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Item 1. Financial Statements

2023-05-04 compared with 2023-01-31 · 314 added, 193 removed, 751 unchanged (40% of the section changed)

38 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three Months Ended December 31, 2022 and 2021

For the Three and Six Months Ended March 31, 2023 and 2022

COMMON STOCK CAPITAL IN

14 unchanged sentences

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

Net loss — — — ( 62,255 ) — — — — ( 62,255 )

Dividend — — — ( 5,714 ) — — — — ( 5,714 )

Shares withheld on employee taxes on vested equity awards — — — — 21 ( 254 ) — — ( 254 )

Amortization of deferred compensation — — — — — — — 570 570

Equity awards granted, net — — ( 617 ) — ( 40 ) 617 — — —

ESOP allocation of common stock — — 1,207 — — — — — 1,207

Stock-based compensation — — 5,296 — — — — — 5,296

Other comprehensive income, net of tax — — — — — — 2,613 — 2,613

Balance at March 31, 2023 84,746 $ 21,187 $ 633,451 $ 318,648 27,541 $ ( 425,405 ) $ ( 67,906 ) $ ( 11,664 ) $ 468,311

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

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Six Months Ended March 31, 2023 and 2022

COMMON STOCK CAPITAL IN

14 unchanged sentences

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

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

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

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

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

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

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

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

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

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

2 unchanged sentences

(in thousands, except per share data)

Three Months Ended December 31,

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

2023 2022 2023 2022

Revenue $ 710,984 $ 779,617 $ 1,360,368 $ 1,371,366

2 unchanged sentences

Selling, general and administrative expenses 160,301 157,838 313,021 285,190

Income from operations 81,105 38,490

Intangible asset impairment 100,000 — 100,000 —

Total operating expenses 260,301 157,838 413,021 285,190

Income (loss) from operations ( 65,809 ) 102,805 15,296 141,295

Other income (expense)

4 unchanged sentences

Total other expense, net ( 24,350 ) ( 20,007 ) ( 37,435 ) ( 34,580 )

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

Provision for income taxes 19,318 7,213

Income from continuing operations $ 48,702 $ 16,704

Income (loss) before taxes from continuing operations ( 90,159 ) 82,798 ( 22,139 ) 106,715

Provision (benefit) for income taxes ( 27,904 ) 24,638 ( 8,586 ) 31,851

Income (loss) from continuing operations $ ( 62,255 ) $ 58,160 $ ( 13,553 ) $ 74,864

Discontinued operations:

Income from operations of discontinued operations — 1,000 — 4,320

Provision for income taxes — 726

Provision (benefit) for income taxes — ( 6,529 ) — ( 5,803 )

Income from discontinued operations — 7,529 — 10,123

Net income $ 48,702 $ 19,298

Net income (loss) $ ( 62,255 ) $ 65,689 $ ( 13,553 ) $ 84,987

Basic earnings per common share:

Income from continuing operations $ 0.93 $ 0.33

Income (loss) from continuing operations $ ( 1.17 ) $ 1.13 $ ( 0.26 ) $ 1.46

Income from discontinued operations — 0.15 — 0.20

Basic earnings per common share $ 0.93 $ 0.38

Basic earnings (loss) per common share $ ( 1.17 ) $ 1.27 $ ( 0.26 ) $ 1.65

Basic weighted-average shares outstanding 53,038 51,668 52,809 51,423

Diluted earnings per common share:

Income from continuing operations $ 0.88 $ 0.31

Income (loss) from continuing operations $ ( 1.17 ) $ 1.09 $ ( 0.26 ) $ 1.40

Income from discontinued operations — 0.14 — 0.19

Diluted earnings per common share $ 0.88 $ 0.36

Diluted earnings (loss) per common share $ ( 1.17 ) $ 1.23 $ ( 0.26 ) $ 1.59

Diluted weighted-average shares outstanding 53,038 53,430 52,809 53,602

Dividends paid per common share $ 0.10 $ 0.09 $ 0.20 $ 0.18

Net income $ 48,702 $ 19,298

Net income (loss) $ ( 62,255 ) $ 65,689 $ ( 13,553 ) $ 84,987

Other comprehensive income (loss), net of taxes:

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Total other comprehensive income (loss), net of taxes 2,613 4,949 14,832 2,198

Comprehensive income, net $ 60,921 $ 16,547

Comprehensive income (loss), net $ ( 59,642 ) $ 70,638 $ 1,279 $ 87,185

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

2 unchanged sentences

(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 48,702 $ 19,298

Net income (loss) $ ( 13,553 ) $ 84,987

Net income from discontinued operations — ( 10,123 )

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

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

Depreciation and amortization 34,367 29,333

Stock-based compensation 13,335 9,959

Intangible asset impairments 100,000 —

Asset impairment charges - restructuring 59,118 806

1 unchanged sentence

Amortization of debt discounts and issuance costs 2,045 1,566

Deferred income taxes — 2,883

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

Deferred income tax provision (benefit) ( 25,744 ) 2,883

Gain on sale of assets and investments ( 10,852 ) ( 118 )

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

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

Increase in accounts receivable ( 19,431 ) ( 177,347 )

(Increase) decrease in inventories 64,582 ( 106,534 )

5 unchanged sentences

Acquisition of property, plant and equipment ( 11,837 ) ( 22,030 )

Acquired businesses, net of cash acquired — ( 851,464 )

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

1 unchanged sentence

Proceeds from the sale of property, plant and equipment 11,834 32

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

Net cash used in investing activities - continuing operations ( 2,571 ) ( 858,539 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Other, net ( 127 ) ( 27 )

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

Net cash provided by ( used in) financing activities - continuing operations ( 99,631 ) 899,924

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

2 unchanged sentences

(in thousands)

Three Months Ended December 31,

Six Months Ended March 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

22 unchanged sentences

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.

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

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, and on April 20, 2023, Griffon announced that its Board of Directors, after extensive evaluation and deliberation, determined that the ongoing execution of the Company’s strategic plan was the best way to maximize value for shareholders and unanimously decided to conclude its review.

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 .

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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.

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.

As of the date of this filing, government restrictions have been relaxed or eliminated as the health risk of COVID-19 has decreased;

however, the effects of COVID-19 continue to linger throughout the global economy and our businesses.

Though the severity of COVID-19 has subsided, new variants could interrupt business, cause renewed labor and supply chain disruptions, and negatively impact the global and US economy, which could materially and adversely impact our businesses.

See information provided in Part 1, Item 1A, “Risk Factors” our Form 10-K filed on November 18, 2022.

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2 – FAIR VALUE MEASUREMENTS

4 unchanged sentences

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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.

On March 31, 2023, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 901,667 and $ 489,540 , respectively.

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

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.

Insurance contracts with values of $ 3,619 at March 31, 2023 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

At December 31, 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).

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

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

As of 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).

As of March 31, 2023, 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 March 31, 2023, Griffon had $ 23,000 of Australian dollar contracts at a weighted average rate of $ 1.42 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 $ 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.

AOCI included deferred gains of $ 1,172 ($ 820 , net of tax) at March 31, 2023.

Upon settlement, gains of $ 155 and $ 2,416 were recorded in COGS during the three and six months ended March 31, 2023, respectively.

All contracts expire in 28 to 90 days.

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).

At March 31, 2023, Griffon had $ 32,750 of Chinese Yuan contracts at a weighted average rate of $ 6.90 which qualified for hedge accounting (level 2 inputs).

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

AOCI included deferred gains of $ 655 ($ 478 , net of tax) at March 31, 2023.

Upon settlement, losses of $ 146 and $ 1,403 were recorded in COGS during the three and six months ended March 31, 2023, respectively.

All contracts expire in 4 to 335 days.

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

At March 31, 2023, Griffon had $ 4,300 of Canadian dollar contracts at a weighted average rate of $ 1.32 .

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.

For the three months and six months ended March 31, 2023, fair value (losses)/gains of $( 105 ) and $ 112 , 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 $ 91 and $ 265 was recorded in Other income during the three months and six months ended March 31, 2023, respectively, for all settled contracts.

All contracts expire in 30 to 359 days.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3 – REVENUE

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

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.

For the six months ended March 31, 2023, Hunter's revenue and Segment Adjusted EBITDA was $ 130,326 and $ 16,659 , respectively.

Based on the final purchase price allocation, the goodwill recognized was $ 250,711 , which was assigned to the CPP segment, and is not deductible for income tax purposes.

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Proforma For the Three Months Ended March 31, 2022 (unaudited) Proforma For the Six Months Ended March 31, 2022 (unaudited)

Revenue $ 791,038 $ 1,461,877

5 unchanged sentences

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Accounts receivable (1)

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

(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)

(3) Deferred tax liability recorded on primarily intangibles assets.

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

4 unchanged sentences

Total goodwill and intangible assets $ 866,711

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 .

During the quarter and six months ended March 31, 2023, there were no acquisition costs.

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

NOTE 5 – INVENTORIES

1 unchanged sentence

The following table details the components of inventory:

At December 31, 2022 At September 30, 2022

At March 31, 2023 At September 30, 2022

Raw materials and supplies $ 153,004 $ 173,520

2 unchanged sentences

Total $ 574,086 $ 669,193

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In connection with the Company's restructuring activities described in Note 17, Restructuring Charges, during the quarter ended March 31, 2023, CPP recorded an inventory impairment charge of $ 37,100 to adjust to net realizable value.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

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

At December 31, 2022 At September 30, 2022

At March 31, 2023 At September 30, 2022

Land, building and building improvements $ 158,500 $ 159,693

4 unchanged sentences

Total $ 262,394 $ 294,561

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.

Depreciation and amortization expense for property, plant and equipment was $ 11,601 and $ 11,782 for the quarters ended March 31, 2023 and 2022, respectively, and $ 23,090 and $ 22,476 for the six months ended March 31, 2023 and 2022, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 4,646 and $ 4,256 for the quarters ended March 31, 2023 and 2022, respectively, and $ 8,885 and $ 7,656 for the six months ended March 31, 2023 and 2022, respectively.

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Except as described in Note 17, Restructuring Charges, no event or indicator of impairment occurred during the three and six months ended March 31, 2023 which would require additional impairment testing of property, plant and equipment.

NOTE 7 – CREDIT LOSSES

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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:

Three months ended December 31,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Six months ended March 31,

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

Allowance for credit losses acquired — 2,599

Provision for expected credit losses 2,395 1,889

1 unchanged sentence

Other, primarily foreign currency translation ( 554 ) 235

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Ending Balance, March 31 $ 13,255 $ 13,500

NOTE 8 – GOODWILL AND OTHER INTANGIBLES

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:

For the quarter ended March 31, 2023, indicators of goodwill impairment were present for our CPP reporting units driven by a decrease in year-to-date and forecasted sales and operating results due to elevated customer inventory levels and reduced consumer demand.

As such, in connection with the preparation of our financial statements for the quarter ended March 31, 2023, we performed a quantitative assessment of the CPP reporting units goodwill using both an income based and market-based valuation approach.

The impairment test did not result in a goodwill impairment.

Indicators of impairment were not present for the HBP reporting unit.

The following table provide a summary of the carrying value of goodwill by segment as of September 30, 2022 and March 31, 2023, as follows:

At September 30, 2022 Hunter Acquisition (1)

At December 31, 2022

At March 31, 2023

Consumer and Professional Products $ 144,537 $ ( 7,926 ) $ 136,611

1 unchanged sentence

Total $ 335,790 $ ( 7,926 ) $ 327,864

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

(1) The decrease is due to the final allocation of the purchase price for the Hunter acquisition primarily related to deferred taxes.

In connection with the preparation of our financial statements for the quarter ended March 31, 2023, indicators of impairment were present for our CPP indefinite-lived intangible assets.

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

We compared the estimated fair values to their carrying amounts.

The impairment test resulted in a pre-tax, non-cash impairment charge of $ 100,000 ($ 74,256 , net of tax) to the gross carrying amount of our trademarks.

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

At December 31, 2022 At September 30, 2022

At March 31, 2023 At September 30, 2022

Gross Carrying Amount Accumulated

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The gross carrying amount of intangible assets was impacted by $ 6,007 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.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Amortization expense for intangible assets was $ 5,653 and $ 4,470 for the quarters ended March 31, 2023 and 2022, respectively, and $ 11,277 and $ 6,857 for the six months ended March 31, 2023 and 2022.

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

7 unchanged sentences

thereafter $ 235,709 .

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 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.

During the quarter ended March 31, 2023, the Company recognized a tax benefit of $ 27,904 on loss before taxes from continuing operations of $ 90,159 , compared to a tax provision of $ 24,638 on income before taxes from continuing operations of $ 82,798 in the comparable prior year quarter.

The current year quarter results included strategic review costs (retention and other) of $ 6,190 ($ 4,658 , net of tax), restructuring charges of $ 78,334 ($ 58,529 , net of tax), intangible asset impairment charges of $ 100,000 ($ 74,256 , net of tax), proxy costs of $ 614 ($ 471 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 8,723 .

The prior year quarter results included restructuring charges of $ 4,766 ($ 3,496 , net of tax), acquisition costs of $ 6,708 ($ 6,146 net of tax), proxy costs of $ 4,661 ($ 3,591 , net of tax), fair value step-up of acquired inventory sold of $ 2,701 ($ 2,007 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 683 .

Excluding these items, the effective tax rates for the quarters ended March 31, 2023 and 2022 were 29.5 % and 28.5 %, respectively.

During the six months ended March 31, 2023, the Company recognized a tax benefit of $ 8,586 on loss before taxes of $ 22,139 , compared to a tax provision of $ 31,851 on income before taxes of $ 106,715 in the comparable prior year period.

The six months ended March 31, 2023 included a gain on the sale of a building of $ 10,852 ($ 8,323 , net of tax), strategic review costs (retention and other) of $ 14,422 ($ 10,880 , net of tax), restructuring charges of $ 78,334 ($ 58,529 , net of tax), intangible asset impairment charges of $ 100,000 ($ 74,256 , net of tax), proxy expenses of $ 2,117 ($ 1,624 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 9,056 .

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

Excluding these items, the effective tax rates for the six months ended March 31, 2023 and 2022 were 29.4 % and 29.1 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 10 – LONG-TERM DEBT

At December 31, 2022 At September 30, 2022

At March 31, 2023 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

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

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

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Effective Interest Rate Cash Interest Amort.

5 unchanged sentences

Senior notes due 2028 (a) 6.0 % $ 14,012 $ ( 12 ) $ 505 $ 14,505 5.9 % $ 14,375 $ ( 12 ) $ 518 $ 14,881

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

Term Loan B due 2029 (b) 7.5 % 8,737 43 352 9,132 3.4 % 4,767 30 232 5,029

Revolver due 2025 (b) Variable 673 — 122 795 Variable 990 — 123 1,113

5 unchanged sentences

Totals $ 23,856 $ 31 $ 992 $ 24,879 $ 20,496 $ 18 $ 894 $ 21,408

Six Months Ended March 31, 2023 Six Months Ended March 31, 2022

Effective Interest Rate Cash Interest Amort.

Premium Amort.

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

Debt Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 28,024 $ ( 24 ) $ 1,010 $ 29,010 6.0 % $ 28,750 $ ( 24 ) $ 1,036 $ 29,762

Term Loan B due 2029 (b) 7.0 % 16,545 86 703 17,334 3.4 % 4,767 30 232 5,029

Revolver due 2025 (b) Variable 2,017 — 245 2,262 Variable 1,251 — 245 1,496

Finance lease - real estate (c) 5.6 % 352 — — 352 5.6 % 390 — 4 394

Non US lines of credit (d) Variable 360 — 25 385 Variable 10 — 7 17

Non US term loans (d) Variable — — — — Variable 351 — 35 386

Other long term debt (e) Variable 194 — 1 195 Variable 158 — 1 159

Capitalized interest ( 11 ) — — ( 11 ) ( 154 ) — — ( 154 )

Totals $ 47,481 $ 62 $ 1,984 $ 49,527 $ 35,523 $ 6 $ 1,560 $ 37,089

GRIFFON CORPORATION AND SUBSIDIARIES

6 unchanged sentences

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

As of March 31, 2023, outstanding 2028 Senior Notes due totaled $ 974,775 ;

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

1 unchanged sentence

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

The fair value of the 2028 Senior Notes approximated $ 901,667 on March 31, 2023 based upon quoted market prices (level 1 inputs).

At March 31, 2023, $ 9,930 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 Term Loan B accrues interest at the Term SOFR rate plus a credit adjustment spread with a floor of 0.50 %, and at March 31, 2023 a spread of 2.50 % ( 7.55 % as of March 31, 2023).

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

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

The Term Loan B facility requires nominal quarterly principal payments of $ 2,000 , which began with the quarter ended June 30, 2022;

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

The Term Loan B facility requires nominal quarterly principal payments of $ 2,000 , potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds starting with the fiscal year ending September 30, 2023;

and a final balloon payment due at maturity.

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

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

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

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

2 unchanged sentences

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 fair value of the Term Loan B facility approximated $ 489,540 on March 31, 2023 based upon quoted market prices (level 1 inputs).

At March 31, 2023, $ 8,120 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.

5 unchanged sentences

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.

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).

Griffon's SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 1.50 % ( 5.71 % at March 31, 2023).

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

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.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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;

At March 31, 2023, there were $ 30,880 of outstanding borrowings under the Revolver;

outstanding standby letters of credit were $ 12,807 ;

3 unchanged sentences

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

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

At March 31, 2023, $ 12,406 was outstanding.

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

3 unchanged sentences

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

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,076 as of March 31, 2023) 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 facility accrues interest at CDOR or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 6.25 % using CDOR and 6.00 % using Bankers Acceptance Rate CDN as of March 31, 2023).

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 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.

At March 31, 2023, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,076 as of March 31, 2023) 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.

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

In March 2023 the existing receivable purchase facility was renewed and increased from AUD 15,000 to AUD 30,000 .

The receivable purchase facility matures in March 2024, but is renewable upon mutual agreement with the lender.

The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25 % per annum ( 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 accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25 % per annum ( 4.88 % at March 31, 2023).

At March 31, 2023, there was no balance outstanding under the receivable purchase facility with AUD 30,000 ($ 20,094 as of March 31, 2023) 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 1.80 % ( 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 Term Loan and Mortgage Loans each accrue interest at the SONIA Rate plus 1.80 % ( 5.98 % at March 31, 2023).

The revolving facility accrues interest at the Bank of England Base Rate plus 3.25 % ( 7.50 % as of March 31, 2023).

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 had an outstanding balance of GBP 2,368 ($ 2,924 as of March 31, 2023) and the term and mortgage loan balances amounted to GBP 9,977 ($ 12,323 as of March 31, 2023).

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

1 unchanged sentence

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

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

At March 31, 2023, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

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 the six months ended March 31, 2023, the Company paid two quarterly cash dividends of $ 0.10 per share each.

On May 2, 2023, the Board of Directors declared a quarterly cash dividend of $ 0.125 per share, payable on June 15, 2023 to shareholders of record as of the close of business on May 25, 2023.

On April 20, 2023, the Board of Directors declared a special cash dividend of $ 2.00 per share, payable on May 19, 2023, to shareholders of record as of the close of business on May 9, 2023.

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

2 unchanged sentences

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

As of March 31, 2023, there were 328,473 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.

3 unchanged sentences

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

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Restricted stock $ 5,296 $ 4,314 $ 10,834 $ 8,204

4 unchanged sentences

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

So long as the minimum performance conditions are attained, the amount of shares that

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(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.

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 weighted average fair value of $ 34.63 per share.

During the second quarter of 2023, Griffon granted 39,972 shares of restricted stock to the non-employee directors of Griffon with a vesting period of one year and a fair value of $ 1,211 , or a weighted average fair value of $ 30.29 per share.

During the six months ended March 31, 2023, 494,748 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 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.

Under these share repurchase programs, the Company may, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, pursuant to an accelerated share repurchase program or issuer tender offer, or in privately negotiated transactions.

During the six months ended March 31, 2023, Griffon did not purchase any shares of common stock under these repurchase programs.

As of March 31, 2023, an aggregate of $ 57,955 remains under Griffon's Board authorized repurchase programs.

On April 20, 2023, the Company's Board of Directors approved an increase to its share repurchase authorization to $ 257,955 from the prior unused authorization of $ 57,955 .

During the three months ended March 31, 2023, 20,688 shares, with a market value of $ 782 , or $ 37.80 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

During the six months ended March 31, 2023, 365,739 shares, with a market value of $ 12,881 , or $ 35.22 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the six months ended March 31, 2023, 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 December 31,

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

2023 2022 2023 2022

Common shares outstanding 57,205 57,032 57,205 57,032

5 unchanged sentences

Weighted average shares outstanding - diluted 53,038 53,430 52,809 53,602

Anti-dilutive restricted stock excluded from diluted EPS computation 2,326 — 2,525 —

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

GRIFFON CORPORATION AND SUBSIDIARIES

13 unchanged sentences

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

For the Three Months Ended December 31,

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

REVENUE 2023 2022 2023 2022

5 unchanged sentences

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

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Residential repair and remodel $ 103,403 $ 114,631 $ 185,109 $ 153,390

13 unchanged sentences

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

For the Three Months Ended December 31,

For the Three Months Ended March 31,

CPP HBP Total CPP HBP Total

5 unchanged sentences

Consolidated revenue $ 314,325 $ 396,659 $ 710,984 $ 411,012 $ 368,605 $ 779,617

For the Six Months Ended March 31,

CPP HBP Total CPP HBP Total

United States $ 366,052 $ 757,641 $ 1,123,693 $ 429,646 $ 647,385 $ 1,077,031

Europe 23,766 16 23,782 65,113 44 65,157

Canada 44,686 30,761 75,447 53,657 25,891 79,548

Australia 122,802 — 122,802 136,537 — 136,537

All other countries 9,830 4,814 14,644 9,232 3,861 13,093

Consolidated revenue $ 567,136 $ 793,232 $ 1,360,368 $ 694,185 $ 677,181 $ 1,371,366

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, non-cash impairment 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 (loss) before taxes from continuing operations:

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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:

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Segment adjusted EBITDA:

11 unchanged sentences

Restructuring charges ( 78,334 ) ( 4,766 ) ( 78,334 ) ( 6,482 )

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

Intangible asset impairment ( 100,000 ) — ( 100,000 ) —

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

Income (loss) before taxes from continuing operations $ ( 90,159 ) $ 82,798 $ ( 22,139 ) $ 106,715

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

For the Three Months Ended December 31,

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

DEPRECIATION and AMORTIZATION 2023 2022 2023 2022

13 unchanged sentences

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

ASSETS At December 31, 2022 At September 30, 2022

ASSETS At March 31, 2023 At September 30, 2022

Segment assets:

8 unchanged sentences

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

Three Months Ended December 31,

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

2023 2022 2023 2022

Interest cost $ 1,826 $ 911 $ 3,651 $ 1,707

28 unchanged sentences

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 December 31, 2021

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

Revenue $ 56,273 $ 110,266

11 unchanged sentences

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.

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

GRIFFON CORPORATION AND SUBSIDIARIES

2 unchanged sentences

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 December 31, 2022 At September 30, 2022

At March 31, 2023 At September 30, 2022

Assets of discontinued operations:

6 unchanged sentences

Total liabilities of discontinued operations $ 13,180 $ 16,918

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.

At March 31, 2023 and September 30, 2022, Griffon's discontinued assets and liabilities includes the Company's obligation of $ 4,587 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 March 31, 2023 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 $ 8,593 and $ 8,072 , respectively.

There was no reported revenue in the six ended March 31, 2023 and 2022 for Installations Services and other discontinued operations.

NOTE 17 – RESTRUCTURING CHARGES

On May 3, 2023, in response to changing market conditions, Griffon announced that its CPP segment will expand its global sourcing strategy to include long handled tools, material handling, and wood storage and organization product lines.

By transitioning these product lines to an asset-light structure, CPP’s operations will be better positioned to serve customers with a more flexible and cost-effective sourcing model that leverages supplier relationships around the world, while improving its competitive positioning in a post-pandemic marketplace.

The global sourcing strategy expansion is expected to be complete by the end of calendar 2024.

Over that period, CPP expects to reduce its facility footprint by approximately 1.2 million square feet, or approximately 15 %, and its headcount by approximately 600 .

The affected U.S.

locations will include Camp Hill and Harrisburg, PA;

Grantsville, MD;

Fairfield, IA;

and four wood mills.

Implementation of this strategy over the duration of the project will result in charges of $ 120,000 to $ 130,000 , including $ 50,000 to $ 55,000 of cash charges for employee retention and severance, operational transition, and facility and lease exit costs, and $ 70,000 to $ 75,000 of non-cash charges primarily related to asset write-downs.

Capital investment in the range of $ 3,000 to $ 5,000 will also be required.

These costs exclude cash proceeds from the sale of real estate and equipment, which are expected to largely offset the cash charges, and also exclude inefficiencies due to duplicative labor costs and absorption impacts during transition.

In both the quarter and six months ended March 31, 2023, CPP incurred pre-tax restructuring and related exit costs approximating $ 78,334 .

During the six ended March 31, 2023, cash charges totaled $ 19,216 and non-cash, asset-related charges totaled $ 59,118 ;

the cash charges included $ 8,050 for one-time termination benefits and other personnel-related costs and $ 11,166 for facility exit costs.

Non-cash charges included a $ 22,018 impairment charge related to certain fixed assets at several manufacturing locations and $ 37,100 to adjust inventory to net realizable value.

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.

1 unchanged sentence

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.

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 ,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 ;

1 unchanged sentence

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 ;

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

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Cost of goods and services $ 74,645 $ 2,455 $ 74,645 $ 2,777

1 unchanged sentence

Total restructuring charges $ 78,334 $ 4,766 $ 78,334 $ 6,482

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Personnel related costs $ 8,050 $ 1,878 $ 8,050 $ 2,138

2 unchanged sentences

Total $ 78,334 $ 4,766 $ 78,334 $ 6,482

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables summarizes the accrued liabilities of the Company's restructuring actions for the six months ended March 31, 2022 and 2023:

Cash Charges Non-Cash

6 unchanged sentences

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

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

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

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

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

___________________

(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.

Cash Charges Non-Cash

Personnel related costs Facilities &

Exit Costs Total

Exit Costs Facility and Other Costs (2)

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

1 unchanged sentence

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

NOTE 18 – OTHER INCOME (EXPENSE)

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.

Q2 Restructuring charges 8,050 11,166 59,118 78,334

Q2 Cash payments ( 244 ) ( 1,883 ) — ( 2,127 )

Q2 Non-cash charges — — ( 59,118 ) ( 59,118 )

Accrued liability at March 31, 2023 $ 8,118 $ 9,454 $ — $ 17,572

___________________

(2) Non-cash charges in Facility and Other Costs represent the non-cash impairment charges related to certain fixed assets at several manufacturing sights and to adjust inventory to net realizable value.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

NOTE 18 – OTHER INCOME (EXPENSE)

For the quarters ended March 31, 2023 and 2022, Other income (expense) of $ 293 and $ 1,369 , respectively, includes $ 164 and ($ 168 ), 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 $( 217 ) and $ 1,079 , respectively, and $ 73 and $( 203 ), respectively, of net investment income.

Other income (expense) also includes rental income of $ 0 and $ 156 for the three months ended March 31, 2023 and 2022, respectively.

Additionally, it includes royalty income of $ 476 and $ 616 for the three months ended March 31, 2023 and 2022, respectively.

For the six months ended March 31, 2023 and 2022, Other income (expense) of $ 900 and $ 2,444 , respectively, includes $ 98 and $( 562 ), 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 $( 433 ) and $ 2,027 , respectively, as well as $ 107 and $ 171 , respectively, of net investment income (loss).

Other income (expense) also includes rental income of $ 212 in both of the six months ended March 31, 2023 and 2022, as well as royalty income of $ 1,025 and $ 616 for the six months ended March 31, 2023 and 2022, respectively.

NOTE 19 – WARRANTY LIABILITY

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

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

Three Months Ended December 31,

Warranty costs expected to be incurred in the next 12 months are classified in accrued liabilities.

Warranty costs expected to be incurred beyond one year are classified in other long-term liabilities.

The current portion of warranty was $ 20,101 as of March 31, 2023 and $ 16,786 as of September 30, 2022.

The long-term warranty liability was $ 1,240 at both March 31, 2023 and September 30, 2022.

Changes in Griffon’s warranty liability for the three and six months ended March 31, 2023 and 2022 were as follows:

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

2023 2022 2023 2022

Balance, beginning of period $ 18,939 $ 9,572 $ 18,026 $ 7,818

1 unchanged sentence

Actual warranty costs incurred ( 4,011 ) ( 3,755 ) ( 7,765 ) ( 5,462 )

Other warranty liabilities assumed from acquisitions — 7,592 — 7,592

Balance, end of period $ 21,341 $ 19,197 $ 21,341 $ 19,197

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 December 31,

For the Three Months Ended March 31,

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

3 unchanged sentences

Total other comprehensive income (loss) $ 3,465 $ ( 852 ) $ 2,613 $ 4,455 $ 494 $ 4,949

For the Six Months Ended March 31,

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

Foreign currency translation adjustments $ 12,271 $ — $ 12,271 $ 3,730 $ — $ 3,730

Pension and other defined benefit plans 2,029 ( 421 ) 1,608 1,023 ( 215 ) 808

Cash flow hedges 1,361 ( 408 ) 953 ( 3,342 ) 1,002 ( 2,340 )

Total other comprehensive income (loss) $ 15,661 $ ( 829 ) $ 14,832 $ 1,411 $ 787 $ 2,198

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

At December 31, 2022 At September 30, 2022

At March 31, 2023 At September 30, 2022

Foreign currency translation adjustments $ ( 44,899 ) $ ( 57,170 )

2 unchanged sentences

$ ( 67,906 ) $ ( 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 December 31,

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

Gain (Loss) 2023 2022 2023 2022

7 unchanged sentences

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 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

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.

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

15 unchanged sentences

Components of operating lease costs are as follows:

For the Three Months Ended December 31,

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

2023 2022 2023 2022

Fixed $ 11,373 $ 9,906 $ 22,667 $ 19,653

Variable (a), (b)

3,246 1,684 6,018 3,536

Short-term (b)

1,844 1,486 4,048 2,835

Total $ 16,463 $ 13,076 $ 32,733 $ 26,024

1 unchanged sentence

(b) Not recorded on the balance sheet.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information were as follows:

For the Three Months Ended December 31,

For the Six Months Ended March 31,

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

2 unchanged sentences

Total $ 21,010 $ 23,911

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Operating Leases:

12 unchanged sentences

Total financing lease liabilities $ 13,084 $ 14,060

(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)

(1) Finance lease assets are recorded net of accumulated depreciation of $ 6,042 and $ 4,972 as of March 31, 2023 and September 30, 2022, respectively.

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

1 unchanged sentence

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

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

At March 31, 2023, $ 12,406 was outstanding.

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

2 unchanged sentences

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):

The aggregate future maturities of lease payments for operating leases and finance leases as of March 31, 2023 are as follows (in thousands):

Operating Leases Finance Leases

9 unchanged sentences

Present value of lease liabilities $ 184,907 $ 13,084

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

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

(a) Excluding the six months ended March 31, 2023.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Average lease terms and discount rates at March 31, 2023 were as follows:

Weighted-average remaining lease term (years):

11 unchanged sentences

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)

Stream sediments downgradient from the Peekskill Site also contain metals.

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

Performance of the RI/FS is expected to be completed by early calendar 2024.

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

7 unchanged sentences

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.

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.

In 2021, the TDEC performed a preliminary assessment of the site and recommended to the United States Environmental Protection Agency (“EPA”) that it include the site on the National Priorities List established under CERCLA.

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

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

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

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

1 unchanged sentence

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

1 unchanged sentence

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

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

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

General legal

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements