GRIFFON CORP 10-K

Item 8. Financial Statements and Supplementary Data The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP (PCAOB ID 248 ) are included herein: ▪ Report of Independent Registered Public Accounting Firm. ▪ Consolidated Balance Sheets at September 30, 2024 and 2023. ▪ Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended September 30, 2024, 2023 and 2022. ▪ Consolidated Statements of Cash Flows for the years ended September 30, 2024, 2023 and 2022. ▪ Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2024, 2023 and 2022. ▪ Notes to Consolidated Financial Statements. ▪ Schedule II – Valuation and Qualifying Account. 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Griffon Corporation Opinions on the financial statements and internal control over financial reporting We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2024 and 2023, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2024, and the related notes and financial statement schedule included under Item 15(a)(2) (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. Basis for opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 47 Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. CPP Goodwill and Indefinite-Lived Intangible Assets Impairment Testing As described further in notes 1 and 7 to the consolidated financial statements, the Company tests goodwill and indefinite-lived intangible assets for impairment at least annually in the fourth quarter, and more frequently whenever events or circumstances change that would more likely than not reduce the fair value below the carrying amount. The Company performed its annual impairment testing of goodwill and indefinite-lived intangible assets as of September 30, 2024. A quantitative assessment of the goodwill and indefinite-lived intangible assets was performed for the Consumer and Professional Products ("CPP") reporting units. The CPP reporting units' goodwill was tested for impairment by comparing the estimated fair value of the reporting units to their respective carrying values. The estimated fair value of the CPP reporting units was determined using a combination of the income-based and market-based valuation methodologies, which include the present value of expected future cash flows and the use of market assumptions specific to the reporting units. The Company used prospective financial information to which discount rates were applied to calculate the estimated fair value. Similarly to goodwill, CPP's indefinite-lived intangible assets were tested for impairment by comparing the estimated fair value of the indefinite-lived intangible assets to their carrying value using a relief from royalty valuation 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 identified the Company's annual impairment testing of the CPP reporting units’ goodwill and certain indefinite-lived intangible assets as a critical audit matter. The principal considerations for our determination that the CPP annual impairment testing is a critical audit matter are as follows: The determination of the fair value of reporting units and indefinite-lived intangible assets require management to make significant estimates and assumptions related to forecasts of future cash flows, such as revenue growth rates, discount rates, weighted average cost of capital, and specifically for indefinite-lived intangibles, royalty rates. This requires management to evaluate historical results and expectations of future operating performance based on relevant information available to them regarding expectations of industry performance, as well as expectations for entity-specific performance. In addition, determining the discount rates requires management to evaluate the appropriate risk premium based on their judgment of industry and entity-specific risks. Similarly, determining the royalty rates requires management to evaluate hypothetical royalty payments that are saved by owning the asset rather than licensing it. As disclosed by management, changes in these assumptions could have a significant impact on the fair value of the reporting units and indefinite-lived intangible assets. In turn, auditing these judgments and assumptions requires a high degree of auditor judgment. Our audit procedures related to the CPP quantitative impairment testing included the following: We tested the design and operating effectiveness of controls relating to the impairment testing, including the Company’s ability to develop the estimates utilized in calculating the fair value of the CPP reporting units and certain indefinite-lived intangible assets. Such estimates included revenue growth rates, discount rates, weighted average cost of capital and specifically for indefinite-lived intangible assets, royalty rates. With the assistance of valuation specialists, we evaluated the appropriateness of the valuation methodologies utilized and assessed the appropriateness of inputs utilized. We also evaluated the qualifications of those responsible for preparing the calculations of fair values. We tested key inputs, significant judgments and estimates utilized in performing the annual impairment test, as follows: a) tested revenue growth rates by comparing to historical trends and industry expectations, performed a sensitivity analysis over revenue growth rates and assessed management’s historical ability to accurately forecast; b) tested discount rates by comparing to historical rates and industry expectations, compared rates to market comparable companies, independently calculated discount rates for comparison to those used by management, performed a sensitivity analysis over discount rates, and tested weighted average cost of capital by analyzing the implied discount rate and independently calculated a weighted-average discount rate compared to the rate utilized by management; and c) for indefinite-lived intangible assets, tested royalty rates by comparing to comparable licensing agreements, and performed a sensitivity analysis over royalty rates. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2006. New York, New York November 13, 2024 48 GRIFFON CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) At September 30, 2024 At September 30, 2023 CURRENT ASSETS Cash and equivalents $ 114,438 $ 102,889 Accounts receivable, net of allowances of $ 10,986 and $ 11,264 312,765 312,432 Inventories 425,489 507,130 Prepaid and other current assets 61,604 57,139 Assets held for sale 14,532 — Assets of discontinued operations 648 1,001 Total Current Assets 929,476 980,591 PROPERTY, PLANT AND EQUIPMENT, net 288,297 279,218 OPERATING LEASE RIGHT-OF-USE ASSETS 171,211 169,942 GOODWILL 329,393 327,864 INTANGIBLE ASSETS, net 618,782 635,243 OTHER ASSETS 30,378 21,731 ASSETS OF DISCONTINUED OPERATIONS 3,417 4,290 Total Assets $ 2,370,954 $ 2,418,879 CURRENT LIABILITIES Notes payable and current portion of long-term debt $ 8,155 $ 9,625 Accounts payable 119,354 116,646 Accrued liabilities 181,918 193,098 Current portion of operating lease liabilities 35,065 32,632 Liabilities of discontinued operations 4,498 7,148 Total Current Liabilities 348,990 359,149 LONG-TERM DEBT, net 1,515,897 1,459,904 LONG-TERM OPERATING LEASE LIABILITIES 147,369 147,224 OTHER LIABILITIES 130,540 132,708 LIABILITIES OF DISCONTINUED OPERATIONS 3,270 4,650 Total Liabilities 2,146,066 2,103,635 COMMITMENTS AND CONTINGENCIES - See Note 16 SHAREHOLDERS’ EQUITY Preferred stock, par value $ 0.25 per share, authorized 3,000 shares, no shares issued — — Common stock, par value $ 0.25 per share, authorized 85,000 shares, issued shares of 84,746 in both 2024 and 2023 21,187 21,187 Capital in excess of par value 677,028 662,680 Retained earnings 461,442 281,516 Treasury shares, at cost, 36,443 common shares and 31,684 common shares, respectively ( 876,527 ) ( 577,686 ) Accumulated other comprehensive loss ( 58,024 ) ( 70,010 ) Deferred compensation ( 218 ) ( 2,443 ) Total Shareholders’ Equity 224,888 315,244 Total Liabilities and Shareholders’ Equity $ 2,370,954 $ 2,418,879 The accompanying notes to consolidated financial statements are an integral part of these statements. 49 GRIFFON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share data) Years Ended September 30, 2024 2023 2022 Revenue $ 2,623,520 $ 2,685,183 $ 2,848,488 Cost of goods and services 1,603,585 1,736,362 1,911,602 Gross profit 1,019,935 948,821 936,886 Selling, general and administrative expenses 621,638 642,734 608,926 Goodwill and intangible asset impairments — 109,200 517,027 Total operating expenses 621,638 751,934 1,125,953 Income (loss) from continuing operations 398,297 196,887 ( 189,067 ) Other income (expense) Interest expense ( 104,086 ) ( 101,445 ) ( 84,379 ) Interest income 2,434 2,094 215 Gain (loss) on sale of buildings ( 61 ) 12,655 — Debt extinguishment, net ( 1,700 ) ( 437 ) ( 4,529 ) Other, net 1,766 2,928 6,881 Total other income (expense) ( 101,647 ) ( 84,205 ) ( 81,812 ) Income (loss) before taxes from continuing operations 296,650 112,682 ( 270,879 ) Provision for income taxes 86,753 35,065 16,836 Income (loss) from continuing operations 209,897 77,617 ( 287,715 ) Discontinued operations: Income before tax from discontinued operations — — 116,345 Provision for income taxes — — 20,188 Income from discontinued operations — — 96,157 Net income (loss) $ 209,897 $ 77,617 $ ( 191,558 ) Basic earnings (loss) per common share: Income (loss) from continuing operations $ 4.41 $ 1.49 $ ( 5.57 ) Income from discontinued operations — — 1.86 Basic earnings (loss) per common share $ 4.41 $ 1.49 $ ( 3.71 ) Weighted-average shares outstanding 47,573 52,111 51,672 Diluted earnings (loss) per common share: Income (loss) from continuing operations $ 4.23 $ 1.42 $ ( 5.57 ) Income from discontinued operations — — 1.86 Diluted earnings (loss) per common share $ 4.23 $ 1.42 $ ( 3.71 ) Weighted-average shares outstanding 49,668 54,612 51,672 Net income (loss) $ 209,897 $ 77,617 $ ( 191,558 ) Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments 10,137 8,447 ( 37,920 ) Pension and other post retirement plans 1,538 6,634 1,503 Gain (loss) on cash flow hedge 311 ( 2,353 ) ( 344 ) Total other comprehensive income (loss), net of taxes 11,986 12,728 ( 36,761 ) Comprehensive income (loss) $ 221,883 $ 90,345 $ ( 228,319 ) The accompanying notes to consolidated financial statements are an integral part of these statements. 50 GRIFFON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended September 30, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS: Net income (loss) $ 209,897 $ 77,617 $ ( 191,558 ) Net income from discontinued operations — — ( 96,157 ) Income (loss) from continuing operations $ 209,897 $ 77,617 $ ( 287,715 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: Depreciation and amortization 60,704 65,445 64,658 Fair value write-up of acquired inventory sold 491 — 5,401 Stock-based compensation 26,838 41,112 33,135 Goodwill and intangible asset impairments — 109,200 517,027 Asset impairment charges - restructuring 23,763 58,932 4,831 Provision for losses on accounts receivable 636 971 1,416 Amortization of deferred financing costs and debt discounts 4,202 4,232 3,775 Debt extinguishment, net 1,700 437 4,529 Deferred income tax provision (benefit) 3,574 ( 37,795 ) ( 56,706 ) Gain on sale of assets and investments ( 61 ) ( 12,960 ) ( 469 ) Change in assets and liabilities, net of assets and liabilities acquired: (Increase) decrease in accounts receivable 4,243 51,119 ( 20,662 ) (Increase) decrease in inventories 73,582 129,209 ( 106,753 ) (Increase) decrease in prepaid and other assets ( 925 ) 621 ( 20,005 ) Decrease in accounts payable, accrued liabilities and income taxes payable ( 30,732 ) ( 67,843 ) ( 96,372 ) Other changes, net 2,130 11,468 13,150 Net cash provided by operating activities - continuing operations 380,042 431,765 59,240 CASH FLOWS FROM INVESTING ACTIVITIES - CONTINUING OPERATIONS: Acquisition of property, plant and equipment ( 68,399 ) ( 63,604 ) ( 42,488 ) Acquired business, net of cash acquired ( 14,579 ) — ( 851,464 ) Proceeds (payments) from investments — — 14,923 Proceeds (payments) from sale of business, net 3,500 ( 2,568 ) 295,712 Proceeds from sale of property, plant and equipment 14,479 20,961 90 Net cash used in investing activities - continuing operations ( 64,999 ) ( 45,211 ) ( 583,227 ) CASH FLOWS FROM FINANCING ACTIVITIES - CONTINUING OPERATIONS: Dividends paid ( 35,806 ) ( 133,814 ) ( 126,677 ) Purchase of shares for treasury ( 309,916 ) ( 163,970 ) ( 10,886 ) Proceeds from long-term debt 217,000 122,558 1,058,909 Payments of long-term debt ( 168,778 ) ( 221,781 ) ( 511,194 ) Financing costs ( 907 ) ( 3,025 ) ( 17,065 ) Other, net ( 341 ) ( 130 ) 258 Net cash provided by (used in) financing activities - continuing operations ( 298,748 ) ( 400,162 ) 393,345 51 GRIFFON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) CASH FLOWS FROM DISCONTINUED OPERATIONS: Net cash provided by (used in) operating activities ( 2,776 ) ( 2,994 ) 10,198 Net cash used in investing activities — — ( 2,627 ) Net cash provided by (used in) discontinued operations ( 2,776 ) ( 2,994 ) 7,571 Effect of exchange rate changes on cash and equivalents ( 1,970 ) ( 693 ) ( 5,398 ) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 11,549 ( 17,295 ) ( 128,469 ) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 102,889 120,184 248,653 CASH AND EQUIVALENTS AT END OF PERIOD $ 114,438 $ 102,889 $ 120,184 Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 100,676 $ 99,833 $ 78,274 Cash paid for taxes 102,978 70,937 80,264 The accompanying notes to consolidated financial statements are an integral part of these statements. 52 GRIFFON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) COMMON STOCK CAPITAL IN EXCESS OF PAR VALUE RETAINED EARNINGS TREASURY SHARES ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) DEFERRED COMPENSATION Total (in thousands) SHARES PAR VALUE SHARES COST Balance at 9/30/2021 84,375 $ 21,094 $ 602,181 $ 669,998 27,762 $ ( 416,850 ) $ ( 45,977 ) $ ( 23,288 ) $ 807,158 Net loss — — — ( 191,558 ) — — — — ( 191,558 ) Dividends — — — ( 134,380 ) — — — — ( 134,380 ) Shares withheld on employee taxes on vested equity awards — — — — 422 ( 10,886 ) — — ( 10,886 ) Amortization of deferred compensation — — — — — — — 10,483 10,483 Equity awards granted, net 371 93 ( 7,713 ) — ( 502 ) 7,620 — — — ESOP allocation of common stock — — 15,729 — — — — — 15,729 Stock-based compensation — — 17,785 — — — — — 17,785 Other comprehensive income, net of tax — — — — — — ( 36,761 ) — ( 36,761 ) Balance at 9/30/2022 84,746 $ 21,187 $ 627,982 $ 344,060 27,682 $ ( 420,116 ) $ ( 82,738 ) $ ( 12,805 ) $ 477,570 Net income — — — 77,617 — — — — 77,617 Dividends — — — ( 140,161 ) — — — — ( 140,161 ) Shares withheld on employee taxes on vested equity awards — — — — 366 ( 12,990 ) — — ( 12,990 ) Amortization of deferred compensation — — — — — — — 10,362 10,362 Common stock acquired — — — — 4,143 ( 152,279 ) — — ( 152,279 ) Equity awards granted, net — — ( 7,699 ) — ( 507 ) 7,699 — — — ESOP allocation of common stock — — 21,868 — — — — — 21,868 Stock-based compensation — — 20,529 — — — — — 20,529 Other comprehensive income, net of tax — — — — — — 12,728 — 12,728 Balance at 9/30/2023 84,746 $ 21,187 $ 662,680 $ 281,516 31,684 $ ( 577,686 ) $ ( 70,010 ) $ ( 2,443 ) $ 315,244 Net income — — — 209,897 — — — — 209,897 Dividends — — — ( 29,971 ) — — — — ( 29,971 ) Shares withheld on employee taxes on vested equity awards — — — — 595 ( 34,330 ) — — ( 34,330 ) Amortization of deferred compensation — — — — — — — 2,225 2,225 Common stock acquired including excise taxes — — — — 4,772 ( 277,896 ) — — ( 277,896 ) Equity awards granted, net — — ( 12,875 ) — ( 608 ) 12,875 — — — ESOP allocation of common stock including excise taxes — — 8,918 — — 510 — — 9,428 Stock-based compensation — — 18,305 — — — — — 18,305 Other comprehensive income, net of tax — — — — — — 11,986 — 11,986 Balance at 9/30/2024 84,746 $ 21,187 $ 677,028 $ 461,442 36,443 $ ( 876,527 ) $ ( 58,024 ) $ ( 218 ) $ 224,888 The accompanying notes to consolidated financial statements are an integral part of these statements. 53 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (US dollars and non US currencies in thousands, except per share data) (Unless otherwise indicated, all references to years or year-end refer to Griffon’s fiscal period ending September 30, NOTE 1 — DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of business Griffon Corporation (the “Company”, “Griffon”, "we" or "us") is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries with acquisition and growth opportunities as well as divestitures. As long-term investors, we intend to continue to grow and strengthen our existing businesses, and to diversify further through investments in our businesses and acquisitions. The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y. and is listed on the New York Stock Exchange (NYSE:GFF). Griffon announced in May 2023 that CPP was expanding its global sourcing strategy to include long handled tools, material handling, and wood storage and organization product lines for the U.S. market. This initiative was successfully completed as of September 30, 2024, ahead of the previously announced date of December 31, 2024. Refer to Note 10 - Restructuring Charges for further details. On July 1, 2024, Griffon announced that its subsidiary, The AMES Companies, Inc., ("AMES") expanded the scope of its Australian operations by acquiring substantially all the assets of Pope, a leading Australian provider of residential watering products, from The Toro Company (NYSE:TTC) for a purchase price of approximately AUD 21,800 (approximately $ 14,500 ) in cash. This is CPP's seventh acquisition in Australia since 2013, and further expands AMES's product portfolio in the Australian market. On June 27, 2022, we completed the sale of our Defense Electronics ("DE") segment, which consisted of our Telephonics Corporation ("Telephonics") subsidiary, for $ 330,000 in cash, excluding customary post-closing adjustments. As such, the results of operations of our Telephonics business is classified as a discontinued operation in the Consolidated Statements of Operations for all periods presented and the related assets and liabilities have been classified as assets and liabilities of the discontinued operation in the Consolidated Balance Sheets. Accordingly, all references made to results and information in this Annual Report on Form 10-K are to Griffon's continuing operations, unless noted otherwise. On January 24, 2022, Griffon acquired Hunter Fan Company (“Hunter”), a market leader in residential ceiling, commercial, and industrial fans, from MidOcean Partners (“MidOcean”) for a contractual purchase price of $ 845,000 . Hunter, part of our CPP segment, complements and diversifies our portfolio of leading consumer brands and products. Griffon currently conducts its operations through two reportable segments: • Home and Building Products ("HBP") conducts its operations through Clopay Corporation ("Clopay"). Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands. • Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid. 54 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Consolidation The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations of acquired businesses are included from the dates of acquisitions. Earnings per share Due to rounding, the sum of earnings per share may not equal earnings per share of Net income. Discontinued operations As of September 30, 2024 and 2023, assets and liabilities of discontinued operations was associated with Installations Services and other discontinued activities, which primarily consisted of insurance claims, product liability, warranty and environmental reserves. For the year ended September 30, 2022, discontinued operations included the Telephonics business in our Consolidated Statements of Operations and Comprehensive Income (Loss), which has been segregated from Griffon's continuing operations. There was no reported revenue for the years ended September 30, 2024, 2023 and 2022 for Installations Services and other discontinued operations. See Note 8, Discontinued Operations. Reclassifications Certain amounts in prior years have been reclassified to conform to the current year presentation. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include expected loss allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, assumptions associated with pension benefit obligations and income or expenses, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, assumption associated with stock based compensation valuation, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets and liabilities of discontinued operations, assumptions associated with valuation of acquired assets and assumed liabilities of acquired companies and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates. Cash and equivalents Griffon considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Cash equivalents primarily consist of overnight commercial paper, highly-rated liquid money market funds backed by U.S. Treasury securities and U.S. Agency securities. Griffon had cash in non-U.S. bank accounts of approximately $ 46,100 and $ 45,500 at September 30, 2024 and 2023, respectively. Substantially all U.S. cash and equivalents are in excess of FDIC insured limits. Griffon regularly evaluates the financial stability of all institutions and funds that hold its cash and equivalents. Fair value of financial instruments The carrying values of cash and cash equivalents, accounts receivable, accounts and notes payable and revolving credit and Term Loan B debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit debt is based upon current market rates. The fair value hierarchy, as outlined in the applicable accounting guidance, establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A 55 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows: • Level 1 inputs are measured and recorded at fair value based upon quoted prices in active markets for identical assets. • Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities. • Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair values of Griffon’s 2028 Senior Notes and Term Loan B facility approximated $ 957,716 and $ 457,571 , respectively, on September 30, 2024. Fair values were based upon quoted market prices (level 1 inputs). Insurance contracts with a value of $ 4,819 at September 30, 2024 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 are included in Other current 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 effect of changes in foreign currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in USD as discussed below. At September 30, 2024 and 2023, Griffon had $ 67,500 and $ 11,000 of Australian dollar contracts at a weighted average rate of $ 1.47 and $ 1.45 , respectively, which qualified for hedge accounting. These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Other comprehensive income (loss) and Prepaid and other current assets, or Accrued liabilities, until settlement (level 2 inputs). Upon settlement, gains and losses were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS"). Accumulated Other Comprehensive Income (AOCI) included deferred losses of $ 660 ($ 462 , net of tax) at September 30, 2024 and deferred gains of $ 765 ($ 536 , net of tax) at September 30, 2023. Upon settlement, gains of $ 1,120 , $ 3,991 and $ 5,477 were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in COGS during 2024, 2023 and 2022, respectively. All contracts expire in 30 days to 240 days . At September 30, 2024 and 2023, Griffon had $ 20,500 and $ 52,000 of Chinese Yuan contracts at a weighted average rate of $ 7.11 and $ 7.00 , respectively, which qualified for hedge accounting. 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 (level 2 inputs). Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in COGS. AOCI included deferred gains of $ 410 ($ 300 , net of tax) and deferred losses of $ 1,721 ($ 1,257 , net of tax) at September 30, 2024 and 2023, respectively. Upon settlement, losses of $ 1,936 , $ 2,313 and $ 736 were recorded in COGS during 2024, 2023 and 2022, respectively. All contracts expire in 9 to 184 days. At September 30, 2024 and 2023, Griffon had $ 13,497 and $ 3,700 , respectively, of Canadian dollar contracts at a weighted average rate of $ 1.35 and $ 1.36 , respectively. These contracts, which protect Canadian operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting and fair value losses of $ 67 and fair value gains of $ 60 were recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the years ended September 30, 2024 and 2023, respectively. Realized gains (losses) of $ 98 , $ 336 and $ 247 were recorded in Other income during 2024, 2023 and 2022, respectively. All contracts expire in 1 to 359 days . 56 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Pension plan assets with a fair value of $ 158,705 at September 30, 2024, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs), quoted market prices for similar assets (level 2 inputs) and fair value assumptions for unobservable inputs in which little or no market data exists (level 3). The Company accounts for acquisitions under the acquisition method, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition using a method substantially similar to the goodwill impairment test methodology (level 3 inputs). The operating results of the acquired companies are included in Griffon’s consolidated financial statements from the date of acquisition in each instance. Non-U.S. currency translation Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have been translated at year-end exchange rates and profit and loss accounts have been translated using weighted average exchange rates during the applicable fiscal year. Adjustments resulting from currency translation are recorded in AOCI as cumulative translation adjustments. The Company recognized cumulative translation gains during 2024 and 2023 of $ 10,137 and $ 8,447 , respectively. As of September 30, 2024 and 2023, the cumulative foreign currency translation recorded in AOCI was a loss of $ 38,586 and $ 48,723 , respectively. Assets and liabilities of an entity that are denominated in currencies other than that entity’s functional currency are re-measured into the functional currency using period end exchange rates, or historical rates where applicable to certain balances. Gains and losses arising on remeasurements are recorded within the Consolidated Statement of Operations and Comprehensive Income as a component of Other income (expense). Revenue recognition The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting. A contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and with respect to which payment terms are identified and collectability is probable. Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). The Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components, and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment. Refer to Note 2 - Revenue for more detail. Accounts receivable, expected loss allowance for doubtful accounts and concentrations of credit risk Accounts receivable is composed principally of trade accounts receivable, that arise from the sale of goods or services on account, and is stated at historical cost. A substantial portion of Griffon’s trade receivables are from Home Depot, whose financial condition is dependent on the construction and related retail sectors of the economy. As a percentage of consolidated accounts receivable, Home Depot was 12 %. Griffon performs continuing evaluations of the financial condition of its customers, and although Griffon generally does not require collateral, letters of credit may be required from customers in certain circumstances. Trade receivables are recorded at the stated amount, less expected loss allowance for doubtful accounts and, when appropriate, for customer program reserves and cash discounts. The expected loss allowance represents estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency). The expected loss allowance for doubtful accounts includes amounts for certain customers where a risk of default has been specifically identified, as well as an amount for customer defaults based on a formula when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers. The provision related to the expected loss allowance for doubtful accounts is recorded in Selling, general and administrative ("SG&A") expenses. The Company writes-off accounts receivable when they are deemed to be uncollectible. 57 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Customer program reserves and cash discounts are netted against accounts receivable when it is customer practice to reduce invoices for these amounts. The amounts netted against accounts receivable in 2024 and 2023 were $ 64,211 and $ 106,166 , respectively. All accounts receivable amounts are expected to be collected in less than one year. The Company does not currently have customers or contracts that prescribe specific retainage provisions. Inventories Inventories, stated at the lower of cost (first-in, first-out or average) or net realizable value, include material, labor and manufacturing overhead costs. Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated. In general, HBP produces residential and commercial sectional garage doors, commercial rolling steel door and grille products, and CPP produces long-handled tools and landscaping products, and storage and organizational products, both in response to orders from customers of retailers and dealers or based on expected orders, as applicable. Long-lived assets, including definite intangible assets Property, plant and equipment includes the historical cost of land, buildings, equipment and significant improvements to existing plant and equipment or, in the case of acquisitions, a fair market value appraisal of such assets completed at the time of acquisition. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the gain or loss is recognized. Depreciation expense, which includes amortization of assets under capital leases, was $ 37,901 , $ 43,056 and $ 46,443 in 2024, 2023 and 2022, respectively, and was calculated on a straight-line basis over the estimated useful lives of the assets. Depreciation included in SG&A expenses was $ 16,510 , $ 17,598 and $ 16,683 in 2024, 2023 and 2022, respectively. The remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services. Estimated useful lives for property, plant and equipment are as follows: buildings and building improvements, 25 to 40 years; machinery and equipment, 2 to 15 years; and leasehold improvements, over the term of the lease or life of the improvement, whichever is shorter. Capitalized interest costs included in Property, plant and equipment were $ 2,228 , $ 1,463 and $ 1,739 for the years ended September 30, 2024, 2023 and 2022, respectively. The original cost of fully-depreciated property, plant and equipment remaining in use at September 30, 2024 was approximately $ 232,857 . Long-lived assets, including customer relationships and software, and tangible assets, primarily property, plant and equipment, are amortized over their expected useful lives, generally eight to twenty-five years , and involves significant assumptions and estimates. We assess the recoverability of the carrying amount of our long-lived assets, including amortizable intangible assets, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. We evaluate the recoverability of such assets based on the expectations of undiscounted cash flows attributable to the asset group. If the sum of the expected future undiscounted cash flows are less than the carrying amount of the asset group, a loss would be recognized for the difference between the fair value and the carrying amount. For the fiscal years ended September 30, 2024 and 2023, we tested long-lived definite intangible and tangible assets for impairment by comparing estimated future undiscounted cash flows of each CPP asset group to the carrying amount of the asset group and determined that an impairment did not exist. No event or indicator of impairment existed for the HBP assets groups. Goodwill and indefinite-lived intangibles Goodwill represents the excess of the cost of net assets acquired in business combinations over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. 58 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) We test goodwill and indefinite-lived intangibles for impairment at least annually in the fourth quarter, and more frequently whenever events or circumstances change that would more likely than not reduce the fair value below the carrying amount. Such events or changes in circumstance include significant deterioration in overall economic conditions, changes in the business climate in which our reporting units operate, a decline in our market capitalization, operating performance indicators, when some portion of a reporting unit is disposed of or classified as held for sale, or when a change in the composition of reporting units occurs for other reasons, such as a change in operating segments. To test goodwill and indefinite-lived intangible assets for impairment, we may perform both a qualitative assessment and quantitative assessment. If we elect to perform a qualitative assessment, we consider operating results as well as circumstances impacting the operations or cash flows of the reporting unit or indefinite-lived intangible assets, including macroeconomic conditions, industry and market conditions and reporting unit events and circumstances. For the quantitative test, the assessment is based on both an income-based and market-based valuation approach. If it is determined that an impairment exists, we recognize an impairment loss for the amount by which the carrying amount of the reporting unit or indefinite-lived intangible asset exceeds its estimated fair value. Fair value estimates are based on assumptions believed to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ materially from those estimates. Any changes in key assumptions or management judgment with respect to a reporting unit or its prospects, which may result from a decline in Griffon’s stock price, a change in market conditions, market trends, interest rates or other factors outside of Griffon’s control, or significant underperformance relative to historical or projected future operating results, could result in a significantly different estimate of the fair value of Griffon’s reporting units, which could result in an impairment charge in the future. In connection with the preparation of our financial statements for the fiscal years ended September 30, 2024, 2023 and 2022, Griffon performed its annual impairment testing of its goodwill and indefinite-lived intangibles. Griffon performed a quantitative assessment of the CPP reporting units and indefinite-lived intangible assets. The assessments in both fiscal 2024 and 2023 did not result in an impairment to goodwill, however, for the fiscal 2022, the impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $ 342,027 to the CPP reporting units. For the HBP reporting unit, we performed a qualitative assessment and determined that indicators that fair value was less than the carrying amount were not present in fiscal years 2024, 2023 and 2022. During the years ended September 30, 2024, 2023 and 2022, the Company compared the estimated fair values of its CPP indefinite-lived intangibles to their carrying amounts 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. The Company then compared the estimated fair values of each trademark to their carrying amounts. For the year ended September 30, 2024, the impairment test did not result in impairment charges to CPP's gross carrying amount of intangible assets; however, for the years ended September 30, 2023 and 2022, the impairment tests resulted in pre-tax non-cash impairment charges of $ 109,200 and $ 175,000 , respectively, to the gross carrying amount of trademarks in the CPP segment. Griffon performed qualitative assessments for the HBP indefinite-lived intangibles and determined that indicators that fair value was less than the carrying amount were not present in fiscal 2024, 2023 and 2022. Leases ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company determines if an arrangement is a lease at inception. The ROU assets and short and long-term liabilities associated with our operating leases are shown as separate line items on our Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, net, other accrued liabilities, and other non-current liabilities. For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability. For leases with a lease term of 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Consolidated Balance Sheets. Variable lease cost for both operating and finance leases, if any, is recognized as incurred. The Company has lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance). 59 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Income taxes We are subject to Federal, state and local income taxes in the U.S. and in various taxing jurisdictions outside the U.S. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Both positive and negative evidence are considered in forming our judgment as to whether a valuation allowance is appropriate, and more weight is given to evidence that can be objectively verified. Valuation allowances are reassessed whenever there are changes in circumstances that may cause a change in judgment. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition of tax positions taken or expected to be taken in a tax return. We record, as needed, a liability for the difference between the benefit recognized for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Interest and penalties recognized on the liability for unrecognized tax benefits is recorded as income tax expense. Research and development costs, shipping and handling costs and advertising costs Research and development costs are charged to SG&A expense as incurred and amounted to approximately $ 19,400 in 2024, $ 18,100 in 2023 and $ 15,600 in 2022. Total shipping and handling costs included in both COGS and SG&A were $ 125,120 in 2024, $ 123,100 in 2023 and $ 130,830 in 2022, of which $ 68,400 in 2024, $ 67,300 in 2023 and $ 69,000 in 2022 were included in SG&A. Advertising costs, which are expensed as incurred in SG&A, was $ 25,600 in 2024, $ 28,400 in 2023 and $ 26,700 in 2022. Risk, retention and insurance Griffon’s property and casualty insurance programs contain various deductibles that, based on Griffon’s experience, are reasonable and customary for a company of its size and risk profile. Griffon generally maintains deductibles for claims and liabilities related primarily to workers’ compensation, general, product and automobile liability as well as property damage and business interruption losses resulting from certain events. Griffon does not consider any of the deductibles to represent a material risk to Griffon. Griffon accrues for claim exposures that are probable of occurrence and can be reasonably estimated. Insurance is maintained to transfer risk beyond the level of self-retention and provides protection on both an individual claim and annual aggregate basis. Pension benefits Griffon sponsors defined and supplemental benefit pension plans for certain retired employees. Annual amounts relating to these plans are recorded based on actuarial projections, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases and turnover rates. Actuarial assumptions used to determine pension liabilities, assets and expense are reviewed annually and modified based on current economic conditions and trends. The expected return on plan assets is determined based on the nature of the plan's investments and expectations for long-term rates of return. The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments, with the appropriate spot rate applicable to the timing of the projected future benefit payments. Assumptions used in determining Griffon’s obligations under the defined benefit pension plans are believed to be reasonable, based on experience and advice from independent actuaries; however, differences in actual experience or changes in assumptions may materially impact Griffon’s financial position or results of operations. All of the defined benefit plans are frozen and have ceased accruing benefits. 60 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) The Company’s non-service cost components of net periodic benefit plan cost was an expense (benefit) of $ 137 , $ 866 and $( 4,256 ) during 2024, 2023, and 2022 respectively. Issued but not yet effective accounting pronouncements In October 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-06, Disclosure Improvements: Amendments - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. The FASB issued the standard to introduce changes to US GAAP that originate in either SEC Regulation S-X or S-K, which are rules about the form and content of financial reports. The provisions of the standard are contingent when the SEC removes the related disclosure provisions from Regulation S-X and S-K. The company does not expect the provisions of the standard to have a material impact on the Company's financial statements and related disclosures. 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 a material 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, (2) continuing operations pre-tax income between domestic and foreign, and (3) continuing operations income tax expense by federal, state and foreign. 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 and information technology systems. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations, or cash flows. NOTE 2 – REVENUE The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting. A contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and with respect to which payment terms are identified and collectability is probable. Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when each performance obligation is satisfied. A majority of the Company’s contracts have a single performance obligation which represents, in most cases, the product being sold to the customer. To a lesser extent, some contracts include multiple performance obligations such as a product, the related installation, and extended warranty services. These contracts require judgment in determining the number of performance obligations. For contracts with multiple performance obligations, judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of contracts, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. The transaction price includes variable consideration, such as discounts and volume rebates, when it is probable that a 61 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) significant reversal of revenue recognized will not occur. Variable consideration is determined using either the expected value or the most likely amount of consideration to be received based on historical experience and the specific facts and circumstances at the time of evaluation. See Note 19 - Reportable Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location. The Company’s performance obligations are recognized at a point in time related to the manufacture and sale of a broad range of products and components and revenue is recognized when title, and risk and rewards of ownership, have transferred to the customer, which is generally upon shipment. A majority of the Company's revenue is short cycle in nature with shipments occurring within one year from order and does not include a material long-term financing component, implicitly or explicitly. Payment terms generally range between 15 to 90 days and vary by the location of the business, the type of products manufactured to be sold and the volume of products sold, among other factors. The Company recognizes revenue from product sales when all factors are met, including when control of a product transfers to the customer upon its shipment, completion of installation, testing, certification or other substantive acceptance required under the contract. Other than standard product warranty provisions, sales arrangements provide for no significant post-shipment obligations on the Company. From time-to-time and for certain customers, rebates and other sales incentives, promotional allowances or discounts are offered, typically related to customer purchase volumes, all of which are fixed or determinable and are classified as a reduction of revenue and recorded at the time of sale. Griffon provides for sales returns and allowances based upon historical returns experience. The Company includes shipping costs billed to customers in revenue and the related shipping costs in either Cost of Goods and Services or Selling, General and Administrative expenses. The majority of the Company’s contracts offer assurance-type warranties in connection with the sale of a product to a customer. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. Payment terms vary depending on the type and location of the customer and the products or services offered. Generally, the period between the time revenue is recognized and the time payment is due is not significant. Shipping and handling charges are not considered a separate performance obligation. Additionally, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (e.g., sales, use, value added, and some excise taxes) are excluded from revenue. NOTE 3 — ACQUISITIONS Griffon continually evaluates potential acquisitions that either 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 July 1, 2024, Griffon announced that its subsidiary, AMES expanded the scope of its Australian operations by acquiring substantially all the assets of Pope, a leading Australian provider of residential watering products, from The Toro Company (NYSE:TTC) for a purchase price of approximately AUD 21,800 (approximately $ 14,500 ) in cash. The purchase price was preliminarily allocated to inventory of AUD 16,581 (approximately $ 11,051 ), goodwill of AUD 2,225 (approximately $ 1,483 ) and acquired intangibles, net of deferred taxes, of AUD 2,940 (approximately $ 1,960 ), which was assigned to the CPP segment, and is not deductible for income tax purposes. 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 Term Loan B facility and a combination of cash on hand and revolver borrowings. Hunter complements and diversifies Griffon's portfolio of leading consumer brands and products. Based on the final purchase price allocation, the goodwill recognized was $ 250,711 , which was assigned to the CPP segment, and is not deductible for income tax purposes. The following unaudited proforma summary from continuing operations presents consolidated information as if the Company acquired Hunter on October 1, 2020: 62 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Proforma For the Year Ended September 30, (unaudited) 2022 Revenue $ 2,938,998 Income (loss) from continuing operations ( 288,062 ) 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, 2020. • 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. The calculation of the final purchase price allocation is as follows: Accounts receivable (1) $ 64,602 Inventories (2) 110,299 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) 139,219 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. 63 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) The amounts assigned to goodwill and major intangible asset classifications for the Hunter acquisition are as follows: 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 years ended September 30, 2024 and 2022, SG&A included acquisition costs of $ 441 and $ 9,303 , respectively. During the year ended September 30, 2023, acquisition related costs were de minimis. NOTE 4 — INVENTORIES The following table details the components of inventory: At September 30, 2024 At September 30, 2023 Raw materials and supplies $ 92,366 $ 127,342 Work in process 13,923 12,070 Finished goods 319,200 367,718 Total $ 425,489 $ 507,130 In connection with the Company's restructuring activities described in Note 10, Restructuring Charges, during the years ended September 30, 2024, and September 30, 2023, CPP recorded inventory impairment charges of $ 23,763 and $ 37,100 , respectively, to adjust inventory to its net realizable value. NOTE 5 — PROPERTY, PLANT AND EQUIPMENT The following table details the components of property, plant and equipment, net: At September 30, 2024 At September 30, 2023 Land, building and building improvements $ 153,076 $ 169,923 Machinery and equipment 472,030 447,972 Leasehold improvements 37,833 33,740 662,939 651,635 Accumulated depreciation and amortization ( 374,642 ) ( 372,417 ) Total $ 288,297 $ 279,218 In connection with the expansion of CPP's global sourcing strategy which has been completed as of September 30, 2024, certain owned manufacturing locations which concluded operations have met the criteria to be classified as held for sale, and the net book value of these properties as of September 30, 2024 totaled $ 14,532 . Except as described in Note 10, Restructuring Charges, no event or indicator of impairment occurred during the years ended September 30, 2024 and September 30, 2023, which would require additional impairment testing of property, plant and equipment. 64 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) NOTE 6 – CREDIT LOSSES The Company is exposed to credit losses primarily through sales of products and services. Trade receivables are recorded at their stated amount, less allowances for credit losses. The Company’s expected loss allowance methodology for trade receivables is primarily based on the aging method of the accounts receivables balances and the financial condition of its customers. The allowances represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency), discounts related to early payment of accounts receivables by customers and estimates for returns. The allowance for doubtful accounts includes amounts for certain customers in which a risk of default has been specifically identified, as well as an amount for customer defaults, based on a formula, when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers. Credit losses are recorded as a reduction of revenue and the provision related to the allowance for doubtful accounts is recorded in SG&A expenses. The Company also considers current and expected future economic and market conditions when determining any estimate of credit losses. Generally, estimates used to determine the allowance are based on assessment of anticipated payment and all other historical, current and future information that is reasonably available. All accounts receivable amounts are expected to be collected in less than one year. Based on a review of the Company's policies and procedures across all segments, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions, Griffon determined that its method to determine credit losses and the amount of its allowances for bad debts is in accordance with this guidance in all material respects. 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: Beginning Balance, October 1, 2022 $ 12,137 Provision for expected credit losses 971 Amounts written off charged against the allowance ( 1,186 ) Other, primarily foreign currency translation ( 658 ) Ending Balance, September 30, 2023 $ 11,264 Provision for expected credit losses 636 Amounts written off charged against the allowance ( 1,325 ) Other, primarily foreign currency translation 411 Ending Balance, September 30, 2024 $ 10,986 65 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) NOTE 7 — GOODWILL AND INTANGIBLES Goodwill at September 30, 2024 and 2023 was $ 329,393 and $ 327,864 , respectively. For the fiscal years ended September 30, 2024, 2023 and 2022, the Company performed a quantitative assessment of the CPP reporting units using both an income-based and market-based approach, which did not result in a goodwill impairment in fiscal 2024 and 2023, however, for the fiscal year ended September 30, 2022, the impairment tests resulted in a pre-tax, non-cash goodwill impairment charge of $ 342,027 to the CPP reporting units. For the HBP reporting unit, we performed a qualitative assessment and determined that indicators that fair value was less than the carrying amount were not present in fiscal years 2024, 2023 and 2022. The following table provides a summary of the carrying value of goodwill by segment as of September 30, 2024, 2023 and 2022. At September 30, 2022 Goodwill from acquisitions (a) At September 30, 2023 Goodwill from acquisitions (b) Foreign currency translation adjustments At September 30, 2024 Consumer and Professional Products $ 144,537 $ ( 7,926 ) $ 136,611 $ 1,483 $ 46 $ 138,140 Home and Building Products 191,253 — 191,253 — — 191,253 Total $ 335,790 $ ( 7,926 ) $ 327,864 $ 1,483 $ 46 $ 329,393 (a) The adjustment to goodwill is in connection with the acquisition of Hunter in 2022. (b) The change in goodwill for the CPP segment relates to the acquisition of Pope in 2024. During the years ended September 30, 2024, 2023 and 2022, the Company compared the estimated fair values of its CPP indefinite-lived intangibles to their carrying amounts 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. The Company then compared the estimated fair values of each trademark to their carrying amounts. For the year ended September 30, 2024, the impairment test did not result in impairment charges to CPP's gross carrying amount of intangible assets; however, for the years ended September 30, 2023 and 2022, the impairment tests resulted in pre-tax non-cash impairment charges of $ 109,200 and $ 175,000 , respectively, to the gross carrying amount of our trademarks in the CPP segment. Griffon performed qualitative assessments for the HBP indefinite-lived intangibles and determined that indicators that fair value was less than the carrying amount were not present during 2024, 2023 and 2022. The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset: At September 30, 2024 At September 30, 2023 Gross Carrying Amount Accumulated Amortization Average Life (Years) Gross Carrying Amount Accumulated Amortization Customer relationships & other (1) $ 450,784 $ 134,296 17 $ 443,164 $ 113,057 Unpatented technology 17,350 6,859 10 15,504 3,815 Total amortizable intangible assets 468,134 141,155 458,668 116,872 Trademarks (1) 291,803 — 293,447 — Total intangible assets $ 759,937 $ 141,155 $ 752,115 $ 116,872 ____________________________ (1) On October 1, 2023, the Company reclassified certain indefinite-lived trademark intangible assets, with a combined carrying value of $ 4,100 , to definite-lived intangible assets. The change resulted from the anticipated future life of these trademarks. We commenced amortizing these assets on a straight-line basis over a five -year useful life . In 2024, the gross carrying amount of intangible assets was impacted by acquired intangibles from the Pope acquisition and $ 5,022 related to foreign currency translation. Amortization expense for intangible assets subject to amortization was $ 22,803 , $ 22,389 and $ 18,215 in 2024, 2023, and 2022, respectively. Amortization expense for each of the next five years and thereafter, based on current intangible balances and classifications, is estimated as follows: 2025 - $ 22,708 ; 2026 - $ 22,107 ; 2027 - $ 22,107 ; 2028 - $ 22,107 and 2029 - $ 22,107 ; thereafter - $ 215,843 . 66 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) NOTE 8 — 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 for $ 330,000 in cash, excluding customary post-closing adjustments, primarily related to working capital. 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) For the year ended September 30, 2022, t he following amounts related to Telephonics have been segregated from Griffon's continuing operations and are reported as discontinued operations: For the Year Ended September 30, 2022 Revenue $ 161,061 Cost of goods and services 125,208 Gross profit 35,853 Selling, general and administrative expenses 26,423 Income from discontinued operations 9,430 Other income (expense) Gain on sale of business 107,517 Interest income, net 2 Other, net ( 604 ) Total other income (expense) 106,915 Income from discontinued operations before tax 116,345 Provision for income taxes 20,188 Income from discontinued operations $ 96,157 For the year ended September 30, 2022, depreciation and amortization was excluded from the 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 for fiscal 2022 would have been approximately $ 7,442 through the date of disposition on June 27, 2022. The following amounts summarize the total assets and liabilities related to 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 Consolidated Balance Sheets: 67 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) At September 30, 2024 At September 30, 2023 Assets of discontinued operations: Prepaid and other current assets $ 648 $ 1,001 Other long-term assets 3,417 4,290 Total assets of discontinued operations $ 4,065 $ 5,291 Liabilities of discontinued operations: Accrued liabilities, current $ 4,498 $ 7,148 Other long-term liabilities 3,270 4,650 Total liabilities of discontinued operations $ 7,768 $ 11,798 At September 30, 2024 and 2023, Griffon’s liabilities for discontinued operations primarily related to insurance claims, income taxes, product liability, warranty claims and environmental reserves totaling $ 7,768 and $ 11,798 , respectively. The decrease in assets and liabilities was primarily associated with insurance claims receivable and payable. Except for revenue from the Telephonics business for the year ended September 30, 2022, as noted above, there was no reported revenue in 2024, 2023 and 2022 for Installations Services and other discontinued operations. NOTE 9 — ACCRUED LIABILITIES The following table details the components of accrued liabilities: At September 30, 2024 At September 30, 2023 Compensation $ 82,413 $ 77,558 Interest 4,532 4,317 Warranties and rebates 16,900 24,294 Insurance 12,535 10,619 Rent, utilities and freight 5,294 6,720 Income and other taxes 17,459 22,954 Marketing and advertising 5,401 7,008 Restructuring 12,998 19,658 Other 24,386 19,970 Total $ 181,918 $ 193,098 NOTE 10 – RESTRUCTURING CHARGES Griffon announced in May 2023 that CPP was expanding its global sourcing strategy to include long handled tools, material handling, and wood storage and organization product lines for the U.S. market. This initiative was successfully completed as of September 30, 2024, ahead of the previously announced date of December 31, 2024. As a result of this global sourcing expansion initiative, manufacturing operations have concluded at four manufacturing sites and four wood mills, resulting in a total facility footprint reduction of approximately 1.2 million square feet, or approximately 15 % of CPP's square footage, and a headcount reduction of approximately 600 . The closed locations, which have a total book value of $ 14,532 , have met the held for sale criteria and have been classified as such on our Consolidated Balance Sheets as of September 30, 2024. The adoption of an asset-light business model for these U.S. products has positioned CPP to better serve customers with a more flexible and cost-effective sourcing model that leverages supplier relationships around the world, and improved its competitive positioning. 68 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) Implementation of this strategy over the duration of the project resulted in charges of $ 133,777 , which included $ 51,082 of cash charges for employee retention and severance, operational transition, and facility and lease exit costs, and $ 82,695 of non-cash charges primarily related to asset write-downs. In addition, there were $ 2,678 of capital investments to effectuate the project. This excludes cash proceeds from the sale of real estate and equipment, which through September 30, 2024 were $ 13,271 , and excludes future proceeds from the sale of remaining real estate and equipment. In the year ended September 30, 2024, CPP incurred pre-tax restructuring and related exit costs approximating $ 41,309 . Cash charges totaled $ 17,546 and non-cash, asset-related charges totaled $ 23,763 ; the cash charges included $ 5,856 for one-time termination benefits and other personnel related costs and $ 11,690 for facility exit costs. Non-cash charges related to $ 23,763 recorded to adjust inventory to net realizable value. In the year ended September 30, 2023, CPP incurred pre-tax restructuring and related exit costs approximating $ 92,468 . Cash charges totaled $ 33,536 and non-cash, asset-related charges totaled $ 58,932 ; the cash charges included $ 16,772 for one-time termination benefits and other personnel related costs and $ 16,764 for facility exit costs. Non-cash charges included a $ 21,832 impairment charge related to certain fixed assets at several manufacturing locations and $ 37,100 to adjust inventory to net realizable value. In the year ended September 30, 2022, CPP incurred pre-tax restructuring and related exit costs approximating $ 16,782 . Cash charges totaled $ 11,951 and non-cash, asset-related charges totaled $ 4,831 ; the cash charges included $ 4,124 for one-time termination benefits and other personnel-related costs and $ 7,827 for facility exit costs. Non-cash charges included a $ 3,805 of inventory that have no recoverable value and $ 1,026 primarily related to disposal of fixed assets at several manufacturing locations. These restructuring charges related to the development of CPP's next-generation business platform, which was completed in fiscal 2022. A summary of the restructuring and other related charges included in Cost of goods and services and Selling, general and administrative expenses in the Company's Consolidated Statements of Operations were as follows: For the Year Ended September 30, 2024 2023 2022 Cost of goods and services $ 35,806 $ 82,028 $ 7,964 Selling, general and administrative expenses 5,503 10,440 8,818 Total restructuring charges $ 41,309 $ 92,468 $ 16,782 For the Year Ended September 30, 2024 2023 2022 Personnel related costs $ 5,856 $ 16,772 $ 4,124 Facilities, exit costs and other 11,690 16,764 7,827 Non-cash facility and other 23,763 58,932 4,831 Total $ 41,309 $ 92,468 $ 16,782 69 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) The following table summarizes the accrued liabilities of the Company's restructuring actions: Cash Charges Cash Charges Non-Cash Charges Personnel related costs Facilities & Exit Costs Facility and Other Costs Total Accrued liability at September 30, 2021 $ 418 $ 264 $ — $ 682 Charges 4,124 7,827 4,831 16,782 Payments ( 4,156 ) ( 7,827 ) — ( 11,983 ) Non-cash charges (1) — — ( 4,831 ) ( 4,831 ) Accrued liability at September 30, 2022 $ 386 $ 264 $ — $ 650 Charges 16,772 16,764 58,932 92,468 Payments ( 3,051 ) ( 11,477 ) — ( 14,528 ) Non-cash charges (1) — — ( 58,932 ) ( 58,932 ) Accrued liability at September 30, 2023 $ 14,107 $ 5,551 $ — $ 19,658 Charges $ 5,856 11,690 23,763 41,309 Payments ( 11,781 ) ( 12,425 ) — ( 24,206 ) Non-cash charges (1) — — ( 23,763 ) ( 23,763 ) Accrued liability at September 30, 2024 $ 8,182 $ 4,816 $ — $ 12,998 (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. NOTE 11 – 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 models. Typical warranties require CPP and HBP 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. CPP offers an express limited warranty for a period of ninety days on all products from the date of the original purchase unless otherwise stated on the product or packaging from the date of original purchase. Warranty costs expected to be incurred in the next 12 months are classified in accrued liabilities. Warranty costs expected to be incurred beyond one year are classified in other long-term liabilities. The short-term warranty liability was $ 13,050 as of September 30, 2024 and $ 20,781 as of September 30, 2023. The long-term warranty liability was $ 1,239 at both September 30, 2024 and 2023. Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows: Years Ended September 30, 2024 2023 Balance, beginning of period $ 20,781 $ 16,786 Warranties issued and changes in estimated pre-existing warranties 23,253 21,301 Actual warranty costs incurred ( 30,984 ) ( 17,306 ) Balance, end of period $ 13,050 $ 20,781 70 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) NOTE 12 — LONG-TERM DEBT Debt at September 30, 2024 and 2023 consisted of the following: At September 30, 2024 Outstanding Balance Original Issuer Premium (Discount) Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate Senior Notes due 2028 (a) $ 974,775 $ 169 $ ( 6,900 ) $ 968,044 5.75 % Term Loan B due 2029 (b) 457,000 ( 599 ) ( 5,420 ) 450,981 Variable Revolver due 2028 (b) 107,500 — ( 2,859 ) 104,641 Variable Non U.S. lines of credit (d) — — ( 2 ) ( 2 ) Variable Other debt (e) 410 — ( 22 ) 388 Variable Totals 1,539,685 ( 430 ) ( 15,203 ) 1,524,052 less: Current portion ( 8,155 ) — — ( 8,155 ) Long-term debt $ 1,531,530 $ ( 430 ) $ ( 15,203 ) $ 1,515,897 At September 30, 2023 Outstanding Balance Original Issuer Premium (Discount) Capitalized Fees & Expenses Balance Sheet Coupon Interest Rate Senior notes due 2028 (a) $ 974,775 $ 218 $ ( 8,920 ) $ 966,073 5.75 % Term Loan B due 2029 (b) 463,000 ( 922 ) ( 7,039 ) 455,039 Variable Revolver due 2028 (b) 50,445 — ( 3,606 ) 46,839 Variable Non U.S. lines of credit (d) — — ( 3 ) ( 3 ) Variable Other debt (e) 1,592 — ( 11 ) 1,581 Variable Totals 1,489,812 ( 704 ) ( 19,579 ) 1,469,529 less: Current portion ( 9,625 ) — — ( 9,625 ) Long-term debt $ 1,480,187 $ ( 704 ) $ ( 19,579 ) $ 1,459,904 Interest expense consists of the following for 2024, 2023 and 2022. Year Ended September 30, 2024 Effective Interest Rate Cash Interest Amort. Debt (Premium) Discount Amort. Deferred Cost & Other Fees Total Interest Expense Senior notes due 2028 (a) 5.93 % $ 56,050 $ ( 48 ) $ 2,020 $ 58,022 Term Loan B due 2029 (b) 8.17 % 36,193 163 1,304 37,660 Revolver due 2028 (b) Variable 8,018 — 746 8,764 Non U.S. lines of credit (d) Variable 43 — 15 58 Other debt (e) Variable 586 1 1 588 Capitalized interest ( 1,006 ) — — ( 1,006 ) Totals $ 99,884 $ 116 $ 4,086 $ 104,086 71 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) Year Ended September 30, 2023 Effective Interest Rate Cash Interest Amort. Debt (Premium) Discount Amort. Deferred Cost & Other Fees Total Interest Expense Senior notes due 2028 (a) 5.95 % $ 56,050 $ ( 48 ) $ 2,020 $ 58,022 Term Loan B due 2029 (b) 7.49 % 35,321 172 1,398 36,891 Revolver due 2028 (b) Variable 4,282 — 646 4,928 Finance lease - real estate (c) 5.60 % 680 — — 680 Non U.S. lines of credit (d) Variable 630 — 42 672 Other debt (e) Variable 392 — 2 394 Capitalized interest ( 142 ) — — ( 142 ) Totals $ 97,213 $ 124 $ 4,108 $ 101,445 Year Ended September 30, 2022 Effective Interest Rate Cash Interest Amort. Debt Premium Amort. Deferred Cost & Other Fees Total Interest Expense Senior notes due 2028 (a) 5.95 % $ 57,105 $ ( 48 ) $ 2,056 $ 59,113 Term Loan B due 2029 (b) 4.14 % $ 18,116 $ 135 $ 1,068 $ 19,319 Revolver due 2028 (b) Variable 3,762 — 491 4,253 Finance lease - real estate (c) 5.60 % 759 — 4 763 Non U.S. lines of credit (d) Variable 17 — 15 32 Non U.S. term and mortgage loans (d) Variable 610 — 53 663 Other debt (e) Variable 544 — 1 545 Capitalized interest ( 309 ) — — ( 309 ) Totals $ 80,604 $ 87 $ 3,688 $ 84,379 Minimum payments under debt agreements for the next five years are as follows: $ 8,155 in 2025, $ 8,104 in 2026, $ 8,045 in 2027, $ 1,090,322 in 2028, $ 425,047 in 2029 and $ 12 thereafter. (a) During 2020, Griffon issued, at par, $ 1,000,000 of 5.75 % Senior Notes due 2028 (the "2028 Senior Notes"). Proceeds from the 2028 Senior Notes were used to redeem $ 1,000,000 of 5.25 % Senior Notes due in 2022. In connection with the issuance and exchange of the 2028 Senior Notes, Griffon capitalized $ 16,448 of underwriting fees and other expenses incurred, which is being amortized over the term of such notes. During 2022, Griffon purchased $ 25,225 of 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 September 30, 2024, outstanding Senior Notes due totaled $ 974,775 ; interest is payable semi-annually on March 1 and September 1. The 2028 Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. The 2028 Senior Notes were registered under the Securities Act of 1933, as amended (the "Securities Act") via an exchange offer. The fair value of the 2028 Senior Notes approximated $ 957,716 on September 30, 2024 based upon quoted market prices (level 1 inputs). At September 30, 2024, $ 6,900 of underwriting fees and other expenses incurred remained to be amortized. 72 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) (b) On January 24, 2022, Griffon amended and restated its Credit Agreement (the "Credit Agreement") to provide for a new $ 800,000 Term Loan B facility, due January 24, 2029, in addition to the revolving credit facility (the "Revolver") provided for under the Credit Agreement. The Term Loan B facility was issued at 99.75 % of par value. Since that time, 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 charges of $ 437 and $ 6,296 on the prepayment of debt in 2023 and 2022, respectively. The charges were comprised of write-offs of unamortized debt issuance costs of $ 386 and $ 5,575 for 2023 and 2022, respectively, and the original issue discount of $ 51 and $ 721 for 2023 and 2022, respectively. As of September 30, 2024, the Term Loan B outstanding balance was $ 457,000 . On June 26, 2024, Griffon further amended its Credit Agreement to favorably reprice the Term Loan B facility. The amendment reduced the margin above SOFR by 0.25 %, eliminated the credit spread adjustment and reduced the SOFR floor from 0.50 % to 0 %. Furthermore, the amendment stipulates that if Griffon prepays all or a portion of the Term Loan B within six months of the amendment date, Griffon will be required to pay a premium equal to 1 % of the amount prepaid. In connection with the amendment, Griffon recognized a $ 1,700 loss on debt extinguishment in the Company's Consolidated Statements of Operations, primarily consisting of the write-off of unamortized debt issuance costs and original issue discount related to portions of the Term Loan B facility that were repaid and then reborrowed from new lenders. At September 30, 2024, unamortized costs of $ 5,420 related to the existing and new Term Loan B facility lenders will continue to be amortized over the term of the loan. The Term Loan B bears interest at the Term SOFR rate plus a spread of 2.00 % ( 6.85 % as of September 30, 2024). The Term Loan B facility continues to require nominal quarterly principal payments of $ 2,000 , potential additional annual principal payments based on a percentage of excess cash flow and certain secured leverage thresholds, and a final balloon payment due at maturity. Term Loan B borrowings may generally be repaid without penalty, subject to a prepayment premium of 1 % in connection with the above repricing transaction with respect to any prepayments within the six months following the closing date of June 26, 2024. Once repaid, Term Loan B borrowings may not be reborrowed. 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 that secures borrowings under the Revolver, on an equal and ratable basis. The fair value of the Term Loan B facility approximated $ 457,571 on September 30, 2024 based upon quoted market prices (level 1 inputs). On August 1, 2023, Griffon amended and restated the Credit Agreement to increase the maximum borrowing availability under the Revolver from $ 400,000 to $ 500,000 and extend 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 % ( 6.95 % at September 30, 2024); SONIA loans accrue interest at SONIA Base Rate plus a credit adjustment spread and a margin of 2.00 % ( 6.98 % at September 30, 2024); and base rate loans accrue interest at prime rate plus a margin of 1.00 % ( 9.00 % at September 30, 2024). At September 30, 2024, under the Credit Agreement, there were $ 107,500 in outstanding borrowings on the Revolver; outstanding standby letters of credit were $ 13,190 ; and $ 379,310 was available, subject to certain loan covenants, for borrowing at that date. The Revolver has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants and events of default. The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments and investments. Both the Revolver and Term Loan B borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors. (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 73 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) $ 23,207 . The Ocala lease had a maturity date in 2025 and bore interest at a fixed rate of approximately 5.6 %. As a result of exercising the purchase option, the Company no longer has any future lease obligations related to this real estate. During 2022, the financing lease on the Troy, Ohio location expired. The Troy lease bore interest at a rate of approximately 5.0 %, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease. Griffon exercised the one dollar buyout option in November 2021. Refer to Note 22- Leases for further details. (d) In November 2012, Garant G.P. (“Garant”), a Griffon wholly owned subsidiary, entered into a CAD 15,000 revolving credit facility. Effective in December 2023, the facility was amended to replace the Canadian Dollar Offer Rate ("CDOR") with the Canadian Overnight Repo Rate Average ("CORRA"). The facility accrues interest at CORRA plus 1.3 % per annum ( 5.46 % as of September 30, 2024). 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 September 30, 2024, there were no outstanding borrowings under the revolving credit facility with CAD 15,000 ($ 11,135 as of September 30, 2024) available. During 2023, Griffon Australia Holdings Pty Ltd and its Australian subsidiaries (collectively, "Griffon Australia") amended its AUD 15,000 receivable purchase facility to AUD 30,000 . The receivable purchase facility was renewed in 2024 and now matures in March 2024, but is renewable upon mutual agreement with the lender. The receivable purchase facility accrues interest at Bank Bill Swap Rate plus 1.25 % per annum ( 5.55 % at September 30, 2024). At September 30, 2024, there was no balance outstanding under the receivable purchase facility with AUD $ 30,000 ($ 20,619 as of September 30, 2024) available. The receivable purchase facility is secured by substantially all of the assets of Griffon Australia and its subsidiaries. Griffon Australia is required to maintain a certain minimum equity level. In July 2018, the AMES Companies UK Ltd and its subsidiaries (collectively, "Ames UK") entered into a GBP 14,000 term loan, GBP 4,000 mortgage loan and GBP 5,000 revolver, 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) In February 2024, Griffon repaid in full a loan with the Pennsylvania Industrial Development Authority. The balance in other long-term debt consists primarily of finance leases. At September 30, 2024, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements. NOTE 13 – EMPLOYEE BENEFIT PLANS Griffon offers defined contribution plans to most of its U.S. employees. In addition to employee contributions to the plans, Griffon makes contributions based upon various percentages of compensation and/or employee contributions, which were $ 10,319 in 2024, $ 10,857 in 2023 and $ 11,080 in 2022. The Company also provides healthcare and life insurance benefits for certain groups of retirees through several plans. For certain employees, the benefits are at fixed amounts per retiree and are partially contributory by the retiree. The post-retirement benefit obligation was $ 1,670 and $ 1,679 as of September 30, 2024 and 2023. The accumulated other comprehensive income for these plans was $ 306 and $ 420 as of September 30, 2024 and 2023, respectively, and the 2024, 2023 and 2022 expense was $ 56 , $ 67 and $ 47 respectively. It is the Company’s practice to fund these benefits as incurred. Griffon also has qualified and non-qualified defined benefit plans covering certain employees which provide benefits based on years of service and employee compensation. Over time, these amounts will be recognized as part of net periodic pension costs in the Consolidated Statements of Operations and Comprehensive Income (Loss). Griffon is responsible for overseeing the management of the investments of two qualified defined benefit plans and uses the services of an investment manager to manage the plans' assets based on agreed upon risk profiles. The primary objective of the qualified defined benefit plan is to secure participant retirement benefits. As such, the key objective in this plan’s financial management is to promote stability and, to the extent appropriate, growth in the funded status. Financial objectives are established in conjunction with a review of current and projected plan financial requirements. The fair values of a majority of the plan assets were determined by the plans’ trustee using quoted market prices for identical instruments (level 1 inputs) as of 74 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) September 30, 2024 and 2023. The fair value of various other investments was determined by the plans' trustees using direct observable market corroborated inputs, including quoted market prices for similar assets (level 2 inputs). A small amount of plan assets are invested in private equity which consist primarily of investments in private companies which are valued using the net asset values provided by the underlying private investment companies as a practical expedient (level 3 inputs). The Clopay AMES Pension Plan, the Hunter Fan Pension Plan and the AMES supplemental executive retirement plan are frozen to new entrants and participants in the plans no longer accrue benefits. The Hunter Fan Pension Plan was terminated with an effective date of April 30, 2024. This was communicated to plan participants in February 2024. The plan is fully funded and the company does not anticipate making an additional funding contribution as of the benefit distribution date. The benefit distribution date will be determined once the company receives approval from certain regulatory agencies. The Company’s non-service cost components of net periodic benefit plan cost was an expense (benefit) of $ 137 , $ 866 and $( 4,256 ) during 2024, 2023, and 2022 respectively. Griffon uses judgment to establish the assumptions used in determining the future liability of the plan, as well as the investment returns on the plan assets. The expected return on assets assumption used for pension expense was developed through analysis of historical market returns, current market conditions and past experience of plan investments. The long-term rate of return assumption represents the expected average rate of earnings on the funds invested, or to be invested, to provide for the benefits included in the benefit obligations. The assumption is based on several factors including historical market index returns, the anticipated long-term asset allocation of plan assets and the historical return. The discount rate assumption is determined by developing a yield curve based on high quality bonds with maturities matching the plans’ expected benefit payment stream. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. A 10 % change in the discount rate or return on assets would not have a material effect on the financial statements of Griffon. Net periodic costs (benefits) were as follows: Defined Benefits for the Years Ended September 30, Supplemental Benefits for the Years Ended September 30, 2024 2023 2022 2024 2023 2022 Net periodic (benefits) costs: Interest cost $ 7,050 $ 6,814 $ 3,448 $ 504 $ 488 $ 172 Expected return on plan assets ( 10,172 ) ( 10,213 ) ( 11,255 ) — — — Amortization of: Actuarial loss 2,250 3,314 2,818 505 463 561 Total net periodic (benefits) costs $ ( 872 ) $ ( 85 ) $ ( 4,989 ) $ 1,009 $ 951 $ 733 The tax benefits in 2024, 2023 and 2022 for the amortization of pension costs in Other comprehensive income (loss) were $ 578 , $ 793 and $ 710 , respectively. The weighted-average assumptions used in determining the net periodic (benefits) costs were as follows: Defined Benefits for the Years Ended September 30, Supplemental Benefits for the Years Ended September 30, 2024 2023 2022 2024 2023 2022 Discount rate 5.63 % 5.17 % 2.63 % 5.53 % 5.02 % 1.94 % Expected return on assets 6.75 % 6.72 % 6.72 % — % — % — % 75 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Plan assets and benefit obligation of the defined and supplemental benefit plans were as follows: Defined Benefits at September 30, Supplemental Benefits at September 30, 2024 2023 2024 2023 Change in benefit obligation: Benefit obligation at beginning of fiscal year $ 139,224 $ 149,021 $ 10,882 $ 11,922 Interest cost 7,050 6,814 504 488 Benefits paid ( 11,576 ) ( 11,541 ) ( 1,896 ) ( 1,907 ) Actuarial (gain) loss 11,048 ( 5,070 ) 1,286 379 Benefit obligation at end of fiscal year 145,746 139,224 10,776 10,882 Change in plan assets: Fair value of plan assets at beginning of fiscal year 146,997 144,091 — — Actual return on plan assets 21,933 12,232 — — Company contributions 1,351 2,215 1,896 1,907 Benefits paid ( 11,576 ) ( 11,541 ) ( 1,896 ) ( 1,907 ) Fair value of plan assets at end of fiscal year 158,705 146,997 — — Projected benefit obligation in excess of plan assets $ 12,959 $ 7,773 $ ( 10,776 ) $ ( 10,882 ) Amounts recognized in the statement of financial position consist of: Non-Current Assets $ 12,959 $ 7,773 $ — $ — Accrued liabilities — — ( 1,823 ) $ ( 1,834 ) Other liabilities (long-term) — — ( 8,953 ) ( 9,048 ) Total Liabilities 12,959 7,773 ( 10,776 ) ( 10,882 ) Net actuarial losses 25,314 28,279 6,700 5,919 Deferred taxes ( 5,316 ) ( 5,939 ) ( 3,037 ) ( 2,873 ) Total Accumulated other comprehensive loss, net of tax 19,998 22,340 3,663 3,046 Net amount recognized at September 30, $ 32,957 $ 30,113 $ ( 7,113 ) $ ( 7,836 ) Accumulated benefit obligations $ 145,746 $ 139,224 $ 10,776 $ 10,882 Information for plans with accumulated benefit obligations in excess of plan assets: ABO $ 145,746 $ 139,224 $ 10,776 $ 10,882 PBO 145,746 139,224 10,776 10,882 Fair value of plan assets 158,705 146,997 — — Actuarial losses as of September 30, 2024 were primarily due to the decrease in the discount rate. Actuarial gains as of September 30, 2023 were primarily the result of the increase in the discount rate. The weighted-average assumptions used in determining the benefit obligations were as follows: Defined Benefits at September 30, Supplemental Benefits at September 30, 2024 2023 2024 2023 Weighted average discount rate 4.76 % 5.63 % 4.46 % 5.53 % 76 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) Estimated future benefit payments to retirees, which reflect expected future service, are as follows: For the years ending September 30, Defined Benefits Supplemental Benefits 2025 $ 12,040 $ 1,823 2026 12,058 1,664 2027 12,031 1,503 2028 11,930 1,342 2029 11,813 1,184 2030-2034 55,522 3,801 During 2025, Griffon is not required to and does not expect to contribute to the Defined Benefit plans and expects to contribute $ 1,823 to Supplemental Benefits that will be funded from the general assets of Griffon. The Clopay AMES Pension Plan and the Hunter Fan Pension Plan are covered by the Pension Protection Act of 2006. The Adjusted Funding Target Attainment Percent for the Clopay AMES Pension Plan and Hunter Fan Pension Plan as of January 1, 2024 was 97.1 % and 127.3 %, respectively. Since the plans were in excess of the 80 % funding threshold there were no plan restrictions. There are no catch up contributions for either plan expected in 2025. The actual and weighted-average asset allocation for qualified benefit plans were as follows: At September 30, 2024 2023 Target Cash and equivalents 2.9 % 3.3 % — % Equity securities 26.4 % 41.9 % 30.0 % Fixed income 48.6 % 24.8 % 50.0 % Other 22.1 % 30.0 % 20.0 % Total 100.0 % 100.0 % 100.0 % The following is a description of the valuation methodologies used for plan assets measured at fair value: Government and agency securities – When quoted market prices are available in an active market, the investments are classified as Level 1. When quoted market prices are not available in an active market, the investments are classified as Level 2. Equity securities – The fair values reflect the closing price reported on a major market where the individual mutual fund securities are traded in equity securities. These investments are classified within Level 1 of the valuation hierarchy. Debt securities – The fair values are based on a compilation of primarily observable market information or a broker quote in a non-active market where the individual mutual fund securities are invested in debt securities. These investments are classified within Level 1 and Level 2 of the valuation hierarchy. Commingled funds – The fair values are determined using NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the trust/entity, minus its liabilities, and then divided by the number of shares outstanding. These investments are generally classified within Level 2 or 3, as appropriate, of the valuation hierarchy and can be liquidated on demand. Interest in limited partnerships and hedge funds - One limited partnership investment is a private equity fund and the fair value is determined by the fund managers based on the net asset values provided by the underlying private investment companies as a practical expedient. These investments are classified within Level 2 of the valuation hierarchy. Fully benefit-responsive investment contracts - The Plan holds fully benefit-responsive investment contracts that are reported at contract value, which is the value of principal and interest under the terms of the annuity contract. 77 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset category: At September 30, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and equivalents $ 4,522 $ — $ — $ 4,522 Government agency securities 5,890 5,116 — 11,006 Debt instruments 42,705 6,144 — 48,849 Equity securities 41,786 — — 41,786 Commingled funds — 4,859 9,979 14,838 Limited partnerships and hedge fund investments — 20,177 — 20,177 Other Securities 17,004 — — 17,004 Subtotal $ 111,907 $ 36,296 $ 9,979 $ 158,182 Accrued income and plan receivables 523 Total $ 158,705 At September 30, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Cash and equivalents $ 4,889 $ — $ — $ 4,889 Government and agency securities 6,249 2,388 — 8,637 Debt instruments 21,828 4,094 — 25,922 Equity securities 61,482 — — 61,482 Commingled funds — 9,022 10,459 19,481 Limited partnerships and hedge fund investments — 21,768 — 21,768 Other Securities 1,834 — — 1,834 Subtotal $ 96,282 $ 37,272 $ 10,459 $ 144,013 Accrued income and plan receivables 285 Fully benefit-responsive investment contract 2,699 Total $ 146,997 78 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) The following table represents level 3 significant unobservable inputs for the years ended September 30, 2024 and 2023: Significant Unobservable Inputs (Level 3) As of October 1, 2022 $ 9,484 Purchases, issuances and settlements — Gains and losses 975 As of September 30, 2023 10,459 Purchases, issuances and settlements ( 1,591 ) Gains and losses 1,111 As of September 30, 2024 $ 9,979 Griffon has an Employee Stock Ownership Plan ("ESOP") that covers substantially all domestic employees. All U.S. employees of Griffon, who are not members of a collective bargaining unit, automatically become eligible to participate in the plan on the October 1 st following completion of one qualifying year of service (as defined in the plan). Securities are allocated to participants’ individual accounts based on the proportion of each participant’s aggregate compensation (not to exceed $ 330 for the plan year ended September 30, 2024), to the total of all participants’ compensation. Shares of the ESOP which have been allocated to employee accounts are charged to expense based on the fair value of the shares transferred and are treated as outstanding in determining earnings per share. Dividends paid on shares held by the ESOP are used to offset debt service on ESOP Loans. Dividends paid on shares held in participant accounts are utilized to allocate shares from the aggregate number of shares to be released, equal in value to those dividends, based on the closing price of Griffon common stock on the dividend payment date. Compensation expense under the ESOP was $ 8,533 in 2024, $ 20,583 in 2023 and $ 14,325 in 2022. The cost of the shares held by the ESOP and not yet allocated to employees is reported as a reduction of Shareholders’ Equity. The fair value of the unallocated ESOP shares as of September 30, 2024 and 2023 based on the closing stock price of Griffon’s stock was $ 1,250 and $ 7,768 , respectively. The ESOP shares were as follows: At September 30, 2024 2023 Allocated shares 4,234,713 4,409,113 Unallocated shares 17,852 195,827 Total 4,252,565 4,604,940 NOTE 14 – INCOME TAXES Income taxes have been based on the following components of Income before taxes from continuing operations: For the Years Ended September 30, 2024 2023 2022 Domestic $ 292,409 $ 106,209 $ ( 247,004 ) Non-U.S. 4,241 6,473 ( 23,875 ) $ 296,650 $ 112,682 $ ( 270,879 ) 79 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) Provision (benefit) for income taxes on income was comprised of the following from continuing operations: For the Years Ended September 30, 2024 2023 2022 Current $ 83,179 $ 72,860 $ 73,542 Deferred 3,574 ( 37,795 ) ( 56,706 ) Total $ 86,753 $ 35,065 $ 16,836 U.S. Federal $ 59,480 $ 23,612 $ ( 5,178 ) State and local 15,328 5,899 14,361 Non-U.S. 11,945 5,554 7,653 Total provision $ 86,753 $ 35,065 $ 16,836 Differences between the effective income tax rate applied to Income (loss) before taxes from continuing operations and the U.S. Federal statutory income tax rate are presented in the table below. For the fiscal year ended September 30, 2022, the Company reported a pre-tax loss and income tax expense. As a result, unfavorable items to the US Federal statutory income tax rate are presented as negative amounts, while favorable items are presented as positive amounts. For the Years Ended September 30, 2024 2023 2022 U.S. Federal statutory income tax rate 21.0 % 21.0 % 21.0 % State and local taxes, net of Federal benefit 3.7 % ( 0.2 ) % ( 5.3 ) % Non-U.S. taxes - foreign permanent items and taxes 1.0 % 1.4 % ( 1.5 ) % Change in tax contingency reserves ( 0.5 ) % ( 0.4 ) % ( 0.1 ) % Tax Reform-Repatriation of Foreign Earnings and GILTI ( 0.5 ) % 0.5 % 0.2 % Change in valuation allowance 2.8 % 3.9 % ( 1.7 ) % Other non-deductible/non-taxable items, net — % — % ( 0.4 ) % Non-deductible officer's compensation 1.9 % 5.1 % ( 1.9 ) % Research and U.S. foreign tax credits ( 0.3 ) % ( 0.9 ) % 0.2 % Goodwill impairment — % — % ( 17.1 ) % Share based compensation ( 0.7 ) % 0.8 % 0.4 % Other 0.8 % ( 0.1 ) % — % Effective tax rate 29.2 % 31.1 % ( 6.2 ) % 80 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows: At September 30, 2024 2023 Deferred tax assets: Bad debt reserves $ 2,491 $ 2,537 Inventory reserves 7,086 11,764 Deferred compensation (equity compensation and defined benefit plans) 7,036 5,929 Compensation benefits 5,052 5,118 Insurance reserve 2,411 2,823 Restructuring reserve 2,616 4,224 Warranty reserve 5,130 6,912 Lease liabilities 47,824 47,077 Net operating loss 25,299 15,459 Tax credits 5,933 5,933 Research & Development 4,510 5,281 Other reserves and accruals 5,167 5,312 120,555 118,369 Valuation allowance ( 26,989 ) ( 17,992 ) Total deferred tax assets 93,566 100,377 Deferred tax liabilities: Goodwill and intangibles ( 126,523 ) ( 130,066 ) Property, plant and equipment ( 19,903 ) ( 18,430 ) Right-of-use assets ( 45,112 ) ( 44,499 ) Unremitted Foreign Earnings ( 1,896 ) ( 1,894 ) Other ( 723 ) ( 1,179 ) Total deferred tax liabilities ( 194,157 ) ( 196,068 ) Net deferred tax liabilities $ ( 100,591 ) $ ( 95,691 ) The components of the net deferred tax liability, by balance sheet account, were as follows: At September 30, 2024 2023 Other assets $ 495 $ 617 Assets held for sale 947 — Other liabilities ( 103,194 ) ( 97,440 ) Liabilities of discontinued operations 1,161 1,132 Net deferred liability $ ( 100,591 ) $ ( 95,691 ) In 2024 and 2023, the net increases in the valuation allowance of $ 8,997 and $ 4,502 , respectively are the result of a determination that certain state and foreign net operating losses will not be realized. Prior to fiscal year 2023, Griffon did not provide deferred U.S. income taxes of undistributed earnings on non-U.S. subsidiaries as such earnings were intended to be reinvested indefinitely. At September 30, 2023, Griffon made a policy election to indefinitely reinvest the undistributed earnings of certain non-U.S. subsidiaries. As of September 30, 2024, we have approximately $ 146,891 of undistributed earnings of non-U.S. subsidiaries. Of these undistributed earnings, $ 80,914 were previously subjected to U.S. federal income tax. As of September 30, 2024, we recognized a deferred tax liability of $ 1,896 for estimated non-U.S. withholding taxes on the non-U.S. earnings that are not indefinitely reinvested. The Company has not provided deferred taxes on any other outside basis differences in its investments in the non-U.S. subsidiaries as these other outside basis differences are currently considered indefinitely reinvested. The Company generates substantial cash flow in the 81 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) U.S. and does not have a current need for the cash to be returned to the U.S. from the foreign entities. The Company may repatriate non-indefinitely reinvested earnings of its non-U.S. subsidiaries where excess cash has accumulated and the Company determines that it is appropriate and tax efficient. Accordingly, the Company continues to reinvest all other undistributed earnings of its non-U.S. subsidiaries and may be subject to additional non-U.S. withholding taxes and U.S. state income taxes if it reverses its indefinite reinvestment assertion in the future. At September 30, 2024, Griffon had no loss carryforwards for U.S. tax purposes and $ 63,217 for non-U.S. tax purposes. At September 30, 2023, Griffon had no loss carryforwards for U.S. tax purposes and $ 27,585 for non-U.S. tax purposes. The non-U.S. loss carryforwards expire in varying amounts beginning in 2027 to indefinite carryforward. At September 30, 2024 and 2023, Griffon had state and local loss carryforwards of $ 228,485 and $ 176,343 , respectively, which expire in varying amounts through 2043. At September 30, 2024 and 2023, Griffon had federal tax credit carryforwards of $ 5,933 in both years, which expire in varying amounts through 2035. We believe it is more likely than not that the benefit from certain federal, state, and non-U.S. tax attributes will not be realized. In recognition of this risk, we have provided a valuation allowance as of September 30, 2024 and 2023 of $ 26,989 and $ 17,992 , respectively, on the deferred tax assets. As it becomes probable that the benefits of these attributes will be realized, the reversal of valuation allowance will be recognized as a reduction of income tax expense. If certain substantial changes in Griffon's ownership occur, there would be an annual limitation on the amount of carryforward(s) that can be utilized. Griffon files U.S. Federal, state and local tax returns, as well as applicable returns in Canada, Australia, U.K. and other non-U.S. jurisdictions. Griffon’s U.S. Federal income tax returns are no longer subject to income tax examination for years before 2018. Griffon's major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2016. Various U.S. state and statutory tax audits are currently underway. The following is a roll forward of unrecognized tax benefits: Balance at September 30, 2022 $ 6,808 Additions based on tax positions related to the current year 208 Additions based on tax positions related to prior years 32 Reductions based on tax positions related to prior years ( 16 ) Lapse of Statutes ( 740 ) Balance at September 30, 2023 $ 6,292 Additions based on tax positions related to the current year 154 Additions based on tax positions related to prior years 35 Reductions based on tax positions related to prior years ( 2,735 ) Lapse of Statutes ( 140 ) Balance at September 30, 2024 $ 3,606 82 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) If recognized, the amount of potential unrecognized tax benefits that would impact Griffon’s effective tax rate is $ 1,638 . Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At September 30, 2024 and 2023, the combined amount of accrued interest and penalties related to tax positions taken or to be taken on Griffon’s tax returns and recorded as part of the reserves for uncertain tax positions was $ 310 and $ 651 , respectively. During the year ended September 30, 2024, the Company incurred a reduction in unrecognized tax benefits primarily due to the acceptance of previously filed amended returns by various jurisdictions, along with a reduction in state tax rates. Griffon cannot reasonably estimate the extent to which other existing liabilities for uncertain tax positions may increase or decrease within the next twelve months as a result of the progression of ongoing tax audits or other events. Griffon believes that it has adequately provided for all open tax years by tax jurisdiction. In August 2022, the U.S. Government enacted the Inflation Reduction Act of 2022 ("IRA"). Included in the IRA was a provision to implement a 15% corporate alternative minimum tax ("CAMT") on large corporations effective beginning with Griffon’s 2024 fiscal year. Griffon is currently not subject to the CAMT. The Organization for Economic Co-operation and Development (“OECD”) released the Global Anti-base Erosion Model Rules for Pillar Two (“Pillar Two”) in December 2021, which defined a 15% global minimum tax. Australia, Canada, U.K. and other countries have enacted or are considering changes in their tax laws and regulations based on Pillar Two, some of which become effective for the Company in 2025. The Company will continue to evaluate the impact of these proposed and enacted legislative changes as guidance becomes available. The Company does not expect Pillar Two to have a material impact on the financial statements. NOTE 15 – STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION During 2024, 2023 and 2022, the Company declared and paid, in quarterly increments, cash dividends totaling $ 0.60 per share, $ 0.45 per share and $ 0.36 per share, respectively. 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 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 loan payments and recorded as a reduction of debt service payments and compensation expense. For all dividends, a dividend payable was established for the holders of restricted shares; such dividends will be released upon vesting of the underlying restricted shares. At September 30, 2024, accrued dividends were $ 9,147 . On November 12, 2024, the Board of Directors declared a cash dividend of $ 0.18 per share, payable on December 18, 2024 to shareholders of record as of the close of business on November 25, 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. On January 31, 2018, shareholders approved Amendment No. 1 to the Original Incentive Plan pursuant to which, among other things, 1,000,000 shares were added to the Original Incentive Plan; 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 March 20, 2024, shareholders approved an amendment to add 2,600,000 shares to the Amended Incentive Plan. Options granted under the Amended Incentive Plan may be either “incentive stock options” or nonqualified stock options, which 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 8,850,000 ( 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 September 30, 2024, 2,377,532 shares were available for grant. 83 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) 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 date of grant, and for performance shares, including performance units, the likelihood of achieving the performance criteria. The Company recognizes forfeitures as they occur. Compensation expense for restricted stock granted to four senior executives is calculated as the target number of shares granted, upon achieving certain performance criteria, multiplied by the stock price as valued by a Monte Carlo Simulation Model. Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years , is recognized using the straight-line attribution method and recorded within SG&A. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans: For the Years Ended September 30, 2024 2023 2022 Restricted stock $ 18,305 $ 20,529 $ 18,810 ESOP (1) 8,533 20,583 14,325 Total stock-based compensation $ 26,838 $ 41,112 $ 33,135 ________________________ (1) During the years ended September 30, 2023 and 2022, special dividend ESOP charges included in compensation expense were $ 15,494 and $ 10,538 , respectively. A summary of restricted stock activity, inclusive of restricted stock units, for 2024 is as follows: Shares Weighted Average Grant- Date Fair Value Unvested at September 30, 2023 3,249,097 $ 20.40 Granted 578,101 54.21 Vested ( 1,382,838 ) 58.48 Forfeited ( 27,160 ) 30.93 Unvested at September 30, 2024 2,417,200 29.26 The fair value of restricted stock which vested during 2024, 2023, and 2022 was $ 80,861 , $ 34,214 and $ 25,863 , respectively. Unrecognized compensation expense related to non-vested shares of restricted stock was $ 31,538 at September 30, 2024 and will be recognized over a weighted average vesting period of 1.9 years. At September 30, 2024, a total of approximately 4,794,732 shares of Griffon’s authorized Common Stock were reserved for issuance in connection with stock compensation plans. During 2024, Griffon granted 561,326 shares of restricted stock and restricted stock units to its employees. This included 166,272 shares of restricted stock and 7,832 restricted stock units granted to forty-three executives and key employees, subject to certain performance conditions, with a vesting period of 36 months with a total fair value of $ 8,225 , or a weighted average fair value of $ 47.24 per share. This also included 387,222 shares of restricted stock granted to four senior executives with a vesting period of thirty-three 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 64,539 to 387,222 , with the target number of shares being 129,074 . The total fair value of these restricted shares using the Monte Carlo Simulation model, assuming achievement of the performance conditions at target, is approximately $ 12,181 , or a weighted average fair value of $ 94.37 per share. Additionally, Griffon granted 16,775 restricted shares to the non-employee directors of Griffon with a vesting period of one year and a fair value of $ 1,210 , or a weighted average fair value of $ 72.13 per share. During the year ended September 30, 2024, 570,269 shares granted were issued out of treasury stock. 84 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) On November 12, 2024, Griffon granted 142,911 shares of restricted stock and restricted stock units to 43 executives and key employees, subject to certain performance conditions, with a vesting period of thirty-six months , with a total fair value of $ 9,735 , or a weighted average fair value of $ 68.12 per share. In addition, Griffon also granted 436,947 shares of restricted stock to four 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 72,827 to a maximum of 436,947 , with the target number of shares being 145,649 . The total estimated fair value of these restricted shares, assuming achievement of the performance conditions at target, is $ 12,372 , or a weighted average fair value of $ 84.95 per share. 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 . 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 year ended September 30, 2024, Griffon purchased 4,771,959 shares of common stock under these repurchase programs, for a total of $ 274,490 , or $ 57.52 per share, excluding excise taxes. The share repurchases during the year ended September 30, 2024 include the repurchase of 1,500,000 shares of common stock by the Company on February 20, 2024 pursuant to a stock purchase and cooperation agreement executed by the Company and Voss Value Master Fund, L.P., Voss Value-Oriented Special Situations Fund, L.P and four separately managed accounts of which Voss Capital, LLC is the investment manager, in a private transaction. The purchase price per share was $ 65.50 , for an aggregate purchase price of $ 98,250 . As of September 30, 2024, $ 32,693 remained available for the purchase of common stock under these Board authorized repurchase programs. Subsequent to September 30, 2024 and through November 12, 2024, Griffon purchased 481,379 shares of common stock for a total of $ 32,693 , or $ 67.91 per share under these Board authorized repurchase programs. On November 13, 2024, Griffon announced that the Board of Directors approved an additional increase of $ 400,000 to its share repurchase program which, prior to such increase, had exhausted its availability. On September 5, 2023, Griffon repurchased 400,000 shares of its common stock, par value $ 0.25 per share, beneficially owned by two separately managed accounts of which Voss Capital, LLC is the investment manager (the “Selling Shareholders”), in a private transaction to facilitate redemptions by investors in the Selling Shareholders. The purchase price per share was approximately $ 41.87 , for an aggregate purchase price of $ 16,746 . The Selling Shareholders are affiliates of Voss Capital, LLC. Travis W. Cocke, the Founder, Chief Investment Officer and Managing Member of Voss Capital, LLC, was formerly a member of the Board of Directors of the Company. These shares are included in the total shares purchased in the previous paragraph. During the year ended September 30, 2024, 595,464 shares, with a market value of $ 34,330 , or $ 57.65 per share, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock. During the year ended September 30, 2024, we accrued $ 2,772 in connection with the share repurchases described above, which was partially offset by the reversal of $ 462 of excise taxes to adjust for a benefit related to employee vesting and a $ 510 net benefit on ESOP contributions. As of September 30, 2024, $ 3,101 was accrued for excise taxes related to employee share repurchases. NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES Purchase Commitments Purchase obligations are generally for the purchase of goods and services in the ordinary course of business. Griffon uses blanket purchase orders to communicate expected requirements to certain vendors. Purchase obligations reflect those purchase orders where the commitment is considered to be firm. Amounts purchased under such commitments were $ 159,362 , $ 184,422 and $ 255,661 for the years ended September 30, 2024, 2023 and 2022, respectively. Aggregate future minimum purchase obligations at September 30, 2024 are $ 195,227 in 2025, $ 2,309 in 2026, $ 304 in 2027, $ 165 in 2028, $ 164 in 2029 and $ 468 thereafter. 85 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non US currencies in thousands, except per share data) Legal and environmental Peekskill Site. Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted lamp manufacturing and metal finishing operations at a location in the Town of Cortlandt, New York, just outside the city of Peekskill, New York (the “Peekskill Site”). ISC Properties, Inc. (“ISCP”), a wholly-owned subsidiary of Griffon, owned the Peekskill Site for approximately three years . ISCP sold the Peekskill Site in November 1982. Based upon studies conducted by ISCP and the New York Department of Environmental Conservation, soils and groundwater beneath the Peekskill Site contain chlorinated solvents and metals. Stream sediments downgradient from the Peekskill Site also contain metals. On May 15, 2019 the United States Environmental Protection Agency ("EPA") added the Peekskill Site to the National Priorities List under CERCLA and has since reached agreement with Lightron and ISCP pursuant to which Lightron and ISCP will perform a Remedial Investigation/Feasibility Study (“RI/FS”). Performance of the RI/FS is expected to be completed in 2025. Lightron has not engaged in any operations in over three decades. ISCP functioned solely as a real estate holding company and has not held any real property in over three decades. Griffon does not acknowledge any responsibility to perform any investigation or remediation at the Peekskill Site. Lightron and ISCP are being defended by an insurance company, subject to a reservation of rights, and this insurer is paying the costs of the RI. Memphis, TN site. Hunter Fan Company (“Hunter”) operated headquarters and a production plant in Memphis, TN for over 50 years (the “Memphis Site”). While Hunter completed certain on-site remediation of PCB-contaminated soils, Hunter did not investigate the extent to which PCBs existed beneath the building itself nor determine whether off-site areas had been impacted. Hunter vacated the site approximately twenty years ago, and the on-site buildings have now been demolished. The State of Tennessee Department of Environment and Conservation (“TDEC”) identified the Memphis site as being potentially contaminated, raising the possibility that site operations could have resulted in soil and groundwater contamination involving volatile organic compounds and metals. In 2021, the TDEC performed a preliminary assessment of the site and recommended to the EPA that it include the site on the National Priorities List established under CERCLA. The TDEC further recommended that the EPA fund an investigation of potential soil gas contamination in receptors near the site. The TDEC has also indicated that it will proceed with this investigation if the EPA does not act. It is unknown whether the EPA will add the Memphis Site to the National Priorities List, whether a site investigation will reveal contamination and, if there is contamination, the extent of any such contamination. However, given that certain PCB work was not completed in the past and the TDEC’s stated intent for the EPA to perform an investigation (and the statement by the TDEC that it will perform the investigation if the EPA will not), liability is probable in this matter. There are other potentially responsible parties for this site, including a former owner of Hunter; Hunter has notified such former owner of this matter. If the EPA decides to add this site to the National Priorities List, a Remedial Investigation/Feasibility Study (“RI/FS”) will be required. Hunter expects that the EPA will ask it to perform this work. If Hunter does not reach an agreement with the EPA to perform this work, the EPA will implement the RI/FS on its own. Should the EPA implement the RI/FS or perform further studies and/or subsequently remediate the site without first reaching an agreement with one or more relevant parties, the EPA would likely seek reimbursement from such parties, including Hunter, for the costs incurred. General legal Griffon is subject to various laws and regulations relating to the protection of the environment and is a party to legal proceedings arising in the ordinary course of business. Management believes, based on facts presently known to it, that the resolution of the matters above and such other matters will not have a material adverse effect on Griffon’s consolidated financial position, results of operations or cash flows. 86 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) NOTE 17 – EARNINGS PER SHARE Basic EPS (and diluted EPS in periods when a loss exists) was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with stock-based compensation. The following table is a reconciliation of the share amounts (in thousands) used in computing basic and diluted EPS for 2024, 2023 and 2022: 2024 2023 2022 Common shares outstanding 48,303 53,062 57,064 Unallocated ESOP shares ( 18 ) ( 196 ) ( 1,025 ) Non-vested restricted stock ( 2,336 ) ( 3,111 ) ( 3,457 ) Impact of weighted average shares 1,624 2,356 ( 910 ) Weighted average shares outstanding - basic 47,573 52,111 51,672 Incremental shares from stock based compensation 2,095 2,501 — Weighted average shares outstanding - diluted 49,668 54,612 51,672 Anti-dilutive restricted stock excluded from diluted EPS computation — — 2,294 Shares of the ESOP that have been allocated to employee accounts are treated as outstanding in determining earnings per share. NOTE 18 – RELATED PARTIES On February 20, 2024, Griffon entered into a stock purchase and cooperation agreement to repurchase, and repurchased, 1,500,000 shares of its common stock, par value $ 0.25 per share, beneficially owned by four separately managed accounts of which Voss Capital, LLC is the investment manager (the "Selling Shareholders"), in a private transaction. The purchase price per share was approximately $ 65.50 , for an aggregate purchase price of $ 98,250 . The Selling Shareholders are affiliates of Voss Capital, LLC. Travis W. Cocke, the Founder, Chief Investment Officer and Managing Member of Voss Capital, LLC, was formerly a member of the Board of Directors of the Company. Pursuant to the stock purchase and cooperation agreement, Mr. Cocke resigned as a member of the Board on February 20, 2024. On September 5, 2023 Griffon entered into a stock purchase agreement to repurchase 400,000 shares of its common stock, par value $ 0.25 per share, beneficially owned by two separately managed accounts of which Voss Capital, LLC is the investment manager (the “Selling Shareholders”), in a private transaction to facilitate redemptions by investors in the Selling Shareholders. The purchase price per share was approximately $ 41.87 , for an aggregate purchase price of $ 16,746 . The Selling Shareholders are affiliates of Voss Capital, LLC. Travis W. Cocke, the Founder, Chief Investment Officer and Managing Member of Voss Capital, LLC, was formerly a member of the Board of Directors of the Company. 87 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) NOTE 19 — REPORTABLE SEGMENTS Griffon conducts its operations through two reportable segments, as follows: • Home and Building Products ("HBP") conducts its operations through Clopay Corporation ("Clopay"). Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands. • Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles. 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 Years Ended September 30, REVENUE 2024 2023 2022 Home and Building Products $ 1,588,625 $ 1,588,505 $ 1,506,882 Consumer and Professional Products 1,034,895 1,096,678 1,341,606 Total revenue $ 2,623,520 $ 2,685,183 $ 2,848,488 Griffon evaluates performance and allocates resources based on segment adjusted EBITDA and adjusted EBITDA, non GAAP measures, 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 other items that may affect comparability, as applicable, non GAAP measures. 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 adjusted EBITDA to income (loss) before taxes from continuing operations: 88 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) For the Years Ended September 30, 2024 2023 2022 Segment Adjusted EBITDA: Home and Building Products $ 501,001 $ 510,876 $ 412,738 Consumer and Professional Products 72,632 50,343 99,308 Segment Adjusted EBITDA 573,633 561,219 512,046 Unallocated amounts, excluding depreciation ( 60,031 ) ( 55,887 ) ( 53,888 ) Adjusted EBITDA 513,602 505,332 458,158 Net interest expense ( 101,652 ) ( 99,351 ) ( 84,164 ) Depreciation and amortization ( 60,704 ) ( 65,445 ) ( 64,658 ) Goodwill and intangible impairments — ( 109,200 ) ( 517,027 ) Restructuring charges ( 41,309 ) ( 92,468 ) ( 16,782 ) Debt extinguishment, net ( 1,700 ) ( 437 ) ( 4,529 ) Acquisition costs ( 441 ) — ( 9,303 ) Strategic review - retention and other ( 10,594 ) ( 20,225 ) ( 9,683 ) Special dividend ESOP charges — ( 15,494 ) ( 10,538 ) Gain (loss) on sale of buildings ( 61 ) 12,655 — Proxy expenses — ( 2,685 ) ( 6,952 ) Fair value step-up of acquired inventory sold ( 491 ) — ( 5,401 ) Income (loss) before taxes from continuing operations $ 296,650 $ 112,682 $ ( 270,879 ) For the Years Ended September 30, DEPRECIATION and AMORTIZATION 2024 2023 2022 Segment: Home and Building Products $ 15,349 $ 15,066 $ 16,539 Consumer and Professional Products 44,797 49,811 47,562 Total segment depreciation and amortization 60,146 64,877 64,101 Corporate 558 568 557 Total consolidated depreciation and amortization $ 60,704 $ 65,445 $ 64,658 CAPITAL EXPENDITURES Segment: Home and Building Products (1) $ 41,765 $ 24,065 $ 11,029 Consumer and Professional Products (2) (3) 26,330 39,476 31,279 Total segment 68,095 63,541 42,308 Corporate (4) 304 63 180 Total consolidated capital expenditures $ 68,399 $ 63,604 $ 42,488 ________________________ (1) During the year ended September 30, 2023, HBP's capital expenditures included approximately $ 6,000 in connection with the purchase of HBP's Mason headquarters. (2) During the year ended September 30, 2023, CPP's capital expenditures included approximately $ 23,207 in connection with the purchase of CPP's Ocala, Florida manufacturing facility. (3) During the years ended September, 30, 2024 and 2023, CPP capital expenditures excludes proceeds from the sale of real estate and equipment of approximately $ 13,271 and $ 8,900 , respectively. (4) During the year ended September 30, 2023, Corporate's capital expenditures exclude proceeds from the sale of real estate of approximately $ 11,800 . 89 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) ASSETS At September 30, 2024 At September 30, 2023 Segment assets: Home and Building Products $ 737,992 $ 703,661 Consumer and Professional Products (1) 1,495,489 1,579,588 Total segment assets 2,233,481 2,283,249 Corporate 133,408 130,339 Total continuing assets 2,366,889 2,413,588 Other discontinued operations 4,065 5,291 Consolidated total $ 2,370,954 $ 2,418,879 __________________________ (1) In connection with the expansion of CPP's global sourcing strategy, certain owned manufacturing locations which concluded operations have met the criteria to be classified as held for sale as of September 30, 2024. The aggregate net book value of these properties as of September 30, 2024 totaled $ 14,532 . Disaggregation of Revenue Revenue from contracts with customers is disaggregated by end markets, segments and geographic location, as it more accurately depicts the nature and amount of the Company’s revenue. For the Years Ended September 30, 2024 2023 2022 Residential repair and remodel $ 769,691 $ 757,088 $ 736,525 Commercial 684,388 700,112 630,066 Residential new construction 134,546 131,305 140,291 Total Home and Building Products 1,588,625 1,588,505 1,506,882 Residential repair and remodel $ 352,797 $ 377,775 $ 392,490 Retail 234,591 267,046 456,735 Residential new construction 57,537 51,093 45,243 Industrial 67,738 78,308 76,430 International excluding North America 322,232 322,456 370,708 Total Consumer and Professional Products 1,034,895 1,096,678 1,341,606 Total Revenue $ 2,623,520 $ 2,685,183 $ 2,848,488 The following table presents revenue disaggregated by geography based on the location of the Company's customer: For the Year Ended September 30, 2024 Revenue by Geographic Area - Destination Home and Building Products Consumer and Professional Products Total United States $ 1,519,063 $ 638,782 $ 2,157,845 Europe 112 52,933 53,045 Canada 60,995 67,375 128,370 Australia — 251,778 251,778 All other countries 8,455 24,027 32,482 Total Revenue $ 1,588,625 $ 1,034,895 $ 2,623,520 90 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) For the Year Ended September 30, 2023 Revenue by Geographic Area - Destination Home and Building Products Consumer and Professional Products Total United States $ 1,515,479 $ 716,098 $ 2,231,577 Europe 18 51,041 51,059 Canada 62,897 75,477 138,374 Australia — 231,764 231,764 All other countries 10,111 22,298 32,409 Total Revenue $ 1,588,505 $ 1,096,678 $ 2,685,183 For the Year Ended September 30, 2022 Revenue by Geographic Area - Destination Home and Building Products Consumer and Professional Products Total United States $ 1,437,085 $ 858,956 $ 2,296,041 Europe 60 106,471 106,531 Canada 57,916 92,930 150,846 Australia — 258,945 258,945 All other countries 11,821 24,304 36,125 Total Revenue $ 1,506,882 $ 1,341,606 $ 2,848,488 As a percentage of segment revenue, HBP sales to The Home Depot approximated 8 %, 9 % and 7 % in 2024, 2023 and 2022, respectively; CPP sales to The Home Depot approximated 15 %, 15 % and 19 % in 2024, 2023 and 2022, respectively. As a percentage of Griffon's consolidated revenue, sales to The Home Depot approximated 11 %, 12 % and 13 % in 2024, 2023 and 2022, respectively. NOTE 20 – OTHER INCOME (EXPENSE) For the years ended September 30, 2024, 2023 and 2022, Other income (expense) from continuing operations of $ 1,766 , $ 2,928 and $ 6,881 , respectively, includes ($ 333 ), $ 302 and $ 305 , respectively, of net currency exchange transaction gains (losses) from receivables and payables held in non-functional currencies, $ 148 , $ 469 and $( 225 ), respectively, of net gains or (losses) on investments, and $( 137 ), $( 866 ) and $ 4,256 , respectively, of net periodic benefit plan income (expense). Other income (expense) also includes rental income of $ 0 , $ 212 and $ 689 and royalty income of $ 2,198 , $ 2,104 and $ 2,250 for the years ended September 30, 2024, 2023 and 2022, respectively. NOTE 21 - OTHER COMPREHENSIVE INCOME (LOSS) The amounts recognized in other comprehensive income (loss) were as follows: Years Ended September 30, 2024 2023 2022 Pre-tax Tax Net of tax Pre-tax Tax Net of tax Pre-tax Tax Net of tax Foreign currency translation adjustments $ 10,137 $ — $ 10,137 $ 8,447 $ — $ 8,447 $ ( 37,920 ) $ — $ ( 37,920 ) Pension and other defined benefit plans 1,947 ( 409 ) 1,538 8,418 ( 1,784 ) 6,634 1,907 ( 404 ) 1,503 Cash flow hedge 444 ( 133 ) 311 ( 3,363 ) 1,010 ( 2,353 ) ( 491 ) 147 ( 344 ) Total other comprehensive income (loss) $ 12,528 $ ( 542 ) $ 11,986 $ 13,502 $ ( 774 ) $ 12,728 $ ( 36,504 ) $ ( 257 ) $ ( 36,761 ) 91 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) The components of Accumulated other comprehensive income (loss) are as follows: At September 30, 2024 2023 Foreign currency translation $ ( 38,586 ) $ ( 48,723 ) Pension and other defined benefit plans ( 19,127 ) ( 20,665 ) Cash flow hedge ( 311 ) ( 622 ) Total $ ( 58,024 ) $ ( 70,010 ) Total comprehensive income (loss) were as follows: For the Years Ended September 30, 2024 2023 2022 Net income (loss) $ 209,897 $ 77,617 $ ( 191,558 ) Other comprehensive income (loss), net of taxes 11,986 12,728 ( 36,761 ) Comprehensive income (loss) $ 221,883 $ 90,345 $ ( 228,319 ) Amounts reclassified from accumulated other comprehensive income (loss) to income (loss) were as follows: For the Years Ended September 30, Gain (Loss) 2024 2023 2022 Pension amortization $ ( 2,755 ) $ ( 3,777 ) $ ( 3,379 ) Cash flow hedges ( 816 ) 1,678 4,741 Total before tax ( 3,571 ) ( 2,099 ) 1,362 Tax 750 441 ( 286 ) Net of tax $ ( 2,821 ) $ ( 1,658 ) $ 1,076 NOTE 22 — LEASES The Company recognizes right-of-use ("ROU") assets and lease liabilities on the balance sheet, with the exception of leases with a term of twelve months or less. The Company determines if an arrangement is a lease at inception. The ROU assets and short and long-term liabilities associated with our Operating leases are shown as separate line items on our Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, net, accrued liabilities, and other liabilities on our Consolidated Balance Sheets. The Company's finance leases are immaterial. ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments primarily include rent and insurance costs (lease components). The Company's leases also include non-lease components such as real estate taxes and common-area maintenance costs. The Company elected the practical expedient to account for lease and non-lease components as a single component. In certain of the Company's leases, the non-lease components are variable and in accordance with the standard are therefore excluded from lease payments to determine the ROU asset. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability. For leases with a lease term of 92 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (US dollars and non-US currencies in thousands, except per share data) 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Consolidated Balance Sheets. Variable lease cost for both operating and finance leases, if any, is recognized as incurred. Components of operating lease costs are as follows: For the Year Ended September 30, 2024 2023 2022 Fixed $ 46,575 $ 45,993 $ 44,457 Variable (a), (b) 9,772 10,654 8,615 Short-term (b) 4,997 7,717 7,438 Total $ 61,344 $ 64,364 $ 60,510 (a) Primarily related to common-area maintenance and property taxes. (b) Not recorded on the balance sheet. Supplemental cash flow information were as follows: For the Year Ended September 30, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 45,439 $ 41,533 $ 47,275 Financing cash flows from finance leases 291 2,164 2,462 Total $ 45,730 $ 43,697 $ 49,737 Supplemental Consolidated Balance Sheet information related to leases were as follows: As of September 30, 2024 2023 Operating Leases: Right of use assets: Operating right-of-use assets $ 171,211 $ 169,942 Lease Liabilities: Current portion of operating lease liabilities $ 35,065 $ 32,632 Long-term operating lease liabilities 147,369 147,224 Total operating lease liabilities $ 182,434 $ 179,856 Finance Leases: Right of use assets: Property, plant and equipment, net (1) $ 808 $ 994 Lease Liabilities: Notes payable and current portion of long-term debt $ 155 $ 280 Long-term debt, net 255 184 Total financing lease liabilities $ 410 $ 464 (1) For the years ended September 30, 2024 and 2023, finance lease assets are recorded net of accumulated depreciation of $ 1,463 and $ 6,769 , 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. 93 GRIFFON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (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 September 30, 2024 are as follows (in thousands): Operating Leases Finance Leases 2025 $ 45,291 $ 177 2026 36,262 116 2027 30,944 54 2028 25,368 50 2029 20,455 50 Thereafter 69,213 12 Total lease payments 227,533 459 Less: imputed interest ( 45,099 ) ( 49 ) Present value of lease liabilities $ 182,434 $ 410 Average lease terms and discount rates were as follows: As of September 30, 2024 2023 Weighted-average remaining lease term (years) Operating Leases 7.1 7.9 Finance Leases 4.2 3.3 Weighted-average discount rate Operating Leases 6.33 % 5.94 % Finance Leases 6.70 % 5.65 % NOTE 23 – SUBSEQUENT EVENTS On November 12, 2024, the Board of Directors declared a cash dividend of $ 0.18 per share, payable on December 18, 2024 to shareholders of record as of the close of business on November 25, 2024. Griffon 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. Subsequent to September 30, 2024 and through November 12, 2024, Griffon purchased 481,379 shares of its common stock for a total of $ 32,693 , or $ 67.91 per share under Board authorized share repurchase programs. On November 13, 2024, Griffon announced a $ 400,000 increase to its share repurchase program which, prior to such increase, had exhausted its availability. On November 12, 2024, Griffon granted 142,911 shares of restricted stock and restricted stock units to 43 executives and key employees, subject to certain performance conditions, with a vesting period of thirty-six months , with a total fair value of $ 9,735 , or a weighted average fair value of $ 68.12 per share. In addition, Griffon also granted 436,947 shares of restricted stock to four 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 72,827 to a maximum of 436,947 , with the target number of shares being 145,649 . The total estimated fair value of these restricted shares, assuming achievement of the performance conditions at target, is $ 12,372 , or a weighted average fair value of $ 84.95 per share. ***** 94 SCHEDULE II GRIFFON CORPORATION VALUATION AND QUALIFYING ACCOUNTS For the Years Ended September 30, 2024, 2023 and 2022 (in thousands) Description Balance at Beginning of Year Additions Reductions Other (1) Balance at End of Year FOR THE YEAR ENDED SEPTEMBER 30, 2024 Allowance for credit losses $ 11,264 $ 636 $ ( 1,325 ) $ 411 $ 10,986 Inventory valuation (2) $ 55,737 $ 27,210 $ ( 27,353 ) $ 691 $ 56,285 Deferred tax valuation allowance $ 17,992 $ 8,997 $ — $ — $ 26,989 FOR THE YEAR ENDED SEPTEMBER 30, 2023 Allowance for credit losses $ 12,137 $ 971 $ ( 1,186 ) $ ( 658 ) $ 11,264 Inventory valuation (2) $ 22,875 $ 44,570 $ ( 11,692 ) $ ( 16 ) $ 55,737 Deferred tax valuation allowance $ 13,490 $ 4,502 $ — $ — $ 17,992 FOR THE YEAR ENDED SEPTEMBER 30, 2022 Allowance for credit losses $ 8,787 $ 1,172 $ ( 251 ) $ 2,429 $ 12,137 Inventory valuation $ 31,605 $ 4,725 $ ( 14,103 ) $ 648 $ 22,875 Deferred tax valuation allowance $ 10,425 $ 4,330 $ ( 1,265 ) $ — $ 13,490 ___________________________________________ (1) For the year ended September 30, 2022, Other primarily consists of foreign currency and opening balances of reserves assumed from the Hunter acquisition. (2) In connection with the Company's restructuring activities described in Note 10, Restructuring Charges, during the years ended September 30, 2024 and 2023, CPP recorded inventory impairment charges of $ 23,763 and $ 37,100 , respectively, to adjust inventory to its net realizable value. 95 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.