What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-11-16 compared with 2022-11-18 · 263 added, 321 removed, 298 unchanged (66% of the section changed)

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

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

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

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

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

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

Griffon now conducts its operations through two reportable segments:

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

Griffon conducts its operations through two reportable segments:

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

HBP revenue was 59%, 53% and 46% of Griffon’s consolidated revenue in 2023, 2022 and 2021, respectively.

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

residential, industrial and commercial fans;

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CPP revenue was 41%, 47%, and 54% of Griffon’s consolidated revenue in 2023, 2022 and 2021, respectively.

• 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.

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

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

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

LLC, the Company's financial advisor.

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

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

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 12, Long-Term Debt for further details.

On June 27, 2022, we completed the sale of our Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary, for $330,000 in cash, excluding customary post-closing adjustments.

As such, the results of operations of our Telephonics business is classified as a discontinued operation in the Consolidated Statements of Operations for all periods presented and 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 Annual Report on Form 10-K are to Griffon's continuing operations, unless noted otherwise.

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 $845,000.

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

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

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

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

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

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

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

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

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

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

In 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").

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

This acquisition broadens AMES' product offerings in the UK market and increases its in-country operational footprint.

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

Update of 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.

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 business.

Though the severity of COVID-19 has subsided, new variants, or the outbreak of a new pathogen, could interrupt business, cause renewed labor and supply chain disruptions, and negatively impact the global and U.S.

economy, which could materially and adversely impact our businesses.

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

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2023 Compared to 2022

Revenue for the year ended September 30, 2023 of $2,685,183 decreased 6% compared to $2,848,488 for the year ended September 30, 2022, resulting from decreased revenue of 18% at CPP, partially offset by increased revenue of 5% at HBP.

Adjusting for the period Griffon did not own Hunter in the prior year, organic revenue decreased 8% to $2,609,417.

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

Gross profit for 2023 was $948,821 compared to $936,886 in 2022.

Gross profit as a percent of sales (“gross margin”) for 2023 and 2022 was 35.3% and 32.9%, respectively.

In the years ended 2023 and 2022, gross profit included restructuring charges of $82,028 and $7,964, respectively.

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

Excluding these charges from both years, gross profit would have been $1,030,849 or 38.4% of revenue, compared to $950,251 or 33.4% in the prior year.

Selling, general and administrative (“SG&A”) expenses in 2023 of $642,734 or 23.9% of revenue, increased 6% from $608,926, or 21.4% of revenue, in 2022.

2023 SG&A expenses included restructuring charges of $10,440, strategic review (retention and other) of $20,225, special dividend ESOP charges of $15,494 and proxy expenses of $2,685.

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

In 2023, proxy expenses of $2,685 related to a settlement entered into with a shareholder that had submitted a slate of director nominees.

In 2022, proxy expenses of $6,952 (including legal and advisory fees) were the result of a proxy contest initiated by a shareholder which was completed at the shareholder meeting on February 17, 2022.

Excluding these items from both periods, 2023 SG&A expenses would have been $593,890, or 22.1% of revenue compared to $563,632, or 19.8%, with the increase in expenses primarily due to a full year of Hunter Fan expenses as well as increased management incentives, marketing, advertising and administrative expenses.

During the fiscal year ended September 30, 2023, Griffon performed annual and interim impairment testing of its goodwill and indefinite-lived intangible assets.

Griffon performed a quantitative assessment of the CPP reporting units and indefinite-lived intangible assets.

The assessments did not result in an impairment to goodwill.

The impairment tests did result in pre-tax noncash impairment charges totaling $109,200 ($81,313, net of tax) to CPP's gross carrying amount intangible assets.

For HBP, Griffon performed qualitative assessments and determined that indicators that fair value was less than the carrying amount were not present.

Interest expense in 2023 of $101,445 increased 20% compared to 2022 interest expense of $84,379, primarily as a result of an increased effective interest rate related to the $800,000 seven year Term Loan B facility entered into in the prior year in connection with the Hunter acquisition, of which Griffon prepaid $25,000 and $300,000 aggregate principal amount in 2023 and 2022, respectively.

These amounts were in addition to the required nominal quarterly principal payments of $2,000 per quarter totaling $8,000 and $4,000 in 2023 and 2022, respectively.

Other income (expense) of $2,928 and $6,881 in 2023 and 2022, respectively, includes $302 and $305, respectively, of net currency exchange transaction gains from receivables and payables held in non-functional currencies, $469 and $(225), respectively, of net gains (losses) on investments, and $(866) and $4,256, respectively, of net periodic benefit plan income (expense).

Other income (expense) also includes rental income of $212 and $689 in 2023 and 2022, respectively.

Additionally, it includes royalty income of $2,104 and $2,250 in 2023 and 2022, respectively.

Griffon reported income before tax from continuing operations for 2023 of $112,682 compared to a loss before tax from continuing operations for 2022 of $270,879.

The income tax provision recognized in 2023 and 2022 translated to an effective

income tax rate of 31.1% and 6.2%, respectively.

The 2023 and 2022 tax rates included discrete and certain other tax provisions net, and other items that affect comparability, as listed below.

Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2023 and 2022 were 27.3% and 29.0%, respectively.

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

Income from continuing operations for 2023 was $77,617, or $1.42 per share, compared to loss from continuing operations of $287,715, or $5.57 per share in 2022.

The 2023 income from continuing operations included the following:

– Restructuring charges of $92,468 ($68,779, net of tax, or $1.26 per share);

– Gain on sale of buildings $12,655 (9,586, net of tax, or $0.18 per share);

– Debt extinguishment, net $437 ($332, net of tax, or $0.01 per share);

– Strategic review - retention and other of $20,225 ($15,253, net of tax, or $0.28 per share);

– Special dividend ESOP charges of $15,494 ($11,779, net of tax, or $0.22 per share);

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

– Intangible asset impairments of $109,200 ($81,313, net of tax, or $1.49 per share);

– Discrete and certain other tax provision, net, of $175 or 0.00 per share.

The 2022 loss from continuing operations included the following:

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

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

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

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

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

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

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

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

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

Excluding these items from both reporting periods, 2023 income from continuing operations would have been $247,721, or $4.54 per share compared to $219,786, or $4.07 per share, in 2022.

2022 Compared to 2021

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

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

The organic revenue increase was 15%.

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

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

The gross margin for 2022 and 2021 was 32.9% and 28.2%, respectively.

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

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

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

Selling, general and administrative expenses in 2022 of $608,926 increased 29% from $470,530 in 2021.

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

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respectively, recorded in the fourth fiscal quarter of 2022.

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

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

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

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

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

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

The 2022 tax rate included $3,913 of discrete and certain other tax provisions net, and other items that affect comparability, as listed below.

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

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

The income tax provision in 2022 and 2021 translated to an effective income tax rate of 6.2% and 36.1%, respectively.

The 2022 and 2021 tax rates included discrete and certain other tax provisions net, and other items that affect comparability, as listed below.

Excluding the discrete and certain other tax provisions, net, and other items that affect comparability, as listed below, the effective income tax rates for 2022 and 2021 were 29.0% and 31.7%, respectively.

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

The 2022 income from continuing operations included the following:

The 2022 loss from continuing operations included the following:

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

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Excluding these items from both reporting periods, 2022 income from continuing operations would have been $219,786, or $4.07 per share compared to $89,678, or $1.68 per share, in 2021.

2021 Compared to 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Income from continuing operations for 2021 was $70,302, or $1.32 per share, compared to $41,444, or $0.92 per share in 2020.

The 2021 income from continuing operations included the following:

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

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

The 2020 income from continuing operations included the following:

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

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

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

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

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

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

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

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

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

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

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:

GRIFFON CORPORATION AND SUBSIDIARIES

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Restructuring charges (1)

92,468 16,782 21,418

Gain on sale of buildings (12,655) — —

Debt extinguishment, net 437 4,529 —

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Strategic review - retention and other 20,225 9,683 —

Acquisition contingent consideration — — (1,733)

Special dividend ESOP charges 15,494 10,538 —

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Restructuring charges (1)

1.26 0.23 0.30

Gain on sale of buildings (0.18) — —

Debt extinguishment, net 0.01 0.06 —

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Strategic review - retention and other 0.28 0.13 —

Acquisition contingent consideration — — (0.03)

Special dividend ESOP charges 0.22 0.15 —

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

(1) For the year ended September 30, 2023, restructuring charges relate to the CPP global sourcing expansion of which $82,028 is included in Cost of goods and services and $10,440 is included in SG&A.

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

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

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

(3) In fiscal 2022, 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.

REPORTABLE SEGMENTS

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

Griffon evaluates performance and allocates resources based on each segment's adjusted EBITDA, a non-GAAP measure, 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 18 - Reportable Segments, for a reconciliation of Segment Adjusted EBITDA to Income before taxes from continuing operations.

See the table provided in Note 19 - Business Segments for a reconciliation of adjusted EBITDA to income before taxes from continuing operations.

Home and Building Products

For the Years Ended September 30,

2023 2022 2021

Residential repair and remodel $ 757,088 $ 736,525 $ 516,995

Residential new construction 131,305 140,291 116,528

Residential 888,393 876,816 633,523

Commercial 700,112 630,066 407,585

Total Revenue $ 1,588,505 $ 1,506,882 $ 1,041,108

Adjusted EBITDA $ 510,876 32.2 % $ 412,738 27.4 % $ 181,015 17.4 %

Depreciation and amortization $ 15,066 $ 16,539 $ 17,370

2023 Compared to 2022

HBP revenue in 2023 increased $81,623, or 5%, compared to 2022, due to favorable commercial and residential pricing and mix of 8%, partially offset by a decline in volume of 3%.

The volume decrease was primarily driven by residential, partially offset by increased commercial.

HBP Adjusted EBITDA in 2023 increased 24% to $510,876 compared to $412,738 in 2022.

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

Segment depreciation and amortization decreased $1,473 from the comparable prior year period primarily due to fully depreciated assets.

2022 Compared to 2021

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

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

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

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

Segment depreciation and amortization decreased $831 in 2022 compared to 2021 primarily due to fully depreciated assets.

Consumer and Professional Products

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2023 Compared to 2022

CPP revenue in 2023 decreased $244,928, or 18%, compared to 2022, primarily resulting from a 25% decrease in volume across all channels and geographies driven by reduced customer demand, elevated customer inventory levels, customer supplier diversification in the U.S., and an unfavorable foreign exchange impact of 2%.

The volume decline was partially offset by $75,766 of Hunter revenue, or 6%, for the portion of the comparable year-to-date period in which Hunter was not owned by Griffon in the prior year, as well as price and mix of 3%.

Hunter contributed $282,723 during 2023 compared to $246,474 in 2022.

CPP adjusted EBITDA in 2023 decreased 49% to $50,343 compared to $99,308 in 2022, 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 material costs, discretionary spending and $7,679 of Hunter EBITDA for the portion of the comparable year-to-date period in which Hunter was not owned by Griffon in the prior year.

EBITDA reflected an unfavorable foreign exchange impact of 2%.

Hunter contributed $56,949 during 2023 compared to $43,579 in 2022.

Segment depreciation and amortization increased $2,249 compared to the prior year period, primarily due 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.

2022 Compared to 2021

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

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

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

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

Segment depreciation and amortization increased $13,129 in 2022 compared to 2021 primarily due to depreciation for new assets placed in service and the Hunter assets acquired.

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

Strategic Initiative and Restructuring Charges

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

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

On April 28, 2022, Griffon announced a reduced scope and an accelerated timeline for the initiative, which was completed in fiscal 2022.

These changes reflect the rapid progress made with the

initiative, and reduced investment in facilities expansion and equipment given recent significant increases in construction and equipment costs.

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

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

This initiative included three key development areas.

First, certain AMES U.S.

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

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

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

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

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

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

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

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

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

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

CPP Global Sourcing Strategy Expansion and 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.

These actions will be essential to CPP achieving 15% EBITDA margins, while enhancing free cash flow through improved working capital and significantly lower capital expenditures.

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, Pennsylvania;

Grantsville, Maryland;

Fairfield, Iowa;

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.

During the year ended September 30, 2023, CPP incurred pre-tax restructuring and related exit costs approximating $92,468.

Cash charges totaled $33,536 and non-cash, asset-related charges totaled $58,932;

the cash charges included $16,772 for one-time termination benefits and other personnel-related costs and $16,764 for facility exit and other related costs.

Non-cash charges included a $21,832 impairment charge related to certain fixed assets at several manufacturing locations and $37,100 to adjust inventory to net realizable value.

Cash Charges Non-Cash Charges

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

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

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

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

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

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

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

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

Anticipated Charges (1)

$ 19,500 $ 35,500 $ 75,000 $ 130,000 $ 5,000

Total 2023 restructuring charges (16,772) (16,764) (58,932) (92,468) —

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

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

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

2021 Compared to 2020

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

due to labor, transportation and supply chain disruptions.

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

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

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

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

Home and Building Products

For the Years Ended September 30,

Estimate to Complete $ 2,728 $ 18,736 $ 16,068 $ 37,532 $ 5,000

________________________

Residential $ 876,816 $ 633,523 $ 572,397

Commercial 630,066 407,585 354,916

Total Revenue $ 1,506,882 $ 1,041,108 $ 927,313

Adjusted EBITDA $ 412,738 27.4 % $ 181,015 17.4 % $ 153,631 16.6 %

Depreciation and amortization $ 16,539 $ 17,370 $ 18,361

2022 Compared to 2021

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

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

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

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

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

2021 Compared to 2020

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

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

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

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

To date, the global sourcing expansion project remains on schedule and within budget.

By the end of calendar 2023, operations at two manufacturing facilities and four wood mills, representing over one million square feet of space, will cease.

The remaining affected AMES locations will be transitioned during calendar year 2024.

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.

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 included one-time charges of approximately $51,869 and capital investments of approximately $13,000, net of future proceeds from the sale of exited facilities.

This initiative resulted in cash savings of approximately $25,000.

Unallocated Amounts

For 2022, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs, totaled $53,888 compared to $50,278 in 2021, with the increase primarily due to compensation and incentive costs.

For 2023, unallocated amounts, excluding depreciation, consisted primarily of corporate overhead costs, totaled $55,887 compared to $53,888 in 2022, with the increase primarily due to stock compensation expense.

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Depreciation and amortization of $65,445 in 2023 compared to $64,658 in 2022;

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

the increase was primarily due to depreciation for new assets placed in service and a full year of depreciation and amortization related to the Hunter Fan acquisition.

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

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

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

Comprehensive Income (Loss)

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

During 2023, total other comprehensive income (loss), net of taxes, of $12,728 included a gain of $8,447 from foreign currency translation adjustments primarily due to the strengthening of the Euro and British Pound, all in comparison to the U.S.

a $6,634 gain from pension and other post-retirement benefits, primarily associated with an increase in the assumed discount rate compared to 2022;

and a $2,353 loss on cash flow hedges.

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

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

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

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

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

and a $344 loss on cash flow hedges.

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, excluding customary post-closing adjustments, primarily related to working capital.

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 for $330,000, excluding customary post-closing adjustments, primarily related to working capital.

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

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

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

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

At September 30, 2023 and 2022, Griffon's discontinued assets and liabilities included the Company's obligation of $4,596 and $8,846, respectively, in connection with the sale of Telephonics related to certain customary post-closing adjustments, primarily working capital and retention bonuses.

At September 30, 2023 and 2022, Griffon’s liabilities for Installations Services and other discontinued operations primarily related to insurance claims, income taxes, product liability, warranty and environmental reserves, and totaled $7,202 and $8,072, respectively.

See Note 8, Discontinued Operations.

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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 September 30, 2022, the amount of cash, cash equivalents and marketable securities held by foreign subsidiaries was $54,200.

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.

In the event we determine that funds from foreign operations are needed to fund operations in the U.S., we will be required to accrue and pay U.S.

taxes to repatriate these funds (unless applicable U.S.

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").

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

As of September 30, 2023, the amount of cash, cash equivalents and marketable securities held by non-U.S.

subsidiaries was $45,500.

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

may repatriate cash from its non-U.S.

subsidiaries if the Company determines that it is beneficial to the company and tax efficient.

The Company has accrued a deferred tax liability for withholding taxes on previously taxed earnings and profit (PTEP) which are not considered permanently reinvested.

In the event we determine that additional funds from non-U.S.

operations are needed to fund operations in the U.S., we will be required to accrue and pay U.S.

taxes to repatriate these additional funds.

Griffon's primary sources of liquidity are cash flows generated from operations, cash on hand and our August 2028 five-year secured $500,000 revolving credit facility ("Revolver").

During the fiscal year ended September 30, 2023, the Company generated $431,765 of net cash from continuing operating activities and, as of September 30, 2023, the Company had $436,593 available, subject to certain loan covenants, for borrowing under the Revolver.

The Company had cash and cash equivalents of $102,889 at September 30, 2023.

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

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Financing activities (400,162) 393,345

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

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

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

Cash provided by operating activities from continuing operations for 2023 was $431,765 compared to $59,240 in 2022, an increase of $372,525.

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

During 2023, Griffon used $45,211 in investing activities from continuing operations compared to $583,227 in 2022.

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

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

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

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

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

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

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

During 2023, 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 $63,604 that included the purchase of two buildings for approximately $29,207, partially offset by proceeds totaling $20,961 from the sale of two buildings.

During 2022, 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 $42,488, 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.

Cash used in financing activities from continuing operations was $400,162 in 2023 compared to cash provided by financing activities of $393,345 in 2022.

During 2023, cash flows used in financing activities from continuing operations primarily consisted of net repayments of long-term debt of $99,223, primarily related to the Revolver, the payoff of AMES UK loans and a prepayment of $25,000 aggregate principal amount of the Term Loan B;

the purchase of treasury shares in connection with the board authorized share repurchase program and to satisfy withholding taxes on vesting of restricted stock totaling $163,970;

and the payment of dividends of $133,814.

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

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

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

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

At September 30, 2023, there were $50,445 in outstanding borrowings under the Credit Agreement, compared to $97,328 in outstanding borrowings at the same date in 2022.

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

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

During 2023, the Board of Directors approved two quarterly cash dividends each for $0.10 per share, and two quarterly cash dividends of $0.125 per share, totaling $0.45.

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;

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During 2023, 365,823 shares, with a market value of $12,882, or $35.21 per share were withheld to settle employee taxes due upon the vesting of restricted stock and were added to treasury stock.

During 2022, an additional 5,480 shares, with a market value of $144, or $26.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

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

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

During 2021, Griffon did not purchase any shares of common stock under these repurchase programs.

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

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

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

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

During 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.

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 2023, Griffon purchased 4,142,794 shares of common stock under these repurchase programs, for a total of $150,772, or $36.39 per share, excluding excise taxes.

As of September 30, 2023, $107,183 remains under these Board authorized repurchase programs.

In connection with the share repurchases, excise taxes totaling $1,301 was accrued as of September 30, 2023.

Subsequent to September 30, 2023 and through November 14, 2023, Griffon purchased 1,127,062 shares of its common stock for a total of $44,980, or $39.91 per share under Board authorized share repurchase programs.

On November 15, 2023, Griffon announced a $200,000 increase to its share repurchase program which on November 15, 2023 had $262,203 available given effect to all repurchases through November 14, 2023.

During 2023, cash used in discontinued operations from operating activities of $2,994 primarily related to the settling of certain liabilities, primarily stay bonuses, associated with the disposition of Telephonics, and environmental and other costs related to other discontinued businesses.

During 2022, cash provided by discontinued operations from operating activities of $10,198 primarily related to Telephonics operations and the payment of income taxes, stay bonuses and transaction related expenses, as well as payments associated with the settling of certain environmental and other liabilities related to other discontinued businesses.

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

At September 30, 2023 and 2022, Griffon had debt, net of cash and equivalents, as follows:

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

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

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

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

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

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

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

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

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

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

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At September 30, 2023, $8,920 of underwriting fees and other expenses incurred remained to be amortized.

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

The Term Loan B contains a SOFR floor of 0.50% and a current spread of 2.50%.

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

On August 1, 2023, Griffon amended and restated its revolving credit agreement (as amended, "Credit Agreement").

The amendment increased the maximum borrowing availability on its revolving credit facility from $400,000 to $500,000 (the "Revolver") 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.

Additionally, the Revolver includes a multi-currency sub-facility of $200,000.

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

Interest is payable on borrowings at either a Secured Overnight Financing Rate ("SOFR"), Sterling Overnight Index Average ("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 2.00% (7.42% at September 30, 2023), SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 2.00% (7.22% at September 30, 2023) and base rate loans accrue interest at prime rate plus a margin of 1.00% (9.50% at September 30, 2023).

At September 30, 2023, under the Credit Agreement, there were $50,445 in outstanding borrowings;

outstanding standby letters of credit were $12,962;

and $436,593 was available, subject to certain loan covenants, for borrowing at that date.

On January 24, 2022, Griffon amended and restated its Credit Agreement to provide for a new $800,000 Term Loan B facility, due January 24, 2029, in addition to the Revolver, and replaced LIBOR with SOFR.

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% (7.79% as of September 30, 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 secured leverage thresholds starting with the fiscal year ended September 30, 2023;

and a final balloon payment due at maturity.

At September 30, 2023, Griffon's secured leverage remained below the threshold set forth in the Credit Agreement that would, if exceeded, require Griffon to make an additional payment, and therefore no additional annual principal payment was required.

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

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

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

During 2023 and 2022, Griffon prepaid $25,000 and $300,000, respectively, of the aggregate principal amount of the Term Loan B, which permanently reduced the outstanding balance, and recognized a $437 and $6,296 charge on the prepayment of debt in 2023 and 2022, respectively.

The charges were comprised of write-offs of underwriting fees and other expenses of $386 and $5,575 for 2023 and 2022, respectively, and the original issue discount of $51 and $721 for 2023 and 2022, respectively.

The Term Loan B facility is subject to the same affirmative and negative covenants that apply to the Revolver, but is not subject to any financial maintenance covenants.

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At September 30, 2023, $7,039 of underwriting fees and other expenses incurred remained to be amortized.

The Revolver's maximum borrowing availability is $400,000 and it matures on March 22, 2025.

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

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

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

In addition, on December 9, 2021, Griffon replaced the Revolver GBP LIBOR benchmark rate with a Sterling Overnight Index Average ("SONIA").

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

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

Current margins are 0.50% for base rate loans, 1.50% for SOFR loans and 1.50% for SONIA loans.

At September 30, 2023, $463,000 of the Term Loan B was outstanding.

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.

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

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

outstanding standby letters of credit were $12,287;

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

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

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

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

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

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

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

During the year ended September 30, 2022, the financing lease on the Troy, Ohio location expired.

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

On September 28, 2023, the Company closed on the exercise of its lease purchase option, as permitted under the lease agreement, to acquire ownership of the manufacturing facility located in Ocala, Florida for a cash purchase price of $23,207.

The Ocala lease had a maturity date in 2025 and bore interest at a fixed rate of approximately 5.6%.

As a result of exercising the purchase option, the Company no longer has any future lease obligations related to this real estate.

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

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

Griffon exercised the one dollar buyout option in November 2021.

Refer to Note 22- Leases for further details.

In November 2012, Garant G.P.

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($11,117 as of September 30, 2023) revolving credit facility.

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

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

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 (6.69% using CDOR and 6.43% using Bankers Acceptance Rate CDN as of September 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.

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

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

At September 30, 2023, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($11,117 as of September 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.

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 ($19,188 as of September 30, 2023).

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

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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% (3.99% at September 30, 2022).

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

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

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

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

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

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

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, which matured in July 2023.

Prior to maturity, on June 30, 2023, AMES UK repaid and cancelled the GBP 14,000 term loan and GBP 4,000 mortgage loan.

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

Upon maturity in July 2023, the GBP 5,000 revolver had no balance and was not renewed.

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

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

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

Capital Resource Requirements

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

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

The OID was 99.75.

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

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

These actions will be essential to CPP achieving 15% EBITDA margins, while enhancing free cash flow through improved working capital and significantly lower capital expenditures.

For additional information, see the CPP segment 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 $56,050, a Term Loan B facility maturing in 2029 with an outstanding balance of $463,000 on September 30, 2023, and the Revolver, which matures in 2028 and has an outstanding balance of $50,445.

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% (7.79% as of September 30, 2023).

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

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.

Griffon's SOFR loans accrue interest at Term SOFR plus a credit adjustment spread and a margin of 2.00% (7.42% at September 30, 2023), SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 2.00% (7.22% at September 30, 2023), and base rate loans accrue interest at prime rate plus a margin of 1.00% (9.50% at September 30, 2023).

Griffon's purchase obligations, which are generally for the purchase of goods and services in the ordinary course of business over the next twelve months is approximately $160,539.

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

In 2022, Home Depot represented 13% of Griffon’s consolidated revenue, 19% of CPP's revenue and 7% of HBP's revenue.

In 2023, Home Depot represented 12% of Griffon’s consolidated revenue, 9% of HBP's revenue and 15% of CPP's revenue.

No other customer exceeded 10% or more of consolidated revenue.

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An estimate is considered to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on Griffon’s financial position or results of operations.

The following have been identified as the most critical accounting policies and estimates:

Revenue Recognition

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting.

A contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and with respect to which payment terms are identified and collectability is probable.

Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations.

For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price).

A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when each performance obligation is satisfied.

A majority of the Company’s contracts have a single performance obligation which represents, in most cases, the product being sold to the customer.

To a lesser extent, some contracts include multiple performance obligations such as a product, the related installation, and extended warranty services.

These contracts require judgment in determining the number of performance obligations.

For contracts with multiple performance obligations, judgment is required to determine whether performance obligations specified in these contacts are distinct and should be accounted for as separate revenue transactions for recognition purposes.

In these types of contracts, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available.

The transaction price includes variable consideration, such as discounts and volume rebates, when it is probable that a significant reversal of revenue recognized will not occur.

Variable consideration is determined using either the expected value or the most likely amount of consideration to be received based on historical experience and the specific facts and circumstances at the time of evaluation.

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

A majority of the Company's revenue is short cycle in nature with shipments occurring within one year from order and does not include a material long-term financing component, implicitly or explicitly.

Payment terms generally range between 15 to 90 days and vary by the location of the business, the type of products manufactured to be sold and the volume of products sold, among other factors.

The Company recognizes revenue from product sales when all factors are met, including when control of a product transfers to the customer upon its shipment, completion of installation, testing, certification or other substantive acceptance required under the contract.

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

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

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

The Company includes shipping costs billed to customers in revenue and the related shipping costs in either Cost of Goods and Services and Selling, general and administrative expenses, as applicable.

The majority of the Company’s contracts offer assurance-type warranties in connection with the sale of a product to a customer.

Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications.

Such warranties do not represent a separate performance obligation.

Payment terms vary depending on the type and location of the customer and the products or services offered.

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

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

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

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

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

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

Warranty Accruals

Direct customer and end-user warranties are provided on certain products.

These warranties cover manufacturing defects that would prevent the product from performing in line with its intended and marketed use.

The terms of such warranties vary by product line and generally provide for the repair or replacement of the defective product.

Warranty claims data is collected and analyzed with a focus on the historical amount of claims, the products involved, the amount of time between the warranty claims and the products’ respective sales and the amount of current sales.

Based on such analysis, warranty accruals are recorded as an increase to cost of sales and regularly reviewed for adequacy.

Stock-based Compensation

Griffon has issued stock-based compensation to certain employees, officers and directors in the form of restricted stock and restricted stock units.

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 or units, the likelihood of achieving the performance criteria.

For certain restricted stock grants with a performance metric related to Griffon's stock price, the company performs a valuation as of the date of grant and recognizes the expense over the vesting period.

The Company recognizes forfeitures as they occur.

Expected Loss Allowances for Discount, Doubtful Account and Returns

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

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

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

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

Acquired businesses are accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the fair value of acquired in-process research and development be recorded on the balance sheet.

Related transaction costs are expensed as incurred.

Any excess of the purchase price over the assigned values of the net assets acquired is recorded as goodwill.

The most significant areas involving management estimates are described below.

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

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

During the fiscal year ended September 30, 2023, the Company performed a qualitative assessment of the HBP reporting unit goodwill and determined that indicators that the fair value was less than the carrying amount were not present.

With respect to CPP's reporting units goodwill, the Company performed a quantitative assessment using both an income-based and market-based approach, which did not result in an impairment.

Additionally, the Company compared the estimated fair values of the CPP indefinite-lived intangibles to their carrying amounts, which resulted in pre-tax noncash impairment charges of $109,200 to the gross carrying amount of our trademarks, of which $9,200 was recognized in the fourth quarter and $100,000 was recognized in the second quarter.

Indicators of impairment were not present for the HBP indefinite-lived intangibles during 2023.

A 100-basis point increase in the discount rate would have resulted in an additional impairment charge to our indefinite-lived intangible assets of $4,600 and a goodwill impairment of $19,400.

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

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

As such, in connection with the preparation of our

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

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

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

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

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

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

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

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

Indicators of impairment were not present for the HBP indefinite-lived intangibles during 2022.

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

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

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

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

As of September 30, 2023 and 2022, we tested long-lived intangible and tangible assets for impairment by comparing estimated future undiscounted cash flows of each CPP asset group to the carrying amount of the asset group and determined that an impairment did not exist.

No event or indicator of impairment existed for the HBP assets groups as of September 30, 2023.

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

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

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

Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC Topic 840.

The Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification.

We also elected a practical expedient to determine the reasonably certain lease term.

The Company applied the modified retrospective approach, whereby the cumulative effect of adoption is recognized as of the date of adoption and comparative prior periods are not retrospectively adjusted.

As a result, upon adoption, we recognized ROU assets of $163,552 and lease liabilities of $163,676 associated with our operating leases.

The standard had no material impact to retained earnings or on our Consolidated Statements of Income or Consolidated Statements of Cash Flows.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

For leases existing as of October 1, 2019, we have elected to use the remaining lease term as of the adoption date in determining the incremental borrowing rate.

Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

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 Consolidated Balance Sheets.

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

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term.

For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability.

For leases with a lease term of 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Consolidated Balance Sheets.

Variable lease cost for both operating and finance leases, if any, is recognized as incurred.

The Company has lease agreements that contain both lease and non-lease components.

For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).

Restructuring Reserves

From time to time, Griffon will establish restructuring reserves at an operation.

These reserves, for both termination and facility related exit costs, require the use of estimates.

Though Griffon believes the estimates made are reasonable, they could differ materially from the actual costs.

Griffon’s effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which Griffon operates.

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For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation.

The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or

emerging legislation.

Such adjustments are recognized in the period in which they are identified.

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The expected return on plan assets is determined based on the nature of the plans’ investments and expectations for long-term rates of return.

The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments, with the appropriate spot rate applicable to the timing of the projected future benefit

Assumptions used in determining Griffon’s obligations under the defined benefit pension plans are believed to be reasonable, based on experience and advice from independent actuaries;

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All of the defined benefit plans are frozen and have ceased accruing benefits.

New Accounting Standards

For a discussion of the new accounting standards impacting the Company, see Note 1 to the Consolidated Financial Statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis