What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-01-31 compared with 2022-08-03 · 244 added, 423 removed, 700 unchanged (49% of the section changed)

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Prepaid and other current assets 64,108 62,453

Assets of discontinued operations held for sale — 275,814

Assets of discontinued operations 1,122 1,189

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Current portion of operating lease liabilities 31,283 31,680

Liabilities of discontinued operations held for sale — 81,023

Liabilities of discontinued operations 8,141 12,656

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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2022 and 2021

For the Three Months Ended December 31, 2022 and 2021

COMMON STOCK CAPITAL IN

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Balance at December 31, 2022 84,746 $ 21,187 $ 627,565 $ 386,617 27,560 $ ( 425,768 ) $ ( 70,519 ) $ ( 12,234 ) $ 526,848

Net income — — — 65,689 — — — — 65,689

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

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

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

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

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

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

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

Net income — — — 140,287 — — — — 140,287

Dividend — — — ( 109,487 ) — — — — ( 109,487 )

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

Equity awards granted, net — — ( 484 ) — ( 32 ) 484 — — —

ESOP allocation of common stock — — 757 — — — — — 757

Stock-based compensation — — 5,130 — — — — — 5,130

Other comprehensive income, net of tax — — — — — — ( 14,177 ) — ( 14,177 )

Balance at June 30, 2022 84,746 $ 21,187 $ 609,027 $ 775,694 27,682 $ ( 420,122 ) $ ( 57,956 ) $ ( 21,515 ) $ 906,315

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2022 and 2021

COMMON STOCK CAPITAL IN

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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(in thousands, except per share data)

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

2022 2021 2022 2021

Three Months Ended December 31,

Revenue $ 649,384 $ 591,749

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Interest income 104 33

Debt extinguishment, net ( 5,287 ) — ( 5,287 ) —

Gain on sale of building 10,852 —

Other, net 607 1,075

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Income from operations of discontinued operations — 3,320

Provision (benefit) for income taxes 25,952 288 20,149 ( 2,085 )

Provision for income taxes — 726

Income from discontinued operations — 2,594

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(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Net income from discontinued operations — ( 2,594 )

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

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

Depreciation and amortization 17,113 13,081

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Amortization of debt discounts and issuance costs 1,023 654

Debt extinguishment, net 5,287 —

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

Deferred income taxes — 2,883

(Gain) loss on sale of assets and investments ( 303 ) 155

Gain on sale of assets and investments ( 10,923 ) ( 154 )

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

Increase in accounts receivable ( 81,825 ) ( 34,914 )

Increase in inventories ( 135,473 ) ( 101,553 )

(Increase) decrease in accounts receivable 13,689 ( 53,030 )

(Increase) decrease in inventories 22,931 ( 59,478 )

Increase in prepaid and other assets 100 329

Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 44,864 ) 27,180

Decrease in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 26,333 ) ( 12,164 )

Other changes, net 1,954 662

Net cash (used in) provided by operating activities - continuing operations ( 65,001 ) 13,314

Net cash provided by (used in) operating activities - continuing operations 75,480 ( 85,005 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment ( 4,726 ) ( 10,573 )

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

Proceeds from sale of business, net 295,712 —

Proceeds (payments) from investments 14,923 ( 4,658 )

Payments related to sale of Telephonics ( 2,568 ) —

Proceeds from investments — 575

Proceeds from the sale of property, plant and equipment 11,815 29

Other, net — 28

Net cash used in investing activities - continuing operations ( 574,256 ) ( 31,705 )

Net cash provided by (used in) investing activities - continuing operations 4,521 ( 9,969 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Other, net ( 42 ) ( 28 )

Net cash provided by (used in) financing activities - continuing operations 513,762 ( 14,327 )

Net cash used in financing activities - continuing operations ( 78,363 ) ( 8,612 )

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

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(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash provided by operating activities 26,889 27,035

Net cash provided by (used in) investing activities ( 2,627 ) 8,155

Net cash provided by discontinued operations 24,262 35,190

Net cash provided by (used in) operating activities ( 1,953 ) 7,916

Net cash used in investing activities — ( 853 )

Net cash provided by (used in) discontinued operations ( 1,953 ) 7,063

Effect of exchange rate changes on cash and equivalents 689 ( 910 )

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

On May 16, 2022, we announced that our 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.

There is no timeline for this review and there is no assurance that the Board of Director's review will result in any transaction being entered into or consummated.

As previously announced, we do not intend to disclose further developments until our Board of Directors approves a specific transaction or otherwise concludes its review of strategic alternatives.

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

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

("TTM") for $ 330,000 in cash, subject to customary post-closing adjustments.

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

On June 27, 2022, we completed the sale of our Defense Electronics segment which consisted of our Telephonics subsidiary for $ 330,000 in cash.

As a result, the results of operations of our Telephonics business is classified 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 in the consolidated balance sheets.

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

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

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

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

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.

While the process remains ongoing, there is no assurance that the process will result in any transaction being entered into or consummated.

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

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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.

GRIFFON CORPORATION AND SUBSIDIARIES

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

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 impacted, and could continue to impact, our business and consolidated results of operations and financial condition.

Update on COVID-19 on our Business

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 and restricting on-site visitors, to minimize the risk to our employees of contracting COVID-19.

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

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

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

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

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

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

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

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

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” our Form 10-K filed on November 18, 2022.

Basis of Presentation

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Accordingly, these financial statements do not include all the information and footnotes required by US GAAP for complete financial statements.

As such, they should be read together with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2021, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business, properties and other matters.

As such, they should be read together with Griffon’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business, properties and other matters.

In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results.

Griffon’s CPP operations are seasonal;

Griffon’s businesses, in particular its CPP operations, are seasonal;

for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.

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

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

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

NOTE 2 – FAIR VALUE MEASUREMENTS

The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit and variable interest rate debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit and variable rate debt is based upon current market rates.

GRIFFON CORPORATION AND SUBSIDIARIES

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

NOTE 2 – FAIR VALUE MEASUREMENTS

Applicable accounting guidance establishes a fair value hierarchy requiring the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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

On June 30, 2022, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 888,759 and $ 473,100 , respectively.

On December 31, 2022, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 877,298 and $ 485,355 , respectively.

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

Insurance contracts with values of $ 3,742 at June 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 Prepaid and other current assets on the Consolidated Balance Sheets.

Insurance contracts with values of $ 3,466 at December 31, 2022 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

At June 30, 2022, marketable debt and equity securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 525 ($ 333 cost basis) were included in Prepaid and other current assets on the Consolidated Balance Sheets.

At December 31, 2022, marketable debt and equity securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $ 67 ($ 83 cost basis) were included in Prepaid and other current assets on the Consolidated Balance Sheets.

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

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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.

As of June 30, 2022, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in U.S.

At June 30, 2022, Griffon had $ 27,000 of Australian dollar contracts at a weighted average rate of $ 1.33 which qualified for hedge accounting (level 2 inputs).

As of December 31, 2022, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade liabilities payable in U.S.

At December 31, 2022, Griffon had $ 15,000 of Australian dollar contracts at a weighted average rate of $ 1.46 which qualified for hedge accounting (level 2 inputs).

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

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

AOCI included deferred gains of $ 2,116 ($ 1,482 , net of tax) at June 30, 2022.

Upon settlement, gains of $ 936 and $ 3,199 were recorded in COGS during the three and nine months ended June 30, 2022, respectively.

AOCI included deferred gains of $ 188 ($ 132 , net of tax) at December 31, 2022.

Upon settlement, gains of $ 2,261 were recorded in COGS during the quarter ended December 31, 2022, respectively.

All contracts expire in 30 to 90 days.

At June 30, 2022, Griffon had 61,000 of Chinese Yuan contracts at a weighted average rate of $ 6.57 which qualified for hedge accounting (level 2 inputs).

At December 31, 2022, Griffon had $ 71,500 of Chinese Yuan contracts at a weighted average rate of $ 6.88 which qualified for hedge accounting (level 2 inputs).

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

AOCI included deferred losses of $ 1,216 ($ 887 , net of tax) at June 30, 2022.

Upon settlement, (losses)/gains of $( 220 ) and $ 434 were recorded in COGS during the three and nine months ended June 30, 2022, respectively.

All contracts expire in 1 to 243 days.

At June 30, 2022, Griffon had $ 10,450 of Canadian dollar contracts at a weighted average rate of $ 1.26 .

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

dollar based purchases, do not qualify for hedge accounting.

For the three and nine months ended June 30, 2022, fair value gains of $ 223 and $ 225 , respectively, were recorded to Other

GRIFFON CORPORATION AND SUBSIDIARIES

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

liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized gains of $ 76 and $ 74 were recorded in Other income during the three and nine months ended June 30, 2022, respectively for all settled contracts.

included deferred gains of $ 109 ($ 79 , net of tax) at December 31, 2022.

Upon settlement, losses of $ 1,257 were recorded in COGS during the quarter ended December 31, 2022.

All contracts expire in 4 to 334 days.

At December 31, 2022, Griffon had $ 6,900 of Canadian dollar contracts at a weighted average rate of $ 1.26 .

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

dollar based purchases, do not qualify for hedge accounting.

For the three months ended December 31, 2022, fair value gains of $ 217 , respectively, were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized gains of $ 174 was recorded in Other income during the three months ended December 31, 2022, respectively for all settled contracts.

All contracts expire in 30 to 300 days.

NOTE 3 – REVENUE

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

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

On January 24, 2022, Griffon acquired Hunter, a market leader in residential ceiling, commercial, and industrial fans, from MidOcean for a contractual purchase price of $ 845,000 .

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

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

Since the date of acquisition through June 30, 2022, Hunter's revenue was $ 176,623 .

The goodwill recognized was $ 281,668 , 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.

For the three months ended December 31, 2022, Hunter's revenue and Segment Adjusted EBITDA was $ 54,117 and $ 4,428 , respectively.

The goodwill recognized was $ 256,728 , which was assigned to the CPP segment, and is not deductible for income tax purposes.

The preliminary purchase price allocation is based on appraisals and other analysis of fair values of acquired assets and liabilities.

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

Proforma For the Three Months Ended June 30, (unaudited) Proforma For the Nine Months Ended June 30, (unaudited)

2022 2021 2022 2021

Revenue $ 768,179 $ 669,199 $ 2,230,056 $ 1,984,377

Income from continuing operations 52,782 11,149 127,299 65,811

GRIFFON CORPORATION AND SUBSIDIARIES

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

Proforma For the Three Months Ended December 31, (unaudited)

Revenue $ 670,839

Income from continuing operations 19,974

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

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(3) Deferred tax liability recorded on intangibles assets.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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Total goodwill and intangible assets $ 862,728

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the nine months ended June 30, 2022, the Company incurred acquisition costs of $ 9,303 .

During the three months ended June 30, 2022, there were no acquisition costs.

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

During the quarter ended December 31, 2022, there were no acquisition costs.

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

NOTE 5 – INVENTORIES

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

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

The following table details the components of inventory:

At June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

Raw materials and supplies $ 163,118 $ 173,520

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

At June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

Land, building and building improvements $ 157,626 $ 159,693

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Total $ 290,505 $ 294,561

Depreciation and amortization expense for property, plant and equipment was $ 12,173 and $ 10,896 for the quarters ended June 30, 2022 and 2021, respectively, and $ 34,650 and $ 31,950 for the nine months ended June 30, 2022 and 2021, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 4,578 and $ 3,724 for the quarters ended June 30, 2022 and 2021, respectively, and $ 12,234 and $ 10,672 for the nine months ended June 30, 2022 and 2021, respectively.

Depreciation and amortization expense for property, plant and equipment was $ 11,489 and $ 10,694 for the quarters ended December 31, 2022 and 2021, respectively.

Depreciation and amortization expense included in Selling, general and administrative ("SG&A") expenses was $ 4,239 and $ 3,400 for the quarters ended December 31, 2022 and 2021, respectively.

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

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

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

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

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

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

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

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

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

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

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

The Company also considers current and expected future economic and market conditions when determining any estimate of credit losses.

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

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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:

Nine months ended June 30,

Three months ended December 31,

Beginning Balance, October 1 $ 12,137 $ 8,787

Allowance for credit losses acquired 2,599 —

Provision for expected credit losses 1,457 1,039

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Other, primarily foreign currency translation 90 ( 35 )

Ending Balance, June 30 $ 13,541 $ 9,247

Ending Balance, December 31 $ 13,636 $ 9,787

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 8 – GOODWILL AND OTHER INTANGIBLES

The following table provides changes in the carrying value of goodwill by segment during the nine months ended June 30, 2022:

At September 30, 2021 Hunter Acquisition Foreign

translations adjustments At June 30, 2022

The following table provide a summary of the carrying value of goodwill by segment as of September 30, 2022 and December 31, 2022, as follows:

At September 30, 2022 Hunter Acquisition (1)

At December 31, 2022

Consumer and Professional Products $ 144,537 $ ( 1,808 ) $ 142,729

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Total $ 335,790 $ ( 1,808 ) $ 333,982

(1) The decrease is due to the preliminary allocation of the purchase price for the Hunter acquisition.

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

At June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

Gross Carrying Amount Accumulated

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Total intangible assets $ 861,639 $ 100,513 $ 856,079 $ 94,165

The gross carrying amount of intangible assets was impacted by $ 4,630 related to foreign currency translation.

Amortization expense for intangible assets was $ 5,514 and $ 2,409 for the quarters ended June 30, 2022 and 2021, respectively, and $ 12,371 and $ 7,168 for the nine months ended June 30, 2022 and 2021, respectively.

The gross carrying amount of intangible assets was impacted by $ 5,560 related to favorable foreign currency translation.

Amortization expense for intangible assets was $ 5,624 and $ 2,387 for the quarters ended December 31, 2022 and 2021, respectively.

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

Amortization expense for the remainder of 2023 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows:

2022 - $ 5,462 ;

remaining in 2023 - $ 16,161 ;

2024 - $ 21,305 ;

4 unchanged sentences

thereafter $ 235,364 .

During the nine months ended June 30, 2022, the Company determined that there were no triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at June 30, 2022.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the quarter ended December 31, 2022, the Company determined that there were no triggering events and, as a result, there was no impairment to either its goodwill or indefinite-lived intangible assets at December 31, 2022.

NOTE 9 – INCOME TAXES

During the quarter ended June 30, 2022, the Company recognized a tax provision of $ 23,268 on income before taxes from continuing operations of $ 76,050 , compared to a tax provision of $ 12,078 on income before taxes from continuing operations of $ 26,893 in the comparable prior year quarter.

The current year quarter results included restructuring charges of $ 5,909 ($ 4,359 , net of tax), fair value step-up of acquired inventory sold of $ 2,700 ($ 2,005 , net of tax), strategic review (retention and other) of $ 3,220 ($ 2,416 , net of tax), debt extinguishment, net of $ 5,287 ($ 4,022 , net of tax), and discrete and certain other tax provisions, net, that affect comparability of $ 913 .

The prior year quarter results included restructuring charges of $ 4,081 ($ 3,128 , net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $ 2,850 .

Excluding these items, the effective tax rates for the quarters ended June 30, 2022 and 2021 were 28.6 % and 32.9 %, respectively.

During the nine months ended June 30, 2022, the Company recognized a tax provision of $ 55,119 on income before taxes of $ 182,765 , compared to a tax provision of $ 34,868 on income before taxes of $ 92,546 in the comparable prior year period.

The nine month period ended June 30, 2022 included restructuring charges of $ 12,391 ($ 9,185 , net of tax), acquisition costs of $ 9,303 ($ 8,149 , net of tax), proxy expenses of $ 6,952 ($ 5,359 , net of tax), fair value step-up of acquired inventory sold of $ 5,401 ($ 4,012 , net of tax), strategic review (retention and other) of $ 3,220 ($ 2,416 , net of tax), debt extinguishment, net $ 5,287 ($ 4,022 , net of tax), and discrete and certain other tax benefits, net, that affect comparability of $ 661 .

The nine month period ended June 30, 2021 included restructuring charges of $ 14,662 ($ 11,034 , net of tax), and discrete tax and certain other tax provisions, net, that affect comparability of $ 3,219 .

Excluding these items, the effective tax rates for the nine months ended June 30, 2022 and 2021 were 28.9 % and 32.9 %, respectively.

During the quarter ended December 31, 2022, the Company recognized a tax provision of $ 19,318 on income before taxes from continuing operations of $ 68,020 , compared to a tax provision of $ 7,213 on income before taxes from continuing operations of $ 23,917 in the comparable prior year quarter.

The current year quarter results include a gain on the sale of a building of $ 10,852 ($ 8,323 , net of tax), strategic review (retention and other) of $ 8,232 ($ 6,222 , net of tax), proxy costs of $ 1,503 ($ 1,153 , net of tax), and discrete and certain other tax benefits, net, that affect comparability of $ 333 .

The prior year quarter results included restructuring charges of $ 1,716 ($ 1,330 , net of tax), acquisition costs of $ 2,595 ($ 2,003 , net of tax), proxy contest costs of $ 2,291 ($ 1,768 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 891 .

Excluding these items, the effective tax rates for the quarters ended December 31, 2022 and 2021 were 29.1 % and 31.5 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

NOTE 10 – LONG-TERM DEBT

At June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

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

Senior notes due 2028 (a) $ 974,775 $ 254 ( 10,434 ) $ 964,595 5.75 % $ 974,775 $ 266 $ ( 10,939 ) $ 964,102 5.75 %

Term Loan B due 2029 (b) 498,000 ( 1,187 ) ( 9,174 ) 487,639 Variable — — — — — n/a

Term Loan B due 2029 (b) 494,000 ( 1,101 ) ( 8,472 ) 484,427 Variable 496,000 ( 1,144 ) ( 8,823 ) 486,033 Variable

Revolver due 2025 (b) 45,100 — ( 1,104 ) 43,996 Variable 97,328 — ( 1,227 ) 96,101 Variable

9 unchanged sentences

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

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

Effective Interest Rate Cash Interest Amort.

Debt (Premium)/Discount Amort.

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

Premium Amort.

Debt Issuance Costs

& Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 14,340 $ ( 12 ) $ 516 $ 14,844 6.0 % $ 14,375 $ ( 12 ) $ 496 $ 14,859

Term Loan B due 2029 (b) 3.9 % 7,129 61 485 7,675 n/a — — — —

Revolver due 2025 (b) Variable 1,056 — 123 1,179 Variable 344 — 123 467

Finance lease - real estate (c) 5.6 % 187 — — 187 5.7 % 215 — 6 221

Non US lines of credit (d) Variable 4 — 5 9 Variable 4 — 4 8

Non US term loans (d) Variable 141 — 9 150 Variable 169 — 18 187

Other long term debt (e) Variable 54 — — 54 Variable 107 — — 107

Capitalized interest ( 76 ) — — ( 76 ) — — — —

Totals $ 22,835 $ 49 $ 1,138 $ 24,022 $ 15,214 $ ( 12 ) $ 647 $ 15,849

Nine Months Ended June 30, 2022 Nine Months Ended June 30, 2021

Three Months Ended December 31, 2022 Three Months Ended December 31, 2021

Effective Interest Rate Cash Interest Amort.

5 unchanged sentences

Senior notes due 2028 (a) 5.9 % $ 14,012 $ ( 12 ) $ 505 $ 14,505 5.9 % $ 14,375 $ ( 12 ) $ 518 $ 14,881

Term Loan B due 2029 (b) 3.7 % 11,896 91 717 12,704 n/a — — — —

Term Loan B due 2029 (b) Variable 7,808 43 351 8,202 n/a — — — —

Revolver due 2025 (b) Variable 1,344 — 123 1,467 Variable 261 — 122 383

8 unchanged sentences

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

(a) During 2020, Griffon issued, at par, $ 1,000,000 of 5.75 % Senior Notes due in 2028 (the “2028 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 $ 1,000,000 of 5.25 % Senior Notes due 2022.

During the period ended June 30, 2022, Griffon purchased $ 15,225 of 2028 Senior Notes in the open market at a weighted average discount of 92.19 % of par, or $ 14,036 .

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

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

In connection with these purchases, Griffon recognized a $ 1,767 net gain on the early extinguishment of debt 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 June 30, 2022, outstanding 2028 Senior Notes due totaled $ 984,775 ;

As of December 31, 2022, outstanding 2028 Senior Notes due totaled $ 974,775 ;

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

Subsequent to June 30, 2022, Griffon purchased $ 10,000 of 2028 Senior Notes in the open market at a weighted average discount of 91.25 % of par, or $ 9,125 .

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

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 $ 888,759 on June 30, 2022 based upon quoted market prices (level 1 inputs).

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

The Term Loan B contains a SOFR floor of 0.50 % and a current spread of 2.75 %.

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

The 2028 Senior Notes were registered under the Securities Act of 1933, as amended (the "Securities Act") via exchange offer.

The fair value of the 2028 Senior Notes approximated $ 877,298 on December 31, 2022 based upon quoted market prices (level 1 inputs).

At December 31, 2022, $ 10,434 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 $ 400,000 revolving credit facility ("Revolver"), and replaced LIBOR with SOFR (Secured Overnight Financing Rate).

The Term Loan B accrues interest at the Term SOFR rate plus a credit adjustment spread with a floor of 0.50 %, and a current spread of 2.50 % ( 7.01 % as of December 31, 2022).

Additionally, there are two interest rate step-downs tied to achieving decreased secured leverage ratio thresholds, the first of which was achieved during 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 , beginning with the quarter ended June 30, 2022;

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;

1 unchanged sentence

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

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

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

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

In connection with the prepayment of the Term Loan B, Griffon recognized a $ 6,296 charge on the prepayment of debt;

$ 5,575 related to the write-off of underwriting fees and other expenses and $ 721 of the original issuer 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 $ 473,100 on June 30, 2022 based upon quoted market prices (level 1 inputs).

At June 30, 2022, $ 9,174 of underwriting fees and other expenses incurred, remained to be amortized.

Term Loan B borrowings are secured by the same collateral as the Revolver on an equal and ratable basis.

The fair value of the Term Loan B facility approximated $ 485,355 on December 31, 2022 based upon quoted market prices (level 1 inputs).

At December 31, 2022, $ 8,472 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.

2 unchanged sentences

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").

During 2022, 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 0.75 % for base rate loans, 1.75 % for SOFR loans and 1.75 % for SONIA loans.

Griffon's SOFR loans accrue interest at Term SOFR plus a credit adjustment spread and a margin of 1.50 % ( 5.91 % at December 31, 2022) and SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 1.50 % ( 4.96 % at December 31, 2022).

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.

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 June 30, 2022, there were $ 97,816

Both the Revolver and Term Loan B borrowings under the Credit Agreement are guaranteed by Griffon’s

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

of outstanding borrowings under the Revolver;

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

At December 31, 2022, there were $ 45,100 of outstanding borrowings under the Revolver;

outstanding standby letters of credit were $ 12,287 ;

3 unchanged sentences

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

At June 30, 2022, $ 13,426 was outstanding.

During the year-to-date period ended June 30, 2022, the financing lease on the Troy, Ohio location expired.

At December 31, 2022, $ 12,751 was outstanding.

During 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.

2 unchanged sentences

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,666 as of June 30, 2022) revolving credit facility.

The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 3.09 % LIBOR USD and 3.86 % Bankers Acceptance Rate CDN as of June 30, 2022).

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,072 as of December 31, 2022) revolving credit facility.

Effective in December 2022, the facility was amended to replace LIBOR (USD) with the Canadian Dollar Offer Rate ("CDOR").

The facility accrues interest at CDOR or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 6.04 % using CDOR and 5.79 % using Bankers Acceptance Rate CDN as of December 31, 2022).

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

Garant is required to maintain a certain minimum equity.

At June 30, 2022, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,666 as of June 30, 2022) available.

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

At December 31, 2022, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,072 as of December 31, 2022) available.

During 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.

1 unchanged sentence

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

The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25 %, respectively, per annum ( 2.39 % at June 30, 2022).

At June 30, 2022, there was no balance outstanding under the receivable purchase facility with AUD 15,000 ($ 10,392 as of June 30, 2022) available.

The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25 % per annum ( 4.51 % at December 31, 2022).

At December 31, 2022, there was no balance outstanding under the receivable purchase facility with AUD 15,000 ($ 10,134 as of December 31, 2022) available.

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

3 unchanged sentences

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

The Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.92 % ( 3.11 % at June 30, 2022).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25 % ( 4.50 % as of June 30, 2022).

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

As of June 30, 2022, the revolver had no outstanding balance while the term and mortgage loan balances amounted to GBP 11,603 ($ 14,193 as of June 30, 2022).

The Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.80 % ( 5.23 % at December 31, 2022).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25 % ( 6.75 % as of December 31, 2022).

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

As of December 31, 2022, the revolver had no outstanding balance while the term and mortgage loan balances amounted to GBP 10,519 ($ 12,663 as of December 31, 2022).

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

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

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

The trade loan facility has a maximum loan period of 135 days and expired on June 30, 2022.

The trade facility accrues interest at the Mid-point of the FED Target Range plus 2.50 % ( 4.13 % as of June 30, 2022).

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

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

NOTE 11 — SHAREHOLDERS’ EQUITY

During the nine months ended June 30, 2022, the Company paid three quarterly cash dividends of $ 0.09 per share each.

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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

On July 27, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.09 per share, payable on September 15, 2022 to shareholders of record as of the close of business on August 18, 2022.

As of June 30, 2022, the Company accrued $ 104,053 in connection with the declaration of the special dividend.

NOTE 11 — SHAREHOLDERS’ EQUITY AND EQUITY COMPENSATION

During the three months ended December 31, 2022, the Company paid a quarterly cash dividend of $ 0.10 per share.

During 2022, the Company paid a regular quarterly cash dividend of $ 0.09 per share, totaling $ 0.36 per share for the year.

Additionally, on June 27, 2022, the Board of Directors declared a special cash dividend of $ 2.00 per share, paid on July 20, 2022.

For all dividends, a dividend payable is established for the holders of restricted shares;

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

On January 30, 2023, the Board of Directors declared a quarterly cash dividend of $ 0.10 per share, payable on March 23, 2023 to shareholders of record as of the close of business on February 23, 2023.

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.

6 unchanged sentences

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 June 30, 2022, there were 835,517 shares available for grant.

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

As of December 31, 2022, there were 368,445 shares available for grant.

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

The Company recognizes forfeitures as they occur.

Compensation expense for restricted stock granted to two senior executives is calculated as the maximum number of shares granted, upon achieving certain performance criteria, multiplied by the stock price as valued by a Monte Carlo Simulation Model.

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 SG&A expenses.

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

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

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

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

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

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

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

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

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

During the nine months ended June 30, 2022, 501,718 shares granted were issued out of treasury stock.

During the third quarter of 2022, Griffon granted 31,663 shares of restricted stock.

This included 31,208 shares of restricted stock, subject to certain performance conditions, with vesting periods of thirty-two months , with a total fair value of $ 700 , or a weighted average fair value of $ 22.43 per share.

Furthermore, this included 455 shares of a restricted stock award granted to one executive, with a vesting period of 3 years and a total fair value of $ 9 or a weighted average fair value of $ 18.89 per share.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

2022 2021 2022 2021

For the Three Months Ended December 31,

Restricted stock $ 5,538 $ 3,890

1 unchanged sentence

Total stock-based compensation $ 6,742 $ 4,867

During the first quarter of 2023, Griffon granted 466,677 shares of restricted stock and restricted stock units ("RSUs").

This includes 249,480 shares of restricted stock and 11,901 RSUs granted to 44 executives and key employees, subject to certain performance conditions, with a vesting period of thirty-six months and a total fair value of $ 8,385 , or a weighted average fair value of $ 33.61 per share.

This also includes 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 fair value of these restricted shares, assuming achievement of the performance conditions at target, is $ 3,555 , or a

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

weighted average fair value of $ 34.63 per share.

During the three months ended December 31, 2022, 454,776 shares granted were issued out of treasury stock.

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.

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

During the nine months ended June 30, 2022, Griffon did not purchase any shares of common stock under these repurchase programs.

As of June 30, 2022, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

During the nine months ended June 30, 2022, 421,860 shares, with a market value of $ 10,742 , or $ 25.46 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the nine months ended June 30, 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.

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

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

During the three months ended December 31, 2022, 345,051 shares, with a market value of $ 12,627 , or $ 36.59 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the three months ended December 31, 2022, an additional 3,066 shares, with a market value of $ 108 , or $ 35.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

NOTE 12 – EARNINGS PER SHARE (EPS)

2 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended December 31,

Common shares outstanding 57,186 56,304

18 unchanged sentences

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

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

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

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

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

For the Three Months Ended December 31,

REVENUE 2022 2021

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

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

2022 2021 2022 2021

For the Three Months Ended December 31,

Residential repair and remodel $ 81,706 $ 38,759

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

For the Three Months Ended June 30,

CPP HBP Total CPP HBP Total

United States $ 248,068 $ 384,265 $ 632,333 $ 206,809 $ 246,268 $ 453,077

Europe 31,113 7 31,120 43,767 31 43,798

Canada 19,592 15,683 35,275 20,547 10,724 31,271

Australia 55,142 — 55,142 51,437 — 51,437

All other countries 8,719 5,590 14,309 2,266 2,369 4,635

Consolidated revenue $ 362,634 $ 405,545 $ 768,179 $ 324,826 $ 259,392 $ 584,218

For the Nine Months Ended June 30, 2022

For the Three Months Ended December 31,

CPP HBP Total CPP HBP Total

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Consolidated revenue $ 252,811 $ 396,573 $ 649,384 $ 283,173 $ 308,576 $ 591,749

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

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

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

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

2022 2021 2022 2021

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

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

For the Three Months Ended December 31,

Segment adjusted EBITDA:

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Depreciation and amortization ( 17,113 ) ( 13,081 )

Debt extinguishment, net ( 5,287 ) — ( 5,287 ) —

Restructuring charges ( 5,909 ) ( 4,081 ) ( 12,391 ) ( 14,662 )

Acquisition costs — — ( 9,303 ) —

Gain on sale of building 10,852 —

Strategic review - retention and other ( 8,232 ) —

Proxy expenses ( 1,503 ) ( 2,291 )

Fair value step-up of acquired inventory sold ( 2,700 ) — ( 5,401 ) —

Acquisition costs — ( 2,595 )

Restructuring charges — ( 1,716 )

Income before taxes from continuing operations $ 68,020 $ 23,917

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

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

For the Three Months Ended December 31,

DEPRECIATION and AMORTIZATION 2022 2021

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

ASSETS At June 30, 2022 At September 30, 2021

ASSETS At December 31, 2022 At September 30, 2022

Segment assets:

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Total continuing assets 2,771,545 2,810,699

Discontinued operations - held for sale — 275,814

Other discontinued operations 3,110 4,029

Discontinued operations 5,693 5,775

Consolidated total $ 2,777,238 $ 2,816,474

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

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

2022 2021 2022 2021

Three Months Ended December 31,

Interest cost $ 1,825 $ 796

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NOTE 15 – RECENT ACCOUNTING PRONOUNCEMENTS

Issued but not yet effective accounting pronouncements

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

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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 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.

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.

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

GRIFFON CORPORATION AND SUBSIDIARIES

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

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

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

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

NOTE 16 – DISCONTINUED OPERATIONS

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

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

In connection with the sale of Telephonics, the Company recorded a gain of $ 108,949 ($ 88,977 , net of tax) during the quarter ended June 30, 2022.

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 $ 2,568 for post-closing working capital adjustments.

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.

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

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

2022 2021 2022 2021

For the Three Months Ended December 31, 2021

Revenue $ 53,993

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Selling, general and administrative expenses 10,020

Income (loss) from discontinued operations 5,622 1,919 9,430 ( 2,902 )

Income from discontinued operations 3,012

Other income (expense)

Interest income, net —

Gain on sale of business 108,949 — 108,949 5,291

Other, net 308

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Income from discontinued operations before taxes $ 3,320

Provision (benefit) for income taxes 25,952 288 20,149 ( 2,085 )

Provision for income taxes 726

Income from discontinued operations $ 2,594

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

Depreciation and amortization would have been approximately $ 2,342 and $ 7,442 in the three and nine months ended June 30, 2022, respectively.

Depreciation and amortization was excluded from the prior 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 would have been approximately $ 2,700 for the quarter ended December 31, 2021.

GRIFFON CORPORATION AND SUBSIDIARIES

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

The Company completed the sale of Telephonics on June 27, 2022.

The following amounts related to Telephonics that 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

Accounts receivable, net $ 42,020

Contract assets, net of progress payments 72,983

Inventories 83,970

Prepaid and other current assets 4,409

PROPERTY, PLANT AND EQUIPMENT, net 47,771

OPERATING LEASE RIGHT-OF-USE ASSETS 1,167

GOODWILL 17,734

INTANGIBLE ASSETS, net 131

OTHER ASSETS 5,629

Total Assets $ 275,814

CURRENT LIABILITIES

Accounts payable 60,588

Accrued liabilities 15,326

Current portion of operating lease liabilities 287

LONG-TERM OPERATING LEASE LIABILITIES 867

OTHER LIABILITIES 3,955

Total Liabilities $ 81,023

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 June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

Assets of discontinued operations:

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Total liabilities of discontinued operations $ 12,350 $ 16,918

Accrued liabilities as of June 30, 2022 includes the Company's obligation of $ 27,703 in connection with the sale of Telephonics primarily related to income taxes payable.

At June 30, 2022 and September 30, 2021, Griffon’s liabilities for Installations Services and other discontinued operations primarily relate to insurance claims, warranty and environmental reserves total $ 6,928 and $ 7,074 , respectively.

There was no reported revenue in the quarter and nine month period ended June 30, 2022 and 2021 for Installations Services and other discontinued operations.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

At December 31, 2022 and September 30, 2022, Griffon's discontinued assets and liabilities includes the Company's obligation of $ 5,288 and $ 8,846 , respectively, in connection with the sale of Telephonics primarily related to certain customary post-closing adjustments, primarily working capital and stay bonuses.

At December 31, 2022 and September 30, 2022, Griffon’s liabilities for Installations Services and other discontinued operations primarily relate to insurance claims, income taxes, product liability, warranty and environmental reserves total $ 7,062 and $ 8,072 , respectively.

There was no reported revenue in the quarters ended December 31, 2022 and 2021 for Installations Services and other discontinued operations.

NOTE 17 – RESTRUCTURING CHARGES

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

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

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

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

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

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

This initiative includes three key development areas.

First, certain AMES U.S.

and global operations will be consolidated to optimize facilities footprint and talent.

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

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

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

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

In the quarter and nine months ended June 30, 2022, CPP incurred pre-tax restructuring and related exit costs approximating $ 5,909 and $ 12,391 , respectively.

During the nine months ended June 30, 2022, cash charges totaled $ 9,897 and non-cash, asset-related charges totaled $ 2,494 ;

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 accelerated timeline for the initiative, which was completed in fiscal 2022.

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.

Non-cash charges included a $ 1,766 impairment charge related to certain fixed assets at several manufacturing locations and $ 728 of inventory that have no recoverable value.

During the nine months ended June 30, 2022, headcount was reduced by 20 .

In the quarter and nine months ended June 30, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 4,081 and $ 14,662 , respectively.

During the nine months ended June 30, 2021, cash charges totaled $ 10,780 and non-cash, asset-related charges totaled $ 3,882 ;

the cash charges included $ 1,783 for one-time termination benefits and other personnel related costs and $ 8,997 for facility and lease exit costs primarily driven by the consolidation of distribution facilities.

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

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

In the quarter ended December 31, 2021, CPP incurred pre-tax restructuring and related exit costs approximating $ 1,716 .

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

2022 2021 2022 2021

For the Three Months Ended December 31,

Cost of goods and services $ 322

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Total restructuring charges $ 1,716

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

2022 2021 2022 2021

For the Three Months Ended December 31,

Personnel related costs $ 260

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Personnel related costs Facilities &

Exit Costs Facility and Other Costs Total

Exit Costs Facility and Other Costs (1)

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

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

Q2 Restructuring charges 1,878 1,122 1,766 4,766

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

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

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

Q3 Restructuring charges 1,613 3,857 439 5,909

___________________

(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

Personnel related costs Facilities &

Exit Costs Total

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

Q1 Cash payments ( 74 ) ( 93 ) ( 167 )

Q3 Non-cash charges — — ( 439 ) ( 439 )

Accrued liability at June 30, 2022 $ 392 $ 264 $ — $ 656

Accrued liability at December 31, 2022 $ 312 $ 171 $ 483

NOTE 18 – OTHER INCOME (EXPENSE)

For the quarters ended June 30, 2022 and 2021, Other income (expense) of $ 2,084 and $ 587 , respectively, includes $ 265 and $ 77 , respectively, of net currency exchange losses in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 1,118 and $ 226 , respectively, as well as $( 91 ) and $ 111 , respectively, of net investment income (loss).

Other income (expense) also includes rental income of $ 156 in both of the three months ended June 30, 2022 and 2021.

Additionally, it includes royalty income of $ 828 for the three months ended June 30, 2022.

For the nine months ended June 30, 2022 and 2021, Other income (expense) of $ 4,528 and $ 1,413 , respectively, includes $ 297 and $ 302 , respectively, of net currency exchange losses in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income of $ 3,145 and $ 680 , respectively, as well as $( 328 ) and $ 496 , respectively, of net investment income (loss).

Other income (expense) also includes rental income of $ 468 in both of the nine months ended June 30, 2022 and 2021.

Additionally, it includes royalty income of $ 1,444 for the nine months ended June 30, 2022.

For the quarters ended December 31, 2022 and 2021, Other income (expense) of $ 607 and $ 1,075 , respectively, includes $ 67 and ($ 394 ), respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income (expense) of $( 216 ) and $ 948 , respectively, and $ 33 and $ 374 , respectively, of net investment income.

Other income (expense) also includes rental income of $ 212 and $ 156 for the three months ended December 31, 2022 and 2021, respectively.

Additionally, it includes royalty income of $ 549 for the three months ended December 31, 2022.

GRIFFON CORPORATION AND SUBSIDIARIES

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

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

2022 2021 2022 2021

Three Months Ended December 31,

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

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Actual warranty costs incurred ( 3,754 ) ( 1,707 )

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

Balance, end of period $ 17,699 $ 9,572

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 20 – OTHER COMPREHENSIVE INCOME (LOSS)

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

For the Three Months Ended June 30,

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

Foreign currency translation adjustments $ ( 17,823 ) $ — $ ( 17,823 ) $ 1,160 $ — $ 1,160

Pension and other defined benefit plans 1,511 ( 315 ) 1,196 1,576 ( 331 ) 1,245

Cash flow hedges 3,500 ( 1,050 ) 2,450 478 ( 144 ) 334

Total other comprehensive income (loss) $ ( 12,812 ) $ ( 1,365 ) $ ( 14,177 ) $ 3,214 $ ( 475 ) $ 2,739

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

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

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

At June 30, 2022 At September 30, 2021

At December 31, 2022 At September 30, 2022

Foreign currency translation adjustments $ ( 45,233 ) $ ( 57,170 )

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$ ( 70,519 ) $ ( 82,738 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

For the Three Months Ended December 31,

Gain (Loss) 2022 2021

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The Company determines if an arrangement is a lease at inception.

The ROU assets and short and long-term liabilities associated with our Operating leases are shown as separate line items on our Condensed

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Balance Sheets.

The ROU assets and short and long-term liabilities associated with our Operating leases are shown as separate line items on our Condensed Consolidated Balance Sheets.

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

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Components of operating lease costs are as follows:

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

2022 2021 2022 2021

For the Three Months Ended December 31,

Fixed $ 11,294 $ 9,747

Variable (a), (b)

2,742 1,877 6,278 5,690

Short-term (b)

1,741 897 4,576 2,952

Total $ 16,270 $ 12,948

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(b) Not recorded on the balance sheet.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information were as follows:

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

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

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Total $ 10,367 $ 11,597

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

June 30, 2022 September 30, 2021

December 31, 2022 September 30, 2022

Operating Leases:

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Total financing lease liabilities $ 13,634 $ 14,060

(1) Finance lease assets are recorded net of accumulated depreciation of $ 4,689 and $ 6,136 as of June 30, 2022 and September 30, 2021, respectively.

(1) Finance lease assets are recorded net of accumulated depreciation of $ 5,568 and $ 4,972 as of December 31, 2022 and September 30, 2022, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

At June 30, 2022, $ 13,426 was outstanding.

During the nine months ended June 30, 2022, the financing lease on the Troy, Ohio location expired.

At December 31, 2022, $ 12,751 was outstanding.

During 2022, the financing lease on the Troy, Ohio location expired.

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

Griffon exercised the one dollar buyout option in November 2021.

The aggregate future maturities of lease payments for operating leases and finance leases as of June 30, 2022 are as follows (in thousands):

The remaining lease liability balance relates to finance equipment leases.

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

Operating Leases Finance Leases

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Present value of lease liabilities $ 191,947 $ 13,634

(a) Excluding the nine months ended June 30, 2022.

Average lease terms and discount rates at June 30, 2022 were as follows:

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(a) Excluding the three months ended December 31, 2022.

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

Weighted-average remaining lease term (years):

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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 .

The operations, which included plating, may have involved the use of certain chemicals and solvents.

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 and 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 to perform certain studies to determine the nature and extent of any possible contamination.

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 performing these studies.

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

Lightron and ISCP are currently in negotiations with the EPA regarding the scope of the aforementioned studies, which will address the Peekskill site and certain areas downstream from the Peekskill Site.

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 fromthe 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”).

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

1 unchanged sentence

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

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

Union Fork and Hoe, Frankfort, NY site.

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

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

While the Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site, the Order required AMES to perform a remedial investigation of certain portions of the property and to recommend a remediation option.

In 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, and is now performing a statistical analysis to determine the area, if any, required to be remediated.

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

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

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.

Memphis, TN site.

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

been impacted.

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

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

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.

In 2021, 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.

5 unchanged sentences

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.

Hunter expects that the 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.

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements