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PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets at ~~March 31,~~June 30, 2014 (unaudited) and September 30, 2013	1

Condensed Consolidated Statement of Shareholders’ Equity for the ~~Six~~Nine Months Ended ~~March 31,~~June 30, 2014 (unaudited)	1 2

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and ~~Six~~Nine Months Ended ~~March 31,~~June 30, 2014 and 2013 (unaudited)	2 3

Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~March 31,~~June 30, 2014 and 2013 (unaudited)	3 4

Notes to Condensed Consolidated Financial Statements (unaudited)	4 5

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 35

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	38 47

Item 4 - Controls & Procedures	39 48

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings	39 49

Item 1A – Risk Factors	39 49

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	40 49

Item 3 – Defaults Upon Senior Securities	40 49

Item 4 – Mine Safety Disclosures	40 49

Item 5 – Other Information	40 49

Item 6 – Exhibits	40 50

Signatures	42 51

Exhibit Index	43

Table of Contents

Part I – Financial Information

Item 1 – Financial Statements

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)
At March 31,
2014 At September
30, 2013
CURRENT ASSETS
Cash and equivalents $ 69,933 $ 178,130
Accounts receivable, net of allowances of $6,481 and $6,136 309,162 256,215
Contract costs and recognized income not yet billed, net of progress payments of $ 13,173 and $6,941 107,825 109,828
Inventories, net 256,690 230,120
Prepaid and other current assets 51,212 48,903
Assets of discontinued operations 1,217 1,214
Total Current Assets 796,039 824,410
PROPERTY, PLANT AND EQUIPMENT, net 357,882 353,593
GOODWILL 370,172 357,730
INTANGIBLE ASSETS, net 224,226 221,391
OTHER ASSETS 30,774 28,580
ASSETS OF DISCONTINUED OPERATIONS 3,107 3,075
Total Assets $ 1,782,200 $ 1,788,779

CURRENT LIABILITIES
Notes payable and current portion of long-term debt $ 13,393 $ 10,768
Accounts payable 182,505 163,610
Accrued liabilities 82,472 106,743
Liabilities of discontinued operations 3,069 3,288
Total Current Liabilities 281,439 284,409
LONG-TERM DEBT, net of debt discount of $11,454 and $13,246 773,579 678,487
OTHER LIABILITIES 165,071 170,675
LIABILITIES OF DISCONTINUED OPERATIONS 4,359 4,744
Total Liabilities 1,224,448 1,138,315
COMMITMENTS AND CONTINGENCIES - See Note 19
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity 557,752 650,464
Total Liabilities and Shareholders’ Equity $ 1,782,200 $ 1,788,779



	(Unaudited)
	June 30, 2014		September 30, 2013
CURRENT ASSETS
Cash and equivalents	$	87,437	$	178,130
Accounts receivable, net of allowances of $7,176 and $6,136	269,669		256,215
Contract costs and recognized income not yet billed, net of progress payments of $16,985 and $6,941	104,877		109,828
Inventories, net	278,462		230,120
Prepaid and other current assets	74,290		48,903
Assets of discontinued operations	1,209		1,214
Total Current Assets	815,944		824,410
PROPERTY, PLANT AND EQUIPMENT, net	365,376		353,593
GOODWILL	381,315		357,730
INTANGIBLE ASSETS, net	235,092		221,391
OTHER ASSETS	30,491		28,580
ASSETS OF DISCONTINUED OPERATIONS	3,032		3,075
Total Assets	$	1,831,250	$	1,788,779

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	11,886	$	10,768
Accounts payable	181,052		163,610
Accrued liabilities	103,721		106,743
Liabilities of discontinued operations	2,959		3,288
Total Current Liabilities	299,618		284,409
LONG-TERM DEBT, net of debt discount of $10,532 and $13,246	797,180		678,487
OTHER LIABILITIES	162,103		170,675
LIABILITIES OF DISCONTINUED OPERATIONS	4,008		4,744
Total Liabilities	1,262,909		1,138,315
COMMITMENTS AND CONTINGENCIES - See Note 19
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity	568,341		650,464
Total Liabilities and Shareholders’ Equity	$	1,831,250	$	1,788,779

Table of Contents

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

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

Balance at September 30, 2013 77,616 $ 19,404 $ 494,412 $ 434,363 18,527 $ (274,602 ) $ (3,339 ) $ (19,774 ) $ 650,464
Net loss — — — (22,589 ) — — — — (22,589 )
Dividend — — — (3,290 ) — — — — (3,290 )
Tax effect from exercise/vesting of equity awards, net — — 273 — — — — — 273
Amortization of deferred compensation — — — — — — — 1,043 1,043
Common stock acquired — — — — 5,454 (63,370 ) — — (63,370 )
Stock grants and equity awards, net 877 219 300 — — — — — 519
ESOP purchase of common stock — — — — — — — (10,000 ) (10,000 )
ESOP allocation of common stock — — 204 — — — — — 204
Stock-based compensation — — 4,996 — — — — — 4,996
Other comprehensive loss, net of tax — — — — — — (498 ) — (498 )
Balance at March 31, 2014 78,493 $ 19,623 $ 500,185 $ 408,484 23,981 $ (337,972 ) $ (3,837 ) $ (28,731 ) $ 557,752



	COMMON STOCK			CAPITAL IN EXCESS OF PAR VALUE		RETAINED EARNINGS			TREASURY SHARES				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			DEFERRED COMPENSATION
(in thousands)	SHARES	PAR VALUE		CAPITAL IN EXCESS OF PAR VALUE		RETAINED EARNINGS			SHARES	COST			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			DEFERRED COMPENSATION			Total
Balance at September 30, 2013	77,616	$	19,404	$	494,412	$	434,363		18,527	$	(274,602	)	$	(3,339	)	$	(19,774	)	$	650,464
Net loss	—	—		—		(8,125		)	—	—			—			—			(8,125		)
Dividend	—	—		—		(4,841		)	—	—			—			—			(4,841		)
Tax effect from exercise/vesting of equity awards, net	—	—		273		—			—	—			—			—			273
Amortization of deferred compensation	—	—		—		—			—	—			—			1,586			1,586
Common stock acquired	—	—		—		—			6,237	(72,518		)	—			—			(72,518		)
Stock grants and equity awards, net	857	214		302		—			—	—			—			—			516
ESOP purchase of common stock	—	—		—		—			—	—			—			(10,000		)	(10,000		)
ESOP allocation of common stock	—	—		225		—			—	—			—			—			225
Stock-based compensation	—	—		8,133		—			—	—			—			—			8,133
Other comprehensive income, net of tax	—	—		—		—			—	—			2,628			—			2,628
Balance at June 30, 2014	78,473	$	19,618	$	503,345	$	421,397		24,764	$	(347,120	)	$	(711	)	$	(28,188	)	$	568,341

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

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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,
2014 2013 2014 2013
Revenue $ 507,687 $ 488,743 $ 961,145 $ 912,492
Cost of goods and services 397,700 383,246 745,655 709,325
Gross profit 109,987 105,497 215,490 203,167

Selling, general and administrative expenses 89,622 86,059 177,302 168,278
Restructuring and other related charges 692 9,336 1,534 10,444
Total operating expenses 90,314 95,395 178,836 178,722

Income from operations 19,673 10,102 36,654 24,445

Other income (expense)
Interest expense (12,389 ) (13,060 ) (25,523 ) (26,167 )
Interest income 28 151 61 179
Loss from debt extinguishment, net (38,890 ) — (38,890 ) —
Other, net 783 422 1,689 908
Total other expense, net (50,468 ) (12,487 ) (62,663 ) (25,080 )

Loss before taxes (30,795 ) (2,385 ) (26,009 ) (635 )
Benefit for income taxes (4,970 ) (1,566 ) (3,420 ) (374 )
Net loss $ (25,825 ) $ (819 ) $ (22,589 ) $ (261 )

Basic loss per common share $ (0.53 ) $ (0.02 ) $ (0.44 ) $ (0.00 )
Weighted-average shares outstanding 48,990 54,345 50,872 54,749

Diluted loss per common share $ (0.53 ) $ (0.02 ) $ (0.44 ) $ (0.00 )
Weighted-average shares outstanding 48,990 54,345 50,872 54,749

Net loss $ (25,825 ) $ (819 ) $ (22,589 ) $ (261 )
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments 1,224 (5,924 ) (1,913 ) (2,921 )
Pension and other post retirement plans 1,099 489 1,415 4,349
Gain on cash flow hedge — 171 — 171
Total other comprehensive income (loss), net of taxes 2,323 (5,264 ) (498 ) 1,599
Comprehensive income (loss), net $ (23,502 ) $ (6,083 ) $ (23,087 ) $ 1,338



	Three Months Ended June 30,						Nine Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	505,039		$	509,826		$	1,466,184		$	1,422,318
Cost of goods and services	386,732			401,515			1,132,387			1,110,840
Gross profit	118,307			108,311			333,797			311,478

Selling, general and administrative expenses	96,135			86,345			273,437			254,623
Restructuring and other related charges	358			1,604			1,892			12,048
Total operating expenses	96,493			87,949			275,329			266,671

Income from operations	21,814			20,362			58,468			44,807

Other income (expense)
Interest expense	(11,661		)	(13,279		)	(37,184		)	(39,446		)
Interest income	120			142			181			321
Loss from debt extinguishment, net	—			—			(38,890		)	—
Other, net	2,621			607			4,310			1,515
Total other expense, net	(8,920		)	(12,530		)	(71,583		)	(37,610		)

Income (loss) before taxes	12,894			7,832			(13,115		)	7,197
Provision (benefit) for income taxes	(1,570		)	4,229			(4,990		)	3,855
Net income (loss)	$	14,464		$	3,603		$	(8,125	)	$	3,342

Basic income (loss) per common share	$	0.30		$	0.07		$	(0.16	)	$	0.06
Weighted-average shares outstanding	48,370			54,265			50,038			54,588

Diluted income (loss) per common share	$	0.29		$	0.06		$	(0.16	)	$	0.06
Weighted-average shares outstanding	49,836			56,204			50,038			56,735

Dividends paid per common share	$	0.03		$	0.025		$	0.09		$	0.075

Net income (loss)	$	14,464		$	3,603		$	(8,125	)	$	3,342
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	2,809			(7,884		)	896			(10,805		)
Pension and other post retirement plans	317			490			1,732			4,839
Gain (loss) on cash flow hedge	—			(158		)	—			13
Total other comprehensive income (loss), net of taxes	3,126			(7,552		)	2,628			(5,953		)
Comprehensive income (loss), net	$	17,590		$	(3,949	)	$	(5,497	)	$	(2,611	)

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

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GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Six Months Ended March 31,
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (22,589 ) $ (261 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 33,232 35,038
Stock-based compensation 4,996 6,298
Asset impairment charges - restructuring 169 3,122
Provision for losses on accounts receivable 132 440
Amortization of deferred financing costs and debt discounts 3,188 3,102
Loss from debt extinguishment, net 38,890 —
Deferred income taxes (57 ) (592 )
(Gain) loss on sale/disposal of assets 180 (801 )
Change in assets and liabilities, net of assets and liabilities acquired:
Increase in accounts receivable and contract costs and recognized income not yet billed (46,834 ) (87,531 )
(Increase) decrease in inventories (23,858 ) 90
Decrease in prepaid and other assets 3,482 411
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable (18,713 ) 7,080
Other changes, net 1,145 (379 )
Net cash used in operating activities (26,637 ) (33,983 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (34,845 ) (30,995 )
Acquired business, net of cash acquired (22,720 ) —
Proceeds from sale of assets 294 1,216
Net cash used in investing activities (57,271 ) (29,779 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 584 —
Dividends paid (3,290 ) (2,938 )
Purchase of shares for treasury (63,370 ) (22,109 )
Proceeds from issuance of long-term debt 644,514 303
Payments of long-term debt (586,310 ) (5,400 )
Change in short-term borrowings 4,908 2,157
Financing costs (10,687 ) (759 )
Purchase of ESOP shares (10,000 ) —
Tax benefit from exercise/vesting of equity awards, net 273 150
Other, net 144 242
Net cash used in financing activities (23,234 ) (28,354 )

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities (640 ) (478 )
Net cash used in discontinued operations (640 ) (478 )

Effect of exchange rate changes on cash and equivalents (415 ) (138 )

NET DECREASE IN CASH AND EQUIVALENTS (108,197 ) (92,732 )
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 178,130 209,654
CASH AND EQUIVALENTS AT END OF PERIOD $ 69,933 $ 116,922



	Nine Months Ended June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(8,125	)	$	3,342

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization	50,027			52,787
Stock-based compensation	8,133			9,327
Asset impairment charges - restructuring	191			3,122
Provision for losses on accounts receivable	420			824
Amortization of deferred financing costs and debt discounts	4,789			4,651
Loss from debt extinguishment, net	38,890			—
Deferred income taxes	(314		)	(897		)
(Gain) loss on sale/disposal of assets	78			(788		)
Change in assets and liabilities, net of assets and liabilities acquired:
(Increase) decrease in accounts receivable and contract costs and recognized income not yet billed	7,443			(81,381		)
(Increase) decrease in inventories	(33,195		)	36,588
(Increase) decrease in prepaid and other assets	(3,439		)	2,890
Decrease in accounts payable, accrued liabilities and income taxes payable	(15,754		)	(28,767		)
Other changes, net	712			856
Net cash provided by operating activities	49,856			2,554

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(54,859		)	(45,886		)
Acquired businesses, net of cash acquired	(62,306		)	—
Proceeds from sale of assets	491			1,326
Investment purchases	(8,402		)	—
Net cash used in investing activities	(125,076		)	(44,560		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	584			—
Dividends paid	(4,841		)	(4,384		)
Purchase of shares for treasury	(72,518		)	(25,689		)
Proceeds from long-term debt	682,913			303
Payments of long-term debt	(602,134		)	(12,842		)
Change in short-term borrowings	3,138			2,408
Financing costs	(10,928		)	(759		)
Purchase of ESOP shares	(10,000		)	—
Tax benefit from exercise/vesting of equity awards, net	273			150
Other, net	194			261
Net cash used in financing activities	(13,319		)	(40,552		)

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities	(1,018		)	(486		)
Net cash used in discontinued operations	(1,018		)	(486		)

Effect of exchange rate changes on cash and equivalents	(1,136		)	(506		)

NET DECREASE IN CASH AND EQUIVALENTS	(90,693		)	(83,550		)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	178,130			209,654
CASH AND EQUIVALENTS AT END OF PERIOD	$	87,437		$	126,104

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

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except ~~share and~~ per share data)

(Unaudited)

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

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

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

Griffon currently conducts its operations through three 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.~~

- 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, 2013, 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, 2013 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2013.

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 compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves

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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)

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 senior notes due 2022 and 2017 4% convertible notes approximated ~~$591,000~~$594,000 and ~~$111,300,~~$113,400, respectively, on ~~March 31,~~June 30, 2014. Fair values were based upon quoted market prices (level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

Insurance contracts with values of $3,594 (level 2 inputs) at June 30, 2014, are measured and ~~trading~~recorded at fair value based upon quoted prices in active markets for similar assets. Trading securities with values of ~~$3,644 and $1,321~~$11,160 (level 1 inputs) at ~~March 31,~~June 30, 2014, ~~respectively,~~ are measured and recorded at fair value based upon quoted prices in active markets for identical ~~assets (level 2 inputs).~~

assets.

At ~~March 31,~~June 30, 2014, Griffon had ~~$3,861~~$4,172 and $1,750 of Australian dollar contracts and Canadian dollar contracts, respectively, at a weighted average rate of ~~$1.10.~~$1.06 and $1.07, respectively. The contracts, which protect Australia and Canada operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting and a fair value ~~gain~~loss of ~~$16~~$192 and ~~$54~~$125 was recorded in Other assets and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs), for the quarter and ~~six~~nine months ended ~~March 31,~~June 30, 2014, respectively. All contracts expire in 1524 to 80114 days.

NOTE 3 – ~~ACQUISITION~~

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. Cyclone is expected to generate approximately $65,000 of annualized revenue. Selling, General and Administrative ("SG&A") expenses in the current quarter included $1,600 of acquisition costs.

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 complements Southern Patio, acquired in 2011, and adds to Ames’ existing lawn and garden operations in Australia. Northcote, which ~~will be~~was integrated with Ames, is expected to generate approximately $28,000 of annualized revenue. ~~Included in selling, general and administrative~~First quarter 2014 SG&A expenses ~~are~~included $798 of acquisition ~~costs, incurred by Griffon, related to this transaction in the first quarter of 2014.~~

costs.

The accounts of the acquired ~~company,~~companies, after adjustment to reflect fair market values (level 23 inputs) assigned to assets purchased, 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 adjustments to the purchase price, if any, for Cyclone and Northcote, primarily related to working capital, and gathering data as of the closing date to complete the purchase price allocation; accordingly, management has used their best estimates in the initial purchase price allocation as of the date of these financial statements.

The following table summarizes the ~~preliminary~~ fair values of the Cyclone and Northcote assets and liabilities as of the date of acquisition:

2014
Current Assets, net of cash acquired $ 7,921
PP&E 1,376
Goodwill 11,617
Amortizable intangible assets 6,023
Indefinite life intangible assets 1,686
Total assets acquired 28,623
Total liabilities assumed (6,903 )
Net assets acquired $ 21,720

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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)



	Cyclone			Northcote			Total
Current Assets, net of cash acquired	$	23,936		$	7,921		$	31,857
PP&E	491			1,376			1,867
Goodwill	10,072			11,617			21,689
Amortizable intangible assets	9,844			6,023			15,867
Indefinite life intangible assets	1,874			1,686			3,560
Total assets acquired	46,217			28,623			74,840
Total liabilities assumed	(6,692		)	(6,842		)	(13,534		)
Net assets acquired	$	39,525		$	21,781		$	61,306

The amounts assigned to major intangible asset classifications, none of which are tax deductible, for the Cyclone and Northcote ~~acquisition~~acquisitions are as follows:

Amortization
2014 Period (Years)
Goodwill $ 11,617 N/A
Tradenames 1,686 Indefinite
Customer relationships 6,023 25
$ 19,326



	Cyclone		Northcote		Total	Amortization Period (Years)
Goodwill	$	10,072	$	11,617	21,689	N/A
Tradenames	1,874		1,686		3,560	Indefinite
Customer relationships	9,844		6,023		15,867	25
	$	21,790	$	19,326	41,116

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, At September 30,
2014 2013
Raw materials and supplies $ 73,152 $ 65,560
Work in process 68,795 63,930
Finished goods 114,743 100,630
Total $ 256,690 $ 230,120



	At June 30, 2014		At September 30, 2013
Raw materials and supplies	$	71,533	$	65,560
Work in process	69,884		63,930
Finished goods	137,045		100,630
Total	$	278,462	$	230,120

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

The following table details the components of property, plant and equipment, net:

At March 31, At September 30,
2014 2013
Land, building and building improvements $ 130,974 $ 130,905
Machinery and equipment 697,621 661,094
Leasehold improvements 36,454 35,884
865,049 827,883
Accumulated depreciation and amortization (507,167 ) (474,290 )
Total $ 357,882 $ 353,593



	At June 30, 2014			At September 30, 2013
Land, building and building improvements	$	131,270		$	130,905
Machinery and equipment	715,805			661,094
Leasehold improvements	38,792			35,884
	885,867			827,883
Accumulated depreciation and amortization	(520,491		)	(474,290		)
Total	$	365,376		$	353,593

Depreciation and amortization expense for property, plant and equipment was ~~$14,491~~$14,766 and ~~$15,695~~$15,781 for the quarters ended ~~March 31,~~June 30, 2014 and 2013, respectively, and ~~$29,396~~$44,163 and ~~$31,066~~$46,846 for the ~~six~~nine months ended ~~March 31,~~June 30, 2014 and 2013, respectively.

Depreciation included in SG&A expenses was $2,507 and $3,128 for the quarters ended June 30, 2014 and 2013, respectively,

and $7,743 and $9,402 for the nine months ended June 30, 2014 and 2013, respectively. The 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 quarter ended ~~March 31,~~June 30, 2014, which would require additional impairment testing of property, plant and equipment.

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 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides changes in the carrying value of goodwill by segment during the ~~six~~nine months ended ~~March 31,~~June 30, 2014:

At September 30,
2013 Goodwill from
2014 acquisitions Other
adjustments
including currency
translations At March 31,
2014
Home & Building Products $ 269,802 $ 11,617 $ 244 $ 281,663
Telephonics 18,545 — — 18,545
Plastics 69,383 — 581 69,964
Total $ 357,730 $ 11,617 $ 825 $ 370,172



	At September 30, 2013		Goodwill from 2014 acquisitions		Other adjustments including currency translations		At June 30, 2014
Home & Building Products	$	269,802	$	21,689	$	948	$	292,439
Telephonics	18,545		—		—		18,545
Plastics	69,383		—		948		70,331
Total	$	357,730	$	21,689	$	1,896	$	381,315

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

At March 31, 2014 At September 30, 2013
Gross Carrying Amount Accumulated Amortization Average
Life
(Years) Gross Carrying Amount Accumulated Amortization
Customer relationships $ 172,191 $ 32,515 25 $ 166,985 $ 29,049
Unpatented technology 6,804 3,177 13 6,804 2,916
Total amortizable intangible assets 178,995 35,692 173,789 31,965
Trademarks 80,923 — 79,567 —
Total intangible assets $ 259,918 $ 35,692 $ 253,356 $ 31,965



	At June 30, 2014					At September 30, 2013
	Gross Carrying Amount		Accumulated Amortization		Average Life (Years)	Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	183,152	$	34,543	25	$	166,985	$	29,049
Unpatented technology	6,708		3,290		13	6,804		2,916
Total amortizable intangible assets	189,860		37,833			173,789		31,965
Trademarks	83,065		—			79,567		—
Total intangible assets	$	272,925	$	37,833		$	253,356	$	31,965

Amortization expense for intangible assets was ~~$1,949~~$2,028 and ~~$1,986~~$1,969 for the quarters ended ~~March 31,~~June 30, 2014 and 2013, respectively, and ~~$3,836~~$5,864 and ~~$3,972~~$5,941 for the ~~six~~nine months ended ~~March 31,~~June 30, 2014 and 2013, respectively.

No event or indicator of impairment occurred during the quarter ended ~~March 31,~~June 30, 2014, which would require impairment testing of long-lived intangible assets including goodwill.

NOTE 7 – INCOME TAXES

The Company reported pretax income for the quarter and ~~six-month periods~~a pretax loss for the nine months ended ~~March 31,~~June 30, 2014, compared to pretax income for the quarter and ~~2013, the Company incurred pretax losses.~~nine months ended June 30, 2013. The Company recognized tax benefits of ~~16.1%~~12.2% and ~~13.2%~~38.0% for the quarter and ~~six-month periods~~nine months ended ~~March 31,~~June 30, 2014, respectively, compared to ~~benefits~~provisions of ~~65.7%~~54.0% and ~~59.0%~~53.6%, respectively, in the comparable prior year periods. The current and prior year ~~benefit~~tax rates reflect the impact of permanent differences not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations, which are material relative to the level of pretax ~~result.~~

results and the impact of discrete items reported.

The ~~current~~ quarter and ~~six-month periods~~nine months ended June 30, 2014 include ~~$609~~$1,860 and ~~$320,~~$1,540, respectively, of ~~provisions for~~benefits from discrete items resulting primarily from the conclusion of tax audits, the filing of tax returns in ~~certain~~various jurisdictions, the release of previously established reserves for uncertain tax positions and the impact of tax law changes enacted in the ~~current quarter.~~second quarter of 2014. The comparable prior year periods included ~~$309~~$1,495 and ~~$364,~~$1,859, respectively, of benefits from discrete items, primarily resulting from the release of previously established reserves for uncertain tax positions on conclusion of tax audits, benefits arising on the filing of tax returns in various jurisdictions and the retroactive extension of the federal R&D credit signed into law January 2, 2013.

Excluding discrete items, the effective tax ~~benefit~~ rates for the quarter and ~~six month periods~~nine months ended ~~March 31,~~June 30, 2014 were ~~18.1%~~a provision of 27.0% and ~~14.4%~~a benefit of 26.3%, respectively, compared to ~~benefit rates~~provisions of ~~52.7%~~73.1% and ~~1.7%~~79.4% in the comparable prior year periods, respectively.

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 8 – LONG-TERM DEBT

At March 31, 2014 At September 30, 2013
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) $ — $ — $ — $ — n/a $ 550,000 $ — $ 550,000 $ 7,328 7.10 %
Senior notes due 2022 (a) 600,000 — 600,000 9,839 5.25 % — — — — n/a
Revolver due 2019 (a) 20,000 — 20,000 2,227 n/a — — — 2,425 n/a
Convert. debt due 2017 (b) 100,000 (11,454 ) 88,546 1,256 4.00 % 100,000 (13,246 ) 86,754 1,478 4.00 %
Real estate mortgages (c) 16,818 — 16,818 657 n/a 13,212 — 13,212 185 n/a
ESOP Loans (d) 30,087 — 30,087 79 n/a 21,098 — 21,098 24 n/a
Capital lease - real estate (e) 9,042 — 9,042 194 5.00 % 9,529 — 9,529 207 5.00 %
Non U.S. lines of credit (f) 9,443 — 9,443 — n/a 4,606 — 4,606 — n/a
Non U.S. term loans (f) 11,559 — 11,559 88 n/a 3,115 — 3,115 27 n/a
Other long term debt (g) 1,477 — 1,477 29 n/a 941 — 941 — n/a
Totals 798,426 (11,454 ) 786,972 $ 14,369 702,501 (13,246 ) 689,255 $ 11,674
less: Current portion (13,393 ) — (13,393 ) (10,768 ) — (10,768 )
Long-term debt $ 785,033 $ (11,454 ) $ 773,579 $ 691,733 $ (13,246 ) $ 678,487

Three Months Ended March 31, 2014 Three Months Ended March 31, 2013
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) 7.1 % $ 6,133 $ — $ 261 $ 6,394 7.5 % $ 9,797 $ — $ 405 $ 10,202
Senior notes due 2022 (a) 5.3 % 2,800 — 111 2,911 n/a — — — —
Revolver due 2019 (a) n/a 306 — 142 448 n/a 206 — 157 363
Convert. debt due 2017 (b) 9.3 % 1,000 909 110 2,019 9.3 % 1,000 834 111 1,945
Real estate mortgages (c) 3.8 % 122 — 37 159 5.4 % 135 — 22 157
ESOP Loans (d) 3.4 % 180 — 5 185 2.9 % 158 — 2 160
Capital lease - real estate (e) 5.3 % 114 — 7 121 5.2 % 125 — 7 132
Non U.S. lines of credit (f) n/a 224 — — 224 n/a 147 — — 147
Non U.S. term loans (f) n/a 101 — — 101 n/a 133 — 25 158
Other long term debt (g) n/a — — — — n/a 136 — — 136
Capitalized interest (173 ) — — (173 ) (340 ) — — (340 )
Totals $ 10,807 $ 909 $ 673 $ 12,389 $ 11,497 $ 834 $ 729 $ 13,060

Six Months Ended March 31, 2014 Six Months Ended March 31, 2013
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) 7.1 % $ 15,930 $ — $ 667 $ 16,597 7.4 % $ 19,594 $ — $ 811 $ 20,405
Senior notes due 2022 (a) 5.3 % 2,800 — 111 2,911 n/a — — — —
Revolver due 2019 (a) n/a 473 — 278 751 n/a 424 — 313 737
Convert. debt due 2017 (b) 9.1 % 2,000 1,792 221 4,013 9.2 % 2,000 1,645 222 3,867
Real estate mortgages (c) 4.0 % 252 — 73 325 5.4 % 274 — 43 317
ESOP Loans (d) 3.2 % 332 — 7 339 2.9 % 325 — 4 329
Capital lease - real estate (e) 5.3 % 233 — 14 247 5.3 % 256 — 13 269
Non U.S. lines of credit (f) n/a 417 — — 417 n/a 260 — — 260
Non U.S. term loans (f) n/a 153 — 4 157 n/a 306 — 51 357
Other long term debt (g) n/a 11 — 21 32 n/a 251 — — 251
Capitalized interest (266 ) — — (266 ) (625 ) — — (625 )
Totals $ 22,335 $ 1,792 $ 1,396 $ 25,523 $ 23,065 $ 1,645 $ 1,457 $ 26,167

~~(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, starting September 1, 2014. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a 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 fees and expenses. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. At the time of issuance of the Senior Notes, Griffon agreed that, within certain time periods after the issue date, it would offer to each noteholder, pursuant to a registration statement filed with and to be declared effective by the SEC, the opportunity to exchange its Senior Notes for new notes that have substantially identical terms to those of the Senior Notes (the only material difference being that the new notes are registered with the SEC).



		At June 30, 2014													At September 30, 2013
		Outstanding Balance			Original Issuer Discount			Balance Sheet			Capitalized Fees & Expenses		Coupon Interest Rate (1)		Outstanding Balance			Original Issuer Discount			Balance Sheet			Capitalized Fees & Expenses		Coupon Interest Rate (1)
Senior notes due 2018	(a)	$	—		$	—		$	—		$	—	n/a		$	550,000		$	—		$	550,000		$	7,328	7.10	%
Senior notes due 2022	(a)	600,000			—			600,000			9,529		5.25	%	—			—			—			—		n/a
Revolver due 2019	(a)	25,000			—			25,000			2,122		n/a		—			—			—			2,425		n/a
Convert. debt due 2017	(b)	100,000			(10,532		)	89,468			1,145		4.00	%	100,000			(13,246		)	86,754			1,478		4.00	%
Real estate mortgages	(c)	16,603			—			16,603			612		n/a		13,212			—			13,212			185		n/a
ESOP Loans	(d)	29,583			—			29,583			233		n/a		21,098			—			21,098			24		n/a
Capital lease - real estate	(e)	8,798			—			8,798			188		5.00	%	9,529			—			9,529			207		5.00	%
Non U.S. lines of credit	(f)	7,754			—			7,754			—		n/a		4,606			—			4,606			—		n/a
Non U.S. term loans	(f)	30,612			—			30,612			189		n/a		3,115			—			3,115			27		n/a
Other long term debt	(g)	1,248			—			1,248			27		n/a		941			—			941			—		n/a
Totals		819,598			(10,532		)	809,066			$	14,045			702,501			(13,246		)	689,255			$	11,674
less: Current portion		(11,886		)	—			(11,886		)					(10,768		)	—			(10,768		)
Long-term debt		$	807,712		$	(10,532	)	$	797,180						$	691,733		$	(13,246	)	$	678,487

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)



		Three Months Ended June 30, 2014												Three Months Ended June 30, 2013
		Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense			Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense
Senior notes due 2018	(a)	n/a		$	—		$	—	$	—	$	—		7.4	%	$	9,797		$	—	$	406	$	10,203
Senior notes due 2022	(a)	5.5	%	7,875			—		310		8,185			n/a		—			—		—		—
Revolver due 2019	(a)	n/a		309			—		144		453			n/a		179			—		131		310
Convert. debt due 2017	(b)	9.1	%	1,000			921		112		2,033			9.1	%	1,000			846		110		1,956
Real estate mortgages	(c)	3.8	%	124			—		35		159			4.9	%	133			—		22		155
ESOP Loans	(d)	2.9	%	192			—		25		217			2.8	%	151			—		2		153
Capital lease - real estate	(e)	5.3	%	112			—		5		117			5.3	%	125			—		6		131
Non U.S. lines of credit	(f)	n/a		307			—		27		334			n/a		155			—		—		155
Non U.S. term loans	(f)	n/a		273			—		13		286			n/a		109			—		26		135
Other long term debt	(g)	n/a		6			—		9		15			n/a		272			—		—		272
Capitalized interest				(138		)	—		—		(138		)			(191		)	—		—		(191		)
Totals				$	10,060		$	921	$	680	$	11,661				$	11,730		$	846	$	703	$	13,279

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)



		Nine Months Ended June 30, 2014												Nine Months Ended June 30, 2013
		Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense			Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense
Senior notes due 2018	(a)	7.4	%	$	15,930		$	—	$	667	$	16,597		7.4	%	$	29,391		$	—	$	1,217	$	30,608
Senior notes due 2022	(a)	5.5	%	10,675			—		421		11,096			n/a		—			—		—		—
Revolver due 2019	(a)	n/a		782			—		422		1,204			n/a		603			—		444		1,047
Convert. debt due 2017	(b)	9.1	%	3,000			2,713		333		6,046			9.2	%	3,000			2,491		332		5,823
Real estate mortgages	(c)	4.0	%	376			—		108		484			4.9	%	407			—		65		472
ESOP Loans	(d)	3.2	%	524			—		32		556			2.9	%	476			—		6		482
Capital lease - real estate	(e)	5.4	%	345			—		19		364			5.3	%	381			—		19		400
Non U.S. lines of credit	(f)	n/a		724			—		27		751			n/a		415			—		—		415
Non U.S. term loans	(f)	n/a		426			—		17		443			n/a		415			—		77		492
Other long term debt	(g)	n/a		17			—		30		47			n/a		523			—		—		523
Capitalized interest				(404		)	—		—		(404		)			(816		)	—		—		(816		)
Totals				$	32,395		$	2,713	$	2,076	$	37,184				$	34,795		$	2,491	$	2,160	$	39,446

(1) not applicable = n/a

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)

In connection with these transactions, Griffon capitalized $9,950 of underwriting fees and other expenses incurred related to issuance 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 February 14, 2014, Griffon amended its $225,000 Revolving Credit Facility (“Credit Agreement”) ~~extending~~to extend its maturity date from March 28, 2018 to March 28, 2019, ~~amending~~and to revise certain financial maintenance ~~ratio test thresholds~~ and ~~increasing certain baskets for permitted debt, guaranties, liens, asset sales, foreign acquisitions, investments~~negative covenants to improve Griffon's financial and ~~restricted payments.~~operating flexibility. The facility includes a letter of credit sub-facility with a limit of $60,000, a multi-currency sub-facility of $50,000 and a swing line 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 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. The current margins are 1.25% for base rate loans and 2.25% 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 Credit Agreement also includes certain restrictions, such as limitations on the ability of Griffon to incur indebtedness and liens and to 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 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.~~

subsidiaries (except that a lien on the assets of Griffon and its material domestic subsidiaries securing a limited amount of the debt under the ESOP credit agreement ranks pari passu with the lien granted on such assets under the Credit Agreement; see footnote (d) below).

At ~~March 31,~~June 30, 2014, outstanding borrowings and standby letters of credit were ~~$20,000~~$25,000 and ~~$20,352,~~$20,365, respectively; ~~$184,648~~$179,635 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 68.6238 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to a conversion price of ~~$14.57~~$14.53 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,~~June 30, 2014, aggregate dividends since the ~~above~~last conversion price ~~included dividends paid through March 27, 2014.~~adjustment of $0.03 per share would have resulted in an adjustment to the conversion ratio of approximately .27%. At both ~~March 31,~~June 30, 2014 and 2013, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.


(c)	On October 21, 2013, Griffon refinanced two properties’ real estate mortgages to secure ~~new~~ 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,~~June 30, 2014, ~~$16,818~~$16,603 was outstanding.

(d)

In December 2013, Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into ana credit agreement which refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098. The ~~Agreement~~agreement also provided a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market through September 29, 2014. As of ~~March 31,~~June 30, 2014, 749,977 shares of Griffon common stock, for a total of $10,000, were purchased with proceeds from the Line Note. In March 2014, the Line Note was combined with the Term Loan to form one new term loan. The loan bears interest at a) LIBOR plus 2.25% or b) the lender’s prime rate, at Griffon’s option. The loan requires quarterly principal payments of $505 through September 30, 2014 and $419 per quarter thereafter, with a balloon payment of approximately ~~$19,000~~$22,400 due at maturity in December 2018. The loan is secured by shares purchased with the proceeds of the loan and with a lien on ~~a specific amount~~the assets of Griffon ~~assets,~~ and ~~Griffon guarantees repayment. As of March 31, 2014, approximately $30,087 was outstanding.~~its material domestic

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)

subsidiaries securing a limited amount of the loan (which lien ranks pari passu with the lien granted on such assets securing the debt under Griffon’s revolving credit facility; see footnote (a) above), and Griffon guarantees repayment. As of June 30, 2014, $29,583 was outstanding.

In July 2014, Griffon's ESOP entered into an amendment to the existing agreement which provides for an additional $10,000 Line Note available to purchase shares in the open market. The new Line Note will bear interest at a) LIBOR plus 2.75% or b) the lender’s prime rate, at Griffon’s option, through its expiration date on June 30, 2015. Upon expiration or at an earlier date, at Griffon’s option, the new Line Note will be combined with the Term Loan and require quarterly principal payments based on the remaining amortization schedule at a weighted average interest rate of the combined loans, with a balloon payment due at the final maturity date of December 31, 2018, based on the new amortization schedule. The new Line Note and the Term Loan are secured by shares purchased with the proceeds of the loan and with a lien on the assets of Griffon and its material domestic subsidiaries securing a limited amount of the loan (which lien ranks pari passu with the lien granted on such assets securing the debt under Griffon’s revolving credit facility; see footnote (a) above), and Griffon guarantees repayment.


(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. At June 30, 2014, $8,798 was outstanding.

(f)

In November 2010, Clopay Europe ~~GMBH~~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 borrowings of ~~$5,500~~$4,093 at ~~March 31,~~June 30, 2014. The revolving facility matures in November 2014, but is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 2.20% per ~~annum.~~annum (2.41% at June 30, 2014). 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 approximately $5,700. Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% ~~(16.55%~~(16.80% at ~~March 31,~~June 30, 2014). At ~~March 31,~~June 30, 2014 there was ~~approximately $3,943~~$3,660 borrowed under the lines. Clopay Plastic Products ~~Co.,~~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 ~~(1.45%~~(1.46% LIBOR USD and ~~2.47%~~2.51% Bankers Acceptance Rate CDN as of ~~March 31,~~June 30, 2014). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity. At ~~March 31,~~June 30, 2014, there were no borrowings under the revolving credit facility with CAD $15,000 available for borrowing.

In December 2013 and May 2014, Northcote Holdings ~~Pty.~~Pty Ltd entered into antwo term loans in the outstanding amounts of AUD $12,500 and AUD $20,000, respectively. The AUD $12,500 and AUD $20,000 term ~~loan. The term loan is~~loans are unsecured ~~requires~~and require quarterly interest payments, ~~and~~with quarterly principal payments of $625 beginning in August 2015 on the AUD $20,000 term loan. Remaining principal is due at maturity ~~(December 2016).~~in December 2016 and May 2017, respectively. The ~~loan accrues~~loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.5% at ~~March 31, 2014)~~June 30, 2014 for each loan). As of ~~March 31,~~June 30, 2014, Griffon had an outstanding combined balance of ~~$11,559.~~$30,612 on the term loans. Subsidiaries of Northcote Holdings Pty Ltd also maintain ~~a line~~two lines of credit of ~~approximately $2,800. The line of credit accrues~~AUD $3,000 and AUD $5,000 which accrue interest at BBSY plus 2.25% per annum ~~(4.95%~~(5.00% at ~~March 31,~~June 30, 2014). and 2.50% per annum (5.25% at June 30, 2014), respectively. At ~~March 31,~~June 30, 2014, there were no outstanding borrowings under the ~~line.~~lines. Griffon Corporation guarantees ~~both~~ the term ~~loan~~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.

~~(g)~~

~~Other long-term debt primarily consists of capital leases.~~

(g) Other long-term debt primarily consists of capital leases.

At ~~March 31,~~June 30, 2014, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

NOTE 9 — SHAREHOLDERS’ EQUITY

During 2013, the Company declared and paid quarterly dividends of $0.025 per share, totaling $0.10 per share for the year. During ~~the first and second quarter of~~ 2014, the Board of Directors approved and paid a quarterly cash dividend of $0.03 per ~~share.~~share in each quarter, totaling $0.09 per share for the nine months ended June 30, 2014. 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.

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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)

On ~~May 1,~~July 30, 2014, the Board of Directors declared a quarterly cash dividend of $0.03 per share, payable on ~~June 26,~~September 24, 2014 to shareholders of record as of the close of business on ~~May 23,~~August 21, 2014.

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 is amortized using the straight-line attribution method.

In February 2011, shareholders approved the Griffon Corporation 2011 Equity 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 (as amended, 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 cancelled or forfeited. As of ~~March 31,~~June 30, 2014, ~~963,657~~989,895 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 2014, Griffon granted 599,328 restricted stock awards with vesting periods up to four years, 554,498 of which are also subject to certain performance conditions, with a total fair value of $7,426, or a weighted average fair value of $12.39 per share. During the second quarter of 2014, Griffon granted 518,490 restricted stock awards with vesting periods up to four years, 461,827 of which are also subject to certain performance conditions, with a total fair value of $7,074, or a weighted average fair value of $13.64 per share.

For the quarters ended March 31, 2014 and 2013, stock based compensation expense totaled $3,321 and $3,338, respectively. For the six months ended March 31, 2014 and 2013, stock based compensation expenses totaled $4,996 and $6,298, 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 purchase shares, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. In the six months ended March 31, 2014, Griffon purchased 598,481 shares of common stock under the authorized program, for a total of $7,501 or $12.53 per share. To date, Griffon has purchased 4,320,712 shares of common stock, for a total of $45,474 or $10.52 per share under this repurchase authorization. As of March 31, 2014, $4,525 remains under this $50,000 authorization.

On May 1, 2014, Griffon’s Board of Directors authorized the repurchase of up to an additional $50,000 of Griffon’s outstanding common stock. Under this repurchase program, the Company may purchase shares, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan.

During the first quarter, 288,012 shares, with a market value of $3,764 or $13.07 per share, withheld to settle employee taxes due upon the vesting of restricted stock, were added to treasury stock. During the second quarter, 123,052 shares, with a market value of $1,502 or $12.21 per share, withheld to settle employee taxes due upon the vesting of restricted stock, were added to treasury.

In connection with the Northcote acquisition, Griffon entered into certain retention arrangements with Northcote management. Under these arrangements, on January 10, 2014, Griffon issued 44,476 shares of common stock to Northcote management for an aggregate purchase price of $584 or $13.13 per share, and for each share of common stock purchased, Northcote management received one restricted stock unit ~~included~~(included in the detail in the prior ~~paragraph,~~paragraph), that vests in three equal installments over 3 years, subject to the attainment of specified performance criteria.

For the quarters ended June 30, 2014 and 2013, stock based compensation expense totaled $3,137 and $3,029, respectively. For the nine months ended June 30, 2014 and 2013, stock based compensation expenses totaled $8,133 and $9,327, respectively.

In each of August 2011 and May 2014, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock for each program. Under both repurchase programs, the Company may purchase shares, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. During the quarter ended June 30, 2014, Griffon purchased 750,000 shares of common stock under these programs, for a total of $8,784 or $11.71 per share. In the nine months ended June 30, 2014, Griffon purchased 1,348,481 shares of common stock under these programs, for a total of $16,285 or $12.08 per share. Since the resumption of share repurchases in 2011 through the end of the third quarter of 2014, Griffon has repurchased 6,436,712 shares of common stock, for a total of $65,315 or $10.15 per share, under Board authorized repurchase programs (which repurchases included exhausting the remaining availability under a Board authorized repurchase program that was in existence prior to 2011). As of June 30, 2014, the August 2011 program was completed and $45,742 remains under the May 2014 authorization.

During the quarter and nine months ended June 30, 2014, 33,046 shares, with a market value of $364 or $11.02 per share, and 444,110 shares, with a market value of $5,631 or $12.68 per share, respectively, were withheld to settle employee taxes due to the vesting of restricted stock and were added to treasury.

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)

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. The transaction was exclusive of the Company’s August 2011 $50,000 authorized share repurchase program. After closing the transaction, GS Direct continued to hold approximately 5.56 million shares (approximately 10%) of Griffon’s common stock. GS Direct also agreed that, subject to certain exceptions, if it intends to sell its remaining shares of Griffon common stock at any time prior to December 31, 2014, it will first negotiate in good faith to sell such shares to the Company.

In December 2013, Griffon’s Board of Directors authorized the ESOP to purchase up to $10,000 of Griffon’s outstanding common stock, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. During the first quarter of 2014, the ESOP purchased 120,000 shares of common stock, for a total of $1,591 or $13.26 per share. During the second quarter of 2014, the ESOP purchased 629,977 shares of common stock, for a total of $8,409 or $13.35 per share. In total, during the ~~six month~~nine months ended ~~March 31,~~June 30, 2014, the ESOP purchased 749,977 shares of common stock, for a total of $10,000 or $13.33 per share, exhausting the $10,000 authorization.

In July 2014, Griffon's ESOP entered into an amendment of the existing Agreement, which provides an additional $10,000 Line Note available to purchase shares in the open market.

NOTE 10 – EARNINGS PER SHARE (EPS)

Basic EPS (and diluted EPS in periods where 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. 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,
2014 2013 2014 2013
Weighted average shares outstanding - basic 48,990 54,345 50,872 54,749
Incremental shares from stock based compensation — — — —

Weighted average shares outstanding - diluted 48,990 54,345 50,872 54,749

Anti-dilutive options excluded from diluted EPS computation 644 856 644 856
Anti-dilutive restricted stock excluded from diluted EPS computation 1,507 2,421 1,682 2,259



	Three Months Ended June 30,		Nine Months Ended June 30,
	2014	2013	2014	2013
Weighted average shares outstanding - basic	48,370	54,265	50,038	54,588
Incremental shares from stock based compensation	1,466	1,939	—	2,147

Weighted average shares outstanding - diluted	49,836	56,204	50,038	56,735

Anti-dilutive options excluded from diluted EPS computation	643	715	643	715
Anti-dilutive restricted stock excluded from diluted EPS computation	—	—	1,609	—

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 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.

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)

Information on Griffon’s business segments is as follows:

For the Three Months Ended March 31, For the Six Months Ended March 31,
REVENUE 2014 2013 2014 2013
Home & Building Products:
Ames $ 160,705 $ 136,237 $ 257,313 $ 213,546
CBP 90,838 89,499 212,680 202,366
Home & Building Products 251,543 225,736 469,993 415,912
Telephonics 104,185 121,631 200,210 217,681
Plastics 151,959 141,376 290,942 278,899
Total consolidated net sales $ 507,687 $ 488,743 $ 961,145 $ 912,492



	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
REVENUE	2014		2013		2014		2013
Home & Building Products:
Ames	$	132,179	$	128,332	$	389,492	$	341,878
CBP	121,814		112,285		334,494		314,651
Home & Building Products	253,993		240,617		723,986		656,529
Telephonics	102,446		129,997		302,656		347,678
Plastics	148,600		139,212		439,542		418,111
Total consolidated net sales	$	505,039	$	509,826	$	1,466,184	$	1,422,318

The following table reconciles segment operating profit to Loss before taxes:

For the Three Months Ended March 31, For the Six Months Ended March 31,
LOSS BEFORE TAXES 2014 2013 2014 2013
Segment operating profit:
Home & Building Products $ 8,818 $ 3,835 $ 18,211 $ 11,106
Telephonics 10,677 13,753 21,329 28,398
Plastics 9,352 916 15,177 3,558
Total segment operating profit 28,847 18,504 54,717 43,062
Net interest expense (12,361 ) (12,909 ) (25,462 ) (25,988 )
Unallocated amounts (8,391 ) (7,980 ) (16,374 ) (15,567 )
Loss from debt extinguishment, net (38,890 ) — (38,890 ) —
Loss on pension settlement — — — (2,142 )
Loss before taxes $ (30,795 ) $ (2,385 ) $ (26,009 ) $ (635 )



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
INCOME (LOSS) BEFORE TAXES	2014			2013			2014			2013
Segment operating profit:
Home & Building Products	$	9,747		$	11,549		$	27,958		$	22,655
Telephonics	13,134			10,592			34,463			38,990
Plastics	8,075			5,401			23,252			8,959
Total segment operating profit	30,956			27,542			85,673			70,604
Net interest expense	(11,541		)	(13,137		)	(37,003		)	(39,125		)
Unallocated amounts	(6,521		)	(6,573		)	(22,895		)	(22,140		)
Loss from debt extinguishment, net	—			—			(38,890		)	—
Loss on pension settlement	—			—			—			(2,142		)
Income (loss) before taxes	$	12,894		$	7,832		$	(13,115	)	$	7,197

Griffon evaluates performance and allocates resources based on each ~~segments’~~segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses, and gains (losses) from pension settlement and debt extinguishment, 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 ~~Loss~~Income (loss) before taxes:

For the Three Months Ended March 31, For the Six Months Ended March 31,
2014 2013 2014 2013
Segment adjusted EBITDA:
Home & Building Products $ 17,124 $ 17,555 $ 36,191 $ 34,794
Telephonics 12,535 15,505 24,931 31,869
Plastics 16,216 12,352 28,959 21,671
Total Segment adjusted EBITDA 45,875 45,412 90,081 88,334
Net interest expense (12,361 ) (12,909 ) (25,462 ) (25,988 )
Segment depreciation and amortization (16,336 ) (17,572 ) (33,032 ) (34,828 )
Unallocated amounts (8,391 ) (7,980 ) (16,374 ) (15,567 )
Loss from debt extinguishment, net (38,890 ) — (38,890 ) —
Restructuring charges (692 ) (9,336 ) (1,534 ) (10,444 )
Acquisition costs — — (798 ) —
Loss on pension settlement — — — (2,142 )
Loss before taxes $ (30,795 ) $ (2,385 ) $ (26,009 ) $ (635 )

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)



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2014			2013			2014			2013
Segment adjusted EBITDA:
Home & Building Products	$	19,596		$	21,478		$	55,787		$	56,272
Telephonics	15,087			13,146			40,018			45,015
Plastics	14,922			12,161			43,881			33,832
Total Segment adjusted EBITDA	49,605			46,785			139,686			135,119
Net interest expense	(11,541		)	(13,137		)	(37,003		)	(39,125		)
Segment depreciation and amortization	(16,691		)	(17,639		)	(49,723		)	(52,467		)
Unallocated amounts	(6,521		)	(6,573		)	(22,895		)	(22,140		)
Loss from debt extinguishment, net	—			—			(38,890		)	—
Restructuring charges	(358		)	(1,604		)	(1,892		)	(12,048		)
Acquisition costs	(1,600		)	—			(2,398		)	—
Loss on pension settlement	—			—			—			(2,142		)
Income (loss) before taxes	$	12,894		$	7,832		$	(13,115	)	$	7,197

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)

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 2014 2013 2014 2013
Segment:
Home & Building Products $ 7,614 $ 9,157 $ 15,648 $ 18,017
Telephonics 1,858 1,752 3,602 3,471
Plastics 6,864 6,663 13,782 13,340
Total segment depreciation and amortization 16,336 17,572 33,032 34,828
Corporate 103 109 200 210
Total consolidated depreciation and amortization $ 16,439 $ 17,681 $ 33,232 $ 35,038

CAPITAL EXPENDITURES
Segment:
Home & Building Products $ 6,722 $ 6,711 $ 15,190 $ 15,804
Telephonics 5,520 2,630 8,887 3,452
Plastics 4,390 4,333 10,150 11,701
Total segment 16,632 13,674 34,227 30,957
Corporate 297 33 618 38
Total consolidated capital expenditures $ 16,929 $ 13,707 $ 34,845 $ 30,995

ASSETS At March 31,
2014 At September 30,
2013
Segment assets:
Home & Building Products $ 995,765 $ 908,386
Telephonics 299,820 296,919
Plastics 426,563 422,730
Total segment assets 1,722,148 1,628,035
Corporate 55,728 156,455
Total continuing assets 1,777,876 1,784,490
Assets of discontinued operations 4,324 4,289
Consolidated total $ 1,782,200 $ 1,788,779



	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
DEPRECIATION and AMORTIZATION	2014		2013		2014		2013
Segment:
Home & Building Products	$	7,891	$	9,075	$	23,539	$	27,092
Telephonics	1,953		1,804		5,555		5,275
Plastics	6,847		6,760		20,629		20,100
Total segment depreciation and amortization	16,691		17,639		49,723		52,467
Corporate	104		110		304		320
Total consolidated depreciation and amortization	$	16,795	$	17,749	$	50,027	$	52,787

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	8,194	$	6,534	$	23,384	$	22,352
Telephonics	6,082		2,401		14,969		5,853
Plastics	5,063		5,947		15,213		17,648
Total segment	19,339		14,882		53,566		45,853
Corporate	675		9		1,293		33
Total consolidated capital expenditures	$	20,014	$	14,891	$	54,859	$	45,886



ASSETS	At June 30, 2014		At September 30, 2013
Segment assets:
Home & Building Products	$	1,020,849	$	908,386
Telephonics	299,058		296,919
Plastics	421,892		422,730
Total segment assets	1,741,799		1,628,035
Corporate	85,210		156,455
Total continuing assets	1,827,009		1,784,490
Assets of discontinued operations	4,241		4,289
Consolidated total	$	1,831,250	$	1,788,779

NOTE 12 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense was as follows:

Three Months Ended
March 31, Six Months Ended
March 31,
2014 2013 2014 2013
Service cost $ 45 $ 48 $ 90 $ 98
Interest cost 2,500 2,422 5,000 4,847
Expected return on plan assets (2,885 ) (3,136 ) (5,770 ) (6,274 )
Amortization:
Prior service cost 4 5 8 10
Recognized actuarial loss 489 840 978 1,680
Loss on pension settlement — — — 2,142
Net periodic expense $ 153 $ 179 $ 306 $ 2,503



	Three Months Ended June 30,						Nine Months Ended June 30,
	2014			2013			2014			2013
Service cost	$	—		$	51		$	90		$	149
Interest cost	2,416			2,427			7,415			7,274
Expected return on plan assets	(2,820		)	(3,139		)	(8,590		)	(9,413		)
Amortization:
Prior service cost	4			5			11			15
Recognized actuarial loss	485			840			1,463			2,520
Loss on pension settlement	—			—			—			2,142
Net periodic expense	$	85		$	184		$	389		$	2,687

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)

During the second quarter of 2014, the company contributed €1,300 (U.S. $1,776), which equaled the net balance sheet liability, in settlement of all remaining obligations for a non U.S. Pension liability. There were no gains or losses recorded for this settlement.

First quarter of 2013 ~~Selling, general and administrative~~SG&A expenses included a $2,142 ~~non-cash,~~ pension settlement loss resulting from the lump-sum buyout of certain participant’s balances in the Company’s defined benefit plan. The buyouts, funded by the pension plan, reduced the Company’s net pension liability by $3,472 and increased Accumulated Other Comprehensive Income ~~(Loss)~~ by $3,649.

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ~~new accounting~~ guidance requiring enhanced disclosures for items reclassified out of accumulated other comprehensive income (loss). The guidance does not amend any existing requirements for reporting net income (loss) or other comprehensive income (loss) in the financial statements. This guidance is effective prospectively for annual reporting periods beginning after December 15, 2012, with early adoption permitted. As this new guidance is related to presentation only, the implementation of this guidance in the first quarter of fiscal year 2014 did not have a material effect on the Company’s financial condition or results of operations.

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 prospectively for annual reporting periods beginning after December 15, 2014, with early adoption permitted for disposals that have not been previously reported. The implementation of this guidance is not expected to have a material effect on the Company’s financial condition or results of operations.

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 annual reporting periods beginning after December 15, 2016; 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.

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.

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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 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,
2014 At September 30,
2013
Assets of discontinued operations:
Prepaid and other current assets $ 1,217 $ 1,214
Other long-term assets 3,107 3,075
Total assets of discontinued operations $ 4,324 $ 4,289

Liabilities of discontinued operations:
Accrued liabilities, current $ 3,069 $ 3,288
Other long-term liabilities 4,359 4,744
Total liabilities of discontinued operations $ 7,428 $ 8,032



	At June 30, 2014		At September 30, 2013
Assets of discontinued operations:
Prepaid and other current assets	$	1,209	$	1,214
Other long-term assets	3,032		3,075
Total assets of discontinued operations	$	4,241	$	4,289

Liabilities of discontinued operations:
Accrued liabilities, current	$	2,959	$	3,288
Other long-term liabilities	4,008		4,744
Total liabilities of discontinued operations	$	6,967	$	8,032

There was no Installation Services revenue or income for the quarter or ~~six~~nine months ended ~~March 31,~~June 30, 2014 or 2013.

NOTE 15 – RESTRUCTURING AND OTHER RELATED CHARGES

In January 2013, Ames announced its intention to close certain manufacturing facilities, and to consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. The intended actions, to be completed by the end of calendar 2014, will improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production currently performed by third party suppliers, and improve material flow and absorption of fixed costs.

Ames anticipates incurring pre-tax restructuring and related exit costs approximating $8,000, comprised of cash charges of $4,000 and non-cash, asset-related charges of $4,000; the cash charges will include $2,500 for one-time termination benefits and other personnel-related costs and $1,500 for facility exit costs. Ames expects $20,000 in capital expenditures in connection with this initiative and, to date, has incurred ~~$7,583~~$7,941 and ~~$15,269~~$15,712 in restructuring costs and capital expenditures, respectively.

HBP recognized ~~$692~~$358 and ~~$1,534,~~$1,892, respectively, for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2014, and ~~$4,563~~$854 and ~~$5,671,~~$6,525, respectively, for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2013 in restructuring and other related exit costs; 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. The 2013 period also included charges related to a CBP plant consolidation.

In February 2013, Plastics undertook a restructuring project, primarily in Europe, to exit low margin business and to eliminate approximately 80 positions, resulting in restructuring charges of $4,773, primarily related to one-time termination benefits and other personnel costs. The project was completed in 2013.

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, 2012 $ 994 $ 39 $ 75 $ — $ 1,108
Quarter ended March 31, 2013 3,795 523 1,517 3,501 9,336
Six Months Ended March 31, 2013 $ 4,789 $ 562 $ 1,592 $ 3,501 $ 10,444

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

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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)



	Workforce Reduction		Facilities & Exit Costs		Other Related Costs		Non-cash Facility and Other		Total
Amounts incurred in:
Quarter ended December 31, 2012	$	994	$	39	$	75	$	—	$	1,108
Quarter ended March 31, 2013	3,635		683		1,517		3,501		9,336
Quarter ended June 30, 2013	$	641	$	926	$	37	$	—	$	1,604
Nine Months Ended June 30, 2013	$	5,270	$	1,648	$	1,629	$	3,501	$	12,048

Quarter ended December 31, 2013	$	638	$	95	$	109	$	—	$	842
Quarter ended March 31, 2014	495		137		60		—		692
Quarter ended June 30, 2014	$	289	$	47	$	22	$	—	$	358
Nine Months Ended June 30, 2014	$	1,422	$	279	$	191	$	—	$	1,892

The activity in the restructuring accrual recorded in accrued liabilities consisted of the following:

Workforce
Reduction Facilities &
Exit Costs Other
Related Total
Accrued liability at September 30, 2013 $ 3,057 $ 393 $ 407 $ 3,857
Charges 1,133 232 169 1,534
Payments (2,094 ) (552 ) (425 ) (3,071 )
Accrued liability at March 31, 2014 $ 2,096 $ 73 $ 151 $ 2,320



	Workforce Reduction			Facilities & Exit Costs			Other Related			Total
Accrued liability at September 30, 2013	$	3,057		$	393		$	407		$	3,857
Charges	1,422			279			191			1,892
Payments	(3,151		)	(599		)	(466		)	(4,216		)
Accrued liability at June 30, 2014	$	1,328		$	73		$	132		$	1,533

NOTE 16 – OTHER EXPENSE

For the quarters ended ~~March 31,~~June 30, 2014 and 2013, Other income (expense) included ~~$436~~$365 and $168, respectively, of net currency exchange (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 $1,437 and $12, respectively, of net investment income.

For the nine months ended June 30, 2014 and 2013, Other income (expense) included $1,044 and ($~~479)~~299), respectively, of net currency exchange (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 ~~$15~~$1,563 and ~~$321,~~$365, respectively, of net investment income.

For the six months ended March 31, 2014 and 2013, Other income (expense) included $679 and ($467), respectively, of net currency exchange (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 $127 and $353, 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 from the date of original purchase.~~

packaging.

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

Three Months Ended March 31, Six Months Ended March 31,
2014 2013 2014 2013
Balance, beginning of period $ 6,929 $ 7,743 $ 6,649 $ 8,856
Warranties issued and changes in
estimated pre-existing warranties 1,135 662 2,101 656
Actual warranty costs incurred (953 ) (981 ) (1,639 ) (2,088 )
Balance, end of period $ 7,111 $ 7,424 $ 7,111 $ 7,424

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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)



	Three Months Ended June 30,						Nine Months Ended June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	7,111		$	7,424		$	6,649		$	8,856
Warranties issued and changes in estimated pre-existing warranties	576			1,309			2,677			1,965
Actual warranty costs incurred	(1,199		)	(1,342		)	(2,838		)	(3,430		)
Balance, end of period	$	6,488		$	7,391		$	6,488		$	7,391

NOTE 18 – OTHER COMPREHENSIVE INCOME (LOSS)

The amounts recognized in other comprehensive income (loss) were as follows:

Three Months Ended March 31, 2014 Three Months Ended March 31, 2013
Pre-tax Tax Net of tax Pre-tax Tax Net of tax
Foreign currency translation adjustments $ 1,224 $ — $ 1,224 $ (5,924 ) $ — $ (5,924 )
Pension and other defined benefit plans 1,698 (599 ) 1,099 845 (356 ) 489
Gain on cash flow hedge — — — 171 — 171
Total other comprehensive income (loss) $ 2,922 $ (599 ) $ 2,323 $ (4,908 ) $ (356 ) $ (5,264 )

Six Months Ended March 31, 2014 Six Months Ended March 31, 2013
Pre-tax Tax Net of tax Pre-tax Tax Net of tax
Foreign currency translation adjustments $ (1,913 ) $ — $ (1,913 ) $ (2,921 ) $ — $ (2,921 )
Pension and other defined benefit plans 2,191 (776 ) 1,415 7,304 (2,955 ) 4,349
Gain on cash flow hedge — — — 171 — 171
Total other comprehensive income (loss) $ 278 $ (776 ) $ (498 ) $ 4,554 $ (2,955 ) $ 1,599



	Three Months Ended June 30, 2014							Three Months Ended June 30, 2013
	Pre-tax		Tax			Net of tax		Pre-tax			Tax			Net of tax
Foreign currency translation adjustments	$	2,809	$	—		$	2,809	$	(7,884	)	$	—		$	(7,884	)
Pension and other defined benefit plans	491		(174		)	317		823			(333		)	490
Gain on cash flow hedge	—		—			—		(158		)	—			(158		)
Total other comprehensive income (loss)	$	3,300	$	(174	)	$	3,126	$	(7,219	)	$	(333	)	$	(7,552	)



	Nine Months Ended June 30, 2014							Nine Months Ended June 30, 2013
	Pre-tax		Tax			Net of tax		Pre-tax			Tax			Net of tax
Foreign currency translation adjustments	$	896	$	—		$	896	$	(10,805	)	$	—		$	(10,805	)
Pension and other defined benefit plans	2,682		(950		)	1,732		8,127			(3,288		)	4,839
Gain on cash flow hedge	—		—			—		13			—			13
Total other comprehensive income (loss)	$	3,578	$	(950	)	$	2,628	$	(2,665	)	$	(3,288	)	$	(5,953	)

Amounts reclassified from accumulated other comprehensive income (loss) to income (loss) were as follows:

Three Months Ended March 31, Six Months Ended March 31,
2014 2013 2014 2013
Pension amortization $ 493 $ 845 $ 986 $ 1,690
Pension settlement — — — 2,142
Total before tax 493 845 986 3,832
Tax (168 ) (296 ) (345 ) (1,341 )
Net of tax $ 325 $ 549 $ 641 $ 2,491



	Three Months Ended June 30,						Nine Months Ended June 30,
	2014			2013			2014			2013
Pension amortization	$	489		$	845		$	1,474		$	2,535
Pension settlement	—			—			—			2,142
Total before tax	489			845			1,474			4,677
Tax	(167		)	(296		)	(516		)	(1,341		)
Net of tax	$	322		$	549		$	958		$	3,336

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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 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, the 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, the 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 the 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 the 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 acknowledgement that there has been

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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)

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. Demolition of the structures on the property has been substantially completed. The DEC has inspected the progress of the work and is satisfied with the results thus far. On February 12, 2013, the DEC issued comments to the Remedial Investigation Work Plan previously submitted by Ames in October 2011, and in response, Ames issued a Revised Remedial Investigation Work Plan. Completion of the remedial investigation is dependent on timing of the DEC approval; no additional comments have been provided by the DEC to date. On October 21, 2013 Ames filed its revised Remedial Investigation Report (“RIR”) with the DEC. On February 3, 2014, the DEC accepted Ames’ RIR as a draft and requested certain revisions. Ames is currently reviewing the requested revisions and will either revise the RIR as requested or negotiate alternate action acceptable to the DEC. On March 31, 2014, the DEC approved Ames Preliminary Schedule for “Additional Remedial Investigation/Feasibility Study Activities” (RI/FS) that identifies remedial investigations and remedial actions through to a Record of Decision. In accordance with the approved RI/FS schedule, Ames filed its work plan for Supplemental Remedial Investigation Activities with the DEC on April 3, 2014.

On May 12, 2014 Ames filed a final Soil Vapor Intrusion Work Plan with DEC, which has been approved by DEC. On June 2, 2014 Ames submitted a Draft IRM Construction Completion Report to DEC. To date, DEC has not responded with approvals or comments to the Draft IRM Construction Report.

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 subpoenas 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, 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 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.

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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 20 — RELATED PARTY

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

NOTE 21 — 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, each of which are 100%, indirectly, 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,~~June 30, 2014 and September 30, 2013 and for the quarter and ~~six-month period~~nine months ended ~~March 31,~~June 30, 2014 and 2013. 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.

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.

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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)

CONDENSED CONSOLIDATING BALANCE SHEETS

At ~~March 31,~~June 30, 2014

Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation
CURRENT ASSETS
Cash and equivalents $ 4,199 $ 25,259 $ 40,475 $ — $ 69,933
Accounts receivable, net of allowances — 258,037 82,765 (31,640 ) 309,162
Contract costs and recognized income not yet billed, net of progress payments — 107,388 437 — 107,825
Inventories, net — 197,947 58,814 (71 ) 256,690
Prepaid and other current assets 4,273 21,059 15,319 10,561 51,212
Assets of discontinued operations — — 1,217 — 1,217
Total Current Assets 8,472 609,690 199,027 (21,150 ) 796,039

PROPERTY, PLANT AND EQUIPMENT, net 1,424 255,330 101,128 — 357,882
GOODWILL — 290,761 79,411 — 370,172
INTANGIBLE ASSETS, net — 158,950 65,276 — 224,226
INTERCOMPANY RECEIVABLE 558,505 886,492 83,046 (1,528,043 ) —
EQUITY INVESTMENTS IN SUBSIDIARIES 787,103 549,256 1,783,996 (3,120,355 ) —
OTHER ASSETS 47,410 51,142 7,435 (75,213 ) 30,774
ASSETS OF DISCONTINUED OPERATIONS — — 3,107 — 3,107
Total Assets $ 1,402,914 $ 2,801,621 $ 2,322,426 $ (4,744,761 ) $ 1,782,200

CURRENT LIABILITIES
Notes payable and current portion of long-term debt $ 1,847 $ 1,098 $ 10,448 $ — $ 13,393
Accounts payable and accrued liabilities 22,247 194,512 70,153 (21,935 ) 264,977
Liabilities of discontinued operations — — 3,069 — 3,069
Total Current Liabilities 24,094 195,610 83,670 (21,935 ) 281,439

LONG-TERM DEBT, net of debt discounts 736,786 8,298 28,495 — 773,579
INTERCOMPANY PAYABLES 21,318 772,390 707,295 (1,501,003 ) —
OTHER LIABILITIES 62,964 153,635 22,804 (74,332 ) 165,071
LIABILITIES OF DISCONTINUED OPERATIONS — — 4,359 — 4,359
Total Liabilities 845,162 1,129,933 846,623 (1,597,270 ) 1,224,448

SHAREHOLDERS’ EQUITY 557,752 1,671,688 1,475,803 (3,147,491 ) 557,752
Total Liabilities and Shareholders’ Equity $ 1,402,914 $ 2,801,621 $ 2,322,426 $ (4,744,761 ) $ 1,782,200



	Parent Company		Guarantor Companies		Non-Guarantor Companies		Elimination			Consolidation
CURRENT ASSETS
Cash and equivalents	$	9,208	$	19,500	$	58,729	$	—		$	87,437
Accounts receivable, net of allowances	—		222,754		78,918		(32,003		)	269,669
Contract costs and recognized income not yet billed, net of progress payments	—		104,518		359		—			104,877
Inventories, net	—		200,772		77,550		140			278,462
Prepaid and other current assets	21,180		23,835		18,714		10,561			74,290
Assets of discontinued operations	—		—		1,209		—			1,209
Total Current Assets	30,388		571,379		235,479		(21,302		)	815,944
PROPERTY, PLANT AND EQUIPMENT, net	1,392		261,632		102,352		—			365,376
GOODWILL	—		288,147		93,168		—			381,315
INTANGIBLE ASSETS, net	—		157,861		77,231		—			235,092
INTERCOMPANY RECEIVABLE	547,665		877,793		122,932		(1,548,390		)	—
EQUITY INVESTMENTS IN SUBSIDIARIES	802,548		682,810		1,916,521		(3,401,879		)	—
OTHER ASSETS	46,687		51,205		7,812		(75,213		)	30,491
ASSETS OF DISCONTINUED OPERATIONS	—		—		3,032		—			3,032
Total Assets	$	1,428,680	$	2,890,827	$	2,558,527	$	(5,046,784	)	$	1,831,250
CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	1,762	$	1,129	$	8,995	$	—		$	11,886
Accounts payable and accrued liabilities	33,353		187,496		84,571		(20,647		)	284,773
Liabilities of discontinued operations	—		—		2,959		—			2,959
Total Current Liabilities	35,115		188,625		96,525		(20,647		)	299,618

LONG-TERM DEBT, net of debt discounts	742,289		8,096		46,795		—			797,180
INTERCOMPANY PAYABLES	21,450		746,378		733,551		(1,501,379		)	—
OTHER LIABILITIES	61,485		149,029		25,921		(74,332		)	162,103
LIABILITIES OF DISCONTINUED OPERATIONS	—		—		4,008		—			4,008
Total Liabilities	860,339		1,092,128		906,800		(1,596,358		)	1,262,909
SHAREHOLDERS’ EQUITY	568,341		1,798,699		1,651,727		(3,450,426		)	568,341
Total Liabilities and Shareholders’ Equity	$	1,428,680	$	2,890,827	$	2,558,527	$	(5,046,784	)	$	1,831,250

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)

CONDENSED CONSOLIDATING BALANCE SHEETS

At September 30, 2013

Parent
Company Guarantor
Companies Non-Guarantor
Companies Elimination Consolidation

CURRENT ASSETS
Cash and equivalents $ 68,994 $ 25,343 $ 83,793 $ — $ 178,130
Accounts receivable, net of allowances — 213,506 76,241 (33,532 ) 256,215
Contract costs and recognized income not yet billed, net of progress payments — 109,683 145 — 109,828
Inventories, net — 173,406 56,723 (9 ) 230,120
Prepaid and other current assets (712 ) 21,854 17,330 10,431 48,903
Assets of discontinued operations — — 1,214 — 1,214
Total Current Assets 68,282 543,792 235,446 (23,110 ) 824,410

PROPERTY, PLANT AND EQUIPMENT, net 972 248,973 103,648 — 353,593
GOODWILL — 288,146 69,584 — 357,730
INTANGIBLE ASSETS, net — 160,349 61,042 — 221,391
INTERCOMPANY RECEIVABLE 547,903 911,632 573,269 (2,032,804 ) —
EQUITY INVESTMENTS IN SUBSIDIARIES 772,374 533,742 2,718,956 (4,025,072 ) —
OTHER ASSETS 45,968 50,423 7,423 (75,234 ) 28,580
ASSETS OF DISCONTINUED OPERATIONS — — 3,075 — 3,075
Total Assets $ 1,435,499 $ 2,737,057 $ 3,772,443 $ (6,156,220 ) $ 1,788,779

CURRENT LIABILITIES
Notes payable and current portion of long-term debt $ 1,000 $ 1,079 $ 8,689 $ — $ 10,768
Accounts payable and accrued liabilities 41,121 183,665 70,427 (24,860 ) 270,353
Liabilities of discontinued operations — — 3,288 — 3,288
Total Current Liabilities 42,121 184,744 82,404 (24,860 ) 284,409

LONG-TERM DEBT, net of debt discounts 656,852 9,006 12,629 — 678,487
INTERCOMPANY PAYABLES 20,607 796,741 1,188,017 (2,005,365 ) —
OTHER LIABILITIES 65,455 153,970 25,578 (74,328 ) 170,675
LIABILITIES OF DISCONTINUED OPERATIONS — — 4,744 — 4,744
Total Liabilities 785,035 1,144,461 1,313,372 (2,104,553 ) 1,138,315

SHAREHOLDERS’ EQUITY 650,464 1,592,596 2,459,071 (4,051,667 ) 650,464
Total Liabilities and Shareholders’ Equity $ 1,435,499 $ 2,737,057 $ 3,772,443 $ (6,156,220 ) $ 1,788,779

Parent
Company

Guarantor
Companies

Non-Guarantor
Companies
Elimination Consolidation
CURRENT ASSETS

Cash and equivalents $ 68,994
$ 25,343
$ 83,793
$ —
$ 178,130
Accounts receivable, net of allowances —
213,506
76,241
(33,532 ) 256,215
Contract costs and recognized income not yet billed, net of progress payments —
109,683
145
—
109,828
Inventories, net —
173,406
56,723
(9 ) 230,120
Prepaid and other current assets (712 ) 21,854
17,330
10,431
48,903
Assets of discontinued operations —
—
1,214
—
1,214
Total Current Assets 68,282
543,792
235,446
(23,110 ) 824,410

PROPERTY, PLANT AND EQUIPMENT, net 972
248,973
103,648
—
353,593
GOODWILL —
288,146
69,584
—
357,730
INTANGIBLE ASSETS, net —
160,349
61,042
—
221,391
INTERCOMPANY RECEIVABLE 547,903
911,632
573,269
(2,032,804 ) —
EQUITY INVESTMENTS IN SUBSIDIARIES 772,374
533,742
2,718,956
(4,025,072 ) —
OTHER ASSETS 45,968
50,423
7,423
(75,234 ) 28,580
ASSETS OF DISCONTINUED OPERATIONS —
—
3,075
—
3,075
Total Assets $ 1,435,499
$ 2,737,057
$ 3,772,443
$ (6,156,220 ) $ 1,788,779
CURRENT LIABILITIES

Notes payable and current portion of long-term debt $ 1,000
$ 1,079
$ 8,689
$ —
$ 10,768
Accounts payable and accrued liabilities 41,121
183,665
70,427
(24,860 ) 270,353
Liabilities of discontinued operations —
—
3,288
—
3,288
Total Current Liabilities 42,121
184,744
82,404
(24,860 ) 284,409
LONG-TERM DEBT, net of debt discounts 656,852
9,006
12,629
—
678,487
INTERCOMPANY PAYABLES 20,607
796,741
1,188,017
(2,005,365 ) —
OTHER LIABILITIES 65,455
153,970
25,578
(74,328 ) 170,675
LIABILITIES OF DISCONTINUED OPERATIONS —
—
4,744
—
4,744
Total Liabilities 785,035
1,144,461
1,313,372
(2,104,553 ) 1,138,315
SHAREHOLDERS’ EQUITY 650,464
1,592,596
2,459,071
(4,051,667 ) 650,464
Total Liabilities and Shareholders’ Equity $ 1,435,499
$ 2,737,057
$ 3,772,443
$ (6,156,220 ) $ 1,788,779

28
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)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended ~~March 31,~~June 30, 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 170 80 2,073 — 2,323
Comprehensive income (loss) $ (25,655 ) $ 12,046 $ 14,124 $ (24,017 ) $ (23,502 )

($ in thousands) Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation
Revenue $ —
$ 392,361
$ 126,343
$ (13,665 ) $ 505,039
Cost of goods and services —
295,148
103,938
(12,354 ) 386,732
Gross profit —
97,213
22,405
(1,311 ) 118,307
Selling, general and administrative expenses 7,034
71,110
19,617
(1,626 ) 96,135
Restructuring and other related charges —
349
9
—
358
Total operating expenses 7,034
71,459
19,626
(1,626 ) 96,493

Income (loss) from operations (7,034 ) 25,754
2,779
315
21,814

Other income (expense)

Interest income (expense), net (1,750 ) (7,367 ) (2,424 ) —
(11,541 )
Loss from debt extinguishment, net —
—
—
—
—
Other, net 1,436
2,497
(997 ) (315 ) 2,621
Total other income (expense) (314 ) (4,870 ) (3,421 ) (315 ) (8,920 )
Income (loss) before taxes (7,348 ) 20,884
(642 ) —
12,894
Provision (benefit) for income taxes (9,322 ) 7,322
430
—
(1,570 )
Income (loss) before equity in net income of subsidiaries 1,974
13,562
(1,072 ) —
14,464
Equity in net income (loss) of subsidiaries 12,490
(1,161 ) 13,562
(24,891 ) —
Net income (loss) $ 14,464
$ 12,401
$ 12,490
$ (24,891 ) $ 14,464

Net Income (loss) $ 14,464
$ 12,401
$ 12,490
$ (24,891 ) $ 14,464
Other comprehensive income (loss), net of taxes 171
(592 ) 3,547
—
3,126
Comprehensive income (loss) $ 14,635
$ 11,809
$ 16,037
$ (24,891 ) $ 17,590

29
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)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended ~~March 31,~~June 30, 2013

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

Revenue $ — $ 379,846 $ 123,599 $ (14,702 ) $ 488,743
Cost of goods and services — 292,369 104,011 (13,134 ) 383,246
Gross profit — 87,477 19,588 (1,568 ) 105,497

Selling, general and administrative expenses 3,821 67,936 15,912 (1,610 ) 86,059
Restructuring and other related charges — 5,372 3,964 — 9,336
Total operating expenses 3,821 73,308 19,876 (1,610 ) 95,395

Income (loss) from operations (3,821 ) 14,169 (288 ) 42 10,102

Other income (expense)
Interest income (expense), net (3,610 ) (6,824 ) (2,475 ) — (12,909 )
Other, net 322 1,546 (1,404 ) (42 ) 422
Total other income (expense) (3,288 ) (5,278 ) (3,879 ) (42 ) (12,487 )

Income (loss) before taxes (7,109 ) 8,891 (4,167 ) — (2,385 )
Provision (benefit) for income taxes (4,393 ) 2,750 77 — (1,566 )
Income (loss) before equity in net income of subsidiaries (2,716 ) 6,141 (4,244 ) — (819 )
Equity in net income (loss) of subsidiaries 1,897 (4,235 ) 6,981 (4,643 ) —
Net income (loss) $ (819 ) $ 1,906 $ 2,737 $ (4,643 ) $ (819 )

Net Income (loss) $ (819 ) $ 1,906 $ 2,737 $ (4,643 ) $ (819 )
Other comprehensive income (loss), net of taxes (1,181 ) (1,422 ) (2,661 ) — (5,264 )
Comprehensive income (loss) $ (2,000 ) $ 484 $ 76 $ (4,643 ) $ (6,083 )

($ in thousands) Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation
Revenue $ —
$ 408,371
$ 114,004
$ (12,549 ) $ 509,826
Cost of goods and services —
317,156
95,461
(11,102 ) 401,515
Gross profit —
91,215
18,543
(1,447 ) 108,311
Selling, general and administrative expenses 4,141
69,015
14,793
(1,604 ) 86,345
Restructuring and other related charges —
1,565
39
—
1,604
Total operating expenses 4,141
70,580
14,832
(1,604 ) 87,949
Income (loss) from operations (4,141 ) 20,635
3,711
157
20,362
Other income (expense)

Interest income (expense), net (3,559 ) (6,982 ) (2,596 ) —
(13,137 )
Other, net 12
2,462
(1,710 ) (157 ) 607
Total other income (expense) (3,547 ) (4,520 ) (4,306 ) (157 ) (12,530 )
Income (loss) before taxes (7,688 ) 16,115
(595 ) —
7,832
Provision (benefit) for income taxes (2,913 ) 6,745
397
—
4,229
Income (loss) before equity in net income of subsidiaries (4,775 ) 9,370
(992 ) —
3,603
Equity in net income (loss) of subsidiaries 8,378
(969 ) 9,370
(16,779 ) —
Net income (loss) $ 3,603
$ 8,401
$ 8,378
$ (16,779 ) $ 3,603
Net Income (loss) $ 3,603
$ 8,401
$ 8,378
$ (16,779 ) $ 3,603
Other comprehensive income (loss), net of taxes 211
836
(8,599 ) —
(7,552 )
Comprehensive income (loss) $ 3,814
$ 9,237
$ (221 ) $ (16,779 ) $ (3,949 )

30
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)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the ~~Six~~Nine Months Ended ~~March~~ June 30, 2014

Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation
Revenue $ —
$ 1,133,510
$ 375,877
$ (43,203 ) $ 1,466,184
Cost of goods and services —
860,322
310,887
(38,822 ) 1,132,387
Gross profit —
273,188
64,990
(4,381 ) 333,797
Selling, general and administrative expenses 20,525
207,725
50,025
(4,838 ) 273,437
Restructuring and other related charges —
1,841
51
—
1,892
Total operating expenses 20,525
209,566
50,076
(4,838 ) 275,329
Income (loss) from operations (20,525 ) 63,622
14,914
457
58,468
Other income (expense)

Interest income (expense), net (8,240 ) (21,946 ) (6,817 ) —
(37,003 )
Loss from debt extinguishment, net (38,890 ) —
—
—
(38,890 )
Other, net 1,563
5,569
(2,365 ) (457 ) 4,310
Total other income (expense) (45,567 ) (16,377 ) (9,182 ) (457 ) (71,583 )
Income (loss) before taxes (66,092 ) 47,245
5,732
—
(13,115 )
Provision (benefit) for income taxes (24,901 ) 19,014
897
—
(4,990 )
Income (loss) before equity in net income of subsidiaries (41,191 ) 28,231
4,835
—
(8,125 )
Equity in net income (loss) of subsidiaries 33,066
4,587
28,231
(65,884 ) —
Net income (loss) $ (8,125 ) $ 32,818
$ 33,066
$ (65,884 ) $ (8,125 )
Net Income (loss) $ (8,125 ) $ 32,818
$ 33,066
$ (65,884 ) $ (8,125 )
Other comprehensive income (loss), net of taxes 511
1,277
840
—
2,628
Comprehensive income (loss) $ (7,614 ) $ 34,095
$ 33,906
$ (65,884 ) $ (5,497 )

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 340 1,869 (2,707 ) — (498 )
Comprehensive income (loss) $ (22,249 ) $ 22,286 $ 17,869 $ (40,993 ) $ (23,087 )

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)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the ~~Six~~Nine Months Ended ~~March 31,~~June 30, 2013

Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation

Revenue $ — $ 700,904 $ 238,510 $ (26,922 ) $ 912,492
Cost of goods and services — 531,186 202,365 (24,226 ) 709,325
Gross profit — 169,718 36,145 (2,696 ) 203,167

Selling, general and administrative expenses 11,278 129,586 30,534 (3,120 ) 168,278
Restructuring and other related charges — 6,480 3,964 — 10,444
Total operating expenses 11,278 136,066 34,498 (3,120 ) 178,722

Income (loss) from operations (11,278 ) 33,652 1,647 424 24,445

Other income (expense)
Interest income (expense), net (7,222 ) (13,703 ) (5,063 ) — (25,988 )
Other, net 355 3,765 (2,788 ) (424 ) 908
Total other income (expense) (6,867 ) (9,938 ) (7,851 ) (424 ) (25,080 )

Income (loss) before taxes (18,145 ) 23,714 (6,204 ) — (635 )
Provision (benefit) for income taxes (9,759 ) 8,948 437 — (374 )
Income (loss) before equity in net income of subsidiaries (8,386 ) 14,766 (6,641 ) — (261 )
Equity in net income (loss) of subsidiaries 8,125 (6,596 ) 14,766 (16,295 ) —
Net income (loss) $ (261 ) $ 8,170 $ 8,125 $ (16,295 ) $ (261 )

Net Income (loss) $ (261 ) $ 8,170 $ 8,125 $ (16,295 ) $ (261 )
Other comprehensive income (loss), net of taxes 422 3,457 (2,280 ) — 1,599
Comprehensive income (loss) $ 161 $ 11,627 $ 5,845 $ (16,295 ) $ 1,338



	Parent Company			Guarantor Companies			Non-Guarantor Companies			Elimination			Consolidation
Revenue	$	—		$	1,109,275		$	352,514		$	(39,471	)	$	1,422,318
Cost of goods and services	—			848,342			297,826			(35,328		)	1,110,840
Gross profit	—			260,933			54,688			(4,143		)	311,478
Selling, general and administrative expenses	15,419			198,601			45,327			(4,724		)	254,623
Restructuring and other related charges	—			8,045			4,003			—			12,048
Total operating expenses	15,419			206,646			49,330			(4,724		)	266,671
Income (loss) from operations	(15,419		)	54,287			5,358			581			44,807
Other income (expense)
Interest income (expense), net	(10,781		)	(20,685		)	(7,659		)	—			(39,125		)
Other, net	367			6,227			(4,498		)	(581		)	1,515
Total other income (expense)	(10,414		)	(14,458		)	(12,157		)	(581		)	(37,610		)
Income (loss) before taxes	(25,833		)	39,829			(6,799		)	—			7,197
Provision (benefit) for income taxes	(12,672		)	15,693			834			—			3,855
Income (loss) before equity in net income of subsidiaries	(13,161		)	24,136			(7,633		)	—			3,342
Equity in net income (loss) of subsidiaries	16,503			(7,565		)	24,136			(33,074		)	—
Net income (loss)	$	3,342		$	16,571		$	16,503		$	(33,074	)	$	3,342
Net Income (loss)	$	3,342		$	16,571		$	16,503		$	(33,074	)	$	3,342
Foreign currency translation adjustments	—			330			(11,135		)	—			(10,805		)
Other comprehensive income (loss), net of taxes	633			3,963			256			—			4,852
Comprehensive income (loss)	$	3,975		$	20,864		$	5,624		$	(33,074	)	$	(2,611	)

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)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the ~~Six~~Nine Months Ended ~~March 31,~~June 30, 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 ) 31,588 — (26,637 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (618 ) (29,921 ) (4,306 ) — (34,845 )
Acquired business, net of cash acquired — (1,000 ) (21,720 ) — (22,720 )
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 ) (25,962 ) — (57,271 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 584 — — — 584
Purchase of shares for treasury (63,370 ) — — — (63,370 )
Proceeds from issuance of 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 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



	Parent Company			Guarantor Companies			Non-Guarantor Companies			Elimination			Consolidation
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(8,125	)	$	32,818		$	33,066		$	(65,884	)	$	(8,125	)
Net cash provided by (used in) operating activities	(10,966		)	(8,300		)	69,122			—			49,856
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(672		)	(45,749		)	(8,438		)	—			(54,859		)
Acquired businesses, net of cash acquired	—			(1,000		)	(61,306		)	—			(62,306		)
Intercompany distributions	10,000			(10,000		)	—			—			—
Investment purchases	(8,402		)	—			—			—			(8,402		)
Proceeds from sale of assets	—			298			193			—			491
Net cash provided by (used in) investing activities	926			(56,451		)	(69,551		)	—			(125,076		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	584			—			—			—			584
Purchase of shares for treasury	(72,518		)	—			—			—			(72,518		)
Proceeds from long-term debt	649,568			(253		)	33,598			—			682,913
Payments of long-term debt	(597,613		)	(708		)	(3,813		)	—			(602,134		)
Change in short-term borrowings	—			—			3,138			—			3,138
Financing costs	(10,393		)	—			(535		)	—			(10,928		)
Purchase of ESOP shares	(10,000		)	—			—			—			(10,000		)
Tax effect from exercise/vesting of equity awards, net	273			—			—			—			273
Dividend	(9,841		)	5,000			—			—			(4,841		)
Other, net	194			54,869			(54,869		)	—			194
Net cash provided by (used in) financing activities	(49,746		)	58,908			(22,481		)	—			(13,319		)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in discontinued operations	—			—			(1,018		)	—			(1,018		)
Effect of exchange rate changes on cash and equivalents	—			—			(1,136		)	—			(1,136		)
NET DECREASE IN CASH AND EQUIVALENTS	(59,786		)	(5,843		)	(25,064		)	—			(90,693		)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	68,994			25,343			83,793			—			178,130
CASH AND EQUIVALENTS AT END OF PERIOD	$	9,208		$	19,500		$	58,729		$	—		$	87,437

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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)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the ~~Six~~Nine Months Ended ~~March 31,~~June 30, 2013

Parent Company Guarantor Companies Non-Guarantor Companies Elimination Consolidation

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (261 ) $ 8,170 $ 8,125 $ (16,295 ) $ (261 )

Net cash provided by (used in) operating activities (43,968 ) (26,900 ) 36,885 — (33,983 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (24 ) (28,624 ) (2,347 ) — (30,995 )
Intercompany distributions 10,000 (10,000 ) — — —
Proceeds from sale of assets — 1,171 45 — 1,216
Net cash provided by (used in) investing activities 9,976 (37,453 ) (2,302 ) — (29,779 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares for treasury (22,109 ) — — — (22,109 )
Proceeds from issuance of long-term debt — 303 — — 303
Payments of long-term debt (813 ) (514 ) (4,073 ) — (5,400 )
Change in short-term borrowings — — 2,157 — 2,157
Financing costs (759 ) — — — (759 )
Tax effect from exercise/vesting of equity awards, net 150 — — — 150
Dividend (2,938 ) — — — (2,938 )
Other, net 242 44,885 (44,885 ) — 242
Net cash provided by (used in) financing activities (26,227 ) 44,674 (46,801 ) — (28,354 )

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in discontinued operations — — (478 ) — (478 )

Effect of exchange rate changes on cash and equivalents — — (138 ) — (138 )

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (60,219 ) (19,679 ) (12,834 ) — (92,732 )
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 125,093 34,782 49,779 — 209,654
CASH AND EQUIVALENTS AT END OF PERIOD $ 64,874 $ 15,103 $ 36,945 $ — $ 116,922

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

Net income (loss) $ 3,342
$ 16,571
$ 16,503
$ (33,074 ) $ 3,342
Net cash provided by (used in) operating activities (67,628 ) 23,214
46,968
—
2,554
CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property, plant and equipment (33 ) (40,324 ) (5,529 ) —
(45,886 )
Intercompany distributions 10,000
(10,000 ) —
—
—
Proceeds from sale of assets —
1,172
154
—
1,326
Net cash provided by (used in) investing activities 9,967
(49,152 ) (5,375 ) —
(44,560 )
CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of shares for treasury (25,689 ) —
—
—
(25,689 )
Proceeds from long-term debt —
303
—
—
303
Payments of long-term debt (1,751 ) (772 ) (10,319 ) —
(12,842 )
Change in short-term borrowings —
—
2,408
—
2,408
Financing costs (759 ) —
—
—
(759 )
Tax effect from exercise/vesting of equity awards, net 150
—
—
—
150
Dividend (4,384 ) —
—
—
(4,384 )
Other, net 261
14,661
(14,661 ) —
261
Net cash provided by (used in) financing activities (32,172 ) 14,192
(22,572 ) —
(40,552 )
CASH FLOWS FROM DISCONTINUED OPERATIONS:

Net cash used in discontinued operations —
—
(486 ) —
(486 )
Effect of exchange rate changes on cash and equivalents —
—
(506 ) —
(506 )
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (89,833 ) (11,746 ) 18,029
—
(83,550 )
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 125,093
34,782
49,779
—
209,654
CASH AND EQUIVALENTS AT END OF PERIOD $ 35,260
$ 23,036
$ 67,808
$ —
$ 126,104

34
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(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 currently conducts its operations through three businesses: 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.~~

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.

On May 21, 2014, Ames acquired the Australian Garden and Tools division of Illinois Tool Works, Inc. (“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. Current quarter Selling, general and administrative ("SG&A") expenses included $1,600 of acquisition costs.

On May 1, 2014, Griffon’s Board of Directors authorized the repurchase of up to ~~an additional~~ $50,000 of Griffon’s outstanding common stock. Under this repurchase program, the Company may purchase shares, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan.

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.

On February 14, 2014, Griffon amended its $225,000 Revolving Credit Facility (“Credit Agreement”)~~, extending~~ to extend its maturity date from March 28, 2018 to March 28, 2019, ~~amending~~and to revise certain financial maintenance ~~ratio test thresholds~~ and ~~increasing certain baskets for permitted debt, guaranties, liens, asset sales, foreign acquisitions, investments~~negative covenants to improve Griffon's financial and ~~restricted payments.~~

operating flexibility.

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to Ames’ existing lawn and garden operations in Australia. Northcote ~~which will be integrated with Ames,~~ is expected to generate approximately $28,000 of annualized revenue. ~~Griffon incurred~~First quarter 2014 SG&A expenses included $798 of acquisition ~~costs related to this transaction in the first quarter of 2014.~~

costs.

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. The transaction was exclusive of the Company´s August 2011, $50,000 authorized share repurchase program. After closing the transaction, GS Direct continued to hold approximately 5.56 million shares (approximately 10%) of Griffon’s common stock. GS Direct also agreed that, subject to certain exceptions, if it intends to sell its remaining shares of Griffon common stock at any time prior to December 31, 2014, it will first negotiate in good faith to sell such shares to the Company.

In January 2013, Ames announced its intention to close certain manufacturing facilities and consolidate affected operations primarily into its Camp Hill and Carlisle, PA locations. The intended actions, to be completed by the end of calendar 2014, will improve manufacturing and distribution efficiencies, allow for in-sourcing of certain production currently performed by third party suppliers, and improve material flow and absorption of fixed costs. Management estimates that, upon completion, these actions will result in annual cash savings exceeding $10,000, based on current operating levels; these savings are consistent with those anticipated at the onset of the initiative.

First quarter 2013, ~~Selling, general and administrative~~SG&A expenses included a $2,142 ~~non-cash,~~ pension settlement loss resulting from the lump-sum buyout of certain participant’s balances in the Company’s defined benefit plan. The buyouts, funded by the pension plan, reduced the Company’s net pension liability by $3,472.

OVERVIEW

Revenue for the quarter ended ~~March 31,~~June 30, 2014 was ~~$507,687~~$505,039 compared to ~~$488,743~~$509,826 in the prior year quarter. Net ~~loss~~income was ~~$25,825~~$14,464 or ~~$0.53~~$0.29 per share, compared to ~~a net loss of $819~~$3,603 or ~~$0.02~~$0.06 per share, in the prior year quarter.

The current 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~~
	-	~~Impact of debt extinguishment on full year effective tax rate of $5,848 or $0.12 per share.~~

Restructuring charges of $358 ($222, net of tax or $0.00 per share);

Acquisition costs of $1,600 ($992, net of tax or $0.02 per share);

Discrete tax benefits, net, of $1,860 or $0.04 per share; and

Change in impact of debt extinguishment on full year effective tax rate of $(4,357) or $(0.09) per share.

The prior year quarter included:

	-	~~Restructuring charges of $9,336 ($5,788, net of tax or $0.10 per share); and~~
	-	~~Discrete tax provisions, net, of $309 or $0.01 per share.~~

Restructuring charges of $1,604 ($994, net of tax or $0.02 per share); and

Discrete tax benefits, net, of $1,495 or $0.03 per share.

Excluding these items from the respective quarterly results, net income would have been ~~$6,025~~$9,461 or ~~$0.12~~$0.19 per share in the current quarter compared to ~~$4,660~~$3,102 or ~~$0.08~~$0.06 per share in the prior year quarter.

Revenue for the ~~six~~nine months ended ~~March 31,~~June 30, 2014 was ~~$961,145~~$1,466,184 compared to ~~$912,492~~$1,422,318 in the prior year period. Net loss was ~~$22,589~~$8,125 or ~~$0.44~~$0.16 per share, compared to a net ~~loss~~income of ~~$261~~$3,342 or ~~$0.00~~$0.06 per share, in the prior year period.

Results for the ~~six~~nine months ended ~~March 31,~~June 30, 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.~~

Restructuring charges of $1,892 ($1,173, net of tax or $0.02 per share);

Loss from debt extinguishment of $38,890 ($24,964, net of tax or $0.50 per share);

Acquisition costs of $2,398 ($1,487, net of tax or $0.03 per share);

Discrete tax benefits, net, of $1,540 or $0.03per share; and

Impact of debt extinguishment on full year effective tax rate of $1,491 or 0.03 per share.

Results for the ~~six~~nine months ended ~~March 31,~~June 30, 2013 included:

	-	~~Restructuring charges of $10,444 ($6,508, net of tax or $0.11 per share);~~
	-	~~Loss on pension settlement of $2,142 ($1,392, net of tax or $0.02 per share); and~~
	-	~~Discrete tax benefits, net, of $364 or $0.01 per share.~~

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Restructuring charges of $12,048 ($7,502, net of tax or $0.13 per share);

Loss on pension settlement of $2,142 ($1,392, net of tax or $0.02 per share); and

Discrete tax benefits, net, of $1,859 or $0.03 per share.

Excluding these items from the respective periods, net income would have been ~~$9,989~~$19,450 or ~~$0.20~~$0.39 per share in the ~~six~~nine months ended ~~March 31,~~June 30, 2014 compared to ~~$7,275~~$10,377 or ~~$0.13~~$0.18 per share in the ~~six~~nine months ended ~~March 31,~~June 30, 2013.

Griffon evaluates performance based on Earnings (loss) per share and Net income (loss) 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 ~~loss~~income (loss) to adjusted net income and Earnings (loss) per share to Adjusted earnings per share:

GRIFFON CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET LOSS

TO ADJUSTED NET INCOME

~~(Unaudited)~~

For the Three Months Ended
March 31, For the Six Months Ended March
31,
2014 2013 2014 2013

Net loss $ (25,825 ) $ (819 ) $ (22,589 ) $ (261 )

Adjusting items, net of tax:
Loss from debt extinguishment, net 24,964 — 24,964 —
Restructuring and related 429 5,788 951 6,508
Acquisition costs — — 495 —
Loss on pension settlement — — — 1,392
Extinguishment impact on period tax rate^a 5,848 — 5,848 —
Discrete tax provisions (benefits) 609 (309 ) 320 (364 )

Adjusted net income $ 6,025 $ 4,660 $ 9,989 $ 7,275

Diluted loss per common share $ (0.53 ) $ (0.02 ) $ (0.44 ) $ (0.00 )

Adjusting items, net of tax:
Loss from debt extinguishment, net 0.51 — 0.49 —
Restructuring 0.01 0.10 0.02 0.11
Acquisition costs — — 0.01 —
Loss on pension settlement — — — 0.02
Extinguishment impact on period tax rate^a 0.12 — 0.12 —
Discrete tax provisions (benefits) 0.01 (0.01 ) 0.01 (0.01 )

Adjusted earnings per common share $ 0.12 $ 0.08 $ 0.20 $ 0.13

Weighted-average shares outstanding (in thousands) 48,990 54,345 50,872 54,749

Prior to refinancing the debt and resultant loss on debt extinguishment, the Company anticipated its full year 2014 effective tax rate to approximate 40%. As a result of the loss from debt extinguishment, the Company anticipates it will now incur a pretax loss for the full year 2014, and recognize a corresponding tax benefit at an effective rate approximating 13.0%. In the current quarter, the impact of debt extinguishment on the full year effective tax rate was estimated to be a benefit of $5,848 or $0.12 per share.

(Unaudited)



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	14,464		$	3,603		$	(8,125	)	$	3,342
Adjusting items, net of tax:
Loss from debt extinguishment, net	—			—			24,964			—
Restructuring charges	222			994			1,173			7,502
Acquisition costs	992			—			1,487			—
Loss on pension settlement	—			—			—			1,392
Extinguishment impact on period tax rate (a)	(4,357		)	—			1,491			—
Discrete tax benefits	(1,860		)	(1,495		)	(1,540		)	(1,859		)
Adjusted net income	$	9,461		$	3,102		$	19,450		$	10,377
Diluted income (loss) per common share	$	0.29		$	0.06		$	(0.16	)	$	0.06
Adjusting items, net of tax:
Loss from debt extinguishment, net	—			—			0.50			—
Restructuring charges	—			0.02			0.02			0.13
Acquisition costs	0.02			—			0.03			—
Loss on pension settlement	—			—			—			0.02
Extinguishment impact on period tax rate (a)	(0.09		)	—			0.03			—
Discrete tax benefits	(0.04		)	(0.03		)	(0.03		)	(0.03		)
Adjusted earnings per common share	$	0.19		$	0.06		$	0.39		$	0.18
Weighted-average shares outstanding (in thousands)	49,836			56,204			50,038			56,735

a) Prior to refinancing the debt and resultant loss on debt extinguishment, the Company anticipated its full year 2014 effective tax rate to approximate 40%. As a result of the loss from debt extinguishment, the Company anticipates it will now incur a pretax loss for the full year 2014, and recognize a corresponding tax benefit at an effective rate approximating 23.1%. In the current quarter, the impact of debt extinguishment on the full year effective tax rate was estimated to be a benefit of $4,357 or $0.09 per share, and for the nine months ending June 30, 2014 a provision of $1,491 or $0.03 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.

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RESULTS OF OPERATIONS

~~Quarters~~

Three and nine months ended ~~March 31,~~June 30, 2014 and 2013

Griffon evaluates performance and allocates resources based on each ~~segments’~~segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges, acquisition-related expenses and gains (losses) from pension settlement and debt extinguishment, 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 ~~Loss~~Income (loss) before taxes:

For the Three Months Ended March 31, For the Six Months Ended March 31,
2014 2013 2014 2013
Segment operating profit:
Home & Building Products $ 8,818 $ 3,835 $ 18,211 $ 11,106
Telephonics 10,677 13,753 21,329 28,398
Plastics 9,352 916 15,177 3,558
Total segment operating profit 28,847 18,504 54,717 43,062
Net interest expense (12,361 ) (12,909 ) (25,462 ) (25,988 )
Unallocated amounts (8,391 ) (7,980 ) (16,374 ) (15,567 )
Loss from debt extinguishment, net (38,890 ) — (38,890 ) —
Loss on pension settlement — — — (2,142 )
Loss before taxes $ (30,795 ) $ (2,385 ) $ (26,009 ) $ (635 )



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2014			2013			2014			2013
Segment operating profit:
Home & Building Products	$	9,747		$	11,549		$	27,958		$	22,655
Telephonics	13,134			10,592			34,463			38,990
Plastics	8,075			5,401			23,252			8,959
Total segment operating profit	30,956			27,542			85,673			70,604
Net interest expense	(11,541		)	(13,137		)	(37,003		)	(39,125		)
Unallocated amounts	(6,521		)	(6,573		)	(22,895		)	(22,140		)
Loss from debt extinguishment, net	—			—			(38,890		)	—
Loss on pension settlement	—			—			—			(2,142		)
Income (loss) before taxes	$	12,894		$	7,832		$	(13,115	)	$	7,197

The following table provides a reconciliation of Segment adjusted EBITDA to ~~Loss~~Income (loss) before taxes:



	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2014			2013			2014			2013
Segment adjusted EBITDA:
Home & Building Products	$	19,596		$	21,478		$	55,787		$	56,272
Telephonics	15,087			13,146			40,018			45,015
Plastics	14,922			12,161			43,881			33,832
Total Segment adjusted EBITDA	49,605			46,785			139,686			135,119
Net interest expense	(11,541		)	(13,137		)	(37,003		)	(39,125		)
Segment depreciation and amortization	(16,691		)	(17,639		)	(49,723		)	(52,467		)
Unallocated amounts	(6,521		)	(6,573		)	(22,895		)	(22,140		)
Loss from debt extinguishment, net	—			—			(38,890		)	—
Restructuring charges	(358		)	(1,604		)	(1,892		)	(12,048		)
Acquisition costs	(1,600		)	—			(2,398		)	—
Loss on pension settlement	—			—			—			(2,142		)
Income (loss) before taxes	$	12,894		$	7,832		$	(13,115	)	$	7,197

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Home & Building Products

Three Months Ended March 31, For the Six Months Ended March 31,
2014 2013 2014 2013
Revenue:
Ames $ 160,705 $ 136,237 $ 257,313 $ 213,546
CBP 90,838 89,499 212,680 202,366
Home & Building Products $ 251,543 $ 225,736 $ 469,993 $ 415,912
Segment operating profit $ 8,818 3.5 % $ 3,835 1.7 % $ 18,211 3.9 % $ 11,106 2.7 %
Depreciation and amortization 7,614 9,157 15,648 18,017
Restructuring charges 692 4,563 1,534 5,671
Acquisition costs — — 798 —
Segment adjusted EBITDA $ 17,124 6.8 % $ 17,555 7.8 % $ 36,191 7.7 % $ 34,794 8.4 %



	For the Three Months Ended June 30,								For the Nine Months Ended June 30,
	2014				2013				2014				2013
Revenue:
Ames	$	132,179			$	128,332			$	389,492			$	341,878
CBP	121,814				112,285				334,494				314,651
Home & Building Products	$	253,993			$	240,617			$	723,986			$	656,529
Segment operating profit	$	9,747	3.8	%	$	11,549	4.8	%	$	27,958	3.9	%	$	22,655	3.5	%
Depreciation and amortization	7,891				9,075				23,539				27,092
Restructuring charges	358				854				1,892				6,525
Acquisition costs	1,600				—				2,398				—
Segment adjusted EBITDA	$	19,596	7.7	%	$	21,478	8.9	%	$	55,787	7.7	%	$	56,272	8.6	%

For the quarter ended ~~March 31,~~June 30, 2014, revenue increased ~~$25,807~~$13,376 or ~~11%~~6%, compared to the prior year quarter. Ames revenue increased ~~18%~~3% compared to the prior year quarter primarily due to ~~improved U.S. and Canada snow tool and planter sales, and~~ the inclusion of Northcote and Cyclone results, ~~while~~partially offset by decreased North American lawn and hose reel sales due to cold and wet weather conditions. CBP revenue increased 1%8%, primarily due to increased volume and favorable ~~mix, partially offset by lower volume influenced by inclement weather conditions.~~

product mix.

For the quarter ended ~~March 31,~~June 30, 2014, Segment operating profit was ~~$8,818~~$9,747 compared to ~~$3,835~~$11,549 in the prior year quarter. Excluding restructuring charges primarily related to the ~~manufacturing and operations~~ consolidation initiative at Ames, and acquisition costs related to the Cyclone transaction, current and prior year Segment operating profit was ~~$9,510~~$11,705 and ~~$8,398,~~$12,403, respectively. Excluding restructuring and acquisition costs, the ~~increase in Segment operating profit was~~decrease resulted primarily from ~~improved volume~~unfavorable sales mix and manufacturing inefficiencies along with increased distribution and freight costs at Ames and, for both Ames and CBP, the unfavorable impact of foreign currency translation of a weaker Canadian dollar, partially offset by the benefit of increased volume and favorable product mix at ~~CBP, partially offset by higher distribution and selling costs.~~CBP. Ames ~~also~~ continued to experience manufacturing inefficiencies in connection with its plant consolidation initiative, which are expected to continue until the initiative is ~~completed.~~complete. The ~~impact of~~contributions from Northcote and Cyclone were not significant in the ~~quarter was not significant.~~quarter. Segment depreciation and amortization decreased ~~$1,543~~$1,184 from the prior year period.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, revenue increased ~~$54,081~~$67,457 or ~~13%~~10%, compared to the prior year period. Ames revenue increased ~~20%~~14% mainly driven by ~~improved US and Canadian snow tool and planter sales, and~~ the inclusion of Northcote ~~results.~~and Cyclone results and increased snow tool sales. CBP revenue increased 5%6% due to ~~higher~~increased volume and favorable product mix.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, Segment operating profit was ~~$18,211~~$27,958 compared to ~~$11,106~~$22,655 in the prior year period. Excluding restructuring charges, primarily related to the consolidation initiative at Ames, and acquisition costs related to the Northcote ~~transaction,~~and Cyclone transactions, current and prior year Segment operating profit was ~~$20,543~~$32,248 and ~~$16,777,~~$29,180, respectively. Excluding restructuring and acquisition costs, the increase was primarily ~~from improved~~due to increased volume and favorable product mix at ~~Ames and~~ CBP, partially offset by ~~higher~~the impact of increased Ames distribution ~~costs.~~and freight costs and manufacturing inefficiencies and, for both Ames ~~also~~and CBP, the unfavorable impact of foreign currency translation of a weaker Canadian dollar. Ames continued to experience manufacturing inefficiencies in connection with its plant consolidation initiative, which are expected to continue until the initiative is ~~completed.~~complete. The ~~impact of~~contributions from Northcote ~~in the quarter was~~and Cyclone were not significant. The prior year period benefitted from $1,000 in Byrd Amendment receipts (anti-dumping compensation from the government); current period Byrd Amendment receipts were not significant. Segment depreciation and amortization decreased ~~$2,369~~$3,553 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. Current quarter SG&A expenses included $1,600 of acquisition costs.

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, and adds to Ames’ existing lawn and garden

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operations in Australia. Northcote ~~which will be integrated with Ames,~~ is expected to generate approximately $28,000 of annualized revenue.

First quarter 2014 SG&A expenses included $798 of acquisition costs.

Telephonics

Three Months Ended March 31, For the Six Months Ended March 31,
2014 2013 2014 2013
Revenue $ 104,185 $ 121,631 $ 200,210 $ 217,681
Segment operating profit $ 10,677 10.2 % $ 13,753 11.3 % $ 21,329 10.7 % $ 28,398 13.0 %
Depreciation and amortization 1,858 1,752 3,602 3,471
Segment adjusted EBITDA $ 12,535 12.0 % $ 15,505 12.7 % $ 24,931 12.5 % $ 31,869 14.6 %



	For the Three Months Ended June 30,								For the Nine Months Ended June 30,
	2014				2013				2014				2013
Revenue	$	102,446			$	129,997			$	302,656			$	347,678
Segment operating profit	$	13,134	12.8	%	$	10,592	8.1	%	$	34,463	11.4	%	$	38,990	11.2%
Depreciation and amortization	1,953				1,804				5,555				5,275
Restructuring charges	—				$	750			—				750
Segment adjusted EBITDA	$	15,087	14.7	%	$	13,146	10.1	%	$	40,018	13.2	%	$	45,015	12.9%

For the quarter ended ~~March 31,~~June 30, 2014, revenue decreased ~~$17,446~~$27,551 or ~~14%~~21% compared to the prior year quarter. The 2013 quarter included ~~$13,225~~$20,033 of electronic warfare program ("ICREW") revenue where Telephonics ~~serves~~served as a contract manufacturer; there was no such revenue in the current ~~year~~ quarter. Excluding revenue from these programs, current quarter revenue decreased 4%7% from the 2013 quarter, primarily due to ~~lower mobile surveillance~~reduced airborne and wireless intercommunication systems ~~sales, partially offset by higher Identification Friend or Foe systems~~ sales.

For the quarter ended ~~March 31,~~June 30, 2014, Segment operating profit ~~decreased $3,076~~increased $2,542 or ~~22%~~24%, and operating profit margin ~~decreased 110~~increased 470 basis points compared to the prior year ~~quarter;~~quarter. Excluding prior year restructuring charges, Segment operating profit increased $1,792 or 16% and operating margin increased 410 basis points compared to the prior year quarter, ~~benefitted from~~primarily attributable to the ~~electronic warfare programs,~~benefit of favorable program mix, ~~and manufacturing efficiencies, none~~the effect of which ~~were repeated in~~more than offset the ~~current quarter.~~

impact of the ICREW revenue decline, as well as lower expenditures associated with research and development and proposal efforts.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, revenue decreased ~~$17,471~~$45,022 or 8%13%, compared to the prior year period. The prior year period included ~~$13,225~~$33,257 of electronic warfare program revenue ~~where~~in which Telephonics ~~serves~~served as a contract manufacturer; there was no such revenue in the current ~~year period.~~year. Excluding revenue from these programs, revenue decreased 2%4% primarily due to ~~reduced~~decreased airborne ~~intercommunication products~~ and ~~mobile surveillance~~wireless intercommunication systems sales, partially offset by ~~higher~~increased Identification Friend or Foe ~~products~~ sales.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, Segment operating profit decreased ~~$7,069~~$4,527 or ~~25%~~12%, ~~and~~while operating margin ~~decreased 230~~increased 20 basis points compared to the prior year period. Excluding restructuring charges, Segment operating profit decreased $5,277 or 13%, while operating profit margin remained consistent compared to the prior year period. The decrease in Segment operating profit was mainly the result of reduced gross profit driven by the decline in sales volume; the prior year period ~~benefitted~~reflected revenue from the electronic warfare programs, ~~favorable program mix~~which, while profitable, typically generate lower operating margins than Telephonics' core products.

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During the third quarter of 2013, Telephonics recognized $750 in restructuring costs in connection with the termination of a facility lease. The facility was vacated as a result of the headcount reductions and ~~manufacturing efficiencies, which were not repeated~~changes in organizational structure Telephonics had undertaken in the ~~current year period.~~

preceding two years.

During the ~~six~~nine months ended ~~March 31,~~June 30, 2014, Telephonics was awarded several new contracts and incremental funding on existing contracts approximating ~~$241,800.~~$315,600. Contract backlog was ~~$486,000~~$457,000 at ~~March 31,~~June 30, 2014, with ~~66%~~67% expected to be fulfilled in the next 12 months. Backlog was $444,000 at September 30, 2013 and ~~$416,000~~$486,000 at ~~December~~March 31, ~~2013.~~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

Three Months Ended March 31, For the Six Months Ended March 31,
2014 2013 2014 2013
Revenue $ 151,959 $ 141,376 $ 290,942 $ 278,899
Segment operating profit $ 9,352 6.2 % $ 916 0.6 % $ 15,177 5.2 % $ 3,558 1.3 %
Depreciation and amortization 6,864 6,663 13,782 13,340
Restructuring charges — 4,773 — 4,773
Segment adjusted EBITDA $ 16,216 10.7 % $ 12,352 8.7 % $ 28,959 10.0 % $ 21,671 7.8 %



	For the Three Months Ended June 30,								For the Nine Months Ended June 30,
	2014				2013				2014				2013
Revenue	$	148,600			$	139,212			$	439,542			$	418,111
Segment operating profit	$	8,075	5.4	%	$	5,401	3.9	%	$	23,252	5.3	%	$	8,959	2.1	%
Depreciation and amortization	6,847				6,760				20,629				20,100
Restructuring charges	—				—				—				4,773
Segment adjusted EBITDA	$	14,922	10.0	%	$	12,161	8.7	%	$	43,881	10.0	%	$	33,832	8.1	%

For the quarter ended ~~March 31,~~June 30, 2014, revenue increased ~~$10,583,~~$9,388, or 7%, compared to the prior year quarter. The increase reflected the benefit of ~~favorable mix (6%~~increased volume (5%), the pass through of ~~higher~~increased resin costs in customer selling prices ~~(1%~~(3%) and ~~higher volume~~favorable foreign exchange translation (1%), partially offset by the impact of unfavorable ~~foreign exchange translation (1%~~product mix (2%)~~; the 1% volume increase was net of volume lost as a result of Plastics exiting certain low margin products in the second half of 2013.~~. Plastics adjusts selling prices based on underlying resin costs on a delayed basis.

For the quarter ended ~~March 31,~~June 30, 2014, Segment operating profit increased ~~$8,436~~$2,674 or 50% compared to the prior year ~~quarter; the prior year~~ quarter ~~included restructuring charges of $4,773. Excluding restructuring charges, Segment operating profit increased $3,663 primarily~~mainly due to ~~favorable mix,~~increased volume and continued operating efficiency ~~improvements and the positive impact of restructuring initiatives undertaken over the past year.~~improvements.. Resin ~~did not have a~~had no material impact on profit for the quarter.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, revenue increased ~~$12,043,~~$21,431, or 4%5%, compared to the prior year ~~quarter.~~period. The increase reflected the benefit of favorable mix ~~(5%~~(3%) and the pass through of higher resin costs in customer selling prices ~~(1%), partially offset by the impact of lower volume~~ (2%)~~, the majority of which was attributable to Plastics exiting certain low margin products in the second half of 2013.~~

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, Segment operating profit increased ~~$11,619~~$14,293 compared to the prior year period; the prior year period included restructuring charges of $4,773. Excluding ~~restructuring~~such charges, Segment operating profit increased ~~$6,846~~$9,520 or 69% primarily due to continued efficiency improvements, favorable product mix and an ~~$800 favorable~~approximate $1,100 resin ~~benefit, partially offset by the impact of reduced volume.~~

benefit.

Unallocated

For the quarter ended ~~March 31,~~June 30, 2014, unallocated amounts totaled ~~$8,391~~$6,521 compared to ~~$7,980~~$6,573 in the prior year; for the ~~six~~nine months ended ~~March 31,~~June 30, 2014, unallocated amounts totaled ~~$16,374~~$22,895 compared to ~~$15,567~~$22,140 in the prior year. The increase in the current ~~quarter and six-month~~nine month period compared to the respective prior year ~~periods~~period related primarily ~~related~~ to increased compensation and incentive costs.

Segment Depreciation and Amortization

Segment depreciation and amortization decreased ~~$1,236~~$948 and ~~$1,796,~~$2,744, respectively, for the quarter and ~~six-month periods~~nine months ended ~~March 31,~~June 30, 2014 compared to the prior year periods, primarily due to assets fully amortizing, partially offset by the onset of depreciation for new assets placed in service.

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Other Expense

For the quarters ended ~~March 31,~~June 30, 2014 and 2013, Other income (expense) included ~~$436~~$365 and $168, 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 $1,437 and $12, respectively, of net investment income.

For the nine months ended June 30, 2014 and 2013, Other income (expense) included $1,044 and ($~~479)~~299), 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 ~~$15~~$1,563 and ~~$321,~~$365, respectively, of net investment income.

For the six months ended March 31, 2014 and 2013, Other income (expense) included $679 and ($467), 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 $127 and $353, respectively, of net investment income.

Provision (benefit) for income taxes

The Company reported pretax income for the current quarter and a pretax loss for the nine months ended June 30, 2014, compared to pretax income for the quarter and ~~six-month periods~~nine months ended ~~March 31, 2014 and 2013, the Company incurred pretax losses.~~June 30, 2013. The Company recognized tax benefits of ~~16.1%~~12.2% and ~~13.2%~~38.0% for the quarter and ~~six-month periods~~nine months ended ~~March 31,~~June 30, 2014, respectively, compared to ~~benefits~~provisions of ~~65.7%~~54.0% and ~~59.0%~~53.6%, respectively, in the comparable prior year periods. The current and prior year ~~benefit~~tax rates reflect the impact of permanent differences not deductible in determining taxable income, mainly limited deductibility of restricted stock, tax reserves and changes in earnings mix between domestic and non-domestic operations, which are material relative to the level of pretax ~~result.~~

results and the impact of discrete items reported.

The ~~current~~ quarter and ~~six-month periods~~nine months ended June 30, 2014 include ~~$609~~$1,860 and ~~$320,~~$1,540, respectively, of ~~provisions~~benefits for discrete items resulting primarily from the conclusion of tax audits, filing of tax returns in ~~certain~~various jurisdictions, release of previously established reserves for uncertain tax positions and the impact of tax law changes enacted in the ~~current quarter.~~second quarter of 2014. The comparable prior year periods included ~~$309~~$1,495 and ~~$364,~~$1,859, respectively, of benefits from discrete items primarily resulting from release of previously established reserves for uncertain tax positions on conclusion of tax audits, benefits arising on the filing of tax returns in various jurisdictions and the retroactive extension of the federal R&D credit signed into law January 2, 2013.

Excluding discrete items, the effective tax ~~benefit~~ rates for the quarter and ~~six month periods~~nine months ended ~~March 31,~~June 30, 2014 were ~~18.1%~~a provision of 27.0% and ~~14.4%~~benefit of 26.3%, respectively, compared to ~~benefit rates~~provisions of ~~52.7%~~73.1% and ~~1.7%~~79.4% in the comparable prior year periods, respectively.

Prior to ~~refinancing~~ the debt refinancing and resultant loss on debt extinguishment, the Company anticipated its full year 2014 effective tax rate to approximate 40%. As a result of the loss from debt extinguishment, the Company anticipates it will now incur a pretax loss for the full year 2014, and recognize a corresponding tax benefit at an effective rate approximating ~~13.0%~~23%. In the current quarter, the impact of debt extinguishment on the full year effective tax rate was estimated to be a benefit of ~~$5,848~~$4,357 or ~~$0.12~~$0.09 per share, and for the nine months ended June 30, 2014, a provision of $1,491 or $0.03 per share, as detailed in the Company’s Reconciliation of Net (loss) Income to Adjusted Net Income.

Stock based compensation

For the quarters ended ~~March 31,~~June 30, 2014 and 2013, stock based compensation expense totaled ~~$3,321~~$3,137 and ~~$3,338,~~$3,029, respectively. For the ~~six~~nine months ended ~~March 31,~~June 30, 2014 and 2013, stock based compensation ~~expenses~~expense totaled ~~$4,996~~$8,133 and ~~$6,298,~~$9,327, respectively.

Comprehensive income (loss)

For the quarter ended ~~March 31,~~June 30, 2014, total other comprehensive income, net of taxes, of ~~$2,323,~~$3,126, included a ~~$1,224~~$2,809 gain from Foreign currency translation adjustments primarily due to the strengthening of the Canadian, 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~~$317 benefit from ~~Pension~~pension and other post retirement plans, primarily due to settling a non U.S. pension plan and amortization of actuarial losses.

For the ~~six~~nine months ended ~~March 31,~~June 30, 2014, total other comprehensive ~~loss,~~income, net of taxes, of ~~$498,~~$2,628, included a ~~$1,913 loss~~$896 gain from Foreign currency translation adjustments primarily due to the ~~weakening~~strengthening of the ~~Canadian currency,~~Euro, Australian and Brazilian currencies, partially offset by the ~~strengthening~~weakening of the ~~Euro and the Australian~~Canadian currency, all in comparison to the U.S. Dollar, and a ~~$1,415~~$1,732 benefit from Pension and other post retirement plans, primarily due to amortization of actuarial losses and settling a non U.S. pension ~~plan and amortization of actuarial losses.~~

plan.

Discontinued operations – Installation Services

There was no revenue or income from the Installation Services’ business for the quarters and ~~six-month~~nine month periods ended ~~March 31,~~June 30, 2014 and 2013.

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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 remains in a strong financial position with sufficient liquidity available for reinvestment in existing businesses and strategic acquisitions while managing its capital structure on both a short-term and long-term basis.

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

Cash Flows from Continuing Operations Six Months Ended March 31,
(in thousands) 2014 2013
Net Cash Flows Used In:
Operating activities $ (26,637 ) $ (33,983 )
Investing activities (57,271 ) (29,779 )
Financing activities (23,234 ) (28,354 )



Cash Flows from Continuing Operations	For the Nine Months Ended June 30, 2014
(in thousands)	2014			2013
Net Cash Flows Provided by (Used In):
Operating activities	$	49,856		$	2,554
Investing activities	(125,076		)	(44,560		)
Financing activities	(13,319		)	(40,552		)

Cash ~~used in~~provided by continuing operations for the ~~six~~nine months ended ~~March 31,~~June 30, 2014 was ~~$26,637~~$49,856 compared to ~~$33,983~~$2,554 in the prior ~~year. The current~~ year included $16,716 of interest payments made in conjunction with the redemption of the $550,000 7.125% senior notes due 2018; in prior years, such payments would have been made April 1. Excluding this payment, cash flow used in operating activities would have approximated $9,921.period. Current assets net of current liabilities, excluding short-term debt and cash, increased to ~~$458,060~~$440,775 at ~~March 31,~~June 30, 2014 compared to $372,639 at September 30, 2013, primarily due to ~~increased~~an increase in inventory ~~contract costs and recognized income not yet billed~~ and a decrease in income taxes payable, net, partially offset by a decrease in accounts ~~payable~~receivable, all excluding increases from acquired assets and ~~accrued~~ liabilities.

During the ~~six~~nine months ended ~~March 31,~~June 30, 2014, Griffon used cash for investing activities of ~~$57,271~~$125,076 compared to ~~$29,779~~$44,560 in the prior year; the ~~acquisition~~acquisitions of Northcote and Cyclone for approximately $22,000 and $40,000, respectively, impacted the current year. During the quarter, Griffon purchased $8,400 of marketable securities. Current ~~quarter~~year capital expenditures totaled ~~$34,845,~~$54,859, an increase of ~~$3,850~~$8,973 from the comparable prior year ~~quarter.~~

period.

During the ~~six~~nine months ended ~~March 31,~~June 30, 2014, cash used in financing activities totaled ~~$23,234~~$13,319 compared to ~~$28,354~~$40,552 in the prior year. On May 1, 2014, Griffon’s Board of Directors authorized the repurchase of up to ~~an additional~~ $50,000 of Griffon’s outstanding common stock. Under this repurchase program, the Company may purchase shares, depending upon market conditions, in open market or privately negotiated transactions, including pursuant to a 10b5-1 plan. During the ~~six~~nine months ended ~~March 31,~~June 30, 2014, the Board of Directors approved ~~two~~three quarterly cash dividends ofeach for $0.03 per share. 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., in a private transaction. This purchase was exclusive of the Company’s August 2011 $50,000 authorized share repurchase program, of which ~~$4,525 remains~~has been completed at ~~March 31,~~June 30, 2014. InDuring the ~~six months~~quarter ended ~~March 31,~~June 30, 2014, Griffon purchased ~~598,481~~750,000 shares of common stock under ~~the August 2011~~Board authorized ~~program,~~programs, for a total of ~~$7,501~~$8,784 or ~~$12.53~~$11.71 per share. In the nine months ended June 30, 2014, Griffon purchased 1,348,481 shares of common stock under Board authorized programs, for a total of $16,285 or $12.08 per shares. ~~To date,~~Since the resumption of share repurchases in 2011 through the end of the third quarter of 2014, Griffon has ~~purchased 4,320,712~~repurchased 6,436,712 shares of common stock, for a total of ~~$45,474~~$65,315 or ~~$10.52~~$10.15 per share under ~~the August 2011~~Board share repurchase ~~authorization.~~authorizations (which repurchases included exhausting the remaining availability under a Board authorized repurchase program that was in existence prior to 2011). In December 2013, Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into an agreement, which refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098. The Agreement also provided a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market through September 29, 2014. In the ~~six~~nine months ended ~~March 31,~~June 30, 2014, 749,977 shares of Griffon common stock, for a total of $10,000, were purchased with proceeds from the Line Note. In July 2014, Griffon's ESOP entered into an amendment of the ~~six~~existing Agreement which provides an additional $10,000 Line Note available to purchase shares in the open market. The new Line Note will bear interest at a) LIBOR plus 2.75% or b) the lender’s prime rate, at Griffon’s option through its expiration date on June 30, 2015. Upon expiration or at an earlier date, at Griffon’s option, the new Line Note will be combined with the Term Loan and require quarterly principal payments based on the remaining amortization schedule at a weighted average interest rate of the combined loans, with a balloon payment due at the final maturity date of December 31, 2018, based on the new amortization schedule. The new Line Note and subsequent Term Loan are secured by shares purchased with the proceeds of the loan and with a lien on the assets of Griffon and its material domestic subsidiaries securing a limited amount of the loan (which lien ranks pari passu with the lien granted on such assets securing the debt under Griffon’s revolving credit facility), and Griffon guarantees repayment. In the nine months ended ~~March 31,~~June 30, 2014, ~~411,064~~444,110 shares, with a market value of ~~$5,266~~$5,631 or ~~$12.81~~$12.68 per share, were withheld to settle employee taxes due upon the vesting of restricted stock and were added to treasury stock.

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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~~Plastics' customers are generally substantial industrial companies whose payments have been steady, reliable and made in accordance with the terms governing such sales. ~~Plastics~~Plastics' sales satisfy orders that are received in advance of production, and where payment terms are established in advance. With respect to HBP, there have been no material adverse impacts on payment for sales.

A small number of customers account for, and are expected to continue to account for, a substantial portion of Griffon’s consolidated revenue. For the ~~six~~nine months ended ~~March 31,~~June 30, 2014:

The United States Government and its agencies, through either prime or subcontractor relationships, represented 15% of Griffon’s consolidated revenue and ~~73%~~71% of Telephonics’ revenue.

Procter & Gamble Co. represented ~~13%~~16% of Griffon’s consolidated revenue and ~~44%~~45% of Plastics’ revenue.

The Home Depot represented ~~11%~~12% of Griffon’s consolidated revenue and ~~22%~~24% of HBP’s revenue.

No other customer exceeded 7%8% 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. Theloss 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 At March 31, At September 30,
(in thousands) 2014 2013
Cash and equivalents $ 69,933 $ 178,130
Notes payables and current portion of long-term debt 13,393 10,768
Long-term debt, net of current maturities 773,579 678,487
Debt discount 11,454 13,246
Total debt 798,426 702,501
Debt, net of cash and equivalents $ 728,493 $ 524,371



Cash and Equivalents and Debt	June 30,		September 30,
(in thousands)	2014		2013
Cash and equivalents	$	87,437	$	178,130
Notes payables and current portion of long-term debt	11,886		10,768
Long-term debt, net of current maturities	797,180		678,487
Debt discount	10,532		13,246
Total debt	819,598		702,501
Debt, net of cash and equivalents	$	732,161	$	524,371

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, starting September 1, 2014. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a 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. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. ~~At the time of issuance~~On June 18, 2014, Griffon exchanged all of the Senior Notes Griffon agreed that, within certain time periods after the issue date, it would offer to each noteholder, pursuant to a registration statement filed with and to be declared effective by the SEC, the opportunity to exchange itsfor substantially identical Senior Notes ~~for new notes that have substantially identical terms to those~~registered under the Securities Act of ~~the Senior Notes (the only material difference being that the new notes are registered with the SEC).~~1933 via an exchange offer. The fair value of the Senior Notes approximated ~~$591,000~~$594,000 on ~~March 31,~~June 30, 2014 based upon quoted market prices (level 1 inputs).

On February 14, 2014, Griffon amended its $225,000 Credit Agreement ~~extending~~to extend its maturity date from March 28, 2018 to March 28, 2019, ~~amending~~and to revise certain financial maintenance ~~ratio test thresholds~~ and ~~increasing certain baskets for permitted debt, guaranties, liens, asset sales, foreign acquisitions, investments~~negative covenants to improve Griffon's financial and ~~restricted payments.~~operating flexibility. The facility includes a letter of credit sub-facility with a limit of $60,000, a multi-currency sub-facility of $50,000 and a swing line 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 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. The current margins are 1.25% for base rate loans and 2.25% 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 Credit Agreement also includes certain restrictions, such as limitations on the ability of Griffon to incur indebtedness and liens and to make restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s

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material domestic subsidiaries and are secured, on a first priority basis, by substantially all 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.~~

subsidiaries (except that a lien on the assets of Griffon’s material domestic subsidiaries securing a limited amount of the debt under the ESOP credit agreement ranks pari passu with the lien granted on such assets under the Credit Agreement).

On October 21, 2013, Griffon refinanced two properties’ real estate mortgages to secure ~~new~~ 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,~~June 30, 2014, ~~$16,818~~$16,603 was outstanding.

In December 2013, Griffon’s ESOP entered into ana credit agreement which refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098. The Agreement also provided a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market through September 29, 2014. As of ~~March 31,~~June 30, 2014 , 749,977 shares of Griffon common stock, for a total of $10,000, were purchased with proceeds from the Line Note. In March 2014, the Line Note was combined with the Term Loan to form one new term loan. The loan bears interest at a) LIBOR plus 2.25% or b) the lender’s prime rate, at Griffon’s option. The loan requires quarterly principal payments of $505 through September 30, 2014 and $419 per quarter thereafter, with a balloon payment of approximately ~~$19,000~~$22,400 due at maturity in December 2018. The loan is secured by shares purchased with the proceeds of the loan and with a lien on ~~a specific amount~~the assets of Griffon and its material domestic subsidiaries securing a limited about of the loan (which lien ranks pari passu with the lien granted on such assets securing the debt under Griffon’s revolving credit facility), and Griffon guarantees repayment. At ~~March~~June 30, 2014 , $29,583 was outstanding. In July 2014, Griffon's ESOP entered into an amendment to the existing agreement which provides for additional $10,000 Line Note available to purchase shares in the open market. The new Line Note will bear interest at a) LIBOR plus 2.75% or b) the lender’s prime rate, at Griffon’s option through its expiration date on June 30, 2015. Upon expiration or at an earlier date, at Griffon’s option, the new Line Note will be combined with the Term Loan and require quarterly principal payments based on the remaining amortization schedule at a weighted average interest rate of the combined loans, with a balloon payment due at the final maturity date of December 31, ~~2014, $30,087 was outstanding.~~

2018, based on the new amortization schedule. The new Line Note and the Term Loan are secured by shares purchased with the proceeds of the loan and with a lien on the assets of Griffon and its material domestic subsidiaries securing a limited amount of the loan (which lien ranks pari passu with the lien granted on such assets under Griffon’s revolving credit facility), and Griffon guarantees repayment.

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 ~~December 31, 2013, $9,289~~June 30, 2014, $8,798 was outstanding.

In November 2010, Clopay Europe ~~GMBH~~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 borrowings of ~~$5,500~~$4,093 at ~~March 31,~~June 30, 2014. The revolving facility matures in November 2014, but is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 2.20% per annum. 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 ~~approximately~~ $5,700. Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% ~~(16.55%~~(16.80% at ~~March 31, 2014).~~June 30, 2014 ). At ~~March 31,~~June 30, 2014 there was approximately ~~$3,943~~$3,660 borrowed under the lines. Clopay Plastic Products ~~Co.,~~Company, Inc. guarantees the loan and lines.

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Rate CDN as of ~~March 31,~~June 30, 2014). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity. At ~~March 31,~~June 30, 2014, there were no borrowings under the revolving credit facility with CAD $15,000 available.

In December 2013 and May 2014, Northcote Holdings ~~Pty.~~Pty Ltd entered into antwo term loans in the outstanding amounts of AUD $12,500 and AUD $20,000, respectively. The AUD $12,500 and AUD $20,000 term ~~loan. The term loan is~~loans are unsecured ~~requires~~and require quarterly interest payments, ~~and~~with quarterly principal payments of $625 beginning in August 2015 on the AUD $20,000 term loan. Remaining principal is due at maturity ~~(December 2016).~~in December 2016 and May 2017, respectively. The ~~loan accrues~~loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.5% at ~~March 31, 2014)~~June 30, 2014 for each loan). As of ~~March 31,~~June 30, 2014, Griffon had an outstanding combined balance of ~~$11,559.~~$30,612 on the term loans. Subsidiaries of Northcote Holdings Pty Ltd also maintain ~~a line~~two lines of credit of ~~approximately $2,800. The line of credit accrues~~AUD$3,000 and AUD $5,000 which accrue interest at BBSY plus 2.25% per annum ~~(4.95%~~(5.00% at ~~March 31,~~June 30, 2014). and 2.50% per annum (5.25% at June 30, 2014), respectively. At ~~March 31,~~June 30, 2014, there were no outstanding borrowings under the line. Griffon Corporation guarantees ~~both~~ the term ~~loan~~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,~~June 30, 2014, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

During the ~~six month period~~nine months ended ~~March 31,~~June 30, 2014 and 2013, Griffon used cash for discontinued operations of ~~$640~~$1,018 and ~~$478,~~$486, 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, 2013.

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, 2013. 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.

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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; 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, 2013. 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, 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.

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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.

~~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, 2013, 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 10, 2014, Griffon sold 44,476 shares of common stock to Ames management for an aggregate of $584 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.

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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, 2013, 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.

None

(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, 2014 — $ — —
February 1 - 28, 2014 294,200 ⁽²⁾ 12.39 171,148
March 1 - 31, 2014 361,633 12.55 361,633

Total 655,833 $ 12.47 532,781 $ 4,525



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)
April 1 - 30, 2014	—		$	—	—
May 1 - 31, 2014	363,046	(2)	11.30		330,000
June 1 - 30, 2014	420,000		12.04		420,000
Total	783,046		$	11.71	750,000	$	45,742

On each of August 2, 2011 the Company’s Board of Directors authorized the repurchase of up to an additional $50,000 of Griffon common stock; as of March 31, 2014, $4,525 remained available for the purchase of Griffon common stock under this program. Onand May 1, 2014, the Company’s Board of Directors authorized the repurchase of up to an additional $50,000 of Griffon common ~~stock.~~stock ; as of June 30, 2014, the August 2011 $50,000 Board repurchase authorization has been completed and $45,742 remained available for the purchase of Griffon common stock under the May 1, 2014 $50,000 board authorized program.


2.	Includes ~~123,052~~33,046 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

Item 5 Other Information

None

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Item 3 ~~Item 4~~ 6	~~Defaults Upon Senior Securities~~ ~~None~~ ~~Mine Safety Disclosures~~ ~~Not applicable~~ Exhibits

~~Item 5~~10.1	~~Other Information~~
	~~None~~

~~Item 6~~

~~Exhibits~~

~~4.1~~	~~Indenture (relating to the 5.25% Senior Notes due 2022), dated as of February 27, 2014, among~~ Griffon Corporation the Guarantors named on the signature pages thereto and Wells Fargo Bank, National Association, as Trustee (Exhibit 4.1 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)). Director Compensation Program, dated May 1, 2014.

~~4.2~~31.1	Registration Rights Agreement (relating to the 5.25% Senior Notes due 2022), dated as of February 27, 2014, by and among Griffon Corporation, the Guarantors party thereto and Deutsche Bank Securities Inc., as the Representative of the several Initial Purchasers (Exhibit 4.2 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)).

~~4.3~~	Supplemental Indenture (relating to the 7.125% Senior Notes due 2018), dated as of February 27, 2014, between Griffon Corporation and Wells Fargo Bank, National Association, as Trustee (Exhibit 4.3 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)).

~~10.1~~	Purchase Agreement, dated as of February 12, 2014, by and among Griffon Corporation, the Guarantors named therein and Deutsche Bank Securities Inc., as Representative of the several Initial Purchasers named therein (Exhibit 99.1 to the Current Report on Form 8-K filed February 13, 2014 (Commission File No. 1-06620)).

~~10.2~~	Fourth Amendment to Amended and Restated Credit Agreement, dated as of February 14, 2014, to that certain Amended and Restated Credit Agreement, dated as of March 28, 2013 among Griffon Corporation, JPMorgan Chase Bank, N.A., as administrative agent, Deutsche Bank Securities Inc., as syndication agent, Wells Fargo Bank, National Association, HSBC Bank USA, N.A and RBS Citizens, N.A., as co-documentation agents, and the other lenders party thereto (Exhibit 99.1 to the Current Report on Form 8-K filed February 14, 2014 (Commission File No. 1-06620))

~~10.3~~	Griffon Corporation 2011 Equity Incentive Plan, as amended and restated through January 30, 2014 (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement relating to the 2014 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on December 20, 2013).

~~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”.

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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: ~~May 2,~~July 30, 2014

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EXHIBIT INDEX

~~EXHIBIT INDEX~~

~~4.1~~	~~Indenture (relating to the 5.25% Senior Notes due 2022), dated as of February 27, 2014, among~~
10.1	Griffon Corporation the Guarantors named on the signature pages thereto and Wells Fargo Bank, National Association, as Trustee (Exhibit 4.1 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)).Director Compensation Program, dated May 1, 2014.

~~4.2~~	Registration Rights Agreement (relating to the 5.25% Senior Notes due 2022), dated as of February 27, 2014, by and among Griffon Corporation, the Guarantors party thereto and Deutsche Bank Securities Inc., as the Representative of the several Initial Purchasers (Exhibit 4.2 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)).

~~4.3~~	Supplemental Indenture (relating to the 7.125% Senior Notes due 2018), dated as of February 27, 2014, between Griffon Corporation and Wells Fargo Bank, National Association, as Trustee (Exhibit 4.3 to the Current Report on Form 8-K filed February 27, 2014 (Commission File No. 1-06620)).

~~10.1~~	Purchase Agreement, dated as of February 12, 2014, by and among Griffon Corporation, the Guarantors named therein and Deutsche Bank Securities Inc., as Representative of the several Initial Purchasers named therein (Exhibit 99.1 to the Current Report on Form 8-K filed February 13, 2014 (Commission File No. 1-06620)).

~~10.2~~	Fourth Amendment to Amended and Restated Credit Agreement, dated as of February 14, 2014, to that certain Amended and Restated Credit Agreement, dated as of March 28, 2013 among Griffon Corporation, JPMorgan Chase Bank, N.A., as administrative agent, Deutsche Bank Securities Inc., as syndication agent, Wells Fargo Bank, National Association, HSBC Bank USA, N.A and RBS Citizens, N.A., as co-documentation agents, and the other lenders party thereto (Exhibit 99.1 to the Current Report on Form 8-K filed February 14, 2014 (Commission File No. 1-06620))

~~10.3~~	Griffon Corporation 2011 Equity Incentive Plan, as amended and restated through January 30, 2014 (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement relating to the 2014 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on December 20, 2013).

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”.



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)



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

S

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

£

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

	(Unaudited) At March 31, 2014		At September 30, 2013
CURRENT ASSETS
Cash and equivalents	$	69,933	$	178,130
Accounts receivable, net of allowances of $6,481 and $6,136		309,162		256,215
Contract costs and recognized income not yet billed, net of progress payments of $ 13,173 and $6,941		107,825		109,828
Inventories, net		256,690		230,120
Prepaid and other current assets		51,212		48,903
Assets of discontinued operations		1,217		1,214
Total Current Assets		796,039		824,410
PROPERTY, PLANT AND EQUIPMENT, net		357,882		353,593
GOODWILL		370,172		357,730
INTANGIBLE ASSETS, net		224,226		221,391
OTHER ASSETS		30,774		28,580
ASSETS OF DISCONTINUED OPERATIONS		3,107		3,075
Total Assets	$	1,782,200	$	1,788,779

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	13,393	$	10,768
Accounts payable		182,505		163,610
Accrued liabilities		82,472		106,743
Liabilities of discontinued operations		3,069		3,288
Total Current Liabilities		281,439		284,409
LONG-TERM DEBT, net of debt discount of $11,454 and $13,246		773,579		678,487
OTHER LIABILITIES		165,071		170,675
LIABILITIES OF DISCONTINUED OPERATIONS		4,359		4,744
Total Liabilities		1,224,448		1,138,315
COMMITMENTS AND CONTINGENCIES - See Note 19
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity		557,752		650,464
Total Liabilities and Shareholders’ Equity	$	1,782,200	$	1,788,779

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

Balance at September 30, 2013		77,616	$	19,404	$	494,412	$	434,363			18,527	$	(274,602	)	$	(3,339	)	$	(19,774	)	$	650,464
Net loss		—		—		—		(22,589	)		—		—			—			—			(22,589	)
Dividend		—		—		—		(3,290	)		—		—			—			—			(3,290	)
Tax effect from exercise/vesting of equity awards, net		—		—		273		—			—		—			—			—			273
Amortization of deferred compensation		—		—		—		—			—		—			—			1,043			1,043
Common stock acquired		—		—		—		—			5,454		(63,370	)		—			—			(63,370	)
Stock grants and equity awards, net		877		219		300		—			—		—			—			—			519
ESOP purchase of common stock		—		—		—		—			—		—			—			(10,000	)		(10,000	)
ESOP allocation of common stock		—		—		204		—			—		—			—			—			204
Stock-based compensation		—		—		4,996		—			—		—			—			—			4,996
Other comprehensive loss, net of tax		—		—		—		—			—		—			(498	)		—			(498	)
Balance at March 31, 2014		78,493	$	19,623	$	500,185	$	408,484			23,981	$	(337,972	)	$	(3,837	)	$	(28,731	)	$	557,752

	Three Months Ended March 31,						Six Months Ended March 31,
	2014			2013			2014			2013
Revenue	$	507,687		$	488,743		$	961,145		$	912,492
Cost of goods and services		397,700			383,246			745,655			709,325
Gross profit		109,987			105,497			215,490			203,167

Selling, general and administrative expenses		89,622			86,059			177,302			168,278
Restructuring and other related charges		692			9,336			1,534			10,444
Total operating expenses		90,314			95,395			178,836			178,722

Income from operations		19,673			10,102			36,654			24,445

Other income (expense)
Interest expense		(12,389	)		(13,060	)		(25,523	)		(26,167	)
Interest income		28			151			61			179
Loss from debt extinguishment, net		(38,890	)		—			(38,890	)		—
Other, net		783			422			1,689			908
Total other expense, net		(50,468	)		(12,487	)		(62,663	)		(25,080	)

Loss before taxes		(30,795	)		(2,385	)		(26,009	)		(635	)
Benefit for income taxes		(4,970	)		(1,566	)		(3,420	)		(374	)
Net loss	$	(25,825	)	$	(819	)	$	(22,589	)	$	(261	)

Basic loss per common share	$	(0.53	)	$	(0.02	)	$	(0.44	)	$	(0.00	)
Weighted-average shares outstanding		48,990			54,345			50,872			54,749

Diluted loss per common share	$	(0.53	)	$	(0.02	)	$	(0.44	)	$	(0.00	)
Weighted-average shares outstanding		48,990			54,345			50,872			54,749

Net loss	$	(25,825	)	$	(819	)	$	(22,589	)	$	(261	)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		1,224			(5,924	)		(1,913	)		(2,921	)
Pension and other post retirement plans		1,099			489			1,415			4,349
Gain on cash flow hedge		—			171			—			171
Total other comprehensive income (loss), net of taxes		2,323			(5,264	)		(498	)		1,599
Comprehensive income (loss), net	$	(23,502	)	$	(6,083	)	$	(23,087	)	$	1,338

			Amortization
	2014		Period (Years)
Goodwill	$	11,617		N/A
Tradenames		1,686		Indefinite
Customer relationships		6,023		25
	$	19,326

	At March 31,		At September 30,
	2014		2013
Raw materials and supplies	$	73,152	$	65,560
Work in process		68,795		63,930
Finished goods		114,743		100,630
Total	$	256,690	$	230,120

	At September 30, 2013		Goodwill from 2014 acquisitions		Other adjustments including currency translations		At March 31, 2014
Home & Building Products	$	269,802	$	11,617	$	244	$	281,663
Telephonics		18,545		—		—		18,545
Plastics		69,383		—		581		69,964
Total	$	357,730	$	11,617	$	825	$	370,172

	At March 31, 2014						At September 30, 2013
	Gross Carrying Amount		Accumulated Amortization		Average Life (Years)		Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	172,191	$	32,515		25	$	166,985	$	29,049
Unpatented technology		6,804		3,177		13		6,804		2,916
Total amortizable intangible assets		178,995		35,692				173,789		31,965
Trademarks		80,923		—				79,567		—
Total intangible assets	$	259,918	$	35,692			$	253,356	$	31,965

		Three Months Ended March 31, 2014													Three Months Ended March 31, 2013
		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)		7.1	%	$	6,133		$	—	$	261	$	6,394			7.5	%	$	9,797		$	—	$	405	$	10,202
Senior notes due 2022	(a)		5.3	%		2,800			—		111		2,911			n/a			—			—		—		—
Revolver due 2019	(a)		n/a			306			—		142		448			n/a			206			—		157		363
Convert. debt due 2017	(b)		9.3	%		1,000			909		110		2,019			9.3	%		1,000			834		111		1,945
Real estate mortgages	(c)		3.8	%		122			—		37		159			5.4	%		135			—		22		157
ESOP Loans	(d)		3.4	%		180			—		5		185			2.9	%		158			—		2		160
Capital lease - real estate	(e)		5.3	%		114			—		7		121			5.2	%		125			—		7		132
Non U.S. lines of credit	(f)		n/a			224			—		—		224			n/a			147			—		—		147
Non U.S. term loans	(f)		n/a			101			—		—		101			n/a			133			—		25		158
Other long term debt	(g)		n/a			—			—		—		—			n/a			136			—		—		136
Capitalized interest						(173	)		—		—		(173	)					(340	)		—		—		(340	)
Totals					$	10,807		$	909	$	673	$	12,389					$	11,497		$	834	$	729	$	13,060

		Six Months Ended March 31, 2014													Six Months Ended March 31, 2013
		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)		7.1	%	$	15,930		$	—	$	667	$	16,597			7.4	%	$	19,594		$	—	$	811	$	20,405
Senior notes due 2022	(a)		5.3	%		2,800			—		111		2,911			n/a			—			—		—		—
Revolver due 2019	(a)		n/a			473			—		278		751			n/a			424			—		313		737
Convert. debt due 2017	(b)		9.1	%		2,000			1,792		221		4,013			9.2	%		2,000			1,645		222		3,867
Real estate mortgages	(c)		4.0	%		252			—		73		325			5.4	%		274			—		43		317
ESOP Loans	(d)		3.2	%		332			—		7		339			2.9	%		325			—		4		329
Capital lease - real estate	(e)		5.3	%		233			—		14		247			5.3	%		256			—		13		269
Non U.S. lines of credit	(f)		n/a			417			—		—		417			n/a			260			—		—		260
Non U.S. term loans	(f)		n/a			153			—		4		157			n/a			306			—		51		357
Other long term debt	(g)		n/a			11			—		21		32			n/a			251			—		—		251
Capitalized interest						(266	)		—		—		(266	)					(625	)		—		—		(625	)
Totals					$	22,335		$	1,792	$	1,396	$	25,523					$	23,065		$	1,645	$	1,457	$	26,167

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
REVENUE	2014		2013		2014		2013
Home & Building Products:
Ames	$	160,705	$	136,237	$	257,313	$	213,546
CBP		90,838		89,499		212,680		202,366
Home & Building Products		251,543		225,736		469,993		415,912
Telephonics		104,185		121,631		200,210		217,681
Plastics		151,959		141,376		290,942		278,899
Total consolidated net sales	$	507,687	$	488,743	$	961,145	$	912,492

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
DEPRECIATION and AMORTIZATION	2014		2013		2014		2013
Segment:
Home & Building Products	$	7,614	$	9,157	$	15,648	$	18,017
Telephonics		1,858		1,752		3,602		3,471
Plastics		6,864		6,663		13,782		13,340
Total segment depreciation and amortization		16,336		17,572		33,032		34,828
Corporate		103		109		200		210
Total consolidated depreciation and amortization	$	16,439	$	17,681	$	33,232	$	35,038

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	6,722	$	6,711	$	15,190	$	15,804
Telephonics		5,520		2,630		8,887		3,452
Plastics		4,390		4,333		10,150		11,701
Total segment		16,632		13,674		34,227		30,957
Corporate		297		33		618		38
Total consolidated capital expenditures	$	16,929	$	13,707	$	34,845	$	30,995

	Three Months Ended March 31,						Six Months Ended March 31,
	2014			2013			2014			2013
Service cost	$	45		$	48		$	90		$	98
Interest cost		2,500			2,422			5,000			4,847
Expected return on plan assets		(2,885	)		(3,136	)		(5,770	)		(6,274	)
Amortization:
Prior service cost		4			5			8			10
Recognized actuarial loss		489			840			978			1,680
Loss on pension settlement		—			—			—			2,142
Net periodic expense	$	153		$	179		$	306		$	2,503

	Parent Company			Guarantor Companies		Non-Guarantor Companies		Elimination			Consolidation

CURRENT ASSETS
Cash and equivalents	$	68,994		$	25,343	$	83,793	$	—		$	178,130
Accounts receivable, net of allowances		—			213,506		76,241		(33,532	)		256,215
Contract costs and recognized income not yet billed, net of progress payments		—			109,683		145		—			109,828
Inventories, net		—			173,406		56,723		(9	)		230,120
Prepaid and other current assets		(712	)		21,854		17,330		10,431			48,903
Assets of discontinued operations		—			—		1,214		—			1,214
Total Current Assets		68,282			543,792		235,446		(23,110	)		824,410

PROPERTY, PLANT AND EQUIPMENT, net		972			248,973		103,648		—			353,593
GOODWILL		—			288,146		69,584		—			357,730
INTANGIBLE ASSETS, net		—			160,349		61,042		—			221,391
INTERCOMPANY RECEIVABLE		547,903			911,632		573,269		(2,032,804	)		—
EQUITY INVESTMENTS IN SUBSIDIARIES		772,374			533,742		2,718,956		(4,025,072	)		—
OTHER ASSETS		45,968			50,423		7,423		(75,234	)		28,580
ASSETS OF DISCONTINUED OPERATIONS		—			—		3,075		—			3,075
Total Assets	$	1,435,499		$	2,737,057	$	3,772,443	$	(6,156,220	)	$	1,788,779

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	1,000		$	1,079	$	8,689	$	—		$	10,768
Accounts payable and accrued liabilities		41,121			183,665		70,427		(24,860	)		270,353
Liabilities of discontinued operations		—			—		3,288		—			3,288
Total Current Liabilities		42,121			184,744		82,404		(24,860	)		284,409

LONG-TERM DEBT, net of debt discounts		656,852			9,006		12,629		—			678,487
INTERCOMPANY PAYABLES		20,607			796,741		1,188,017		(2,005,365	)		—
OTHER LIABILITIES		65,455			153,970		25,578		(74,328	)		170,675
LIABILITIES OF DISCONTINUED OPERATIONS		—			—		4,744		—			4,744
Total Liabilities		785,035			1,144,461		1,313,372		(2,104,553	)		1,138,315

SHAREHOLDERS’ EQUITY		650,464			1,592,596		2,459,071		(4,051,667	)		650,464
Total Liabilities and Shareholders’ Equity	$	1,435,499		$	2,737,057	$	3,772,443	$	(6,156,220	)	$	1,788,779

($ 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		170			80			2,073			—			2,323
Comprehensive income (loss)	$	(25,655	)	$	12,046		$	14,124		$	(24,017	)	$	(23,502	)

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2014			2013			2014			2013

Net loss	$	(25,825	)	$	(819	)	$	(22,589	)	$	(261	)

Adjusting items, net of tax:
Loss from debt extinguishment, net		24,964			—			24,964			—
Restructuring and related		429			5,788			951			6,508
Acquisition costs		—			—			495			—
Loss on pension settlement		—			—			—			1,392
Extinguishment impact on period tax rate^a		5,848			—			5,848			—
Discrete tax provisions (benefits)		609			(309	)		320			(364	)

Adjusted net income	$	6,025		$	4,660		$	9,989		$	7,275

Diluted loss per common share	$	(0.53	)	$	(0.02	)	$	(0.44	)	$	(0.00	)

Adjusting items, net of tax:
Loss from debt extinguishment, net		0.51			—			0.49			—
Restructuring		0.01			0.10			0.02			0.11
Acquisition costs		—			—			0.01			—
Loss on pension settlement		—			—			—			0.02
Extinguishment impact on period tax rate^a		0.12			—			0.12			—
Discrete tax provisions (benefits)		0.01			(0.01	)		0.01			(0.01	)

Adjusted earnings per common share	$	0.12		$	0.08		$	0.20		$	0.13

Weighted-average shares outstanding (in thousands)		48,990			54,345			50,872			54,749