SEC Filing | Griffon Corporation

View:

Download DOC

Download PDF

Download XLS

Download XBRL

gff-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-06620

GRIFFON CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			11-1893410
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

712 Fifth Ave, 18th Floor	New York	New York	10019
(Address of principal executive offices)			(Zip Code)

(212) 957-5000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.25 par value

GFF

New York Stock Exchange

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of common stock outstanding at July 31, 2024 was 49,263,240.

Griffon Corporation and Subsidiaries

Contents


			Page
PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets at June 30 , 2024 (unaudited) and September 30, 2023			1

Condensed Consolidated Statement of Shareholders’ Equity for the Three and Nine Months Ended June 30 , 2024 and 2023 (unaudited)			2

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended June 30 , 2024 and 2023 (unaudited)			4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30 , 2024 and 2023 (unaudited)			5

Notes to Condensed Consolidated Financial Statements (unaudited)			7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			34

Item 3 - Quantitative and Qualitative Disclosures about Market Risk			49

Item 4 - Controls & Procedures			49

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings			50

Item 1A – Risk Factors			50

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			50

Item 3 – Defaults Upon Senior Securities			50

Item 4 – Mine Safety Disclosures			50

Item 5 – Other Information			51

Item 6 – Exhibits			51

Signatures			52

Table of Contents

Part I – Financial Information

Item 1 – Financial Statements

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


	(Unaudited)
	June 30, 2024		September 30, 2023
CURRENT ASSETS
Cash and equivalents	$	133,452	$	102,889
Accounts receivable, net of allowances of $11,009 and $11,264	320,385		312,432

Inventories	430,708		507,130
Prepaid and other current assets	65,797		57,139
Assets held for sale	14,747		—
Assets of discontinued operations	1,310		1,001
Total Current Assets	966,399		980,591
PROPERTY, PLANT AND EQUIPMENT, net	274,980		279,218
OPERATING LEASE RIGHT-OF-USE ASSETS	159,865		169,942
GOODWILL	327,864		327,864
INTANGIBLE ASSETS, net	619,867		635,243
OTHER ASSETS	25,115		21,731
ASSETS OF DISCONTINUED OPERATIONS	4,774		4,290
Total Assets	$	2,378,864	$	2,418,879

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	8,138	$	9,625
Accounts payable	156,564		116,646
Accrued liabilities	185,218		193,098
Current portion of operating lease liabilities	32,572		32,632

Liabilities of discontinued operations	4,216		7,148
Total Current Liabilities	386,708		359,149
LONG-TERM DEBT, net	1,499,211		1,459,904
LONG-TERM OPERATING LEASE LIABILITIES	138,665		147,224
OTHER LIABILITIES	124,969		132,708
LIABILITIES OF DISCONTINUED OPERATIONS	5,801		4,650
Total Liabilities	2,155,354		2,103,635
COMMITMENTS AND CONTINGENCIES - See Note 22
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity	223,510		315,244
Total Liabilities and Shareholders’ Equity	$	2,378,864	$	2,418,879

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

Table of Contents

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2024 and 2023

(Unaudited)


	COMMON STOCK			CAPITAL IN EXCESS OF PAR VALUE		RETAINED EARNINGS		TREASURY SHARES			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		DEFERRED COMPENSATION
(in thousands)	SHARES	PAR VALUE						SHARES	COST						TOTAL
Balance at September 30, 2023	84,746	$	21,187	$	662,680	$	281,516	31,684	$	(577,686)	$	(70,010)	$	(2,443)	$	315,244
Net income	—	—		—		42,177		—	—		—		—		42,177

Dividend	—	—		—		(7,825)		—	—		—		—		(7,825)
Shares withheld on employee taxes on vested equity awards	—	—		—		—		221	(11,604)		—		—		(11,604)
Amortization of deferred compensation	—	—		—		—		—	—		—		520		520

Common stock acquired including excise taxes	—	—		—		—		1,634	(70,543)		—		—		(70,543)
Equity awards granted, net	—	—		(3,383)		—		(180)	3,383		—		—		—



ESOP allocation of common stock	—	—		1,550		—		—	—		—		—		1,550
Stock-based compensation	—	—		5,028		—		—	—		—		—		5,028

Other comprehensive income, net of tax	—	—		—		—		—	—		10,475		—		10,475
Balance at December 31, 2023	84,746	$	21,187	$	665,875	$	315,868	33,359	$	(656,450)	$	(59,535)	$	(1,923)	$	285,022
Net income	—	—		—		64,143		—	—		—		—		64,143

