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Item 1. Financial Statements

2024-02-07 compared with 2023-08-03 · 238 added, 506 removed, 596 unchanged (56% of the section changed)

10 unchanged sentences

Prepaid and other current assets 57,863 57,139

Assets held for sale 15,010 —

Assets of discontinued operations 984 1,001

26 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2023 and 2022

For the Three Months Ended December 31, 2023 and 2022

COMMON STOCK CAPITAL IN

9 unchanged sentences

Amortization of deferred compensation — — — — — — — 520 520

Common stock acquired — — — — 1,634 ( 70,543 ) — — ( 70,543 )

Equity awards granted, net — — ( 3,383 ) — ( 180 ) 3,383 — — —

3 unchanged sentences

Balance at December 31, 2023 84,746 $ 21,187 $ 665,875 $ 315,868 33,359 $ ( 656,450 ) $ ( 59,535 ) $ ( 1,923 ) $ 285,022

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

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

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

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

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

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

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

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

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

Net income — — — 49,205 — — — — 49,205

Dividend — — — ( 121,461 ) — — — — ( 121,461 )

Amortization of deferred compensation — — — — — — — 6,630 6,630

Common stock acquired — — — — 2,542 ( 86,009 ) — — ( 86,009 )

ESOP allocation of common stock — — 13,609 — — — — — 13,609

Stock-based compensation — — 5,106 — — — — — 5,106

Other comprehensive income, net of tax — — — — — — 315 — 315

Balance at June 30, 2023 84,746 $ 21,187 $ 652,166 $ 246,392 30,083 $ ( 511,414 ) $ ( 67,591 ) $ ( 5,034 ) $ 335,706

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

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2023 and 2022

COMMON STOCK CAPITAL IN

14 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2 unchanged sentences

(in thousands, except per share data)

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

2023 2022 2023 2022

Three Months Ended December 31,

Revenue $ 643,153 $ 649,384

2 unchanged sentences

Selling, general and administrative expenses 152,803 152,720

Intangible asset impairment — — 100,000 —

Total operating expenses 172,439 157,387 585,460 442,577

Income from operations 83,838 81,105

3 unchanged sentences

Gain on sale of building 547 10,852

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

Other, net 632 607

Total other expense, net ( 23,696 ) ( 13,085 )

Income before taxes from continuing operations 78,453 76,050 56,314 182,765

Provision for income taxes 29,248 23,268 20,662 55,119

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

Discontinued operations:

Income from operations of discontinued operations — 113,457 — 117,777

Income before taxes 60,142 68,020

Provision for income taxes 17,965 19,318

Income from discontinued operations — 87,505 — 97,628

Net income $ 42,177 $ 48,702

Basic earnings per common share $ 0.86 $ 0.93

Income from continuing operations $ 0.94 $ 1.02 $ 0.68 $ 2.48

Income from discontinued operations — 1.69 — 1.89

Basic earnings per common share $ 0.94 $ 2.71 $ 0.68 $ 4.37

Basic weighted-average shares outstanding 48,784 52,579

Diluted earnings per common share $ 0.82 $ 0.88

Income from continuing operations $ 0.90 $ 0.98 $ 0.65 $ 2.38

Income from discontinued operations — 1.62 — 1.82

Diluted earnings per common share $ 0.90 $ 2.60 $ 0.65 $ 4.19

Diluted weighted-average shares outstanding 51,467 55,298

5 unchanged sentences

Change in cash flow hedges ( 295 ) ( 580 )

Total other comprehensive income (loss), net of taxes 315 ( 14,177 ) 15,147 ( 11,979 )

Total other comprehensive income, net of taxes 10,475 12,219

Comprehensive income, net $ 52,652 $ 60,921

3 unchanged sentences

(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 42,177 $ 48,702

Net income from discontinued operations — ( 97,628 )

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

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 14,823 17,113

Stock-based compensation 6,417 6,742

Intangible asset impairments 100,000 —

Asset impairment charges - restructuring 8,482 —

1 unchanged sentence

Amortization of debt discounts and issuance costs 1,056 1,023

Debt extinguishment, net — 5,287

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

Deferred income tax provision (benefit) ( 25,744 ) 1,465

Gain on sale of assets and investments ( 550 ) ( 10,923 )

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

(Increase) decrease in accounts receivable 6,236 ( 81,825 )

(Increase) decrease in inventories 84,190 ( 135,473 )

Change in assets and liabilities:

Decrease in accounts receivable 14,491 13,689

Decrease in inventories 24,623 22,931

(Increase) decrease in prepaid and other assets ( 3,631 ) 100

Decrease in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities ( 36,945 ) ( 44,864 )

Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities 36,491 ( 26,333 )

Other changes, net 1,117 1,954

Net cash provided by (used in) operating activities - continuing operations 309,003 ( 65,001 )

Net cash provided by operating activities 146,058 75,480

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment ( 14,330 ) ( 4,726 )

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

Proceeds (payments) from sale of business, net ( 2,568 ) 295,712

Proceeds from investments — 14,923

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

Proceeds from the sale of property, plant and equipment 787 11,815

Net cash used in investing activities - continuing operations ( 10,911 ) ( 574,256 )

Net cash provided by (used in) investing activities ( 13,543 ) 4,521

CASH FLOWS FROM FINANCING ACTIVITIES:

5 unchanged sentences

Other, net ( 59 ) ( 42 )

Net cash provided by ( used in) financing activities - continuing operations ( 262,560 ) 513,762

Net cash used in financing activities ( 123,947 ) ( 78,363 )

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

2 unchanged sentences

(in thousands)

Nine Months Ended June 30,

Three Months Ended December 31,

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash provided by (used in) operating activities ( 2,799 ) 26,889

Net cash used in investing activities — ( 2,627 )

Net cash provided by (used in) discontinued operations ( 2,799 ) 24,262

Net cash used in operating activities ( 2,926 ) ( 1,953 )

Net cash used in discontinued operations ( 2,926 ) ( 1,953 )

Effect of exchange rate changes on cash and equivalents 2,015 689

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 31,606 ( 103,966 )

NET INCREASE IN CASH AND EQUIVALENTS 7,657 374

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 102,889 120,184

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

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

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

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

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

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

On May 16, 2022, Griffon announced that its Board of Directors initiated a process to review a comprehensive range of strategic alternatives to maximize shareholder value including a sale, merger, divestiture, recapitalization or other strategic transaction, and on April 20, 2023, Griffon announced that its Board of Directors, after extensive evaluation and deliberation, determined that the ongoing execution of the Company’s strategic plan was the best way to maximize value for shareholders and unanimously decided to conclude its review.

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

Hunter, which is part of Griffon's Consumer and Professional Products 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 revolving credit facility borrowings to fund the balance of the purchase price and related acquisition and debt expenditures.

Griffon conducts its operations through two reportable segments:

3 unchanged sentences

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

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

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

residential, industrial and commercial fans;

2 unchanged sentences

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Update on COVID-19 on our Business

On May 11, 2023, the U.S.

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

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

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

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

Basis of Presentation

3 unchanged sentences

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

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

Griffon’s businesses are seasonal;

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

4 unchanged sentences

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

of intangible and fixed assets, warranty reserves, sales incentive accruals, assumption associated with stock based compensation valuation, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets and liabilities of discontinued operations, assumptions associated with valuation of acquired assets and assumed liabilities of acquired companies and the accompanying disclosures.

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

Actual results may ultimately differ from these estimates.

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

NOTE 2 – FAIR VALUE MEASUREMENTS

3 unchanged sentences

The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

1 unchanged sentence

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

On June 30, 2023, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 904,104 and $ 487,550 , respectively.

On December 31, 2023, the fair values of Griffon’s 2028 senior notes and Term Loan B facility approximated $ 945,532 and $ 462,153 , respectively.

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

Insurance contracts with values of $ 3,697 at June 30, 2023 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Insurance contracts with values of $ 3,711 at December 31, 2023 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets and $ 634 is included in other assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

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

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

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

As of June 30, 2023, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade liabilities payable in U.S.

At June 30, 2023, Griffon had $ 18,000 of Australian dollar contracts at a weighted average rate of $ 1.45 which qualified for hedge accounting (level 2 inputs).

As of December 31, 2023, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade liabilities payable in U.S.

At December 31, 2023, Griffon had $ 61,000 of Australian dollar contracts at a weighted average rate of $ 1.50 which qualified for hedge accounting (level 2 inputs).

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

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

AOCI included deferred gains of $ 757 ($ 530 , net of tax) at June 30, 2023.

Upon settlement, gains of $ 882 and $ 3,298 were recorded in COGS during the three and nine months ended June 30, 2023, respectively.

AOCI included deferred losses of $ 1,425 ($ 997 , net of tax) at December 31, 2023.

Upon settlement, gains of $ 525 were recorded in COGS during the three months ended December 31, 2023.

All contracts expire in 30 to 240 days.

At June 30, 2023, Griffon had $ 55,500 of Chinese Yuan contracts at a weighted average rate of $ 6.95 which qualified for hedge accounting (level 2 inputs).

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

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

AOCI included deferred losses of $ 1,672 ($ 1,220 , net of tax) at June 30, 2023.

Upon settlement, losses of $ 241 and $ 1,644 were recorded in COGS during the three and nine months ended June 30, 2023, respectively.

At December 31, 2023, Griffon had $ 44,000 of Chinese Yuan contracts at a weighted average rate of $ 7.02 which qualified for hedge accounting (level 2 inputs).

These hedges were all deemed effective as cash flow hedges with gains and losses related to

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

changes in fair value deferred and recorded in AOCI and Prepaid and other current assets, or Accrued liabilities, until settlement.

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

AOCI included deferred losses of $ 307 ($ 224 , net of tax) at December 31, 2023.

Upon settlement, losses of $ 636 were recorded in COGS during the three months ended December 31, 2023.

All contracts expire in 3 to 283 days.

At June 30, 2023, Griffon had $ 5,800 of Canadian dollar contracts at a weighted average rate of $ 1.33 .

At December 31, 2023, Griffon had $ 6,580 of Canadian dollar contracts at a weighted average rate of $ 1.35 .

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

dollar based purchases, do not qualify for hedge accounting.

For the three months and nine months ended June 30, 2023, fair value losses of $ 116 and $ 4 , respectively, were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized gains of $ 51 and $ 317 was recorded in Other income during the three months and nine months ended June 30, 2023, respectively, for all settled contracts.

For the three months ended December 31, 2023, fair value losses of $ 103 were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs).

Realized gains of $ 24 were recorded in Other income during the three months ended December 31, 2023 for all settled contracts.

All contracts expire in 30 to 267 days.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3 – REVENUE

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See Note 12 - Business Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location.

NOTE 4 – ACQUISITIONS

Griffon continually evaluates potential acquisitions that strategically fit within its portfolio or expand its portfolio into new product lines or adjacent markets.

Griffon has completed a number of acquisitions that have been accounted for as business combinations, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition and have resulted in the recognition of goodwill.

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

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

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

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

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

For the nine months ended June 30, 2023, Hunter's revenue and Segment adjusted EBITDA was $ 218,105 and $ 41,746 , respectively.

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

The following unaudited proforma summary from continuing operations for the nine month period presents consolidated information as if the Company acquired Hunter on October 1, 2021:

Proforma For the Nine Months Ended June 30, 2022 (unaudited)

Revenue $ 2,230,056

Income from continuing operations 127,299

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

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

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

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Accounts receivable (1)

Inventories (2)

Other current assets 7,940

Property, plant and equipment 15,007

Operating lease right-of-use assets 12,447

Goodwill 250,711

Intangible assets 616,000

Total assets acquired $ 1,077,006

Accounts payable and accrued liabilities $ 70,039

Current portion of operating lease liabilities 3,323

Deferred tax liability (3)

Long-term operating lease liabilities 9,123

Other long-term liabilities 3,848

Total liabilities assumed $ 225,552

Total net assets acquired $ 851,454

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

The fair value of accounts receivable approximated book value acquired.

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

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

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

Average Life (Years)

Goodwill $ 250,711 N/A

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

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

Total goodwill and intangible assets $ 866,711

During the quarter and nine months ended June 30, 2023, there were no acquisition costs.

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4 – INVENTORIES

1 unchanged sentence

The following table details the components of inventory:

At June 30, 2023 At September 30, 2022

At December 31, 2023 At September 30, 2023

Raw materials and supplies $ 102,757 $ 127,342

2 unchanged sentences

Total $ 478,609 $ 507,130

In connection with the Company's restructuring activities described in Note 17, Restructuring Charges, during the nine months ended June 30, 2023, CPP recorded an inventory impairment charge of $ 37,100 to adjust to net realizable value.

In connection with the Company's restructuring activities described in Note 16, Restructuring Charges, during the quarter ended December 31, 2023, CPP recorded an inventory impairment charge of $ 8,482 to adjust to net realizable value.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

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

At June 30, 2023 At September 30, 2022

At December 31, 2023 At September 30, 2023

Land, building and building improvements $ 145,321 $ 169,923

2 unchanged sentences

636,332 651,635

Accumulated depreciation and amortization ( 373,345 ) ( 412,400 )

Accumulated depreciation ( 367,203 ) ( 372,417 )

Total $ 269,129 $ 279,218

Depreciation and amortization expense for property, plant and equipment was $ 10,000 and $ 12,173 for the quarters ended June 30, 2023 and 2022, respectively, and $ 33,090 and $ 34,650 for the nine months ended June 30, 2023 and 2022, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 4,404 and $ 4,578 for the quarters ended June 30, 2023 and 2022, respectively, and $ 13,289 and $ 12,234 for the nine months ended June 30, 2023 and 2022, respectively.

Depreciation expense for property, plant and equipment was $ 9,267 and $ 11,489 for the quarters ended December 31, 2023 and 2022, respectively.

Depreciation included in Selling, general and administrative ("SG&A") expenses was $ 3,999 and $ 4,239 for the quarters ended December 31, 2023 and 2022, respectively.

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

Except as described in Note 17, Restructuring Charges, no event or indicator of impairment occurred during the three and nine months ended June 30, 2023 which would require additional impairment testing of property, plant and equipment.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In connection with the expansion of CPP's global sourcing strategy announced on May 3, 2023, certain owned manufacturing locations which ceased operations have met the criteria to be classified as held for sale as of December 31, 2023.

The net book value of these properties as of December 31, 2023 totaled $ 15,010 .

Except as described in Note 16, Restructuring Charges, no event or indicator of impairment occurred during the three months ended December 31, 2023 which would require additional impairment testing of property, plant and equipment.

NOTE 6 – CREDIT LOSSES

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

Nine months ended June 30,

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three months ended December 31,

Beginning Balance, October 1 $ 11,264 $ 12,137

Allowance for credit losses acquired — 2,599

Provision for expected credit losses 1,030 1,457

1 unchanged sentence

Other, primarily foreign currency translation 42 90

Ending Balance, June 30 $ 12,516 $ 13,541

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Ending Balance, December 31 $ 11,985 $ 13,636

NOTE 7 – GOODWILL AND OTHER INTANGIBLES

Indicators of impairment were not present for any of Griffon's reporting units during the three months ended June 30, 2023.

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

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

The impairment test performed during the second quarter ended March 31, 2023 did not result in a goodwill impairment.

Indicators of impairment were not present for the HBP reporting unit during the second quarter ended March 31, 2023.

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

At September 30, 2022 Hunter Acquisition (1)

At June 30, 2023

Indicators of impairment were not present for any of Griffon's reporting units during the three months ended December 31, 2023.

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

Consumer and Professional Products $ 136,611

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Total $ 327,864

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

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

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

We compared the estimated fair values to their carrying amounts.

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

Indicators of impairment were not present for any of Griffon's indefinite-lived intangible assets during the three months ended June 30, 2023.

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

At June 30, 2023 At September 30, 2022

At December 31, 2023 At September 30, 2023

Gross Carrying Amount Accumulated

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The gross carrying amount of intangible assets was impacted by $ 3,518 related to favorable foreign currency translation.

Amortization expense for intangible assets was $ 5,669 and $ 5,514 for the quarters ended June 30, 2023 and 2022, respectively, and $ 16,946 and $ 12,371 for the nine months ended June 30, 2023 and 2022, respectively.

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

Amortization expense for intangible assets was $ 5,556 and $ 5,624 for the quarters ended December 31, 2023 and 2022, respectively.

Amortization expense for the remainder of 2024 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows:

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NOTE 8 – INCOME TAXES

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

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

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

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

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

The nine months ended June 30, 2023 included a gain on the sale of a building of $ 10,852 ($ 8,323 , net of tax), strategic review costs (retention and other) of $ 20,234 ($ 15,258 , net of tax), restructuring charges of $ 82,196 ($ 61,360 , net of tax), special dividend ESOP charges of $ 9,042 ($ 6,936 , net of tax), intangible asset impairment charges of $ 100,000 ($ 74,256 , net of tax), proxy expenses of $ 2,685 ($ 2,059 , net of tax) and discrete and certain other tax benefits, net, that affect comparability of $ 2,537 .

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

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

During the quarter ended December 31, 2023, the Company recognized a tax provision of $ 17,965 on income before taxes of $ 60,142 , compared to $ 19,318 on income before taxes of $ 68,020 in the prior year quarter.

The current year quarter results included strategic review costs - retention and other of $ 4,658 ($ 3,500 , net of tax), restructuring charges of $ 12,400 ($ 9,213 , net of tax), gain on sale of building of $ 547 ($ 406 , net of tax);

and discrete and certain other tax provisions, net, that affect comparability of $ 783 .

The prior year quarter results included strategic review - retention and other of $ 8,232 ($ 6,222 , net of tax);

proxy costs of $ 1,503 ($ 1,153 , net of tax);

gain on the sale of building $ 10,852 ($ 8,323 , net of tax);

and discrete and certain other tax benefits, net, that affect comparability of $ 333 .

Excluding these items, the effective tax rates for the quarters ended December 31, 2023 and 2022 were 27.9 % and 29.1 %, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

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NOTE 9 – LONG-TERM DEBT

At June 30, 2023 At September 30, 2022

At December 31, 2023 At September 30, 2023

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

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Revolver due 2025 (b) 21,500 — ( 3,419 ) 18,081 Variable 50,445 — ( 3,606 ) 46,839 Variable

Finance lease - real estate (c) 12,056 — — 12,056 Variable 13,091 — — 13,091 Variable

Non US lines of credit (d) — — — — Variable — — ( 3 ) ( 3 ) Variable

Non US term loans (d) — — — — Variable 12,090 — ( 27 ) 12,063 Variable

Other long term debt (e) 1,461 — ( 11 ) 1,450 Variable 1,592 — ( 11 ) 1,581 Variable

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Long-term debt $ 1,449,462 $ ( 674 ) $ ( 18,553 ) $ 1,430,235 $ 1,480,187 $ ( 704 ) $ ( 19,579 ) $ 1,459,904

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Three Months Ended December 31, 2023 Three Months Ended December 31, 2022

Effective Interest Rate Cash Interest Amort.

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

Premium Amort.

Debt (Premium)/Discount Amort.

Debt Issuance Costs

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Revolver due 2025 (b) Variable 908 — 186 1,094 Variable 1,344 — 123 1,467

Finance lease - real estate (c) 5.6 % 168 — — 168 5.6 % 187 — — 187

Non US lines of credit (d) Variable 259 — 12 271 Variable 4 — 5 9

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

Other long term debt (e) Variable 104 — — 104 Variable 54 — — 54

Capitalized interest ( 38 ) — — ( 38 ) ( 76 ) — — ( 76 )

Totals $ 24,619 $ 31 $ 991 $ 25,641 $ 22,835 $ 49 $ 1,138 $ 24,022

Nine Months Ended June 30, 2023 Nine Months Ended June 30, 2022

Effective Interest Rate Cash Interest Amort.

Premium Amort.

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

Debt Premium Amort.

Debt Issuance Costs & Other Fees Total Interest Expense

Senior notes due 2028 (a) 6.0 % $ 42,037 $ ( 36 ) $ 1,515 $ 43,516 6.0 % $ 43,090 $ ( 36 ) $ 1,552 $ 44,606

Term Loan B due 2029 (b) 7.3 % 25,753 129 1,054 26,936 3.7 % 11,896 91 717 12,704

Revolver due 2025 (b) Variable 2,922 — 368 3,290 Variable 2,307 — 368 2,675

Finance lease - real estate (c) 5.6 % 520 — — 520 5.6 % 577 — 4 581

Finance lease - real estate (c) n/a — — — — 5.6 % 178 — — 178

Non US lines of credit (d) Variable — — 4 4 Variable 155 — 13 168

Non US term loans (d) Variable — — — — Variable 492 — 44 536

Other long term debt (e) Variable 302 — — 302 Variable 130 — — 130

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

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

As of June 30, 2023, outstanding 2028 Senior Notes due totaled $ 974,775 ;

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

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

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

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

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

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

The Term Loan B accrues interest at the Term SOFR rate plus a credit adjustment spread with a floor of 0.50 %, and a spread of 2.25 % ( 7.64 % as of June 30, 2023).

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

The fair value of the 2028 Senior Notes approximated $ 945,532 on December 31, 2023 based upon quoted market prices (level 1 inputs).

At December 31, 2023, $ 8,415 of underwriting fees and other expenses incurred remained to be amortized.

(b) On August 1, 2023, Griffon amended and restated its 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 under the Revolver from $ 100,000 to $ 125,000 and increasing the customary accordion feature from a minimum of $ 375,000 to a minimum of $ 500,000 .

The Revolver also 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 % ( 7.46 % at December 31, 2023);

SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 2.00 % ( 7.22 % at December 31, 2023);

and base rate loans accrue interest at prime rate plus a margin of 1.00 % ( 9.50 % at December 31, 2023).

At December 31, 2023, under the Revolver, there were $ 21,500 in outstanding borrowings;

outstanding standby letters of credit were $ 12,962 ;

and $ 465,538 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.

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 % ( 7.75 % as of December 31, 2023).

The Term Loan B was issued at 99.75 % of par value.

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.

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

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

$ 5,575 related to the write-off of underwriting fees and other expenses and $ 721 of the original issuer discount.

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

During 2023 and 2022, Griffon prepaid $ 25,000 and $ 300,000 , respectively, 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 charge of $ 437 and $ 6,296 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 (as described below), but is not subject to any financial maintenance covenants.

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

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

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

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

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

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

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

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

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

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

A more detailed description of the amended Credit Agreement can be found in Part II, Item 5 of this Quarterly Report on Form 10-Q.

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

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

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

The fair value of the Term Loan B facility approximated $ 462,153 on December 31, 2023 based upon quoted market prices (level 1 inputs).

At December 31, 2023, $ 6,708 of underwriting fees and other expenses incurred, remained to be amortized.

At December 31, 2023, $ 461,000 of the Term Loan B was outstanding.

GRIFFON CORPORATION AND SUBSIDIARIES

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

financial performance.

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

The Revolver has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants and events of default.

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

outstanding standby letters of credit were $ 12,802 ;

and $ 300,493 was available, subject to certain loan covenants, for borrowing at that date.

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

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

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

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

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

Griffon exercised the one dollar buyout option in November 2021.

(c) 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.

The remaining lease liability balance relates to finance equipment leases.

Refer to Note 20-Leases for further details.

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

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,334 as of June 30, 2023) revolving credit facility.

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

The facility accrues interest at CDOR or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 6.57 % using CDOR and 6.32 % using Bankers Acceptance Rate CDN as of June 30, 2023).

(“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 ($ 11,363 as of December 31, 2023) revolving credit facility.

Effective in December 2023, the facility was amended to replace the Canadian Dollar Offer Rate with the Canadian Overnight Repo Rate Average ("CORRA").

The facility accrues interest at CORRA or the Bankers Acceptance Rate (CDN) plus 1.3 % per annum ( 6.36 % using CORRA and 6.53 % using Bankers Acceptance Rate CDN as of December 31, 2023).

The revolving facility matures in December 2024, but is renewable upon mutual agreement with the lender.

Garant is required to maintain a certain minimum equity.

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

At December 31, 2023, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,363 as of December 31, 2023) available.

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

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

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

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

The receivable purchase facility accrues interest at BBSY (Bank Bill Swap Rate) plus 1.25 % per annum ( 5.56 % at December 31, 2023).

At December 31, 2023, there was no balance outstanding under the receivable purchase facility with AUD 30,000 ($ 20,511 as of December 31, 2023) available.

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

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

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

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

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

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

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

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 paid off 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.

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

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

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

NOTE 10 — SHAREHOLDERS’ EQUITY AND EQUITY COMPENSATION

During the nine months ended June 30, 2023, the Company paid three quarterly cash dividends consisting of two cash dividends of $ 0.10 per share and one cash dividend of $ 0.125 per share.

During the three months ended December 31, 2023, the Company paid a quarterly cash dividend of $ 0.15 per share.

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.

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

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

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

The Company currently intends to pay dividends each quarter;

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

Dividends paid on shares in the ESOP were used to offset ESOP compensation expense.

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

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

On February 6, 2024, the Board of Directors declared a quarterly cash dividend of $ 0.15 per share, payable on March 21, 2024 to shareholders of record as of the close of business on February 29, 2024.

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

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

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

on January 30, 2020, shareholders approved Amendment No.

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

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

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

A proposal to approve an amendment to add 2,600,000 shares to the Amended Incentive Plan (the “Amendment”) is included in Griffon’s Proxy Statement dated January 29, 2024 related to the 2024 Annual Meeting of Shareholders, scheduled to be held on March 20, 2024.

If shareholders approve this proposal, 2,600,000 shares will be added to the Amended Incentive Plan as of the date of the 2024 Annual Meeting of Shareholders.

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

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

As of June 30, 2023, there were 328,473 shares available for grant.

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

As of December 31, 2023, there were 154,369 shares available for grant.

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

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

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Restricted stock $ 5,028 $ 5,538

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performance conditions, with a vesting period of thirty-six months and a total fair value of $ 8,225 , or a weighted average fair value of $ 47.24 per share.

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

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

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

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

During the third quarter of 2023, there were no shares of restricted stock or RSU's granted.

During the nine months ended June 30, 2023, 494,748 shares granted were issued out of treasury stock.

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 authorization of $ 57,955 .

During the quarter ended December 31, 2023, 166,272 shares granted were issued out of treasury stock.

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 of $ 57,955 .

Also, on November 15, 2023, Griffon announced that the Board of Directors approved an additional increase of $ 200,000 to its share repurchase authorization.

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

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

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

During the three months ended June 30, 2023, there were no shares withheld to settle employee taxes due upon the vesting of restricted stock.

During the nine months ended June 30, 2023, 365,739 shares, with a market value of $ 12,881 , or $ 35.22 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

Furthermore, during the nine months ended June 30, 2023, an additional 3,066 shares, with a market value of $ 108 , or $ 35.31 per share, were withheld from common stock issued upon the vesting of restricted stock units to settle employee taxes due upon vesting.

Share repurchases during the quarter ended December 31, 2023 totaled 1,634,454 shares of common stock, for a total of $ 69,640 , or an average of $ 42.61 per share.

As of December 31, 2023, $ 237,543 remains under these Board authorized repurchase programs.

During the quarter ended and as of December 31, 2023, $ 696 and $ 1,997 , respectively, were accrued for excise taxes for share repurchases.

During the quarter ended December 31, 2023, 221,229 shares, with a market value of $ 11,604 , or $ 52.45 per share were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

NOTE 11 – EARNINGS PER SHARE (EPS)

2 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended December 31,

Common shares outstanding 51,386 57,186

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

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

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

residential, industrial and commercial fans;

2 unchanged sentences

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

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

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

Information on Griffon’s reportable segments is as follows:

For the Three Months Ended December 31,

REVENUE 2023 2022

5 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended December 31,

Residential repair and remodel $ 186,541 $ 190,730

13 unchanged sentences

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

For the Three Months Ended June 30,

HBP CPP Total HBP CPP Total

United States $ 382,295 $ 195,132 $ 577,427 $ 384,265 $ 248,068 $ 632,333

Europe — 19,792 19,792 7 31,113 31,120

Canada 16,576 12,955 29,531 15,683 19,592 35,275

Australia — 49,548 49,548 — 55,142 55,142

All other countries 2,271 4,861 7,132 5,590 8,719 14,309

Consolidated revenue $ 401,142 $ 282,288 $ 683,430 $ 405,545 $ 362,634 $ 768,179

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

HBP CPP Total HBP CPP Total

5 unchanged sentences

Consolidated revenue $ 395,791 $ 247,362 $ 643,153 $ 396,573 $ 252,811 $ 649,384

Griffon evaluates performance and allocates resources based on segment adjusted EBITDA and adjusted EBITDA, non-GAAP measures, which is defined as income before taxes from continuing operations, excluding interest income and expense, depreciation and amortization, strategic review charges, non-cash impairment charges, restructuring charges, gain/loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable.

Griffon evaluates performance and allocates resources based on segment adjusted EBITDA and adjusted EBITDA, non-GAAP measures, which is defined as income before taxes, excluding interest income and expense, depreciation and amortization, strategic review charges, non-cash impairment charges, restructuring charges, gain/loss from debt extinguishment and acquisition related expenses, as well as other items that may affect comparability, as applicable.

Segment adjusted EBITDA also excludes unallocated amounts, mainly corporate overhead.

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

The following table provides a reconciliation of segment and adjusted EBITDA to income before taxes from continuing operations:

The following table provides a reconciliation of segment and adjusted EBITDA to income before taxes:

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Segment adjusted EBITDA:

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Depreciation and amortization ( 14,823 ) ( 17,113 )

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

Restructuring charges ( 12,400 ) —

Gain on sale of building 547 10,852

1 unchanged sentence

Proxy expenses — ( 1,503 )

Acquisition costs — — — ( 9,303 )

Restructuring charges ( 3,862 ) ( 5,909 ) ( 82,196 ) ( 12,391 )

Intangible asset impairment — — ( 100,000 ) —

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

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

Income before taxes from continuing operations $ 78,453 $ 76,050 $ 56,314 $ 182,765

Income before taxes $ 60,142 $ 68,020

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

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

For the Three Months Ended December 31,

DEPRECIATION and AMORTIZATION 2023 2022

13 unchanged sentences

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

ASSETS At June 30, 2023 At September 30, 2022

ASSETS At December 31, 2023 At September 30, 2023

Segment assets:

1 unchanged sentence

Consumer and Professional Products (1)

1,573,506 1,579,588

Total segment assets 2,267,657 2,283,249

Corporate 120,534 130,339

Total continuing assets 2,566,090 2,810,699

Total assets 2,388,191 2,413,588

Discontinued operations 5,122 5,291

Consolidated total $ 2,393,313 $ 2,418,879

___________________

(1) In connection with the expansion of CPP's global sourcing strategy, certain owned manufacturing locations which ceased operations have met the criteria to be classified as held for sale as of December 31, 2023.

The net book value of these properties as of December 31, 2023 totaled $ 15,010 .

NOTE 13 – EMPLOYEE BENEFIT PLANS

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

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

2023 2022 2023 2022

Three Months Ended December 31,

Interest cost $ 1,888 $ 1,825

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Recognized actuarial loss 689 944

Net periodic expense (income) $ 217 $ ( 1,118 ) $ 650 $ ( 3,145 )

Net periodic expense $ 34 $ 216

NOTE 14 – RECENT ACCOUNTING PRONOUNCEMENTS

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

2021-08, Business Combinations (Topic 805);

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

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

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

Under current U.S.

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

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

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

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

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No.

2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.

This standard expands disclosures regarding a public entity’s reportable segments and requires additional information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

The standard does not change the definition of operating segments.

This standard is effective for the Company beginning with our fiscal year 2025, with early adoption permitted.

The Company is currently evaluating the potential changes to its reportable segment disclosures and related impact on its business and financial reporting processes and information technology systems.

The Company does not expect the adoption of this standard to have an impact on its financial position, results of operations, or cash flows.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosure.

The standard requires significant additional disclosures focused on income taxes paid and the rate reconciliation table.

Specifically, the amendments in the standard require the Company to disclose disaggregated:

(1) income taxes paid by federal, state, and foreign taxes on both an interim and annual basis, (2) pre-tax income between domestic and foreign, and (3) income tax expense by federal, state and foreign tax expense.

The standard also requires the Company to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

This standard is effective for the Company beginning with our fiscal year 2026, with retrospective application permitted.

The Company is currently evaluating the potential changes to its income tax disclosures and related impact on its financial reporting processes

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

and information technology systems.

The Company does not expect the adoption of this standard to have an impact on its financial position, results of operations, or cash flows.

NOTE 15 – DISCONTINUED OPERATIONS

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

On June 27, 2022, Griffon completed the sale of Telephonics to TTM for $ 330,000 in cash, excluding $ 2,568 for post-closing working capital adjustments.

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

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

Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component of an entity meets the criteria in paragraph 205-20-45-10.

In the period in which the component meets held-for-sale or discontinued operations criteria, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations.

At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.

Defense Electronics (DE or Telephonics)

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

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

Revenue $ 50,795 $ 161,061

Cost of goods and services 39,059 125,208

Gross profit 11,736 35,853

Selling, general and administrative expenses 6,114 26,423

Income from discontinued operations 5,622 9,430

Other income (expense):

Interest income, net — 2

Gain on sale of business 108,949 108,949

Other, net ( 1,114 ) ( 604 )

Total other income (expense) 107,835 108,347

Income from discontinued operations before taxes $ 113,457 $ 117,777

Provision for income taxes 25,952 20,149

Income from discontinued operations $ 87,505 $ 97,628

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

At June 30, 2023 At September 30, 2022

At December 31, 2023 and September 30, 2023, Griffon’s liabilities for discontinued operations primarily relate to insurance claims, income taxes, product liability, warranty and environmental reserves total $ 8,703 and $ 11,798 , respectively.

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

At December 31, 2023 At September 30, 2023

Assets of discontinued operations:

6 unchanged sentences

Total liabilities of discontinued operations $ 8,703 $ 11,798

At June 30, 2023 and September 30, 2022, Griffon's discontinued assets and liabilities includes the Company's obligation of $ 4,553 and $ 8,846 , respectively, in connection with the sale of Telephonics primarily related to certain customary post-closing adjustments, primarily working capital and stay bonuses.

At June 30, 2023 and September 30, 2022, Griffon’s liabilities for Installations Services and other discontinued operations primarily relate to insurance claims, income taxes, product liability, warranty and environmental reserves total $ 8,357 and $ 8,072 , respectively.

There was no reported revenue in the nine ended June 30, 2023 and 2022 for Installations Services and other discontinued operations.

There was no reported revenues or costs in the three months ended December 31, 2023 and 2022 for discontinued operations.

NOTE 16 – 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.

In response to changing market conditions, Griffon announced in May 2023 that CPP is expanding its global sourcing strategy to include long handled tools, material handling, and wood storage and organization product lines.

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

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

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

The affected U.S.

locations will include Camp Hill and Harrisburg, PA;

Grantsville, MD;

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

Operations have ceased at Camp Hill and Harrisburg, PA;

Fairfield, IA;

and four wood mills.

The final facility, in Grantsville, MD, is expected to close by March 2024.

The closed locations, totaling a net book value of $ 15,010 , have met the held for sale criteria and have been classified as such on our Balance Sheet as of December 31, 2023.

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.

1 unchanged sentence

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

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

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

In the quarter ended December 31, 2023, CPP incurred pre-tax restructuring and related exit costs approximating $ 12,400 .

During the quarter ended December 31, 2023, cash charges totaled $ 3,918 and non-cash, asset-related charges totaled $ 8,482 .

The cash charges included $ 1,847 for one-time termination benefits and other personnel-related costs and $ 2,071 for facility exit costs.

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

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

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

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

The cost to implement this new business platform, over the duration of the project, included one-time charges of approximately $ 51,869 and capital investments of approximately $ 15,000 ,

Non-cash charges of $ 8,482 were recorded to adjust inventory to net realizable value.

GRIFFON CORPORATION AND SUBSIDIARIES

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

net of future proceeds from the sale of exited facilities.

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

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

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

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

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

the cash charges included $ 3,751 for one-time termination benefits and other personnel-related costs and $ 6,146 for facility exit costs.

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

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

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Cost of goods and services $ 11,646

1 unchanged sentence

Total restructuring charges $ 12,400

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Personnel related costs $ 1,847

2 unchanged sentences

Total $ 12,400

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following tables summarizes the accrued liabilities of the Company's restructuring actions for the nine months ended June 30, 2023 and 2022:

Cash Charges Non-Cash

Personnel related costs Facilities &

Exit Costs Facility and Other Costs (1)

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

Q1 Restructuring charges 260 1,167 289 1,716

Q1 Cash payments ( 275 ) ( 1,167 ) — ( 1,442 )

Q1 Non-cash charges — — ( 289 ) ( 289 )

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

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

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

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

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

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

Q3 Cash payments ( 1,619 ) ( 3,857 ) — ( 5,476 )

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

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

___________________

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

The following tables summarizes the accrued liabilities of the Company's restructuring actions for the three months ended December 31, 2023:

Cash Charges Non-Cash

2 unchanged sentences

Accrued liability at September 30, 2023 $ 14,107 $ 5,551 $ — $ 19,658

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

Restructuring charges 1,847 2,071 8,482 12,400

Cash payments ( 7,215 ) ( 3,362 ) — ( 10,577 )

Non-cash charges — — ( 8,482 ) ( 8,482 )

Accrued liability at December 31, 2023 $ 8,739 $ 4,260 $ — $ 12,999

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

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

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

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

Q3 Restructuring charges 2,234 1,628 — 3,862

Q3 Cash payments ( 579 ) ( 4,245 ) — ( 4,824 )

Accrued liability at June 30, 2023 $ 9,773 $ 6,837 $ — $ 16,610

___________________

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

(1) Non-cash charges in Facility and Other Costs represent non-cash impairment charges to adjust inventory to net realizable value.

NOTE 17 – OTHER INCOME (EXPENSE)

For the quarters ended December 31, 2023 and 2022, Other income (expense) of $ 632 and $ 607 , respectively, includes $ 13 and $ 67 , respectively, of net currency exchange gains in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan expense of $ 34 and $ 216 , respectively, and net investment income of $ 56 and $ 33 , respectively.

Other income (expense) also includes rental income of $ 0 and $ 212 and royalty income of $ 592 and $ 549 for the three months ended December 31, 2023 and 2022, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

NOTE 18 – OTHER INCOME (EXPENSE)

For the quarters ended June 30, 2023 and 2022, Other income (expense) of $ 1,475 and $ 2,084 , respectively, includes $ 590 and $ 265 , respectively, of net currency exchange gains in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income (expense) of $( 217 ) and $ 1,118 , respectively, and $ 336 and $( 91 ), respectively, of net investment income (loss).

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

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

For the nine months ended June 30, 2023 and 2022, Other income (expense) of $ 2,375 and $ 4,528 , respectively, includes $ 492 and $( 297 ), respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries, net periodic benefit plan income (loss) of $( 650 ) and $ 3,145 , respectively, as well as $ 444 and $( 328 ), respectively, of net investment income (loss).

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

NOTE 18 – WARRANTY LIABILITY

CPP and HBP offer warranties against product defects for periods generally ranging from one to ten years , with limited lifetime warranties on certain door and fan models.

Typical warranties require CPP and HBP to repair or replace the defective products during the warranty period at no cost to the customer.

HBP and CPP offer warranties against product defects for periods generally ranging from one to ten years , with limited lifetime warranties on certain door and fan models.

Typical warranties require HBP and CPP to repair or replace the defective products during the warranty period at no cost to the customer.

At the time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical experience, and periodically assesses its warranty obligations and adjusts the liability as necessary.

2 unchanged sentences

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

The current portion of warranty was $ 21,698 as of June 30, 2023 and $ 16,786 as of September 30, 2022.

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

Changes in Griffon’s warranty liability for the three and nine months ended June 30, 2023 and 2022 were as follows:

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

2023 2022 2023 2022

The current portion of warranty was $ 15,461 as of December 31, 2023 and $ 20,781 as of September 30, 2023.

The long-term warranty liability was $ 1,239 at both December 31, 2023 and September 30, 2023.

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

Three Months Ended December 31,

Balance, beginning of period $ 20,781 $ 16,786

1 unchanged sentence

Actual warranty costs incurred ( 6,260 ) ( 3,754 )

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

Balance, end of period $ 15,461 $ 17,699

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 19 – OTHER COMPREHENSIVE INCOME (LOSS)

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

For the Three Months Ended June 30,

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

Foreign currency translation adjustments $ 2,309 $ — $ 2,309 $ ( 17,823 ) $ — $ ( 17,823 )

Pension and other defined benefit plans 943 ( 196 ) 747 1,511 ( 315 ) 1,196

Cash flow hedges ( 3,916 ) 1,175 ( 2,741 ) 3,500 ( 1,050 ) 2,450

Total other comprehensive income (loss) $ ( 664 ) $ 979 $ 315 $ ( 12,812 ) $ ( 1,365 ) $ ( 14,177 )

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

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

4 unchanged sentences

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

At June 30, 2023 At September 30, 2022

At December 31, 2023 At September 30, 2023

Foreign currency translation adjustments $ ( 38,485 ) $ ( 48,723 )

Pension and other defined benefit plans ( 20,133 ) ( 20,665 )

Change in Cash flow hedges ( 57 ) 1,731

Cash flow hedges ( 917 ) ( 622 )

$ ( 59,535 ) $ ( 70,010 )

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

For the Three Months Ended December 31,

Gain (Loss) 2023 2022

1 unchanged sentence

Cash flow hedges ( 111 ) 1,004

Total gain (loss) $ ( 303 ) $ ( 128 ) $ ( 1,179 ) $ 1,099

Total gain (loss) before tax $ ( 800 ) $ 60

Tax benefit (expense) 168 ( 13 )

Total $ ( 239 ) $ ( 101 ) $ ( 931 ) $ 869

Net of tax $ ( 632 ) $ 47

NOTE 20 — LEASES

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

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Balance Sheets.

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

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

15 unchanged sentences

Components of operating lease costs are as follows:

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Fixed $ 11,574 $ 11,294

Variable (a), (b)

2,067 2,742 8,085 6,278

Short-term (b)

2,201 1,741 6,249 4,576

Total $ 15,629 $ 16,270

________________

(a) Primarily relates to common-area maintenance and property taxes.

(b) Not recorded on the balance sheet.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information were as follows:

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

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

2 unchanged sentences

Total $ 11,186 $ 10,367

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

Operating Leases:

7 unchanged sentences

Property, plant and equipment, net (1)

$ 12,340 $ 13,696

Lease Liabilities:

2 unchanged sentences

Total financing lease liabilities $ 362 $ 464

(1) Finance lease assets are recorded net of accumulated depreciation of $ 6,528 and $ 4,972 as of June 30, 2023 and September 30, 2022, respectively.

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 a five-year renewal option.

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

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

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

Griffon exercised the one dollar buyout option in November 2021.

(1) Finance lease assets are recorded net of accumulated depreciation of $ 1,645 and $ 6,769 as of December 31, 2023 and September 30, 2023, respectively.

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.

The remaining lease liability balance relates to finance equipment leases.

The aggregate future maturities of lease payments for operating leases and finance leases as of June 30, 2023 are as follows (in thousands):

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Operating Leases Finance Leases

$ 10,405 $ 660

2024(a) $ 34,061 $ 187

2025 39,247 125

7 unchanged sentences

Present value of lease liabilities $ 186,418 $ 362

(a) Excluding the nine months ended June 30, 2023.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Average lease terms and discount rates at June 30, 2023 were as follows:

(a) Excluding the quarter ended December 31, 2023.

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

Weighted-average remaining lease term (years):

18 unchanged sentences

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Memphis, TN site.

10 unchanged sentences

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

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

7 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements