Griffon

www.griffoncorp.com

71794Cover_Griffon.indd   2-3

12/13/12   8:49 PM

2012 Annual Report

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LETTER TO SHAREHOLDERS

Griffon performed well in a challenging global economic environment in 2012. We saw signs of
improvement in each of our businesses. I am pleased with our performance, but expect us to do
much better as the recovery accelerates. Revenue for the year increased 2% over the prior year, to
$1.9 billion, while our segment adjusted EBITDA increased 3% to $171 million.

Telephonics, our defense technology business, had an exceptional year in which it achieved
record profitability and, importantly, ended the year with the highest reported backlog in its
history. Telephonics maintained its solid technology leadership in Intelligence, Surveillance and
Reconnaissance. Advancements in maritime surveillance radar such as the introduction of Active
Electronically Scanned Arrays will contribute significantly to maintaining our industry leadership
position. In the Identification Friend or Foe (“IFF”) area, Telephonics has the distinction of
being the first, and currently only, provider of an All-Mode IFF Interrogator that is fully
certified by the U.S. Government AIMES organization. This will soon be a Federal Aviation
Administration requirement for both civil and military aircraft to be allowed to fly. Telephonics
is also the first U.S. company to be certified by the Civil Aviation Authority of China to be a
supplier of Air Traffic Control systems. Telephonics’ future remains bright in an uncertain
budgetary environment.

The housing industry, which continues to exhibit early signs of recovery, helped Home and
Buildings Products (“HBP”) results. In particular, our Clopay Building Products (“CBP”)
business delivered profit growth while strengthening its leadership position. CBP’s broad range
of attractively designed, premium garage and entry doors has been well accepted by remodeling
consumers. We also flawlessly executed a major capital expenditure project on time and below
budget while simultaneously improving our excellent customer service performance. CBP is well
positioned to perform at higher levels as the housing industry improves.

(“ATT”),

is North America’s

largest
HBP’s other business unit, Ames True Temper
manufacturer of non-powered lawn and garden tools and the world’s largest manufacturer of
snow shovels. In any given year, ATT’s business is subject to weather related variability, but over
a longer period these variations will even themselves out, and we expect ATT to be a positive
long term contributor to our company. The past winter was the worst on record for snowfall in
many areas of North America. The absence of snow tool replenishment orders combined with
swollen customer inventories had significant negative impact on sales, operations and financial
results. However, ATT expanded its product placements for 2013 through successful partnering
with key customers and improved marketing programs. Last year’s Southern Patio acquisition has
been integrated and solidifies our leadership position in the planter category. As a result, ATT
will perform better with normal weather conditions and maintain its strong relationships with
North America’s top lawn and garden retailers.

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Clopay Plastics delivered improved results this year from new business associated with our
expansion. Revenue increased 5% over the prior year (+10% excluding foreign exchange impacts)
and segment adjusted EBITDA grew by 6%. We enhanced our industry leadership position by
both deepening our penetration with existing customers and aligning with new ones around the
globe. We appointed a new leadership team in January, and I am pleased with the steady progress
they are making. The business demonstrated significant quarter-over-quarter improvements
throughout the year. A significant portion of Clopay Plastics’ business is international, and the
the turbulent economic
performance of
environments in which it operates. I am confident that with a heightened focus on lowering our
overall cost structure, together with continued improvement in operating efficiencies, we will
return to higher profitability levels.

that business is heartening in light of some of

We continue to focus on the strength of our balance sheet while expanding and improving our
operations. We delivered strong operating cash flow and ended the year with $210 million of
cash. During the year, we bought back approximately 1.2 million shares of common stock for
$10.4 million while paying $0.08 per share in dividends. In November, we increased our dividend
by 25% to an annualized $0.10 per share. We continue to have ample liquidity to provide the
foundation for future growth through acquisitions. While our appetite for value enhancing
acquisitions remains strong, continued uncertainty about the future of the global economy
remains a reality.

Over the past two years, we have invested significantly in people, plant and equipment to
strengthen and diversify our companies. This disciplined effort has delivered increased revenues
and profitability while maintaining a strong balance sheet. As the economy recovers, our
businesses are well positioned for growth. We end this year optimistic for Griffon’s future.

Yours sincerely,

Ronald J. Kramer
Chief Executive Officer

17457

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended September 30, 2012
or
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-06620
GRIFFON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

11-1893410
(I.R.S. Employer Identification No.)

712 Fifth Avenue, 18th Floor, New York, New York
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code:

(212) 957-5000

10019
(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, $0.25 par value

Name of each exchange
on which registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:3) No (cid:2)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:3) No (cid:2)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such period that the registrant was required to submit and post such files). Yes (cid:2) No (cid:3)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer (cid:3)

Accelerated filer (cid:2)

Non-accelerated filer (cid:3)
(Do not check if a smaller
reporting company)

Smaller reporting company (cid:3)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:2)

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the
close of business March 31, 2012, the registrant’s most recently completed second quarter, was approximately
$494,000,000. The registrant’s closing price as reported by the New York Stock Exchange-Composite Transactions for
March 31, 2012 was $10.70. The number of the registrant’s outstanding shares was 60,793,342 as of October 31, 2012.

DOCUMENTS INCORPORATED BY REFERENCE:
Part III—(Items 10, 11, 12, 13 and 14). Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A of the Securities Exchange
Act of 1934.

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Special Notes Regarding Forward-Looking Statements

This Annual Report on Form 10-K, especially “Management’s Discussion and Analysis”, contains
certain “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.
Such statements relate to, among other things,
income, earnings, cash flows, revenue, changes in
industries in which Griffon Corporation (the “Company” or
operations, operating improvements,
“Griffon”) operates and the United States and global economies. Statements in this Form 10-K that are
not historical are hereby identified as “forward-looking statements” and may be indicated by words or
phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,”
“could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,”
“explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words
or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could
cause actual results to differ materially from those expressed in any forward-looking statements. These
risks and uncertainties include, among others: current economic conditions and uncertainties in the
housing, credit and capital markets; Griffon’s ability to achieve expected savings from cost control,
integration and disposal initiatives; the ability to identify and successfully consummate and integrate
value-adding acquisition opportunities; increasing competition and pricing pressures in the markets
served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into
new geographic and product markets and to anticipate and meet customer demands for new products
and product enhancements and innovations; reduced military spending by the government on projects
for which Griffon’s Telephonics Corporation supplies products, including as a result of sequestration
which is currently scheduled to take effect in January 2013; increases in the cost of raw materials such
as resin and steel; changes in customer demand or loss of a material customer at one of the operating
companies; the potential impact of seasonal variations and uncertain weather patterns on certain of
Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in
Griffon’s credit ratings; changes in international economic conditions including interest rate and
currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party
suppliers and manufacturers to meet customer demands; the relative mix of products and services
offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term capacity
constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation;
unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability
to adequately protect and maintain the validity of patent and other intellectual property rights; the
cyclical nature of the businesses of certain of Griffon’s operating companies; and possible terrorist
threats and actions and their impact on the global economy. Readers are cautioned not to place undue
reliance on these forward-looking statements. These forward-looking statements speak only as of
the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required
by law.

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(Unless otherwise indicated, any reference to years or year-end refers to the fiscal year ending
September 30 and US dollars and non US currencies are in thousands, except per share data)

PART I

Item 1. Business

The Company

Griffon Corporation (the “Company” or “Griffon”), 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 in connection with acquisition and growth opportunities as
well as in connection with divestitures. Griffon, to further diversify, also seeks out, evaluates and, when
appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Headquartered in New York, N.Y., the Company was founded in 1959 and is incorporated in Delaware.
Griffon is listed on the New York Stock Exchange and trades under the symbol GFF.

Griffon currently conducts
(“Telephonics”), Home & Building Products
(“Plastics”).

its operations

through three businesses: Telephonics Corporation
(“HBP”) and Clopay Plastic Products Company

• HBP, which consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building
Products (“CBP”), accounted for 46% of Griffon’s consolidated revenue in 2012, 46% in 2011,
and on a pro forma basis giving effect to the acquisition of ATT as if it had occurred on October
1, 2009, 48% of Griffon’s consolidated revenue in 2010:

– ATT, acquired on September 30, 2010,

is a global provider of non-powered landscaping
products that make work easier for homeowners and professionals. Due to the timing of the
acquisition, none of ATT’s 2010 and prior results of operations were included in Griffon’s
results. ATT’s revenue was 23% of Griffon’s consolidated revenue in 2012 and 24% in 2011.
2010 pro forma revenue was $443,634, or 26% of Griffon’s pro forma 2010 revenue of
$1,737,630 (unaudited), giving effect to the acquisition of ATT as if it had occurred on October
1, 2009.

– CBP is a leading manufacturer and marketer of residential, commercial and industrial garage
doors to professional installing dealers and major home center retail chains. CBP’s revenue
was 23% of Griffon’s consolidated revenue in 2012, 22% in 2011 and 30% in 2010.

• Telephonics designs, develops and manufactures high-technology integrated information,
communication and sensor system solutions for military and commercial markets worldwide.
Telephonics’ revenue was 24% of Griffon’s consolidated revenue in 2012, 25% in 2011 and 34%
in 2010.

• Plastics is an international leader in the development and production of embossed, laminated and
printed specialty plastic films used in a variety of hygienic, health-care and industrial
applications. Plastics’ revenue was 30% of Griffon’s consolidated revenue in 2012, 29% in
2011 and 36% in 2010.

On October 17, 2011, Griffon acquired the pots and planters business of Southern Sales & Marketing
Group, Inc. (“Southern Patio”) for approximately $23,000. The acquired business, which markets its
products under the Southern Patio™ brand name, is a leading designer, manufacturer and marketer of
landscape accessories. Southern Patio, which has been integrated with ATT, had revenue exceeding
$40,000 in 2011.

On March 17, 2011, in an unregistered offering through a private placement under Rule 144A, Griffon
issued, at par, $550,000 of 7.125% Senior Notes due in 2018 (“Senior Notes”); interest on the Senior

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Notes is payable semi-annually. Proceeds were used to pay down the outstanding borrowings under a
senior secured term loan facility and two senior secured revolving credit facilities of certain Company
subsidiaries. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain
domestic subsidiaries, and are subject to certain covenants, limitations and restrictions. On August 9,
2011, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under
the Securities Act of 1933, via an exchange offer.

On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit
Agreement”), which includes a letter of credit sub-facility with a limit of $50,000, a multi-currency sub-
facility of $50,000 and a swing line sub-facility with a limit of $30,000. Interest is payable on borrowings
at either a LIBOR or base rate benchmark rate plus an applicable margin, which adjusts based on
financial performance. The current margins are 1.5% for base rate loans and 2.5% for LIBOR loans, in
each case without a floor. Borrowings under the Credit Agreement are guaranteed by certain domestic
subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the
guarantors. At September 30, 2012, there were $21,693 of standby letters of credit outstanding under
the Credit Agreement; $178,307 was available for borrowing at that date.

On September 30, 2010, Griffon purchased all of the outstanding stock of CHATT Holdings, Inc.
(“ATT Holdings”), the parent of ATT, on a cash and debt-free basis, for $542,000 in cash, subject to
certain adjustments. As the purchase of ATT occurred on September 30, 2010, ATT’s operating results
are not included in Griffon’s consolidated statements of operations or cash flows, or footnotes relating
thereto for any year presented prior to October 1, 2010, except where explicitly stated as pro-forma
results. All pro forma results are unaudited and, unless otherwise stated, give effect to the acquisition of
ATT as if it had occurred on October 1, 2009. The Griffon consolidated balance sheet at September 30,
2010, and related notes thereto, include ATT’s balances at that date.

In July 2010, Griffon retired substantially all of its outstanding 4% Convertible Subordinated Notes due
2023 when these notes were put to Griffon at par.

In December 2009, Griffon issued $100,000 principal amount of 4% Convertible Subordinated Notes
due 2017 (the “2017 Notes”) at an initial conversion ratio of 67.0799 shares of Griffon common stock
per $1,000 principal amount of the 2017 Notes, corresponding to an initial conversion price of
approximately $14.91 per share.

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all
operating activities of its Installation Services segment which sold, installed and serviced garage doors
and openers, fireplaces, floor coverings, cabinetry and a range of related building products, primarily for
the new residential housing market. Griffon sold eleven units, closed one unit and merged two units
into CBP. Operating results of substantially all this segment has been reported as discontinued
operations in the Consolidated Statements of Operations for all periods presented; the Installation
Services segment is excluded from segment reporting.

Griffon makes available, free of charge through its website at www.griffoncorp.com, its annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as soon as
reasonably practicable after such materials are filed with or furnished to the Securities and Exchange
Commission (the “SEC”).

For information regarding revenue, profit and total assets of each segment, see the Business Segments
footnote in the Notes to Consolidated Financial Statements.

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Reportable Segments:

Home & Building Products

Home & Building Products consists of two companies, Ames True Temper, Inc and Clopay Building
Products, which are described below.

Ames True Temper

ATT is the leading U.S. and a global provider of non-powered landscaping products that make work
easier for homeowners and professionals. ATT employs approximately 1,400 employees.

Brands

ATT brands are among the most recognized across primary product categories in the North American,
non-powered landscaping product markets. ATT’s brand portfolio includes Ames®, True Temper®,
Ames True Temper®, Garant®, Hound Dog®, Westmix™, Dynamic Design® and Southern Patio™, as
well as contractor-oriented brands including UnionTools®, Razor-Back® Professional Tools and
Jackson® Professional Tools. This strong portfolio of brands enables ATT to build and maintain long-
standing relationships with leading retailers and distributors. In addition, given the breadth of ATT’s
brand portfolio and product category depth, ATT is able to offer specific, differentiated branding
strategies for key retail customers. In addition to the brands listed, ATT also sells private label branded
products further enabling channel management and customer differentiation.

Products

ATT manufactures and markets one of the broadest product portfolios in the non-powered landscaping
product industry. This portfolio is anchored by three core product categories:
long handle tools,
wheelbarrows, and snow tools. As a result of ATT’s brand portfolio recognition, high product quality,
industry leading service and strong customer relationships, ATT has earned market-leading positions in
the long handle tool, wheelbarrow, and snow tool product categories. The following is a brief
description of ATT’s primary product lines:

• Long Handle Tools: An extensive line of engineered tools including shovels, spades, scoops,
rakes, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks, marketed under
leading brand names including Ames®, True Temper®, Jackson® Professional Tools, Union-
Tools®, Razor-Back® Professional Tools, and Garant®.

• Wheelbarrows: ATT designs, develops and manufactures a full line of wheelbarrows and lawn
carts, primarily under the Ames®, True Temper®, Jackson® Professional Tools, Razor-Back®
Professional Tools, UnionTools®, Garant® and Westmix™ brand names. The products range in
size (2 cubic feet to 10 cubic feet), material (poly and steel), tray form, tire type, handle length
and color based on the needs of homeowners, landscapers and contractors.

• Snow Tools: A complete line of snow tools is marketed under the Ames True Temper®, True
Temper® and Garant® brand names. The snow tool line includes shovels, pushers, roof rakes,
sled sleigh shovels, scoops and ice scrapers.

• Planters and Lawn Accessories: ATT is a designer, manufacturer and distributor of indoor and
outdoor planters and accessories, sold under the Dynamic Design® and Southern Patio™ brand
names, as well as various private label brands. The range of planter sizes (from 6 to 32 inches)
are available in various designs, colors and materials. On October 17, 2011, Griffon acquired the
pots and planters business which markets its products under the Southern Patio™ brand name.
Southern Patio is a leading designer, manufacturer and marketer of decorative landscape
products. Southern Patio™ and Dynamic Design® have been integrated to leverage Southern
Patio’s capabilities, enhances ATT’s product offering in the pots and planters category and
enables ATT to improve its innovation and speed to market in the category.

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• Striking Tools: Axes, picks, mattocks, mauls, wood splitters, sledgehammers and repair handles
make up the striking tools product line. These products are marketed under the True Temper®,
Jackson® Professional Tools, UnionTools®, Garant® and Razor-Back® Professional Tools
brand names.

• Pruning: The pruning line is made up of pruners, loppers, shears and other tools sold primarily

under the True Temper® brand name.

• Garden Hose and Storage: ATT offers a wide range of both manufactured and sourced garden
hoses and hose reels under the Ames®, NeverLeak® and Jackson® Professional Tools brand
names.

Customers

ATT sells products throughout North America, Australia, and Europe through (1) retail centers,
including home centers and mass merchandisers, such as The Home Depot (“Home Depot”), Lowe’s
Companies (“Lowe’s”), Walmart, Canadian Tire, Costco, Rona, Bunnings, and Woodies (2) wholesale
chains, including hardware stores and garden centers, such as Ace, Do-It-Best and True Value and (3)
industrial distributors, such as Grainger and ORS Nasco.

Home Depot and Lowe’s are significant customers of ATT. The loss of either of these customers would
have a material effect on ATT’s and Griffon’s business.

Product Development

ATT product development efforts focus on both new products and product line extensions. Products are
developed through in-house industrial design and engineering staffs, and through relationships with a
number of outside product engineering and design firms, to introduce new products timely and cost
effectively. Examples of recent new product initiatives include the SnoForce™ combo snow shovel,
NeverLeak® hose reel with patent pending aluminum water system, Total Control™ Wheelbarrow with
patented handle system, and new Stonecraft™ fiber clay planters providing a heavier, more durable
ceramic-like pot.

Sales and Marketing

sales organization is

ATT’s
in the U.S. and by country
structured by distribution channel
internationally. In the U.S., a dedicated team of sales professionals is provided for each of the large
retail customers. Offices are maintained adjacent to each of the three largest customers’ headquarters,
as well as dedicated in-house sales analysts at the corporate office. In addition, sales professionals are
assigned to domestic, wholesale and industrial distribution channels. Sales teams located in Canada,
Australia, Mexico and Ireland handle sales in each of their respective locations.

Raw Materials and Suppliers

inputs

ATT’s primary raw material
include resin (primarily polypropylene and high density
polyethylene), wood (mainly ash, hickory and poplar logs) and steel (hot rolled and cold rolled). In
addition, some key materials and components are purchased, such as metal
fork components,
wheelbarrow tires, shovel heads and fiberglass handles; most final assembly is completed internally in
order to ensure consistent quality. All raw materials used by ATT are generally available from a
number of sources.

Competition

The non-powered landscaping product industry is highly competitive and fragmented. Most competitors
consist of small, privately-held companies focusing on a single product category. Some competitors such
as Fiskars Corporation and Truper Herramientas S.A. de C.U. compete in various tool categories,
Suncast Corporation in hose reels and accessories, and Colorite Waterworks and Swan, both Techniplex
companies, in garden hoses. In addition, there is competition from imported or sourced products from

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China, India and other low-cost producing countries, particularly in long handled tools, wheelbarrows,
planters, striking tools and pruning tools.

The principal factors by which ATT differentiates itself and provides the best value to customers are
innovation, service, quality, performance and reliability with strong brand heritage. ATT’s size, depth
and breadth of product offering, category knowledge, research and development (“R&D”) investment
and service are competitive advantages. Offshore manufacturers lack sufficient product innovation,
capacity, lead time and distribution capabilities to service large retailers to compete in highly seasonal,
weather related product categories.

Manufacturing & Distribution

ATT has nine operational distribution centers. In the U.S., the largest of these is a 1.2 million square
foot facility in Carlisle, Pennsylvania and a 400,000 square foot facility in Reno, Nevada. Finished goods
from manufacturing sites are transported to these facilities by an internal fleet, over the road trucking
and rail. Additionally, light assembly is performed at the Carlisle, Pennsylvania and Reno, Nevada
locations. Distribution centers are maintained in Canada and Ireland, and ATT utilizes a third party
distribution center in Mexico City, Mexico. ATT has five distribution centers in Australia. ATT has a
combination of internal and external, domestic and foreign manufacturing sources from which it
produces products for sale in North American, Australian and European markets.

Clopay Building Products

CBP is the largest manufacturer and marketer of residential garage doors, among the largest
manufacturers of commercial sectional doors in the United States and manufactures a complete line of
entry door systems uniquely designed to complement its popular residential garage door styles. The
majority of CBP’s sales are for home remodeling and renovation, with the balance for the new
residential housing and commercial building markets. Sales into the home remodeling market are being
driven by the continued aging of the housing stock, existing home sales activity, the trend of improving
home appearance, as well as improved energy efficiency. CBP employs approximately 1,300 employees.

According to the US census, calendar year 2012 new construction single-family homes starts will
increase by 43%. The repair and remodel market increased 4% from calendar year 2011 spending
levels. The commercial segment saw spending drop 6% for the year (according to estimates from
McGraw Hill Construction Dodge). According to industry sources, the residential and commercial
sectional garage door market for calendar year 2011 was estimated to be $1,600,000, which increased
$100,000 over the prior year.

Brands

CBP brings nearly 50 years of experience and innovation to the garage door industry. Our strong family
of brands includes Clopay®, America’s Favorite Garage Doors®; Holmes Garage Door Company® and
IDEAL Door®. Clopay is the only residential garage door brand to hold the Good Housekeeping Seal
of Approval.

Products and Service

CBP manufactures a broad line of residential sectional garage doors with a variety of options, at varying
prices. CBP offers garage doors made primarily from steel, plastic composite and wood, and also sells
related products, such as garage door openers, manufactured by third parties.

CBP also markets commercial sectional doors, which are similar to residential garage doors, but are
designed to meet the more demanding performance specifications of a commercial application.

CBP has a complete line of entry door systems uniquely designed to complement its popular residential
garage door styles.

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Customers

CBP is the principal supplier of residential garage doors throughout North America to Home Depot
and Menards. The loss of either of these customers would have a material adverse effect on CBP’s and
Griffon’s business. CBP distributes its garage doors directly to customers from its manufacturing
facilities and through its distribution centers located throughout the United States and Canada. These
distribution centers allow CBP to maintain an inventory of garage doors near installing dealers and
provide quick-ship service to retail and professional dealer customers.

Product Development

CBP product development efforts focus on both new products and improvements to existing products.
Products are developed through in-house design and engineering staffs.

CBP operates a technical development center where its research engineers design, develop and
implement new products and technologies and perform durability and performance testing of new and
existing products, materials and finishes. CBP continually improves their garage door offerings through
these development efforts, focusing on characteristics such as strength, design and energy efficiency.
Also at this facility, the process engineering team works to develop new manufacturing processes and
production techniques aimed at
improving manufacturing efficiencies and ensuring quality-made
products.

Sales and Marketing

The CBP sales and marketing organization supports our customers, consults on new product
development and aggressively markets garage door solutions, with a primary focus on the North
American market.

Raw Materials and Suppliers

The principal raw material used in CBP’s manufacturing is galvanized steel. CBP also utilizes certain
hardware components, as well as wood and insulated foam. All of these raw materials are generally
available from a number of sources.

Competition

The garage door industry is characterized by several large national manufacturers and many smaller
regional and local manufacturers. CBP competes on the basis of service, quality, price, brand awareness
and product design.

CBP’s brand names are widely recognized in the building products industry. CBP believes that it has
earned a reputation among installing dealers, retailers and wholesalers for producing a broad range of
innovative, high-quality doors. CBP’s market position and brand recognition are key marketing tools for
expanding its customer base, leveraging its distribution network and increasing its market share.

Distribution

CBP distributes its products through a wide range of distribution channels, including installing dealers,
retailers and wholesalers. CBP owns and operates a national network of 49 distribution centers.
Additionally, products are sold to approximately 2,000 independent professional installing dealers and
to major home center retail chains. CBP maintains strong relationships with its installing dealers and
believes it is the largest supplier of residential garage doors to the retail and professional installing
channels in North America.

Manufacturing

CBP currently has manufacturing facilities, in Troy, Ohio, Russia, Ohio, and Auburn, Washington.

During the first quarter of 2013, CBP announced the closing of the Auburn, Washington facility and the
consolidation of that facility into its Russia, Ohio facility. The consolidation of these facilities is
expected to be completed in the second quarter of 2013.

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In June 2009, CBP undertook to consolidate its manufacturing facilities. These actions were completed
in 2011. CBP incurred total pre-tax exit and restructuring costs approximating $9,031, substantially all of
which was cash charges; charges include $1,160 for one-time termination benefits and other personnel
costs, $210 for excess facilities and related costs, and $7,661 for other exit costs, primarily in connection
with production realignment, and had $10,365 of capital expenditures.

The facility consolidation was part of CBP’s continuing efforts to improve and streamline its
manufacturing processes. CBP’s engineering and technological expertise, combined with its capital
investment programs, has enabled it to efficiently manufacture products in large volume and meet
changing customer needs in a timely manner. CBP uses proprietary manufacturing processes to produce
the majority of its products. Certain machinery and equipment are internally modified to achieve
manufacturing objectives. These manufacturing facilities produce a broad line of high quality garage
doors for distribution to professional installer, retail and wholesale channels.

Telephonics Corporation

Telephonics specializes in advanced electronic information and communication systems for defense,
aerospace, civil, industrial, and commercial applications for the United States (“U.S.”) and international
markets. Telephonics designs, develops, manufactures, sells, and provides logistical support for aircraft
intercommunication systems, radar, air traffic management, identification friend or foe equipment,
Integrated Homeland Security Systems and custom, mixed-signal, application-specific,
integrated
circuits. Telephonics is also a provider of advanced systems engineering services supporting air and
missile defense programs, as well as other threat and situational analysis requirements. Telephonics is a
leading supplier of airborne maritime surveillance radar and aircraft intercommunication management
systems, the segment’s two largest product lines. In addition to its traditional defense products used
predominantly by the U.S. Government and its agencies, Telephonics has adapted its core technologies
to products used in international markets in an effort to further increase its presence in both non-
defense government and commercial markets. In 2012, approximately 79% of the segment’s sales were
to the U.S. Government and agencies thereof, as a prime or subcontractor, 11% to international
customers and 10% to U.S. commercial customers. Telephonics employs approximately 1,100
employees.

Griffon believes that Telephonics’ advanced systems and sub-systems are well-positioned to address the
needs of an electronic battlefield with emphasis on providing situational awareness to the warfighters
through the retrieval and dissemination of timely data for use by highly mobile ground, air and sea-
going forces. Telephonics anticipates that the need for such systems will increase in connection with the
increasingly active role that the military is playing in the war on terrorism, both at home and abroad. In
recent years, Telephonics has increasingly focused its technologies and core competencies in the
growing Homeland Security, Air Traffic Management, and Unmanned Aerial Vehicle (“UAV”)
markets.

On August 1, 2012, Telephonics signed a definitive agreement to form a Joint Venture (“JV”) with
Mahindra & Mahindra Ltd., one of India’s leading business houses, to provide the Indian Ministry of
Defense and the Indian Civil sector with radar and surveillance systems, Identification Friend or Foe
(“IFF”) devices and communication systems. In addition, the JV intends to provide systems for Air
Traffic Management Services, Homeland Security and other emerging surveillance requirements.

Programs and Products

Based on long-established relationships supported by existing contractual arrangements, Telephonics is
a first-tier supplier to prime contractors in the defense industry such as Lockheed Martin, Boeing,
Northrop Grumman, General Dynamics, MacDonald Dettwiler, Sierra Nevada Corporation and
Sikorsky Aircraft, and is at times a prime contractor to the U.S. Department of Defense and the U.S.
Department of Homeland Security (“Homeland Security”). The significance of each of these customers
to Telephonics’ revenue fluctuates on an annual basis, based on the timing and funding of the Original
Equipment Manufacturers (“OEM”) contract award, and the technological scope of the work required
to be performed. The significant contraction and consolidation in the U.S. and international defense
industry provides opportunities for established first-tier suppliers to capitalize on existing relationships

8

with major prime contractors and play a larger role in defense systems development and procurement,
for the foreseeable future.

29261

resources

to direct

Telephonics continues
towards Homeland Security programs. Previously,
Telephonics has completed a contract from the U.S. Customs and Border Protection for mobile
surveillance systems as part of Homeland Security’s initiative to protect the U.S. borders, and in 2011
was awarded another contract to provide additional mobile surveillance systems. These programs
represent strategic advances for Telephonics by enabling it to expand its core technical expertise into
the nascent and growing Homeland Security market. As with many Department of Homeland Security
programs, the system specifications, and operational and test requirements are challenging, exacerbated
by demanding delivery schedules.

In 2010, Telephonics was selected by Northrop Grumman as the radar supplier for the U.S. Navy’s
Firescout MQ-8 program, which is a vertical take-off and landing UAV platform. This positions
Telephonics, with both its radar and communications products, as a strong competitor in this growing
market segment. Telephonics expects to start recognizing revenue for this project in 2013 and begin
shipping in 2014.

As a result of its performance on a prior manufacturing contract with Syracuse Research Corporation,
Telephonics received a subcontract award from Sierra Nevada Corporation for both production and
support of counter-IED devices which resulted in $24,000, $44,000 and $46,000 in 2012, 2011 and 2010,
respectively.

Backlog

The funded backlog for Telephonics approximated $451,000 at September 30, 2012, compared to
$417,000 at September 30, 2011. The increase in backlog is primarily attributable to additional funding
received for the MH-60R program, a unique, fully integrated multi-mode radar and identification friend
or foe interrogator system. Approximately 70% of the current backlog is expected to be filled during
2013.

Customers

The U.S. Government, through its agencies, Lockheed Martin Corporation and the Boeing Company
are significant customers of Telephonics. The loss of any one of these customers would have a material
adverse effect on Telephonics’ business. Notwithstanding the significance of Lockheed Martin
Corporation and the Boeing Company, Telephonics sells to a diverse group of other domestic and
international defense industry contractors, as well as others who use Telephonics products for
commercial use.

Telephonics participates in a range of long-term defense and non-military government programs, both
in the U.S. and internationally. Telephonics has developed a base of installed products that generate
significant recurring revenue from product enhancements and retrofits as well as providing spare parts
and customer support. Due to the inherent complexity of these electronic systems, Telephonics believes
that its incumbent status on major platforms provides a competitive advantage in the selection process
for platform upgrades and enhancements. Furthermore, Telephonics believes that its ability to leverage
and apply its advanced technology to new platforms provides a competitive advantage when bidding for
new business.

Research and Development

In an effort to maintain customer satisfaction and loyalty, Telephonics works closely with prime
customers to ensure that there is a future market for its products by investing R&D funds in desired
enhancements. Telephonics continually updates its core technologies through internally funded R&D
while coordinating with its customers at the earliest stages of new program development in an effort to
provide solutions well in advance of its competitors. Telephonics is a technological leader in its core
markets and pursues new growth opportunities by leveraging its systems design and engineering
capabilities and incumbent position on key platforms.

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In addition to products for defense programs, Telephonics technology is also used in commercial
applications such as airborne weather, search and rescue radar, and air traffic management systems.
Telephonics’ reputation for innovative product design and engineering capabilities, especially in the
areas of voice and data communications, radio frequency design, digital signal processing, networking
systems, inverse synthetic aperture radar and analog, digital and mixed-signal integrated circuits, will
continue to enhance its ability to secure, retain and expand its participation in defense programs and
commercial opportunities.

Telephonics often designs its products to exceed customers’ minimum specifications, providing its
customers with greater performance, flexibility, and value. Telephonics believes that early participation
and communication with its customers in the requirements definition stages of new program
development increases the likelihood that its products will be selected and integrated as part of a
total system solution.

Sales and Marketing

Telephonics has technical business development personnel who act as the focal point for its marketing
activities and sales representatives who introduce its products and systems to customers worldwide.

Competition

Telephonics competes with major manufacturers of electronic information and communication systems,
as well as several smaller manufacturers of similar products. Telephonics endeavors to design products
with greater performance and flexibility than its competitors while competing on the basis of
technology, design, quality and price.

Manufacturing Facilities

Telephonics’ facilities are principally located in the United States, primarily in New York, with one
facility in Sweden. Telephonics also maintains a Technical Support Services Center in Elizabeth City,
North Carolina which supports aircraft integration and upgrade activities, in addition to providing
support services to customers.

Clopay Plastic Products

Plastics produces and develops specialty plastic films and laminates for a variety of hygienic, health care
and industrial uses in the United States and certain international markets. Products include thin gauge
embossed and printed films, elastomeric films, laminates of film and non-woven fabrics, and perforated
films and non-wovens. These products are used as moisture barriers in disposable infant diapers, adult
incontinence products and feminine hygiene products, protective barriers in single-use surgical and
industrial gowns, drapes and equipment covers, fluid transfer/distribution layers in absorbent products,
components to enhance comfort and fit in infant diaper and adult incontinence products, packaging for
hygienic products, house wrap and other products. Plastics’ products are sold through a direct sales
force, primarily to multinational consumer and medical products companies. Plastics employs
approximately 1,500 employees.

