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

	
 	
FORM 8-K	

	
 	
CURRENT REPORT	
PURSUANT TO SECTION 13 OR 15(d) OF	
THE SECURITIES EXCHANGE ACT OF 1934	
 	
Date of Report (Date of earliest event reported): June 24, 2011	
 	
GRIFFON CORPORATION	

	
(Exact Name of Registrant as Specified in Charter)	

Delaware	 	1-06620	 	11-1893410	

	 	

	 	

	
(State or Other Jurisdiction of
Incorporation or Organization)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification No.)	

712 Fifth Avenue, 18th Floor
New York, New York	 	10019	

	 	

	
(Address of Principal Executive Offices)	 	(Zip Code)	

(212) 957-5000	

	
(Registrant’s telephone number, including area code)	
 	
Not Applicable	
(Former Name or Former Address, if Changed Since Last Report)	

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):	
 	 	
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 	 	
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)	
 	 	
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 	 	
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

Item 8.01. Other Events
Griffon Corporation (“Griffon”) is filing this Current Report on Form 8-K to provide supplemental guarantor financial information pursuant to Rule 3-10 of Regulation S-X regarding certain of Griffon’s subsidiaries that guarantee Griffon’s 7-1/8% Senior Notes due 2018 (collectively, the “Guarantors”).

Griffon is disclosing condensed consolidating financial information of the Guarantors in a new footnote to certain of its previously issued financial statements. Griffon is updating the historical financial statements contained in its Annual Report on Form 10-K for the year ended September 30, 2010, originally filed with the Securities and Exchange Commission (“SEC”) on November 18, 2010, to (i) include Note 22 in the Notes to Consolidated Financial Statements for the periods disclosed within such report, and (ii) conform the pro forma financial information contained in Note 2 in the Notes to Consolidated Financial Statements to the presentation of such pro forma financial information contained in Griffon’s Current Report on Form 8-K/A (Amendment No. 3), filed with the SEC on April 22, 2011 (the “Form 8-K/A”). Griffon is also updating the historical financial statements contained in its Quarterly Report on Form 10-Q for the period ended March 31, 2011, originally filed with the SEC on May 5, 2011, to (i) include Note 21 in the Notes to Condensed Consolidated Financial Statements for the periods disclosed within the report, and (ii) conform the pro forma financial information contained in Note 3 in the Notes to Condensed Consolidated Financial Statements to the presentation of such pro forma financial information contained in the Form 8-K/A.

These updated historical financial statements are filed as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K and are incorporated herein by reference. The revised historical financial statements should be read in conjunction with other information that Griffon has filed with the SEC.

Item 9.01. Financial Statements and Exhibits
 	 	 	
 	(d)	Exhibits	

Exhibit
Number	 	Exhibit Title 	

	 	

	
23.1	 	Consent of Grant Thornton, LLP	
 	 	 	
99.1	 	Consolidated Financial Statements and Notes thereto updated to disclose condensed consolidating guarantor financial information (which replaces and supersedes Part II, Item 8 of the Form 10-K filed with the SEC on November 18, 2010).	
 	 	 	
99.2	 	Consolidated Financial Statements and Notes thereto updated to disclose condensed consolidating guarantor financial information (which replaces and supersedes Part I, Item 1 of the Form 10-Q filed with the SEC on May 5, 2011).	

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 	 	 	 	 	
Dated: June 24, 2011	 	GRIFFON CORPORATION.	
 	 	 	 	
 	 	By:	 /s/ Douglas J. Wetmore	

	
 	 	 	Name:	Douglas J. Wetmore	
 	 	 	Title:	Executive Vice President and
Chief Financial Officer	

EXHIBIT INDEX
 	 	 	
Exhibit
Number	 	Exhibit Title 	

	 	

	
23.1	 	Consent of Grant Thornton, LLP	
 	 	 	
99.1	 	Consolidated Financial Statements and Notes thereto updated to disclose condensed consolidating guarantor financial information (which replaces and supersedes Part II, Item 8 of the Form 10-K filed with the SEC on November 18, 2010).	
 	 	 	
99.2	 	Consolidated Financial Statements and Notes thereto updated to disclose condensed consolidating guarantor financial information (which replaces and supersedes Part I, Item 1 of the Form 10-Q filed with the SEC on May 5, 2011).	

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated November 17, 2010, except for Note 22 as to which the date is June 24, 2011, with respect to the consolidated financial statements, financial statement schedules and internal control over financial reporting included in the Current Report on Form 8-K filed on June 24, 2011. We hereby consent to the inclusion of said reports in the Registration Statements of Griffon Corporation on Form S-3 (File No. 333-158273, effective May 18, 2009), Form S-4 (File No. 333-158274, effective May 18, 2009) and Forms S-8 (File No. 33-39090, effective February 22, 1991, File No. 33-62966, effective May 19, 1993, File No. 33-52319, effective February 18, 1994, File No. 333-21503, effective February 10, 1997, File No. 333-62319, effective August 26, 1998, File No. 333-84409, effective August 3, 1999, File No. 333-67760, effective August 17, 2001, File No. 333-88422, effective May 16, 2002, File No. 333-102742, effective January 27, 2003, File No. 333-131737, effective February 10, 2006, File No. 333-133833, effective May 5, 2006, File No. 333-149811, effective March 19, 2008, File No. 333-157190, effective February 9, 2009 and File No. 333-172162, effective February 10, 2011).

 
/s/ Grant Thornton LLP
 
New York, New York
June 24, 2011

EXHIBIT 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
G RIFFON  C ORPORATION
We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2010 and 2009, 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, 2010. Our audits of the basic financial statements included the financial statement schedules included on pages 54 to 57 of the consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
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, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2010 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As described in the notes to the consolidated financial statements, the Company adopted new accounting guidance related to the accounting for business combinations (Note 1) and convertible debt (Note 3) effective October 1, 2009.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Griffon Corporation and subsidiaries’ internal control over financial reporting as of September 30, 2010 based on criteria established in  Internal Control—Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 17, 2010 expressed an unqualified opinion thereon.
/s/Grant Thornton LLP
New York, New York
November 17, 2010 (except for Note 22,
as to which the date is June 24, 2011)
1

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 	 	 	 	 	
 	 	At September 30,
2010	 	At September 30,
2009*	
CURRENT ASSETS	 	 	 	 	
Cash and equivalents	 	 	$	 	169,802	 	 	 	$	 	320,833	 	
Accounts receivable, net of allowances of $6,581 and $4,457	 	 	 	252,029	 	 	 	 	164,619	 	
Contract costs and recognized income not yet billed, net of progress payments of $1,423 and $14,592	 	 	 	63,155	 	 	 	 	75,536	 	
Inventories, net	 	 	 	268,801	 	 	 	 	139,170	 	
Prepaid and other current assets	 	 	 	55,782	 	 	 	 	39,261	 	
Assets of discontinued operations	 	 	 	1,079	 	 	 	 	1,576	 	
 	 	 	 	 	
Total Current Assets	 	 	 	810,648	 	 	 	 	740,995	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	 	314,926	 	 	 	 	236,019	 	
GOODWILL	 	 	 	357,221	 	 	 	 	97,657	 	
INTANGIBLE ASSETS, net	 	 	 	233,011	 	 	 	 	34,211	 	
OTHER ASSETS	 	 	 	27,907	 	 	 	 	29,132	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	 	5,803	 	 	 	 	5,877	 	
 	 	 	 	 	
Total Assets	 	 	$	 	1,749,516	 	 	 	$	 	1,143,891	 	
 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	
Notes payable and current portion of long-term debt, net of debt discount of $0 and $2,820	 	 	$	 	20,901	 	 	 	$	 	78,590	 	
Accounts payable	 	 	 	185,165	 	 	 	 	125,027	 	
Accrued liabilities	 	 	 	124,700	 	 	 	 	61,120	 	
Liabilities of discontinued operations	 	 	 	4,289	 	 	 	 	4,932	 	
 	 	 	 	 	
Total Current Liabilities	 	 	 	335,055	 	 	 	 	269,669	 	
LONG-TERM DEBT, net of debt discount of $30,650 and $0	 	 	 	503,935	 	 	 	 	98,394	 	
OTHER LIABILITIES	 	 	 	191,365	 	 	 	 	78,837	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	 	8,446	 	 	 	 	8,784	 	
 	 	 	 	 	
Total Liabilities	 	 	 	1,038,801	 	 	 	 	455,684	 	
 	 	 	 	 	
COMMITMENTS AND CONTINGENCIES	 	 	 	 	
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 72,385 shares and 72,040 shares	 	 	 	18,096	 	 	 	 	18,010	 	
Capital in excess of par value	 	 	 	461,504	 	 	 	 	438,843	 	
Retained earnings	 	 	 	431,584	 	 	 	 	421,992	 	
Treasury shares, at cost, 12,466 common shares for 2010 and 2009	 	 	 	(213,560	)	 	 	 	 	(213,560	)	 	
Accumulated other comprehensive income	 	 	 	17,582	 	 	 	 	28,170	 	
Deferred compensation	 	 	 	(4,491	)	 	 	 	 	(5,248	)	 	
 	 	 	 	 	
Total Shareholders’ Equity	 	 	 	710,715	 	 	 	 	688,207	 	
 	 	 	 	 	
Total Liabilities and Shareholders’ Equity	 	 	$	 	1,749,516	 	 	 	$	 	1,143,891	 	
 	 	 	 	 	
* See Adoption of New Accounting Pronouncements footnote.
The accompanying notes to consolidated financial statements are an integral part of these statements.
2

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 	 	 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009*	 	2008*	 	
Revenue	 	 	$	 	1,293,996	 	 	 	$	 	1,194,050	 	 	 	 	$	 	1,269,305	 	 	
Cost of goods and services	 	 	 	1,005,692	 	 	 	 	936,927	 	 	 	 	 	996,308	 	 	
 	 	 	 	 	 	 	 	
Gross profit	 	 	 	288,304	 	 	 	 	257,123	 	 	 	 	 	272,997	 	 	
Selling, general and administrative expenses	 	 	 	261,403	 	 	 	 	230,736	 	 	 	 	 	245,430	 	 	
Impairment of goodwill	 	 	 	—	 	 	 	 	—	 	 	 	 	 	12,913	 	 	
Restructuring and other related charges	 	 	 	4,180	 	 	 	 	1,240	 	 	 	 	 	2,610	 	 	
 	 	 	 	 	 	 	 	
Total operating expenses	 	 	 	265,583	 	 	 	 	231,976	 	 	 	 	 	260,953	 	 	
Income from operations	 	 	 	22,721	 	 	 	 	25,147	 	 	 	 	 	12,044	 	 	
Other income (expense)	 	 	 	 	 	 	 	
Interest expense	 	 	 	(12,322	)	 	 	 	 	(13,091	)	 	 	 	 	 	(16,909	)	 	 	
Interest income	 	 	 	409	 	 	 	 	1,539	 	 	 	 	 	1,970	 	 	
Gain (loss) from debt extinguishment, net	 	 	 	(1,117	)	 	 	 	 	4,488	 	 	 	 	 	—	 	 	 	
Other, net	 	 	 	4,121	 	 	 	 	1,522	 	 	 	 	 	2,713	 	 	
 	 	 	 	 	 	 	 	
Total other income (expense)	 	 	 	(8,909	)	 	 	 	 	(5,542	)	 	 	 	 	 	(12,226	)	 	 	
 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	 	13,812	 	 	 	 	19,605	 	 	 	 	 	(182	)	 	 	
Provision for income taxes	 	 	 	4,308	 	 	 	 	1,687	 	 	 	 	 	2,651	 	 	
 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	 	9,504	 	 	 	 	17,918	 	 	 	 	 	(2,833	)	 	 	
Discontinued operations:	 	 	 	 	 	 	 	
Income (loss) from operations of the discontinued Installation Services business	 	 	 	142	 	 	 	 	1,230	 	 	 	 	 	(62,447	)	 	 	
Provision (benefit) for income taxes	 	 	 	54	 	 	 	 	440	 	 	 	 	 	(21,856	)	 	 	
 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations	 	 	 	88	 	 	 	 	790	 	 	 	 	 	(40,591	)	 	 	
 	 	 	 	 	 	 	 	
Net income (loss)	 	 	$	 	9,592	 	 	 	$	 	18,708	 	 	 	 	$	 	(43,424	)	 	 	
 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	$	 	0.16	 	 	 	$	 	0.31	 	 	 	 	$	 	(0.09	)	 	 	
Income (loss) from discontinued operations	 	 	 	0.00	 	 	 	 	0.01	 	 	 	 	 	(1.24	)	 	 	
Net income (loss)	 	 	 	0.16	 	 	 	 	0.32	 	 	 	 	 	(1.33	)	 	 	
Weighted-average shares outstanding	 	 	 	58,974	 	 	 	 	58,699	 	 	 	 	 	32,667	 	 	
 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	$	 	0.16	 	 	 	$	 	0.30	 	 	 	 	$	 	(0.09	)	 	 	
Income (loss) from discontinued operations	 	 	 	0.00	 	 	 	 	0.01	 	 	 	 	 	(1.24	)	 	 	
Net income (loss)	 	 	 	0.16	 	 	 	 	0.32	 	 	 	 	 	(1.32	)	 	 	
Weighted-average shares outstanding	 	 	 	59,993	 	 	 	 	59,002	 	 	 	 	 	32,836	 	 	
 	 	 	 	 	 	 	 	
* See Adoption of New Accounting Pronouncements footnote.
The accompanying notes to consolidated financial statements are an integral part of these statements.
3

GRIFFON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 	 	 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009*	 	2008*	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	
Net income (loss)	 	 	$	 	9,592	 	 	 	$	 	18,708	 	 	 	$	 	(43,424	)	 	 	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	 	 	 	 	 	 	 	
Loss (income) from discontinued operations	 	 	 	(88	)	 	 	 	 	(790	)	 	 	 	 	40,591	 	 	
Depreciation and amortization	 	 	 	40,442	 	 	 	 	42,346	 	 	 	 	42,923	 	 	
Impairment of goodwill	 	 	 	—	 	 	 	 	—	 	 	 	 	12,913	 	 	
Stock-based compensation	 	 	 	5,778	 	 	 	 	4,145	 	 	 	 	3,327	 	 	
Provision for losses on account receivable	 	 	 	2,431	 	 	 	 	628	 	 	 	 	1,089	 	 	
Amortization/write-off of deferred financing costs and debt discounts	 	 	 	5,059	 	 	 	 	5,209	 	 	 	 	5,966	 	 	
(Gain) loss from debt extinguishment, net	 	 	 	1,117	 	 	 	 	(4,488	)	 	 	 	 	—	 	 	
Deferred income taxes	 	 	 	(3,666	)	 	 	 	 	(3,144	)	 	 	 	 	(1,431	)	 	 	
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	 	 	 	(25,481	)	 	 	 	 	(6,690	)	 	 	 	 	13,585	 	 	
(Increase) decrease in inventories	 	 	 	(10,611	)	 	 	 	 	28,498	 	 	 	 	(23,500	)	 	 	
(Increase) decrease in prepaid and other assets	 	 	 	(14,342	)	 	 	 	 	11,130	 	 	 	 	(12,524	)	 	 	
Increase (decrease) in accounts payable, accrued liabilities and income taxes payable	 	 	 	72,218	 	 	 	 	(8,627	)	 	 	 	 	53,095	 	 	
Other changes, net	 	 	 	676	 	 	 	 	(2,825	)	 	 	 	 	(6,561	)	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	 	 	83,125	 	 	 	 	84,100	 	 	 	 	86,049	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	 	(40,477	)	 	 	 	 	(32,697	)	 	 	 	 	(53,116	)	 	 	
Acquired business, net of cash acquired	 	 	 	(542,000	)	 	 	 	 	—	 	 	 	 	(1,829	)	 	 	
Proceeds from sale of assets	 	 	 	(1,666	)	 	 	 	 	200	 	 	 	 	1,000	 	 	
(Increase) decrease in equipment lease deposits	 	 	 	—	 	 	 	 	(336	)	 	 	 	 	4,593	 	 	
 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	 	(584,143	)	 	 	 	 	(32,833	)	 	 	 	 	(49,352	)	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	 	 	 	2,823	 	 	 	 	7,257	 	 	 	 	241,344	 	 	
Purchase of shares for treasury	 	 	 	—	 	 	 	 	—	 	 	 	 	(579	)	 	 	
Proceeds from issuance of long-term debt	 	 	 	543,875	 	 	 	 	11,431	 	 	 	 	89,235	 	 	
Payments of long-term debt	 	 	 	(176,802	)	 	 	 	 	(56,676	)	 	 	 	 	(87,785	)	 	 	
Decrease in short-term borrowings	 	 	 	—	 	 	 	 	(866	)	 	 	 	 	(924	)	 	 	
Financing costs	 	 	 	(17,455	)	 	 	 	 	(597	)	 	 	 	 	(10,027	)	 	 	
Purchase of ESOP shares	 	 	 	—	 	 	 	 	(4,370	)	 	 	 	 	—	 	 	
Exercise of stock options	 	 	 	343	 	 	 	 	—	 	 	 	 	—	 	 	
Tax benefit from vesting of restricted stock	 	 	 	325	 	 	 	 	217	 	 	 	 	3	 	 	
Other, net	 	 	 	184	 	 	 	 	402	 	 	 	 	139	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	 	353,293	 	 	 	 	(43,202	)	 	 	 	 	231,406	 	 	
CASH FLOWS FROM DISCONTINUED OPERATIONS:	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	 	(638	)	 	 	 	 	(1,305	)	 	 	 	 	(5,410	)	 	 	
Net cash provided by investing activities	 	 	 	—	 	 	 	 	—	 	 	 	 	5,496	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) discontinued operations	 	 	 	(638	)	 	 	 	 	(1,305	)	 	 	 	 	86	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	 	(2,668	)	 	 	 	 	2,152	 	 	 	 	(1,015	)	 	 	
 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	 	(151,031	)	 	 	 	 	8,912	 	 	 	 	267,174	 	 	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	 	320,833	 	 	 	 	311,921	 	 	 	 	44,747	 	 	
 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	 	$	 	169,802	 	 	 	$	 	320,833	 	 	 	$	 	311,921	 	 	
 	 	 	 	 	 	 	 	
Supplemental Disclosure of Cash Flow Information:	 	 	 	 	 	 	 	
Cash paid for interest	 	 	$	 	6,489	 	 	 	$	 	7,065	 	 	 	$	 	8,303	 	 	
Cash paid for taxes	 	 	 	4,643	 	 	 	 	7,602	 	 	 	 	6,207	 	 	
Stock subscriptions receivable pursuant to rights offering	 	 	 	—	 	 	 	 	—	 	 	 	 	5,274	 	 	
* See Adoption of New Accounting Pronouncements footnote.
The accompanying notes to consolidated financial statements are an integral part of these statements.
4

GRIFFON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	COMMON STOCK	 	CAPITAL IN
EXCESS OF
PAR VALUE	 	RETAINED
EARNINGS	 	TREASURY SHARES	 	ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)	 	DEFERRED
ESOP
COMPENSATION	 	Total	 	COMPREHENSIVE
INCOME
(LOSS)	 	
 	 	SHARES	 	PAR VALUE	 	 	 	 	 	SHARES	 	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2007*	 	 	 	42,586	 	 	 	$	 	10,647	 	 	 	$	 	198,314	 	 	 	$	 	451,377	 	 	 	 	12,399	 	 	 	$	 	(212,731	)	 	 	 	$	 	29,522	 	 	 	$	 	(1,619	)	 	 	 	$	 	475,510	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(43,424	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(43,424	)	 	 	 	 	(43,424	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax benefit from the exercise of stock options	 	 	 	—	 	 	 	 	—	 	 	 	 	3	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of deferred compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(221	)	 	 	 	 	(221	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock acquired	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	41	 	 	 	 	(579	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(579	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted stock awards granted, net	 	 	 	588	 	 	 	 	147	 	 	 	 	(147	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP distribution of common stock	 	 	 	—	 	 	 	 	—	 	 	 	 	(71	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(71	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	3,236	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	91	 	 	 	 	3,327	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock pursuant to rights offering, net of financing costs	 	 	 	28,393	 	 	 	 	7,098	 	 	 	 	232,409	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	239,507	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Translation of foreign financial statements	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(6,061	)	 	 	 	 	—	 	 	 	 	(6,061	)	 	 	 	 	(6,061	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adoption of uncertain tax position guidance	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(4,669	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(4,669	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension OCI amortization, net of tax	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	2,008	 	 	 	 	—	 	 	 	 	2,008	 	 	 	 	2,008	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2008*	 	 	 	71,567	 	 	 	 	17,892	 	 	 	 	433,744	 	 	 	 	403,284	 	 	 	 	12,440	 	 	 	 	(213,310	)	 	 	 	 	25,469	 	 	 	 	(1,749	)	 	 	 	 	665,330	 	 	 	 	(47,477	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	18,708	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	18,708	 	 	 	 	18,708	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock issued for options exercised	 	 	 	33	 	 	 	 	7	 	 	 	 	(7	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax benefit from the exercise of stock options	 	 	 	—	 	 	 	 	—	 	 	 	 	217	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	217	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of deferred compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	818	 	 	 	 	818	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock acquired	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	26	 	 	 	 	(250	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(250	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted stock awards granted, net	 	 	 	1,209	 	 	 	 	302	 	 	 	 	(1,034	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(732	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP purchase of common stock	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(4,370	)	 	 	 	 	(4,370	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP distribution of common stock	 	 	 	—	 	 	 	 	—	 	 	 	 	(22	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(22	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	4,092	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	53	 	 	 	 	4,145	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock pursuant to rights offering, net of financing costs	 	 	 	854	 	 	 	 	214	 	 	 	 	1,711	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	1,925	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of convertible debt, net	 	 	 	—	 	 	 	 	—	 	 	 	 	(263	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(263	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Translation of foreign financial statements	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	11,836	 	 	 	 	—	 	 	 	 	11,836	 	 	 	 	11,836	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension OCI amortization, net of tax	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(9,135	)	 	 	 	 	—	 	 	 	 	(9,135	)	 	 	 	 	(9,135	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2009*	 	 	 	73,663	 	 	 	 	18,415	 	 	 	 	438,438	 	 	 	 	421,992	 	 	 	 	12,466	 	 	 	 	(213,560	)	 	 	 	 	28,170	 	 	 	 	(5,248	)	 	 	 	 	688,207	 	 	 	 	21,409	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	9,592	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	9,592	 	 	 	 	9,592	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock issued for options exercised	 	 	 	54	 	 	 	 	13	 	 	 	 	329	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	342	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
5

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	COMMON STOCK	 	CAPITAL IN
EXCESS OF
PAR VALUE	 	RETAINED
EARNINGS	 	TREASURY SHARES	 	ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)	 	DEFERRED
ESOP
COMPENSATION	 	Total	 	COMPREHENSIVE
INCOME
(LOSS)	 	
 	 	SHARES	 	PAR VALUE	 	 	 	 	 	SHARES	 	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax benefit from the exercise of stock options	 	 	 	—	 	 	 	 	—	 	 	 	 	325	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	325	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of deferred compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	744	 	 	 	 	744	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted stock awards granted, net	 	 	 	624	 	 	 	 	157	 	 	 	 	(627	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(470	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of convertible debt, net	 	 	 	—	 	 	 	 	—	 	 	 	 	13,694	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	13,694	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP distribution of common stock	 	 	 	—	 	 	 	 	—	 	 	 	 	266	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	266	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	 	—	 	 	 	 	—	 	 	 	 	5,765	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	13	 	 	 	 	5,778	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of common stock pursuant to acquisition	 	 	 	239	 	 	 	 	60	 	 	 	 	2,765	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	2,825	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Translation of foreign financial statements	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(9,677	)	 	 	 	 	—	 	 	 	 	(9,677	)	 	 	 	 	(9,677	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension OCI amortization, net of tax	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(911	)	 	 	 	 	—	 	 	 	 	(911	)	 	 	 	 	(911	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2010	 	 	 	74,580	 	 	 	$	 	18,645	 	 	 	$	 	460,955	 	 	 	$	 	431,584	 	 	 	 	12,466	 	 	 	$	 	(213,560	)	 	 	 	$	 	17,582	 	 	 	$	 	(4,491)	 	 	 	$	 	710,715	 	 	 	 	(996	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
* See Adoption of New Accounting Pronouncements footnote.
The accompanying notes to consolidated financial statements are an integral part of these statements.
6

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars 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 also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital to further diversify itself.
Headquartered in New York, N.Y., the Company was incorporated in New York in 1959, and was reincorporated in Delaware in 1970.
Griffon currently conducts its operations through three businesses: Telephonics Corporation, Home & Building Products and Clopay Plastic Products Company.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Home & Building Products consists of two companies.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Clopay Building Products Company (“BPC”) is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Ames True Temper, Inc. (“ATT”), which was 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 2010 results of operations were included in Griffon’s results.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Clopay Plastic Products Company (“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.	
Consolidation
The consolidated financial statements include the accounts of Griffon Corporation and all subsidiaries (the “Company” or “Griffon”). 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.
Discontinued Operations—Installation Services
As a result of the downturn in the residential housing market, in 2008, Griffon exited substantially all of the operating activities of its Installation Services segment; this segment
7

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

sold, installed and serviced garage doors, garage door openers, fireplaces, floor coverings, cabinetry and a range of related building products primarily for the new residential housing market. Operating results of substantially the entire Installation Services segment have been reported as discontinued operations in the Consolidated Statements of Operations for all periods presented herein, and the 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.
The prior year Consolidated Balance Sheet and the prior years Consolidated Statements of Operations, Cash Flows, Shareholders’ Equity and Comprehensive Income reflect the adoption of the new accounting guidance for convertible debt (see Adoption of New Accounting Pronouncements footnote).
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, 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 $32,765 and $39,007 at September 30, 2010 and 2009, respectively. The majority of these amounts are covered by government insurance or backed by government securities. Griffon evaluates the financial stability of all institutions and funds that hold its cash and equivalents.
Fair value of financial instruments
In September 2006, the Financial Accounting Standards Board (“FASB”) issued new guidance, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. For financial assets and liabilities, this statement, which was effective for Griffon on October 1, 2008, did not require any new fair value measurements. The adoption of this new guidance did not have a material impact on Griffon’s consolidated financial statements. In February
8

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

2008, the FASB delayed the effective date of the new guidance for Griffon to October 1, 2009, for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
In February 2007, the FASB issued new guidance to provide companies the option to report selected financial assets and liabilities at fair value. Upon adoption of this new guidance on October 1, 2008, Griffon did not elect the fair value option to report its financial assets and liabilities at fair value. Accordingly, the adoption of this new guidance did not have an impact on Griffon’s financial position or results of operations.
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.
Griffon’s 2017 and 2023 4% convertible notes’ fair value was approximately $106,000 and $500 on September 30, 2010, respectively, which were based upon quoted market prices (level 1 inputs).
Items Measured at Fair Value on a Recurring Basis
Insurance contracts with a value of $4,621 and trading securities with a value of $4,133 at September 30, 2010, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 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 an entity’s functional currency are remeasured into the functional currency using end of period exchange rates, or historical rates where applicable to certain balances. Gains and losses related to these 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 is 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 volume, 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
9

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

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 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 Home & Building Products 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. Telephonics sells its products to domestic and international government agencies, as well as commercial customers. 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.
10

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

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 Selling, general and administrative expenses.
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 2010 was $11,827.
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 primarily produces fabricated materials used by customers in the production of their products and these materials are produced against orders by those customers. Home & Building Products produces doors and non-powered lawn and garden tools in response to orders from customers of retailers and dealers.
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 $38,456, $40,919 and $42,061 for the years ended September 30, 2010, 2009 and 2008, 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 $303, $331 and $511 for the years ended September 30, 2010, 2009 and 2008, respectively. The original cost
11

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

of fully-depreciated property, plant and equipment remaining in use at September 30, 2010 was approximately $155,000.
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 performs its annual impairment testing of goodwill in September. The performance of the test involves a two-step process. The first step involves comparing the fair value 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% terminal value to which discount rates between 11.75% and 12.50% were applied to calculate each unit’s fair value. To substantiate the 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.
In 2008, based on the results of the annual goodwill impairment testing, all of the goodwill of BPC was written down due to impairment resulting in a charge of $12,900. In 2010 and 2009, all reporting units passed step one, and therefore step two was not performed.
Similar to Goodwill, Griffon tests indefinite-lived intangible assets at least annually unless 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 2010, 2009 or 2008.
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
12

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

undiscounted future cash flows resulting from the use of the asset and its eventual disposition.
The goodwill impairment in 2008 was deemed an indicator of potential impairment of the definite-lived long-lived assets of BPC. As a result, these assets were tested as a group for impairment in 2008, and again in 2010 and 2009. For both periods, the future undiscounted cash flows expected to be generated from the use of these 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 allowance against the deferred tax assets would be established in the period such determination was made.
Effective October 1, 2007, Griffon adopted FASB guidance which prescribes the way companies are to account for uncertainty in income tax reporting, and prescribes methodology for recognizing, reversing and measuring the tax benefits of a tax position expected to be taken, in a tax return. 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, 2010 Griffon believes that it has appropriately accounted for all unrecognized tax benefits. As a result of adopting this new guidance effective October 1, 2007, Griffon recorded a $4,669 increase to reserves as a “cumulative effect” decrease to opening retained earnings. As of September 30, 2010, 2009 and 2008, Griffon has recorded unrecognized tax benefits in the amount of $11,764, $8,138 and $11,634, 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 selling, general and administrative expense as incurred and amounted to $21,400, $17,800 and $17,500 in 2010, 2009 and 2008, respectively.
Selling, general and administrative expenses include shipping and handling costs of $32,100 in 2010, $30,500 in 2009 and $37,700 in 2008 and advertising costs, which are expensed as incurred, of $14,700 in 2010, $15,200 in 2009 and $17,800 in 2008.
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, health and welfare claims, general commercial, product and automobile liability and property damage, and business interruption 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.
13

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

In the U.S., Griffon currently self-assumes its product and commercial general liability claims up to $500 per occurrence, its workers’ compensation claims up to $350 per occurrence, 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, Ireland, Australia and China which is subject to reasonable deductibles. Griffon has worldwide excess coverage above these local programs.
Pension Benefits
Griffon sponsors defined 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 qualified defined benefit plan has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continue to accrue a service benefit through December 2010, at which time all plan participants will stop accruing service benefits.
Newly issued but not yet effective accounting pronouncements
In October 2009, the FASB issued new guidance on accounting for multiple-deliverable arrangements to enable vendors to account for products and services separately rather than as a combined unit. The guidance addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The new guidance will be effective as of the beginning of the annual reporting period commencing after June 15, 2010, and will be adopted by Griffon as of October 1, 2010. Early adoption is permitted. Griffon is evaluating the potential impact, if any, of the adoption of the new guidance on its consolidated financial statements.
Recently issued effective accounting pronouncements
In December 2007, the FASB issued new accounting guidance related to the accounting for business combinations. The purpose of the new guidance is to better represent the economic value of a business combination transaction. The new guidance retains the fundamental requirement of existing guidance where the acquisition method of accounting is to be used for all business combinations and for an acquirer to be identified for each
14

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

business combination. In general the new guidance: 1) broadens the existing guidance by extending its applicability to all events where one entity obtains control over one or more businesses; 2) broadens the use of the fair value measurements used to recognize the assets acquired and liabilities assumed; 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition; and 4) increases required disclosures. The new guidance was effective for Griffon for any business combinations that occur after October 1, 2009, and impacts the way in which business combinations are accounted for. Griffon applied this new guidance for the acquisition of ATT.
In December 2007, the FASB issued new accounting guidance related to the accounting for noncontrolling interests in consolidated financial statements. The new guidance was issued to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way, that is, as equity in the consolidated financial statements. Moreover, the new guidance eliminates the diversity then existing in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on Griffon’s consolidated financial statements.
In December 2008, the FASB issued authoritative guidance to require employers to provide additional disclosures about plan assets of a defined benefit pension or other post-retirement plan. These disclosures should principally include information detailing investment policies and strategies, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and an understanding of significant concentrations of risk within plan assets. While earlier application of this guidance is permitted, the required disclosures shall be provided for fiscal years ending after December 15, 2009. Upon initial application, this guidance is not required to be applied to earlier periods that are presented for comparative purposes. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In March 2008, the FASB issued new guidance, which enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: 1) an entity uses derivative instruments; 2) derivative instruments and related hedged items are accounted for; and 3) derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on Griffon’s consolidated financial statements.
In April 2008, the FASB issued new guidance, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset, and requires enhanced related disclosures. The new guidance must be applied prospectively to all intangible assets acquired as of and subsequent to years beginning after December 15, 2008, which for Griffon was the fiscal year beginning October 1, 2009. The adoption of the new guidance was applied for the valuation of the intangibles for the ATT acquisition.
NOTE 2 — ACQUISITION
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 Ò , True Temper Ò , Ames True Temper Ò , Garant Ò , Union Tools Ò , Razor-back Ò , Jackson Ò , Hound Dog Ò  and
15

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

Dynamic DesignTM. ATT’s brands hold the number one or number two market position 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.
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 facility (“Term Loan”) and a new $125,000 Asset Based Lending Agreement (“New ABL”). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash. ATT’s previous outstanding debt has been defeased in connection with the acquisition. Following the ATT transaction, Griffon holds consolidated cash balances of $169,802 at September 30, 2010.
The purchase of ATT occurred on September 30, 2010. Accordingly, ATT’s results of operations are not included in the Griffon consolidated statements of operations or cash flows, or footnotes relating thereto for any year presented, except where explicitly stated as pro-forma results. The Griffon consolidated balance sheet at September 30, 2010 and related notes thereto include ATT’s balances at that date.
The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in the consolidated financial statements from the date of acquisition.
Griffon is in the process of finalizing the adjustment to the purchase price, if any, primarily related to a working capital adjustment as required by the stock purchase agreement; accordingly, management has used their best estimate in the initial purchase price allocation as of the date of these financial statements.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition and the amounts assigned to goodwill and intangible asset classifications:
 	 	 	
 	 	2010	
Current assets, net of cash acquired	 	 	$	 	195,214	 	
PP&E	 	 	 	72,918	 	
Goodwill	 	 	 	261,064	 	
Intangibles	 	 	 	203,290	 	
Other assets	 	 	 	1,124	 	
 	 	 	
Total assets acquired	 	 	 	733,610	 	
Total liabilities assumed	 	 	 	(191,610	)	 	
 	 	 	
Net assets acquired	 	 	$	 	542,000	 	
 	 	 	
The amounts assigned to goodwill and major intangible asset classifications by segment for the acquisition are as follows:
 	 	 	 	 	
 	 	2010	 	Amortization
Period (Years)	
Goodwill (non-deductible)	 	 	$	 	261,064	 	 	N/A	
Tradenames (non-deductible)	 	 	 	76,090	 	 	Indefinite	
Customer relationships	 	 	 	127,200	 	 	25	
 	 	 	 	 	
 	 	 	$	 	464,354	 	 	 	
 	 	 	 	 	
16

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
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 had taken place on October 1, 2008.
 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009	 	
Revenue from continuing operations:	 	 	 	 	 	
As reported	 	 	$	 	1,293,996	 	 	 	$	 	1,194,050	 	 	
Pro forma	 	 	 	1,737,631	 	 	 	 	1,659,524	 	 	
Net earnings from continuing operations:	 	 	 	 	 	
As reported	 	 	$	 	9,504	 	 	 	$	 	17,918	 	 	
Pro forma	 	 	 	16,885	 	 	 	 	22,690	 	 	
Diluted earnings per share from continuing operations:	 	 	 	 	 	
As reported	 	 	$	 	0.16	 	 	 	$	 	0.30	 	 	
Pro forma	 	 	 	0.28	 	 	 	 	0.38	 	 	
Average shares—Diluted	 	 	 	59,993	 	 	 	 	59,002	 	 	
These proforma results of operations 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.
For the years ended September 30, 2010 and 2009, pro forma Net earning from continuing operations included $3,284 and $3,431, respectively, of management fees from ATT’s prior owner. For the year ended September 30, 2010, pro forma Net earnings from continuing operations included $17,791 of costs incurred by ATT and Griffon in connection with Griffon’s acquisition of ATT.
NOTE 3—ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
Retrospective Adjustment for Adoption of Convertible Debt Guidance
In May 2008, the FASB issued new guidance to clarify that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) must be separately accounted for in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized. This guidance, which is applicable to Griffon’s 4% convertible subordinated notes due 2023 issued in 2003 (the “2023 Notes”) and 4% convertible subordinated notes due 2017 issued in December 2009 (the “2017 Notes”), became effective for Griffon as of October 1, 2009 and is implemented retrospectively, as required, for the 2023 Notes. For more information, see the Long-Term Debt footnote.
At September 30, 2010, the 2023 Notes had an outstanding balance of $532, with no unamortized discount or capital in excess of par value component balance as substantially all of these notes were put to Griffon in July 2010. At September 30, 2009, the 2023 Notes had an outstanding balance of $79,380, an unamortized discount balance of $2,820, a net carrying value of $76,560 and a capital in excess of par value component balance, net of tax, of $18,094. The stock price was below the conversion price for all periods presented. Griffon used 8.5% as the nonconvertible debt borrowing rate to discount the 2023 Notes. For more information, see the Long-Term Debt footnote.
17

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

For the 2023 Notes, the effective interest rate and interest expense was as follows:
 	 	 	 	 	 	 	 	
 	 	Years Ended Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
Effective interest rate	 	 	 	9.4	%	 	 	 	 	9.0	%	 	 	 	 	8.9	%	 	 	
Interest expense related to the coupon	 	 	$	 	1,998	 	 	 	$	 	3,472	 	 	 	$	 	5,200	 	 	
Amortization of the discount	 	 	 	2,105	 	 	 	 	3,576	 	 	 	 	4,720	 	 	
Amortization of deferred issuance costs	 	 	 	217	 	 	 	 	530	 	 	 	 	601	 	 	
 	 	 	 	 	 	 	 	
Total interest expense on the 2023 Notes	 	 	$	 	4,320	 	 	 	$	 	7,578	 	 	 	$	 	10,521	 	 	
 	 	 	 	 	 	 	 	
The cumulative effect of the adjustments prior to September 30, 2009 was recognized in the September 30, 2009 balance sheet as follows:
 	 	 	 	 	 	
 	 	As of September 30, 2009	 	
 	 	Reported	 	As Adjusted	 	
Other Assets	 	 	$	 	30,648	 	 	 	$	 	29,132	 	 	
All other assets	 	 	 	1,114,759	 	 	 	 	1,114,759	 	 	
 	 	 	 	 	 	
Total Assets	 	 	$	 	1,145,407	 	 	 	$	 	1,143,891	 	 	
 	 	 	 	 	 	
Notes payable & current portion of LT debt	 	 	$	 	81,410	 	 	 	$	 	78,590	 	 	
Long-term debt	 	 	 	98,394	 	 	 	 	98,394	 	 	
All other liabilities	 	 	 	278,700	 	 	 	 	278,700	 	 	
 	 	 	 	 	 	
Total liabilities	 	 	 	458,504	 	 	 	 	455,684	 	 	
Capital in excess of par value	 	 	 	420,749	 	 	 	 	438,843	 	 	
Retained earnings	 	 	 	438,782	 	 	 	 	421,992	 	 	
All other shareholders’ equity	 	 	 	(172,628	)	 	 	 	 	(172,628	)	 	 	
 	 	 	 	 	 	
Total Shareholders’ Equity	 	 	 	686,903	 	 	 	 	688,207	 	 	
 	 	 	 	 	 	
Total Liabilities and shareholders’ equity	 	 	$	 	1,145,407	 	 	 	$	 	1,143,891	 	 	
 	 	 	 	 	 	
The prior year statements of operations have been adjusted as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2009	 	September 30, 2008	 	
 	 	Reported	 	As adjusted	 	Reported	 	As adjusted	 	
Income from operations	 	 	$	 	25,147	 	 	 	$	 	25,147	 	 	 	$	 	12,044	 	 	 	$	 	12,044	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	 	(9,562	)	 	 	 	 	(13,091	)	 	 	 	 	(12,345	)	 	 	 	 	(16,909	)	 	 	
Interest income	 	 	 	1,539	 	 	 	 	1,539	 	 	 	 	1,970	 	 	 	 	1,970	 	 	
Gain from debt extinguishment, net	 	 	 	7,360	 	 	 	 	4,488	 	 	 	 	—	 	 	 	 	—	 	 	
Other, net	 	 	 	1,522	 	 	 	 	1,522	 	 	 	 	2,713	 	 	 	 	2,713	 	 	
 	 	 	 	 	 	 	 	 	 	
Total other income (expense)	 	 	 	859	 	 	 	 	(5,542	)	 	 	 	 	(7,662	)	 	 	 	 	(12,226	)	 	 	
Income (loss) before taxes and discontinued operations	 	 	 	26,006	 	 	 	 	19,605	 	 	 	 	4,382	 	 	 	 	(182	)	 	 	
Provision for income taxes	 	 	 	4,005	 	 	 	 	1,687	 	 	 	 	4,294	 	 	 	 	2,651	 	 	
 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	 	22,001	 	 	 	 	17,918	 	 	 	 	88	 	 	 	 	(2,833	)	 	 	
Income (loss) from discontinued operations	 	 	 	790	 	 	 	 	790	 	 	 	 	(40,591	)	 	 	 	 	(40,591	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	$	 	22,791	 	 	 	$	 	18,708	 	 	 	$	 	(40,503	)	 	 	 	$	 	(43,424	)	 	 	

18

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2009	 	September 30, 2008	 	
 	 	Reported	 	As adjusted	 	Reported	 	As adjusted	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	$	 	0.37	 	 	 	$	 	0.31	 	 	 	$	 	0.00	 	 	 	$	 	(0.09	)	 	 	
Income (loss) from discontinued operations	 	 	 	0.01	 	 	 	 	0.01	 	 	 	 	(1.24	)	 	 	 	 	(1.24	)	 	 	
Net income (loss)	 	 	 	0.39	 	 	 	 	0.32	 	 	 	 	(1.24	)	 	 	 	 	(1.33	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding	 	 	 	58,699	 	 	 	 	58,699	 	 	 	 	32,667	 	 	 	 	32,667	 	 	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	$	 	0.37	 	 	 	$	 	0.30	 	 	 	$	 	0.00	 	 	 	$	 	(0.09	)	 	 	
Income (loss) from discontinued operations	 	 	 	0.01	 	 	 	 	0.01	 	 	 	 	(1.24	)	 	 	 	 	(1.24	)	 	 	
Net income (loss)	 	 	 	0.39	 	 	 	 	0.32	 	 	 	 	(1.24	)	 	 	 	 	(1.32	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding	 	 	 	59,002	 	 	 	 	59,002	 	 	 	 	32,836	 	 	 	 	32,836	 	 	
 	 	 	 	 	 	 	 	 	 	
On December 21, 2009, Griffon issued $100,000 aggregate principal amount of the 2017 Notes. Griffon used 8.75% as the nonconvertible debt-borrowing rate to discount the 2017 Notes and will amortize the debt discount through January 2017. On the date of issuance, the debt component of the 2017 Notes was $75,437 and the debt discount was $24,563. At September 30, 2010, the 2017 Notes had an outstanding balance of $100,000, an unamortized discount balance of $22,525, a net carrying value of $77,475 and a capital in excess of par component balance, net of tax, of $15,720.
For the 2017 Notes, the effective interest rate and interest expense was as follows:
 	 	 	
 	 	Year Ended
September 30, 2010	
Effective interest rate	 	 	 	9.1	%	 	
Interest expense related to the coupon	 	 	$	 	3,100	 	
Amortization of the discount	 	 	 	2,037	 	
Amortization of deferred issuance costs	 	 	 	323	 	
 	 	 	
Total interest expense on the 2017 Notes	 	 	$	 	5,460	 	
 	 	 	
NOTE 4—INVENTORIES
The following table details the components of inventory:
 	 	 	 	 	
 	 	At September 30,
2010	 	At September 30,
2009	
Raw materials and supplies	 	 	$	 	64,933	 	 	 	$	 	38,943	 	
Work in process	 	 	 	69,107	 	 	 	 	66,741	 	
Finished goods	 	 	 	134,761	 	 	 	 	33,486	 	
 	 	 	 	 	
Total	 	 	$	 	268,801	 	 	 	$	 	139,170	 	
 	 	 	 	 	
19

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
NOTE 5—PROPERTY, PLANT AND EQUIPMENT
The following table details the components of property, plant and equipment, net:
 	 	 	 	 	
 	 	At September 30,
2010	 	At September 30,
2009	
Land, building and building improvements	 	 	$	 	126,785	 	 	 	$	 	110,617	 	
Machinery and equipment	 	 	 	498,017	 	 	 	 	423,742	 	
Leasehold improvements	 	 	 	33,455	 	 	 	 	23,390	 	
 	 	 	 	 	
 	 	 	 	658,257	 	 	 	 	557,749	 	
Accumulated depreciation and amortization	 	 	 	(343,331	)	 	 	 	 	(321,730	)	 	
 	 	 	 	 	
Total	 	 	$	 	314,926	 	 	 	$	 	236,019	 	
 	 	 	 	 	
NOTE 6—GOODWILL AND OTHER INTANGIBLES
The following table provides changes in carrying value of goodwill by segment through the year ended September 30, 2010:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At
September 30,
2008	 	Other
adjustments
including
currency
translations	 	At
September 30,
2009	 	Goodwill
from 2010
acquisitions	 	Other
adjustments
including
currency
translations	 	At
September 30,
2010	
Telephonics	 	 	$	 	18,545	 	 	 	$	 	—	 	 	 	$	 	18,545	 	 	 	$	 	—	 	 	 	$	 	—	 	 	 	$	 	18,545	 	
Home & Building Products	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	261,064	 	 	 	 	—	 	 	 	 	261,064	 	
Clopay Plastic Products	 	 	 	75,237	 	 	 	 	3,875	 	 	 	 	79,112	 	 	 	 	—	 	 	 	 	(1,500	)	 	 	 	 	77,612	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	$	 	93,782	 	 	 	$	 	3,875	 	 	 	$	 	97,657	 	 	 	$	 	261,064	 	 	 	$	 	(1,500	)	 	 	 	$	 	357,221	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset:
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At September 30, 2010	 	Average
Life
(Years)	 	At September 30, 2009	 	
 	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	 	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	 	 	 	 	 	 	 	
Customer relationships	 	 	$	 	155,798	 	 	 	$	 	6,477	 	 	 	 	25	 	 	 	$	 	30,650	 	 	 	$	 	5,628	 	 	 	 	 	 	 	 	 	
Unpatented technology	 	 	 	8,154	 	 	 	 	1,144	 	 	 	 	12	 	 	 	 	2,990	 	 	 	 	349	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total amortizable intangible assets	 	 	 	163,952	 	 	 	 	7,621	 	 	 	 	24	 	 	 	 	33,640	 	 	 	 	5,977	 	 	 	 	 	 	 	 	 	
Trademark	 	 	 	76,680	 	 	 	 	—	 	 	 	 	 	 	590	 	 	 	 	—	 	 	 	 	 	 	 	 	 	
Unpatented technology	 	 	 	—	 	 	 	 	—	 	 	 	 	 	 	5,958	 	 	 	 	—	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total intangible assets	 	 	$	 	240,632	 	 	 	$	 	7,621	 	 	 	 	 	$	 	40,188	 	 	 	$	 	5,977	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
An unpatented intangible assets with a gross carrying value of $5,958 at October 1, 2009 was reclassified from indefinite lived to amortizable, as information became available that allowed a useful life to be determined; the intangible asset is being amortized over 10 years, its estimated useful life, with effect from October 1, 2009.
Amortization expense for intangible assets subject to amortization was $1,987, $1,427 and $1,574 for the years ended September 30, 2010, 2009 and 2008, respectively. Amortization expense for each of the next five years, based on current intangible balances and classifications, is estimated as follows: 2011—$6,454; 2012—$6,419; 2013—$6,412; 2014—$6,405 and 2015—$6,405.
20

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
NOTE 7—DISCONTINUED OPERATIONS
As a result of the downturn in the residential housing market and the impact on the Installation Services segment, Griffon’s management originally initiated a plan during 2008 to exit certain markets within the Installation Services segment through the sale or disposition of business units. As part of the decision to exit certain markets, Griffon closed three units of the Installation Services segment in 2008.
Subsequently, Griffon’s Board of Directors approved a plan to exit all other operating activities of the Installation Services segment in 2008, with the exception of two units which were merged into BPC. As part of this plan, Griffon closed one additional unit during the third quarter of 2008, sold nine units to one buyer in the third quarter of 2008 and sold its two remaining units in Phoenix and Las Vegas in the fourth quarter of 2008. The plan met the criteria for discontinued operations classification in accordance with GAAP. Operating results of substantially all of the Installation Services segment have been reported as discontinued operations in the consolidated statements of operations for all periods presented and the Installation Services segment is excluded from segment reporting.
The following amounts related 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, 2010	 	At September 30, 2009	 	
 	 	Current	 	Long-term	 	Current	 	Long-term	 	
Assets of discontinued operations:	 	 	 	 	 	 	 	 	 	
Prepaid and other current assets	 	 	$	 	1,079	 	 	 	$	 	—	 	 	 	$	 	1,576	 	 	 	$	 	—	 	 	
Other long-term assets	 	 	 	—	 	 	 	 	5,803	 	 	 	 	—	 	 	 	 	5,877	 	 	
 	 	 	 	 	 	 	 	 	 	
Total assets of discontinued operations	 	 	$	 	1,079	 	 	 	$	 	5,803	 	 	 	$	 	1,576	 	 	 	$	 	5,877	 	 	
 	 	 	 	 	 	 	 	 	 	
Liabilities of discontinued operations:	 	 	 	 	 	 	 	 	 	
Accounts payable	 	 	$	 	8	 	 	 	$	 	—	 	 	 	$	 	13	 	 	 	$	 	—	 	 	
Accrued liabilities	 	 	 	4,281	 	 	 	 	—	 	 	 	 	4,919	 	 	 	 	—	 	 	
Other long-term liabilities	 	 	 	—	 	 	 	 	8,446	 	 	 	 	—	 	 	 	 	8,784	 	 	
 	 	 	 	 	 	 	 	 	 	
Total liabilities of discontinued operations	 	 	$	 	4,289	 	 	 	$	 	8,446	 	 	 	$	 	4,932	 	 	 	$	 	8,784	 	 	
 	 	 	 	 	 	 	 	 	 	
Installation Services’ revenue was $109,400 for 2008. There was no reported revenue in 2010 and 2009. Disposal costs related to the Installation Services segment of $43,100 were included in discontinued operations in 2008.
21

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
NOTE 8—ACCRUED LIABILITIES
The following table details the components of accrued liabilities:
 	 	 	 	 	
 	 	At September 30,
2010	 	At September 30,
2009	
Compensation	 	 	$	 	54,136	 	 	 	$	 	31,088	 	
Income and other taxes	 	 	 	16,347	 	 	 	 	5,738	 	
Insurance	 	 	 	10,717	 	 	 	 	5,024	 	
Warranties and rebates	 	 	 	8,184	 	 	 	 	7,040	 	
Interest	 	 	 	6,099	 	 	 	 	872	 	
Deferred income taxes	 	 	 	4,719	 	 	 	 	—	 	
Professional fees	 	 	 	4,139	 	 	 	 	1,463	 	
Rent, utilities and freight	 	 	 	3,210	 	 	 	 	430	 	
Marketing and advertising	 	 	 	1,551	 	 	 	 	1,589	 	
Other	 	 	 	15,598	 	 	 	 	7,876	 	
 	 	 	 	 	
Total	 	 	$	 	124,700	 	 	 	$	 	61,120	 	
 	 	 	 	 	
NOTE 9—RESTRUCTURING AND OTHER RELATED CHARGES
As part of its cost structure review, in June 2009, Griffon announced plans to consolidate facilities in BPC. These actions are scheduled to be completed in early calendar 2011, consistent with the plan. BPC estimates it will incur pre-tax exit and restructuring costs approximating $11,000, substantially all of which will be cash charges; charges include $2,000 for one-time termination benefits and other personnel costs, $1,000 for excess facilities and related costs, and $8,000 for other exit costs, primarily in connection with production realignment. BPC expects approximately $11,000 in capital expenditures in order to effectuate the restructuring plan. BPC spent $4,180 and $7,300 in 2010 for the restructuring plan and related capital expenditures, respectively, and since inception through September 30, 2010, has spent $5,420 and $9,300 of restructuring and related capital expenditures to-date for the plan, respectively.
In the latter part of 2007, as a result of the downturn in the residential housing market and the impact on BPC, a plan, which was substantially completed in 2008, was initiated to restructure operations. This plan included charges for workforce reductions, closure or consolidation of excess facilities and other costs for the closure and relocation of its Tempe, AZ manufacturing facility to Troy, OH.
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 2008, 2009 and 2010 were as follows:
 	 	 	 	 	 	 	 	 	
 	 	Workforce
Reduction	 	Facilities &
Exit Costs	 	Other
Related Costs	 	Total	
Amounts incurred in:	 	 	 	 	 	 	 	 	
Year ended September 30, 2008	 	 	$	 	647	 	 	 	$	 	(11	)	 	 	 	$	 	1,974	 	 	 	$	 	2,610	 	
Year ended September 30, 2009	 	 	$	 	207	 	 	 	$	 	672	 	 	 	$	 	361	 	 	 	$	 	1,240	 	
Year ended September 30, 2010	 	 	$	 	602	 	 	 	$	 	2,549	 	 	 	$	 	1,029	 	 	 	$	 	4,180	 	
22

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars 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 Costs	 	Total	
Accrued liability at September 30, 2008	 	 	$	 	—	 	 	 	$	 	231	 	 	 	$	 	—	 	 	 	$	 	231	 	
Charges	 	 	 	207	 	 	 	 	672	 	 	 	 	361	 	 	 	 	1,240	 	
Payments	 	 	 	—	 	 	 	 	(903	)	 	 	 	 	(361	)	 	 	 	 	(1,264	)	 	
Accrued liability at September 30, 2009	 	 	 	207	 	 	 	 	—	 	 	 	 	—	 	 	 	 	207	 	
Charges	 	 	 	602	 	 	 	 	2,549	 	 	 	 	1,029	 	 	 	 	4,180	 	
Payments	 	 	 	(213	)	 	 	 	 	(2,549	)	 	 	 	 	(1,029	)	 	 	 	 	(3,791	)	 	
 	 	 	 	 	 	 	 	 	
Accrued liability at September 30, 2010	 	 	$	 	596	 	 	 	$	 	—	 	 	 	$	 	—	 	 	 	$	 	596	 	
 	 	 	 	 	 	 	 	 	
NOTE 10—WARRANTY LIABILITY
Telephonics offers warranties against product defects for periods ranging from six months to three years, with certain products having a limited lifetime warranty, 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, Home & Building Products 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:
 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009	 	
Balance, beginning of fiscal year	 	 	$	 	5,707	 	 	 	$	 	5,328	 	 	
 	 	 	 	 	 	
Warranties issued and charges in estimated pre-existing warranties	 	 	 	4,194	 	 	 	 	5,968	 	 	
Actual warranty costs incurred	 	 	 	(4,005	)	 	 	 	 	(5,589	)	 	 	
 	 	 	 	 	 	
Balance, end of fiscal period	 	 	$	 	5,896	 	 	 	$	 	5,707	 	 	
 	 	 	 	 	 	
NOTE 11—NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT
The present value of the net minimum payments on capitalized leases as of September 30, 2010 is as follows:
 	 	 	
 	 	At September 30,
2010	
Total minimum lease payments	 	 	$	 	16,459	 	
Less amount representing interest	 	 	 	(3,790	)	 	
 	 	 	
Present value of net minimum lease payments	 	 	 	12,669	 	
Current Portion	 	 	 	(1,038	)	 	
 	 	 	
Capitalized lease obligation, less current portion	 	 	$	 	11,631	 	
 	 	 	
Minimum payments under current capital leases for the next five years are as follows: $1,663 in 2011, $1,553 in 2012, $1,514 in 2013, $1,493 in 2014 and $1,471 in 2015.
23

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

Included in the consolidated balance sheet at September 30, 2010 under property, plant and equipment are cost and accumulated depreciation subject to capitalized leases of $10,046 and $647, respectively, and included in other assets are restricted cash and deferred interest charges of $4,629 and $283, respectively. At September 30, 2009, the amounts subject to capitalized leases were $10,450 and $1,268, respectively, and included in other assets were restricted cash and deferred interest charges of $4,629 and $308, respectively. The capitalized leases carry interest rates from 5.00% to 10.10% and mature from 2011 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 is 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.
Debt at September 30 2010 and 2009 consisted of the following:
 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	
Term loan (A)	 	 	$	 	375,000	 	 	 	$	 	—	 	 	
Debt discount on term loan	 	 	 	(7,500	)	 	 	 	 	—	 	 	
4% convertible subordinated debt due 2017 (D)	 	 	 	100,000	 	 	 	 	—	 	 	
Debt discount on 4% convertible subordinated debt	 	 	 	(22,525	)	 	 	 	 	—	 	 	
Note payable to banks—revolving credit (C)	 	 	 	30,000	 	 	 	 	38,000	 	 	
Asset based lending (B)	 	 	 	25,000	 	 	 	 	35,925	 	 	
Debt discount on asset based lending	 	 	 	(625	)	 	 	 	 	—	 	 	
Capital lease—real estate	 	 	 	12,182	 	 	 	 	12,978	 	 	
Real estate mortgages	 	 	 	7,287	 	 	 	 	7,746	 	 	
ESOP loan (F)	 	 	 	5,000	 	 	 	 	5,625	 	 	
4% convertible subordinated debt due 2023 (E)	 	 	 	532	 	 	 	 	79,380	 	 	
Debt discount on 4% convertible subordinated debt	 	 	 	—	 	 	 	 	(2,820	)	 	 	
Capital lease—equipment	 	 	 	485	 	 	 	 	150	 	 	
 	 	 	 	 	 	
Total debt	 	 	 	524,836	 	 	 	 	176,984	 	 	
less: Current portion	 	 	 	(20,901	)	 	 	 	 	(78,590	)	 	 	
 	 	 	 	 	 	
Long-term debt	 	 	$	 	503,935	 	 	 	$	 	98,394	 	 	
 	 	 	 	 	 	
Minimum payments under debt agreements for the next five years are as follows: $20,901 in 2011, $27,762 in 2012, $50,581 in 2013, $20,097 in 2014 and $45,147 in 2015.
(A) On September 30, 2010, Griffon purchased all of the outstanding stock of ATT Holdings, the parent of ATT, on a cash and debt-free basis, for $542,000 in cash, subject to certain adjustments. In connection with the ATT acquisition, Clopay Ames entered into the $375,000 secured Term Loan and the $125,000 New ABL. The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash. ATT’s previous outstanding debt was defeased in connection with the acquisition.
The Borrower has the option to select interest rates in respect of the loans under the Term Loan agreement based upon either the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Term Loan agreement). Interest on outstanding loans accrues at a rate of 6.00% per annum above the Adjusted Eurodollar Rate, subject to a Eurodollar floor of 1.75%, or 5.00% per annum above the Base Rate.
Borrowings under the Term Loan agreement are guaranteed by Clopay Ames True Temper LLC (“Clopay LLC”), the parent of Clopay Ames, and certain material domestic
24

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

subsidiaries of the Borrower (collectively, the “Term Loan Guarantors”). All obligations under the Term Loan agreement are secured by a first-priority security interest in substantially all of the Borrower’s assets and substantially all of the assets of the Term Loan Guarantors other than inventory, accounts receivable and cash of the Borrower and the Term Loan Guarantors, which collateralizes borrowings under an ABL Credit Agreement (as defined below) on a first-priority basis and borrowings under the Term Loan agreement on a second-priority basis.
The Term Loan agreement contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions, certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions, limitations on subsidiary distributions, modifications of constituent documents and debt agreements, capital expenditures, equity issuances and sale/leasebacks.
Under the Term Loan agreement, the Borrower is required to maintain a certain minimum interest coverage ratio, defined as the ratio of EBIDTA to interest expense, which increases over time. The Borrower is also required to keep its leverage ratio below a certain level, defined as the ratio of total debt to EBIDTA, which level decreases over time.
Fees and expenses for the term loan of $9,800 were capitalized in Other assets and an original issuer discount (“OID”) of $7,500 was recorded as a reduction of Long-term debt, both will amortize into interest expense over the 6 year life of the loan.
At September 30, 2010, Griffon was in compliance with the terms and covenants of the Term Loan agreement and expects to remain in compliance for the reasonably foreseeable future. Further, the covenants within the Term Loan agreement do not materially affect Griffon’s ability to undertake additional debt or equity financing for Griffon, the parent company, as the Term Loan agreement is at the subsidiary level and not guaranteed by Griffon. The debt balance under the Term Loan agreement approximates fair value, as the interest rate is indexed to current market rates.
(B) In addition to the Term Loan agreement, on September 30, 2010, the Borrower entered into the New ABL with JPMorgan Chase Bank, N.A. as administrative agent. The New ABL replaces the credit agreement, dated as of June 24, 2008, by BPC and Plastics. A $1,111 charge to write-off previously capitalized financing costs related to the replaced credit agreement was recorded in September, 2010.
The New ABL provides for a revolving credit facility in an aggregate principal amount equal to $125,000 (subject to customary borrowing base limitations) which includes a swingline facility with a sublimit of $12,500 and a letter of credit facility with a sublimit of $25,000. Borrowings under the New ABL mature on September 30, 2015. Loans under the New ABL may be repaid and reborrowed from time to time.
The Borrower has the option to select interest rates in respect of the loans under the New ABL based upon either the Alternative Base Rate or the Adjusted LIBO Rate (each as defined in the New ABL). Depending upon availability under the New ABL, interest on borrowings accrues at rates ranging from 1.25% to 1.75% per annum above the Alternative Base Rate or 2.25% to 2.75% per annum above the Adjusted LIBO Rate.
Borrowings under the New ABL are guaranteed by Clopay LLC and certain material domestic subsidiaries of the Borrower and are secured by a first-priority security interest on inventory, accounts receivable and cash of the Borrower, and a second-priority security interest on substantially all of the other assets of such entities.
25

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

The New ABL contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions, certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions, limitations on subsidiary distributions, modifications of constituent documents and debt agreements, equity issuances and sale/leasebacks.
The New ABL contains customary events of default, including without limitation, failure to make certain payments when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, default on other indebtedness, changes in control with respect to Griffon and certain of its subsidiaries, and the failure of any of the loan documents to remain in full force and effect.
Fees and expenses for the New ABL of $3,400 were capitalized in Other assets and an original issuer discount (“OID”) of $625 was recorded as a reduction of Long-term debt, both will amortize into interest expense over the 5 year life of the facility.
In June 2008, BPC and Plastics entered into a credit agreement for their domestic operations 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, senior secured revolving credit facility of $100,000 (the “CCA”). At September 30, 2010 the outstanding balance was paid in connection with the acquisition of ATT described above. At September 30, 2009, $35,925 was outstanding under the CCA.
(C) 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”). Borrowings under the TCA bear interest (1.8% at September 30, 2010) at rates based upon LIBOR or the prime rate and are collateralized by the stock and assets of Telephonics. At September 30, 2010 and September 30, 2009, $30,000 and $38,000, respectively, were outstanding under the TCA and approximately $64,562 was available for borrowing at September 30, 2010. Griffon has been in compliance with all financial covenants under the TCA since its inception. The balance of the debt approximates its fair value.
The TCA and the New ABL include various sublimits for standby letters of credit. At September 30, 2010, there was approximately $18,901 of aggregate standby letters of credit outstanding under these credit facilities and $31,099 are available to be drawn. Additionally, these agreements limit dividends and advances that these subsidiaries may pay to the parent.
(D) 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 approximately $14.91 per share. This represents a 23% conversion premium over the $12.12 per share closing price on December 15, 2009. The outstanding balance of these notes on September 30, 2010 was $100,000 and the fair value was approximately $106,000, based on quoted market price (level 1 inputs).
(E) At September 30, 2010, Griffon had $532 remaining of 4% convertible subordinated notes due 2023 (the “2023 Notes”). At September 30, 2009, $79,400 was outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2010, 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. In July 2010, substantially all of the 2023 Notes were put to Griffon at par and settled.
26

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

In January 2010, Griffon purchased $10,100 face value of the 2023 Notes for $10,200. Griffon recorded a pre-tax gain from debt extinguishment of $32, offset by $20 for a proportionate reduction in the related deferred financing costs for a net pre-tax gain of $12. Capital in excess of par was reduced by $300 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $200.
In December 2009, Griffon purchased $19,200 face value of the 2023 Notes for $19,400. Including a proportionate reduction in the related deferred financing costs, Griffon recorded an immaterial net pre-tax loss on the extinguishment in the first quarter of 2010. Capital in excess of par value was reduced by $700 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $500.
During 2009, Griffon purchased $50,620 face value of the Notes from certain note holders for $42,741. Griffon recorded a pre-tax gain from debt extinguishment of approximately $7,879, offset by a $519 proportionate reduction in the related deferred financing costs for a net gain of $7,360.
Griffon’s ESOP entered into a new loan agreement in September 2010 to borrow an additional $20,000 over a one-year period. After the first year, Griffon has the option to convert all or a portion of the outstanding loan to a five-year term. If converted, principal is payable in quarterly installments at the rate of $250 per quarter beginning September 2011, with the remainder due at the final maturity date. The loan will bear interest at a rate equal to either a) LIBOR plus 2.5% or b) the Bank’s prime rate. The proceeds of the loan are to be used to purchase common stock of Griffon in the open market. The loan is secured by a pledge of the shares purchased with the loan proceeds and payments are guaranteed by Griffon. At September 30, 2010, there were no borrowings under this line.
(F) Griffon’s ESOP has a loan agreement, guaranteed by Griffon, which requires payments of principal and interest through the expiration date of September 2012 at which time the $3,900 balance of the loan, and any outstanding interest, will be payable. The primary purpose of this loan and its predecessor loans, which were refinanced by this loan in October 2008, was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan bears interest (1.5% at September 30, 2010) at rates based upon the prime rate or LIBOR. The balance of the loan was $5,000 at September 30, 2010, and the outstanding balance approximates fair value, as the interest rates are indexed to current market rates.
Real estate mortgages bear interest at rates from 6.3% to 6.6% with maturities extending through 2016 and are collateralized by real property whose carrying value at September 30, 2010 aggregated approximately $10,500. These mortgages approximate fair value.
Derivative Instruments and Hedging Activities
Fair values of derivative instruments as of September 30, 2010 are as follows:
 	 	 	 	 	 	 	 	 	 	
Description of Derivative	 	Qualifies
for Hedge
Designation	 	Liabilities Derivatives	 	
 	 	 	 	Fair Value	 	Balance
Sheet
Location	 	Pretax Loss
Recognized
in OCI	 	 	 	
Interest rate swaps	 	No	 	 	$	 	741	 	 	(a)	 	 	$	 	—	 	 	 	 	
Interest rate swaps	 	No	 	 	 	3,104	 	 	(a)	 	 	 	—	 	 	 	 	

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(a)	 	 	 	The interest rate swap is included in Accrued expenses and other current liabilities.	
As part of the acquisition of ATT, these swaps were terminated in October 2010.
27

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
NOTE 12—EMPLOYEE BENEFIT PLANS
Griffon offers defined contribution plans to most of its U.S. employees. In addition to employee contributions to the plans, Griffon makes contributions based upon various percentages of compensation and/or employee contributions, which were $5,200 in 2010, $5,800 in 2009 and $9,800 in 2008.
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 $2,005 as of September 30, 2010 arising primarily from the acquisition of ATT. It is the Company’s practice to fund these benefits as incurred.
Griffon also has qualified and a non-qualified defined benefit plans covering certain employees with benefits based on years of service and employee compensation. Griffon adopted the FASB amendments on September 30, 2007, which required Griffon to recognize the funded status of its defined benefit plans in the Consolidated Balance Sheets with a corresponding adjustment to Accumulated other comprehensive income, net of tax. 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 requirements. The fair value of a majority of the plan assets were determined by the plans’ trustee using quoted market prices identical instruments (level 1 inputs) as of September 30, 2010. 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).
One of the qualified defined benefit plans has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continue to accrue a service benefit through December 2010, at which time all plan participants will stop accruing service benefits. 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.
The benefits for the ATT defined benefit and supplemental executive retirement plans have been frozen since 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.
28

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

Net periodic costs were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Defined Benefits for the Years
Ended September 30,	 	Supplemental Benefits for the
Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	2010	 	2009	 	2008	 	
Net periodic benefit costs	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	 	$	 	529	 	 	 	$	 	425	 	 	 	$	 	520	 	 	 	$	 	29	 	 	 	$	 	22	 	 	 	$	 	137	 	 	
Interest cost	 	 	 	1,645	 	 	 	 	1,638	 	 	 	 	1,571	 	 	 	 	1,984	 	 	 	 	2,586	 	 	 	 	2,432	 	 	
Expected return on plan assets	 	 	 	(1,371	)	 	 	 	 	(1,723	)	 	 	 	 	(2,081	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
Amortization of:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service costs	 	 	 	9	 	 	 	 	9	 	 	 	 	9	 	 	 	 	328	 	 	 	 	328	 	 	 	 	328	 	 	
Actuarial loss	 	 	 	1,064	 	 	 	 	325	 	 	 	 	135	 	 	 	 	986	 	 	 	 	596	 	 	 	 	821	 	 	
Transition obligation	 	 	 	—	 	 	 	 	(1	)	 	 	 	 	(1	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net periodic benefit costs	 	 	$	 	1,876	 	 	 	$	 	673	 	 	 	$	 	153	 	 	 	$	 	3,327	 	 	 	$	 	3,532	 	 	 	$	 	3,718	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The tax benefits in 2010, 2009 and 2008 for the amortization of pension costs in other comprehensive income were $835, $440 and $452, 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 2011 are $8,476 and $336, respectively.
The weighted-average assumptions used in determining the net periodic benefit costs were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Defined Benefits
for the Years
Ended September 30,	 	Supplemental Benefits
for the Years
Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	2010	 	2009	 	2008	 	
Discount rate	 	 	 	5.60	%	 	 	 	 	7.50	%	 	 	 	 	6.30	%	 	 	 	 	5.00	%	 	 	 	 	7.50	%	 	 	 	 	6.30	%	 	 	
Average wage increase	 	 	 	3.50	%	 	 	 	 	3.50	%	 	 	 	 	3.50	%	 	 	 	 	5.00	%	 	 	 	 	5.00	%	 	 	 	 	5.00	%	 	 	
Expected return on assets	 	 	 	7.00	%	 	 	 	 	8.50	%	 	 	 	 	8.50	%	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
Plan assets and benefit obligation of the defined benefit plans were as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	Defined
Benefits at
September 30,	 	Supplemental
Benefits at
September 30,	 	
 	 	2010	 	2009	 	2010	 	2009	 	
Change in benefit obligation	 	 	 	 	 	 	 	 	 	
Benefit obligation at beginning of fiscal year	 	 	$	 	29,803	 	 	 	$	 	22,263	 	 	 	$	 	41,632	 	 	 	$	 	36,429	 	 	
Assumed in business combination	 	 	 	166,689	 	 	 	 	—	 	 	 	 	876	 	 	 	 	—	 	 	
Benefits earned during the year	 	 	 	529	 	 	 	 	425	 	 	 	 	29	 	 	 	 	22	 	 	
Interest cost	 	 	 	1,644	 	 	 	 	1,638	 	 	 	 	1,984	 	 	 	 	2,586	 	 	
Benefits paid	 	 	 	(1,372	)	 	 	 	 	(1,251	)	 	 	 	 	(3,898	)	 	 	 	 	(3,899	)	 	 	
Actuarial loss	 	 	 	2,915	 	 	 	 	6,728	 	 	 	 	2,597	 	 	 	 	6,494	 	 	
 	 	 	 	 	 	 	 	 	 	
Benefit obligation at end of fiscal year	 	 	 	200,208	 	 	 	 	29,803	 	 	 	 	43,220	 	 	 	 	41,632	 	 	

29

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	
 	 	Defined
Benefits at
September 30,	 	Supplemental
Benefits at
September 30,	 	
 	 	2010	 	2009	 	2010	 	2009	 	
Change in Plan Assets	 	 	 	 	 	 	 	 	 	
Fair value of plan assets at beginning of fiscal year	 	 	$	 	19,877	 	 	 	$	 	20,442	 	 	 	$	 	—	 	 	 	$	 	—	 	 	
Assumed in business combination	 	 	 	109,490	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
Actual return on plan assets	 	 	 	2,176	 	 	 	 	(365	)	 	 	 	 	—	 	 	 	 	—	 	 	
Company contributions	 	 	 	3,562	 	 	 	 	1,051	 	 	 	 	3,898	 	 	 	 	3,899	 	 	
Benefits paid	 	 	 	(1,372	)	 	 	 	 	(1,251	)	 	 	 	 	(3,898	)	 	 	 	 	(3,899	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Fair value of plan assets at end of fiscal year	 	 	 	133,733	 	 	 	 	19,877	 	 	 	 	—	 	 	 	 	—	 	 	
 	 	 	 	 	 	 	 	 	 	
Projected benefit obligation in excess of plan assets	 	 	$	 	(66,475	)	 	 	 	$	 	(9,926	)	 	 	 	$	 	(43,220	)	 	 	 	$	 	(41,632	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Amounts recognized in the statement of financial position consist of:	 	 	 	 	 	 	 	 	 	
Accrued liabilities	 	 	$	 	—	 	 	 	$	 	(876	)	 	 	 	$	 	(3,932	)	 	 	 	$	 	(3,898	)	 	 	
Other liabilities (long-term)	 	 	 	(66,475	)	 	 	 	 	(9,050	)	 	 	 	 	(39,288	)	 	 	 	 	(37,734	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Total Liabilities	 	 	 	(66,475	)	 	 	 	 	(9,926	)	 	 	 	 	(43,220	)	 	 	 	 	(41,632	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Net actuarial losses	 	 	 	15,236	 	 	 	 	14,189	 	 	 	 	20,445	 	 	 	 	18,833	 	 	
Prior service cost	 	 	 	24	 	 	 	 	33	 	 	 	 	611	 	 	 	 	939	 	 	
Deferred taxes	 	 	 	(5,341	)	 	 	 	 	(4,978	)	 	 	 	 	(7,370	)	 	 	 	 	(6,920	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Total Accumulated other comprehensive loss, net of tax	 	 	 	9,919	 	 	 	 	9,244	 	 	 	 	13,686	 	 	 	 	12,852	 	 	
 	 	 	 	 	 	 	 	 	 	
Net amount recognized at September 30,	 	 	$	 	(56,556	)	 	 	 	$	 	(682	)	 	 	 	$	 	(29,534	)	 	 	 	$	 	(28,780	)	 	 	
 	 	 	 	 	 	 	 	 	 	
Accumulated benefit obligations	 	 	$	 	199,604	 	 	 	$	 	29,674	 	 	 	$	 	42,827	 	 	 	$	 	41,317	 	 	
 	 	 	 	 	 	 	 	 	 	
Information for plans with accumulated benefit obligations in excess of plan assets:	 	 	 	 	 	 	 	 	 	
ABO	 	 	$	 	199,604	 	 	 	$	 	29,674	 	 	 	$	 	42,827	 	 	 	$	 	41,317	 	 	
PBO	 	 	 	200,208	 	 	 	 	29,803	 	 	 	 	43,220	 	 	 	 	41,632	 	 	
Fair value of plan assets	 	 	 	133,733	 	 	 	 	19,877	 	 	 	 	—	 	 	 	 	—	 	 	
The weighted-average assumptions used in determining the benefit obligations were as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	Defined
Benefits at
September 30,	 	Supplemental
Benefits at
September 30,	 	
 	 	2010	 	2009	 	2010	 	2009	 	
Weighted average discount rate	 	 	 	4.89	%	 	 	 	 	5.60	%	 	 	 	 	4.26	%	 	 	 	 	5.00	%	 	 	
Weighted average wage increase	 	 	 	0.73	%	 	 	 	 	3.50	%	 	 	 	 	4.90	%	 	 	 	 	5.00	%	 	 	
30

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

The actual and weighted-average assets allocation for qualified benefit plans were as follows:
 	 	 	 	 	 	 	 	
 	 	At September 30,	 	Target	 	
 	 	2010	 	2009	 	 	 	
Equity securities	 	 	 	64.0	%	 	 	 	 	0.0	%	 	 	 	 	63.0	%	 	 	
Fixed income	 	 	 	35.0	%	 	 	 	 	91.7	%	 	 	 	 	37.0	%	 	 	
Other	 	 	 	1.0	%	 	 	 	 	8.3	%	 	 	 	 	0.0	%	 	 	
 	 	 	 	 	 	 	 	
Total	 	 	 	100.0	%	 	 	 	 	100.0	%	 	 	 	 	100.0	%	 	 	
 	 	 	 	 	 	 	 	
Estimated future benefit payments to retirees, which reflect expected future service, are as follows:
 	 	 	 	 	
For the fiscal years ending September	 	Defined
Benefits	 	Supplemental
Benefits	
2011	 	 	$	 	10,138	 	 	 	$	 	3,932	 	
2012	 	 	 	10,386	 	 	 	 	3,932	 	
2013	 	 	 	10,662	 	 	 	 	3,955	 	
2014	 	 	 	10,888	 	 	 	 	3,955	 	
2015	 	 	 	11,140	 	 	 	 	3,873	 	
2016 through 2020	 	 	 	59,823	 	 	 	 	16,512	 	
Griffon expects to contribute $7,332 to the Defined Benefit plans in 2011, in addition to the $3,932 in payments related to the Supplemental Benefits that will be funded from the general assets of Griffon.
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.
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.
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.
31

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

The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset category as of September 30, 2010:
 	 	 	 	 	 	 	 	 	
 	 	Quoted Prices in
Active Markets for
Identical Assets
(Level 1)	 	Significant Other
Observable Inputs
(Level 2)	 	Significant
Unobservable
Inputs
(Level 3)	 	Total	
Short-term investment funds	 	 	$	 	—	 	 	 	$	 	190	 	 	 	$	 	 —	 	 	 	$	 	190	 	
Government agency securities	 	 	 	2,030	 	 	 	 	2,780	 	 	 	 	—	 	 	 	 	4,810	 	
Debt instruments	 	 	 	—	 	 	 	 	15,255	 	 	 	 	—	 	 	 	 	15,255	 	
Equity securities	 	 	 	60,807	 	 	 	 	4,023	 	 	 	 	—	 	 	 	 	64,830	 	
Commingled funds	 	 	 	—	 	 	 	 	48,648	 	 	 	 	—	 	 	 	 	48,648	 	
 	 	 	 	 	 	 	 	 	
Total	 	 	$	 	62,837	 	 	 	$	 	70,896	 	 	 	$	 	—	 	 	 	$	 	133,733	 	
 	 	 	 	 	 	 	 	 	
Griffon has an ESOP that covers substantially all domestic employees. 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 $1,011 in 2010, $796 in 2009 and $338 in 2008. The cost of the shares held by the ESOP and not yet allocated to employees is reported as a reduction of Shareholders’ Equity. In connection with the rights offering in September 2008, the ESOP purchased 74,100 shares underlying rights associated with the unallocated shares of the ESOP. The ESOP shares were as follows:
 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	
Allocated shares	 	 	 	2,213,122	 	 	 	 	2,126,058	 	 	
Unallocated shares	 	 	 	626,725	 	 	 	 	780,697	 	 	
 	 	 	 	 	 	
 	 	 	 	2,839,847	 	 	 	 	2,906,755	 	 	
 	 	 	 	 	 	
NOTE 13—INCOME TAXES
Income taxes have been based on the following components of Income before taxes and discontinued operations:
 	 	 	 	 	 	 	 	
 	 	For the Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
Domestic	 	 	$	 	7,360	 	 	 	$	 	10,260	 	 	 	$	 	(18,583	)	 	 	
Non-U.S.	 	 	 	6,452	 	 	 	 	9,345	 	 	 	 	18,401	 	 	
 	 	 	 	 	 	 	 	
 	 	 	$	 	13,812	 	 	 	$	 	19,605	 	 	 	$	 	(182	)	 	 	
 	 	 	 	 	 	 	 	
Provision (benefit) for income taxes on income from continuing operations was comprised of the following:
 	 	 	 	 	 	 	 	
 	 	For the Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
Current	 	 	$	 	7,974	 	 	 	$	 	4,831	 	 	 	$	 	4,082	 	 	
Deferred	 	 	 	(3,666	)	 	 	 	 	(3,144	)	 	 	 	 	(1,431	)	 	 	
 	 	 	 	 	 	 	 	
Total	 	 	$	 	4,308	 	 	 	$	 	1,687	 	 	 	$	 	2,651	 	 	
 	 	 	 	 	 	 	 	
32

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	
 	 	For the Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
U.S. Federal	 	 	$	 	5,426	 	 	 	$	 	984	 	 	 	$	 	5,527	 	 	
State and local	 	 	 	(1,795	)	 	 	 	 	1,543	 	 	 	 	1,105	 	 	
Non-U.S.	 	 	 	677	 	 	 	 	(840	)	 	 	 	 	(3,981	)	 	 	
 	 	 	 	 	 	 	 	
Total provision	 	 	$	 	4,308	 	 	 	$	 	1,687	 	 	 	$	 	2,651	 	 	
 	 	 	 	 	 	 	 	
Griffon’s income tax provision (benefit) included benefits of ($2,740) in 2010, ($1,387) in 2009 and ($11,422) in 2008 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.
Included in Prepaids and other current assets are tax receivable amounts of $690 and $6,074 at September 30, 2010 and 2009, respectively.
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,	 	
 	 	2010	 	2009	 	2008	 	
U.S. Federal income tax rate	 	 	 	35.0	%	 	 	 	 	35.0	%	 	 	 	 	35.0	%	 	 	
State and local taxes, net of Federal benefit	 	 	 	2.6	 	 	 	 	4.8	 	 	 	 	191.6	 	 	
Non-U.S. taxes	 	 	 	(11.3	)	 	 	 	 	(21.0	)	 	 	 	 	(513.4	)	 	 	
Acquisition costs	 	 	 	9.5	 	 	 	 	—	 	 	 	 	—	 	 	
Reduction of tax contingency reserves	 	 	 	(5.5	)	 	 	 	 	(1.0	)	 	 	 	 	5,020.3	 	 	
Non-deductible goodwill	 	 	 	—	 	 	 	 	—	 	 	 	 	(2,483.3	)	 	 	
Non-U.S. dividends	 	 	 	—	 	 	 	 	4.3	 	 	 	 	(1,028.0	)	 	 	
Valuation allowance	 	 	 	—	 	 	 	 	(14.9	)	 	 	 	 	(2,307.1	)	 	 	
Meals and entertainment	 	 	 	1.4	 	 	 	 	1.0	 	 	 	 	(141.3	)	 	 	
Non-U.S. purchase price adjustment	 	 	 	—	 	 	 	 	—	 	 	 	 	(233.0	)	 	 	
Other	 	 	 	(0.5	)	 	 	 	 	0.4	 	 	 	 	2.6	 	 	
 	 	 	 	 	 	 	 	
Effective tax rate from continuing operations	 	 	 	31.2	%	 	 	 	 	8.6	%	 	 	 	 	(1,456.6	)%	 	 	
 	 	 	 	 	 	 	 	
The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows:
 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	
Deferred tax assets:	 	 	 	 	 	
Bad debt reserves	 	 	$	 	1,834	 	 	 	$	 	1,323	 	 	
Inventory reserves	 	 	 	4,716	 	 	 	 	5,469	 	 	
Deferred compensation	 	 	 	48,826	 	 	 	 	23,361	 	 	
Compensation benefits	 	 	 	2,237	 	 	 	 	281	 	 	
Insurance reserve	 	 	 	3,894	 	 	 	 	3,263	 	 	
Restructuring reserve	 	 	 	619	 	 	 	 	578	 	 	
Warranty reserve	 	 	 	3,185	 	 	 	 	2,665	 	 	
Net operating loss and foreign tax credit	 	 	 	30,914	 	 	 	 	12,154	 	 	
Other reserves and accruals	 	 	 	5,580	 	 	 	 	1,197	 	 	
 	 	 	 	 	 	
 	 	 	 	101,805	 	 	 	 	50,291	 	 	
Valuation allowance	 	 	 	(15,069	)	 	 	 	 	(4,726	)	 	 	
 	 	 	 	 	 	
Total deferred tax assets	 	 	 	86,736	 	 	 	 	45,565	 	 	
33

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	
Deferred tax liabilities:	 	 	 	 	 	
Deferred income	 	 	$	 	(16,619	)	 	 	 	$	 	(3,350	)	 	 	
Goodwill and intangibles	 	 	 	(77,099	)	 	 	 	 	(6,770	)	 	 	
Depreciation and amortization	 	 	 	(29,120	)	 	 	 	 	(14,841	)	 	 	
Interest	 	 	 	(8,687	)	 	 	 	 	(11,906	)	 	 	
Unremitted earnings	 	 	 	(10,118	)	 	 	 	 	—	 	 	
Other	 	 	 	(2,825	)	 	 	 	 	(1,424	)	 	 	
 	 	 	 	 	 	
Total deferred tax liabilities	 	 	 	(144,468	)	 	 	 	 	(38,291	)	 	 	
 	 	 	 	 	 	
Net deferred tax assets	 	 	$	 	(57,732	)	 	 	 	$	 	7,274	 	 	
 	 	 	 	 	 	
The increase to the valuation allowance relates to foreign tax credits, capital losses and state net operating losses acquired in connection with the ATT acquisition.
The components of the net deferred tax asset (liability), by balance sheet account, were as follows:
 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	
Prepaid and other current assets	 	 	$	 	10,897	 	 	 	$	 	10,024	 	 	
Other assets	 	 	 	1	 	 	 	 	7,115	 	 	
Current liabilities	 	 	 	(4,719	)	 	 	 	 	—	 	 	
Other liabilities	 	 	 	(65,155	)	 	 	 	 	(11,475	)	 	 	
Assets of discontinued operations	 	 	 	1,244	 	 	 	 	1,610	 	 	
 	 	 	 	 	 	
Net deferred tax assets	 	 	$	 	(57,732	)	 	 	 	$	 	7,274	 	 	
 	 	 	 	 	 	
Other than for ATT, 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, 2010, Griffon’s share of the undistributed earnings of the non-U.S. subsidiaries amounted to approximately $62,408.
Deferred income taxes on the undistributed earnings of non-U.S. subsidiaries has been recorded in the opening balance sheet for the ATT group of entities as these earnings were historically not indefinitely reinvested outside of the U.S.
At September 30, 2010 and 2009, Griffon had net operating loss carryforwards for federal tax purposes of $11,028 resulting from the acquisition of ATT and had loss carryforwards for non-U.S. tax purposes of $36,438 and $17,141, respectively. The U.S. loss carryforwards expire in 2027 and 2028, the non-U.S. loss carryforwards of $36,438 are available for carryforward indefinitely.
Griffon had State and local loss carryforwards at September 30, 2010 and 2009 of $5,400 and $2,900, respectively, which expire in varying amounts through 2030.
Griffon had foreign tax credit carryforwards of $11,188 and $6,326 at September 30, 2010 and 2009, respectively, which are available for use through 2020.
Griffon had foreign capital loss carryforwards of $13,702 at September 30, 2010. The capital loss caryforwards do not expire.
Griffon files U.S. Federal, state and local tax returns, as well as Germany, Canada, Brazil, Ireland 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, Griffon’s German income tax returns are no longer subject to income tax examination for years
34

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

through 2007 and Griffon’s major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2000. Various U.S. state and non-U.S. statutory tax audits are currently underway. Griffon does not believe that its unrecognized tax benefits will materially change within the next twelve months.
The following is a roll forward of the unrecognized tax benefits activity:
 	 	 	
Balance at October 1, 2008	 	 	$	 	11,634	 	
Additions based on tax positions related to the current year	 	 	 	1,395	 	
Reductions based on tax positions related to prior years	 	 	 	(358	)	 	
Lapse of statutes	 	 	 	(895	)	 	
Settlements	 	 	 	(3,638	)	 	
 	 	 	
Balance at September 30, 2009	 	 	 	8,138	 	
Additions based on tax positions related to the current year	 	 	 	1,975	 	
Assumed in business combination	 	 	 	4,391	 	
Reductions based on tax positions related to prior years lapse of statutes	 	 	 	(2,740	)	 	
 	 	 	
Balance at September 30, 2010	 	 	$	 	11,764	 	
 	 	 	
If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is $8,489. Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At September 30, 2010 and 2009, 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 $2,134 and $1,407, respectively.
NOTE 14—STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION
In August 2008, Griffon’s Board of Directors authorized a 20 million share common stock rights offering to its shareholders in order to raise equity capital for general corporate purposes and to fund future growth. The rights had an exercise price of $8.50 per share. In conjunction with the rights offering, GS Direct, L.L.C. (“GS Direct”), an affiliate of Goldman Sachs, agreed to back stop the rights offering by purchasing, on the same terms, any and all shares not subscribed through the exercise of rights. GS Direct also agreed to purchase additional shares of common stock at the rights offering price if it did not acquire a minimum of 10 million shares of common stock as a result of its back stop commitment. Griffon received a total of $248,600 in gross proceeds from the rights offering and issued 29.2 million shares as follows: In September 2008, Griffon received $241,300 of gross proceeds, and issued 28.4 million shares, from the first closing of its rights offering and the closing of the related investments by GS Direct and by Griffon’s Chief Executive Officer; in October 2008, an additional $5,300 of rights offering proceeds were received, and 620,486 shares were issued, in connection with the second closing of the rights offering; and in April 2009, $2,000 of rights offering proceeds were received, and 233,298 shares were issued, in connection with the rights offering.
Griffon expenses the fair value of equity compensation grants over the related vesting period. Compensation cost related to stock-based awards with graded vesting are amortized using the straight-line attribution method. Options for an aggregate of 1,375,000 shares of Common Stock were previously authorized for grant under Griffon’s 2001 Stock Option Plan at September 30, 2010. As of September 30, 2010, options for 101,567 shares remain available for future grants under this plan. The plan provides for the granting of options at an exercise price of not less than 100% of the fair market value at the date of grant. Options
35

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

generally expire ten years after date of grant and become exercisable in equal installments over two to four years.
During 2006, shareholders approved the Griffon Corporation 2006 Equity Incentive Plan (“Incentive Plan”) under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares and deferred shares may be granted. Options under the Incentive Plan 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 shareholders approved an amendment to the Incentive Plan in 2009. The maximum number of shares of common stock available for award under the Incentive Plan is 7,750,000. The number of shares available under the Incentive Plan is reduced by a factor of two-to-one for awards other than stock options. If the remaining shares available under the Incentive Plan at September 30, 2010 were awarded through stock options, 2,418,000 shares would be available for grants or if the remaining shares were awarded as restricted stock, 1,209,000 shares would be available for grants.
A summary of stock option activity for the years ended September 30, 2010, 2009 and 2008 is as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	Options	 	
 	 	Shares	 	Weighted
Average
Exercise
Price	 	Aggregated
Intrinsic
Value	 	Weighted
Average
Contractual
Term
(Years)	 	
Outstanding at October 1, 2007	 	 	 	2,208,773	 	 	 	$	 	13.49	 	 	 	 	 	 	
Granted	 	 	 	25,000	 	 	 	 	14.19	 	 	 	 	 	 	
Exercised	 	 	 	—	 	 	 	 	 	 	 	 	
Forfeited/expired	 	 	 	(832,882	)	 	 	 	 	11.08	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2008	 	 	 	1,400,891	 	 	 	 	13.87	 	 	 	$	 	670	 	 	 	 	4.5	 	 	
 	 	 	 	 	 	 	 	 	 	
Exercisable at September 30, 2008	 	 	 	1,329,066	 	 	 	 	13.40	 	 	 	 	670	 	 	 	 	4.3	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at October 1, 2008	 	 	 	1,400,891	 	 	 	 	13.87	 	 	 	 	 	 	
Granted	 	 	 	350,000	 	 	 	 	20.00	 	 	 	 	 	 	
Exercised	 	 	 	(33,000	)	 	 	 	 	6.12	 	 	 	 	109	 	 	 	 	
Forfeited/expired	 	 	 	(27,552	)	 	 	 	 	20.55	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2009	 	 	 	1,690,339	 	 	 	 	15.18	 	 	 	 	980	 	 	 	 	4.6	 	 	
 	 	 	 	 	 	 	 	 	 	
Exercisable at September 30, 2009	 	 	 	1,420,381	 	 	 	 	14.21	 	 	 	 	980	 	 	 	 	3.9	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at October 1, 2009	 	 	 	1,690,339	 	 	 	 	15.18	 	 	 	 	 	 	
Granted	 	 	 	—	 	 	 	 	 	 	 	 	
Exercised	 	 	 	(54,075	)	 	 	 	 	6.33	 	 	 	 	337	 	 	 	 	
Forfeited/expired	 	 	 	(92,043	)	 	 	 	 	16.46	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2010	 	 	 	1,544,221	 	 	 	 	15.42	 	 	 	 	1,667	 	 	 	 	3.9	 	 	

36

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	
 	 	Options	 	
 	 	Shares	 	Weighted
Average
Exercise
Price	 	Aggregated
Intrinsic
Value	 	Weighted
Average
Contractual
Term
(Years)	 	
Exercisable at September 30, 2010 through:	 	 	 	 	 	 	 	 	 	
September 30, 2011	 	 	 	333,125	 	 	 	 	 	 	 	 	
September 30, 2012	 	 	 	212,500	 	 	 	 	 	 	 	 	
September 30, 2013	 	 	 	172,726	 	 	 	 	 	 	 	 	
September 30, 2014	 	 	 	133,000	 	 	 	 	 	 	 	 	
September 30, 2015	 	 	 	217,120	 	 	 	 	 	 	 	 	
September 30, 2016	 	 	 	99,500	 	 	 	 	 	 	 	 	
September 30, 2017	 	 	 	20,625	 	 	 	 	 	 	 	 	
September 30, 2018	 	 	 	—	 	 	 	 	 	 	 	 	
September 30, 2019	 	 	 	233,334	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Total Exercisable	 	 	 	1,421,930	 	 	 	$	 	15.04	 	 	 	$	 	1,667	 	 	 	 	3.5	 	 	

Range of
Exercises
Prices	 	Options Outstanding	 	Options Exercisable	 	
 	 	Shares	 	Weighted
Average
Exercise
Price	 	Aggregated
Intrinsic
Value	 	Weighted
Average
Contractual
Term
(Years)	 	Shares	 	Weighted
Average
Exercise
Price	 	Aggregated
Intrinsic
Value	 	Weighted
Average
Contractual
Term
(Years)	 	
$6.33 to $6.33	 	 	 	3,125	 	 	 	 	6.33	 	 	 	$	 	18	 	 	 	 	0.1	 	 	 	 	3,125	 	 	 	 	6.33	 	 	 	$	 	18	 	 	 	 	0.1	 	 	
$7.75 to $11.14	 	 	 	505,000	 	 	 	 	8.92	 	 	 	 	1,649	 	 	 	 	0.8	 	 	 	 	505,000	 	 	 	 	8.92	 	 	 	 	1,649	 	 	 	 	0.8	 	 	
$12.39 to $17.23	 	 	 	417,513	 	 	 	 	14.88	 	 	 	 	—	 	 	 	 	3.6	 	 	 	 	411,888	 	 	 	 	14.88	 	 	 	 	—	 	 	 	 	3.6	 	 	
$19.49 to $26.06	 	 	 	618,583	 	 	 	 	21.13	 	 	 	 	—	 	 	 	 	6.5	 	 	 	 	501,917	 	 	 	 	21.39	 	 	 	 	—	 	 	 	 	6.1	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Totals	 	 	 	1,544,221	 	 	 	 	 	$	 	1,667	 	 	 	 	 	 	1,421,930	 	 	 	 	 	$	 	1,667	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrecognized compensation expense related to non-vested options was $76 at September 30, 2010 and will be recognized over a weighted average vesting period of 0.5 years. The fair value of options vested during the years ended September 30, 2010, 2009 and 2008 were $585, $631 and $775, respectively.
37

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

A summary of restricted stock activity for the years ended September 30, 2010, 2009 and 2008 is as follows:
 	 	 	 	 	 	 	 	 	 	
 	 	Restricted Stock	 	
 	 	Shares	 	Weighted
Average
Grant
Price	 	Aggregated
Intrinsic
Value*	 	Weighted
Average
Contractual
Term
(Years)	 	
Outstanding at October 1, 2007	 	 	 	257,255	 	 	 	$	 	23.51	 	 	 	$	 	97	 	 	 	 	3.4	 	 	
Granted	 	 	 	300,000	 	 	 	 	8.98	 	 	 	 	2,694	 	 	 	 	
Fully Vested	 	 	 	(98,255	)	 	 	 	 	22.38	 	 	 	 	3,252	 	 	 	 	
Forfeited	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2008	 	 	 	459,000	 	 	 	 	14.25	 	 	 	 	11	 	 	 	 	2.8	 	 	
Granted	 	 	 	1,202,500	 	 	 	 	8.38	 	 	 	 	10,077	 	 	 	 	
Fully Vested	 	 	 	(53,000	)	 	 	 	 	24.20	 	 	 	 	511	 	 	 	 	
Forfeited	 	 	 	(6,000	)	 	 	 	 	9.30	 	 	 	 	56	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2009	 	 	 	1,602,500	 	 	 	 	9.53	 	 	 	 	2,414	 	 	 	 	3.1	 	 	
Granted	 	 	 	703,845	 	 	 	 	11.35	 	 	 	 	7,989	 	 	 	 	
Fully Vested	 	 	 	(43,000	)	 	 	 	 	24.20	 	 	 	 	590	 	 	 	 	
Forfeited	 	 	 	(52,500	)	 	 	 	 	14.79	 	 	 	 	776	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding at September 30, 2010	 	 	 	2,210,845	 	 	 	 	9.70	 	 	 	$	 	6,255	 	 	 	 	2.5	 	 	

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
*	 	 	 	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 $14,800 at September 30, 2010 and will be recognized over a weighted average vesting period of 2.9 years.
In connection with the September 2008 rights offering, Griffon was obligated under certain anti-dilution provisions within its stock option plans to reduce the exercise price of the then-outstanding options and recorded stock-based compensation expense of approximately $354. Also in September 2008, in connection with an investment in conjunction with the rights offering, Griffon’s Chief Executive Officer purchased 578,151 shares of Common Stock at $8.50 per share, representing a discount to the fair value of such shares at closing. Griffon recorded stock-based compensation expense related to this transaction of approximately $104.
Griffon has an Outside Director Stock Award Plan (the “Outside Director Plan”), which was approved by the shareholders in 1994, under which 330,000 shares may be issued to non-employee directors. Annually, each eligible director is awarded shares of Griffon’s Common Stock having a value of $10, which vests over a three-year period. For shares issued under the Outside Director Plan, the fair market value of the shares at the date of issuance is recognized as compensation expense over the vesting period. In 2010, 2009 and 2008, 9,792, 12,732 and 12,155 shares, respectively, were issued under the Outside Director Plan.
In connection with the ATT acquisition, Griffon entered into certain retention arrangements with the ATT senior management team. Under these arrangements, on September 30, 2010, Griffon issued 239,145 shares of common stock to the ATT senior management team, and for each share of common stock purchased, the ATT senior management team received one share of restricted stock that vests in full after four years, subject to the attainment of a specified performance measure.
38

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

At September 30, 2010, a total of approximately 6,443,558 shares of Griffon’s authorized Common Stock were reserved for issuance in connection with stock compensation plans.
The fair value of restricted stock and option grants is amortized over the respective vesting periods.
Using historical data as of the grant dates, the fair value of the 2009 option grant was estimated as of the grant dates using the Black-Scholes option pricing model with the following weighted average assumptions:
 	 	 	 	 	
 	 	2009
Grant	 	2008
Grant	
Risk-free interest rate	 	 	 	3.04%	 	 	 	 	4.09%	 	
Dividend yield	 	 	 	0.00%	 	 	 	 	0.00%	 	
Expected life (years)	 	 	 	7.0	 	 	 	 	7.0	 	
Volatility	 	 	 	38.98%	 	 	 	 	40.00%	 	
Option exercise price	 	 	$	 	20.00	 	 	 	$	 	14.19	 	
Fair value of options granted	 	 	$	 	2.06	 	 	 	$	 	6.89	 	
For the years ended September 30, 2010, 2009 and 2008, stock based compensation expense totaled $5,778, $4,415 and $3,327, respectively.
NOTE 15—ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of Accumulated other comprehensive income were:
 	 	 	 	 	 	 	 	
 	 	At September 30,	 	
 	 	2010	 	2009	 	2008	 	
Foreign currency translation adjustment	 	 	$	 	41,187	 	 	 	$	 	50,266	 	 	 	$	 	38,431	 	 	
Minimum pension liability	 	 	 	(23,605	)	 	 	 	 	(22,096	)	 	 	 	 	(12,962	)	 	 	
 	 	 	 	 	 	 	 	
Accumulative other comprehensive income	 	 	$	 	17,582	 	 	 	$	 	28,170	 	 	 	$	 	25,469	 	 	
 	 	 	 	 	 	 	 	
NOTE 16—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 $25,100, $24,700 and $32,400 in 2010, 2009 and 2008, respectively. Griffon has engaged in sale-leaseback transactions for various manufacturing equipment used at selected U.S. locations. Net proceeds received from these transactions, classified as operating leases, for the years ended September 30, 2010, 2009 and 2008 were zero, zero, and $4,791, respectively. Aggregate future minimum lease payments for operating leases at September 30, 2010 are $27,000 in 2011, $20,000 in 2012, $15,000 in 2013, $11,000 in 2014, $9,000 in 2015 and $29,000 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.
39

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

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. Thereafter, in a process that is still ongoing, ISC has submitted additional revised drafts of the Feasibility Study in response to comments received from the DEC.
Improper Advertisement Claim involving Union Tools Products. During December 2004, a customer of ATT was named in litigation that involved UnionTools products. The complaint asserted causes of action against the defendant for improper advertisement to the end consumer. The allegation suggests that advertisements led the consumer to believe that the hand tools sold were manufactured within boundaries of the United States. The allegation asserts cause of action against the customer for common law fraud. In the event that an adverse judgment is rendered against the customer, there is a possibility that the customer would seek legal recourse against ATT for an unspecified amount in contributory damages. Presently, ATT cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against ATT.
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. ATT is actively working with the New York Department of Environmental Conservation and the New York State Department of Health to define remediation requirements. Due to changes in administrative proceedings to date, the date by which the Company believes remediation will be completed has changed to December 2011 from December 2010. The Company believes that future remediation costs will be less than $1,000, and that it has adequately accrued for this liability.
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 claim has been asserted
40

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

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.
Contingent acquisition purchase price liabilities
In connection with certain acquisitions, Griffon has recorded contingent consideration of zero and $2,861 at September 30, 2010 and 2009, respectively, included in other liabilities.
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 17—EARNINGS PER SHARE
The rights offering discussed in the Stockholders’ Equity and Equity Compensation footnote contained a bonus element to existing shareholders that required Griffon to adjust the shares used in the computation of basic and fully-diluted weighted-average shares outstanding for all periods presented prior to the offering. Basic and diluted EPS from continuing operations for the years ended September 30, 2010, 2009 and 2008 were determined using the following information:
 	 	 	 	 	 	 	 	
(Shares in thousands)	 	For the Years Ended September 30,	 	
 	 	2010	 	2009*	 	2008*	 	
Weighted average shares outstanding—basic	 	 	 	58,974	 	 	 	 	58,699	 	 	 	 	32,667	 	 	
Incremental shares from 4% convertible notes	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
Incremental shares from stock based compensation	 	 	 	1,019	 	 	 	 	303	 	 	 	 	169	 	 	
 	 	 	 	 	 	 	 	
Weighted average shares outstanding—diluted	 	 	 	59,993	 	 	 	 	59,002	 	 	 	 	32,836	 	 	
 	 	 	 	 	 	 	 	
Anti-dilutive options excluded from diluted EPS computation	 	 	 	1,036	 	 	 	 	1,305	 	 	 	 	980	 	 	
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 18—RELATED PARTIES
Simultaneously with the closing of the September 2008 rights offering and related investment by GS Direct, two employees of GS Direct joined Griffon’s Board of Directors. In connection with the rights offering, GS Direct was paid a commitment fee, and received expense reimbursements from Griffon, of $2,432 during 2008. An affiliate of GS Direct acted
41

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

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; and acted as dealer manager for the tender of two prior issuances of ATT bonds. Fees and expenses paid in 2010 were approximately $14,149.
NOTE 19—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly results of operations for the years ended September 30, 2010 and 2009 were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Quarter ended	 	Continuing Operations	 	Net Income (loss)	 	
 	 	Revenue	 	Gross
Profit	 	Income
(loss)	 	Per Share
—Basic	 	Per Share
—Diluted	 	Income
(loss)	 	Per Share
—Basic	 	Per Share
—Diluted	 	
2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2009	 	 	$	 	305,157	 	 	 	$	 	70,281	 	 	 	$	 	4,180	 	 	 	$	 	0.07	 	 	 	$	 	0.07	 	 	 	$	 	4,291	 	 	 	$	 	0.07	 	 	 	$	 	0.07	 	 	
March 31, 2010	 	 	 	313,977	 	 	 	 	69,070	 	 	 	 	2,034	 	 	 	 	0.03	 	 	 	 	0.03	 	 	 	 	2,033	 	 	 	 	0.03	 	 	 	 	0.03	 	 	
June 30, 2010	 	 	 	327,026	 	 	 	 	74,355	 	 	 	 	4,989	 	 	 	 	0.08	 	 	 	 	0.08	 	 	 	 	4,968	 	 	 	 	0.08	 	 	 	 	0.08	 	 	
September 30, 2010	 	 	 	347,836	 	 	 	 	74,598	 	 	 	 	(1,699	)	 	 	 	 	(0.03	)	 	 	 	 	(0.03	)	 	 	 	 	(1,700	)	 	 	 	 	(0.03	)	 	 	 	 	(0.03	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	 	1,293,996	 	 	 	$	 	288,304	 	 	 	$	 	9,504	 	 	 	$	 	0.16	 	 	 	$	 	0.16	 	 	 	$	 	9,592	 	 	 	$	 	0.16	 	 	 	$	 	0.16	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2009	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2008	 	 	$	 	302,334	 	 	 	$	 	58,957	 	 	 	$	 	2,066	 	 	 	$	 	0.04	 	 	 	$	 	0.04	 	 	 	$	 	2,069	 	 	 	$	 	0.04	 	 	 	$	 	0.04	 	 	
March 31, 2009	 	 	 	276,087	 	 	 	 	53,975	 	 	 	 	(2,076	)	 	 	 	 	(0.04	)	 	 	 	 	(0.04	)	 	 	 	 	(1,427	)	 	 	 	 	(0.02	)	 	 	 	 	(0.02	)	 	 	
June 30, 2009	 	 	 	287,385	 	 	 	 	66,286	 	 	 	 	6,089	 	 	 	 	0.10	 	 	 	 	0.10	 	 	 	 	6,100	 	 	 	 	0.10	 	 	 	 	0.10	 	 	
September 30, 2009	 	 	 	328,244	 	 	 	 	77,905	 	 	 	 	11,839	 	 	 	 	0.20	 	 	 	 	0.20	 	 	 	 	11,966	 	 	 	 	0.20	 	 	 	 	0.20	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	 	1,194,050	 	 	 	$	 	257,123	 	 	 	$	 	17,918	 	 	 	$	 	0.31	 	 	 	$	 	0.30	 	 	 	$	 	18,708	 	 	 	$	 	0.32	 	 	 	$	 	0.32	 	 	

 
 	
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.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Income (loss) from continuing operations and Net income (loss), and the related per share earnings, for the three months and year ended September 30, 2008, included a $12,913 BPC goodwill write-off.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Income (loss) from continuing operations and Net income (loss), and the related per share earnings, included restructuring and other related charges related to BPC of $38, $1,202, $1,011, 1,220, $1,489 and $460 for the three-month periods ended June 30, 2009 and September 30, 2009 and each quarter in 2010, respectively and $4,180 and $1,240 for the years ended September 30, 2010 and 2009, respectively.	
NOTE 20—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.	
42

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
•	 	 	 	Home & 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, 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.	
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,	 	
 	 	2010	 	2009	 	2008	 	
REVENUE     	 	 	 	 	 	 	 	
Telephonics	 	 	$	 	434,516	 	 	 	$	 	387,881	 	 	 	$	 	366,288	 	 	
Home & Building Products	 	 	 	389,366	 	 	 	 	393,414	 	 	 	 	435,321	 	 	
Clopay Plastic Products	 	 	 	470,114	 	 	 	 	412,755	 	 	 	 	467,696	 	 	
 	 	 	 	 	 	 	 	
Total consolidated net sales	 	 	$	 	1,293,996	 	 	 	$	 	1,194,050	 	 	 	$	 	1,269,305	 	 	
 	 	 	 	 	 	 	 	
INCOME (LOSS) BEFORE TAXES AND
 DISCONTINUED OPERATIONS     	 	 	 	 	 	 	 	
Segment operating profit (loss):	 	 	 	 	 	 	 	
Telephonics	 	 	$	 	38,586	 	 	 	$	 	34,883	 	 	 	$	 	32,862	 	 	
Home & Building Products	 	 	 	4,986	 	 	 	 	(11,326	)	 	 	 	 	(17,444	)	 	 	
Clopay Plastic Products	 	 	 	20,469	 	 	 	 	24,072	 	 	 	 	20,620	 	 	
 	 	 	 	 	 	 	 	
Total segment operating profit	 	 	 	64,041	 	 	 	 	47,629	 	 	 	 	36,038	 	 	
Unallocated amounts	 	 	 	(37,199	)	 	 	 	 	(20,960	)	 	 	 	 	(21,281	)	 	 	
Gain (loss) from debt extinguishment, net	 	 	 	(1,117	)	 	 	 	 	4,488	 	 	 	 	—	 	 	
Net interest expense	 	 	 	(11,913	)	 	 	 	 	(11,552	)	 	 	 	 	(14,939	)	 	 	
 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	$	 	13,812	 	 	 	$	 	19,605	 	 	 	$	 	(182	)	 	 	
 	 	 	 	 	 	 	 	
Unallocated amounts typically include general corporate expenses not attributable to reportable segment.	 	
DEPRECIATION and AMORTIZATION     	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	
Telephonics	 	 	$	 	7,534	 	 	 	$	 	6,657	 	 	 	$	 	6,753	 	 	
Home & Building Products	 	 	 	10,185	 	 	 	 	13,223	 	 	 	 	12,071	 	 	
Clopay Plastic Products	 	 	 	22,384	 	 	 	 	21,930	 	 	 	 	22,638	 	 	
 	 	 	 	 	 	 	 	
Total segment	 	 	 	40,103	 	 	 	 	41,810	 	 	 	 	41,462	 	 	
Corporate	 	 	 	339	 	 	 	 	536	 	 	 	 	1,461	 	 	
 	 	 	 	 	 	 	 	
Total consolidated depreciation and amortization	 	 	$	 	40,442	 	 	 	$	 	42,346	 	 	 	$	 	42,923	 	 	

43

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	
 	 	For the Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
CAPITAL EXPENDITURES     	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	
Telephonics	 	 	$	 	12,410	 	 	 	$	 	7,564	 	 	 	$	 	5,862	 	 	
Home & Building Products	 	 	 	10,527	 	 	 	 	7,560	 	 	 	 	8,227	 	 	
Clopay Plastic Products	 	 	 	16,819	 	 	 	 	16,801	 	 	 	 	38,718	 	 	
 	 	 	 	 	 	 	 	
Total segment	 	 	 	39,756	 	 	 	 	31,925	 	 	 	 	52,807	 	 	
Corporate	 	 	 	721	 	 	 	 	772	 	 	 	 	309	 	 	
 	 	 	 	 	 	 	 	
Total consolidated capital expenditures	 	 	$	 	40,477	 	 	 	$	 	32,697	 	 	 	$	 	53,116	 	 	

ASSETS	 	At
September 30,
2010	 	At
September 30,
2009	 	At
September 30,
2008	
Segment assets:	 	 	 	 	 	 	
Telephonics	 	 	$	 	268,373	 	 	 	$	 	271,809	 	 	 	$	 	251,016	 	
Home & Building Products	 	 	 	919,146	 	 	 	 	169,251	 	 	 	 	197,740	 	
Clopay Plastic Products	 	 	 	397,470	 	 	 	 	364,626	 	 	 	 	356,635	 	
 	 	 	 	 	 	 	
Total segment assets	 	 	 	1,584,989	 	 	 	 	805,686	 	 	 	 	805,391	 	
Corporate (principally cash and equivalents)	 	 	 	157,645	 	 	 	 	330,752	 	 	 	 	344,254	 	
 	 	 	 	 	 	 	
Total continuing assets	 	 	 	1,742,634	 	 	 	 	1,136,438	 	 	 	 	1,149,645	 	
Assets from discontinued operations	 	 	 	6,882	 	 	 	 	7,453	 	 	 	 	17,841	 	
 	 	 	 	 	 	 	
Consolidated total	 	 	$	 	1,749,516	 	 	 	$	 	1,143,891	 	 	 	$	 	1,167,486	 	
 	 	 	 	 	 	 	
Segment information by geographic region was as follows:
 	 	 	 	 	 	 	 	
 	 	For the Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
REVENUE BY GEOGRAPHIC AREA     	 	 	 	 	 	 	 	
United States	 	 	$	 	882,444	 	 	 	$	 	827,009	 	 	 	$	 	853,692	 	 	
Germany	 	 	 	89,775	 	 	 	 	97,879	 	 	 	 	110,900	 	 	
Canada	 	 	 	68,934	 	 	 	 	69,198	 	 	 	 	64,378	 	 	
Brazil	 	 	 	55,570	 	 	 	 	41,566	 	 	 	 	44,019	 	 	
Turkey	 	 	 	27,601	 	 	 	 	10,161	 	 	 	 	13,415	 	 	
All other countries	 	 	 	169,672	 	 	 	 	148,237	 	 	 	 	182,901	 	 	
 	 	 	 	 	 	 	 	
Consolidated revenue	 	 	$	 	1,293,996	 	 	 	$	 	1,194,050	 	 	 	$	 	1,269,305	 	 	

PROPERTY, PLANT & EQUIPMENT BY
 GEOGRAPHIC AREA     	 	At
September 30,
2010	 	At
September 30,
2009	 	At
September 30,
2008	
United States	 	 	$	 	216,825	 	 	 	$	 	150,132	 	 	 	$	 	151,733	 	
Germany	 	 	 	61,860	 	 	 	 	64,503	 	 	 	 	67,800	 	
All other countries	 	 	 	36,241	 	 	 	 	21,384	 	 	 	 	19,470	 	
 	 	 	 	 	 	 	
Consolidated property, plant and equipment	 	 	$	 	314,926	 	 	 	$	 	236,019	 	 	 	$	 	239,003	 	
 	 	 	 	 	 	 	
Plastics sales to P&G were approximately $233,000 in 2010, $224,000 in 2009 and $262,000 in 2008. Telephonics’ sales to the United States Government and its agencies, either as a prime contractor or subcontractor, aggregated approximately $316,000 in 2010, $276,000 in 2009 and $257,000 in 2008.
44

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
NOTE 21—OTHER INCOME (EXPENSE)
Other income (expense) included $249, $(392) and $(5) for the years ended September 30, 2010, 2009 and 2008, 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.
NOTE 22—CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
On March 17, 2011, Griffon issued $550,000 of senior unsecured notes (the “Notes”) that are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation and Ames True Temper, Inc. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below is condensed consolidating balance sheets as of September 30, 2010 and 2009 and the related condensed consolidating statements of operations and cash flows for each of the three years in the period ended September 30, 2010, based on the guarantor structure. 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.
45

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2010
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	$	74,600	 	$	57,113	 	$	38,089	 	$	—	 	$	169,802	 	
Accounts receivable, net of allowances	 	 	—	 	 	181,549	 	 	70,480	 	 	—	 	 	252,029	 	
Contract costs and recognized income not yet billed, net of progress payments	 	 	—	 	 	62,681	 	 	474	 	 	—	 	 	63,155	 	
Inventories, net	 	 	—	 	 	211,920	 	 	56,881	 	 	—	 	 	268,801	 	
Prepaid and other current assets	 	 	5,963	 	 	39,843	 	 	10,291	 	 	(315	)	 	55,782	 	
Assets of discontinued operations	 	 	—	 	 	—	 	 	1,079	 	 	—	 	 	1,079	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Assets	 	 	80,563	 	 	553,106	 	 	177,294	 	 	(315	)	 	810,648	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	1,267	 	 	205,085	 	 	108,574	 	 	—	 	 	314,926	 	
GOODWILL	 	 	—	 	 	279,409	 	 	77,812	 	 	—	 	 	357,221	 	
INTANGIBLE ASSETS, net	 	 	—	 	 	91,507	 	 	141,504	 	 	—	 	 	233,011	 	
INTERCOMPANY RECEIVABLE	 	 	—	 	 	271,143	 	 	218,488	 	 	(489,631	)	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	3,269,975	 	 	1,091,359	 	 	2,546,639	 	 	(6,907,973	)	 	—	 	
OTHER ASSETS	 	 	40,586	 	 	44,188	 	 	11,784	 	 	(68,651	)	 	27,907	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	5,803	 	 	—	 	 	5,803	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	3,392,391	 	$	2,535,797	 	$	3,287,898	 	$	(7,466,570	)	$	1,749,516	 	

CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	625	 	$	1,135	 	$	19,141	 	$	—	 	$	20,901	 	
Accounts payable and accrued liabilities	 	 	24,247	 	 	224,082	 	 	61,851	 	 	(315	)	 	309,865	 	
Liabilities of discontinued operations	 	 	—	 	 	—	 	 	4,289	 	 	—	 	 	4,289	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Liabilities	 	 	24,872	 	 	225,217	 	 	85,281	 	 	(315	)	 	335,055	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	82,382	 	 	44,902	 	 	376,651	 	 	—	 	 	503,935	 	
INTERCOMPANY PAYABLES	 	 	—	 	 	238,392	 	 	251,239	 	 	(489,631	)	 	—	 	
OTHER LIABILITIES	 	 	76,821	 	 	114,515	 	 	68,680	 	 	(68,651	)	 	191,365	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	8,446	 	 	—	 	 	8,446	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities	 	 	184,075	 	 	623,026	 	 	790,297	 	 	(558,597	)	 	1,038,801	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	3,208,316	 	 	1,912,771	 	 	2,497,601	 	 	(6,907,973	)	 	710,715	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities and Shareholders’ Equity	 	$	3,392,391	 	$	2,535,797	 	$	3,287,898	 	$	(7,466,570	)	$	1,749,516	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
46

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	$	223,511	 	$	37,865	 	$	59,457	 	$	—	 	$	320,833	 	
Accounts receivable, net of allowances	 	 	—	 	 	120,498	 	 	44,121	 	 	—	 	 	164,619	 	
Contract costs and recognized income not yet billed,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
net of progress payments	 	 	—	 	 	75,393	 	 	143	 	 	—	 	 	75,536	 	
Inventories, net	 	 	—	 	 	112,164	 	 	27,006	 	 	—	 	 	139,170	 	
Prepaid and other current assets	 	 	2,050	 	 	22,854	 	 	9,094	 	 	5,263	 	 	39,261	 	
Assets of discontinued operations	 	 	—	 	 	—	 	 	1,576	 	 	—	 	 	1,576	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Assets	 	 	225,561	 	 	368,774	 	 	141,397	 	 	5,263	 	 	740,995	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	837	 	 	137,577	 	 	97,605	 	 	—	 	 	236,019	 	
GOODWILL	 	 	—	 	 	18,345	 	 	79,312	 	 	—	 	 	97,657	 	
INTANGIBLE ASSETS, net	 	 	—	 	 	—	 	 	34,211	 	 	—	 	 	34,211	 	
INTERCOMPANY RECEIVABLE	 	 	—	 	 	222,217	 	 	7,671	 	 	(229,888	)	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	1,597,672	 	 	349,148	 	 	901,314	 	 	(2,848,134	)	 	—	 	
OTHER ASSETS	 	 	36,089	 	 	19,039	 	 	(258	)	 	(25,738	)	 	29,132	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	5,877	 	 	—	 	 	5,877	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	1,860,159	 	$	1,115,100	 	$	1,267,129	 	$	(3,098,497	)	$	1,143,891	 	

CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	77,185	 	$	1,161	 	$	244	 	$	—	 	$	78,590	 	
Accounts payable and accrued liabilities	 	 	15,191	 	 	140,407	 	 	25,286	 	 	5,263	 	 	186,147	 	
Liabilities of discontinued operations	 	 	—	 	 	—	 	 	4,932	 	 	—	 	 	4,932	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Liabilities	 	 	92,376	 	 	141,568	 	 	30,462	 	 	5,263	 	 	269,669	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	5,000	 	 	112,699	 	 	(19,305	)	 	—	 	 	98,394	 	
INTERCOMPANY PAYABLES	 	 	—	 	 	7,120	 	 	222,768	 	 	(229,888	)	 	—	 	
OTHER LIABILITIES	 	 	67,897	 	 	18,937	 	 	17,741	 	 	(25,738	)	 	78,837	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	8,784	 	 	—	 	 	8,784	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities	 	 	165,273	 	 	280,324	 	 	260,450	 	 	(250,363	)	 	455,684	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	1,694,886	 	 	834,776	 	 	1,006,679	 	 	(2,848,134	)	 	688,207	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities and Shareholders’ Equity	 	$	1,860,159	 	$	1,115,100	 	$	1,267,129	 	$	(3,098,497	)	$	1,143,891	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
47

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the year ended September 30, 2010
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	$	—	 	$	983,665	 	$	323,867	 	$	(13,536	) 	$	1,293,996	 	
Cost of goods and services	 	 	—	 	 	740,622	 	 	279,632	 	 	(14,562	)	 	1,005,692	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	 	 	243,043	 	 	44,235	 	 	1,026	 	 	288,304	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	26,491	 	 	190,308	 	 	44,860	 	 	(256	)	 	261,403	 	
Restructuring and other related charges	 	 	—	 	 	4,180	 	 	—	 	 	—	 	 	4,180	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	26,491	 	 	194,488	 	 	44,860	 	 	(256	)	 	265,583	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(26,491	)	 	48,555	 	 	(625	)	 	1,282	 	 	22,721	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	(8,607	)	 	6,010	 	 	(9,316	)	 	—	 	 	(11,913	)	
Loss from debt extinguishment, net	 	 	(6	)	 	(1,111	)	 	—	 	 	—	 	 	(1,117	)	
Other intercompany	 	 	—	 	 	(5,217	)	 	5,217	 	 	—	 	 	—	 	
Other, net	 	 	999	 	 	6,917	 	 	(2,513	)	 	(1,282	)	 	4,121	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (expense)	 	 	(7,614	)	 	6,599	 	 	(6,612	)	 	(1,282	)	 	(8,909	)	

Income (loss) before taxes and discontinued operations	 	 	(34,105	)	 	55,154	 	 	(7,237	)	 	—	 	 	13,812	 	
Provision (benefit) for income taxes	 	 	(14,853	)	 	18,017	 	 	1,144	 	 	—	 	 	4,308	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in net income of subsidiaries	 	 	(19,252	)	 	37,137	 	 	(8,381	)	 	—	 	 	9,504	 	
Equity in net income of subsidiaries	 	 	28,844	 	 	1,115	 	 	37,137	 	 	(67,096	)	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	9,592	 	 	38,252	 	 	28,756	 	 	(67,096	)	 	9,504	 	
Loss from discontinued operations	 	 	—	 	 	—	 	 	88	 	 	—	 	 	88	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	9,592	 	$	38,252	 	$	28,844	 	$	(67,096	)	$	9,592	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
48

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the year ended September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	$	—	 	$	919,072	 	$	283,945	 	$	(8,967	) 	$	1,194,050	 	
Cost of goods and services	 	 	—	 	 	706,051	 	 	240,869	 	 	(9,993	)	 	936,927	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	 	 	213,021	 	 	43,076	 	 	1,026	 	 	257,123	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	20,643	 	 	179,759	 	 	30,590	 	 	(256	)	 	230,736	 	
Restructuring and other related charges	 	 	—	 	 	1,240	 	 	—	 	 	—	 	 	1,240	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	20,643	 	 	180,999	 	 	30,590	 	 	(256	)	 	231,976	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(20,643	)	 	32,022	 	 	12,486	 	 	1,282	 	 	25,147	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	(5,996	)	 	(1,356	)	 	(4,200	)	 	—	 	 	(11,552	)	
Gain from debt extinguishment, net	 	 	4,488	 	 	—	 	 	—	 	 	—	 	 	4,488	 	
Other intercompany	 	 	—	 	 	5,570	 	 	(5,570	)	 	—	 	 	—	 	
Other, net	 	 	68	 	 	6,079	 	 	(3,343	)	 	(1,282	)	 	1,522	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (expense)	 	 	(1,440	)	 	10,293	 	 	(13,113	)	 	(1,282	)	 	(5,542	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	(22,083	)	 	42,315	 	 	(627	)	 	—	 	 	19,605	 	
Provision (benefit) for income taxes	 	 	(8,974	)	 	11,135	 	 	(474	)	 	—	 	 	1,687	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in net income of subsidiaries	 	 	(13,109	)	 	31,180	 	 	(153	)	 	—	 	 	17,918	 	
Equity in net income of subsidiaries	 	 	31,817	 	 	(412	)	 	31,180	 	 	(62,585	)	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	18,708	 	 	30,768	 	 	31,027	 	 	(62,585	)	 	17,918	 	
Loss from discontinued operations	 	 	—	 	 	—	 	 	790	 	 	—	 	 	790	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	18,708	 	$	30,768	 	$	31,817	 	$	(62,585	)	$	18,708	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
49

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the year ended September 30, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	$	—	 	$	935,608	 	$	343,077	 	$	(9,380	) 	$	1,269,305	 	
Cost of goods and services	 	 	—	 	 	724,800	 	 	281,914	 	 	(10,406	)	 	996,308	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	 	 	210,808	 	 	61,163	 	 	1,026	 	 	272,997	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	21,155	 	 	181,963	 	 	42,568	 	 	(256	)	 	245,430	 	
Impairment of goodwill	 	 	—	 	 	12,913	 	 	—	 	 	—	 	 	12,913	 	
Restructuring and other related charges	 	 	—	 	 	2,407	 	 	203	 	 	—	 	 	2,610	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	21,155	 	 	197,283	 	 	42,771	 	 	(256	)	 	260,953	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(21,155	)	 	13,525	 	 	18,392	 	 	1,282	 	 	12,044	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	(10,227	)	 	(279	)	 	(4,433	)	 	—	 	 	(14,939	)	
Other intercompany	 	 	—	 	 	4,407	 	 	(4,407	)	 	—	 	 	—	 	
Other, net	 	 	669	 	 	7,305	 	 	(3,979	)	 	(1,282	)	 	2,713	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (expense)	 	 	(9,558	)	 	11,433	 	 	(12,819	)	 	(1,282	)	 	(12,226	)	

Income (loss) before taxes and discontinued operations	 	 	(30,713	)	 	24,958	 	 	5,573	 	 	—	 	 	(182	)	
Provision (benefit) for income taxes	 	 	(7,606	)	 	10,791	 	 	(534	)	 	—	 	 	2,651	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in net income of subsidiaries	 	 	(23,107	)	 	14,167	 	 	6,107	 	 	—	 	 	(2,833	)	
Equity in net income of subsidiaries	 	 	(20,317	)	 	13,533	 	 	14,167	 	 	(7,383	)	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(43,424	)	 	27,700	 	 	20,274	 	 	(7,383	)	 	(2,833	)	
Income from discontinued operations	 	 	—	 	 	—	 	 	(40,591	)	 	—	 	 	(40,591	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(43,424	)	$	27,700	 	$	(20,317	)	$	(7,383	)	$	(43,424	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
50

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2010
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	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	 	 	(720	)	 	(28,713	)	 	(11,044	)	 	—	 	 	(40,477	)	
Acquired business, net of cash acquired	 	 	(167,950	)	 	—	 	 	(374,050	)	 	—	 	 	(542,000	)	
Intercompany distributions	 	 	10,000	 	 	(10,000	)	 	—	 	 	—	 	 	—	 	
Proceeds from sale of assets	 	 	—	 	 	(1,666	)	 	—	 	 	—	 	 	(1,666	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	 	 	(158,670	)	 	(40,379	)	 	(385,094	)	 	—	 	 	(584,143	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	 	 	2,823	 	 	—	 	 	—	 	 	—	 	 	2,823	 	
Proceeds from issuance of long-term debt	 	 	100,000	 	 	40,000	 	 	403,875	 	 	—	 	 	543,875	 	
Payments of long-term debt	 	 	(79,473	)	 	(85,086	)	 	(12,243	)	 	—	 	 	(176,802	)	
Financing costs	 	 	(4,278	)	 	—	 	 	(13,177	)	 	—	 	 	(17,455	)	
Exercise of stock options	 	 	343	 	 	—	 	 	—	 	 	—	 	 	343	 	
Tax benefit from vesting of restricted stock	 	 	325	 	 	—	 	 	—	 	 	—	 	 	325	 	
Capital contribution	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Other, net	 	 	182	 	 	17,093	 	 	(17,091	)	 	—	 	 	184	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	19,922	 	 	(27,993	)	 	361,364	 	 	—	 	 	353,293	 	
Net cash used in discontinued operations	 	 	—	 	 	—	 	 	(638	)	 	—	 	 	(638	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	—	 	 	—	 	 	(2,668	)	 	—	 	 	(2,668	)	

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	(148,911	)	 	19,248	 	 	(21,368	)	 	—	 	 	(151,031	)	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	223,511	 	 	37,865	 	 	59,457	 	 	—	 	 	320,833	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	$	74,600	 	$	57,113	 	$	38,089	 	$	—	 	$	169,802	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
51

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	18,708	 	$	30,768	 	$	31,817	 	$	(62,585	)	$	18,708	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	3,556	 	 	69,939	 	 	10,605	 	 	—	 	 	84,100	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(372	)	 	(23,888	)	 	(8,437	)	 	—	 	 	(32,697	)	
Intercompany distributions	 	 	10,000	 	 	(10,000	)	 	—	 	 	—	 	 	—	 	
Proceeds from sale of assets	 	 	—	 	 	—	 	 	200	 	 	—	 	 	200	 	
Increase in equipment lease deposits	 	 	—	 	 	(336	)	 	—	 	 	—	 	 	(336	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	 	 	9,628	 	 	(34,224	)	 	(8,237	)	 	—	 	 	(32,833	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	 	 	7,257	 	 	—	 	 	—	 	 	—	 	 	7,257	 	
Proceeds from issuance of long-term debt	 	 	4,370	 	 	6,523	 	 	538	 	 	—	 	 	11,431	 	
Payments of long-term debt	 	 	(43,885	)	 	(11,563	)	 	(1,228	)	 	—	 	 	(56,676	)	
Decrease in short-term borrowings	 	 	—	 	 	—	 	 	(866	)	 	—	 	 	(866	)	
Financing costs	 	 	(541	)	 	—	 	 	(56	)	 	—	 	 	(597	)	
Purchase of ESOP shares	 	 	(4,370	)	 	—	 	 	—	 	 	—	 	 	(4,370	)	
Tax benefit from vesting of restricted stock	 	 	217	 	 	—	 	 	—	 	 	—	 	 	217	 	
Other, net	 	 	(275	)	 	(34,339	)	 	35,016	 	 	—	 	 	402	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	(37,227	)	 	(39,379	)	 	33,404	 	 	—	 	 	(43,202	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in discontinued operations	 	 	—	 	 	—	 	 	(1,305	)	 	—	 	 	(1,305	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	—	 	 	—	 	 	2,152	 	 	—	 	 	2,152	 	

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	(24,043	)	 	(3,664	)	 	36,619	 	 	—	 	 	8,912	 	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	247,554	 	 	41,529	 	 	22,838	 	 	—	 	 	311,921	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	$	223,511	 	$	37,865	 	$	59,457	 	$	—	 	$	320,833	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
52

GRIFFON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except per share data)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended September 30, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(43,424	)	$	27,700	 	$	(20,317	)	$	(7,383	)	$	(43,424	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	(11,977	)	 	74,411	 	 	23,615	 	 	—	 	 	86,049	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(46	)	 	(47,013	)	 	(6,057	)	 	—	 	 	(53,116	)	
Intercompany distributions	 	 	60,000	 	 	(60,000	)	 	—	 	 	—	 	 	—	 	
Acquired business, net of cash acquired	 	 	—	 	 	(1,829	)	 	—	 	 	—	 	 	(1,829	)	
Proceeds from sale of assets	 	 	—	 	 	1,000	 	 	—	 	 	—	 	 	1,000	 	
Advances from subsidiaries	 	 	42,000	 	 	—	 	 	(42,000	)	 	—	 	 	—	 	
Decrease in equipment lease deposits	 	 	—	 	 	4,593	 	 	—	 	 	—	 	 	4,593	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	101,954	 	 	(103,249	)	 	(48,057	)	 	—	 	 	(49,352	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	 	 	241,344	 	 	—	 	 	—	 	 	—	 	 	241,344	 	
Purchase of shares for treasury	 	 	(579	)	 	—	 	 	—	 	 	—	 	 	(579	)	
Proceeds from issuance of long-term debt	 	 	630	 	 	50,000	 	 	38,605	 	 	—	 	 	89,235	 	
Payments of long-term debt	 	 	(76,417	)	 	(6,412	)	 	(4,956	)	 	—	 	 	(87,785	)	
Decrease in short-term borrowings	 	 	—	 	 	—	 	 	(924	)	 	—	 	 	(924	)	
Financing costs	 	 	(7,111	)	 	(857	)	 	(2,059	)	 	—	 	 	(10,027	)	
Tax benefit from vesting of restricted stock	 	 	3	 	 	—	 	 	—	 	 	—	 	 	3	 	
Other, net	 	 	(3,928	)	 	5,545	 	 	(1,478	)	 	—	 	 	139	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	153,942	 	 	48,276	 	 	29,188	 	 	—	 	 	231,406	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) discontinued operations	 	 	—	 	 	—	 	 	86	 	 	—	 	 	86	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	—	 	 	—	 	 	(1,015	)	 	—	 	 	(1,015	)	

NET INCREASE IN CASH AND EQUIVALENTS	 	 	243,919	 	 	19,438	 	 	3,817	 	 	—	 	 	267,174	 	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	3,635	 	 	22,091	 	 	19,021	 	 	—	 	 	44,747	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	$	247,554	 	$	41,529	 	$	22,838	 	$	—	 	$	311,921	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
53

SCHEDULE I
GRIFFON CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(in thousands)
 	 	 	 	 	
 	 	At September 30,
2010	 	At September 30,
2009	
CURRENT ASSETS	 	 	 	 	
Cash and equivalents	 	 	$	 	74,600	 	 	 	$	 	223,511	 	
Prepaid and other current assets	 	 	 	5,963	 	 	 	 	2,050	 	
 	 	 	 	 	
Total Current Assets	 	 	 	80,563	 	 	 	 	225,561	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	 	1,267	 	 	 	 	837	 	
INVESTMENT IN SUBSIDIARIES	 	 	 	772,374	 	 	 	 	590,993	 	
OTHER ASSETS	 	 	 	40,586	 	 	 	 	36,089	 	
 	 	 	 	 	
Total Assets	 	 	$	 	894,790	 	 	 	$	 	853,480	 	
 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	
Current portion of long-term debt, net of debt discount	 	 	$	 	625	 	 	 	$	 	77,185	 	
Accounts payable and accrued liabilities	 	 	 	24,247	 	 	 	 	15,191	 	
 	 	 	 	 	
Total Current Liabilities	 	 	 	24,872	 	 	 	 	92,376	 	
CONVERTIBLE SUBORDINATED NOTES, net of debt discount	 	 	 	78,007	 	 	 	 	—	 	
OTHER	 	 	 	81,196	 	 	 	 	72,897	 	
 	 	 	 	 	
Total Liabilities	 	 	 	184,075	 	 	 	 	165,273	 	
COMMITMENTS AND CONTINGENCIES	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	710,715	 	 	 	 	688,207	 	
 	 	 	 	 	
Total Liabilities and Shareholders’ Equity	 	 	$	 	894,790	 	 	 	$	 	853,480	 	
 	 	 	 	 	
54

SCHEDULE I—(Continued)
GRIFFON CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(in thousands)
 	 	 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
Costs and Expenses:	 	 	 	 	 	 	 	
General and administrative expenses	 	 	$	 	(26,491	)	 	 	 	$	 	(20,643	)	 	 	 	$	 	(21,155	)	 	 	
Gain (loss) from debt extinguishment, net	 	 	 	(6	)	 	 	 	 	4,488	 	 	 	 	—	 	 	
Interest expense and other, net	 	 	 	(7,608	)	 	 	 	 	(5,928	)	 	 	 	 	(9,558	)	 	 	
 	 	 	 	 	 	 	 	
Loss before credit for federal income taxes and equity in net income of subsidiaries	 	 	 	(34,105	)	 	 	 	 	(22,083	)	 	 	 	 	(30,713	)	 	 	
Credit for federal income taxes resulting from tax sharing arrangement with subsidiaries	 	 	 	(14,853	)	 	 	 	 	(8,974	)	 	 	 	 	(7,606	)	 	 	
 	 	 	 	 	 	 	 	
Loss before equity in net income of subsidiaries	 	 	 	(19,252	)	 	 	 	 	(13,109	)	 	 	 	 	(23,107	)	 	 	
Equity in income of subsidiaries	 	 	 	28,756	 	 	 	 	31,027	 	 	 	 	20,274	 	 	
 	 	 	 	 	 	 	 	
Income from continuing operations	 	 	 	9,504	 	 	 	 	17,918	 	 	 	 	(2,833	)	 	 	
Equity in income (loss) of discontinued operations	 	 	 	88	 	 	 	 	790	 	 	 	 	(40,591	)	 	 	
 	 	 	 	 	 	 	 	
Net income (loss)	 	 	$	 	9,592	 	 	 	$	 	18,708	 	 	 	$	 	(43,424	)	 	 	
 	 	 	 	 	 	 	 	
55

SCHEDULE I—(Continued)
GRIFFON CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(in thousands)
 	 	 	 	 	 	 	 	
 	 	Years Ended September 30,	 	
 	 	2010	 	2009	 	2008	 	
CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	
Net income (loss)	 	 	$	 	9,592	 	 	 	$	 	18,708	 	 	 	$	 	(43,424	)	 	 	
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	
Stock-based compensation	 	 	 	5,778	 	 	 	 	4,145	 	 	 	 	3,327	 	 	
Amortization/write-off of deferred financing costs and debt discount	 	 	 	4,439	 	 	 	 	4,586	 	 	 	 	5,059	 	 	
(Gain) loss from debt extinguishment, net	 	 	 	6	 	 	 	 	(4,488	)	 	 	 	 	—	 	 	
Deferred income taxes	 	 	 	(2,500	)	 	 	 	 	(10,174	)	 	 	 	 	2,840	 	 	
Equity in income of subsidiaries	 	 	 	(28,756	)	 	 	 	 	(31,027	)	 	 	 	 	(20,274	)	 	 	
Equity in (income) loss of discontinued operations	 	 	 	(88	)	 	 	 	 	(790	)	 	 	 	 	40,591	 	 	
Change in assets and liabilities:	 	 	 	 	 	 	 	
(Increase) decrease in prepaid and other assets	 	 	 	(4,309	)	 	 	 	 	199	 	 	 	 	(120	)	 	 	
Increase in accounts payable, accrued liabilities and income taxes payable	 	 	 	4,609	 	 	 	 	17,640	 	 	 	 	4,060	 	 	
Other changes, net	 	 	 	1,066	 	 	 	 	4,757	 	 	 	 	(4,036	)	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	 	(10,163	)	 	 	 	 	3,556	 	 	 	 	(11,977	)	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	 	(720	)	 	 	 	 	(372	)	 	 	 	 	(46	)	 	 	
Acquired business, net of cash acquired	 	 	 	(167,950	)	 	 	 	 	—	 	 	 	 	—	 	 	
Advances from subsidiaries	 	 	 	—	 	 	 	 	—	 	 	 	 	42,000	 	 	
Distribution from subsidiaries	 	 	 	10,000	 	 	 	 	10,000	 	 	 	 	60,000	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	 	 	 	(158,670	)	 	 	 	 	9,628	 	 	 	 	101,954	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	
Proceeds from issuance of from rights offering	 	 	 	2,823	 	 	 	 	7,257	 	 	 	 	241,344	 	 	
Proceeds of shares for treasury	 	 	 	—	 	 	 	 	—	 	 	 	 	(579	)	 	 	
Proceeds from issuance of long-term debt	 	 	 	100,000	 	 	 	 	4,370	 	 	 	 	630	 	 	
Payments of long-term debt	 	 	 	(79,473	)	 	 	 	 	(43,885	)	 	 	 	 	(76,417	)	 	 	
Decrease in short-term borrowings	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	
Financing costs	 	 	 	(4,278	)	 	 	 	 	(541	)	 	 	 	 	(7,111	)	 	 	
Purchase of ESOP shares	 	 	 	—	 	 	 	 	(4,370	)	 	 	 	 	—	 	 	
Exercise of stock options	 	 	 	343	 	 	 	 	—	 	 	 	 	—	 	 	
Tax benefit from vesting of restricted stock	 	 	 	325	 	 	 	 	217	 	 	 	 	3	 	 	
Capital contribution	 	 	 	—	 	 	 	 	(676	)	 	 	 	 	(4,067	)	 	 	
Other, net	 	 	 	182	 	 	 	 	401	 	 	 	 	139	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	 	19,922	 	 	 	 	(37,227	)	 	 	 	 	153,942	 	 	
 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	 	(148,911	)	 	 	 	 	(24,043	)	 	 	 	 	243,919	 	 	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	 	223,511	 	 	 	 	247,554	 	 	 	 	3,635	 	 	
 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	 	$	 	74,600	 	 	 	$	 	223,511	 	 	 	$	 	247,554	 	 	
 	 	 	 	 	 	 	 	
56

SCHEDULE II
GRIFFON CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 2010, 2009 AND 2008
(in thousands)
 	 	 	 	 	 	 	 	 	 	 	 	 	
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, 2010	 	 	 	 	 	 	 	 	
Allowance for Doubtful Accounts	 	 	 	 	 	 	 	 	 	 	 	 	
Bad debts	 	 	$	 	3,138	 	 	 	$	 	521	 	 	 	$	 	2,431	 	 	 	$	 	(996	)	 	 	 	$	 	(3	)	 	 	 	$	 	5,091	 	
Sales returns and allowances	 	 	 	1,319	 	 	 	 	—	 	 	 	 	430	 	 	 	 	(258	)	 	 	 	 	(1	)	 	 	 	 	1,490	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	 	4,457	 	 	 	$	 	521	 	 	 	$	 	2,861	 	 	 	$	 	(1,254	)	 	 	 	$	 	(4	)	 	 	 	$	 	6,581	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Inventory valuation	 	 	$	 	11,178	 	 	 	$	 	1,187	 	 	 	$	 	4,904	 	 	 	$	 	(4,017	)	 	 	 	$	 	(111	)	 	 	 	$	 	13,141	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred tax valuation allowance	 	 	$	 	4,726	 	 	 	$	 	9,971	 	 	 	$	 	372	 	 	 	$	 	—	 	 	 	$	 	—	 	 	 	$	 	15,069	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
FOR THE YEAR ENDED SEPTEMBER 30, 2009	 	 	 	 	 	 	 	 	
Allowance for Doubtful Accounts	 	 	 	 	 	 	 	 	 	 	 	 	
Bad debts	 	 	$	 	3,675	 	 	 	$	 	—	 	 	 	$	 	628	 	 	 	$	 	(1,210	)	 	 	 	$	 	45	 	 	 	$	 	3,138	 	
Sales returns and
allowances	 	 	 	1,934	 	 	 	 	—	 	 	 	 	(247	)	 	 	 	 	(385	)	 	 	 	 	17	 	 	 	 	1,319	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	 	5,609	 	 	 	$	 	—	 	 	 	$	 	381	 	 	 	$	 	(1,595	)	 	 	 	$	 	62	 	 	 	$	 	4,457	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Inventory valuation	 	 	$	 	10,315	 	 	 	$	 	—	 	 	 	$	 	5,549	 	 	 	$	 	(4,725	)	 	 	 	$	 	39	 	 	 	$	 	11,178	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred tax valuation allowance	 	 	$	 	8,040	 	 	 	$	 	—	 	 	 	$	 	(3,314	)	 	 	 	$	 	—	 	 	 	$	 	—	 	 	 	$	 	4,726	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
FOR THE YEAR ENDED SEPTEMBER 30, 2008	 	 	 	 	 	 	 	 	
Allowance for Doubtful Accounts	 	 	 	 	 	 	 	 	 	 	 	 	
Bad debts	 	 	$	 	3,834	 	 	 	$	 	—	 	 	 	$	 	1,257	 	 	 	$	 	(1,407	)	 	 	 	$	 	(9	)	 	 	 	$	 	3,675	 	
Sales returns and
allowances	 	 	 	2,503	 	 	 	 	—	 	 	 	 	(157	)	 	 	 	 	(415	)	 	 	 	 	3	 	 	 	 	1,934	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	$	 	6,337	 	 	 	$	 	—	 	 	 	$	 	1,100	 	 	 	$	 	(1,822	)	 	 	 	$	 	(6	)	 	 	 	$	 	5,609	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Inventory valuation	 	 	$	 	10,231	 	 	 	$	 	—	 	 	 	$	 	4,862	 	 	 	$	 	(4,834	)	 	 	 	$	 	56	 	 	 	$	 	10,315	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred tax valuation allowance	 	 	$	 	3,841	 	 	 	$	 	—	 	 	 	$	 	4,199	 	 	 	$	 	—	 	 	 	$	 	—	 	 	 	$	 	8,040	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Note: This Schedule II is for continuing operations only.
57

EXHIBIT 99.2

GRIFFON CORPORATION AND SUBSIDIARIES
C ONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 	 	 	 	 	 	 	 	
 	 	(Unaudited)
At March 31,
2011	 	At September 30,
2010	 	

	 	

	 	
 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	
Cash and equivalents	 	$	208,337	 	$	169,802	 	
Accounts receivable, net of allowances of $6,419 and $6,581	 	 	293,172	 	 	252,029	 	
Contract costs and recognized income not yet billed, net of progress payments of $4,663 and $1,423	 	 	62,878	 	 	63,155	 	
Inventories, net	 	 	270,501	 	 	268,801	 	
Prepaid and other current assets	 	 	54,758	 	 	55,782	 	
Assets of discontinued operations	 	 	1,543	 	 	1,079	 	

	

	 	

	

	 	
Total Current Assets	 	 	891,189	 	 	810,648	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	337,198	 	 	314,926	 	
GOODWILL	 	 	360,268	 	 	357,221	 	
INTANGIBLE ASSETS, net	 	 	231,642	 	 	233,011	 	
OTHER ASSETS	 	 	31,915	 	 	27,907	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	5,136	 	 	5,803	 	

	

	 	

	

	 	
Total Assets	 	$	1,857,348	 	$	1,749,516	 	

	

	 	

	

	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	8,579	 	$	20,901	 	
Accounts payable	 	 	186,358	 	 	185,165	 	
Accrued liabilities	 	 	77,088	 	 	124,700	 	
Liabilities of discontinued operations	 	 	4,323	 	 	4,289	 	

	

	 	

	

	 	
Total Current Liabilities	 	 	276,348	 	 	335,055	 	
LONG-TERM DEBT, net of debt discount of $21,139 and $30,650	 	 	666,995	 	 	503,935	 	
OTHER LIABILITIES	 	 	197,482	 	 	191,365	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	7,282	 	 	8,446	 	

	

	 	

	

	 	
Total Liabilities	 	 	1,148,107	 	 	1,038,801	 	

	

	 	

	

	 	
COMMITMENTS AND CONTINGENCIES	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	 	 	 	 	
Total Shareholders’ Equity	 	 	709,241	 	 	710,715	 	

	

	 	

	

	 	
Total Liabilities and Shareholders’ Equity	 	$	1,857,348	 	$	1,749,516	 	

	

	 	

	

	 	
GRIFFON CORPORATION
C ONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	CAPITAL IN
EXCESS OF
PAR VALUE	 	RETAINED
EARNINGS	 	 	 	ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)	 	DEFERRED
ESOP
COMPENSATION	 	Total	 	 	
 	 	COMMON STOCK	 	 	 	 	 	TREASURY SHARES	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	SHARES	 	PAR VALUE	 	 	 	 	 	SHARES	 	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2010	 	 	74,580	 	$	18,645	 	$	460,955	 	$	431,584	 	 	12,466	 	$	(213,560	)	$	17,582	 	$	(4,491	)	$	710,715	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	—	 	 	—	 	 	—	 	 	(15,681	)	 	—	 	 	—	 	 	—	 	 	—	 	 	(15,681	)	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock issued for options exercised	 	 	3	 	 	1	 	 	20	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	21	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax benefit/credit from the exercise/forfeiture of stock options	 	 	—	 	 	—	 	 	8	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	8	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of deferred compensation	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	372	 	 	372	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted stock awards granted, net	 	 	1,387	 	 	347	 	 	(347	)	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP purchase of common stock	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(8,310	)	 	(8,310	)	 	 	 	 	 	 	 	 	 	 	 	 	
ESOP distribution of common stock	 	 	—	 	 	—	 	 	152	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	152	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	—	 	 	—	 	 	4,647	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	4,647	 	 	 	 	 	 	 	 	 	 	 	 	 	
Translation of foreign financial statements	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	16,466	 	 	—	 	 	16,466	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension other comprehensive income amort, net of tax	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	851	 	 	—	 	 	851	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at 3/31/2011	 	 	75,970	 	$	18,993	 	$	465,435	 	$	415,903	 	 	12,466	 	$	(213,560	)	$	34,899	 	$	(12,429	)	$	709,241	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

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

1

GRIFFON CORPORATION AND SUBSIDIARIES
C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	Six Months Ended March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	
Revenue	 	$	476,129	 	$	313,977	 	$	890,531	 	$	619,134	 	
Cost of goods and services	 	 	374,986	 	 	244,907	 	 	701,529	 	 	479,783	 	

	

	 	

	

	 	

	

	 	

	

	 	
Gross profit	 	 	101,143	 	 	69,070	 	 	189,002	 	 	139,351	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	84,363	 	 	64,055	 	 	164,808	 	 	126,016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring and other related charges	 	 	1,212	 	 	1,220	 	 	2,605	 	 	2,231	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total operating expenses	 	 	85,575	 	 	65,275	 	 	167,413	 	 	128,247	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	 	 	15,568	 	 	3,795	 	 	21,589	 	 	11,104	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	(11,319	)	 	(3,729	)	 	(22,542	)	 	(6,699	)	
Interest income	 	 	97	 	 	192	 	 	166	 	 	254	 	
Gain (loss) from debt extinguishment, net	 	 	(26,164	)	 	12	 	 	(26,164	)	 	(6	)	
Other, net	 	 	1,177	 	 	589	 	 	3,262	 	 	1,216	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total other income (expense)	 	 	(36,209	)	 	(2,936	)	 	(45,278	)	 	(5,235	)	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	(20,641	)	 	859	 	 	(23,689	)	 	5,869	 	
Benefit for income taxes	 	 	(6,640	)	 	(1,175	)	 	(8,008	)	 	(345	)	

	

	 	

	

	 	

	

	 	

	

	 	
Income (loss) from continuing operations	 	 	(14,001	)	 	2,034	 	 	(15,681	)	 	6,214	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations of the discontinued Installation Services business	 	 	—	 	 	(1	)	 	—	 	 	169	 	
Provision for income taxes	 	 	—	 	 	—	 	 	—	 	 	59	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income from discontinued operations	 	 	—	 	 	(1	)	 	—	 	 	110	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income (loss)	 	$	(14,001	)	$	2,033	 	$	(15,681	)	$	6,324	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	$	(0.24	)	$	0.03	 	$	(0.26	)	$	0.11	 	
Income from discontinued operations	 	 	0.00	 	 	0.00	 	 	0.00	 	 	0.00	 	
Net income (loss)	 	 	(0.24	)	 	0.03	 	 	(0.26	)	 	0.11	 	
Weighted-average shares outstanding	 	 	59,280	 	 	58,977	 	 	59,277	 	 	58,906	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	$	(0.24	)	$	0.03	 	$	(0.26	)	$	0.10	 	
Income from discontinued operations	 	 	0.00	 	 	0.00	 	 	0.00	 	 	0.00	 	
Net income (loss)	 	 	(0.24	)	 	0.03	 	 	(0.26	)	 	0.11	 	
Weighted-average shares outstanding	 	 	59,280	 	 	59,939	 	 	59,277	 	 	59,769	 	

	

	 	

	

	 	

	

	 	

	

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

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

2

GRIFFON CORPORATION AND SUBSIDIARIES
C ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 	 	 	 	 	 	 	 	
 	 	Six Months Ended March 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	
Net income (loss)	 	$	(15,681	)	$	6,324	 	
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	
Income from discontinued operations	 	 	—	 	 	(110	)	
Depreciation and amortization	 	 	29,378	 	 	20,208	 	
Fair value write-up of acquired inventory sold	 	 	15,152	 	 	—	 	
Stock-based compensation	 	 	4,647	 	 	2,935	 	
Provision for losses on accounts receivable	 	 	709	 	 	1,138	 	
Amortization/write-off of deferred financing costs and debt discounts	 	 	3,677	 	 	2,711	 	
Loss from debt extinguishment, net	 	 	26,164	 	 	6	 	
Deferred income taxes	 	 	(2,539	)	 	(4,384	)	
Gain on sale/disposal of assets	 	 	(380	)	 	—	 	
Change in assets and liabilities, net of assets and liabilities acquired:	 	 	 	 	 	 	 	
Increase in accounts receivable and contract costs and recognized income not yet billed	 	 	(37,789	)	 	(26,170	)	
(Increase) decrease in inventories	 	 	(14,705	)	 	1,998	 	
Decrease in prepaid and other assets	 	 	2,575	 	 	4,170	 	
Decrease in accounts payable, accrued liabilities and income taxes payable	 	 	(44,114	)	 	(3,724	)	
Other changes, net	 	 	(2,793	)	 	409	 	

	

	 	

	

	 	
Net cash provided by (used in) operating activities	 	 	(35,699	)	 	5,511	 	
 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(41,737	)	 	(17,689	)	
Acquired business, net of cash acquired	 	 	(855	)	 	—	 	
Funds restricted for capital projects	 	 	3,875	 	 	—	 	
(Increase) decrease in equipment lease deposits	 	 	(351	)	 	28	 	
Proceeds from sale of investment	 	 	1,333	 	 	—	 	

	

	 	

	

	 	
Net cash used in investing activities	 	 	(37,735	)	 	(17,661	)	
 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	
Proceeds from issuance of long-term debt	 	 	637,737	 	 	100,000	 	
Payments of long-term debt	 	 	(498,771	)	 	(53,897	)	
Increase in short-term borrowings	 	 	2,022	 	 	—	 	
Financing costs	 	 	(21,239	)	 	(4,145	)	
Purchase of ESOP shares	 	 	(8,310	)	 	—	 	
Exercise of stock options	 	 	20	 	 	285	 	
Tax benefit from exercise of options/vesting of restricted stock	 	 	23	 	 	99	 	
Other, net	 	 	(94	)	 	37	 	

	

	 	

	

	 	
Net cash provided by financing activities	 	 	111,388	 	 	42,379	 	
 	 	 	 	 	 	 	 	
CASH FLOWS FROM DISCONTINUED OPERATIONS:	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	(561	)	 	(269	)	

	

	 	

	

	 	
Net cash used in discontinued operations	 	 	(561	)	 	(269	)	
Effect of exchange rate changes on cash and equivalents	 	 	1,142	 	 	(2,351	)	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
NET INCREASE IN CASH AND EQUIVALENTS	 	 	38,535	 	 	27,609	 	
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	 	 	169,802	 	 	320,833	 	

	

	 	

	

	 	
CASH AND EQUIVALENTS AT END OF PERIOD	 	$	208,337	 	$	348,442	 	

	

	 	

	

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

3

GRIFFON CORPORATION AND SUBSIDIARIES
N OTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and 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” 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.

Griffon operates through three business segments: Home & Building Products, Telephonics Corporation and Clopay Plastic Products Company.
 	 	 	 	
 	•	Home & Building Products (“HBP”) consists of:	
 	 	 	 	
 	 	-	Clopay Building Products Company (“CBP”), a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains; and	
 	 	 	 	
 	 	-	Ames True Temper, Inc. (“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 timing of the acquisition, none of ATT’s 2010 results of operations were included in Griffon’s results for the year ended September 30, 2010.	

 	•	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 production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.	
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 (“U.S. GAAP”) for interim financial information and with 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 U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2010, 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 HBP operations are seasonal and the results of any interim period are not necessarily indicative of the results for the full year.

4

The condensed consolidated balance sheet information at September 30, 2010 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2010.

The consolidated financial statements include the accounts of Griffon Corporation and all subsidiaries. Intercompany accounts and transactions are eliminated on consolidation.

The preparation of financial statements in conformity with U.S. 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 revenue recorded using a percentage of completion, allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, 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, fair value of hedges 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.

NOTE 2 – FAIR VALUE MEASUREMENTS

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.

At March 31, 2010, the fair value of Griffon’s 2017 4% convertible notes and 2018 Senior Notes approximated $116,000 and $561,000, respectively, based upon quoted market prices (level 1 inputs).

Insurance contracts with a value of $4,716 and trading securities with a value of $8,769 at March 31, 2011, 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 March 31, 2011, Griffon had $5,419 of Canadian dollar contracts at a weighted average rate of $0.99 and $2,840 of Australian dollar contracts at a weighted average rate of $0.99. The contracts do not qualify for hedge accounting and a fair value loss of $192 was recorded in other liabilities and to other income for the outstanding contracts based on similar contract values (level 2 inputs) for the three and six month periods ended March 31, 2011, respectively.

NOTE 3 — ACQUISITION

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 Design TM . ATT’s brands hold the number one or number two market position 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 Griffon’s consolidated statements of operations or cash flows, or related footnotes for any period presented prior to September 30, 2010, except where explicitly stated as pro forma results. Griffon’s consolidated balance sheet at September 30, 2010 and related footnotes include ATT’s balances at that date. The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in Griffon’s consolidated financial statements from the date of acquisition.

5

The following table summarizes estimated fair values of assets acquired and liabilities assumed as of the date of acquisition, and the amounts assigned to goodwill and intangible assets:
 	 	 	 	 	
 	 	2010	 	

	 	
Current assets, net of cash acquired	 	$	195,214	 	
PP&E	 	 	72,918	 	
Goodwill	 	 	261,064	 	
Intangibles	 	 	203,290	 	
Other assets	 	 	1,124	 	

	

	 	
Total assets acquired	 	 	733,610	 	
Total liabilities assumed	 	 	(191,610	)	

	

	 	
Net assets acquired	 	$	542,000	 	

	

	 	
Amounts assigned to goodwill and major intangible asset classifications are as follows:
 	 	 	 	 	 	 	 	
 	 	2010	 	Amortization
Period (Years)	 	

	 	

	 	
Goodwill (non-deductible)	 	$	261,064	 	 	N/A	 	
Tradenames (non-deductible)	 	 	76,090	 	 	Indefinite	 	
Customer relationships (non-deductible)	 	 	127,200	 	 	25	 	

	

	 	 	 	 	
 	 	$	464,354	 	 	 	 	

	

	 	 	 	 	
Pro Forma Information

The following unaudited pro forma information illustrates the effect on Griffon’s revenue and net earnings for the three and six months ended March 31, 2010, assuming the acquisition of ATT took place on October 1, 2009.
 	 	 	 	 	 	 	 	
 	 	Three Months
Ended March 31,
2010	 	Six Months
Ended March 31,
2010	 	

	 	
Revenue from continuing operations:	 	 	 	 	 	 	 	
As reported	 	$	313,977	 	$	619,134	 	
Pro forma	 	 	457,380	 	 	853,666	 	
Net earnings from continuing operations:	 	 	 	 	 	 	 	
As reported	 	$	2,034	 	$	6,214	 	
Pro forma	 	 	8,078	 	 	13,737	 	
Diluted earnings per share from continuing operations:	 	 	 	 	 	 	 	
As reported	 	$	0.03	 	$	0.10	 	
Pro forma	 	 	0.13	 	 	0.23	 	
 	 	 	 	 	 	 	 	
Average shares - Diluted (in thousands)	 	 	59,939	 	 	59,769	 	
The pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results, such as imputed financing costs, and estimated 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 would have actually resulted had the acquisition occurred on the date indicated or that may result in the future.

During the 2011 first quarter, Plastics purchased a business in Shanghai, China for $855. The purchase price was primarily allocated to fixed assets.

6

NOTE 4 – INVENTORIES

Inventories, stated at the lower of cost (first-in, first-out or average) or market, were comprised of the following:
 	 	 	 	 	 	 	 	
 	 	At March 31,
2011	 	At September 30,
2010	 	

	 	

	 	

	 	
Raw materials and supplies	 	$	73,868	 	$	64,933	 	
Work in process	 	 	70,739	 	 	69,107	 	
Finished goods	 	 	125,894	 	 	134,761	 	

	

	 	

	

	 	
Total	 	$	270,501	 	$	268,801	 	

	

	 	

	

	 	
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment were comprised of the following:
 	 	 	 	 	 	 	 	
 	 	At March 31,
2011	 	At September 30,
2010	 	

	 	

	 	

	 	
Land, building and building improvements	 	$	129,174	 	$	126,785	 	
Machinery and equipment	 	 	545,995	 	 	498,017	 	
Leasehold improvements	 	 	33,841	 	 	33,455	 	

	

	 	

	

	 	
 	 	 	709,010	 	 	658,257	 	
Accumulated depreciation and amortization	 	 	(371,812	)	 	(343,331	)	

	

	 	

	

	 	
Total	 	$	337,198	 	$	314,926	 	

	

	 	

	

	 	
Depreciation and amortization expense for property, plant and equipment was $13,645 and $9,790 for the quarters ended March 31, 2011 and 2010, respectively, and $25,460 and $19,183 for the six-month periods ended March 31, 2011 and 2010, respectively.

No event or indicator of impairment occurred during the three and six months ended March 31, 2011, which would require additional impairment testing of property, plant and equipment.

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides the changes in carrying value of goodwill by segment during the six months ended March 31, 2011.
 	 	 	 	 	 	 	 	 	 	 	
 	 	At September 30,
2010	 	Other
adjustments
including
currency
translations	 	At March 31,
2011	 	

	 	

	 	
Home & Building Products	 	$	261,064	 	$	—	 	$	261,064	 	
Telephonics	 	 	18,545	 	 	—	 	 	18,545	 	
Plastics	 	 	77,612	 	 	3,047	 	 	80,659	 	

	

	

	

	

	

	

	

	 	
Total	 	$	357,221	 	$	3,047	 	$	360,268	 	

	

	

	

	

	

	

	

	 	
7

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At March 31, 2011	 	 	 	At September 30, 2010	 	

	 	 	 	

	 	
 	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Average
Life
(Years)	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	

	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Customer relationships	 	$	159,094	 	$	10,543	 	 	25	 	$	155,798	 	$	6,477	 	
Unpatented technology	 	 	7,361	 	 	1,688	 	 	12	 	 	8,154	 	 	1,144	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Total amortizable intangible assets	 	 	166,455	 	 	12,231	 	 	 	 	 	163,952	 	 	7,621	 	
Trademarks	 	 	77,418	 	 	—	 	 	 	 	 	76,680	 	 	—	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Total intangible assets	 	$	243,873	 	$	12,231	 	 	 	 	$	240,632	 	$	7,621	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Amortization expense for intangible assets subject to amortization was $1,908 and $500 for the quarters ended March 31, 2011 and 2010, respectively, and $3,918 and $1,025 for the six-month periods ended March 31, 2011 and 2010, respectively.

During the 2011 first quarter, Griffon reduced the carrying value of unpatented technology by approximately $1,400 due to the expiration of contingency agreements related to certain past acquisitions.

No event or indicator of impairment occurred during the six months ended March 31, 2011, which would require impairment testing of long-lived intangible assets including goodwill.

NOTE 7 – INCOME TAXES

Griffon’s effective tax rate for continuing operations for the quarter ended March 31, 2011 was a benefit of 32.2%, compared to a benefit of 137% in the prior year quarter. The March 31, 2011 quarter effective tax rate reflected a change in earnings mix between domestic and non-domestic and the results of ATT which was acquired on September 30, 2010. The March 31, 2010 quarter effective tax rate benefited from resolution of certain non-domestic tax audits resulting in the release previously established reserves for uncertain tax positions, combined with the benefit of certain tax planning initiatives with respect to non-U.S. operating locations.

Griffon’s effective tax rate for continuing operations for the six months ended March 31, 2011 was a benefit of 33.8%, compared to a benefit of 5.9% in the prior year quarter. The March 31, 2011 quarter effective tax rate reflected a change in earnings mix between domestic and non-domestic and includes the results of ATT which was acquired on September 30, 2010. In addition, a tax benefit of $241 was recorded in connection with the retroactively extended research tax credit signed into law on December 22, 2010. The March 31, 2010 quarter effective tax rate benefited from resolution of certain non-domestic tax audits resulting in the release of previously established reserves for uncertain tax positions, combined with the benefit of certain tax planning initiatives with respect to non-U.S. operating locations, and a benefit arising on the filing of certain of Griffon’s tax returns in various jurisdictions.

Excluding the above discrete period items, the effective tax rate on continuing operations for the quarter and six months ended March 31, 2011 would have been a benefit of 33.4% and 32.8%, respectively. The effective tax rate for the quarter and six months ended March 31, 2010, excluding the discrete period items, would have been a provision of 26.6% and 25.5%, respectively.

8

NOTE 8 – LONG-TERM DEBT
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	At March 31, 2011	 	At September 30, 2010	 	

	 	

	 	
 	 	 	 	 	Outstanding
Balance	 	Original
Issuer
Discount	 	Balance
Sheet	 	Capitalized
Fees &
Expenses	 	Coupon
Interest
Rate	 	Outstanding
Balance	 	Original
Issuer
Discount	 	Balance
Sheet	 	Capitalized
Fees &
Expenses	 	Coupon
Interest
Rate	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	
Senior notes due 2018	 	 	(a	)	$	550,000	 	$	—	 	$	550,000	 	$	11,444	 	 	7.125	%	$	—	 	$	—	 	$	—	 	$	—	 	 	n/a	 	
Revolver due 2016	 	 	(a	)	 	—	 	 	—	 	 	—	 	 	2,727	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	
Convert. debt due 2017	 	 	(b	)	 	100,000	 	 	(21,139	)	 	78,861	 	 	2,586	 	 	4.000	%	 	100,000	 	 	(22,525	)	 	77,475	 	 	2,807	 	 	4.000	%	
Real estate mortgages	 	 	(c	)	 	18,747	 	 	—	 	 	18,747	 	 	366	 	 	n/a	 	 	7,287	 	 	—	 	 	7,287	 	 	159	 	 	n/a	 	
ESOP Loans	 	 	(d	)	 	12,998	 	 	—	 	 	12,998	 	 	33	 	 	n/a	 	 	5,000	 	 	—	 	 	5,000	 	 	—	 	 	n/a	 	
Capital lease - real estate	 	 	(e	)	 	11,765	 	 	—	 	 	11,765	 	 	270	 	 	5.000	%	 	12,182	 	 	—	 	 	12,182	 	 	282	 	 	5.000	%	
Convert. debt due 2023	 	 	(f	)	 	532	 	 	—	 	 	532	 	 	—	 	 	4.000	%	 	532	 	 	—	 	 	532	 	 	—	 	 	4.000	%	
Term loan due 2013	 	 	(g	)	 	—	 	 	—	 	 	—	 	 	260	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	
Revolver due 2011	 	 	(g	)	 	—	 	 	—	 	 	—	 	 	124	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	
Foreign line of credit	 	 	(g	)	 	2,043	 	 	—	 	 	2,043	 	 	—	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	
Term loan due 2016	 	 	(h	)	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	 	375,000	 	 	(7,500	)	 	367,500	 	 	9,782	 	 	7.800	%	
Asset based lending	 	 	(h	)	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	 	25,000	 	 	(625	)	 	24,375	 	 	3,361	 	 	4.500	%	
Revolver due 2013	 	 	(i	)	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	 	30,000	 	 	—	 	 	30,000	 	 	476	 	 	1.800	%	
Other long term debt	 	 	(j	)	 	628	 	 	—	 	 	628	 	 	—	 	 	 	 	 	485	 	 	—	 	 	485	 	 	—	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	
Totals	 	 	 	 	 	696,713	 	 	(21,139	)	 	675,574	 	$ 	17,810	 	 	 	 	 	555,486	 	 	(30,650	)	 	524,836	 	$ 	16,867	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	 	 	 	 	
less: Current portion	 	 	 	 	 	(8,579	)	 	—	 	 	(8,579	)	 	 	 	 	 	 	 	(20,901	)	 	—	 	 	(20,901	)	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	
Long-term debt	 	 	 	 	$	688,134	 	$	(21,139	)	$	666,995	 	 	 	 	 	 	 	$	534,585	 	$	(30,650	)	$	503,935	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	

 	 	 	 	 	Quarter Ended March 31, 2011	 	Quarter Ended March 31, 2010	 	

	 	

	 	
 	 	 	 	 	Effective
Interest Rate	 	Cash
Interest	 	Amort.
Debt
Discount	 	Amort.
Deferred
Cost &
Other Fees	 	Total
Interest
Expense	 	Effective
Interest
Rate	 	Cash
Interest	 	Amort.
Debt
Discount	 	Amort.
Deferred
Cost &
Other Fees	 	Total
Interest
Expense	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	
Senior notes due 2018	 	 	(a	)	 	7.5	%	$	1,633	 	$	—	 	$	68	 	$	1,701	 	 	n/a	 	$	—	 	$	—	 	$	—	 	$	—	 	
Revolver due 2016	 	 	(a	)	 	n/a	 	 	—	 	 	—	 	 	23	 	 	23	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Convert. debt due 2017	 	 	(b	)	 	9.2	%	 	1,000	 	 	703	 	 	111	 	 	1,814	 	 	9.2	%	 	1,000	 	 	650	 	 	110	 	 	1,760	 	
Real estate mortgages	 	 	(c	)	 	5.6	%	 	213	 	 	—	 	 	19	 	 	232	 	 	6.7	%	 	122	 	 	—	 	 	5	 	 	127	 	
ESOP Loans	 	 	(d	)	 	2.6	%	 	24	 	 	—	 	 	17	 	 	41	 	 	1.5	%	 	21	 	 	—	 	 	—	 	 	21	 	
Capital lease - real estate	 	 	(e	)	 	5.2	%	 	147	 	 	—	 	 	6	 	 	153	 	 	5.2	%	 	158	 	 	—	 	 	6	 	 	164	 	
Convert. debt due 2023	 	 	(f	)	 	4.0	%	 	5	 	 	—	 	 	—	 	 	5	 	 	9.0	%	 	500	 	 	565	 	 	32	 	 	1,097	 	
Term loan due 2013	 	 	(g	)	 	n/a	 	 	—	 	 	—	 	 	70	 	 	70	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Revolver due 2011	 	 	(g	)	 	n/a	 	 	10	 	 	—	 	 	39	 	 	49	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Foreign line of credit	 	 	(g	)	 	3.8	%	 	8	 	 	—	 	 	—	 	 	8	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Term loan due 2016	 	 	(h	)	 	8.5	%	 	6,002	 	 	263	 	 	300	 	 	6,565	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Asset based lending	 	 	(h	)	 	4.9	%	 	586	 	 	26	 	 	157	 	 	769	 	 	6.4	%	 	210	 	 	—	 	 	175	 	 	385	 	
Revolver due 2013	 	 	(i	)	 	n/a	 	 	49	 	 	—	 	 	31	 	 	80	 	 	n/a	 	 	200	 	 	—	 	 	47	 	 	247	 	
Other long term debt	 	 	(j	)	 	 	 	 	5	 	 	—	 	 	—	 	 	5	 	 	 	 	 	—	 	 	—	 	 	—	 	 	—	 	
Capitalized interest	 	 	 	 	 	 	 	 	(196	)	 	—	 	 	—	 	 	(196	)	 	 	 	 	(72	)	 	—	 	 	—	 	 	(72	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	
Totals	 	 	 	 	 	 	 	$	9,486	 	$	992	 	$	841	 	$	11,319	 	 	 	 	$	2,139	 	$	1,215	 	$	375	 	$	3,729	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	 	 	 	Six Months Ended March 31, 2011	 	Six Months Ended March 31, 2010	 	

	 	

	 	
 	 	 	 	 	Effective
Interest Rate	 	Cash
Interest	 	Amort.
Debt
Discount	 	Amort.
Deferred
Cost &
Other Fees	 	Total
Interest
Expense	 	Effective
Interest
Rate	 	Cash
Interest	 	Amort.
Debt
Discount	 	Amort.
Deferred
Cost &
Other Fees	 	Total
Interest
Expense	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	
Senior notes due 2018	 	 	(a	)	 	7.5	%	$	1,633	 	$	—	 	$	68	 	$	1,701	 	 	n/a	 	$	—	 	$	—	 	$	—	 	$	—	 	
Revolver due 2016	 	 	(a	)	 	n/a	 	 	—	 	 	—	 	 	23	 	 	23	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Convert. debt due 2017	 	 	(b	)	 	9.3	%	 	2,000	 	 	1,386	 	 	222	 	 	3,608	 	 	9.2	%	 	1,100	 	 	715	 	 	110	 	 	1,925	 	
Real estate mortgages	 	 	(c	)	 	5.6	%	 	344	 	 	—	 	 	28	 	 	372	 	 	6.7	%	 	247	 	 	—	 	 	9	 	 	256	 	
ESOP Loans	 	 	(d	)	 	2.6	%	 	47	 	 	—	 	 	33	 	 	80	 	 	1.5	%	 	43	 	 	—	 	 	—	 	 	43	 	
Capital lease - real estate	 	 	(e	)	 	5.4	%	 	309	 	 	—	 	 	13	 	 	322	 	 	5.2	%	 	320	 	 	—	 	 	13	 	 	333	 	
Convert. debt due 2023	 	 	(f	)	 	4.0	%	 	11	 	 	—	 	 	—	 	 	11	 	 	9.0	%	 	1,426	 	 	1,386	 	 	106	 	 	2,918	 	
Term loan due 2013	 	 	(g	)	 	n/a	 	 	—	 	 	—	 	 	70	 	 	70	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Revolver due 2011	 	 	(g	)	 	n/a	 	 	11	 	 	—	 	 	39	 	 	50	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Foreign line of credit	 	 	(g	)	 	3.8	%	 	8	 	 	—	 	 	—	 	 	8	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Term loan due 2016	 	 	(h	)	 	9.5	%	 	13,498	 	 	572	 	 	745	 	 	14,815	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Asset based lending	 	 	(h	)	 	6.2	%	 	1,076	 	 	58	 	 	341	 	 	1,475	 	 	5.8	%	 	573	 	 	—	 	 	277	 	 	850	 	
Revolver due 2013	 	 	(i	)	 	n/a	 	 	159	 	 	—	 	 	79	 	 	238	 	 	2.8	%	 	417	 	 	—	 	 	95	 	 	512	 	
Other long term debt	 	 	(j	)	 	 	 	 	12	 	 	—	 	 	—	 	 	12	 	 	 	 	 	—	 	 	—	 	 	—	 	 	—	 	
Capitalized interest	 	 	 	 	 	 	 	 	(243	)	 	—	 	 	—	 	 	(243	)	 	 	 	 	(138	)	 	—	 	 	—	 	 	(138	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	
Totals	 	 	 	 	 	 	 	$	18,865	 	$	2,016	 	$	1,661	 	$	22,542	 	 	 	 	$	3,988	 	$	2,101	 	$	610	 	$	6,699	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	
9

 	 	 	
 	(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 on the Senior 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 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 includes 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 will decrease based on financial performance. The initial 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. There was no outstanding balance as of March 31, 2011, and the Company was in compliance with the terms and covenants of the Credit Agreement.	
 	 	 	
 	 	At March 31, 2011, there were $20,467 of standby letters of credit outstanding under the Credit Agreement; $179,533 was available for borrowing.	
 	 	 	
 	(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. 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, 2010 and March 31, 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, that bear interest at rates from 6.3% to 6.6% with maturities extending through 2016.	
 	 	 	
 	(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, to be used to purchase Griffon common stock in the open market. The loan bears interest at a) LIBOR plus 2.5% or b) the Bank’s prime rate. After the first year, Griffon has the option to convert all or a portion of the outstanding loan to a five-year term. If converted, principal is payable in quarterly installments of $250, beginning September 2011, with the remainder due at maturity. The loan is secured by the shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At March 31, 2011, 675,848 shares have been purchased; the outstanding balance was $8,310 and $11,690 was available for borrowing under the agreement.	
10

 	 	 	
 	 	 	
 	 	In addition, the ESOP has a loan agreement, guaranteed by Griffon, which requires quarterly principal payments of $156 and interest through the expiration date of September 2012 at which time the $3,900 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 the 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 March 31, 2011, $4,688 was outstanding.	
 	 	 	
 	(e)	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.	
 	 	 	
 	(f)	At March 31, 2011 and September 30, 2010, 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. At March 31, 2011 and September 30, 2010, 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.	
 	 	 	
 	 	In January 2010, Griffon purchased $10,100 face value of the 2023 Notes for $10,200 which, after proportionate reduction in related deferred financing costs, resulted in a net pre-tax gain from debt extinguishment of $12. Capital in excess of par was reduced by $300 for the equity portion of the extinguished 2023 Notes, and debt discount was reduced by $200.	
 	 	 	
 	 	In December 2009, Griffon purchased $19,200 face value of the 2023 Notes for $19,400. Including a proportionate reduction in the related deferred financing costs, Griffon recorded an immaterial net pre-tax loss on the extinguishment. Capital in excess of par value was reduced by $700 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $500.	
 	 	 	
 	(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 2.35% per annum, and the term loan accrues interest at Euribor plus 2.45% per annum. The revolving facility matures in November 2011, but is renewable upon mutual agreement with the bank. The term loan can be drawn until August 2011 and, if drawn, repayment will be in ten equal installments beginning 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. There were no borrowings under the term loan or revolving facility at March 31, 2011.	
 	 	 	
 	 	Clopay do Brazil, a subsidiary of Plastics, maintains a line of credit of approximately $5,000. Interest on borrowings accrue at a rate of LIBOR plus 4%. $2,043 was borrowed under the line and $2,957 was available as of as of March 31, 2011.	
 	 	 	
 	(h)	In connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. (“Clopay Ames”), a subsidiary of Griffon, entered into the $375,000 secured term Loan (“Term Loan”) and a $125,000 asset based lending agreement (“ABL”). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash. ATT’s previous outstanding debt was repaid in connection with the acquisition.	
 	 	 	
 	 	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.	
11

 	 	 	
 	 	On March 17, 2011, the Term Loan, ABL and swap were terminated in connection with the issuance of the Senior Notes and Credit Agreement.	
 	 	 	
 	(i)	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.	
 	 	 	
 	(j)	Primarily capital leases.	
At March 31, 2011, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit agreements and loan agreements.

During the quarter, 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 9 — SHAREHOLDERS’ EQUITY

During 2010, Griffon granted 703,845 shares of restricted stock to employees, with two to four-year cliff vesting, and a total fair value of $7,989, or a weighted average fair value of $11.35 per share. In connection with the ATT acquisition, Griffon entered into certain retention arrangements with the ATT senior management team. Under these arrangements, the ATT management team purchased 239,145 shares of common stock and received 239,145 shares of restricted stock that vest in full after four years, subject to the attainment of a specified performance measure.

During the quarter ended March 31, 2011, Griffon granted 365,000 restricted shares and 590,000 performance shares. The restricted shares had a total fair value of $4,544, or a weighted average fair value of $12.45 per share with 260,000 shares having a three-year cliff vesting; 30,000 shares, issued to Directors, vesting annually in equal installments over three years; and 75,000 shares vesting annually in equal installments over five years. The performance shares have a fair value of $7,346, or a weighted average fair value of $12.45 per share, and cliff vest when either the stock price of Griffon closes at $16 per share for twenty consecutive trading days or in 7 years, whichever comes first.

During the three months ended December 31, 2010, Griffon granted a total of 450,700 shares of restricted stock with three-year cliff vesting and a total fair value of $5,956, or a weighted average fair value of $13.22 per share.

The fair value of restricted stock and option grants is amortized over the respective vesting periods.

For the three and six months ended March 31, 2011, stock based compensation expense totaled $2,624 and $4,647, respectively. For the three and six months ended March 31, 2010, stock based compensation expense totaled $1,505 and $2,935, respectively.

NOTE 10 – EARNINGS PER SHARE (EPS)

Basic EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with stock based compensation. The 2023 Notes and the 2017 Notes were anti-dilutive due to the conversion price being greater than the weighted-average stock price during the periods presented. Due to the net loss in the three and six-month period ended March 31, 2011, the incremental shares from stock based compensation are anti-dilutive.

12

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	Six Months Ended March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	
Weighted average shares outstanding - basic	 	 	59,280	 	 	58,977	 	 	59,277	 	 	58,906	 	
Incremental shares from stock based compensation	 	 	—	 	 	962	 	 	—	 	 	863	 	

	

	 	

	

	 	

	

	 	

	

	 	
Weighted average shares outstanding - diluted	 	 	59,280	 	 	59,939	 	 	59,277	 	 	59,769	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Anti-dilutive options excluded from diluted EPS computation	 	 	1,031	 	 	991	 	 	1,031	 	 	1,039	 	
Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash; therefore, the potential issuance of shares related to the principal amount of the 2017 Notes is not included in diluted shares.

NOTE 11 – BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:
 	 	 	
 	•	Home & 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, as well as a global provider of non-powered landscaping products that make work easier for homeowners and professionals.	
 	 	 	
 	•	Telephonics develops, designs and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.	
 	 	 	
 	•	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.	
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 and costs related to the fair value of inventory for acquisitions. Griffon believes this information is useful to investors for the same reason. The following tables provide a reconciliation of Segment profit and Segment profit before depreciation, amortization, restructuring and fair value write up of acquired inventory sold to Income before taxes and discontinued operations:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the Three Months
Ended March 31,	 	For the Six Months
Ended March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	
REVENUE	 	 	 	 	 	 	 	 	 	 	 	 	 	
Home & Building Products	 	$	232,319	 	$	82,204	 	$	430,582	 	$	181,726	 	
Telephonics	 	 	113,525	 	 	116,190	 	 	211,804	 	 	219,809	 	
Plastics	 	 	130,285	 	 	115,583	 	 	248,145	 	 	217,599	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total consolidated net sales	 	$	476,129	 	$	313,977	 	$	890,531	 	$	619,134	 	

	

	 	

	

	 	

	

	 	

	

	 	
13

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the Three Months
Ended March 31,	 	For the Six Months Ended
March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	
INCOME (LOSS) BEFORE TAXES AND
DISCONTINUED OPERATIONS	 	 	 	 	 	
Segment operating profit (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Home & Building Products *	 	$	6,931	 	$	(3,714	)	$	5,308	 	$	3,147	 	
Telephonics	 	 	11,225	 	 	10,622	 	 	21,918	 	 	17,617	 	
Plastics	 	 	5,170	 	 	5,086	 	 	9,312	 	 	5,447	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total segment operating profit	 	 	23,326	 	 	11,994	 	 	36,538	 	 	26,211	 	
Unallocated amounts	 	 	(6,581	)	 	(7,610	)	 	(11,687	)	 	(13,891	)	
Gain (loss) from debt extinguishment, net	 	 	(26,164	)	 	12	 	 	(26,164	)	 	(6	)	
Net interest expense	 	 	(11,222	)	 	(3,537	)	 	(22,376	)	 	(6,445	)	

	

	 	

	

	 	

	

	 	

	

	 	
Income (loss) before taxes and discontinued operations	 	$	(20,641	)	$	859	 	$	(23,689	)	$	5,869	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment profit before depreciation, amortization, restructuring and fair value write-up of acquired inventory sold:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Home & Building Products	 	$	19,619	 	$	92	 	$	37,153	 	$	10,561	 	
Telephonics	 	 	12,929	 	 	12,409	 	 	25,335	 	 	21,030	 	
Plastics	 	 	11,231	 	 	10,919	 	 	21,017	 	 	16,893	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Segment profit before depreciation, amortization, restructuring and fair value write-up of acquired inventory sold	 	 	43,779	 	 	23,420	 	 	83,505	 	 	48,484	 	
Unallocated amounts	 	 	(6,581	)	 	(7,610	)	 	(11,687	)	 	(13,891	)	
Gain (loss) from debt extinguishment, net	 	 	(26,164	)	 	12	 	 	(26,164	)	 	(6	)	
Net interest expense	 	 	(11,222	)	 	(3,537	)	 	(22,376	)	 	(6,445	)	
Segment depreciation and amortization	 	 	(15,453	)	 	(10,206	)	 	(29,210	)	 	(20,042	)	
Home & Building Products:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring charges	 	 	(1,212	)	 	(1,220	)	 	(2,605	)	 	(2,231	)	
Fair value write-up of acquired inventory sold	 	 	(3,788	)	 	—	 	 	(15,152	)	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income (loss) before taxes and discontinued operations	 	$	(20,641	)	$	859	 	$	(23,689	)	$	5,869	 	

	

	 	

	

	 	

	

	 	

	

	 	
* Includes $3,788 and $15,152 of costs related to the sale of inventory that was recorded at fair value in connection with acquisition accounting for ATT for the three and six months ended March 31, 2011, respectively.

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

14

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the Three Months
Ended March 31,	 	For the Six Months Ended
March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	
DEPRECIATION and AMORTIZATION	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Home & Building Products	 	$	7,688	 	$	2,586	 	$	14,088	 	$	5,183	 	
Telephonics	 	 	1,704	 	 	1,787	 	 	3,417	 	 	3,413	 	
Plastics	 	 	6,061	 	 	5,833	 	 	11,705	 	 	11,446	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total segment depreciation and amortization	 	 	15,453	 	 	10,206	 	 	29,210	 	 	20,042	 	
Corporate	 	 	100	 	 	84	 	 	168	 	 	166	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total consolidated depreciation and amortization	 	$	15,553	 	$	10,290	 	$	29,378	 	$	20,208	 	

	

	 	

	

	 	

	

	 	

	

	 	
CAPITAL EXPENDITURES	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Home & Building Products	 	$	7,335	 	$	3,119	 	$	13,775	 	$	6,458	 	
Telephonics	 	 	1,333	 	 	4,291	 	 	2,138	 	 	6,367	 	
Plastics	 	 	14,996	 	 	96	 	 	25,616	 	 	4,299	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total segment	 	 	23,664	 	 	7,506	 	 	41,529	 	 	17,124	 	
Corporate	 	 	143	 	 	173	 	 	208	 	 	565	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total consolidated capital expenditures	 	$	23,807	 	$	7,679	 	$	41,737	 	$	17,689	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	At March
31, 2011	 	At
September
30, 2010	 	

	 	

	 	
ASSETS	 	 	 	 	 	 	 	
Segment assets:	 	 	 	 	 	 	 	
Home & Building Products	 	$	976,715	 	$	919,146	 	
Telephonics	 	 	269,122	 	 	268,373	 	
Plastics	 	 	434,194	 	 	397,470	 	

	

	 	

	

	 	
Total segment assets	 	 	1,680,031	 	 	1,584,989	 	
Corporate	 	 	170,638	 	 	157,645	 	

	

	 	

	

	 	
Total continuing assets	 	 	1,850,669	 	 	1,742,634	 	
Assets of discontinued operations	 	 	6,679	 	 	6,882	 	

	

	 	

	

	 	
Consolidated total	 	$	1,857,348	 	$	1,749,516	 	

	

	 	

	

	 	
NOTE 12 – COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months Ended
March 31,	 	Six Months Ended
March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	

	

	

	

	 	

	 	
Net income (loss)	 	$	(14,001	)	$	2,033	 	$	(15,681	)	$	6,324	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in fair value of interest rate swap, net of tax	 	 	48	 	 	—	 	 	—	 	 	—	 	
Foreign currency translation adjustment	 	 	16,911	 	 	(11,566	)	 	16,466	 	 	(14,437	)	
Pension other comprehensive income amortization, net of tax	 	 	426	 	 	389	 	 	851	 	 	776	 	

	

	 	

	

	 	

	

	 	

	

	 	
Comprehensive income (loss)	 	$	3,384	 	$	(9,144	)	$	1,636	 	$	(7,337	)	

	

	 	

	

	 	

	

	 	

	

	 	

15

NOTE 13 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was recognized as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended
March 31,	 	Six Months Ended
March 31,	 	

	 	

	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	

	 	
Service cost	 	$	88	 	$	139	 	$	174	 	$	278	 	
Interest cost	 	 	2,792	 	 	907	 	 	5,578	 	 	1,814	 	
Expected return on plan assets	 	 	(2,843	)	 	(343	)	 	(5,681	)	 	(686	)	
Amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service cost	 	 	84	 	 	84	 	 	168	 	 	168	 	
Recognized actuarial loss	 	 	571	 	 	512	 	 	1,142	 	 	1,024	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net periodic expense	 	$	692	 	$	1,299	 	$	1,381	 	$	2,598	 	

	

	 	

	

	 	

	

	 	

	

	 	
NOTE 14 – RECENT ACCOUNTING PRONOUNCEMENTS

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

NOTE 15 – DISCONTINUED OPERATIONS

The following amounts related to the Installation Services segment, discontinued in 2008, have been segregated from Griffon’s continuing operations and are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At March 31, 2011	 	At September 30, 2010	 	

	 	

	 	
 	 	Current	 	Long-term	 	Current	 	Long-term	 	

	 	

	 	

	 	

	 	

	 	
Assets of discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prepaid and other current assets	 	$	1,543	 	$	—	 	$	1,079	 	$	—	 	
Other long-term assets	 	 	—	 	 	5,136	 	 	—	 	 	5,803	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets of discontinued operations	 	$	1,543	 	$	5,136	 	$	1,079	 	$	5,803	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities of discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	4	 	$	—	 	$	8	 	$	—	 	
Accrued liabilities	 	 	4,319	 	 	—	 	 	4,281	 	 	—	 	
Other long-term liabilities	 	 	—	 	 	7,282	 	 	—	 	 	8,446	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities of discontinued operations	 	$	4,323	 	$	7,282	 	$	4,289	 	$	8,446	 	

	

	 	

	

	 	

	

	 	

	

	 	
There was no Installation Services’ operating unit revenue for the three and six months ended March 31, 2011 and 2010.

NOTE 16 – RESTRUCTURING AND OTHER RELATED CHARGES

The consolidation of the CBP manufacturing facilities plan, announced in June 2009, is substantially complete. The remaining restructuring related expenses primarily consist of shutdown costs for the Baldwin plant, which will be completed by fiscal year end. For the total project, CBP estimates it will incur pre-tax exit and restructuring costs approximating $11,000, substantially all of which will be cash charges; charges include $2,000 for one-time termination benefits and other personnel costs, $1,000 for excess facilities and related costs, and $8,000 for other exit costs, primarily in connection with production realignment. CBP expects approximately $11,000 in capital expenditures in order to effectuate the restructuring plan. To date, CBP has spent $7,901 and $10,070 for the

16

restructuring plan and related capital expenditures, respectively, including $1,153 and $283, respectively, in the second quarter of 2011 and $2,482 and $755, respectively, for the six months ended March 31, 2011.

Restructuring and other related charges recognized for the three and six months ended March 31, 2011 and 2010 were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Workforce
Reduction	 	Facilities &
Exit Costs	 	Other
Related
Costs	 	Total	 	

	 	

	 	

	 	

	 	

	 	
Amounts incurred in:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Quarter ended December 31, 2009	 	$	279	 	$	694	 	$	38	 	$	1,011	 	
Quarter ended March 31, 2010	 	 	124	 	 	775	 	 	321	 	 	1,220	 	

	

	 	

	

	 	

	

	 	

	

	 	
Six months ended March 31, 2010	 	$	403	 	$	1,469	 	$	359	 	$	2,231	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Quarter ended December 31, 2010	 	$	239	 	$	791	 	$	363	 	$	1,393	 	
Quarter ended March 31, 2011	 	 	61	 	 	470	 	 	681	 	 	1,212	 	

	

	 	

	

	 	

	

	 	

	

	 	
Six months ended March 31, 2011	 	$	300	 	$	1,261	 	$	1,044	 	$	2,605	 	

	

	 	

	

	 	

	

	 	

	

	 	
At March 31, 2011, the accrued liability for the restructuring and other related charges consisted of:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Workforce
Reduction	 	Facilities &
Exit Costs	 	Other
Related
Costs	 	Total	 	

	 	

	 	

	 	

	 	

	 	
Accrued liability at September 30, 2010	 	$	1,541	 	$	—	 	$	—	 	$	1,541	 	
Charges	 	 	300	 	 	1,261	 	 	1,044	 	 	2,605	 	
Payments	 	 	(1,284	)	 	(1,261	)	 	(1,044	)	 	(3,589	)	

	 	

	 	

	 	

	 	
Accrued liability at March 31, 2011	 	$	557	 	$	—	 	$	—	 	$	557	 	

	 	

	 	

	 	

	 	
NOTE 17 – OTHER INCOME

For the quarters ended March 31, 2011 and 2010, Other income included losses of $150 and $241, respectively, of foreign exchange gains/losses, and $168 and nil, respectively, of investment income.

For the six months ended March 31, 2011 and 2010, Other income included losses of $27 and $166, respectively, of foreign exchange gains/losses and $1,307 and nil, respectively, of investment income.

NOTE 18 – WARRANTY LIABILITY

Telephonics offers warranties against product defects for periods ranging from one to two years, with certain products having a limited lifetime warranty, 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. For Home & Building Products and Telephonics, at the time revenue is recognized, a liability is recorded for warranty costs, estimated based on historical experience; the Segment periodically assesses its warranty obligations and adjusts the liability as necessary. ATT offers an express limited warranty for a period of ninety days, from the date of original purchase, on all products unless otherwise stated on the product or packaging.

17

Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended
March 31,	 	Six Months Ended
March 31,	 	
 	 	2011	 	2010	 	2011	 	2010	 	

	 	

	 	

	 	

	 	

	 	
Balance, beginning of fiscal year	 	$	5,819	 	$	4,796	 	$	5,896	 	$	5,707	 	
Warranties issued and charges in estimated pre-existing warranties	 	 	709	 	 	1,236	 	 	1,380	 	 	1,319	 	
Actual warranty costs incurred	 	 	(847	)	 	(1,272	)	 	(1,595	)	 	(2,266	)	

	

	 	

	

	 	

	

	 	

	

	 	
Balance, end of fiscal period	 	$	5,681	 	$	4,760	 	$	5,681	 	$	4,760	 	

	

	 	

	

	 	

	

	 	

	

	 	
NOTE 19 — COMMITMENTS AND CONTINGENCIES
 	
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 had 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 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. DEC has received public comments on the PRAP and is expected to issue a Record of Decision (“ROD”) that will set forth the specific remedy DEC has selected and will explain why the remedy was selected and respond to public comments.	
 	
It is expected DEC will thereafter enter negotiations with potentially responsible parties to request they undertake performance of the remedies selected in the ROD and if not, then the State may use State Superfund money to remediate the Peekskill site. Griffon does not acknowledge any responsibility to perform any remediation at the Peekskill Site.	
 	
Improper Advertisement Claim involving Union Tools Products. During December 2004, a customer of ATT was named in litigation that involved UnionTools products. The complaint asserted causes of action against the defendant for improper advertisement to the end consumer. The allegation suggests that advertisements led the consumer to believe that the hand tools sold were manufactured within boundaries of the United States. The allegation asserts cause of action against the customer for common law fraud. In the event that an adverse judgment is rendered against the customer, there is a possibility that the customer would seek legal recourse against ATT for an unspecified amount in contributory damages. Presently, ATT cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against ATT.	
18

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. ATT is actively working with the New York Department of Environmental Conservation and the New York State Department of Health to define remediation requirements. Griffon believes remediation will be completed during the first half of 2012, that future remediation costs will be less than $1,000, and that it has adequately accrued for this liability.

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 20 — RELATED PARTY

Goldman, Sachs & Co. acted as a co-manager and as an initial purchaser in connection with the Senior Notes offering and received a fee of $825.

19

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands, except share and per share data)
(Unaudited)
NOTE 21—CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
On March 17, 2011, Griffon issued $550,000 of senior unsecured notes (the “Notes”) that are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation and Ames True Temper, Inc. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below is condensed consolidating balance sheets as of March 31, 2011 and September 30, 2010, the condensed consolidating statements of operations and cash flows for the six months ended March 31, 2011 and 2010, and the condensed consolidating Statements of Operations for the three months ended March 31, 2011 and 2010 based on the guarantor structure. 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.
20

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
At March 31, 2011
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	 	$	 	147,774	 	 	 	$	 	25,109	 	 	 	$	 	35,454	 	 	 	$	 	—	 	 	 	$	 	208,337	 	
Accounts receivable, net of allowances	 	 	 	—	 	 	 	 	216,997	 	 	 	 	76,175	 	 	 	 	—	 	 	 	 	293,172	 	
Contract costs and recognized income not yet billed, net of progress payments	 	 	 	—	 	 	 	 	61,906	 	 	 	 	972	 	 	 	 	—	 	 	 	 	62,878	 	
Inventories, net	 	 	 	—	 	 	 	 	203,232	 	 	 	 	67,269	 	 	 	 	—	 	 	 	 	270,501	 	
Prepaid and other current assets	 	 	 	15,471	 	 	 	 	38,227	 	 	 	 	2,272	 	 	 	 	(1,212	)	 	 	 	 	54,758	 	
Assets of discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	1,543	 	 	 	 	—	 	 	 	 	1,543	 	
Total Current Assets	 	 	 	163,245	 	 	 	 	545,471	 	 	 	 	183,685	 	 	 	 	(1,212	)	 	 	 	 	891,189	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	 	1,341	 	 	 	 	207,112	 	 	 	 	128,745	 	 	 	 	—	 	 	 	 	337,198	 	
GOODWILL	 	 	 	—	 	 	 	 	279,409	 	 	 	 	80,859	 	 	 	 	—	 	 	 	 	360,268	 	
INTANGIBLE ASSETS, net	 	 	 	—	 	 	 	 	157,180	 	 	 	 	74,462	 	 	 	 	—	 	 	 	 	231,642	 	
INTERCOMPANY RECEIVABLE	 	 	 	468,372	 	 	 	 	236,234	 	 	 	 	49,571	 	 	 	 	(754,177	)	 	 	 	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	 	2,942,595	 	 	 	 	783,427	 	 	 	 	2,474,688	 	 	 	 	(6,200,710	)	 	 	 	 	—	 	
OTHER ASSETS	 	 	 	52,696	 	 	 	 	43,498	 	 	 	 	10,236	 	 	 	 	(74,515	)	 	 	 	 	31,915	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	 	—	 	 	 	 	—	 	 	 	 	5,136	 	 	 	 	—	 	 	 	 	5,136	 	
Total Assets	 	 	$	 	3,628,249	 	 	 	$	 	2,252,331	 	 	 	$	 	3,007,382	 	 	 	$	 	(7,030,614	)	 	 	 	$	 	1,857,348	 	
 	 	 	 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	 	$	 	1,125	 	 	 	$	 	4,400	 	 	 	$	 	3,054	 	 	 	$	 	—	 	 	 	$	 	8,579	 	
Accounts payable and accrued liabilities	 	 	 	19,837	 	 	 	 	195,840	 	 	 	 	48,981	 	 	 	 	(1,212	)	 	 	 	 	263,446	 	
Liabilities of discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	4,323	 	 	 	 	—	 	 	 	 	4,323	 	
Total Current Liabilities	 	 	 	20,962	 	 	 	 	200,240	 	 	 	 	56,358	 	 	 	 	(1,212	)	 	 	 	 	276,348	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	 	641,266	 	 	 	 	11,070	 	 	 	 	14,659	 	 	 	 	—	 	 	 	 	666,995	 	
INTERCOMPANY Payables	 	 	 	—	 	 	 	 	35,075	 	 	 	 	719,102	 	 	 	 	(754,177	)	 	 	 	 	—	 	
OTHER LIABILITIES	 	 	 	76,835	 	 	 	 	165,126	 	 	 	 	30,036	 	 	 	 	(74,515	)	 	 	 	 	197,482	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	 	—	 	 	 	 	—	 	 	 	 	7,282	 	 	 	 	—	 	 	 	 	7,282	 	
Total Liabilities	 	 	 	739,063	 	 	 	 	411,511	 	 	 	 	827,437	 	 	 	 	(829,904	)	 	 	 	 	1,148,107	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	2,889,186	 	 	 	 	1,840,820	 	 	 	 	2,179,945	 	 	 	 	(6,200,710	)	 	 	 	 	709,241	 	
Total Liabilities and Shareholders’ Equity	 	 	$	 	3,628,249	 	 	 	$	 	2,252,331	 	 	 	$	 	3,007,382	 	 	 	$	 	(7,030,614	)	 	 	 	$	 	1,857,348	 	
 	 	 	 	 	 	 	 	 	 	 	
21

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
At of September 30, 2010
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	
 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	$	74,600	 	$	57,113	 	$	38,089	 	$	—	 	$	169,802	 	
Accounts receivable, net of allowances	 	 	—	 	 	181,549	 	 	70,480	 	 	—	 	 	252,029	 	
Contract costs and recognized income not yet billed, net of progress payments	 	 	—	 	 	62,681	 	 	474	 	 	—	 	 	63,155	 	
Inventories, net	 	 	—	 	 	211,920	 	 	56,881	 	 	—	 	 	268,801	 	
Prepaid and other current assets	 	 	5,963	 	 	39,843	 	 	10,291	 	 	(315	)	 	55,782	 	
Assets of discontinued operations	 	 	—	 	 	—	 	 	1,079	 	 	—	 	 	1,079	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Assets	 	 	80,563	 	 	553,106	 	 	177,294	 	 	(315	)	 	810,648	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	1,267	 	 	205,085	 	 	108,574	 	 	—	 	 	314,926	 	
GOODWILL	 	 	—	 	 	279,409	 	 	77,812	 	 	—	 	 	357,221	 	
INTANGIBLE ASSETS, net	 	 	—	 	 	91,507	 	 	141,504	 	 	—	 	 	233,011	 	
INTERCOMPANY RECEIVABLE	 	 	—	 	 	271,143	 	 	218,488	 	 	(489,631	)	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	3,269,975	 	 	1,091,359	 	 	2,546,639	 	 	(6,907,973	)	 	—	 	
OTHER ASSETS	 	 	40,586	 	 	44,188	 	 	11,784	 	 	(68,651	)	 	27,907	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	5,803	 	 	—	 	 	5,803	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	3,392,391	 	$	2,535,797	 	$	3,287,898	 	$	(7,466,570	)	$	1,749,516	 	

CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	625	 	$	1,135	 	$	19,141	 	$	—	 	$	20,901	 	
Accounts payable and accrued liabilities	 	 	24,247	 	 	224,082	 	 	61,851	 	 	(315	)	 	309,865	 	
Liabilities of discontinued operations	 	 	—	 	 	—	 	 	4,289	 	 	—	 	 	4,289	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Current Liabilities	 	 	24,872	 	 	225,217	 	 	85,281	 	 	(315	)	 	335,055	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	82,382	 	 	44,902	 	 	376,651	 	 	—	 	 	503,935	 	
INTERCOMPANY PAYABLES	 	 	—	 	 	238,392	 	 	251,239	 	 	(489,631	)	 	—	 	
OTHER LIABILITIES	 	 	76,821	 	 	114,515	 	 	68,680	 	 	(68,651	)	 	191,365	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	8,446	 	 	—	 	 	8,446	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities	 	 	184,075	 	 	623,026	 	 	790,297	 	 	(558,597	)	 	1,038,801	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	3,208,316	 	 	1,912,771	 	 	2,497,601	 	 	(6,907,973	)	 	710,715	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities and Shareholders’ Equity	 	$	3,392,391	 	$	2,535,797	 	$	3,287,898	 	$	(7,466,570	)	$	1,749,516	 	

22

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2011
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
Revenue	 	 	$	 	—	 	 	 	$	 	363,254	 	 	 	$	 	123,554	 	 	 	$	 	(10,679	) 	 	 	$	 	476,129	 	
Cost of goods and services	 	 	 	—	 	 	 	 	282,809	 	 	 	 	103,226	 	 	 	 	(11,049	)	 	 	 	 	374,986	 	
Gross profit	 	 	 	—	 	 	 	 	80,445	 	 	 	 	20,328	 	 	 	 	370	 	 	 	 	101,143	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	 	5,481	 	 	 	 	64,308	 	 	 	 	14,666	 	 	 	 	(92	)	 	 	 	 	84,363	 	
Restructuring and other related charges	 	 	 	—	 	 	 	 	1,153	 	 	 	 	59	 	 	 	 	—	 	 	 	 	1,212	 	
Total operating expenses	 	 	 	5,481	 	 	 	 	65,461	 	 	 	 	14,725	 	 	 	 	(92	)	 	 	 	 	85,575	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	 	(5,481	)	 	 	 	 	14,984	 	 	 	 	5,603	 	 	 	 	462	 	 	 	 	15,568	 	
 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	 	(3,572	)	 	 	 	 	2,472	 	 	 	 	(10,122	)	 	 	 	 	—	 	 	 	 	(11,222	)	 	
Loss from debt extinguishment, net	 	 	 	—	 	 	 	 	(397	)	 	 	 	 	(25,767	)	 	 	 	 	—	 	 	 	 	(26,164	)	 	
Other, net	 	 	 	168	 	 	 	 	(89	)	 	 	 	 	1,560	 	 	 	 	(462	)	 	 	 	 	1,177	 	
Total other income (expense)	 	 	 	(3,404	)	 	 	 	 	1,986	 	 	 	 	(34,329	)	 	 	 	 	(462	)	 	 	 	 	(36,209	)	 	
 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	 	(8,885	)	 	 	 	 	16,970	 	 	 	 	(28,726	)	 	 	 	 	—	 	 	 	 	(20,641	)	 	
Provision (benefit) for income taxes	 	 	 	(3,651	)	 	 	 	 	8,071	 	 	 	 	(11,060	)	 	 	 	 	—	 	 	 	 	(6,640	)	 	
Income (loss) before equity in net income of subsidiaries	 	 	 	(5,234	)	 	 	 	 	8,899	 	 	 	 	(17,666	)	 	 	 	 	—	 	 	 	 	(14,001	)	 	
Equity in net income of subsidiaries	 	 	 	(8,767	)	 	 	 	 	3,734	 	 	 	 	8,899	 	 	 	 	(3,866	)	 	 	 	 	—	 	
Loss from operations	 	 	 	(14,001	)	 	 	 	 	12,633	 	 	 	 	(8,767	)	 	 	 	 	(3,866	)	 	 	 	 	(14,001	)	 	
Income from discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	
Net loss	 	 	$	 	(14,001	)	 	 	 	$	 	12,633	 	 	 	$	 	(8,767	)	 	 	 	$	 	(3,866	)	 	 	 	$	 	(14,001	)	 	
 	 	 	 	 	 	 	 	 	 	 	
23

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2011
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
Revenue	 	 	$	 	—	 	 	 	$	 	668,901	 	 	 	$	 	239,372	 	 	 	$	 	(17,742	) 	 	 	$	 	890,531	 	
Cost of goods and services	 	 	 	—	 	 	 	 	523,413	 	 	 	 	196,484	 	 	 	 	(18,368	)	 	 	 	 	701,529	 	
Gross profit	 	 	 	—	 	 	 	 	145,488	 	 	 	 	42,888	 	 	 	 	626	 	 	 	 	189,002	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	 	10,563	 	 	 	 	124,961	 	 	 	 	29,440	 	 	 	 	(156	)	 	 	 	 	164,808	 	
Restructuring and other related charges	 	 	 	—	 	 	 	 	2,482	 	 	 	 	123	 	 	 	 	—	 	 	 	 	2,605	 	
Total operating expenses	 	 	 	10,563	 	 	 	 	127,443	 	 	 	 	29,563	 	 	 	 	(156	)	 	 	 	 	167,413	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	 	(10,563	)	 	 	 	 	18,045	 	 	 	 	13,325	 	 	 	 	782	 	 	 	 	21,589	 	
 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	 	(5,397	)	 	 	 	 	1,699	 	 	 	 	(18,678	)	 	 	 	 	—	 	 	 	 	(22,376	)	 	
Loss from debt extinguishment, net	 	 	 	—	 	 	 	 	(397	)	 	 	 	 	(25,767	)	 	 	 	 	—	 	 	 	 	(26,164	)	 	
Other, net	 	 	 	1,307	 	 	 	 	(2,231	)	 	 	 	 	4,968	 	 	 	 	(782	)	 	 	 	 	3,262	 	
Total other income (expense)	 	 	 	(4,090	)	 	 	 	 	(929	)	 	 	 	 	(39,477	)	 	 	 	 	(782	)	 	 	 	 	(45,278	)	 	
 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	 	(14,653	)	 	 	 	 	17,116	 	 	 	 	(26,152	)	 	 	 	 	—	 	 	 	 	(23,689	)	 	
Provision (benefit) for income taxes	 	 	 	(5,886	)	 	 	 	 	11,217	 	 	 	 	(13,339	)	 	 	 	 	—	 	 	 	 	(8,008	)	 	
Income (loss) before equity in net income of subsidiaries	 	 	 	(8,767	)	 	 	 	 	5,899	 	 	 	 	(12,813	)	 	 	 	 	—	 	 	 	 	(15,681	)	 	
Equity in net income (loss) of subsidiaries	 	 	 	(6,914	)	 	 	 	 	14,359	 	 	 	 	5,899	 	 	 	 	(13,344	)	 	 	 	 	—	 	
Loss from operations	 	 	 	(15,681	)	 	 	 	 	20,258	 	 	 	 	(6,914	)	 	 	 	 	(13,344	)	 	 	 	 	(15,681	)	 	
Income from discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	
Net income (loss)	 	 	$	 	(15,681	)	 	 	 	$	 	20,258	 	 	 	$	 	(6,914	)	 	 	 	$	 	(13,344	)	 	 	 	$	 	(15,681	)	 	

24

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For The Three Months Ended March 31, 2010
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
Revenue	 	 	$	 	—	 	 	 	$	 	238,864	 	 	 	$	 	76,946	 	 	 	$	 	(1,833	) 	 	 	$	 	313,977	 	
Cost of goods and services	 	 	 	—	 	 	 	 	181,940	 	 	 	 	65,056	 	 	 	 	(2,089	)	 	 	 	 	244,907	 	
Gross profit	 	 	 	—	 	 	 	 	56,924	 	 	 	 	11,890	 	 	 	 	256	 	 	 	 	69,070	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	 	7,502	 	 	 	 	47,648	 	 	 	 	8,969	 	 	 	 	(64	)	 	 	 	 	64,055	 	
Restructuring and other related charges	 	 	 	—	 	 	 	 	1,220	 	 	 	 	—	 	 	 	 	—	 	 	 	 	1,220	 	
Total operating expenses	 	 	 	7,502	 	 	 	 	48,868	 	 	 	 	8,969	 	 	 	 	(64	)	 	 	 	 	65,275	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	 	(7,502	)	 	 	 	 	8,056	 	 	 	 	2,921	 	 	 	 	320	 	 	 	 	3,795	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	 	(2,560	)	 	 	 	 	1,350	 	 	 	 	(2,327	)	 	 	 	 	—	 	 	 	 	(3,537	)	 	
Gain from debt extinguishment, net	 	 	 	12	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	12	 	
Other, net	 	 	 	—	 	 	 	 	2,416	 	 	 	 	(1,507	)	 	 	 	 	(320	)	 	 	 	 	589	 	
Total other income (expense)	 	 	 	(2,548	)	 	 	 	 	3,766	 	 	 	 	(3,834	)	 	 	 	 	(320	)	 	 	 	 	(2,936	)	 	
Income (loss) before taxes and discontinued operations	 	 	 	(10,050	)	 	 	 	 	11,822	 	 	 	 	(913	)	 	 	 	 	—	 	 	 	 	859	 	
Provision (benefit) for income taxes	 	 	 	(5,956	)	 	 	 	 	5,617	 	 	 	 	(836	)	 	 	 	 	—	 	 	 	 	(1,175	)	 	
Income (loss) before equity in net income of subsidiaries	 	 	 	(4,094	)	 	 	 	 	6,205	 	 	 	 	(77	)	 	 	 	 	—	 	 	 	 	2,034	 	
Equity in net income of subsidiaries	 	 	 	6,127	 	 	 	 	(136	)	 	 	 	 	6,205	 	 	 	 	(12,196	)	 	 	 	 	—	 	
Income from operations	 	 	 	2,033	 	 	 	 	6,069	 	 	 	 	6,128	 	 	 	 	(12,196	)	 	 	 	 	2,034	 	
Loss from discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	(1	)	 	 	 	 	—	 	 	 	 	(1	)	 	
Net income	 	 	$	 	2,033	 	 	 	$	 	6,069	 	 	 	$	 	6,127	 	 	 	$	 	(12,196	)	 	 	 	$	 	2,033	 	

25

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For The Six Months Ended March 31, 2010
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
Revenue	 	 	$	 	—	 	 	 	$	 	470,853	 	 	 	$	 	153,010	 	 	 	$	 	(4,729	) 	 	 	$	 	619,134	 	
Cost of goods and services	 	 	 	—	 	 	 	 	352,984	 	 	 	 	132,041	 	 	 	 	(5,242	)	 	 	 	 	479,783	 	
Gross profit	 	 	 	—	 	 	 	 	117,869	 	 	 	 	20,969	 	 	 	 	513	 	 	 	 	139,351	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	 	13,721	 	 	 	 	94,939	 	 	 	 	17,484	 	 	 	 	(128	)	 	 	 	 	126,016	 	
Restructuring and other related charges	 	 	 	—	 	 	 	 	2,231	 	 	 	 	—	 	 	 	 	—	 	 	 	 	2,231	 	
Total operating expenses	 	 	 	13,721	 	 	 	 	97,170	 	 	 	 	17,484	 	 	 	 	(128	)	 	 	 	 	128,247	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	 	(13,721	)	 	 	 	 	20,699	 	 	 	 	3,485	 	 	 	 	641	 	 	 	 	11,104	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	
Interest income (expense), net	 	 	 	(4,238	)	 	 	 	 	2,671	 	 	 	 	(4,878	)	 	 	 	 	—	 	 	 	 	(6,445	)	 	
Loss from debt extinguishment, net	 	 	 	(6	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(6	)	 	
Other, net	 	 	 	—	 	 	 	 	1,663	 	 	 	 	194	 	 	 	 	(641	)	 	 	 	 	1,216	 	
Total other income (expense)	 	 	 	(4,244	)	 	 	 	 	4,334	 	 	 	 	(4,684	)	 	 	 	 	(641	)	 	 	 	 	(5,235	)	 	
 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes and discontinued operations	 	 	 	(17,965	)	 	 	 	 	25,033	 	 	 	 	(1,199	)	 	 	 	 	—	 	 	 	 	5,869	 	
Provision (benefit) for income taxes	 	 	 	(7,522	)	 	 	 	 	8,766	 	 	 	 	(1,589	)	 	 	 	 	—	 	 	 	 	(345	)	 	
Income (loss) before equity in net income of subsidiaries	 	 	 	(10,443	)	 	 	 	 	16,267	 	 	 	 	390	 	 	 	 	—	 	 	 	 	6,214	 	
Equity in net income (loss) of subsidiaries	 	 	 	16,767	 	 	 	 	227	 	 	 	 	16,267	 	 	 	 	(33,261	)	 	 	 	 	—	 	
Income (loss) from operations	 	 	 	6,324	 	 	 	 	16,494	 	 	 	 	16,657	 	 	 	 	(33,261	)	 	 	 	 	6,214	 	
Income from discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	110	 	 	 	 	—	 	 	 	 	110	 	
Net income (loss)	 	 	$	 	6,324	 	 	 	$	 	16,494	 	 	 	$	 	16,767	 	 	 	$	 	(33,261	)	 	 	 	$	 	6,324	 	

26

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2011
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	$	 	(15,681	)	 	 	 	$	 	20,258	 	 	 	$	 	(6,914	)	 	 	 	$	 	(13,344	)	 	 	 	$	 	(15,681	)	 	
 	 	 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	$	 	(3,611	)	 	 	 	$	 	(14,241	)	 	 	 	$	 	(22,699	)	 	 	 	$	 	—	 	 	 	$	 	(40,551	)	 	
 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	 	(208	)	 	 	 	 	(19,449	)	 	 	 	 	(22,080	)	 	 	 	 	—	 	 	 	 	(41,737	)	 	
Acquired business, net of cash acquired	 	 	 	—	 	 	 	 	(1,066	)	 	 	 	 	211	 	 	 	 	—	 	 	 	 	(855	)	 	
Intercompany distributions	 	 	 	10,000	 	 	 	 	(10,000	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	
Funds restricted for capital projects	 	 	 	—	 	 	 	 	3,875	 	 	 	 	—	 	 	 	 	—	 	 	 	 	3,875	 	
Proceeds from sale of investment	 	 	 	—	 	 	 	 	—	 	 	 	 	1,333	 	 	 	 	—	 	 	 	 	1,333	 	
Increase in equipment lease deposits	 	 	 	—	 	 	 	 	(351	)	 	 	 	 	—	 	 	 	 	 	—	 	 	 	 	(351	)	 	
Net cash provided by (used in) investing activities	 	 	 	9,792	 	 	 	 	(26,991	)	 	 	 	 	(20,536	)	 	 	 	 	—	 	 	 	 	(37,735	)	 	
 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of long-term debt	 	 	 	558,310	 	 	 	 	—	 	 	 	 	79,427	 	 	 	 	—	 	 	 	 	637,737	 	
Payments of long-term debt	 	 	 	(312	)	 	 	 	 	(30,567	)	 	 	 	 	(467,892	)	 	 	 	 	—	 	 	 	 	(498,771	)	 	
Decrease in short-term borrowings	 	 	 	—	 	 	 	 	—	 	 	 	 	2,022	 	 	 	 	—	 	 	 	 	2,022	 	
Intercompany debt	 	 	 	(468,372	)	 	 	 	 	—	 	 	 	 	468,372	 	 	 	 	—	 	 	 	 	—	 	
Financing costs	 	 	 	(14,272	)	 	 	 	 	—	 	 	 	 	(2,115	)	 	 	 	 	—	 	 	 	 	(16,387	)	 	
Purchase of ESOP shares	 	 	 	(8,310	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(8,310	)	 	
Exercise of stock options	 	 	 	20	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	20	 	
Tax benefit from vesting of restricted stock	 	 	 	23	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	23	 	
Other, net	 	 	 	(94	)	 	 	 	 	39,795	 	 	 	 	(39,795	)	 	 	 	 	—	 	 	 	 	(94	)	 	
Net cash provided by financing activities	 	 	 	66,993	 	 	 	 	9,228	 	 	 	 	40,019	 	 	 	 	—	 	 	 	 	116,240	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	(561	)	 	 	 	 	—	 	 	 	 	(561	)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	 	—	 	 	 	 	—	 	 	 	 	1,142	 	 	 	 	—	 	 	 	 	1,142	 	
 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	 	73,174	 	 	 	 	(32,004	)	 	 	 	 	(2,635	)	 	 	 	 	—	 	 	 	 	38,535	 	
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	 	 	 	74,600	 	 	 	 	57,113	 	 	 	 	38,089	 	 	 	 	—	 	 	 	 	169,802	 	
CASH AND EQUIVALENTS AT END OF PERIOD	 	 	$	 	147,774	 	 	 	$	 	25,109	 	 	 	$	 	35,454	 	 	 	$	 	—	 	 	 	$	 	208,337	 	

27

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For The Six Months Ended March 31, 2010
 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-Guarantor
Companies	 	Elimination	 	Consolidation	
CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	$	 	6,324	 	 	 	$	 	16,494	 	 	 	$	 	16,767	 	 	 	$	 	(33,261	)	 	 	 	$	 	6,324	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	$	 	(12,147	)	 	 	 	$	 	16,993	 	 	 	$	 	665	 	 	 	 	—	 	 	 	$	 	5,511	 	
 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	 	(565	)	 	 	 	 	(14,360	)	 	 	 	 	(2,764	)	 	 	 	 	—	 	 	 	 	(17,689	)	 	
Intercompany distributions	 	 	 	5,000	 	 	 	 	(5,000	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	
Decrease in equipment lease deposits	 	 	 	—	 	 	 	 	28	 	 	 	 	—	 	 	 	 	—	 	 	 	 	28	 	
Net cash provided by (used in) investing activities	 	 	 	4,435	 	 	 	 	(19,332	)	 	 	 	 	(2,764	)	 	 	 	 	—	 	 	 	 	(17,661	)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of long-term debt	 	 	 	100,000	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	100,000	 	
Payments of long-term debt	 	 	 	(29,987	)	 	 	 	 	(23,789	)	 	 	 	 	(121	)	 	 	 	 	—	 	 	 	 	(53,897	)	 	
Financing costs	 	 	 	(4,145	)	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	(4,145	)	 	
Exercise of stock options	 	 	 	285	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	285	 	
Tax benefit from vesting of restricted stock	 	 	 	99	 	 	 	 	—	 	 	 	 	—	 	 	 	 	—	 	 	 	 	99	 	
Other, net	 	 	 	37	 	 	 	 	9,544	 	 	 	 	(9,544	)	 	 	 	 	—	 	 	 	 	37	 	
Net cash provided by (used in) financing activities	 	 	 	66,289	 	 	 	 	(14,245	)	 	 	 	 	(9,665	)	 	 	 	 	—	 	 	 	 	42,379	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in discontinued operations	 	 	 	—	 	 	 	 	—	 	 	 	 	(269	)	 	 	 	 	—	 	 	 	 	(269	)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	 	—	 	 	 	 	—	 	 	 	 	(2,351	)	 	 	 	 	—	 	 	 	 	(2,351	)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	 	58,577	 	 	 	 	(16,584	)	 	 	 	 	(14,384	)	 	 	 	 	—	 	 	 	 	27,609	 	
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	 	 	 	223,511	 	 	 	 	37,865	 	 	 	 	59,457	 	 	 	 	—	 	 	 	 	320,833	 	
CASH AND EQUIVALENTS AT END OF PERIOD	 	 	$	 	282,088	 	 	 	$	 	21,281	 	 	 	$	 	45,073	 	 	 	$	 	—	 	 	 	$	 	348,442	 	

28