What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-11-18 compared with 2021-11-17 · 262 added, 268 removed, 357 unchanged (60% of the section changed)

7 unchanged sentences

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

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

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

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

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

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

On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary.

On June 27, 2022, we completed the sale of Telephonics to TTM Technologies, Inc.

(NASDAQ:TTMI) ("TTM") for $330,000 in cash, excluding customary post-closing adjustments, primarily related to working capital.

Since September 2021, we have classified the results of operations of our Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and classified the related assets and liabilities associated with the discontinued operation as held for sale in the consolidated balance sheets.

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

Griffon now conducts its operations through two reportable segments:

• Consumer and Professional Products ("CPP") conducts its operations through AMES.

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

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

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

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

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

CPP revenue was 47%, 54%, and 55% of Griffon’s consolidated revenue in 2022, 2021 and 2020, respectively.

2 unchanged sentences

Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes.

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

Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands.

HBP revenue was 53%, 46% and 45% of Griffon’s consolidated revenue in 2022, 2021 and 2020, respectively.

On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction.

This process is active and discussions with potential counterparties are ongoing with respect to a number of these options.

The Committee on Strategic Considerations, a committee comprised of independent directors who serve on Griffon's Board, is overseeing the process and working with Griffon's management and Goldman Sachs & Co.

LLC, the Company's financial advisor.

There is no assurance that the process will result in any transaction being entered into or consummated.

On December 17, 2021, Griffon entered into a definitive agreement to acquire Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $845,000 and completed the acquisition on January 24, 2022.

Hunter, part of our CPP segment, complements and diversifies our portfolio of leading consumer brands and products.

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

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

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

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

Quatro is expected

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

Quatro contributed approximately $5,000 in revenue in the first twelve months after the acquisition.

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

The Company used a portion of the net proceeds to repay outstanding borrowings under its Credit Agreement.

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

The Company used the remainder of the proceeds for working capital and general corporate purposes.

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

5 unchanged sentences

Update of COVID-19 on Our Business

The health and safety of our employees, our customers and their families is a high priority for Griffon.

The health and safety of our employees, our customers and their families is always a high priority for Griffon.

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

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

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

While this helps mitigate the effects of global supplier and transportation disruptions, we are still impacted by these disruptions.

Our supply chain has experienced certain disruptions which, together with other factors such as a shortage of labor, has resulted in longer delivery lead times and restricted manufacturing capacity for certain of our products.

Commodity prices have increased during COVID-19 and may continue to increase, and we may not be able to pass off all or any of such price increases to our customers on a timely basis, or at all.

It is difficult to predict whether the supply chain disruptions that impact us will improve, worsen or remain the same in the near term.

Our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above;

might be limited in their production capacity due to complying with restrictions relating to the operation of businesses during the COVID-19 pandemic;

When COVID-19 struck, we 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.

While many of these precautions have been relaxed or eliminated as the health risk of COVID-19 has decreased, we would not hesitate to reinstitute and/or modify these policies and procedures as necessary should the health risk return to an unacceptable level.

In such event, our businesses or our suppliers could be required by government authorities to temporarily cease operations;

might be limited in their production capacity due to complying with restrictions relating to the operation of businesses to mitigate the impacts of COVID-19;

or could suffer their own supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.

During fiscal 2021 and through the date of this filing, all of our businesses have experienced normal or better order patterns compared with the same time period last year.

executive orders issued in 2020, which required workers to remain at home unless their work is critical, essential, or life-sustaining, have been lifted.

Regardless, we believe that, based on the various standards published to date, the work our employees are performing are either critical, essential and/or life-sustaining for the following reasons:

1) HBP residential and commercial garage doors, rolling steel doors and related products that (a) provide protection and support for the efficient and safe movement of people, goods, and equipment in and out of residential and commercial facilities, (b) help prevent fires from spreading from one location to another, and (c) protect warehouses and homes, and their contents, from damage caused by strong weather events such as hurricanes and tornadoes;

and 2) CPP tools and storage products provide critical support for the national infrastructure including construction, maintenance, manufacturing and natural disaster recovery, and is part of the essential supply base to many of its largest customers including Home Depot, Lowe's and Menards.

Our AMES international facilities are currently fully operational, as they meet the applicable standards in their respective countries.

On September 9, 2021, President Biden announced a proposed new rule requiring that all employers with at least 100 employees require that their employees be fully vaccinated or tested weekly.

Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an emergency temporary standard regulation to carry out this mandate.

On November 6, 2021, the Unites States Court of Appeals for the Fifth Circuit granted a stay of the emergency temporary standard, and on November 12, 2021 the Court upheld its stay and barred OSHA from enforcing the mandate “pending adequate judicial review” of a motion for permanent injunction.

At this time, it is unclear, among other things, when the vaccine mandate will go into effect (or if it will go into effect at all);

whether it will apply to all employees or only to employees who work in the office;

and how compliance will be documented.

As a company with more than 100 employees, it is anticipated that, should the vaccine mandate go into effect, we would be subject to the OSHA regulation concerning COVID-19 vaccination and the vaccine mandate.

Should the mandate apply to us, we may be required to implement a requirement that all of our employees get vaccinated, subject to limited exceptions.

At this time, it is not possible to predict the impact that a vaccine mandate, or a vaccine requirement should we adopt one, will have on us or on our workforce.

Any vaccine requirement or vaccine mandate, if implemented, may result in employee attrition, which could materially and adversely affect our business and results of operations.

Griffon believes it has adequate liquidity to invest in its existing businesses and execute its business plan, while managing its capital structure on both a short-term and long-term basis.

In January 2020, Griffon increased total borrowing capacity under its Credit Agreement by $50,000, to $400,000 (of which $370,927 was available at September 30, 2021), and extended maturity of the facility to 2025.

In addition, the Credit Agreement has a $100,000 accordion feature (subject to lender consent).

In February 2020, Griffon refinanced $850,000 of its $1,000,000 of senior notes due 2022 with new 5.75% senior notes with a maturity of 2028, and in June 2020 refinanced the remaining $150,000 under the same terms and indenture as the $850,000 senior notes

In August 2020, we completed a Public Offering of 8,700,000 shares of our common stock for total net proceeds of $178,165;

a portion of these net proceeds were used to repay outstanding borrowing under our Credit Agreement.

At September 30, 2021 Griffon had cash and equivalents of $248,653.

We will continue to actively monitor the situation and may take further actions that impact our operations as may be required by federal, state or local authorities or that we determine is in the best interests of our employees, customers, suppliers and shareholders.

While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our businesses, results of operations, liquidity or capital resources, we believe it is important to discuss where our company stands today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses.

