GFF 3-31-2015 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2015

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. ý 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). ý 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
ý
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 Yes ý No
 
The number of shares of common stock outstanding at March 31, 2015 was 51,045,387.




Griffon Corporation and Subsidiaries
 
Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

Part I – Financial Information
Item 1 – Financial Statements
 
GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

 
(Unaudited)
 
 
 
March 31,
2015
 
September 30,
2014
CURRENT ASSETS
 
 
 
Cash and equivalents
$
42,602

 
$
92,405

Accounts receivable, net of allowances of $6,121 and $7,336
286,452

 
258,436

Contract costs and recognized income not yet billed, net of progress payments of $14,592 and $16,985 at March 31, 2015 and September 30, 2014, respectively.
94,844

 
109,930

Inventories, net
320,297

 
290,135

Prepaid and other current assets
44,525

 
62,569

Assets of discontinued operations
1,638

 
1,624

Total Current Assets
790,358

 
815,099

PROPERTY, PLANT AND EQUIPMENT, net
361,200

 
370,565

GOODWILL
358,695

 
371,846

INTANGIBLE ASSETS, net
220,811

 
233,623

OTHER ASSETS
13,943

 
13,302

ASSETS OF DISCONTINUED OPERATIONS
2,246

 
2,126

Total Assets
$
1,747,253

 
$
1,806,561

 
 
 
 
CURRENT LIABILITIES
 

 
 

Notes payable and current portion of long-term debt
$
9,162

 
$
7,886

Accounts payable
182,369

 
218,703

Accrued liabilities
84,494

 
101,292

Liabilities of discontinued operations
2,528

 
3,282

Total Current Liabilities
278,553

 
331,163

LONG-TERM DEBT, net
858,315

 
791,301

OTHER LIABILITIES
142,229

 
148,240

LIABILITIES OF DISCONTINUED OPERATIONS
3,524

 
3,830

Total Liabilities
1,282,621

 
1,274,534

COMMITMENTS AND CONTINGENCIES - See Note 19


 


SHAREHOLDERS’ EQUITY
 

 
 

Total Shareholders’ Equity
464,632

 
532,027

Total Liabilities and Shareholders’ Equity
$
1,747,253

 
$
1,806,561



1

Table of Contents

GRIFFON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
 
 
COMMON STOCK
 
CAPITAL IN
EXCESS OF
PAR VALUE
 
RETAINED
EARNINGS
 
TREASURY SHARES
 
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
 
DEFERRED
COMPENSATION
 
 
(in thousands)
SHARES
 
PAR VALUE
 
 
 
SHARES
 
COST
 
 
 
Total
Balance at September 30, 2014
78,484

 
$
19,621

 
$
506,090

 
$
427,913

 
25,335

 
$
(354,216
)
 
$
(30,064
)
 
$
(37,317
)
 
$
532,027

Net income

 

 

 
12,593

 

 

 

 

 
12,593

Dividend

 

 

 
(3,911
)
 

 

 

 

 
(3,911
)
Tax effect from exercise/vesting of equity awards, net

 

 
345

 

 

 

 

 

 
345

Amortization of deferred compensation

 

 

 

 

 

 

 
1,391

 
1,391

Common stock issued
51

 
13

 
272

 

 

 

 

 

 
285

Common stock acquired

 

 

 

 
2,683

 
(37,577
)
 

 

 
(37,577
)
Common stock issued for equity awards, net
528

 
132

 
(150
)
 









 
(18
)
ESOP allocation of common stock

 

 
327

 

 

 

 

 

 
327

Stock-based compensation

 

 
5,372

 

 

 

 

 

 
5,372

Other comprehensive loss, net of tax

 

 

 

 

 

 
(46,202
)
 

 
(46,202
)
Balance at March 31, 2015
79,063

 
$
19,766

 
$
512,256

 
$
436,595

 
28,018

 
$
(391,793
)
 
$
(76,266
)
 
$
(35,926
)
 
$
464,632

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


2

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited)
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Revenue
$
500,020

 
$
507,687

 
$
1,002,180

 
$
961,145

Cost of goods and services
385,645

 
397,700

 
769,816

 
745,655

Gross profit
114,375

 
109,987

 
232,364

 
215,490

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
93,566

 
89,622

 
187,462

 
177,302

Restructuring and other related charges

 
692

 

 
1,534

Total operating expenses
93,566

 
90,314

 
187,462

 
178,836

 
 
 
 
 
 
 
 
Income from operations
20,809

 
19,673

 
44,902

 
36,654

 
 
 
 
 
 
 
 
Other income (expense)
 

 
 

 
 

 
 

Interest expense
(12,012
)
 
(12,389
)
 
(23,766
)
 
(25,523
)
Interest income
155

 
28

 
272

 
61

Loss from debt extinguishment, net

 
(38,890
)
 

 
(38,890
)
Other, net
(757
)
 
783

 
(1,208
)
 
1,689

Total other expense, net
(12,614
)
 
(50,468
)
 
(24,702
)
 
(62,663
)
 
 
 
 
 
 
 
 
Income (loss) before taxes
8,195

 
(30,795
)
 
20,200

 
(26,009
)
Provision (benefit) for income taxes
3,073

 
(4,970
)
 
7,607

 
(3,420
)
Net income (loss)
$
5,122

 
$
(25,825
)
 
$
12,593

 
$
(22,589
)
 
 
 
 
 
 
 
 
Basic income per common share
$
0.11

 
$
(0.53
)
 
$
0.27

 
$
(0.44
)
Weighted-average shares outstanding
45,349

 
48,990

 
45,829

 
50,872

 
 
 
 
 
 
 
 
Diluted income per common share
$
0.11

 
$
(0.53
)
 
$
0.26

 
$
(0.44
)
Weighted-average shares outstanding
47,669

 
48,990

 
47,682

 
50,872

 
 
 
 
 
 
 
 
Dividends paid per common share
$
0.04

 
$
0.03

 
$
0.08

 
$
0.06

 
 
 
 
 
 
 
 
Net income (loss)
$
5,122

 
$
(25,825
)
 
$
12,593

 
$
(22,589
)
Other comprehensive income (loss), net of taxes:
 

 
 

 
 

 
 

Foreign currency translation adjustments
(30,384
)
 
1,224

 
(45,884
)
 
(1,913
)
Pension and other post retirement plans
353

 
1,099

 
706

 
1,415

Loss on cash flow hedge
(80
)
 

 
(154
)
 

Gain (loss) on available-for-sale securities
92

 

 
(870
)
 

Total other comprehensive income (loss), net of taxes
(30,019
)
 
2,323

 
(46,202
)
 
(498
)
Comprehensive income (loss), net
$
(24,897
)
 
$
(23,502
)
 
$
(33,609
)
 
$
(23,087
)
 
The accompanying notes to condensed consolidated financial statements are an integral part of these statements.


3

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended March 31,
 
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income (loss)
$
12,593

 
$
(22,589
)
 
 
 
 
Adjustments to reconcile net income to net cash used in operating activities:
 

 
 

 
 
 
 
Depreciation and amortization
34,453

 
33,232

Stock-based compensation
5,372

 
4,996

Asset impairment charges - restructuring

 
169

Provision for losses on accounts receivable
242

 
132

Amortization of debt discounts and issuance costs
3,265

 
3,188

Loss from debt extinguishment, net

 
38,890

Deferred income taxes
1,282

 
(57
)
(Gain) loss on sale/disposal of assets and investments
(315
)
 
180

Change in assets and liabilities, net of assets and liabilities acquired:
 

 
 

Increase in accounts receivable and contract costs and recognized income not yet billed
(23,424
)
 
(46,834
)
Increase in inventories
(39,252
)
 
(23,858
)
Decrease in prepaid and other assets
754

 
3,482

Decrease in accounts payable, accrued liabilities and income taxes payable
(40,244
)
 
(18,713
)
Other changes, net
2,223

 
1,206

Net cash used in operating activities
(43,051
)
 
(26,576
)
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Acquisition of property, plant and equipment
(39,713
)
 
(34,845
)
Acquired businesses, net of cash acquired

 
(22,781
)
Proceeds from sale of assets
177

 
294

Proceeds from sale of investments
8,891

 

Net cash used in investing activities
(30,645
)
 
(57,332
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Proceeds from issuance of common stock
285

 
584

Dividends paid
(3,911
)
 
(3,290
)
Purchase of shares for treasury
(37,577
)
 
(63,370
)
Proceeds from long-term debt
99,556

 
644,514

Payments of long-term debt
(29,425
)
 
(586,310
)
Change in short-term borrowings
(572
)
 
4,908

Financing costs
(590
)
 
(10,687
)
Purchase of ESOP shares

 
(10,000
)
Tax benefit from exercise/vesting of equity awards, net
345

 
273

Other, net
95

 
144

Net cash provided by (used in) financing activities
28,206

 
(23,234
)
 
 
 
 
CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

Net cash used in operating activities
(545
)
 
(640
)
Net cash used in discontinued operations
(545
)
 
(640
)
 
 
 
 
Effect of exchange rate changes on cash and equivalents
(3,768
)
 
(415
)
 
 
 
 
NET DECREASE IN CASH AND EQUIVALENTS
(49,803
)
 
(108,197
)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
92,405

 
178,130

CASH AND EQUIVALENTS AT END OF PERIOD
$
42,602

 
$
69,933

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

4

Table of Contents
GRIFFON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US dollars and non US currencies in thousands, except per share data)
(Unaudited)
(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)



NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
About Griffon Corporation
 
Griffon Corporation (the “Company” 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 currently conducts its operations through three reportable segments:
 
Home & Building Products (“HBP”) consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc. (“CBP”):

- AMES 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, Inc. (“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, 2014, 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; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.
 
The condensed consolidated balance sheet information at September 30, 2014 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2014.
 
The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been 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 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

5


compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves and the valuation of assets and liabilities of discontinued operations, acquisition assumptions used 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.

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

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

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

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
 
The fair values of Griffon’s 2022 senior notes and 2017, 4% convertible notes approximated $594,000 and $129,813, respectively, on March 31, 2015. Fair values were based upon quoted market prices (level 1 inputs).
 
Insurance contracts with values of $3,397 at March 31, 2015, are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.
 
Items Measured at Fair Value on a Recurring Basis

At March 31, 2015, trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $1,267 ($1,000 cost basis) were included in Prepaid and other current assets on the Consolidated Balance Sheets. During the current quarter, the Company settled all outstanding available-for-sale securities with proceeds totaling $8,891 and recognized a gain of $489 in Other income, and accordingly, gains on available-for-sale securities were reclassified out of Accumulated other comprehensive income (loss) ("AOCI"). Realized and unrealized gains and losses on trading securities, and realized gains and losses on available-for-sale securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

In the normal course of business, Griffon’s operations are exposed to the effect of changes in foreign currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. During 2015, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars. At inception, these hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in Other comprehensive income (loss) and Prepaid and other current assets until settlement. Upon settlement, gains and losses were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) as Other income. Griffon had $5,378 of Australian dollar contracts at a weighted average rate of $1.29, which qualified for hedge accounting at March 31, 2015. AOCI included

6



deferred gains of $134 ($98, net of tax) at March 31, 2015. All contracts expire in 15 to 105 days. Gains of $151 and $239 were recorded in Other Income during the quarter and six months ended March 31, 2015, respectively, for all settled contracts.

At March 31, 2015, Griffon had $2,408 of Canadian dollar contracts at a weighted average rate of $1.27. The contracts, which protect Canada operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting. For the quarter and six months ended March 31, 2015, a fair value gain of $163 and $256, respectively, was recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs). All contracts expire in 16 to 196 days. Losses of $41 and $42 were recorded in Other Income during the quarter and six months ended March 31, 2015, respectively, for all settled contracts.

NOTE 3 – ACQUISITIONS
 
On May 21, 2014, AMES acquired the Australian Garden and Tools business of Illinois Tool Works, Inc. (“Cyclone”) for approximately $40,000, including a $4,000 working capital adjustment. Cyclone, which was integrated with AMES, offers a full range of quality garden and hand tool products sold under various leading brand names including Cyclone®, Nylex® and Trojan®, designed to meet the requirements of both the Do-it-Yourself and professional trade segments. Selling, General and Administrative ("SG&A") expenses included $2,363 of related acquisition costs recorded in the third and fourth quarters of 2014.

On December 31, 2013, AMES acquired Northcote Pottery (“Northcote”), founded in 1897 and a leading brand in the Australian outdoor planter and decor market, for approximately $22,000. Northcote, which was integrated with AMES, complements Southern Patio, acquired in 2011, and, with Cyclone, adds to AMES’ existing lawn and garden operations in Australia. First quarter 2014 SG&A expenses included $798 of related acquisition costs.
 
The accounts of the acquired companies, after adjustment to reflect fair market values (level 3 inputs), have been included in the consolidated financial statements from the date of acquisition; in each instance, acquired inventory was not significant. Griffon is in the process of finalizing the initial purchase price allocation for Cyclone as of the date of these financial statements, primarily with respect to the finalization of tax accounts.

The following table summarizes the fair values of the Cyclone and Northcote assets and liabilities as of the date of acquisition:
 
Cyclone
Northcote
Total
Current Assets, net of cash acquired
$
21,116

$
7,398

$
28,514

PP&E
488

1,385

1,873

Goodwill
11,322

11,254

22,576

Amortizable intangible assets
11,608

6,098

17,706

Indefinite life intangible assets
3,548

3,121

6,669

Total assets acquired
48,082

29,256

77,338

Total liabilities assumed
(8,557
)
(7,475
)
(16,032
)
Net assets acquired
$
39,525

$
21,781

$
61,306

Amounts assigned to major intangible assets, none of which are tax deductible, for Cyclone and Northcote are as follows:
 
Cyclone
Northcote
Total
Amortization
Period (Years)
Goodwill
$
11,322

$
11,254

22,576

N/A
Tradenames
3,548

3,121

6,669

Indefinite
Customer relationships
11,608

6,098

17,706

25
 
$
26,478

$
20,473

46,951

 


7



NOTE 4 – INVENTORIES
 
Inventories are stated at the lower of cost (first-in, first-out or average) or market.
 
The following table details the components of inventory:
 
At March 31, 2015
 
At September 30, 2014
Raw materials and supplies
$
79,885

 
$
75,560

Work in process
78,573

 
67,866

Finished goods
161,839

 
146,709

Total
$
320,297

 
$
290,135

 
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

The following table details the components of property, plant and equipment, net:
 
At March 31, 2015
 
At September 30, 2014
Land, building and building improvements
$
120,192

 
$
127,714

Machinery and equipment
717,505

 
720,417

Leasehold improvements
45,916

 
42,852


883,613

 
890,983

Accumulated depreciation and amortization
(522,413
)
 
(520,418
)
Total
$
361,200

 
$
370,565

Depreciation and amortization expense for property, plant and equipment was $15,279 and $14,491 for the quarters ended March 31, 2015 and 2014, respectively, and $30,558 and $29,396 for the six months ended March 31, 2015 and 2014, respectively. Depreciation included in SG&A expenses was $3,262 and $2,394 for the quarters ended March 31, 2015 and 2014, respectively, and $6,432 and $5,236 for the six months ended March 31, 2015 and 2014. Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

No event or indicator of impairment occurred during the six months ended March 31, 2015, which would require additional impairment testing of property, plant and equipment.
 
NOTE 6 – GOODWILL AND OTHER INTANGIBLES
 
The following table provides changes in the carrying value of goodwill by segment during the six months ended March 31, 2015:

 
At September 30, 2014

Other
adjustments
including currency
translations

At March 31, 2015
Home & Building Products
$
288,396

 
$
(2,467
)
 
$
285,929

Telephonics
18,545

 

 
18,545

Plastics
64,905

 
(10,684
)
 
54,221

Total
$
371,846

 
$
(13,151
)
 
$
358,695



8


The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:
 
 
At March 31, 2015
 
 
 
At September 30, 2014
 
Gross Carrying Amount
 
Accumulated
Amortization
 
Average
Life
(Years)
 
Gross Carrying Amount
 
Accumulated
Amortization
Customer relationships
$
171,047

 
$
36,594

 
25
 
$
180,282

 
$
35,280

Unpatented technology
6,069

 
3,285

 
13
 
6,500

 
3,313

Total amortizable intangible assets
177,116

 
39,879

 
 
 
186,782

 
38,593

Trademarks
83,574

 

 
 
 
85,434

 

Total intangible assets
$
260,690

 
$
39,879

 
 
 
$
272,216

 
$
38,593

 
Amortization expense for intangible assets was $1,914 and $1,949 for the quarters ended March 31, 2015 and 2014, respectively and $3,895 and $3,836 for the six months ended March 31, 2015 and 2014, respectively.
 
No event or indicator of impairment occurred during the six months ended March 31, 2015, which would require impairment testing of long-lived intangible assets including goodwill.
 
NOTE 7 – INCOME TAXES
 
In both the quarter and six months ended March 31, 2015, the Company reported pre-tax income compared to losses in the prior year respective periods. The effective tax rates for the quarter and six months ended March 31, 2015 were provisions of 37.5% and 37.7%, respectively, compared to benefits of 16.1% and 13.2%, in the comparable period year periods, respectively. The current and prior year tax rates reflect the impact of permanent differences not deductible in determining taxable income, changes in earnings mix between domestic and non-domestic operations, and tax reserves. 
 
The quarter and six months ended March 31, 2015 included net tax provisions of $145 and $494, respectively, for discrete items resulting primarily from provision for taxes on repatriation of foreign earnings, partially offset by the benefit of the retroactive extension of the federal R&D credit signed into law December 19, 2014, and release of a valuation allowance. The comparable prior year periods included $609 and $320, respectively, of provisions for discrete items primarily resulting from the conclusion of tax audits in certain jurisdictions and the impact of tax law changes.

Excluding discrete items, the effective tax rates for the quarter and six months ended March 31, 2015 were 35.7% and 35.2%, respectively, compared to benefit rates of 18.1% and 14.4% in the comparable prior year periods, respectively.





9


NOTE 8 – LONG-TERM DEBT
 
 
 
At March 31, 2015
 
At September 30, 2014
  
 
Outstanding Balance

Original Issuer Discount

Capitalized Fees & Expenses
 
Balance Sheet

Coupon Interest Rate (1)

Outstanding Balance

Original Issuer Discount

Capitalized Fees & Expenses
 
Balance Sheet

Coupon Interest Rate (1)
Senior notes due 2022
(a)
$
600,000

 
$

 
$
(8,909
)
 
$
591,091

 
5.25
%
 
$
600,000

 
$

 
$
(9,553
)
 
$
590,447

 
5.25
%
Revolver due 2020
(a)
95,000

 

 
(2,278
)
 
92,722

 
n/a

 
25,000

 

 
(2,009
)
 
22,991

 
n/a

Convert. debt due 2017
(b)
100,000

 
(7,632
)
 
(813
)
 
91,555

 
4.00
%
 
100,000

 
(9,584
)
 
(1,034
)
 
89,382

 
4.00
%
Real estate mortgages
(c)
15,958

 

 
(504
)
 
15,454

 
n/a

 
16,388

 

 
(576
)
 
15,812

 
n/a

ESOP Loans
(d)
37,845

 

 
(257
)
 
37,588

 
n/a

 
38,946

 

 
(262
)
 
38,684

 
n/a

Capital lease - real estate
(e)
8,044

 

 
(169
)
 
7,875

 
5.00
%
 
8,551

 

 
(181
)
 
8,370

 
5.00
%
Non U.S. lines of credit
(f)
4,491

 

 

 
4,491

 
n/a

 
3,306

 

 

 
3,306

 
n/a

Non U.S. term loans
(g)
25,191

 

 
(112
)
 
25,079

 
n/a

 
28,470

 

 
(161
)
 
28,309

 
n/a

Other long term debt
(h)
1,635

 

 
(13
)
 
1,622

 
n/a

 
1,910

 

 
(24
)
 
1,886

 
n/a

Totals
 
888,164

 
(7,632
)
 
(13,055
)
 
867,477

 
 

 
822,571

 
(9,584
)
 
(13,800
)
 
799,187

 
 

less: Current portion
 
(9,162
)
 

 

 
(9,162
)
 
 

 
(7,886
)
 

 

 
(7,886
)
 
 

Long-term debt
 
$
879,002

 
$
(7,632
)
 
$
(13,055
)
 
$
858,315

 
 

 
$
814,685

 
$
(9,584
)
 
$
(13,800
)
 
$
791,301

 
 

 

10


 
 
Three Months Ended March 31, 2015
 
Three Months Ended March 31, 2014
 
 
Effective Interest Rate (1)

Cash Interest

Amort. Debt
Discount

Amort. Debt Issuance Costs
& Other Fees

Total Interest Expense

Effective Interest Rate (1)

Cash Interest

Amort. Debt
Discount

Amort.
Debt Issuance Costs
& Other Fees

Total Interest Expense
Senior notes due 2018
(a)
n/a

 
$

 
$

 
$

 
$

 
7.1
%
 
$
6,133

 
$

 
$
261

 
$
6,394

Senior notes due 2022
(a)
5.5
%
 
7,875

 

 
322

 
8,197

 
5.3

 
2,800

 

 
111

 
2,911

Revolver due 2020
(a)
n/a

 
659

 

 
133

 
792

 
n/a

 
306

 

 
142

 
448

Convert. debt due 2017
(b)
9.2
%
 
1,000

 
990

 
110

 
2,100

 
9.3
%
 
1,000

 
909

 
110

 
2,019

Real estate mortgages
(c)
3.8
%
 
116

 

 
36

 
152

 
3.8
%
 
122

 

 
37

 
159

ESOP Loans
(d)
2.9
%
 
254

 

 
18

 
272

 
3.4
%
 
180

 

 
5

 
185

Capital lease - real estate
(e)
5.3
%
 
102

 

 
6

 
108

 
5.3
%
 
114

 

 
7

 
121

Non U.S. lines of credit
(f)
n/a

 
109

 

 

 
109

 
n/a

 
224

 

 

 
224

Non U.S. term loans
(g)
n/a

 
337

 

 
14

 
351

 
n/a

 
101

 

 

 
101

Other long term debt
(h)
n/a

 
22

 

 
2

 
24

 
n/a

 

 

 

 

Capitalized interest
 
 

 
(93
)
 

 

 
(93
)
 
 

 
(173
)
 

 

 
(173
)
Totals
 
 

 
$
10,381

 
$
990

 
$
641

 
$
12,012

 
 

 
$
10,807

 
$
909

 
$
673

 
$
12,389

(1) not applicable = n/a


11


 
 
Six Months Ended March 31, 2015
 
Six Months Ended March 31, 2014
 
 
Effective Interest Rate (1)
 
Cash Interest
 
Amort. Debt Discount
 
Amort. Debt Issuance Costs & Other Fees
 
Total Interest Expense
 
Effective Interest Rate (1)
 
Cash Interest
 
Amort. Debt Discount
 
Amort. Debt Issuance Costs & Other Fees
 
Total Interest Expense
Senior notes due 2018
(a)
n/a

 
$

 
$

 
$

 
$

 
7.1
%
 
$
15,930

 
$

 
$
667

 
$
16,597

Senior notes due 2022
(a)
5.5
%
 
15,750

 

 
644

 
16,394

 
5.3

 
2,800

 

 
111

 
2,911

Revolver due 2020
(a)
n/a

 
997

 

 
291

 
1,288

 
n/a

 
473

 

 
278

 
751

Convert. debt due 2017
(b)
9.1
%
 
2,000

 
1,952

 
221

 
4,173

 
9.1
%
 
2,000

 
1,792

 
221

 
4,013

Real estate mortgages
(c)
3.9
%
 
240

 

 
72

 
312

 
4.0
%
 
252

 

 
73

 
325

ESOP Loans
(d)
2.9
%
 
514

 

 
35

 
549

 
3.2
%
 
332

 

 
7

 
339

Capital lease - real estate
(e)
5.3
%
 
208

 

 
12

 
220

 
5.3
%
 
233

 

 
14

 
247

Non U.S. lines of credit
(f)
n/a

 
250

 

 

 
250

 
n/a

 
417

 

 

 
417

Non U.S. term loans
(g)
n/a

 
725

 

 
30

 
755

 
n/a

 
153

 

 
4

 
157

Other long term debt
(h)
n/a

 
53

 

 
8

 
61

 
n/a

 
11

 

 
21

 
32

Capitalized interest
 
 

 
(236
)
 

 

 
(236
)
 
 

 
(266
)
 

 

 
(266
)
Totals
 
 

 
$
20,501

 
$
1,952

 
$
1,313

 
$
23,766

 
 

 
$
22,335

 
$
1,792

 
$
1,396

 
$
25,523



12



(a)
On February 27, 2014, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $600,000 of 5.25% Senior Notes due 2022 (“Senior Notes”); interest is payable semi-annually on March 1 and September 1. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a call and tender offer premium of $31,530 and to make interest payments of $16,716, with the balance used to pay a portion of the related transaction fees and expenses. In connection with the issuance of the Senior Notes, all obligations under the $550,000 of 7.125% senior notes due 2018 were discharged.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On June 18, 2014, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 via an exchange offer. The fair value of the Senior Notes approximated $594,000 on March 31, 2015 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $10,313 of underwriting fees and other expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over the term of such notes. Griffon recognized a loss on the early extinguishment of debt on the 7.125% senior notes aggregating $38,890, comprised of the $31,530 tender offer premium, the write-off of $6,574 of remaining deferred financing fees and $786 of prepaid interest on defeased notes.
 
On March 13, 2015, Griffon amended its Revolving Credit Facility (the “Credit Agreement”) to increase the credit facility from $225,000 to $250,000, extend its maturity date from March 28, 2019 to March 13, 2020 and modify certain other provisions of the credit facility. The facility includes a letter of credit sub-facility with a limit of $50,000 (decreased from $60,000), and a multi-currency sub-facility of $50,000. The Credit Agreement provides for same day borrowings of base rate loans in lieu of a swing line sub-facility. 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 an event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.00% (compared to 1.25% prior to the amendment) for base rate loans and 2.00% (compared to 2.25% prior to the amendment) for LIBOR loans. 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 negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens and make restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors, and a pledge of not greater than 65% of the equity interest in each of Griffon’s material, first-tier foreign subsidiaries (except that a lien on the assets of Griffon's material domestic subsidiaries securing a limited amount of the debt under the credit agreement relating to Griffon's Employee Stock Ownership Plan ("ESOP") ranks pari passu with the lien granted on such assets under the Credit Agreement; see footnote (d) below). At March 31, 2015, outstanding borrowings and standby letters of credit were $95,000 and $20,560, respectively, under the Credit Agreement; $134,440 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 current conversion rate of the 2017 Notes is 69.3811 shares of Griffon’s common stock per $1 principal amount of notes, corresponding to a conversion price of $14.41 per share. 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 31, 2015, the above conversion price reflects dividends paid through March 26, 2015. At both March 31, 2015 and 2014, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720. The fair value of the 2017 Notes approximated $129,813 on March 31, 2015 based upon quoted market prices (level 1 inputs).

(c)
On October 21, 2013, Griffon refinanced two real estate mortgages to secure loans totaling $17,175. The loans mature in October 2018, are collateralized by the related properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 2.75%.

(d)
In December 2013, Griffon’s ESOP entered into an agreement that refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098 (the "Agreement"). The Agreement also provided for a Line Note with $10,000 available to purchase

13


shares of Griffon common stock in the open market. In July 2014, Griffon's ESOP entered into an amendment to the existing Agreement which provided an additional $10,000 Line Note available to purchase shares in the open market. During 2014, the Line Notes were combined with the Term Loan to form one new Term Loan. The Term Loan bears interest at LIBOR plus 2.38% or the lender’s prime rate, at Griffon’s option. The Term Loan requires quarterly principal payments of $551, with a balloon payment of approximately $30,137 due at maturity on December 31, 2018. During 2014, 1,591,117 shares of Griffon common stock, for a total of $20,000 or $12.57 per share, were purchased with proceeds from the Line Notes. The Term Loan is secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of Griffon assets (which lien ranks pari passu with the lien granted on such assets under the Credit Agreement) and is guaranteed by Griffon.

(e)
In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon.

(f)
In November 2010, Clopay Europe GmbH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The term loan was paid off in December 2013 and the revolver had no borrowings outstanding at March 31, 2015. The revolving facility matures in November 2015 and is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 2.20% per annum (2.28% at March 31, 2015). 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.
Clopay do Brazil maintains lines of credit of $4,000. Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% (18.60% at March 31, 2015). At March 31, 2015 there was $2,200 borrowed under the lines. Clopay Plastic Products Company, Inc. guarantees the loan and lines.
In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 revolving credit facility.  The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.54% LIBOR USD and 2.45% Bankers Acceptance Rate CDN as of March 31, 2015). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity.  At March 31, 2015, there was $2,291 borrowed under the revolving credit facility with CAD $12,110 available.

(g)
In December 2013 and May 2014, Northcote Holdings Pty Ltd entered into two unsecured term loans in the outstanding amounts of AUD $12,500 and AUD $20,000, respectively. The AUD $12,500 term loan requires quarterly interest payments with principal due upon maturity in December 2016. The AUD $20,000 term loan requires quarterly principal payments of AUD $625 beginning in August 2015, with a balloon payment due upon maturity in May 2017. The loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.2% at March 31, 2015 for each loan). As of March 31, 2015, Northcote had an outstanding combined balance of $25,079 on the term loans, net of deferred costs.

Subsidiaries of Northcote Holdings Pty Ltd also maintain two lines of credit of AUD $3,000 and AUD $5,000 which accrue interest at BBSY plus 2.25% per annum (4.61% at March 31, 2015) and 2.50% per annum (4.86% at March 31, 2015), respectively. At March 31, 2015, there were no outstanding borrowings under the lines. Griffon guarantees the term loans and the AUD $3,000 line of credit; the assets of a subsidiary of Northcote Holdings Pty Ltd secures the AUD $5,000 line of credit.

(h)
Other long-term debt primarily consists of capital leases.
At March 31, 2015, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

NOTE 9 — SHAREHOLDERS’ EQUITY
 
During 2015, the Company paid a quarterly cash dividend of $0.04 per share in each quarter, totaling $0.08 per share for the six months ended March 31, 2015. During 2014, the Company paid quarterly cash dividends of $0.03 per share, totaling $0.12 per share for the year. Dividends paid on allocated shares in the ESOP were used to pay down the ESOP loan and recorded as a reduction in expense. A dividend payable was established for the holders of restricted shares; such dividends will be released upon vesting of the underlying restricted shares.
 
On April 30, 2015, the Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on June 25, 2015 to shareholders of record as of the close of business on May 22, 2015.
 

14


Compensation expense for restricted stock is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria. Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years, is recognized using the straight-line attribution method and recorded within SG&A expenses.
 
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. On January 30, 2014, shareholders approved an amendment and restatement of the Incentive Plan, which, among other things, added 1,200,000 shares to the Incentive Plan. 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 4,200,000 (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 canceled or forfeited. As of March 31, 2015, 422,877 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 2015, Griffon granted 462,032 restricted stock awards with vesting periods of three years, 458,016 of which are also subject to certain performance conditions, with a total fair value of $5,775, or a weighted average fair value of $12.50 per share. During the second quarter of 2015, Griffon granted 201,399 restricted stock awards with vesting periods of three years, 146,699 of which are also subject to certain performance conditions, with a total fair value of $2,805, or a weighted average fair value of $13.93 per share.

For the quarters ended March 31, 2015 and 2014, stock based compensation expense totaled $2,795 and $3,321, respectively. For the six months ended March 31, 2015 and 2014, stock based compensation expense totaled $5,372 and $4,996, respectively.

During the quarter and six months ended March 31, 2015, 14,626 shares, with a market value of $195 or $13.30 per share, and 76,025 shares, with a market value of $1,080 or $14.21 per share, respectively, were withheld to settle employee taxes due to the vesting of restricted stock, and were added to treasury.

In May 2014, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock; on March 20, 2015, an additional $50,000 was authorized. Under both programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended March 31, 2015, Griffon purchased 1,581,200 shares of common stock under the May 2014 program, for a total of $24,212 or $15.31 per share. During the six months ended March 31, 2015, Griffon purchased 2,606,241 shares of common stock under the May 2014 program, for a total of $36,498 or $14.00 per share. As of March 31, 2015, $52,362 remains under existing Board authorizations.

From August 2011 to March 31, 2015, Griffon repurchased 9,601,103 shares of common stock, for a total of $108,695 or $11.32 per share, under Board authorized repurchase programs.

In addition to repurchases under Board authorized programs, on December 10, 2013, Griffon repurchased 4,444,444 shares of its common stock for $50,000 from GS Direct, L.L.C. (“GS Direct”), an affiliate of The Goldman Sachs Group, Inc. The repurchase was effected in a private transaction at a per share price of $11.25, an approximate 9.2% discount to the stock’s closing price on November 12, 2013, the day before announcement of the transaction. After closing the transaction, GS Direct continued to hold approximately 5.56 million shares (approximately 10% of the shares outstanding at such time) of Griffon’s common stock. Subject to certain exceptions, if GS Direct intends to sell its remaining shares of Griffon common stock at any time prior to December 31, 2015, it will first negotiate in good faith to sell such shares to the Company.


15



NOTE 10 – EARNINGS PER SHARE (EPS)
 
Basic EPS (and diluted EPS in periods when a loss exists) 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 and upon the settlement of the 2017 Convertible notes. In the six months ended March 31, 2015 and in the prior year periods, the 2017 Notes were anti-dilutive due to the conversion price being greater than the weighted-average stock price during the periods presented.
 
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,
 
2015
 
2014
 
2015
 
2014
Weighted average shares outstanding - basic
45,349

 
48,990

 
45,829

 
50,872

Incremental shares from stock based compensation
1,874

 

 
1,853

 

Convertible debt due 2017
446

 

 

 

 
 
 
 
 
 
 
 
Weighted average shares outstanding - diluted
47,669

 
48,990

 
47,682

 
50,872

 
 
 
 
 
 
 
 
Anti-dilutive options excluded from diluted EPS computation
567

 
644

 
580

 
644

 
Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash, and 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 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.
Information on Griffon’s reportable segments is as follows:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
REVENUE
2015
 
2014
 
2015
 
2014
Home & Building Products:
 

 
 

 
 

 
 

AMES
$
159,092

 
$
160,705

 
$
292,202

 
$
257,313

CBP
104,513

 
90,838

 
243,113

 
212,680

Home & Building Products
263,605

 
251,543

 
535,315

 
469,993

Telephonics
98,687

 
104,185

 
189,345

 
200,210

Plastics
137,728

 
151,959

 
277,520

 
290,942

Total consolidated net sales
$
500,020

 
$
507,687

 
$
1,002,180

 
$
961,145


16


The following table reconciles segment operating profit to income before taxes:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
INCOME (LOSS) BEFORE TAXES
2015
 
2014
 
2015
 
2014
Segment operating profit:
 

 
 

 
 

 
 

Home & Building Products
$
8,651

 
$
8,818

 
$
25,020

 
$
18,211

Telephonics
9,114

 
10,677

 
16,631

 
21,329

Plastics
9,867

 
9,352

 
17,887

 
15,177

Total segment operating profit
27,632

 
28,847

 
59,538

 
54,717

Net interest expense
(11,857
)
 
(12,361
)
 
(23,494
)
 
(25,462
)
Unallocated amounts
(7,580
)
 
(8,391
)
 
(15,844
)
 
(16,374
)
Loss from debt extinguishment, net

 
(38,890
)
 

 
(38,890
)
Income before taxes
$
8,195

 
$
(30,795
)
 
$
20,200

 
$
(26,009
)
 
Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors for the same reason.

The following table provides a reconciliation of Segment adjusted EBITDA to Income (loss) before taxes:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Segment adjusted EBITDA:
 

 
 

 
 

 
 

Home & Building Products
$
17,330

 
$
17,124

 
$
41,800

 
$
36,191

Telephonics
11,616

 
12,535

 
21,648

 
24,931

Plastics
15,764

 
16,216

 
30,315

 
28,959

Total Segment adjusted EBITDA
44,710

 
45,875

 
93,763

 
90,081

Net interest expense
(11,857
)
 
(12,361
)
 
(23,494
)
 
(25,462
)
Segment depreciation and amortization
(17,078
)
 
(16,336
)
 
(34,225
)
 
(33,032
)
Unallocated amounts
(7,580
)
 
(8,391
)
 
(15,844
)
 
(16,374
)
Loss from debt extinguishment, net

 
(38,890
)
 

 
(38,890
)
Restructuring charges

 
(692
)
 

 
(1,534
)
Acquisition costs

 

 

 
(798
)
Income (loss) before taxes
$
8,195

 
$
(30,795
)
 
$
20,200

 
$
(26,009
)

17


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

For the Three Months Ended March 31,

For the Six Months Ended March 31,
DEPRECIATION and AMORTIZATION
2015

2014

2015

2014
Segment:
 

 

 

 
Home & Building Products
$
8,679

 
$
7,614

 
$
16,780

 
$
15,648

Telephonics
2,502

 
1,858

 
5,017

 
3,602

Plastics
5,897

 
6,864

 
12,428

 
13,782

Total segment depreciation and amortization
17,078

 
16,336

 
34,225

 
33,032

Corporate
115

 
103

 
228

 
200

Total consolidated depreciation and amortization
$
17,193

 
$
16,439

 
$
34,453

 
$
33,232













CAPITAL EXPENDITURES
 


 


 


 

Segment:
 


 


 


 

Home & Building Products
$
11,114

 
$
6,722

 
$
21,375

 
$
15,190

Telephonics
1,339

 
5,520

 
2,308

 
8,887

Plastics
7,486

 
4,390

 
15,165

 
10,150

Total segment
19,939

 
16,632

 
38,848

 
34,227

Corporate
853

 
297

 
865

 
618

Total consolidated capital expenditures
$
20,792

 
$
16,929

 
$
39,713

 
$
34,845

ASSETS
At March 31, 2015

At September 30, 2014
Segment assets:
 

 
Home & Building Products
$
1,091,443

 
$
1,030,005

Telephonics
291,535

 
319,327

Plastics
354,150

 
389,464

Total segment assets
1,737,128

 
1,738,796

Corporate
6,241

 
64,015

Total continuing assets
1,743,369

 
1,802,811

Assets of discontinued operations
3,884

 
3,750

Consolidated total
$
1,747,253

 
$
1,806,561


NOTE 12 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense (income) was as follows:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Service cost
$

 
$
45

 
$

 
$
90

Interest cost
2,207

 
2,500

 
4,414

 
5,000

Expected return on plan assets
(2,932
)
 
(2,885
)
 
(5,864
)
 
(5,770
)
Amortization:
 

 
 

 
 

 
 

Prior service cost
4

 
4

 
8

 
8

Recognized actuarial loss
541

 
489

 
1,082

 
978

Net periodic expense (income)
$
(180
)
 
$
153

 
$
(360
)
 
$
306




18



NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS
In July 2013, the FASB issued new accounting guidance requiring an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss or tax credit carryforward, except for instances when the carryforward is not available to settle any additional income taxes and an entity does not intend to use the deferred tax benefit for these purposes. In these circumstances, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This standard was effective for fiscal years beginning after December 15, 2013, and accordingly, the Company adopted this guidance effective October 1, 2014. Adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In April 2014, the FASB issued guidance changing the requirements for reporting discontinued operations where a disposal of a component of an entity or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when either classified as held for sale, or disposed of by sale or otherwise disposed. The amendment also requires enhanced disclosures about the discontinued operation and disclosure information for other significant dispositions. This guidance is effective for the Company beginning in 2015. The Company's adoption of this standard did not have an impact on its consolidated financial statements.

In May 2014, the FASB issued guidance on revenue from contracts with customers. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved, in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance permits the use of either the retrospective or cumulative effect transition method and is effective for the Company beginning in 2017; early adoption is not permitted. We have not yet selected a transition method and are currently evaluating the impact of the guidance on the Company's financial condition, results of operations and related disclosures.

In August 2014, the FASB issued guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern and related footnote disclosures. Management will be required to evaluate, at each reporting period, whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective prospectively for annual and interim reporting periods beginning in 2017; implementation of this guidance is not expected to have a material effect on the Company’s financial condition or results of operations.

In April 2015, the FASB issued guidance on simplifying the presentation of debt issuance costs. This guidance requires debt issuance costs on the balance sheet to be presented as a direct deduction from the carrying amount of a related debt liability, similar to debt discounts. The Company early adopted this guidance and applied it retrospectively for all periods presented in the financial statements. Adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

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.


19


NOTE 14 – DISCONTINUED OPERATIONS
 
The following amounts related to the Installation Services segment, discontinued in 2008, and other businesses discontinued several years ago, which 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, 2015

At September 30, 2014
Assets of discontinued operations:
 


 

Prepaid and other current assets
$
1,638

 
$
1,624

Other long-term assets
2,246

 
2,126

Total assets of discontinued operations
$
3,884

 
$
3,750

 
 
 
 
Liabilities of discontinued operations:
 

 
 

Accrued liabilities, current
$
2,528

 
$
3,282

Other long-term liabilities
3,524

 
3,830

Total liabilities of discontinued operations
$
6,052

 
$
7,112


There was no Installation Services revenue or income for the six months ended March 31, 2015 or 2014.

NOTE 15 – RESTRUCTURING AND OTHER RELATED CHARGES
 
In September 2014, Telephonics recognized $4,244 in restructuring costs in connection with the closure of its Swedish facility and restructuring of operations, a voluntary early retirement plan and a reduction in force aimed at improving efficiency by combining functions and responsibilities, resulting in the elimination of 80 positions.

In January 2013, AMES undertook to close certain of its U.S. manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. These actions, completed at the end of the 2015 first quarter, improved manufacturing and distribution efficiencies, allow for in-sourcing of certain production previously performed by third party suppliers, and improved material flow and absorption of fixed costs. AMES incurred pre-tax restructuring and related exit costs approximating $7,941, comprised of cash charges of $4,016 and non-cash, asset-related charges of $3,925; the cash charges included $2,622 for one-time termination benefits and other personnel-related costs and $1,394 for facility exit costs and had $19,964 of capital expenditures.

HBP recognized $692 and $1,534 in restructuring and other related exit costs in the quarter and six months ended March 31, 2014, respectively; such charges primarily related to one-time termination benefits, facility and other personnel costs, and asset impairment charges related to the AMES plant consolidation initiatives. There were no restructuring charges in the current year.
 
A summary of the restructuring and other related charges included in the line item “Restructuring and other related charges” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) were recognized as follows:
 
Workforce
Reduction
 
Facilities &
Exit Costs
 
Other
Related
Costs
 
Non-cash
Facility and
Other
 
Total
Amounts incurred in:
 


 


 


 


 

Quarter ended December 31, 2013
$
638

 
$
95

 
$
109

 
$

 
$
842

Quarter ended March 31, 2014
495

 
137

 
60

 

 
692

Six Months Ended March 31, 2014
$
1,133

 
$
232

 
$
169

 
$

 
$
1,534

 
 
 
 
 
 
 
 
 
 


20


The activity in the restructuring accrual recorded in accrued liabilities consisted of the following:
 
Workforce
Reduction
 
Accrued liability at September 30, 2014
$
5,228

 
Payments
(4,064
)
 
Accrued liability at March 31, 2015
$
1,164

 

NOTE 16 – OTHER EXPENSE
 
For the quarters ended March 31, 2015 and 2014, Other income (expense) included $(985) and $436, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $517 and $15, respectively, of net investment income.

For the six months ended March 31, 2015 and 2014, Other income (expense) included $(1,525) and $679, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $563 and $127, respectively, of net investment income.

NOTE 17 – 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. AMES offers an express limited warranty for a period of ninety days on all products from the date of original purchase 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,
 
2015
 
2014
 
2015
 
2014
Balance, beginning of period
$
4,908

 
$
6,929

 
$
4,934

 
$
6,649

Warranties issued and changes in estimated pre-existing warranties
1,842

 
1,135

 
2,791

 
2,101

Actual warranty costs incurred
(1,076
)
 
(953
)
 
(2,051
)
 
(1,639
)
Balance, end of period
$
5,674

 
$
7,111

 
$
5,674

 
$
7,111


NOTE 18 – OTHER COMPREHENSIVE INCOME (LOSS)
 
The amounts recognized in other comprehensive income (loss) were as follows:
 
Three Months Ended March 31, 2015

Three Months Ended March 31, 2014
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
(30,384
)
 
$

 
$
(30,384
)
 
$
1,224

 
$

 
$
1,224

Pension and other defined benefit plans
545

 
(192
)
 
353

 
1,698

 
(599
)
 
1,099

Loss on cash flow hedge
(91
)
 
11

 
(80
)
 

 

 

Available-for-sale securities
$
145

 
$
(53
)
 
$
92

 
$

 
$

 
$

Total other comprehensive income (loss)
$
(29,785
)
 
$
(234
)
 
$
(30,019
)
 
$
2,922

 
$
(599
)
 
$
2,323

 

21


 
Six Months Ended March 31, 2015
 
Six Months Ended March 31, 2014
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Foreign currency translation adjustments
$
(45,884
)
 
$

 
$
(45,884
)
 
$
(1,913
)
 
$

 
$
(1,913
)
Pension and other defined benefit plans
1,090

 
(384
)
 
706

 
2,191

 
(776
)
 
1,415

Loss on cash flow hedge
(204
)
 
50

 
(154
)
 

 

 

Available-for-sale securities
(1,370
)
 
500

 
(870
)
 

 

 

Total other comprehensive income (loss)
$
(46,368
)
 
$
166

 
$
(46,202
)
 
$
278

 
$
(776
)
 
$
(498
)

The components of Accumulated other comprehensive income (loss) are as follows:
 
March 31, 2015
 
September 30, 2014
Foreign currency translation adjustments
$
(49,704
)
 
$
(3,820
)
Pension and other defined benefit plans
(26,660
)
 
(27,366
)
Gain on cash flow hedge
98

 
252

Available-for-sale securities

 
870

 
$
(76,266
)
 
$
(30,064
)

Total comprehensive income (loss) were as follows:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Net income (loss)
$
5,122

 
$
(25,825
)
 
$
12,593

 
$
(22,589
)
Other comprehensive income (loss), net of taxes
(30,019
)
 
2,323

 
(46,202
)
 
(498
)
Comprehensive loss
$
(24,897
)
 
$
(23,502
)
 
$
(33,609
)
 
$
(23,087
)

Amounts reclassified from accumulated other comprehensive income (loss) to income (loss) were as follows:
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
(Gain) Loss
2015
 
2014
 
2015
 
2014
Pension amortization
$
545

 
$
493

 
$
1,090

 
$
986

Cash flow hedges
(110
)
 

 
(197
)
 

Available-for-sale securities
(489
)
 

 
(489
)
 

Total
(54
)
 
493

 
404

 
986

Tax
20

 
(168
)
 
(146
)
 
(345
)
Total
$
(34
)
 
$
325

 
$
258

 
$
641


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 accordingly

22


conduct 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.

Improper Advertisement Claim involving Union Tools® Products. Since December 2004, a customer of AMES has been named in various litigation matters relating to certain Union Tools products. The plaintiffs in those litigation matters have asserted causes of action against the customer of AMES for improper advertisement to end consumers. The allegations suggest that advertisements led the consumers to believe that Union Tools’ hand tools were wholly manufactured within boundaries of the United States. The complaints assert various causes of action against the customer of AMES under federal and state law, including common law fraud. At some point, likely once the litigation against the customer of AMES ends, the customer may seek indemnity (including recovery of its legal fees and costs) against AMES for an unspecified amount. Presently, AMES cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against AMES.

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 AMES’ ownership. While AMES 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 AMES was responsible to remediate other types of contamination on the site. After negotiations with the DEC, on August 15, 2011, AMES executed an Order on Consent with the DEC. The Order is without admission or finding of liability or acknowledgment that there has been a release of hazardous substances at the site. Importantly, the Order does not waive any rights that AMES has under a 1991 Consent Judgment entered into between the DEC and a predecessor of AMES relating to the site. The Order requires that AMES identify areas of concern at the site, and formulate a strategy to investigate and remedy both on and off site conditions in compliance with applicable environmental law. At the conclusion of the remedy phase of the remediation to the satisfaction of the DEC, the DEC will issue a Certificate of Completion. On August 1, 2012, a fire occurred during the course of demolition of certain structures at the Frankfort, NY site, requiring cleanup and additional remediation under the oversight of the DEC, which work has been substantially completed. AMES has performed significant additional investigative and remedial activities in the last few years under work plans approved by the DEC and has submitted a remedial investigative report to the DEC, which the DEC accepted in draft form. In September 2014, AMES submitted an addendum to the remedial investigation report to the DEC and in February 2015 submitted a Final Remedial Investigation Report to DEC. In March 2015, the NYDEC approved the Remedial Investigation Report and conducted a public information session. After receipt of public comments, the next steps will be to define the remedial objectives, develop cleanup alternatives and prepare a Proposed Remedial Action Plan for public comment.


23



U.S. Government investigations and claims

Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit and review by various agencies and instrumentalities of the United States government, including among others, the Defense Contract Audit Agency (“DCAA”), the Defense Criminal Investigative Service (“DCIS”), and the Department of Justice ("DOJ") 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 and the DOJ. No claim has been asserted against Griffon in connection with this matter, and Griffon is unaware of any material financial exposure in connection with the 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 a material adverse effect on Telephonics because of its reliance on government contracts.

General legal

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

24


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, The AMES Companies, Inc., ATT Southern, Inc. and Clopay Ames True Temper Holding Corp., all of which are indirectly 100% owned by Griffon. 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 March 31, 2015 and September 30, 2014 and for the three and six months ended March 31, 2015 and 2014. The financial information may not necessarily be indicative of the results of operations or financial position of the guarantor companies or non-guarantor companies had they 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.

The indenture relating to the Senior Notes (the “Indenture”) contains terms providing that, under certain limited circumstances, a guarantor will be released from its obligations to guarantee the Senior Notes.  These circumstances include (i) a sale of at least a majority of the stock, or all or substantially all the assets, of the subsidiary guarantor as permitted by the Indenture; (ii) a public equity offering of a subsidiary guarantor that qualifies as a “Minority Business” as defined in the Indenture (generally, a business the EBITDA of which constitutes less than 50% of the segment adjusted EBITDA of the Company for the most recently ended four fiscal quarters), and that meets certain other specified conditions as set forth in the Indenture; (iii) the designation of a guarantor as an “unrestricted subsidiary” as defined in the Indenture, in compliance with the terms of the Indenture; (iv) Griffon exercising its right to defease the Senior Notes, or to otherwise discharge its obligations under the Indenture, in each case in accordance with the terms of the Indenture; and (v) upon obtaining the requisite consent of the holders of the Senior Notes.

25


CONDENSED CONSOLIDATING BALANCE SHEETS
At March 31, 2015
 
 
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and equivalents
$
3,174

 
$
10,803

 
$
28,625

 
$

 
$
42,602

Accounts receivable, net of allowances

 
257,607

 
62,622

 
(33,777
)
 
286,452

Contract costs and recognized income not yet billed, net of progress payments

 
94,385

 
459

 

 
94,844

Inventories, net

 
259,569

 
60,728

 

 
320,297

Prepaid and other current assets
6,691

 
22,895

 
10,742

 
4,197

 
44,525

Assets of discontinued operations

 

 
1,638

 

 
1,638

Total Current Assets
9,865

 
645,259

 
164,814

 
(29,580
)
 
790,358

PROPERTY, PLANT AND EQUIPMENT, net
1,230

 
272,429

 
87,541

 

 
361,200

GOODWILL

 
284,875

 
73,820

 

 
358,695

INTANGIBLE ASSETS, net

 
154,636

 
66,175

 

 
220,811

INTERCOMPANY RECEIVABLE
590,476

 
993,640

 
197,273

 
(1,781,389
)
 

EQUITY INVESTMENTS IN SUBSIDIARIES
767,088

 
641,569

 
1,736,265

 
(3,144,922
)
 

OTHER ASSETS
41,721

 
50,077

 
9,594

 
(87,449
)
 
13,943

ASSETS OF DISCONTINUED OPERATIONS

 

 
2,246

 

 
2,246

Total Assets
$
1,410,380

 
$
3,042,485

 
$
2,337,728

 
$
(5,043,340
)
 
$
1,747,253

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Notes payable and current portion of long-term debt
$
2,202

 
$
1,147

 
$
5,813

 
$

 
$
9,162

Accounts payable and accrued liabilities
17,305

 
199,512

 
66,422

 
(16,376
)
 
266,863

Liabilities of discontinued operations

 

 
2,528

 

 
2,528

Total Current Liabilities
19,507

 
200,659

 
74,763

 
(16,376
)
 
278,553

 
 
 
 
 
 
 
 
 
 
LONG-TERM DEBT, net
810,754

 
6,792

 
40,769

 

 
858,315

INTERCOMPANY PAYABLES
55,663

 
1,000,772

 
709,578

 
(1,766,013
)
 

OTHER LIABILITIES
59,824

 
158,927

 
26,622

 
(103,144
)
 
142,229

LIABILITIES OF DISCONTINUED OPERATIONS

 

 
3,524

 

 
3,524

Total Liabilities
945,748

 
1,367,150

 
855,256

 
(1,885,533
)
 
1,282,621

SHAREHOLDERS’ EQUITY
464,632

 
1,675,335

 
1,482,472

 
(3,157,807
)
 
464,632

Total Liabilities and Shareholders’ Equity
$
1,410,380

 
$
3,042,485

 
$
2,337,728

 
$
(5,043,340
)
 
$
1,747,253



26


CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2014

 
Parent
Company
 
Guarantor
Companies
 
Non-Guarantor
Companies
 
Elimination
 
Consolidation
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and equivalents
$
6,813

 
$
31,522

 
$
54,070

 
$

 
$
92,405

Accounts receivable, net of allowances

 
213,922

 
77,218

 
(32,704
)
 
258,436

Contract costs and recognized income not yet billed, net of progress payments

 
109,804

 
126

 

 
109,930

Inventories, net

 
219,326

 
70,537

 
272

 
290,135

Prepaid and other current assets
4,366

 
26,319

 
17,101

 
14,783

 
62,569

Assets of discontinued operations

 

 
1,624

 

 
1,624

Total Current Assets
11,179

 
600,893

 
220,676

 
(17,649
)
 
815,099

 
 
 
 
 
 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
1,327

 
270,519

 
98,643

 
76

 
370,565

GOODWILL

 
284,875

 
86,971

 

 
371,846

INTANGIBLE ASSETS, net

 
156,772

 
76,851

 

 
233,623

INTERCOMPANY RECEIVABLE
540,080

 
892,433

 
213,733

 
(1,646,246
)
 

EQUITY INVESTMENTS IN SUBSIDIARIES
780,600

 
662,403

 
1,782,406

 
(3,225,409
)
 

OTHER ASSETS
27,880

 
53,896

 
6,739

 
(75,213
)
 
13,302

ASSETS OF DISCONTINUED OPERATIONS

 

 
2,126

 

 
2,126

Total Assets
$
1,361,066

 
$
2,921,791

 
$
2,488,145

 
$
(4,964,441
)
 
$
1,806,561

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Notes payable and current portion of long-term debt
$
2,202

 
$
1,144

 
$
4,540

 
$

 
$
7,886

Accounts payable and accrued liabilities
25,703

 
227,419

 
87,684

 
(20,811
)
 
319,995

Liabilities of discontinued operations

 

 
3,282

 

 
3,282

Total Current Liabilities
27,905

 
228,563

 
95,506

 
(20,811
)
 
331,163

LONG-TERM DEBT, net
738,360

 
7,806

 
45,135

 

 
791,301

INTERCOMPANY PAYABLES
21,573

 
815,094

 
762,192

 
(1,598,859
)
 

OTHER LIABILITIES
41,201

 
151,674

 
26,949

 
(71,584
)
 
148,240

LIABILITIES OF DISCONTINUED OPERATIONS

 

 
3,830

 

 
3,830

Total Liabilities
829,039

 
1,203,137

 
933,612

 
(1,691,254
)
 
1,274,534

SHAREHOLDERS’ EQUITY
532,027

 
1,718,654

 
1,554,533

 
(3,273,187
)
 
532,027

Total Liabilities and Shareholders’ Equity
$
1,361,066

 
$
2,921,791

 
$
2,488,145

 
$
(4,964,441
)
 
$
1,806,561



27


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2015
 
($ in thousands)
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
400,042

 
$
113,206

 
$
(13,228
)
 
$
500,020

Cost of goods and services

 
306,625

 
91,320

 
(12,300
)
 
385,645

Gross profit

 
93,417

 
21,886

 
(928
)
 
114,375

Selling, general and administrative expenses
5,301

 
71,970

 
17,349

 
(1,054
)
 
93,566

Total operating expenses
5,301

 
71,970

 
17,349

 
(1,054
)
 
93,566

 
 
 
 
 
 
 
 
 
 
Income (loss) from operations
(5,301
)
 
21,447

 
4,537

 
126

 
20,809

 
 
 
 
 
 
 
 
 
 
Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(2,224
)
 
(7,698
)
 
(1,935
)
 

 
(11,857
)
Other, net
521

 
1,615

 
(2,767
)
 
(126
)
 
(757
)
Total other income (expense)
(1,703
)
 
(6,083
)
 
(4,702
)
 
(126
)
 
(12,614
)
Income (loss) before taxes
(7,004
)
 
15,364

 
(165
)
 

 
8,195

Provision (benefit) for income taxes
(1,984
)
 
3,062

 
1,995

 

 
3,073

Income (loss) before equity in net income of subsidiaries
(5,020
)
 
12,302

 
(2,160
)
 

 
5,122

Equity in net income (loss) of subsidiaries
10,142

 
(735
)
 
12,302

 
(21,709
)
 

Net income (loss)
$
5,122

 
$
11,567

 
$
10,142

 
$
(21,709
)
 
$
5,122

 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
5,122

 
$
11,567

 
$
10,142

 
$
(21,709
)
 
$
5,122

Other comprehensive income (loss), net of taxes
(30,019
)
 
(12,075
)
 
(18,389
)
 
30,464

 
(30,019
)
Comprehensive income (loss)
$
(24,897
)
 
$
(508
)
 
$
(8,247
)
 
$
8,755

 
$
(24,897
)
 

28


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2014

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

 
$
396,505

 
$
127,782

 
$
(16,600
)
 
$
507,687

Cost of goods and services

 
305,191

 
107,555

 
(15,046
)
 
397,700

Gross profit

 
91,314

 
20,227

 
(1,554
)
 
109,987

Selling, general and administrative expenses
7,161

 
68,234

 
15,833

 
(1,606
)
 
89,622

Restructuring and other related charges

 
728

 
(36
)
 

 
692

Total operating expenses
7,161

 
68,962

 
15,797

 
(1,606
)
 
90,314

Income (loss) from operations
(7,161
)
 
22,352

 
4,430

 
52

 
19,673

Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(2,885
)
 
(7,329
)
 
(2,147
)
 

 
(12,361
)
Loss from debt extinguishment, net
(38,890
)
 

 

 

 
(38,890
)
Other, net
15

 
1,014

 
(194
)
 
(52
)
 
783

Total other income (expense)
(41,760
)
 
(6,315
)
 
(2,341
)
 
(52
)
 
(50,468
)
Income (loss) before taxes
(48,921
)
 
16,037

 
2,089

 

 
(30,795
)
Provision (benefit) for income taxes
(11,045
)
 
6,053

 
22

 

 
(4,970
)
Income (loss) before equity in net income of subsidiaries
(37,876
)
 
9,984

 
2,067

 

 
(25,825
)
Equity in net income (loss) of subsidiaries
12,051

 
1,982

 
9,984

 
(24,017
)
 

Net income (loss)
$
(25,825
)
 
$
11,966

 
$
12,051

 
$
(24,017
)
 
$
(25,825
)
 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
(25,825
)
 
$
11,966

 
$
12,051

 
$
(24,017
)
 
$
(25,825
)
Other comprehensive income (loss), net of taxes
2,323

 
80

 
2,073

 
(2,153
)
 
2,323

Comprehensive income (loss)
$
(23,502
)
 
$
12,046

 
$
14,124

 
$
(26,170
)
 
$
(23,502
)

29


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended March 31, 2015

 
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
778,156

 
$
252,087

 
$
(28,063
)
 
$
1,002,180

Cost of goods and services

 
595,995

 
199,594

 
(25,773
)
 
769,816

Gross profit

 
182,161

 
52,493

 
(2,290
)
 
232,364

Selling, general and administrative expenses
10,821

 
141,527

 
37,448

 
(2,334
)
 
187,462

Total operating expenses
10,821

 
141,527

 
37,448

 
(2,334
)
 
187,462

Income (loss) from operations
(10,821
)
 
40,634

 
15,045

 
44

 
44,902

Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(4,128
)
 
(15,125
)
 
(4,241
)
 

 
(23,494
)
Other, net
567

 
2,910

 
(4,641
)
 
(44
)
 
(1,208
)
Total other income (expense)
(3,561
)
 
(12,215
)
 
(8,882
)
 
(44
)
 
(24,702
)
Income (loss) before taxes
(14,382
)
 
28,419

 
6,163

 

 
20,200

Provision (benefit) for income taxes
(5,465
)
 
10,799

 
2,273

 

 
7,607

Income (loss) before equity in net income of subsidiaries
(8,917
)
 
17,620

 
3,890

 

 
12,593

Equity in net income (loss) of subsidiaries
21,510

 
5,301

 
17,620

 
(44,431
)
 

Net income (loss)
$
12,593

 
$
22,921

 
$
21,510

 
$
(44,431
)
 
$
12,593

 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
12,593

 
$
22,921

 
$
21,510

 
$
(44,431
)
 
$
12,593

Other comprehensive income (loss), net of taxes
(46,202
)
 
(16,655
)
 
(29,220
)
 
45,875

 
(46,202
)
Comprehensive income (loss)
$
(33,609
)
 
$
6,266

 
$
(7,710
)
 
$
1,444

 
$
(33,609
)




30


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Six Months Ended March 31, 2014

 
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
Revenue
$

 
$
741,149

 
$
249,534

 
$
(29,538
)
 
$
961,145

Cost of goods and services

 
565,174

 
206,949

 
(26,468
)
 
745,655

Gross profit

 
175,975

 
42,585

 
(3,070
)
 
215,490

 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
13,491

 
136,615

 
30,408

 
(3,212
)
 
177,302

Restructuring and other related charges

 
1,492

 
42

 

 
1,534

Total operating expenses
13,491

 
138,107

 
30,450

 
(3,212
)
 
178,836

 
 
 
 
 
 
 
 
 
 
Income (loss) from operations
(13,491
)
 
37,868

 
12,135

 
142

 
36,654

 
 
 
 
 
 
 
 
 
 
Other income (expense)
 

 
 

 
 

 
 

 
 

Interest income (expense), net
(6,490
)
 
(14,579
)
 
(4,393
)
 

 
(25,462
)
Loss from debt extinguishment, net
(38,890
)
 

 

 

 
(38,890
)
Other, net
127

 
3,072

 
(1,368
)
 
(142
)
 
1,689

Total other income (expense)
(45,253
)
 
(11,507
)
 
(5,761
)
 
(142
)
 
(62,663
)
Income (loss) before taxes
(58,744
)
 
26,361

 
6,374

 

 
(26,009
)
Provision (benefit) for income taxes
(15,579
)
 
11,692

 
467

 

 
(3,420
)
Income (loss) before equity in net income of subsidiaries
(43,165
)
 
14,669

 
5,907

 

 
(22,589
)
Equity in net income (loss) of subsidiaries
20,576

 
5,748

 
14,669

 
(40,993
)
 

Net income (loss)
$
(22,589
)
 
$
20,417

 
$
20,576

 
$
(40,993
)
 
$
(22,589
)
 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
(22,589
)
 
$
20,417

 
$
20,576

 
$
(40,993
)
 
$
(22,589
)
Other comprehensive income (loss), net of taxes
(498
)
 
1,869

 
(2,707
)
 
838

 
(498
)
Comprehensive income (loss)
$
(23,087
)
 
$
22,286

 
$
17,869

 
$
(40,155
)
 
$
(23,087
)















31


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2015

 
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Net income (loss)
$
12,593

 
$
22,921

 
$
21,510

 
$
(44,431
)
 
$
12,593

Net cash provided by (used in) operating activities
(49,888
)
 
(451
)
 
7,288

 

 
(43,051
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Acquisition of property, plant and equipment
(188
)
 
(30,584
)
 
(8,941
)
 

 
(39,713
)
Intercompany distributions
10,000

 
(10,000
)
 

 

 

Proceeds from sale of investments
8,891

 

 


 

 
8,891

Proceeds from sale of assets

 
12

 
165

 

 
177

Net cash provided by (used in) investing activities
18,703

 
(40,572
)
 
(8,776
)
 

 
(30,645
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Proceeds from issuance of common stock
285

 

 

 

 
285

Purchase of shares for treasury
(37,577
)
 

 

 

 
(37,577
)
Proceeds from long-term debt
97,000

 

 
2,556

 

 
99,556

Payments of long-term debt
(28,101
)
 
(717
)
 
(607
)
 

 
(29,425
)
Change in short-term borrowings

 

 
(572
)
 

 
(572
)
Financing costs
(590
)
 

 

 

 
(590
)
Tax effect from exercise/vesting of equity awards, net
345

 

 

 

 
345

Dividend
(3,911
)
 

 

 

 
(3,911
)
Other, net
95

 
21,021

 
(21,021
)
 

 
95

Net cash provided by (used in) financing activities
27,546

 
20,304

 
(19,644
)
 

 
28,206

CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
 

 
 

 
 

Net cash used in discontinued operations

 

 
(545
)
 

 
(545
)
Effect of exchange rate changes on cash and equivalents

 

 
(3,768
)
 

 
(3,768
)
NET DECREASE IN CASH AND EQUIVALENTS
(3,639
)
 
(20,719
)
 
(25,445
)
 

 
(49,803
)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
6,813

 
31,522

 
54,070

 

 
92,405

CASH AND EQUIVALENTS AT END OF PERIOD
$
3,174

 
$
10,803

 
$
28,625

 
$

 
$
42,602



32


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2014
 
 
Parent Company
 
Guarantor Companies
 
Non-Guarantor Companies
 
Elimination
 
Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Net income (loss)
$
(22,589
)
 
$
20,417

 
$
20,576

 
$
(40,993
)
 
$
(22,589
)
Net cash provided by (used in) operating activities
(30,836
)
 
(27,389
)
 
31,649

 

 
(26,576
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Acquisition of property, plant and equipment
(618
)
 
(29,921
)
 
(4,306
)
 

 
(34,845
)
Acquired businesses, net of cash acquired

 
(1,000
)
 
(21,781
)
 

 
(22,781
)
Intercompany distributions
10,000

 
(10,000
)
 

 

 

Proceeds from sale of assets

 
230

 
64

 

 
294

Net cash provided by (used in) investing activities
9,382

 
(40,691
)
 
(26,023
)
 

 
(57,332
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

 
 

 
 

 
 

Proceeds from issuance of common stock
584

 

 

 

 
584

Purchase of shares for treasury
(63,370
)
 

 

 

 
(63,370
)
Proceeds from long-term debt
629,568

 
10,939

 
4,007

 

 
644,514

Payments of long-term debt
(582,108
)
 
(12,097
)
 
7,895

 

 
(586,310
)
Change in short-term borrowings

 

 
4,908

 

 
4,908

Financing costs
(10,142
)
 

 
(545
)
 

 
(10,687
)
Purchase of ESOP shares
(10,000
)
 

 

 

 
(10,000
)
Tax effect from exercise/vesting of equity awards, net
273

 

 

 

 
273

Dividend
(8,290
)
 
5,000

 

 

 
(3,290
)
Other, net
144

 
43,140

 
(43,140
)
 

 
144

Net cash provided by (used in) financing activities
(43,341
)
 
46,982

 
(26,875
)
 

 
(23,234
)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
 

 
 

 
 

 
 

 
 

Net cash used in discontinued operations

 

 
(640
)
 

 
(640
)
Effect of exchange rate changes on cash and equivalents

 

 
(415
)
 

 
(415
)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(64,795
)
 
(21,098
)
 
(22,304
)
 

 
(108,197
)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
68,994

 
46,357

 
62,779

 

 
178,130

CASH AND EQUIVALENTS AT END OF PERIOD
$
4,199

 
$
25,259

 
$
40,475

 
$

 
$
69,933

 

33

Table of Contents

(Unless otherwise indicated, US dollars and non US currencies are in thousands, except per share data)

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
BUSINESS OVERVIEW
 
Griffon Corporation (the “Company” or “Griffon”) is a diversified management and holding company conducting 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 currently conducts its operations through three reportable segments: Home & Building Products (“HBP”), Telephonics Corporation (“Telephonics”) and Clopay Plastic Products Company (“Plastics”).

HBP consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc. (“CBP”):

- AMES 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 designs, develops and manufactures high-technology integrated information, communication and sensor system solutions for 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.
As a result of the decline in the U.S. housing market and the subsequent global financial crisis, Griffon has been undergoing a strategic transformation. In May 2008, we announced the divestiture of our Installation Services business, which was consummated by September 2008. In September 2008, Griffon strengthened its balance sheet by raising $248,600 in equity through a common stock rights offering and a related investment by GS Direct L.L.C., an affiliate of The Goldman Sachs Group, Inc. Over the past five years, Griffon has continued to refine and enhance the strategic direction and operating performance of its companies, while strengthening its balance sheet. During this period, Griffon has grown revenue and earnings through organic growth, cost containment and acquisitions, while returning capital to its shareholders through dividends and stock buybacks.

We are focused on acquiring, owning and operating businesses in a variety of industries. We are long-term investors that have substantial experience in a variety of industries. Our intent is to continue the growth of our existing segments and to diversify further through investments and acquisitions.

On September 30, 2010, Griffon purchased AMES for $542,000 in cash. Subsequently, Griffon acquired three businesses complementary to AMES: the pots and planters business of Southern Sales & Marketing ("Southern Patio"), Northcote Pottery™ ("Northcote") and the Australian Garden and Tools division of Illinois Tool Works, Inc. ("Cyclone").

On October 17, 2011, AMES acquired Southern Patio for approximately $23,000. Southern Patio is a leading designer, manufacturer and marketer of landscape accessories. Southern Patio had revenue exceeding $40,000 in 2011.

In January 2013, AMES announced its intention to close certain U.S. manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. These actions, which were completed at the end of the first quarter of 2015, improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production previously performed by third party suppliers, and improve material flow and absorption of fixed costs. Management continues to estimate that AMES' initiative will result in annual cash savings exceeding $10,000, based on current operating levels.

On December 31, 2013, AMES acquired Northcote, founded in 1897 and a leading brand in the Australian outdoor planter and decor market, for approximately $22,000. Northcote is expected to generate approximately $28,000 of annualized revenue.


34

Table of Contents

On May 21, 2014, AMES acquired Cyclone for approximately $40,000, including a $4,000 working capital adjustment. Cyclone offers a full range of quality garden and hand tool products sold under various leading brand names including Cyclone®, Nylex® and Trojan®, designed to meet the requirements of both the Do-it-Yourself and professional trade segments. Cyclone is expected to generate approximately $65,000 of annualized revenue. Northcote complements Southern Patio and, with Cyclone, adds to AMES' existing lawn and garden operations in Australia.

From August 2011 through March 31, 2015, Griffon repurchased 14,045,547 shares of its common stock, for a total of $158,695 or $11.30 per share. This included the repurchase of 9,601,103 shares on the open market, as well as the December 10, 2013 repurchase of 4,444,444 shares from GS Direct for $50,000, or $11.25 per share. In each of August 2011, May 2014 and March 2015, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. At March 31, 2015, $52,362 remains under existing Board authorizations.

Since September 2008, Griffon's Employee Stock Ownership Plan ("ESOP") purchased 4,013,459 shares of Griffon's common stock, for a total of $44,973 or $11.21 per share. At March 31, 2015, the ESOP holds allocated and unallocated shares totaling 5,572,054, or 11% of Griffon's outstanding shares, with a related loan balance of $37,588, net of issuance costs.

On November 17, 2011, the Company began declaring quarterly dividends. During the six months ended March 31, 2015, and during 2014 and 2013, the Company declared and paid dividends per share of $0.08, $0.12 and $0.10, respectively, for a total of $16,009 dividends paid during the period.

During 2014, Griffon issued $600,000 of 5.25% Senior Notes due 2022 the proceeds of which were used to redeem $550,000 of 7.125% senior notes due 2018.

On March 13, 2015, Griffon amended its Revolving Credit Facility to increase the credit facility from $225,000 to $250,000, extend its maturity date from March 28, 2019 to March 13, 2020 and modify certain other provisions of the credit facility.

Griffon also has outstanding $100,000 principal amount of 4% Convertible Subordinated Notes due 2017, with a current conversion rate of 69.3811 shares of Griffon’s common stock per $1 principal amount of notes, which corresponds to a conversion price of $14.41 per share.

OVERVIEW
 
Revenue for the quarter ended March 31, 2015 was $500,020 compared to $507,687 in the prior year quarter, a decrease of 2%; excluding the impact of foreign currency, revenue increased 2% primarily due to the contribution from the Cyclone acquisition. Net income was $5,122 or $0.11 per share, compared to a net loss of $25,825 or $0.53 per share, in the prior year quarter. Excluding the impact of foreign currency, current quarter net income would have been $6,592 or $0.14 per share.
 
The current quarter included:
Discrete tax provisions, net, of $145 or $0.00 per share.

The prior year quarter included:
Restructuring charges of $692 ($429, net of tax or $0.01 per share);
Loss from debt extinguishment of $38,890 ($24,964, net of tax or $0.51 per share)
Discrete tax provisions, net, of $609 or $0.01 per share; and
Benefit of debt extinguishment on full year effective tax rate of $5,848 or $0.12 per share.

Excluding these items from the respective quarterly results, net income would have been $5,267 or $0.11 per share in the current quarter compared to $6,025 or $0.12 per share in the prior year quarter.
 
Revenue for the six months ended March 31, 2015 was $1,002,180 compared to $961,145 in the prior year period, an increase of 4%; excluding the impact of foreign currency, revenue increased 7%. Net income was $12,593 or $0.26 per share, compared to a net loss of $22,589 or $0.44 per share, in the prior year period. Excluding the impact of foreign currency, current year-to-date net income would have been $15,043 or $0.32 per share.

Results for the six months ended March 31, 2015 included:

35

Table of Contents

Discrete tax provisions, net, of $494 or $0.01 per share.

Results for the six months ended March 31, 2014 included:
Restructuring charges of $1,534 ($951, net of tax or $0.02 per share);
Loss from debt extinguishment of $38,890 ($24,964, net of tax or $0.49 per share);
Acquisition costs of $798 ($495, net of tax or $0.01 per share);
Discrete tax provisions, net, of $320 or $0.01 per share; and
Impact of debt extinguishment on full year effective tax rate of $5,848 or $0.12 per share.

Excluding these items from the respective periods, net income would have been $13,087 or $0.27 per share in the six months ended March 31, 2015 compared to $9,989 or $0.20 per share in the six months ended March 31, 2014.

Griffon evaluates performance based on Earnings per share and Net income excluding restructuring charges, acquisition-related expenses, gains (losses) from pension settlement and debt extinguishment and discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Net income (loss) to adjusted net income and Earnings per share to Adjusted earnings per share:
 
GRIFFON CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS)
TO ADJUSTED NET INCOME
(Unaudited) 
 
For the Three Months Ended March 31,

For the Six Months Ended March 31,
 
2015

2014

2015

2014
Net income (loss)
$
5,122

 
$
(25,825
)
 
$
12,593

 
$
(22,589
)
Adjusting items, net of tax:
 

 
 

 
 

 
 

Loss from debt extinguishment, net

 
24,964

 

 
24,964

Restructuring charges

 
429

 

 
951

Acquisition costs

 

 

 
495

Extinguishment impact on period tax rate (a)

 
5,848

 

 
5,848

Discrete tax provisions
145

 
609

 
494

 
320

Adjusted net income
$
5,267

 
$
6,025

 
$
13,087

 
$
9,989

Diluted income (loss) per common share
$
0.11

 
$
(0.53
)
 
$
0.26

 
$
(0.44
)
Adjusting items, net of tax:
 

 
 

 
 

 
 

Loss from debt extinguishment, net

 
0.51

 

 
0.49

Restructuring charges

 
0.01

 

 
0.02

Acquisition costs

 

 

 
0.01

Extinguishment impact on period tax rate (a)

 
0.12

 

 
0.12

Discrete tax provisions

 
0.01

 
0.01

 
0.01

Adjusted earnings per common share
$
0.11

 
$
0.12

 
$
0.27

 
$
0.20

Weighted-average shares outstanding (in thousands)
47,669

 
48,990

 
47,682

 
50,872

 
a) In the prior year quarter and six months ended March 31, 2014, the impact of debt extinguishment on the full year effective tax rate was estimated to be a provision of $5,848 or $0.12 per share.

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

36

Table of Contents

RESULTS OF OPERATIONS
 
Three and six months ended March 31, 2015 and 2014
 
Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, and acquisition-related expenses, as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors for the same reason. The following table provides a reconciliation of Segment operating profit to Income (loss) before taxes:
 
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2015
Segment operating profit:
 

 

 

 
Home & Building Products
$
8,651

 
$
8,818

 
$
25,020

 
$
18,211

Telephonics
9,114

 
10,677

 
16,631

 
21,329

Plastics
9,867

 
9,352

 
17,887

 
15,177

Total segment operating profit
27,632

 
28,847

 
59,538

 
54,717

Net interest expense
(11,857
)
 
(12,361
)
 
(23,494
)
 
(25,462
)
Unallocated amounts
(7,580
)
 
(8,391
)
 
(15,844
)
 
(16,374
)
Loss from debt extinguishment, net

 
(38,890
)
 

 
(38,890
)
Income (loss) before taxes
$
8,195

 
$
(30,795
)
 
$
20,200

 
$
(26,009
)
 
The following table provides a reconciliation of Segment adjusted EBITDA to Income (loss) before taxes:
 
 
For the Three Months Ended March 31,
 
For the For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Segment adjusted EBITDA:
 

 
 

 
 

 
 

Home & Building Products
$
17,330

 
$
17,124

 
$
41,800

 
$
36,191

Telephonics
11,616

 
12,535

 
21,648

 
24,931

Plastics
15,764

 
16,216

 
30,315

 
28,959

Total Segment adjusted EBITDA
44,710

 
45,875

 
93,763

 
90,081

Net interest expense
(11,857
)
 
(12,361
)
 
(23,494
)
 
(25,462
)
Segment depreciation and amortization
(17,078
)
 
(16,336
)
 
(34,225
)
 
(33,032
)
Unallocated amounts
(7,580
)
 
(8,391
)
 
(15,844
)
 
(16,374
)
Loss from debt extinguishment, net

 
(38,890
)
 

 
(38,890
)
Restructuring charges

 
(692
)
 

 
(1,534
)
Acquisition costs

 

 

 
(798
)
Income (loss) before taxes
$
8,195

 
$
(30,795
)
 
$
20,200

 
$
(26,009
)


37

Table of Contents

Home & Building Products
 
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Revenue:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

AMES
$
159,092

 
 

 
$
160,705

 
 

 
$
292,202

 
 

 
$
257,313

 
 

CBP
104,513

 
 

 
90,838

 
 

 
243,113

 
 

 
212,680

 
 

Home & Building Products
$
263,605

 
 

 
$
251,543

 
 

 
$
535,315

 
 

 
$
469,993

 
 

Segment operating profit
$
8,651

 
3.3
%
 
$
8,818

 
3.5
%
 
$
25,020

 
4.7
%
 
$
18,211

 
3.9
%
Depreciation and amortization
8,679

 
 

 
7,614

 
 

 
16,780

 
 

 
15,648

 
 

Restructuring charges

 
 

 
692

 
 

 

 
 

 
1,534

 
 

Acquisition costs

 
 

 

 
 

 

 
 

 
798

 
 

Segment adjusted EBITDA
$
17,330

 
6.6
%
 
$
17,124

 
6.8
%
 
$
41,800

 
7.8
%
 
$
36,191

 
7.7
%
 
For the quarter ended March 31, 2015, revenue increased $12,062 or 5%, compared to the prior year quarter, reflecting a 6% contribution from the Cyclone acquisition, partially offset by a $3,700 or 1% unfavorable foreign currency impact. AMES revenue decreased 1% due to reduced sales of snow tools, and reduced sales of lawn tools and North American pots and planters due to a late spring, partially offset by the inclusion of Cyclone results contributing 8%; foreign currency was 2% unfavorable. CBP revenue increased 15%, due to increased volume of 10% with the balance primarily due to product mix; foreign currency was 1% unfavorable.

For the quarter ended March 31, 2015, Segment operating profit decreased 2% to $8,651 compared to $8,818 in the prior year quarter. The prior year included $692 of restructuring charges related to the consolidation initiative at AMES. Excluding restructuring charges, prior year Segment operating profit was $9,510 compared to $8,651 in the current quarter, a decrease of 9% due to reduced sales at AMES and an unfavorable impact of foreign currency of $700 or 8%, partially offset by the contribution from Cyclone of 15%, favorable mix and increased volume at CBP. Segment depreciation and amortization increased $1,065 from the prior year quarter.

For the six months ended March 31, 2015, revenue increased $65,322 or 14%, compared to the prior year period; excluding the benefit from the inclusion of first quarter Northcote (Northcote was acquired in December 2013) and year-to-date Cyclone results, revenue increased 5%. AMES revenue increased 14%, mainly driven by the inclusion of Northcote and Cyclone results contributing 16% and improved US and Canadian snow tool sales. CBP revenue increased 14% due to increased volume of 10% with the balance primarily due to favorable product mix. Segment revenue reflected the unfavorable impact of foreign currency translation of $7,200 or 2%.

For the six months ended March 31, 2015, Segment operating profit increased 37% to $25,020 compared to $18,211 in the prior year period. The prior year included $1,534 of restructuring charges related to the consolidation initiative at AMES and $798 of acquisition costs related to the Northcote transaction. Excluding restructuring charges and acquisition costs, prior year Segment operating profit was $20,543 compared to $25,020 in the current period, an increase of 22%. The current period included an unfavorable impact of foreign currency of $1,700 or 9%; the currency impact was more than offset by the contributions from Northcote and Cyclone of 26%, with the balance of the profit increase attributable to organic revenue growth. In both periods, AMES experienced manufacturing inefficiencies in connection with its plant consolidation initiative; this initiative was completed at the end of the 2015 first quarter. Segment depreciation and amortization increased $1,132 from the prior year period.

On May 21, 2014, AMES acquired Cyclone for approximately $40,000, including a $4,000 working capital adjustment. Cyclone offers a full range of quality garden and hand tool products sold under various leading brand names including Cyclone®, Nylex® and Trojan®, designed to meet the requirements of both the Do-it-Yourself and professional trade segments. Cyclone is expected to generate approximately $65,000 of annualized revenue. Selling, General and Administrative ("SG&A") expenses included $2,363 of related acquisition costs recorded in the third and fourth quarters of 2014.

On December 31, 2013, AMES acquired Northcote, a leading brand in the Australian outdoor planter and decor market, for approximately $22,000. Northcote complements Southern Patio, acquired in 2011. Northcote is expected to generate approximately $28,000 of annualized revenue. First quarter 2014 SG&A expenses included $798 of related acquisition costs. Both Cyclone and Northcote add to AMES’ existing lawn and garden operations in Australia.
 

38

Table of Contents

In January 2013, AMES undertook to close certain of its U.S. manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. These actions, completed at the end of the 2015 first quarter, improved manufacturing and distribution efficiencies, allow for in-sourcing of certain production previously performed by third party suppliers, and improved material flow and absorption of fixed costs. Management continues to estimate that AMES' initiative will result in annual cash savings exceeding $10,000, based on current operating levels. Realization of expected savings began in the current quarter.

Since January 2013, AMES incurred pre-tax restructuring and related exit costs approximating $7,941, comprised of cash charges of $4,016 and non-cash, asset-related charges of $3,925; cash charges included $2,622 for one-time termination benefits and other personnel-related costs and $1,394 for facility exit costs; there were $19,964 of related capital expenditures. The charges and capital expenditures are consistent with the amounts estimated at the onset of the initiative.

HBP recognized $692 and $1,534 in restructuring and related exit costs for the quarter and six months ended March 31, 2014; such charges primarily related to one-time termination benefits, facility and other personnel costs, and asset impairment charges related to the AMES initiative. There were no such charges in the current year.

Telephonics 
 
For the Three Months Ended March 31,
 
For the Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
Revenue
$
98,687

 
 

 
$
104,185

 
 

 
$
189,345

 
 

 
$
200,210

 
 
Segment operating profit
$
9,114

 
9.2
%
 
$
10,677

 
10.2
%
 
$
16,631

 
8.8
%
 
$
21,329

 
10.7%
Depreciation and amortization
2,502

 
 

 
1,858

 
 

 
5,017

 
 

 
3,602

 
 
Segment adjusted EBITDA
$
11,616

 
11.8
%
 
$
12,535

 
12.0
%
 
$
21,648

 
11.4
%
 
$
24,931

 
12.5%
 
For the quarter ended March 31, 2015, revenue decreased $5,498 or 5% compared to the prior year quarter, primarily due to timing of awards and work performed on Communications and Surveillance Systems ("CSS"), specifically Communication Open System Architecture ("COSA") and Secure Digital Intercommunications ("SDI") product sales, partially offset by the timing of work performed on the Multi-Mode ASW radar.
 
For the quarter ended March 31, 2015, Segment operating profit decreased $1,563 or 15%, and operating profit margin decreased 100 basis points, compared to the prior year quarter. The decrease was primarily attributable to reduced revenue.

For the six months ended March 31, 2015, revenue decreased $10,865 or 5%, compared to the prior year period, due to the timing of awards and work performed on COSA and SDI products.

For the six months ended March 31, 2015, Segment operating profit decreased $4,698 or 22%, and operating margin decreased 190 basis points compared to the prior year period, primarily as a result of reduced revenue.

During the six months ended March 31, 2015, Telephonics was awarded several new contracts and incremental funding on existing contracts approximating $178,100. Contract backlog was $482,000 at March 31, 2015, with 73% expected to be fulfilled in the next 12 months. Backlog was $494,000 at September 30, 2014 and $486,000 at March 31, 2014. 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.

Plastics
 
For the Three Months Ended March 31,

For the Six Months Ended March 31,
 
2015

2014

2015

2014
Revenue
$
137,728


 


$
151,959


 


$
277,520


 


$
290,942


 

Segment operating profit
$
9,867


7.2
%

$
9,352


6.2
%

$
17,887


6.4
%

$
15,177


5.2
%
Depreciation and amortization
5,897


 


6,864


 


12,428


 


13,782


 

Segment adjusted EBITDA
$
15,764


11.4
%

$
16,216


10.7
%

$
30,315


10.9
%

$
28,959


10.0
%
 

39

Table of Contents

For the quarter ended March 31, 2015, revenue decreased $14,231, or 9%, compared to the prior year quarter, primarily due to the unfavorable impact of foreign currency of $11,700 or 7% and 4% unfavorable product mix, partially offset by the benefit of increased volume contributing 2%. Resin had no material impact on revenue in the quarter. Plastics adjusts selling prices based on underlying resin costs on a delayed basis.

For the quarter ended March 31, 2015, Segment operating profit increased $515 or 6% compared to the prior year quarter. The impact of the revenue decrease and unfavorable mix was more than offset by the change in the impact of resin pricing pass through of 47% and the benefit from improved operations. The unfavorable impact of foreign currency was $1,400 or 15%.

For the six months ended March 31, 2015, revenue decreased $13,422, or 5%, compared to the prior year period, primarily due to the unfavorable impact of foreign currency of $17,500 or 6%; excluding the impact of currency, revenue increased 1% due to the benefit of favorable volume contributing 3% and the pass through of higher resin costs in customer selling prices contributing 1%, partially offset by a 2% impact from unfavorable mix.

For the six months ended March 31, 2015, Segment operating profit increased $2,710 or 18%, compared to the prior year period. The impact of the revenue decrease and unfavorable mix was more than offset by the change in the impact of resin pricing pass through of 42% and the benefit of improved operations. The unfavorable impact of foreign currency was $1,800 or 12%.

Unallocated
 
For the quarter ended March 31, 2015, unallocated amounts totaled $7,580 compared to $8,391 in the prior year; for the six months ended March 31, 2015, unallocated amounts totaled $15,844 compared to $16,374 in the prior year. The decrease in the current quarter and six months compared to the respective prior year periods primarily related to decreased stock compensation and incentive costs.

Segment Depreciation and Amortization
 
Segment depreciation and amortization increased $742 and $1,193, respectively, for the quarter and six months ended March 31, 2015 compared to the prior year periods, primarily due to the inclusion of Northcote and Cyclone.

Other Expense

For the quarters ended March 31, 2015 and 2014, Other income (expense) included $(985) and $436, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $517 and $15, respectively, of net investment income.

For the six months ended March 31, 2015 and 2014, Other income (expense) included $(1,525) and $679, respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $563 and $127, respectively, of net investment income.

Provision for income taxes
 
In both the quarter and six months ended March 31, 2015, the Company reported pretax income compared to losses in the prior year respective periods.  The Company recognized tax provisions of 37.5% and 37.7% for the quarter and six months ended March 31, 2015, respectively, compared to benefits of 16.1% and 13.2%, respectively, in the comparable prior year periods. 
The current quarter and six months include $145 and $494, respectively, of provisions for discrete items resulting primarily from the provision for taxes on repatriation of foreign earnings, partially offset by the benefit of the retroactive extension of the federal R&D credit signed into law December 19, 2014 and release of valuation allowance. The comparable prior year periods included provisions of $609 and $320, respectively, from discrete items resulting primarily from the conclusion of tax audits in certain jurisdictions, and the impact of enacted tax law changes. Excluding discrete items, the effective tax rates for the quarter and six months ended March 31, 2015 were 35.7% and 35.2%, respectively, compared to benefit rates of 18.1% and 14.4% in the comparable prior year periods, respectively.

Stock based compensation
 
For the quarters ended March 31, 2015 and 2014, stock based compensation expense totaled $2,795 and $3,321, respectively. For the six months ended March 31, 2015 and 2014, stock based compensation expense totaled $5,372 and $4,996, respectively.
 

40

Table of Contents

Comprehensive income (loss)
 
For the quarter ended March 31, 2015, total other comprehensive loss, net of taxes, of $30,019, included a $30,384 loss from foreign currency translation adjustments primarily due to the weakening of the Euro, Canadian, Australian and Brazilian currencies, all in comparison to the U.S. Dollar, a $353 benefit from pension amortization of actuarial losses, a $80 loss on cash flow hedges and $92 gain on available-for-sale securities.

For the quarter ended March 31, 2014, total other comprehensive income, net of taxes, of $2,323, included a $1,224 gain from foreign currency translation adjustments primarily due to the strengthening of the Australian and Brazilian currencies, partially offset by the weakening of the Canadian currency and Euro, all in comparison to the U.S. Dollar, and a $1,099 benefit from pension, primarily due to settling a non U.S. pension plan and amortization of actuarial losses.

For the six months ended March 31, 2015, total other comprehensive loss, net of taxes, of $46,202 included a $45,884 loss from foreign currency translation adjustments primarily due to the weakening of the Euro, Canadian, Australian and Brazilian currencies, all in comparison to the U.S. Dollar, and a $706 benefit from pension amortization of actuarial losses, a $154 loss on cash flow hedges and $870 settlement of available-for-sale securities.

For the six months ended March 31, 2014, total other comprehensive loss, net of taxes, of $498, included a $1,913 loss from Foreign currency translation adjustments primarily due to the weakening of the Canadian currency, partially offset by the strengthening of the Euro and the Australian currency, all in comparison to the U.S. Dollar, and a $1,415 benefit from Pension and other post retirement plans, primarily due to settling a non U.S. pension plan and amortization of actuarial losses.

Discontinued operations – Installation Services

There was no revenue or income from the Installation Services’ business for the quarters and six months ended March 31, 2015 and 2014.

41

Table of Contents

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 include: cash flows from operating activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital under satisfactory terms. Griffon believes it has 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.

The following table is derived from the Condensed Consolidated Statements of Cash Flows:
Cash Flows from Continuing Operations
For the Six Months Ended March 31,
(in thousands)
2015
 
2014
Net Cash Flows Used In:
 

 
 

Operating activities
$
(43,051
)
 
$
(26,576
)
Investing activities
(30,645
)
 
(57,332
)
Financing activities
28,206

 
(23,234
)

Cash used in continuing operations for the six months ended March 31, 2015 was $43,051 compared to usage of $26,576 in the prior year period. Current assets net of current liabilities, excluding short-term debt and cash, increased to $478,365 at March 31, 2015 compared to $399,417 at September 30, 2014, primarily due to increases in inventory, contract costs and recognized income not yet billed, and decreases in accounts payable and accrued liabilities. Current year cash flow from operating activities benefited $7,423 from the inclusion of first quarter Northcote results and year-to-date Cyclone results.

During the six months ended March 31, 2015, Griffon used cash for investing activities of $30,645 compared to $57,332 in the prior year; the prior year included approximately $22,000 related to the acquisition of Northcote. The current year includes proceeds received of $8,891 from the sale of available securities. Current year capital expenditures totaled $39,713, an increase of $4,868 from the prior year.

During the six months ended March 31, 2015, cash used in financing activities totaled $28,206 compared to a cash source of $23,234 in the prior year. The outflow of cash used in financing activities in the current year compared to the inflow in the prior year principally reflects the changes in the Revolving Credit Facility (the "Credit Agreement") net borrowings in 2015 compared to 2014. At March 31, 2015, outstanding borrowings under the Credit Agreement were $95,000 compared to outstanding borrowings of $20,000 in the prior year. At March 31, 2015, we had $867,477 of debt outstanding compared to $772,603 outstanding at March 31, 2014. On May 1, 2014 Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock; on March 20, 2015, an additional $50,000 was authorized. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the six months ended March 31, 2015, Griffon purchased 2,606,241 shares of common stock under the May 1, 2014 program, for a total of $36,498 or $14.00 per share. In addition, during the six months ended March 31, 2015, 76,025 shares, with a market value of $1,080, or $$14.21 per share, were withheld to settle employee taxes due upon the vesting of restricted stock, and were added to treasury stock.

During the six months ended March 31, 2015, the Board of Directors approved two quarterly cash dividends of $0.04 per share each. On April 30, 2015, the Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on June 25, 2015 to shareholders of record as of the close of business on May 22, 2015.

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, in which 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 six months ended March 31, 2015:
 
The United States Government and its agencies, through either prime or subcontractor relationships, represented 14% of Griffon’s consolidated revenue and 72% of Telephonics’ revenue.
Procter & Gamble Co. represented 14% of Griffon’s consolidated revenue and 51% of Plastics’ revenue.

42

Table of Contents

The Home Depot represented 11% of Griffon’s consolidated revenue and 21% of HBP’s revenue.

No other customer exceeded 9% of consolidated revenue. Future operating results will continue to substantially depend on the success of Griffon’s largest customers and our ongoing 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.
Cash and Equivalents and Debt
March 31,
 
September 30,
(in thousands)
2015
 
2014
Cash and equivalents
$
42,602

 
$
92,405

Notes payables and current portion of long-term debt
9,162

 
7,886

Long-term debt, net of current maturities
858,315

 
791,301

Debt discount and issuance costs
20,687

 
23,384

Total debt
888,164

 
822,571

Debt, net of cash and equivalents
$
845,562

 
$
730,166

 
On February 27, 2014, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $600,000 of 5.25% Senior Notes due 2022 (“Senior Notes”); interest is payable semi-annually on March 1 and September 1. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a call and tender offer premium of $31,530 and to make interest payments of $16,716, with the balance used to pay a portion of the related transaction fees and expenses. In connection with the issuance of the Senior Notes, all obligations under the $550,000 of 7.125% senior notes due 2018 were discharged.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On June 18, 2014, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 via an exchange offer. The fair value of the Senior Notes approximated $594,000 on March 31, 2015 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $10,313 of underwriting fees and other expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over the term of such notes. Griffon recognized a loss on the early extinguishment of debt on the 7.125% senior notes aggregating $38,890, comprised of the $31,530 tender offer premium, the write-off of $6,574 of remaining deferred financing fees and $786 of prepaid interest on defeased notes.

On March 13, 2015, Griffon amended its Credit Agreement to increase the credit facility from $225,000 to $250,000, extend its maturity date from March 28, 2019 to March 13, 2020, and modify certain other provisions of the credit facility. The facility includes a letter of credit sub-facility with a limit of $50,000 (decreased from $60,000 prior to the amendment), and a multi-currency sub-facility of $50,000. The Credit Agreement provides for same day borrowings of base rate loans in lieu of a swing line sub-facility. 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 an event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.00% (compared to 1.25% prior to the amendment) for base rate loans and 2.00% (compared to 2.25% prior to the amendment) for LIBOR loans. 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 negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens and make restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors and a pledge of not greater than 65% of the equity interest in each of Griffon’s material, first-tier foreign subsidiaries (except that a lien on the assets of Griffon's material domestic subsidiaries securing a limited amount of the debt under the credit agreement relating to Griffon's Employee Stock Ownership Plan ("ESOP") ranks pari passu with the lien granted on such assets under the Credit Agreement). At March 31, 2015, outstanding borrowings and standby letters of credit were $95,000 and $20,560, respectively, under the Credit Agreement; $134,440 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 current conversion rate of the 2017 Notes is 69.3811 shares of Griffon’s common stock per $1 principal amount of notes, corresponding to a conversion price of $14.41 per share. 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;

43

Table of Contents

(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 31, 2015, the above conversion price reflects dividends paid through March 26, 2015. At both March 31, 2015 and 2014, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720. The fair value of the 2017 Notes approximated $129,813 on March 31, 2015 based upon quoted market prices (level 1 inputs).

On October 21, 2013, Griffon refinanced two real estate mortgages to secure loans totaling $17,175. The loans mature in October 2018, are collateralized by the related properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 2.75%. At March 31, 2015, $15,454 was outstanding, net of issuance costs.

In December 2013, Griffon’s ESOP entered into an agreement that refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098 (the "Agreement"). The Agreement also provided for a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market. In July 2014, Griffon's ESOP entered into an amendment to the existing Agreement which provided an additional $10,000 Line Note available to purchase shares in the open market. During 2014, the Line Notes were combined with the Term Loan to form one new Term Loan. The Term Loan bears interest at LIBOR plus 2.38% or the lender’s prime rate, at Griffon’s option. The Term Loan requires quarterly principal payments of $551, with a balloon payment of approximately $30,137 due at maturity on December 31, 2018. During 2014, 1,591,117 shares of Griffon common stock, for a total of $20,000 or $12.57 per share, were purchased with proceeds from the Line Notes. As of March 31, 2015, $37,588, net of issuance costs, was outstanding under the Term Loan. The Term Loan is secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of Griffon assets (which lien ranks pari passu with the lien granted on such assets under the Credit Agreement) and is guaranteed by Griffon.

In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon. At March 31, 2015, $7,875 was outstanding.

In November 2010, Clopay Europe GmbH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The term loan was paid off in December 2013 and the revolver had no borrowings outstanding at March 31, 2015. The revolving facility matures in November 2015 and is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 2.20% per annum (2.28% at March 31, 2015). 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.
Clopay do Brazil maintains lines of credit of $4,000. Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% (18.60% at March 31, 2015). At March 31, 2015 there was $2,200 borrowed under the lines. Clopay Plastic Products Company, Inc. guarantees the loan and lines.
In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 revolving credit facility.  The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.54% LIBOR USD and 2.45% Bankers Acceptance Rate CDN as of March 31, 2015). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity.  At March 31, 2015, there was $2,291 borrowed under the revolving credit facility with CAD $12,110 available.

In December 2013 and May 2014, Northcote Holdings Pty Ltd entered into two unsecured term loans in the outstanding amounts of AUD $12,500 and AUD $20,000, respectively. The AUD $12,500 term loan requires quarterly interest payments with principal due upon maturity in December 2016. The AUD $20,000 term loan requires quarterly principal payments of AUD $625 beginning in August 2015, with a balloon payment due upon maturity in May 2017. The loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.16% at March 31, 2015 for each loan). As of March 31, 2015, Northcote had an outstanding combined balance of $25,079, net of issuance costs, on the term loans.

Subsidiaries of Northcote Holdings Pty Ltd also maintain two lines of credit of AUD $3,000 and AUD $5,000 which accrue interest at BBSY plus 2.25% per annum (4.61% at March 31, 2015) and 2.50% per annum (4.86% at December 31, 2014), respectively. At March 31, 2015, there were no outstanding borrowings under the lines. Griffon guarantees the term loans and the AUD $3,000 line of credit; the assets of a subsidiary of Northcote Holdings Pty Ltd secures the AUD $5,000 line of credit.

At March 31, 2015, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

In each of May 2014 and March 2015, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under both programs, the Company may, from time to time, purchase shares of its common stock in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended March 31, 2015, Griffon purchased 1,581,200 shares of common stock under the May 2014 program, for a total of $24,212 or $15.31 per share. During the six month period ended March 31, 2015, Griffon purchased 2,606,241 shares of common stock under the May 2014 program, for a total of $36,498 or $14.00 per share.

44

Table of Contents


The December 10, 2013 repurchase of 4,444,444 shares from GS Direct for $50,000 was effected in a private transaction at a per share price of $11.25, an approximate 9.2% discount to the stock’s closing price on November 12, 2013, the day before announcement of the transaction. This transaction was exclusive of the Company’s authorized share repurchase programs. After closing the transaction, GS Direct continued to hold approximately 5.56 million shares (approximately 10% of the shares outstanding at such time) of Griffon’s common stock. Subject to certain exceptions, if GS Direct intends to sell its remaining shares of Griffon common stock at any time prior to December 31, 2015, it will first negotiate in good faith to sell such shares to the Company.

From August 2011 to March 31, 2015, Griffon repurchased 14,045,547 shares of common stock, for a total of $158,695 or $11.30 per share, inclusive of the December 10, 2013 repurchase of 4,444,444 shares of its common stock for $50,000 from GS Direct. As of March 31, 2015, $52,362 remains under existing Board authorizations.

On November 17, 2011, the Company began declaring quarterly cash dividends. During 2014, the Company declared and paid dividends totaling $0.12 per share. During the six months ended March 31, 2015, the Board of Directors approved two quarterly cash dividends of $0.04 per share. The Company currently intends to pay dividends each quarter; however, payment of dividends is determined by the Board of Directors at its discretion based on various factors, and no assurance can be provided as to the payment of future dividends.

On April 30, 2015, the Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on June 25, 2015 to shareholders of record as of the close of business on May 22, 2015.

During the six months ended March 31, 2015 and 2014, Griffon used cash for discontinued operations of $545 and $640, respectively, primarily related to settling remaining Installation Services liabilities and environmental costs.
 
CRITICAL ACCOUNTING POLICIES

The preparation of Griffon’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on assets, liabilities, revenue and expenses. These estimates can also affect supplemental information contained in public disclosures of Griffon, including information regarding contingencies, risk and its financial condition. These estimates, assumptions and judgments are evaluated on an ongoing basis and based on historical experience, current conditions and various other assumptions, and form the basis for estimating the carrying values of assets and liabilities, as well as identifying and assessing the accounting treatment for commitments and contingencies. Actual results may materially differ from these estimates. There have been no changes in Griffon’s critical accounting policies from September 30, 2014.

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, 2014. 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.


45

Table of Contents

FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, especially “Management’s Discussion and Analysis”, contains certain “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon Corporation (the “Company” or “Griffon”) operates and the United States and global economies. Statements in this Form 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” “may,” “will,” “estimates,” “intends,” “explores,” “opportunities,” the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; Griffon’s ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon’s operating companies; the ability of Griffon’s operating companies to expand into new geographic and product markets and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon’s Telephonics Corporation supplies products, including as a result of sequestration at such time as the budgetary cuts mandated by sequestration begin to take effect; the ability of the federal government to fund and conduct its operations; increases in the cost of raw materials such as resin and steel; changes in customer demand or loss of a material customer at one of Griffon’s operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon’s businesses; political events that could impact the worldwide economy; a downgrade in Griffon’s credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon’s businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon’s businesses, which impacts margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon’s ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain of Griffon’s operating companies; and possible terrorist threats and actions and their impact on the global economy. 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, 2014. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Item 3 - Quantitative and Qualitative Disclosure About Market Risk
 
Griffon’s business’ activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency rates and commodity prices.
 
Interest Rates
 
Griffon’s exposure to market risk for changes in interest rates relates primarily to variable interest rate debt and investments in cash and equivalents.
 
The revolving credit facility and certain other of Griffon’s credit facilities have a LIBOR-based variable interest rate. Due to the current and expected level of borrowings under these facilities, a 100 basis point change in LIBOR would not have a material impact on Griffon’s results of operations or liquidity.

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

46

Table of Contents

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.
 
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.
 

47

Table of Contents

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, 2014, 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

(a)    Recent sales of unregistered securities
On January 14, 2015, Griffon sold 21,699 shares of common stock to AMES management for an aggregate of $285 in a private offering pursuant to the exemption provided for in Section 4(2) of, and Regulation D promulgated pursuant to, the Securities Act of 1933.

(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 (1)
 
(d) Maximum Number (or
Approximate Dollar
Value) of Shares (or Units)
That May Yet Be
Purchased Under the
Plans or Programs(1)
January 1 - 31, 2015
547,626

(2)
 
$
13.46

 
533,000

 
 

February 1 - 28, 2015
398,200

 
 
15.64

 
398,200

 
 

March 1 - 31, 2015
650,000

 
 
16.63

 
650,000

 
 

Total
1,595,826

 
 
$
15.31

 
1,581,200

 
$
52,362


1.
On each of May 1, 2014 and March 31, 2015, the Company’s Board of Directors authorized the repurchase of up to $50,000 of Griffon common stock; as of March 31, 2015, an aggregate of $52,362 remained available for the purchase of Griffon common stock under the May 1, 2014 and March 31, 2015 $50,000 Board authorized repurchase programs.
2.
Includes (a) 533,000 shares purchased by the Company in open market purchases pursuant to a stock buyback plan authorized by the Company's Board of Directors and (b) 14,626 shares acquired by the Company from holders of restricted stock upon vesting of the restricted stock, to satisfy tax-withholding obligations of the holders.

 
Item 3    Defaults Upon Senior Securities
None

Item 4    Mine Safety Disclosures
None


48



Item 5    Other Information
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On April 30, 2015, Louis J. Grabowsky was elected to serve on Griffon’s Board of Directors, and entered into a customary indemnification agreement with Griffin which provides that Griffon will indemnify Mr. Grabowsky to the fullest extent permitted by applicable law, and which includes provisions relating to the advancement of expenses incurred by or on behalf of Mr. Grabowsky. This indemnification agreement is in the same form as the indemnification agreement entered into between Griffon and each of its other directors and each of its executive officers; the form of the indemnification agreement is filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
 
Mr. Grabowsky will receive compensation for his services pursuant to our director compensation program. This program is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. Pursuant to our director compensation program, Mr. Grabowsky received a grant of 3,700 restricted shares of Griffon common stock at the time of his election to the Board, which grant vests at the rate of one-third a year for three years.

Item 6
Exhibits
 
 
10.1
Letter Agreement, dated January 28, 2015, between Griffon Corporation and Harvey R. Blau.
 
 
10.2
Director Compensation Program, amended and restated as of January 29, 2015.
 
 
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 Presentations 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”.


49

Table of Contents

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
 
 
Vice President, Controller and Chief Accounting Officer
 
(Principal Accounting Officer)
 
 
Date: April 30, 2015


50

Table of Contents

EXHIBIT INDEX
 
10.1
Letter Agreement, dated January 28, 2015, between Griffon Corporation and Harvey R. Blau.
 
 
10.2
Director Compensation Program, amended and restated as of January 29, 2015.
 
 
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 Presentations 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”.

51