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

FORM 10-Q
 	 	
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	
For the quarterly period ended December 31, 2011	
 	 	
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from          to          

Commission File Number: 1-06620
 	
GRIFFON CORPORATION	
(Exact name of registrant as specified in its charter)	

DELAWARE	11-1893410	
(State or other jurisdiction of	(I.R.S. Employer	
incorporation or organization)	Identification No.)	
 	 	
712 Fifth Ave, 18th Floor, New York, New York	10019	
(Address of principal executive offices)	(Zip Code)	
(212) 957-5000
(Registrant’s telephone number, including area code)
 	 	 	 	 	
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes     o  No	
 	 	 	 	 	
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	
x Yes    o No	
 	 	 	 	 	
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):	
 	Large accelerated filer	o	Accelerated filer	x	
 	Non-accelerated filer	o	Smaller reporting company	o	
 	(Do not check if a smaller reporting company)	 	 	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	
o   Yesx   No	
 	
APPLICABLE ONLY TO CORPORATE ISSUERS	
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 61,721,963 shares of Common Stock as of January 31, 2012.	

Griffon Corporation and Subsidiaries
Contents
 	 	 	 	
 	 	Page	
 	 	 	 	
PART I - FINANCIAL INFORMATION	 	 	 	
 	 	 	 	
Item 1 – Financial Statements	 	 	 	
 	 	 	 	
Condensed Consolidated Balance Sheets at December 31, 2011 (unaudited) and September 30, 2011	 	1	 	
 	 	 	 	
Condensed Consolidated Statement of Shareholders’ Equity for the Three Months Ended December 31, 2011 (unaudited)	 	1	 	
 	 	 	 	
Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2011 and 2010 (unaudited)	 	2	 	
 	 	 	 	
Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2011 and 2010 (unaudited)	 	3	 	
 	 	 	 	
Notes to Condensed Consolidated Financial Statements	 	4	 	
 	 	 	 	
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	25	 	
 	 	 	 	
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	 	34	 	
 	 	 	 	
Item 4 - Controls & Procedures	 	34	 	
 	 	 	 	
PART II – OTHER INFORMATION	 	 	 	
 	 	 	 	
Item 1 – Legal Proceedings	 	35	 	
 	 	 	 	
Item 1A – Risk Factors	 	35	 	
 	 	 	 	
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	 	35	 	
 	 	 	 	
Item 3 – Defaults upon Senior Securities	 	35	 	
 	 	 	 	
Item 4 – [Removed and Reserved]	 	35	 	
 	 	 	 	
Item 5 – Other Information	 	36	 	
 	 	 	 	
Item 6 – Exhibits	 	36	 	
 	 	 	 	
Signatures	 	37	 	
 	 	 	 	
Exhibit Index	 	38	 	

Part I – Financial Information
I tem 1 – Financial Statements

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

	 	

	 	
 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	
Cash and equivalents	 	$	177,358	 	$	243,029	 	
Accounts receivable, net of allowances of $6,699 and $6,072	 	 	270,067	 	 	267,471	 	
Contract costs and recognized income not yet billed, net of progress payments of $1,221 and $9,697	 	 	62,217	 	 	74,737	 	
Inventories, net	 	 	296,996	 	 	263,809	 	
Prepaid and other current assets	 	 	46,350	 	 	48,828	 	
Assets of discontinued operations	 	 	1,307	 	 	1,381	 	

	

	 	

	

	 	
Total Current Assets	 	 	854,295	 	 	899,255	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	352,729	 	 	350,050	 	
GOODWILL	 	 	360,915	 	 	357,888	 	
INTANGIBLE ASSETS, net	 	 	234,872	 	 	223,189	 	
OTHER ASSETS	 	 	30,304	 	 	31,197	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	3,006	 	 	3,675	 	

	

	 	

	

	 	
Total Assets	 	$	1,836,121	 	$	1,865,254	 	

	

	 	

	

	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	21,302	 	$	25,164	 	
Accounts payable	 	 	190,280	 	 	186,290	 	
Accrued liabilities	 	 	80,472	 	 	99,631	 	
Liabilities of discontinued operations	 	 	3,611	 	 	3,794	 	

	

	 	

	

	 	
Total Current Liabilities	 	 	295,665	 	 	314,879	 	
LONG-TERM DEBT, net of debt discount of $18,949 and $19,693	 	 	685,270	 	 	688,247	 	
OTHER LIABILITIES	 	 	201,008	 	 	204,434	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	4,979	 	 	5,786	 	

	

	 	

	

	 	
Total Liabilities	 	 	1,186,922	 	 	1,213,346	 	

	

	 	

	

	 	
COMMITMENTS AND CONTINGENCIES - See Note	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	 	 	 	 	 	
Total Shareholders’ Equity	 	 	649,199	 	 	651,908	 	

	

	 	

	

	 	
Total Liabilities and Shareholders’ Equity	 	$	1,836,121	 	$	1,865,254	 	

	

	 	

	

	 	
GRIFFON CORPORATION
C ONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)

COMMON STOCK	 	CAPITAL IN
EXCESS OF
PAR VALUE	 	RETAINED
EARNINGS	 	TREASURY SHARES	 	ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)	 	DEFERRED
ESOP & OTHER
COMPENSATION	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	SHARES	 	PAR VALUE	 	 	 	 	 	SHARES	 	COST	 	 	 	 	 	Total	 	 	 	 	 	 	 	 	 	 	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	 	 	 	 	 	 	 	 	 	 	
Balance at 9/30/2011	 	 	76,184	 	$ 	19,046	 	$ 	471,928	 	$ 	424,153	 	 	14,434	 	$ 	(231,699	)	$ 	(7,724	)	$ 	(23,796	)	$ 	651,908	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	 	 	—	 	 	—	 	 	2,487	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2,487	 	 	 	 	 	 	 	 	 	 	 	
Dividend	 	 	—	 	 	—	 	 	—	 	 	(1,184	)	 	—	 	 	—	 	 	—	 	 	—	 	 	(1,184	)	 	 	 	 	 	 	 	 	 	 	
Tax effect from exercise/vesting of equity awards, net	 	 	—	 	 	—	 	 	(219	)	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(219	)	 	 	 	 	 	 	 	 	 	 	
Amortization of deferred compensation	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	371	 	 	371	 	 	 	 	 	 	 	 	 	 	 	
Common stock acquired	 	 	—	 	 	—	 	 	—	 	 	—	 	 	283	 	 	(2,351	)	 	—	 	 	—	 	 	(2,351	)	 	 	 	 	 	 	 	 	 	 	
Restricted stock awards granted, net	 	 	255	 	 	64	 	 	(64	)	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 	 	 	 	 	 	 	 	
ESOP allocation of common stock	 	 	—	 	 	—	 	 	(22	)	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(22	)	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	—	 	 	—	 	 	2,257	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2,257	 	 	 	 	 	 	 	 	 	 	 	
Translation of foreign financial statements	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(4,566	)	 	—	 	 	(4,566	)	 	 	 	 	 	 	 	 	 	 	
Pension OCI, net of tax	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	518	 	 	—	 	 	518	 	 	 	 	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	 	 	 	 	
Balance at 12/31/2011	 	 	76,439	 	$	19,110	 	$	473,880	 	$	425,456	 	 	14,717	 	$	(234,050	)	$	(11,772	)	$	(23,425	)	$	649,199	 	 	 	 	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	 	 	 	 	
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 December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
Revenue	 	$	451,031	 	$	414,402	 	
Cost of goods and services	 	 	348,323	 	 	326,543	 	

	

	 	

	

	 	
Gross profit	 	 	102,708	 	 	87,859	 	
 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	83,066	 	 	80,445	 	
Restructuring and other related charges	 	 	1,795	 	 	1,393	 	

	

	 	

	

	 	
Total operating expenses	 	 	84,861	 	 	81,838	 	
 	 	 	 	 	 	 	 	
Income from operations	 	 	17,847	 	 	6,021	 	
 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	
Interest expense	 	 	(13,063	)	 	(11,223	)	
Interest income	 	 	63	 	 	69	 	
Other, net	 	 	47	 	 	2,085	 	

	

	 	

	

	 	
Total other income (expense)	 	 	(12,953	)	 	(9,069	)	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Income (loss) before taxes	 	 	4,894	 	 	(3,048	)	
Provision (benefit) for income taxes	 	 	2,407	 	 	(1,368	)	

	

	 	

	

	 	
Net income (loss)	 	$	2,487	 	$	(1,680	)	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share	 	$	0.04	 	$	(0.03	)	

	

	 	

	

	 	
Weighted-average shares outstanding	 	 	56,025	 	 	59,274	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share	 	$	0.04	 	$	(0.03	)	

	

	 	

	

	 	
Weighted-average shares outstanding	 	 	57,082	 	 	59,274	 	

	

	 	

	

	 	
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)
 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	
Net income (loss)	 	$	2,487	 	$	(1,680	)	
Adjustments to reconcile net income (loss) to net cash used in operating activities:	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	15,515	 	 	13,825	 	
Fair value write-up of acquired inventory sold	 	 	—	 	 	11,364	 	
Stock-based compensation	 	 	2,257	 	 	2,023	 	
Provision for losses on accounts receivable	 	 	569	 	 	266	 	
Amortization/write-off of deferred financing costs and debt discounts	 	 	1,505	 	 	1,845	 	
Deferred income taxes	 	 	(141	)	 	(2,582	)	
Gain on sale/disposal of assets	 	 	(44	)	 	—	 	
Change in assets and liabilities, net of assets and liabilities acquired:	 	 	 	 	 	 	 	
Decrease in accounts receivable and contract costs and recognized income not yet billed	 	 	8,067	 	 	29,952	 	
Increase in inventories	 	 	(30,318	)	 	(24,316	)	
(Increase) decrease in prepaid and other assets	 	 	4	 	 	(3,850	)	
Decrease in accounts payable, accrued liabilities and income taxes payable	 	 	(14,582	)	 	(50,724	)	
Other changes, net	 	 	838	 	 	62	 	

	

	 	

	

	 	
Net cash used in operating activities	 	 	(13,843	)	 	(23,815	)	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(19,892	)	 	(17,930	)	
Acquired business, net of cash acquired	 	 	(22,432	)	 	(855	)	
Change in funds restricted for capital projects	 	 	—	 	 	1,283	 	
Change in equipment lease deposits	 	 	—	 	 	(1,141	)	
Proceeds from sale of assets	 	 	61	 	 	—	 	

	

	 	

	

	 	
Net cash used in investing activities	 	 	(42,263	)	 	(18,643	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	
Dividend	 	 	(1,184	)	 	—	 	
Purchase of shares for treasury	 	 	(2,351	)	 	—	 	
Proceeds from issuance of long-term debt	 	 	—	 	 	47,974	 	
Payments of long-term debt	 	 	(6,826	)	 	(35,234	)	
Financing costs	 	 	(4	)	 	(1,708	)	
Exercise of stock options	 	 	—	 	 	20	 	
Tax effect from exercise/vesting of equity awards, net	 	 	834	 	 	7	 	
Other, net	 	 	(14	)	 	(12	)	

	

	 	

	

	 	
Net cash provided by (used in) financing activities	 	 	(9,545	)	 	11,047	 	
CASH FLOWS FROM DISCONTINUED OPERATIONS:	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	(277	)	 	(367	)	

	

	 	

	

	 	
Net cash used in discontinued operations	 	 	(277	)	 	(367	)	
 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	257	 	 	383	 	

	

	 	

	

	 	
NET DECREASE IN CASH AND EQUIVALENTS	 	 	(65,671	)	 	(31,395	)	
 	 	 	 	 	 	 	 	
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	 	 	243,029	 	 	169,802	 	

	

	 	

	

	 	
CASH AND EQUIVALENTS AT END OF PERIOD	 	$	177,358	 	$	138,407	 	

	

	 	

	

	 	
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. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three segments:
 	 	 	 	
 	•	Home & Building Products (“HBP”) consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building Products (“CBP”):	
 	 	 	 	
 	 	-	ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.	
 	 	 	 	
 	 	-	CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.	
 	 	 	 	
 	•	Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.	
 	 	 	 	
 	•	Clopay Plastic Products Company (“Plastics”) is an international leader in the development and 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, 2011, 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.

The condensed consolidated balance sheet information at September 30, 2011 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2011.

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

4

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, percentage of completion method of accounting, pension assumptions, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves and the valuation of discontinued assets and liabilities, and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates.

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

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.

The fair values of Griffon’s 2018 senior notes, 2017 and 2023 4% convertible notes approximated $543,000, $93,000 and $532, respectively, on December 31, 2011. Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with a value of $4,290 and trading securities with a value of $697 at December 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 December 31, 2011, Griffon had $1,000 of Australian dollar contracts at a weighted average rate of $0.94. The contracts, which protect Australia operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting and a fair value gain of $44 was recorded in other assets and to other income for the outstanding contracts based on similar contract values (level 2 inputs) for the quarter ended December 31, 2011. All contracts expire in 30 to 90 days.

NOTE 3 – ACQUISITION

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

The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets purchased from SSMG, have been included in the consolidated financial statements from date of acquisition; acquired inventory was not significant. Griffon is in the process of finalizing the adjustment to the purchase price, if any, primarily related to working capital; accordingly, management has used their best estimate in the initial purchase price allocation as of the date of these financial statements.

5

The following table summarizes the fair values of the assets acquired as of the date of the acquisition and the amounts assigned to goodwill and intangible asset classifications:
 	 	 	 	 	
Inventory	 	$	3,673	 	
PP&E	 	 	416	 	
Goodwill	 	 	4,655	 	
Intangibles	 	 	13,688	 	

	

	 	
Total assets acquired	 	$	22,432	 	

	

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

	 	
Goodwill	 	$	4,655	 	 	N/A	 	
Tradenames	 	 	2,611	 	 	Indefinite	 	
Customer relationships	 	 	11,077	 	 	25	 	

	

	 	 	 	 	
 	 	$	18,343	 	 	 	 	

	

	 	 	 	 	
NOTE 4 – INVENTORIES

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

	 	

	 	

	 	
Raw materials and supplies	 	$	84,317	 	$	76,563	 	
Work in process	 	 	71,033	 	 	66,585	 	
Finished goods	 	 	141,646	 	 	120,661	 	

	

	 	

	

	 	
Total	 	$	296,996	 	$	263,809	 	

	

	 	

	

	 	
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

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

	 	

	 	

	 	
Land, building and building improvements	 	$	125,341	 	$	126,340	 	
Machinery and equipment	 	 	584,540	 	 	571,414	 	
Leasehold improvements	 	 	32,533	 	 	32,867	 	

	

	 	

	

	 	
 	 	 	742,414	 	 	730,621	 	
Accumulated depreciation and amortization	 	 	(389,685	)	 	(380,571	)	

	

	 	

	

	 	
Total	 	$	352,729	 	$	350,050	 	

	

	 	

	

	 	
Depreciation and amortization expense for property, plant and equipment was $13,489 and $11,815 for the quarters ended December 31, 2011 and 2010, respectively.

No event or indicator of impairment occurred during the quarter ended December 31, 2011, which would require additional impairment testing of property, plant and equipment.

6

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides the changes in carrying value of goodwill by segment during the quarter ended December 31, 2011.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At September 30,
2011	 	Goodwill from
2011
acquisitions	 	Other
adjustments
including
currency
translations	 	At December 31,
2011	 	

	 	

	

	

	

	

	

	

	 	
Home & Building Products	 	$	265,147	 	$	4,655	 	$	—	 	$	269,802	 	
Telephonics	 	 	18,545	 	 	—	 	 	—	 	 	18,545	 	
Plastics	 	 	74,196	 	 	—	 	 	(1,628	)	 	72,568	 	

	

	

	

	

	

	

	

	

	

	

	 	
Total	 	$	357,888	 	$	4,655	 	$	(1,628	)	$	360,915	 	

	

	

	

	

	

	

	

	

	

	

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

	 	 	 	

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

	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Customer relationships	 	$	166,348	 	$	15,576	 	 	25	 	$	155,602	 	$	13,862	 	
Unpatented technology	 	 	6,525	 	 	1,895	 	 	11	 	 	6,534	 	 	1,749	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Total amortizable intangible assets	 	 	172,873	 	 	17,471	 	 	 	 	 	162,136	 	 	15,611	 	
Trademarks	 	 	79,470	 	 	—	 	 	 	 	 	76,664	 	 	—	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Total intangible assets	 	$	252,343	 	$	17,471	 	 	 	 	$	238,800	 	$	15,611	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	
Amortization expense for intangible assets subject to amortization was $2,026 and $2,010 for the quarters ended December 31, 2011 and 2010, respectively. The amortizable intangibles acquired in the Southern Patio acquisition will increase amortization in 2011 and forward by approximately $440 per year.

No event or indicator of impairment occurred during the quarter ended December 31, 2011, which would require impairment testing of long-lived intangible assets including goodwill. Subsequent to the end of the quarter, there were changes in management at both Plastics and Telephonics. Management performed a qualitative assessment as to whether these changes affected these reporting units’ carrying value and concluded that it was more likely than not that that the fair value of the units are greater than the respective carrying values.

NOTE 7 – INCOME TAXES

The tax rate for the 2011 quarter was a provision of 49.2%, compared to a benefit of 44.9% in the 2010 quarter; the 2010 benefit arose on the pretax loss for the quarter. The 2011 rate reflects the impact of permanent differences, tax reserves and a change in earnings mix; the 2010 rate benefited $320 from the retroactively extended research tax credit signed into law on December 22, 2010. There were no discrete period items in the current quarter.

7

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

	 	

	 	
 	 	 	 	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	 	$	10,249	 	 	7.125	%	$	550,000	 	$	—	 	$	550,000	 	$	11,337	 	 	7.125	%	
Revolver due 2016	 	(a	)	 	—	 	 	—	 	 	—	 	 	2,574	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	2,937	 	 	n/a	 	
Convert. debt due 2017	 	(b	)	 	100,000	 	 	(18,949	)	 	81,051	 	 	2,253	 	 	4.000	%	 	100,000	 	 	(19,693	)	 	80,307	 	 	2,474	 	 	4.000	%	
Real estate mortgages	 	(c	)	 	14,671	 	 	—	 	 	14,671	 	 	336	 	 	n/a	 	 	18,233	 	 	—	 	 	18,233	 	 	379	 	 	n/a	 	
ESOP Loans	 	(d	)	 	23,942	 	 	—	 	 	23,942	 	 	21	 	 	n/a	 	 	24,348	 	 	—	 	 	24,348	 	 	17	 	 	n/a	 	
Capital lease - real estate	 	(e	)	 	11,123	 	 	—	 	 	11,123	 	 	251	 	 	5.000	%	 	11,341	 	 	—	 	 	11,341	 	 	257	 	 	5.000	%	
Convert. debt due 2023	 	(f	)	 	532	 	 	—	 	 	532	 	 	—	 	 	4.000	%	 	532	 	 	—	 	 	532	 	 	—	 	 	4.000	%	
Term loan due 2013	 	(g	)	 	20,736	 	 	—	 	 	20,736	 	 	173	 	 	n/a	 	 	24,096	 	 	—	 	 	24,096	 	 	201	 	 	n/a	 	
Revolver due 2012	 	(g	)	 	—	 	 	—	 	 	—	 	 	—	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	33	 	 	n/a	 	
Foreign line of credit	 	(g	)	 	3,759	 	 	—	 	 	3,759	 	 	—	 	 	n/a	 	 	3,780	 	 	—	 	 	3,780	 	 	—	 	 	n/a	 	
Other long term debt	 	(j	)	 	758	 	 	—	 	 	758	 	 	—	 	 	 	 	 	774	 	 	—	 	 	774	 	 	—	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	
Totals	 	 	 	 	725,521	 	 	(18,949	)	 	706,572	 	$	15,857	 	 	 	 	 	733,104	 	 	(19,693	)	 	713,411	 	$	17,635	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	 	 	 	 	
less: Current portion	 	 	 	 	(21,302	)	 	—	 	 	(21,302	)	 	 	 	 	 	 	 	(25,164	)	 	—	 	 	(25,164	)	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	
Long-term debt	 	 	 	$	704,219	 	$	(18,949	)	$	685,270	 	 	 	 	 	 	 	$	707,940	 	$	(19,693	)	$	688,247	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Three Months Ended December 31, 2011	 	Three Months Ended December 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	)	 	7.4	%	$	9,797	 	$	—	 	$	412	 	$	10,209	 	 	n/a	 	$	—	 	$	—	 	$	—	 	$	—	 	
Revolver due 2016	 	(a	)	 	n/a	 	 	—	 	 	—	 	 	153	 	 	153	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Convert. debt due 2017	 	(b	)	 	9.1	%	 	1,000	 	 	744	 	 	111	 	 	1,855	 	 	9.1	%	 	1,000	 	 	683	 	 	113	 	$	1,796	 	
Real estate mortgages	 	(c	)	 	5.6	%	 	150	 	 	—	 	 	22	 	 	172	 	 	6.6	%	 	133	 	 	—	 	 	9	 	 	142	 	
ESOP Loans	 	(d	)	 	2.9	%	 	180	 	 	—	 	 	1	 	 	181	 	 	3.1	%	 	23	 	 	—	 	 	17	 	 	40	 	
Capital lease - real estate	 	(e	)	 	5.6	%	 	142	 	 	—	 	 	6	 	 	148	 	 	5.6	%	 	162	 	 	—	 	 	6	 	 	168	 	
Convert. debt due 2023	 	(f	)	 	4.0	%	 	5	 	 	—	 	 	—	 	 	5	 	 	4.0	%	 	5	 	 	—	 	 	—	 	 	5	 	
Term loan due 2013	 	(g	)	 	9.3	%	 	282	 	 	—	 	 	22	 	 	304	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Revolver due 2012	 	(g	)	 	n/a	 	 	22	 	 	—	 	 	34	 	 	56	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Foreign line of credit	 	(g	)	 	10.9	%	 	103	 	 	—	 	 	—	 	 	103	 	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	
Term loan due 2016	 	(h	)	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	8.8	%	 	7,485	 	 	309	 	 	453	 	 	8,247	 	
Asset based loan	 	(h	)	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	6.5	%	 	497	 	 	31	 	 	176	 	 	704	 	
Revolver due 2013	 	(i	)	 	n/a	 	 	—	 	 	—	 	 	—	 	 	—	 	 	3.2	%	 	111	 	 	—	 	 	48	 	 	159	 	
Other long term debt	 	(j	)	 	 	 	 	328	 	 	—	 	 	—	 	 	328	 	 	 	 	 	3	 	 	—	 	 	—	 	 	3	 	
Capitalized interest	 	 	 	 	 	 	 	(451	)	 	—	 	 	—	 	 	(451	)	 	 	 	 	(41	)	 	—	 	 	—	 	 	(41	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	
Totals	 	 	 	 	 	 	$	11,558	 	$	744	 	$	761	 	$	13,063	 	 	 	 	$	9,378	 	$	1,023	 	$	822	 	$	11,223	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	(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; interest is payable semi-annually. On August 9, 2011, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 (“Senior Notes”), via an exchange offer.	
 	 	 	
 	 	The Senior Notes can be redeemed prior to April 1, 2014 at a price of 100% of principal plus a make-whole premium and accrued interest; on or after April 1, 2014, the Senior Notes can be redeemed at a certain price (declining from 105.344% of principal on or after April 1, 2014 to 100% of principal on or after April 1, 2017), plus accrued interest. Proceeds from the Senior Notes were used to pay down the outstanding borrowings under a senior secured term loan facility and two senior secured revolving credit facilities of certain of the Company’s subsidiaries. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and are subject to certain covenants, limitations and restrictions.	
8

 	 	 	
 	 	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 margins are 1.50% for base rate loans and 2.50% for LIBOR loans, in each case without a floor. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio as well as customary affirmative and negative covenants and events of default. The Credit Agreement also includes certain restrictions, such as limitations on the incurrence of indebtedness and liens and the making of restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the guarantors.	
 	 	 	
 	 	At December 31, 2011, there were $19,511 of standby letters of credit outstanding under the Credit Agreement; $180,489 was available for borrowing at that date.	
 	 	 	
 	(b)	On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of $14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15, 2009. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion, (ii) the 42nd trading day prior to maturity of the notes, and (iii) such time as the cumulative adjustment equals or exceeds 1%. As of March 27, 2012, aggregate dividends of $0.04 per share would result in a cumulative change in the conversion rate of 0.5%. 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 December 31, 2011 and September 30, 2011, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.	
 	 	 	
 	(c)	On December 20, 2010, Griffon entered into two second lien real estate mortgages to secure new loans totaling $11,834. The loans mature in February 2016, are collateralized by the related properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 3% with the option to swap to a fixed rate.	
 	 	 	
 	 	Griffon has other real estate mortgages, collateralized by real property, which bear interest at 6.3% and mature in 2016. During the quarter, the mortgage at Russia, Ohio was paid in full, on maturity.	
 	 	 	
 	(d)	Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of Griffon common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus 2.5% or b) the lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an option to convert the outstanding loan to a five-year term loan; principal is payable in quarterly installments of $250, beginning December 2011, with a balloon payment of $15,223 due at maturity (November 2016). The loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At December 31, 2011, $19,723 was outstanding.	
 	 	 	
 	 	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 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 December 31, 2011, $4,219 was outstanding.	
9

 	 	 	
 	(e)	In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2021, bears interest at a fixed rate of 5.1%, is secured by a mortgage on the real estate and is guaranteed by Griffon.	
 	 	 	
 	(f)	At December 31, 2011 and September 30, 2011, Griffon had $532 of 4% convertible subordinated notes due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below the conversion price of the 2023 Notes, as well as upon a change in control. An adjustment to the conversion rate will be required as the result of payment of a cash dividend only if such adjustment would be greater than 1% (or at such time as the cumulative impact on the conversion rate reaches 1% in the aggregate). As of March 27, 2012, aggregate dividends of $0.04 per share would result in a cumulative change in the conversion rate of 0.5%. At December 31, 2011 and September 30, 2011, the 2023 Notes had no capital in excess of par value component as substantially all of these notes were put to Griffon at par and settled in July 2010.	
 	 	 	
 	(g)	In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The facility accrues interest at Euribor plus 2.35% per annum, and the term loan accrues interest at Euribor plus 2.45% per annum. The revolving facility matures in November 2012, but is renewable upon mutual agreement with the bank. In July 2011, the full €20,000 was drawn on the Term Loan, with a portion of the proceeds used to repay borrowings under the revolving credit facility. The term loan is payable in ten equal quarterly installments which began in September 2011, with maturity in December 2013. Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. There were no borrowings outstanding under the revolving facility at December 31, 2011 with €10,000 available for borrowing.	
 	 	 	
 	 	Clopay do Brazil, a subsidiary of Plastics, maintains lines of credit of approximately $4,000. Interest on borrowings accrue at a rate of LIBOR plus 3.8% or CDI plus 5.6%. At December 31, 2011, $3,759 was borrowed under the lines.	
 	 	 	
 	(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”).	
 	 	 	
 	 	On November 30, 2010, Clopay Ames, as required under the Term Loan agreement, entered into an interest rate swap on a notional amount of $200,000 of the Term Loan. The agreement fixed the LIBOR component of the Term Loan interest rate at 2.085% for the notional amount of the swap.	
 	 	 	
 	 	On March 17, 2011, the Term Loan and swap were terminated, and on March 18, 2011, the ABL was terminated, in connection with the issuance of the Senior Notes and Credit Agreement.	
 	 	 	
 	(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)	Includes capital leases.	
At December 31, 2011, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

10

NOTE 9 — SHAREHOLDERS’ EQUITY

On November 17, 2011, the Board of Directors approved a quarterly cash dividend of $0.02 per common share, which was paid on December 27, 2011, to holders of common stock as of close of business on November 29, 2011. $1,184 was recorded to retained earnings for the dividend. Dividends paid on allocated shares in the ESOP were used to pay down the ESOP loan and were recorded as a reduction in expense. A dividend payable was established for the holders of restricted shares and will be released upon vesting of the underlying restricted shares.

On January 31, 2012, the Board of Directors declared a second quarterly cash dividend of $0.02 per share, payable on March 27, 2012 to shareholder of record as of the close of business on February 28, 2012.

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.

In February 2011, shareholders approved the Griffon Corporation 2011 Equity Incentive Plan (“Incentive Plan”) under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, deferred shares and other stock-based awards may be granted. Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, generally expire ten years after the date of grant and are granted at an exercise price of not less than 100% of the fair market value at the date of grant. The maximum number of shares of common stock available for award under the Incentive Plan is 3,000,000 (600,000 of which may be issued as incentive stock options) plus any shares underlying awards outstanding on the effective date of the Incentive Plan under the 2006 Incentive Plan that are subsequently cancelled or forfeited. As of December 31, 2011, 1,865,009 shares were available for grant.

All grants outstanding under the Griffon Corporation 2001 Stock Option Plan, 2006 Equity Incentive Plan and Outside Director Stock Award Plan will continue under their terms; no additional awards will be granted under such plans.

During the first quarter of 2012, Griffon granted 309,500 restricted shares with three-year cliff vesting, 191,000 of which are also subject to certain performance conditions, with a total fair value of $2,881, or a weighted average fair value of $9.31 per share.

During the second quarter of 2011, Griffon granted 590,000 performance shares. Prior to the change in the terms of the grant, the performance shares had a fair value of $7,346, or a weighted average fair value of $12.45 per share, and cliff vested when either Griffon’s common stock closed at or above $16 per share for twenty consecutive trading days or 7 years from the date of grant, whichever came first. In January 2012, the terms of the grant were modified such that the price of Griffon common stock must close at or above $16 per share for thirty consecutive trading days on or prior to January 10, 2016 in order for the shares to vest; otherwise, the shares will be forfeited. The unamortized portion of the original fair value of approximately $6,400 will be expensed over the new service period of 32 months beginning January 2012.

For the quarters ended December 31, 2011 and 2010, stock based compensation expense totaled $2,257 and $2,023, respectively.

In August 2011, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under this repurchase program, the Company may, from time to time, purchase shares of its common stock, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. In the first quarter of 2012, Griffon purchased 283,400 shares of common stock, for a total of $2,351, or $8.29 per share; in total, Griffon has purchased 448,779 shares of common stock, for a total of $3,660, or $8.16 per share, under this repurchase program. $46,340 remains under the $50,000 authorization.

11

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 during the quarter ended December 31, 2010, the incremental shares from stock based compensation are anti-dilutive.

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

	 	
 	 	2011	 	2010	 	

	 	

	 	
Weighted average shares outstanding - basic	 	 	56,025	 	 	59,274	 	
Incremental shares from stock based compensation	 	 	1,057	 	 	—	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Weighted average shares outstanding - diluted	 	 	57,082	 	 	59,274	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Anti-dilutive options excluded from diluted EPS computation	 	 	1,202	 	 	1,202	 	
 	 	 	 	 	 	 	 	
Anti-dilutive restricted stock excluded from diluted EPS computation	 	 	900	 	 	627	 	
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 11 – BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:
 	 	 	
 	•	HBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains, as well as a global provider of non-powered landscaping products that make work easier for homeowners and professionals.	
 	 	 	
 	•	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. 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 and acquisition costs to Income before taxes and discontinued operations:

12

 	 	 	 	 	 	 	 	
 	 	For the Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
REVENUE	 	 	 	 	 	
Home & Building Products:	 	 	 	 	 	 	 	
ATT	 	$	98,741	 	$	94,197	 	
CBP	 	 	111,647	 	 	104,066	 	

	

	 	

	

	 	
Home & Building Products	 	 	210,388	 	 	198,263	 	
Telephonics	 	 	104,513	 	 	98,279	 	
Plastics	 	 	136,130	 	 	117,860	 	

	

	 	

	

	 	
Total consolidated net sales	 	$	451,031	 	$	414,402	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
 	 	For the Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
INCOME (LOSS) BEFORE TAXES	 	 	 	 	 	 	 	
Segment operating profit (loss):	 	 	 	 	 	 	 	
Home & Building Products	 	$	9,834	 	$	(1,623	)	
Telephonics	 	 	12,515	 	 	10,693	 	
Plastics	 	 	1,880	 	 	4,142	 	

	

	 	

	

	 	
Total segment operating profit	 	 	24,229	 	 	13,212	 	
Unallocated amounts	 	 	(6,335	)	 	(5,106	)	
Net interest expense	 	 	(13,000	)	 	(11,154	)	

	

	 	

	

	 	
Income (loss) before taxes	 	$	4,894	 	$	(3,048	)	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs:	 	 	 	 	 	 	 	
Home & Building Products	 	$	17,750	 	$	17,534	 	
Telephonics	 	 	15,690	 	 	12,406	 	
Plastics	 	 	8,180	 	 	9,786	 	

	

	 	

	

	 	
Total Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs	 	 	41,620	 	 	39,726	 	
Unallocated amounts, less acquisition costs	 	 	(6,335	)	 	(5,106	)	
Net interest expense	 	 	(13,000	)	 	(11,154	)	
Segment depreciation and amortization	 	 	(15,418	)	 	(13,757	)	
Restructuring charges	 	 	(1,795	)	 	(1,393	)	
Fair value write-up of acquired inventory sold	 	 	—	 	 	(11,364	)	
Acquisition costs	 	 	(178	)	 	—	 	

	

	 	

	

	 	
Income (loss) before taxes	 	$	4,894	 	$	(3,048	)	

	

	 	

	

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

13

 	 	 	 	 	 	 	 	
 	 	For the Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
DEPRECIATION and AMORTIZATION	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	
Home & Building Products	 	$	7,465	 	$	6,400	 	
Telephonics	 	 	1,653	 	 	1,713	 	
Plastics	 	 	6,300	 	 	5,644	 	

	

	 	

	

	 	
Total segment depreciation and amortization	 	 	15,418	 	 	13,757	 	
Corporate	 	 	97	 	 	68	 	

	

	 	

	

	 	
Total consolidated depreciation and amortization	 	$	15,515	 	$	13,825	 	

	

	 	

	

	 	
CAPITAL EXPENDITURES	 	 	 	 	 	 	 	
Segment:	 	 	 	 	 	 	 	
Home & Building Products	 	$	6,268	 	$	6,440	 	
Telephonics	 	 	1,230	 	 	805	 	
Plastics	 	 	12,328	 	 	10,620	 	

	

	 	

	

	 	
Total segment	 	 	19,826	 	 	17,865	 	
Corporate	 	 	66	 	 	65	 	

	

	 	

	

	 	
Total consolidated capital expenditures	 	$	19,892	 	$	17,930	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
 	 	At December 31,
2011	 	At September 30,
2011	 	

	 	

	 	
ASSETS	 	 	 	 	 	 	 	
Segment assets:	 	 	 	 	 	 	 	
Home & Building Products	 	$	952,487	 	$	972,714	 	
Telephonics	 	 	283,360	 	 	288,968	 	
Plastics	 	 	434,834	 	 	450,452	 	

	

	 	

	

	 	
Total segment assets	 	 	1,670,681	 	 	1,712,134	 	
Corporate	 	 	161,127	 	 	148,064	 	

	

	 	

	

	 	
Total continuing assets	 	 	1,831,808	 	 	1,860,198	 	
Assets of discontinued operations	 	 	4,313	 	 	5,056	 	

	

	 	

	

	 	
Consolidated total	 	$	1,836,121	 	$	1,865,254	 	

	

	 	

	

	 	
NOTE 12 – COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:
 	 	 	 	 	 	 	 	
 	 	Three Months Ended
Ended December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	

	 	
Net income (loss)	 	$	2,487	 	$	(1,680	)	
 	 	 	 	 	 	 	 	
Change in fair value of interest rate swap, net of tax	 	 	—	 	 	(48	)	
Foreign currency translation adjustment	 	 	(4,566	)	 	(445	)	
Pension other comprehensive income amortization, net of tax	 	 	518	 	 	425	 	

	

	 	

	

	 	
Comprehensive loss	 	$	(1,561	)	$	(1,748	)	

	

	 	

	

	 	
14

NOTE 13 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was as follows:
 	 	 	 	 	 	 	 	
 	 	Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	

	 	
Service cost	 	$	52	 	$	162	 	
Interest cost	 	 	2,670	 	 	2,780	 	
Expected return on plan assets	 	 	(2,933	)	 	(2,755	)	
Amortization:	 	 	 	 	 	 	 	
Prior service cost	 	 	83	 	 	84	 	
Recognized actuarial loss	 	 	718	 	 	551	 	

	

	 	

	

	 	
Net periodic expense	 	$	590	 	$	822	 	

	

	 	

	

	 	
Effective January 1, 2012, the Clopay Pension Plan merged into the Ames True Temper Inc. Pension Plan. The merged Pension Plan was renamed the Clopay Ames True Temper Plan.

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 December 31, 2011	 	At September 30, 2011	 	

	 	

	 	
 	 	Current	 	Long-term	 	Current	 	Long-term	 	

	 	

	 	

	 	

	 	

	 	
Assets of discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prepaid and other current assets	 	$	1,307	 	$	—	 	$	1,381	 	$	—	 	
Other long-term assets	 	 	—	 	 	3,006	 	 	—	 	 	3,675	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets of discontinued operations	 	$	1,307	 	$	3,006	 	$	1,381	 	$	3,675	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities of discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accrued liabilities	 	$	3,611	 	$	—	 	$	3,794	 	$	—	 	
Other long-term liabilities	 	 	—	 	 	4,979	 	 	—	 	 	5,786	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities of discontinued operations	 	$	3,611	 	$	4,979	 	$	3,794	 	$	5,786	 	

	

	 	

	

	 	

	

	 	

	

	 	
There was no Installation Services’ operating unit revenue or income for the quarters ended December 31, 2011 or 2010.

15

NOTE 16 – RESTRUCTURING AND OTHER RELATED CHARGES

In June 2009, Griffon announced plans to consolidate facilities in CBP. These actions were completed in 2011, consistent with the plan. In completing the consolidation plan, CBP incurred total pre-tax exit and restructuring costs approximating $9,031, substantially all of which was cash charges; charges include $1,160 for one-time termination benefits and other personnel costs, $210 for excess facilities and related costs, and $7,661 for other exit costs, primarily in connection with production realignment, and had $10,365 of capital expenditures. The restructuring costs in the quarter ended December 31, 2010 were $1,328.

ATT recognized $273 and $65 in restructuring and other related charges, primarily related to a facility, in the quarters ended December 31, 2011 and 2010, respectively.

Telephonics recognized $1,522 of restructuring and other related charges, primarily for one-time termination benefits and other personnel costs, in the quarter ended December 31, 2011, in conjunction with changes to its organizational structure.

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 was as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Workforce
Reduction	 	Facilities &
Exit Costs	 	Other
Related
Costs	 	Total	 	

	 	

	 	

	 	

	 	

	 	
Amounts incurred in:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Quarter ended December 31, 2010	 	$	239	 	$	791	 	$	363	 	$	1,393	 	
Quarter ended December 31, 2011	 	$	1,538	 	$	257	 	$	—	 	$	1,795	 	
At December 31, 2011, the accrued liability for the restructuring and related charges consisted of:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Workforce
Reduction	 	Facilities &
Exit Costs	 	Other
Related
Costs	 	Total	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	
Accrued liability at September 30, 2011	 	$	2,657	 	$	—	 	$	—	 	$	2,657	 	
Charges	 	 	1,538	 	 	257	 	 	—	 	 	1,795	 	
Payments	 	 	(1,358	)	 	(175	)	 	—	 	 	(1,533	)	

	

	 	

	

	 	

	

	 	

	

	 	
Accrued liability at December 31, 2011	 	$	2,837	 	$	82	 	$	—	 	$	2,919	 	

	

	 	

	

	 	

	

	 	

	

	 	
NOTE 17 – OTHER INCOME

For the quarters ended December 31, 2011 and 2010, Other income included a loss of $264 and income of $123, respectively, of foreign exchange gains/losses, net, and $65 and $1,139, respectively, of investment income.

NOTE 18 – WARRANTY LIABILITY

Telephonics offers warranties against product defects for periods generally ranging from one to two years, depending on the specific product and terms of the customer purchase agreement. Typical warranties require Telephonics to repair or replace the defective products during the warranty period at no cost to the customer. At the time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical experience and periodically assesses its warranty obligations and adjusts the liability as necessary. ATT offers an express limited warranty for a period of ninety days on all products unless otherwise stated on the product or packaging from the date of original purchase.

16

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

	 	

	 	

	 	
Balance, beginning of period	 	$	7,963	 	$	6,719	 	
Warranties issued and charges in estimated pre-existing warranties	 	 	2,030	 	 	831	 	
Actual warranty costs incurred	 	 	(1,040	)	 	(849	)	

	

	 	

	

	 	
Balance, end of period	 	$	8,953	 	$	6,701	 	

	

	 	

	

	 	
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 has accepted and approved the feasibility study. Accordingly, ISC has no further obligations under the consent order.

Upon acceptance of the feasibility study, DEC issued a Proposed Remedial Action Plan (“PRAP”) that sets forth the proposed remedy for the site. The PRAP accepted the recommendation contained in the feasibility study for remediation of the soil and groundwater medias, but selected a different remediation alternative for the sediment medium. The approximate cost and the current net capital cost value of the remedy proposed by DEC in the PRAP is approximately $10,000. After receiving public comments on the PRAP, the DEC issued a Record of Decision (“ROD”) that set forth the specific remedies selected and responded to public comments. The remedies selected by the DEC in the ROD are the same remedies as those set forth in the PRAP.

It is now expected that DEC will enter into negotiations with potentially responsible parties to request they undertake performance of the remedies selected in the ROD, and if such parties do not agree to implement such remedies, then the State may use State Superfund money to remediate the Peekskill site and seek recovery of costs from such parties. Griffon does not acknowledge any responsibility to perform any remediation at the Peekskill Site.

17

Improper Advertisement Claim involving Union Tools Products. During December 2004, a customer of ATT was named in litigation that involved Union Tools 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. While ATT was actively working with the DEC and the New York State Department of Health to define remediation requirements relative to the underground fuel tank, the DEC took the position that ATT was responsible to remediate other types of contamination on the site. After negotiations with the DEC, on August 15, 2011, ATT executed an Order on Consent with the DEC. The Order is without admission or finding of liability or acknowledgement that there has been a release of hazardous substances at the site. Importantly, the Order does not waive any rights that ATT has under a 1991 Consent Judgment entered into between the DEC and a predecessor of ATT relating to the site. On September 26, 2011 ATT submitted a Records Search Report to DEC and on October 24, 2011 filed the draft Remedial Investigation Work Plan completing the first two steps under the Order. The Order requires that ATT identify Areas of Concern at the site, and formulate a strategy to investigate and remedy both on and off site conditions in compliance with applicable environmental law. At the conclusion of the remedy phase of the remediation to the satisfaction of the DEC, the DEC will issue a Certificate of Completion.

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”) 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 against Griffon, and Griffon is unaware of any material financial exposure in connection with the Inspector General’s inquiry.

In general, departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of Griffon, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have material adverse effect on Telephonics because of its reliance on government contracts.

General legal

Griffon is a party to legal proceedings arising in the ordinary course of business and is subject to various laws and regulations relating to the protection of the environment. 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.

18

NOTE 20 — CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the domestic assets of Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation and Ames True Temper Inc. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below are condensed consolidating financial information as of and for the three month periods ended December 31, 2011 and 2010. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly-owned subsidiaries accounted for under the equity method.

CONDENSED CONSOLIDATING BALANCE SHEETS
At December 31, 2011
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	$	115,354	 	$	17,916	 	$	44,088	 	$	—	 	$	177,358	 	
Accounts receivable, net of allowances	 	 	—	 	 	187,535	 	 	82,532	 	 	—	 	 	270,067	 	
Contract costs and recognized income not yet billed, net of progress payments	 	 	—	 	 	61,188	 	 	1,029	 	 	—	 	 	62,217	 	
Inventories, net	 	 	—	 	 	223,777	 	 	73,219	 	 	—	 	 	296,996	 	
Prepaid and other current assets	 	 	(1,031	)	 	40,397	 	 	7,596	 	 	(612	)	 	46,350	 	
Assets of discontinued operations	 	 	—	 	 	—	 	 	1,307	 	 	—	 	 	1,307	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Current Assets	 	 	114,323	 	 	530,813	 	 	209,771	 	 	(612	)	 	854,295	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	1,387	 	 	229,315	 	 	122,027	 	 	—	 	 	352,729	 	
GOODWILL	 	 	—	 	 	283,491	 	 	77,424	 	 	—	 	 	360,915	 	
INTANGIBLE ASSETS, net	 	 	—	 	 	154,275	 	 	80,597	 	 	—	 	 	234,872	 	
INTERCOMPANY RECEIVABLE	 	 	505,848	 	 	247,534	 	 	112,838	 	 	(866,220	)	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	2,816,497	 	 	729,644	 	 	2,383,273	 	 	(5,929,414	)	 	—	 	
OTHER ASSETS	 	 	52,029	 	 	50,560	 	 	8,856	 	 	(81,141	)	 	30,304	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	3,006	 	 	—	 	 	3,006	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Assets	 	$	3,490,084	 	$	2,225,632	 	$	2,997,792	 	$	(6,877,387	)	$	1,836,121	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	5,219	 	$	1,004	 	$	15,079	 	$	—	 	$	21,302	 	
Accounts payable and accrued liabilities	 	 	23,951	 	 	189,297	 	 	58,116	 	 	(612	)	 	270,752	 	
Liabilities of discontinued operations	 	 	—	 	 	—	 	 	3,611	 	 	—	 	 	3,611	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Current Liabilities	 	 	29,170	 	 	190,301	 	 	76,806	 	 	(612	)	 	295,665	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	650,306	 	 	10,558	 	 	24,406	 	 	—	 	 	685,270	 	
INTERCOMPANY Payables	 	 	—	 	 	92,076	 	 	774,144	 	 	(866,220	)	 	—	 	
OTHER LIABILITIES	 	 	77,778	 	 	170,546	 	 	33,825	 	 	(81,141	)	 	201,008	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	4,979	 	 	—	 	 	4,979	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Liabilities	 	 	757,254	 	 	463,481	 	 	914,160	 	 	(947,973	)	 	1,186,922	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	2,732,830	 	 	1,762,151	 	 	2,083,632	 	 	(5,929,414	)	 	649,199	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Liabilities and Shareholders’ Equity	 	$	3,490,084	 	$	2,225,632	 	$	2,997,792	 	$	(6,877,387	)	$	1,836,121	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
19

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2011
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and equivalents	 	$	178,448	 	$	15,164	 	$	49,417	 	$	—	 	$	243,029	 	
Accounts receivable, net of allowances	 	 	—	 	 	190,986	 	 	76,485	 	 	—	 	 	267,471	 	
Contract costs and recognized income not yet billed, net of progress payments	 	 	—	 	 	73,755	 	 	982	 	 	—	 	 	74,737	 	
Inventories, net	 	 	—	 	 	194,355	 	 	69,454	 	 	—	 	 	263,809	 	
Prepaid and other current assets	 	 	1,839	 	 	40,436	 	 	1,913	 	 	4,640	 	 	48,828	 	
Assets of discontinued operations	 	 	—	 	 	—	 	 	1,381	 	 	—	 	 	1,381	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Current Assets	 	 	180,287	 	 	514,696	 	 	199,632	 	 	4,640	 	 	899,255	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
PROPERTY, PLANT AND EQUIPMENT, net	 	 	1,402	 	 	224,193	 	 	124,455	 	 	—	 	 	350,050	 	
GOODWILL	 	 	—	 	 	283,491	 	 	74,397	 	 	—	 	 	357,888	 	
INTANGIBLE ASSETS, net	 	 	—	 	 	155,242	 	 	67,947	 	 	—	 	 	223,189	 	
INTERCOMPANY RECEIVABLE	 	 	449,112	 	 	278,344	 	 	98,953	 	 	(826,409	)	 	—	 	
EQUITY INVESTMENTS IN SUBSIDIARIES	 	 	2,844,527	 	 	746,686	 	 	2,397,258	 	 	(5,988,471	)	 	—	 	
OTHER ASSETS	 	 	54,354	 	 	49,771	 	 	14,270	 	 	(87,198	)	 	31,197	 	
ASSETS OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	3,675	 	 	—	 	 	3,675	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Assets	 	$	3,529,682	 	$	2,252,423	 	$	2,980,587	 	$	(6,897,438	)	$	1,865,254	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable and current portion of long-term debt	 	$	5,375	 	$	4,350	 	$	15,439	 	$	—	 	$	25,164	 	
Accounts payable and accrued liabilities	 	 	36,765	 	 	199,742	 	 	44,774	 	 	4,640	 	 	285,921	 	
Liabilities of discontinued operations	 	 	—	 	 	—	 	 	3,794	 	 	—	 	 	3,794	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Current Liabilities	 	 	42,140	 	 	204,092	 	 	64,007	 	 	4,640	 	 	314,879	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LONG-TERM DEBT, net of debt discounts	 	 	649,812	 	 	10,794	 	 	27,641	 	 	—	 	 	688,247	 	
INTERCOMPANY Payables	 	 	—	 	 	89,198	 	 	737,211	 	 	(826,409	)	 	—	 	
OTHER LIABILITIES	 	 	79,655	 	 	172,203	 	 	39,774	 	 	(87,198	)	 	204,434	 	
LIABILITIES OF DISCONTINUED OPERATIONS	 	 	—	 	 	—	 	 	5,786	 	 	—	 	 	5,786	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Liabilities	 	 	771,607	 	 	476,287	 	 	874,419	 	 	(908,967	)	 	1,213,346	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SHAREHOLDERS’ EQUITY	 	 	2,758,075	 	 	1,776,136	 	 	2,106,168	 	 	(5,988,471	)	 	651,908	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total Liabilities and Shareholders’ Equity	 	$	3,529,682	 	$	2,252,423	 	$	2,980,587	 	$	(6,897,438	)	$	1,865,254	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
20

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2011
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
Revenue	 	$	—	 	$	338,062	 	$	126,963	 	$	(13,994	)	$	451,031	 	
Cost of goods and services	 	 	—	 	 	253,527	 	 	109,160	 	 	(14,364	)	 	348,323	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Gross profit	 	 	—	 	 	84,535	 	 	17,803	 	 	370	 	 	102,708	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	4,616	 	 	63,991	 	 	14,551	 	 	(92	)	 	83,066	 	
Restructuring and other related charges	 	 	—	 	 	1,779	 	 	16	 	 	—	 	 	1,795	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total operating expenses	 	 	4,616	 	 	65,770	 	 	14,567	 	 	(92	)	 	84,861	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(4,616	)	 	18,765	 	 	3,236	 	 	462	 	 	17,847	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	(3,398	)	 	(5,982	)	 	(3,620	)	 	—	 	 	(13,000	)	
Other, net	 	 	65	 	 	2,842	 	 	(2,398	)	 	(462	)	 	47	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total other income (expense)	 	 	(3,333	)	 	(3,140	)	 	(6,018	)	 	(462	)	 	(12,953	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes	 	 	(7,949	)	 	15,625	 	 	(2,782	)	 	—	 	 	4,894	 	
Provision (benefit) for income taxes	 	 	(4,441	)	 	6,726	 	 	122	 	 	—	 	 	2,407	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income (loss) before equity in net income of subsidiaries	 	 	(3,508	)	 	8,899	 	 	(2,904	)	 	—	 	 	2,487	 	
Equity in net income (loss) of subsidiaries	 	 	5,995	 	 	(2,840	)	 	8,899	 	 	(12,054	)	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income (loss)	 	$	2,487	 	$	6,059	 	$	5,995	 	$	(12,054	)	$	2,487	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
21

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2010
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
Revenue	 	$	—	 	$	305,647	 	$	108,755	 	$	—	 	$	414,402	 	
Cost of goods and services	 	 	—	 	 	240,604	 	 	86,195	 	 	(256	)	 	326,543	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Gross profit	 	 	—	 	 	65,043	 	 	22,560	 	 	256	 	 	87,859	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	5,082	 	 	60,653	 	 	14,774	 	 	(64	)	 	80,445	 	
Restructuring and other related charges	 	 	—	 	 	1,329	 	 	64	 	 	—	 	 	1,393	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total operating expenses	 	 	5,082	 	 	61,982	 	 	14,838	 	 	(64	)	 	81,838	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(5,082	)	 	3,061	 	 	7,722	 	 	320	 	 	6,021	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	(1,825	)	 	(773	)	 	(8,556	)	 	—	 	 	(11,154	)	
Other, net	 	 	1,139	 	 	(2,142	)	 	3,408	 	 	(320	)	 	2,085	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total other income (expense)	 	 	(686	)	 	(2,915	)	 	(5,148	)	 	(320	)	 	(9,069	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before taxes	 	 	(5,768	)	 	146	 	 	2,574	 	 	—	 	 	(3,048	)	
Provision (benefit) for income taxes	 	 	(2,235	)	 	3,146	 	 	(2,279	)	 	—	 	 	(1,368	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income (loss) before equity in net income of subsidiaries	 	 	(3,533	)	 	(3,000	)	 	4,853	 	 	—	 	 	(1,680	)	
Equity in net income (loss) of subsidiaries	 	 	1,853	 	 	10,625	 	 	(3,000	)	 	(9,478	)	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income (loss)	 	$	(1,680	)	$	7,625	 	$	1,853	 	$	(9,478	)	$	(1,680	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
22

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2011
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	2,487	 	$	6,059	 	$	5,995	 	$	(12,054	)	$	2,487	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	(36,903	)	 	2,275	 	 	20,785	 	 	—	 	 	(13,843	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(66	)	 	(15,747	)	 	(4,079	)	 	—	 	 	(19,892	)	
Acquired business, net of cash acquired	 	 	—	 	 	(22,432	)	 	—	 	 	—	 	 	(22,432	)	
Proceeds from sale of investment	 	 	—	 	 	21	 	 	40	 	 	—	 	 	61	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net cash used in investing activities	 	 	(66	)	 	(38,158	)	 	(4,039	)	 	—	 	 	(42,263	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of shares for treasury	 	 	(2,351	)	 	—	 	 	—	 	 	—	 	 	(2,351	)	
Payments of long-term debt	 	 	(406	)	 	(3,604	)	 	(2,816	)	 	—	 	 	(6,826	)	
Intercompany debt	 	 	(23,000	)	 	—	 	 	23,000	 	 	—	 	 	—	 	
Financing costs	 	 	(4	)	 	—	 	 	—	 	 	—	 	 	(4	)	
Tax effect from exercise/vesting of equity awards, net	 	 	834	 	 	—	 	 	—	 	 	—	 	 	834	 	
Dividend	 	 	(1,184	)	 	—	 	 	—	 	 	—	 	 	(1,184	)	
Other, net	 	 	(14	)	 	42,667	 	 	(42,667	)	 	—	 	 	(14	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net cash provided by (used in) financing activities	 	 	(26,125	)	 	39,063	 	 	(22,483	)	 	—	 	 	(9,545	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in discontinued operations	 	 	—	 	 	—	 	 	(277	)	 	—	 	 	(277	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	—	 	 	—	 	 	257	 	 	—	 	 	257	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	(63,094	)	 	3,180	 	 	(5,757	)	 	—	 	 	(65,671	)	
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	 	 	178,448	 	 	15,164	 	 	49,417	 	 	—	 	 	243,029	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
CASH AND EQUIVALENTS AT END OF PERIOD	 	$	115,354	 	$	18,344	 	$	43,660	 	$	—	 	$	177,358	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
23

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2010
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
($ in thousands)	 	Parent
Company	 	Guarantor
Companies	 	Non-
Guarantor
Companies	 	Elimination	 	Consolidation	 	

	 	

	 	

	 	

	 	

	 	
CASH FLOWS FROM OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	(1,680	)	$	7,625	 	$	1,853	 	$	(9,478	)	$	(1,680	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	(7,009	)	 	(3,967	)	 	(12,839	)	 	—	 	 	(23,815	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition of property, plant and equipment	 	 	(65	)	 	(8,519	)	 	(9,346	)	 	—	 	 	(17,930	)	
Acquired business, net of cash acquired	 	 	—	 	 	(1,066	)	 	211	 	 	—	 	 	(855	)	
Intercompany distributions	 	 	10,000	 	 	(10,000	)	 	—	 	 	—	 	 	—	 	
Funds restricted for capital projects	 	 	—	 	 	1,283	 	 	—	 	 	—	 	 	1,283	 	
Change in equipment lease deposits	 	 	—	 	 	(1,141	)	 	—	 	 	—	 	 	(1,141	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net cash provided by (used in) investing activities	 	 	9,935	 	 	(19,443	)	 	(9,135	)	 	—	 	 	(18,643	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH FLOWS FROM FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of long-term debt	 	 	—	 	 	—	 	 	47,974	 	 	—	 	 	47,974	 	
Payments of long-term debt	 	 	(156	)	 	(30,283	)	 	(4,795	)	 	—	 	 	(35,234	)	
Financing costs	 	 	(5	)	 	—	 	 	(1,703	)	 	—	 	 	(1,708	)	
Exercise of stock options	 	 	20	 	 	—	 	 	—	 	 	—	 	 	20	 	
Tax benefit from vesting of restricted stock	 	 	7	 	 	—	 	 	—	 	 	—	 	 	7	 	
Other, net	 	 	(12	)	 	25,185	 	 	(25,185	)	 	—	 	 	(12	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net cash provided by (used in) financing activities	 	 	(146	)	 	(5,098	)	 	16,291	 	 	—	 	 	11,047	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in discontinued operations	 	 	—	 	 	—	 	 	(367	)	 	—	 	 	(367	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and equivalents	 	 	—	 	 	—	 	 	383	 	 	—	 	 	383	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	 	 	2,780	 	 	(28,508	)	 	(5,667	)	 	—	 	 	(31,395	)	
CASH AND EQUIVALENTS AT BEGINNING OF YEAR	 	 	74,600	 	 	57,113	 	 	38,089	 	 	—	 	 	169,802	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
CASH AND EQUIVALENTS AT END OF YEAR	 	$	77,380	 	$	28,605	 	$	32,422	 	$	—	 	$	138,407	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
24

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

BUSINESS OVERVIEW (in thousands, except per share data)

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. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three segments:
 	 	 	 	
 	•	Home & Building Products (“HBP”) consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building Products (“CBP”):	
 	 	 	 	
 	 	-	ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.	
 	 	 	 	
 	 	-	CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.	
 	 	 	
 	•	Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions to military and commercial markets worldwide.	
 	 	 	 	
 	•	Clopay Plastic Products Company (“Plastics”) is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.	
On October 17, 2011, Griffon acquired the pots and planters business of Southern Sales & Marketing Group, Inc. for $22,432. The acquired business, which markets its products under the Southern Patio brand name (“Southern Patio”), is a leading designer, manufacturer and marketer of landscape accessories. Southern Patio, which was integrated with ATT, had revenue exceeding $40,000 in 2011; acquired inventory was not significant.

Southern Patio’s results of operations are not included in the Griffon consolidated balance sheet, statement of operations or cash flows, or footnotes relating thereto prior to October 17, 2011.

OVERVIEW
 	 	 	 	
Revenue for the quarter ended December 31, 2011 was $451,031, compared to $414,402 in the prior year quarter. Net income was $2,487, or $0.04 per diluted share, compared to a loss of $1,680, or $0.03 per share, in the prior year quarter. The current quarter results included:	
 	 	- 	$1,795 ($1,167, net of tax, or $0.02 per share) of restructuring and related charges; and	
 	 	- 	$178 ($116, net of tax, or $0.00 per share) of acquisition costs.	
 	 	 	 	
The prior year quarter included the following:	
 	 	-	$11,364 ($7,387, net of tax, or $0.12 per share) of increased cost of goods related to the sale of inventory recorded at fair value in connection with acquisition accounting for ATT;	
 	 	-	Restructuring charges of $1,393 ($905, net of tax, or $0.02 per share); and	
 	 	-	Discrete tax benefits of $320, or $0.01 per share.	
Excluding these items from both periods, Net income would have been $3,770, or $0.07 per share, compared to $6,292, or $0.11 per share, in the prior year quarter.

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Griffon evaluates performance based on Earnings per share and Net income (loss) excluding restructuring charges, gain (loss) from debt extinguishment, discrete tax items, acquisition costs and costs related to the fair value of inventory for acquisitions. Griffon believes this information is useful to investors. The following table provides a reconciliation of Earnings (loss) per share and Net income (loss) to Adjusted earnings per share and Adjusted net income:

GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) TO ADJUSTED INCOME (LOSS)
(Unaudited)
 	 	 	 	 	 	 	 	
 	 	For the Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
 	 	 	 	 	 	 	 	
Net income (loss)	 	$	2,487	 	$	(1,680	)	
 	 	 	 	 	 	 	 	
Adjusting items, net of tax:	 	 	 	 	 	 	 	
Fair value write-up of acquired inventory sold	 	 	—	 	 	7,387	 	
Restructuring and related	 	 	1,167	 	 	905	 	
Acquisition costs	 	 	116	 	 	—	 	
Discrete tax benefits	 	 	—	 	 	(320	)	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Adjusted net income	 	$	3,770	 	$	6,292	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Earnings (loss) per common share	 	$	0.04	 	$	(0.03	)	
 	 	 	 	 	 	 	 	
Adjusting items, net of tax:	 	 	 	 	 	 	 	
Fair value write-up of acquired inventory sold	 	 	—	 	 	0.12	 	
Restructuring	 	 	0.02	 	 	0.02	 	
Acquisition costs	 	 	0.00	 	 	—	 	
Discrete tax benefits	 	 	—	 	 	(0.01	)	
 	 	 	 	 	 	 	 	
Adjusted earnings per common share	 	$	0.07	 	$	0.11	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Weighted-average shares outstanding (in thousands)	 	 	57,082	 	 	59,274	 	

	

	 	

	

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

RESULTS OF OPERATIONS

Three months ended December 31, 2011 and 2010

Griffon evaluates performance and allocates resources based on each segments’ operating results before interest income or expense, income taxes, depreciation and amortization, gain (loss) from debt extinguishment, unallocated amounts, restructuring charges, acquisition costs and costs related to the fair value of inventory for acquisitions. Griffon believes this information is useful to investors.

The following table provides a reconciliation of Segment operating profit before depreciation, amortization, acquisition costs, restructuring and fair value write up of acquired inventory sold to Income (loss) before taxes:

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 	 	For the Three Months Ended
December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	
Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs:	 	 	 	 	 	 	 	
Home & Building Products	 	$	17,750	 	$	17,534	 	
Telephonics	 	 	15,690	 	 	12,406	 	
Plastics	 	 	8,180	 	 	9,786	 	

	

	 	

	

	 	
Total Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs	 	 	41,620	 	 	39,726	 	
Unallocated amounts, less acquisition costs	 	 	(6,335	)	 	(5,106	)	
Net interest expense	 	 	(13,000	)	 	(11,154	)	
Segment depreciation and amortization	 	 	(15,418	)	 	(13,757	)	
Restructuring charges	 	 	(1,795	)	 	(1,393	)	
Fair value write-up of acquired inventory sold	 	 	—	 	 	(11,364	)	
Acquisition costs	 	 	(178	)	 	—	 	

	

	 	

	

	 	
Income (loss) before taxes	 	$	4,894	 	$	(3,048	)	

	

	 	

	

	 	
Home & Building Products
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	

	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
ATT	 	$	98,741	 	 	 	 	$	94,197	 	 	 	 	
CBP	 	 	111,647	 	 	 	 	 	104,066	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Home & Building Products	 	$	210,388	 	 	 	 	$	198,263	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment operating profit (loss)	 	$	9,834	 	 	4.7	%	$	(1,623	)	 	NC	 	
Depreciation and amortization	 	 	7,465	 	 	 	 	 	6,400	 	 	 	 	
Fair value write-up of acquired inventory sold	 	 	—	 	 	 	 	 	11,364	 	 	 	 	
Restructuring charges	 	 	273	 	 	 	 	 	1,393	 	 	 	 	
Acquisition costs	 	 	178	 	 	 	 	 	—	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment profit before depreciation, amortization, restructuring and acquisition costs	 	$	17,750	 	 	8.4	%	$	17,534	 	 	8.8	%	

	

	 	 	 	 	

	

	 	 	 	 	
For the quarter ended December 31, 2011, revenue increased $12,125, or 6%, compared to the prior year quarter driven mainly by the acquisition of Southern Patio, as well as higher volume. For the quarter, ATT and CBP revenue increased 5% and 7%, respectively. Excluding the acquisition of Southern Patio, ATT had a decrease in revenue, which was primarily the result of lower wheelbarrow and striking tool volume. CBP revenue increased mainly due to favorable mix and higher volume.

For the quarter ended December 31, 2011, Segment operating profit was $9,834 compared to a loss of $1,623 in the prior year quarter. Excluding the impact of the fair value write-up of acquired inventory sold, Segment operating profit was in line with the prior year with the inclusion of Southern Patio’s operating profit in the current period’s results, as well as improved production efficiencies, partially offset by somewhat higher material and fuel costs.

Current and prior year restructuring and other related charges were primarily related to facilities and for the prior year related compensation costs. The current year acquisition costs were related to the Southern Patio acquisition.

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Telephonics	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	

	 	
Revenue	 	$	104,513	 	 	 	 	$	98,279	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment operating profit	 	$	12,515	 	 	12.0	%	$	10,693	 	 	10.9	%	
Depreciation and amortization	 	 	1,653	 	 	 	 	 	1,713	 	 	 	 	
Restructuring charges	 	 	1,522	 	 	 	 	 	—	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment profit before depreciation, amortization and restructuring	 	$	15,690	 	 	15.0	%	$	12,406	 	 	12.6	%	

	

	 	 	 	 	

	

	 	 	 	 	
For the quarter ended December 31, 2011, Telephonics revenue increased $6,234, or 6%, compared to the prior year quarter. The increase was primarily attributable to Ground Surveillance Radars (“GSR”) ($4,246) and NETCOM ($3,378); these increases were partially offset by a decrease in Air Traffic Management program revenue. For the quarters ended December 31, 2011 and 2010, revenue included $5,944 and $8,050, respectively, related to revenue for the Counter Remote Control Improvised Explosive Device Electronic Warfare 3.1 (“CREW 3.1”) program where Telephonics serves as a subcontractor; excluding CREW 3.1 from both quarters, Telephonics current quarter revenue increased 9% over the prior year quarter.

For the quarter ended December 31, 2011, Segment operating profit increased by $1,822 or 17%, and operating profit margin increased 110 basis points from the prior year quarter primarily due to higher gross profits from increased revenue, and lower selling, general and administrative expenses due to the timing of research and development initiatives, partially offset by the restructuring charge. In the current quarter, Telephonics recognized $1,522 of restructuring and other related charges, primarily for one-time termination benefits and other personnel costs, in conjunction with changes to its organizational structure. The lower SG&A also reflected the benefit of the voluntary early retirement plan and other restructuring initiatives undertaken in the latter stages of the last fiscal year.

During the quarter, Telephonics was awarded several new contracts and received incremental funding on current contracts totaling $68,000. Contract backlog was $380,000 at December 31, 2011 with 78% expected to be realized in the next 12 months. Backlog was $417,000 at September 30, 2011 and $424,000 at December 31, 2010. Backlog is defined as unfilled firm orders for products and services for which funding has been both authorized and appropriated by the customer or congress, in the case of the U.S. government agencies.

Clopay Plastic Products
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	

	 	
 	 	2011	 	2010	 	

	 	

	 	

	 	
Revenue	 	$	136,130	 	 	 	 	$	117,860	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment operating profit	 	$	1,880	 	 	1.4	%	$	4,142	 	 	3.5	%	
Depreciation and amortization	 	 	6,300	 	 	 	 	 	5,644	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Segment profit before depreciation and amortization	 	$	8,180	 	 	6.0	%	$	9,786	 	 	8.3	%	

	

	 	 	 	 	

	

	 	 	 	 	
For the quarter ended December 31, 2011, Plastics revenue increased $18,270, or 16%, compared to the prior year quarter primarily due to higher unit volumes (15%) in North America and Europe and the pass through of higher resin costs in customer selling prices (2%), offset by the unfavorable impact of foreign exchange translation and product mix.

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For the quarter ended December 31, 2011, Segment operating profit decreased $2,262, or 55%, compared to the prior year quarter. As discussed in the second half of last year, both Germany and Brazil have experienced a high incidence of start up costs related to expanding capacity and product offerings to meet increased customer demand; such start up costs include higher than normal levels of scrap production. While improvements in operations in the newly expanded locations continues, the Company expects that Plastics will continue to operate at below normal efficiency levels for the first half of fiscal 2012.

Unallocated

For the quarter ended December 31, 2011, unallocated amounts totaled $6,335 compared to $5,106 in the prior year. The increase was primarily due to $1,139 of investment income recorded in the prior year.

Segment Depreciation and Amortization

Segment depreciation and amortization increased $1,661 for the quarter ended December 31, 2011 over the prior year period primarily due to capital spending in 2011.

Other income (expense)

For the quarter ended December 31, 2011, interest expense increased $1,846 compared to the prior year period, primarily as a result of increased borrowings in 2011.

For the quarters ended December 31, 2011 and 2010, Other income (expense) included a loss of $264 and income of $123, respectively, of foreign exchange gains/losses, net, and $65 and $1,139, respectively, of investment income.

Provision for income taxes

The tax rate for the 2011 quarter was a provision of 49.2%, compared to a benefit of 44.9% in the 2010 quarter; the 2010 benefit arose on the pretax loss for the quarter. The 2011 rate reflects the impact of permanent differences, tax reserves and a change in earnings mix; the 2010 rate benefited $320 from the retroactively extended research tax credit signed into law on December 22, 2010. There were no discrete period items in the current quarter.

Stock based compensation

For the quarter ended December 31, 2011, stock based compensation expense totaled $2,257 compared to $2,023 for the prior year comparable period.

Discontinued operations – Installation Services

There was no revenue or income from discontinued operations of the Installation Services’ business for the quarters ended December 31, 2011 and 2010.

LIQUIDITY AND CAPITAL RESOURCES

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

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The following table is derived from the Consolidated Statements of Cash Flows:
 	 	 	 	 	 	 	 	
Cash Flows from Continuing Operations	 	Three Months Ended December 31,	 	

	 	
(in thousands)	 	2011	 	2010	 	

	 	

	 	

	 	
Net Cash Flows Provided by (Used In):	 	 	 	 	 	 	 	
Operating activities	 	$	(13,843	)	$	(23,815	)	
Investing activities	 	 	(42,263	)	 	(18,643	)	
Financing activities	 	 	(9,545	)	 	11,047	 	
Cash used in continuing operations for the quarter ended December 31, 2011 were $13,843 compared to $23,815 in the prior year quarter. Current assets net of current liabilities, excluding short-term debt and cash, increased to $402,574 at December 31, 2011 compared to $366,511 at September 30, 2011, primarily as a result of an increase in inventories. Operating cash flows were impacted by an increase in inventories as well as the decrease in accounts payable and accrued liabilities primarily due to normal HBP seasonality.

During the quarter ended December 31, 2011, Griffon used cash for investing activities of $42,263 compared to $18,643 in the prior year period, primarily for the acquisition of Southern Patio as well as for capital expenditures. Griffon expects capital spending to be in the range of $65,000 to $70,000 for 2012.

During the quarter ended December 31, 2011, cash used in financing activities totaled $9,545 compared to cash provided by financing activities of $11,047 in the prior year period. On November 17, 2011, the Board of Directors approved a quarterly cash dividend of $0.02 per common share, which was paid on December 27, 2011, to holders of common stock as of the close of business on November 29, 2011.

On January 31, 2012, the Board of Directors declared a second quarterly cash dividend of $0.02 per share, payable on March 27, 2012 to shareholder of record as of the close of business on February 28, 2012.

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

A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue. For the quarter ended December 31, 2011:
 	 	 	
 	•	The United States Government and its agencies, through either prime or subcontractor relationships, represented 18% of Griffon’s consolidated revenue and 80% of Telephonics revenue.	
 	•	Procter & Gamble represented 14% of Griffon’s consolidated revenue and 46% of Plastics revenue.	
 	•	The Home Depot represented 11% of Griffon’s consolidated revenue and 23% of Home & Building Products revenue.	
No other customers exceed 9% of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and Griffon’s relationships with them. Orders from these customers are subject to fluctuation and may be reduced materially. The loss of all or a portion of volume from any one of these customers could have a material adverse impact on Griffon’s liquidity and operations.

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Cash, Cash Equivalents and Debt
(in thousands)	 	At December 31,
2011	 	At September 30,
2011	 	

	 	

	 	

	 	
Cash and equivalents	 	$	177,358	 	$	243,029	 	

	

	 	

	

	 	
Notes payables and current portion of long-term debt	 	 	21,302	 	 	25,164	 	
Long-term debt, net of current maturities	 	 	685,270	 	 	688,247	 	
Debt discount	 	 	18,949	 	 	19,693	 	

	

	 	

	

	 	
Total debt	 	 	725,521	 	 	733,104	 	

	

	 	

	

	 	
Net cash and equivalents (debt)	 	$	(548,163	)	$	(490,075	)	

	

	 	

	

	 	
On March 17, 2011, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $550,000 of 7.125% Senior Notes due in 2018; interest is payable semi-annually. On August 9, 2011, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 (“Senior Notes”), via an exchange offer.

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

On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit Agreement”), which 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 margins are 1.50% for base rate loans and 2.50% for LIBOR loans, in each case without a floor. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio as well as customary affirmative and negative covenants and events of default. The Credit Agreement also includes certain restrictions, such as limitations on the incurrence of indebtedness and liens and the making of restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the guarantors.

At December 31, 2011, there were $19,511 of standby letters of credit outstanding under the Credit Agreement; $180,489 was available for borrowing at that date.

On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of $14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15, 2009. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion, (ii) the 42nd trading day prior to maturity of the notes, and (iii) such time as the cumulative adjustment equals or exceeds 1%. As of March 27, 2012, aggregate dividends of $0.04 per share would result in a cumulative change in the conversion rate of 0.5%. 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 December 31, 2011 and September 30, 2011, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.

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

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

Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of Griffon common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus 2.5% or b) the lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an option to convert the outstanding loan to a five-year term loan; principal is payable in quarterly installments of $250, beginning December 2011, with a balloon payment of $15,223 due at maturity (November 2016). The loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At December 31, 2011, $19,723 was outstanding.

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 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 December 31, 2011, $4,219 was outstanding.

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

At December 31, 2011 and September 30, 2011, Griffon had $532 of 4% convertible subordinated notes due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below the conversion price of the 2023 Notes, as well as upon a change in control. An adjustment to the conversion rate will be required as the result of payment of a cash dividend only if such adjustment would be greater than 1% (or at such time as the cumulative impact on the conversion rate reaches 1% in the aggregate). As of March 27, 2012, aggregate dividends of $0.04 per share would result in a cumulative change in the conversion rate of 0.5%. At December 31, 2011 and September 30, 2011, the 2023 Notes had no capital in excess of par value component as substantially all of these notes were put to Griffon at par and settled in July 2010.

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 2012, but is renewable upon mutual agreement with the bank. In July 2011, the full €20,000 was drawn on the Term Loan, with a portion of the proceeds used to repay borrowings under the revolving credit facility. The term loan is payable in ten equal quarterly installments which began in September 2011, with maturity in December 2013. Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. There were no borrowings outstanding under the revolving facility at December 31, 2011 with €10,000 available for borrowing.

Clopay do Brazil, a subsidiary of Plastics, maintains lines of credit of approximately $4,000. Interest on borrowings accrue at a rate of LIBOR plus 3.8% or CDI plus 5.6%. At December 31, 2011, $3,759 was borrowed under the lines.

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”).

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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.

At December 31, 2011, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

In August 2011, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under this repurchase program, the Company may, from time to time, purchase shares of its common stock, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. In the first quarter of 2012, Griffon purchased 283,400 shares of common stock, for a total of $2,351, or $8.29 per share; in total, Griffon has purchased 448,779 shares of common stock, for a total of $3,660, or $8.16 per share, under this repurchase program. $46,340 remains under the $50,000 authorization.

Griffon substantially concluded its remaining disposal activities for the Installation Services business, discontinued in 2008, in the second quarter of 2009 and does not expect to incur significant expense in the future. Future net cash outflows to satisfy liabilities related to disposal activities accrued at December 31, 2011 are estimated to be $3,611. Certain of Griffon’s subsidiaries are also contingently liable for approximately $624 related to certain facility leases with varying terms through 2012 that were assigned to the respective purchasers of certain of the Installation Services businesses. Griffon does not believe it has a material exposure related to these contingencies.

During the quarters ended December 31, 2011 and 2010, Griffon used cash for discontinued operations of $277 and $367, respectively, related to settling remaining Installation Services liabilities.

CRITICAL ACCOUNTING POLICIES

The preparation of Griffon’s consolidated financial statements in conformity with GAAP requires Griffon to make estimates and judgments that affect reported amounts of assets, liabilities, sales and expenses, and the related disclosures of contingent assets and contingent liabilities at the date of the financial statements. Griffon evaluates these estimates and judgments on an ongoing basis and base the estimates on historical experience, current conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities, as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Griffon’s actual results may materially differ from these estimates. There have been no changes in Griffon’s critical accounting policies from September 30, 2011.

Griffon’s significant accounting policies and procedures are explained in the Management Discussion and Analysis section in the Annual Report on Form 10-K for the year ended September 30, 2011. In the selection of the critical accounting policies, the objective is to properly reflect the financial position and results of operations for each reporting period in a consistent manner that can be understood by the reader of the financial statements. Griffon considers an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on the financial position or results of operations of Griffon.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issues, from time to time, new financial accounting standards, staff positions and emerging issues task force consensus. See the Notes to Condensed Consolidated Financial Statements for a discussion of these matters.

33

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact, including, without limitation, statements regarding Griffon’s financial position, business strategy and the plans and objectives of Griffon’s management for future operations, are forward-looking statements. Without limiting the generality of the foregoing, in some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “would,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend” or the negative of these expressions or comparable terminology. Such forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: general domestic and international business, financial market and economic conditions; the credit market; the housing market; results of integrating acquired businesses into existing operations; the results of Griffon’s restructuring and disposal efforts; competitive factors; pricing pressures for resin and steel; capacity and supply constraints; Griffon’s ability to identify and successfully consummate and integrate value-adding acquisition opportunities; the ability of Griffon to remain in compliance with the covenants under its respective credit facilities; and the inherent uncertainties relating to resolution of ongoing legal and environmental matters from time to time. Additional important factors that could cause the statements made in this Quarterly Report on Form 10-Q or the actual results of operations or financial condition of Griffon to differ are discussed under the caption “Item 1A. Risk Factors” and “Special Notes Regarding Forward-Looking Statements” in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2011. Some of the factors are also discussed elsewhere in this Quarterly Report on Form 10-Q and have been or may be discussed from time to time in Griffon’s filings with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on Griffon’s forward-looking statements. Griffon does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

Item 3 - Quantitative and Qualitative Disclosure About Market Risk

Interest Rates

 Griffon’s exposure to market risk for changes in interest rates relates primarily to variable interest rate debt and investments in cash and cash equivalents.
 	 	 	
 	•	Certain of Griffon’s credit facilities have a Libor-based variable interest rate. Due to the current and expected level of borrowings under these facilities, a 100 basis point change in Libor would not have a material impact on Griffon’s results of operations or liquidity.	
Foreign Exchange

Griffon conducts business in various non-U.S. countries, primarily in Canada, Mexico, Europe, Brazil, Australia and China; therefore, changes in the value of the currencies of these countries affect the financial position and cash flows when translated into U.S. Dollars. Griffon has generally accepted the exposure to exchange rate movements relative to its non-U.S. operations. Griffon may, from time to time, hedge its currency risk exposures. A change of 5% or less in the value of all applicable foreign currencies would not have a material effect on Griffon’s financial position and cash flows.

Item 4 - Controls and Procedures

Under the supervision and with the participation of Griffon’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), Griffon’s disclosure controls and procedures, as defined by Exchange Act Rule 13a-15(e) and 15d-15(e), were evaluated as of the end of the period covered by this report. Based on that evaluation, Griffon’s CEO and CFO concluded that Griffon’s disclosure controls and procedures were effective at the reasonable assurance level.

During the period covered by this report, there were no changes in Griffon’s internal control over financial reporting which materially affected, or are reasonably likely to materially affect, Griffon’s internal control over financial reporting.

34

Limitations on the Effectiveness of Controls

Griffon believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within a company have been detected. Griffon’s disclosure controls and procedures, as defined by Exchange Act Rule 13a-15(e) and 15d-15(e), are designed to provide reasonable assurance of achieving their objectives.
PART II - OTHER INFORMATION
 	 	
Item 1	Legal Proceedings	
 	None	
 	 	
Item 1A	Risk Factors	
 	In addition to the other information set forth in this report, carefully consider the factors discussed in Item 1A to Part I in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2011, which could materially affect Griffon’s business, financial condition or future results. The risks described in Griffon’s Annual Report on Form 10-K are not the only risks facing Griffon. Additional risks and uncertainties not currently known to Griffon or that Griffon currently deems to be immaterial also may materially adversely affect Griffon’s business, financial condition and/or operating results.	
 	 	
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	
 	 	
 	(c)	
ISSUER PURCHASES OF EQUITY SECURITIES
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Period	 	(a) Total
Number of
Shares (or
Units)
Purchased	 	(b) Average
Price Paid Per
Share (or Unit)	 	(c) Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs	 	(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares (or Units)
That May Yet Be
Purchased Under
the Plans or
Programs	 	 	
October 1 - 31, 2011	 	 	253,400	1	$	8.30	 	 	253,400	 	 	 	 	 	
November 1 - 30, 2011	 	 	20,000	1	 	8.12	 	 	20,000	 	 	 	 	 	
December 1 - 31, 2011	 	 	10,000	1	 	8.46	 	 	10,000	 	 	 	 	 	

	

	 	 	 	 	 	

	 	 	 	 	 	
Total	 	 	283,400	 	$	8.29	 	 	283,400	 	$	46,339,708	2	 	

	

	 	 	 	 	

	

	 	 	 	 	 	
 	 	
1.	Shares were purchased by the Company in open market purchases pursuant to share repurchase plans authorized by the Company’s Board of Directors.	
 	 	
2.	On August 2, 2011, the Company’s Board of Directors authorized the repurchase of up to an additional $50,000,000 of Griffon common stock; as of December 31, 2011, $46,339,708 remained available for the purchase of Griffon common stock under this program.	
 	 	
Griffon’s revolving credit facility, as well as the indenture governing Griffon’s 7.125% Senior Notes due 2018, each contain limitations regarding the making of restricted payments (which include cash dividends and share repurchases).	

Item 3	Defaults upon Senior Securities	
 	None	
 	 	
Item 4	[Removed and Reserved]	
 	 	
35

 	 	
Item 5	Other Information	
 	 	
 	Submission of Matters to a Vote of Security Holders	
 	 	
 	On January 31, 2012, Griffon Corporation ("Griffon") held its 2012 Annual Meeting of Stockholders. Of the 61,734,463 shares of common stock outstanding and entitled to vote, 58,666,661 shares, or 95.0%, were represented at the meeting in person or by proxy, and therefore a quorum was present. The final results for each of the matters submitted to a vote of stockholders at the Annual Meeting are as follows:	
 	 	
 	Item No. 1:  All of the Board's nominees for Class II directors were elected to serve until Griffon's 2015 Annual Meeting of Stockholders, by the votes set forth below:	
 
 	Nominee	For	Withheld	Broker Non-Votes	
 	 	 	 	 	
 	Harvey R. Blau	53,986,109	2,056,647	2,623,905	
 	Gerald J. Cardinale	54,213,007	1,829,749	2,623,905	
 	Bradley J. Gross	54,213,166	1,829,590	2,623,905	
 	General Donald J. Kutyna	54,227,585	1,815,171	2,623,905	
 	(USAF Retired)	 	 	 	

 	Item No. 2:  The stockholders approved, on an advisory basis, the compensation of the named executive officers as disclosed in Griffon's proxy statement, by the votes set forth below:	
 
 	For	Against	Abstain	Broker Non-votes	
 	 	 	 	 	
 	44,212,277	5,074,887	6,754,591	2,624,906	
 	 	
 	Item No. 3:  The stockholders ratified the appointment of Grant Thornton LLP as Griffon's independent registered public accounting firm for fiscal 2012, by the votes set forth below:	
 
 	For	Against	Abstain	
 	 	 	 	
 	58,184,541	224,116	258,004	

 	 	
Item 6	Exhibits	

10.1	Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and between Griffon Corporation and Ronald J. Kramer (Exhibit 99.1 to Current Report on Form 8-K filed January 10, 2012 (Commission File No. 1-06620)).	
 	 	
10.2	Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and between Griffon Corporation and Douglas J. Wetmore (Exhibit 99.2 to Current Report on Form 8-K filed January 10, 2012 (Commission File No. 1-06620)).	
 	 	
31.1	Certification pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
31.2	Certification pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
32	Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS	XBRL Instance Document*	
 	 	
101.SCH	XBRL Taxonomy Extension Schema Document*	
 	 	
101.CAL	XBRL Taxonomy Extension Calculation Document*	
 	 	
101.DEF	XBRL Taxonomy Extension Definitions Document*	
 	 	
101.LAB	XBRL Taxonomy Extension Labels Document*	
 	 	
101.PRE	XBRL Taxonomy Extension Presentation Document*	

*	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”	
 	 	
36

SIGNATURES

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 thereunto duly authorized.
 	 	 	
 	GRIFFON CORPORATION	 	
 	 	 	
 	/s/ Douglas J. Wetmore	 	

	 	
 	Douglas J. Wetmore	
 	Executive Vice President and Chief Financial Officer	
 	(Principal Financial Officer)	
 	 	 	
 	/s/ Brian G. Harris	 	

	 	
 	Brian G. Harris	
 	Chief Accounting Officer	
 	(Principal Accounting Officer)	
 	 	 	
Date: February 2, 2012	 	
37

EXHIBIT INDEX
 	 	
10.1	Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and between Griffon Corporation and Ronald J. Kramer (Exhibit 99.1 to Current Report on Form 8-K filed January 10, 2012 (Commission File No. 1-06620)).	
 	 	
10.2	Amended and Restated Restricted Share Award letter made as of January 10, 2012 by and between Griffon Corporation and Douglas J. Wetmore (Exhibit 99.2 to Current Report on Form 8-K filed January 10, 2012 (Commission File No. 1-06620)).	
 	 	
31.1	Certification pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
31.2	Certification pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
32	Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS	XBRL Instance Document*	
 	 	
101.SCH	XBRL Taxonomy Extension Schema Document*	
 	 	
101.CAL	XBRL Taxonomy Extension Calculation Document*	
 	 	
101.DEF	XBRL Taxonomy Extension Definitions Document*	
 	 	
101.LAB	XBRL Taxonomy Extension Labels Document*	
 	 	
101.PRE	XBRL Taxonomy Extension Presentation Document*	

*	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”	
 	 	
38

Exhibit 31.1
CERTIFICATION
 	 	 	
I, Ronald J. Kramer, certify that:	
 	
1.	I have reviewed this quarterly report on Form 10-Q of Griffon Corporation;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
 	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	
 	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	
 	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	
 	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	 	
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
 	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	
 	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: February 2, 2012	 	
 	/s/ Ronald J. Kramer	

	
 	Ronald J. Kramer	
 	President and Chief Executive Officer	
 	(Principal Executive Officer)	

Exhibit 31.2

CERTIFICATION
 	 	 	
I, Douglas J. Wetmore, certify that:	
 	
1.	I have reviewed this quarterly report on Form 10-Q of Griffon Corporation;	
 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	
 	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	
 	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	
 	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	
 	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	 	
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 	 	
 	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	
 	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: February 2, 2012	 	
 	 	
 	/s/ Douglas J. Wetmore	

	
 	Douglas J. Wetmore	
 	Executive Vice President and Chief Financial Officer	
 	(Principal Financial Officer)	

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald J. Kramer, President and Chief Executive Officer of Griffon Corporation, hereby certify that the Form 10-Q of Griffon Corporation for the period ended December 31, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Griffon Corporation.
 	 	 	
 	/s/ Ronald J. Kramer	 	

	 	
 	Name: Ronald J. Kramer	
 	 	
 	Date: February 2, 2012	
I, Douglas J. Wetmore, Executive Vice President and Chief Financial Officer of Griffon Corporation, hereby certify that the Form 10-Q of Griffon Corporation for the period ended December 31, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Griffon Corporation.
 	 	 	
 	/s/ Douglas J. Wetmore	 	

	 	
 	Name: Douglas J. Wetmore	
 	 	
 	Date: February 2, 2012	
A signed original of this written statement required by Section 906 has been provided to Griffon Corporation and will be retained by Griffon Corporation and furnished to the Securities and Exchange Commission or its staff upon request.