While we are unable to determine or predict the nature, duration or scope of the overall impact COVID-19 will have on our businesses, results of operations, liquidity or capital resources, we believe it is important to discuss where our company stands today, how we have responded (and will continue to respond) to COVID 19 and how our operations and financial condition may change as COVID-19 evolves.

See information provided in Part 1, Item 1A, “Risk Factors” in this Form 10-K.

CONSOLIDATED RESULTS OF OPERATIONS

2022 Compared to 2021

Revenue for the year ended September 30, 2021 of $2,270,626 compared to $2,066,546 in the year ended September 30, 2020 increased 10% resulting from increased revenue at HBP and CPP of 12% and 8%, respectively.

Revenue for the year ended September 30, 2022 of $2,848,488 compared to $2,270,626 for the year ended September 30, 2021 increased 25% resulting from increased revenue at HBP and CPP of 45% and 9%, respectively.

Hunter (purchased on January 24, 2022) contributed $246,474 of revenue in 2022.

Gross profit for 2022 was $936,886 compared to $641,113 in 2021.

Gross margin as a percent of sales (“gross margin”) for 2021 and 2020 was 28.2% and 28.3%, respectively.

Gross profit as a percent of sales (“gross margin”) for 2022 and 2021 was 32.9% and 28.2%, respectively.

In the years ended 2022 and 2021, gross profit included restructuring charges of $7,964 and $7,923, respectively.

Excluding restructuring charges from both years, gross profit would have been $649,036 or 28.6% of revenue, compared to $588,153 or 28.5% in the prior year.

In the year ended 2022, gross profit also included amortization of $5,401 related to the fair value step-up of acquired inventory sold in connection with the Hunter Fan acquisition.

Excluding these charges from both years, gross profit would have been $950,251 or 33.4% of revenue, compared to $649,036 or 28.6% in the prior year.

Selling, general and administrative (“SG&A”) expenses in 2022 of $608,926 increased 29% from $470,530 in 2021.

The 2022 SG&A expenses included restructuring charges of $8,818, acquisition costs of $9,303, strategic review (retention and other) of $9,683, special dividend ESOP charges of $10,538, proxy expenses of $6,952.

The 2021 SG&A expenses included restructuring charges of $13,495.

The 2020 SG&A expenses included restructuring charges of $9,510, acquisition costs of $2,960 and income from the reversal of contingent consideration related to the Kelkay acquisition of $1,733.

Excluding these items from both periods, the 2021 SG&A expenses would have been $457,035, or 20.1% of revenue compared to $433,717 or 21.0%, with the increase in expenses primarily due to increased distribution and shipping costs.

Interest expense in 2021 of $63,175 decreased 5% compared to 2020 of $66,544, primarily as a result of decreased outstanding borrowings and decreased variable interest rates on our Revolving Credit Facility.

Other income (expense) of $3,331 and $2,885 in 2021 and 2020, respectively, includes $81 and $915, respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $283 and $184, respectively, of net gains on investments, and $907 and $1,559, respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $1,848 in 2021 and 2020.

Griffon reported Income before tax from continuing operations for 2021 of $111,179 compared to $68,705 for 2020.

Excluding these items from both periods, 2022 SG&A expenses would have been $563,632, or 19.8% of revenue compared to $457,035 or 20.1%, with the increase in expenses primarily due to the inclusion of expenses related to Hunter, which was acquired in January 2022, and increased distribution and shipping costs.

In connection with the preparation of our financial statements for the fiscal year ended September 30, 2022, Griffon performed its annual impairment testing of its goodwill and indefinite lived intangibles.

Indicators of impairment were present due to decreases in comparable company market multiples for the CPP reporting units and increased interest rates, and the related impact on weighted average cost of capital rates.

Accordingly, a quantitative assessment was performed, which resulted in non-cash, pre-tax impairment charges for goodwill and indefinite lived intangibles of $342,027 and $175,000.

respectively, recorded in the fourth fiscal quarter of 2022.

Interest expense in 2022 of $84,379 increased 34% compared to 2021 of $63,175, primarily as a result of increased debt levels related to the $800,000 seven year Term Loan B facility entered into in connection with the Hunter acquisition, of which Griffon repaid $300,000 aggregate principal amount in the third quarter of 2022.

Other income (expense) of $6,881 and $2,107 in 2022 and 2021, respectively, includes $305 and ($81), respectively, of net currency exchange transaction gains (losses) from receivables and payables held in non-functional currencies, $(225) and $283, respectively, of net gains (losses) on investments, and $4,256 and $907, respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $689 in 2022 and $624 in 2021.

Additionally, it includes royalty income of $2,250 for the year ended September 30, 2022.

Griffon reported Income (loss) before tax from continuing operations for 2022 of $(270,879) compared to $109,955 for 2021.

In 2022, the Company had an effective income tax rate of (6.2)% compared to 36.1% in 2021.

3 unchanged sentences

These rates reflect the impact of tax reserves and changes in earnings mix between U.S.

Income from continuing operations for 2021 was $71,239, or $1.33 per share, compared to $42,443, or $0.94 per share in 2020.

Loss from continuing operations for 2022 was $287,715, or $5.57 per share, compared to Income from continuing operations of $70,302, or $1.32 per share in 2021.

The 2022 income from continuing operations included the following:

– Restructuring charges of $16,782 ($12,479, net of tax, or $0.23 per share);

– Debt extinguishment, net $4,529 ($3,474, net of tax, or $0.06 per share);

– Acquisition costs of $9,303 ($8,149, net of tax, or $0.15 per share);

– Strategic review - retention and other of $9,683 ($7,280, net of tax, or $0.13 per share);

– Special dividend ESOP charges of $10,538 ($8,083, net of tax, or $0.15 per share);

– Proxy expenses of $6,952 ($5,359, net of tax, or $0.10 per share);

– Fair value step-up of acquired inventory sold of $5,401 ($4,012, net of tax, or $0.07 per share);

– Goodwill and intangible asset impairments of $517,027 ($454,753, net of tax, or $8.43 per share);

– Discrete and certain other tax provision, net, of $3,913 or 0.07 per share.

1 unchanged sentence

– Restructuring charges of $21,418 ($16,131, net of tax, or $0.30 per share);

– Loss from debt extinguishment $7,925 ($6,167, net of tax, or $0.14 per share);

– Acquisition costs of $2,960 ($2,297, net of tax, or $0.05 per share);

– Acquisition contingent consideration benefit of $1,733 ($1,403, net of tax, or $0.03 per share);

– Discrete and certain other tax provision, net, of $3,245 or $0.06 per share.

1 unchanged sentence

2021 Compared to 2020

Revenue for the year ended September 30, 2020 of $2,066,546 increased 10% compared to $1,874,248 in the year ended September 30, 2019, primarily driven by increased consumer demand for home improvement projects at both CPP and HBP.

Organic growth was 9%.

Gross profit for 2020 was $583,994 compared to $516,845 in 2019, with gross margin of 28.3% in 2020, compared to 27.6% in 2019.

In 2020, gross profit included restructuring charges of $4,159.

Excluding restructuring charges in 2020, gross profit would have been $588,153 or 28.5% of revenue compared to $516,845 or 27.6% in the prior year.

Gross profit for 2021 was $641,113 compared to $583,994 in 2020.

Gross margin as a percent of sales (“gross margin”) for 2021 and 2020 was 28.2% and 28.3%, respectively.

In the years ended 2021 and 2020, gross profit included restructuring charges of $7,923 and $4,159, respectively.

Excluding restructuring charges from both years, gross profit would have been $649,036 or 28.6% of revenue, compared to $588,153 or 28.5% in the prior year.

Selling, general and administrative (“SG&A”) expenses in 2021 of $470,530 increased 6% from $444,454 in 2020.

The 2020 SG&A expenses included restructuring charges of $9,510, acquisition costs of $2,960 and the reversal of contingent consideration related to the Kelkay acquisition of $1,733.

The 2019 SG&A expenses include income from the reversal of contingent consideration related to the Kelkay acquisition of $1,646.

Excluding these items from both periods, the 2020 SG&A expenses would have been $433,717 or 21.0% of revenue compared to $409,985 or 21.9%, with the increase in expenses primarily due to the Apta acquisition and increased management incentives, partially offset by COVID-19 related reduced travel expenses.

Interest expense in 2020 of $66,544 decreased 3% compared to 2019 of $68,312, primarily as a result of decreased outstanding borrowings and variable interest rates on our Revolving Credit Facility.

Other income (expense) of $2,885 and $5,230 in 2020 and 2019, respectively, includes $915 and $438, respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $184 and $(40), respectively, of net gains or (losses) on investments, and $1,559 and $3,148, respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $1,848 in 2020 and 2019.

The 2021 SG&A expenses included restructuring charges of $13,495.

The 2020 SG&A expenses included restructuring charges of $9,510, acquisition costs of $2,960 and income from the reversal of contingent consideration related to the Kelkay acquisition of $1,733.

Other income (expense) of $2,107 and $1,661 in 2021 and 2020, respectively, includes $81 and $915, respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $283 and $184, respectively, of net gains on investments, and $907 and $1,559, respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $624 in both 2021 and 2020.

Griffon reported Income before tax from continuing operations for 2021 of $109,955 compared to $67,481 for 2020.

In 2020, the Company recognized an effective income tax rate of 38.2% compared to 44.9% in 2019.

In 2021, the Company had an effective income tax rate of 36.1% compared to 38.6% in 2020.

The 2021 tax rate included $3,245 of discrete and certain other tax provisions, net, and other items that affect comparability, as listed below.

The 2019 tax rate included $1,786 of discrete and certain other tax provisions, net.

The 2020 tax rate included $966 of discrete and certain other tax provisions, net, and other items that affect comparability, as listed below.

Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2021 and 2020 were 31.7% and 33.9%, respectively.

3 unchanged sentences

– Restructuring charges of $21,418 ($16,131, net of tax, or $0.30 per share);

– Discrete and certain other tax provision, net, of $3,245 or $0.06 per share.

The 2020 income from continuing operations included the following:

– Restructuring charges of $13,669 ($10,177, net of tax, or $0.23 per share);

– Loss from debt extinguishment $7,925 ($6,167, net of tax, or $0.14 per share);

2 unchanged sentences

– Discrete and certain other tax provision, net, of $966 or $0.02 per share.

The 2019 Income from continuing operations included a benefit from the reversal of contingent consideration related to the Kelkay acquisition of $1,646 ($1,333, net of tax, or $0.03 per share) and discrete and certain other tax provisions, net, of $1,786 or $0.04 per share.

Excluding these items from both reporting periods, 2020 Income from continuing operations would have been $60,646, or $1.35 share compared to $25,923, or $0.60 per share, in 2019.

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, loss on debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable.

Excluding these items from both reporting periods, 2021 Income from continuing operations would have been $89,678, or $1.68 per share compared to $59,647, or $1.33 per share, in 2020.

Griffon evaluates performance based on Earnings (loss) per share and Income (loss) from continuing operations excluding non-cash impairment charges, restructuring charges, debt extinguishment, acquisition related expenses, discrete and certain other tax items, as well other items that may affect comparability, as applicable.

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

The following table provides a reconciliation of Income from continuing operations to Adjusted income from continuing operations and Earnings per common share from continuing operations to Adjusted earnings per common share from continuing operations:

The following table provides a reconciliation of Income (loss) from continuing operations to Adjusted income from continuing operations and Earnings (loss) per common share from continuing operations to Adjusted earnings per common share from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES

RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS

RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS

TO ADJUSTED INCOME FROM CONTINUING OPERATIONS

1 unchanged sentence

2022 2021 2020

Income from continuing operations $ 71,239 $ 42,443 $ 25,470

Income (loss) from continuing operations $ (287,715) $ 70,302 $ 41,444

Adjusting items:

Restructuring charges 16,782 21,418 13,669

Loss from debt extinguishment — 7,925 —

Debt extinguishment, net 4,529 — 7,925

Acquisition costs 9,303 — 2,960

Strategic review - retention and other 9,683 — —

Acquisition contingent consideration — — (1,733)

Special dividend ESOP charges 10,538 — —

Proxy expenses 6,952 — —

Fair value step-up of acquired inventory sold 5,401 — —

Goodwill and intangible asset impairments 517,027 — —

Tax impact of above items 1

Discrete and other certain tax provisions 3,245 965 1,786

(76,627) (5,287) (5,584)

Discrete and other certain tax provision 3,913 3,245 966

Adjusted income from continuing operations $ 219,786 $ 89,678 $ 59,647

Earnings per common share from continuing operations $ 1.33 $ 0.94 $ 0.59

Earnings (loss) per common share from continuing operations $ (5.57) $ 1.32 $ 0.92

Adjusting items, net of tax:

Anti-dilutive share impact 2

Restructuring charges 0.23 0.30 0.23

Loss from debt extinguishment — 0.14 —

Debt extinguishment, net 0.06 — 0.14

Acquisition costs 0.15 — 0.05

Strategic review - retention and other 0.13 — —

Acquisition contingent consideration — — (0.03)

Discrete and other certain tax provisions 0.06 0.02 0.04

Special dividend ESOP charges 0.15 — —

Proxy expenses 0.10 — —

Fair value step-up of acquired inventory sold 0.07 — —

Goodwill and intangible asset impairments 8.43 — —

Discrete and other certain tax (benefit) provision 0.07 0.06 0.02

Adjusted earnings per share from continuing operations $ 4.07 1.68 $ 1.33

Weighted-average shares outstanding (in thousands) 51,672 53,369 45,015

Diluted weighted average shares outstanding (in thousands) 2

53,966 53,369 45,015

Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.

The tax impact for the above reconciling adjustments from GAAP to non-GAAP Income from continuing operations and the related EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments.

(1) Tax impact for the above reconciling adjustments from GAAP to non-GAAP Income from continuing operations and the related EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments.

(2) Loss from continuing operations is calculated using basic shares on the face of the income statement.

Per share impact of using diluted shares represents the impact of converting from the basic shares used in calculating earnings per share from the Loss from continuing operations to the diluted shares used in calculating earnings per share form the adjusted income from continuing operations.

REPORTABLE SEGMENTS

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

Griffon evaluates performance and allocates resources based on each segment's operating results from continuing operations before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (primarily corporate overhead), non-cash impairment charges, restructuring charges, debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure).

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

12 unchanged sentences

2022 Compared to 2021

CPP revenue in 2021 increased $90,285, or 8%, compared to 2020, comprised of a 3% increase in volume, driven by increased consumer demand across all international geographies, partially offset by reduced volume in the U.S.

due to labor, transportation and supply chain disruptions.

Revenue also benefited from favorable price and mix of 1%, and a favorable impact from foreign exchange of 4%.

CPP Adjusted EBITDA in 2021 increased $11,620 or 11% to $115,673 compared to $104,053 in 2020.

The favorable variance resulted primarily from the increased revenue noted above and a favorable foreign exchange impact of 5%, partially offset by increased U.S.

material costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

Segment depreciation and amortization increased $1,645 from the comparable prior year period primarily due to the onset of depreciation for new assets placed in service.

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

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

Quatro is expected

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

On November 29, 2019, AMES acquired Vatre Group Limited ("Apta"), a leading U.K.

supplier of innovative garden pottery and associated products sold to leading UK and Ireland garden centers for approximately $10,500 (GBP 8,750), inclusive of a post-closing working capital adjustment, net of cash acquired.

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

market and increases its in-country operational footprint.

Apta contributed approximately $20,000 in revenue in the first 12 months after the acquisition.

CPP revenue in 2022 increased $112,088, or 9%, compared to 2021, primarily resulting from a 20% or $246,474 contribution from the Hunter acquisition, and price and mix of 11%.

These benefits were partially offset by a 20% reduction in volume primarily from reduced consumer demand and rebalancing of customer inventory levels in North America and the United Kingdom (U.K.), in part offset by Australia.

Foreign exchange was an unfavorable impact of 2%.

CPP Adjusted EBITDA in 2022 decreased 14% to $99,308 compared to $115,673 in 2021.

Excluding the Hunter contribution of $43,579, EBITDA of $55,729 decreased 52% primarily due to the unfavorable impact of the reduced volume noted above and the related impact on manufacturing absorption, and increased material, labor and transportation costs, partially offset by the benefits of price and mix.

The year ended September 30, 2022 included increased demurrage and detention costs, primarily related to COVID-19 and global supply chain disruptions, of approximately $15,172 ($9,512 related to Hunter).

Segment depreciation and amortization increased $13,129 from the comparable prior year period primarily due to depreciation for new assets placed in service and the Hunter assets acquired.

On January 24, 2022, Griffon completed the acquisition of Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans for a contractual purchase price of $845,000.

Hunter adds to Griffon's CPP segment, complementing and diversifying our portfolio of leading consumer brands and products.

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 approximately AU$3,500.

Strategic Initiative and 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.

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

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

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

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

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

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

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

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

The 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.

In connection with this initiative, during the years ended September 30, 2021 and 2020, CPP incurred pre-tax restructuring and related exit costs approximating $21,418 and $13,669, respectively.

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

the cash charges included $8,810 for one-time termination benefits and other personnel-related costs and $14,930 for facility and lease exit costs primarily driven by the consolidation of distribution facilities and system optimization.

operations, and on November 12, 2020, Griffon announced that CPP was 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 a reduced scope and an accelerated timeline for the initiative, which was completed in 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 included three key development areas.

First, certain AMES U.S.

and global operations were consolidated to optimize facilities footprint and talent.

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

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

We continue to expect that this initiative with result in annual cash savings of $25,000.

Realization of expected cash savings will begin in the first quarter of fiscal 2023.

The cost to implement this new business platform, over the duration of the project, included one-time charges of approximately $51,869 and capital investments of approximately $15,000, net of future proceeds from the sale of exited facilities.

Cumulative charges of $51,869 consisted of cash charges totaling $35,691 and non-cash, asset-related charges totaling $16,178;

the cash charges included $12,934 for one-time termination benefits and other personnel-related costs and $22,757 for facility exit costs.

During the years ended September 30, 2022 and 2021, CPP incurred pre-tax restructuring and related exit costs approximating $16,782 and $21,418, respectively.

During the years ended September, 30, 2022 and 2021, capital expenditures of $6,337 and $8,774, respectively, were driven by investment in CPP business intelligence systems and e-commerce facility.

1 unchanged sentence

Personnel related costs Facilities, exit costs and other Facility and other Total Capital Investments

Domestic Expansion $ 12,000 $ 4,000 $ 19,000 35,000 $ 40,000

Global Expansion 14,000 16,000 — 30,000 25,000

Total Anticipated Charges 26,000 20,000 19,000 65,000 65,000

Phase I $ 12,000 $ 4,000 $ 19,000 35,000 $ 40,000

Phase II 14,000 16,000 — 30,000 25,000

Increase (Reduction) in Scope (13,066) 2,757 (2,822) (13,131) (50,000)

Total Charges 12,934 22,757 16,178 51,869 15,000

Total 2020 restructuring charges (5,620) (3,357) (4,692) (13,669) (6,733)

Total 2021 restructuring charges (3,190) (11,573) (6,655) (21,418) (8,774)

Total 2022 restructuring charges (4,124) (7,827) (4,831) (16,782) (6,337)

Total cumulative charges $ (12,934) $ (22,757) $ (16,178) $ (51,869) $ (21,844)

Estimate to Complete $ 17,190 $ 5,070 $ 7,653 $ 29,913 $ 49,493

Estimate to Complete $ — $ — $ — $ — $ (6,844) (a)

(a) Includes future proceeds from the sale of exited facilities.

2021 Compared to 2020

CPP revenue in 2020 increased $138,625, or 14%, compared to 2019, primarily from a 12% increase in volume, due to increased consumer demand for home improvement initiatives across most of our geographic regions supplemented by COVID-19 stay at home orders, favorable price and mix of 1% and an incremental 2% revenue contribution from the Apta acquisition, partially offset by an unfavorable impact of foreign exchange of 1%.

Organic growth was 12%.

due to labor, transportation and supply chain disruptions.

Revenue also benefited from favorable price and mix of 1%, and a favorable impact from foreign exchange of 4%.

CPP Adjusted EBITDA in 2021 increased $11,620 or 11% to $115,673 compared to $104,053 in 2020.

The favorable variance resulted primarily from the increased revenue noted above, partially offset by increased tariffs, COVID-19 related inefficiencies and direct costs, and an unfavorable foreign exchange impact of 1%.

Direct COVID-19 related expenses totaled approximately $5,000 in 2020.

The favorable variance resulted primarily from the increased revenue noted above and a favorable foreign exchange impact of 5%, partially offset by increased U.S.

material costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

Home and Building Products

7 unchanged sentences

2022 Compared to 2021

HBP revenue in 2021 increased $113,795, or 12%, compared to 2020, primarily due to favorable mix and pricing of 8% driven by both residential and commercial, and increased volume of 4% equally driven by both residential and commercial.

HBP Adjusted EBITDA in 2021 increased $27,384, or 18% to $181,015 compared to $153,631 in 2020.

EBITDA benefited from the increased revenue noted above, partially offset by increased material costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

HBP revenue in 2022 increased $465,774, or 45%, compared to 2021, primarily due to favorable pricing and mix of 47% driven by both residential and commercial.

Total volume decreased 2%, primarily due to labor and supply chain disruptions impacting residential deliveries, partially offset by increased commercial volume.

HBP Adjusted EBITDA in 2022 increased 128% to $412,738 compared to $181,015 in 2021.

EBITDA benefited from the increased revenue noted above, partially offset by increased material, labor and transportation costs.

Segment depreciation and amortization decreased $831 from the comparable prior year period primarily due to fully depreciated assets.

2021 Compared to 2020

HBP revenue in 2020 increased $53,673, or 6%, compared to 2019, with 4% from volume and 2% from favorable mix and pricing.

HBP Adjusted EBITDA in 2021 increased $27,384, or 18% to $181,015 compared to $153,631 in 2020.

The favorable variance resulted from the increased revenue noted above and general operational efficiency improvements, partially offset by COVID-19 related inefficiencies and direct costs.

Direct COVID-19 related expenses totaled approximately $2,000 in 2020.

EBITDA benefited from the increased revenue noted above, partially offset by increased material costs coupled with the lag in realization of price increases and COVID-19 related inefficiencies.

Unallocated Amounts

3 unchanged sentences

Depreciation and amortization of $64,658 in 2022 compared to $52,302 in 2021;

the increase was primarily due to depreciation for new assets placed in service.

the increase was primarily due to depreciation for new assets placed in service and the Hunter assets acquired.

Depreciation and amortization of $52,302 in 2021 compared to $52,100 in 2020;

1 unchanged sentence

Comprehensive Income (Loss)

During 2021, total other comprehensive income (loss), net of taxes, of $26,115 included a gain of $6,433 from foreign currency translation adjustments primarily due to the strengthening of the Canadian, British and Australian currencies, all in comparison to the U.S.

During 2022, total other comprehensive income (loss), net of taxes, of $(36,761) included a loss of $37,920 from foreign currency translation adjustments primarily due to the weakening of the British, Australian and Canadian currencies, all in comparison to the U.S.

a $1,503 gain from pension and other post-retirement benefits, primarily associated with an increase in the assumed discount rate compared to 2021;

and a $344 loss on cash flow hedges.

During 2021, total other comprehensive income (loss), net of taxes, of $26,115 included a gain of $6,433 from foreign currency translation adjustments primarily due to the strengthening of the British, Australian and Canadian currencies, all in comparison to the U.S.

a $17,796 gain from pension and other post-retirement benefits, primarily related to the change between actual and expected return on assets compared to 2020;

and a $1,886 gain on cash flow hedges.

During 2020, total other comprehensive income (loss), net of taxes, of $(6,176) included a gain of $5,601 from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian, British and Australian currencies, all in comparison to the U.S.

a $11,784 loss from Pension and other post-retirement benefits, primarily associated with a decrease in the assumed discount rate compared to 2019;

and a $7 gain on cash flow hedges.

DISCONTINUED OPERATIONS

Defense Electronics

On September 27, 2021, Griffon announced it will explore strategic alternatives for its DE segment, which consists of its Telephonics subsidiary.

As a result, the DE segment results have been classified as a discontinued operation.

For the Years Ended September 30,

2021 2020 2019

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

Adjusted EBITDA $ 20,486 7.6 % $ 25,228 7.4 % $ 35,104 10.5 %

Depreciation and amortization $ 10,762 $ 10,645 $ 10,667

2021 Compared to 2020

DE revenue in 2021 decreased $69,916, or 21%, compared to 2020.

The current and prior year results include revenue from the SEG business of $6,713 and $31,758, respectively.

Excluding SEG from both years, revenue decreased $44,871, or 15%.

The decrease was driven by reduced volume due to delayed awards for Surveillance Systems and decreased deliveries for Communications Systems, partially offset by increased Radar Systems volume.

DE Adjusted EBITDA in 2021 decreased $4,742, or 19% to $20,486, compared to $25,228 in 2020.

The current and prior year results include Adjusted EBITDA from the SEG business of $412 and $1,491, respectively.

Excluding SEG from both years, Adjusted EBITDA decreased $3,663, or 15%.

The decrease was due to the reduced revenue noted above and cost growth primarily for Surveillance Systems, partially offset by favorable program performance for Radar Systems and reduced operating expenses.

DE's depreciation and amortization remained consistent with the prior year period.

On December 18, 2020, DE completed the sale of its SEG business.

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

military commands.

SEG had sales of approximately $7,000 for the first fiscal quarter ended December 31, 2020 and $32,000 for the fiscal year ended September 30, 2020.

During 2021, DE was awarded new contracts and incremental funding on existing contracts approximating $246,500 (excludes $5,500 of SEG awards).

Contract backlog was $352,200 at September 30, 2021 with 62% expected to be fulfilled in the next 12 months;

backlog was $370,000 at September 30, 2020 (excludes approximately $10,000 of SEG related backlog).

The decrease in backlog is primarily due to awards delayed until 2022.

Backlog is defined as unfilled firm orders for products and services for which funding has been both authorized and appropriated by the customer or Congress, in the case of U.S.

government agencies.

2020 Compared to 2019

DE revenue in 2020 increased $5,935, or 2%, compared to 2019, primarily due to increased deliveries and increased volume on airborne and ground communications systems as well as airborne surveillance systems, partially offset by reduced volume on Multi-Mode airborne maritime surveillance radar systems.

DE Adjusted EBITDA in 2020 decreased $9,876, or 28% to $25,228, compared to $35,104 in 2019, primarily due to program inefficiencies associated with certain radar programs, unfavorable program mix and increased operating expenses primarily due to bid and proposal activities and timing of research and development initiatives, partially offset by program efficiencies within airborne intercommunication surveillance systems.

Direct COVID-19 related expenses totaled approximately $1,000 in 2020.

Restructuring Charges and Divestiture

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

The reduction in force initiative resulted in severance charges of approximately $2,200, recorded in the first quarter of fiscal 2021.

These actions reduced headcount by approximately 90 people.

In addition, in the first quarter of fiscal 2021, charges of $5,601 were recorded primarily related to exiting our older weather radar product lines.

DE recorded a pre-tax gain of $5,291 ($5,443, including a net tax benefit of $152) during the year ended September 30, 2021 related to the divestiture of SEG.

Other Discontinued Activities

In fiscal 2018, Griffon completed the sale of Plastics to Berry for approximately $465,000, net of certain post-closing adjustments.

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

The charge consisted primarily of a purchase price adjustment to resolve a claim related to the $465,000 Plastics divestiture and included an additional reserve for a legacy environmental matter.

At September 30, 2021 and 2020, Griffon’s liabilities for discontinued operations primarily related to insurance claims, income taxes and product liability, warranty and environmental reserves totaling liabilities of approximately $10,811 and $7,074, respectively.

On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics segment, which consisted of Telephonics Corporation ("Telephonics"), and on June 27, 2022, Griffon completed the sale of Telephonics to TTM for $330,000, excluding customary post-closing adjustments, primarily related to working capital.

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

At September 30, 2022 and 2021, Griffon's discontinued assets and liabilities includes the Company's obligation of $8,846 in connection with the sale of Telephonics related to certain customary post-closing adjustments, primarily working capital and retention bonuses.

At September 30, 2022 and 2021, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, income taxes, product liability, warranty and environmental reserves totaled $10,049 and $7,074, respectively.

See Note 8, Discontinued Operations.

9 unchanged sentences

Griffon's primary sources of liquidity are cash flows generated from operations, cash on hand and our January 2025 five-year secured $400,000 revolving credit facility ("Credit Facility").

During the fiscal year ended September 30, 2021, the Company generated $71,032 of net cash from continuing operating activities and had $370,927 available, subject to certain loan covenants, for borrowing at that date.

During the fiscal year ended September 30, 2022, the Company generated $59,240 of net cash from continuing operating activities and had $290,385 available, subject to certain loan covenants, for borrowing on September 30, 2022.

The table below provides a summary of the Consolidated Statements of Cash Flows for the periods indicated.

6 unchanged sentences

Cash provided by operating activities from continuing operations for 2022 was $59,240 compared to $69,808 in 2021, a decrease of $10,568.

The variance was primarily due to increased working capital, primarily inventory, partially offset by increased in accounts payable and income from continuing operations, adjusted for non-cash expenditures.

For 2022, Net income from continuing operations adjusted for items to reconcile net income to net cash provided by operating activities of continuing operations was offset by increased working capital, predominately consisting of increased inventory, receivables and prepaid and other current assets and a decrease in accounts payable, accrued liabilities and income tax payable.

For 2021, Net income from continuing operations adjusted for items to reconcile net income to net cash provided by operating activities of continuing operations was offset by increased working capital, predominately consisting of increased inventory, receivables, and prepaid and other current assets, partially offset by an increase in accounts payable, accrued liabilities and income tax payable.

Cash flows from investing activities from continuing operations is primarily comprised of capital expenditures and business acquisitions as well as proceeds from the sale of businesses, investments and property, plant and equipment.

During 2022, Griffon used $583,227 in investing activities from continuing operations compared to $56,167 in 2021.

Payments for acquired businesses totaled $851,464 in 2022 to acquire Hunter compared to $2,242 in 2021 to acquire Quatro.

On January 24, 2022, Griffon acquired Hunter, a market leader in residential ceiling, commercial, and industrial fans, and on December 22, 2020, AMES acquired Quatro, a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects.

On June 27, 2022, the Company completed the sale of Telephonics to TTM for $330,000, excluding customary post-closing adjustments, primarily related to working capital.

Capital expenditures, net of proceeds from the sale of assets, totaled $42,398 in 2022 compared to $36,714 in 2021.

Payments for acquired businesses totaled $2,242 in 2021 compared to $10,531 in 2020.

On December 22, 2020, AMES acquired Quatro, a leading Australian manufacturer and supplier of glass fiber reinforced concrete landscaping products for residential, commercial, and public sector projects.

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

During 2021, Griffon also invested $17,211, primarily in marketable debt and equity securities.

During 2021, Griffon used cash of $28,245 in financing activities from continuing operations compared to cash provided by of $68,190 in 2020.

Proceeds from the sale of investments totaled $14,923 in 2022 compared to cash used to purchase investments of $17,211 in the prior year comparable period.

Cash provided by financing activities from continuing operations was $393,345 in 2022 compared to cash used in financing activities of $28,245 in 2021.

During 2022, cash flows from financing activities from continuing operations primarily consisted of the payment of dividends of $126,677, purchase of treasury shares to satisfy vesting of restricted stock of $10,886 and net proceeds from long-term debt of $547,715.

During 2022, Griffon prepaid $300,000 aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance.

In connection with the prepayment of the Term Loan B Griffon recognized a $6,296 charge related to the write-off of capitalized debt issuance costs.

In addition, during 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161.

In connection with these purchases, Griffon recognized a $1,767 net gain on the early extinguishment of debt.

During 2021, cash flows from financing activities from continuing operations primarily consisted of the payment of dividends of $17,139, purchase of treasury shares to satisfy vesting of restricted stock of $3,357 and net repayments of long-term debt and lease payments of $6,921.

During 2020, cash flows from financing activities from continuing operations primarily consisted of proceeds from the issuance of common stock, partially offset by the payment of dividends of $14,529 and net repayments of long-term debt and lease payments of $68,835.

At September 30, 2022, there were $97,328 in outstanding borrowings under the Credit Agreement, compared to $13,483 in outstanding borrowings at the same date in 2021.

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

The Company used a portion of the net proceeds to repay outstanding borrowings under its Credit Agreement.

Additionally, on June 22, 2020, Griffon completed an add-on offering through a private placement of $150,000 aggregate principal amount of its 5.75% Senior Notes, at 100.25% of par, to Griffon's previously issued $850,000 principal amount of its 5.75% Senior Notes, at par, completed on February 19, 2020.

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

Cash provided by financing activities in 2020 also included financing costs of $571 primarily associated with the redemption of the $1,000,000 of 2022 Senior Notes;

and the amendment and extension of the Company's revolving credit facility which increased the maximum borrowing availability from $350,000 to $400,000 and extended its maturity date from March 22, 2021 to March 22, 2025.

During 2022, the Board of Directors approved four quarterly cash dividends each for $0.09 per share, totaling $0.36.

In addition, on June 27, 2022, the Board of Directors declared a special cash dividend of $2.00 per share, paid on July 20, 2022 to shareholders of record as of the close of business on July 8, 2022.

The Company currently intends to pay dividends each quarter;

however, payment of dividends is determined by the Board of Directors at its discretion based on various factors, and no assurance can be provided as to the payment of future dividends.

On November 16, 2022, the Board of Directors declared a cash dividend of $0.10 per share, payable on December 16, 2022 to shareholders of record as of the close of business on November 29, 2022.

During 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 2021, an additional 6,507 shares, with a market value of $135, or $20.75 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

During 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.

On each of August 3, 2016 and August 1, 2018, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock.

2 unchanged sentences

At September 30, 2022, $57,955 remains under Griffon's Board authorized repurchase programs.

During 2021, cash provided by discontinued operations from operating activities of $40,737 primarily related to DE operations and the settling of certain Installation services and environmental liabilities.

Cash provided by discontinued operations from investing activities of $6,751 primarily related to net proceeds received of $14,345 from DE's sale of its SEG business less capital expenditures of $10,343 and a recovery of insurance proceeds received of $2,748 associated with other discontinued operations.

During 2022 and 2021, cash provided by discontinued operations from operating activities of $10,198 and $41,961, respectively, primarily related to DE operations and the payment of income taxes, stay bonuses and transaction related expenses as well as payments associated with the settling of certain Installation services and environmental liabilities.

During 2022, cash used by discontinued operations from investing activities of $(2,627) primarily related to DE capital expenditures.

During 2021, $6,751 cash provided by discontinued operations from investing activities was comprised of net proceeds received of $14,345 from DE's sale of its SEG business less capital expenditures of $10,343 and a recovery of insurance proceeds received of $2,749 associated with other discontinued operations.

At September 30, 2022 and 2021, Griffon had debt, net of cash and equivalents, as follows:

7 unchanged sentences

Debt, net of cash and equivalents $ 1,475,376 $ 811,853

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

During 2020, Griffon issued, at par $1,000,000 of 5.75% Senior Notes due 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 (the "2022 Senior Notes").

In connection with the issuance and exchange of the 2028 Senior Notes, Griffon capitalized $16,448 of underwriting fees and other expenses incurred, which will amortize over the term of such notes.

Additionally, during 2020 Griffon recognized a $7,925 loss on the early extinguishment of debt of the 2022 Senior Notes, comprised primarily of the write-off of $6,725 of remaining deferred financing fees, $607 of tender offer net premium expense and $593 of redemption interest expense.

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

During the year ended September 30, 2022, Griffon purchased $25,225 of 2028 Senior Notes in the open market at a weighted average discount of 91.82% of par, or $23,161.

In connection with these purchases, Griffon recognized a $1,767 net gain on the early extinguishment of debt comprised of $2,064 of face value in excess of purchase price, offset by $297 related to the write-off of underwriting fees and other expenses.

As of September 30, 2022, outstanding 2028 Senior Notes due totaled $974,775;

1 unchanged sentence

The 2028 Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.

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

The 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 2028 Senior Notes approximated $833,433 on September 30, 2022 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 Senior Notes, which will amortize over the term of such notes, and, at September 30, 2021, $13,293 remained to be amortized.

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

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

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

The facility includes a letter of credit sub-facility with a limit of $100,000 and a multi-currency sub-facility of $200,000;

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

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

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

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

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.

At September 30, 2022, $10,939 of underwriting fees and other expenses incurred remained to be amortized.

On January 24, 2022, Griffon amended and restated its Revolving Credit Facility (as amended, the "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 Term Loan B contains a SOFR floor of 0.50% and a current spread of 2.50%.

Additionally, there are two interest rate step-downs tied to achieving decreased secured leverage ratio thresholds, the first of which was achieved during the year ended September 30, 2022.

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

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.

The Term Loan B facility requires nominal quarterly principal payments of $2,000, which began 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.

During the year ended September 30, 2022, Griffon prepaid $300,000 aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance.

In connection with the prepayment of the Term Loan B Griffon recognized a $6,296 charge on the prepayment of debt, $5,575 related to the write-off of underwriting fees and other expenses and $721 of the original issue discount.

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.

The fair value of the Term Loan B facility approximated $476,160 on September 30, 2022 based upon quoted market prices (level 1 inputs).

At September 30, 2022, $8,823 of underwriting fees and other expenses incurred 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.

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 0.50% for base rate loans, 1.50% for SOFR loans and 1.50% 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.

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 September 30, 2022, under the Credit Agreement, there were $97,328 in outstanding borrowings;

3 unchanged sentences

Net Debt to EBITDA (Leverage), as calculated in accordance with the definition in the Credit Agreement, was 2.89x at September 30, 2022.

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

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

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

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%.

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

As of September 30, 2021, $14,590 was outstanding, net of issuance costs.

Refer to Note 21 - Leases for further details.

At September 30, 2022, $13,091 was outstanding.

During the year ended September 30, 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.

In November 2012, Garant G.P.

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

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

The revolving facility matures in October 2022.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($10,956 as of September 30, 2022) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (4.44% LIBOR USD and 4.76% Bankers Acceptance Rate CDN as of September 30, 2022).

The revolving facility was amended and matures in October 2024, and is renewable upon mutual agreement with the lender.

Garant is required to maintain a certain minimum equity.

As of September 30, 2022, there were no borrowings under the revolving credit facility with CAD 15,000 ($10,956 as of September 30, 2022) available for borrowing.

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

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

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

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

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

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

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

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

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.

In March 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 Swap Rate) plus 1.25% per annum (3.96% at September 30, 2022).

At September 30, 2022, there was no balance outstanding under the receivable purchase facility with AUD $15,000 ($9,722 as of September 30, 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 loan accrue interest at the GBP LIBOR Rate plus 1.8% (1.85% at September 30, 2021, respectively).

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

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

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

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

The Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.80% (3.99% at September 30, 2022).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25% (5.50% as of September 30, 2022).

The revolving credit facility matures in July 2023, but is renewable upon mutual agreement with the lender.

As of September 30, 2022, the revolver had no outstanding balance while the term and mortgage loan balances amounted to GBP $11,060 ($12,090 as of September 30, 2022).

The revolver and the term loan are both secured by substantially all 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.

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

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

The Term Loan interest rate was LIBOR plus 3.00%.

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

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

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

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

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

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

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

Capital Resource Requirements

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.

The project is expected to be completed by the end of calendar year 2023.

For additional information, see CPP reportable segments discussion.

Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $1,000,000 payable in 2028 and related annual interest payments of approximately $57,500.

Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $974,775 payable in 2028 and related annual interest payments of $57,105.

As noted above, Griffon entered into a new $800,000 seven year Term Loan B facility with initial pricing of a SOFR floor of 50 basis points plus a spread of 275 basis points.

The OID was 99.75.

During the period ended June 30, 2022, Griffon prepaid $300,000 aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance.

The Term Loan B facility requires quarterly payments equal to 0.25% of the outstanding principal amount, or $2,000, which began with the quarter ended June 30, 2022, and a balloon payment due at maturity.

Griffon's purchase obligations, which are generally for the purchase of goods and services in the ordinary course of business over the next twelve months is approximately $184,422.

10 unchanged sentences

The loss of all or a portion of volume from any one of these customers could have a material adverse impact on Griffon’s liquidity and operations.

Off-Balance Sheet Arrangements

Except for purchase obligations as disclosed herein, Griffon is not a party to any off-balance sheet arrangements.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by Clopay Corporation, Telephonics Corporation, The AMES Companies, Inc., ATT Southern LLC, Clopay AMES Holding Corp., ClosetMaid LLC, CornellCookson, LLC and Cornell Real Estate Holdings, LLC, all of which are indirectly 100% owned by Griffon.

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally by Clopay Corporation, The AMES Companies, Inc., Clopay AMES Holding Corp., ClosetMaid LLC, AMES Hunter Holdings Corporation, Hunter Fan Company, CornellCookson, LLC and Cornell Real Estate Holdings, LLC, all of which are indirectly 100% owned by Griffon.

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of September 30, 2022 and September 30, 2021 and for the years ended September 30, 2022 and 2021.

68 unchanged sentences

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

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

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

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

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

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

Warranty Accruals

18 unchanged sentences

Goodwill, Long-Lived Intangible and Tangible Assets, and Impairment

Griffon has significant intangible and tangible long-lived assets on its balance sheet that includes goodwill and other intangible assets related to acquisitions.

Goodwill represents the excess of the cost of net assets acquired in business combinations over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

We review goodwill and indefinite-lived intangibles for impairment at least annually in the fourth quarter, or more frequently whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below the carrying amount.

As of September 30, 2022, the balance of goodwill on our balance sheet is $335,790 and indefinite-lived intangibles representing our trademarks is $399,668.

We test goodwill and indefinite-lived intangibles for impairment at least annually in the fourth quarter, and more frequently whenever events or circumstances change that would more likely than not reduce the fair value below the carrying amount.

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

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

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

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

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

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

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

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

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

The more significant assumptions used for the impairment test as of March 31, 2020 were a five-year cash flow projection and a 3.0% terminal value to which discount rates between 7.1% and 9.0% were

applied to calculate each unit’s fair value.

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

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

We performed a qualitative assessment as of September 30, 2021 and 2020, as the estimated fair values of each reporting unit significantly exceeded the carrying value based on our most recent quantitative assessment, which was performed as of March 31, 2020.

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

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

With respect to indefinite-lived intangibles we performed a quantitative annual impairment test as of September 30, 2019, and a quantitative impairment test as of March 31, 2020, to assess the impact of the global outbreak of COVID-19, using a relief from royalty method, neither of which resulted in an impairment.

To test goodwill and indefinite-lived intangible assets for impairment, we may perform both a qualitative assessment and quantitative assessment.

If we elect to perform a qualitative assessment, we consider operating results as well as circumstances impacting the operations or cash flows of the reporting unit or indefinite-lived intangible assets, including macroeconomic conditions, industry and market conditions and reporting unit events and circumstances.

For the quantitative test, the assessment is based on both an income-based and market-based valuation approach.

If it is determined that an impairment exists, we recognize an impairment loss for the amount by which the carrying amount of the reporting unit or indefinite-lived intangible asset exceeds its estimated fair value.

Under the income-based approach, we determine the fair value of a reporting unit by using discounted cash flows that require significant judgement and assumptions, such as our best estimate of future revenue, operating costs, cash flows, expected long-term cash flow growth rates (terminal value growth rates), and risk adjusted discount rates.

Under the market-based approach, we determine the fair value of a reporting unit by applying those multiples exhibited by comparable publicly traded companies and those multiples paid in acquisitions of peer company transactions to the financial results of the reporting units.

We then compare the fair value estimates resulting from the income and market-based valuations to the sum of Griffon’s market capitalization and net debt position to assess the reasonableness of the implied control premium.

We determine the fair value of indefinite-lived intangible assets by using the relief from royalty method, which estimates the value of a trademark by discounting to present value the hypothetical royalty payments that are saved by owning the asset rather than licensing it.

For the fiscal year ended September 30, 2022, we performed a qualitative assessment of the HBP reporting unit and determined that indicators that the fair value was less than the carrying amount were not present.

However, indicators of impairment were present for our CPP reporting units driven by a decrease in comparable company market multiples and an increase in interest rates and the related impact on weighted average cost of capital rates.

As such, in connection with the preparation of our

financial statements for the fiscal year ended September 30, 2022, we performed a quantitative assessment of the CPP reporting units using both an income-based and market-based approach.

The impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $342,027.

Further, we compared the estimated fair values of the CPP indefinite lived intangibles to their carrying amounts which resulted in a pre-tax, non-cash impairment charge of $175,000.

A 100-basis point increase in the discount rate would have resulted in an additional impairment charge to our indefinite-lived intangible assets of $34,000.

We performed a qualitative assessment as of September 30, 2021, and 2020, as the estimated fair values of each reporting unit significantly exceeded the carrying amount based on our baseline quantitative assessment, which was performed as of March 31, 2020.

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

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

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

Long-lived intangible and tangible assets are tested for impairment by comparing estimated future undiscounted cash flows to the carrying value of the asset when an impairment indicator, such as change in business, customer loss or obsolete technology, exists.

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

We assess the recoverability of the carrying amount of our long-lived assets, including amortizable intangible assets, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

We evaluate the recoverability of such assets based on the expectations of undiscounted cash flows attributable to the asset group.

If the sum of the expected future undiscounted cash flows are less than the carrying amount of the asset group, a loss would be recognized for the difference between the fair value and the carrying amount.

For the fiscal year ended September 30, 2022, we tested long-lived intangible and tangible assets for impairment by comparing estimated future undiscounted cash flows of each CPP asset group to the carrying amount of the asset group and determined that an impairment did not exist.

No event or indicator of impairment existed for the HBP assets groups.

Fair value estimates are based on assumptions believed to be reasonable at the time, but such assumptions are subject to inherent uncertainty.

66 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis