GRIFFON CORP - FORM 8-K - EX-99.2

Attached files

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8-K - GRIFFON CORP	c65158_8-k.htm
EX-23.1 - GRIFFON CORP	c65158_23-1.htm
EX-99.1 - GRIFFON CORP	c65158_ex99-1.htm

EXHIBIT 99.2

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	(Unaudited) At March 31, 2011		At September 30, 2010


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

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

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

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

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

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

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

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

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)


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

(in thousands)	SHARES		PAR VALUE								SHARES		COST


Balance at 9/30/2010		74,580	$	18,645	$	460,955		$	431,584			12,466	$	(213,560	)	$	17,582	$	(4,491	)	$	710,715

Net income (loss)		—		—		—			(15,681	)		—		—			—		—			(15,681	)
Common stock issued for options exercised		3		1		20			—			—		—			—		—			21
Tax benefit/credit from the exercise/forfeiture of stock options		—		—		8			—			—		—			—		—			8
Amortization of deferred compensation		—		—		—			—			—		—			—		372			372
Restricted stock awards granted, net		1,387		347		(347	)		—			—		—			—		—			—
ESOP purchase of common stock		—		—		—			—			—		—			—		(8,310	)		(8,310	)
ESOP distribution of common stock		—		—		152			—			—		—			—		—			152
Stock-based compensation		—		—		4,647			—			—		—			—		—			4,647
Translation of foreign financial statements		—		—		—			—			—		—			16,466		—			16,466
Pension other comprehensive income amort, net of tax		—		—		—			—			—		—			851		—			851

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

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

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


	Three Months Ended March 31,						Six Months Ended March 31,

	2011			2010			2011			2010

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

Gross profit		101,143			69,070			189,002			139,351

Selling, general and administrative expenses		84,363			64,055			164,808			126,016

Restructuring and other related charges		1,212			1,220			2,605			2,231

Total operating expenses		85,575			65,275			167,413			128,247

Income from operations		15,568			3,795			21,589			11,104

Other income (expense)
Interest expense		(11,319	)		(3,729	)		(22,542	)		(6,699	)
Interest income		97			192			166			254
Gain (loss) from debt extinguishment, net		(26,164	)		12			(26,164	)		(6	)
Other, net		1,177			589			3,262			1,216

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


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

Income (loss) from continuing operations		(14,001	)		2,034			(15,681	)		6,214

Discontinued operations:
Income from operations of the discontinued Installation Services business		—			(1	)		—			169
Provision for income taxes		—			—			—			59

Income from discontinued operations		—			(1	)		—			110

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


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


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

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

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

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


	Six Months Ended March 31,

	2011			2010

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

Net cash provided by (used in) operating activities		(35,699	)		5,511

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

Net cash used in investing activities		(37,735	)		(17,661	)

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

Net cash provided by financing activities		111,388			42,379

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities		(561	)		(269	)

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


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

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

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

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(Unaudited)

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

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

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

Griffon operates through three business segments: Home & Building Products, Telephonics Corporation and Clopay Plastic Products Company.


•	Home & Building Products (“HBP”) consists of:

	-	Clopay Building Products Company (“CBP”), a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains; and

	-	Ames True Temper, Inc. (“ATT”), acquired by Griffon on September 30, 2010, is a global provider of non-powered landscaping products that make work easier for homeowners and professionals. Due to the timing of the acquisition, none of ATT’s 2010 results of operations were included in Griffon’s results for the year ended September 30, 2010.


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

•	Clopay Plastic Products Company (“Plastics”), is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2010, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal and the results of any interim period are not necessarily indicative of the results for the full year.

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

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

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

NOTE 2 – FAIR VALUE MEASUREMENTS

The carrying values of cash and equivalents, accounts receivable, accounts and notes payable and revolving credit debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit debt is based upon current market rates.

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

Insurance contracts with a value of $4,716 and trading securities with a value of $8,769 at March 31, 2011, are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

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

NOTE 3 — ACQUISITION

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

ATT’s results of operations are not included in Griffon’s consolidated statements of operations or cash flows, or related footnotes for any period presented prior to September 30, 2010, except where explicitly stated as pro forma results. Griffon’s consolidated balance sheet at September 30, 2010 and related footnotes include ATT’s balances at that date. The accounts of the acquired company, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in Griffon’s consolidated financial statements from the date of acquisition.

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


	2010

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

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

Net assets acquired	$	542,000

Amounts assigned to goodwill and major intangible asset classifications are as follows:


	2010		Amortization Period (Years)

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

	$	464,354

Pro Forma Information

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


	Three Months Ended March 31, 2010		Six Months Ended March 31, 2010

Revenue from continuing operations:
As reported	$	313,977	$	619,134
Pro forma		457,380		853,666
Net earnings from continuing operations:
As reported	$	2,034	$	6,214
Pro forma		8,078		13,737
Diluted earnings per share from continuing operations:
As reported	$	0.03	$	0.10
Pro forma		0.13		0.23

Average shares - Diluted (in thousands)		59,939		59,769

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

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

NOTE 4 – INVENTORIES

Inventories, stated at the lower of cost (first-in, first-out or average) or market, were comprised of the following:


	At March 31, 2011		At September 30, 2010

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

Total	$	270,501	$	268,801

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment were comprised of the following:


	At March 31, 2011			At September 30, 2010

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

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

Total	$	337,198		$	314,926

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

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

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides the changes in carrying value of goodwill by segment during the six months ended March 31, 2011.


	At September 30, 2010		Other adjustments including currency translations		At March 31, 2011

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

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

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


	At March 31, 2011						At September 30, 2010

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


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

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

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

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

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

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

NOTE 7 – INCOME TAXES

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

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

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

NOTE 8 – LONG-TERM DEBT


			At March 31, 2011														At September 30, 2010

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

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

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

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

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


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

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

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

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


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

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

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

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


	(a)	On March 17, 2011, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $550,000 of 7.125% Senior Notes due in 2018 (“Senior Notes”); interest on the Senior Notes is payable semi-annually. Proceeds were used to pay down the outstanding borrowings under a senior secured term loan facility and two senior secured revolving credit facilities of certain of the Company’s subsidiaries. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and are subject to certain covenants, limitations and restrictions.

		On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit Agreement”), which includes a letter of credit sub-facility with a limit of $50,000, a multi-currency sub-facility of $50,000 and a swingline sub-facility with a limit of $30,000. Borrowings under the Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the occurrence of a default or event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate plus an applicable margin, which will decrease based on financial performance. The initial margins are 1.75% for base rate loans and 2.75% for LIBOR loans, in each case without a floor. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio as well as customary affirmative and negative covenants and events of default. The Credit Agreement also includes certain restrictions, such as limitations on the incurrence of indebtedness and liens and the making of restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the guarantors. There was no outstanding balance as of March 31, 2011, and the Company was in compliance with the terms and covenants of the Credit Agreement.

		At March 31, 2011, there were $20,467 of standby letters of credit outstanding under the Credit Agreement; $179,533 was available for borrowing.

	(b)	On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of $14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15, 2009. Griffon used 8.75% as the nonconvertible debt-borrowing rate to discount the 2017 Notes and will amortize the debt discount through January 2017. At issuance, the debt component of the 2017 Notes was $75,437 and debt discount was $24,563. At September 30, 2010 and March 31, 2011, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.

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

		Griffon has other real estate mortgages, collateralized by real property, that bear interest at rates from 6.3% to 6.6% with maturities extending through 2016.

	(d)	Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to borrow $20,000 over a one-year period, to be used to purchase Griffon common stock in the open market. The loan bears interest at a) LIBOR plus 2.5% or b) the Bank’s prime rate. After the first year, Griffon has the option to convert all or a portion of the outstanding loan to a five-year term. If converted, principal is payable in quarterly installments of $250, beginning September 2011, with the remainder due at maturity. The loan is secured by the shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At March 31, 2011, 675,848 shares have been purchased; the outstanding balance was $8,310 and $11,690 was available for borrowing under the agreement.



		In addition, the ESOP has a loan agreement, guaranteed by Griffon, which requires quarterly principal payments of $156 and interest through the expiration date of September 2012 at which time the $3,900 balance of the loan, and any outstanding interest, will be payable. The primary purpose of this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan is secured by the shares purchased with the proceeds of the loan and repayment is guaranteed by Griffon. The loan bears interest at rates based upon the prime rate or LIBOR. At March 31, 2011, $4,688 was outstanding.

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

	(f)	At March 31, 2011 and September 30, 2010, Griffon had $532 of 4% convertible subordinated notes due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below the conversion price of the 2023 Notes, as well as upon a change in control. At March 31, 2011 and September 30, 2010, the 2023 Notes had no capital in excess of par value component as substantially all of these notes were put to Griffon at par and settled in July 2010.

		In January 2010, Griffon purchased $10,100 face value of the 2023 Notes for $10,200 which, after proportionate reduction in related deferred financing costs, resulted in a net pre-tax gain from debt extinguishment of $12. Capital in excess of par was reduced by $300 for the equity portion of the extinguished 2023 Notes, and debt discount was reduced by $200.

		In December 2009, Griffon purchased $19,200 face value of the 2023 Notes for $19,400. Including a proportionate reduction in the related deferred financing costs, Griffon recorded an immaterial net pre-tax loss on the extinguishment. Capital in excess of par value was reduced by $700 related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $500.

	(g)	In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The facility accrues interest at Euribor plus 2.35% per annum, and the term loan accrues interest at Euribor plus 2.45% per annum. The revolving facility matures in November 2011, but is renewable upon mutual agreement with the bank. The term loan can be drawn until August 2011 and, if drawn, repayment will be in ten equal installments beginning September 2011 with maturity in December 2013. Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. There were no borrowings under the term loan or revolving facility at March 31, 2011.

		Clopay do Brazil, a subsidiary of Plastics, maintains a line of credit of approximately $5,000. Interest on borrowings accrue at a rate of LIBOR plus 4%. $2,043 was borrowed under the line and $2,957 was available as of as of March 31, 2011.

	(h)	In connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. (“Clopay Ames”), a subsidiary of Griffon, entered into the $375,000 secured term Loan (“Term Loan”) and a $125,000 asset based lending agreement (“ABL”). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash. ATT’s previous outstanding debt was repaid in connection with the acquisition.

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


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

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

	(j)	Primarily capital leases.

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

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

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

NOTE 9 — SHAREHOLDERS’ EQUITY

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

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

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

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

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

NOTE 10 – EARNINGS PER SHARE (EPS)

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

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:


	Three Months Ended March 31,				Six Months Ended March 31,

	2011		2010		2011		2010

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

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


Anti-dilutive options excluded from diluted EPS computation		1,031		991		1,031		1,039

Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash; therefore, the potential issuance of shares related to the principal amount of the 2017 Notes is not included in diluted shares.

NOTE 11 – BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:


	•	Home & Building Products is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains, as well as a global provider of non-powered landscaping products that make work easier for homeowners and professionals.

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

	•	Plastics is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

Griffon evaluates performance and allocates resources based on each segments’ operating results before interest income or expense, income taxes, depreciation and amortization, gain (losses) from debt extinguishment, unallocated amounts, restructuring charges and costs related to the fair value of inventory for acquisitions. Griffon believes this information is useful to investors for the same reason. The following tables provide a reconciliation of Segment profit and Segment profit before depreciation, amortization, restructuring and fair value write up of acquired inventory sold to Income before taxes and discontinued operations:


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

	2011		2010		2011		2010

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

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


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

	2011			2010			2011			2010

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

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

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


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

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

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

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

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


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

	2011		2010		2011		2010

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

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

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

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

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

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


	At March 31, 2011		At September 30, 2010

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

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

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

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

NOTE 12 – COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:


	Three months Ended March 31,						Six Months Ended March 31,

	2011			2010			2011			2010

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

Change in fair value of interest rate swap, net of tax		48			—			—			—
Foreign currency translation adjustment		16,911			(11,566	)		16,466			(14,437	)
Pension other comprehensive income amortization, net of tax		426			389			851			776

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

NOTE 13 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was recognized as follows:


	Three Months Ended March 31,						Six Months Ended March 31,

	2011			2010			2011			2010

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

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

NOTE 14 – RECENT ACCOUNTING PRONOUNCEMENTS

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

NOTE 15 – DISCONTINUED OPERATIONS

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


	At March 31, 2011				At September 30, 2010

	Current		Long-term		Current		Long-term

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

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


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

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

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

NOTE 16 – RESTRUCTURING AND OTHER RELATED CHARGES

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

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

Restructuring and other related charges recognized for the three and six months ended March 31, 2011 and 2010 were as follows:


	Workforce Reduction		Facilities & Exit Costs		Other Related Costs		Total

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

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


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

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

At March 31, 2011, the accrued liability for the restructuring and other related charges consisted of:


	Workforce Reduction			Facilities & Exit Costs			Other Related Costs			Total

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

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

NOTE 17 – OTHER INCOME

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

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

NOTE 18 – WARRANTY LIABILITY

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

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


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

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

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

NOTE 19 — COMMITMENTS AND CONTINGENCIES

Legal and environmental

Department of Environmental Conservation of New York State (“DEC”), with ISC Properties, Inc. Lightron Corporation (“Lightron”), a wholly-owned subsidiary of Griffon, once conducted operations at a location in Peekskill in the Town of Cortlandt, New York (the “Peekskill Site”) owned by ISC Properties, Inc. (“ISC”), a wholly-owned subsidiary of Griffon. ISC sold the Peekskill Site in November 1982.

Subsequently, Griffon was advised by the DEC that random sampling at the Peekskill Site and in a creek near the Peekskill Site indicated concentrations of solvents and other chemicals common to Lightron’s prior plating operations. ISC then entered into a consent order with the DEC in 1996 (the “Consent Order”) to perform a remedial investigation and prepare a feasibility study. After completing the initial remedial investigation pursuant to the Consent Order, ISC was required by the DEC, and did conduct accordingly over the next several years, supplemental remedial investigations, including soil vapor investigations, under the Consent Order.

In April 2009, the DEC advised ISC’s representatives that both the DEC and the New York State Department of Health had reviewed and accepted an August 2007 Remedial Investigation Report and an Additional Data Collection Summary Report dated January 30, 2009. With the acceptance of these reports, ISC completed the Remedial Investigation required under the Consent Order and was authorized, accordingly, by the DEC to conduct the Feasibility Study required by the Consent Order. Pursuant to the requirements of the Consent Order and its obligations thereunder, ISC, without acknowledging any responsibility to perform any remediation at the Site, submitted to the DEC in August 2009, a draft Feasibility Study which recommended for the soil, groundwater and sediment medias, remediation alternatives having a current net capital cost value, in the aggregate, of approximately $5,000. In February 2011, DEC advised ISC it had accepted and approved the feasibility study. Accordingly, ISC has no further obligations under the Consent Order.

Upon acceptance of the feasibility study, DEC issued a Proposed Remedial Action Plan (“PRAP”) that sets forth the proposed remedy for the site. The PRAP accepted the recommendation contained in the feasibility study for remediation of the soil and groundwater medias, but selected a different remediation alternative for the sediment medium. The approximate cost and the current net capital cost value of the remedy proposed by DEC in the PRAP is approximately $10,000. DEC has received public comments on the PRAP and is expected to issue a Record of Decision (“ROD”) that will set forth the specific remedy DEC has selected and will explain why the remedy was selected and respond to public comments.

It is expected DEC will thereafter enter negotiations with potentially responsible parties to request they undertake performance of the remedies selected in the ROD and if not, then the State may use State Superfund money to remediate the Peekskill site. Griffon does not acknowledge any responsibility to perform any remediation at the Peekskill Site.

Improper Advertisement Claim involving Union Tools Products. During December 2004, a customer of ATT was named in litigation that involved UnionTools products. The complaint asserted causes of action against the defendant for improper advertisement to the end consumer. The allegation suggests that advertisements led the consumer to believe that the hand tools sold were manufactured within boundaries of the United States. The allegation asserts cause of action against the customer for common law fraud. In the event that an adverse judgment is rendered against the customer, there is a possibility that the customer would seek legal recourse against ATT for an unspecified amount in contributory damages. Presently, ATT cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against ATT.

Department of Environmental Conservation of New York State, regarding Frankfort, NY site. During fiscal 2009, an underground fuel tank with surrounding soil contamination was discovered at the Frankfort, N.Y. site, which is the result of historical facility operations prior to ATT’s ownership. ATT is actively working with the New York Department of Environmental Conservation and the New York State Department of Health to define remediation requirements. Griffon believes remediation will be completed during the first half of 2012, that future remediation costs will be less than $1,000, and that it has adequately accrued for this liability.

General legal

Griffon is subject to various laws and regulations relating to the protection of the environment and is a party to legal proceedings arising in the ordinary course of business. Management believes, based on facts presently known to it, that the resolution of the matters above and such other matters will not have a material adverse effect on Griffon’s consolidated financial position, results of operations or cash flows.

NOTE 20 — RELATED PARTY

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

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands, except share and per share data)
(Unaudited)

NOTE 21—CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

On March 17, 2011, Griffon issued $550,000 of senior unsecured notes (the “Notes”) that are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation and Ames True Temper, Inc. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below is condensed consolidating balance sheets as of March 31, 2011 and September 30, 2010, the condensed consolidating statements of operations and cash flows for the six months ended March 31, 2011 and 2010, and the condensed consolidating Statements of Operations for the three months ended March 31, 2011 and 2010 based on the guarantor structure. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly-owned subsidiaries accounted for under the equity method.

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
At March 31, 2011


($ in thousands)	Parent Company			Guarantor Companies			Non-Guarantor Companies			Elimination				Consolidation
CURRENT ASSETS
Cash and equivalents		$	147,774		$	25,109		$	35,454		$	—			$	208,337
Accounts receivable, net of allowances			—			216,997			76,175			—				293,172
Contract costs and recognized income not yet billed, net of progress payments			—			61,906			972			—				62,878
Inventories, net			—			203,232			67,269			—				270,501
Prepaid and other current assets			15,471			38,227			2,272			(1,212	)			54,758
Assets of discontinued operations			—			—			1,543			—				1,543
Total Current Assets			163,245			545,471			183,685			(1,212	)			891,189

PROPERTY, PLANT AND EQUIPMENT, net			1,341			207,112			128,745			—				337,198
GOODWILL			—			279,409			80,859			—				360,268
INTANGIBLE ASSETS, net			—			157,180			74,462			—				231,642
INTERCOMPANY RECEIVABLE			468,372			236,234			49,571			(754,177	)			—
EQUITY INVESTMENTS IN SUBSIDIARIES			2,942,595			783,427			2,474,688			(6,200,710	)			—
OTHER ASSETS			52,696			43,498			10,236			(74,515	)			31,915
ASSETS OF DISCONTINUED OPERATIONS			—			—			5,136			—				5,136
Total Assets		$	3,628,249		$	2,252,331		$	3,007,382		$	(7,030,614	)		$	1,857,348

CURRENT LIABILITIES
Notes payable and current portion of long-term debt		$	1,125		$	4,400		$	3,054		$	—			$	8,579
Accounts payable and accrued liabilities			19,837			195,840			48,981			(1,212	)			263,446
Liabilities of discontinued operations			—			—			4,323			—				4,323
Total Current Liabilities			20,962			200,240			56,358			(1,212	)			276,348

LONG-TERM DEBT, net of debt discounts			641,266			11,070			14,659			—				666,995
INTERCOMPANY Payables			—			35,075			719,102			(754,177	)			—
OTHER LIABILITIES			76,835			165,126			30,036			(74,515	)			197,482
LIABILITIES OF DISCONTINUED OPERATIONS			—			—			7,282			—				7,282
Total Liabilities			739,063			411,511			827,437			(829,904	)			1,148,107

SHAREHOLDERS’ EQUITY			2,889,186			1,840,820			2,179,945			(6,200,710	)			709,241
Total Liabilities and Shareholders’ Equity		$	3,628,249		$	2,252,331		$	3,007,382		$	(7,030,614	)		$	1,857,348

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
At of September 30, 2010


($ in thousands)	Parent Company		Guarantor Companies		Non- Guarantor Companies		Elimination			Consolidation

CURRENT ASSETS
Cash and equivalents	$	74,600	$	57,113	$	38,089	$	—		$	169,802
Accounts receivable, net of allowances		—		181,549		70,480		—			252,029
Contract costs and recognized income not yet billed, net of progress payments		—		62,681		474		—			63,155
Inventories, net		—		211,920		56,881		—			268,801
Prepaid and other current assets		5,963		39,843		10,291		(315	)		55,782
Assets of discontinued operations		—		—		1,079		—			1,079

Total Current Assets		80,563		553,106		177,294		(315	)		810,648

PROPERTY, PLANT AND EQUIPMENT, net		1,267		205,085		108,574		—			314,926
GOODWILL		—		279,409		77,812		—			357,221
INTANGIBLE ASSETS, net		—		91,507		141,504		—			233,011
INTERCOMPANY RECEIVABLE		—		271,143		218,488		(489,631	)		—
EQUITY INVESTMENTS IN SUBSIDIARIES		3,269,975		1,091,359		2,546,639		(6,907,973	)		—
OTHER ASSETS		40,586		44,188		11,784		(68,651	)		27,907
ASSETS OF DISCONTINUED OPERATIONS		—		—		5,803		—			5,803

Total Assets	$	3,392,391	$	2,535,797	$	3,287,898	$	(7,466,570	)	$	1,749,516


CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	625	$	1,135	$	19,141	$	—		$	20,901
Accounts payable and accrued liabilities		24,247		224,082		61,851		(315	)		309,865
Liabilities of discontinued operations		—		—		4,289		—			4,289

Total Current Liabilities		24,872		225,217		85,281		(315	)		335,055

LONG-TERM DEBT, net of debt discounts		82,382		44,902		376,651		—			503,935
INTERCOMPANY PAYABLES		—		238,392		251,239		(489,631	)		—
OTHER LIABILITIES		76,821		114,515		68,680		(68,651	)		191,365
LIABILITIES OF DISCONTINUED OPERATIONS		—		—		8,446		—			8,446

Total Liabilities		184,075		623,026		790,297		(558,597	)		1,038,801

SHAREHOLDERS’ EQUITY		3,208,316		1,912,771		2,497,601		(6,907,973	)		710,715

Total Liabilities and Shareholders’ Equity	$	3,392,391	$	2,535,797	$	3,287,898	$	(7,466,570	)	$	1,749,516

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2011


($ in thousands)	Parent Company				Guarantor Companies				Non-Guarantor Companies				Elimination				Consolidation
Revenue		$	—			$	363,254			$	123,554			$	(10,679	)		$	476,129
Cost of goods and services			—				282,809				103,226				(11,049	)			374,986
Gross profit			—				80,445				20,328				370				101,143

Selling, general and administrative expenses			5,481				64,308				14,666				(92	)			84,363
Restructuring and other related charges			—				1,153				59				—				1,212
Total operating expenses			5,481				65,461				14,725				(92	)			85,575

Income (loss) from operations			(5,481	)			14,984				5,603				462				15,568

Other income (expense)
Interest income (expense), net			(3,572	)			2,472				(10,122	)			—				(11,222	)
Loss from debt extinguishment, net			—				(397	)			(25,767	)			—				(26,164	)
Other, net			168				(89	)			1,560				(462	)			1,177
Total other income (expense)			(3,404	)			1,986				(34,329	)			(462	)			(36,209	)

Income (loss) before taxes and discontinued operations			(8,885	)			16,970				(28,726	)			—				(20,641	)
Provision (benefit) for income taxes			(3,651	)			8,071				(11,060	)			—				(6,640	)
Income (loss) before equity in net income of subsidiaries			(5,234	)			8,899				(17,666	)			—				(14,001	)
Equity in net income of subsidiaries			(8,767	)			3,734				8,899				(3,866	)			—
Loss from operations			(14,001	)			12,633				(8,767	)			(3,866	)			(14,001	)
Income from discontinued operations			—				—				—				—				—
Net loss		$	(14,001	)		$	12,633			$	(8,767	)		$	(3,866	)		$	(14,001	)

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2011


($ in thousands)	Parent Company				Guarantor Companies				Non-Guarantor Companies				Elimination				Consolidation
Revenue		$	—			$	668,901			$	239,372			$	(17,742	)		$	890,531
Cost of goods and services			—				523,413				196,484				(18,368	)			701,529
Gross profit			—				145,488				42,888				626				189,002

Selling, general and administrative expenses			10,563				124,961				29,440				(156	)			164,808
Restructuring and other related charges			—				2,482				123				—				2,605
Total operating expenses			10,563				127,443				29,563				(156	)			167,413

Income (loss) from operations			(10,563	)			18,045				13,325				782				21,589

Other income (expense)
Interest income (expense), net			(5,397	)			1,699				(18,678	)			—				(22,376	)
Loss from debt extinguishment, net			—				(397	)			(25,767	)			—				(26,164	)
Other, net			1,307				(2,231	)			4,968				(782	)			3,262
Total other income (expense)			(4,090	)			(929	)			(39,477	)			(782	)			(45,278	)

Income (loss) before taxes and discontinued operations			(14,653	)			17,116				(26,152	)			—				(23,689	)
Provision (benefit) for income taxes			(5,886	)			11,217				(13,339	)			—				(8,008	)
Income (loss) before equity in net income of subsidiaries			(8,767	)			5,899				(12,813	)			—				(15,681	)
Equity in net income (loss) of subsidiaries			(6,914	)			14,359				5,899				(13,344	)			—
Loss from operations			(15,681	)			20,258				(6,914	)			(13,344	)			(15,681	)
Income from discontinued operations			—				—				—				—				—
Net income (loss)		$	(15,681	)		$	20,258			$	(6,914	)		$	(13,344	)		$	(15,681	)

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For The Three Months Ended March 31, 2010


($ in thousands)	Parent Company				Guarantor Companies				Non-Guarantor Companies				Elimination				Consolidation
Revenue		$	—			$	238,864			$	76,946			$	(1,833	)		$	313,977
Cost of goods and services			—				181,940				65,056				(2,089	)			244,907
Gross profit			—				56,924				11,890				256				69,070

Selling, general and administrative expenses			7,502				47,648				8,969				(64	)			64,055
Restructuring and other related charges			—				1,220				—				—				1,220
Total operating expenses			7,502				48,868				8,969				(64	)			65,275

Income (loss) from operations			(7,502	)			8,056				2,921				320				3,795

Other income (expense)
Interest income (expense), net			(2,560	)			1,350				(2,327	)			—				(3,537	)
Gain from debt extinguishment, net			12				—				—				—				12
Other, net			—				2,416				(1,507	)			(320	)			589
Total other income (expense)			(2,548	)			3,766				(3,834	)			(320	)			(2,936	)
Income (loss) before taxes and discontinued operations			(10,050	)			11,822				(913	)			—				859
Provision (benefit) for income taxes			(5,956	)			5,617				(836	)			—				(1,175	)
Income (loss) before equity in net income of subsidiaries			(4,094	)			6,205				(77	)			—				2,034
Equity in net income of subsidiaries			6,127				(136	)			6,205				(12,196	)			—
Income from operations			2,033				6,069				6,128				(12,196	)			2,034
Loss from discontinued operations			—				—				(1	)			—				(1	)
Net income		$	2,033			$	6,069			$	6,127			$	(12,196	)		$	2,033

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For The Six Months Ended March 31, 2010


($ in thousands)	Parent Company				Guarantor Companies			Non-Guarantor Companies				Elimination				Consolidation
Revenue		$	—			$	470,853		$	153,010			$	(4,729	)		$	619,134
Cost of goods and services			—				352,984			132,041				(5,242	)			479,783
Gross profit			—				117,869			20,969				513				139,351

Selling, general and administrative expenses			13,721				94,939			17,484				(128	)			126,016
Restructuring and other related charges			—				2,231			—				—				2,231
Total operating expenses			13,721				97,170			17,484				(128	)			128,247

Income (loss) from operations			(13,721	)			20,699			3,485				641				11,104

Other income (expense)
Interest income (expense), net			(4,238	)			2,671			(4,878	)			—				(6,445	)
Loss from debt extinguishment, net			(6	)			—			—				—				(6	)
Other, net			—				1,663			194				(641	)			1,216
Total other income (expense)			(4,244	)			4,334			(4,684	)			(641	)			(5,235	)

Income (loss) before taxes and discontinued operations			(17,965	)			25,033			(1,199	)			—				5,869
Provision (benefit) for income taxes			(7,522	)			8,766			(1,589	)			—				(345	)
Income (loss) before equity in net income of subsidiaries			(10,443	)			16,267			390				—				6,214
Equity in net income (loss) of subsidiaries			16,767				227			16,267				(33,261	)			—
Income (loss) from operations			6,324				16,494			16,657				(33,261	)			6,214
Income from discontinued operations			—				—			110				—				110
Net income (loss)		$	6,324			$	16,494		$	16,767			$	(33,261	)		$	6,324

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2011


($ in thousands)	Parent Company				Guarantor Companies				Non-Guarantor Companies				Elimination				Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(15,681	)		$	20,258			$	(6,914	)		$	(13,344	)		$	(15,681	)

Net cash used in operating activities		$	(3,611	)		$	(14,241	)		$	(22,699	)		$	—			$	(40,551	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment			(208	)			(19,449	)			(22,080	)			—				(41,737	)
Acquired business, net of cash acquired			—				(1,066	)			211				—				(855	)
Intercompany distributions			10,000				(10,000	)			—				—				—
Funds restricted for capital projects			—				3,875				—				—				3,875
Proceeds from sale of investment			—				—				1,333				—				1,333
Increase in equipment lease deposits			—				(351	)			—				—				(351	)
Net cash provided by (used in) investing activities			9,792				(26,991	)			(20,536	)			—				(37,735	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt			558,310				—				79,427				—				637,737
Payments of long-term debt			(312	)			(30,567	)			(467,892	)			—				(498,771	)
Decrease in short-term borrowings			—				—				2,022				—				2,022
Intercompany debt			(468,372	)			—				468,372				—				—
Financing costs			(14,272	)			—				(2,115	)			—				(16,387	)
Purchase of ESOP shares			(8,310	)			—				—				—				(8,310	)
Exercise of stock options			20				—				—				—				20
Tax benefit from vesting of restricted stock			23				—				—				—				23
Other, net			(94	)			39,795				(39,795	)			—				(94	)
Net cash provided by financing activities			66,993				9,228				40,019				—				116,240

Net cash used in discontinued operations			—				—				(561	)			—				(561	)

Effect of exchange rate changes on cash and equivalents			—				—				1,142				—				1,142

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS			73,174				(32,004	)			(2,635	)			—				38,535
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD			74,600				57,113				38,089				—				169,802
CASH AND EQUIVALENTS AT END OF PERIOD		$	147,774			$	25,109			$	35,454			$	—			$	208,337

GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For The Six Months Ended March 31, 2010


($ in thousands)	Parent Company				Guarantor Companies				Non-Guarantor Companies				Elimination				Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	6,324			$	16,494			$	16,767			$	(33,261	)		$	6,324

Net cash provided by (used in) operating activities		$	(12,147	)		$	16,993			$	665				—			$	5,511

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment			(565	)			(14,360	)			(2,764	)			—				(17,689	)
Intercompany distributions			5,000				(5,000	)			—				—				—
Decrease in equipment lease deposits			—				28				—				—				28
Net cash provided by (used in) investing activities			4,435				(19,332	)			(2,764	)			—				(17,661	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt			100,000				—				—				—				100,000
Payments of long-term debt			(29,987	)			(23,789	)			(121	)			—				(53,897	)
Financing costs			(4,145	)			—				—				—				(4,145	)
Exercise of stock options			285				—				—				—				285
Tax benefit from vesting of restricted stock			99				—				—				—				99
Other, net			37				9,544				(9,544	)			—				37
Net cash provided by (used in) financing activities			66,289				(14,245	)			(9,665	)			—				42,379

Net cash used in discontinued operations			—				—				(269	)			—				(269	)

Effect of exchange rate changes on cash and equivalents			—				—				(2,351	)			—				(2,351	)

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS			58,577				(16,584	)			(14,384	)			—				27,609
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD			223,511				37,865				59,457				—				320,833
CASH AND EQUIVALENTS AT END OF PERIOD		$	282,088			$	21,281			$	45,073			$	—			$	348,442

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