Edgar Filing: GRIFFON CORP

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

FORM 10-Q


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

For the quarterly period ended March 31, 2012


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 incorporation or organization)		(I.R.S. Employer Identification No.)

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

(212) 957-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

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


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
(Do not check if a smaller reporting company)

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

APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 61,820,463 shares of Common Stock as of April 30, 2012.

Griffon Corporation and Subsidiaries

Contents


	Page

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets at March 31, 2012 (unaudited) and September 30, 2011	1

Condensed Consolidated Statement of Shareholders’ Equity for the Six Months Ended March 31, 2012 (unaudited)	1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2012 and 2011 (unaudited)	2

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2012 and 2011 (unaudited)	3

Notes to Condensed Consolidated Financial Statements	4

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	36

Item 4 - Controls & Procedures	36

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings	37

Item 1A – Risk Factors	37

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3 – Defaults upon Senior Securities	37

Item 4 – Mine Safety Disclosures	37

Item 5 – Other Information	37

Item 6 – Exhibits	37

Signatures	39

Exhibit Index	40

Part I – Financial Information
Item 1 – Financial Statements

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


	(Unaudited) At March 31, 2012		At September 30, 2011


CURRENT ASSETS
Cash and equivalents	$	164,879	$	243,029
Accounts receivable, net of allowances of $5,598 and $6,072		289,834		267,471
Contract costs and recognized income not yet billed, net of progress payments of $3,834 and $9,697		66,966		74,737
Inventories, net		285,542		263,809
Prepaid and other current assets		46,458		48,828
Assets of discontinued operations		1,312		1,381

Total Current Assets		854,991		899,255
PROPERTY, PLANT AND EQUIPMENT, net		361,456		350,050
GOODWILL		362,931		357,888
INTANGIBLE ASSETS, net		234,591		223,189
OTHER ASSETS		32,261		31,197
ASSETS OF DISCONTINUED OPERATIONS		3,050		3,675

Total Assets	$	1,849,280	$	1,865,254

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	16,255	$	25,164
Accounts payable		174,989		186,290
Accrued liabilities		96,045		99,631
Liabilities of discontinued operations		3,334		3,794

Total Current Liabilities		290,623		314,879
LONG-TERM DEBT, net of debt discount of $18,183 and $19,693		689,011		688,247
OTHER LIABILITIES		201,493		204,434
LIABILITIES OF DISCONTINUED OPERATIONS		4,788		5,786

Total Liabilities		1,185,915		1,213,346
COMMITMENTS AND CONTINGENCIES - See Note 19
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity		663,365		651,908

Total Liabilities and Shareholders’ Equity	$	1,849,280	$	1,865,254

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


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

Balance at 9/30/2011		76,184	$	19,046	$	471,928		$	424,153			14,434	$	(231,699	)	$	(7,724	)	$	(23,796	)	$	651,908
Net income		—		—		—			4,513			—		—			—			—			4,513
Dividend		—		—		—			(2,374	)		—		—			—			—			(2,374	)
Tax effect from exercise/vesting of equity awards, net		—		—		(219	)		—			—		—			—			—			(219	)
Amortization of deferred compensation		—		—		—			—			—		—			—			887			887
Common stock acquired		—		—		—			—			283		(2,350	)		—			—			(2,350	)
Restricted stock awards granted, net		353		88		(88	)		—			—		—			—			—			—
ESOP allocation of common stock		—		—		4			—			—		—			—			—			4
Stock-based compensation		—		—		4,908			—			—		—			—			—			4,908
Translation of foreign financial statements		—		—		—			—			—		—			5,048			—			5,048
Pension OCI, net of tax		—		—		—			—			—		—			1,040			—			1,040

Balance at 3/31/2012		76,537	$	19,134	$	476,533		$	426,292			14,717	$	(234,049	)	$	(1,636	)	$	(22,909	)	$	663,365

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

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


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

	2012			2011			2012			2011

Revenue	$	482,431		$	476,129		$	933,462		$	890,531
Cost of goods and services		379,630			374,986			727,953			701,529

Gross profit		102,801			101,143			205,509			189,002

Selling, general and administrative expenses		86,152			84,363			169,219			164,808
Restructuring and other related charges		—			1,212			1,795			2,605

Total operating expenses		86,152			85,575			171,014			167,413

Income from operations		16,649			15,568			34,495			21,589

Other income (expense)
Interest expense		(13,005	)		(11,319	)		(26,068	)		(22,542	)
Interest income		86			97			149			166
Loss from debt extinguishment, net		—			(26,164	)		—			(26,164	)
Other, net		1,029			1,177			1,076			3,262

Total other income (expense)		(11,890	)		(36,209	)		(24,843	)		(45,278	)


Income (loss) before taxes		4,759			(20,641	)		9,652			(23,689	)
Provision (benefit) for income taxes		2,732			(6,640	)		5,139			(8,008	)

Net income (loss)	$	2,027		$	(14,001	)	$	4,513		$	(15,681	)



Basic earnings (loss) per common share	$	0.04		$	(0.24	)	$	0.08		$	(0.26	)


Weighted-average shares outstanding		56,037			59,280			56,031			59,277


Diluted earnings (loss) per common share	$	0.04		$	(0.24	)	$	0.08		$	(0.26	)


Weighted-average shares outstanding		57,380			59,280			57,228			59,277

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

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


	Six Months Ended March 31,

	2012			2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	4,513		$	(15,681	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		31,836			29,378
Fair value write-up of acquired inventory sold		—			15,152
Stock-based compensation		4,908			4,647
Provision for losses on accounts receivable		611			709
Amortization/write-off of deferred financing costs and debt discounts		3,021			3,677
Loss from debt extinguishment, net		—			26,164
Deferred income taxes		(807	)		(2,539	)
(Gain) loss on sale/disposal of assets		29			(380	)
Change in assets and liabilities, net of assets and liabilities acquired:
Increase in accounts receivable and contract costs and recognized income not yet billed		(14,648	)		(37,789	)
Increase in inventories		(17,003	)		(14,705	)
Decrease in prepaid and other assets		905			2,575
Decrease in accounts payable, accrued liabilities and income taxes payable		(19,482	)		(44,114	)
Other changes, net		3,909			(2,793	)

Net cash used in operating activities		(2,208	)		(35,699	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment		(40,205	)		(41,737	)
Acquired business, net of cash acquired		(22,432	)		(855	)
Change in funds restricted for capital projects		—			3,875
Change in equipment lease deposits		—			(351	)
Proceeds from sale of assets		195			1,333

Net cash used in investing activities		(62,442	)		(37,735	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend		(2,374	)		—
Purchase of shares for treasury		(2,350	)		—
Proceeds from issuance of long-term debt		4,000			637,737
Payments of long-term debt		(10,398	)		(498,771	)
Change in short-term borrowings		(3,331	)		2,022
Financing costs		(4	)		(21,239	)
Purchase of ESOP shares		—			(8,310	)
Exercise of stock options		—			20
Tax effect from exercise/vesting of equity awards, net		834			23
Other, net		(29	)		(94	)

Net cash provided by (used in) financing activities		(13,652	)		111,388
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities		(764	)		(561	)

Net cash used in discontinued operations		(764	)		(561	)

Effect of exchange rate changes on cash and equivalents		916			1,142

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS		(78,150	)		38,535
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		243,029			169,802

CASH AND EQUIVALENTS AT END OF PERIOD	$	164,879		$	208,337

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

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

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

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

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

Griffon currently conducts its operations through three segments:


•	Home & Building Products (“HBP”) consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building Products (“CBP”):

	-	ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.

	-	CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.

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

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2011, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal and the results of any interim period are not necessarily indicative of the results for the full year.

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

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

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

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

NOTE 2 – FAIR VALUE MEASUREMENTS

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

The fair values of Griffon’s 2018 senior notes, 2017 and 2023 4% convertible notes approximated $568,000, $100,000 and $532, respectively, on March 31, 2012. Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with a value of $4,309 and trading securities with a value of $409 at March 31, 2012 are measured and recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

At March 31, 2012, Griffon had $1,750 of Australian dollar contracts at a weighted average rate of $0.96. The contracts, which protect Australia operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting. A fair value gain (loss) of $(4) and $41 was recorded in other assets and to other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the three and six months ended March 31, 2012, respectively. The contracts expire in 30 to 90 days.

NOTE 3 – ACQUISITION

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

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

The following table summarizes the fair values of the assets acquired as of the date of the acquisition and the amounts assigned to goodwill and intangible asset classifications:


Inventory	$	3,673
PP&E		416
Goodwill		4,655
Intangibles		13,688

Total assets acquired	$	22,432

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


			Amortization Period (Years)

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

	$	18,343

NOTE 4 – INVENTORIES

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


	At March 31, 2012		At September 30, 2011

Raw materials and supplies	$	75,715	$	76,563
Work in process		71,349		66,585
Finished goods		138,478		120,661

Total	$	285,542	$	263,809

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment were comprised of the following:


	At March 31, 2012			At September 30, 2011

Land, building and building improvements	$	126,930		$	126,340
Machinery and equipment		609,162			571,414
Leasehold improvements		32,715			32,867

		768,807			730,621
Accumulated depreciation and amortization		(407,351	)		(380,571	)

Total	$	361,456		$	350,050

Depreciation and amortization expense for property, plant and equipment was $14,282 and $13,645 for the quarters ended March 31, 2012 and 2011, respectively, and $27,771 and $25,460 for the six months ended March 31, 2012 and 2011, respectively.

No event or indicator of impairment occurred during the three and six months ended March 31, 2012, which would require additional impairment testing of property, plant and equipment.

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides the changes in carrying value of goodwill by segment during the six months ended March 31, 2012.


	At September 30, 2011		Goodwill from 2012 acquisitions		Other adjustments including currency translations		At March 31, 2012

Home & Building Products	$	265,147	$	4,655	$	—	$	269,802
Telephonics		18,545		—		—		18,545
Plastics		74,196		—		388		74,584

Total	$	357,888	$	4,655	$	388	$	362,931

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


	At March 31, 2012						At September 30, 2011

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


Customer relationships	$	167,906	$	17,738		25	$	155,602	$	13,862
Unpatented technology		6,734		2,042		11		6,534		1,749

Total amortizable intangible assets		174,640		19,780				162,136		15,611
Trademarks		79,731		—				76,664		—

Total intangible assets	$	254,371	$	19,780			$	238,800	$	15,611

Amortization expense for intangible assets subject to amortization was $2,038 and $1,908 for the quarters ended March 31, 2012 and 2011, respectively, and $4,065 and $3,918 for the six months ended March 31, 2012 and 2011, respectively. The amortizable intangibles acquired in the Southern Patio acquisition will increase amortization in 2012 and forward by approximately $440 per year.

During the quarter, there were changes in management at both Plastics and Telephonics. Management performed a qualitative assessment as to whether these changes affected these reporting units’ carrying value and concluded that it was more likely than not that the fair value of the units continue to be greater than their respective carrying values.

NOTE 7 – INCOME TAXES

The tax rate for the quarter ended March 31, 2012 was a provision of 57.4 %, compared to a 32.2% benefit in the prior year quarter. The prior year benefit arose on the pretax loss for the quarter, which arose mainly in connection with the debt refinancing, completed in March 2011. The current year rate reflects the impact of permanent differences that are not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and a change in earnings mix. There were no discrete period items in the current quarter.

The tax rate for the six months ended March 31, 2012 was a provision of 53.2%, compared to a 33.8% benefit in 2011. The prior year benefit arose on the pretax loss. The 2012 rate reflects the impact of permanent differences, mainly limited deductibility of restricted stock, tax reserves and a change in earnings mix; the 2011 rate benefited $241 primarily from the retroactively extended research tax credit signed into law on December 22, 2010. There were no discrete items in the current period.

NOTE 8 – LONG-TERM DEBT


		At March 31, 2012														At September 30, 2011

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

Senior notes due 2018	(a)	$	550,000		$	—		$	550,000		$	10,249		7.125	%	$	550,000		$	—		$	550,000		$	11,337		7.125	%
Revolver due 2016	(a)		—			—			—			2,574		n/a			—			—			—			2,937		n/a
Convert. debt due 2017	(b)		100,000			(18,183	)		81,817			2,253		4.000	%		100,000			(19,693	)		80,307			2,474		4.000	%
Real estate mortgages	(c)		14,469			—			14,469			336		n/a			18,233			—			18,233			379		n/a
ESOP Loans	(d)		23,536			—			23,536			21		n/a			24,348			—			24,348			17		n/a
Capital lease - real estate	(e)		10,901			—			10,901			251		5.000	%		11,341			—			11,341			257		5.000	%
Convert. debt due 2023	(f)		532			—			532			—		4.000	%		532			—			532			—		4.000	%
Term loan due 2013	(g)		18,679			—			18,679			173		n/a			24,096			—			24,096			201		n/a
Revolver due 2012	(g)		—			—			—			—		n/a			—			—			—			33		n/a
Foreign line of credit	(g)		588			—			588			—		n/a			3,780			—			3,780			—		n/a
Foreign term loan	(g)		4,000			—			4,000			—		n/a			—			—			—			—		n/a
Other long term debt	(j)		744			—			744			—					774			—			774			—

Totals			723,449			(18,183	)		705,266		$	15,857					733,104			(19,693	)		713,411		$	17,635

less: Current portion			(16,255	)		—			(16,255	)							(25,164	)		—			(25,164	)

Long-term debt		$	707,194		$	(18,183	)	$	689,011							$	707,940		$	(19,693	)	$	688,247


		Three Months Ended March 31, 2012													Three Months Ended March 31, 2011

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

Senior notes due 2018	(a)		7.4	%	$	9,797		$	—	$	399	$	10,196			7.5	%	$	1,633		$	—	$	68	$	1,701
Revolver due 2016	(a)		n/a			—			—		156		156			n/a			—			—		23		23
Convert. debt due 2017	(b)		9.2	%		1,000			766		111		1,877			9.2	%		1,000			703		111		1,814
Real estate mortgages	(c)		5.6	%		144			—		22		166			5.6	%		213			—		19		232
ESOP Loans	(d)		3.0	%		176			—		1		177			2.6	%		24			—		17		41
Capital lease - real estate	(e)		5.3	%		138			—		6		144			5.2	%		147			—		6		153
Convert. debt due 2023	(f)		4.0	%		5			—		—		5			4.0	%		5			—		—		5
Term loan due 2013	(g)		6.0	%		245			—		55		300			n/a			—			—		70		70
Revolver due 2012	(g)		n/a			40			—		—		40			n/a			10			—		39		49
Foreign line of credit	(g)		9.1	%		54			—		—		54			3.8	%		8			—		—		8
Foreign term loan	(g)		10.0	%		50			—		—		50			n/a			—			—		—		—
Term loan due 2016	(h)		n/a			—			—		—		—			8.5	%		6,002			263		300		6,565
Asset based lending	(h)		n/a			—			—		—		—			4.9	%		586			26		157		769
Revolver due 2013	(i)		n/a			—			—		—		—			n/a			49			—		31		80
Other long term debt	(j)					356			—		—		356						5			—		—		5
Capitalized interest						(516	)		—		—		(516	)					(196	)		—		—		(196	)

Totals					$	11,489		$	766	$	750	$	13,005					$	9,486		$	992	$	841	$	11,319


		Six Months Ended March 31, 2012													Six Months Ended March 31, 2011

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

Senior notes due 2018	(a)		7.4	%	$	19,594		$	—	$	811	$	20,405			7.5	%	$	1,633		$	—	$	68	$	1,701
Revolver due 2016	(a)		n/a			—			—		309		309			n/a			—			—		23		23
Convert. debt due 2017	(b)		9.1	%		2,000			1,510		222		3,732			9.3	%		2,000			1,386		222		3,608
Real estate mortgages	(c)		5.6	%		294			—		43		337			5.6	%		344			—		28		372
ESOP Loans	(d)		3.0	%		355			—		2		357			2.6	%		47			—		33		80
Capital lease - real estate	(e)		5.3	%		280			—		13		293			5.4	%		309			—		13		322
Convert. debt due 2023	(f)		4.0	%		11			—		—		11			4.0	%		11			—		—		11
Term loan due 2013	(g)		6.1	%		527			—		77		604			n/a			—			—		70		70
Revolver due 2012	(g)		n/a			61			—		34		95			n/a			11			—		39		50
Foreign line of credit	(g)		9.1	%		156			—		—		156			3.8	%		8			—		—		8
Foreign term loan	(g)		10.0	%		50			—		—		50			n/a			—			—		—		—
Term loan due 2016	(h)		n/a			—			—		—		—			9.5	%		13,498			572		745		14,815
Asset based loan	(h)		n/a			—			—		—		—			6.2	%		1,076			58		341		1,475
Revolver due 2013	(i)		n/a			—			—		—		—			n/a			159			—		79		238
Other long term debt	(j)					686			—		—		686						12			—		—		12
Capitalized interest						(967	)		—		—		(967	)					(243	)		—		—		(243	)

Totals					$	23,047		$	1,510	$	1,511	$	26,068					$	18,865		$	2,016	$	1,661	$	22,542


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

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

		On March 18, 2011, Griffon entered into a five-year $200,000 Revolving Credit Facility (“Credit Agreement”), which includes a letter of credit sub-facility with a limit of $50,000, a multi-currency sub-facility of $50,000 and a swingline sub-facility with a limit of $30,000. Borrowings under the Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the occurrence of a default or event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate plus an applicable margin, which will adjust based on financial performance. The margins are 1.75% for base rate loans and 2.75% for LIBOR loans, in each case without a floor. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio as well as customary affirmative and negative covenants and events of default. The Credit Agreement also includes certain restrictions, such as limitations on the incurrence of indebtedness and liens and the making of restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by certain domestic subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the guarantors.

		At March 31, 2012, there were $19,523 of standby letters of credit outstanding under the Credit Agreement; $180,477 was available for borrowing at that date.


	(b)	On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The initial conversion rate of the 2017 Notes was 67.0799 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of $14.91 per share, a 23% conversion premium over the $12.12 closing price on December 15, 2009. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion, (ii) the 42nd trading day prior to maturity of the notes, and (iii) such time as the cumulative adjustment equals or exceeds 1%. As of June 26, 2012, aggregate dividends of $0.06 per share would result in a cumulative change in the conversion rate of approximately 0.6%. Griffon used 8.75% as the nonconvertible debt-borrowing rate to discount the 2017 Notes and will amortize the debt discount through January 2017. At issuance, the debt component of the 2017 Notes was $75,437 and debt discount was $24,563. At March 31, 2012 and September 30, 2011, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.

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

		Griffon has other real estate mortgages, collateralized by real property, which bear interest at 6.3% and mature in 2016. On October 3, 2011, the mortgage at Russia, Ohio was paid in full, on maturity.

	(d)	Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of Griffon common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus 2.5% or b) the lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an option to convert the outstanding loan to a five-year term loan; principal is payable in quarterly installments of $250, beginning December 2011, with a balloon payment of $15,223 due at maturity (November 2016). The loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At March 31, 2012, $19,473 was outstanding.

		In addition, the ESOP has a loan agreement, guaranteed by Griffon, which requires quarterly principal payments of $156 and interest through the expiration date of September 2012 at which time the $3,900 balance of the loan, and any outstanding interest, will be payable. The primary purpose of this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. The loan bears interest at rates based upon the prime rate or LIBOR. At March 31, 2012, $4,063 was outstanding. Griffon is in process of extending the loan.

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

	(f)	At March 31, 2012 and September 30, 2011, Griffon had $532 of 4% convertible subordinated notes due 2023 (the “2023 Notes”) outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2013 and 2018, if Griffon’s common stock price is below the conversion price of the 2023 Notes, as well as upon a change in control. An adjustment to the conversion rate will be required as the result of payment of a cash dividend only if such adjustment would be greater than 1% (or at such time as the cumulative impact on the conversion rate reaches 1% in the aggregate). As of June 26, 2012, aggregate dividends of $0.06 per share would result in a cumulative change in the conversion rate of approximately 0.6%. At March 31, 2012 and September 30, 2011, the 2023 Notes had no capital in excess of par value component as substantially all of these notes were put to Griffon at par and settled in July 2010.

	(g)	In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The facility accrues interest at Euribor plus 2.35% per annum, and the term loan accrues interest at Euribor plus 2.45% per annum. The revolving facility matures in November 2012, but is renewable upon mutual agreement with the bank. In July 2011, the full €20,000 was drawn on the Term Loan, with a portion of the proceeds used to repay borrowings under the revolving credit facility. The term loan is payable in ten equal quarterly installments which began in September 2011, with maturity in December 2013.


		Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA. There were no borrowings outstanding under the revolving facility at March 31, 2012, with €10,000 available for borrowing.

		In February 2012, Clopay do Brazil, a subsidiary of Plastics, borrowed $4,000 at a rate of 104.5% of Brazilian CDI. The loan was used to refinance existing loans and is collateralized by accounts receivable and a 50% guaranty by Plastics. Starting in August 2012, the loan is to be repaid in four equal, semi-annual installments. Clopay do Brazil also maintains a line of credit of approximately $1,900. Interest on borrowings accrue at a rate of Brazilian CDI plus 6.0%. At March 31, 2012 there was approximately $588 borrowed under the line.

	(h)	In connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. (“Clopay Ames”), a subsidiary of Griffon, entered into the $375,000 secured term Loan (“Term Loan”) and a $125,000 asset based lending agreement (“ABL”).

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

		On March 17, 2011, the Term Loan and swap were terminated, and on March 18, 2011, the ABL was terminated, in connection with the issuance of the Senior Notes and Credit Agreement.

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

	(j)	Includes capital leases.

At March 31, 2012, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

During the second quarter of 2011, in connection with the termination of the Term Loan, ABL and Telephonics credit agreement, Griffon recorded a $26,164 loss on extinguishment of debt consisting of $21,617 of deferred financing charges and original issuer discounts, a call premium of $3,703 on the Term Loan, and $844 of swap and other breakage costs.

NOTE 9 — SHAREHOLDERS’ EQUITY

During the first and second quarters of 2012, the Board of Directors approved two quarterly cash dividends of $0.02 per common share, which were paid on December 27, 2011 and March 27, 2012, to holders of common stock as of close of business on November 29, 2011 and February 28, 2012, respectively. $1,190 and $2,374 was recorded to retained earnings for the dividend for the three and six months ended March 31, 2012, respectively. Dividends paid on allocated shares in the ESOP were used to pay down the ESOP loan and were recorded as a reduction in expense. A dividend payable was established for the holders of restricted shares; such payable will be released upon vesting of the underlying restricted shares.

On May 8, 2012, the Board of Directors declared a third quarterly cash dividend of $0.02 per share, payable on June 26, 2012 to shareholders of record as of the close of business on May 29, 2012.

Griffon expenses the fair value of equity compensation grants over the related vesting period. Compensation cost related to stock-based awards with graded vesting are amortized using the straight-line attribution method.

In February 2011, shareholders approved the Griffon Corporation 2011 Equity Incentive Plan (“Incentive Plan”) under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, deferred shares and other stock-based awards may be granted. Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, generally expire ten years after the date of grant and are granted at an exercise price of not less than 100% of the fair market value at the date of grant. The maximum number of shares of common stock available for award under the Incentive Plan is 3,000,000 (600,000 of which may be issued as incentive stock options) plus any shares underlying awards outstanding on the effective date of the Incentive Plan under the 2006 Incentive Plan that are subsequently cancelled or forfeited. As of March 31, 2012, 1,766,509 shares were available for grant.

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

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

During the second quarter of 2012, Griffon granted 110,000 restricted shares, 82,500 of which are three-year cliff vesting and 27,500 of which vest equally over 3 years; 75,000 of the 110,000 shares are subject to certain performance conditions. The total fair value of these grants is $1,119, or a weighted average fair value of $9.83 per share.

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

For the three and six months ended March 31, 2012, stock based compensation expense totaled $2,651 and $4,908, respectively. For the three and six months ended March 31, 2011, stock based compensation expense totaled $2,624 and $4,647, respectively.

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

NOTE 10 – EARNINGS PER SHARE (EPS)

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

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


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

	2012		2011		2012		2011

Weighted average shares outstanding - basic		56,037		59,280		56,031		59,277
Incremental shares from stock based compensation		1,343		—		1,197		—

Weighted average shares outstanding - diluted		57,380		59,280		57,228		59,277


Anti-dilutive options excluded from diluted EPS computation		989		1,050		1,202		988
Anti-dilutive restricted stock excluded from diluted EPS computation		—		—		—		2

Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash, as such, the potential issuance of shares related to the principal amount of the 2017 Notes does not affect diluted shares.

NOTE 11 – BUSINESS SEGMENTS

Griffon’s reportable business segments are as follows:


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

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

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

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


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

	2012		2011		2012		2011

REVENUE
Home & Building Products:
ATT	$	133,321	$	145,644	$	232,061	$	239,841
CBP		91,269		86,675		202,915		190,741

Home & Building Products		224,590		232,319		434,976		430,582
Telephonics		113,992		113,525		218,506		211,804
Plastics		143,849		130,285		279,980		248,145

Total consolidated net sales	$	482,431	$	476,129	$	933,462	$	890,531


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

	2012			2011			2012			2011

INCOME (LOSS) BEFORE TAXES
Segment operating profit (loss):
Home & Building Products	$	8,096		$	6,931		$	17,930		$	5,308
Telephonics		13,543			11,225			26,056			21,918
Plastics		2,492			5,170			4,372			9,312

Total segment operating profit		24,131			23,326			48,358			36,538
Unallocated amounts		(6,453	)		(6,581	)		(12,787	)		(11,687	)
Loss from debt extinguishment, net		—			(26,164	)		—			(26,164	)
Net interest expense		(12,919	)		(11,222	)		(25,919	)		(22,376	)

Income (loss) before taxes	$	4,759		$	(20,641	)	$	9,652		$	(23,689	)


Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs:
Home & Building Products	$	15,853		$	19,619		$	33,603		$	37,153
Telephonics		15,336			12,929			31,024			25,335
Plastics		9,164			11,231			17,344			21,017

Total Segment profit before depreciation, amortization, restructuring, fair value write-up of acquired inventory sold and acquisition costs		40,353			43,779			81,971			83,505
Unallocated amounts, less acquisition costs		(6,453	)		(6,581	)		(12,787	)		(11,687	)
Loss from debt extinguishment, net		—			(26,164	)		—			(26,164	)
Net interest expense		(12,919	)		(11,222	)		(25,919	)		(22,376	)
Segment depreciation and amortization		(16,222	)		(15,453	)		(31,640	)		(29,210	)
Restructuring charges		—			(1,212	)		(1,795	)		(2,605	)
Fair value write-up of acquired inventory sold		—			(3,788	)		—			(15,152	)
Acquisition costs		—			—			(178	)		—

Income (loss) before taxes	$	4,759		$	(20,641	)	$	9,652		$	(23,689	)

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,

	2012		2011		2012		2011

DEPRECIATION and AMORTIZATION
Segment:
Home & Building Products	$	7,757	$	7,688	$	15,222	$	14,088
Telephonics		1,793		1,704		3,446		3,417
Plastics		6,672		6,061		12,972		11,705

Total segment depreciation and amortization		16,222		15,453		31,640		29,210
Corporate		99		100		196		168

Total consolidated depreciation and amortization	$	16,321	$	15,553	$	31,836	$	29,378

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	8,305	$	7,335	$	14,573	$	13,775
Telephonics		2,554		1,333		3,784		2,138
Plastics		9,446		14,996		21,774		25,616

Total segment		20,305		23,664		40,131		41,529
Corporate		8		143		74		208

Total consolidated capital expenditures	$	20,313	$	23,807	$	40,205	$	41,737


	At March 31, 2012		At September 30, 2011

ASSETS
Segment assets:
Home & Building Products	$	1,005,209	$	972,714
Telephonics		254,574		288,968
Plastics		436,314		450,452

Total segment assets		1,696,097		1,712,134
Corporate		148,821		148,064

Total continuing assets		1,844,918		1,860,198
Assets of discontinued operations		4,362		5,056

Consolidated total	$	1,849,280	$	1,865,254

NOTE 12 – COMPREHENSIVE INCOME

Comprehensive income was as follows:


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

	2012		2011			2012		2011

Net income (loss)	$	2,027	$	(14,001	)	$	4,513	$	(15,681	)

Change in fair value of interest rate swap, net of tax		—		48			—		—
Foreign currency translation adjustment		9,620		16,911			5,048		16,466
Pension other comprehensive income amortization, net of tax		523		426			1,040		851

Comprehensive income	$	12,170	$	3,384		$	10,601	$	1,636

NOTE 13 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was as follows:


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

	2012			2011			2012			2011

Service cost	$	51		$	88		$	123		$	174
Interest cost		2,666			2,792			5,568			5,578
Expected return on plan assets		(2,930	)		(2,843	)		(5,732	)		(5,681	)
Amortization:
Prior service cost		84			84			168			168
Recognized actuarial loss		718			571			1,293			1,142

Net periodic expense	$	589		$	692		$	1,420		$	1,381

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

NOTE 14 – RECENT ACCOUNTING PRONOUNCEMENTS

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

NOTE 15 – DISCONTINUED OPERATIONS

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


	At March 31, 2012				At September 30, 2011

	Current		Long-term		Current		Long-term

Assets of discontinued operations:
Prepaid and other current assets	$	1,312	$	—	$	1,381	$	—
Other long-term assets		—		3,050		—		3,675

Total assets of discontinued operations	$	1,312	$	3,050	$	1,381	$	3,675


Liabilities of discontinued operations:
Accrued liabilities	$	3,334	$	—	$	3,794	$	—
Other long-term liabilities		—		4,788		—		5,786

Total liabilities of discontinued operations	$	3,334	$	4,788	$	3,794	$	5,786

There was no Installation Services’ operating unit revenue or income for the three and six months ended March 31, 2012 or 2011.

NOTE 16 – RESTRUCTURING AND OTHER RELATED CHARGES

In June 2009, Griffon announced plans to consolidate facilities in CBP. These actions were completed in 2011, consistent with the plan. In completing the consolidation plan, CBP incurred total pre-tax exit and restructuring costs approximating $9,031, substantially all of which was cash charges; charges include $1,160 for one-time termination benefits and other personnel costs, $210 for excess facilities and related costs, and $7,661 for other exit costs, primarily in connection with production realignment, and had $10,365 of capital expenditures. The restructuring costs in the three and six months ended March 31, 2011 were $1,153 and $2,482, respectively.

ATT recognized nil and $273, respectively, for the three and six months ended March 31, 2012, and $59 and $123, respectively, for the three and six months ended March 31, 2011, in restructuring and other related charges, primarily related to a facility and related one-time termination costs.

In the first quarter of 2012, Telephonics recognized $1,522 of restructuring and other related charges, primarily for one-time termination benefits and other personnel costs in conjunction with changes to its organizational structure.

A summary of the restructuring and other related charges included in the line item “Restructuring and other related charges” in the Consolidated Statements of Operations recognized was as follows:


	Workforce Reduction		Facilities & Exit Costs		Other Related Costs		Total

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

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


Quarter ended December 31, 2011	$	1,538	$	257	$	—	$	1,795
Quarter ended March 31, 2012		—		—		—		—

Six months ended March 31, 2012	$	1,538	$	257	$	—	$	1,795

At March 31, 2012, the accrued liability for the restructuring and related charges consisted of:


	Workforce Reduction			Facilities & Exit Costs			Other Related Costs		Total


Accrued liability at September 30, 2011	$	2,657		$	—		$	—	$	2,657
Charges		1,538			257			—		1,795
Payments		(2,972	)		(234	)		—		(3,206	)

Accrued liability at March 31, 2012	$	1,223		$	23		$	—	$	1,246

NOTE 17 – OTHER INCOME

For the quarters ended March 31, 2012 and 2011, Other income included net foreign exchange losses of $404 and $150, respectively, and $107 and $168, respectively, of investment income.

For the six months ended March 31, 2012 and 2011, Other income included net foreign exchange losses of $668 and $27, respectively, and $172 and $1,307, respectively, of investment income.

NOTE 18 – WARRANTY LIABILITY

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

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


	Three Months Ended March 31,						Six Months Ended March 31,
	2012			2011			2012			2011

Balance, beginning of period	$	8,953		$	6,701		$	7,963		$	6,719
Warranties issued and charges in estimated pre-existing warranties		2,916			845			4,946			1,676
Actual warranty costs incurred		(1,513	)		(1,033	)		(2,553	)		(1,882	)

Balance, end of period	$	10,356		$	6,513		$	10,356		$	6,513

NOTE 19 — COMMITMENTS AND CONTINGENCIES

Legal and environmental

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

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

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

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

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

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

Department of Environmental Conservation of New York State, regarding Frankfort, NY site. During fiscal 2009, an underground fuel tank with surrounding soil contamination was discovered at the Frankfort, N.Y. site which is the result of historical facility operations prior to ATT’s ownership. While ATT was actively working with the DEC and the New York State Department of Health to define remediation requirements relative to the underground fuel tank, the DEC took the position that ATT was responsible to remediate other types of contamination on the site. After negotiations with the DEC, on August 15, 2011, ATT executed an Order on Consent with the DEC. The Order is without admission or finding of liability or acknowledgement that there has been a release of hazardous substances at the site. Importantly, the Order does not waive any rights that ATT has under a 1991 Consent Judgment entered into between the DEC and a predecessor of ATT relating to the site. The Order requires that ATT identify Areas of Concern at the site, and formulate a strategy to investigate and remedy both on and off site conditions in compliance with applicable environmental law. At the conclusion of the remedy phase of the remediation to the satisfaction of the DEC, the DEC will issue a Certificate of Completion. On September 26, 2011 ATT submitted a Records Search Report to DEC and on October 24, 2011 filed the draft Remedial Investigation Work Plan (“RIWP”) completing the first two steps under the Order. DEC responded to ATT’s draft work plan and requested certain changes that will be reflected in an amended work plan that is expected to be submitted to DEC in June 2012. Prior to the submission of the RIWP, ATT will perform Interim Remedial Measures at the site, consisting primarily of the demolition of buildings to facilitate the implementation of the RIWP.

U.S. Government investigations and claims

Defense contracts and subcontracts, including Griffon’s contracts and subcontracts, are subject to audit and review by various agencies and instrumentalities of the United States government, including, among others, the Defense Contract Audit Agency (“DCAA”) and the Department of Justice, which has responsibility for asserting claims on behalf of the U.S. government. In addition to ongoing audits, pursuant to an administrative subpoena Griffon is currently providing information to the U.S. Department of Defense Office of the Inspector General. No claim has been asserted against Griffon, and Griffon is unaware of any material financial exposure in connection with the Inspector General’s inquiry.

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

General legal

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

NOTE 20 — CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Griffon’s Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the domestic assets of Clopay Building Products Company, Inc., Clopay Plastic Products Company, Inc., Telephonics Corporation and Ames True Temper Inc. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, presented below are condensed consolidating financial information as of March 31, 2012 and September 30, 2011 and for the three and six months ended March 31, 2012 and 2011. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly-owned subsidiaries accounted for under the equity method.

CONDENSED CONSOLIDATING BALANCE SHEETS
At March 31, 2012


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

CURRENT ASSETS
Cash and equivalents	$	101,314	$	22,315	$	41,250		$	—		$	164,879
Accounts receivable, net of allowances		—		190,672		99,162			—			289,834
Contract costs and recognized income not yet billed, net of progress payments		—		64,772		2,194			—			66,966
Inventories, net		—		214,884		70,658			—			285,542
Prepaid and other current assets		3,435		46,930		(242	)		(3,665	)		46,458
Assets of discontinued operations		—		—		1,312			—			1,312

Total Current Assets		104,749		539,573		214,334			(3,665	)		854,991

PROPERTY, PLANT AND EQUIPMENT, net		1,313		237,538		122,605			—			361,456
GOODWILL		—		283,491		79,440			—			362,931
INTANGIBLE ASSETS, net		—		153,305		81,286			—			234,591
INTERCOMPANY RECEIVABLE		539,962		291,998		189,237			(1,021,197	)		—
EQUITY INVESTMENTS IN SUBSIDIARIES		2,850,415		750,616		2,397,506			(5,998,537	)		—
OTHER ASSETS		53,195		57,425		2,782			(81,141	)		32,261
ASSETS OF DISCONTINUED OPERATIONS		—		—		3,050			—			3,050

Total Assets	$	3,549,634	$	2,313,946	$	3,090,240		$	(7,104,540	)	$	1,849,280


CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	1,000	$	1,012	$	14,243		$	—		$	16,255
Accounts payable and accrued liabilities		40,367		181,518		52,814			(3,665	)		271,034
Liabilities of discontinued operations		—		—		3,334			—			3,334

Total Current Liabilities		41,367		182,530		70,391			(3,665	)		290,623

LONG-TERM DEBT, net of debt discounts		654,884		10,300		23,827			—			689,011
INTERCOMPANY PAYABLES		—		161,162		860,035			(1,021,197	)		—
OTHER LIABILITIES		78,941		183,570		20,123			(81,141	)		201,493
LIABILITIES OF DISCONTINUED OPERATIONS		—		—		4,788			—			4,788

Total Liabilities		775,192		537,562		979,164			(1,106,003	)		1,185,915

SHAREHOLDERS’ EQUITY		2,774,442		1,776,384		2,111,076			(5,998,537	)		663,365

Total Liabilities and Shareholders’ Equity	$	3,549,634	$	2,313,946	$	3,090,240		$	(7,104,540	)	$	1,849,280

CONDENSED CONSOLIDATING BALANCE SHEETS
At September 30, 2011


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


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

Total Current Assets		180,287		514,696		199,632		4,640			899,255

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

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


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

Total Current Liabilities		42,140		204,092		64,007		4,640			314,879

LONG-TERM DEBT, net of debt discounts		649,812		10,794		27,641		—			688,247
INTERCOMPANY PAYABLES		—		89,198		737,211		(826,409	)		—
OTHER LIABILITIES		79,655		172,203		39,774		(87,198	)		204,434
LIABILITIES OF DISCONTINUED OPERATIONS		—		—		5,786		—			5,786

Total Liabilities		771,607		476,287		874,419		(908,967	)		1,213,346

SHAREHOLDERS’ EQUITY		2,758,075		1,776,136		2,106,168		(5,988,471	)		651,908

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

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2012


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


Revenue	$	—		$	344,442		$	151,309		$	(13,320	)	$	482,431
Cost of goods and services		—			264,078			129,241			(13,689	)		379,630

Gross profit		—			80,364			22,068			369			102,801

Selling, general and administrative expenses		4,627			65,072			16,546			(93	)		86,152
Restructuring and other related charges		—			—			—			—			—

Total operating expenses		4,627			65,072			16,546			(93	)		86,152

Income (loss) from operations		(4,627	)		15,292			5,522			462			16,649

Other income (expense)
Interest income (expense), net		(3,345	)		(5,327	)		(4,247	)		—			(12,919	)
Loss from debt extinguishment, net		—			—			—			—			—
Other intercompany		—			—			—			—			—
Other, net		109			2,746			(1,364	)		(462	)		1,029

Total other income (expense)		(3,236	)		(2,581	)		(5,611	)		(462	)		(11,890	)


Income (loss) before taxes		(7,863	)		12,711			(89	)		—			4,759
Provision (benefit) for income taxes		(3,316	)		6,061			(13	)		—			2,732

Income (loss) before equity in net income (loss) of subsidiaries		(4,547	)		6,650			(76	)		—			2,027
Equity in net income (loss) of subsidiaries		6,574			(38	)		6,650			(13,186	)		—

Net income (loss)	$	2,027		$	6,612		$	6,574		$	(13,186	)	$	2,027


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

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


Revenue	$	—		$	363,254		$	123,554		$	(10,679	)	$	476,129
Cost of goods and services		—			282,809			103,226			(11,049	)		374,986

Gross profit		—			80,445			20,328			370			101,143

Selling, general and administrative expenses		5,481			64,308			14,666			(92	)		84,363
Restructuring and other related charges		—			1,153			59			—			1,212

Total operating expenses		5,481			65,461			14,725			(92	)		85,575

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

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

Total other income (expense)		(3,404	)		1,986			(34,329	)		(462	)		(36,209	)


Income (loss) before taxes and discontinued operations		(8,885	)		16,970			(28,726	)		—			(20,641	)
Provision (benefit) for income taxes		(3,651	)		8,071			(11,060	)		—			(6,640	)

Income (loss) before equity in net income (loss) of subsidiaries		(5,234	)		8,899			(17,666	)		—			(14,001	)
Equity in net income of subsidiaries		(8,767	)		3,734			8,899			(3,866	)		—

Net income (loss)	$	(14,001	)	$	12,633		$	(8,767	)	$	(3,866	)	$	(14,001	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2012


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


Revenue	$	—		$	682,504		$	278,272		$	(27,314	)	$	933,462
Cost of goods and services		—			517,605			238,401			(28,053	)		727,953

Gross profit		—			164,899			39,871			739			205,509

Selling, general and administrative expenses		9,244			129,063			31,097			(185	)		169,219
Restructuring and other related charges		—			1,779			16			—			1,795

Total operating expenses		9,244			130,842			31,113			(185	)		171,014

Income (loss) from operations		(9,244	)		34,057			8,758			924			34,495

Other income (expense)
Interest income (expense), net		(6,743	)		(11,309	)		(7,867	)		—			(25,919	)
Loss from debt extinguishment, net		—			—			—			—			—
Other intercompany		—			—			—			—			—
Other, net		174			5,588			(3,762	)		(924	)		1,076

Total other income (expense)		(6,569	)		(5,721	)		(11,629	)		(924	)		(24,843	)


Income (loss) before taxes		(15,813	)		28,336			(2,871	)		—			9,652
Provision (benefit) for income taxes		(7,757	)		12,787			109			—			5,139

Income (loss) before equity in net income (loss) of subsidiaries		(8,056	)		15,549			(2,980	)		—			4,513
Equity in net income (loss) of subsidiaries		12,569			(2,878	)		15,549			(25,240	)		—

Net income (loss)	$	4,513		$	12,671		$	12,569		$	(25,240	)	$	4,513


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

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


Revenue	$	—		$	668,901		$	239,372		$	(17,742	)	$	890,531
Cost of goods and services		—			523,413			196,484			(18,368	)		701,529

Gross profit		—			145,488			42,888			626			189,002

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

Total operating expenses		10,563			127,443			29,563			(156	)		167,413

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

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

Total other income (expense)		(4,090	)		(929	)		(39,477	)		(782	)		(45,278	)


Income (loss) before taxes and discontinued operations		(14,653	)		17,116			(26,152	)		—			(23,689	)
Provision (benefit) for income taxes		(5,886	)		11,217			(13,339	)		—			(8,008	)

Income (loss) before equity in net income of subsidiaries		(8,767	)		5,899			(12,813	)		—			(15,681	)
Equity in net income (loss) of subsidiaries		(6,914	)		14,359			5,899			(13,344	)		—

Net income (loss)	$	(15,681	)	$	20,258		$	(6,914	)	$	(13,344	)	$	(15,681	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2012


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


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	4,513		$	12,671		$	12,569		$	(25,240	)	$	4,513

Net cash provided by (used in) operating activities		(59,324	)		8,258			48,858			—			(2,208	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment		(74	)		(35,119	)		(5,012	)		—			(40,205	)
Acquired business, net of cash acquired		—			—			(22,432	)		—			(22,432	)
Intercompany distributions		10,000			(10,000	)		—			—			—
Proceeds from sale of assets		—			140			55			—			195

Net cash provided by (used in) investing activities		9,926			(44,979	)		(27,389	)		—			(62,442	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares for treasury		(2,350	)		—			—			—			(2,350	)
Proceeds from issuance of long-term debt		—			—			4,000			—			4,000
Payments of long-term debt		(813	)		(3,852	)		(5,733	)		—			(10,398	)
Decrease in short-term borrowings		—			1			(3,332	)		—			(3,331	)
Intercompany debt		(23,000	)		—			23,000			—			—
Financing costs		(4	)		—			—			—			(4	)
Tax effect from exercise/vesting of equity awards, net		834			—			—			—			834
Dividend		(2,374	)		—			—			—			(2,374	)
Other, net		(29	)		47,723			(47,723	)		—			(29	)

Net cash provided by (used in) financing activities		(27,736	)		43,872			(29,788	)		—			(13,652	)

Net cash used in discontinued operations		—			—			(764	)		—			(764	)

Effect of exchange rate changes on cash and equivalents		—			—			916			—			916


NET INCREASE (DECREASE) IN CASH AND EQUIVALENT		(77,134	)		7,151			(8,167	)		—			(78,150	)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		178,448			15,164			49,417			—			243,029

CASH AND EQUIVALENTS AT END OF PERIOD	$	101,314		$	22,315		$	41,250		$	—		$	164,879

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


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


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(15,681	)	$	20,258		$	(6,914	)	$	(13,344	)	$	(15,681	)

Net cash used in operating activities		(3,611	)		(14,241	)		(17,847	)		—			(35,699	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment		(208	)		(19,449	)		(22,080	)		—			(41,737	)
Acquired business, net of cash acquired		—			(1,066	)		211			—			(855	)
Intercompany distributions		10,000			(10,000	)		—			—			—
Funds restricted for capital projects		—			3,875			—			—			3,875
Proceeds from sale of investment		—			—			1,333			—			1,333
Increase in equipment lease deposits		—			(351	)		—			—			(351	)

Net cash provided by (used in) investing activities		9,792			(26,991	)		(20,536	)		—			(37,735	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		558,310			—			79,427			—			637,737
Payments of long-term debt		(312	)		(30,567	)		(467,892	)		—			(498,771	)
Decrease in short-term borrowings		—			—			2,022			—			2,022
Intercompany debt		(468,372	)		—			468,372			—			—
Financing costs		(14,272	)		—			(6,967	)		—			(21,239	)
Purchase of ESOP shares		(8,310	)		—			—			—			(8,310	)
Exercise of stock options		20			—			—			—			20
Tax benefit from vesting of restricted stock		23			—			—			—			23
Other, net		(94	)		39,795			(39,795	)		—			(94	)

Net cash provided by financing activities		66,993			9,228			35,167			—			111,388

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

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


NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS		73,174			(32,004	)		(2,635	)		—			38,535
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		74,600			57,113			38,089			—			169,802

CASH AND EQUIVALENTS AT END OF PERIOD	$	147,774		$	25,109		$	35,454		$	—		$	208,337

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

BUSINESS OVERVIEW (in thousands, except per share data)

Griffon currently conducts its operations through three segments:


•	Home & Building Products (“HBP”) consists of two companies, Ames True Temper, Inc (“ATT”) and Clopay Building Products (“CBP”):

	-	ATT is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.

	-	CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional installing dealers and major home center retail chains.

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

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

On October 17, 2011, Griffon acquired the pots and planters business of Southern Sales & Marketing Group, Inc. for $22,432. The acquired business, which markets its products under the Southern Patio brand name (“Southern Patio”), is a leading designer, manufacturer and marketer of landscape accessories. Southern Patio, which was integrated with ATT, had revenue exceeding $40,000 in 2011; acquired inventory was not significant.

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

OVERVIEW

Revenue for the quarter ended March 31, 2012 was $482,431, compared to $476,129 in the prior year quarter. Net income was $2,027, or $0.04 per share, compared to a loss of $14,001, or $0.24 per share, in the prior year quarter.

The prior year quarter included the following:


	-	$26,164 ($16,813, net of tax, or $0.28 per share) charge related to debt extinguishment;
	-	$3,788 ($2,462, net of tax, or $0.04 per share) of increased cost of goods related to the sale of inventory recorded at fair value in connection with acquisition accounting for ATT;
	-	Restructuring charges of $1,212 ($788, net of tax, or $0.01 per share); and
	-	Discrete tax expense of $79, or $0.00 per share.

Excluding these items from the prior year quarter, Net income would have been $6,141, or $0.10 per share, compared to $2,027, or $0.04 per, in the current year quarter.

Revenue for the six months ended March 31, 2012 was $933,462, compared to $890,531 in the prior year. Net income was $4,513, or $0.08 per share, compared to a loss of $15,681, or $0.26 per share, in the prior year. Results for the six months ended March 31, 2012 results included:


	-	$1,795 ($1,167, net of tax, or $0.02 per share) of restructuring and related charges; and
	-	$178 ($116, net of tax, or $0.00 per share) of acquisition costs.

Results for the six months ended March 31, 2011 included:


	-	$26,164 ($16,813, net of tax, or $0.28 per share) charge related to debt extinguishment;
	-	$15,152 ($9,849, net of tax, or $0.17 per share) of increased cost of goods related to the sale of inventory recorded at fair value in connection with acquisition accounting for ATT;
	-	Restructuring charges of $2,605 ($1,693, net of tax, or $0.03 per share); and
	-	Discrete tax benefits of $241, or $0.00 per share.

Excluding these items from both periods, Net income would have been $5,796, or $0.10 per share, compared to $12,433, or $0.21 per share, in the prior year.

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


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

	2012		2011			2012		2011


Net income (loss)	$	2,027	$	(14,001	)	$	4,513	$	(15,681	)

Adjusting items, net of tax:
Loss from debt extinguishment, net		—		16,813			—		16,813
Fair value write-up of acquired inventory sold		—		2,462			—		9,849
Restructuring and related		—		788			1,167		1,693
Acquisition costs		—		—			116		—
Discrete tax benefits		—		79			—		(241	)


Adjusted net income	$	2,027	$	6,141		$	5,796	$	12,433


Earnings (loss) per common share	$	0.04	$	(0.24	)	$	0.08	$	(0.26	)

Adjusting items, net of tax:
Loss from debt extinguishment, net		—		0.28			—		0.28
Fair value write-up of acquired inventory sold		—		0.04			—		0.17
Restructuring		—		0.01			0.02		0.03
Acquisition costs		—		—			0.00		—