The markets in which Plastics participates have been affected by several key trends over the past five
years. These trends include the increased use of disposable products in developing countries and
favorable demographics, including increasing immigration in major global economies. Other trends
representing significant opportunities include the continued demand for innovative products such as
cloth-like, breathable, laminated and printed products, and large consumer products companies’ need
for global supply partners. Notwithstanding the positive trends affecting the industry, product design
changes by the customer can change the products manufactured by Plastics and the associated demand.

Plastics believes that its business development activities targeting major multinational and regional
producers of hygiene, healthcare and related products and its investments in its technology development
capability and capacity increases will lead to additional sales of new and related products.

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Products

Plastics’ specialty plastic film is a thin-gauge film engineered to provide certain performance
characteristics and manufactured from polymer resins. A laminate is the combination of a plastic
film and a woven or non-woven fabric. These products are produced using both cast and blown
extrusion and various laminating processes. High speed, multi-color custom printing of
films,
customized embossing patterns, and proprietary perforation technology further differentiate the
products. Specialty plastic film products typically provide a unique combination of performance
characteristics, such as breathability, barrier properties, fluid flow management, elastic properties,
process ability and aesthetic appeal, that meet specific, proprietary customer needs.

Customers

Plastics’ largest customer is Procter & Gamble, Co. (“P&G”), which has accounted for approximately
half of its revenue over the last five years. The loss of this customer would have a material adverse
effect on the Plastics business and Griffon. Notwithstanding the significance of P&G, Plastics sells to a
diverse group of other leading consumer, health care and industrial companies.

Product Development

Plastics is an industry leader in the research, design and development of specialty plastic film and
laminate products. Plastics operates a technical center where polymer chemists, scientists and engineers
work independently and in partnerships with customers to develop new technologies, products,
processes and product applications.

Plastics’ R&D efforts have resulted in many inventions covering embossing patterns,
improved
processing methods, product formulations, product applications and other proprietary technology.
Products developed include microporous breathable films and cost-effective printed films and laminates.
Microporous breathability provides for moisture vapor transmission and airflow while maintaining
barrier properties resulting in improved comfort and skin care. Elastic laminates provide the user with
improved comfort and fit. Printed films and laminates provide consumers preferred aesthetics, such as
softness and visual appeal. Perforated films and non-wovens provide engineered fluid transfer with
unique softness and aesthetics. Plastics holds a number of patents for its specialty film and laminate
products and related manufacturing processes. While patents play a significant role, Plastics believes
that its proprietary know-how and the knowledge, ability and experience of its employees are more
significant to its long-term success.

Sales and Marketing

Plastics sells its products primarily in North America, Europe, and South and Central America with
additional sales in Asia Pacific. Plastics utilizes an internal direct sales force, with senior management
actively participating in developing and maintaining close contacts with customers.

Plastics seeks to expand its market presence by providing innovative products and services to major
international consumer products companies. Specifically, Plastics believes that it can continue to
increase its North American sales and expand internationally through ongoing product development
and enhancement, and by marketing its technologically-advanced films, laminates and printed films for
use in all of its markets. Operations in Germany, Brazil and most recently China and Turkey, provide a
strong platform for additional sales growth in international markets.

Raw Materials and Suppliers

Plastic resins, such as polyethylene and polypropylene, and non-woven fabrics are the basic raw
materials used in the manufacture of substantially all Plastics’ products. The price of resin has
fluctuated dramatically over the past five years primarily due to volatility in oil prices and producer
capacity. Resins are purchased in pellet form from several suppliers. Sources for raw materials are
believed to be adequate for current and anticipated needs.

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Competition

Plastics has a number of competitors, some of which are larger, in the specialty plastic films and
laminates market. Plastics competes on quality, service and price using its technical expertise, product
development capabilities and broad international footprint to enhance its market position, build and
maintain long-term customer relationships and meet changing customer needs.

Manufacturing

Specialty plastic film and laminate products are manufactured using high-speed equipment designed to
meet stringent tolerances. The manufacturing process consists of melting a mixture of polymer resins
and additives, and forcing this mixture through a die and rollers to produce thin films. Laminates of
films and non-wovens are manufactured by a variety of techniques to meet customer needs. In addition,
films and laminates can be printed.

Plastics’ U.S. manufacturing facilities are in Augusta, Kentucky and Nashville, Tennessee from which it
sells plastic films throughout the United States and various parts of the world.

Plastics has two manufacturing facilities in Germany from which it sells plastic films throughout Europe
and the Middle East. Plastics also has operations in Brazil, China and Turkey, which manufacture
plastic hygienic and specialty films. Plastics’ international operations provide a platform to broaden
participation in Europe, the Middle East, South America and Asia and strengthen Plastics’ position as a
global supplier.

Griffon Corporation

Employees

Griffon and its subsidiaries employ approximately 5,400 people located primarily throughout the U.S.,
Canada, Europe, Brazil, Australia, China and Mexico. Approximately 440 of these employees are
covered by collective bargaining agreements in the U.S., primarily with an affiliate of the American
Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), United Brotherhood of
Carpenters and Joiners of America (“UBCJA”), International Brotherhood of Teamsters (“IBT”) and
the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy Allied Industrial and Service
Workers International Union. Additionally, approximately 169 employees in Canada are represented by
the Trade Union Advisory Committee. Griffon believes its relationships with its employees are
satisfactory.

Regulation

Griffon’s operations are subject to various environmental, health, and employee safety laws and
is in material compliance with these laws and regulations.
regulations. Griffon believes that
Historically, compliance with environmental laws has not materially affected, and is not expected to
materially affect, Griffon’s capital expenditures, earnings or competitive position in the future.
Nevertheless, Griffon cannot guarantee that,
it will not incur additional costs for
compliance or that such costs will not be material.

in the future,

it

Telephonics, which sells directly and indirectly to the U.S. government, is subject to certain regulations,
laws and standards set by the U.S. government. Additionally, Telephonics is subject to routine audits
and investigations by U.S. Government Agencies such as the Defense Contract Audit Agency and other
Inspectors General. These agencies review a contractor’s performance under its contracts, cost structure
and compliance with applicable laws, regulations and standards. These agencies also review the
adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the
contractor’s management, purchasing, property, estimating, compensation, and accounting and
information systems.

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72923

Customers

A small number of customers account for, and are expected to continue to account for, a substantial
portion of Griffon’s consolidated revenue. For 2012:

a. The U.S. Government and its agencies, through either prime or subcontractor relationships,

represented 19% of Griffon’s consolidated revenue and 79% of Telephonics revenue.

b. P&G represented 13% of Griffon’s consolidated revenue and 43% of Plastics revenue.

c. Home Depot represented 12% of Griffon’s consolidated revenue and 25% of HBP revenue.

No other customers exceeded 9% of consolidated revenue. Future operating results will continue to
substantially depend on the success of Griffon’s largest customers and Griffon’s relationships with them.
Orders from these customers are subject to fluctuation and may be reduced materially. The loss of all or
a portion of volume from any one of these customers could have a material adverse impact on Griffon’s
liquidity and operations.

Seasonality

Generally, Griffon’s revenue and income are lowest in our first and fourth quarters ending December
31 and September 30, respectively, and highest in our second and third quarters ending March 31 and
June 30, respectively, primarily due to the seasonality of ATT’s business. ATT’s lawn and garden
products are used primarily in the spring and summer; in 2012, 61% of ATT’s sales occurred during the
second and third quarters. CBP’s business is driven by residential renovation and construction during
warm weather, which is generally at reduced levels during the winter months.

Demand for lawn and garden products is influenced by weather, particularly weekend weather during
the peak gardening season. ATT’s sales volumes could be adversely affected by certain weather patterns
such as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In addition,
lack of snow or lower than average snowfall during the winter season may also result in reduced sales of
certain ATT products, such as snow shovels and other snow tools. As a result, ATT’s results of
operations, financial results and cash flows could be adversely impacted.

Financial Information About Geographic Areas

Segment and operating results are included in Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations.

For geographic financial information, see the Business Segment footnote in the Notes to Consolidated
Financial Statements in Item 8, Financial Statements and Supplementary Data.

Griffon’s non-U.S. businesses are primarily in Germany, Canada, Brazil, Turkey, China, Australia,
Sweden and Mexico.

Research and Development

Griffon’s companies are encouraged to improve existing products as well as develop new products to
satisfy customer needs; expand revenue opportunities; maintain or extend competitive advantages;
increase market share and reduce production costs. R&D costs, not recoverable under contractual
arrangements, are charged to expense as incurred. R&D costs for Griffon were $23,600 in 2012, $23,900
in 2011 and $21,400 in 2010.

Intellectual Property

Griffon follows a practice of actively protecting and enforcing its proprietary rights in the U.S. and
throughout the world where Griffon’s products are sold.

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65431

Trademarks are of significant importance to Griffon’s HBP business. Principal global and regional
trademarks include Clopay®, Ideal Door®, Holmes®, Ames®, True Temper®, Ames True Temper®,
Garant®, Hound Dog®, Westmix and Dynamic Design™, UnionTools®, Razor-Back® Professional
Tools and Jackson® Professional Tools. Plastics uses the Clopay® trademark in addition to its 7 other
trademarks. The HBP business has 482 trademarks and approximately 75 pending trademark
applications. Griffon’s rights in these trademarks endure for as long as they are used and registered.

Patents are significant to Plastics. Technology evolves rapidly in the plastics business, and Plastics’
customers are constantly striving to offer products with innovative features at a competitive price to the
end consumer. As a result, Plastics is constantly seeking to offer new and innovative products to its
customers. Plastics has 26 patents in the U.S., and 164 corresponding foreign patents, primarily covering
breathable and elastic polymer films and laminates and various methods and machinery for producing
these materials. Patents are also important to our HBP segment. ATT protects its designs and product
innovation through the use of patents, and currently has 228 issued patents and 41 pending patent
applications in the United States, as well as 81 and 49 corresponding foreign patents and patent
applications, respectively. CBP has 25 patents in the United States, and 32 corresponding foreign
patents, primarily related to garage door system components. Design patents are generally valid for
fourteen years, and utility patents are generally valid for twenty years. Our various patents are in
different stages of their useful life.

In the government and defense business, formal
intellectual property rights are of limited value.
Therefore, our Telephonics business tends to hold most of its important intellectual property as trade
secrets, which it protects through the use of contract terms and carefully restricting access to its
technology.

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Executive Officers of the Registrant

The following is a current list of Griffon’s executive officers:

Name

Ronald J. Kramer . . . . . . . . .

Age

54

Positions Held and Prior Business Experience

President since February 2009, Chief Executive Officer since
April 2008, Director since 1993 and Vice Chairman of the Board
since November 2003. From 2002 through March 2008, President
and a Director of Wynn Resorts, Ltd., a developer, owner and
operator of hotel and casino resorts. From 1999 to 2001,
Managing Director at Dresdner Kleinwort Wasserstein, an
investment banking firm, and its predecessor Wasserstein
Perella & Co. Member of the Board of Directors of Leap
Wireless
(NASDAQ: LEAP), a wireless
communications company. Formerly on the boards of directors
of Monster Worldwide, Inc. (NYSE: MWW) and Sapphire
Industrials Corporation (AMEX: FYR). Mr. Kramer is the
son-in-law of Harvey R. Blau, Griffon’s Chairman of the Board.

International,

Inc.

Douglas J. Wetmore . . . . . .

55

Patrick L. Alesia . . . . . . . . . .

64

Seth L. Kaplan . . . . . . . . . . . .

43

Executive Vice President and Chief Financial Officer since
September 2009. From April 1998 to July 2008, Senior Vice
President and Chief Financial Officer of International Flavors &
Fragrances Inc. (“IFF”), a creator of flavors and fragrances used
in a variety of consumer products (NYSE: IFF). From October
2007 to July 2008, Treasurer of IFF. From 1991 to 1998,
Corporate Controller of IFF. Prior to IFF, Price Waterhouse
for 12 years.

Chief Administrative Officer since September 2009, appointed
Senior Vice President in May 2010, Vice President since 1990,
Treasurer from 1979 to 2010, Ethics Officer since 2005, Secretary
from 2005 to 2010. Served as Chief Financial Officer from
November 2007 to September 2009.

Senior Vice President, General Counsel and Secretary since May
2010. From July 2008 to May 2010, Assistant General Counsel
and Assistant Secretary at Hexcel Corporation, a manufacturer of
advanced composite materials for space and defense, commercial
aerospace and wind energy applications. From 2000 to July 2008,
Senior Corporate Counsel and Assistant Secretary at Hexcel.
From 1994 to 2000, associate at the law firm Winthrop, Stimson,
Putnam & Roberts (now Pillsbury Winthrop Shaw Pittman LLP).

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Item 1A. Risk Factors

Griffon’s business, financial condition, operating results and cash flows can be impacted by a number of
factors which could cause Griffon’s actual results to vary materially from recent or anticipated future
results. The risk factors discussed in this section should be carefully considered with all of the
information in this Annual Report on Form 10-K. These risk factors should not be considered the only
risk factors facing Griffon. Additional risks and uncertainties not presently known or that are currently
deemed immaterial may also materially impact Griffon’s business, financial condition, operating results
and cash flows in the future.

In general, Griffon is subject to the same general risks and uncertainties that impact other diverse
manufacturing companies including, but not limited to, general economic,
industry and/or market
conditions and growth rates; impact of natural disasters and their effect on global markets; continued
events in the Middle East and possible future terrorist threats and their effect on the worldwide
economy; and changes in laws or accounting rules. Griffon has identified the following specific risks and
uncertainties that it believes have the potential to materially affect its business and financial condition.

Current worldwide economic uncertainty and market volatility could adversely affect Griffon’s businesses.

The current worldwide economic uncertainty, market volatility and credit crisis will continue to have an
adverse effect on Griffon during 2013, particularly in HBP, which is substantially linked to the U.S.
housing market and the U.S. economy, in general. Also, purchases of ATT products are discretionary
for consumers and consumers are generally more willing to purchase products during periods in which
favorable macroeconomic conditions prevail. Additionally, the current condition of the credit markets
could impact Griffon’s ability to refinance expiring debt, obtain additional credit for investments in
current businesses or for acquisitions, with favorable terms, or there may be no financing available.
Griffon is also exposed to basic economic risks including a decrease in the demand for the products and
services offered or a higher risk of default on its receivables.

Adverse trends in the housing sector and in general economic conditions will directly impact Griffon’s
business.

HBP’s business is influenced by market conditions for new home construction and renovation of
existing homes. For the year ended September 30, 2012, approximately 46% of Griffon’s consolidated
revenue was derived from the HBP segment, which is heavily dependent on new home construction and
renovation of existing homes. The strength of the U.S. economy, the age of existing home stock, job
interest rates, consumer confidence and the availability of consumer credit, as well as
growth,
demographic factors such as the migration into the United States and migration of the population
within the United States also have an effect on HBP. In that respect, the significant downturn in the
housing market has had an adverse effect on the operating results of HBP and this effect is likely to
continue in 2013, particularly to its CBP business.

Griffon operates in highly competitive industries and may be unable to compete effectively.

Griffon’s operating companies face intense competition in each of the markets served. There are a
number of competitors, some of which are larger and have greater resources than Griffon’s operating
companies. Griffon competes primarily on the basis of competitive prices, technical expertise, product
differentiation, and quality of products and services. There can be no assurance that Griffon will not
encounter increased competition in the future, which could have a material adverse effect on Griffon’s
financial results.

The loss of large customers can harm financial results.

A small number of customers account for, and are expected to continue to account for, a substantial
portion of consolidated revenue. Approximately 13% of consolidated revenue and 43% of the Plastics
segment revenue for the year ended September 30, 2012 was generated from P&G, the largest customer
in the Plastics segment. Home Depot, Lowe’s and Menards are significant customers of HBP with

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Home Depot accounting for approximately 12% of consolidated revenue and 25% of the HBP segment
revenue for the year ended September 30, 2012. The U.S. Government and its agencies, Lockheed
Martin Corporation and the Boeing Company, are significant customers of Telephonics. Future
operating results will continue to substantially depend on the success of Griffon’s largest customers, as
well as Griffon’s relationship with them. Orders from these customers are subject to fluctuation and
may be reduced materially due to changes in these customers’ needs. Any reduction or delay in sales of
products to one or more of these customers could significantly reduce Griffon’s revenue. Griffon’s
operating results will also depend on successfully developing relationships with additional key
customers. Griffon cannot assure that Griffon’s largest customers will be retained or that additional key
customers will be recruited. Also, HBP extends credit to its customers, which exposes it to credit risk.
Their largest customer accounted for approximately 22% and 9% of HBP’s and Griffon’s net accounts
receivable as of September 30, 2012, respectively. If this customer were to become insolvent or
otherwise unable to pay its debts, the financial condition, results of operations and cash flows of the
HBP segment would be adversely affected.

Reliance on third party suppliers and manufacturers may impair ability to meet ATT’s customer
demands.

ATT relies on a limited number of domestic and foreign companies to supply components and
manufacture certain of its products. The percentage of ATT’s products sourced, based on revenue,
approximated 34% in 2012. Reliance on third party suppliers and manufacturers may reduce control
over the timing of deliveries and quality of ATT’s products. Reduced product quality or failure to
deliver products quickly may jeopardize relationships with certain of ATT’s key customers. In addition,
reliance on third party suppliers or manufacturers may result in failure to meet ATT’s customer
demands. Continued turbulence in the worldwide economy may affect the liquidity and financial
condition of ATT’s suppliers. Should any of these parties fail to manufacture sufficient supply, go out of
business or discontinue a particular component, alternative suppliers may not be found in a timely
manner, if at all. Such events could impact ATT’s ability to fill orders, which would have a material
adverse effect on customer relationships.

If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact
operating performance.

HBP’s and Plastics’ suppliers primarily provide resin, wood and steel. Assurance cannot be provided
that these segments may not experience shortages of raw materials or components for products or be
forced to seek alternative sources of supply. If temporary shortages due to disruptions in supply caused
by weather, transportation, production delays or other factors require raw materials to be secured from
sources other than current suppliers, the terms may not be as favorable as current terms or material
may not be available at all. In recent years, HBP and Plastics have experienced price increases in steel
and plastic resins.

While most key raw materials used in Griffon’s businesses are generally available from numerous
sources, raw materials are subject to price fluctuations. Because raw materials in the aggregate
constitute a significant component of the cost of goods sold, price fluctuations could have a material
adverse effect on Griffon’s results of operations. Griffon’s ability to pass raw material price increases to
customers is limited due to supply arrangements and competitive pricing pressure, and there is generally
a time lag between increased raw material costs and implementation of corresponding price increases
for Griffon’s products. In particular, sharp increases in raw material prices are more difficult to pass
through to customers and may negatively affect short-term financial performance.

ATT is subject to risks associated with sourcing from Asia.

A substantial amount of ATT’s finished goods sourcing is done through supply agreements with China
based vendors. China does not have a well-developed, consolidated body of laws governing agreements
with international customers. Enforcement of existing laws or contracts based on existing law may be
uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement or to obtain

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enforcement of a judgment by a court of another jurisdiction. The relative inexperience of China’s
judiciary in many cases creates additional uncertainty as to the outcome of any litigation. In addition,
interpretation of statutes and regulations may be subject to government policies reflecting domestic
political changes. Products entering from China may be subject to import quotas, import duties and
other restrictions. Any inability to import these products into the U.S. and any tariffs that may be levied
with respect to these products may have a material adverse result on ATT’s business and results of
operations, financial position and cash flows.

Griffon’s businesses are subject to seasonal variations and the impact of uncertain weather patterns.

Generally, Griffon’s revenue and income are lowest in our first and fourth quarters ending December
31 and September 30, respectively, and highest in our second and third quarters ending March 31 and
June 30, respectively, primarily due to the seasonality of ATT’s business. ATT’s lawn and garden
products are used primarily in the spring and summer; in 2012 61% of ATT’s sales occurred during the
second and third quarters. CBP’s business is driven by residential renovation and construction during
warm weather, which is generally at reduced levels during the winter months.

Demand for lawn and garden products is influenced by weather, particularly weekend weather during
the peak gardening season. ATT’s sales volumes could be adversely affected by certain weather patterns
such as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In addition,
lack of snow or lower than average snowfall during the winter season may also result in reduced sales of
certain ATT products, such as snow shovels and other snow tools. As a result, ATT’s results of
operations, financial results and cash flows could be adversely impacted.

Further consolidation in the retail industry may adversely affect profitability.

Home centers and mass merchandisers have consolidated and increased in scale. If this trend continues,
customers will
likely seek more favorable terms for their purchases of products, which will limit
Griffon’s ability to pass through raw material or other cost increases, or to raise prices for any reason.
Sales on terms less favorable than current terms could have a material adverse effect on profitability.

Unionized employees could strike or participate in a work stoppage.

Griffon employs approximately 5,400 people on a full-time basis, approximately 8% of whom are
covered by collective bargaining or similar labor agreements (all
in the Telephonics and ATT
businesses). If unionized employees engage in a strike or other work stoppage, or if Griffon is unable to
negotiate acceptable extensions of agreements with labor unions, a significant disruption of operations
and increased operating costs could occur. In addition, any renegotiation or renewal of
labor
agreements could result in higher wages or benefits paid to unionized employees, which could increase
operating costs and could have a material adverse effect on profitability.

Griffon may be required to record impairment charges for goodwill and indefinite-lived intangible assets.

Griffon is required to assess goodwill and indefinite-lived intangible assets annually for impairment or
on an interim basis if changes in circumstances or the occurrence of events suggest impairment exists. If
impairment testing indicates that the carrying value of reporting units or indefinite-lived intangible
assets exceeds the respective fair value, an impairment charge would be recognized. If goodwill or
indefinite-lived intangible assets were to become impaired, the results of operations could be materially
and adversely affected.

Trends in the baby diaper market will directly impact Griffon’s business.

Recent trends have been for baby diaper manufacturers to specify thinner plastic films for use in their
products which reduces the amount of product sold and Plastics’ revenue; this trend has generally
resulted in Plastics incurring costs to redesign and reengineer products to accommodate required
specification changes. Such decreases, or the inability to meet changing customer specifications, could
result in a material decline in Plastics revenue and profits.

18

12665

Telephonics’ business depends heavily upon government contracts and, therefore, the defense budget.

Telephonics sells products to the U.S. government and its agencies both directly and indirectly as a first-
tier supplier to prime contractors in the defense industry such as Boeing, Lockheed Martin, Sikorsky
and Northrop Grumman. In the year ended September 30, 2012, U.S. government contracts and
subcontracts accounted for approximately 19% of Griffon’s consolidated revenue. Contracts involving
the U.S. government may include various risks, including:

• Termination for convenience by the government;

• Reduction or modification in the event of changes in the government’s requirements or

budgetary constraints;

• Increased or unexpected costs, causing losses or reduced profits under contracts where
Telephonics’ prices are fixed, or determinations that certain costs are not allowable under
particular government contracts;

• The failure or inability of the prime contractor to perform its contract in circumstances where

Telephonics is a subcontractor;

• Failure to observe and comply with government business practice and procurement regulations
such that Telephonics could be suspended or barred from bidding on or receiving awards of new
government contracts;

• The failure of the government to exercise options for additional work provided for in contracts;

and

• The government’s right, in certain circumstances, to freely use technology developed under these

contracts.

All of Telephonics’ U.S. Government end-user contracts contain a termination for convenience clause,
regardless if Telephonics is the prime contractor or the subcontractor. This clause generally entitles
Telephonics, upon a termination for convenience, to receive the purchase price for delivered items,
reimbursement of allowable work-in-process costs, and an allowance for profit. Allowable costs would
include the costs to terminate existing agreements with suppliers.

The programs in which Telephonics participates may extend for several years, but are normally funded
on an incremental basis. Decreases in the U.S. defense budget, in particular with respect to programs to
which Telephonics supplies materials, could have a material adverse impact on Telephonics financial
conditions, results of operations and cash flows. The U.S. government may not continue to fund
programs to which Telephonics’ development projects apply. Even if funding is continued, Telephonics
may fail to compete successfully to obtain funding pursuant to such programs. Reductions to funding on
existing programs or delays in the funding of new opportunities could affect the timing of revenue
recognition, and impact the results of operation.

For 2013, the Budget Control Act calls for additional substantial, mandatory defense spending
reductions, known as “sequestration,” if Congress is unable to agree on a budget that conforms with the
Budget Control Act requirements. There continues to be much uncertainty regarding how sequestration
would be implemented, if it were to go into effect. There are many variables in how the law could be
applied that make it difficult to determine the specific impacts; however, we expect that sequestration,
as currently provided for under the Budget Control Act, would result in lower revenues, profits and
cash flows for Telephonics.

While members of Congress are discussing various options to prevent or defer sequestration’s automatic
spending cuts, we cannot predict whether these efforts will succeed. Budget decisions made in this
environment could have long-term consequences for Telephonics and the entire defense industry.

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93521

Telephonics’ business could be adversely affected by a negative audit by the U.S. Government.

As a government contractor, and a subcontractor to government contractors, Telephonics is subject to
audits and investigations by U.S. Government Agencies such as the Defense Contract Audit Agency,
other Inspectors General and the Department of Justice. These agencies review a contractor’s
performance under its contracts, cost structure and compliance with applicable laws, regulations and
standards. These agencies also review the adequacy of, and a contractor’s compliance with, its internal
control systems and policies, including the contractor’s management, purchasing, property, estimating,
compensation, and accounting and information systems. Any costs found to be misclassified or
improperly allocated to a specific contract will not be reimbursed or must be refunded if already billed
and collected. Griffon could incur significant expenses in complying with audits and subpoenas issued
by the government in aid of inquiries and investigations. If an audit or an investigation uncovers
improper or illegal activities, Telephonics may be subject to civil and criminal penalties and/or
administrative sanctions, which could include contract termination, forfeiture of profit, suspension of
payments, fines and suspension or prohibition from doing business with the U.S. Government. In
addition,
impropriety are made, Telephonics and Griffon could suffer serious
reputational harm.

if allegations of

Many of our contracts contain performance obligations that require innovative design capabilities, are
technologically complex, or are dependent upon factors not wholly within our control. Failure to meet
these obligations could adversely affect customer relations, future business opportunities, and our overall
profitability.

Our Telephonics segment designs, develops and manufactures advanced and innovative surveillance and
communication products for a broad range of applications for use in varying environments. As with
many of our programs, system specifications, operational requirements and test requirements are
challenging, exacerbated by the need for quick delivery schedules. Technical problems encountered and
delays in the development or delivery of such products could prevent us from meeting contractual
obligations, which could subject us to termination for default. Under a termination for default, the
company is entitled to negotiate payment for undelivered work if the Government requests the transfer
of title and delivery of partially completed supplies and materials. Conversely, if the Government does
not make this request, there is no obligation to reimburse the company for its costs incurred. We may
also be subject to the repayment of advance and progress payments, if any. Additionally, the company
may be liable to the Government for any of its excess costs incurred in acquiring supplies and services
similar to those terminated for default, and for other damages. Should any of the foregoing events
occur, it could result in a material adverse effect on our financial position.

Griffon’s companies must continually improve existing products, design and sell new products and invest
in research and development in order to compete effectively.

The markets for Plastics and Telephonics are characterized by rapid technological change, evolving
industry standards and continuous improvements in products. Due to constant changes in these markets,
future success depends on their ability to develop new technologies, products, processes and product
applications.

Product and technological developments are accomplished both through internally-funded R&D
projects, as well as through strategic partnerships with customers. Because it is not generally possible to
predict the amount of time required and costs involved in achieving certain R&D objectives, actual
development costs may exceed budgeted amounts and estimated product development schedules may
be extended. Griffon’s financial condition and results of operations may be materially and adversely
affected if:

• Product improvements are not completed on a timely basis;

• New products are not introduced on a timely basis or do not achieve sufficient market

penetration;

20

58250

• There are budget overruns or delays in research and development efforts; or

• New products experience reliability or quality problems.

Griffon may be unable to implement its acquisition growth strategy, which may result in added expenses
without a commensurate increase in revenue and income and divert management’s attention.

Making strategic acquisitions is a significant part of Griffon’s growth plans. The ability to successfully
complete acquisitions depends on identifying and acquiring, on acceptable terms, companies that either
complement or enhance currently held businesses or expand Griffon into new profitable businesses.
Additionally, Griffon must properly integrate acquired businesses in order to maximize profitability.
The competition for acquisition candidates is intense and Griffon cannot assure that it will successfully
identify acquisition candidates and complete acquisitions at reasonable purchase prices, in a timely
manner or at all. Further, there is a risk that acquisitions will not be properly integrated into Griffon’s
existing structure. In implementing an acquisition growth strategy, the following may be encountered:

• Costs associated with incomplete or poorly implemented acquisitions;

• Expenses, delays and difficulties of integrating acquired companies into Griffon’s existing

organization;

• Dilution of the interest of existing stockholders; or

• Diversion of management’s attention.

An unsuccessful implementation of Griffon’s acquisition growth strategy could have an adverse impact
on Griffon’s results of operations, cash flows and financial condition.

The loss of certain key officers or employees could adversely affect Griffon’s business.

The success of Griffon is materially dependent upon the continued services of certain key officers and
employees. The loss of such key personnel could have a material adverse effect on Griffon’s operating
results or financial condition.

Griffon is exposed to a variety of risks relating to non-U.S. sales and operations, including non-U.S.
economic and political conditions and fluctuations in exchange rates.

through non-U.S.

Griffon and its companies own properties and conduct operations in Europe, Canada, Australia, Brazil,
subsidiaries accounted for
Mexico, China and Turkey. Sales of products
approximately 25% of consolidated revenue for the year ended September 30, 2012. These sales could
be adversely affected by changes in political and economic conditions, trade protection measures,
differing intellectual property rights laws and changes in regulatory requirements that restrict the sales
of products or increase costs. Enforcement of existing laws in foreign jurisdictions can be uncertain, and
the lack of a sophisticated body of laws can create various uncertainties, including with respect to
customer and supplier contracts. Currency fluctuations between the U.S. dollar and the currencies in the
non-U.S. regions in which Griffon does business may also have an impact on future reported financial
results.

Griffon may not be able to protect its proprietary rights.

Griffon relies on a combination of patent, copyright and trademark laws, trade secrets, confidentiality
and non-disclosure agreements and other contractual provisions to protect proprietary rights. Such
measures do not provide absolute protection and Griffon cannot give assurance that measures for
protecting these proprietary rights are and will be adequate, or that competitors will not independently
develop similar technologies.

21

13553

Griffon may inadvertently infringe on, or may be accused of infringing on, proprietary rights held by
another party.

Griffon is regularly improving its technology and employing existing technologies in new ways. Though
Griffon takes reasonable precautions to ensure it does not infringe on the rights of others, it is possible
that Griffon may inadvertently infringe on, or may be accused of infringing on, proprietary rights held
by others. If Griffon is found to have infringed on the propriety rights held by others, any related
litigation or settlement relating to such infringement may have a material effect on Griffon’s financial
statements and financial condition.

Griffon is exposed to product liability claims.

Griffon may be the subject of product liability claims relating to the performance of its products or the
performance of a product in which its products were a component part. There can be no assurance that
future product liability claims will not be brought against Griffon, either by an injured customer of an
end product manufacturer who used one of the products as a component or by a direct purchaser.
Moreover, no assurance can be given that indemnification from customers or coverage under insurance
policies will be adequate to cover future product liability claims against Griffon. In addition, product
liability insurance can be expensive, difficult to maintain and may be unobtainable in the future on
acceptable terms. The amount and scope of any insurance coverage may be inadequate if a product
liability claim is successfully asserted. Furthermore, if any significant claims are made, the business and
the related financial condition of Griffon may be adversely affected by negative publicity.

Griffon has been, and may in the future be, subject to claims and liabilities under environmental laws and
regulations.

Griffon’s operations and assets are subject to environmental laws and regulations pertaining to the
discharge of materials into the environment, the handling and disposal of wastes, including solid and
hazardous wastes, or otherwise relating to health, safety and protection of the environment, in various
jurisdictions in which it operates. Griffon does not expect to make any expenditure with respect to
ongoing compliance with or remediation under these environmental laws and regulations that would
have a material adverse effect on its business, operating results or financial condition. However, the
applicable requirements under environmental laws and regulations may change at any time.

Griffon can incur environmental costs related to sites that are no longer owned or operated, as well as
third-party sites to which hazardous materials are sent. It cannot be assured that material expenditures
or liabilities will not be incurred in connection with such claims. See the Commitment and
Contingencies footnote in the Notes to Consolidated Financial Statements for further information on
environmental contingencies. Based on facts presently known, the outcome of current environmental
matters are not expected to have a material adverse effect on Griffon’s results of operations and
financial condition. However, presently unknown environmental conditions, changes in environmental
laws and regulations or other unanticipated events may give rise to claims that may involve material
expenditures or liabilities.

Changes in income tax laws and regulations or exposure to additional
adversely affect profitability.

income tax liabilities could

Griffon is subject to Federal, state and local income taxes in the U.S. and in various taxing jurisdictions
outside the U.S. Tax provisions and liabilities are subject to the allocation of income among various
U.S. and international tax jurisdictions. Griffon’s effective tax rate could be adversely affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in any valuation
allowance for deferred tax assets or the amendment or enactment of tax laws. The amount of income
taxes paid is subject to audits by U.S. Federal, state and local tax authorities, as well as tax authorities
in the taxing jurisdictions outside the U.S. If such audits result in assessments different from recorded
income tax liabilities, Griffon’s future financial results may include unfavorable adjustments to its
income tax provision.

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18347

Compliance with restrictions and covenants in Griffon’s debt agreements may limit its ability to take
corporate actions and harm its business.

The senior secured credit agreement entered into by, and the terms of the senior notes issued by,
Griffon each contain covenants that restrict the ability of Griffon and its subsidiaries to, among other
things, incur additional debt, pay dividends, incur liens and make investments, acquisitions, dispositions,
restricted payments and capital expenditures. Under the credit agreement, Griffon is also required to
comply with specific financial ratios and tests. Griffon may not be able to comply in the future with
these covenants or restrictions as a result of events beyond its control, such as prevailing economic,
financial and industry conditions or a change in control of Griffon. If Griffon defaults in maintaining
compliance with the covenants and restrictions in its credit agreement or the senior notes, its lenders
could declare all of the principal and interest amounts outstanding due and payable and, in the case of
the credit agreement, terminate their commitments to extend credit to Griffon in the future. If Griffon
or its subsidiaries are unable to secure credit in the future, business could be harmed.

Reported earnings per share may be more volatile because of the conversion contingency provision of the
notes.

The outstanding convertible notes are convertible when a “market price” condition is satisfied and also
upon the occurrence of other circumstances as more fully described in the Notes Payable, Capitalized
Leases and Long-Term Debt footnote in the Notes to Consolidated Financial Statements. Upon
conversion, at Griffon’s discretion, note holders will receive $1,000 in cash for each $1,000 principal
amount of notes presented for conversion or value in Griffon’s common stock, and Griffon common
stock for the value above the principal amount of the notes. The potential shares of Griffon common
stock issuable for value above the principal value of the notes are considered in the calculation of
diluted earnings per share and volatility in Griffon’s stock price could cause these notes to be dilutive in
one quarter and not in a subsequent quarter, increasing the volatility of fully diluted earnings per share.

Griffon may be unable to raise additional financing if needed.

Griffon may need to raise additional financing in the future in order to implement its business plan,
refinance debt, or to acquire new or complimentary businesses or assets. Any required additional
financing may be unavailable, or only available at unfavorable terms, due to uncertainties in the credit
markets. If Griffon raises additional funds by issuing equity securities, current holders of its common
stock may experience significant ownership interest dilution and the new securities may have rights
senior to the rights associated with current outstanding common stock.

Griffon’s indebtedness and interest expense could limit cash flow and adversely affect operations and
Griffon’s ability to make full payment on outstanding debt.

Griffon’s indebtedness poses potential risks such as:

• A substantial portion of cash flows from operations could be used to pay principal and interest
thereby reducing the funds available for working capital, capital expenditures,

on debt,
acquisitions, product development and other general corporate purposes;

• Insufficient cash flows from operations may force Griffon to sell assets, or seek additional capital,

which Griffon may not be able to accomplish on favorable terms, if at all; and

• The level of
downturns.

indebtedness may make Griffon more vulnerable to economic or industry

Griffon has the ability to issue additional equity securities, which would lead to dilution of issued and
outstanding common stock.

The issuance of additional equity securities or securities convertible into equity securities would result
in dilution to existing stockholders’ equity interests. Griffon is authorized to issue, without stockholder
vote or approval, 3,000,000 shares of preferred stock in one or more series, and has the ability to fix the

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93397

rights, preferences, privileges and restrictions of any such series. Any such series of preferred stock
could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences or other rights superior to the rights of holders of Griffon’s common stock.
There is no present intention of issuing any such preferred stock, but Griffon reserves the right to do so
in the future. In addition, Griffon is authorized to issue, without stockholder approval, up to 85,000,000
shares of common stock, of which 60,888,522 shares, net of treasury shares, were outstanding as of
September 30, 2012. Additionally, Griffon is authorized to issue, without stockholder approval,
securities convertible into either shares of common stock or preferred stock.

Item 1B. Unresolved Staff Comments

None.

24

01768

Item 2. Properties

Griffon occupies approximately 7,600,000 square feet of general office, factory and warehouse space
throughout
the U.S., Germany, Sweden, Mexico, Canada, Australia, Ireland and Brazil. For a
description of the encumbrances on certain of these properties, see the Notes Payable, Capitalized
Leases and Long-Term Debt footnote in the Notes to Consolidated Financial Statements. The following
table sets forth certain information related to Griffon’s major facilities:

Location

Business Segment

Primary Use

New York, NY . . . . . . . . . . . . . . . Corporate
Jericho, NY. . . . . . . . . . . . . . . . . . . Corporate
Farmingdale, NY . . . . . . . . . . . . .
Huntington, NY . . . . . . . . . . . . . .
Huntington, NY . . . . . . . . . . . . . .
Columbia, MD . . . . . . . . . . . . . . .
Stockholm, Sweden . . . . . . . . . . .
Elizabeth City, NC . . . . . . . . . . .
Mason, OH . . . . . . . . . . . . . . . . . . . Home & Building Products/

Telephonics
Telephonics
Telephonics
Telephonics
Telephonics
Telephonics

Headquarters
Office
Manufacturing/R&D
Manufacturing
Manufacturing
Manufacturing/Engineering
Manufacturing/Engineering
Repair and Service
Office/R&D

Clopay Plastic Products
Manufacturing
Aschersleben, Germany. . . . . . . Clopay Plastic Products
Manufacturing
Dombuhl, Germany . . . . . . . . . . Clopay Plastic Products
Manufacturing
Augusta, KY . . . . . . . . . . . . . . . . . Clopay Plastic Products
Manufacturing
Nashville, TN . . . . . . . . . . . . . . . . . Clopay Plastic Products
Manufacturing
Nashville, TN . . . . . . . . . . . . . . . . . Clopay Plastic Products
Distribution
Maysville, KY . . . . . . . . . . . . . . . . Clopay Plastic Products
Manufacturing
Jundiai, Brazil . . . . . . . . . . . . . . . . Clopay Plastic Products
Manufacturing
Hangzhou, China . . . . . . . . . . . . . Clopay Plastic Products
Istanbul, Turkey . . . . . . . . . . . . . . Clopay Plastic Products
Manufacturing
Troy, OH. . . . . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing
Russia, OH . . . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing
Auburn, WA . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing
Carlisle, PA . . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing, Distribution
Reno, NV . . . . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing, Distribution
Camp Hill, PA . . . . . . . . . . . . . . . Home & Building Products Office, Manufacturing
Harrisburg, PA . . . . . . . . . . . . . . . Home & Building Products Manufacturing
St. Francois, Quebec. . . . . . . . . . Home & Building Products Manufacturing, Distribution
Bernie, MO. . . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing
Lewistown, PA . . . . . . . . . . . . . . . Home & Building Products Manufacturing
Cork, Ireland . . . . . . . . . . . . . . . . . Home & Building Products Manufacturing, Distribution
Victoria, Australia . . . . . . . . . . . . Home & Building Products Manufacturing, Distribution
New South Wales, Australia . .. Home & Building Products Distribution
South, Australia . . . . . . . . . . . . . . Home & Building Products Distribution
Queensland, Australia . . . . . . . . Home & Building Products Distribution
Western, Australia. . . . . . . . . . . . Home & Building Products Distribution

Approx.
Square
Footage

Owned/
Leased

6,600 Leased
6,900 Leased
180,000 Owned
94,000 Owned
Leased
100,000
Leased
25,000
Leased
22,000
22,000
Leased
131,000 Owned

Lease
End
Year

2016
2014

2016
2013
2015
2039

2014

2016
2014
2021

289,000 Owned
124,000 Owned
275,000 Owned
210,000 Owned
Leased
190,000
61,280
Leased Monthly
88,000 Owned
Leased
44,000
Leased
30,000
867,000
Leased
339,000 Owned
Leased
123,000
1,227,000 Leased
Leased
400,000
380,000
Leased
264,000 Owned
353,000 Owned
95,000 Owned
124,000
Leased
74,000 Owned
Leased
32,000
Leased
24,000
Leased
13,000
Leased
17,000
Leased
22,000

2016
2013
2012
2014
2015

2013
2015
2017
2020

2015

Griffon also leases approximately 1,050,000 square feet of space for the CBP distribution centers in
numerous facilities throughout the U.S. and in Canada. In addition, Griffon owns approximately
200,000 square feet of space for the ATT wood mills in the U.S.

All facilities are generally well maintained and suitable for the operations conducted.

Item 3. Legal Proceedings

Griffon is involved in litigation, investigations and claims arising out of the normal conduct of business,
including those relating to commercial transactions, environmental, employment, and health and safety

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matters. Griffon estimates and accrues liabilities resulting from such matters based on a variety of
factors, including the stage of the proceeding; potential settlement value; assessments by internal and
external counsel; and assessments by environmental engineers and consultants of potential environ-
mental liabilities and remediation costs. Such estimates are not discounted to reflect the time value of
money due to the uncertainty in estimating the timing of the expenditures, which may extend over
several years.

While it is impossible to ascertain the ultimate legal and financial liability with respect to certain
contingent liabilities and claims, Griffon believes, based upon examination of currently available
information, experience to date, and advice from legal counsel, that the individual and aggregate
these contingent matters, after taking into
liabilities resulting from the ultimate resolution of
consideration our existing insurance coverage and amounts already provided for, will not have a
material adverse impact on consolidated results of operations, financial position or cash flows.

Item 4. Reserved

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Griffon’s Common Stock is listed for trading on the New York Stock Exchange under the symbol
“GFF”. The following table shows for the periods indicated the quarterly range in the high and low
sales prices for Griffon’s Common Stock and the amount of dividends paid during the last two years:

Fiscal 2012

Market Prices
High
Low

Dividends
Per Share

First Quarter ended December 31,
Second Quarter ended March 31, . . . . . . . . . . . . . . . . .
Third Quarter ended June 30,
. . . . . . . . . . . . . . . . . . . .
Fourth Quarter ended September 30, . . . . . . . . . . . . .

. . . . . . . . . . . . . . . $10.55
11.40
10.75
11.08

$7.34
9.08
7.54
8.29

$0.02
0.02
0.02
0.02

$0.08

Fiscal 2011
Market Prices
High
Low

$13.62
13.25
13.43
10.42

$11.56
11.05
9.56
6.66

Dividends

On November 17, 2011, the Company began declaring quarterly dividends. No cash dividends on
Common Stock were declared or paid during the four years ended September 30, 2011. The Company
currently intends to pay dividends each quarter; however, the 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
future dividends.

On November 13, 2012, the Company declared a $0.025 per share dividend payable on December 26,
2012 to shareholders of record as of November 29, 2012.

Holders

As of October 31, 2012, there were approximately 12,800 record holders of Griffon’s Common Stock.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding securities authorized for issuance under Griffon’s equity compensation plans is
contained in Part III, Item 12 of this Form 10-K.

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68839

Issuer Purchase of Equity Securities

The table below presents shares of Griffon Stock which were acquired by Griffon during the fourth
quarter of 2012:

ISSUER PURCHASES OF EQUITY SECURITIES

(a) Total
Number of
Shares
(or Units)
Purchased

66,574(2)
211,000(1)
208,800(1)
486,374

(b) Average
Price Paid
Per Share
(or Unit)

$8.47
9.88
9.88

$9.69

(c) Total Number
of Shares
(or Units)
Purchased as
Part of Publicly
Announced Plans
or Programs

66,199
211,000
208,800

485,999

(d) Maximum
Number (or
Approximate Dollar
Value) of Shares
(or Units) That
May Yet Be
Purchased Under
the Plans
or Programs

$38,312(3)

Period

July 1–31, 2012. . . . . . . . . . . . . . . . . . .
August 1–31, 2012 . . . . . . . . . . . . . . .
September 1–30, 2012 . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) Shares were purchased by the Company in open market purchases pursuant to share repurchase

plans authorized by the Company’s Board of Directors.

(2) Includes (a) 66,199 purchased by the Company in open market purchases pursuant to a stock
buyback plan authorized by the Company’s Board of Directors and (b) 375 shares acquired by the
Company from a holder of restricted stock upon vesting of the restricted stock to satisfy tax
withholding obligations of the holder.

(3) On August 2, 2011, the Company’s Board of Directors authorized the repurchase of up to $50,000 of
Griffon common stock; as of September 30, 2012, $38,312 remained available for the purchase of
Griffon common stock under this program.

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74431

Performance Graph

The performance graph does not constitute soliciting material, is not deemed filed with the SEC and is
not incorporated by reference in any of Griffon’s filings under the Securities Act of 1933 or the
Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and
irrespective of any general incorporation language in any such filings, except to the extent Griffon
specifically incorporates this performance graph by reference therein.

The following graph sets forth the cumulative total return to Griffon’s stockholders during the five
years ended September 30, 2012, as well as an overall stock market (S&P Small Cap 600 Index) and
Griffon’s peer group index (Dow Jones U.S. Diversified Industrials Index). Assumes $100 was invested
on September 30, 2007, including the reinvestment of dividends, in each category.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Griffon Corporation, the S&P Smallcap 600 Index
and the Dow Jones US Diversified Industrials Index

$140

$120

$100

$80

$60

$40

$20

$0

9/07

9/08

9/09

9/10

9/11

9/12

Griffon Corporation

S&P Smallcap 600

Dow Jones US Diversified Industrials

* $100 invested on 9/30/07 in stock or index, including reinvestment of dividends.

28

67993

Item 6. Selected Financial Data

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,861,145

2012

For the Years Ended September 30,
2009
2010
2011
(in thousands, except per share amounts)
$1,194,050
$1,293,996
$1,830,802

2008

$1,269,305

Income (loss) before taxes and

discontinued operations . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . .
Income (loss) from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued

operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income (loss). . . . . . . . . . . . . . . . . . . . . .

Basic earnings (loss) per share:

Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
Net Income (loss) . . . . . . . . . . . . . . . . .

Weighted average shares outstanding . .

Diluted earnings (loss) per share:

Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
Net Income (loss) . . . . . . . . . . . . . . . . .

21,941
4,930

(14,349)
(6,918)

13,812
4,308

19,605
1,687

(182)
2,651

17,011

(7,431)

$

$

$

—
17,011

0.30
—
0.30

55,914

0.30
—
0.30

$

$

$

9,504

88
9,592

0.16
0.00
0.16

—
(7,431) $

(0.13) $
—
(0.13)

58,919

58,974

(0.13) $
—
(0.13)

0.16
0.00
0.16

17,918

(2,833)

790
18,708

(40,591)
$ (43,424)

$

$

0.31
0.01
0.32

58,699

0.30
0.01
0.32

(0.09)
(1.24)
(1.33)

32,667

(0.09)
(1.24)
(1.32)

$

$

$

Weighted average shares outstanding . .

57,329

58,919

59,993

59,002

32,836

Capital expenditures . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt, net of debt

discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long Term portion of debt, net of

debt discount . . . . . . . . . . . . . . . . . . . . . . . .
Total debt, net of debt discount . . . . . . .

$

68,851
66,264
1,806,192

$

87,617
60,712
1,865,254

$

40,477
40,442
1,753,701

$

32,697
42,346
1,143,891

$

53,116
42,923
1,167,486

17,703

25,164

20,901

78,590

2,258

681,907
699,610

688,247
713,411

503,935
524,836

98,394
176,984

230,930
233,188

Notes:

Due to the acquisition of ATT occurring on September 30, 2010, none of ATT’s 2010 and prior results
of operations were included in Griffon’s results. The Griffon consolidated balance sheets from
September 30, 2010 forward, and related notes thereto, include ATT’s balances.

2012 includes $4,689 of restructuring charges ($3,048, net of tax, or $0.05 per share) and $477 of
acquisition related costs ($310, net of tax, or $0.01 per share).

2011 includes $26,164 ($16,813, net of tax, or $0.29 per share) of loss on debt extinguishment; $15,152
($9,849, net of tax, or $0.17 per share) of increased cost of goods sold related to the sale of inventory
recorded at fair value in connection with acquisition accounting for ATT; and $7,543 ($4,903, net of tax,
or $0.08 per share) of restructuring charges.

2010 includes $9,805 ($7,704, net of tax, or $0.13 per share) of ATT related acquisition costs; $4,180
($2,717, net of tax, or $0.05 per share) of restructuring charges; and $1,117 ($726, net of tax, or $0.01 per
share) of loss on debt extinguishment.

2009 includes a $4,488 ($2,917, net of tax, or $0.05 per share) of gain on debt extinguishment and $1,240
($806, net of tax, or $0.01 per share) of restructuring charges.

2008 includes a $12,913 ($8,393, net of tax, or $0.26 per share) goodwill impairment charge that is not
deductible for income taxes.

Due to rounding, the sum of earnings per share of Continuing operations and Discontinued operations
may not equal earnings per share of Net Income.

29

13411

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Unless otherwise indicated, all references to years or year-end refers to the fiscal year ending
September 30 and dollars are in thousands, except per share data)

OVERVIEW

The Company

Griffon Corporation (the “Company” or “Griffon”), 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 in connection with acquisition and growth opportunities as
well as in connection with divestitures. Griffon, to further diversify, also seeks out, evaluates and, when
appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Headquartered in New York, N.Y., the Company was founded in 1959 and is incorporated in Delaware.
Griffon is listed on the New York Stock Exchange and trades under the symbol GFF.

Griffon currently conducts
(“Telephonics”), Home & Building Products
(“Plastics”).

its operations

through three businesses: Telephonics Corporation
(“HBP”) and Clopay Plastic Products Company

• HBP, which consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building
Products (“CBP”), accounted for 46% of Griffon’s consolidated revenue in 2012, 46% in 2011,
and on a pro forma basis giving effect to the acquisition of ATT as if it had occurred on October
1, 2009, 48% of Griffon’s consolidated revenue in 2010:

– ATT, acquired on September 30, 2010,

is a global provider of non-powered landscaping
products that make work easier for homeowners and professionals. Due to the timing of the
acquisition, none of ATT’s 2010 and prior results of operations were included in Griffon’s
results. ATT’s revenue was 23% of Griffon’s consolidated revenue in 2012, and 24% in 2011.
ATT 2010 revenue was $443,634, or 26% of Griffon’s pro forma 2010 revenue of $1,737,630
(unaudited), giving effect to the acquisition of ATT as if it had occurred on October 1, 2009.

– CBP is a leading manufacturer and marketer of residential, commercial and industrial garage
doors to professional installing dealers and major home center retail chains. CBP’s revenue
was 23% of Griffon’s consolidated revenue in 2012, 22% in 2011 and 30% in 2010.

• Telephonics designs, develops and manufactures high-technology integrated information,
communication and sensor system solutions for military and commercial markets worldwide.
Telephonics’ revenue was 24% of Griffon’s consolidated revenue in 2012, 25% in 2011 and 34%
in 2010.

• Plastics is an international leader in the development and production of embossed, laminated and
printed specialty plastic films used in a variety of hygienic, health-care and industrial
applications. Plastics’ revenue was 30% of Griffon’s consolidated revenue in 2012, 29% in
2011 and 36% in 2010.

CONSOLIDATED RESULTS OF OPERATIONS

2012 Compared to 2011

Revenue for the year ended September 30, 2012 was $1,861,145, compared to $1,830,802 in the prior
year, with the increase driven by HBP and Plastics. Gross profit for 2012 was $418,805 compared to

30

50467

$393,461 in 2011, with gross margin as a percent of sales (“gross margin”) of 22.5% and 21.5%,
respectively. Gross profit for 2011 reflected $15,152 of costs of goods related to the sale of inventory
recorded at fair value in connection with the ATT acquisition accounting; excluding this amount, 2011
gross profit was $408,613 with a gross margin of 22.3%.

Selling, General and Administrative (“SG&A”) expenses increased $11,327 to $341,696 in 2012 from
$330,369 in 2011 in support of the increased level of sales and due to the inclusion of Southern Patio’s
expenses. SG&A expenses as a percent of revenue for 2012 increased to 18.4% from 18.0% in 2011.

Interest expense in 2012 totaled $52,007, an increase of $4,161 compared to the prior year, primarily as
a result of the increased debt resulting from the 2011 refinancing of domestic subsidiary debt incurred
as a result of the ATT acquisition.

During 2011, in connection with the termination of the Term Loan, ABL and Telephonics credit
agreement (“TCA”), Griffon recorded a $26,164 loss on extinguishment of debt consisting of $21,617 of
deferred financing charges and original issuer discounts, a call premium of $3,703 on the Term Loan,
and $844 of swap and other breakage costs.

Other income of $1,236 in 2012 and $3,714 in 2011 consists primarily of currency exchange transaction
gains and losses from receivables and payables held in non functional currencies, and net gains on
investments.

Griffon’s effective tax rate for 2012 was 22.5% compared to a benefit of 48.2% in 2011. The 2012 rate
reflected net discrete benefits of $5,110 primarily from the release of previously established reserves for
uncertain tax positions on conclusion of various tax audits, and benefits related to various tax planning
initiatives. The 2011 rate reflected net discrete benefits of $4,570 primarily from tax planning related to
unremitted foreign earnings. Excluding discrete tax items, the 2012 rate would have been 45.8%, and
the 2011 benefit would have been 16.4%. In both years, the effective rates reflect the impact of
permanent differences not deductible in determining taxable income, mainly limited deductibility of
restricted stock, as well as the impact of tax reserves and changes in earnings mix between domestic and
non-domestic operations.

Net Income was $17,011, or $0.30 per share, for 2012 compared to a loss of $7,431 or $0.13 cents per
share in the prior year. The current year results included the following:

– Restructuring charges of $4,689 ($3,048, net of tax, or $0.05 per share);

– Acquisition and integration costs of $477 ($310, net of tax, or $0.01 per share); and

– Discrete tax benefits, net, of $5,110, or $0.09 per share.

The prior year results included the following:

– Charges of $26,164 ($16,813, net of tax, or $0.29 per share) resulting from the refinancing of

ATT acquisition related debt;

– $15,152 ($9,849, net of tax, or $0.17 per share) of increased cost of goods related to the sale of

inventory recorded at fair value in connection with acquisition accounting for ATT;

– Restructuring charges of $7,543 ($4,903, net of tax, or $0.08 per share);

– Acquisition costs of $446 ($290, net of tax, or $0.00 per share); and

– Discrete tax benefits, net, of $4,570, or $0.08 per share.

Excluding these items from both reporting periods, 2012 net income would have been $15,259, or $0.27
per share compared to $19,854, or $0.34 per share, in 2011.

31

00329

2011 Compared to 2010

Revenue for the year ended September 30, 2011 was $1,830,802, compared to $1,293,996 in the prior
year; the increase was due to the inclusion of ATT’s revenue as well as higher revenue at CBP,
Telephonics and Plastics. On a pro forma basis, as if ATT was purchased on October 1, 2009, 2011
consolidated revenue increased $93,172 in comparison to 2010. Gross profit for 2011 was $393,461
compared to $288,304 in 2010, with gross margin of 21.5% and 22.3%, respectively. Gross profit for
2011 reflected $15,152 of costs of goods related to the sale of inventory recorded at fair value in
connection with the ATT acquisition accounting; excluding this amount, 2011 gross profit was $408,613
with a gross margin of 22.3%. On a pro forma basis, as if ATT was purchased on October 1, 2009, 2010
gross profit was $434,053 with a gross margin of 25.0%.

SG&A expenses increased $68,966 to $330,369 in 2011 from $261,403 in 2010 due to the inclusion of
ATT’s expenses, and in support of the increased level of sales. In 2010, SG&A expenses included $9,805
of costs related to the ATT acquisition; there were $446 of such costs incurred in 2011. SG&A expenses
as a percent of revenue for 2011 decreased to 18.0% from 20.2% in 2010; excluding the ATT related
acquisition expenses, SG&A as a percent of revenue was 19.4% in 2010. On a pro forma basis, as if
ATT was purchased on October 1, 2009, SG&A expenses were $358,607 for 2010 and as a percent of
pro forma revenue for 2010 were 20.6%. The pro forma 2010 SG&A expenses included $21,075 of costs
related to the sale of ATT to Griffon and other costs relating to ATT’s prior ownership, excluding these
costs, SG&A expenses were $337,532, or 19.4% of pro forma revenue.

Interest expense in 2011 increased by $35,524 compared to the prior year, primarily as a result of the
debt incurred as a result of the ATT acquisition.

Other income of $3,714 in 2011 and $4,121 in 2010 consists primarily of currency exchange transaction
gains and losses from receivables and payables held in non functional currencies, and net gains on
investments.

Griffon’s effective tax rate for continuing operations for 2011 was a benefit of 48.2% compared to a
31.2% provision in the prior year. The 2011 rate reflected net discrete benefits of $4,570 primarily from
tax planning related to unremitted foreign earnings. The 2010 rate reflected net discrete tax benefits of
$2,307 primarily from the resolution of foreign and domestic income tax audits. Excluding the discrete
tax items from both years, the 2011 tax benefit rate would have been 16.4% and the 2010 tax provision
rate would have been 47.9%. The 2011 rate reflects the impact of permanent differences not deductible
in determining taxable income, mainly limited deductibility of restricted stock, as well as the impact of
tax reserves and changes in earnings mix between domestic and non-domestic operations. The 2010 rate
was impacted by permanent book to tax adjustments including non-deductible transaction costs of
$3,800 related to the ATT acquisition.

Net loss was $7,431, or $0.13 per share, for 2011 compared to income of $9,592 or $0.16 cents per share
in the prior year. The 2011 results included the following:

– Charges of $26,164 ($16,813, net of tax, or $0.29 per share) resulting from the refinancing of

ATT acquisition related debt;

– $15,152 ($9,849, net of tax, or $0.17 per share) of increased cost of goods related to the sale of

inventory recorded at fair value in connection with acquisition accounting for ATT;

– Restructuring charges of $7,543 ($4,903, net of tax, or $0.08 per share);

– Acquisition costs of $446 ($290, net of tax, or $0.00 per share); and

– Discrete tax benefits, net, of $4,570, or $0.08 per share.

The 2010 results included the following:

– ATT related acquisition costs of $9,805 ($7,704, net of tax, or $0.13 per share);

– Restructuring charges of $4,180 ($2,717, net of tax, or $0.05 per share);

32

34360

– Charges of $1,117 ($726, net of tax, or $0.01 per share) related to refinancing costs; and

– Discrete tax benefits, net, of $2,307, or $0.04 per share.

Excluding these items from both reporting periods, 2011 net income would have been $19,854, or $0.34
per share compared to $18,432, or $0.31 per share, in 2010.

On a pro forma basis, as if ATT was purchased on October 1, 2009, Net loss was $7,431, or $0.13 per
share, in 2011 compared to income of $16,973 or $0.28 cents per share in 2010. The pro forma prior year
results included the following:

– Acquisition and related costs of $21,075 ($13,699, net of tax, or $0.23 per share);

– Restructuring charges of $6,570 ($4,271, net of tax, or $0.07 per share);

– Charges of $1,117 ($726, net of tax, or $0.01 per share) related to refinancing costs; and

– Discrete tax benefits, net of $2,307, or $0.04 per share.

Excluding these items from both reporting periods, 2011 net income would have been $19,854, or $0.34
per share compared to $33,362, or $0.56 per share, as in 2010.

Griffon evaluates performance based on Earnings per share and Net
income (loss) excluding
restructuring charges, gain (loss) on debt extinguishment, discrete tax items and acquisition-related
expenses including the impact of the fair value of inventory acquired as part of a business combination
(a non-GAAP measure). Griffon believes this information is useful to investors for the same reason.
The following table provides a reconciliation of Earnings per share and Net income (loss) to Adjusted
earnings per share and Adjusted income (loss):

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) TO ADJUSTED INCOME
(Unaudited)

For the Years Ended September 30,
2011

2012

2010

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,011

$ (7,431)

$ 9,592

Adjusting items, net of tax:

Loss from debt extinguishment, net . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold . . . . . . . . . .
Restructuring and related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discrete tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
3,048
310
(5,110)
$15,259

16,813
9,849
4,903
290
(4,570)
$19,854

726
—
2,717
7,704
(2,307)
$18,432

Earnings (loss) per common share. . . . . . . . . . . . . . . . . . . . . . . . . . .

$

0.30

$ (0.13)

$

0.16

Adjusting items, net of tax:

Loss from debt extinguishment, net . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discrete tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
0.05
0.01
(0.09)
0.27

$

0.29
0.17
0.08
0.00
(0.08)
$ 0.34

0.01
—
0.05
0.13
(0.04)
0.31

$

Weighted-average shares outstanding (in thousands). . . . . . . . .

57,329

58,919

59,993

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

33

24476

BUSINESS SEGMENTS

The following table reconciles Segment operating profit to income (loss) before taxes:

For the Years Ended September 30,
2011

2012

2010

Income (Loss) Before Taxes
Segment operating profit:

Home & Building Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total segment operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 28,228
$ 37,082
40,595
49,232
13,308
13,688
82,131
100,002
(22,868)
(26,346)
—
—
— (26,164)
(47,448)

$ 4,986
38,586
20,469
64,041
(27,394)
(9,805)
(1,117)
(11,913)
$(14,349) $ 13,812

(51,715)
$ 21,941

Griffon evaluates performance and allocates resources based on each segments’ operating results before
interest income or expense,
income taxes, depreciation and amortization, gain (losses) from debt
extinguishment, unallocated amounts, restructuring charges, acquisition-related expenses including the
impact of the fair value of inventory acquired as part of a business combination (a non-GAAP
measure). Griffon believes this information is useful to investors for the same reason.

The following table provides a reconciliation of Segment operating profit before depreciation,
amortization, restructuring and acquisition-related expenses including the impact of the fair value of
inventory acquired as part of a business combination to Income (loss) before taxes and discontinued
operations:

For the Years Ended September 30,
2011

2012

2010

Segment profit before depreciation, amortization,

restructuring, fair value write-up of acquired inventory
sold and acquisition costs:

Home & Building Products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70,467
60,565
40,000

$ 77,119
50,875
37,639

$ 19,351
46,120
42,853

Total Segment profit before depreciation, amortization,

restructuring, fair value write-up of acquired inventory
sold and acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net. . . . . . . . . . . . . . . . . . . . . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold . . . . . . . . . . . . . .
Acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171,032
(26,346)

(51,715)
(65,864)
(4,689)

165,633
(22,868)
— (26,164)
(47,448)
(60,361)
(7,543)
— (15,152)
(446)

108,324
(27,394)
(1,117)
(11,913)
(40,103)
(4,180)
—
(9,805)
$ (14,349) $ 13,812

(477)
$ 21,941

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

34

21143

Home & Building Products

Revenue:

2012

Years Ended September 30,
2011

2010

ATT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CBP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home & Building Products . . . . . . . . . . . . . . . . . . . . . . . . .

$433,866
422,674
$856,540

$434,789
404,947
$839,736

$

—
389,366
$389,366

Segment operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold. . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Segment profit before depreciation, amortization,

$ 37,082 4.3% $ 28,228 3.4% $ 4,986 1.3%

32,034
—
874
477

28,796
15,152
4,497
446

10,185
—
4,180
—

restructuring and acquisition costs . . . . . . . . . . . . . . . .

$ 70,467 8.2% $ 77,119 9.2% $ 19,351 5.0%

2012 Compared to 2011

Segment revenue increased $16,804, or 2%, compared to the prior year. ATT revenue was flat with the
prior year, mainly because of weak snow tool sales, driven by the absence of snow throughout much of
the country during the 2011-2012 winter, and lower lawn tool volume due to the severe drought
conditions experienced throughout much of the U.S. during the year. These declines were substantially
offset by the inclusion of Southern Patio, acquired in October 2011. CBP revenue increased 4% due to
a combination of favorable mix (2%) and higher volume (2%).

Segment operating profit in 2012 was $37,082 compared to $28,228 in 2011. Segment operating results in
2011 reflected $15,152 of costs of goods related to the sale of inventory recorded at fair value in
connection with the ATT acquisition accounting; excluding the $15,152 of costs, segment operating
profit would have been $43,380 for 2011. The decline in operating profit in 2012 from the adjusted
$43,380 in 2011 resulted from the weak snow tool sales and lower lawn tool volume due to the drought
conditions. The impact of these declines was partially offset by the inclusion of Southern Patio, as well
as improved CBP profitability driven by improved volume, favorable mix,
lower warehouse and
distribution costs, and lower restructuring costs.

2011 Compared to 2010

Segment revenue increased $450,370, or 116%, compared to the prior year primarily due to the
acquisition of ATT. On a pro forma basis, as if ATT was purchased on October 1, 2009, revenue
increased $6,736, or 1%, compared to the prior year. On this same pro forma basis, ATT 2011 revenue
decreased 2% from 2010, driven mainly by lower volume, primarily lawn tools; CBP 2011 revenue
increased 4%, driven mainly by a favorable shift in mix, partially offset by a 1% decrease in volume.

Segment operating profit in 2011 was $28,228 compared to $4,986 in 2010, with the inclusion of ATT
operations the primary source of increase. Segment operating results in 2011 reflected $15,152 of costs
of goods related to the sale of inventory recorded at fair value in connection with the ATT acquisition
accounting. On a pro forma basis, as if ATT was purchased on October 1, 2009, segment operating
profit in 2010 was $47,490 compared to $28,228 in 2011; the $15,152 inventory item was the primary
cause of decline in 2011, augmented by the impact of higher input costs, lower volume and a decline of
$2,919 in Byrd Amendment receipts (anti-dumping compensation from the U.S. Government). The
2010 pro forma operating income included $7,986 of costs related to the ATT acquisition.

35

12380

Restructuring

In 2012, ATT had restructuring costs of $874, primarily related to a facility closure and termination
benefits for administrative and production staff, and $477 of integration costs related to the Southern
Patio acquisition. In 2011, ATT had $886 in restructuring costs primarily related to termination benefits
for administrative related headcount reductions and $446 of acquisition costs related to the Southern
Patio acquisition. Headcount was reduced by 38 over the two year period.

In June 2009, CBP undertook to consolidate its manufacturing facilities. These actions were completed
in 2011. CBP incurred total pre-tax exit and restructuring costs approximating $9,031, substantially all of
which were cash charges; charges include $1,160 for one-time termination benefits and other personnel
costs, $210 for excess facilities and related costs, and $7,661 for other exit costs, primarily in connection
with production realignment, and had $10,365 of capital expenditures. The restructuring costs were
$3,611 in 2011, $4,180 in 2010 and $1,240 in 2009.

Telephonics

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$441,503

$455,353

2012

Years Ended September 30,
2011

2010

$434,516

Segment operating profit . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . .

$ 49,232 11.2% $ 40,595
7,234
3,046

7,518
3,815

8.9% $ 38,586
7,534
—

8.9%

Segment profit before depreciation,

amortization and restructuring . . . . . . .

$ 60,565 13.7% $ 50,875 11.2% $ 46,120 10.6%

2012 Compared to 2011

Telephonics revenue decreased $13,850, or 3%, compared to 2011. 2012 and 2011 revenue included
$24,101 and $44,305, respectively, related to revenue for Counter Remote Control Improvised
Explosive Device Electronic Warfare 3.1 (“CREW 3.1”) program, where Telephonics serves as a
subcontractor. Excluding Crew 3.1 from both years, revenue increased 2% over the prior year due to
radar growth driven by Light Airborne Multi-Purpose Systems Multi Mode Radar (“LAMPS MMR”),
partially offset by the impact from the timing of awards on Ground Surveillance Radars (“GSR”)
related to the Cerberus program.

Segment operating profit increased $8,637, or 21%, mainly driven by higher gross profit from a
combination of favorable program mix, and manufacturing efficiencies, partially offset by higher selling,
general and administrative expenses primarily due to the timing of proposal activities. Operating results
also benefited from cost reductions resulting from the voluntary early retirement plan undertaken in the
prior year and other restructuring activities implemented in early 2012.

During the year, Telephonics was awarded several new contracts and received incremental funding on
current contracts resulting in approximately $475,000 of net bookings. Contract backlog was $451,000 at
September 30, 2012 with 70% expected to be realized in the next 12 months; backlog was $417,000 at
September 30, 2011. Backlog is defined as unfilled firm orders for products and services for which
funding has been both authorized and appropriated by the customer, or Congress, in the case of the
U.S. government agencies.

On August 1, 2012, Telephonics signed a definitive agreement to form a Joint Venture (“JV”) with
Mahindra & Mahindra Ltd., one of India’s leading business houses, to provide the Indian Ministry of
Defense and the Indian Civil sector with radar and surveillance systems, Identification Friend or Foe
(“IFF”) devices and communication systems. In addition, the JV intends to provide systems for Air
Traffic Management Services, Homeland Security and other emerging surveillance requirements.

36

28759

2011 Compared to 2010

Telephonics revenue increased $20,837, or 5%, compared to 2010 primarily due to increases in radar
and electronic systems, partially offset by a decrease in communication systems. Telephonics continued
to benefit from strong demand for its intelligence, surveillance and reconnaissance products. Electronic
systems growth was primarily from GSR and Mobile Surveillance Capability (“MSC”) programs, and
radar growth was driven by LAMPS MMR. The increases were partially offset by timing on the
Automatic Radar Periscope Detection and Discrimination (“ARPDD”) program from the development
to the production phase and the lower rate of production on the C-17 program. 2011 and 2010 revenue
included $44,305 and $46,426, respectively, related to revenue for CREW 3.1.

Segment operating profit increased $2,009, or 5%, due to revenue growth, partially offset by costs
related to a voluntary early retirement plan and other restructuring costs of $3,046.

Restructuring

In 2012 and 2011, Telephonics recognized $3,815 and $3,046 of restructuring charges in connection with
two discrete voluntary early retirement plans and other restructuring costs related to changes in its
organizational structure and facilities; such charges were primarily related to personnel reducing
headcount by approximately 185 employees over the two-year period.

Plastics

2012

Years Ended September 30,
2011

2010

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$563,102

$535,713

$470,114

Segment operating profit . . . . . . . . . . . . . . . . . .
Depreciation and amortization. . . . . . . . . . . . .

$ 13,688 2.4% $ 13,308 2.5% $ 20,469 4.4%

26,312

24,331

22,384

Segment profit before depreciation

and amortization . . . . . . . . . . . . . . . . . . . . . . . .

$ 40,000 7.1% $ 37,639 7.0% $ 42,853 9.1%

2012 Compared to 2011

Revenue in 2012 increased $27,389, or 5%, compared to 2011, driven by a 10% increase in volume. The
benefit of the volume growth was partially offset by the unfavorable impact of translation of European
and Brazilian revenue into a stronger U.S. dollar (5%). Resin did not significantly impact reported
revenue for the full year 2012; Plastics adjusts customer selling prices based on underlying resin costs,
on a delayed basis.

Segment operating profit increased $380 compared to the prior year primarily driven by the higher
volume, a $3,700 favorable resin benefit and efficiency improvement on past capital initiatives, partially
offset by the unfavorable impact of foreign exchange (2%) and a shift in product mix, as well as
somewhat higher selling, general and administrative expenses.

2011 Compared to 2010

Plastics revenue increased $65,599, or 14%, compared to the prior year primarily due to higher unit
volumes (6%) in North America and Europe, the pass through of higher resin costs in customer selling
prices (5%) and the translation of European results into a weaker U.S. dollar (3%).

Segment operating profit decreased $7,161 compared to the prior year, driven by start up costs, in both
Germany and Brazil, related to expanding capacity and product offerings to meet increased customer
demand; such start up costs included higher than normal levels of scrap production. There were no
significant disruptions in customer service in connection with the scaling up of production of newly

37

28140

installed assets. The decline was partially offset by higher volume and a timing benefit from resin
pricing.

Unallocated Amounts

For 2012, unallocated amounts, which consist primarily of corporate overhead costs, totaled $26,346
compared to $22,868 in 2011, with the increase primarily due to stock and incentive compensation.

For 2011, unallocated amounts totaled $22,868 compared to $27,394 in 2010, with the decrease primarily
due to the absence of legal and consulting expenses incurred in connection with the due diligence of
potential acquisition targets in 2010, as well as reduced incentive compensation costs.

Segment Depreciation and Amortization

Segment depreciation and amortization of $65,864 increased $5,503 in 2012 compared to 2011 primarily
due to the increased depreciation and amortization related to the Southern Patio acquisition and capital
expansion at Plastics and CBP.

Segment depreciation and amortization of $60,361 increased $20,258 in 2011 compared to 2010,
primarily due to the increased depreciation and amortization related to the ATT acquisition as well as
the capital expansion at Plastics.

DISCONTINUED OPERATIONS—Installation Services

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all
operating activities of its Installation Services segment which sold, installed and serviced garage doors
and openers, fireplaces, floor coverings, cabinetry and a range of related building products, primarily for
the new residential housing market. Griffon sold eleven units, closed one unit and merged two units
into CBP. Operating results of substantially all of this segment have been reported as discontinued
operations in the Consolidated Statements of Operations for all periods presented; the Installation
Services segment is excluded from segment reporting.

Griffon substantially concluded remaining disposal activities in 2009. There was no reported revenue in
2012, 2011 and 2010. Griffon does not expect to incur significant expenses in the future. Future net cash
outflows to satisfy liabilities related to disposal activities accrued as of September 30, 2012 are estimated
to be $7,282.

LIQUIDITY AND CAPITAL RESOURCES

Management assesses Griffon’s liquidity in terms of its ability to generate cash to fund its operating,
investing and financing activities. Significant factors affecting liquidity are: cash flows from operating
activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract
long-term capital under satisfactory terms. Griffon remains in a strong financial position with sufficient
liquidity available for reinvestment in existing businesses and strategic acquisitions while managing its
capital structure on both a short-term and long-term basis.

38

77609

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

Cash Flows from Continuing Operations
Net Cash Flows Provided by (Used In):

Years Ended
September 30,

2012

2011

(in thousands)

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 90,130
(90,974)
(30,693)

$ 35,385
(82,333)
122,110

Cash flows generated by operating activities for 2012 increased $54,745, to $90,130 compared to
$35,385 in 2011. Current assets net of current liabilities, excluding short-term debt and cash, decreased
$5,630 to $360,881 at September 30, 2012 compared to $366,511 at the prior year end, primarily due to
decreased accounts receivable partially offset by decreased accounts payable.

During 2012, Griffon used cash in investing activities of $90,974 compared to $82,233 in 2011; the 2012
uses reflected the acquisition on Southern Patio ($22,432). In 2012, capital expenditures totaled $68,851
compared to $87,617 in 2011, with the decrease being driven primarily by decreased capital
expenditures at Plastics.

During 2012, cash used by financing activities was $30,693 compared to cash provided by financing
activities of $122,110 in the prior year primarily due to repayments of long-term borrowings, the
repurchase of common stock ($10,382) and the payment of dividends ($4,743). Prior year cash provided
was primarily due to the refinancing of subsidiary debt at the parent level.

Payments related to Telephonics revenue are received in accordance with the terms of development and
production subcontracts; certain of such receipts are progress or performance based payments. Plastics
customers are generally substantial industrial companies whose payments have been steady, reliable and
made in accordance with the terms governing such sales. Plastics sales satisfy orders that are received in
advance of production, and where payment terms are established
in advance. With respect to HBP, there have been no material adverse impacts on payment for sales.

A small number of customers account for, and are expected to continue to account for, a substantial
portion of Griffon’s consolidated revenue. For 2012:

a. The U.S. Government and its agencies, through either prime or subcontractor relationships,

represented 19% of Griffon’s consolidated revenue and 79% of Telephonics revenue.

b. Procter & Gamble, Co. represented 13% of Griffon’s consolidated revenue and 43% of Plastics

revenue.

c. The Home Depot represented 12% of Griffon’s consolidated revenue and 25% of HBP revenue.

No other customer exceeded 9% of consolidated revenue. Future operating results will continue to
substantially depend on the success of Griffon’s largest customers and Griffon’s relationships with them.
Orders from these customers are subject to fluctuation and may fluctuate materially. The loss of all or a
portion of volume from any one of these customers could have a material adverse impact on Griffon’s
liquidity and operations.

39

43822

At September 30, 2012, Griffon had debt, net of cash and equivalents, as follows:

At September 30,
2012

At September 30,
2011

(in thousands)

Cash and Equivalents, and Debt
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payables and current portion of long-term

debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net of current maturities . . . . . . . . .
Debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 209,654

$ 243,029

17,703
681,907
16,607
716,217

25,164
688,247
19,693
733,104

Debt, net of cash and equivalents . . . . . . . . . . . . . . . . .

$(506,563)

$(490,075)

On March 17, 2011, in an unregistered offering through a private placement under Rule 144A, Griffon
issued, at par, $550,000 of 7.125% Senior Notes due in 2018 (“Senior Notes”); interest is payable semi-
annually. On August 9, 2011, Griffon exchanged all of the Senior Notes for substantially identical
Senior Notes registered under the Securities Act of 1933 (“Senior Notes”), via an exchange offer.
Proceeds were used to pay down outstanding borrowings under a senior secured term loan facility and
two senior secured revolving credit facilities of certain of the Company’s subsidiaries. The Senior Notes
are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and are subject
to certain covenants, limitations and restrictions. The fair value of the Senior Notes approximated
$580,250 on September 30, 2012 based upon quoted market prices (level 1 inputs).

On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit
Agreement”), which included a letter of credit sub-facility with a limit of $50,000, a multi-currency sub-
facility of $50,000 and a swingline sub-facility with a limit of $30,000. Borrowings under the Credit
Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the
occurrence of a default or event of default under the Credit Agreement. Interest is payable on
borrowings at either a LIBOR or base rate benchmark rate plus an applicable margin, which adjusts
based on financial performance. The margins are 1.75% for base rate loans and 2.75% for LIBOR
loans, in each case without a floor. The Credit Agreement 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 Credit Agreement also includes certain restrictions, such as limitations on the incurrence of
indebtedness and liens and the making of restricted payments and investments. Borrowings under the
Credit Agreement are guaranteed by certain domestic subsidiaries and are secured, on a first priority
basis, by substantially all assets of the Company and the guarantors.

At September 30, 2012, there were $21,693 of standby letters of credit outstanding under the Credit
Agreement; $178,307 was available for borrowing at that date.

On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due
2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s
common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of
$14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15, 2009. When
a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%,
any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion, (ii) the
42nd trading day prior to maturity of the notes, and (iii) such time as the cumulative adjustment equals
or exceeds 1%. As of September 30, 2012, aggregate dividends of $0.08 per share resulted in a
cumulative change in the conversion rate of 0.86%. Griffon used 8.75% as the nonconvertible debt-
borrowing rate to discount the 2017 Notes and will amortize the debt discount through January 2017. At
issuance, the debt component of the 2017 Notes was $75,437 and debt discount was $24,563. At
September 30, 2012 and September 30, 2011, the 2017 Notes had a capital in excess of par component,
net of tax, of $15,720. The fair value of the 2017 Notes approximated $102,000 on September 30, 2012
based upon quoted market prices (level 1 inputs).

40

40629

On December 20, 2010, Griffon entered into two second lien real estate mortgages to secure new loans
totaling $11,834. The loans mature in February 2016, are collateralized by the related properties and are
guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 3% with the option to swap to a
fixed rate.

Griffon has other real estate mortgages, collateralized by real property, which bear interest at 6.3% and
mature in 2016. On October 3, 2011, the mortgage at Russia, Ohio was paid in full, on maturity.

Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to
borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of Griffon
common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus 2.5% or b) the
lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an option to convert the
outstanding loan to a five-year term loan; principal
is payable in quarterly installments of $250,
beginning December 2011, with a balloon payment of $15,223 due at maturity (November 2016). The
loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by
Griffon. At September 30, 2012, $18,973 was outstanding.

In addition, the ESOP has a loan agreement, guaranteed by Griffon, which requires quarterly principal
payments of $156 and interest through the extended expiration date of December 2013 at which time
the $3,125 balance of the loan, and any outstanding interest, will be payable. The primary purpose of
this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan is
secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon.
The loan bears interest at rates based upon the prime rate or LIBOR. At September 30, 2012, $3,750
was outstanding.

In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio.
Approximately $10,000 was used to acquire the building and the remaining amount was restricted for
improvements. The lease matures in 2021, bears interest at a fixed rate of 5.1%, is secured by a
mortgage on the real estate and is guaranteed by Griffon.

At September 30, 2012 and September 30, 2011, Griffon had $532 of 4% convertible subordinated notes
due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to repurchase
all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below
the conversion price of the 2023 Notes, as well as upon a change in control. An adjustment to the
conversion rate will be required as the result of payment of a cash dividend only if such adjustment
would be greater than 1% (or at such time as the cumulative impact on the conversion rate reaches 1%
in the aggregate). As of September 30, 2012, aggregate dividends of $0.08 per share resulted in a
cumulative change in the conversion rate of 0.89%. At September 30, 2012 and September 30, 2011, the
2023 Notes had no capital in excess of par value component as substantially all of these notes were put
to Griffon at par and settled in July 2010. The fair value of the 2023 Notes approximated $544 on
September 30, 2012 based upon quoted market prices (level 1 inputs).

In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving credit
facility and a €20,000 term loan. The facility accrues interest at Euribor plus 2.1% per annum (2.3% at
September 30, 2012), and the term loan accrues interest at Euribor plus 2.2% per annum (2.4% at
September 30, 2012). The revolving facility matures in November 2012, but is renewable upon mutual
agreement with the bank. Subsequent to September 30, 2012 the line was renewed for an additional
year to November 2013. In July 2011, the full €20,000 was drawn on the Term Loan, with a portion of
the proceeds used to repay borrowings under the revolving credit facility. The term loan is payable in
ten equal quarterly installments which began in September 2011, with maturity in December 2013.
Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio
and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. At September
30, 2012, there were no borrowings on the revolving credit with €10,000 available for borrowing.

In February 2012, Clopay do Brazil, a subsidiary of Plastics, borrowed $4,000 at a rate of 104.5% of
Brazilian CDI (7.7% at September 30, 2012). The loan was used to refinance existing loans and is
collateralized by accounts receivable and a 50% guaranty by Plastics and is to be repaid in four equal,

41

51970

semi-annual installments of principal plus accrued interest beginning in August 2012. Clopay do Brazil
also maintains lines of credit of approximately $4,200. Interest on borrowings accrue at a rate of
Brazilian CDI plus 6.0% or a fixed rate (13.8% and 10.2%, respectively, at September 30, 2012). At
September 30, 2012 there was approximately $2,064 borrowed under the lines.

At September 30, 2012, Griffon and its subsidiaries were in compliance with the terms and covenants of
all credit and loan agreements.

In August 2011, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s
outstanding common stock; this was in addition to the 1,366,000 shares of common stock authorized for
repurchase under an existing buyback program. Under the repurchase programs, the Company may,
from time to time, purchase shares of its common stock, depending upon market conditions, in open
market or privately negotiated transactions, including pursuant to a 10b5-1 plan. During 2011, Griffon
purchased 1,531,379 shares of common stock, for a total of $12,367, or $8.08 per share, exhausting the
shares under the original program; $48,690 remained under the $50,000 authorization. During 2012,
Griffon purchased 1,187,066 shares of common stock under the plan for a total of $10,379, or $8.74 per
share; $38,312 remains under the $50,000 authorization.

On November 17, 2011, the Company began declaring quarterly dividends at $0.02 per share; a total of
$0.08 per share, for a total of $4,743, was declared and paid in 2012. No cash dividends on Common
Stock were declared or paid during the four years ended September 30, 2011. The Company currently
intends to pay dividends each quarter; however, the 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 future
dividends.

On November 13, 2012, the Company declared a $0.025 per share dividend payable on December 26,
2012 to shareholders of record as of November 29, 2012.

During the year ended September 30, 2012, Griffon used cash for discontinued operations of $2,801,
primarily related to settling remaining Installation Services liabilities.

Contractual Obligations

At September 30, 2012, payments to be made pursuant to significant contractual obligations are as
follows:

Long-term debt . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Rental commitments. . . . . . . . . . . . . . . .
Purchase obligations(a) . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . .
Supplemental & post-retirement

benefits(b). . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions(c) . . . . . . . . . . .
Total obligations . . . . . . . . . . . . . . .

Payments Due By Period

Total

Less Than
1 Year

$ 716,218
239,779
89,381
146,839
10,928
13,489

$ 17,703
45,269
22,345
132,238
1,076
13,489

1-3 Years

3-5 Years

(in thousands)

$ 12,792
89,337
31,575
11,194
2,247
—

$129,879
84,872
20,380
3,407
2,293
—

More than
5 Years

Other

$555,844
20,301
15,082
—
5,312
—

$ —
—
—
—
—
—

36,540
9,059
$1,262,234

6,579
—
$238,699

7,783
—
$154,928

7,498
—
$248,329

14,680

—
— 9,059
$9,059

$611,219

(a) 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

42

46252

be firm. Purchase obligations that extend beyond 2012 are principally related to long-term contracts
received from customers of Telephonics.

(b) Griffon funds required payouts under the non-qualified supplemental defined benefit plan from its

general assets and the expected payments are included in each period, as applicable.

(c) Due to the uncertainty of the potential settlement of future uncertain tax positions, management is
unable to estimate the timing of related payments, if any, that will be made subsequent to 2012.
These amounts do not include any potential indirect benefits resulting from deductions or credits for
payments made to other jurisdictions.

Off-Balance Sheet Arrangements

Except for operating leases and purchase obligations as disclosed herein, Griffon is not a party to any
off-balance sheet arrangements.

Off-Set Agreements

Telephonics may enter into industrial cooperation agreements, sometimes referred to as offset
agreements, as a condition to obtaining orders for its products and services from customers in foreign
countries. These agreements promote investment in the country, and may be satisfied through activities
that do not require Griffon to use its cash, including transferring technology, providing manufacturing
and other consulting support. These agreements may also be satisfied through the use of cash for such
activities as purchasing supplies from in-country vendors, setting up support centers, research and
development investments, acquisitions and building or leasing facilities for in-country operations, if
applicable. The amount of the offset requirement is determined by contract value awarded and
negotiated percentages with customers. At September 30, 2012, Telephonics had outstanding offset
agreements totaling approximately $65,000, primarily related to the Radar Systems segment, some of
which extend through 2024. Offset programs usually extend over several years and in some cases
provide for penalties in the event Griffon fails to perform in accordance with contract requirements.
Historically, Telephonics has not been required to pay any such penalties and as of September 30, 2012,
no such penalties are estimable or probable.

ACCOUNTING POLICIES AND PRONOUNCEMENTS

Critical Accounting Policies

liabilities, revenue and expenses. These estimates can also affect supplemental

The preparation of Griffon’s consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires the use of estimates,
assumptions, judgments and subjective interpretations of accounting principles that have an impact on
assets,
information
contained in public disclosures of Griffon, including information regarding contingencies, risk and its
financial condition. These estimates, assumptions and judgments are evaluated on an ongoing basis and
based on historical experience, current conditions and various other assumptions, and form the basis for
estimating the carrying values of assets and liabilities, as well as identifying and assessing the accounting
treatment
for commitments and contingencies. Actual results may materially differ from these
estimates.

An estimate is considered to be critical if it is subjective and if changes in the estimate using different
assumptions would result in a material impact on Griffon’s financial position or results of operations.
The following have been identified as the most critical accounting policies and estimates:

43

40720

Revenue Recognition

Revenue is recognized when the following circumstances are satisfied: a) persuasive evidence of an
arrangement exists, b) delivery has occurred, title has transferred or services are rendered, c) price is
fixed and determinable and d) collectability is reasonably assured. Goods are sold on terms which
transfer title and risk of loss at a specified location. Revenue recognition from product sales occurs
when all factors are met, including transfer of title and risk of loss, which occurs either upon shipment
or upon receipt by customers at the location specified in the terms of sale. Other than standard product
warranty provisions, sales arrangements provide for no other significant post-shipment obligations.
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 allowances based upon historical returns experience.

Telephonics earns a substantial portion of its revenue as either a prime or subcontractor from contract
awards with the U.S. Government, as well as non-U.S. governments and other commercial customers.
These formal contracts are typically long-term in nature, usually greater than one year. Revenue and
profits from these long-term fixed price contracts are recognized under the percentage-of-completion
method of accounting. Revenue and profits on fixed-price contracts that contain engineering as well as
production requirements are recorded based on the ratio of total actual incurred costs to date to the
total estimated costs for each contract (cost-to-cost method). Using the cost-to-cost method, revenue is
recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated
costs at completion, multiplied by the total estimated contract revenue, less the cumulative revenue
recognized in prior periods. The profit recorded on a contract using this method is equal to the current
estimated total profit margin multiplied by the cumulative revenue recognized, less the amount of
cumulative profit previously recorded for the contract in prior periods. As this method relies on the
substantial use of estimates, these projections may be revised throughout the life of a contract.
Components of this formula and ratio that may be estimated include gross profit margin and total costs
at completion. The cost performance and estimates to complete on long-term contracts are reviewed, at
a minimum, on a quarterly basis, as well as when information becomes available that would necessitate
a review of the current estimate. Adjustments to estimates for a contract’s estimated costs at completion
and estimated profit or loss often are required as experience is gained, and as more information is
obtained, even though the scope of work required under the contract may or may not change, or if
contract modifications occur. The impact of such adjustments or changes to estimates is made on a
cumulative basis in the period when such information has become known. Gross profit is affected by a
variety of factors, including the mix of products, systems and services, production efficiencies, price
competition and general economic conditions.

Revenue and profits on cost-reimbursable type contracts are recognized as allowable costs are incurred
on the contract at an amount equal to the allowable costs plus the estimated profit on those costs. The
estimated profit on a cost-reimbursable contract may be fixed or variable based on the contractual fee
arrangement. Incentive and award fees on these contracts are recorded as revenue when the criteria
under which they are earned are reasonably assured of being met and can be estimated.

For contracts whose anticipated total costs exceed total expected revenue, an estimated loss is
recognized in the period when identifiable. A provision for the entire amount of the estimated loss is
recorded on a cumulative basis.

Amounts representing contract change orders or claims are included in revenue only when they can be
reliably estimated and their realization is probable, and are determined on a percentage-of-completion
basis measured by the cost-to-cost method.

Inventories

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

44

25546

Griffon’s businesses typically do not require inventory that is susceptible to becoming obsolete or dated.
In general, Telephonics sells products in connection with programs authorized and approved under
contracts awarded by the U.S. Government or agencies thereof, either as prime or subcontractor, and in
accordance with customer specifications. Plastics primarily produces fabricated materials used by
customers in the production of their products and these materials are produced against orders by those
customers. HBP produces doors and non-powered lawn and garden tools in response to orders from
customers of retailers and dealers or based on expected orders, as applicable.

Warranty Accruals

Direct customer and end-user warranties are provided on certain products. These warranties cover
manufacturing defects that would prevent the product from performing in line with its intended and
marketed use. The terms of these warranties vary by product line and generally provide for the repair
or replacement of the defective product. Warranty claims data is collected and analyzed with a focus on
the historical amount of claims, the products involved, the amount of time between the warranty claims
and the products’ respective sales and the amount of current sales. Based on these analyses, warranty
accruals are generally recorded as an increase to cost of sales and regularly reviewed for adequacy.

Stock-based Compensation

Griffon has issued stock-based compensation to certain employees, officers and directors in the form of
stock options and restricted stock. For stock option grants made on or after October 1, 2005, expense is
recognized over the awards’ expected vesting period based on their fair value as calculated using the
Black-Scholes pricing model. The Black-Scholes pricing model uses estimated assumptions for a
forfeiture rate, the expected life of the options and a volatility rate using historical data.

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

Allowances for Discount, Doubtful Account and Returns

Trade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts
and returns. 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 where a risk of default has been
specifically identified, as well as an amount for customer defaults based on a general formula when it is
determined the risk of some default is probable and estimable, but cannot yet be associated with
specific customers. Allowance for discounts and returns are recorded as a reduction of revenue and the
provision related to the allowance for doubtful accounts is recorded in SG&A expenses.

Acquisitions

Acquired businesses are accounted for using the acquisition method of accounting which requires,
among other things, that most assets acquired and liabilities assumed be recognized at their fair values
as of the acquisition date and that the fair value of acquired in-process research and development
(“IPR&D”) be recorded on the balance sheet. Related transaction costs are expensed as incurred. Any
excess of the purchase price over the assigned values of the net assets acquired is recorded as goodwill.

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

Griffon has significant intangible and tangible long-lived assets on its balance sheet which includes
goodwill and other intangible assets related to acquisitions. Goodwill represents the excess of the cost

45

65885

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. As required under GAAP,
goodwill and indefinite-lived intangibles are reviewed for impairment annually, for Griffon as of
September 30, or more frequently whenever events or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying amount, using discounted future
cash flows for each reporting unit. The testing of goodwill and indefinite-lived intangibles for
impairment involves significant use of judgment and assumptions in the determination of a reporting
unit’s fair market value. Based upon the results of the annual impairment review, it was determined that
the fair value of each reporting unit substantially exceeded the carrying value of the assets, and no
impairment existed as of September 30, 2012.

Long-lived amortizable intangible assets, such as customer relationships and software, and tangible
assets, primarily Property, Plant and Equipment, are amortized over their expected useful lives, which
involves significant assumptions and estimates. Long-lived intangible and tangible assets are tested for
impairment by comparing estimated future undiscounted cash flows to the carrying value of the asset
when an impairment indicator, such as change in business, customer loss or obsolete technology, exists.

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 under-
performance 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.

Restructuring reserves

From time to time, Griffon will establish restructuring reserves at an operation. These reserves for both
termination and other exit costs require the use of estimates. Though Griffon believes the estimates
made are reasonable, they could differ materially from the actual costs.

Income Taxes

Griffon’s effective tax rate is based on income, statutory tax rates and tax planning opportunities
available in the various jurisdictions in which Griffon operates. For interim financial reporting, the
annual tax rate is estimated based on projected taxable income for the full year and a quarterly income
tax provision is recorded in accordance with the anticipated annual rate. As the year progresses, the
estimates are refined based on the year’s taxable income as new information becomes available,
including year-to-date financial results. This continual estimation process often results in a change to
the effective tax rate throughout the year. Significant judgment is required in determining the effective
tax rate and in evaluating tax positions.

Deferred tax assets and liabilities are recognized based on the differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent
items to be used as a tax deduction or credit in future tax returns for which a tax benefit has been
recorded in the income statement. The likelihood that the deferred tax asset balance will be recovered
from future taxable income is assessed at least quarterly, and the valuation allowance, if any, is adjusted
accordingly.

Tax benefits are recognized for an uncertain tax position when, in management’s judgment, it is more
likely than not that the position will be sustained upon examination by a taxing authority. For a tax
position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the
largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate
settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted
periodically due to changing circumstances, such as the progress of tax audits, case law developments

46

52147

and new or emerging legislation. Such adjustments are recognized in the period in which they are
identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax
benefits and subsequent adjustments as considered appropriate by management. A number of years
may elapse before a particular matter for which Griffon has recorded a liability related to an
unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits
varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution
of any particular tax matter, Griffon believes its liability for unrecognized tax benefits is adequate.
Favorable resolution of an unrecognized tax benefit could be recognized as a reduction in Griffon’s tax
provision and effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized
tax benefit could increase the tax provision and effective tax rate and may require the use of cash in the
period of resolution. The liability for unrecognized tax benefits is generally presented as noncurrent.
However, if it is anticipated that a cash settlement will occur within one year, that portion of the
liability is presented as current. Interest and penalties recognized on the liability for unrecognized tax
benefits is recorded as income tax expense.

Pension Benefits

Griffon sponsors defined and supplemental benefit pension plans for certain employees and 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. The actuarial assumptions used to determine pension liabilities and assets,
as well as pension expense, are reviewed on an annual basis when modifications to assumptions are
made based on current economic conditions and trends. The expected return on plan assets is
determined based on the nature of the plans’ investments and expectations for long-term rates of
return. The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve
that matches projected future benefit payments with the appropriate spot rate applicable to the timing
of the projected future benefit payments. The assumptions utilized in recording 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 the assumptions
may materially affect Griffon’s financial position or results of operations.

The U.S. components of the defined benefit plans, which excludes the supplemental and post retirement
healthcare and insurance benefit plans, are frozen and have stopped accruing benefits.

Effective January 1, 2012, the Clopay Pension Plan merged with the Ames True Temper Inc. Pension
Plan. The merged qualified defined benefit plans was named the Clopay Ames True Temper Plan
(“CATT Plan”).

The ATT supplemental executive retirement plan was frozen to new entrants and participants in the
plan stopped accruing benefits in 2008.

Newly issued but not yet effective accounting pronouncements

In June 2011,
the FASB issued new accounting guidance which requires the presentation of
comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income, or in two separate but
consecutive statements. The new accounting rules eliminate the option to present components of other
comprehensive income as part of the statement of changes in shareholders’ equity. The new accounting
rules will be effective for the Company in 2013 and are not expected to have a material effect on the
Company’s financial condition or results of operations.

In September 2011, the FASB issued new accounting guidance that allows an entity to first assess
qualitative factors to determine whether it is necessary to perform the two-step quantitative impairment
testing of goodwill and indefinite life intangibles. This guidance is effective for the Company in 2013
and is not expected to have an impact on the Company’s financial condition or result of operations.

47

85357

Recently issued effective accounting pronouncements

None

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

Griffon’s exposure to market risk for changes in interest rates relates primarily to variable interest rate
debt and investments in cash and equivalents.

The revolving credit facility and certain other of Griffon’s credit facilities have a LIBOR-based variable
interest rate. Due to the current and expected level of borrowings under these facilities, a 100 basis
point change in LIBOR would not have a material impact on Griffon’s results of operations or liquidity.

Foreign Exchange

Griffon conducts business in various non-U.S. countries, primarily in Canada, Mexico, Europe, Brazil,
Turkey, China, Sweden, Australia and Mexico; therefore, changes in the value of the currencies of these
countries affect the financial position and cash flows when translated into U.S. Dollars. Griffon has
generally accepted the exposure to exchange rate movements relative to its non-U.S. operations.
Griffon may, from time to time, hedge its currency risk exposures. A change of 10% or less in the value
of all applicable foreign currencies would not have a material effect on Griffon’s financial position and
cash flows.

Item 8. Financial Statements and Supplementary Data

The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP
are included herein:

(cid:3) Report of Independent Registered Public Accounting Firm.

(cid:3) Consolidated Balance Sheets at September 30, 2012 and 2011.

(cid:3) Consolidated Statements of Operations for the years ended September 30, 2012, 2011 and 2010.

(cid:3) Consolidated Statements of Cash Flows for the years ended September 30, 2012, 2011 and 2010.

(cid:3) Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the

years ended September 30, 2012, 2011 and 2010.

(cid:3) Notes to Consolidated Financial Statements.

(cid:3) Schedule II—Valuation and Qualifying Account.

48

15033

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Griffon Corporation

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation)
and subsidiaries (the “Company”) as of September 30, 2012 and 2011, and the related consolidated statements of
operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the
period ended September 30, 2012. We also have audited the Company’s internal control over financial reporting as
of September 30, 2012, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is
responsible for these financial statements, for maintaining effective 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 audits of the basic financial statements
included the financial statement schedule listed in the index appearing under Item 15(a)(2). These financial
statements and financial statement schedule is the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements, financial statement schedule and an opinion on Griffon
Corporation’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. 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.

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.

its inherent

Because of
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.

limitations,

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Griffon Corporation and subsidiaries as of September 30, 2012 and 2011, and the results of
their operations and their cash flows for each of the three years in the period ended September 30, 2012 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set forth therein. In addition, in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of September
30, 2012, based on criteria established in Internal Control—Integrated Framework issued by COSO.

/s/ GRANT THORNTON LLP
New York, New York
November 16, 2012

49

73474

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

CURRENT ASSETS

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $5,433 and $6,072
Contract costs and recognized income not yet billed, net of
progress payments of $3,748 and $9,697 . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTY, PLANT AND EQUIPMENT, net. . . . . . . . . . . . . . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . .

At September 30,
2012

At September 30,
2011

$ 209,654
239,857

$ 243,029
267,471

70,777
257,868
47,472
587

826,215
356,879
358,372
230,473
31,317
2,936

74,737
263,809
48,828
1,381

899,255
350,050
357,888
223,189
31,197
3,675

Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,806,192

$1,865,254

CURRENT LIABILITIES

Notes payable and current portion of long-term debt. . . . . . . .
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .

$

Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LONG-TERM DEBT, net of debt discount of $16,607 and

$19,693 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES OF DISCONTINUED OPERATIONS . . . . . . . . . . .

17,703
141,704
110,337
3,639

273,383

681,907
193,107
3,643

$

25,164
186,290
99,631
3,794

314,879

688,247
204,434
5,786

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,152,040

1,213,346

COMMITMENTS AND CONTINGENCIES – See Note 15
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 76,509 shares and 76,184 shares. . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost, 15,621 common shares and 14,434

common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

19,127
482,009
436,421

(242,081)
(19,559)
(21,765)

654,152

—

19,046
471,928
424,153

(231,699)
(7,724)
(23,796)

651,908

Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . . . .

$1,806,192

$1,865,254

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

50

01749

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Years Ended September 30,
2011

2012

2010

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,861,145
1,442,340

$1,830,802
1,437,341

$1,293,996
1,005,692

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . .
Restructuring and other related charges . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other income (expense)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

418,805
341,696
4,689

346,385
72,420

(52,007)
292
—
1,236

(50,479)

21,941
4,930

393,461
330,369
7,543

337,912
55,549

(47,846)
398
(26,164)
3,714

(69,898)

(14,349)
(6,918)

288,304
261,403
4,180

265,583
22,721

(12,322)
409
(1,117)
4,121

(8,909)

13,812
4,308

Income (loss) from continuing operations. . . . . . . . . . . . . . . . . . . . . . .

$

17,011

$

(7,431) $

9,504

Discontinued operations:

Income from operations of the discontinued Installation

Services business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . .

—
—

—

17,011

0.30
0.00
0.30

55,914

0.30
0.00
0.30

—
—

—

142
54

88

$

$

$

$

$

(7,431) $

9,592

(0.13) $
0.00
(0.13) $

0.16
0.00
0.16

58,919

58,974

(0.13) $
0.00
(0.13) $

0.16
0.00
0.16

$

$

$

$

$

Weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .

57,329

58,919

59,993

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

51

04467

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for losses on accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization/write-off of deferred financing costs and debt discounts. . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale/disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in assets and liabilities, net of assets and liabilities acquired:

(Increase) decrease in accounts receivable and contract costs and recognized income

not yet billed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in prepaid and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable .
Other changes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended September 30,
2012
2010
2011

$ 17,011

$

(7,431)

$

9,592

—
66,264
—
10,439
1,212
6,023
—
(2,627)
56

—
60,712
15,152
8,956
1,225
6,733
26,164
(2,749)
(251)

(88)
40,442
—
5,778
2,431
5,059
1,117
(3,666)
74

27,269
9,011
(3,281)
(46,368)
5,121

(30,593)
(12,803)
9,065
(42,604)
3,809

(25,481)
(10,611)
(14,342)
72,144
676

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90,130

35,385

83,125

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired business, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in funds restricted for capital projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(68,851)
(22,432)
—
309

(87,617)
(855)
4,629
1,510

(40,477)
(542,000)
—
—

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(90,974)

(82,333)

(584,143)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of shares for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of ESOP shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect from exercise/vesting of equity awards, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
(4,743)
(10,382)
4,000
(18,546)
(1,859)
(97)
—
—
834
100

—
—
(18,139)
674,251
(498,572)
3,538
(21,653)
(19,973)
2,306
7
345

2,823
—
—
543,875
(176,802)
—
(17,455)
—
343
325
184

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(30,693)

122,110

353,293

CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,801)

(2,801)
963

(962)

(962)
(973)

(638)

(638)
(2,668)

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . .
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . .

(33,375)
243,029

73,227
169,802

(151,031)
320,833

CASH AND EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$209,654

$ 243,029

$ 169,802

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 49,533
8,713

$ 21,396
10,219

$

6,489
4,643

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

52

23326

GRIFFON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)

(in thousands)
Balance at 9/30/2009. . . . . . . . . . 73,663 $18,415 $438,438 $421,992 12,466 $(213,560)

Shares

Cost

Common Stock

Shares

Par
Value

Capital in
Excess of
Par Value

Retained
Earnings

Treasury Shares

Accumulated
Other
Comprehensive
Income (Loss)

Deferred
ESOP &
Other
Compensation

Comprehensive
Income
(Loss)

Total

$ 28,170

$ (5,248)

$688,207

$ 21,409

Net income . . . . . . . . . . . . . . . . . . .
Common stock issued for

options exercised . . . . . . . . . . .

Tax effect from

exercise/vesting of equity
awards, net. . . . . . . . . . . . . . . . .

Amortization of deferred

compensation . . . . . . . . . . . . . .

Restricted stock awards

granted, net . . . . . . . . . . . . . . . .

Issuance of convertible debt,

net . . . . . . . . . . . . . . . . . . . . . . . . .

ESOP allocation of common

stock . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . .
Issuance of common stock

pursuant to acquisition . . . . .

—

48

—

—

—

13

—

—

—

329

325

—

630

157

(627)

—

—
—

239

— 13,694

—
—

60

266
5,765

2,765

9,592

—

—

—

—

—

—
—

—

—

—

—

—

—

—

—
—

—

—

—

—

—

—

—

—
—

—

—

—

—

—

—

—

—
—

—

—

—

—

744

—

—

—
13

—

9,592

9,592

342

325

744

(470)

13,694

266
5,778

2,825

Translation of foreign

—
financial statements . . . . . . . .
Pension OCI, net of tax . . . . . .
—
Balance at 9/30/2010. . . . . . . . . . 74,580

—
—
18,645

—
—
460,955

—
—

—
—
431,584 12,466

—
—
(213,560)

(9,677)
(911)
17,582

—
—
(4,491)

(9,677)
(911)
710,715

(9,677)
(911)
(996)

$

Net income (loss) . . . . . . . . . . . .
Common stock issued for

options exercised . . . . . . . . . . .

Tax effect from

exercise/vesting of equity
awards, net. . . . . . . . . . . . . . . . .

Amortization of deferred

compensation . . . . . . . . . . . . . .
Common stock acquired . . . . . .
Restricted stock awards

granted, net . . . . . . . . . . . . . . . .

ESOP purchase of common

stock . . . . . . . . . . . . . . . . . . . . . . .

ESOP allocation of common

stock . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . .
Translation of foreign

— (7,431)

—

339

—

—
—

—

85

—

—
—

2,425

7

—
—

—

—

—

—

—

—

—

—

—
—
— 1,968

—
(18,139)

1,265

316

(588)

—

—
—

—

—
—

—

173
8,956

—

—

—
—

—

—

—
—

—

—

—
—

financial statements . . . . . . . .
—
Pension OCI, net of tax . . . . . .
—
Balance at 9/30/2011. . . . . . . . . . 76,184 $19,046 $471,928 $424,153 14,434 $(231,699)

—
—

—
—

—
—

—
—

—
—

Net income . . . . . . . . . . . . . . . . . . .
Dividend . . . . . . . . . . . . . . . . . . . . .
Tax effect from

exercise/vesting of equity
awards, net. . . . . . . . . . . . . . . . .

Amortization of deferred

compensation . . . . . . . . . . . . . .
Common stock acquired . . . . . .
Restricted stock awards

granted, net . . . . . . . . . . . . . . . .

ESOP allocation of common

stock . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . .
Translation of foreign

—
—

—

—
—

325

—
—

—
—

—

—
—

81

834

—
—

(1,064)

—
(128)
— 10,439

— 17,011
— (4,743)

—
—

—

—
—

—

—

—
—
— 1,187

—
(10,382)

—

—
—

—

—
—

—

—
—

—
financial statements . . . . . . . .
Pension OCI, net of tax . . . . . .
—
Balance at 9/30/2012. . . . . . . . . . 76,509 $19,127 $482,009 $436,421 15,621 $(242,081)

—
—

—
—

—
—

—
—

—
—

—

—

—

—
—

—

—

—
—

(11,232)
(14,074)

—

—

—

668
—

—

(7,431)

$ (7,431)

2,510

7

668
(18,139)

(272)

(19,973)

(19,973)

—
—

—
—

173
8,956

(11,232)
(14,074)

(11,232)
(14,074)

$ (7,724)

$(23,796)

$651,908

$(32,737)

—
—

—

—
—

—

—
—

—
—

—

17,011
(4,743)

$ 17,011

834

2,031
—

2,031
(10,382)

—

—
—

(983)

(128)
10,439

(6,754)
(5,081)
$(19,559)

—
—
$(21,765)

(6,754)
(5,081)
$654,152

(6,754)
(5,081)
$ 5,176

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

53

86227

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” or “Griffon”), 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 in connection with acquisition and growth opportunities as
well as in connection with divestitures. Griffon to further diversify, also seeks out, evaluates and, when
appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Headquartered in New York, N.Y., the Company was founded in 1959 and is incorporated in Delaware.
Griffon is listed on the New York Stock Exchange and trades under the symbol GFF.

Griffon currently conducts its operations through three segments:

• Home & Building Products (“HBP”) consists of two companies, Ames True Temper, Inc

(“ATT”) and Clopay Building Products (“CBP”):

– ATT, acquired by Griffon on September 30, 2010,

is a global provider of non-powered
landscaping products that make work easier for homeowners and professionals. Due to the
acquisition of ATT occurring on September 30, 2010, none of ATT’s results of operations were
included in Griffon’s results prior to October 1, 2010.

– CBP is a leading manufacturer and marketer of residential, commercial and industrial garage

doors to professional installing dealers and major home center retail chains.

• Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology
integrated information, communication and sensor system solutions to military and commercial
markets worldwide.

• Clopay Plastic Products Company (“Plastics”) is an international leader in the development and
laminated and printed specialty plastic films used in a variety of

production of embossed,
hygienic, health-care and industrial applications.

Consolidation

The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.

Earnings Per Share

Due to rounding, the sum of earnings per share of Continuing operations and Discontinued operations
may not equal earnings per share of Net income.

54

45743

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Discontinued Operations – Installation Services

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all
operating activities of its Installation Services segment which sold, installed and serviced garage doors
and openers, fireplaces, floor coverings, cabinetry and a range of related building products, primarily for
the new residential housing market. Operating results of substantially all of this segment have been
reported as discontinued operations in the Consolidated Statements of Operations for all periods
presented; the Installation Services segment is excluded from segment reporting.

Reclassifications and Adoption of New Accounting Guidance

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 allowances for doubtful accounts
receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill
and intangible assets, percentage of completion method of accounting, pension assumptions, useful lives
associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales
incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves,
environmental reserves, legal reserves, insurance reserves and the valuation of discontinued assets and
liabilities, 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, as well as
insured bank deposits. Griffon had cash in non-U.S. bank accounts of approximately $15,914 and
$39,738 at September 30, 2012 and 2011, respectively. Substantially all U.S. cash and equivalents are
covered by government insurance or backed by government securities. 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 equivalents, accounts receivable, accounts and notes payable and
revolving credit 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 values of Griffon’s 2018 senior notes, 2017 and 2023 4% convertible notes approximated
$580,250, $102,000 and $544, respectively on September 30, 2012. Fair values were based upon quoted
market prices (level 1 inputs).

55

88369

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Insurance contracts with a value of $4,183 and trading securities with a value of $697 at September 30,
2012, are measured and recorded at fair value based upon quoted prices in active markets for identical
assets (level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

At September 30, 2012, Griffon had $1,500 of Australian dollar contracts at a weighted average rate of
$0.966. The contracts, which protect Australia operations from currency fluctuations for U.S. dollar
based purchases, do not qualify for hedge accounting and a fair value loss of $1 was recorded in other
assets and to other income for the outstanding contracts based on similar contract values (level 2 inputs)
for the year ended September 30, 2012. All contracts expire in 15 to 75 days.

Pension plan assets with a fair value of $160,833 at September 30, 2012, 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 derived by audited financial statements (level 3 inputs).

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. Adjustments resulting from currency translation have been recorded
in the equity section of the balance sheet as cumulative translation adjustments. Assets and liabilities of
an entity that are denominated in currencies other than that entity’s functional currency are remeasured
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 Statement of
Operations as a component of Other income (expense).

Revenue recognition

Revenue is recognized when the following circumstances are satisfied: a) persuasive evidence of an
arrangement exists, b) delivery has occurred, title has transferred or services are rendered, c) price is
fixed and determinable and d) collectability is reasonably assured. Goods are sold on terms which
transfer title and risk of loss at a specified location. Revenue recognition from product sales occurs
when all factors are met, including transfer of title and risk of loss, which occurs either upon shipment
or upon receipt by customers at the location specified in the terms of sale. Other than standard product
warranty provisions, sales arrangements provide for no other significant post-shipment obligations.
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 allowances based upon historical returns experience.

Telephonics earns a substantial portion of its revenue as either a prime or subcontractor from contract
awards with the U.S. Government, as well as non-U.S. governments and other commercial customers.
These formal contracts are typically long-term in nature, usually greater than one year. Revenue and
profits from these long-term fixed price contracts are recognized under the percentage-of-completion
method of accounting. Revenue and profits on fixed-price contracts that contain engineering as well as
production requirements are recorded based on the ratio of total actual incurred costs to date to the
total estimated costs for each contract (cost-to-cost method). Using the cost-to-cost method, revenue is
recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated
costs at completion, multiplied by the total estimated contract revenue, less the cumulative revenue

56

64623

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

recognized in prior periods. The profit recorded on a contract using this method is equal to the current
estimated total profit margin multiplied by the cumulative revenue recognized, less the amount of
cumulative profit previously recorded for the contract in prior periods. As this method relies on the
substantial use of estimates, these projections may be revised throughout the life of a contract.
Components of this formula and ratio that may be estimated include gross profit margin and total costs
at completion. The cost performance and estimates to complete on long-term contracts are reviewed, at
a minimum, on a quarterly basis, as well as when information becomes available that would necessitate
a review of the current estimate. Adjustments to estimates for a contract’s estimated costs at completion
and estimated profit or loss often are required as experience is gained, and as more information is
obtained, even though the scope of work required under the contract may or may not change, or if
contract modifications occur. The impact of such adjustments or changes to estimates is made on a
cumulative basis in the period when such information has become known. Gross profit is affected by a
variety of factors, including the mix of products, systems and services, production efficiencies, price
competition and general economic conditions.

Revenue and profits on cost-reimbursable type contracts are recognized as allowable costs are incurred
on the contract at an amount equal to the allowable costs plus the estimated profit on those costs. The
estimated profit on a cost-reimbursable contract may be fixed or variable based on the contractual fee
arrangement. Incentive and award fees on these contracts are recorded as revenue when the criteria
under which they are earned are reasonably assured of being met and can be estimated.

For contracts whose anticipated total costs exceed the total expected revenue, an estimated loss is
recognized in the period when identifiable. A provision for the entire amount of the estimated loss is
recorded on a cumulative basis.

Amounts representing contract change orders or claims are included in revenue only when they can be
reliably estimated and their realization is probable, and are determined on a percentage-of-completion
basis measured by the cost-to-cost method.

Accounts receivable, allowance for doubtful accounts and concentrations of credit risk

Accounts receivable is composed principally of trade accounts receivable that arise primarily 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 customers of HBP, of which the largest customer is Home Depot, whose
financial condition is dependent on the construction and related retail sectors of the economy. In
addition, a significant portion of Griffon’s trade receivables are from one Plastics customer, P&G,
whose financial condition is dependent on the consumer products and related sectors of the economy.
As a percentage of consolidated accounts receivable, U.S. Government related programs was 18%,
while Home Depot and P&G were each under 10%. 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 allowance for doubtful accounts and, when
appropriate, for customer program reserves and cash discounts. The allowance represents estimated
uncollectible receivables associated with potential customer defaults on contractual obligations (usually
due to customers’ potential insolvency). The 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 allowance
for doubtful accounts was recorded in SG&A expenses.

57

23160

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 amount netted against accounts receivable
in 2012 and 2011 was $8,653 and $12,683, respectively.

Contract costs and recognized income not yet billed

Contract costs and recognized income not yet billed consists of amounts accounted for under the
percentage of completion method of accounting, recoverable costs and accrued profit that cannot yet be
invoiced under the terms of certain long-term contracts. Amounts will be invoiced when applicable
contract terms such as the achievement of specified milestones or product delivery, are met.

Inventories

Inventories, stated at the lower of cost (first-in, first-out or average) or market, 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, Telephonics sells products in connection with programs authorized and approved under
contracts awarded by the U.S. Government or agencies thereof, either as prime or subcontractor, and in
accordance with customer specifications. Plastics produces fabricated materials used by customers in the
production of their products and these materials are produced against orders by those customers. HBP
produces doors and non-powered lawn and garden tools in response to orders from customers of
retailers and dealers or based on expected orders, as applicable.

Property, plant and equipment

Property, plant and equipment includes the historical cost of land, buildings, equipment and significant
improvements to existing plant and equipment. 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 realized in income.

Depreciation expense, which includes amortization of assets under capital leases, was $58,216, $52,844
and $38,456 for the years ended September 30, 2012, 2011 and 2010, respectively, and was calculated on
a straight-line basis over the estimated useful lives of the assets. 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 $2,975, $2,250 and $1,700 for
the years ended September 30, 2012, 2011 and 2010, respectively. The original cost of fully-depreciated
property, plant and equipment remaining in use at September 30, 2012 was approximately $195,000.

Goodwill and indefinite-lived intangibles

Goodwill is the excess of the acquisition cost of a business over the fair value of the identifiable net
assets acquired. Goodwill is not amortized, but is subject to an annual impairment test unless during an
interim period, impairment indicators, such as a significant change in the business climate, exist.

Griffon performed its annual
testing of goodwill as of September 30, 2012. The
performance of the test involves a two-step process. The first step involves comparing the fair value

impairment

58

18298

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

of Griffon’s reporting units with the reporting unit’s carrying amount, including goodwill. Griffon
generally determines the fair value of its reporting units using the income approach methodology of
valuation that includes the present value of expected future cash flows. This method uses Griffon’s own
market assumptions. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value,
Griffon performs the second step of the goodwill
impairment test to determine the amount of
impairment loss. The second step compares the implied fair value of the reporting unit’s goodwill with
the carrying amount of that goodwill.

Griffon defines its reporting units as its three segments.

Griffon used five year projections and a 3.0% terminal value to which discount rates between 9.5% and
11.5% were applied to calculate each unit’s fair value. To substantiate fair values derived from the
income approach methodology of valuation, the implied fair value was reconciled to Griffon’s market
capitalization, the results of which supported the implied fair values. 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 Griffon’s control, or significant underperformance relative to historical or project future
operating results, could result in a significantly different estimate of the fair value of the reporting units,
which could result in a future impairment charge.

Based upon the results of the annual impairment review, it was determined that the fair value of each
reporting unit substantially exceeded the carrying value of the assets, as performed under step one, and
no impairment existed.

Similar to Goodwill, Griffon tests indefinite-lived intangible assets at least annually and when indicators
of impairment exist. Griffon uses a discounted cash flow method to calculate and compare the fair value
of the intangible to its book value. This method uses Griffon’s own market assumptions which are
reasonable and supportable. If the fair value is less than the book value of the indefinite-lived
intangibles, an impairment charge would be recognized. There was no impairment related to any
indefinite-lived intangible assets in 2012.

Definite-lived long-lived assets

Amortizable intangible assets are carried at cost less accumulated amortization. For financial reporting
purposes, definite-lived intangible assets are amortized on a straight-line basis over their useful lives,
generally eight to twenty-five years. Long-lived assets and certain identifiable intangible assets to be
held and used are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. Determination of recoverability is based on
an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual
disposition.

For 2012 and 2011, the future undiscounted cash flows expected to be generated from the use of
definite-lived long-lived assets were substantially greater than the carrying value of the assets, and as
such, there was no impairment.

Income taxes

Income taxes are accounted for under the liability method. Deferred taxes reflect the tax consequences
on future years of differences between the tax bases of assets and liabilities and their financial reporting
amounts. The carrying value of Griffon’s deferred tax assets is dependent upon Griffon’s ability to
generate sufficient future taxable income in certain tax jurisdictions. Should Griffon determine that it is
more likely than not that some portion of the deferred tax assets will not be realized, a valuation

59

32788

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

allowance against the deferred tax assets would be established in the period such determination was
made.

Griffon provides for uncertain tax positions and any related interest and penalties based upon
Management’s assessment of whether a tax benefit is more likely than not of being sustained upon
examination by tax authorities. At September 30, 2012 Griffon believes that it has appropriately
accounted for all unrecognized tax benefits. As of September 30, 2012, 2011 and 2010, Griffon has
recorded unrecognized tax benefits in the amount of $11,876, $12,910 and $11,764, respectively.
Accrued interest and penalties related to income tax matters are recorded in the provision for income
taxes.

Research and development costs, shipping and handling costs and advertising costs

Research and development costs not recoverable under contractual arrangements are charged to SG&A
expense as incurred and amounted to $23,600, $23,900 and $21,400 in 2012, 2011 and 2010, respectively.

SG&A expenses include shipping and handling costs of $40,200 in 2012, $41,600 in 2011 and $32,100 in
2010 and advertising costs, which are expensed as incurred, of $22,000 in 2012, $23,000 in 2011 and
$14,700 in 2010.

Risk, Retention and Insurance

Griffon’s property and casualty insurance programs contain various deductibles that, based on Griffon’s
experience, are typical 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.

In the U.S., Griffon currently self-assumes its general and product liability claims up to $350 per
occurrence and its workers’ compensation and automobile liability claims up to $250 per occurrence.
Third-party insurance provides primary level coverage in excess of these deductible amounts up to
certain specified limits. In addition, Griffon has excess liability insurance from third-party insurers on
both an aggregate and an individual occurrence basis substantially in excess of the limits of the primary
coverage.

Griffon has local insurance coverage in Germany, Brazil, Canada, Ireland, Australia, Turkey, Mexico
and China which is subject to reasonable deductibles. Griffon has worldwide excess coverage above
these local programs.

Griffon Corporation and its U.S. subsidiaries also self assume health related claims to a maximum of
$300 per participant, per year.

Pension Benefits

Griffon sponsors defined and supplemental benefit pension plans for certain employees and 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. The actuarial assumptions used to determine pension liabilities and assets,

60

47756

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

as well as pension expense, are reviewed on an annual basis when modifications to assumptions are
made based on current economic conditions and trends. The expected return on plan assets is
determined based on the nature of the plans’ investments and expectations for long-term rates of
return. The discount rate used to measure obligations is based on a corporate bond spot-rate yield curve
that matches projected future benefit payments with the appropriate spot rate applicable to the timing
of the projected future benefit payments. The assumptions utilized in recording 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 the assumptions
may materially affect Griffon’s financial position or results of operations.

The U.S. components of the defined benefit plans, which excludes the supplemental and post retirement
healthcare and insurance benefit plans, are frozen and have stopped accruing benefits.

Newly issued but not yet effective accounting pronouncements

In June 2011,
the FASB issued new accounting guidance which requires the presentation of
comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income, or in two separate but
consecutive statements. The new accounting rules eliminate the option to present components of other
comprehensive income as part of the statement of changes in shareholders’ equity. The new accounting
rules will be effective for the Company in 2013 and are not expected to have a material effect on the
Company’s financial condition or results of operations.

In September 2011, the FASB issued new accounting guidance that allows an entity to first assess
qualitative factors to determine whether it is necessary to perform the two-step quantitative impairment
testing of goodwill and indefinite life intangibles. This guidance is effective for the Company in 2013
and is not expected to have an impact on the Company’s financial condition or result of operations.

Recently issued effective accounting pronouncements

None

NOTE 2—ACQUISITIONS

On October 17, 2011, Griffon acquired the pots and planters business of Southern Sales & Marketing
Group, Inc. (“SSMG”) for $22,432. The acquired business, which markets its products under the
Southern Patio brand name (“Southern Patio”), is a leading designer, manufacturer and marketer of
landscape accessories. Southern Patio, which was integrated with ATT, had revenue exceeding $40,000
in 2011.

The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets
purchased from SSMG, have been included in the consolidated financial statements from the date of
acquisition; acquired inventory was not significant.

The following table summarizes the fair values of the assets acquired as of the date of the acquisition
and the amounts assigned to goodwill and intangible asset classifications:

61

97929

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PP&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortizable intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite life intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,673
416
4,655
11,077
2,611

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22,432

The amounts assigned to goodwill and major intangible asset classifications, all of which are tax
deductible, for the Southern Patio acquisition are as follows:

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization
Period (Years)

N/A
Indefinite
25

$ 4,655
2,611
11,077

$18,343

On September 30, 2010, Griffon purchased all of the outstanding stock of CHATT Holdings, Inc.
(“ATT Holdings”), the parent of ATT, on a cash and debt-free basis, for $542,000 in cash, subject to
certain adjustments (the “Purchase Price”). ATT is a global provider of non-powered lawn and garden
tools, wheelbarrows, and other outdoor work products to the retail and professional markets. ATT’s
brands include Ames®, True Temper®, Ames True Temper®, Garant®, Union Tools®, Razor-back®,
Jackson®, Hound Dog® and Dynamic DesignTM. ATT’s brands hold the number one or number two
market positions in their respective major product categories. The acquisition of ATT expands Griffon’s
position in the home and building products market and provides Griffon the opportunity to recognize
synergies with its other businesses.

ATT’s results of operations are not included in the Griffon consolidated statements of operations or
cash flows, or footnotes relating thereto prior to October 1, 2010, except where explicitly stated as pro-
forma results.

Pro Forma Information

The following unaudited pro forma information illustrates the effect on Griffon’s revenue and net
earnings for the twelve-month period ended September 30, 2010, assuming that the acquisition of ATT
had taken place on October 1, 2009.

Year Ended
September 30,
2010

Revenue from continuing operations:

As reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,293,996
1,737,630

Net earnings from continuing operations:

As reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share from continuing operations:

As reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

9,504
16,885

0.16
0.28

Average shares—Diluted (in thousands). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,993

62

02038

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

These pro forma results have been prepared for comparative purposes only and include certain
adjustments to actual financial results for the period presented, such as imputed financing costs, and
estimated additional amortization and depreciation expense as a result of intangibles and fixed assets
acquired, measured at fair value. They do not purport to be indicative of the results of operations that
actually would have resulted had the acquisition occurred on the date indicated or that may result in the
future.

NOTE 3—INVENTORIES

The following table details the components of inventory:

Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . .
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 63,596
67,077
127,195

$257,868

$ 76,563
66,585
120,661

$263,809

At September 30,
2012

At September 30,
2011

NOTE 4—PROPERTY, PLANT AND EQUIPMENT

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

Land, building and building improvements . . . . . . . .
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation and amortization. . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2012

At September 30,
2011

$ 125,330
622,983
34,890
783,203
(426,324)

$ 356,879

$ 126,340
571,414
32,867
730,621
(380,571)

$ 350,050

NOTE 5—GOODWILL AND OTHER INTANGIBLES

The following table provides changes in carrying value of goodwill by segment through the year ended
September 30, 2012:

Other
adjustments
including
currency
translations

At September 30,
2010

At September 30,
2011

Goodwill
from 2012
acquisitions

Other
adjustments
including
currency
translations

At September 30,
2012

Home & Building

Products. . . . . . . . . . . . . . . .
Telephonics. . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . .

$265,147
18,545
77,612

Total . . . . . . . . . . . . . . . . .

$361,304

$ —
—
(3,416)

$(3,416)

$265,147
18,545
74,196

$357,888

$4,655
—
—

$4,655

$ —
—
(4,171)

$(4,171)

$269,802
18,545
70,025

$358,372

63

80613

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

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

Customer relationships. . . . . . . . . . . . . . . . . . . . . .
Unpatented technology . . . . . . . . . . . . . . . . . . . . .
Total amortizable intangible assets . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible assets. . . . . . . . . . . . . . . . . .

At September 30, 2012
Gross
Carrying
Amount

Accumulated
Amortization

$167,603
6,751

174,354
80,252

$21,799
2,334

24,133
—

Average
Life
(Years)

25
11

At September 30, 2011
Gross
Carrying
Amount

Accumulated
Amortization

$155,602
6,534

162,136
76,664

$13,862
1,749

15,611
—

$254,606

$24,133

$238,800

$15,611

Amortization expense for intangible assets subject to amortization was $8,048, $7,867 and $1,987 for the
years ended September 30, 2012, 2011 and 2010, respectively. Amortization expense for each of the next
five years and thereafter, based on current intangible balances and classifications, is estimated as
follows: 2013—$7,892; 2014—$7,658; 2015—$7,483; 2016—$7,355 and 2017—$7,265;
thereafter—
$112,568.

NOTE 6—DISCONTINUED OPERATIONS

In 2008, as a result of the downturn in the residential housing market, Griffon exited substantially all
operating activities of its Installation Services segment which sold, installed and serviced garage doors
and openers, fireplaces, floor coverings, cabinetry and a range of related building products, primarily for
the new residential housing market. Operating results of substantially all of this segment have been
reported as discontinued operations in the Consolidated Statements of Operations for all periods
presented; the Installation Services segment is excluded from segment reporting.

In 2008, Griffon’s Board of Directors approved a plan to exit substantially all operating activities of the
Installation Services segment. In 2008, Griffon sold eleven units, closed one unit and merged two units
into CBP.

Griffon substantially concluded its remaining disposal activities in 2009. There was no reported revenue
in 2012, 2011 and 2010.

The following amounts related primarily to the Installation Services segment have been segregated from
Griffon’s continuing operations and are reported as assets and liabilities of discontinued operations in
the consolidated balance sheets:

At September 30,
2012

At September 30,
2011

Assets of discontinued operations:

Prepaid and other current assets. . . . . . . . . . . . . .
Other long-term assets. . . . . . . . . . . . . . . . . . . . . . . .
Total assets of discontinued operations. . . . . . . . . . . .

Liabilities of discontinued operations:

Accrued liabilities, current . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . .

Total liabilities of discontinued operations . . . .

$ 587
2,936
$3,523

$3,639
3,643

$7,282

$1,381
3,675
$5,056

$3,794
5,786

$9,580

64

16448

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 7—ACCRUED LIABILITIES

The following table details the components of accrued liabilities:

At September 30,
2012

At September 30,
2011

Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties and rebates. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent, utilities and freight. . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and advertising. . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 41,550
20,588
10,589
8,373
3,649
6,793
2,071
1,513
129
15,082
$110,337

$34,703
22,242
10,439
8,199
3,989
5,592
2,031
1,991
402
10,043
$99,631

NOTE 8—RESTRUCTURING AND OTHER RELATED CHARGES

In June 2009, CBP undertook to consolidate its manufacturing facilities. These actions were completed
in 2011. CBP incurred total pre-tax exit and restructuring costs approximating $9,031, substantially all of
which were cash charges; charges include $1,160 for one-time termination benefits and other personnel
costs, $210 for excess facilities and related costs, and $7,661 for other exit costs, primarily in connection
with production realignment, and had $10,365 of capital expenditures. The restructuring costs were
$3,611 in 2011, $4,180 in 2010 and $1,240 in 2009.

In 2012 and 2011, ATT recognized $874 and $886, respectively, in restructuring and other related exit
costs primarily related to termination benefits for operating personnel due to the closing of the Bernie,
MO facility and other administrative personnel. Over the two years, administrative headcount was
reduced by 31 and operating headcount was reduced by 7.

In 2012 and 2011, Telephonics recognized $3,815 and $3,046 of restructuring charges primarily related
to two separate voluntary early retirement plan and other restructuring costs, reducing headcount by
185 over the two year period.

A summary of the restructuring and other related charges included in the line item “Restructuring and
other related charges” in the Consolidated Statements of Operations recognized for 2010, 2011 and 2012
were as follows:

Amounts incurred in the year ended:

September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 602
3,789
4,204

$2,549
1,809
379

$1,029
1,945
106

$4,180
7,543
4,689

Workforce
Reduction

Facilities &
Exit Costs

Other
Related

Total

65

51585

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The activity in the restructuring accrual recorded in accrued liabilities consisted of the following:

Workforce
Reduction

Facilities &
Exit Costs

Other
Related

Total

Accrued liability at September 30, 2010 . . . . . . . . . . .
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued liability at September 30, 2011 . . . . . . . . . . .
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,541
3,789
(2,673)

$ 2,657
4,204
(4,310)

$ — $ — $ 1,541
7,543
(6,427)

1,945
(1,945)

1,809
(1,809)

$ — $ — $ 2,657
4,689
— (4,515)

379
(205)

106

Accrued liability at September 30, 2012 . . . . . . . . . . .

$ 2,551

$

174

$

106

$ 2,831

NOTE 9—WARRANTY LIABILITY

Telephonics offers warranties against product defects for periods generally ranging from one to two
years, depending on the specific product and terms of the customer purchase agreement. Typical
warranties require Telephonics 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. ATT offers an express limited warranty for a period of ninety days on
all products unless otherwise stated on the product or packaging from the date of original purchase.

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

Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties issued and charges in estimated pre-existing

warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual warranty costs incurred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended Sep-
tember 30,

2012

2011

$ 7,963

$ 6,719

6,088
(5,195)
$ 8,856

5,415
(4,171)
$ 7,963

NOTE 10—NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT

The present value of the net minimum payments on capitalized leases as of September 30, 2012 is as
follows:

Total minimum lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amount representing interest payments. . . . . . . . . . . . . . . . . . . . . . . .

Present value of net minimum lease payments . . . . . . . . . . . . . . . . . . . . .
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,586
(2,658)

10,928
(1,076)

Capitaled lease obligation, less current portion . . . . . . . . . . . . . . . . . . . . .

$ 9,852

At September 30,
2012

Minimum payments under current capital leases for the next five years are as follows: $1,605 in 2013,
$1,582 in 2014, $1,553 in 2015, $1,513 in 2016 and $1,437 in 2017.

66

03471

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Included in the consolidated balance sheet at September 30, 2012 under property, plant and equipment
are costs and accumulated depreciation subject to capitalized leases of $15,342 and $4,414, respectively,
and included in other assets are deferred interest charges of $232. Included in the consolidated balance
sheet at September 30, 2011 under property, plant and equipment are costs and accumulated
depreciation subject to capitalized leases of $15,230 and $3,334, respectively, and included in other
assets are deferred interest charges of $257. The capitalized leases carry interest rates from 5% to 10%
and mature from 2013 through 2022.

In October 2006, a subsidiary of Griffon entered into a capital lease totaling $14,290 for real estate it
occupies in Troy, Ohio. Approximately $10,000 was used to acquire the building and the remaining
amount was used for improvements. The lease matures in 2022, bears interest at a fixed rate of 5.1%, is
secured by a mortgage on the real estate and is guaranteed by Griffon.

Debt at September 30, 2012 and 2011 consisted of the following:

Senior notes due 2018 . . . . . . . . . . . . . . . . . . .
Revolver due 2016 . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2017 . . . . . . . . . . . . . . . . .
Real estate mortgages . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease—real estate. . . . . . . . . . . . . . . .
Convert. debt due 2023 . . . . . . . . . . . . . . . . .
Term loan due 2013 . . . . . . . . . . . . . . . . . . . . .
Revolver due 2012 . . . . . . . . . . . . . . . . . . . . . .
Foreign line of credit. . . . . . . . . . . . . . . . . . . .
Foreign term loan . . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(g)

(h)

(h)

(k)

At September 30, 2012

Outstanding
Balance

Original
Issuer
Discount

Balance
Sheet

Capitalized
Fees &
Expenses

Coupon
Interest
Rate

$550,000
—
100,000
14,063
22,723
10,455
532
12,873
—
2,064
2,693
814
716,217

$

— $550,000
—
—
83,393
(16,607)
14,063
—
22,723
—
10,455
—
532
—
12,873
—
—
—
2,064
—
2,693
—
814
—
699,610
(16,607)

$ 8,862
2,175
1,921
271
32
232

7.125%
n/a
4.000%
n/a
n/a
5.000%
— 4.000%

n/a
n/a
n/a
n/a

107
—
—
19
—
$13,619

less: Current portion . . . . . . . . . . . . . . . . . . . .

(17,703)

— (17,703)

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .

$698,514

$(16,607) $681,907

67

36664

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Senior notes due 2018 . . . . . . . . . . . . . . . . . . .
Revolver due 2016 . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2017 . . . . . . . . . . . . . . . . .
Real estate mortgages . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease—real estate. . . . . . . . . . . . . . . .
Convert. debt due 2023 . . . . . . . . . . . . . . . . .
Term loan due 2013 . . . . . . . . . . . . . . . . . . . . .
Revolver due 2012 . . . . . . . . . . . . . . . . . . . . . .
Foreign line of credit. . . . . . . . . . . . . . . . . . . .
Foreign term loan . . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(g)

(h)

(h)

(k)

At September 30, 2011

Outstanding
Balance

Original
Issuer
Discount

Balance
Sheet

Capitalized
Fees &
Expenses

Coupon
Interest
Rate

$550,000
—
100,000
18,233
24,348
11,341
532
24,096
—
3,780
—
774

$

— $550,000
—
—
80,307
(19,693)
18,233
—
24,348
—
11,341
—
532
—
24,096
—
—
—
3,780
—
—
—
774
—

$11,337
2,937
2,474
379
17
257

7.125%
n/a
4.000%
n/a
n/a
5.000%
— 4.000%

201
33
—
—
—

n/a
n/a
n/a
n/a

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

733,104

(19,693)

713,411

$17,635

less: Current portion . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .

(25,164)
$707,940

— (25,164)
$(19,693) $688,247

Interest expense consists of the following for the years ended September 30, 2012, 2011 and 2010.

Year Ended September 30, 2012

Effective
Interest Rate

Cash
Interest

Amort.
Debt
Discount

Amort.
Deferred
Cost &
Other Fees

Senior notes due 2018. . . . . . . . . . . . . . . . . . . . . .
Revolver due 2016 . . . . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2017 . . . . . . . . . . . . . . . . . . . .
Real estate mortgages . . . . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease—real estate . . . . . . . . . . . . . . . . . .
Convert. debt due 2023 . . . . . . . . . . . . . . . . . . . .
Term loan due 2013. . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign line of credit . . . . . . . . . . . . . . . . . . . . . .
Foreign term loan . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan due 2016. . . . . . . . . . . . . . . . . . . . . . . .
Asset based loan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest. . . . . . . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(g)

(h)

(h)

(i)

(i)

(j)

(k)

7.4% $39,188
881
n/a
4,000
9.2%
575
4.0%
707
3.0%
551
5.3%
21
4.0%
831
5.0%
102
n/a
228
14.3%
238
10.5%
—
n/a
—
n/a
—
n/a
557
(1,895)

$ —
—
3,086
—
—
—
—
—
—
—
—
—
—
—
—
—

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$45,984

$3,086

$1,623
622
443
86
6
25
—
87
34
—
11
—
—
—
—
—

$2,937

Total
Interest
Expense

$40,811
1,503
7,529
661
713
576
21
918
136
228
249
—
—
—
557
(1,895)

$52,007

68

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Year Ended September 30, 2011
Amort.
Deferred
Cost &
Other Fees

Amort.
Debt
Discount

Cash
Interest

Effective
Interest
Rate

Senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2017 . . . . . . . . . . . . . . . . . . . . . . . .
Real estate mortgages . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease—real estate . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2023 . . . . . . . . . . . . . . . . . . . . . . . .
Term loan due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign line of credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset based loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(g)

(h)

(h)

(i)

(i)

(j)

(k)

7.4% $21,118
—
n/a
3,944
9.0%
761
5.6%
345
2.7%
602
5.3%
20
4.0%
338
n/a
90
n/a
3.0%
91
—
n/a
9.5% 13,405
1,076
6.2%
160
1.2%
104
(941)

$ —
—
2,832
—
—
—
—
—
—
—
—
572
58
—
—
—

Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$41,113

$3,462

$ 881
332
443
86
67
26
—
71
107
—
—
838
341
79
—
—

$3,271

Year Ended September 30, 2010
Amort.
Deferred
Cost &
Other Fees

Amort.
Debt
Discount

Cash
Interest

Effective
Interest
Rate

99279

Total
Interest
Expense

$21,999
332
7,219
847
412
628
20
409
197
91
—
14,815
1,475
239
104
(941)

$47,846

Total
Interest
Expense

Senior notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2017 . . . . . . . . . . . . . . . . . . . . . . . .
Real estate mortgages. . . . . . . . . . . . . . . . . . . . . . . . . .
ESOP Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease—real estate . . . . . . . . . . . . . . . . . . . . . .
Convert. debt due 2023 . . . . . . . . . . . . . . . . . . . . . . . .
Term loan due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign line of credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign term loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset based loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long term debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(g)

(h)

(h)

(i)

(i)

(j)

(k)

n/a
n/a
—
9.1% 3,240
487
6.4%
87
1.6%
5.2%
634
9.4% 2,021
—
n/a
—
n/a
—
n/a
—
n/a
7.8%
86
4.3% 1,181
575
2.7%
39
(1,087)

$ — $ —
—
1,847
—
—
—
2,037
—
—
—
—
—
—
—
—
—

$ — $ —
—
5,469
505
87
659
4,213
—
—
—
—
86
1,585
766
39
(1,087)

—
382
18
—
25
155
—
—
—
—
—
404
191
—
—

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,263

$3,884

$1,175

$12,322

Minimum payments under debt agreements for the next five years are as follows: $17,703 in 2013,
$9,719 in 2014, $3,073 in 2015, $28,710 in 2016 and $101,169 in 2017.

(a) On March 17, 2011, in an unregistered offering through a private placement under Rule 144A,
Griffon issued, at par, $550,000 of 7.125% Senior Notes due in 2018 (“Senior Notes”); interest is

69

21288

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

payable semi-annually. On August 9, 2011, Griffon exchanged all of
the Senior Notes for
substantially identical Senior Notes registered under the Securities Act of 1933 (“Senior Notes”), via
an exchange offer.

The Senior Notes can be redeemed prior to April 1, 2014 at a price of 100% of principal plus a
make-whole premium and accrued interest; on or after April 1, 2014, the Senior Notes can be
redeemed at a certain price (declining from 105.344% of principal on or after April 1, 2014 to 100%
of principal on or after April 1, 2017), plus accrued interest. Proceeds from the Senior Notes were
used to pay down the outstanding borrowings under a senior secured term loan facility and two
senior secured revolving credit facilities of certain of the Company’s subsidiaries. The Senior Notes
are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and are
subject to certain covenants, limitations and restrictions.

On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit
Agreement”), which included a letter of credit sub-facility with a limit of $50,000, a multi-currency
sub-facility of $50,000 and a swingline sub-facility with a limit of $30,000. Borrowings under the
Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the
facility or the occurrence of a default or event of default under the Credit Agreement. Interest is
payable on borrowings at either a LIBOR or base rate benchmark rate plus an applicable margin,
which adjusts based on financial performance. The margins are 1.75% for base rate loans and 2.75%
for LIBOR loans,
in each case without a floor. The Credit Agreement 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 Credit Agreement also includes certain restrictions, such as limitations on
the incurrence of indebtedness and liens and the making of restricted payments and investments.
Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries and are
secured, on a first priority basis, by substantially all assets of the Company and the guarantors.

At September 30, 2012, there were $21,693 of standby letters of credit outstanding under the Credit
Agreement; $178,307 was available for borrowing at that date.

(b) On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due
2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of
Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion
price of $14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15,
2009. When a cash dividend is declared that would result in an adjustment to the conversion ratio of
less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual
conversion, (ii) the 42nd trading day prior to maturity of the notes, and (iii) such time as the
cumulative adjustment equals or exceeds 1%. As of September 30, 2012, aggregate dividends of
$0.08 per share resulted in a cumulative change in the conversion rate of 0.86%. Griffon used 8.75%
as the nonconvertible debt-borrowing rate to discount the 2017 Notes and will amortize the debt
discount through January 2017. At issuance, the debt component of the 2017 Notes was $75,437 and
debt discount was $24,563. At September 30, 2012 and September 30, 2011, the 2017 Notes had a
capital in excess of par component, net of tax, of $15,720.

(c) On December 20, 2010, Griffon entered into two second lien real estate mortgages to secure new
loans totaling $11,834. The loans mature in February 2016, are collateralized by the related
properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 3% with
the option to swap to a fixed rate.

Griffon has other real estate mortgages, collateralized by real property, which bear interest at 6.3%
and mature in 2016. On October 3, 2011, the mortgage at Russia, Ohio was paid in full, on maturity.

70

23695

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

(d) Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010
to borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of
Griffon common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus
2.5% or b) the lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an
option to convert the outstanding loan to a five-year term loan; principal is payable in quarterly
installments of $250, beginning December 2011, with a balloon payment of $15,223 due at maturity
(November 2016). The loan is secured by shares purchased with the proceeds of the loan, and
repayment is guaranteed by Griffon. At September 30, 2012, $18,973 was outstanding.

In addition, the ESOP has a loan agreement, guaranteed by Griffon, which requires quarterly
principal payments of $156 and interest through the extended expiration date of December 2013 at
which time the $3,125 balance of the loan, and any outstanding interest, will be payable. The primary
purpose of this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The
loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by
Griffon. The loan bears interest at rates based upon the prime rate or LIBOR. At September 30,
2012, $3,750 was outstanding.

(e) In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The
lease matures in 2021, bears interest at a fixed rate of 5.1%, is secured by a mortgage on the real
estate and is guaranteed by Griffon.

(f) At September 30, 2012 and September 30, 2011, Griffon had $532 of 4% convertible subordinated
notes due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to
repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock
price is below the conversion price of the 2023 Notes, as well as upon a change in control. An
adjustment to the conversion rate will be required as the result of payment of a cash dividend only if
such adjustment would be greater than 1% (or at such time as the cumulative impact on the
conversion rate reaches 1% in the aggregate). As of September 30, 2012, aggregate dividends of
$0.08 per share resulted in a cumulative change in the conversion rate of 0.89%. At September 30,
2012 and September 30, 2011, the 2023 Notes had no capital in excess of par value component as
substantially all of these notes were put to Griffon at par and settled in July 2010.

(g) In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving
credit facility and a €20,000 term loan. The facility accrues interest at Euribor plus 2.1% per annum
(2.3% at September 30, 2012), and the term loan accrues interest at Euribor plus 2.2% per annum
(2.4% at September 30, 2012). The revolving facility matures in November 2012, but is renewable
upon mutual agreement with the bank. Subsequent to September 30, 2012 the line was renewed for
an additional year to November 2013. In July 2011, the full €20,000 was drawn on the Term Loan,
with a portion of the proceeds used to repay borrowings under the revolving credit facility. The term
loan is payable in ten equal quarterly installments which began in September 2011, with maturity in
December 2013. Under the term loan, Clopay Europe is required to maintain a certain minimum
equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to
EBITDA. At September 30, 2012, there were no borrowings on the revolving credit with €10,000
available for borrowing.

(h) In February 2012, Clopay do Brazil, a subsidiary of Plastics, borrowed $4,000 at a rate of 104.5% of
Brazilian CDI (7.7% at September 30, 2012). The loan was used to refinance existing loans and is
collateralized by accounts receivable and a 50% guaranty by Plastics and is to be repaid in four
equal, semi-annual installments of principal plus accrued interest beginning in August 2012. Clopay
do Brazil also maintains lines of credit of approximately $4,200. Interest on borrowings accrue at a
rate of Brazilian CDI plus 6.0% or a fixed rate (13.8% or 10.2%, respectively, at September 30,
2012). At September 30, 2012 there was approximately $2,064 borrowed under the lines.

71

62339

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

(i) In connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. (“Clopay
Ames”), a subsidiary of Griffon, entered into a $375,000 secured term Loan (“Term Loan”) and a
$125,000 asset based lending agreement (“ABL”).

On November 30, 2010, Clopay Ames, as required under the Term Loan agreement, entered into an
interest rate swap on a notional amount of $200,000 of the Term Loan. The agreement fixed the
LIBOR component of the Term Loan interest rate at 2.085% for the notional amount of the swap.

On March 17, 2011, the Term Loan and swap were terminated, and on March 18, 2011, the ABL was
terminated, in connection with the issuance of the Senior Notes and Credit Agreement.

(j) In March 2008, Telephonics entered into a credit agreement with JPMorgan Chase Bank, N.A., as
administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to provide
a five-year, revolving credit facility of $100,000 (the “TCA”). The TCA terminated in connection
with the Credit Agreement.

(k) Includes capital leases.

At September 30, 2012, Griffon and its subsidiaries were in compliance with the terms and covenants of
its credit and loan agreements.

In 2011, in connection with the termination of the Term Loan, ABL and Telephonics credit agreement,
Griffon recorded a $26,164 loss on extinguishment of debt consisting of $21,617 of deferred financing
charges and original issuer discounts, a call premium of $3,703 on the Term Loan, and $844 of swap and
other breakage costs.

As part of the acquisition of ATT, Griffon acquired interest rate swaps that had fair values totaling
$3,845 at September 30, 2010. These swaps were terminated in October 2010 for $4,303, including
accrued interest of $458.

NOTE 11—EMPLOYEE BENEFIT PLANS

Griffon offers defined contribution plans to most of its U.S. employees. In addition to employee
to the plans, Griffon makes contributions based upon various percentages of
contributions
compensation and/or employee contributions, which were $7,300 in 2012, $7,500 in 2011 and $5,200
in 2010.

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 $2,262 and $2,177 as of
September 30, 2012 and 2011. The accumulated other comprehensive loss for these plans was $79 and
$78 as of September 30, for 2012 and 2011, respectively and the 2012 and 2011 benefit expense was $76
and $175, 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 with
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.

Griffon is responsible for overseeing the management of the investments of the qualified defined
benefit plan and uses the service of an investment manager to manage these assets based on agreed
upon risk profiles set by Griffon management. 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

72

44864

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

requirements. The fair value 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 September 30, 2012. The fair value
of various other investments were determined by the plan’s trustee using direct observable market
corroborated inputs, including quoted market prices for similar assets (level 2 inputs). The fair value of
investments with significant unobservable inputs was supported by audited financial statements (level 3
inputs).

Effective January 1, 2012, the Clopay Pension Plan merged with the Ames True Temper Inc. Pension
Plan. The merged qualified defined benefit plan was named the Clopay Ames True Temper Plan (the
“CATT Plan”).

The Clopay portion of the CATT Plan has been frozen to new entrants since December 2000. Certain
employees who were part of the plan prior to December 2000 continued to accrue a service benefit
through December 2010, at which time all plan participants stopped accruing service benefits.

The ATT portion of the CATT Plan has been frozen to all new entrants since November 2009 and
stopped accruing benefits in December 2009.

The ATT supplemental executive retirement plan was frozen to new entrants and participants in the
plan stopped accruing benefits in 2008.

Griffon uses judgment to estimate the assumptions used in determining the future liability of the plan,
as well as the investment returns on the assets invested for the plan. The expected return on assets
assumption used for pension expense was developed through analysis of historical market returns,
current market conditions and the past experience of plan asset investments. 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, average wage
increase 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,
2011

2012

2010

Supplemental Benefits for the
Years Ended September 30,
2012
2010
2011

Net periodic (benefits) costs
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . .
Amortization of:

$

238
9,191
(11,896)

$

377
9,552
(11,501)

$

529
1,645
(1,371)

$
36
1,692
—

$
34
1,759
—

$
29
1,984
—

Prior service costs . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . .

6
1,735

8
1,144

9
1,064

171
1,137

328
1,141

328
986

Total net periodic (benefits) costs . . . . . . . . . .

$

(726) $

(420) $ 1,876

$3,036

$3,262

$3,327

The tax benefits in 2012, 2011 and 2010 for the amortization of pension costs in other comprehensive
income (loss) were $1,067, $917 and $835, respectively.

The estimated net actuarial loss and prior service cost that will be amortized from Accumulated other
comprehensive income into net periodic pension cost during 2013 are $3,360 and $20, respectively.

73

85287

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The weighted-average assumptions used in determining the net periodic (benefits) costs were as follows:

Defined Benefits for the Years
Ended September 30,
2011

2012

2010

Supplemental Benefits for the
Years Ended September 30,
2012
2010
2011

Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average wage increase . . . . . . . . . . . . . . . . . . . . . .
Expected return on assets . . . . . . . . . . . . . . . . . . .

4.44% 4.89% 5.60% 4.30% 4.26% 5.00%
0.11% 0.72% 3.50% 4.89% 4.89% 5.00%
7.71% 7.72% 7.00%

—

—

—

Plan assets and benefit obligation of the defined and supplemental benefit plans were as follows:

Change in benefit obligation
Benefit obligation at beginning of fiscal year . . . . . . . . . . . .
Benefits earned during the year . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . .

Change in Plan Assets
Fair value of plan assets at beginning of fiscal year. . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Defined Benefits at
September 30,

Supplemental Benefits at
September 30,

2012

2011

2012

2011

$212,660
238
9,191
16
(10,359)
(413)
21,616
232,949

$200,208
378
9,552
25
(10,607)
13
13,091
212,660

$ 41,285
36
1,692
—
(3,936)
—
2,396
41,473

$ 43,220
34
1,759
—
(3,915)
—
187
41,285

137,678
25,190
16
8,638
(330)
(10,359)

133,733
636
25
13,889
2
(10,607)

—
—
—
3,936
—
(3,936)

—
—
—
3,915
—
(3,915)

Fair value of plan assets at end of fiscal year. . . . . . . . . . . .
Projected benefit obligation in excess of plan assets . . . . .

160,833

—
137,678
$ (72,116) $ (74,982) $(41,473)

—
$(41,285)

Amounts recognized in the statement of financial

position consist of:

Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities (long-term) . . . . . . . . . . . . . . . . . . . . . . . . .

$

— $

(72,116)

— $ (3,897)
(37,576)

(74,982)

$ (3,918)
(37,367)

Total Liabilites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(72,116)

(74,982)

(41,473)

(41,285)

Net actuarial losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,656
10
(15,633)

38,057
16
(13,326)

20,750
113
(7,302)

19,491
284
(6,921)

Total Accumulated other comprehensive loss, net of tax
Net amount recognized at September 30, . . . . . . . . . . . . . . . .

29,033

13,561
24,747
$ (43,083) $ (50,235) $(27,912)

12,854
$(28,431)

Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . .

$232,574

$212,430

$ 41,473

$ 40,878

Information for plans with accumulated benefit

obligations in excess of plan assets:

ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$232,574
232,949
160,833

$212,430
212,660
137,678

$ 41,473
41,473
—

$ 40,878
41,285
—

74

10980

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

The weighted-average assumptions used in determining the benefit obligations were as follows:

Weighted average discount rate.
Weighted average wage

increase . . . . . . . . . . . . . . . . . . . . . .

Defined Benefits at
September 30,

Supplemental Benefits at
September 30,

2012

3.67%

2011

4.44%

2012

3.40%

0.11%

0.11%

4.87%

2011

4.30%

4.89%

The actual and weighted-average asset allocation for qualified benefit plans were as follows:

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66.0% 55.0% 63.0%
29.0% 41.0% 37.0%
5.0% 4.0% 0.0%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0% 100.0% 100.0%

At September 30,
2012
2011

Target

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:

For the fiscal years ending September 30,

Defined
Benefits

Supplemental
Benefits

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 through 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,455
10,789
10,965
11,208
11,410
61,319

$ 3,951
3,951
3,832
3,778
3,720
14,680

Griffon expects to contribute $2,628 to the Defined Benefit plans in 2013, in addition to the $3,951 in
payments related to the Supplemental Benefits that will primarily be funded from the general assets of
Griffon.

The CATT Plan is covered by the Pension Protection Act of 2006. The Adjusted Funding Target
Attainment Percent (“AFTAP”) for the plan as of January 1, 2012 was 94.5%. Since the plan was in
excess of the 80% funding threshold there were no plan restrictions. The expected level of 2013 catch
up contributions is $2,802.

The following is a description of the valuation methodologies used for plan assets measured at fair
value:

Short-term investment funds—The fair value is determined using the Net Asset Value (“NAV”)
provided by the administrator of the fund. The NAV is based on the value of the underlying assets
owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The
NAV is a quoted price in a market that is not active and is primarily classified as Level 2. These
investments can be liquidated on demand.

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 securities are traded. These investments are classified within Level 1 of the valuation
hierarchy.

75

57523

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Debt securities—The fair values are based on a compilation of primarily observable market information
or a broker quote in a non-active market. These investments are primarily classified within 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 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 estimated value of the
various holdings of the fund portfolio. One of the commingled mutual funds is based on the value of the
underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares
outstanding; these asset values are estimated by underlying managers of the assets in which the fund
invests. These investments are classified within Level 3 of the valuation hierarchy.

The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset
category:

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

At September 30, 2012

Cash and equivalents . . . . . . . . . . . . . . . . . . . . .
Short-term investment funds . . . . . . . . . . . . . .
Government agency securities . . . . . . . . . . . .
Debt instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Commingled funds . . . . . . . . . . . . . . . . . . . . . . . .
Limited partnerships and hedge fund

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

29
—
—
—
62,713
—

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$62,742

The activity for the level 3 assets was as follows:

$ —
5,231
2,899
30,616
—
50,105

—

$88,851

$ —
—
—
—
—
6,224

3,016

$9,240

$

Total

29
5,231
2,899
30,616
62,713
56,329

3,016

$160,833

Beginning Balance at September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending Balance at September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —
175
9,065
$9,240

For 2012, the actual return on plan assets were $159 for the commingled fund and $16 for private
equity.

At September 30, 2011

Short-term investment funds . . . . . . . . . . . . . .
Government agency securities . . . . . . . . . . . .
Debt instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Commingled funds . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

$

667
2,741
14,876
3,841
46,858

$68,983

$—
—
—
—
—

$—

$ —
382
—
68,313
—

$68,695

76

$

Total

667
3,123
14,876
72,154
46,858

$137,678

85373

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Griffon has an ESOP that covers substantially all domestic employees. All employees of Griffon, who
are not members of a collective bargaining unit, automatically become eligible to participate in the plan
on the October 1st following completion of one year of service. Griffon’s securities are allocated to
participants’ individual accounts based on the proportion of each participant’s aggregate compensation
(not to exceed $245 for the plan year ended September 30, 2012), 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 earnings per
share. Compensation expense under the ESOP was $1,796 in 2012, $841 in 2011 and $1,011 in 2010. 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, 2012 and 2011
based on the closing stock price of Griffon’s stock was $21,993 and $19,761, respectively. The ESOP
shares were as follows:

Allocated shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2012
2011

2,335,040
2,135,287
4,470,327

2,233,950
2,339,813
4,573,763

NOTE 12—INCOME TAXES

Income taxes have been based on the following components of Income before taxes and discontinued
operations:

For the Years Ended September 30,
2011

2012

2010

Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,910
(5,969)
$21,941

$(17,869)
3,520
$(14,349)

$ 7,360
6,452
$13,812

Provision (benefit) for income taxes on income from continuing operations was comprised of the
following:

For the Years Ended September 30,
2011

2012

2010

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,557
(2,627)

$(4,169)
(2,749)

$ 7,974
(3,666)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,930

$(6,918)

$ 4,308

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,400
(1,301)
2,831

$(8,988)
91
1,979

$ 5,426
(1,795)
677

Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,930

$(6,918)

$ 4,308

Griffon’s income tax provision (benefit) included benefits of ($3,356) in 2012, ($733) in 2011 and
($2,740) in 2010 reflecting the reversal of previously recorded tax liabilities primarily due to the
resolution of various tax audits and due to the closing of certain statutes for prior years’ tax returns.

77

63864

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Differences between the effective income tax rate applied to income from continuing operations and
U.S. Federal income statutory rate were as follows:

For the Years Ended
September 30,
2011

2012

2010

U.S. Federal income tax provision (benefit) rate . . . . . . . . .
State and local taxes, net of Federal benefit . . . . . . . . . . . . . .
Non-U.S. taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in tax contingency reserves. . . . . . . . . . . . . . . . . . . . . . .
Executive compensation limits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repatriation of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance on foreign tax credits . . . . . . . . . . . . . . .
Non-deductible meals and entertainment . . . . . . . . . . . . . . . . .
Research credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax impact of state rate change . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.0% (35.0)% 35.0%
(1.9)
5.3
—
2.2
13.1
—
(27.2)
2.0
(5.4)
—
(1.3)

2.6
(11.3)
9.5
(5.5)
—
—
—
1.4
—
—
(0.4)

3.6
7.0
—
(6.7)
7.1
(12.3)
(2.4)
1.2
(0.7)
(11.0)
1.6

Effective tax provision (benefit) rate . . . . . . . . . . . . . . . . .

22.5% (48.2)% 31.3%

78

09356

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:

Deferred tax assets:

Bad debt reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation (equity compensation

and defined benefit plans). . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:
Deferred income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unremitted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At September 30,
2012
2011

$

2,071
12,589

$

2,436
10,042

42,773
2,706
3,924
489
3,587
—
25,708
5,622
651

100,120
(10,541)
89,579

(14,051)
—
(70,463)
(33,673)
(6,542)
—
(1,323)

44,083
—
4,697
342
3,617
3,942
33,451
15,451
5,572

123,633
(9,481)
114,152

(14,728)
(1,042)
(77,798)
(43,073)
(7,371)
(13,258)
(2,469)

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(126,052)

(159,739)

Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (36,473) $ (45,587)

The change in the valuation allowance relates to the foreign tax credits, partially offset by an increase in
the valuation allowance for certain foreign tax attributes.

The components of the net deferred tax liability, by balance sheet account, were as follows:

At September 30,
2012
2011

Prepaid and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred liability assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,059
2,956
(129)
(55,882)
523

$ 17,412
1,704
(402)
(65,042)
741
$(36,473) $(45,587)

At September 30, 2011, other than for the ATT pre-acquisition unremitted foreign earnings, and at
September 30, 2012, Griffon has not recorded deferred income taxes on the undistributed earnings of its
non-U.S. subsidiaries because of management’s ability and intent to indefinitely reinvest such earnings
outside the U.S. At September 30, 2012, Griffon’s share of the undistributed earnings of the non-U.S.

79

16015

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

subsidiaries amounted to approximately $75,189. It is not practicable to estimate the amount of deferred
tax liability related to investments in these foreign subsidiaries.

At September 30, 2011 deferred income taxes were recorded on pre-acquisition undistributed earnings
of non-U.S. subsidiaries for the ATT group of entities. The deferred income taxes were recorded as
these earnings were historically not indefinitely reinvested outside of the U.S. At September 30, 2012
the pre-acquisition unremitted foreign earnings of ATT group were distributed as a dividend to the U.S.
Parent Corp. recognizing the previously recorded deferred tax liability.

At September 30, 2012 and 2011, Griffon had net operating loss carryforwards for federal tax purposes
of $0 and $51,000, respectively, resulting from the acquisition of ATT and prior year U.S. losses, and
had loss carryforwards for non-U.S. tax purposes of $75,400 and $54,500, respectively. The non-U.S. loss
carryforwards are available for carryforward indefinitely.

Griffon had State and local loss carryforwards at September 30, 2012 and 2011 of $6,303 and $5,900,
respectively, which expire in varying amounts through 2032.

Griffon had foreign tax credit carryforwards of $3,361 and $13,291 at September 30, 2012 and 2011,
respectively, which are available for use through 2017.

Griffon files U.S. Federal, state and local tax returns, as well as Germany, Canada, Brazil, Ireland,
Australia, Mexico and Sweden non-U.S. jurisdiction tax returns. Griffon’s U.S. Federal income tax
returns are no longer subject to income tax examination for years before 2006, the German income tax
returns are no longer subject to income tax examination for years through 2007 and major U.S. state
and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2001.
Various U.S. state and non-U.S. statutory tax audits are currently underway.

The following is a roll forward of the unrecognized tax benefits:

Balance at October 1, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . .
Reductions based on tax positions related to prior years . . . . . . . . . . . . . . . . . .
Lapse of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . .
Reductions based on tax positions related to prior years . . . . . . . . . . . . . . . . . .
Lapse of Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,764
1,858
(614)
(60)
(38)
12,910
1,840
(822)
(617)
(1,435)

Balance at September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,876

If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is
$8,605. Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits
in income tax expense. At September 30, 2012 and 2011, 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 $2,141 and $2,586, respectively. Griffon cannot reasonably
estimate the extent to which 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.

80

39153

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 13—STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION

On November 17, 2011, the Company began declaring quarterly dividends. No cash dividends on
Common Stock were declared or paid during the four years ended September 30, 2011. During 2012,
the Company declared and paid dividends totaling $0.08 per share. The Company currently intends to
pay dividends each quarter; however, the 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 future dividends.

Compensation expense for restricted stock is recognized ratably over the required service period based
on the fair value of the grant calculated as the number of shares granted multiplied by the stock price
on the date of grant, and for performance shares, the likelihood of achieving the performance criteria.
Compensation cost related to stock-based awards with graded vesting are amortized using the straight-
line attribution method.

In February 2011, shareholders approved the Griffon Corporation 2011 Equity Incentive Plan
(“Incentive Plan”) under which awards of performance shares, performance units, stock options, stock
appreciation rights, restricted shares, deferred shares and other stock-based awards may be granted.
Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock
options, generally expire ten years after the date of grant and are granted at an exercise price of not less
than 100% of the fair market value at the date of grant. The maximum number of shares of common
stock available for award under the Incentive Plan is 3,000,000 (600,000 of which may be issued as
incentive stock options) plus any shares underlying awards outstanding on the effective date of the
Incentive Plan under the 2006 Incentive Plan that are subsequently cancelled or forfeited. As of
September 30, 2012, 1,802,159 shares were available for grant.

All grants outstanding under the Griffon Corporation 2001 Stock Option Plan, 2006 Equity Incentive
Plan and Outside Director Stock Award Plan will continue under their terms; no additional awards will
be granted under such plans.

81

16260

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

A summary of stock option activity for the years ended September 30, 2012, 2011 and 2010 is as follows:

Outstanding at September 30, 2009. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2010. . . . . . . . . . . . . . . . . . . . . .

Shares

1,690,339
—
(54,075)
(92,043)

1,544,221

Exercisable at September 30, 2010 . . . . . . . . . . . . . . . . . . . . . .

1,421,930

Outstanding at September 30, 2010. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2011. . . . . . . . . . . . . . . . . . . . . .

1,544,221
—
(333,125)
(41,435)
1,169,661

Exercisable at September 30, 2011 . . . . . . . . . . . . . . . . . . . . . .

1,169,661

Outstanding at September 30, 2011. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2012. . . . . . . . . . . . . . . . . . . . . .

1,169,661
—
—
(239,900)

929,761

Exercisable at September 30, 2012 through:

September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Exercisable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

215,526
129,750
147,035
73,450
14,000
—
350,000
929,761

Options

Aggregated
Intrinsic
Value

Weighted
Average
Contractual
Term
(Years)

Weighted
Average
Exercise
Price

$15.18

$ 337

1,667

1,667

1,848

1,667

1,667

—

6.33
16.46

15.42

15.04

15.42

7.74
18.34
17.50

17.50

17.50

12.74

18.73

14.01
19.88
18.50
25.66
14.78

20.00
$18.73

3.9

3.5

3.7

3.7

3.4

0.5
1.6
2.7
3.6
4.8

6.0
3.4

Range of
Exercises
Prices

$12,39 to $14.78. . . . . . . . . . . . . . . . . . . . . . . . .
$17.23 to $19.49. . . . . . . . . . . . . . . . . . . . . . . . .
$20.00 to $26.06. . . . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options Outstanding & Exercisable

Weighted
Average
Exercise
Price

$12.78
17.69
21.11

Aggregated
Intrinsic
Value

Weighted
Average
Contractual
Term
(Years)

$—
—
—

—

0.8
2.2
4.6

Shares

189,526
185,535
554,700

929,761

All stock options were fully vested at September 30, 2012 and no options vested during 2012. The fair
value of options vested during the years ended September 30, 2011 and 2010 were $270 and $585,
respectively.

82

16765

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

A summary of restricted stock activity, inclusive of restricted stock units, for the years ended September
30, 2012, 2011 and 2010 is as follows:

Outstanding at September 30, 2009. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fully Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2010. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fully Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2011. . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fully Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at September 30, 2012. . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Grant
Price

Aggregated
Intrinsic
Value*

$ 9.55
11.36
21.90
14.79
9.71
12.68
10.67
11.75
10.85
9.33
11.35
11.13

10.38

$ 2,422
8,108
707
776
6,281
17,946
5,209
1,527
493
4,101
428
728

2,828

Shares

1,623,385
713,637
(52,998)
(52,500)
2,231,524
1,415,700
(402,268)
(130,009)
3,109,947
439,500
(41,045)
(65,400)

3,443,002

Weighted
Average
Contractual
Term
(Years)

3.0

2.5

2.8

1.5

* Aggregated intrinsic value at the date the shares were outstanding, granted, vested or forfeited, as

applicable.

Unrecognized compensation expense related to non-vested shares of restricted stock was $15,100 at
September 30, 2012 and will be recognized over a weighted average vesting period of 1.3 years.

At September 30, 2012, a total of approximately 6,174,922 shares of Griffon’s authorized Common
Stock were reserved for issuance in connection with stock compensation plans.

For the years ended September 30, 2012, 2011 and 2010, stock based compensation expense totaled
$10,439, $8,956 and $5,778, respectively.

In August 2011, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s
outstanding common stock; this was in addition to the 1,366,000 shares of common stock authorized for
repurchase under an existing buyback program. Under the repurchase programs, the Company may,
from time to time, purchase shares of its common stock, depending upon market conditions, in open
market or privately negotiated transactions, including pursuant to a 10b5-1 plan. During 2011, Griffon
purchased 1,531,379 shares of common stock, for a total of $12,367, or $8.08 per share, exhausting the
shares under the original program; $48,690 remained under the $50,000 authorization. During 2012,
Griffon purchased 1,187,066 shares of common stock under the plan for a total of $10,379, or $8.74 per
share; $38,312 remains under the $50,000 authorization.

83

97246

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 14—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of Accumulated other comprehensive income (loss) were:

Foreign currency translation adjustment . . . . . . . . . . . .
Minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,202
(42,761)

$ 29,956
(37,680)

$ 41,187
(23,605)

Accumulative other comprehensive income (loss) . .

$(19,559) $ (7,724) $ 17,582

At September 30,
2011

2012

2010

NOTE 15—COMMITMENTS AND CONTINGENT LIABILITIES

Operating leases

Griffon rents real property and equipment under operating leases expiring at various dates. Most of the
real property leases have escalation clauses related to increases in real property taxes. Rent expense for
all operating leases totaled approximately $30,598, $34,600 and $25,100 in 2012, 2011 and 2010,
respectively. Aggregate future minimum lease payments for operating leases at September 30, 2012 are
$22,345 in 2013, $17,098 in 2014, $14,477 in 2015, $11,647 in 2016, $8,733 in 2017 and $15,082 thereafter.

Legal and environmental

Department of Environmental Conservation of New York State (“DEC”), with ISC Properties, Inc.
Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at
a location in Peekskill in the Town of Cortlandt, New York (the “Peekskill Site”) owned by ISC
Properties, Inc. (“ISC”), a wholly-owned subsidiary of Griffon. ISC sold the Peekskill Site in November
1982.

Subsequently, Griffon was advised by the DEC that random sampling at the Peekskill Site and in a
creek near the Peekskill Site indicated concentrations of solvents and other chemicals common to
Lightron’s prior plating operations. ISC then entered into a consent order with the DEC in 1996 (the
“Consent Order”) to perform a remedial investigation and prepare a feasibility study. After completing
the initial remedial investigation pursuant to the Consent Order, ISC was required by the DEC, and did
conduct accordingly over the next several years, supplemental remedial investigations, including soil
vapor investigations, under the Consent Order.

In April 2009, the DEC advised ISC’s representatives that both the DEC and the New York State
Department of Health had reviewed and accepted an August 2007 Remedial Investigation Report and
an Additional Data Collection Summary Report dated January 30, 2009. With the acceptance of these
reports, ISC completed the remedial
investigation required under the Consent Order and was
authorized, accordingly, by the DEC to conduct the Feasibility Study required by the Consent Order.
Pursuant to the requirements of the Consent Order and its obligations thereunder, ISC, without
acknowledging any responsibility to perform any remediation at the Site, submitted to the DEC in
August 2009, a draft feasibility study which recommended for the soil, groundwater and sediment
medias, remediation alternatives having a current net capital cost value,
in the aggregate, of
approximately $5,000. In February 2011, DEC advised ISC it has accepted and approved the feasibility
study. Accordingly, ISC has no further obligations under the consent order.

Upon acceptance of the feasibility study, DEC issued a Proposed Remedial Action Plan (“PRAP”) that
sets forth the proposed remedy for the site. The PRAP accepted the recommendation contained in the

84

66065

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

feasibility study for remediation of
the soil and groundwater medias, but selected a different
remediation alternative for the sediment medium. The approximate cost and the current net capital cost
value of the remedy proposed by DEC in the PRAP is approximately $10,000. After receiving public
comments on the PRAP, the DEC issued a Record of Decision (“ROD”) that set forth the specific
remedies selected and responded to public comments. The remedies selected by the DEC in the ROD
are the same remedies as those set forth in the PRAP.

It is now expected that DEC will enter into negotiations with potentially responsible parties to request
they undertake performance of the remedies selected in the ROD, and if such parties do not agree to
implement such remedies, then the State may use State Superfund money to remediate the Peekskill
site and seek recovery of costs from such parties. Griffon does not acknowledge any responsibility to
perform any remediation at the Peekskill Site.

Improper Advertisement Claim involving Union Tools Products. Since December 2004, a customer of
ATT has been named in various litigation matters relating to certain Union Tools products. The
plaintiffs in those litigation matters have asserted causes of action against the customer of ATT for
improper advertisement
that advertisements led the
consumers to believe that Union Tools’ hand tools were wholly manufactured within boundaries of the
United States. The complaints assert various causes of action against the customer of ATT under
federal and state law, including common law fraud. At some point, likely once the litigation against the
customer of ATT ends, the customer may seek indemnity (including recovery of its legal fees and costs)
against ATT for an unspecified amount. Presently, ATT cannot estimate the amount of loss, if any, if
the customer were to seek legal recourse against ATT.

to end consumers. The allegations suggest

Department of Environmental Conservation of New York State, regarding Frankfort, NY site. During
fiscal 2009, an underground fuel tank with surrounding soil contamination was discovered at the
Frankfort, N.Y. site which is the result of historical facility operations prior to ATT’s ownership. While
ATT was actively working with the DEC and the New York State Department of Health to define
remediation requirements relative to the underground fuel tank, the DEC took the position that ATT
was responsible to remediate other types of contamination on the site. After negotiations with the
DEC, on August 15, 2011, ATT executed an Order on Consent with the DEC. The Order is without
admission or finding of liability or acknowledgement that there has been a release of hazardous
substances at the site. Importantly, the Order does not waive any rights that ATT has under a 1991
Consent Judgment entered into between the DEC and a predecessor of ATT relating to the site. The
Order requires that ATT identify Areas of Concern at the site, and formulate a strategy to investigate
and remedy both on and off site conditions in compliance with applicable environmental law. At the
conclusion of the remedy phase of the remediation to the satisfaction of the DEC, the DEC will issue a
Certificate of Completion. On August 1, 2012 a fire occurred during the course of demolition of certain
structures at the Frankfort, NY site. The fire caused extensive damage requiring additional remediation
under the oversight of DEC. The insurance carrier for the demolition contractor has responded and has
committed to funding the cost of remediation and clean up resulting from the fire. The cleanup is
ongoing.

U.S. Government investigations and claims

Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit
and review by various agencies and instrumentalities of the United States government, including among
others, the Defense Contract Audit Agency (“DCAA”), the Defense Contract Investigative Service
(“DCIS”), and the Department of Justice which has responsibility for asserting claims on behalf of the
U.S. government. In addition to ongoing audits, pursuant to an administrative subpoena Griffon is
currently providing information to the U.S. Department of Defense Office of the Inspector General. No

85

84246

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

claim has been asserted against Griffon, and Griffon is unaware of any material financial exposure in
connection with the Inspector General’s inquiry.

In general, departments and agencies of the U.S. Government have the authority to investigate various
transactions and operations of Griffon, and the results of such investigations may lead to administrative,
civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or
compensatory or treble damages. U.S. Government regulations provide that certain findings against a
contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of
export privileges for a company or an operating division or subdivision. Suspension or debarment could
have material adverse effect on Telephonics because of its reliance on government contracts.

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.

NOTE 16—EARNINGS PER SHARE

Basic and diluted EPS for the years ended September 30, 2012, 2011 and 2010 were determined using
the following information (in thousands):

Years Ended September 30,
2012
2010
2011

Weighted average shares outstanding—basic. . . . . . . . . . . . . .
Incremental shares from stock based compensation. . . . . . .

55,914
1,415

58,919

58,974
— 1,019

Weighted average shares outstanding—diluted. . . . . . . . . . . .

57,329

58,919

59,993

Anti-dilutive options excluded from diluted EPS

computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

930

1,170

1,036

Anti-dilutive restricted stock excluded from diluted EPS

computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— 1,235

208

Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash, as such, the
potential issuance of shares related to the principal amount of the 2017 Notes does not affect diluted
shares.

NOTE 17—RELATED PARTIES

An affiliate of GS Direct acted as placement agent for the sale of the 2017 notes in December 2009;
provided financial advice to Griffon in connection with the ATT acquisition; acted as co-lead arranger,
co-bookrunner and co-syndication agent in connection with the Term Loan; acted as dealer manager for
the tender of two prior issuances of ATT bonds; and acted as a co-manager with respect to the sale of
the 7.125% senior notes due 2018 in March 2011. Fees and expenses paid in 2011 and 2010 were
approximately $825 and $14,149, respectively.

86

34254

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 18—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly results of operations for the years ended September 30, 2012 and 2011 were as follows:

Quarter ended

2012
December 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . .

2011
December 31, 2010. . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . .

Revenue

Gross Profit

Net Income
(loss)

Per Share
—Basic

Per Share
—Diluted

$ 451,032
482,431
480,246
447,436

$102,708
102,801
115,645
97,651

$ 2,488
2,027
9,048
3,448

$1,861,145

$418,805

$ 17,011

$ 414,402
476,129
455,282
484,989

$ 87,859
101,143
99,169
105,290

$ (1,680)
(14,001)
4,872
3,378

$1,830,802

$393,461

$ (7,431)

$ 0.04
0.04
0.16
0.06

$ 0.30

$(0.03)
(0.24)
0.08
0.06

$(0.13)

$ 0.04
0.04
0.16
0.06

$ 0.30

$(0.03)
(0.24)
0.08
0.06

$(0.13)

Notes to Quarterly Financial Information (unaudited):

• Earnings (loss) per share are computed independently for each quarter and year presented; as

such the sum of the quarters may not be equal to the full year amounts.

• 2012 Net income, and the related per share earnings, included, net of tax, restructuring and other
related charges of $1,167 and $1,881 for the first and fourth quarters, respectively, and $3,048 for
the year; and acquisition related costs of $116 and $194 for the first and fourth quarters,
respectively, and $310 for the year.

• 2011 Net income (loss), and the related per share earnings, included, net of tax, restructuring and
other related charges of $905, $788, $1,377 and $1,833 for each quarter, respectively, and $4,903
for the year; fair value of acquired inventory sold of $7,387 and $2,462 for the first and second
quarters, respectively, and $9,849 for the year; and loss from debt extinguishment of $16,813 for
the second quarter and for the year.

NOTE 19—BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:

• Telephonics develops, designs and manufactures high-technology integrated information,
communication and sensor system solutions to military and commercial markets worldwide.

• HBP is a leading manufacturer and marketer of residential, commercial and industrial garage
doors to professional installing dealers and major home center retail chains, as well as a global
provider of non-powered landscaping products that make work easier for homeowners and
professionals.

• Plastics is an international leader in the development and production of embossed, laminated and
printed specialty plastic films used in a variety of hygienic, health-care and industrial
applications.

87

37875

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

Griffon evaluates performance and allocates resources based on operating results before interest
income or expense, income taxes and certain nonrecurring items of income or expense.

Information on Griffon’s business segments is as follows:

For the Years Ended September 30,
2012
2010
2011

Revenue

Home & Building Products:

ATT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 433,866
422,674

$ 434,789
404,947

$

Home & Building Products . . . . . . . . . . . . . .
Telephonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

856,540
441,503
563,102

839,736
455,353
535,713

—
389,366

389,366
434,516
470,114

Total consolidated net sales . . . . . . . . . . . . . . . . . .

$1,861,145

$1,830,802

$1,293,996

For the Years Ended September 30,
2012
2010
2011

Income (Loss) Before Taxes
Segment operating profit:

Home & Building Products . . . . . . . . . . . . . . . .
Telephonics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37,082
49,232
13,688

Total segment operating profit . . . . . . . . . . . . . . . . .
Unallocated amounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated acquisition costs . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net . . . . . . . . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100,002
(26,346)
—
—
(51,715)

$ 28,228
40,595
13,308

82,131
(22,868)
—
(26,164)
(47,448)

$ 4,986
38,586
20,469

64,041
(27,394)
(9,805)
(1,117)
(11,913)

Income (loss) before taxes. . . . . . . . . . . . . . . . . . . . . .

$ 21,941

$(14,349)

$ 13,812

88

06491

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,
2012
2010
2011

Segment profit before depreciation,

amortization, restructuring, fair value
write-up of acquired inventory sold and
acquisition costs:

Home & Building Products. . . . . . . . . . . . . . . .
Telephonics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70,467
60,565
40,000

$ 77,119
50,875
37,639

$ 19,351
46,120
42,853

Total Segment profit before depreciation,
amortization, restructuring, fair value
write-up of acquired inventory sold and
acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated amounts. . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from debt extinguishment, net . . . . . . . . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment depreciation and amortization . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value write-up of acquired inventory sold
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171,032
(26,346)
—
(51,715)
(65,864)
(4,689)
—
(477)

165,633
(22,868)
(26,164)
(47,448)
(60,361)
(7,543)
(15,152)
(446)

108,324
(27,394)
(1,117)
(11,913)
(40,103)
(4,180)
—
(9,805)

Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . .

$ 21,941

$ (14,349)

$ 13,812

For the Years Ended September 30,
2011

2012

2010

Depreciation and Amortization
Segment:

Home & Building Products. . . . . . . . . . . . . . . . . . .
Telephonics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment depreciation and amortization . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated depreciation and amortization .

Capital Expenditures
Segment:

Home & Building Products. . . . . . . . . . . . . . . . . . .
Telephonics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total segment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$32,034
7,518
26,312

65,864
400
$66,264

$24,648
11,979
32,069

68,696
155

$28,796
7,234
24,331

60,361
351
$60,712

$28,083
8,291
50,824

87,198
419

$10,185
7,534
22,384

40,103
339
$40,442

$10,527
12,410
16,819

39,756
721

Total consolidated capital expenditures . . . . . . . . . . .

$68,851

$87,617

$40,477

89

75619

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

At September 30,
2012

At September 30,
2011

At September 30,
2010

Assets
Segment assets:

Home & Building Products. .
Telephonics. . . . . . . . . . . . . . . . . .
Plastics . . . . . . . . . . . . . . . . . . . . . .

Total segment assets . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . .
Total continuing assets . . . . . . . . . . .
Assets of discontinued operations

$ 943,766
255,420
430,395

1,629,581
173,088
1,802,669
3,523

$ 972,714
288,968
450,452

1,712,134
148,064
1,860,198
5,056

$ 923,331
268,373
397,470

1,589,174
157,645
1,746,819
6,882

Consolidated total. . . . . . . . . . . . . . . .

$1,806,192

$1,865,254

$1,753,701

Segment information by geographic region was as follows:

For the Years Ended September 30,
2012
2010
2011

Revenue by Geographic Area

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South America . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other countries . . . . . . . . . . . . . . . . . . . . . . .
Consolidated revenue. . . . . . . . . . . . . . . . . . . . . . . . .

$1,317,911
255,323
120,457
93,243
74,210
$1,861,145

$1,265,977
262,518
125,330
96,340
80,637
$1,830,802

$ 880,480
220,507
68,934
70,450
53,625
$1,293,996

At September 30,
2012

At September 30,
2011

At September 30,
2010

Property, Plant & Equipment by

Geographic Area

United States . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . .
All other countries . . . . . . . . . .
Consolidated property, plant and
equipment, net. . . . . . . . . . . . . . . . .

$254,080
65,750
37,049

$234,876
74,225
40,949

$216,659
61,860
36,241

$356,879

$350,050

$314,760

As a percentage of consolidated revenue, HBP sales to Home Depot were approximately 12% in 2012
and 12% in 2011; Plastics sales to P&G were approximately 13% in 2012, 14% in 2011 and 18% in
2010; and Telephonics’ sales to the United States Government and its agencies, either as a prime
contractor or subcontractor, aggregated approximately 19% in 2012, 19% in 2011 and 24% in 2010.

NOTE 20—OTHER INCOME (EXPENSE)

Other income (expense) included ($1,414), $626 and $249 for the years ended September 30, 2012, 2011
and 2010, respectively, of currency exchange gains (losses) in connection with the translation of
receivables and payables denominated in currencies other than the functional currencies of Griffon and
its subsidiaries.

90

40559

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 21—CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior
secured basis by the domestic assets of Clopay Building Products Company, Inc., Clopay Plastic
Products Company, Inc., Telephonics Corporation, Ames True Temper Inc., and ATT Southern, Inc. In
accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented
below are condensed consolidating financial information as of September 30, 2012 and 2011, and for the
years ended September 30, 2012, 2011 and 2010. The financial information may not necessarily be
indicative of results of operations or financial position had the guarantor companies or non-guarantor
companies operated as independent entities. The guarantor companies and the non-guarantor
companies include the consolidated financial results of their wholly-owned subsidiaries accounted for
under the equity method.

91

39290

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2012

CURRENT ASSETS

Cash and equivalents . . . . . . . . . . .
Accounts receivable, net of

allowances. . . . . . . . . . . . . . . . . . . .

Contract costs and recognized
income not yet billed, net of
progress payments. . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . .
Prepaid and other current

assets. . . . . . . . . . . . . . . . . . . . . . . . .

Assets of discontinued

operations . . . . . . . . . . . . . . . . . . . .
Total Current Assets. . . . . . .

PROPERTY, PLANT AND

EQUIPMENT, net . . . . . . . . . . . . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . .
INTERCOMPANY RECEIVABLE
EQUITY INVESTMENTS IN

SUBSIDIARIES . . . . . . . . . . . . . . . . . .
OTHER ASSETS. . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED

OPERATIONS . . . . . . . . . . . . . . . . . . .

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

$ 125,093

$

34,782

$

49,779

$

— $ 209,654

—

—
—

187,487

81,279

(28,909)

239,857

69,216
194,618

1,561
63,203

—
47

70,777
257,868

(851)

23,929

21,958

2,436

47,472

—
124,242

1,224
—
—
508,984

—
510,032

244,261
288,147
164,633
648,347

587
218,367

111,394
70,225
65,840
542,025

—
(26,426)

—
—
—
(1,699,356)

2,143,427
49,718

528,411
60,609

2,650,084
8,187

(5,321,922)
(87,197)

587
826,215

356,879
358,372
230,473
—

—
31,317

—

—

2,936

—

2,936

Total Assets . . . . . . . . . . . . . . . . . . . .

$2,827,595

$2,444,440

$3,669,058

$(7,134,901)

$1,806,192

CURRENT LIABILITIES
Notes payable and current portion

of long-term debt . . . . . . . . . . . . . . . . .
Accounts payable and accrued

$

1,625

$

1,032

$

15,046

$

— $

17,703

liabilities . . . . . . . . . . . . . . . . . . . . .

44,649

167,230

66,640

(26,478)

252,041

Liabilities of discontinued

operations . . . . . . . . . . . . . . . . . . . .
Total Current Liabilities . . .

LONG-TERM DEBT, net of debt

discounts. . . . . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY PAYABLES . . .
OTHER LIABILITIES . . . . . . . . . . . . .
LIABILITIES OF

DISCONTINUED
OPERATIONS . . . . . . . . . . . . . . . . . . .
Total Liabilities. . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY. . . . . .

Total Liabilities and

—
46,274

655,023
—
68,827

—
168,262

9,782
558,905
183,989

3,639
85,325

—
(26,478)

17,102
1,149,748
27,489

—
(1,708,653)
(87,198)

3,639
273,383

681,907
—
193,107

—
770,124
2,057,471

—
920,938
1,523,502

3,643
1,283,307
2,385,751

—
(1,822,329)
(5,312,572)

3,643
1,152,040
654,152

Shareholders’ Equity . . . . . . . . .

$2,827,595

$2,444,440

$3,669,058

$(7,134,901)

$1,806,192

92

32671

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2011

CURRENT ASSETS

Cash and equivalents . . . . . . . . . . .
Accounts receivable, net of

allowances. . . . . . . . . . . . . . . . . . . .

Contract costs and recognized
income not yet billed, net of
progress payments. . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . .
Prepaid and other current

assets. . . . . . . . . . . . . . . . . . . . . . . . .

Assets of discontinued

operations . . . . . . . . . . . . . . . . . . . .
Total Current Assets. . . . . . .

PROPERTY, PLANT AND

EQUIPMENT, net . . . . . . . . . . . . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . .
INTERCOMPANY RECEIVABLE
EQUITY INVESTMENTS IN

SUBSIDIARIES . . . . . . . . . . . . . . . . . .
OTHER ASSETS. . . . . . . . . . . . . . . . . . .
ASSETS OF DISCONTINUED

OPERATIONS . . . . . . . . . . . . . . . . . . .

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

$ 178,448

$

15,164

$

49,417

$

— $ 243,029

—

—
—

190,986

76,485

73,755
194,355

982
69,454

1,839

40,436

1,913

—
180,287

1,402
—
—
449,112

—
514,696

224,193
283,491
155,242
278,344

1,381
199,632

124,455
74,397
67,947
98,953

—

—
—

4,640

—
4,640

—
—
—
(826,409)

2,844,527
54,354

746,686
49,771

2,397,258
14,270

(5,988,471)
(87,198)

267,471

74,737
263,809

48,828

1,381
899,255

350,050
357,888
223,189
—

—
31,197

—

—

3,675

—

3,675

Total Assets . . . . . . . . . . . . . . . . . . . .

$3,529,682

$2,252,423

$2,980,587

$(6,897,438)

$1,865,254

CURRENT LIABILITIES

Notes payable and current

portion of long-term debt . . . .

Accounts payable and accrued

liabilities . . . . . . . . . . . . . . . . . . . . .

Liabilities of discontinued

operations . . . . . . . . . . . . . . . . . . . .
Total Current Liabilities . . .

LONG-TERM DEBT, net of debt

discounts. . . . . . . . . . . . . . . . . . . . . . . . . .
INTERCOMPANY PAYABLES . . .
OTHER LIABILITIES . . . . . . . . . . . . .
LIABILITIES OF

DISCONTINUED
OPERATIONS . . . . . . . . . . . . . . . . . . .
Total Liabilities. . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY. . . . . .

Total Liabilities and

$

5,375

$

4,350

$

15,439

$

— $

25,164

36,765

199,742

44,774

4,640

285,921

—
42,140

649,812
—
79,655

—
204,092

10,794
89,198
172,203

3,794
64,007

27,641
737,211
39,774

—
4,640

—
(826,409)
(87,198)

3,794
314,879

688,247
—
204,434

—
771,607
2,758,075

—
476,287
1,776,136

5,786
874,419
2,106,168

—
(908,967)
(5,988,471)

5,786
1,213,346
651,908

Shareholders’ Equity . . . . . . . . .

$3,529,682

$2,252,423

$2,980,587

$(6,897,438)

$1,865,254

93

71368

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2012

Elimination

Consolidation

$(53,625)
(46,603)
(7,022)

$1,861,145
1,442,340
418,805

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . .

Selling, general and administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other related charges. .
Total operating expenses . . . . . . . . . . . .
Income (loss) from operations . . . . . . .

Other income (expense)

Interest income (expense), net. . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . .
Income (loss) before taxes . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . .
Income (loss) before equity in net

income of subsidiaries . . . . . . . . . . . . . . . . .

Equity in net income (loss) of

Parent
Company

Guarantor
Companies

$

— $1,414,910
— 1,060,183
354,727
—

18,982
—
18,982
(18,982)

(14,541)
13
(14,528)
(33,510)
(20,363)

267,677
4,674
272,351
82,376

(25,183)
10,826
(14,357)
68,019
25,366

Non-
Guarantor
Companies

$499,860
428,760
71,100

62,564
15
62,579
8,521

(11,991)
(7,756)
(19,747)
(11,226)
(73)

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

31,500
$ 18,353

(11,007)
31,646

42,653
$ 31,500

$

(63,146)
$(64,488)

$

(13,147)

42,653

(11,153)

(1,342)

Elimination

Consolidation

$(38,075)
(39,440)
1,365

$1,830,802
1,437,341
393,461

For the Year Ended September 30, 2011

Parent
Company

Guarantor
Companies

— $1,379,535
— 1,055,520
324,015
—

16,292
364
16,656
(16,656)

(12,607)
—
(648)
(13,255)
(29,911)
(14,943)

256,880
7,018
263,898
60,117

(26,414)
(397)
6,882
(19,929)
40,188
17,977

Non-
Guarantor
Companies

$489,342
421,261
68,081

57,538
161
57,699
10,382

(8,427)
(25,767)
(1,338)
(35,532)
(25,150)
(9,952)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services . . . . . . . . . . . . . . .

$

Gross profit

Selling, general and administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other related charges. .

Total operating expenses
Income (loss) from operations

Other income (expense)

Interest income (expense), net. . . . . . .
Loss from debt extinguishment, net .
Other, net

Total other income (expense)

Income (loss) before taxes . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . .
Income (loss) before equity in net

income of subsidiaries . . . . . . . . . . . . . . . . .

Equity in net income (loss) of

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . .
Income from discontinued operations . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

(14,968)

22,211

(15,198)

524

7,013
(7,955)
—
$ (7,955) $

1,139
23,350
—
23,350

22,211
7,013
—
$ 7,013

(30,363)
(29,839)
—
$(29,839)

$

94

341,696
4,689
346,385
72,420

(51,715)
1,236
(50,479)
21,941
4,930

17,011

—
17,011

330,369
7,543
337,912
55,549

(47,448)
(26,164)
3,714
(69,898)
(14,349)
(6,918)

(7,431)

—
(7,431)
—
(7,431)

(7,527)
—
(7,527)
505

—
(1,847)
(1,847)
(1,342)
—

(341)

(341)
1,706

—
—
(1,182)
(1,182)
524
—

36061

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2010

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods and services . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling, general and administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other related charges . . .
Total operating expenses. . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . .

Other income (expense)

Parent
Company

Guarantor
Companies

$

— $983,665
— 740,622
— 243,043

26,491
—
26,491
(26,491)

190,308
4,180
194,488
48,555

Interest income (expense), net . . . . . . . .
Loss from debt extinguishment, net . . .
Other intercompany. . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . .

(8,607)
(6)
—
999

(7,614)

Income (loss) before taxes. . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . .

(34,105)
(14,853)

Income (loss) before equity in net income
of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income (loss) of subsidiaries
Income (loss) from operations . . . . . . . . . . . . .
Income from discontinued operations. . . . . .

(19,252)
28,844
9,592
—

6,010
(1,111)
(5,217)
6,917

6,599

55,154
18,017

37,137
1,115
38,252
—

Non-
Guarantor
Companies

$323,867
279,632
44,235

Elimination

Consolidation

$(13,536)
(14,562)
1,026

$1,293,996
1,005,692
288,304

44,860
—
44,860
(625)

(9,316)
—
5,217
(2,513)

(6,612)

(7,237)
1,144

(8,381)
37,137
28,756
88

(256)
—
(256)
1,282

—
—
—
(1,282)

(1,282)

—

—
(67,096)
(67,096)
—

261,403
4,180
265,583
22,721

(11,913)
(1,117)
—
4,121

(8,909)

13,812
4,308

9,504
—
9,504
88

9,592

Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,592

$ 38,252

$ 28,844

$(67,096)

$

95

10243

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2012

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$ 18,353

$ 31,646

$ 31,500

$ (64,488)

$ 17,011

Net cash provided by (used in)

operating activities . . . . . . . . . . . . . . . .

(24,315)

93,349

21,096

—

90,130

CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . . .

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany distributions. . . . . . . . . . .
Proceeds from sale of investment. . . .

Net cash provided by (used in)

(155)

(63,388)

(5,308)

—
10,000
—

(22,432)
(10,000)
200

—
—
109

investing activities . . . . . . . . . . . . . . . . .

9,845

(95,620)

(5,199)

CASH FLOWS FROM FINANCING

ACTIVITIES:

—

—
—
—

—

(68,851)

(22,432)
—
309

(90,974)

Purchase of shares for treasury . . . . . .
Proceeds from issuance of long-term
debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . .
Decrease in short-term borrowings . .
Intercompany debt . . . . . . . . . . . . . . . . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . .
Tax effect from exercise/vesting of

equity awards, net . . . . . . . . . . . . . . . . .
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,382)

—

—

—

(10,382)

(23,000)
(1,625)
—
—
(65)

491,372
(4,351)
—
—
—

27,000
(12,570)
(1,859)
—
(32)

(491,372)
—
—
—
—

834
(4,743)
96

—
(219,516)
(245,616)

—
219,516
(245,752)

—
—
491,372

4,000
(18,546)
(1,859)
—
(97)

834
(4,743)
100

Net cash provided by (used in)

financing activities . . . . . . . . . . . .

CASH FLOWS FROM

DISCONTINUED OPERATIONS:

Net cash used in operating activities.

Net cash used in discontinued

operations . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash
and equivalents . . . . . . . . . . . . . . . . . . . . . . . .

NET INCREASE (DECREASE) IN

(38,885)

21,889

(13,697)

—

(30,693)

—

—

—

—

—

—

(2,801)

(2,801)

963

362

—

—

—

—

—

(2,801)

(2,801)

963

(33,375)

243,029

CASH AND EQUIVALENTS . . . . . . . .

(53,355)

19,618

CASH AND EQUIVALENTS AT

BEGINNING OF PERIOD . . . . . . . . . . .

178,448

15,164

49,417

CASH AND EQUIVALENTS AT END
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . .

$125,093

$ 34,782

$ 49,779

$

— $209,654

96

84833

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2011

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

CASH FLOWS FROM

OPERATING ACTIVITIES:

Net income (loss) . . . . . . . . . . . . . . . . . . . .

$

(7,955) $ 23,350

$

7,013

$(29,839)

$

(7,431)

43,407

38,657

(46,679)

—

35,385

Net cash provided by (used in)

operating activities. . . . . . . . . . . . .
CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant

and equipment. . . . . . . . . . . . . . . . .

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . .
Intercompany distributions . . . . . . .
Funds restricted for capital

projects . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investment
Net cash provided by (used

in) investing activities . . . . . . .

CASH FLOWS FROM

FINANCING ACTIVITIES:

(418)

(55,455)

(31,744)

—
10,000

(1,066)
(10,000)

—
—

4,629
68

211
—

—
1,442

9,582

(61,824)

(30,091)

Purchase of shares for treasury . .
Proceeds from issuance of long-

term debt. . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt. . . . . .
Change in short-term borrowings
Intercompany debt . . . . . . . . . . . . . . .
Financing costs. . . . . . . . . . . . . . . . . . .
Purchase of ESOP shares . . . . . . . .
Exercise of stock options . . . . . . . .
Tax effect from exercise/vesting

of equity awards, net . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used

in) financing activities . . . . . . .

(18,139)

—

—

569,973
(625)
—
(468,372)
(14,663)
(19,973)
2,306

—
(31,138)
—
—
—
—
—

104,278
(466,809)
3,538
468,372
(6,990)
—
—

7
345

—
12,356

—
(12,356)

50,859

(18,782)

90,033

CASH FLOWS FROM
DISCONTINUED
OPERATIONS:

Net cash used in discontinued

operations . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on

cash and equivalents . . . . . . . . . . . . . . .
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS . . . .

CASH AND EQUIVALENTS AT

BEGINNING OF PERIOD. . . . . . . .

CASH AND EQUIVALENTS AT

—

—

(962)

(973)

103,848

(41,949)

11,328

74,600

57,113

38,089

—

—
—

—
—

—

—

—
—
—
—
—
—
—

—
—

—

—

—

—

(87,617)

(855)
—

4,629
1,510

(82,333)

(18,139)

674,251
(498,572)
3,538
—
(21,653)
(19,973)
2,306

7
345

122,110

(962)

(973)

73,227

169,802

END OF PERIOD . . . . . . . . . . . . . . . .

$ 178,448

$ 15,164

$ 49,417

$

— $ 243,029

97

09061

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended September 30, 2010

Parent
Company

Guarantor
Companies

Non-
Guarantor
Companies

Elimination

Consolidation

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$

9,592

$ 38,252

$ 28,844

$(67,096)

$

9,592

Net cash provided by (used in)

operating activities . . . . . . . . . . . . . . . .

(10,163)

87,620

5,668

—

83,125

CASH FLOWS FROM INVESTING

ACTIVITIES:

Acquisition of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . .

Acquired business, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany distributions . . . . . . . . . .
Change in equipment lease deposits.

Net cash provided by (used in)

(720)

(28,713)

(11,044)

(167,950)
10,000
—

— (374,050)
—
—

(10,000)
(1,666)

investing activities . . . . . . . . . . . . . .

(158,670)

(40,379)

(385,094)

CASH FLOWS FROM FINANCING

ACTIVITIES:

Proceeds from issuance of common

stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term
debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt . . . . . . . . .
Financing costs . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options. . . . . . . . . . . .
Tax effect from exercise/vesting of

equity awards, net . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in)

financing activities . . . . . . . . . . . . . .

CASH FLOWS FROM

DISCONTINUED OPERATIONS:

Net cash used in discontinued

operations . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash
and equivalents . . . . . . . . . . . . . . . . . . . . . . . .

NET INCREASE (DECREASE) IN

2,823

—

—

100,000
(79,473)
(4,278)
343

40,000
(85,086)
—
—

325
182

—
17,093

403,875
(12,243)
(13,177)
—

—
(17,091)

19,922

(27,993)

361,364

—

—

—

—

(638)

(2,668)

CASH AND EQUIVALENTS . . . . . . . .

(148,911)

19,248

(21,368)

CASH AND EQUIVALENTS AT

BEGINNING OF PERIOD . . . . . . . . . . .

223,511

37,865

59,457

—

—
—
—

—

—

—
—
—
—

—
—

—

—

—

—

—

(40,477)

(542,000)
—
(1,666)

(584,143)

2,823

543,875
(176,802)
(17,455)
343

325
184

353,293

(638)

(2,668)

(151,031)

320,833

CASH AND EQUIVALENTS AT

END OF PERIOD . . . . . . . . . . . . . . . . . . . .

$ 74,600

$ 57,113

$ 38,089

$

— $ 169,802

98

80462

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(US dollars and non US currencies in thousands, except per share data)

NOTE 22—SUBSEQUENT EVENT

On November 13, 2012, Griffon declared a $0.025 per share dividend payable on December 26, 2012 to
shareholders of record as of November 29, 2012. Griffon currently intends to pay dividends each
quarter; however, the 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 future dividends.

*****

99

28693

SCHEDULE II

GRIFFON CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended September 30, 2012, 2011 and 2010

Description

Balance at
Beginning of
Year

Acquired By
Purchase

Recorded to
Cost and
Expense

Accounts
Written Off,
net

Other

Balance at
End of Year

FOR THE YEAR ENDED SEPTEMBER 30, 2012
Allowance for Doubtful Accounts

Bad debts. . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances. . . . .

$ 4,610
1,462

$ 6,072

Inventory valuation . . . . . . . . . . . . . .

$13,897

Deferred tax valuation

$ —
—

$ —

$ —

$ 2,009
2,018

$ 4,027

$26,624

$ (2,284)
(2,160)

$(189)
(33)

$ 4,146
1,287

$ (4,444)

$(222)

$ 5,433

$(23,002)

$(552)

$16,967

allowance. . . . . . . . . . . . . . . . . . . . . .

$ 9,481

$ —

$ (2,046)

$

— $ —

$ 7,435

FOR THE YEAR ENDED SEPTEMBER 30, 2011
Allowance for Doubtful Accounts

Bad debts. . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances. . . . .

$ 5,091
1,490

$ 6,581

Inventory valuation . . . . . . . . . . . . . .

$13,141

$ —
—

$ —

$ —

$ 1,121
2,741

$ 3,862

$27,361

$ (1,405)
(2,748)

$(197)
(21)

$ 4,610
1,462

$ (4,153)

$(218)

$ 6,072

$(26,474)

$(131)

$13,897

Deferred tax valuation

allowance. . . . . . . . . . . . . . . . . . . . . .

$13,977

$ —

$ (4,496)

FOR THE YEAR ENDED SEPTEMBER 30, 2010
Allowance for Doubtful Accounts

Bad debts. . . . . . . . . . . . . . . . . . . . . . . .
Sales returns and allowances. . . . .

$ 3,138
1,319

$ 4,457

Inventory valuation . . . . . . . . . . . . . .

$11,178

$ 521
—

$ 521

$1,187

$ 2,431
430

$ 2,861

$ 4,904

$

$

— $ —

$ 9,481

(996)
(258)

$ (3)
(1)

$ 5,091
1,490

$ (1,254)

$ (4)

$ 6,581

$ (4,017)

$(111)

$13,141

Deferred tax valuation

allowance. . . . . . . . . . . . . . . . . . . . . .

$ 4,726

$8,879

$

372

$

— $ —

$13,977

Note: This Schedule II is for continuing operations only.

100

22709

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation and Disclosure Controls and Procedures

Griffon’s management, with the participation of its Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of the design and operation of Griffon’s disclosure controls
and procedures, as defined by Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered
by this report, Griffon’s disclosure controls and procedures were effective to ensure that information
required to be disclosed by Griffon in the reports that it files or submits under the Exchange Act are
recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and
forms and such information is accumulated and communicated to management as appropriate to allow
timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Griffon’s management is responsible for establishing and maintaining adequate internal control over
financial reporting. Griffon’s internal control over financial reporting is a process designed under the
supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of Griffon’s financial statements for
external reporting in accordance with accounting principles generally accepted in the United States of
America. Management evaluates the effectiveness of Griffon’s internal control over financial reporting
using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control—Integrated Framework. Management, under the supervision and with the
participation of Griffon’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness
of Griffon’s internal control over financial reporting as of September 30, 2012 and concluded that it is
effective.

Griffon’s independent registered public accounting firm, Grant Thornton LLP, has audited the
effectiveness of Griffon’s internal control over financial reporting as of September 30, 2012, and has
expressed an unqualified opinion in their report which appears in this Annual Report on Form 10-K.

Changes in Internal Controls

There were no changes in Griffon’s internal control over financial reporting identified in connection
with the evaluation referred to above that occurred during the fourth quarter of the year ended
September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the
registrant’s internal control over financial reporting.

Inherent Limitations on the Effectiveness Controls

Griffon’s internal control over financial reporting is 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. Griffon’s internal control over financial
reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of Griffon’s assets;

101

00160

(ii) provide reasonable assurance that
statements

transactions are recorded as necessary to permit
in accordance with generally accepted accounting
preparation of
principles, and that Griffon’s receipts and expenditures are being made only in accordance
with authorizations of Griffon’s management and directors; and

financial

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Griffon’s assets that could have a material effect on the
financial statements.

Management, including Griffon’s Chief Executive Officer and Chief Financial Officer, does not expect
that Griffon’s internal controls will prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can
provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Also, any evaluation of the effectiveness of controls in future periods is subject to the risk that those
internal controls may become inadequate because of changes in business conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Item 9B. Other Information

None

PART III

Item 11, Executive Compensation;

The information required by Part III: Item 10, Directors, and Executive Officers and Corporate
Item 13, Certain Relationships and Related
Governance;
Transactions and Director Independence; and Item 14, Principal Accountant Fees and Services is
included in and incorporated by reference to Griffon’s definitive proxy statement in connection with its
Annual Meeting of Stockholders scheduled to be held in January, 2013, to be filed with the Securities
and Exchange Commission within 120 days following the end of Griffon’s year ended September 30,
2012. Information relating to the executive officers of the Registrant appears under Item 1 of this
report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information regarding security ownership of certain beneficial owners and management that is
required to be included pursuant to this Item 12 is included in and incorporated by reference to
Griffon’s definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled
to be held in January, 2013.

The following sets forth information relating to Griffon’s equity compensation plans as of September
30, 2012:

Plan Category

Equity compensation plans approved by security
holders(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity compensation plans not approved by

security holders(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

(b)
Weighted-
average
exercise
price of
outstanding
options, warrants
and rights

(c)
Number of
securities remaining
available for future
issuance under equity
plans (excluding
securities reflected
in column (a))

753,035

176,726

$18.86

$18.16

1,802,159

—

102

21349

(1) Excludes restricted shares issued in connection with Griffon’s equity compensation plans. The total
reflected in Column (c) includes shares available for grant as any equity award under the Incentive
Plan.

(2) Griffon’s 1998 Employee and Director Stock Option Plan is the only equity plan which was not
approved by Griffon’s stockholders. No new grants have been made under The Employee and
Director Stock Option Plan since February 2008.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) Financial Statements—Covered by Report of Independent Registered Public Accounting Firm

(A) Consolidated Balance Sheets at September 30, 2012 and 2011

(B) Consolidated Statements of Operations for the Fiscal Years Ended September 30, 2012,

2011 and 2010

(C) Consolidated Statements of Cash Flows for the Fiscal Years Ended September 30, 2012,

2011 and 2010

(D) Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the

Fiscal Years Ended September 30, 2012, 2011 and 2010

(E) Notes to the Consolidated Financial Statements

(2) Financial Statement Schedule—Covered by Report of

Independent Registered Public

Accounting Firm

Schedule II—Valuation and Qualifying Accounts

All other schedules are not required and have been omitted.

(3) Exhibits—see (b) below

(b) Exhibits:

Exhibit
No.

2.1

3.1

3.2

4.1

4.2

Stock Purchase Agreement, dated July 19, 2010, among CHATT Holdings LLC, CHATT
Holdings Inc., Clopay Acquisition Corp. and, solely for the purposes of Section 7.09, Griffon
Corporation (Exhibit 2.1 to Current Report on Form 8-K filed July 23, 2010 (Commission File
No. 1-06620)).

Restated Certificate of Incorporation (Exhibit 3.1 of Annual Report on Form 10-K for the year
ended September 30, 1995 (Commission File No. 1-06620)) and Exhibit 3.1 of Quarterly Report
on Form 10-Q for the quarter ended March 31, 2008

Amended By-laws (Exhibit 3 of Current Report on Form 8-K filed May 14, 2008 (Commission
File No. 1-06620))

Specimen Certificate for Shares of Common Stock of Registrant (Exhibit 4.3 of Registration
Statement on Form S-3 filed September 26, 2003 (Commission File No. 333-109171)

Indenture, dated as of June 22, 2004, between the Registrant and American Stock Transfer and
Trust Company, including the form of note (Exhibit 4.3 to Annual Report on Form 10-K for the
year ended September 30, 2004 (Commission File No. 1-06620))

103

12020

Exhibit
No.

4.3

4.4

4.5

4.6

10.1

10.2

10.3

Irrevocable Election Letter related to Indenture dated as of June 22, 2004 between the
Registrant and American Stock Transfer and Trust Company (Exhibit 4.4 to Annual Report on
Form 10-K for the year ended September 30, 2004 (Commission File No. 1-06620))

Indenture, dated December 21, 2009, between Griffon Corporation and American Stock
Transfer & Trust Company, LLC (Exhibit 4.1 to Current Report on Form 8-K filed December
21, 2009 (Commission File No. 1-06620)).

Indenture, dated as of March 17, 2011, by and among Griffon Corporation, the guarantors party
thereto and Wells Fargo Bank, National Association, as Trustee (Exhibit 4.1 to the Current
Report on Form 8-K filed March 18, 2011 (Commission File No. 1-06620)).

Registration Rights Agreement, dated March 17, 2011, by and among, Griffon Corporation, the
guarantors party thereto and Deutsche Bank Securities Inc., as the representative of the several
initial purchasers (Exhibit 4.2 to the Current Report on Form 8-K filed March 18, 2011
(Commission File No. 1-06620)).

Employment Agreement dated as of July 1, 2001 between the Registrant and Harvey R. Blau
(Exhibit 10.1 of Current Report on Form 8-K filed May 18, 2001 (Commission File No. 1-06620))

Employment Agreement dated as of July 1, 2001 between the Registrant and Robert Balemian
(Exhibit 10.2 of Current Report on Form 8-K file May 18, 2001 (Commission File No. 1-06620))

Form of Trust Agreement between the Registrant and Wachovia Bank, National Association, as
Trustee, dated October 2, 2006, relating to Griffon’s Employee Stock Ownership Plan (Exhibit
10.3 to Annual Report on Form 10-K for the year ended September 30, 2006 (Commission File
No. 1-06620))

10.4

1992 Non-Qualified Stock Option Plan (Exhibit 10.10 of Annual Report on Form 10-K for the
year ended September 30, 1993 (Commission File No. 1-06620))

10.5 Non-Qualified Stock Option Plan (Exhibit 10.12 of Annual Report on Form 10-K for the year

ended September 30, 1998 (Commission File No. 1-06620))

10.6

Form of Indemnification Agreement between the Registrant and its officers and directors
(Exhibit 28 to Current Report on Form 8-K dated May 3, 1990 (Commission File No. 1-06620))

10.7 Outside Director Stock Award Plan (Exhibit 4 of Form S-8 Registration Statement No. 33-52319)

10.8

1997 Stock Option Plan (Exhibit 4.2 of Form S-8 Registration Statement No. 333-21503)

10.9

2001 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-67760)

10.10 Senior Management Incentive Compensation Plan (Exhibit 4.2 of Form S-8 Registration

Statement No. 333-62319)

10.11 1998 Employee and Director Stock Option Plan, as amended (Exhibit 4.1 of Form S-8

Registration Statement No. 333-102742)

10.12 1998 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-62319)

10.13 Amendment to Employment Agreement between the Registrant and Harvey R. Blau dated
August 8, 2003 (Exhibit 10.1 of Quarterly Report on Form 10-Q for the quarter ended June 30,
2003 (Commission File No. 1-06620))

10.14 ‘Non-Qualified Stock Option Agreement (Exhibit 4.1 of Form S-8 Registration Statement No.

333-131737)

104

74316

Exhibit
No.

10.15 Griffon Corporation 2006 Equity Incentive Plan, as amended (Exhibit 10.1 of Quarterly Report
on Form 10-Q for the period ended December 31, 2008 (Commission File No. 1-06620))

10.16 Amendment No. 2 to Employment Agreement, dated July 18, 2006 between the Registrant and
Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed July 21, 2006 (Commission
File No. 1-06620))

10.17 Severance agreement, dated July 18, 2006 between the Registrant and Patrick Alesia (Exhibit
10.2 to Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))

10.18 Supplemental Executive Retirement Plan as amended through July 18, 2006 (Exhibit 10.3 to

Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))

10.19 Griffon Corporation 2006 Performance Bonus Plan (Exhibit 10.2 to Current Report on Form

8-K filed February 17, 2006 (Commission File No. 1-06620))

10.20 Form of Restricted Stock Award Agreement under the Griffon Corporation 2006 Equity
Incentive Plan (Exhibit 10.3 to Current Report on Form 8-K/A filed July 31, 2006 (Commission
File No. 1-06620))

10.21 Amendment No. 3 to Employment Agreement, dated August 3, 2007, between the Registrant
and Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed August 6, 2007
(Commission File No. 1-06620))

10.22 Amendment No. 1 to the Severance Agreement, dated August 3, 2007, between the Registrant
and Patrick L. Alesia (Exhibit 10.2 to Current Report on Form 8-K filed August 6, 2007
(Commission File No. 1-06620))

10.23 Amendment No. 1 to the Amended and Restated Supplemental Executive Retirement Plan
dated August 3, 2007 (Exhibit 10.3 to the Current Report on Form 8-K filed August 6, 2007
(Commission File No. 1-06620))

10.24 Guarantee and Collateral Agreement, dated as of March 31, 2008, made by Gritel Holding Co.,
Inc. and Telephonics Corporation in favor of JPMorgan Chase Bank, N.A. (Exhibit 10.2 to the
Current Report on Form 8-K filed April 4, 2008 (Commission File No. 1-06620)).

10.25 Employment Agreement, dated March 16, 2008, between the Registrant and Ronald J. Kramer.
(Exhibit 10.1 to the Current Report on Form 8-K filed March 20, 2008 (Commission File
No. 1-06620))

10.26 Employment Agreement dated August 6, 2009, between the Registrant and Douglas J. Wetmore
(Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009
(Commission File No. 1-06620))

10.27 Offer Letter Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan
(Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
(Commission File No. 1-06620)).

10.28 Severance Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan (Exhibit
10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File
No. 1-06620)).

10.29 Letter Agreement, dated February 3, 2011, between Griffon Corporation and Harvey R. Blau
(Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2011
(Commission File No. 1-06620)).

105

24682

Exhibit
No.

10.30 Griffon Corporation Director Compensation Program, dated February 3, 2011 (Exhibit 10.2 to
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (Commission File
No. 1-06620)).

10.31 Griffon Corporation 2011 Equity Incentive Plan (Exhibit 99.1 to the Current Report on Form

8-K filed February 9, 2011 (Commission File No. 1-06620)).

10.32 Form of Award Agreement for Restricted Share Award under Griffon Corporation 2011 Equity
Incentive Plan (Exhibit 99.2 to the Current Report on Form 8-K filed February 9, 2011
(Commission File No. 1-06620)).

10.33 Griffon Corporation 2011 Performance Bonus Plan (Exhibit 99.3 to the Current Report on Form

8-K filed February 9, 2011 (Commission File No. 1-06620)).

10.34 Amendment No.1 to Employment Agreement made as of February 3, 2011 by and between
Griffon Corporation and Ronald J. Kramer (Exhibit 99.4 to the Current Report on Form 8-K
filed February 9, 2011 (Commission File No. 1-06620)).

10.35 Purchase Agreement, dated as of March 14, 2011, by and among Griffon Corporation, the
Guarantors named therein and Deutsche Bank Securities Inc., as Representative of the several
Initial Purchasers named therein (Exhibit 99.1 to the Current Report on Form 8-K filed March
18, 2011 (Commission File No. 1-06620)).

10.36 Letter agreement, dated March 4, 2011, among Griffon Corporation, J.P. Morgan Securities
LLC and JPMorgan Chase Bank, N.A. (Exhibit 10.8 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 2011 (Commission File No. 1-06620)).

10.37 Amendment, dated March 14, 2011, to letter agreement dated March 4, 2011 among Griffon
Corporation, J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. (Exhibit 10.9 to
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (Commission File
No. 1-06620)).

10.38 Credit Agreement, dated as of March 18, 2011, by and among Griffon Corporation, JPMorgan
Chase Bank, N.A., as administrative agent, JPMorgan Securities LLC, as sole lead arranger and
sole bookrunner, and the other lenders party thereto (Exhibit 99.2 to the Current Report on
Form 8-K filed March 18, 2011 (Commission File No. 1-06620)).

10.39 Guarantee and Collateral Agreement, dated as of March 18, 2011, by Griffon Corporation and
certain of its subsidiaries in favor of JPMorgan Chase Bank, N.A., as administrative agent
(Exhibit 99.3 to the Current Report on Form 8-K filed March 18, 2011 (Commission File
No. 1-06620)).

10.40 Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and
between Griffon Corporation and Ronald J. Kramer (Exhibit 99.1 to Current Report on
Form 8-K filed January 10, 2012 (Commission File No. 1-06620)).

10.41 Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and
between Griffon Corporation and Douglas J. Wetmore (Exhibit 99.2 to Current Report on Form
8-K filed January 10, 2012 (Commission File No. 1-06620)).

14.1

14.2

Code of Ethics for the Chairman and Chief Executive Officer and Senior Financial Officers
(Exhibit 14.1 to Current Report on Form 8-K dated February 9, 2011).

Code of Business Conduct and Ethics (Exhibit 14.2 to Current Report on Form 8-K dated
February 9, 2011).

21*

Subsidiaries of the Registrant

106

84313

Exhibit
No.
23*

Consent of Grant Thornton LLP

31.1* Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act

31.2* Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act

32*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 USC
Section 1350.

* Filed herewith. All other exhibits are incorporated herein by reference to the exhibit indicated in the

parenthetical references.

107

85262

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Griffon has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the
16th day of November 2012.

GRIFFON CORPORATION

By: /s/ RONALD J. KRAMER
Ronald J. Kramer,
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
on November 16, 2012 by the following persons on behalf of the Registrant in the capacities indicated:

/s/ HARVEY R. BLAU
Harvey R. Blau

/s/ RONALD J. KRAMER
Ronald J. Kramer

Chairman of the Board

Chief Executive Officer

(Principal Executive Officer)

/s/ DOUGLAS J. WETMORE
Douglas J. Wetmore

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/ BRIAN G. HARRIS
Brian G. Harris

/s/ HENRY A. ALPERT
Henry A. Alpert

/s/ BERTRAND M. BELL
Bertrand M. Bell

/s/ GERALD J. CARDINALE
Gerald J. Cardinale

/s/ BLAINE V. FOGG
Blaine V. Fogg

/s/ BRADLEY J. GROSS
Bradley J. Gross

/s/ ROBERT G. HARRISON
Robert G. Harrison

/s/ DONALD J. KUTYNA
Donald J. Kutyna

/s/ MARTIN S. SUSSMAN
Martin S. Sussman

/s/ WILLIAM H. WALDORF
William H. Waldorf

/s/ JOSEPH J. WHALEN
Joseph J. Whalen

Vice President, Controller and Chief Accounting

Officer (Principal Accounting Officer)

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

108

43147

Exhibit 31.1

I, Ronald J. Kramer, certify that:

Certification

1. I have reviewed this annual report on Form 10-K of Griffon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of

the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2012

/s/ RONALD J. KRAMER
Ronald J. Kramer,
Chief Executive Officer
(Principal Executive Officer)

98034

Exhibit 31.2

I, Douglas J. Wetmore, certify that:

Certification

1. I have reviewed this annual report on Form 10-K of Griffon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of

the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2012

/s/ DOUGLAS J. WETMORE
Douglas J. Wetmore
Chief Financial Officer
(Principal Financial Officer)

69409

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of Griffon Corporation (the “Company”) for the
period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), Ronald J. Kramer, as Chief Executive Officer of Griffon, and Douglas J.
Wetmore, as Chief Financial Officer of Griffon, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their
knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial

condition and results of operations of Griffon.

/s/ RONALD J. KRAMER

Name: Ronald J. Kramer
Title:

Chief Executive Officer
(Principal Executive Officer)

Date: November 16, 2012

/s/ DOUGLAS J. WETMORE

Name: Douglas J. Wetmore
Title:

Chief Financial Officer
(Principal Financial Officer)

Date: November 16, 2012

A signed original of this written statement required by Section 906 has been provided to Griffon
Corporation and will be retained by Griffon Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.

22242

C O M PA N Y   P RO F I L E 

HOME & BUILDING PRODUCTS
Ames True Temper, established in 1774, is a global provider of non-powered landscaping products
that make work easier for homeowners and professionals.
Website: www.amestruetemper.com

Clopay Building Products is a leading manufacturer and marketer of residential, commercial and

industrial garage doors to professional

installing dealers and major home center retail chains.

Website: www.clopaydoor.com

TELEPHONICS
Telephonics designs, develops and manufactures high-technology, integrated information,
communication and sensor system solutions for use in military and commercial markets worldwide.
Website: www.telephonics.com

Clopay Plastic Products is an international

leader in the development and production of embossed

laminated and printed specialty plastic films used in a variety of hygienic, healthcare and industrial applications.
Website: www.clopayplastics.com

CLOPAY PLASTIC PRODUCTS

DIRECTORS

Henry A. Alpert
President, Spartan Petroleum Corp.
(petroleum distributor/real estate)

Bertrand M. Bell, M.D.
Albert Einstein Medical Center

Harvey R. Blau
Chairman of the Board

Gerald J. Cardinale
Managing Director, Goldman Sachs

Blaine V. Fogg, Esq.
Of Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP

Bradley J. Gross
Managing Director, Goldman Sachs

Rear Admiral Robert G. Harrison
USN (Ret.)

Ronald J. Kramer
Chief Executive Officer

General Donald J. Kutyna
USAF (Ret.)

Martin S. Sussman, Esq.
Partner
Seltzer Sussman Habermann &
Heitner LLP

William H. Waldorf
President, Landmark Capital, LLC
(investments)

Independent Registered Public
Accountants
Grant Thornton LLP

Joseph J. Whalen
Retired Partner
Arthur Andersen LLP

OFFICERS

Ronald J. Kramer
Chief Executive Officer

Robert F. Mehmel
President and
Chief Operating Officer

Douglas J. Wetmore
Executive Vice President and
Chief Financial Officer

Patrick L. Alesia
Senior Vice President and
Chief Administrative Officer

Seth L. Kaplan
Senior Vice President,
General Counsel and Secretary

Thomas D. Gibbons
Treasurer

Brian G. Harris
Vice President, Controller and
Chief Accounting Officer

Denise A. Lueders
Vice President, Taxation

Stock Listing
The company’s Common Stock is listed
on the New York Stock Exchange
(NYSE) under the symbol GFF.

Registrar and Transfer Agent
American Stock Transfer &
Trust Company

Additional copies of this report will be
furnished to shareholders upon written
request to the company at:

Griffon Corporation
Attn. Secretary
712 Fifth Avenue, 18th Floor
New York, New York 10019

Website:
www.griffoncorp.com

Griffon Corporation has included as
to its Annual Report on
exhibits
Form 10-K for
fiscal year 2012 filed
with the SEC certifications of Griffon’s
Chief Executive Officer
and Chief
Financial Officer certifying the quality
the company’s public disclosures.
of
Griffon’s Chief Executive Officer has also
submitted to the NYSE a certification
that he is not aware of any violations by
Griffon
corporate
the NYSE
governance listing standards.

of

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2012 Annual Report