loan B borrowings may generally be repaid without penalty but may not be re-borrowed.

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

Term Loan B borrowings are secured by the same collateral as the Revolver.

In connection with this amendment, Griffon capitalized $ 15,466 of underwriting fees and other expenses incurred, which are being amortized over the term of the loan.

At March 31, 2022, $ 15,235 remained to be amortized.

The Revolver's maximum borrowing availability is $ 400,000 and it matures on March 22, 2025.

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

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

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

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

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.

In addition, on December 9, 2021, Griffon replaced the Revolver GBP LIBOR benchmark rate with a Sterling Overnight Index Average ("SONIA").

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

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

Current margins are 1.00 % for base rate loans, 2.00 % for SOFR loans and 2.00 % for SONIA loans.

The Revolver 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.

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

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

Both the Revolver and Term Loan B 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 March 31, 2022, there were $ 153,146 of outstanding borrowings under the Revolver;

outstanding standby letters of credit were $ 13,815 ;

2 unchanged sentences

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

At March 31, 2022, $ 13,757 was outstanding, net of issuance costs.

During the year-to-date period ended March 31, 2022, 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 buyout option in November 2021.

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 ($ 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 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

1 unchanged sentence

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

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 ( 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.

Griffon Australia is required to maintain a certain minimum equity level and is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 12,018 as of March 31, 2022) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.75 % LIBOR USD and 2.38 % Bankers Acceptance Rate CDN as of March 31, 2022).

The revolving facility matures in October 2022.

Garant is required to maintain a certain minimum equity.

At March 31, 2022, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 12,018 as of March 31, 2022) available.

During the period ended March 31,2022, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 18,375 term loan, AUD 20,000 revolver and AUD 15,000 receivable purchase facility agreement that was entered into in July 2016 and further amended in fiscal 2020.

Griffon Australia paid off the term loan in the amount of AUD 9,625 and canceled the AUD 20,000 revolver.

The amendment refinanced the existing AUD 15,000 receivable purchase facility.

The receivable purchase facility matures in March 2023, but is renewable upon mutual agreement with the lender.

The receivable purchase facility accrues interest at BBSY (Bank Bill Sap Rate) plus 1.25 %, respectively, per annum ( 1.31 % at March 31, 2022).

At March 31, 2022, there was no balance outstanding under the receivable purchase facility with AUD 15,000 ($ 11,273 as of March 31, 2022) available.

The receivable purchase facility is secured by substantially all of the assets of Griffon Australia and its subsidiaries.

Griffon Australia is required to maintain a certain minimum equity level.

In July 2018, The AMES Companies UK Ltd and its subsidiaries (collectively, "AMES UK") entered into a GBP 14,000 term loan, GBP 4,000 mortgage loan and GBP 5,000 revolver.

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 1.80 % ( 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 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 Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.92 % ( 2.61 % at March 31, 2022).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25 % ( 4.00 % as of March 31, 2022).

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

As of March 31, 2022, the revolver had an outstanding balance of GBP 2,827 ($ 3,713 as of March 31, 2022) while the term and mortgage loan balances amounted to GBP 12,145 ($ 15,948 as of March 31, 2022).

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

AMES UK is subject to a maximum leverage ratio and a minimum fixed charges cover ratio.

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

During the period ended March 31, 2022, AMES UK entered into a $ 8,500 trade loan facility agreement.

The trade loan facility has a maximum loan period of 135 days and is due on June 29, 2022.

The trade facility accrues interest at the Mid-point of the FED Target Range plus 2.50 % ( 2.88 % as of March 31, 2022).

The trade facility had an outstanding balance of $ 8,000 as of March 31, 2022.

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

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.

At March 31, 2022, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

NOTE 11 — SHAREHOLDERS’ EQUITY

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

During the six months ended March 31, 2022, the Company paid two quarterly cash dividends of $ 0.09 per share each.

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 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

On April 27, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.09 per share, payable on June 16, 2022 to shareholders of record as of the close of business on May 19, 2022.

On January 29, 2016, shareholders approved the Griffon Corporation 2016 Equity Incentive Plan (the "Original Incentive Plan") pursuant to which, among other things, under which awards of performance shares, performance units, stock options,

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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 Original Incentive Plan pursuant to which, among other things, 1,000,000 shares were added to the Original 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 December 31, 2021, there were 378,905 shares available for grant.

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

On February 17, 2022, shareholders approved the Amended and Restated 2016 Equity Incentive Plan (the “Amended Incentive Plan”), which amended and restated the Original Incentive Plan and pursuant to which, among other things, 1,200,000 shares were added to the Original Incentive Plan.

Options granted under the Amended 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 Amended Incentive Plan is 6,250,000 ( 600,000 of which may be issued as incentive stock options), plus (i) any shares that were reserved for issuance under the Original Incentive Plan as of the effective date of the Original Incentive Plan, and (ii) any shares underlying awards outstanding on such date under the 2011 Incentive Plan that were subsequently canceled or forfeited.

As of March 31, 2022, there were 867,180 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.

2 unchanged sentences

During the first quarter of 2022, Griffon granted 236,973 shares of restricted stock and restricted stock units.

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 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.

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

Furthermore, this included an 18,811 shares of 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.

During the second quarter of 2022, Griffon granted 711,725 shares of restricted stock.

This included 199,195 shares of restricted stock to nine executives with a vesting period of three years , with a total fair value of $ 1,494 , or a weighted average fair value of $ 22.50 per share.

This also included 454,146 shares of restricted stock granted to two senior executives with a vesting period of thirty-four months and a two -year post-vesting holding period, subject to the achievement of certain performance conditions relating to required levels of return on invested capital and the relative total shareholder return of Griffon's common stock as compared to a market index.

So long as the minimum performance condition is attained, the amount of shares that can vest will range from 113,538 to 454,146 .

The total fair value of these restricted shares, assuming achievement of the performance conditions at target, is approximately $ 5,456 , or a weighted average fair value of $ 24.03 per share.

Additionally, Griffon granted 58,384 restricted shares to the non-employee directors of Griffon with a vesting period of one year and a fair value of $ 1,375 , or a weighted average fair value of $ 23.55 per share.

During the six months ended March 31, 2022, 469,855 shares granted were issued out of treasury stock.

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Restricted stock $ 4,314 $ 4,286 $ 8,204 $ 7,714

ESOP 778 1,007 1,755 1,787

Total stock based compensation $ 5,092 $ 5,293 $ 9,959 $ 9,501

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 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.

During the six months ended March 31, 2022, Griffon did not purchase any shares of common stock under these repurchase programs.

As of March 31, 2022, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

During the six months ended March 31, 2022, 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 six months ended March 31, 2022, 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.

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 December 31,

Three Months Ended March 31, Six Months Ended March 31,

2022 2021 2022 2021

Common shares outstanding 57,032 56,684 57,032 56,684

5 unchanged sentences

Weighted average shares outstanding - diluted 53,430 53,264 53,602 53,211

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 13 – BUSINESS SEGMENTS

9 unchanged sentences

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

REVENUE 2022 2021 2022 2021

1 unchanged sentence

Home and Building Products 368,605 242,811 677,181 493,292

Defense Electronics 53,993 67,768

Subtotal 645,742 609,291

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

Total revenue $ 779,617 $ 574,682 $ 1,371,366 $ 1,116,205

2 unchanged sentences

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Residential repair and remodel $ 50,478 $ 50,560 $ 89,237 $ 96,160

13 unchanged sentences

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

For the Three Months Ended December 31,

For the Three Months Ended March 31,

CPP HBP Total CPP HBP Total

5 unchanged sentences

Consolidated revenue $ 411,012 $ 368,605 $ 779,617 $ 331,871 $ 242,811 $ 574,682

For the Six Months Ended March 31, 2022

CPP HBP Total CPP HBP Total

United States $ 429,646 $ 647,385 $ 1,077,031 $ 388,810 $ 467,486 $ 856,296

Europe 65,113 44 65,157 52,121 41 52,162

Canada 53,657 25,891 79,548 43,893 21,285 65,178

Australia 136,537 — 136,537 133,231 — 133,231

All other countries 9,232 3,861 13,093 4,858 4,480 9,338

Consolidated revenue $ 694,185 $ 677,181 $ 1,371,366 $ 622,913 $ 493,292 $ 1,116,205

Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Segment adjusted EBITDA”).

1 unchanged sentence

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Segment adjusted EBITDA:

1 unchanged sentence

Home and Building Products 104,474 40,060 160,771 88,429

Defense Electronics 4,472 5,585

Subtotal 76,983 86,667

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

Segment adjusted EBITDA 152,318 77,483 224,829 158,565

5 unchanged sentences

Acquisition costs ( 6,708 ) — ( 9,303 ) —

Proxy contest costs ( 2,291 ) —

Proxy expenses ( 4,661 ) — ( 6,952 ) —

Fair value step-up of acquired inventory sold ( 2,701 ) — ( 2,701 ) —

Income before taxes from continuing operations $ 83,104 $ 29,201 $ 107,327 $ 66,339

3 unchanged sentences

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

DEPRECIATION and AMORTIZATION 2022 2021 2022 2021

1 unchanged sentence

Home and Building Products 4,324 4,379 8,662 8,720

Defense Electronics — 2,676

Subtotal 12,944 15,216

Defense Electronics — ( 2,676 )

Total segment depreciation and amortization 16,115 12,999 29,059 25,539

4 unchanged sentences

Home and Building Products 2,403 1,998 5,752 4,113

Defense Electronics 853 2,904

Subtotal 11,332 11,926

Defense Electronics ( 853 ) ( 2,904 )

Total segment 11,457 8,811 21,936 17,833

1 unchanged sentence

Total consolidated capital expenditures $ 11,457 $ 8,813 $ 22,030 $ 17,835

ASSETS At December 31, 2021 At September 30, 2021

ASSETS At March 31, 2022 At September 30, 2021

Segment assets:

7 unchanged sentences

Consolidated total $ 3,787,023 $ 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 December 31,

Three Months Ended March 31, Six Months Ended March 31,

2022 2021 2022 2021

Interest cost $ 911 $ 745 $ 1,707 $ 1,489

3 unchanged sentences

Net periodic expense (income) $ ( 1,079 ) $ ( 227 ) $ ( 2,027 ) $ ( 454 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 15 – RECENT ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

Early adoption is permitted.

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

New Accounting Standards Implemented

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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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 16 – DISCONTINUED OPERATIONS

On September 27, 2021, Griffon announced it is exploring strategic alternatives for its DE segment, which consists of its Telephonics subsidiary, and on April 18, 2022, Griffon entered into a definitive agreement to sell Telephonics to TTM for $ 330,000 in cash.

The transaction is expected to close within the second calendar quarter of 2022.

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

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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.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Revenue $ 56,273 $ 60,150 $ 110,266 $ 127,918

4 unchanged sentences

Other income (expense)

Interest income, net 2 1 2 1

Gain on sale of business — ( 949 ) — 5,291

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Income from discontinued operations $ 7,118 $ ( 1,007 ) $ 9,511 $ 3,063

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

During the three and six months ended March 31, 2022, Income from discontinued operations includes $ 2,422 and $ 4,214 , respectively, 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.

Depreciation and amortization would have been approximately $ 2,400 and $ 5,100 in the three and six months ended March 31, 2022, respectively.

Provision (benefit) for income taxes includes $ 4,954 of estimated deferred tax benefits related to the anticipated disposition of the Telephonics subsidiary.

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

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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,

At March 31, At September 30,

CURRENT ASSETS

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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 December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

Assets of discontinued operations:

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Total liabilities of discontinued operations $ 7,718 $ 7,074

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.

At March 31, 2022 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 $ 7,718 and $ 7,074 , respectively.

There was no reported revenue in the quarter and six month period ended March 31 2022 and 2021.

GRIFFON CORPORATION AND SUBSIDIARIES

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(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

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

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.

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

On April 28, 2022, Griffon announced an accelerated timeline and reduced scope for the initiative, which will now be completed by the end of fiscal 2022.

These changes reflect the rapid progress made with the initiative, and reduced investment in facilities expansion and equipment given recent significant increases in construction and equipment costs.

Any remaining expenditures, after the end of fiscal 2022, including those related to the deployment of AMES' global information systems, will be included in the continuing operations of the business.

Future investments in equipment, particularly for automation, will be part of normal-course annual capital expenditures.

This initiative includes three key development areas.

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

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 .

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

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

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.

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

When fully implemented and the efficiencies are fully realized, we expect annual cash savings of $ 25,000 (previously $ 30,000 to $ 35,000 ).

The cost to implement this new business platform, over the duration of the project, will now include one-time charges of approximately $ 50,000 (previously $ 65,000 ) and capital investments of approximately $ 15,000 (previously $ 65,000 ), net of future proceeds from the sale of exited facilities.

In the quarter and six months ended March 31, 2022, CPP incurred pre-tax restructuring and related exit costs approximating $ 4,766 and $ 6,482 , respectively.

During the six months ended March 31, 2022, cash charges totaled $ 4,427 and non-cash, asset-related charges totaled $ 2,055 ;

the cash charges included $ 2,138 for one-time termination benefits and other personnel-related costs and $ 2,289 for facility exit costs.

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

Non-cash charges included a $ 1,766 impairment charge related to certain fixed assets at several manufacturing locations and $ 289 of inventory that have no recoverable value.

During the six months ended March 31, 2022, headcount was reduced by 20 .

In the quarter and six months ended March 31, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 7,502 and $ 10,581 , respectively.

During the six months ended March 31, 2021, cash charges totaled $ 7,891 and non-cash, asset-related charges totaled $ 2,690 ;

the cash charges included $ 1,084 for one-time termination benefits and other personnel related costs and $ 6,807 for facility and lease exit costs primarily driven by the consolidation of distribution facilities.

Non-cash charges of $ 2,690 predominantly related to inventory that have no recoverable value.

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 December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Cost of goods and services $ 2,455 $ 3,337 $ 2,777 $ 3,878

1 unchanged sentence

Total restructuring charges $ 4,766 $ 7,502 $ 6,482 $ 10,581

For the Three Months Ended December 31,

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 March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Personnel related costs $ 1,878 $ 722 $ 2,138 $ 1,084

2 unchanged sentences

Total $ 4,766 $ 7,502 $ 6,482 $ 10,581

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 1,878 1,122 1,766 4,766

Q2 Cash payments ( 1,883 ) ( 1,122 ) — ( 3,005 )

Q2 Non-cash charges — — ( 1,766 ) ( 1,766 )

Accrued liability at March 31, 2022 $ 398 $ 264 $ — $ 662

NOTE 18 – OTHER INCOME (EXPENSE)

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.

For the quarters ended March 31, 2022 and 2021, Other income (expense) of $ 1,675 and $ 1,081 , respectively, includes $ 168 and $ 320 , 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 $ 1,079 and $ 227 , respectively, as well as $( 331 ) and $ 55 , respectively, of net investment income (loss).

Other income (expense) also includes rental income of $ 462 in each of the three months ended March 31, 2022 and 2021.

Additionally, it includes royalty income of $ 616 for the three months ended March 31, 2022.

For the six months ended March 31, 2022 and 2021, Other income (expense) of $ 3,056 and $ 1,438 , respectively, includes $ 562 and $ 379 , 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 $ 2,027 and $ 454 , respectively, as well as $( 238 ) and $ 386 , respectively, of net investment income (loss).

Other income (expense) also includes rental income of $ 924 in each of the six months ended March 31, 2022 and 2021.

Additionally, it includes royalty income of $ 616 for the six months ended March 31, 2022.

NOTE 19 – WARRANTY LIABILITY

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.

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

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

1 unchanged sentence

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

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

Three Months Ended December 31,

Three Months Ended March 31, Six Months Ended March 31,

2022 2021 2022 2021

Balance, beginning of period $ 9,572 $ 6,232 $ 7,818 $ 6,268

1 unchanged sentence

Actual warranty costs incurred ( 3,755 ) ( 3,245 ) ( 5,462 ) ( 6,857 )

Other warranty liabilities assumed from acquisitions 6,353 — 6,353 —

Balance, end of period $ 17,958 $ 7,920 $ 17,958 $ 7,920

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 20 – OTHER COMPREHENSIVE INCOME (LOSS)

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

For the Three Months Ended December31,

For the Three Months Ended March 31,

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

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Total other comprehensive income (loss) $ 4,455 $ 494 $ 4,949 $ 5,883 $ ( 1,108 ) $ 4,775

For the Six Months Ended March 31,

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

Foreign currency translation adjustments $ 3,730 $ — $ 3,730 $ 13,862 $ — $ 13,862

Pension and other defined benefit plans 1,023 ( 215 ) 808 3,735 ( 784 ) 2,951

Cash flow hedges ( 3,342 ) 1,002 ( 2,340 ) 1,576 ( 473 ) 1,103

Total other comprehensive income (loss) $ 1,411 $ 787 $ 2,198 $ 19,173 $ ( 1,257 ) $ 17,916

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

At December 31, 2021 At September 30, 2021

At March 31, 2022 At September 30, 2021

Foreign currency translation adjustments $ ( 15,520 ) $ ( 19,250 )

2 unchanged sentences

$ ( 43,779 ) $ ( 45,977 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

Gain (Loss) 2022 2021 2022 2021

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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.

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.

We use the implicit rate when readily determinable.

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Components of operating lease costs are as follows:

For the Three Months Ended December 31,

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Fixed $ 9,906 $ 9,686 $ 19,653 $ 19,177

Variable (a), (b)

1,684 1,919 3,536 3,813

Short-term (b)

1,486 985 2,835 2,055

Total $ 13,076 $ 12,590 $ 26,024 $ 25,045

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(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 Three Months Ended December 31,

For the Six Months Ended March 31,

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

2 unchanged sentences

Total $ 23,911 $ 23,088

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:

December 31, 2021 September 30, 2021

March 31, 2022 September 30, 2021

Operating Leases:

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Total financing lease liabilities $ 15,348 $ 16,467

(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.

(1) Finance lease assets are recorded net of accumulated depreciation of $ 4,488 and $ 6,136 as of March 31, 2022 and September 30, 2021, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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):

At March 31, 2022, $ 13,757 was outstanding, net of issuance costs.

During the six months ended March 31, 2022, 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 buyout option in November 2021.

The aggregate future maturities of lease payments for operating leases and finance leases as of March 31, 2022 are as follows (in thousands):

Operating Leases Finance Leases

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Present value of lease liabilities $ 154,698 $ 15,348

(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:

(a) Excluding the six months ended March 31, 2022.

Average lease terms and discount rates at March 31, 2022 were as follows:

Weighted-average remaining lease term (years)

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The EPA also sent a request for information under Section 104(e) of CERCLA to each party.

Lightron and ISCP have informed the EPA that they are willing to participate in discussions regarding implementation of the RI/FS.

Lightron and ISCP have informed the

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

EPA that they are willing to participate in discussions regarding implementation of the RI/FS.

Lightron and ISCP have also submitted responses to certain items contained in the Section 104(e) information request, with additional responses to follow.

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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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

investigation of a small area on the site and of an area adjacent to the site perimeter.

While AMES was implementing the remediation required by the ROD, DEC requested additional investigation of a small area on the site and of an area adjacent to the site perimeter.

AMES investigated the on-site area and has completed remediation of that small area under a workplan approved by DEC.

AMES also completed a workplan approved by DEC to investigate the areas adjacent to the site perimeter.

AMES also completed a workplan approved by DEC to investigate the areas adjacent to the site perimeter, and is now performing a statistical analysis to determine the area, if any, required to be remediated.

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.

Memphis, TN site.

Hunter Fan Company (“Hunter”) operated its headquarters and a production plant in Memphis, Tennessee for over 50 years (the “Memphis Site”).

While Hunter completed certain on-site remediation of PCB-contaminated soils, Hunter did not investigate the extent to which PCBs existed beneath the building itself nor determine whether off-site areas had been impacted.

Hunter vacated the Memphis Site approximately twenty years ago, and the on-site buildings have now been demolished.

The State of Tennessee Department of Environment and Conservation (“TDEC”) identified the Memphis Site as being potentially contaminated, raising the possibility that site operations could have resulted in soil and groundwater contamination involving volatile organic compounds and metals.

The TDEC performed a preliminary assessment of the site and recommended to the United States Environmental Protection Agency (“EPA”) that the site be listed on the National Priorities List established under CERCLA.

The TDEC further recommended that the EPA fund an investigation of potential soil gas contamination in receptors near the site.

The TDEC has also indicated that it will proceed with this investigation if the EPA does not act.

It is unknown whether the EPA will add the Memphis Site to the National Priorities List, whether a site investigation will reveal contamination and, if there is contamination, the extent of such contamination.

However, given that certain PCB work was not completed in the past and the TDEC’s stated intent for the EPA to perform an investigation (and the statement by the TDEC that it will perform the investigation if the EPA will not), liability is probable in this matter.

There are other potentially responsible parties for this site, including a former owner of Hunter;

Hunter has notified such former owner of this matter, which may have liability for any required remediation.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

If the EPA decides to add this site to the National Priorities List, a Remedial Investigation/Feasibility Study (“RI/FS”) will be required.

Hunter expects that EPA will ask it to perform this work.

If Hunter does not reach an agreement with the EPA to perform this work, the EPA will implement the RI/FS on its own.

Should the EPA implement the RI/FS or perform further studies and/or subsequently remediate the site without first reaching an agreement with one or more relevant parties, the EPA would likely seek from such parties, including Hunter, reimbursement for the costs incurred.

General legal

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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