What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 184 added, 190 removed, 360 unchanged (51% of the section changed)

16 unchanged sentences

We divested our specialty plastics business in 2018 to focus on our core markets and improve our free cash flow conversion.

In our Consumer and Professional Products ("CPP") segment, we expanded the scope of our brands through the acquisition of Hunter Fan Company ("Hunter") on January 24, 2022 and ClosetMaid, LLC ("ClosetMaid") in 2018.

In our Home and Building Products ("HBP") segment, we acquired CornellCookson, Inc.

("CornellCookson") in 2018, which has been integrated into Clopay Corporation ("Clopay"), creating a leading North American manufacturer and marketer of residential garage doors and sectional commercial doors, and rolling steel doors and grille products under brands that include Clopay, Ideal, Cornell and Cookson.

We established an integrated headquarters for CPP in Orlando, Florida for our portfolio of leading brands that includes AMES, Hunter, True Temper and ClosetMaid.

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

Griffon 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 in the consolidated balance sheets.

Griffon classified the results of operations of our Telephonics business as a discontinued operation in the Consolidated Statements of Operations for all periods presented and the related assets and liabilities have been classified as assets and liabilities of 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.

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

On August 1, 2023, Griffon amended its credit agreement to increase the total amount available for borrowing under its revolving credit facility from $400,000 to $500,000, extend the maturity date of the revolving credit facility from March 22, 2025 to August 1, 2028 and modify certain other provisions of the facility (the "Credit Agreement").

See Note 10, Long-Term Debt for further details.

Update on COVID-19 on our Business

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

On May 11, 2023, the U.S.

Department of Health and Human Services declared the end of the Public Health Emergency for COVID-19;

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

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

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

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

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Griffon conducts its operations through two reportable segments:

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

Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.

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 Cornell and Cookson brands.

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

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

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

Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America.

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 Cornell and Cookson brands.

Revenue for the quarter ended March 31, 2023 was $710,984 compared to $779,617 in the prior year comparable quarter, a decrease of 9%.

Revenue decreased at CPP by 24% partially offset by increased revenue at HBP of 8%.

Adjusting for the period Griffon did not own Hunter in the prior year quarter, organic revenue decreased 12% to $689,335 .

Hunter contributed $21,649 of revenue during the current quarter.

Loss from continuing operations was $62,255 or $1.17 per share, compared to income from continuing operations of $58,160, or $1.09 per share, in the prior year quarter.

Revenue for the quarter ended June 30, 2023 was $683,430 compared to $768,179 in the prior year quarter, a decrease of 11%.

Revenue decreased at CPP and HBP by 22% and 1%, respectively.

Income from continuing operations was $49,205 or $0.90 per share, compared to $52,782, or $0.98 per share, in the prior year quarter.

The current year quarter results from operations included the following:

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– Restructuring charges of $3,862 ($2,831, net of tax, or $0.05 per share)

– Intangible asset impairment charges of $100,000 ($74,256, net of tax, or $1.34 per share);

– Special dividend Employee Stock Ownership Plan ("ESOP") charges of $9,042 ($6,936, net of tax, or $0.13 per share);

– Proxy costs of $568 ($435, net of tax, or 0.01 per share);

– Discrete and certain other tax benefits, net, of $8,723 or $0.16 per share.

– Discrete and certain other tax provisions, net, of $6,519 or $0.12 per share.

The prior year quarter results from operations included the following:

– Restructuring charges of $5,909 ($4,359, net of tax, or $0.08 per share);

– Acquisition costs of $6,708 ($6,146, net of tax, or $0.12 per share);

– Proxy costs of $4,661 ($3,591, net of tax, or $0.07 per share);

– Fair value step-up of acquired inventory sold of $2,700 ($2,005 , net of tax, or $0.04 per share);

– Discrete and certain other tax benefits, net, of $683 or $0.01 per share.

– Strategic review - retention and other of $3,220 ($2,416, net of tax, or $0.04 per share);

– Debt extinguishment, net, of $5,287 ($4,022, net of tax, or $0.07 per share);

– Discrete and certain other tax provisions, net, of $913 or $0.02 per share.

Excluding these items from the respective quarterly results, Income from continuing operations would have been $70,304, or $1.29 per share, in the current year quarter compared to $66,497, or $1.23 per share in the prior year quarter.

Revenue for the six months ended March 31, 2023 was $1,360,368 compared to $1,371,366 in the prior year period, a decrease of 1%.

Decreased revenue of 18% at CPP was partially offset by increased revenue of 17% at HBP.

Revenue for the nine months ended June 30, 2023 was $2,043,798 compared to $2,139,545 in the prior year period, a decrease of 4% driven by decreased revenue of 20% at CPP, partially offset by increased revenue of 10% at HBP.

Adjusting for the period Griffon did not own Hunter in the prior year quarter, organic revenue decreased 8% to $1,968,032.

Hunter contributed $75,766 of revenue during the year-to-date period.

Loss from continuing operations was $13,553 or $0.26 per share, compared to income from continuing operations of $74,864, or $1.40 per share, in the prior year period.

Hunter contributed $75,766 of incremental revenue during the year-to-date period.

Income from continuing operations was $35,652 or $0.65 per share, compared to $127,646, or $2.38 per share, in the prior year period.

The current year-to-date results from operations included the following:

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– Intangible asset impairment charges of $100,000 ($74,256, net of tax, or $1.35 per share);

– Special dividend ESOP charges of $9,042 ($6,936, net of tax, or $0.13 per share);

– Proxy costs of $2,685 ($2,059, net of tax, or $0.04 per share);

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

– Strategic review - retention and other of $3,220 ($2,416, net of tax, or $0.04 per share);

– Debt extinguishment, net, of $5,287 ($4,022, net of tax, or $0.07 per share);

– Discrete and certain other tax benefits, net, of $661 or $0.01 per share.

Excluding these items from the respective periods, Income from continuing operations would have been $114,357, or $2.07 per share in the current year period ended March 31, 2023 compared to $93,631, or $1.75 per share, in the comparable prior year period.

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

Excluding these items from the respective periods, Income from continuing operations would have been $184,661, or $3.35 per share in the current year period ended June 30, 2023 compared to $160,128, or $2.98 per share, in the prior year period.

Griffon evaluates performance based on adjusted income from continuing operations and the related adjusted earnings per share, which excludes restructuring charges, non-cash impairment charges, loss from debt extinguishment, acquisition related expenses and discrete and certain other tax items, as well as other items that may affect comparability, as applicable.

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

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

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

The following table provides a reconciliation of income from continuing operations to adjusted income from continuing operations and earnings per share from continuing operations to adjusted earnings per share from continuing operations:

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

2023 2022 2023 2022

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

Income from continuing operations $ 49,205 $ 52,782 $ 35,652 $ 127,646

Adjusting items:

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Gain on sale of building — — (10,852) —

Debt extinguishment, net — 5,287 — 5,287

Acquisition costs — — — 9,303

Special dividend ESOP charges 9,042 — 9,042 —

Strategic review - retention and other 5,812 3,220 20,234 3,220

4 unchanged sentences

(4,704) (4,314) (51,759) (9,411)

Discrete and certain other tax benefits, net (4)

Discrete and certain other tax provisions (benefits), net (4)

6,519 913 (2,537) (661)

Adjusted income from continuing operations $ 70,304 $ 66,497 $ 184,661 $ 160,128

Earnings (loss) per common share from continuing operations $ (1.17) $ 1.09 $ (0.26) $ 1.40

Earnings per common share from continuing operations $ 0.90 $ 0.98 $ 0.65 $ 2.38

Adjusting items, net of tax:

Anti-dilutive share impact (5)

0.05 — 0.02 —

Restructuring charges (1)

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Gain on sale of building — — (0.15) —

Debt extinguishment, net — 0.07 — 0.07

Acquisition costs — — — 0.15

Special dividend ESOP charges 0.13 — 0.13 —

Strategic review - retention and other 0.08 0.04 0.28 0.04

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Fair value step-up of acquired inventory sold — 0.04 — 0.07

Discrete and certain other tax benefits, net (4)

Discrete and certain other tax provisions (benefits), net (4)

0.12 0.02 (0.05) (0.01)

Adjusted earnings per common share from continuing operations $ 1.29 $ 1.23 $ 3.35 $ 2.98

Weighted-average shares outstanding (in thousands) 53,038 51,668 52,809 51,423

Diluted weighted-average shares outstanding (in thousands) 54,602 53,914 55,087 53,704

55,364 53,430 55,334 53,602

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

(1) For the quarter and six months ended March 31, 2023, restructuring charges relates to the CPP global sourcing expansion, of which $74,645 is included in Cost of goods and services and $3,689 is included in SG&A.

(1) For the quarter and nine months ended June 30, 2023, restructuring charges relate to the CPP global sourcing expansion, of which $1,777 and $76,422, respectively, are included in Cost of goods and services and $2,085 and $5,774, respectively, are included in SG&A.

(2) The fair value step-up of acquired inventory sold is included in Cost of goods and services.

(3) The tax impact for the above reconciling adjustments from GAAP to non-GAAP Net income and EPS is determined by comparing the Company's tax provision, including the reconciling adjustments, to the tax provision excluding such adjustments.

(4) Discrete and certain other tax benefits primarily relate to the impact of a rate differential between statutory and annual effective tax rate on items impacting the quarter.

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

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

(4) Discrete and certain other tax provisions (benefits) primarily relate to the impact of a rate differential between statutory and annual effective tax rate on items impacting the quarter.

RESULTS OF OPERATIONS

Three and Six months ended March 31, 2023 and 2022

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 (primarily corporate overhead), restructuring charges, loss on debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable (“Adjusted EBITDA”, a non-GAAP measure).

Three and Nine Months ended June 30, 2023 and 2022

Griffon evaluates performance and allocates resources based on each segment adjusted EBITDA, a non-GAAP measure, which is defined as income before taxes from continuing operations, excluding interest income and expense, depreciation and amortization, unallocated amounts (mainly corporate overhead), strategic review charges, non-cash impairment charges, restructuring charges, and acquisition related expenses, as well as other items that may affect comparability, as applicable.

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

See table provided in Note 13 - Business Segments for a reconciliation of Segment Adjusted EBITDA to Income before taxes from continuing operations.

See table provided in Note 13 - Business Segments for a reconciliation of adjusted EBITDA to income before taxes from continuing operations.

Home and Building Products

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

2023 2022 2023 2022

Residential $ 222,088 $ 238,372 $ 669,563 $ 627,388

Commercial 179,054 167,173 524,811 455,338

Total Revenue $ 401,142 $ 405,545 $ 1,194,374 $ 1,082,726

Adjusted EBITDA $ 134,330 33.5 % $ 119,847 29.6 % $ 390,346 32.7 % $ 280,618 25.9 %

Depreciation and amortization $ 3,868 $ 4,116 $ 11,525 $ 12,778

For the quarter ended June 30, 2023, HBP revenue declined $4,403, or 1%, compared to the prior year period due to decreased volume of 5% driven by reduced residential volume partially offset by increased commercial volume, and favorable pricing and mix of 4% driven by both residential and commercial.

