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Item 8. Financial Statements and Supplementary Data

2022-11-18 compared with 2021-11-17 · 534 added, 426 removed, 1318 unchanged (42% of the section changed)

Financial Statements and Supplementary Data

The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP are included herein:

The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP (PCAOB ID 248 ) are included herein:

▪ Report of Independent Registered Public Accounting Firm.

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Opinions on the financial statements and internal control over financial reporting

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

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of September 30, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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We believe that our audits provide a reasonable basis for our opinions.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Hunter Fan Company (“Hunter”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 31 percent and 9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2022.

As indicated in Management’s Report, Hunter Fan Company was acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Hunter Fan Company.

Definition and limitations of internal control over financial reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical audit matters

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

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

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

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

Revenue from Customer Contracts – Discontinued Defense Electronics Segment

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

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

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

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

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

This method relies on substantial use of estimates.

These estimations require the Company to have effective cost estimation processes, forecasting, and revenue and expense reporting.

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

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

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

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

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

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

We assessed the appropriateness of adjustments to estimates on a cumulative basis for the year ended September 30, 2021 and their impact on the financial statements.

We tested the cost accumulation process by obtaining and inspecting underlying documents for a sample of labor, material costs and overhead and agreeing to amounts recorded by the Company.

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

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

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

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

Annual Goodwill and Indefinite-Lived Intangible Assets Impairment Testing

As described further in notes 1 and 7 to the consolidated financial statements, the Company tests goodwill and indefinite-lived intangible assets at least annually at the reporting unit level.

The Company performed its annual impairment testing of goodwill as of September 30, 2022, comparing the fair value of the Company’s reporting units to the respective reporting unit’s carrying value, including goodwill.

For the Consumer Professional Products (“CPP”) and Hunter reporting units and associated indefinite-lived intangible assets, indicators of impairment were present, and as such, the Company performed a quantitative assessment.

The fair value of CPP and Hunter were determined using a combination of the income and market-based valuation approach methodologies, which include the present value of expected future cash flows and the use of market assumptions specific to each reporting unit.

The Company used prospective financial information to which discount rates were applied to calculate the fair value.

Similarly to goodwill, the Company tested indefinite-lived intangibles for impairment as of September 30, 2022.

The Company utilized a relief from royalty method to calculate and compare the fair value of the indefinite-lived intangible assets to their book value, which includes the use of market assumptions specific to each reporting unit.

As a result of the impairment tests, the Company recorded goodwill and intangible asset impairment as of September 30, 2022.

We identified the Company’s impairment testing of goodwill and indefinite-lived intangible assets for CPP and Hunter as a critical audit matter.

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

The determination of the fair value of reporting units and indefinite-lived intangibles require management to make significant estimates and assumptions related to forecasts of future cash flows and discount rates.

This requires management to evaluate historical results and expectations of future operating performance based on relevant information available to them regarding expectations of industry performance, as well as expectations for entity-specific performance.

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

Management also used a selection of comparable companies that correspond to each reporting unit to derive a market-based multiple.

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

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

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

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

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

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

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

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

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

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

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

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

/s/ GRANT THORNTON LLP

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OTHER ASSETS 21,553 21,589

ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE — 79,952

ASSETS OF DISCONTINUED OPERATIONS 4,586 3,424

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OTHER LIABILITIES 190,651 109,585

LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR SALE — 10,438

LIABILITIES OF DISCONTINUED OPERATIONS 4,262 3,794

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CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

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Selling, general and administrative expenses 608,926 470,530 444,454

Income from continuing operations 170,583 139,540 108,506

Goodwill and intangible asset impairments 517,027 — —

Total operating expenses 1,125,953 470,530 444,454

Income (loss) from continuing operations ( 189,067 ) 170,583 139,540

Other income (expense)

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Interest income 215 440 749

Loss from debt extinguishment — ( 7,925 ) —

Debt extinguishment, net ( 4,529 ) — ( 7,925 )

Other, net 6,881 2,107 1,661

Total other income (expense) ( 81,812 ) ( 60,628 ) ( 72,059 )

Income before taxes from continuing operations 111,179 68,705 46,223

Income (loss) before taxes from continuing operations ( 270,879 ) 109,955 67,481

Provision for income taxes 16,836 39,653 26,037

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

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

Discontinued operations:

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Income from discontinued operations 96,157 8,909 11,985

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

Basic earnings per common share:

Income from continuing operations $ 1.40 $ 1.00 $ 0.62

Income from discontinued operations 0.16 0.26 0.29

Basic earnings per common share $ 1.56 $ 1.25 $ 0.91

Net income (loss) $ ( 191,558 ) $ 79,211 $ 53,429

Basic earnings (loss) per common share:

Income (loss) from continuing operations $ ( 5.57 ) $ 1.38 $ 0.97

Income (loss) from discontinued operations 1.86 0.18 0.28

Basic earnings (loss) per common share $ ( 3.71 ) $ 1.56 $ 1.25

Weighted-average shares outstanding 51,672 50,830 42,588

Diluted earnings per common share:

Income from continuing operations $ 1.33 $ 0.94 $ 0.59

Income from discontinued operations 0.15 0.24 0.28

Diluted earnings per common share $ 1.48 $ 1.19 $ 0.87

Diluted earnings (loss) per common share:

Income (loss) from continuing operations $ ( 5.57 ) $ 1.32 $ 0.92

Income (loss) from discontinued operations 1.86 0.17 0.27

Diluted earnings (loss) per common share $ ( 3.71 ) $ 1.48 $ 1.19

Weighted-average shares outstanding 51,672 53,369 45,015

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

Net income (loss) $ ( 191,558 ) $ 79,211 $ 53,429

Other comprehensive income (loss), net of taxes:

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Total other comprehensive income (loss), net of taxes ( 36,761 ) 26,115 ( 6,176 )

Comprehensive income $ 105,326 $ 47,253 $ 5,483

Comprehensive income (loss) $ ( 228,319 ) $ 105,326 $ 47,253

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

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CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS:

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

Net income (loss) $ ( 191,558 ) $ 79,211 $ 53,429

Net income from discontinued operations ( 96,157 ) ( 8,909 ) ( 11,985 )

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Depreciation and amortization 64,658 52,302 52,100

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

Stock-based compensation 33,135 20,088 17,580

Goodwill and intangible asset impairments 517,027 — —

Asset impairment charges - restructuring 4,831 6,655 4,692

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Amortization of deferred financing costs and debt discounts 3,775 2,640 3,661

Loss from debt extinguishment — 7,925 —

Debt extinguishment, net 4,529 — 7,925

Deferred income tax ( 56,706 ) 13,763 2,122

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

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

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

Increase in accounts receivable ( 20,662 ) ( 7,002 ) ( 72,463 )

Increase in inventories ( 106,753 ) ( 154,515 ) 23,262

Increase in prepaid and other assets ( 20,005 ) ( 9,598 ) ( 15,878 )

Increase in accounts payable, accrued liabilities and income taxes payable 72,894 40,399 19,615

Increase (decrease) in accounts payable, accrued liabilities and income taxes payable ( 96,372 ) 72,773 40,381

Other changes, net 13,150 1,668 1,017

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Acquired business, net of cash acquired ( 851,464 ) ( 2,242 ) ( 10,531 )

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

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

Insurance payments — — ( 10,604 )

Proceeds (payments) from investments 14,923 ( 17,211 ) ( 130 )

Proceeds from sale of business 295,712 — —

Proceeds from sale of property, plant and equipment 90 237 352

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Payments of long-term debt ( 511,194 ) ( 27,833 ) ( 1,308,915 )

Change in short-term borrowings — — ( 366 )

Financing costs ( 17,065 ) ( 571 ) ( 17,384 )

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Effect of exchange rate changes on cash and equivalents ( 5,398 ) ( 3,544 ) 2,377

NET INCREASE IN CASH AND EQUIVALENTS 30,564 145,712 2,619

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ( 128,469 ) 30,564 145,712

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 248,653 218,089 72,377

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

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

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

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

Common stock acquired — — — — 37 ( 372 ) — — ( 372 )

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

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

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

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

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

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

Stock-based consideration — — 645 — — — — — 645

Other comprehensive loss, net of tax — — — — — — ( 6,176 ) — ( 6,176 )

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

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

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

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

Net income (loss) — — — ( 191,558 ) — — — — ( 191,558 )

Dividends — — — ( 134,380 ) — — — — ( 134,380 )

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

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

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.

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

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

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.

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.

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

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

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

Quatro is expected

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

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

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.

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

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In January 2020, Griffon amended its credit agreement to increase the total amount available for borrowing from $ 350,000 to $ 400,000 , extend its maturity date from March 22, 2021 to March 22, 2025 and modify certain other provisions of the facility (the "Credit Agreement").

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.

GRIFFON CORPORATION

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

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

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

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

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

and the world.

The impact from the rapidly changing U.S.

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

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 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.

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.

Total 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.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic.

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

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

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 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.

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

Griffon currently conducts its operations through two reportable segments:

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

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

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

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

residential, industrial and commercial fans;

home storage and organization products;

and products that enhance indoor and outdoor lifestyles.

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

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

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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.

Consolidation

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The results of operations of acquired businesses are included from the dates of acquisitions.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Earnings per share

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Use of estimates

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

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

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

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

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

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

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Insurance contracts with a value of $ 3,447 at September 30, 2022 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Other current assets on the consolidated balance sheet.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Items Measured at Fair Value on a Recurring Basis

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

During 2021 and 2020, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in USD.

Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in USD as discussed below.

At September 30, 2022 and 2021, Griffon had $ 25,000 and $ 20,000 of Australian dollar contracts at a weighted average rate of $ 1.42 and $ 1.27 , respectively, which qualified for hedge accounting.

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

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

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

Contracts expire in 29 to 90 days .

At September 30, 2021 and 2020, Griffon had $ 4,600 and $ 7,900 , respectively, of Canadian dollar contracts at a weighted average rate of $ 1.26 and $ 1.32 .

Accumulated Other Comprehensive Income (AOCI) included deferred gains of $ 2,017 ($ 1,412 , net of tax) and deferred gains of $ 1,710 ($ 1,197 , net of tax) at September 30, 2022 and 2021, respectively.

Upon settlement gains/(losses) of $ 5,477 and $( 2,204 ) were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS") during 2022 and 2021, respectively.

All contracts expire in 30 to 90 days .

At September 30, 2022, Griffon had $ 74,250 of Chinese Yuan contracts at a weighted average rate of $ 6.79 , which qualified for hedge accounting (level 2 inputs).

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

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

AOCI included deferred losses of $ 3,179 ($ 2,320 , net of tax) at September 30, 2022.

Upon settlement, losses of $ 736 were recorded in COGS during 2022.

All contracts expire in 11 to 396 days.

At September 30, 2022 and 2021, Griffon had $ 6,300 and $ 4,600 , respectively, of Canadian dollar contracts at a weighted average rate of $ 1.28 and $ 1.26 , respectively.

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

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

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

Contracts expire in 30 to 360 days .

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

These contracts, which protect U.K.

operations from currency fluctuations for U.S.

dollar based purchases, do not qualify for hedge accounting;

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

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

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

dollar based purchases, do not qualify for hedge accounting and fair value gains of $ 427 and $ 38 were recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years ended September 30, 2022 and 2021, respectively.

Realized gains (losses) of $ 247 and $( 381 ) were recorded in Other income during 2022 and 2021, respectively.

All contracts expire in 3 to 390 days .

Pension plan assets with a fair value of $ 144,091 at September 30, 2022, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs), quoted market prices for similar assets (level 2 inputs) and fair value assumptions for unobservable inputs in which little or no market data exists (level 3).

The Company accounts for acquisitions under the acquisition method, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition using a method substantially similar to the goodwill impairment test

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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methodology (level 3 inputs).

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

currency translation

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subsidiaries, where the functional currency is not the U.S.

dollar, have been translated at year-end exchange rates and profit and loss accounts have been translated using weighted average exchange rates.

Adjustments resulting from currency translation have been recorded in the equity section of the balance sheet in AOCI as cumulative translation adjustments.

Cumulative translation adjustments were gains (losses) of $ 6,433 and $ 5,601 for 2021 and 2020, respectively.

As of September 30, 2021 and 2020, the foreign currency translation components of Accumulated other comprehensive loss were $ 19,250 and $ 25,683 , respectively.

dollar, have been translated at year-end exchange rates and profit and loss accounts have been translated using weighted average exchange rates during the applicable fiscal year.

Adjustments resulting from currency translation are recorded in AOCI as cumulative translation adjustments.

The Company recognized cumulative translation losses of $ 37,920 during 2022 and gains of $ 6,433 during 2021.

As of September 30, 2022 and 2021, the cumulative foreign currency translation recorded in AOCI was a loss of $ 57,170 and $ 19,250 , respectively.

Assets and liabilities of an entity that are denominated in currencies other than that entity’s functional currency are re-measured into the functional currency using period end exchange rates, or historical rates where applicable to certain balances.

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Revenue recognition

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

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

Refer to Note 2 - Revenue for more detail.

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

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

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

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

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

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

GRIFFON CORPORATION

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Property, plant and equipment

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

Inventories, stated at the lower of cost (first-in, first-out or average) or 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.

Long-Lived Assets, Including Intangible Assets

Property, plant and equipment includes the historical cost of land, buildings, equipment and significant improvements to existing plant and equipment or, in the case of acquisitions, a fair market value appraisal of such assets completed at the time of acquisition.

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When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the gain or loss is recognized.

No event or indicator of impairment occurred during the three years ended September 30, 2021, which would require additional impairment testing of property, plant and equipment.

Depreciation expense, which includes amortization of assets under capital leases, was $ 46,443 , $ 42,741 and $ 42,614 in 2022, 2021 and 2020, respectively, and was calculated on a straight-line basis over the estimated useful lives of the assets.

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The original cost of fully-depreciated property, plant and equipment remaining in use at September 30, 2022 was approximately $ 274,783 .

Long-lived assets, including 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.

Goodwill and indefinite-lived intangibles

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.

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 % 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

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

GRIFFON CORPORATION

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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 did not result in an impairment.

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

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

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.

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.

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

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Any changes in key assumptions or management judgment with respect to a reporting unit or its prospects, which may result from a decline in Griffon’s stock price, a change in market conditions, market trends, interest rates or other factors outside of Griffon’s control, or significant underperformance relative to historical or projected future operating results, could result in a significantly different estimate of the fair value of Griffon’s reporting units, which could result in an impairment charge in the future.

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 values which resulted in a pre-tax, non-cash impairment charge of $ 175,000 .

On October 1, 2019, the Company adopted the Accounting Standards Codifications ("ASC") Topic 842, Leases, which requires the recording of operating lease Right-of-Use ("ROU") assets and operating lease liabilities.

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

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

Research and development costs are charged to SG&A expense as incurred and amounted to approximately $ 16,000 in 2022, $ 7,000 in 2021 and $ 8,000 in 2020.

Total shipping and handling costs were $ 130,830 in 2022, $ 113,700 in 2021 and $ 100,135 in 2020, of which $ 69,000 in 2022, $ 58,100 in 2021 and $ 54,500 in 2020 were included in SG&A.

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Issued but not yet effective accounting pronouncements

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

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

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

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

2021-08, Business Combinations (Topic 805);

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

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

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

Under current U.S.

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

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

Early adoption is permitted.

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

New Accounting Standards Implemented

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

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

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

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

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

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

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

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

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

The guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and was effective for the Company in our fiscal year beginning October 1, 2021.

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

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

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

We adopted the amendments to the disclosure

GRIFFON CORPORATION

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requirements during the first quarter of fiscal 2021.

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

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

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

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

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

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

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

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

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

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

Shipping and handling charges are not considered a separate performance obligation.

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.

Discontinued Operations:

Revenue from Defense Electronics

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

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

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

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

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

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

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

Foreign government and certain commercial contracts contain similar termination for convenience clauses, or we have a legally enforceable right to receive payment for costs incurred and a reasonable profit for product or services that do not have alternative use to us.

Revenue and profits on fixed-price and cost-plus contracts that include performance obligations satisfied over time are recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by the total estimated contract revenue, less the cumulative revenue recognized in prior periods.

Accounting for the sales and profits on performance obligations for which progress is measured using the cost-to-cost method relies on the substantial use of estimates, these projections may be revised throughout the life of a contract.

Components of this formula and ratio that may be estimated include gross profit margin and total costs at completion.

The cost performance and estimates to complete long-term contracts are reviewed, at a minimum, on a quarterly basis, as well as when information becomes available that would necessitate a review of the current estimate.

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

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

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

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

Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract.

Contract modifications for goods or services that are not distinct are accounted for as part of the existing contract on a cumulative catch-up basis.

From time to time, Telephonics may combine contracts if they are negotiated together, have specific requirements to combine, or are otherwise closely related.

Shipping and handling charges

GRIFFON CORPORATION

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are not considered a separate performance obligation.

NOTE 3 — ACQUISITIONS

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

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

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

The acquisition was primarily financed 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.

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

Since the date of acquisition through September 30, 2022, Hunter's revenue and Segment Adjusted EBITDA was $ 246,474 and $ 43,579 , respectively.

The goodwill recognized was $ 258,536 , which was assigned to the CPP segment, and is not expected to be deductible for income tax purposes.

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

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

Proforma For the Year Ended September 30, (unaudited)

Revenue $ 2,938,998 $ 2,624,378

Income (loss) from continuing operations ( 288,062 ) 77,804

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

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

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

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

• The tax effects on the above adjustments using the statutory tax rate of 25.7 % for Griffon and 27.1 % for Hunter.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

Accounts receivable (1)

Inventories (2)

Other current assets 7,940

Property, plant and equipment 15,007

Operating lease right-of-use assets 12,447

Goodwill 258,536

Intangible assets 616,000

Total assets acquired $ 1,084,831

Accounts payable and accrued liabilities 69,789

Current portion of operating lease liabilities 3,323

Deferred tax liability(3) 147,294

Long-term operating lease liabilities 9,123

Other long-term liabilities 3,848

Total liabilities assumed 233,377

Total net assets acquired $ 851,454

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

The fair value of accounts receivable approximated book value acquired.

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

(3) Deferred tax liability recorded on intangibles assets.

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

Average Life (Years)

Goodwill $ 258,536 N/A

Indefinite-lived intangibles (Hunter and Casablanca brands) 356,000 N/A

Definite-lived intangibles (Customer relationships) 260,000 20

Total goodwill and intangible assets $ 874,536

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

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

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

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

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

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

During the year ended September 30, 2022, SG&A included acquisition costs of $ 9,303 .

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

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

There were no acquisition-related costs in 2019.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 4 — INVENTORIES

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Total $ 669,193 $ 472,794

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

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Total $ 294,561 $ 290,222

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

Except as described in Note 10, Restructuring Charges, no impairment occurred during the year ended September 30, 2022 .