Dividend	—	—		—		(7,289)		—	—		—		—		(7,289)
Shares withheld on employee taxes on vested equity awards	—	—		—		—		375	(22,722)		—		—		(22,722)
Amortization of deferred compensation	—	—		—		—		—	—		—		586		586

Common stock acquired including excise taxes	—	—		—		—		1,803	(118,964)		—		—		(118,964)
Equity awards granted, net	—	—		(9,492)		—		(428)	9,492		—		—		—



ESOP allocation of common stock	—	—		2,484		—		—	—		—		—		2,484
Stock-based compensation	—	—		3,849		—		—	—		—		—		3,849

SEC filing fees	—	—		(27)		—		—	—		—		—		(27)
Other comprehensive loss, net of tax	—	—		—		—		—	—		(4,896)		—		(4,896)
Balance at March 31, 2024	84,746	$	21,187	$	662,689	$	372,722	35,109	$	(788,644)	$	(64,431)	$	(1,337)	$	202,186
Net income	—	—		—		41,086		—	—		—		—		41,086

Dividend	—	—		—		(7,458)		—	—		—		—		(7,458)

Amortization of deferred compensation	—	—		—		—		—	—		—		553		553

Common stock acquired including excise taxes	—	—		—		—		284	(19,294)		—		—		(19,294)




ESOP allocation of common stock including excise taxes	—	—		2,451		—		—	509		—		—		2,960
Stock-based compensation	—	—		4,699		—		—	—		—		—		4,699

Other comprehensive income, net of tax	—	—		—		—		—	—		(1,222)		—		(1,222)
Balance at June 30, 2024	84,746	$	21,187	$	669,839	$	406,350	35,393	$	(807,429)	$	(65,653)	$	(784)	$	223,510

Table of Contents

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended June 30, 2024 and 2023

(Unaudited)


	COMMON STOCK			CAPITAL IN EXCESS OF PAR VALUE		RETAINED EARNINGS		TREASURY SHARES			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		DEFERRED COMPENSATION
(in thousands)	SHARES	PAR VALUE						SHARES	COST						TOTAL
Balance at September 30, 2022	84,746	$	21,187	$	627,982	$	344,060	27,682	$	(420,116)	$	(82,738)	$	(12,805)	$	477,570
Net income	—	—		—		48,702		—	—		—		—		48,702

Dividend	—	—		—		(6,145)		—	—		—		—		(6,145)
Shares withheld on employee taxes on vested equity awards	—	—		—		—		345	(12,734)		—		—		(12,734)
Amortization of deferred compensation	—	—		—		—		—	—		—		571		571


Equity awards granted, net	—	—		(7,082)		—		(467)	7,082		—		—		—



ESOP allocation of common stock	—	—		1,127		—		—	—		—		—		1,127
Stock-based compensation	—	—		5,538		—		—	—		—		—		5,538

Other comprehensive income, net of tax	—	—		—		—		—	—		12,219		—		12,219
Balance at December 31, 2022	84,746	$	21,187	$	627,565	$	386,617	27,560	$	(425,768)	$	(70,519)	$	(12,234)	$	526,848
Net loss	—	—		—		(62,255)		—	—		—		—		(62,255)

Dividend	—	—		—		(5,714)		—	—		—		—		(5,714)
Shares withheld on employee taxes on vested equity awards	—	—		—		—		21	(254)		—		—		(254)
Amortization of deferred compensation	—	—		—		—		—	—		—		570		570


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



ESOP allocation of common stock	—	—		1,207		—		—	—		—		—		1,207
Stock-based compensation	—	—		5,296		—		—	—		—		—		5,296

Other comprehensive income, net of tax	—	—		—		—		—	—		2,613		—		2,613
Balance at March 31, 2023	84,746	$	21,187	$	633,451	$	318,648	27,541	$	(425,405)	$	(67,906)	$	(11,664)	$	468,311
Net income	—	—		—		49,205		—	—		—		—		49,205

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

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

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




ESOP allocation of common stock	—	—		13,609		—		—	—		—		—		13,609
Stock-based compensation	—	—		5,106		—		—	—		—		—		5,106

Other comprehensive income, net of tax	—	—		—		—		—	—		315		—		315
Balance at June 30, 2023	84,746	$	21,187	$	652,166	$	246,392	30,083	$	(511,414)	$	(67,591)	$	(5,034)	$	335,706

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

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	647,814	$	683,430	$	1,963,847	$	2,043,798
Cost of goods and services	398,665		408,806		1,207,392		1,340,857
Gross profit	249,149		274,624		756,455		702,941

Selling, general and administrative expenses	159,810		172,439		469,830		485,460
Intangible asset impairment	—		—		—		100,000
Total operating expenses	159,810		172,439		469,830		585,460

Income from operations	89,339		102,185		286,625		117,481

Other income (expense)
Interest expense	(27,024)		(25,641)		(78,472)		(75,168)
Interest income	769		434		1,830		774
Gain (loss) on sale of buildings	(725)		—		(167)		10,852
Loss from debt extinguishment	(1,700)		—		(1,700)		—
Other, net	350		1,475		1,608		2,375
Total other expense, net	(28,330)		(23,732)		(76,901)		(61,167)

Income before taxes	61,009		78,453		209,724		56,314
Provision for income taxes	19,923		29,248		62,318		20,662






Net income	$	41,086	$	49,205	$	147,406	$	35,652




Basic earnings per common share	$	0.87	$	0.94	$	3.08	$	0.68

Basic weighted-average shares outstanding	47,034		52,304		47,921		52,640




Diluted earnings per common share	$	0.84	$	0.90	$	2.94	$	0.65

Diluted weighted-average shares outstanding	48,851		54,602		50,085		55,087

Dividends paid per common share	$	0.15	$	2.125	$	0.45	$	2.325

Net income	$	41,086	$	49,205	$	147,406	$	35,652
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	(827)		2,309		2,212		14,580
Pension and other post retirement plans	532		747		1,595		2,355
Change in cash flow hedges	(927)		(2,741)		550		(1,788)

Total other comprehensive income (loss), net of taxes	(1,222)		315		4,357		15,147
Comprehensive income, net	$	39,864	$	49,520	$	151,763	$	50,799

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

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	147,406	$	35,652

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

Depreciation and amortization	45,150		50,036
Stock-based compensation	19,726		28,587
Intangible asset impairments	—		100,000
Asset impairment charges - restructuring	22,979		59,118
Provision for losses on accounts receivable	874		689
Amortization of debt discounts and issuance costs	3,169		3,068
Loss from debt extinguishment	1,700		—

Deferred income tax benefit	—		(25,744)
Gain on sale of assets and investments	(1,448)		(10,852)

Change in assets and liabilities:
(Increase) decrease in accounts receivable	(6,051)		6,236
Decrease in inventories	55,939		84,190
(Increase) decrease in prepaid and other assets	(3,351)		1,887
Increase (decrease) in accounts payable, accrued liabilities, income taxes payable and operating lease liabilities	19,454		(36,945)
Other changes, net	2,391		13,081
Net cash provided by operating activities	307,938		309,003

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(47,849)		(20,183)


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


Proceeds from the sale of property, plant and equipment	13,572		11,840

Net cash used in investing activities	(34,277)		(10,911)

CASH FLOWS FROM FINANCING ACTIVITIES:

Dividends paid	(28,770)		(127,372)
Purchase of shares for treasury	(241,501)		(98,350)
Proceeds from long-term debt	179,500		102,558
Payments of long-term debt	(146,727)		(139,244)


Financing costs	(907)		—


Other, net	(307)		(152)
Net cash used in financing activities	(238,712)		(262,560)

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

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended June 30,
	2024		2023















































CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities	(3,707)		(2,799)



Net cash used in discontinued operations	(3,707)		(2,799)

Effect of exchange rate changes on cash and equivalents	(679)		(1,127)

NET INCREASE IN CASH AND EQUIVALENTS	30,563		31,606
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	102,889		120,184
CASH AND EQUIVALENTS AT END OF PERIOD	$	133,452	$	151,790

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

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

Griffon Corporation (the “Company”, “Griffon”, "we" or "us") is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities, as well as in connection with divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

The Company was founded in 1959, is a Delaware corporation headquartered in New York, N.Y. and is listed on the New York Stock Exchange (NYSE:GFF).

Griffon conducts its operations through two reportable segments:

•Home and Building Products ("HBP") conducts its operations through Clopay Corporation ("Clopay"). Founded in 1964, Clopay is the largest manufacturer and marketer of garage doors and rolling steel doors in North America. Residential and commercial sectional garage doors are sold through professional dealers and leading home center retail chains throughout North America under the brands Clopay, Ideal, and Holmes. Rolling steel door and grille products designed for commercial, industrial, institutional, and retail use are sold under the Cornell and Cookson brands.

•Consumer and Professional Products (“CPP”) is a leading global provider of branded consumer and professional tools; residential, industrial and commercial fans; home storage and organization products; and products that enhance indoor and outdoor lifestyles. CPP sells products globally through a portfolio of leading brands including AMES, since 1774, Hunter, since 1886, True Temper, and ClosetMaid.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. As such, they should be read together with Griffon’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business, properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s businesses are seasonal; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.

The Condensed Consolidated Balance Sheet information at September 30, 2023 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2023.

The condensed consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Certain amounts in prior years may have been reclassified to conform to the current year presentation.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include expected loss allowances for credit losses and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, assumptions associated with pension benefit obligations and income or

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

expenses, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, assumptions associated with stock based compensation valuation, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves, the valuation of assets and liabilities of discontinued operations 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.

NOTE 2 – FAIR VALUE MEASUREMENTS

The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit and variable interest rate 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 and variable rate debt is based upon current market rates.

Applicable accounting guidance establishes a fair value hierarchy requiring the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:

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

•Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

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

On June 30, 2024, the fair values of Griffon’s 2028 Senior Notes and Term Loan B facility approximated $940,658 and $459,000, respectively. Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with values of $4,794 at June 30, 2024 are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets and $634 is included in other assets on the Condensed Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

In the normal course of business, Griffon’s operations are exposed to the effects of changes in foreign currency exchange rates related to inventory purchases. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. As of June 30, 2024, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade liabilities payable in U.S. Dollars.

At June 30, 2024, Griffon had $18,500 of Australian Dollar contracts at a weighted average rate of $1.47 which qualified for hedge accounting (Level 2 inputs). These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Accumulated other comprehensive income (loss) ("AOCI") and Prepaid and other current assets, or Accrued liabilities, until settlement. Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS"). AOCI included deferred gains of $424 ($297, net of tax) at June 30, 2024. Upon settlement, gains of $501 and $811 were recorded in COGS during the three months and nine months ended June 30, 2024. All contracts expire in 30 to 90 days.

At June 30, 2024, Griffon had $30,000 of Chinese Yuan contracts at a weighted average rate of $7.10 which qualified for hedge accounting (level 2 inputs). These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in AOCI and Prepaid and other current assets, or Accrued liabilities, until

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

settlement. Upon settlement, gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in COGS. AOCI included deferred losses of $625 ($457, net of tax) at June 30, 2024. Upon settlement, losses of $571 and $1,771 were recorded in COGS during the three months and nine months ended June 30, 2024. All contracts expire in 3 to 274 days.

At June 30, 2024, Griffon had $9,595 of Canadian Dollar contracts at a weighted average rate of $1.36. The contracts, which protect Canadian operations from currency fluctuations for U.S. Dollar based purchases, do not qualify for hedge accounting. For the three and nine months ended June 30, 2024, fair value gains (losses) of $31 and $(34), respectively, were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs). Realized gains of $53 and $79 were recorded in Other income during the three months and nine months ended June 30, 2024 for all settled contracts. All contracts expire in 30 to 449 days.

NOTE 3 – REVENUE

The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting. A contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance and with respect to which payment terms are identified and collectability is probable. Once the Company has entered into a contract or purchase order, it is evaluated to identify performance obligations. For each performance obligation, revenue is recognized when control of the promised products is transferred to the customer, or services are satisfied under the contract or purchase order, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price).

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

For a complete explanation of Griffon’s revenue accounting policies, this note should be read in conjunction with Griffon’s Annual Report on Form 10-K for the year ended September 30, 2023. See Note 13 - Business Segments for revenue from contracts with customers disaggregated by end markets, segments and geographic location.

NOTE 4 – ACQUISITIONS

Griffon continually evaluates potential acquisitions that strategically fit within its portfolio or expand its portfolio into new product lines or adjacent markets. Operating results of business acquisitions are included in Griffon’s consolidated financial statements from the date of acquisition.

On July 1, 2024, Griffon announced that its subsidiary, The AMES Companies, Inc., ("AMES") acquired substantially all of the assets of Pope, a leading Australian provider of residential watering products for approximately AUD 22,000 (approximately $14,600 USD). This is CPP's seventh acquisition in Australia since 2013, and further expands AMES’s product portfolio in the Australian market. Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out or average cost) or net realizable value.

The following table details the components of inventory:


	At June 30, 2024		At September 30, 2023
Raw materials and supplies	$	91,620	$	127,342
Work in process	14,876		12,070
Finished goods	324,212		367,718
Total	$	430,708	$	507,130

In connection with the Company's restructuring activities described in Note 17, Restructuring Charges, during the nine months ended June 30, 2024, CPP recorded an impairment charge of $22,979 to adjust inventory to its net realizable value.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

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


	At June 30, 2024		At September 30, 2023
Land, building and building improvements	$	144,934	$	169,923
Machinery and equipment	466,163		447,972
Leasehold improvements	35,413		33,740
	646,510		651,635
Accumulated depreciation	(371,530)		(372,417)
Total	$	274,980	$	279,218

Depreciation and amortization expense for property, plant and equipment was $9,389 and $10,000 for the quarters ended June 30, 2024 and 2023, respectively, and $28,155 and $33,090 for the nine months ended June 30, 2024 and 2023, respectively. Depreciation included in Selling, general and administrative ("SG&A") expenses was $4,124 and $4,404 for the quarters ended June 30, 2024 and 2023, respectively, and $12,218 and $13,289 for the nine months ended June 30, 2024 and 2023, respectively. Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

In connection with the expansion of CPP's global sourcing strategy announced on May 3, 2023, certain owned manufacturing locations which ceased operations have met the criteria to be classified as held for sale as of June 30, 2024. The net book value of these properties as of June 30, 2024 totaled $14,747.

Except as described in Note 17, Restructuring charges, no event or indicator of impairment occurred during the nine months ended June 30, 2024 which would require additional impairment testing of property, plant and equipment.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 7 – CREDIT LOSSES

The Company is exposed to credit losses primarily through sales of products and services. Trade receivables are recorded at their stated amount, less allowances for discounts, credit losses and returns. The Company’s expected loss allowance methodology for trade receivables is primarily based on the aging method of the accounts receivables balances and the financial condition of its customers. The allowances represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency), discounts related to early payment of accounts receivables by customers and estimates for returns. The allowance for credit losses includes amounts for certain customers in which a risk of default has been specifically identified, as well as an amount for customer defaults, based on a formula, when it is determined the risk of some default is probable and estimable, but cannot yet be associated with specific customers. Allowance for discounts and returns are recorded as a reduction of revenue and the provision related to the allowance for credit losses is recorded in SG&A expenses.

The Company also considers current and expected future economic and market conditions when determining any estimate of credit losses. Generally, estimates used to determine the allowance are based on assessment of anticipated payment and all other historical, current and future information that is reasonably available. All accounts receivable amounts are expected to be collected in less than one year.

Based on a review of the Company's policies and procedures across all segments, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions, Griffon determined that its method to determine credit losses and the amount of its allowances for bad debts is in accordance with the accounting guidance for credit losses on financial instruments, including trade receivables, in all material respects.

The following table provides a roll-forward of the allowance for doubtful accounts, including provisions for expected credit losses that is deducted from gross accounts receivable to present the net amount expected to be collected:


	Nine months ended June 30,
	2024		2023
Beginning Balance, October 1	$	11,264	$	12,137

Provision for expected credit losses	874		2,732
Amounts written off charged against the allowance	(1,155)		(1,916)
Other, primarily foreign currency translation	26		(437)
Ending Balance, June 30	$	11,009	$	12,516

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 8 – GOODWILL AND OTHER INTANGIBLES

Indicators of impairment were not present for any of Griffon's reporting units during the nine months ended June 30, 2024. The following table provides a summary of the carrying value of goodwill by segment as of September 30, 2023 and June 30, 2024, as follows:



Home and Building Products	$	191,253
Consumer and Professional Products	136,611


Total	$	327,864

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


	At June 30, 2024					At September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Average Life (Years)	Gross Carrying Amount		Accumulated Amortization
Customer relationships & other	$	447,339	$	129,841	23	$	443,164	$	113,057
Technology and patents	16,890		4,705		13	15,504		3,815
Total amortizable intangible assets	464,229		134,546			458,668		116,872
Trademarks	290,184		—			293,447		—
Total intangible assets	$	754,413	$	134,546		$	752,115	$	116,872

The gross carrying amount of intangible assets was impacted by $624 related to favorable foreign currency translation.

Amortization expense for intangible assets was $5,858 and $5,669 for the quarters ended June 30, 2024 and 2023, respectively, and $16,995 and $16,946 for the nine months ended June 30, 2024 and 2023, respectively. Amortization expense for the remainder of 2024 and the next five fiscal years and thereafter, based on current intangible balances and classifications, is estimated as follows: remaining in 2024 - $5,179; 2025 - $22,174; 2026 - $22,174; 2027 - $22,174; 2028 - $22,174; 2029 - $21,353; thereafter $214,455.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 9 – INCOME TAXES

During the quarter ended June 30, 2024, the Company recognized a tax provision of $19,923 on income before taxes of $61,009, compared to a tax provision of $29,248 on income before taxes of $78,453 in the prior year quarter. The current year quarter results included restructuring charges of $18,688 ($13,991, net of tax); strategic review costs - retention and other of $1,870 ($1,390, net of tax); loss on debt extinguishment of $1,700 ($1,292, net of tax); loss on sale of buildings of $725 ($520, net of tax); and discrete and certain other tax provisions, net, that affect comparability of $2,247. The prior year quarter results included strategic review costs - retention and other of $5,812 ($4,378, net of tax); restructuring charges of $3,862 ($2,831, net of tax); special dividend Employee Stock Ownership Plan ("ESOP") charges of $9,042 ($6,936, net of tax); proxy expenses of $568 ($435, net of tax); and discrete and certain other tax provisions, net, that affect comparability of $6,519. Excluding these items, the effective tax rates for the quarters ended June 30, 2024 and 2023 were 27.9% and 28.1%, respectively.

During the nine months ended June 30, 2024, the Company recognized a tax provision of $62,318 on income before taxes of $209,724, compared to a tax provision of $20,662 on income before taxes of $56,314 in the comparable prior year period. The nine month period ended June 30, 2024 included restructuring charges of $33,489 ($24,973, net of tax); strategic review - retention and other of $9,204 ($6,887, net of tax); loss on debt extinguishment of $1,700 ($1,292, net of tax); loss on sale of buildings of $167 ($105, net of tax); and discrete and certain other tax provisions, net, that affect comparability of $2,640. The nine month period ended June 30, 2023 included a gain on the sale of a building of $10,852 ($8,323, net of tax); strategic review costs - retention and other of $20,234 ($15,258, net of tax); restructuring charges of $82,196 ($61,360, net of tax); special dividend ESOP charges of $9,042 ($6,936, net of tax), intangible asset impairment charges of $100,000 ($74,256, net of tax); proxy expenses of $2,685 ($2,059, net of tax); and discrete tax and certain other tax benefits, net, that affect comparability of $2,537. Excluding these items, the effective tax rates for the nine months ended June 30, 2024 and 2023 were 27.9% and 28.9%, respectively.

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

NOTE 10 – LONG-TERM DEBT


		At June 30, 2024										At September 30, 2023
		Outstanding Balance		Original Issuer Premium/(Discount)		Capitalized Fees & Expenses		Balance Sheet		Coupon Interest Rate			Outstanding Balance		Original Issuer Premium/(Discount)		Capitalized Fees & Expenses		Balance Sheet		Coupon Interest Rate
Senior notes due 2028	(a)	$	974,775	$	181	(7,405)		$	967,551	5.75	%		$	974,775	$	218	$	(8,920)	$	966,073	5.75	%
Term Loan B due 2029	(b)	459,000		(633)		(5,733)		452,634		Variable			463,000		(922)		(7,039)		455,039		Variable
Revolver due 2028	(b)	90,000		—		(3,046)		86,954		Variable			50,445		—		(3,606)		46,839		Variable

Non US lines of credit	(d)	—		—		(6)		(6)		Variable			—		—		(3)		(3)		Variable

Other long term debt	(e)	237		—		(21)		216		Variable			1,592		—		(11)		1,581		Variable
Totals		1,524,012		(452)		(16,211)		1,507,349					1,489,812		(704)		(19,579)		1,469,529
less: Current portion		(8,138)		—		—		(8,138)					(9,625)		—		—		(9,625)
Long-term debt		$	1,515,874	$	(452)	$	(16,211)	$	1,499,211				$	1,480,187	$	(704)	$	(19,579)	$	1,459,904


		Three Months Ended June 30, 2024										Three Months Ended June 30, 2023
		Effective Interest Rate		Cash Interest		Amort. Debt (Premium)/Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense		Effective Interest Rate		Cash Interest		Amort. Debt (Premium)/Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense
Senior notes due 2028	(a)	6.0	%	$	14,013	$	(12)	$	505	$	14,506	6.0	%	$	14,013	$	(12)	$	505	$	14,506
Term Loan B due 2029	(b)	8.2	%	9,070		43		331		9,444