For the quarter ended June 30, 2023, adjusted EBITDA increased 12% to $134,330 compared to $119,847 in the prior year period.

Adjusted EBITDA benefited from reduced material costs, partially offset by reduced revenue noted above and increased labor, advertising and marketing costs.

For the nine months ended June 30, 2023, revenue increased $111,648 or 10%, compared to the prior year period due to favorable mix and pricing of 12% driven by both residential and commercial, partially offset by decreased volume of 2% driven by a decline in residential volume.

For the nine months ended June 30, 2023, adjusted EBITDA increased 39% to $390,346 compared to $280,618 in the prior year period.

The favorable variance resulted from the increased revenue noted above and reduced material costs, partially offset by increased labor, transportation, advertising and marketing costs.

For the quarter and nine months ended June 30, 2023, segment depreciation and amortization decreased $248 and $1,253, respectively, compared to the prior year periods, due to fully depreciated assets.

Consumer and Professional Products

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

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

2023 2022 2023 2022

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Depreciation and amortization $ 11,661 $ 13,434 $ 38,091 $ 33,831

For the quarter ended March 31, 2023, revenue decreased $96,687, or 24%, compared to the prior year period due to a 29% reduction in volume across all channels and geographies driven by reduced consumer demand, customer supplier diversification in the U.S.

and elevated customer inventory levels, coupled with an unfavorable foreign exchange impact of 2%.

These items were partially offset by $21,649 of Hunter revenue, or 5%, for the portion of the current quarter in which Hunter was not owned by Griffon in the prior year quarter, as well as price and mix of 2%.

Hunter contributed $76,209 in the current quarter compared to $70,849 in the prior year comparable period.

For the quarter ended March 31, 2023, Adjusted EBITDA of $19,635 compared to Adjusted EBITDA of $47,844 in the prior year quarter.

The variance to prior year was primarily due to the unfavorable impact of the reduced volume noted above, and its related impact on manufacturing and overhead absorption, and increased material costs in Australia and Canada.

This was partially offset by $3,251 from the Hunter acquisition for the portion of the current quarter in which Hunter was not owned by Griffon in the prior year quarter and reduced discretionary spending.

For the quarter ended June 30, 2023, revenue decreased $80,346, or 22%, compared to the prior year period primarily due to a 22% reduction in volume across all channels and geographies driven by reduced consumer demand and elevated customer inventory levels, and customer supplier diversification in the U.S.

In addition, unfavorable foreign exchange of 1% was offset by favorable price and mix of 1%.

Hunter contributed $87,779 in the current quarter compared to $105,774 in the prior year period.

For the quarter ended June 30, 2023, adjusted EBITDA was $18,265 compared to adjusted EBITDA of $28,373 in the prior year quarter.

The variance to prior year was primarily due to the unfavorable impact of the reduced volume noted above, and its related impact on manufacturing and overhead absorption, partially offset by reduced discretionary spending.

EBITDA reflected an unfavorable foreign exchange impact of 1%.

Hunter contributed $12,231 in the current quarter compared to $14,339 in the prior year comparable period.

For the six months ended March 31, 2023, revenue decreased $127,049, or 18%, compared to the prior year period due to a 31% reduction in volume across all channels and geographies driven by reduced customer demand, elevated customer inventory levels, primarily in North America, the impact of customer supplier diversification in the U.S., and an unfavorable foreign exchange impact of 2%.

These items were partially offset by $75,766 of Hunter revenue, or 11%, for the portion of the current quarter in which Hunter was not owned by Griffon in the prior year quarter, as well as price and mix of 4%.

Hunter contributed $130,326 during the six months ended March 31, 2023 compared to $70,849 in the prior year comparable period.

For the six months ended March 31, 2023, Adjusted EBITDA decreased 72% to $17,826 compared to $64,058 in the prior year period.

Excluding the Hunter contribution of $7,679, EBITDA of $10,147 decreased 84% primarily due to the unfavorable impact of the reduced volume noted above and its related impact on manufacturing and overhead absorption, and increased material costs in Australia, partially offset by reduced discretionary spending.

Hunter contributed $25,087 in the current quarter compared to $16,792 in the prior year period.

For the nine months ended June 30, 2023, revenue decreased $207,395, or 20%, compared to the prior year period due to a 28% reduction in volume across all channels and geographies driven by reduced customer demand, elevated customer inventory levels, primarily in the U.S., the impact of customer supplier diversification in the U.S., and an unfavorable foreign exchange impact of 2%.

These items were partially offset by $75,766 of Hunter revenue, or 7%, for the portion of the comparable nine month period in which Hunter was not owned by Griffon in the prior year, as well as price and mix of 3%, primarily in Canada and Australia.

Hunter contributed $218,105 during the nine months ended June 30, 2023 compared to $176,623 in the prior year period.

For the nine months ended June 30, 2023, adjusted EBITDA decreased 61% to $36,091 compared to $92,431 in the prior year period primarily due to the unfavorable impact of the reduced volume noted above and its related impact on manufacturing and overhead absorption, partially offset by reduced discretionary spending and $7,679 of Hunter EBITDA for the portion of the comparable nine month period in which Hunter was not owned by Griffon in the prior year.

EBITDA reflected an unfavorable foreign exchange impact of 2%.

Hunter contributed $16,659 during the six months ended March 31, 2023 compared to $14,339 in the prior year comparable period.

For the quarter and six months ended March 31, 2023, segment depreciation and amortization increased $1,512 and $6,033, respectively, compared to the prior year comparable periods, due to the Hunter assets acquired and new assets placed in service.

On January 24, 2022, Griffon completed the acquisition of Hunter Fan Company (“Hunter”), a market leader in residential

ceiling, commercial, and industrial fans for a contractual purchase price of $845,000.

Hunter contributed $41,746 during the nine months ended June 30, 2023 compared to $31,131 in the prior year period.

For the quarter ended June 30, 2023, segment depreciation and amortization decreased $1,773 compared to the prior year period, primarily related to fully depreciated assets and the write-down of certain fixed assets at several manufacturing facilities in connection with restructuring activities.

For the nine months ended June 30, 2023, segment depreciation and amortization increased $4,260 compared to the prior year period, primarily relate to depreciation and amortization on assets placed in service, including a full period of Hunter assets, partially offset by fully depreciated assets and the write-down of certain fixed assets at several manufacturing facilities in connection with CPP's restructuring activities.

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

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

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

In the quarter and nine months ended June 30, 2023, CPP incurred pre-tax restructuring and related exit costs approximating $3,862 and $82,196, respectively.

During the nine months ended June 30, 2023, cash charges totaled $23,078 and non-cash, asset-related charges totaled $59,118;

the cash charges included $10,284 for one-time termination benefits and other personnel-related costs and $12,794 for facility exit and other related costs.

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Q2 FY2023 Activity (8,050) (11,166) (59,118) (78,334) —

Q3 FY2023 Activity (2,234) (1,628) — (3,862) —

Total 2023 restructuring charges (10,284) (12,794) (59,118) (82,196) —

Estimate to Complete $ 9,216 $ 22,706 $ 15,882 $ 47,804 $ 5,000

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(1)The above table represents the upper range of anticipated charges during the duration of the project.

Home and Building Products

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

2023 2022 2023 2022

Residential $ 220,416 $ 211,229 $ 447,475 $ 389,016

Commercial 176,243 157,376 345,757 288,165

Total Revenue $ 396,659 $ 368,605 $ 793,232 $ 677,181

Adjusted EBITDA 131,871 33.2 % 104,474 28.3 % $ 256,016 32.3 % $ 160,771 23.7 %

Depreciation and amortization 3,811 4,324 $ 7,657 $ 8,662

For the quarter ended March 31, 2023, HBP revenue increased $28,054, or 8%, compared to the prior year period due to favorable pricing and mix of 14% driven by both residential and commercial.

Total volume decreased 6% due to decreased residential volume, partially offset by increased commercial volume.

For the quarter ended March 31, 2023, Adjusted EBITDA increased 26% to $131,871 compared to $104,474 in the prior year period.

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

For the six months ended March 31, 2023, revenue increased $116,051 or 17%, compared to the prior year period due to favorable mix and pricing of 17% driven by both residential and commercial.

Total volume was in line with the prior year period with increased commercial volume offset by decreased residential volume.

For the six months ended March 31, 2023, Adjusted EBITDA increased 59% to $256,016 compared to $160,771 in the prior year period.

The favorable variance resulted from the increased revenue noted above and reduced material costs, partially offset by increased labor, transportation, advertising and marketing costs.

For the quarter and six months ended March 31, 2023, segment depreciation and amortization decreased $513 and $1,005, respectively, compared to the prior year comparable periods, due to fully depreciated assets.

For the quarter ended March 31, 2023, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $14,630 compared to $13,056 in the prior year quarter;

for the six months ended March 31, 2023, unallocated amounts totaled $28,406 compared to $26,319 in the prior year period.

The increase in both the current quarter and six month periods, compared to their respective comparable prior year periods, primarily relates to increased incentive and equity compensation, medical claims, and travel expenses.

For the quarter ended June 30, 2023, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs totaling $13,982 compared to $13,405 in the prior year quarter;

for the nine months ended June 30, 2023, unallocated amounts totaled $42,388 compared to $39,724 in the prior year period.

The increase in both the current quarter and nine month periods, compared to their respective prior year periods, primarily relates to increased incentive and equity compensation, medical claims, and travel expenses.

Proxy expenses

During the three and six months ended March 31, 2023, we incurred $614 ($471, net of tax) and $2,117 ($1,624, net of tax) of proxy expenses (including legal and advisory fees) in SG&A, respectively.

During the quarter and six months ended March 31, 2023, proxy expenses related to a settlement entered into with a shareholder that had submitted a slate of director nominees.

During the three and six months ended March 31, 2022, we incurred $4,661 and $6,952, respectively, of proxy expenses (including legal and advisory fees) in unallocated amounts as a result of a proxy contest initiated by a shareholder which was completed at the shareholder meeting on February 17, 2022.

During the three and nine months ended June 30, 2023, we incurred $568 ($435, net of tax) and $2,685 ($2,059, net of tax) of proxy expenses (including legal and advisory fees) in SG&A, respectively.

During the quarter and nine months ended June 30, 2023, proxy expenses related to a settlement entered into with a shareholder that had submitted a slate of director nominees.

During nine months ended June 30, 2022, we incurred $6,952 of proxy expenses (including legal and advisory fees) in unallocated amounts as a result of a proxy contest initiated by a shareholder which was completed at the shareholder meeting on February 17, 2022.

In the three months ended June 30, 2022, we did not incur any proxy expenses.

Segment Depreciation and Amortization

Segment depreciation and amortization increased $999 and $5,028 for the quarter and six months ended March 31, 2023, respectively, compared to the comparable prior year periods, primarily due to depreciation and amortization on new assets placed in service.

Segment depreciation and amortization decreased $2,021 and increased $3,007 for the quarter and nine months ended June 30, 2023, respectively, compared to the prior year periods.

The decrease in the current quarter ended June 30, 2023 primarily relates to fully depreciated assets and the write-down of certain fixed assets at several manufacturing facilities in connection with CPP's restructuring activities.

The increase for the nine months ended June 30, 2023 primarily relate to depreciation and amortization on assets placed in service, including a full period of Hunter assets, partially offset by fully depreciated assets and the write-down of certain fixed assets at several manufacturing facilities in connection with CPP's restructuring activities.

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.

Additionally, it includes royalty income of $1,025 and $616 for the six months ended March 31, 2023 and 2022, respectively.

For the quarters ended June 30, 2023 and 2022, Other income (expense) of $1,475 and $2,084, respectively, includes $590 and $265, respectively, of net currency exchange gains 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 $1,118, respectively, and $336 and $(91), respectively, of net investment income (loss).

Other income (expense) also includes rental income of $0 and $156 for the three months ended June 30, 2023 and 2022, respectively.

Additionally, it includes royalty income of $438 and $828 for the three months ended June 30, 2023 and 2022, respectively.

For the nine months ended June 30, 2023 and 2022, Other income (expense) of $2,375 and $4,528, respectively, includes $492 and $(297), 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 (loss) of $(650) and $3,145, respectively, as well as $444 and $(328), respectively, of net investment income (loss).

Other income (expense) also includes rental income of $212 and $468 in the nine months ended June 30, 2023 and 2022, as well as royalty income of $1,463 and $1,444 for the nine months ended June 30, 2023 and 2022, respectively.

Provision for income taxes

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.

During the quarter ended June 30, 2023, the Company recognized a tax provision of $29,248 on income before taxes from continuing operations of $78,453, compared to a tax provision of $23,268 on income before taxes from continuing operations of $76,050 in the prior year quarter.

The current year quarter results included strategic review costs (retention and other) of $5,812 ($4,378, net of tax), restructuring charges of $3,862 ($2,831, net of tax), special dividend ESOP charges of $9,042 ($6,936, net of tax), proxy costs of $568 ($435, net of tax) and discrete and certain other tax provisions, net, that affect comparability of $6,519.

The prior 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.

Excluding these items, the effective tax rates for the quarters ended June 30, 2023 and 2022 were 28.1% and 28.6%, respectively.

During the nine months ended June 30, 2023, the Company recognized a tax provision of $20,662 on income before taxes from continuing operations of $56,314, compared to a tax provision of $55,119 on income before taxes from continuing operations of $182,765 in the prior year period.

The nine months ended June 30, 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 $20,234 ($15,258, net of tax), restructuring charges of $82,196 ($61,360, net of tax), special dividend ESOP charges of $9,042 ($6,936, net of tax), intangible asset impairment charges of $100,000 ($74,256, net of tax), proxy expenses of $2,685 ($2,059, net of tax) and discrete and certain other tax benefits, net, that affect comparability of $2,537.

The nine months 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 costs 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, of $5,287 ($4,022, net of tax), and discrete and certain other tax benefits, net, that affect comparability of $661.

Excluding these items, the effective tax rates for the nine months ended June 30, 2023 and 2022 were both 28.9%.

Stock-based compensation

For the quarters ended March 31, 2023 and 2022, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $6,593 and $5,092, respectively.

For the six months ended March 31, 2023 and 2022, stock based compensation expense totaled $13,335 and $9,959, respectively.

For the quarters ended June 30, 2023 and 2022, stock based compensation expense, which includes expenses for both restricted stock grants and the ESOP, totaled $15,252 and $6,019, respectively.

For the nine months ended June 30, 2023 and 2022, stock based compensation expense totaled $28,587 and $15,978, respectively.

Comprehensive income (loss)

For the quarter ended March 31, 2023, total other comprehensive loss, net of taxes, of $2,613 included a gain of $334 from foreign currency translation adjustments primarily due to the strengthening of the Euro and British Pound, partially offset by the weakening of Australian Dollars, all in comparison to the U.S.

For the quarter ended June 30, 2023, total other comprehensive income, net of taxes, of $315 included a gain of $2,309 from foreign currency translation adjustments primarily due to the strengthening of the Euro, British Pound and Canadian Dollar, all in comparison to the U.S.

a $747 benefit from pension amortization;

and a $1,533 a gain on cash flow hedges.

For the quarter ended March 31, 2022, total other comprehensive income (loss), net of taxes, of $4,949 included a gain of

$6,049 from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian Dollar and

British Pound, offset by the weakening of the Australian Dollar, all in comparison to the US Dollar;

a $140 benefit from

pension amortization;

and a $2,741 loss on cash flow hedges.

For the six months ended March 31, 2023, total other comprehensive loss, net of taxes, of $14,832 included a gain of $12,271 from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian and Australian Dollars and British Pound, all in comparison to the US Dollar;

a $1,608 benefit from pension amortization of actuarial losses;

For the quarter ended June 30, 2022, total other comprehensive loss, net of taxes, of $14,177 included a loss of $17,823 from foreign currency translation adjustments primarily due to the weakening of the Euro, Canadian and Australian Dollars and British Pound, all in comparison to the US Dollar;

a $1,196 benefit from pension amortization;

and a $2,450 gain on cash flow hedges.

For the six months ended March 31, 2022, total other comprehensive income, net of taxes, of $2,198 included a gain of $3,730

from foreign currency translation adjustments primarily due to the strengthening of the Canadian and Australian Dollars, offset

by the weakening of the Euro and the British Pound, all in comparison to the US Dollar;

a $808 benefit from pension

amortization of actuarial losses;

For the nine months ended June 30, 2023, total other comprehensive income, net of taxes, of $15,147 included a gain of $14,580 from foreign currency translation adjustments primarily due to the strengthening of the Euro, Canadian and Australian Dollars and British Pound, all in comparison to the US Dollar;

a $2,355 benefit from pension amortization of actuarial losses;

and a $1,788 loss on cash flow hedges.

For the nine months ended June 30, 2022, total other comprehensive loss, net of taxes, of $11,979 included a loss of $14,093 from foreign currency translation adjustments primarily due to the weakening of the Euro, Canadian and Australian Dollars and British Pound, all in comparison to the US Dollar;

a $2,004 benefit from pension amortization of actuarial losses;

and a $110 gain on cash flow hedges.

DISCONTINUED OPERATIONS

Defense Electronics

On September 27, 2021, Griffon announced it was exploring strategic alternatives for its Defense Electronics segment, which consisted of Telephonics Corporation ("Telephonics"), and on June 27, 2022, Griffon completed the sale of Telephonics to TTM for $330,000.

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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.

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 totaling $8,593 and $8,072, respectively.

At June 30, 2023 and September 30, 2022, Griffon's discontinued assets and liabilities includes the Company's obligation of $4,553 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 June 30, 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 totaling $8,357 and $8,072, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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Griffon believes it has sufficient liquidity available to invest in existing businesses and strategic acquisitions while managing its capital structure on both a short-term and long-term basis.

As of March 31, 2023, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $71,300.

As of June 30, 2023, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $88,300.

Our intent is to permanently reinvest these funds outside the U.S., and we do not currently anticipate that we will need funds generated from foreign operations to fund our domestic operations.

2 unchanged sentences

taxes have already been paid).

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

At March 31, 2023, $356,313 of revolver capacity was available, subject to certain loan covenants, for borrowing under the Credit Agreement and we had cash and cash equivalents of $175,592.

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

At June 30, 2023, $300,493 of revolver capacity was available, subject to certain loan covenants, for borrowing under the Credit Agreement and we had cash and cash equivalents of $151,790.

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

Cash Flows from Operations For the Six Months Ended March 31,

Cash Flows from Operations For the Nine Months Ended June 30,

Net Cash Flows Provided by (Used In):

2 unchanged sentences

Financing activities (262,560) 513,762

Cash provided by operating activities from continuing operations for the six months ended March 31, 2023 was $161,636 compared to cash used in continuing operations of $173,373 in the comparable prior year period.

The variance was due to increased cash generated from operations at HBP and a decrease in working capital across all businesses, primarily inventory and accounts receivable, partially offset by an increase in accounts payable and accrued liabilities.

During the six months ended March 31, 2023, Cash used in investing activities from continuing operations was $2,571 compared to $858,539 in the comparable prior year period.

Cash provided by operating activities from continuing operations for the nine months ended June 30, 2023 was $309,003 compared to cash used in continuing operations of $65,001 in the prior year period.

The variance was due to increased cash generated from operations at HBP and a decrease in working capital across all businesses, primarily inventory and accounts receivable.

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

During the nine months ended June 30, 2023, cash used in investing activities from continuing operations was $10,911 compared to $574,256 in the prior year period.

In the current quarter, cash flows used in investing activities from continuing operations primarily consisted of a working capital adjustment payment of $2,568 related to the sale of Telephonics and capital expenditures of $20,183, partially offset by proceeds totaling $11,840 from the sale of a building.

In the prior year comparable quarter, cash flows used in investing activities from continuing operations primarily consisted of a $851,464 payment to acquire Hunter on January 24, 2022 and capital expenditures of $22,030, partially offset by proceeds from the sale of investments totaling $14,923.

During the six months ended March 31, 2023, Cash used in financing activities from continuing operations totaled $99,631 compared to cash provided by financing activities from continuing operations of $899,924 in the comparable prior year period.

Cash used in financing activities from continuing operations in the current period consisted of net repayments of long-term debt of $73,691, primarily related to the Credit Facility, the purchase of treasury shares to satisfy vesting of restricted stock of $12,989 and the payment of dividends of $12,824.

Cash provided by financing activities from continuing operations in the prior year period consisted primarily of net proceeds from long-term debt of $937,385, primarily related to the Credit Facility, partially offset by the purchase of treasury shares to satisfy vesting of restricted stock of $10,886 and the payment of dividends of $10,091.

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 three 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.

During 2022, the Company declared and paid regular cash dividends totaling $0.36 per share, or $0.09 per share each quarter.

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

During the six months ended March 31, 2023, the Board of Directors approved and paid two quarterly cash dividends of $0.10 per share each.

In the prior year quarter, cash flows used in investing activities from continuing operations primarily consisted of a $851,464 payment to acquire Hunter on January 24, 2022 and capital expenditures of $33,516, partially offset by proceeds from the sale of Telephonics on June 27, 2022 totaling $295,712 and proceeds from the sale of investments totaling $14,923.

During the nine months ended June 30, 2023, cash used in financing activities from continuing operations totaled $262,560 compared to cash provided by financing activities from continuing operations of $513,762 in the prior year period.

Cash used in financing activities from continuing operations in the current period consisted of net repayments of long-term debt of $36,686, primarily related to the Revolver and the payoff of AMES UK loans, the purchase of treasury shares in connection with the board authorized share repurchase board program and to satisfy vesting of restricted stock totaling $98,350 and the payment of dividends of $127,372.

Cash provided by financing activities from continuing operations in the prior year period consisted primarily of net proceeds from long-term debt of $556,431, partially offset by financing costs of $17,065, purchases of treasury shares to satisfy vesting of restricted stock of $10,886 and the payment of dividends of $14,906.

During the prior year comparable period Griffon prepaid $300,000 aggregate principal amount of its Term Loan B and recognized a $6,296 charge related to the write-off of capitalized debt issuance costs.

Furthermore, during the prior year period, Griffon purchased $15,225 of its 2028 Senior Notes in the open market at a weighted average discount of 92.19% of par and recognized a net gain of $1,009 on the early extinguishment.

During the nine months ended June 30, 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 nine months ended June 30, 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.

During the nine months ended June 30, 2023, the Board of Directors approved and paid two quarterly cash dividends of $0.10 per share each and one quarterly cash dividend of $0.125 per share.

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

The Company currently intends to pay dividends each quarter;

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

On 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.

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

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.

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

No shares were repurchased during the six months ended March 31, 2023 under these share 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 six months ended March 31, 2023, cash used in discontinued operations from operating activities of $2,598 primarily related to the settling of certain liabilities and environmental costs associated with DE and the former Installations Services businesses.

During the six months ended March 31, 2022, cash provided by discontinued operations from operating activities of $10,586 primarily related to DE operations and the settling of certain liabilities and environmental costs associated with the former Installations Services business.

During the six months ended March 31, 2022, Cash used by discontinued operations from investing activities of $1,445 related to DE operations capital expenditures.

Cash and Equivalents and Debt March 31, September 30,

On August 1, 2023, the Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on September 14, 2023 to shareholders of record as of the close of business on August 23, 2023.

During 2022, the Company declared and paid regular cash dividends totaling $0.36 per share, or $0.09 per share each quarter.

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

On April 19, 2023, the Company's Board of Directors approved a $200,000 increase to Griffon's share repurchase program to $257,955 from the prior unused board authorizations from August 3, 2016 and August 1, 2018 of $57,955.

Under the authorized share repurchase program, 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 both the quarter and nine months ended June 30, 2023, Griffon purchased 2,541,932 shares of common stock under these repurchase programs, for a total of $85,361, or $33.58 per share, excluding excise taxes.

As of June 30, 2023, $172,594 remains under these Board authorized repurchase programs.

In connection with the share repurchases, excise taxes totaling $647 was accrued as of June 30, 2023.

During the nine months ended June 30, 2023, cash used in discontinued operations from operating activities of $2,799 primarily related to the settling of certain liabilities and environmental costs associated with DE and the former Installations Services businesses.

During the nine months ended June 30, 2022, cash provided by discontinued operations from operating activities of $26,889 primarily related to DE operations and the settling of certain liabilities and environmental costs associated with the former Installations Services business.

During the nine months ended June 30, 2022, Cash used by discontinued operations from investing activities of $2,627 related to DE operations capital expenditures.

Cash and Equivalents and Debt June 30, September 30,

Cash and equivalents $ 151,790 $ 120,184

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

As of June 30, 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 $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.

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 at March 31, 2023 a spread of 2.50% (7.55% as of March 31, 2023).

The fair value of the 2028 Senior Notes approximated $904,104 on June 30, 2023 based upon quoted market prices (level 1 inputs).

At June 30, 2023, $9,425 of underwriting fees and other expenses incurred remained to be amortized.

On January 24, 2022, Griffon amended and restated its Revolving Credit Facility (as amended, "Credit Agreement") to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to its $400,000 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 spread of 2.25% (7.64% as of June 30, 2023).

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

8 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 $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.

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

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

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

The fair value of the Term Loan B facility approximated $487,550 on June 30, 2023 based upon quoted market prices (level 1 inputs).

At June 30, 2023, $7,769 of underwriting fees and other expenses incurred, remained to be amortized.

At June 30, 2023 the Revolver's maximum borrowing availability was $400,000 with a maturity date of March 22, 2025.

The Revolver included a letter of credit sub-facility with a limit of $100,000 and a multi-currency sub-facility with a limit of of $200,000.

The Revolver and Term Loan B contained a customary accordion feature that permitted us to request, subject to each lender's consent, an incremental amount that can be borrowed by up to the greater of $375,000 or an amount based on the senior secured leverage ratio.

On August 1, 2023, Griffon amended its Credit Agreement.

The amendment increased the maximum borrowing availability on the Revolver from $400,000 to $500,000 and extended the maturity date of the Revolver from March 22, 2025 to August 1, 2028.

In the event the 2028 Senior Notes are not repaid, refinanced, or replaced prior to December 1, 2027, the Revolver will mature on December 1, 2027.

The amendment also modified certain other provisions of the Credit Agreement, including increasing the letter of credit sub-facility from $100,000 to $125,000 and increasing the customary accordion feature from a minimum of $375,000 to a minimum of $500,000.

During 2022, Griffon replaced the Revolver GBP LIBOR benchmark rate with a Sterling Overnight Index Average ("SONIA").

1 unchanged sentence

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 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).

Griffon's SOFR loans accrue interest at Term SOFR plus a credit adjustment spread and a margin of 1.50% (6.75% at June 30, 2023), SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 1.50% (6.46% at June 30, 2023) and base rate loans accrue interest at prime rate plus a margin of 0.50% (8.75% at June 30, 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.

1 unchanged sentence

Both the Revolver and Term Loan B borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors, and a pledge of not greater than 65% of the equity interest in Griffon’s material, first-tier foreign subsidiaries.

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

At June 30, 2023, there were $86,705 of outstanding borrowings under the Revolver;

outstanding standby letters of credit were $12,802;

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The lease matures in 2025 and bears interest at a fixed rate of approximately 5.6%.

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

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

The Ocala, Florida lease contains a five-year renewal option.

At June 30, 2023, $12,056 was outstanding.

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

3 unchanged sentences

In November 2012, Garant G.P.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($11,076 as of March 31, 2023) revolving credit facility.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($11,334 as of June 30, 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 (6.25% using CDOR and 6.00% using Bankers Acceptance Rate CDN as of March 31, 2023).

The facility accrues interest at CDOR or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (6.57% using CDOR and 6.32% using Bankers Acceptance Rate CDN as of June 30, 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 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.

At June 30, 2023, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($11,334 as of June 30, 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.

2 unchanged sentences

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 (4.88% 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 accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25% per annum (5.39% at June 30, 2023).

At June 30, 2023, there was no balance outstanding under the receivable purchase facility with AUD 30,000 ($19,878 as of June 30, 2023) available.

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

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

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

The term loan and mortgage loan require quarterly principal payments of GBP 438 and GBP 105 plus interest, respectively, and have balloon payments due upon maturity, July 2023, of GBP 7,088

and GBP 2,349, respectively.

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% (5.98% 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.

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 ($12,310 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.

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

On June 30, 2023, The AMES Companies UK Ltd and its subsidiaries (collectively, "AMES UK") paid off and cancelled the GBP 14,000 term loan and GBP 4,000 mortgage loan that were entered into in July 2018 and further amended in January 2022 and that were maturing in July 2023.

The payoff amounts were GBP 7,525($9,543) and GBP 2,451($3,108), for the term loan and mortgage loan, respectively.

In July 2018, The AMES UK entered into a GBP 5,000 revolving facility that accrues interest at the Bank of England Base Rate plus 3.25% (8.25% as of June 30, 2023) and expires in July 2023.

The revolver had no outstanding balance as of June 30, 2023.

The revolver is secured by substantially all the assets of AMES UK and its subsidiaries, and subjects Ames UK to a maximum leverage ratio and a minimum fixed charges cover ratio.

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

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

Gross Debt to EBITDA (Leverage), as calculated in accordance with the definition in the Credit Agreement, was 2.5x at March 31, 2023.

At June 30, 2023, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

Gross Debt to EBITDA (Leverage), as calculated in accordance with the definition in the Credit Agreement, was 2.6x at June 30, 2023.

Capital Resource Requirements

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For additional information, see CPP reportable segments discussion.

Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $974,775 payable in 2028 and related annual interest payments of approximately $57,246, a Term Loan B facility maturing in 2029 with an outstanding balance of $492,000 on March 31, 2023 and revolving credit facility maturing in 2025 with an outstanding balance of $30,880.

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% (7.55% as of March 31, 2023).

Griffon's debt requirements include principal on our outstanding debt, most notably our Senior Notes totaling $974,775 payable in 2028 and related annual interest payments of approximately $57,246, a Term Loan B facility maturing in 2029 with an outstanding balance of $490,000 on June 30, 2023 and Revolver maturing in 2025 with an outstanding balance of $86,705.

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 2.25% (7.64% as of June 30, 2023).

Additionally, the Term Loan B facility requires quarterly payments of $2,000 and a balloon payment due at maturity.

For the revolving credit facility 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 March 31, 2023) and 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).

For the Revolver, 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.

A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue.

For the six months ended March 31, 2023, our largest customer, The Home Depot, represented 11% of Griffon’s consolidated revenue, 16% of CPP's revenue and 9% of HBP’s revenue.

For the nine months ended June 30, 2023, our largest customer, The Home Depot, represented 12% of Griffon’s consolidated revenue, 16% of CPP's revenue and 9% of HBP’s revenue.

No other customer exceeded 10% of consolidated revenue.

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

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of March 31, 2023 and September 30, 2022 and for the six months ended March 31, 2023 and for the year ended September 30, 2022.

In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act, presented below are summarized financial information of the Parent (Griffon) subsidiaries and the Guarantor subsidiaries as of June 30, 2023 and September 30, 2022 and for the nine months ended June 30, 2023 and for the year ended September 30, 2022.

All intercompany balances and transactions between subsidiaries under Parent and subsidiaries under the Guarantor have been eliminated.

The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis.

The summarized

information excludes financial information of the Non-Guarantors, including earnings from and investments in these entities.

The summarized information excludes financial information of the Non-Guarantors, including earnings from and investments in these entities.

The financial information may not necessarily be indicative of the results of operations or financial position of the guarantor companies or non-guarantor companies had they operated as independent entities.

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Summarized Statements of Operations and Comprehensive Income (Loss)

For the Six Months Ended For the Year Ended

March 31, 2023 September 30, 2022

For the Nine Months Ended For the Year Ended

June 30, 2023 September 30, 2022

Parent Company Guarantor Companies Parent Company Guarantor Companies

5 unchanged sentences

Summarized Balance Sheet Information

For the Six Months Ended For the Year Ended

March 31, 2023 September 30, 2022

For the Nine Months Ended For the Year Ended

June 30, 2023 September 30, 2022

Parent Company Guarantor Companies Parent Company Guarantor Companies

20 unchanged sentences

This Quarterly Report on Form 10-Q, especially “Management’s Discussion and Analysis”, contains certain “forward-looking statements” within the meaning of the Securities Act, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.

Such statements relate to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies.

“Griffon”) operates and the United States and global economies.

Statements in this Form 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases.

31 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 2. Management’s Discussion and Analysis