NOTE 6 – CREDIT LOSSES

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

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Ending Balance, September 30, 2021 $ 8,787

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 7 — GOODWILL AND OTHER INTANGIBLES

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

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

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

Allowance for credit losses acquired 2,598

Provision for expected credit losses 1,172

Amounts written off charged against the allowance ( 251 )

Other, primarily foreign currency translation ( 169 )

Ending Balance, September 30, 2022 $ 12,137

NOTE 7 — GOODWILL AND INTANGIBLES

The impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $ 342,027 to the CPP reporting units.

The following table provides changes in carrying value of goodwill by segment through the year ended September 30, 2022:

1 unchanged sentence

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

2021 Goodwill from acquisitions (a) Accumulated Impairment Charges Foreign currency translation adjustments At September 30,

Consumer and Professional Products $ 232,845 $ 784 $ 1,266 $ 234,895 $ 258,536 $ ( 342,027 ) $ ( 6,867 ) $ 144,537

1 unchanged sentence

Total $ 424,098 $ 784 $ 1,266 $ 426,148 $ 258,536 $ ( 342,027 ) $ ( 6,867 ) $ 335,790

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

(a) The increase in the CPP segment was due to the acquisitions of Hunter in 2022 and Quatro in 2021.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

In connection with the preparation of our financial statements for the fiscal year ended September 30, 2022, indicators of impairment were present for our CPP indefinite-lived intangible assets.

As such, we determined the fair values of the 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.

We compared the estimated fair values to their carrying amounts.

The impairment tests resulted in a pre-tax, non-cash impairment charge of $ 175,000 to the gross carrying amount of our Trademarks.

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

10 unchanged sentences

Amortization expense for intangible assets subject to amortization was $ 18,215 , $ 9,561 and $ 9,486 in 2022, 2021 and 2020, respectively.

The increase in amortization expense in 2022 compared to the prior year was related to Intangible assets acquired in connection with the Hunter acquisition.

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

4 unchanged sentences

thereafter - $ 255,241 .

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 8 — DISCONTINUED OPERATIONS

On September 27, 2021, Griffon announced it was exploring strategic alternatives for its DE segment, which consisted of its Telephonics subsidiary.

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

In connection with the sale of Telephonics, the Company recorded a gain of $ 107,517 ($ 89,241 , net of tax) for the year ended September 30, 2022.

The gain and related tax for the sale of Telephonics is preliminary and is subject to finalization.

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

4 unchanged sentences

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

For the Year Ended September 30,

11 unchanged sentences

Income from discontinued operations before tax $ 116,345 $ 10,121 $ 15,276

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

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

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

These actions reduced headcount by approximately 90 people.

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

At September 30, At September 30,

Provision for income taxes 20,188 1212 3,291

Income from discontinued operations 96,157 8,909 11,985

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

Depreciation and amortization for fiscal 2022 would have been approximately $ 7,442 through the date of disposition on June 27, 2022.

As noted above, the Company completed the sale of Telephonics on June 27, 2022.

The following amounts related to Telephonics were classified as assets and liabilities of discontinued operations held for sale in the consolidated balance sheet as of September 30, 2021:

At September 30,

CURRENT ASSETS

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Total Liabilities Held for Sale $ 80,748

Installation Services and Other Discontinued Activities

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

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

The following amounts summarize the total assets and liabilities related to Telephonics, Installation Services and other discontinued activities which have been segregated from Griffon’s continuing operations, and are reported as assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets:

At September 30,

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Total liabilities of discontinued operations $ 16,918 $ 7,074

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

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Accrued liabilities as of September 30, 2022 includes the Company's obligation of $ 8,846 in connection with the sale of Telephonics primarily related to certain customary post-closing adjustments, primarily working capital and stay 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 totaling $ 10,049 and $ 7,074 , respectively.

The increase in assets and liabilities for Installations Services and other discontinued operations was primarily associated with insurance claims receivable and payable.

Except for revenue from the Telephonics business, as noted above, there was no reported revenue in 2022, 2021 and 2020 for Installations Services and other discontinued operations.

NOTE 9 — ACCRUED LIABILITIES

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

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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.

Total 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.

As a result of these transactions, headcount was reduced by approximately 420 .

In the year ended September 30, 2022, CPP incurred pre-tax restructuring and related exit costs approximating $ 16,782 .

Cash charges totaled $ 11,951 and non-cash, asset-related charges totaled $ 4,831 ;

the cash charges included $ 4,124 for one-time termination benefits and other personnel related costs and $ 7,827 for facility exit costs.

Non-cash charges included a $ 3,805 of inventory that have no recoverable value and $ 1,026 primarily related to disposal of fixed assets at several manufacturing locations.

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

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

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

4 unchanged sentences

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

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

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

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

For the Year Ended

September 30, 2021 September 30, 2020

For the Year Ended September 30,

2022 2021 2020

Cost of goods and services $ 7,964 $ 7,923 $ 4,159

1 unchanged sentence

Total restructuring charges $ 16,782 $ 21,418 $ 13,669

For the Year Ended

September 30, 2021 September 30, 2020

For the Year Ended September 30,

2022 2021 2020

Personnel related costs $ 4,124 $ 3,190 $ 5,620

2 unchanged sentences

Total $ 16,782 $ 21,418 $ 13,669

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

13 unchanged sentences

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

(1) Non-cash charges in Facility and Other Costs primarily represent the non-cash write-off of certain long-lived assets in connection with certain facility closures.

Charges 4,124 7,827 4,831 16,782

Payments ( 4,156 ) ( 7,827 ) — ( 11,983 )

Non-cash charges (1)

— ( 4,831 ) ( 4,831 )

Accrued liability at September 30, 2022 $ 386 $ 264 $ — $ 650

(1) Non-cash charges in Facility and Other Costs primarily represent the non-cash write-off of certain long-lived assets and inventory that has no recoverable value in connection with certain facility closures.

NOTE 11 – WARRANTY LIABILITY

3 unchanged sentences

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

3 unchanged sentences

Actual warranty costs incurred ( 16,413 ) ( 14,010 )

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

Balance, end of period $ 16,786 $ 7,818

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 12 — LONG-TERM DEBT

2 unchanged sentences

Balance Original

Premium Capitalized Fees & Expenses Balance

Premium (Discount) Capitalized Fees & Expenses Balance

Interest Rate

Senior Notes due 2028 (a) $ 974,775 $ 266 $ ( 10,939 ) $ 964,102 5.75 %

Term Loan B due 2029 (b) 496,000 ( 1,144 ) ( 8,823 ) 486,033 Variable

Revolver due 2025 (b) 97,328 — ( 1,227 ) 96,101 Variable

1 unchanged sentence

lines of credit (d) — — ( 2 ) ( 2 ) Variable

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

term and mortgage loans (d) 12,090 — ( 27 ) 12,063 Variable

Other long term debt (e) 2,276 — ( 13 ) 2,263 Variable

11 unchanged sentences

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

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

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

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

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

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

7 unchanged sentences

Interest Rate Cash Interest Amort.

Premium Amort.

(Premium) Discount Amort.

Deferred Cost

1 unchanged sentence

Senior notes due 2028 (a) 5.95 % $ 57,105 $ ( 48 ) $ 2,056 $ 59,113

Term Loan B due 2029 (b) Variable 18,116 135 1,068 19,319

Revolver due 2025 (b) Variable 3,762 — 491 4,253

1 unchanged sentence

lines of credit (d) Variable 17 — 15 32

term loans (d) Variable 655 — 71 726

term and mortgage loans (d) Variable 610 — 53 663

Other long term debt (e) Variable 544 — 1 545

3 unchanged sentences

Interest Rate Cash Interest Amort.

Discount Amort.

Debt Premium Amort.

Deferred Cost

1 unchanged sentence

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

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

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

1 unchanged sentence

lines of credit (d) Variable 15 — 15 30

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

term and mortgage loans (d) Variable 655 — 71 726

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

1 unchanged sentence

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

Year Ended September 30, 2020

4 unchanged sentences

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

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

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

1 unchanged sentence

lines of credit (d) Variable 12 — 15 27

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

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

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

ESOP Loans (f) 6.3 % 937 — 186 1,123

Capitalized interest ( 128 ) — — ( 128 )

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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

$ 12,653 in 2023, $ 12,267 in 2024, $ 109,522 in 2025, $ 12,261 in 2026, $ 12,324 in 2027 and $ 1,436,533 thereafter.

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

(a) 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.

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

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

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

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.

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

The 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

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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;

1 unchanged sentence

and $ 290,385 was available, subject to certain loan covenants, for borrowing at that date.

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

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

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.

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.

Refer to Note 21- Leases for further details.

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

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

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 1.38 % 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).

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

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

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 and 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,

GRIFFON CORPORATION

1 unchanged sentence

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

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

The 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 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.

of GBP 7,088 and GBP 2,349 , respectively.

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

The term loan and mortgage loan each accrue interest at the SONIA Rate plus 1.80 % ( 3.99 % as of September 30, 2022).

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

The revolver matures in July 2023, and is renewable upon mutual agreement with the lender.

As of September 30, 2022, the revolver had no outstanding balance, and the term and mortgage loan balances were 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.

The mortgage loan is secured by the underlying property.

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.

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

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

The Term Loan interest rate was LIBOR plus 3.00 %.

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

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 .

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

At September 30, 2022, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 13 – EMPLOYEE BENEFIT PLANS

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It is the Company’s practice to fund these benefits as incurred.

Griffon also has qualified and non-qualified defined benefit plans covering certain employees with benefits based on years of service and employee compensation.

Griffon also has qualified and non-qualified defined benefit plans covering certain employees which provide benefits based on years of service and employee compensation.

Over time, these amounts will be recognized as part of net periodic pension costs in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Griffon is responsible for overseeing the management of the investments of the qualified defined benefit plan and uses the services of an investment manager to manage these assets based on agreed upon risk profiles.

Griffon is responsible for overseeing the management of the investments of two qualified defined benefit plan and uses the services of an investment manager to manage the plans' assets based on agreed upon risk profiles.

The primary objective of the qualified defined benefit plan is to secure participant retirement benefits.

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The fair values of a majority of the plan assets were determined by the plans’ trustee using quoted market prices for identical instruments (level 1 inputs) as of September 30, 2022 and 2021.

The fair value of various other investments was determined by the plan’s trustee using direct observable market corroborated inputs, including quoted market prices for similar assets (level 2 inputs).

The fair value of various other investments was determined by the plans' trustees using direct observable market corroborated inputs, including quoted market prices for similar assets (level 2 inputs).

A small amount of plan assets are invested in private equity which consist primarily of investments in private companies which are valued using the net asset values provided by the underlying private investment companies as a practical expedient (level 3 inputs).

The Clopay AMES Pension Plan and the AMES supplemental executive retirement plan are frozen to new entrants and participants in the plans no longer accrue benefits.

The Clopay AMES Pension Plan, the Hunter Fan Pension Plan and the AMES supplemental executive retirement plan are frozen to new entrants and participants in the plans no longer accrue benefits.

The Company’s non-service cost components of net periodic benefit plan cost was a benefit of $ 4,256 , $ 907 and $ 1,559 during 2022, 2021, and 2020 respectively.

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The discount rate assumption is determined by developing a yield curve based on high quality bonds with maturities matching the plans’ expected benefit payment stream.

The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates.

A 10 % change in the discount rate or return on assets would not have a material effect on the financial statements of Griffon.

GRIFFON CORPORATION

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

plans’ expected cash flows are then discounted by the resulting year-by-year spot rates.

A 10 % change in the discount rate or return on assets would not have a material effect on the financial statements of Griffon.

Net periodic costs (benefits) were as follows:

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Benefit obligation at beginning of fiscal year $ 170,505 $ 183,003 $ 14,775 $ 16,070

Business acquisition 21,839 — — —

Interest cost 3,448 2,816 172 162

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Fair value of plan assets at beginning of fiscal year 160,523 147,145 — —

Business acquisition 22,288 — — —

Actual return on plan assets ( 27,439 ) 23,199 — —

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Fair value of plan assets 144,091 160,523 — —

Actuarial gains as of September 30, 2022 were primarily the result of the increase in the discount rate.

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

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

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

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

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2028 through 2031 18,990 4,600

During 2022, Griffon expects to contribute $ 1,884 in payments related to Supplemental Benefits that will be funded from the general assets of Griffon.

Griffon expects to contribute $ 953 to the Defined Benefit plan in 2022.

The Clopay AMES Plan is covered by the Pension Protection Act of 2006.

The Adjusted Funding Target Attainment Percent for the plan as of January 1, 2021 was 98.7 %.

Since the plan was in excess of the 80 % funding threshold there were no plan restrictions.

The expected level of 2022 catch up contributions is $ 198 .

During 2023, Griffon expects to contribute $ 300 to the Defined Benefit plan and $ 1,866 to Supplemental Benefits that will be funded from the general assets of Griffon.

The Clopay AMES Pension Plan and the Hunter Fan Pension Plan are covered by the Pension Protection Act of 2006.

The Adjusted Funding Target Attainment Percent for the Clopay AMES Pension Plan and Hunter Fan Pension Plan as of January 1, 2022 was 105.0 % and 129.2 %, respectively.

Since the plans were in excess of the 80 % funding threshold there were no plan restrictions.

There are no catch up contributions for either plan expected in 2023.

The actual and weighted-average asset allocation for qualified benefit plans were as follows:

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

Fully benefit-responsive investment contracts - The Plan holds fully benefit-responsive investment contracts that are reported at contract value, which is the value of principal and interest under the terms of the annuity contract.

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

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Accrued income and plan receivables 265

Fully benefit-responsive investment contract 2,814

Total $ 144,091

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As of October 1, 2021 $ 9,362

Purchases, issuances and settlements —

Gains and losses 1,924

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As of September 30, 2022 $ 9,484

Griffon has an ESOP that covers substantially all domestic employees.

Griffon has an Employee Stock Ownership Plan ("ESOP") that covers substantially all domestic employees.

employees of Griffon, who are not members of a collective bargaining unit, automatically become eligible to participate in the plan on the October 1 st following completion of one qualifying year of service (as defined in the plan).

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Total provision $ 16,836 $ 39,653 $ 26,037

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

Federal income statutory rate were as follows:

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

Federal statutory income tax rate are presented in the table below.

For the fiscal year ended September 30, 2022, the Company reported a pre-tax loss and income tax expense.

As a result, unfavorable items to the US Federal statutory income tax rate are presented as negative amounts, while favorable items are presented as positive amounts.

For the Years Ended September 30,

2022 2021 2020

Federal income tax provision rate 21.0 % 21.0 % 21.0 %

Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

State and local taxes, net of Federal benefit ( 5.3 ) % 4.8 % 7.9 %

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foreign tax credits 0.2 % ( 0.1 ) % 1.4 %

Goodwill impairment ( 17.1 ) % — % — %

Share based compensation 0.4 % ( 2.0 ) % — %

Other — % 1.1 % ( 0.7 ) %

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

Effective tax rate ( 6.2 ) % 36.1 % 38.6 %

GRIFFON CORPORATION

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Net deferred liability $ ( 137,101 ) $ ( 48,106 )

In 2022, the net increase in the valuation allowance of $ 3,065 is the result of a determination that certain state and foreign net operating losses will not be realized, partially offset by tax rate changes impacting the value of the deferred tax assets and the reversal of a valuation allowance related to certain state credits for the Telephonics business, which was sold on June 27, 2022 .

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

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

At both September 30, 2022 and 2021, Griffon has a policy election to indefinitely reinvest the undistributed earnings of foreign subsidiaries with operations outside the U.S.

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

At September 30, 2021, Griffon had no loss carryforwards for U.S.

At September 30, 2022, Griffon had $ 44,521 loss carryforwards for U.S.

tax purposes and $ 8,798 for non-U.S.

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tax purposes.

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

The U.S loss carryforwards can be carried forward indefinitely but are subject to certain limitations on annual usage.

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

At September 30, 2022 and 2021, Griffon had state and local loss carryforwards of $ 192,134 and $ 139,894 , respectively, which expire in varying amounts through 2041.

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Additions based on tax positions related to prior years 24

Reductions based on tax positions related to prior years ( 3 )

Lapse of Statutes ( 7 )

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Balance at September 30, 2022 $ 6,808

If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is $ 1,106 .

(1) Relates to unrecognized tax benefits assumed with the acquisition of Hunter.

If recognized, the amount of potential unrecognized tax benefits that would impact Griffon’s effective tax rate is $ 3,536 .

Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

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

On August 16, 2022, the U.S.

Government enacted the Inflation Reduction Act ("IRA") into law.

Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on “adjusted financial statement income” for applicable corporations and a 1% excise tax on repurchases of stock.

These provisions are effective for tax years beginning after December 31, 2022.

We are in the process of evaluating the provisions of the IRA.

NOTE 15 – STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION

During 2021, 2020 and 2019, the Company declared and paid cash dividends totaling $ 0.32 per share, $ 0.30 per share and $ 0.29 per share, respectively.

During 2022, 2021 and 2020, the Company declared and paid, in quarterly increments, cash dividends totaling $ 0.36 per share, $ 0.32 per share and $ 0.30 per share, respectively.

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;

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

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

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

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

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

On January 31, 2018, shareholders approved Amendment No.

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

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

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

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

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

As of September 30, 2021, there are no stock options outstanding.

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

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

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

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

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

As of September 30, 2022, 835,122 shares were available for grant.

Compensation expense for restricted stock, including restricted stock units, is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares or units granted multiplied by the stock price on date of grant, and for performance shares, including performance units, the likelihood of achieving the performance criteria.

Compensation expense for restricted stock and restricted stock units is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares or units granted multiplied by the stock price on date of grant, and for performance shares, including performance units, the likelihood of achieving the performance criteria.

The Company recognizes forfeitures as they occur.

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Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years , is recognized using the straight-line attribution method and recorded within Selling, general and administrative expenses.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

4 unchanged sentences

Total stock based compensation $ 33,135 $ 20,088 $ 17,580

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

A summary of restricted stock activity, inclusive of restricted stock units, for 2022 is as follows:

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During 2022, Griffon granted 946,371 shares of restricted stock and restricted stock units to its employees.

This included 226,811 restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of three years , with a total fair value of $ 5,500 , or a weighted average fair value of $ 24.25 per share.

Furthermore, this included 488,095 restricted stock awards granted to six executives, with vesting periods ranging from 34 months to 60 months, with a total fair value of $ 10,836 , or a weighted average fair value of $ 22.20 per share.

This also included 528,000 shares of restricted stock granted to two senior executives with a vesting period of four years and a two year post-vesting holding period, subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon's common stock.

This included 218,162 restricted stock and restricted stock units, subject to certain performance conditions, with vesting periods of 34 months with a total fair value of $ 6,285 , or a weighted average fair value of $ 28.81 per share.

Furthermore, this included 274,063 restricted stock awards granted to seventeen executives, with a vesting period of three years and a total fair value of $ 6,240 , or a weighted average fair value of $ 22.77 per share.

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

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

The total fair value of these restricted shares using the Monte Carlo Simulation model is approximately $ 5,456 , or a weighted average fair value of $ 24.03 per share.

Additionally, Griffon granted 44,424 restricted shares to the non-employee directors of Griffon with a vesting period of three years and a fair value of $ 1,080 , or a weighted average fair value of $ 24.31 per share.

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

During the year ended September 30, 2022, 502,113 shares granted were issued out of treasury stock.

On November 16, 2022, Griffon granted 466,677 shares of restricted stock.

This includes 261,381 shares of restricted stock granted to 44 executives and key employees, subject to certain performance conditions, with a vesting period of thirty-six months , with a total fair value of $ 8,785 , or a weighted average fair value of $ 33.61 per share.

In addition, Griffon also granted 205,296 shares of restricted stock granted to two senior executives with a vesting period of thirty-six months and a two-year post-vesting holding period, subject to the achievement of certain performance conditions relating to required levels of return on invested capital and the relative total shareholder return of Griffon's common stock as compared to a market index.

So long as the minimum performance conditions are attained, the amount of shares that can vest will range from a minimum of 51,324 to a maximum of 205,296 , with the target number of shares being 102,648 .

The total estimated fair value of these restricted shares, assuming achievement of the performance conditions at target, is $ 3,555 , or a weighted average fair value of $ 34.63 per share.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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.

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Furthermore, 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.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES

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Peekskill Site.

Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at a location in the Town of Cortlandt, New York, just outside the city of Peekskill, New York (the “Peekskill Site”) which was owned by ISC Properties, Inc.

Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted lamp manufacturing and metal finishing operations at a location in the Town of Cortlandt, New York, just outside the city of Peekskill, New York (the “Peekskill Site”) which was owned by ISC Properties, Inc.

(“ISCP”), a wholly-owned subsidiary of Griffon, for approximately three years.

ISCP sold the Peekskill Site in November 1982.

On May 15, 2019 the United States Environmental Protection Agency ("EPA") added the Peekskill Site to the National Priorities List under CERCLA and has since announced that it is performing a Remedial Investigation/Feasibility Study ("RI/FS").

On August 25, 2020, the EPA sent a letter to several parties, including Lightron and ISCP, requesting that each such party inform the EPA as to whether it would be willing to enter into discussions regarding implementation of the RI/FS.

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

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

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

The current owner of the property, which acquired the Peekskill Site from ISCP in 1982 and has no relationship with Lightron or ISCP, has also informed the EPA that it is willing to discuss implementation of the RI/FS, and has also received, and submitted certain information in response to, a Section 104(e) information request.

The EPA may decide to implement the RI/FS, on its own or through the use of consultants, may reach agreement with one or more parties to perform the RI/FS, or may offer to negotiate with one or more parties to accept a settlement addressing the potential liability of such parties for investigation and/or remediation at the Peekskill Site.

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

Based upon studies conducted by ISCP and the New York Department of Environmental Conservation, soils and groundwater beneath the Peekskill Site contain chlorinated solvents and metals.

Stream sediments downgradient of the Peekskill Site also contain metals.

On May 15, 2019 the United States Environmental Protection Agency ("EPA") added the Peekskill Site to the National Priorities List under CERCLA and has since reached agreement with Lightron and ISCP wherein Lightron and ISCP will perform a Remedial Investigation/Feasibility Study (“RI/FS”).

Lightron has not engaged in any operations in over three decades.

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Griffon does not acknowledge any responsibility to perform any investigation or remediation at the Peekskill Site.

One of Griffon’s insurers is defending Lightron, ISCP and Griffon subject to a reservation of rights.

One of Griffon’s insurers is defending Lightron, ISCP and Griffon subject to a reservation of rights and is paying the costs of the RI/FS.

Union Fork and Hoe, Frankfort, NY site.

The former Union Fork and Hoe property in Frankfort, New York was acquired by AMES in 2006 as part of a larger acquisition, and has historic site contamination involving chlorinated solvents, petroleum hydrocarbons and metals.

The former Union Fork and Hoe property in Frankfort, NY was acquired by AMES in 2006 as part of a larger acquisition, and has historic site contamination involving chlorinated solvents, petroleum hydrocarbons and metals.

AMES entered into an Order on Consent with the New York State Department of Environmental Conservation (“DEC”).

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

In June 2020, AMES completed the remediation required by the Record of Decision issued by DEC in 2019 ("ROD") and filed a Construction Completion Report, a Site Management Plan and an environmental easement with DEC.

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

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

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

AMES has a number of defenses to liability in this matter, including its rights under a previous Consent Judgment entered into between DEC and a predecessor of AMES relating to the site.

AMES’ insurer has accepted AMES’ claim for a substantial portion of the costs incurred and to be incurred for both the on-site and off-site activities.

In June 2020, AMES completed the remediation required by the Record of Decision issued by DEC in 2019 and filed a Construction Completion Report, a Site Management Plan and an environmental easement with DEC.

DEC has approved the Site Management Plan, which requires annual inspection of the site cover and groundwater monitoring every five years.

AMES also has completed an investigation of certain areas adjacent to the site perimeter and a statistical analysis to determine the area, if any, required to be remediated.

DEC has informed AMES that no further investigation or remediation is required.

AMES has a number of defenses to liability in this matter, including its rights under a

GRIFFON CORPORATION

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

previous Consent Judgment entered into between DEC and a predecessor of AMES relating to the site.

AMES’ insurer has accepted AMES’ claim for a substantial portion of the costs incurred and to be incurred for both the on-site and off-site activities.

Memphis, TN site.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

General legal

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Management believes, based on facts presently known to it, that the resolution of the matters above and such other matters will not have a material adverse effect on Griffon’s consolidated financial position, results of operations or cash flows.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 17 – EARNINGS PER SHARE

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Weighted average shares outstanding - diluted 51,672 53,369 45,015

Anti-dilutive shares were not material.

Anti-dilutive restricted stock excluded from diluted EPS computation 2,294 — —

Shares of the ESOP that have been allocated to employee accounts are treated as outstanding in determining earnings per share.

GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

NOTE 18 — REPORTABLE SEGMENTS

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

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

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.

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

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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.

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

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

Telephonics, founded in 1933, is a globally recognized leading provider of highly sophisticated intelligence, surveillance and communications solutions that are deployed across a wide range of land, sea and air applications.

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

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

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

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Home and Building Products 1,506,882 1,041,108 927,313

Defense Electronics 271,060 340,976 $ 335,041

Subtotal $ 2,541,686 $ 2,407,522 $ 2,209,289

Defense Electronics ( 271,060 ) ( 340,976 ) ( 335,041 )

Total revenue $ 2,848,488 $ 2,270,626 $ 2,066,546

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

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 (“Segment Adjusted EBITDA”).

GRIFFON CORPORATION

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

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

The following table provides a reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes from continuing operations:

For the Years Ended September 30,

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Home and Building Products 412,738 181,015 153,631

Defense Electronics 20,486 25,228 35,104

Subtotal 317,174 282,912 245,942

Defense Electronics ( 20,486 ) ( 25,228 ) ( 35,104 )

Segment Adjusted EBITDA 512,046 296,688 257,684

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Depreciation and amortization ( 64,658 ) ( 52,302 ) ( 52,100 )

Goodwill and intangible impairments ( 517,027 ) — —

Restructuring charges ( 16,782 ) ( 21,418 ) ( 13,669 )

Loss from debt extinguishment — ( 7,925 ) —

Debt Extinguishment, net ( 4,529 ) — ( 7,925 )

Acquisition contingent consideration — — 1,733

Acquisition costs ( 9,303 ) — ( 2,960 )

Income before taxes from continuing operations $ 111,179 $ 68,705 $ 46,223

Strategic review - retention and other ( 9,683 ) — —

Special dividend ESOP charges ( 10,538 ) — —

Proxy expenses ( 6,952 ) — —

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

Income (loss) before taxes from continuing operations $ ( 270,879 ) $ 109,955 $ 67,481

For the Years Ended September 30,

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Home and Building Products 16,539 17,370 18,361

Defense Electronics 10,762 10,645 10,667

Subtotal 62,565 61,794 61,290

Defense Electronics ( 10,762 ) ( 10,645 ) ( 10,667 )

Total segment depreciation and amortization 64,101 51,803 51,149

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Home and Building Products 11,029 8,648 17,499

Defense Electronics 10,343 7,830 10,492

Subtotal 47,256 48,650 44,818

Defense Electronics ( 10,343 ) ( 7,830 ) ( 10,492 )

Total segment 42,308 36,913 40,820

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

ASSETS At September 30, 2021 At September 30, 2020

At September 30, 2022 At September 30, 2021

Segment assets:

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Revenue from contracts with customers is disaggregated by end markets, segments and geographic location, as it more accurately depicts the nature and amount of the Company’s revenue.

For the Year Ended September 30, 2021 For the Year Ended September 30, 2020 For the Year Ended September 30, 2019

For the Years Ended September 30,

2022 2021 2020

Residential repair and remodel $ 392,490 $ 185,896 $ 173,859

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HBP sales to The Home Depot approximated 7 %, 10 % and 12 % in 2022, 2021 and 2020, respectively.

As a percentage of Griffon's consolidated revenue, CPP sales to The Home Depot approximated 14 % in 2021, and approximated 13 % in both 2020 and 2019;

HBP sales to The Home Depot approximated 5 % in 2021, 2020 and 2019.

As a percentage of Griffon's consolidated revenue, CPP sales to The Home Depot approximated 13 %, 14 % and 13 % in 2022, 2021 and 2020, respectively;

HBP sales to The Home Depot approximated 7 % in 2022 and 5 % in both 2021 and 2020.

NOTE 19 – OTHER INCOME (EXPENSE)

For the year ended September 30, 2021, 2020 and 2019, Other income (expense) from continuing operations of $ 3,331 , $ 2,885 and $ 5,230 , respectively, includes $ 81 , $ 915 and $ 438 , respectively, of net currency exchange transaction losses from receivables and payables held in non-functional currencies, $ 283 , $ 184 and $( 40 ), respectively, of net gains or (losses) on investments, and $ 907 and $ 1,559 and $ 3,148 , respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $ 1,848 in 2021, 2020 and 2019.

For the year ended September 30, 2022, 2021 and 2020, Other income (expense) from continuing operations of $ 6,881 , $ 2,107 and $ 1,661 , respectively, includes $ 305 , ($ 81 ) and $( 915 ), respectively, of net currency exchange transaction gains (losses) from receivables and payables held in non-functional currencies, $( 225 ), $ 283 and $ 184 , respectively, of net gains or (losses) on investments, and $ 4,256 , $ 907 and $ 1,559 , respectively, of net periodic benefit plan income.

Other income (expense) also includes rental income of $ 689 in 2022, and $ 624 in both 2021 and 2020.

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

NOTE 20 - OTHER COMPREHENSIVE INCOME (LOSS)

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2022 2021 2020

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

Net income (loss) $ ( 191,558 ) $ 79,211 $ 53,429

Other comprehensive income (loss), net of taxes ( 36,761 ) 26,115 ( 6,176 )

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Components of operating lease costs are as follows:

For the Year Ended

September 30, 2021 September 30, 2020

For the Year Ended September 30,

2022 2021 2020

$ 44,457 $ 38,362 $ 36,155

Variable (a), (b)

8,615 7,573 7,178

Short-term (b)

7,438 4,210 5,470

Total $ 60,510 $ 50,145 $ 48,803

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(b) Not recorded on the balance sheet.

Fixed rent expense for all operating leases totaled approximately $ 34,816 in 2019.

Supplemental cash flow information were as follows:

For the Year Ended

September 30, 2021 September 30, 2020

For the Year Ended September 30,

2022 2021 2020

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

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

At September 30, 2021 At September 30, 2020

As of September 30,

Operating Leases:

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(1) For the years ended September 30, 2022 and 2021, finance lease assets are recorded net of accumulated depreciation of $ 4,972 and $ 6,136 , respectively.

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.

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 and 2020, $ 14,590 and $ 17,188 , respectively, was outstanding, net of issuance costs.

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.

The remaining lease liability balance relates to finance equipment leases.

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2027 18,597 2,074

2027 63,921 7,777

Thereafter 96,938 5,702

Total lease payments 244,608 17,075

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Average lease terms and discount rates were as follows:

September 30, 2021 September 30, 2020

As of September 30,

Weighted-average remaining lease term (years)

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Deferred tax valuation allowance $ 10,823 $ — $ ( 999 ) $ — $ 9,824

For the year ended September 30, 2022, Other primarily consists of foreign currency and opening balances of reserves assumed from the Hunter acquisition.

See Note 6 for the detail on the Allowance for Doubtful Accounts.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data