UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the year ended September 30, 2010ORo

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


Commission File No. 1-06620

GRIFFON CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

11-1893410(I.R.S. Employer
Identification No.)712 Fifth Avenue, 18th Floor, New York, New York(Address of Principal Executive Offices)

10019(Zip Code)(212) 957-5000Registrant's telephone number, including area code:


Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on
which registeredCommon Stock, $0.25 par value

New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes o No ý

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.    ý

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

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the close of business
March 31, 2010, the registrant's most recently completed second quarter, was approximately $553,000,000. The registrant's closing price as reported by the New York Stock Exchange-Composite
Transactions for March 31, 2010 was $12.46.

The
number of the registrant's outstanding shares was 62,116,568 as of October 29, 2010.

DOCUMENTS INCORPORATED BY REFERENCE:

Part III(Items 10, 11, 12, 13 and 14). Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934.



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Special Notes Regarding Forward-Looking Statements

This Annual Report on Form 10-K, 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, 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-K 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, including our recent acquisition of Ames True Temper; 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; increases in the cost of
raw materials such as resin and steel; changes in customer demand; 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 Griffon's subsidiary, 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. 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.

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PART I

Item 1.    Business

The Company

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

Headquartered
in New York, N.Y., the Company was incorporated in New York in 1959, and was reincorporated in Delaware in 1970.

Griffon
currently conducts its operations through three segments:



(Unless otherwise indicated, any reference to years or year-end refers to the fiscal year ending September 30)

On September 30, 2010, Griffon purchased all of the outstanding stock of CHATT Holdings, Inc. ("ATT Holdings"), the
parent of ATT, on a cash and debt-free basis, for $542 million in cash, subject to certain adjustments. ATT is a global provider of non-powered lawn and garden tools,
wheelbarrows, and other outdoor work products to the retail and professional markets. ATT's brands include Ames®, True Temper®, Ames True Temper®,
Garant®, Union Tools®, Razor-back®, Jackson®, Hound Dog® and Dynamic DesignTM. ATT's brands hold the number one or
number two market positions in their respective major product categories.

In
connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. ("Clopay Ames"), a wholly-owned subsidiary of Griffon, entered into a $375 million secured term loan
facility ("Term Loan") and a new $125 million asset based lending facility ("New ABL"). The acquisition, including all related transaction costs, was funded by proceeds of the
Term Loan, $25 million drawn under the New ABL, and $168 million of Griffon cash. ATT's previous outstanding debt has been

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repaid
in connection with the acquisition. Following the ATT transaction, Griffon holds consolidated cash balances of $170 million at September 30, 2010.

The
purchase of ATT occurred on September 30, 2010. Accordingly, ATT's operating results are not included in Griffon's consolidated statements of operations or cash flows, or
footnotes relating thereto for any year presented, except where explicitly stated as pro-forma results. All pro forma results are unaudited and, unless otherwise stated, give effect to the
acquisition of ATT as if it had occurred on October 1, 2009. The Griffon consolidated balance sheet at September 30, 2010 and related notes thereto include ATT's balances at that date.

In
July 2010, Griffon retired substantially all of the outstanding 4% Convertible Subordinated Notes due 2023 when they were put to Griffon at par.

In
December 2009, Griffon issued $100 million principal amount of 4% Convertible Subordinated Notes due 2017 (the "2017 Notes") at an initial conversion ratio of 67.0799 shares of
Griffon common stock per $1,000 principal amount of the 2017 Notes, corresponding to an initial conversion price of approximately $14.91 per share.

In
2008, Griffon substantially strengthened its balance sheet by refinancing its senior debt and raising $248.6 million in gross proceeds through a common stock rights offering,
along with an investment by GS Direct, L.L.C. ("GS Direct"), an affiliate of Goldman Sachs.

As
a result of the downturn in the residential housing market, in 2008, Griffon exited substantially all of the operating activities of its Installation Services segment; this segment
sold, installed and serviced garage doors, garage door openers, fireplaces, floor coverings, cabinetry and a range of related building products primarily for the new residential housing market.
Operating results of substantially all the Installation Services segment have been reported as discontinued operations in the consolidated statements of operations for all periods presented herein,
and the Installation Services segment is excluded from segment reporting (see the Discontinued Operations footnote in the Notes to Consolidated Financial Statements).

Griffon
makes available, free of charge through its website atwww.griffoncorp.com, its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as soon as reasonably practicable after such material is filed with or furnished to the Securities and Exchange Commission (the "SEC").

For
information regarding revenue, profit and total assets of each segment, see the Business Segments footnote in the Notes to Consolidated Financial Statements.

Reportable Segments:

Telephonics Corporation

Telephonics specializes in advanced electronic information and communication systems for defense, aerospace, civil, industrial, and
commercial applications for the United States and international markets. Telephonics designs, develops, manufactures, sells, and provides logistical support for aircraft intercommunication systems,
radar, air traffic management, identification friend or foe equipment, Integrated Homeland Security Systems and custom, mixed-signal, application-specific, integrated circuits. Telephonics is a
leading supplier of airborne maritime surveillance radar and aircraft intercommunication management systems, the segment's two largest product lines. In addition to its traditional defense products
used predominantly by the United States ("U.S") Government and its agencies, Telephonics has adapted its core technologies to products used in international markets in an effort to further increase
its presence in both non-defense government and commercial markets. In 2010, approximately 73% of the
segment's sales were to the United States Government and agencies thereof, as a prime or subcontractor, 19% to international customers and 8% to U.S. commercial customers.

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Telephonics
employs approximately 1,400 employees.

Griffon
believes that Telephonics' advanced systems and sub-systems are well-positioned to address the needs of an electronic battlefield with emphasis on
providing situational awareness to the warfighters through the retrieval and dissemination of timely data for use by highly mobile ground, air and sea-going forces. Telephonics anticipates
that the need for such systems will increase in connection with the increasingly active role that the military is playing in the war on terrorism, both at home and abroad. In recent years, Telephonics
has increasingly focused its technologies and core competencies in the growing Homeland Security, Air Traffic Management, and Unmanned Aerial Vehicle (UAV) markets.

Programs and Products

Telephonics is generally a first-tier supplier to prime contractors in the defense industry such as Lockheed Martin,
Boeing, Northrop Grumman, General Dynamics, BAE Systems, MacDonald Dettwiler, Sikorsky Aircraft, and is often a prime contractor to the U.S. Department of Defense and the U.S. Department of Homeland
Security ("Homeland Security"). The significant contraction and consolidation in the U.S. and international defense industry provides opportunities for established first-tier suppliers to
capitalize on existing relationships with major prime contractors and play a larger role in defense systems development and procurement, for the foreseeable future.

As
a result of its performance on a prior manufacturing contract with Syracuse Research Corporation, Telephonics received a subcontract award from Sierra Nevada Corporation for both
production and support of counter-IED devices which resulted in $46 million of revenue in 2010 and $11 million of revenue in 2009.

Telephonics
continues to direct resources towards Homeland Security programs, and was previously selected by Boeing Company to participate in the Secure Border Initiative net (SBInet)
program. Additionally, Telephonics has completed a contract from the U.S. Customs and Border Protection for mobile surveillance systems as part of Homeland Security's initiative to protect the U.S.
borders, and continues to pursue other opportunities with this customer. These programs represent strategic
advances for Telephonics by allowing it to expand its core technical expertise into this nascent and growing Homeland Security market.

In
2010, Telephonics was selected by Northrop Grumman as the radar supplier for the U.S. Navy's Firescout MQ-8 program, which is a vertical take-off and landing
UAV platform. This strategic win positions Telephonics, with both its radar and communications products, as a strong competitor in this growing market segment.

Backlog

The funded backlog for Telephonics was approximately $407 million at September 30, 2010, compared to $393 million
at September 30, 2009. The increase in backlog is primarily attributable to additional funding received for the MH-60R program, a unique, fully integrated multi-mode
radar and identification friend or foe interrogator system. Approximately 73% of the current backlog is expected to be filled during 2011.

Sales and Marketing

Telephonics has technical business development personnel who act as the focal point for its marketing activities and sales
representatives who introduce its products and systems to customers worldwide.

The
U.S. Government through its agencies, Lockheed Martin Corporation and the Boeing Company are significant customers of Telephonics. The loss of these customers would have a material
adverse effect on Telephonics' business. Notwithstanding the significance of Lockheed Martin Corporation and Boeing Company, Telephonics sells to a diverse group of other domestic and

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international
defense industry contractors, as well as others who use Telephonics products for commercial use.

Telephonics
participates in a range of long-term defense and non-military government programs, both in the U.S. and internationally. Telephonics has developed a
base of installed products that generate significant recurring revenue from product enhancements and retrofits as well as providing spare parts and customer support. Due to the inherent complexity of
these
electronic systems, Telephonics believes that its incumbent status on major platforms provides a competitive advantage in the selection process for platform upgrades and enhancements. Furthermore,
Telephonics believes that its ability to leverage and apply its advanced technology to new platforms provides a competitive advantage when bidding for new business.

In
recent years, the segment has significantly expanded its customer base in international markets. Telephonics' international projects include contracts with MacDonald Dettwiler as part
of Canada's CP-140 Aurora Aircraft Modernization program, with General Dynamics for the Canadian Maritime Helicopter Program, and a number of contracts with the Civil Aviation Authority of
China for air traffic management systems for Mainland China.

Manufacturing Facilities

Telephonics' facilities are principally located in the United States, primarily in New York, with one facility in Sweden. In 2010,
Telephonics added an additional New York facility to provide increased manufacturing capacity, as well as a state-of-the-art Air Traffic Management
high-tech development laboratory and demonstration center. Telephonics also established its Technical Support Services Center in Elizabeth City, North Carolina which supports aircraft
integration and upgrade activities, in addition to providing support services to customers.

Research and Development

In an effort to ensure customer satisfaction and loyalty, Telephonics seeks to anticipate the needs of core markets by investing in
research and development ("R&D") to provide solutions well in advance of its competitors. Telephonics continually updates its core technologies through internally funded R&D while coordinating with
its customers at the earliest stages of new program development. The selection of R&D projects is based on available opportunities in the marketplace, as well as input from Telephonics' customers.
Telephonics is a technological leader in its core markets and intends to pursue new growth opportunities by leveraging its systems design and engineering capabilities and incumbent position on key
platforms.

In
addition to products for defense programs, Telephonics technology is also used in commercial applications such as airborne weather, search and rescue radar, and air traffic management
systems. Telephonics' reputation for innovative product design and engineering capabilities, especially in the areas of voice and data communications, radio frequency design, digital signal
processing, networking systems, inverse synthetic aperture radar and analog, digital and mixed-signal integrated circuits, will continue to enhance its ability to secure, retain and expand its
participation in defense programs and commercial opportunities.

Telephonics
often designs its products to exceed customers' minimum specifications, providing its customers with greater performance, flexibility, and value. Telephonics believes that
early participation and communication with its customers in the requirements definition stages of new program development, increases the likelihood that its products will be selected and integrated as
part of a total system solution.

Competition

Telephonics competes with major manufacturers of electronic information and communication systems, as well as several smaller
manufacturers of similar products. Telephonics endeavors to design

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products
with greater performance and flexibility than its competitors while competing on the basis of technology, design, quality and price.

Home & Building Products:

Home & Building Products includes CBP and ATT. These businesses both serve The Home Depot, Inc. ("Home Depot"), a
significant customer, as well as purchase common raw materials. These businesses are exploring opportunities to leverage their manufacturing, sourcing and distribution footprints.

Clopay Building Products

CBP is the largest manufacturer and marketer of residential garage doors and among the largest manufacturers of commercial sectional
doors in the United States. The majority of CBP's sales are for home remodeling and renovation, with the balance for the new residential housing and commercial building markets. Sales into the home
remodeling market are being driven by the continued aging of the housing stock, existing home sales activity, the trend of improving home appearance, as well as improved energy efficiency, leading to
increased demand for insulated doors. CBP employs approximately 1,350 employees.

The
garage door industry has been negatively impacted by the recessionary effect on the residential housing market. Key statistics regarding housing sales, construction permits and
starts in 2010 and 2009 were substantially lower than the prior decade. According to the National Association of Home Builders, current data compared to the prior year shows new home starts up 4% with
new home sales down 21% and the inventory of new homes stands at an eight month supply. Current year existing home sales are down 19% versus the prior year and the inventory of existing homes now
stands at a 10.7-month supply. According to industry sources, the residential and commercial sectional garage door market for 2009 was estimated to be $1.5 billion, declining
approximately $200 million from the prior year.

Brands

CBP brings nearly 50 years of experience and innovation to the garage door industry. Our strong family of brands includes
Clopay®, America's Favorite Garage Doors®; Holmes Garage Door Company® and IDEAL Door®. Clopay is the only residential garage door brand to hold the
Good Housekeeping Seal of Approval. With two manufacturing facilities and 51 distribution centers across the U.S. and Canada, CBP is North America's leading manufacturer of residential garage doors, a
preferred supplier of commercial overhead doors and in 2010 launched a complete line of entry door systems uniquely designed to complement its popular residential garage door styles.

Products and Service

CBP manufactures a broad line of residential sectional garage doors with a variety of options, at varying prices. CBP offers garage
doors made primarily from steel, plastic composite and wood, and also sells related products, such as garage door openers, manufactured by third parties.

CBP
also markets commercial sectional doors, which are similar to residential garage doors, but are designed to meet the more demanding performance specifications of a commercial
application.

Sales and Marketing

CBP distributes its products through a wide range of distribution channels, including installing dealers, retailers and wholesalers.
CBP owns and operates a national network of 51 distribution centers. Additionally, products are sold to approximately 2,000 independent professional installing dealers and to major home center retail
chains. CBP maintains strong relationships with its installing dealers and

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believes
it is the largest supplier of residential garage doors to the retail and professional installing channels in the North America.

CBP
is the principal supplier of residential garage doors throughout North America to Home Depot and Menards. The loss of either of these customers would have a material adverse effect
on CBP's and Griffon's business. CBP distributes its garage doors directly to customers from its manufacturing facilities and through its distribution centers located throughout the United States and
Canada. These distribution centers allow CBP to maintain an inventory of garage doors near installing dealers and provide quick-ship service to retail and professional dealer customers.

Manufacturing and Raw Materials

As part of its cost structure review, in June 2009, Griffon announced plans to consolidate facilities in its CBP segment. These actions
are scheduled to be completed in early calendar 2011, consistent with the plan. CBP estimates it will incur pre-tax exit and restructuring costs approximating $11 million,
substantially all of which will be cash charges; charges include $2 million for one-time termination benefits and other personnel costs, $1 million for excess facilities and
related costs, and $8 million for other exit costs, primarily in connection with production realignment. CBP expects approximately $11 million in capital expenditures in order to
effectuate the restructuring plan. CBP spent $4.2 million and $7.3 million in 2010 for the restructuring plan and related capital expenditures, respectively, and since inception through
September 30, 2010, has spent $5.4 million and $9.3 million of restructuring and related capital expenditures to-date for the plan, respectively.

The
facility consolidation is part of CBP's continuing efforts to improve and streamline its manufacturing processes. CBP's engineering and technological expertise, combined with its
capital investment programs, generally has enabled it to efficiently manufacture products in large volume and meet changing customer needs in a timely manner. CBP uses proprietary manufacturing
processes to produce the majority of its products. Certain machinery and equipment are internally modified to
achieve manufacturing objectives. These manufacturing facilities produce a broad line of high quality garage doors for distribution to professional installer, retail and wholesale channels.

The
principal raw material used in CBP's manufacturing is galvanized steel. CBP also utilizes certain hardware components, as well as wood and insulated foam. All of these raw materials
are generally available from a number of sources.

Research and Development

CBP operates a technical development center where its research engineers work to design, develop and implement new products and
technologies and perform durability and performance testing of new and existing products, materials and finishes. Also at this facility, the process engineering team works to develop new manufacturing
processes and production techniques aimed at improving manufacturing efficiencies.

Competition and market conditions

The garage door industry is characterized by several large national manufacturers and many smaller regional and local manufacturers.
CBP competes on the basis of service, quality, price, brand awareness and product design.

CBP's
brand names are widely recognized in the building products industry. CBP believes that it has earned a reputation among installing dealers, retailers and wholesalers for producing
a broad range of innovative, high-quality doors. CBP's market position and brand recognition are key marketing tools for expanding its customer base, leveraging its distribution network
and increasing its market share.

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Ames True Temper

ATT is the leading U.S. and a global provider of non-powered landscaping products that make work easier for homeowners and
professionals. ATT has a global manufacturing strategy, based primarily upon a blend of domestic manufacturing and sourced product, which makes ATT cost competitive while allowing it to provide a high
level of customer service. ATT employs approximately 1,600 employees.

Brands

ATT brands are among the most recognized across primary product categories in the North American non-powered landscaping
products market. ATT's brand portfolio includes Ames®, True Temper®, Ames True Temper®, Garant®, Hound Dog®, Westmix and Dynamic
Design, as well as contractor-oriented brands including UnionTools®, Razor-Back® Professional Tools and Jackson® Professional Tools. This
strong portfolio of brands allows ATT to build and maintain long-standing relationships with the leading companies that sell ATT product categories and to offer specific branding
strategies for key retail customers. In addition to the brands listed, ATT also sells unbranded products to capture the opening price point at major retailers or to satisfy the entire product offering
of a customer. While the opening price point category historically has not generated significant revenue, it is an important part of establishing a step-up strategy. As an example, opening
price point products are used for long handle tools to strengthen the position of that category's "good," "better" and "best" product lines. ATT also manufactures and distributes products under
proprietary customer brands, as requested.

Products

ATT manufactures and markets one of the broadest product portfolios in the non-powered landscaping product industry. This
portfolio is anchored by two core product categories: long handle tools and wheelbarrows. As a result of ATT's brands' strengths, high product quality, high level of customer service and strong
customer relationships, ATT has earned market-leading positions in the long handle tool and wheelbarrow product lines. The following is a brief description of ATT's primary product
lines:



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Customers

ATT sells products primarily in the U.S. and Canada through (1) retail centers, including home centers and mass merchandisers,
such as Home Depot, Lowe's Companies, Wal-Mart, Canadian Tire, and Rona (2) wholesale chains, including hardware stores and garden centers, such as Ace,
Do-It-Best and True Value and (3) industrial distributors, such as Grainger and McMaster-Carr.

Home
Depot and Lowes are significant customers of ATT. The loss of either of these customers would have a material effect on ATT's and Griffon's business.

Product Development and Intellectual Property

ATT product development efforts focus on both new products and product line extensions. Products are developed through
in-house industrial design and engineering staffs and through relationships with a number of outside product engineering and design firms to introduce new products timely and cost
effectively. Examples of recent new product initiatives include the Water Genie® Bottomless Watering Can with integrated hose reel in a lightweight
easy-to-use product, Pulverizer® multi-demolition tool, SnoBoss® sleigh shovel for ergonomic shoveling, EcoGardener series of long handle
tools made with bamboo handles and recycled steel heads, and three new lines of planters made with new materials: EcoGardener series of planters which are biodegradable when buried,
Ceramix® planters which look like ceramic but are lighter weight and more durable, and Roto Molded planters which use double wall construction for added strength.

ATT
holds various registered U.S. trademarks and issued U.S. patents and its wholly-owned subsidiaries hold trademarks, patents and copyrights in countries where products are sold. ATT
also holds an exclusive license in the U.S. and Canada to manufacture Clog-Free rakes.

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Sales and Marketing

ATT's sales organization is structured by distribution channel in the U.S., and by country internationally. In the U.S., a dedicated
team of sales professionals is provided for each of the large retail customers. Offices are maintained adjacent to each of the three largest customers' headquarters, as well as dedicated
in-house sales analysts at the corporate office. In addition, sales professionals are assigned to domestic, wholesale and industrial distribution channels. Sales teams located in Canada,
Australia and Ireland are available to handle the Canadian, Australian and European sales efforts, respectively. In 2008, ATT initiated marketing and distribution efforts in Mexico. To assist clients
in marketing products and responding to new customer trends, ATT has created teams headed by a product line marketing director focused on each product line. Each team is responsible for implementing
category-specific marketing strategies, including new product development, Stock Keeping Unit rationalization and support for key accounts. ATT offers internal graphics capabilities to design
catalogs, labels, point of purchase and other sales materials. In addition, point of sale and sell-through activity is monitored to identify product opportunities and develop merchandising
programs to help customers achieve their sales objectives. ATT also works closely with external research firms, design studios and product engineering organizations to identify and capitalize on
emerging consumer and professional end user trends.

Raw Materials and Suppliers

ATT's primary raw material inputs include resin (primarily polypropylene and high density polyethylene), wood (mainly ash, hickory and
poplar logs) and steel (hot rolled and cold rolled). In addition, some key materials and components are purchased, such as metal fork components, wheelbarrow tires, shovel heads and fiberglass
handles; however, most of the final assembly is completed internally in order to ensure consistent quality for customers. All raw materials used by ATT are generally available from a number of sources

Competition

The non-powered landscaping product industry is highly competitive and fragmented. Most competitors consist of small,
privately-held companies focusing on a single product category. Some competitors such as Fiskars and Truper compete in various tool categories, Suncast in hose reels and accessories and
Colorite/Swan in garden hoses. In addition, there is competition from imported or sourced products from China, India and other low-cost producing countries, particularly in long handled
tools, wheelbarrows, planters, striking tools and pruning tools.

The
principal factors by which ATT competes are quality, performance, price, brand strength, reliability and customer service, with the relative importance of each factor varying by
product line. Additionally, ATT is a party to three Asian joint ventures that enable ATT to compete with products from low-cost producing countries. The overall size, product depth and
category knowledge provide ATT with a competitive advantage. In addition, some offshore manufacturers lack sufficient distribution capabilities to service large retailers. Extensive wood mill
infrastructure and expertise in curing wood handles, coupled with the proximity to American ash and hickory sources, provide ATT with a competitive advantage over offshore manufacturers.

Distribution

ATT has nine operational distribution centers. In the U.S., the largest of these are a 1.2 million square foot facility in
Carlisle, Pennsylvania and a 400,000 square foot facility in Reno, Nevada. Finished goods from manufacturing sites are transported to these facilities by internal fleet, over the road trucking and
rail. Additionally, light assembly is performed at the Carlisle, Pennsylvania and Reno, Nevada locations. Distribution centers are maintained in Canada and Ireland and ATT utilizes a third party
distribution center in Mexico City, Mexico. Australia has five distribution centers. Streamlined

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logistics
and manufacturing capabilities allow ATT to deliver products cost effectively with shorter lead times, providing customers significant value for products and services.

Joint Ventures

ATT holds joint venture interests ranging from 25% to 35% in three separate joint ventures. ATT sources products from these joint
ventures which enables them to compete with products from low cost countries. ATT does not share in the profits or losses of the joint ventures. Under the terms of the joint venture agreements, ATT is
entitled to minority representation on the board of directors of each joint venture, and does not receive financial information.



Clopay Plastic Products

Plastics produces and develops specialty plastic films and laminates for a variety of hygienic, health care and industrial uses in the
United States and certain international markets. Products include thin gauge embossed and printed films, elastomeric films and laminates of film and non-woven fabrics. These products are
used primarily as moisture barriers in disposable infant diapers, adult incontinence products and feminine hygiene products, as protective barriers in single-use surgical and industrial
gowns, drapes and equipment covers, as packaging for hygienic products, house wrap and other products. Plastics' products are sold through a direct sales force primarily to multinational consumer and
medical products companies.

Plastics
employs approximately 1,350 employees.

The
markets in which Plastics participates have been affected by several key trends over the past five years. These trends include the increased use of disposable products in developing
countries and favorable demographics, including increasing immigration in major global economies. Other trends
representing significant opportunities for manufacturers include the continued demand for innovative products such as cloth-like, breathable, laminated and printed products, and large
consumer products companies' need for global supply partners. Notwithstanding the positive trends affecting the industry, product design changes by the customer can change the products manufactured by
Plastics and the associated demand.

Plastics
believes that its business development activities targeting major multinational and regional producers of hygiene, healthcare and related products and its investments in its
technology development capability and capacity increases will lead to additional sales of new and related products.

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Products

Plastics' specialty plastic film is a thin-gauge film engineered to provide certain performance characteristics and
manufactured from polymer resins. A laminate is the combination of a plastic film and a woven or non-woven fabric. These products are produced using both cast and blown extrusion and
laminating processes. High speed, multi-color custom printing of films and customized embossing patterns further differentiate the products. Specialty plastic film products typically provide a unique
combination of performance characteristics, such as breathability, barrier properties, elastic properties, processability and aesthetic appeal, that meet specific, proprietary customer needs.

Sales and Marketing

Plastics sells its products primarily in North America, Europe, and South and Central America with additional sales in Asia Pacific.
Plastics utilizes an internal direct sales force, with Plastics' senior management actively participating in developing and maintaining close contacts with customers.

Plastics'
largest customer is Procter & Gamble, Co. ("P&G"), which has accounted for approximately 50% of its revenue over the last five years. The loss of this customer
would have a material adverse effect on the business. Notwithstanding the significance of P&G, Plastics sells to a diverse group of other leading consumer, health care and industrial companies.

Plastics
seeks to expand its market presence by providing innovative products and services to major international consumer products companies. Specifically, Plastics believes that it can
continue to increase its North American sales and expand internationally through ongoing product development and enhancement, and by marketing its technologically-advanced films, laminates and printed
films for use in all of its markets. Operations in Germany, Brazil and most recently China, provide a strong platform for additional sales growth in international markets.

Research and Development

Plastics is an industry leader in the research, design and development of specialty plastic film and laminate products. Plastics
operates a technical center where polymer chemists, scientists and engineers work independently and in partnerships with customers to develop new technologies, products, processes and product
applications.

Plastics'
research and development efforts have resulted in many inventions covering embossing patterns, improved processing methods, product formulations, product applications and other
proprietary technology. Products developed include microporous breathable films and cost-effective printed films and laminates. Microporous breathability provides for moisture vapor
transmission and airflow while maintaining barrier properties resulting in improved comfort and skin care. Elastic laminates provide the user with improved comfort and fit. Printed films and laminates
provide consumers preferred aesthetics, such as softness and visual appeal. Plastics holds a number of patents for its specialty film and laminate products and related manufacturing processes. While
patents play a significant role, Plastics believes that its proprietary know-how and the knowledge, ability and experience of its employees are more significant to it long-term
success.

International Operations

Plastics has two operations in Germany from which it sells plastic films throughout Europe and the Middle East. Plastics also has
operations in Brazil which manufacture plastic hygienic and specialty films. Plastics' international operations provide a platform to broaden participation in Europe, the Middle East, South America
and Asia and strengthen Plastics' position as a global supplier.

Manufacturing and Raw Materials

Specialty plastic film and laminate products are manufactured using high-speed equipment designed to meet stringent
tolerances. The manufacturing process consists of melting a mixture of

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polymer
resins and additives, and forcing this mixture through a die and rollers to produce embossed films. Laminates of films and non-wovens are manufactured by a variety of techniques to
meet customer needs. In addition, films and laminates can be printed.

Plastic
resins, such as polyethylene and polypropylene, and non-woven fabrics are the basic raw materials used in the manufacture of substantially all Plastics' products. The
price of resin has fluctuated dramatically over the past five years primarily due to volatility in oil prices and producer capacity. Resins are purchased in pellet form from several suppliers. Sources
for raw materials are believed to be adequate for current and anticipated needs.

Competition

Plastics has a number of competitors, some of which are larger, in the specialty plastic films and laminates market. Plastics competes
on quality, service and price using its technical expertise, product development capabilities and broad international footprint to enhance its market position, build and maintain long-term
customer relationships and meet changing customer needs.

Employees

Griffon and its subsidiaries employ approximately 5,700 people located throughout the U.S., Canada, Europe, Brazil, China, Mexico and
Australia. Approximately 515 of these employees are covered by collective bargaining agreements in the U.S., primarily with an affiliate of the American Federation of Labor and Congress of Industrial
Organizations ("AFL-CIO"), United Brotherhood of Carpenters and Joiners of America ("UBCJA"), International Brotherhood of Teamsters ("IBT") and the United Steel, Paper and Forestry,
Rubber, Manufacturing, Energy Allied Industrial and Service Workers International Union. Additionally, approximately 200 employees in
Canada are represented by the Trade Union Advisory Committee. Griffon believes its relationships with its employees are satisfactory.

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Executive Officers of the Registrant

The following is a current list of Griffon's executive officers:

Name

Age

Positions Held and Prior Business ExperienceRonald J. Kramer


52

President since February 2009, Chief Executive Officer since April 2008, director since 1993 and Vice Chairman of the Board since November 2003. From 2002 through March 2008, President and a director of Wynn Resorts,
 Ltd., a developer, owner and operator of hotel and casino resorts. From 1999 to 2001, Managing Director at Dresdner Kleinwort Wasserstein, an investment banking firm, and its predecessor Wasserstein Perella & Co. Member of the
Board of Directors of Leap Wireless International, Inc. (NASDAQ: LEAP), a wireless communications company. Formerly on the boards of directors of Monster Worldwide, Inc. (NYSE: MWW), Sapphire Industrials Corporation (AMEX: FYR), Lakes
Entertainment, Inc. (NASDAQ: LACO), Republic Property Trust (formerly NYSE: RPB) and New Valley Corporation (NASDAQ: NVAL). Mr. Kramer is the son-in-law of Harvey R. Blau, Griffon's Chairman of the Board.Douglas J. Wetmore


53

Executive Vice President and Chief Financial Officer since September 2009. From April 1998 to July 2008, Senior Vice President and Chief Financial Officer of International Flavors & Fragrances Inc.
("IFF"), a creator of flavors and fragrances used in a variety of consumer products (NYSE: IFF). From October 2007 to July 2008, Treasurer of IFF. From 1991 to 1998, Corporate Controller of IFF. Prior to IFF, Price Waterhouse for 12 years.
Member of the Board of Directors and the Chair of the Audit Committee of Arch Chemicals, Inc., a global biocides company.Patrick L. Alesia


62

Chief Administrative Officer since September 2009, appointed Senior Vice President in May 2010, Vice President since 1990, Treasurer from 1979 to 2010, Ethics Officer since 2005, Secretary from 2005 to 2010. Served as
Chief Financial Officer from November 2007 to September 2009.Seth L. Kaplan


41

Senior Vice President, General Counsel and Secretary since May 2010. From July 2008 to May 2010, Assistant General Counsel and Assistant Secretary at Hexcel Corporation, a manufacturer of advanced composite materials
for space and defense, commercial aerospace and wind energy applications. From 2000 to July 2008, Senior Corporate Counsel and Assistant Secretary at Hexcel. From 1994 to 2000, associate at the law firm Winthrop, Stimson, Putnam & Roberts
(now Pillsbury Winthrop Shaw Pittman LLP).


Regulation

Griffon's operations are subject to various environmental, health, and employee safety laws and regulations. Griffon believes that it
is in material compliance with these laws and regulations. Historically, compliance with environmental laws has not materially affected, and is not expected to materially affect, Griffon's capital
expenditures, earnings or competitive position in the future.

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Nevertheless,
Griffon cannot guarantee that, in the future, it will not incur additional costs for compliance or that such costs will not be material.

Telephonics,
which sells directly and indirectly to the U.S. government, is subject to certain regulations, laws and standards set by the U.S. government. Additionally, Telephonics is
subject to routine audits and investigations by U.S. Government Agencies such as the Defense Contract Audit Agency and other Inspectors General. These agencies review a contractor's performance under
its contracts, cost structure and compliance with applicable laws, regulations and standards. These agencies also review the adequacy of, and a contractor's compliance with, its internal control
systems and policies, including the contractor's management, purchasing, property, estimating, compensation, and accounting and information systems.

Seasonality

Historically, Griffon's revenue and earnings are lowest in its second quarter and highest in its fourth quarter. With the inclusion of
ATT, revenue and earnings are expected to be lowest in the first and second quarters, and highest in the third and fourth quarters.

Financial Information About Geographic Areas

Segment and operating results are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of
Operations.

For
geographic financial information, see the Business Segment footnote in the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data.

Griffon's
non-U.S. businesses are primarily in Germany, Canada, Brazil, Mexico, Australia and Sweden.

Research and Development

Griffon's companies are encouraged to improve existing products as well as develop new products to satisfy customer needs; expand
revenue opportunities; maintain or extend competitive advantages; increase market share and reduce production costs. Research and development costs, not recoverable under contractual arrangements, are
charged to expense as incurred. Research and development costs for Griffon were $21.4 million in 2010, $17.8 million in 2009 and $17.5 million in 2008. ATT research and
development costs, which are not included in the results of Griffon Corporation, were $1.6 million in 2010.

Intellectual Property

Trademarks are considered to be of importance to Griffon's business. Griffon follows a practice of seeking trademark protection in the
U.S. and throughout the world where Griffon's products are sold. Principal global and regional trademarks include Clopay®, Ideal Door®, Holmes®, Ames®,
True Temper®, Ames True Temper®, Garant®, Hound Dog®, Westmix and Dynamic Design, UnionTools®,
Razor-Back® Professional Tools and Jackson® Professional Tools. Griffon's rights in these trademarks endure for as long as they are used and registered.

Item 1A.    Risk Factors

Griffon's business, financial condition, operating results and cash flows can be impacted by a number of factors which could cause
Griffon's actual results to vary materially from recent or anticipated future results. The risk factors discussed in this section should be carefully considered with all of the information in this
Annual Report on Form 10-K. These risk factors should not be considered the only risk factors facing Griffon. Additional risks and uncertainties
not presently known or that are currently deemed immaterial may also materially impact Griffon's business, financial condition, operating results and cash flows in the future.

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In general, Griffon is subject to the same general risks and uncertainties that impact other diverse manufacturing companies including, but not limited to, general economic, industry
and/or market conditions and growth rates; impact of natural disasters and their effect on global markets; continued events in the Middle East and possible future terrorist threats and their effect on
the worldwide economy; and changes in laws or accounting rules. Griffon has identified the following specific risks and uncertainties that it believes has the potential to materially affect its
business and financial condition.

Acquisition of Ames True Temper, Inc.

On September 30, 2010, Griffon purchased all of the outstanding stock of the parent company of ATT for total consideration of
$542 million, subject to certain adjustments.

Griffon
will face risks commonly encountered with a substantial acquisition and related financing including:



Current worldwide economic uncertainty and market volatility could adversely affect Griffon's businesses.

The current worldwide economic uncertainty, market volatility and credit crisis will continue to have an adverse effect on Griffon
during 2011, particularly in Home & Building Products, which is substantially linked to the U.S. housing market and the general U.S. economy. Also, purchases of ATT products are discretionary
for consumers and consumers are generally more willing to purchase products during periods in which favorable macroeconomic conditions prevail. Additionally, the current condition of the credit
markets could impact Griffon's ability to refinance expiring debt, obtain additional credit for investments in current businesses or for acquisitions, with favorable terms, or there may be no
financing available. Griffon is also exposed to basic economic risks including a decrease in the demand for the products and services offered or a higher risk of default on its receivables.

Adverse trends in the housing sector and in general economic conditions will directly impact Griffon's business.

Home & Building Products' business is influenced by market conditions for new home construction and renovation of existing
homes. For the year ended September 30, 2010, approximately 30% of Griffon's consolidated revenue was derived from the Home & Building Products segment (48% on a pro forma basis) which
is heavily dependent on new home construction and renovation of existing homes. The strength of the U.S. economy, the age of existing home stock, job growth, interest rates, consumer confidence and
the availability of consumer credit, as well as demographic factors such as the migration into the United States and migration of the population within the United States also have an effect on
Home & Building Products. In that respect, the significant downturn in the housing market has had an adverse effect on the operating results of Home & Building Products and this effect
is likely to continue in 2011, particularly to its CBP business.

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Griffon operates in highly competitive industries and may be unable to compete effectively.

Griffon's operating companies face intense competition in each of the markets served. There are a number of competitors, some of which
are larger and have greater resources than Griffon's operating companies. Griffon competes primarily on the basis of competitive prices, technical expertise, product differentiation, and quality of
products and services. There can be no assurance that Griffon will not encounter increased competition in the future, which could have a material adverse effect on Griffon's financial results.

The loss of large customers can harm financial results.

A small number of customers account for, and are expected to continue to account for, a substantial portion of consolidated revenue.
Approximately 18% of consolidated revenue and 50% of the Plastics segment revenue for the year ended September 30, 2010 was generated from P&G, the largest customer in the Plastics segment.
Home Depot, Lowes and Menards are significant customers of Home & Building Products with Home Depot accounting for approximately 13% of proforma consolidated revenue of $1.7 billion and
27% of the proforma Home & Building Products segment revenue of $833 million for the year ended September 30, 2010. The U.S. Government
and its agencies, Lockheed Martin Corporation and the Boeing Company, are significant customers of Telephonics. Future operating results will continue to substantially depend on the success of
Griffon's largest customers, as well as Griffon's relationship with them. Orders from these customers are subject to fluctuation and may be reduced materially due to changes in these customers' needs.
Any reduction or delay in sales of products to one or more of these customers could significantly reduce Griffon's revenue. Griffon's operating results will also depend on successfully developing
relationships with additional key customers. Griffon cannot assure that Griffon's largest customers will be retained or that additional key customers will be recruited. Also, Home & Building
Products extends credit to its customers, which exposes it to credit risk. Their largest customer accounted for approximately 26% and 10% of Home & Building Products' and Griffon's net accounts
receivable as of September 30, 2010, respectively. If this customer were to become insolvent or otherwise unable to pay, the financial condition, results of operations and cash flows of the
Home & Building Products segment would be adversely affected.

Reliance on third party suppliers and manufacturers may impair ability to meet ATT's customer demands.

ATT relies on a limited number of domestic and foreign companies, including its joint venture partners, to supply components and
manufacture certain of its products. The percentage of ATT's products sourced, based on revenue, approximated 41% in 2010. Reliance on third party suppliers and manufacturers may reduce control over
the timing of deliveries and quality of ATT's products. Reduced product quality or failure to deliver products quickly may jeopardize relationships with certain of ATT's key customers. In addition,
reliance on third party suppliers or manufacturers may result in failure to meet ATT's customer demands. Continued turbulence in the worldwide economy may affect the liquidity and financial condition
of ATT's suppliers. Should any of these parties fail to manufacture sufficient supply, go out of business or discontinue a particular component, alternative suppliers may not be found in a timely
manner, if at all. Such events could impact ATT's ability to fill orders, which would have a material adverse effect on customer relationships.

If Griffon is unable to obtain raw materials for products at favorable prices it could adversely impact operating performance.

Home & Building Products' and Plastics' suppliers primarily provide resin, wood and steel. Assurance cannot be provided that
these segments may not experience shortages of raw materials or components for products or be forced to seek alternative sources of supply. If temporary shortages due to disruptions in supply caused
by weather, transportation, production delays or other factors require raw materials to be secured from sources other than current suppliers, the terms may not be as

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favorable
as current terms or material may not be available at all. In recent years, Home & Building Products and Plastics have experienced price increases in steel and plastic resins.

While
most key raw materials used in Griffon's businesses are generally available from numerous sources, raw materials are subject to price fluctuations. Because raw materials in the
aggregate constitute a significant component of the cost of goods sold, price fluctuations could have a material adverse effect on Griffon's results of operations. Griffon's ability to pass raw
material price increases to customers is limited due to supply arrangements and competitive pricing pressure, and there is generally a time lag between increased raw material costs and implementation
of corresponding price increases for Griffon's products. In particular, sharp increases in raw material prices are more difficult to pass through to customers and may negatively affect
short-term financial performance.

ATT is subject to risks associated with its operations in China.

A substantial amount of ATT's sourcing is done through Chinese joint ventures. China does not have a well-developed,
consolidated body of laws governing foreign investment enterprises. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic, and it may be difficult to obtain
swift and equitable enforcement or to obtain enforcement of a judgment by a court of another jurisdiction. The relative inexperience of China's judiciary in many cases creates additional uncertainty
as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Furthermore, a substantial
portion of ATT's pruning tools, as well as all foam and fiberglass planters, are manufactured in China and must be shipped into the U.S. When they enter the U.S., these products may be subject to
import quotas, import duties and other restrictions. Any inability to import these products into the U.S. and any tariffs that may be levied with respect to these products may have a material adverse
result on ATT's business and results of operations, financial position and cash flows.

Griffon's businesses are subject to seasonal variations and the impact of uncertain weather patterns.

Historically, Griffon's revenue and income have been lowest in the second quarter ending March 31 and highest in the fourth
quarter ending September 30, primarily due to the seasonality of CBP's business. CBP's revenue is driven by residential renovation and construction which is generally at reduced levels during
the winter months. Because a high percentage of manufacturing overhead and operating expenses are relatively fixed throughout the year, operating margins have historically been lower in quarters with
lower revenue. ATT's lawn and garden products are used primarily in the spring and summer; in 2010, 61% of ATT's sales occurred during the second and third quarters. A majority of ATT's operating
income and cash flow is generated in this period, and therefore ATT's working capital needs and borrowings generally peak near the end of the second quarter in preparation for the spring selling
season.

With
the inclusion of ATT's operating results, starting in 2011, the first and second quarters are expected to be Griffon's lower revenue and income quarters.

Demand
for lawn and garden products is influenced by weather, particularly weekend weather during the peak gardening season. ATT's sales volumes could be adversely affected by certain
weather patterns such as unseasonably cool or warm temperatures, hurricanes, water shortages or floods. In addition, lack of snow or lower than average snowfall during the winter season may also
result in reduced sales of certain ATT products, such as snow shovels and other snow tools. As a result, ATT's results of operations, financial results and cash flows could be adversely impacted.

Further consolidation in the retail industry may adversely affect profitability.

Home centers and mass merchandisers have consolidated and increased in scale. If this trend continues, customers will likely seek more
favorable terms for their purchases of products, which will limit Griffon's ability to pass through raw material or other cost increases, or to raise prices for any

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reason.
Sales on terms less favorable than current terms could have a material adverse effect on profitability.

Unionized employees could strike or participate in a work stoppage.

Griffon employs approximately 5,700 people on a full-time basis, approximately 9% of whom are covered by collective
bargaining or similar labor agreements (all in the Telephonics and ATT businesses). If unionized employees engage in a strike or other work stoppage, or if Griffon is unable to negotiate acceptable
extensions of agreements with labor unions, a significant disruption of operations and increased operating costs could occur. In addition, any renegotiation or renewal of labor agreements could result
in higher wages or benefits paid to unionized employees, which could increase operating costs and could have a material adverse effect on profitability.

Griffon may be required to record impairment charges for goodwill and indefinite-lived intangible assets.

Griffon is required to assess goodwill and indefinite-lived intangible assets annually for impairment or on an interim basis if changes
in circumstances or the occurrence of events suggest impairment exists. If impairment testing indicates that the carrying value of reporting units or indefinite-lived intangible assets exceeds the
respective fair value, an impairment charge would be recognized. If goodwill or indefinite-lived intangible assets were to become impaired, the results of operations could be materially and adversely
affected.

Trends in the baby diaper market will directly impact Griffon's business.

Recent trends have been for baby diaper manufacturers to specify thinner plastic films for use in their products which reduces the
amount of product sold and Plastics' revenue; this trend has generally resulted in Plastics incurring costs to redesign and reengineer products to accommodate required specification changes. Such
decreases, or the inability to meet changing customer specifications, could result in a material decline in Plastics revenue and profits.

Telephonics' business depends heavily upon government contracts and, therefore, the defense budget.

Telephonics sells products to the U.S. government and its agencies both directly, and indirectly as a first-tier supplier
to prime contractors in the defense
industry such as Boeing, Lockheed Martin and Northrop Grumman. In the year ended September 30, 2010, U.S. government contracts and subcontracts accounted for approximately 24% of Griffon's
consolidated revenue. Contracts involving the U.S. government may include various risks, including:



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The
programs in which Telephonics participates may extend for several years, but are normally funded on an incremental basis. Decreases in the U.S. defense budget, in particular with
respect to programs to which Telephonics supplies materials, could have a material adverse impact on Telephonics financial conditions, results of operations and cash flows. The U.S. government may not
continue to fund programs to which Telephonics' development projects apply. Even if funding is continued, Telephonics may fail to compete successfully to obtain funding pursuant to such programs.

Telephonics' business could be adversely affected by a negative audit by the U.S. Government

As a government contractor, and a subcontractor to government contractors, Telephonics is subject to audits and investigations by U.S.
Government Agencies such as the Defense Contract Audit Agency, other Inspectors General and the Department of Justice. These agencies review a contractor's performance under its contracts, cost
structure and compliance with applicable laws, regulations and standards. These agencies also review the adequacy of, and a contractor's compliance with, its internal control systems and policies,
including the contractor's management, purchasing, property, estimating, compensation, and accounting and information systems. Any costs found to be misclassified or improperly allocated to a specific
contract will not be reimbursed or must be refunded if already billed and collected. Griffon could incur significant expenses in complying with audits and subpoenas issued by the government in aid of
inquiries and investigations. If an audit or an investigation uncovers improper or illegal activities, Telephonics may be subject to civil and criminal penalties and/or administrative sanctions, which
could include contract termination, forfeiture of profit, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. In addition, if allegations of
impropriety are made, Telephonics and Griffon could suffer serious reputational harm.

Griffon's companies must continually improve existing products, design and sell new products and invest in research and development in order to compete effectively.

The markets for Plastics and Telephonics are characterized by rapid technological change, evolving industry standards and continuous
improvements in products. Due to constant changes in these markets, future success depends on their ability to develop new technologies, products, processes and product applications.

Product
and technological developments are accomplished both through internally-funded research and development projects, as well as through strategic partnerships with customers.
Because it is not generally possible to predict the amount of time required and costs involved in achieving certain research and development objectives, actual development costs may exceed budgeted
amounts and estimated product development schedules may be extended. Griffon's financial condition and results of operations may be materially and adversely affected if:



Griffon may be unable to implement its acquisition growth strategy, which may result in added expenses without a commensurate increase in revenue and income and divert
management's attention.

Making strategic acquisitions is a significant part of Griffon's growth plans. The ability to successfully complete acquisitions
depends on identifying and acquiring, on acceptable terms, companies that either complement or enhance currently held businesses or expand Griffon into new profitable businesses. Additionally, Griffon
must properly integrate acquired businesses in order to maximize profitability. The competition for acquisition candidates is intense and Griffon cannot assure that it will

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successfully
identify acquisition candidates and complete acquisitions at reasonable purchase prices, in a timely manner or at all. Further, there is a risk that acquisitions will not be properly
integrated into
Griffon's existing structure. In implementing an acquisition growth strategy, the following may be encountered:



An
unsuccessful implementation of Griffon's acquisition growth strategy could have an adverse impact on Griffon's results of operations, cash flows and financial condition.

The loss of certain key officers or employees could adversely affect Griffon's business.

The success of Griffon is materially dependent upon the continued services of certain key officers and employees. The loss of such key
personnel could have a material adverse effect on Griffon's operating results or financial condition.

Griffon is exposed to a variety of risks relating to non-U.S. sales and operations, including non-U.S. economic and political conditions and
fluctuations in exchange rates.

Griffon and its companies own properties and conduct operations in Europe, Canada, Australia, Mexico and South America. Sales of
products through non-U.S. subsidiaries accounted for approximately 32% of consolidated revenue for the year ended September 30, 2010. These sales could be adversely affected by
changes in political and economic conditions, trade protection measures, differing intellectual property rights laws and changes in regulatory requirements that restrict the sales of products or
increase costs. Currency fluctuations between the U.S. dollar and the currencies in the non-U.S. regions in which Griffon does business may also have an impact on future reported financial
results. Including ATT, on a pro forma basis, non-U.S. sales were approximately 29% of total Griffon sales.

Griffon may not be able to protect its proprietary rights.

Griffon relies on a combination of patent, copyright and trademark laws, trade secrets, confidentiality and non-disclosure
agreements and other contractual provisions to protect proprietary rights. Such measures do not provide absolute protection and Griffon cannot give assurance that measures for protecting these
proprietary rights are and will be adequate, or that competitors will not independently develop similar technologies.

Griffon may inadvertently infringe on, or may be accused of infringing on, proprietary rights held by another party.

Griffon is regularly improving its technology and employing existing technologies in new ways. Though Griffon takes reasonable
precautions to ensure it does not infringe on the rights of others, it is possible that Griffon may inadvertently infringe on, or may be accused of infringing on, proprietary rights held by others. If
Griffon is found to have infringed on the propriety rights held by others, any related litigation or settlement relating to such infringement may have a material effect on Griffon's financial
statements and financial condition.

Griffon is exposed to product liability claims.

Griffon may be the subject of product liability claims relating to the performance of its products or the performance of a product in
which its products were a component part. There can be no assurance

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that
future product liability claims will not be brought against Griffon, either by an injured customer of an end product manufacturer who used one of the products as a component or by a direct
purchaser. Moreover, no assurance can be given that indemnification from customers or coverage under insurance policies will be adequate to cover future product liability claims against Griffon. In
addition, product liability insurance can be expensive, difficult to maintain and may be unobtainable in the future on acceptable terms. The amount and scope of any insurance coverage may be
inadequate if a product liability claim is successfully asserted. Furthermore, if any significant claims are made, the business and the related financial condition of Griffon may be adversely affected
by negative publicity.

Griffon has been, and may in the future be, subject to claims and liabilities under environmental laws and regulations.

Griffon's operations and assets are subject to environmental laws and regulations pertaining to the discharge of materials into the
environment, the handling and disposal of wastes, including solid and hazardous wastes, or otherwise relating to health, safety and protection of the environment, in various jurisdictions in which it
operates. Griffon does not expect to make any expenditure with respect to ongoing compliance with or remediation under these environmental laws and regulations that would have a material adverse
effect on its business, operating results or financial condition. However, the applicable requirements under environmental laws and regulations may change at any time.

Griffon
can incur environmental costs related to sites that are no longer owned or operated, as well as third-party sites to which hazardous materials are sent. It cannot be assured that
material expenditures or liabilities will not be incurred in connection with such claims. See the Commitment and Contingencies footnote in the Notes to Consolidated Financial Statements for further
information on environmental contingencies. Based on facts presently known, the outcome of current environmental matters are not expected to have a material adverse effect on Griffon's results of
operations and financial condition. However, presently unknown environmental conditions, changes in environmental laws and regulations or other unanticipated events may give rise to claims that may
involve material expenditures or liabilities.

Changes in income tax laws and regulations or exposure to additional income tax liabilities could adversely affect profitability.

Griffon is subject to federal, state and local income taxes in the United States and in various taxing jurisdictions outside the United
States. Tax provisions and liabilities are subject to the allocation of income among various U.S. and international tax jurisdictions. Griffon's effective tax rate could be adversely affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in any valuation allowance for deferred tax assets or the amendment or enactment of tax laws. The amount of
income taxes paid is subject to audits by U.S. Federal, state and local tax authorities, as well as tax authorities in the taxing jurisdictions outside the United States. If such audits result in
assessments different from recorded income tax liabilities, Griffon's future financial results may include unfavorable adjustments to its income tax provision.

Compliance with restrictions and covenants in Griffon's debt agreements may limit its ability to take corporate actions and harm its business.

The credit agreements entered into by certain of Griffon's subsidiaries contain covenants that restrict their ability to, among other
things, incur additional debt, pay dividends, incur liens and make investments, acquisitions, dispositions, restricted payments and capital expenditures. Under the respective credit agreements, these
subsidiaries are also required to comply with specific financial ratios and tests. These subsidiaries may not be able to comply in the future with these covenants or restrictions as a result of events
beyond their control, such as prevailing economic, financial and industry conditions or a change in control of Griffon. If a subsidiary defaults in maintaining compliance with the covenants and
restrictions in its credit agreement, its lenders could declare all of the principal and interest amounts outstanding due and payable and terminate their commitments to extend credit to

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the
subsidiary in the future. If the subsidiary or Griffon is unable to secure credit in the future, business could be harmed.

Reported earnings per share may be more volatile because of the conversion contingency provision of the notes.

The outstanding convertible notes are convertible when a "market price" condition is satisfied and also upon the occurrence of other
circumstances as more fully described in the Notes Payable, Capitalized Leases and Long-Term Debt footnote in the Notes to
Consolidated Financial Statements. Upon conversion, at Griffon's discretion, note holders will receive $1,000 in cash for each $1,000 principal amount of notes presented for conversion or value in
Griffon's common stock, and Griffon common stock for the value above the principal amount of the notes. The potential shares of Griffon common stock issuable for value above the principal value of the
notes are considered in the calculation of diluted earnings per share and volatility in Griffon's stock price could cause these notes to be dilutive in one quarter and not in a subsequent quarter,
increasing the volatility of fully diluted earnings per share.

Griffon may be unable to raise additional financing if needed

Griffon may need to raise additional financing in the future in order to implement its business plan, refinance debt, or to acquire new
or complimentary businesses or assets. Any required additional financing may be unavailable, or only available at unfavorable terms, due to uncertainties in the credit markets. If Griffon raises
additional funds by issuing equity securities, current holders of its common stock may experience significant ownership interest dilution and the new securities may have rights senior to the rights
associated with current outstanding common stock.

Griffon's indebtedness and interest expense could limit cash flow and adversely affect operations and Griffon's ability to make full payment on outstanding debt.

Griffon's indebtedness poses potential risks such as:



Griffon has the ability to issue additional equity securities, which would lead to dilution of issued and outstanding common stock.

The issuance of additional equity securities or securities convertible into equity securities would result in dilution to existing
stockholders' equity interests. Griffon is authorized to issue, without stockholder vote or approval, 3,000,000 shares of preferred stock in one or more series, and has the ability to fix the rights,
preferences, privileges and restrictions of any such series. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences or other rights superior to the rights of holders of Griffon's common stock. There is no present intention of issuing any such preferred stock, but Griffon reserves the right
to do so in the future. In addition, Griffon is authorized to issue, without stockholder approval, up to 85,000,000 shares of common stock, of which approximately 62,113,293 shares, net of treasury
shares, were outstanding as of September 30, 2010. Additionally, Griffon is authorized to issue, without stockholder approval, securities convertible into either shares of common stock or
preferred stock.

Item 1B.    Unresolved Staff Comments

None.

23

---





Item 2.    Properties

Griffon occupies approximately 8,500,000 square feet of general office, factory and warehouse space throughout the United States,
Germany, Sweden, Mexico, Canada, Australia, Ireland and Brazil. For a description of the encumbrances on certain of these properties, see the Notes Payable, Capitalized Leases and
Long-Term Debt footnote in the Notes to Consolidated Financial Statements. The following table sets forth certain information related to Griffon's major facilities:

Location

Business Segment

Primary Use

Approx.
Square
Footage

Owned/
Leased

Lease
End YearNew York, NY

Corporate

Headquarters


6,600

Leased


2016Jericho, NY

Corporate

Office


6,900

Leased


2014Farmingdale, NY

Telephonics

Manufacturing/R&D


193,000

OwnedHuntington, NY

Telephonics

Manufacturing


94,000

OwnedHuntington, NY

Telephonics

Manufacturing


55,000

Leased


2015Huntington, NY

Telephonics

Manufacturing


98,000

Leased


2016Melville, NY

Telephonics

Manufacturing


23,000

Leased


2014Columbia, MD

Telephonics

Manufacturing


25,000

Leased


2013Gardena, CA

Telephonics

Repairs


10,000

Leased


2014Stockholm, Sweden

Telephonics

Manufacturing/Engineering


22,000

Leased


2012Elizabeth City, NC

Telephonics

Repair and Service


22,000

Leased


2049Mason, OH

Home & Building Products/
Clopay Plastic Products

Office/R&D


131,000

OwnedAschersleben, Germany

Clopay Plastic Products

Manufacturing


289,000

OwnedDombuhl, Germany

Clopay Plastic Products

Manufacturing


124,000

OwnedAugusta, KY

Clopay Plastic Products

Manufacturing


275,000

OwnedNashville, TN

Clopay Plastic Products

Manufacturing


210,000

OwnedNashville, TN

Clopay Plastic Products

Manufacturing


150,000

Leased


2014Jundiai, Brazil

Clopay Plastic Products

Manufacturing


88,000

OwnedTroy, OH

Home & Building Products

Manufacturing


867,000

Leased


2021Russia, OH

Home & Building Products

Idle


339,000

OwnedBaldwin, WI

Home & Building Products

Manufacturing


155,000

Leased


2011Auburn, WA

Home & Building Products

Manufacturing


123,000

Leased


2011Carlisle, PA

Home & Building Products

Manufacturing, Distribution


1,227,000

Leased


2020Reno, NV

Home & Building Products

Manufacturing, Distribution


400,000

Leased


2017Camp Hill, PA

Home & Building Products

Office, Manufacturing


380,000

Leased


2012Harrisburg, PA

Home & Building Products

Manufacturing


264,000

OwnedSt. Francois, Quebec

Home & Building Products

Manufacturing, Distribution


353,000

OwnedBernie, MO

Home & Building Products

Manufacturing


170,000

OwnedLewistown, PA

Home & Building Products

Manufacturing


124,000

Leased


2015Cork, Ireland

Home & Building Products

Manufacturing, Distribution


74,000

OwnedFalls City, NE

Home & Building Products

Manufacturing


82,000

OwnedVictoria, Australia

Home & Building Products

Distribution


13,000

Leased


2011New South Wales, Australia

Home & Building Products

Distribution


24,000

Leased


2013South, Australia

Home & Building Products

Distribution


13,000

Leased


2012Queensland, Australia

Home & Building Products

Distribution


17,000

Leased


2011Western, Australia

Home & Building Products

Distribution


27,000

Leased


2011


24

---



Griffon also leases approximately 1,500,000 square feet of space for the CBP distribution centers in numerous facilities throughout the United
States and in Canada. In addition, Griffon owns 200,000 square feet of space for the ATT wood mills in the United States.

In
June 2009, Griffon announced plans to consolidate facilities used by CBP, which are expected to be completed in early 2011 and will result in the closure of the Baldwin, WI facility.

All
facilities are generally well maintained and suitable for the operations conducted.

Item 3.    Legal Proceedings

Griffon is involved in litigation, investigations and claims arising out of the normal conduct of business, including those relating to
commercial transactions, environmental, employment, and health and safety matters. Griffon estimates and accrues liabilities resulting from such
matters based on a variety of factors, including the stage of the proceeding; potential settlement value; assessments by internal and external counsel; and assessments by environmental engineers and
consultants of potential environmental liabilities and remediation costs. Such estimates are not discounted to reflect the time value of money due to the uncertainty in estimating the timing of the
expenditures, which may extend liability over several years.

While
it is impossible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities and claims, Griffon believes, based upon examination of
currently available information, experience to date, and advice from legal counsel, that the individual and aggregate liabilities resulting from the ultimate resolution of these contingent matters,
after taking into consideration our existing insurance coverage and amounts already provided for, will not have a material adverse impact on consolidated results of operations, financial position or
cash flows.

Item 4.    Reserved

25

---





PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Griffon's Common Stock is listed for trading on the New York Stock Exchange under the symbol "GFF". The following table shows for the
periods indicated the quarterly range in the high and low sales prices for Griffon's Common Stock:

Fiscal 2010

Fiscal 2009Market Prices

Market PricesHigh

Low

High

LowFiscal First Quarter ended December 31,

$
12.55

$
8.58

$
9.35

$
5.34Fiscal Second Quarter ended March 31,


14.13


11.19


10.55


5.85Fiscal Third Quarter ended June 30,


15.13


10.26


10.33


7.30Fiscal Fourth Quarter ended September 30,


14.31


10.32


11.93


7.27


Dividends

No cash dividends on Common Stock were declared or paid during the five years ended September 30, 2010.

Holders

As of November 1, 2010, there were approximately 13,600 record holders of Griffon's Common Stock.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding securities authorized for issuance under Griffon's equity compensation plans is contained in Part III,
Item 12 of this Form 10-K.

Recent Sales of Unregistered Securities

On September 30, 2010, Griffon sold 239,145 shares of common stock to a group of ATT executives for an aggregate of
$2.9 million 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.

Issuer Purchase of Equity Securities

The table below presents shares of Griffon Stock which were acquired by Griffon during the fourth quarter of 2010:

Period

Total Number of
Shares
Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased
as Part Publicly
Announced Plans
or Programs(1)

Maximum Number
of Shares That May
yet be Purchased
Under the Plans or
ProgramsJuly 1 - 31, 2010




$






1,366,295August 1 - 31, 2010











1,366,295September 1 - 30, 2010











1,366,295Total




$






(1)Griffon's
stock buyback program has been in effect since 1993, under which a total of approximately 17.2 million shares have been purchased for
approximately $234 million. There is no time limit on the repurchases to be made under the plan.


26

---






Performance Graph

The performance graph does not constitute soliciting material, is not deemed filed with the SEC and is not incorporated by reference in
any of Griffon's filings under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and irrespective of
any general incorporation language in any such filings, except to the extent Griffon specifically incorporates this performance graph by reference therein.

The
following graph sets forth the cumulative total return to Griffon's stockholders during the five years ended September 30, 2010, as well as an overall stock market (S&P Small
Cap 600 Index) and Griffon's peer group index (Dow Jones U.S. Diversified Industrials Index). Assumes $100 was invested on September 30, 2005, including the reinvestment of dividends, in each
category.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Griffon Corporation, the S&P Smallcap 600 Index  and the Dow Jones US Diversified Industrials Index

GRAPHIC

*
$100 invested on 9/30/05 in stock or index, including reinvestment of dividends.

27

---



Item 6.    Selected Financial Data

For the Years Ended September 30,(in thousands, except per share amounts)

2010

2009

2008

2007

2006Revenue

$
1,293,996

$
1,194,050

$
1,269,305

$
1,365,729

$
1,327,735Income (loss) before taxes and discontinued operations


13,812


19,605


(182
)

37,249


65,305Provision for income taxes


4,308


1,687


2,651


11,764


21,907Income (loss) from continuing operations


9,504


17,918


(2,833
)

25,485


43,398Income (loss) from discontinued operations


88


790


(40,591
)

(6,086
)

5,930Net Income (loss)

$
9,592

$
18,708

$
(43,424
)
$
19,399

$
49,328Basic earnings (loss) per share:Continuing operations

$
0.16

$
0.31

$
(0.09
)
$
0.79

$
1.34Discontinued operations


0.00


0.01


(1.24
)

(0.19
)

0.18Net Income (loss)


0.16


0.32


(1.33
)

0.60


1.52Weighted average shares outstanding


58,974


58,699


32,667


32,405


32,388Diluted earnings (loss) per share:Continuing operations

$
0.16

$
0.30

$
(0.09
)
$
0.76

$
1.29Discontinued operations


0.00


0.01


(1.24
)

(0.18
)

0.17Net Income (loss)


0.16


0.32


(1.32
)

0.58


1.46Weighted average shares outstanding


59,993


59,002


32,836


33,357


33,746Capital expenditures

$
40,477

$
32,697

$
53,116

$
29,737

$
41,653Depreciation and amortization


40,442


42,346


42,923


39,458


33,974Total assets


1,749,516


1,143,891


1,167,486


959,415


927,614Total debt, excluding debt discount


555,486


179,804


233,188


232,830


217,320


---

Notes:

2008 includes a $12,913 goodwill impairment charge that is not deductible for income taxes.Due to rounding, the sum of earnings per share of Continuing operations and Discontinued operations may not equal earnings per share of Net Income.2010 includes $9,805 of costs related to the acquisition of ATT.2006 - 2009 reflects the retrospective adoption of new accounting guidance for convertible debt.See Adoption of New Accounting Pronouncements footnote.


28

---





Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

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

OVERVIEW

The Company

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

Headquartered
in New York, N.Y., the Company was incorporated in New York in 1959, and was reincorporated in Delaware in 1970.

Griffon
currently conducts its operations through three businesses: Telephonics Corporation, Home & Building Products and Clopay Plastic Products Company.



Telephonicsrevenue increased $46.6 million, or 12%, compared to the prior year. In 2010, Telephonics was awarded significant
contracts for radar programs and CREW 3.1. Telephonics backlog at September 30, 2010 was $407 million, approximately 73% of which is expected to be fulfilled in 2011.

Home & Building Products includes CBP and will include the operating results of ATT beginning October 1, 2010.

Clopay Building Productsresults continued to be impacted by the sustained downturn in the residential housing and commercial construction
markets, with revenue decreasing from the prior year. The segment remains committed to retaining its customer base and, where possible, growing market share. Additionally, CBP's ongoing review of, and
changes to, its cost structure resulted in a segment profit for 2010 and 2009.

29

---



In
June 2009, Griffon announced plans to consolidate facilities in CBP. These actions are scheduled to be completed in early calendar 2011, consistent with the plan. Griffon estimates
that it will incur pre-tax exit and restructuring costs of approximately $11 million, substantially all of which will be cash charges. These charges include $2 million for
one-time termination benefits and other personnel costs, $1 million for excess facilities and related costs, and $8 million in other exit costs primarily in connection with
production realignment. In addition, Griffon expects to invest approximately $11 million in capital expenditures in order to effectuate the restructuring plan. CBP spent $4.2 million and
$7.3 million in 2010 in connection with the restructuring plan and related capital expenditures, respectively, and spent $5.4 million and $9.3 million of restructuring and related
capital expenditures to-date for the plan, respectively.

Plastics'revenue increased $57.4 million, or 14%, from the prior year due to higher unit volumes in all regions, the translation
of European results into a weaker U.S. dollar and resin price pass through, partially offset by less favorable mix; however, segment operating profit decreased $3.6 million, or 15%, primarily
due to the increases in the cost of resin, increasing cost of sales; such increased costs were not yet reflected in higher customer selling prices due to the lag , impacting margin. Plastics adjusts
customer selling prices based, on underlying resin costs, on a delayed basis. Over the past several years, the segment has successfully diversified it's customer portfolio.

Ames True Temper

On September 30, 2010, Griffon purchased all of the outstanding stock of ATT Holdings, the parent of ATT, on a cash and
debt-free basis, for $542 million in cash, subject to certain adjustments. ATT is a global provider of non-powered lawn and garden tools, wheelbarrows, and other outdoor
work products to the retail and professional markets. ATT's brands include Ames®, True Temper®, Ames True Temper®, Garant®, Union Tools®,
Razor-back®, Jackson®, Hound Dog® and Dynamic DesignTM. ATT's brands hold the number one or number two market position in their respective
major product categories.

In
connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. ("Clopay Ames"), a subsidiary of Griffon, entered into a $375 million secured term loan facility
("Term Loan") and a new $125 million Asset Based Lending Agreement ("New ABL Agreement"). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan,
$25 million drawn under the New ABL, and $168 million of Griffon cash. ATT's previous outstanding debt was repaid in connection with the acquisition. Following the ATT transaction,
Griffon holds consolidated cash balances of $170 million at September 30, 2010.

The
purchase of ATT occurred on September 30, 2010. Accordingly, ATT's results of operations are not included in the Griffon consolidated statements of operations or cash flows,
or footnotes relating thereto for any year presented, except where explicitly stated as pro forma results. The Griffon consolidated balance sheet at September 30, 2010 and related notes thereto
include ATT's balances at that date. All pro forma results are unaudited and, unless otherwise stated, give effect to the acquisition of ATT as if it had occurred on October 1, 2009.

CONSOLIDATED RESULTS OF OPERATIONS

2010 Compared to 2009

Revenue for the year ended September 30, 2010 was $1.30 billion, compared to $1.19 billion in the prior year; the
increase was due to higher revenue at Telephonics and Plastics, partially offset by decreased revenue at CBP. Gross profit for the year was $288.3 million compared to $257.1 million in
2009 with gross margin as a percent of sales of 22% in both years.

Selling,
General and Administrative ("SG&A") expenses increased $31.7 million to $261.4 million in 2010 from $230.7 million in 2009 primarily in support of increased
sales. SG&A expenses include $9.8 million of costs related to the ATT acquisition. SG&A expenses as a percent of revenue for 2010

30

---



increased
to 20.2% from 19.3% in 2009; excluding the ATT related acquisition expenses, SG&A as a percent of revenue was 19.4% in 2010.

Interest
expense in 2010 decreased by $0.8 million compared to the prior year, principally due to lower levels of outstanding borrowings.

During
2010, Griffon recorded a $1.1 million loss on extinguishment of debt resulting from the write-off of unamortized financing costs associated with the existing
Clopay Asset Based Lending facility terminated upon the ATT acquisition. During 2009, Griffon recorded a non-cash pre-tax gain from extinguishment of debt of
$4.5 million, net of a proportionate write-off of deferred financing costs, which resulted from the purchase of $50.6 million of its outstanding convertible notes at a
discount.

Other
income of $4.1 million in 2010 and $1.5 million in 2009 consists primarily of currency exchange transaction gains and losses from receivables and payables held in non
functional currencies and from gains on investments.

Griffon's
effective tax rate for continuing operations for 2010 was a provision of 31.2% compared to 8.6% in the prior year. The 2009 rate benefited from tax planning, primarily with
respect to foreign tax credits and reversal of $1.4 million of previously established reserves related to uncertain tax positions due to the lapse of applicable statues of limitation.The 2010
rate reflected the benefit from the resolution of foreign and domestic income tax audits resulting in the release of $2.2 million of tax and accrued interest from previously established
reserves for uncertain tax positions and the adjustment of tax liabilities on filing of applicable tax returns. The rate was also impacted by permanent book to tax adjustments including
non-deductible transaction costs of $3,800 related to the ATT acquisition.

Income
from continuing operations was $9.5 million, or $0.16 per diluted share, for 2010 compared to $17.9 million or $0.30 cents per diluted share in the prior year.
Excluding the ATT related acquisition costs and the loss from the extinguishment of debt, income from continuing operating would have been $17.2 million, or $0.29 per diluted share, in 2010;
excluding the gain from the extinguishment of debt, income from continuing operations would have been $15.0 million, or $0.25 per diluted share, in 2009. Income from discontinued operations for
2010 was $0.1 million, or $0.00 per diluted share, compared to $0.8 million, or $0.01 per diluted share, in the prior year. Net income for 2010 was $9.6 million, or $0.16 per
diluted share, compared to $18.7 million, or $0.32 per diluted share, in 2009.

2009 Compared to 2008

Revenue for the year ended September 30, 2009 was $1.19 billion, compared to $1.27 billion in the prior year; the
decline was due to lower revenue at both CBP and Plastics, partially offset by increased revenue at Telephonics. 2009 gross profit was $257.1 million compared to $273.0 million in the
prior year with gross margin of 22% remaining flat with 2008.

Selling,
General and Administrative ("SG&A") expenses decreased $14.7 million to $230.7 million in 2009 from $245.4 million in 2008 as a result of cost saving
measures undertaken across all of the segments, particularly in CBP and Plastics, to offset the impact of lower revenue. SG&A expenses as a percent of revenue for 2009 remained flat to 2008 at 19.3%.

Interest
expense in 2009 decreased by $3.5 million compared to the prior year, principally due to lower levels of outstanding borrowings and lower average borrowing rates.

During
2009, Griffon recorded a non-cash pre-tax gain from extinguishment of debt of $4.5 million, net of a proportionate write-off of deferred
financing costs, which resulted from the purchase of $50.6 million of its outstanding convertible notes at a discount.

Other
income of $1.5 million in 2009 and $2.7 million in 2008 consists primarily of currency exchange transaction gains and losses from receivables and payables held in non
functional currencies.

31

---



Griffon's
effective tax rate for continuing operations for 2009 was a provision of 8.6% compared to the prior year which had an income tax provision of $2.7 million on a
pre-tax loss of $0.2 million. The 2009 tax rate benefitted from tax planning with respect to U.S. foreign tax credits and discrete tax benefits related to the reversal of previously
recorded tax liabilities principally due to the closing of certain statutes for prior year returns. The 2008 rate was impacted by a non-deductible goodwill impairment charge, an increase
in the valuation allowance regarding deferred tax assets and taxes on a non-U.S. dividend partially offset by discrete tax benefits related to the reversal of previously recorded tax
liabilities principally due to the closing of certain statutes for prior year returns.

Income
from continuing operations was $17.9 million, or $0.30 per diluted share, for 2009 compared to a loss of $2.8 million, or $0.09 per diluted share, in the prior year.
The 2008 results were impacted by a $12.9 million impairment charge related to the write-off of all of CBP's goodwill. Excluding the gain on the extinguishment of debt, income from
continuing operations would have been $15.0 million, or $0.25 per diluted share in 2009, and excluding the impairment charge, income from continuing operations would have been
$10.1 million, or $0.31 per diluted share, in 2008. Income from discontinued operations for 2009 was $0.8 million, or $0.01 per diluted share, compared to a loss of $40.6 million,
or $1.24 per diluted share in the prior year. Net income for 2009 was $18.7 million, or $0.32 per diluted share, compared to a loss of $43.4 million, or $1.33 per diluted share, in 2008.
The 2009 diluted shares used for the earnings per share calculations were 59,002,000 shares compared to 32,836,000 shares in 2008 primarily due to the 2008 rights offering.

BUSINESS SEGMENTS

Telephonics

Years Ended September 30,(in thousands)

2010

2009

2008Revenue

$
434,516




$
387,881




$
366,288Segment operating profit


38,586


8.9
%

34,883


9.0
%

32,862


9.0
%Depreciation and amortization


7,534





6,657





6,753Segment profit before depreciation and amortization

$
46,120


10.6
%
$
41,540


10.7
%
$
39,615


10.8
%


2010 Compared to 2009

In 2010, Telephonics' revenue increased $46.6 million, or 12%, compared to the prior year, mainly due to awards associated with
various radar programs, and the CREW 3.1 contract.

Segment
operating profit increased $3.7 million to $38.6 million in 2010; segment operating profit margin remained consistent with prior year due to the strong sales
performance and favorable program mix, partially offset by higher SG&A expenses. The increase in SG&A expenses resulted from higher research and development and marketing related expenses incurred in
connection with business development initiatives to sustain revenue growth in future periods, as well as additional administrative expenses to support the operations.

2009 Compared to 2008

In 2009, Telephonics' revenue increased $21.6 million, or 6%, compared to the prior year, mainly due to higher sales in the
Radar Systems division.

Segment
operating profit increased $2 million to $34.9 million in 2008; segment operating profit margin remained at 9.0%, due to the strong sales performance and favorable
program mix being offset by higher SG&A expenses. The increase in SG&A expenses was resulted from higher research and development expenditures and additional administrative expenses to support revenue
growth.

32

---



Home & Building Products

Years Ended September 30,(in thousands)

2010

2009

2008Net Sales

$
389,366




$
393,414




$
435,321Segment operating profit (loss)


4,986


1.3
%

(11,326
)

NM


(17,444
)

NMDepreciation and amortization


10,185





13,223





12,071Goodwill impairment














12,913Restructuring charges


4,180





1,240





2,610Segment profit before depreciation, amortization, restructuring and impairment

$
19,351


5.0
%
$
3,137


0.8
%
$
10,150


2.3
%


Home &
Building Products is comprised of ATT and CBP. The acquisition of ATT occurred on September 30, 2010. Accordingly, ATT's results of operations are not included in
the Griffon consolidated statements of operations or cash flows, nor segment results for the year ended September 30, 2010. The Griffon consolidated balance sheet and the Home & Building
Products segment assets at September 30, 2010 include ATT's balances at that date.

2010 Compared to 2009

CBP revenue decreased $4.0 million, or 1% compared to the prior year. The decrease was primarily due to the continued effects of
the weak construction market in, particular the commercial market, offset in part by the favorable translation benefit from a weaker U.S. dollar.

Segment
operating profit for 2010 was $5.0 million, an improvement of $16.3 million compared to the prior year. The improved operating performance was driven by higher
volume, associated plant absorption and lower product costs from the various restructuring activities undertaken in the past two years.

2009 Compared to 2008

In 2009, CBP revenue decreased $41.9 million, or 10%, compared to the prior year, primarily due to the continuing effects of the
weak housing market. The revenue decline was principally due to reduced unit volume, partially offset by a favorable shift in mix to higher priced products.

Segment
operating loss for 2009 was $11.3 million, an improvement of $6.1 million compared to the prior year. The 2008 result included the goodwill impairment charge of
$12.9 million; excluding this charge, the 2008 operating results would have been a $4.5 million loss. Excluding the goodwill impairment charge from 2008, the increased loss in 2009 was
mainly due to the sharp decline in volume, and the resultant unfavorable impact on absorption of fixed operating expenses. Notwithstanding the overall loss for 2009, CBP segment operating profit
improved sequentially during 2009, reaching $0.6 million and $4.3 million in the third and fourth quarters, respectively, a significant improvement over the segment operating losses
incurred in the first two quarters of 2009.

Plastics

Years Ended September 30,(in thousands)

2010

2009

2008Net Sales

$
470,114




$
412,755




$
467,696Segment operating profit


20,469


4.4
%

24,072


5.8
%

20,620


4.4
%Depreciation and amortization


22,384





21,930





22,638Segment profit before depreciation and amortization

$
42,853


9.1
%
$
46,002


11.1
%
$
43,258


9.2
%


33

---



2010 Compared to 2009

In 2010, Plastics' revenue increased $57.4 million, or 14%, compared to the prior year. The increase was principally due to
higher unit volumes in all geographic regions and the positive impact from foreign currency translation.

Segment
operating profit decreased $3.6 million, or 15%, and operating profit margin decreased 140 basis points primarily due to increases in the cost of resin, increasing cost of
sales; such increased costs were not yet reflected in higher customer selling prices due to delays in passing on such cost increase, with a resultant unfavorable impact on margin. Plastics adjusts
customer selling prices based on underlying resin costs, on a delayed basis. Other contributing factors relate to increases in freight costs as well as product development costs.

2009 Compared to 2008

In 2009, Plastics' revenue decreased $54.9 million, or 12%, compared to the prior year. The decrease was principally due to
lower volume in Plastics' European business, translation of the European results into a stronger U.S. dollar and the pass through of lower resin costs in customer selling prices.

Segment
operating profit increased $3.5 million, or 17%, primarily due to cost-cutting initiatives and favorable product mix, partially offset by lower unit volume.
Segment operating profit margin increased 140 basis points.

DISCONTINUED OPERATIONS  Installation Services

As a result of the downturn in the residential housing market, in 2008, Griffon exited substantially all of the operating activities of
its Installation Services segment; this segment sold, installed and serviced garage doors, garage door openers, fireplaces, floor coverings, cabinetry and a range of related building products
primarily for the new residential housing market. Operating results of substantially all of the segment has been reported as discontinued operations in the Consolidated Statements of Operations for
all periods presented; the Installation Services segment is excluded from segment reporting.

In
May 2008, Griffon's Board of Directors approved a plan to exit substantially all operating activities of the Installation Services segment in 2008. In the third quarter of 2008,
Griffon sold nine units to one buyer, closed one unit and merged two units into CBP. In the fourth quarter of 2008, Griffon sold its two remaining units in Phoenix and Las Vegas. Griffon recorded
aggregate disposal costs of $43.7 million in 2008.

Griffon
substantially concluded its remaining disposal activities in the second quarter of 2009. There was no reported revenue in 2010 and 2009. Revenue in 2008 was $109.4 million
compared to $250.9 million in 2007; the sharp decline resulted from the overall weakness in the residential construction market and closure or sale of operating units during 2008. Installation
Services operating loss was $62.4 million and $9.8 million for 2008 and 2007, respectively.

Griffon
does not expect to incur significant expenses in the future. Future net cash outflows to satisfy liabilities related to disposal activities that were accrued as of
September 30, 2010 are estimated to be $4.3 million. Substantially all of such liabilities are expected to be paid during 2011. Certain of Griffon's subsidiaries are also contingently
liable for approximately $1.7 million related to certain facilities leases with varying terms through 2012 that were assigned to the respective purchasers of certain of the
Installation Services businesses. Griffon does not believe it has a material exposure related to these contingencies.

LIQUIDITY AND CAPITAL RESOURCES

Management assesses Griffon's liquidity in terms of its ability to generate cash to fund its operating, investing and financing
activities. Significant factors affecting liquidity are: cash flows from

34

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operating
activities, capital expenditures, acquisitions, dispositions, bank lines of credit and the ability to attract long-term capital with satisfactory terms. Griffon remains in a
strong financial position with sufficient liquidity available for reinvestment in existing businesses and strategic acquisitions while managing its capital structure on both a short-term
and long-term basis.

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

Cash Flows from Continuing Operations

Years Ended September 30,(in thousands)

2010

2009Net Cash Flows Provided by (Used In):Operating activities

$
83,125

$
84,100Investing activities


(584,143
)

(32,833
)Financing activities


353,293


(43,202
)


Cash
flows generated by operating activities for 2010 decreased $1.0 million to $83.1 million compared to $84.1 million in the prior year. Current assets net of
current liabilities, excluding short-term debt and cash, increased $97.6 million to $326.7 million at September 30, 2010 compared to $229.1 million at the prior
year end, primarily due to the acquisition of ATT.

During
2010, Griffon used cash from investing activities of $584.1 million compared to $32.8 million in the prior year due to the acquisition on ATT. Griffon had capital
expenditures of $40.5 million; $7.8 million higher than the prior year, consistent with 2010 depreciation.

During
2010, cash provided by financing activities was $353.3 million mainly due to a net increase in borrowings primarily as a result of the ATT acquisition, partially offset by
repayments of long term debt of $176.8 million.

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

A
small number of customers account for a substantial portion of historical revenue and Griffon expects that this will continue for the foreseeable future. Approximately 18% and 19% of
consolidated revenue from continuing operations for the years ended September 30, 2010 and 2009, respectively, and 50% and 54% of Plastics sales for the years ended September 30, 2010
and 2009, respectively, were to P&G. Home Depot, Lowes and Menards are significant customers of Home & Building Products with Home Depot accounting for approximately 13% of pro forma
consolidated revenue and 27% of the pro forma Home & Building Products segment revenue for the year ended September 30, 2010. Lockheed Martin Corporation and the Boeing Company are
significant customers of Telephonics. Future operating results will continue to substantially depend on the success of Griffon's largest customers and Griffon's relationships with them. Orders from
these customers are subject to fluctuation and may be reduced materially. The loss of all or a portion of the sales volume from any one of these customers would have an adverse affect on Griffon's
liquidity and operations.

35

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At September 30, 2010, Griffon had debt, net of cash and equivalents, as follows:

At September 30,Cash, Cash Equivalents and Debt

2010

2009(in thousands)Cash and equivalents

$
169,802

$
320,833Notes payables and current portion of long-term debt


20,901


78,590Long-term debt, net of current maturities


503,935


98,394Debt discount


30,650


2,820Total debt


555,486


179,804Net cash and equivalents (debt)

$
(385,684
)
$
141,029


Clopay
Ames, the parent of ATT, CBP and Plastics, and a subsidiary of Griffon (the "Borrower"), entered into the Term Loan, a six year term loan credit agreement for an aggregate
principal amount equal to $375 million, all of which was borrowed on September 30, 2010.

The
Borrower has the option to select interest rates in respect of the loans under the Term Loan agreement based upon either the Base Rate or the Adjusted Eurodollar Rate (each as
defined in the Term Loan agreement). Interest on outstanding loans accrues at a rate of 6.00% per annum above the Adjusted Eurodollar Rate, subject to a Eurodollar floor of 1.75%, or 5.00% per annum
above the Base Rate.

Borrowings
under the Term Loan agreement are guaranteed by Clopay Ames True Temper LLC ("Clopay LLC"), the direct parent of Clopay Ames, and certain material domestic
subsidiaries of the Borrower (collectively, the "Term Loan Guarantors"). All obligations under the Term Loan agreement are secured by a first-priority security interest in substantially all of the
Borrower's assets and substantially all of the assets of the Term Loan Guarantors other than inventory, accounts receivable and cash of the Borrower and the Term Loan Guarantors, which collateralize
borrowings under the New ABL on a first-priority basis and borrowings under the Term Loan on a second-priority basis.

The
Term Loan agreement contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset
dispositions, certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate
transactions, limitations on subsidiary distributions, modifications of constituent documents and debt agreements, capital expenditures, equity issuances and sale/leasebacks.

Under
the Term Loan agreement, the Borrower is required to maintain a certain minimum interest coverage ratio, defined as the ratio of EBITDA to interest expense, which increases over
time. The Borrower is also required to keep its leverage ratio below a certain level, defined as the ratio of total debt to EBITDA, which level decreases over time.

Fees
and expenses for the term loan of $9.8 million were capitalized in Other assets and an original issue discount ("OID") of $7.5 million was recorded as a reduction of
Long-term debt; such deferred costs will be amortized into interest expense over the 6 year life of the loan.

At
September 30, 2010, Griffon was in compliance with the terms and covenants of the Term Loan agreement and expects to remain in compliance for the reasonably foreseeable future.
Further, the covenants within the Term Loan agreement do not materially affect Griffon's ability to undertake additional debt or equity financing for Griffon. The debt balance under the Term Loan
agreement approximates fair value, as the interest rate is indexed to current market rates.

In
addition to the Term Loan agreement, on September 30, 2010, Clopay Ames entered into the New ABL with JPMorgan Chase Bank, N.A. as administrative agent. The New ABL replaces
the credit agreement, dated as of June 24, 2008, by CBP and Plastics, resulting in the write-off of $1.1 million of previously capitalized financing costs related to the
replaced credit agreement in September 2010.

36

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The
New ABL provides for a revolving credit facility in an aggregate principal amount equal to $125 million (subject to customary borrowing base limitations) which includes a
swingline facility with a sublimit of $12.5 million and a letter of credit facility with a sublimit of $25 million. Borrowings under the New ABL may be repaid and reborrowed from time to
time; all borrowings mature on September 30, 2015.

As
provided by the New ABL, the Borrower has the option to select interest rates in respect of the loans based upon either the Alternative Base Rate or the Adjusted LIBO Rate (each as
defined in the New ABL agreement). Depending upon availability, interest on borrowings accrues at rates ranging from 1.25% to 1.75% per annum above the Alternative Base Rate or 2.25% to 2.75% per
annum above the Adjusted LIBO Rate. Borrowings under the New ABL are guaranteed by Clopay LLC and certain material domestic subsidiaries of the Borrower and are secured by a first-priority
security interest on inventory, accounts receivable and cash of the Borrower, and a second-priority security interest on substantially all of the other assets of such entities.

The
New ABL contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions,
certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions,
limitations on subsidiary distributions, modifications of constituent documents and debt agreements, equity issuances and sale/leasebacks.

The
New ABL also contains customary events of default, including without limitation, failure to make certain payments when due, materially incorrect representations and warranties,
breach of covenants, events of bankruptcy, default on other indebtedness, changes in control with respect to Griffon and certain of its subsidiaries, and the failure of any of the loan documents to
remain in full force and effect.

Fees
and expenses for the New ABL of $3.4 million were capitalized in Other assets and an OID of $0.6 million was recorded as a reduction of Long-term debt,
both of which will be amortized into interest expense over the 5 year life of the facility.

In
March 2008, Telephonics entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the lenders agreed to
provide a five-year, revolving credit facility of $100 million (the "TCA"). At September 30, 2010, $30.0 million was outstanding under the TCA and approximately
$64.6 million was available for borrowing.

The
New ABL and the TCA include various sublimits for standby letters of credit. At September 30, 2010, there were approximately $18.9 million of aggregate standby letters
of credit outstanding under these facilities and $31.1 are available to be drawn. These agreements, and the Term Loan agreement, limit dividends and advances that these subsidiaries may pay to
Griffon. The agreements permit the payment of income taxes, management fees and overhead and expenses, with dividends or advances in excess of these amounts limited (a) with respect to the New
ABL, maintaining certain minimum
availability under the loan agreement, (b) with respect to the Term Loan agreement, having available excess cash flow and certain minimum availability under the New ABL and (c) with
respect to the TCA, compliance with certain conditions and limited to an annual maximum.

At
September 30, 2010, Griffon was in compliance with the covenants under its respective credit facilities, and expects to remain in compliance for the reasonably foreseeable
future. The New ABL provides for credit availability primarily based on working capital assets and imposes one ratio compliance requirement, which becomes operative only in the event that utilization
of that facility were to reach a defined level significantly beyond the September 30, 2010 level. The TCA is a "cash flow based" facility and compliance with required ratios at
September 30, 2010 was well within the parameters set forth in that agreement. Further, the covenants within such credit facilities do not materially affect Griffon's ability to undertake
additional debt or equity financing for Griffon, the parent company, as such credit facilities are at the subsidiary level and are not guaranteed by Griffon.

37

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The
debt balances under these credit facilities approximate fair values, as the interest rates are indexed to current market rates.

On
December 21, 2009, Griffon issued $100 million principal of 4% convertible subordinated notes due 2017 (the "2017 Notes"). The initial conversion rate of the 2017 Notes
was 67.0799 shares of Griffon's common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of approximately $14.91 per share. This represents a 23% conversion
premium over the $12.12 per share closing price on December 15, 2009. The outstanding balance of these notes on September 30, 2010 was $100 million and the fair value was
approximately $106 million, based on quoted market price (level 1 inputs).

In
July 2010, Griffon settled substantially all of the remaining outstanding 4% Convertible Subordinated Notes due 2023 when they were put to Griffon at par.

In
January 2010, Griffon purchased $10.1 million face value of the 2023 Notes for $10.2 million. Griffon recorded a pre-tax gain from debt extinguishment of
$32 thousand, offset by $20 thousand for a proportionate reduction in the related deferred financing costs, resulting in a net pre-tax gain of $12 thousand. Capital in
excess of par was reduced by $0.3 million related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $0.2 million.

In
December 2009, Griffon purchased $19.2 million face value of the 2023 Notes for $19.4 million. Including a proportionate reduction in the related deferred financing
costs, Griffon recorded an immaterial net pre-tax loss on the extinguishment in the first quarter of 2010. Capital in excess of par value was reduced by $0.7 million related to the
equity portion of the extinguished 2023 Notes and the debt discount was reduced by $0.5 million.

In
April 2009, Griffon purchased $15.1 million face value of the 2023 Notes for $14.3 million. Griffon recorded a pre-tax gain from debt extinguishment of
$0.3 million, offset by $0.1 million for a proportionate reduction in the related deferred financing costs for a net pre-tax gain of $0.2 million in the third quarter
of 2009. Capital in excess of par value was reduced by $0.3 million related to the equity portion of the extinguished 2023 Notes and the debt discount was reduced by $0.8 million.

In
October 2008, Griffon purchased $35.5 million face value of the 2023 Notes for $28.4 million. Griffon recorded a pre-tax gain from debt extinguishment of
$4.6 million, offset by $0.3 million for a proportionate reduction in the related deferred financing costs for a net pre-tax gain of $4.3 million in the first quarter
of 2009. No portion of the extinguishment was attributed to capital in excess of par value and the debt discount was reduced by $2.5 million.

A
foreign subsidiary of Plastics maintains a line of credit of approximately $5 million. Interest on borrowings accrue at a rate of LIBOR plus 4%. There were no outstanding
borrowings under the line as of as of September 30, 2010.

Approximately
1.4 million shares of common stock are available for purchase pursuant to Griffon's stock buyback program and additional purchases, including pursuant to a
10b5-1 plan, may be made, depending upon market conditions and other factors, at prices deemed appropriate by management.

Griffon's
Employee Stock Ownership Plan ("ESOP") entered into a new loan agreement in September 2010 to borrow an additional $20 million over a one-year period. After
the first year, Griffon has the option to convert all or a portion of the outstanding loan to a five-year term. If converted, principal is payable in quarterly installments at the rate of
$250,000 per quarter beginning September 2011, with the remainder due at the final maturity date. The loan will bear interest at a rate equal to either a) LIBOR plus 2.5% or b) the
Bank's prime rate. The proceeds of the loan are to be used to purchase common stock of Griffon in the open market. The loan is secured by a pledge of the shares purchased with the loan proceeds and
payments are guaranteed by Griffon. At September 30, 2010, there were no borrowings under this line.

Griffon's
ESOP has an additional loan agreement, guaranteed by Griffon, which requires payments of principal and interest through the expiration date of September 2012 at which time the
$3.9 million

38

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balance
of the loan, and any outstanding interest, will be payable. The primary purpose of this loan and its predecessor loans, which were refinanced by this loan in October 2008, was to purchase
547,605 shares of Griffon's common stock in October 2008. The loan bears interest at rates based upon the prime rate or LIBOR. The balance of the loan was $5.0 million at September 30,
2010, and the outstanding balance approximates fair value, as the interest rates are indexed to current market rates.

As
part of its cost structure review, in June 2009, Griffon announced plans to consolidate facilities in CBP. These actions are scheduled to be completed in early calendar 2011,
consistent with the plan. CBP estimates it will incur pre-tax exit and restructuring costs approximating $11 million, substantially all of which will be cash charges; charges
include $2 million for one-time termination benefits and other personnel costs, $1 million for excess facilities and related costs, and $8 million for other exit
costs, primarily in connection with production realignment. CBP expects approximately $11 million in capital expenditures in order to effectuate the restructuring plan. CBP spent
$4.2 million and $7.3 million in 2010 for the restructuring plan and related capital expenditures, respectively, and since inception through September 30, 2010, has spent
$5.4 million and $9.3 million of restructuring and related capital expenditures to-date for the plan, respectively.

Griffon
substantially concluded its remaining disposal activities for the Installation Services business, discontinued in 2008, in the second quarter of 2009 and does not expect to incur
significant expense in the future. Future net cash outflows to satisfy liabilities related to disposal activities accrued at September 30, 2010 are estimated to be $4.3 million. Certain
of Griffon's subsidiaries are also contingently liable for approximately $1.7 million related to certain facility leases with varying terms through 2012 that were assigned to the respective
purchasers of certain of the Installation Services businesses. Griffon does not believe it has a material exposure related to these contingencies.

In
August 2008, Griffon's Board of Directors authorized a 20 million share common stock rights offering to its shareholders in order to raise equity capital for general corporate
purposes and to fund future growth. The rights had an exercise price of $8.50 per share. In conjunction with the offering, GS Direct agreed to back stop the rights offering by purchasing, on the same
terms, any and all shares not subscribed through the exercise of rights. GS Direct also agreed to purchase additional shares of common stock at the rights offering price if it did not acquire a
minimum of 10 million shares of common stock as a result of its back stop commitment. Griffon received $248.6 million in gross proceeds from the rights offering as follows: (i) in
September 2008, Griffon received $241.3 million of gross proceeds from the first closing of its rights offering and related investments by GS Direct and by Griffon's Chief Executive Officer;
(ii) in October 2008, an additional $5.3 million of proceeds were received in connection with the second closing of the rights offering; (iii) and in April 2009,
$2.0 million of rights offering proceeds were received.

During
the year ended September 30, 2010, Griffon used cash for discontinued operations of $0.6 million related to settling remaining Installation Services liabilities.

39

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Contractual Obligations

At September 30, 2010, payments to be made pursuant to significant contractual obligations are as follows:

Payments Due by Period(in thousands)

Total

Less Than
1 Year

1-3 Years

4-5 Years

More than
5 Years

OtherLong-term debt

$
555,486

$
20,902

$
78,343

$
65,244

$
390,997

$
Interest expense


183,811


35,180


63,326


57,022


28,283


Rental commitments


111,000


27,000


35,000


20,000


29,000


Purchase obligations(a)


151,612


148,696


2,741


175





Capital leases


16,459


1,663


3,067


2,964


8,765


Capital expenditures


17,707


17,707











Supplemental & post-retirement benefits(b)


46,085


11,264


10,481


7,828


16,512


Uncertain tax positions(c)


8,602














8,602Total obligations

$
1,090,762

$
262,412

$
192,958

$
153,233

$
473,557

$
8,602


(a)The
purchase obligations are generally for the purchase of goods and services in the ordinary course of business. Griffon uses blanket purchase orders to
communicate expected requirements to certain of its vendors. Purchase obligations reflect those purchase orders where the commitment is considered to be firm. Purchase obligations that extend beyond
2010 are principally related to long-term contracts received from customers of Telephonics.(b)Griffon
funds required payouts under the non-qualified supplemental defined benefit plan from its general assets and the expected payments are
included in each period, as applicable.(c)Due
to the uncertainty of the potential settlement of future uncertain tax positions, management is unable to estimate the timing of related payments, if
any, that will be made subsequent to 2010. These amounts do not include any potential indirect benefits resulting from deductions or credits for payments made to other jurisdictions.


Off-Balance Sheet Arrangements

Except for operating leases and purchase obligations as disclosed herein, Griffon is not a party to any off-balance sheet
arrangements.

Off-Set Agreements

Telephonics may enter into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to obtaining
orders for its products and services from customers in foreign countries. These agreements promote investment in the country, and may be
satisfied through activities that do not require Griffon to use its cash, including transferring technology, providing manufacturing and other consulting support. These agreements may also be
satisfied through the use of cash for such activities as purchasing supplies from in-country vendors, setting up support centers, research and development investments, acquisitions and
building or leasing facilities for in-country operations, if applicable. The amount of the offset requirement is determined by contract value awarded and negotiated percentages with
customers. At September 30, 2010, Telephonics had outstanding offset agreements totaling approximately $102 million, primarily related to Radar Systems segment, some of which extend
through 2015. Offset programs usually extend over several years and in some cases provide for penalties in the event Griffon fails to perform in accordance with contract requirements. Historically,
Telephonics has not been required to pay any such penalties and as of September 30, 2010, no such penalties are estimable or probable.

40

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ACCOUNTING POLICIES AND PRONOUNCEMENTS

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.

An
estimate is considered to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on Griffon's financial position
or results of operations. The following have been identified as the most critical accounting policies and estimates:

Revenue Recognition

Revenue is recognized when the following circumstances are satisfied: a) persuasive evidence of an arrangement exists,
b) delivery has occurred, title has transferred or services are rendered, c) price is fixed and determinable and d) collectability is reasonably assured. Goods are sold on terms
which transfer title and risk of loss at a specified location. Revenue recognition from product sales occurs when all factors are met, including transfer of title and risk of loss, which occurs either
upon shipment or upon receipt by customers at the location specified in the terms of sale. Other than standard product warranty provisions, sales arrangements provide for no other significant
post-shipment obligations. From time to time and for certain customers rebates and other sales incentives, promotional allowances or discounts are offered, typically related to customer
purchase volumes, all of which are fixed or determinable and are classified as a reduction of revenue and recorded at the time of sale. Griffon provides for sales returns allowances based upon
historical returns experience.

Telephonics
earns a substantial portion of its revenue as either a prime or subcontractor from contract awards with the U.S. Government, as well as non-U.S. governments and
other commercial customers. These formal contracts are typically long-term in nature, usually greater than one year. Revenue and profits from these long-term fixed price
contracts are recognized under the percentage-of-completion method of accounting. Revenue and profits on fixed-price contracts that contain engineering as well as production
requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract (cost-to-cost method). Using the
cost-to-cost method, revenue is recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by the
total estimated contract revenue, less the cumulative revenue recognized in prior periods. The profit recorded on a contract using this method is equal to the current estimated total profit margin
multiplied by the cumulative revenue recognized, less the amount of cumulative profit previously recorded for the contract in prior periods. As this method relies on the substantial use of estimates,
these projections may be revised throughout the life of a contract. Components of this formula and ratio that may be estimated include gross profit margin and total costs at completion. The cost
performance and estimates to complete on long-term contracts are reviewed, at a minimum, on a quarterly basis, as well as when information becomes available that would necessitate a review
of the current estimate. Adjustments to estimates for a contract's estimated costs at completion and estimated profit or loss often are required as experience is gained, and as more information is
obtained, even though the scope of work required under the contract may or may not change, or if contract modifications occur. The impact of such adjustments or changes to estimates is made on a
cumulative basis in the period when such information has become

41

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known.
Gross profit is affected by a variety of factors, including the mix of products, systems and services, production efficiencies, price competition and general economic conditions.

Revenue
and profits on cost-reimbursable type contracts are recognized as allowable costs are incurred on the contract at an amount equal to the allowable costs plus the
estimated profit
on those costs. The estimated profit on a cost-reimbursable contract may be fixed or variable based on the contractual fee arrangement. Incentive and award fees on these contracts are
recorded as revenue when the criteria under which they are earned are reasonably assured of being met and can be estimated.

For
contracts whose anticipated total costs exceed the total expected revenue, an estimated loss is recognized in the period when identifiable. A provision for the entire amount of the
estimated loss is recorded on a cumulative basis.

Amounts
representing contract change orders or claims are included in revenue only when they can be reliably estimated and their realization is probable, and are determined on a
percentage-of-completion basis measured by the cost-to-cost method.

Inventories

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor
and manufacturing overhead costs.

Griffon's
businesses typically do not require inventory that is susceptible to becoming obsolete or dated. In general, Telephonics sells products in connection with programs authorized
and approved under contracts awarded by the U.S. Government or agencies thereof, either as prime or subcontractor, and in accordance with customer specifications. Plastics primarily produces
fabricated materials used by customers in the production of their products and these materials are produced against orders by those customers. Home & Building Products produces doors and
non-powered lawn and garden tools in response to orders from customers of retailers and dealers.

Warranty Accruals

Direct customer and end-user warranties are provided on certain products. These warranties cover manufacturing defects that
would prevent the product from performing in line with its intended and marketed use. The terms of these warranties vary by product line and generally provide for the repair or replacement of the
defective product. Warranty claims data is collected and analyzed with a focus on the historical amount of claims, the products involved, the amount of time between the warranty claims and the
products' respective sales and the amount of current sales. Based on these analyses, warranty accruals are generally recorded as an increase to cost of sales and regularly reviewed for adequacy.

Stock-based Compensation

Griffon has issued stock-based compensation to certain employees, officers and directors in the form of stock options and restricted
stock. For stock option grants made on or after October 1, 2005, expense is recognized over the awards' expected vesting period based on their fair value as calculated using the Black-Scholes
pricing model. The Black-Scholes pricing model uses estimated assumptions for a forfeiture rate, the expected life of the options and a volatility rate using historical data.

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.

Allowances for Discount, Doubtful Account and Returns

Trade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts and returns. The allowances
represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers' potential insolvency),

42

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discounts
related to early payment of accounts receivables by customers and estimates for returns. The allowance for doubtful accounts includes amounts for certain customers where a risk of default
has been specifically identified, as well as an amount for customer defaults based on a general formula when it is determined the risk of some default is probable and estimable, but cannot yet be
associated with specific customers. Allowance for discounts and returns are recorded as a reduction of revenue and the provision related to the allowance for doubtful accounts is recorded in Selling,
general and administrative expenses.

Acquisitions

The consolidated financial statements include an acquired business' balance sheet, and no operations as the transaction was completed
on September 30, 2010, Griffon's
year end. Acquired businesses are accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed be recognized at their
fair values as of the acquisition date and that the fair value of acquired in-process research and development (IPR&D) be recorded on the balance sheet. Related transaction costs are
expensed as incurred. Any excess of the purchase price over the assigned values of the net assets acquired is recorded as goodwill.

Goodwill, Long-Lived Intangible and Tangible Assets, and Impairment

Griffon has significant intangible and tangible long lived assets on its balance sheet which includes goodwill and other intangible
assets related to acquisitions. Goodwill represents the excess of the cost of net assets acquired in business combinations over the fair value of the identifiable tangible and intangible assets
acquired and liabilities assumed in a business combination. As required under GAAP, goodwill and indefinite lived intangibles are reviewed for impairment annually, for Griffon in September, or more
frequently whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The testing of goodwill and indefinite lived
intangibles for impairment involves the significant use of judgment and assumptions in the determination of a reporting unit's fair market value.

Long-lived
amortizable intangible assets, such as customer relationships and software, and tangible assets, which is primarily made up of Property, Plant and Equipment, are
amortized over their expected useful lives, which involves significant assumptions and estimates. Long-lived intangible and tangible assets are tested for impairment by comparing estimated
future undiscounted cash flows to the carrying value of the asset when an impairment indicator, such as change in business, customer loss or obsolete technology, exists.

Fair
value estimates are based on assumptions believed to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ materially from
those estimates. Any changes in key assumptions or management judgment with respect to a reporting unit or its prospects, which may result from a decline in Griffon's stock price, a change in market
conditions, market trends, interest rates or other factors outside of Griffon's control, or significant underperformance relative to historical or projected future operating results, could result in a
significantly different estimate of the fair value of Griffon's reporting units, which could result in an impairment charge in the future.

Restructuring reserves

From time to time, Griffon will establish restructuring reserves at an operation. These reserves for both termination and other exit
costs require the use of estimates.
Though Griffon believes the estimates made are reasonable, they could differ materially from the actual costs.

Income Taxes

Griffon's effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various
jurisdictions in which Griffon operates. For interim financial reporting, the

43

---



annual
tax rate is estimated based on projected taxable income for the full year and a quarterly income tax provision is recorded in accordance with the anticipated annual rate. As the year
progresses, the estimates are refined based on the year's taxable income as new information becomes available, including year-to-date financial results. This continual
estimation process often results in a change to the effective tax rate throughout the year. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

Deferred
tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax
assets represent items to be used as a tax deduction or credit in future tax returns for which a tax benefit has been recorded in the income statement. The likelihood that the deferred tax asset
balance will be recovered from future taxable income is assessed at least quarterly, and the valuation allowance, if any, is adjusted accordingly.

Tax
benefits are recognized for an uncertain tax position when, in management's judgment, it is more likely than not that the position will be sustained upon examination by a taxing
authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a
greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing
circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The
effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. A number of years may elapse
before a particular matter for which Griffon has recorded a liability related to an unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits varies by
jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, Griffon believes its liability for unrecognized tax benefits is
adequate. Favorable resolution of an unrecognized tax benefit could be recognized as a reduction in Griffon's tax provision and effective tax rate in the period of resolution. Unfavorable settlement
of an unrecognized tax benefit could increase the tax provision and effective tax rate and may require the use of cash in the period of resolution. The liability for unrecognized tax benefits is
generally presented as noncurrent. However, if it is anticipated that a cash
settlement will occur within one year, that portion of the liability is presented as current. Interest and penalties recognized on the liability for unrecognized tax benefits is recorded as income tax
expense.

Pension Benefits

Griffon sponsors three defined benefit pension plans for certain employees and retired employees. Annual amounts relating to these
plans are recorded based on actuarial projections, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases and turnover rates. The
actuarial assumptions used to determine pension liabilities and assets, as well as pension expense, are reviewed on an annual basis when modifications to assumptions are made based on current economic
conditions and trends. The expected return on plan assets is determined based on the nature of the plans' investments and expectations for long-term rates of return. The discount rate used
to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments with the appropriate spot rate applicable to the timing of the
projected future benefit payments. The assumptions utilized in recording Griffon's obligations under the defined benefit pension plans are believed to be reasonable based on experience and advice from
independent actuaries; however, differences in actual experience or changes in the assumptions may materially affect Griffon's financial position or results of operations.

The
qualified defined benefit plan has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continue to accrue a service
benefit for an additional 10 years, at which time all plan participants will stop accruing service benefits.

44

---



Newly issued but not yet effective accounting pronouncements

In October 2009, the FASB issued new guidance on accounting for multiple-deliverable arrangements to enable vendors to account for
products and services separately rather than as a combined unit. The guidance addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of
accounting. The new guidance will be effective as of the beginning of the annual reporting period commencing after June 15, 2010, and will be adopted by Griffon as of October 1, 2010.
Early adoption is permitted. Griffon is evaluating the potential impact, if any, of the adoption of the new guidance on its consolidated financial statements.

Recently issued effective accounting pronouncements

In December 2007, the FASB issued new accounting guidance related to the accounting for business combinations. The purpose of the new
guidance is to better represent the economic value of a business combination transaction. The new guidance retains the fundamental requirement of existing guidance where the acquisition method of
accounting is to be used for all business combinations and for an acquirer to be identified for each business combination. In general the new guidance: 1) broadens the existing guidance by
extending its applicability to all events where one entity obtains control over one or more businesses; 2) broadens the use of the fair value measurements used to recognize the assets acquired
and liabilities assumed; 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition; and 4) increases required disclosures.
The new guidance was effective for Griffon for any business combinations that occur after October 1, 2009, and impacts the way in which business combinations are accounted for. Griffon applied
this new guidance for the acquisition of ATT.

In
December 2007, the FASB issued new accounting guidance related to the accounting for noncontrolling interests in consolidated financial statements. The new guidance was issued to
improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the
same way, that is, as equity in the consolidated financial statements. Moreover, the new guidance eliminates the diversity then existing in accounting for transactions between an entity and
noncontrolling interests by requiring they be treated as equity transactions. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on
Griffon's consolidated financial statements.

In
December 2008, the FASB issued authoritative guidance to require employers to provide additional disclosures about plan assets of a defined benefit pension or other
post-retirement plan. These disclosures should principally include information detailing investment policies and strategies, the major categories of plan assets, the inputs and valuation
techniques used to measure the fair value of plan assets and an understanding of significant concentrations of risk within plan assets. While earlier application of this guidance is permitted, the
required disclosures shall be provided for fiscal years ending after December 15, 2009. Upon initial application, this guidance is not required to be applied to earlier periods that are
presented for comparative purposes. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In
March 2008, the FASB issued new guidance, which enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: 1) an
entity uses derivative instruments; 2) derivative instruments and related hedged items are accounted for; and 3) derivative instruments and related hedged items affect an entity's
financial position, financial performance and cash flows. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on Griffon's consolidated
financial statements.

In
April 2008, the FASB issued new guidance, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset, and requires enhanced related disclosures. The new guidance must be applied prospectively to all intangible assets acquired as of and subsequent to years beginning after

45

---



December 15,
2008, which for Griffon was the fiscal year beginning October 1, 2009. The adoption of the new guidance was applied for the valuation of the intangibles for the ATT
acquisition.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

Griffon's exposure to market risk for changes in interest rates relates primarily to variable interest rate debt and investments in
cash and cash equivalents.



Foreign Exchange

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

Item 8.    Financial Statements and Supplementary Data

The financial statements of Griffon and its subsidiaries and the report thereon of Grant Thornton LLP are included
herein:



46

---







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Shareholders Griffon Corporation

We have audited the accompanying consolidated balance sheets of Griffon Corporation (a Delaware corporation) and subsidiaries (the "Company") as of
September 30, 2010 and 2009, and the related consolidated statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for each of the three years in the
period ended September 30, 2010. Our audits of the basic financial statements included the financial statement schedules listed in the index appearing under Item 15(a)(2). These
financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial
statement schedules based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Griffon Corporation and subsidiaries as of
September 30, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2010 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set forth therein.

As
described in the notes to the consolidated financial statements, the Company adopted new accounting guidance related to the accounting for business combinations (Note 1) and
convertible debt (Note 3) effective October 1, 2009.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Griffon Corporation and subsidiaries' internal control over
financial reporting as of September 30, 2010 based on criteria established inInternal Control  Integrated Frameworkissued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 17, 2010 expressed an unqualified opinion thereon.

/s/
GRANT THORNTON LLP
New York, New York
November 17, 2010

47

---





GRIFFON CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (in thousands, except per share data)

At September 30,
2010

At September 30,
2009*CURRENT ASSETSCash and equivalents

$
169,802

$
320,833Accounts receivable, net of allowances of $6,581 and $4,457


252,029


164,619Contract costs and recognized income not yet billed, net of progress payments of $1,423 and $14,592


63,155


75,536Inventories, net


268,801


139,170Prepaid and other current assets


55,782


39,261Assets of discontinued operations


1,079


1,576Total Current Assets


810,648


740,995PROPERTY, PLANT AND EQUIPMENT, net


314,926


236,019GOODWILL


357,221


97,657INTANGIBLE ASSETS, net


233,011


34,211OTHER ASSETS


27,907


29,132ASSETS OF DISCONTINUED OPERATIONS


5,803


5,877Total Assets

$
1,749,516

$
1,143,891CURRENT LIABILITIESNotes payable and current portion of long-term debt, net of debt discount of $0 and $2,820

$
20,901

$
78,590Accounts payable


185,165


125,027Accrued liabilities


124,700


61,120Liabilities of discontinued operations


4,289


4,932Total Current Liabilities


335,055


269,669LONG-TERM DEBT, net of debt discount of $30,650 and $0


503,935


98,394OTHER LIABILITIES


191,365


78,837LIABILITIES OF DISCONTINUED OPERATIONS


8,446


8,784Total Liabilities


1,038,801


455,684COMMITMENTS AND CONTINGENCIESSHAREHOLDERS' EQUITYPreferred stock, par value $0.25 per share, authorized 3,000 shares, no shares issued





Common stock, par value $0.25 per share, authorized 85,000 shares, issued 72,385 shares and 72,040 shares


18,096


18,010Capital in excess of par value


461,504


438,843Retained earnings


431,584


421,992Treasury shares, at cost, 12,466 common shares for 2010 and 2009


(213,560
)

(213,560
)Accumulated other comprehensive income


17,582


28,170Deferred compensation


(4,491
)

(5,248
)Total Shareholders' Equity


710,715


688,207Total Liabilities and Shareholders' Equity

$
1,749,516

$
1,143,891


---

* See Adoption of New Accounting Pronouncements footnote.

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

48

---





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

Years Ended September 30,2010

2009*

2008*Revenue

$
1,293,996

$
1,194,050

$
1,269,305Cost of goods and services


1,005,692


936,927


996,308Gross profit


288,304


257,123


272,997Selling, general and administrative expenses


261,403


230,736


245,430Impairment of goodwill








12,913Restructuring and other related charges


4,180


1,240


2,610Total operating expenses


265,583


231,976


260,953Income from operations


22,721


25,147


12,044Other income (expense)Interest expense


(12,322
)

(13,091
)

(16,909
)Interest income


409


1,539


1,970Gain (loss) from debt extinguishment, net


(1,117
)

4,488


Other, net


4,121


1,522


2,713Total other income (expense)


(8,909
)

(5,542
)

(12,226
)Income (loss) before taxes and discontinued operations


13,812


19,605


(182
)Provision for income taxes


4,308


1,687


2,651Income (loss) from continuing operations


9,504


17,918


(2,833
)Discontinued operations:Income (loss) from operations of the discontinued Installation Services business


142


1,230


(62,447
)Provision (benefit) for income taxes


54


440


(21,856
)Income (loss) from discontinued operations


88


790


(40,591
)Net income (loss)

$
9,592

$
18,708

$
(43,424
)Basic earnings (loss) per common share:Income (loss) from continuing operations

$
0.16

$
0.31

$
(0.09
)Income (loss) from discontinued operations


0.00


0.01


(1.24
)Net income (loss)


0.16


0.32


(1.33
)Weighted-average shares outstanding


58,974


58,699


32,667Diluted earnings (loss) per common share:Income (loss) from continuing operations

$
0.16

$
0.30

$
(0.09
)Income (loss) from discontinued operations


0.00


0.01


(1.24
)Net income (loss)


0.16


0.32


(1.32
)Weighted-average shares outstanding


59,993


59,002


32,836


*See
Adoption of New Accounting Pronouncements footnote.


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

49

---





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

Years Ended September 30,2010

2009*

2008*CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)

$
9,592

$
18,708

$
(43,424
)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Loss (income) from discontinued operations


(88
)

(790
)

40,591Depreciation and amortization


40,442


42,346


42,923Impairment of goodwill








12,913Stock-based compensation


5,778


4,145


3,327Provision for losses on account receivable


2,431


628


1,089Amortization/write-off of deferred financing costs and debt discounts


5,059


5,209


5,966(Gain) loss from debt extinguishment, net


1,117


(4,488
)

Deferred income taxes


(3,666
)

(3,144
)

(1,431
)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


(25,481
)

(6,690
)

13,585(Increase) decrease in inventories


(10,611
)

28,498


(23,500
)(Increase) decrease in prepaid and other assets


(14,342
)

11,130


(12,524
)Increase (decrease) in accounts payable, accrued liabilities and income taxes payable


72,218


(8,627
)

53,095Other changes, net


676


(2,825
)

(6,561
)Net cash provided by operating activities


83,125


84,100


86,049CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of property, plant and equipment


(40,477
)

(32,697
)

(53,116
)Acquired business, net of cash acquired


(542,000
)




(1,829
)Proceeds from sale of assets


(1,666
)

200


1,000(Increase) decrease in equipment lease deposits





(336
)

4,593Net cash used in investing activities


(584,143
)

(32,833
)

(49,352
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock


2,823


7,257


241,344Purchase of shares for treasury








(579
)Proceeds from issuance of long-term debt


543,875


11,431


89,235Payments of long-term debt


(176,802
)

(56,676
)

(87,785
)Decrease in short-term borrowings





(866
)

(924
)Financing costs


(17,455
)

(597
)

(10,027
)Purchase of ESOP shares





(4,370
)

Exercise of stock options


343





Tax benefit from vesting of restricted stock


325


217


3Other, net


184


402


139Net cash provided by (used in) financing activities


353,293


(43,202
)

231,406CASH FLOWS FROM DISCONTINUED OPERATIONS:Net cash used in operating activities


(638
)

(1,305
)

(5,410
)Net cash provided by investing activities








5,496Net cash provided by (used in) discontinued operations


(638
)

(1,305
)

86Effect of exchange rate changes on cash and equivalents


(2,668
)

2,152


(1,015
)NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS


(151,031
)

8,912


267,174CASH AND EQUIVALENTS AT BEGINNING OF YEAR


320,833


311,921


44,747CASH AND EQUIVALENTS AT END OF YEAR

$
169,802

$
320,833

$
311,921Supplemental Disclosure of Cash Flow Information:Cash paid for interest

$
6,489

$
7,065

$
8,303Cash paid for taxes


4,643


7,602


6,207Stock subscriptions receivable pursuant to rights offering








5,274


*See
Adoption of New Accounting Pronouncements footnote.


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

50

---





GRIFFON CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

COMMON STOCK





TREASURY SHARES

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)CAPITAL IN
EXCESS OF
PAR VALUE

RETAINED
EARNINGS

DEFERRED
ESOP
COMPENSATION



COMPREHENSIVE
INCOME (LOSS)SHARES

PAR VALUE

SHARES

COST

TotalBalance at 9/30/2007*


42,329

$
10,582

$
198,379

$
451,377


12,399

$
(212,731
)
$
29,522

$
(1,619
)
$
475,510Net income











(43,424
)













(43,424
)
$
(43,424
)Tax benefit from the exercise of stock options








3

















3Amortization of deferred compensation























(221
)

(221
)Common stock acquired














41


(579
)







(579
)Restricted stock vesting


373


94


(94
)
















ESOP distribution of common stock








(71
)
















(71
)Stock-based compensation








3,236














91


3,327Issuance of common stock pursuant to rights offering, net of financing costs


28,393


7,098


232,409

















239,507Translation of foreign financial statements




















(6,061
)




(6,061
)

(6,061
)Adoption of uncertain tax position guidance











(4,669
)













(4,669
)Pension OCI amortization, net of tax




















2,008





2,008


2,008Balance at 9/30/2008*


71,095


17,774


433,862


403,284


12,440


(213,310
)

25,469


(1,749
)

665,330

$
(47,477
)Net loss











18,708














18,708


18,708Common stock issued for options exercised


33


7


(7
)
















Tax benefit from the exercise of stock options








217

















217Amortization of deferred compensation























818


818Common stock acquired














26


(250
)







(250
)Restricted stock vesting


58


15


(747
)
















(732
)ESOP purchase of common stock























(4,370
)

(4,370
)ESOP distribution of common stock








(22
)
















(22
)Stock-based compensation








4,092














53


4,145Issuance of common stock pursuant to rights offering, net of financing costs


854


214


1,711

















1,925Issuance of convertible debt, net








(263
)
















(263
)Translation of foreign financial statements




















11,836





11,836


11,836Pension OCI amortization, net of tax




















(9,135
)




(9,135
)

(9,135
)Balance at 9/30/2009*


72,040


18,010


438,843


421,992


12,466


(213,560
)

28,170


(5,248
)

688,207

$
21,409Net income











9,592














9,592

$
9,592Common stock issued for options exercised


54


13


329

















342Tax benefit from the exercise of stock options








325

















325Amortization of deferred compensation























744


744Restricted stock vesting


52


13


(483
)
















(470
)Issuance of convertible debt, net








13,694

















13,694ESOP distribution of common stock








266

















266Stock-based compensation








5,765














13


5,778Issuance of common stock pursuant to acquisition


239


60


2,765

















2,825Translation of foreign financial statements




















(9,677
)




(9,677
)

(9,677
)Pension OCI amortization, net of tax




















(911
)




(911
)

(911
)Balance at 9/30/2010


72,385

$
18,096

$
461,504

$
431,584


12,466

$
(213,560
)
$
17,582

$
(4,491
)
$
710,715

$
(996
)


*See
Adoption of New Accounting Pronouncements footnote.


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

51

---





GRIFFON CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (dollars in thousands, except per share data)

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

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

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

Headquartered
in New York, N.Y., the Company was incorporated in New York in 1959, and was reincorporated in Delaware in 1970.

Griffon
currently conducts its operations through three businesses: Telephonics Corporation, Home & Building Products and Clopay Plastic Products Company.



Consolidation

The consolidated financial statements include the accounts of Griffon Corporation and all subsidiaries (the "Company" or "Griffon").
Intercompany accounts and transactions have been eliminated in consolidation.

Earnings Per Share

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

52

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Discontinued OperationsInstallation Services

As a result of the downturn in the residential housing market, in 2008, Griffon exited substantially all of the operating activities of
its Installation Services segment; this segment sold, installed and serviced garage doors, garage door openers, fireplaces, floor coverings, cabinetry and a range of related building products
primarily for the new residential housing market. Operating results of substantially the entire Installation Services segment have been reported as discontinued operations in the Consolidated
Statements of Operations for all periods presented herein, and the segment is excluded from segment reporting.

Reclassifications and Adoption of New Accounting Guidance

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

The
prior year Consolidated Balance Sheet and the prior years Consolidated Statements of Operations, Cash Flows, Shareholders' Equity and Comprehensive Income reflect the adoption of the
new accounting guidance for convertible debt (see Adoption of New Accounting Pronouncements footnote).

Use of estimates

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

Cash and equivalents

Griffon considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Cash
equivalents primarily consist of overnight commercial paper, highly-rated liquid money market funds backed by U.S. Treasury securities and U.S. Agency securities, as well as insured bank deposits.
Griffon had cash in non-U.S. bank accounts of approximately $32,765 and $39,007 at September 30, 2010 and 2009, respectively. The majority of these amounts are covered by government
insurance or backed by government securities. Griffon evaluates the financial stability of all institutions and funds that hold its cash and equivalents.

53

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair value of financial instruments

In September 2006, the Financial Accounting Standards Board ("FASB") issued new guidance, which defines fair value, establishes a
framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. For financial assets and liabilities, this statement, which was effective for Griffon
on October 1, 2008, did not require any new fair value measurements. The adoption of this new guidance did not have a material impact on Griffon's consolidated financial statements. In February
2008, the FASB delayed the effective date of the new guidance for Griffon to October 1, 2009, for non-financial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually).

In
February 2007, the FASB issued new guidance to provide companies the option to report selected financial assets and liabilities at fair value. Upon adoption of this new guidance on
October 1, 2008, Griffon did not elect the fair value option to report its financial assets and liabilities at fair value. Accordingly, the adoption of this new guidance did not have an impact
on Griffon's financial position or results of operations.

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.

Griffon's
2017 and 2023 4% convertible notes' fair value was approximately $106,000 and $500 on September 30, 2010, respectively, which were based upon quoted market prices
(level 1 inputs).

Items Measured at Fair Value on a Recurring Basis

Insurance contracts with a value of $4,621 and trading securities with a value of $4,133 at September 30, 2010, are measured and
recorded at fair value based upon quoted prices in active markets for identical assets (level 1 inputs).

Non-U.S. currency translation

Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have been translated
at year-end exchange rates and profit and loss accounts have been translated using weighted average exchange rates. Adjustments resulting from currency translation have been recorded in
the equity section of the balance sheet as cumulative translation adjustments. Assets and liabilities of an entity that are denominated in currencies other than an entity's functional currency are
remeasured into the functional currency using end of period exchange rates, or historical rates where applicable to certain balances. Gains and losses related to these remeasurements are recorded
within the Statement of Operations as a component of Other income (expense).

Revenue recognition

Revenue is recognized when the following circumstances are satisfied: a) persuasive evidence of an arrangement exists,
b) delivery has occurred, title is transferred or services are rendered, c) price is fixed and determinable and d) collectability is reasonably assured. Goods are sold on terms
which transfer title and risk of loss at a specified location. Revenue recognition from product sales occurs

54

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

when
all factors are met, including transfer of title and risk of loss, which occurs either upon shipment or upon receipt by customers at the location specified in the terms of sale. Other than
standard product warranty provisions, sales arrangements provide for no other significant post-shipment obligations. From time to time and for certain customers rebates and other sales
incentives, promotional allowances or discounts are offered, typically related to customer purchase volume, all of which are fixed or determinable and are classified as a reduction of revenue and
recorded at the time of sale. Griffon provides for sales returns allowances based upon historical returns experience.

Telephonics
earns a substantial portion of its revenue as either a prime or subcontractor from contract awards with the U.S. Government, as well as non-U.S. governments and
other commercial customers. These formal contracts are typically long-term in nature, usually greater than one year. Revenue and profits from these long-term fixed price
contracts are recognized under the percentage-of-completion method of accounting. Revenue and profits on fixed-price contracts that contain engineering as well as production
requirements are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract (cost-to-cost method). Using the
cost-to-cost method, revenue is recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by the
total estimated contract revenue, less the cumulative revenue recognized in prior periods. The profit recorded on a contract using this method is equal to the current estimated total profit margin
multiplied by the cumulative revenue recognized, less the amount of cumulative profit previously recorded for the contract in prior periods. As this method relies on the substantial use of estimates,
these projections may be revised throughout the life of a contract. Components of this formula and ratio that may be estimated include gross profit margin and total costs at completion. The cost
performance and estimates to complete on long-term contracts are reviewed, at a minimum, on a quarterly basis, as well as when information becomes available that would necessitate a review
of the current estimate. Adjustments to estimates for a contract's estimated costs at completion and estimated profit or loss often are required as experience is gained, and as more information is
obtained, even though the scope of work required under the contract may or may not change, or if contract modifications occur. The impact of such adjustments or changes to estimates is made on a
cumulative basis in the period when such information has become known. Gross profit is affected by a variety of factors, including the mix of products, systems and services, production efficiencies,
price competition and general economic conditions.

Revenue
and profits on cost-reimbursable type contracts are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the
estimated profit on those costs. The estimated profit on a cost-reimbursable contract may be fixed or variable based on the contractual fee arrangement. Incentive and award fees on these
contracts are recorded as revenue when the criteria under which they are earned are reasonably assured of being met and can be estimated.

For
contracts whose anticipated total costs exceed the total expected revenue, an estimated loss is recognized in the period when identifiable. A provision for the entire amount of the
estimated loss is recorded on a cumulative basis.

Amounts
representing contract change orders or claims are included in revenue only when they can be reliably estimated and their realization is probable, and are determined on a
percentage-of-completion basis measured by the cost-to-cost method.

55

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts receivable, allowance for doubtful accounts and concentrations of credit risk

Accounts receivable is composed principally of trade accounts receivable that arise primarily from the sale of goods or services on
account and is stated at historical cost. A substantial portion of Griffon's trade receivables are from customers of Home & Building Products whose financial condition is dependent on the
construction and related retail sectors of the economy. In addition, a significant portion of Griffon's trade receivables are from one Plastics customer, P&G, whose financial condition is dependent on
the consumer products and related sectors of the economy. Telephonics sells its products to domestic and international government agencies, as well as commercial customers. Griffon performs continuing
evaluations of the financial condition of its customers, and although Griffon generally does not require collateral, letters of credit may be required from customers in certain circumstances.

Trade
receivables are recorded at the stated amount, less allowance for doubtful accounts and, when appropriate, for customer program reserves and cash discounts. The allowance
represents estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers' potential insolvency). The allowance for doubtful
accounts includes amounts for certain customers where a risk of default has been specifically identified, as well as an amount for customer defaults based on a formula when it is determined the risk
of some default is probable and
estimable, but cannot yet be associated with specific customers. The provision related to the allowance for doubtful accounts was recorded in Selling, general and administrative expenses.

Customer
program reserves and cash discounts are netted against accounts receivable when it is customer practice to reduce invoices for these amounts. The amount netted against accounts
receivable in 2010 was $11,827.

Contract costs and recognized income not yet billed

Contract costs and recognized income not yet billed consists of amounts accounted for under the percentage of completion method of
accounting, recoverable costs and accrued profit that cannot yet be invoiced under the terms of certain long-term contracts. Amounts will be invoiced when applicable contract terms such as
the achievement of specified milestones or product delivery, are met.

Inventories

Inventories, stated at the lower of cost (first-in, first-out or average) or market, include material, labor
and manufacturing overhead costs.

Griffon's
businesses typically do not require inventory that is susceptible to becoming obsolete or dated. In general, Telephonics sells products in connection with programs authorized
and approved under contracts awarded by the U.S. Government or agencies thereof, either as prime or subcontractor, and in accordance with customer specifications. Plastics primarily produces
fabricated materials used by customers in the production of their products and these materials are produced against orders by those customers. Home & Building Products produces doors and
non-powered lawn and garden tools in response to orders from customers of retailers and dealers.

56

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

Property, plant and equipment includes the historical cost of land, buildings, equipment and significant improvements to existing plant
and equipment. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated
depreciation is removed from the respective accounts and the gain or loss is realized in income.

Depreciation
expense, which includes amortization of assets under capital leases, was $38,456, $40,919 and $42,061 for the years ended September 30, 2010, 2009 and 2008,
respectively, and was calculated on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives for property, plant and equipment are as follows: buildings
and building improvements, 25 to 40 years; machinery and equipment, 2 to 15 years and leasehold improvements, over the term of the lease or life of the improvement, whichever is shorter.

Capitalized
interest costs included in property, plant and equipment were $303, $331 and $511 for the years ended September 30, 2010, 2009 and 2008, respectively. The original
cost of fully-depreciated property, plant and equipment remaining in use at September 30, 2010 was approximately $155,000.

Goodwill and indefinite-lived intangibles

Goodwill is the excess of the acquisition cost of a business over the fair value of the identifiable net assets acquired. Goodwill is
not amortized, but is subject to an annual impairment test unless during an interim period, impairment indicators, such as a significant change in the business climate, exist.

Griffon
performs its annual impairment testing of goodwill in September. The performance of the test involves a two-step process. The first step involves comparing the fair
value of Griffon's reporting units with the reporting unit's carrying amount, including goodwill. Griffon generally determines the fair value of its reporting units using the income approach
methodology of valuation that includes the present value of expected future cash flows. This method uses Griffon's own market assumptions. If the carrying amount of a reporting unit exceeds the
reporting unit's fair value, Griffon performs the second step of the goodwill impairment test to determine the amount of impairment loss. The second step compares the implied fair value of the
reporting unit's goodwill with the carrying amount of that goodwill.

Griffon
defines its reporting units as its three segments.

Griffon
used five year projections and a 3% terminal value to which discount rates between 11.75% and 12.50% were applied to calculate each unit's fair value. To substantiate the fair
values derived from the income approach methodology of valuation, the implied fair value was reconciled to Griffon's market capitalization, the results of which supported the implied fair values. Any
changes in key assumptions or management judgment with respect to a reporting unit or its prospects, which may result from a decline in Griffon's stock price, a change in market conditions, market
trends, interest rates or other factors outside Griffon's control, or significant underperformance relative to historical or project future operating results, could result in a significantly different
estimate of the fair value of the reporting units, which could result in a future impairment charge.

57

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In 2008, based on the results of the annual goodwill impairment testing, all of the goodwill of CBP was
written down due to impairment resulting in a charge of $12,900. In 2010 and 2009, all reporting units passed step one, and therefore step two was not performed.

Similar
to Goodwill, Griffon tests indefinite-lived intangible assets at least annually unless indicators of impairment exist. Griffon uses a discounted cash flow method to calculate and
compare the fair value of the intangible to its book value. This method uses Griffon's own market assumptions which are reasonable and supportable. If the fair value is less than the book value of the
indefinite-lived intangibles, an impairment charge would be recognized. There was no impairment related to any indefinite-lived intangible assets in 2010, 2009 or 2008.

Definite-lived long-lived assets

Amortizable intangible assets are carried at cost less accumulated amortization. For financial reporting purposes, definite lived
intangible assets are amortized on a straight-line basis over their useful lives, generally eight to twenty-five years. Long-lived assets and certain identifiable
intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of
recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.

The
goodwill impairment in 2008 was deemed an indicator of potential impairment of the definite-lived long-lived assets of CBP. As a result, these assets were tested as a
group for impairment in 2008, and again in 2010 and 2009. For both periods, the future undiscounted cash flows expected to be generated from the use of these assets were substantially greater than the
carrying value of the assets, and as such, there was no impairment.

Income taxes

Income taxes are accounted for under the liability method. Deferred taxes reflect the tax consequences on future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts. The carrying value of Griffon's deferred tax assets is dependent upon Griffon's ability to generate sufficient
future taxable income in certain tax jurisdictions. Should Griffon determine that it is more likely than not that some portion of the deferred tax assets will not be realized, a valuation allowance
against the deferred tax assets would be established in the period such determination was made.

Effective
October 1, 2007, Griffon adopted FASB guidance which prescribes the way companies are to account for uncertainty in income tax reporting, and prescribes methodology for
recognizing, reversing and measuring the tax benefits of a tax position expected to be taken, in a tax return. Griffon provides for uncertain tax positions and any related interest and penalties based
upon Management's assessment of whether a tax benefit is more likely than not of being sustained upon examination by tax authorities. At September 30, 2010 Griffon believes that it has
appropriately accounted for all unrecognized tax benefits. As a result of adopting this new guidance effective October 1, 2007, Griffon recorded a $4,669 increase to reserves as a "cumulative
effect" decrease to opening retained earnings. As of September 30, 2010, 2009 and 2008, Griffon has recorded unrecognized tax benefits in the

58

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

amount
of $11,764, $8,138 and $11,634, respectively. Accrued interest and penalties related to income tax matters are recorded in the provision for income taxes.

Research and development costs, shipping and handling costs and advertising costs

Research and development costs not recoverable under contractual arrangements are charged to selling, general and administrative
expense as incurred and amounted to $21,400, $17,800 and $17,500 in 2010, 2009 and 2008, respectively.

Selling,
general and administrative expenses include shipping and handling costs of $32,100 in 2010, $30,500 in 2009 and $37,700 in 2008 and advertising costs, which are expensed as
incurred, of $14,700 in 2010, $15,200 in 2009 and $17,800 in 2008.

Risk, Retention and Insurance

Griffon's property and casualty insurance programs contain various deductibles that, based on Griffon's experience, are typical and
customary for a company of its size and risk profile. Griffon generally maintains deductibles for claims and liabilities related primarily to workers' compensation, health and welfare claims, general
commercial, product and automobile liability and property damage, and business interruption resulting from certain events. Griffon does not consider any of the deductibles to represent a material risk
to Griffon. Griffon accrues for claim exposures that are probable of occurrence and can be reasonably estimated. Insurance is maintained to transfer risk beyond the level of self-retention
and provides protection on both an individual claim and annual aggregate basis.

In
the U.S., Griffon currently self-assumes its product and commercial general liability claims up to $500 per occurrence, its workers' compensation claims up to $350 per
occurrence, and automobile liability claims up to $250 per occurrence. Third-party insurance provides primary level coverage in excess of these deductible amounts up to certain specified limits. In
addition, Griffon has excess liability insurance from third-party insurers on both an aggregate and an individual occurrence basis substantially in excess of the limits of the primary coverage.

Griffon
has local insurance coverage in Germany, Brazil, Ireland, Australia and China which is subject to reasonable deductibles. Griffon has worldwide excess coverage above these local
programs.

Pension Benefits

Griffon sponsors defined benefit pension plans for certain employees and retired employees. Annual amounts relating to these plans are
recorded based on actuarial projections, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases and turnover rates. The actuarial
assumptions used to determine pension liabilities and assets, as well as pension expense, are reviewed on an annual basis when modifications to assumptions are made based on current economic
conditions and trends. The expected return on plan assets is determined based on the nature of the plans' investments and expectations for long-term rates of return. The discount rate used
to measure obligations is based on a corporate bond spot-rate yield curve that matches projected future benefit payments with the appropriate spot rate applicable to the timing of the
projected future benefit payments. The assumptions utilized in recording Griffon's obligations under the defined benefit pension plans are believed to be reasonable based on experience and advice

59

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

from
independent actuaries; however, differences in actual experience or changes in the assumptions may materially affect Griffon's financial position or results of operations.

The
qualified defined benefit plan has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continue to accrue a service
benefit through December 2010, at which time all plan participants will stop accruing service benefits.

Newly issued but not yet effective accounting pronouncements

In October 2009, the FASB issued new guidance on accounting for multiple-deliverable arrangements to enable vendors to account for
products and services separately
rather than as a combined unit. The guidance addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The new guidance will
be effective as of the beginning of the annual reporting period commencing after June 15, 2010, and will be adopted by Griffon as of October 1, 2010. Early adoption is permitted. Griffon
is evaluating the potential impact, if any, of the adoption of the new guidance on its consolidated financial statements.

Recently issued effective accounting pronouncements

In December 2007, the FASB issued new accounting guidance related to the accounting for business combinations. The purpose of the new
guidance is to better represent the economic value of a business combination transaction. The new guidance retains the fundamental requirement of existing guidance where the acquisition method of
accounting is to be used for all business combinations and for an acquirer to be identified for each business combination. In general the new guidance: 1) broadens the existing guidance by
extending its applicability to all events where one entity obtains control over one or more businesses; 2) broadens the use of the fair value measurements used to recognize the assets acquired
and liabilities assumed; 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition; and 4) increases required disclosures.
The new guidance was effective for Griffon for any business combinations that occur after October 1, 2009, and impacts the way in which business combinations are accounted for. Griffon applied
this new guidance for the acquisition of ATT.

In
December 2007, the FASB issued new accounting guidance related to the accounting for noncontrolling interests in consolidated financial statements. The new guidance was issued to
improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the
same way, that is, as equity in the consolidated financial statements. Moreover, the new guidance eliminates the diversity then existing in accounting for transactions between an entity and
noncontrolling interests by requiring they be treated as equity transactions. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on
Griffon's consolidated financial statements.

In
December 2008, the FASB issued authoritative guidance to require employers to provide additional disclosures about plan assets of a defined benefit pension or other
post-retirement plan. These disclosures should principally include information detailing investment policies and strategies, the major categories of plan assets, the inputs and valuation
techniques used to measure the fair value of plan assets and an understanding of significant concentrations of risk within plan assets. While earlier application of this guidance is permitted, the
required disclosures shall be provided for fiscal years

60

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 1DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ending
after December 15, 2009. Upon initial application, this guidance is not required to be applied to earlier periods that are presented for comparative purposes. The adoption of this
guidance did not have a material impact on the Company's consolidated financial statements.

In
March 2008, the FASB issued new guidance, which enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: 1) an
entity uses derivative instruments; 2) derivative instruments and related hedged items are accounted for; and 3) derivative instruments and related hedged items affect an entity's
financial position, financial performance and cash flows. This new guidance was effective for Griffon as of October 1, 2009 and the adoption had no material effect on Griffon's consolidated
financial statements.

In
April 2008, the FASB issued new guidance, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset, and requires enhanced related disclosures. The new guidance must be applied prospectively to all intangible assets acquired as of and subsequent to years beginning after
December 15, 2008, which for Griffon was the fiscal year beginning October 1, 2009. The adoption of the new guidance was applied for the valuation of the intangibles for the ATT
acquisition.

NOTE 2ACQUISITION

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

In
connection with the ATT acquisition, Clopay Ames True Temper Holding Corp. ("Clopay Ames"), a subsidiary of Griffon, entered into a $375,000 secured term loan facility ("Term Loan")
and a new $125,000 Asset Based Lending Agreement ("New ABL"). The acquisition, including all related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the
New ABL, and $168,000 of Griffon cash. ATT's previous outstanding debt has been defeased in connection with the
acquisition. Following the ATT transaction, Griffon holds consolidated cash balances of $169,802 at September 30, 2010.

The
purchase of ATT occurred on September 30, 2010. Accordingly, ATT's results of operations are not included in the Griffon consolidated statements of operations or cash flows,
or footnotes relating thereto for any year presented, except where explicitly stated as pro-forma results. The Griffon consolidated balance sheet at September 30, 2010 and related
notes thereto include ATT's balances at that date.

The
accounts of the acquired company, after adjustments to reflect fair market values assigned to assets and liabilities, have been included in the consolidated financial statements from
the date of acquisition.

61

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 2ACQUISITION (Continued)

Griffon
is in the process of finalizing the adjustment to the purchase price, if any, primarily related to a working capital adjustment as required by the stock purchase agreement;
accordingly, management has used their best estimate in the initial purchase price allocation as of the date of these financial statements.

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

2010Current assets, net of cash acquired

$
195,214PP&E


72,918Goodwill


261,064Intangibles


203,290Other assets


1,124Total assets acquired


733,610Total liabilities assumed


(191,610
)Net assets acquired

$
542,000


The
amounts assigned to goodwill and major intangible asset classifications by segment for the acquisition are as follows:

2010

Amortization
Period (Years)Goodwill (non-deductible)

$
261,064

N/ATradenames (non-deductible)


76,090

IndefiniteCustomer relationships


127,200

25$
464,354


Pro Forma Information

The following unaudited pro forma information illustrates the effect on Griffon's revenue and net earnings for the twelve-month period
ended September 30, 2010, assuming that the acquisition had taken place on October 1, 2008.

Years Ended September 30,2010

2009Revenue from continuing operations:As reported

$
1,293,996

$
1,194,050Pro forma


1,737,630


1,659,524Net earnings from continuing operations:As reported

$
9,504

$
17,918Pro forma


30,072


24,920Diluted earnings per share from continuing operations:As reported

$
0.16

$
0.30Pro forma


0.50


0.42Average sharesDiluted


59,993


59,002


62

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GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 2ACQUISITION (Continued)

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

NOTE 3ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

Retrospective Adjustment for Adoption of Convertible Debt Guidance

In May 2008, the FASB issued new guidance to clarify that the liability and equity components of convertible debt instruments that may
be settled in cash upon conversion (including partial cash settlement) must be separately accounted for in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost
is recognized. This guidance, which is applicable to Griffon's 4% convertible subordinated notes due 2023 issued in 2003 (the "2023 Notes") and 4% convertible subordinated notes due 2017 issued in
December 2009 (the "2017 Notes"), became effective for Griffon as of October 1, 2009 and is implemented retrospectively, as required, for the 2023 Notes. For more information, see the
Long-Term Debt footnote.

At
September 30, 2010, the 2023 Notes had an outstanding balance of $532, with no unamortized discount or capital in excess of par value component balance as substantially all of
these notes were put to Griffon in July 2010. At September 30, 2009, the 2023 Notes had an outstanding balance of $79,380, an unamortized discount balance of $2,820, a net carrying value of
$76,560 and a capital in excess of par value component balance, net of tax, of $18,094. The stock price was below the conversion price for all periods presented. Griffon used 8.5% as the
nonconvertible debt borrowing rate to discount the 2023 Notes. For more information, see the Long-Term Debt footnote.

For
the 2023 Notes, the effective interest rate and interest expense was as follows:

Years Ended September 30,2010

2009

2008Effective interest rate


9.4
%

9.0
%

8.9
%Interest expense related to the coupon

$
1,998

$
3,472

$
5,200Amortization of the discount


2,105


3,576


4,720Amortization of deferred issuance costs


217


530


601Total interest expense on the 2023 Notes

$
4,320

$
7,578

$
10,521


63

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 3ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS (Continued)

The cumulative effect of the adjustments prior to September 30, 2009 was recognized in the September 30, 2009 balance sheet as follows:

As of September 30, 2009Reported

As AdjustedOther Assets

$
30,648

$
29,132All other assets


1,114,759


1,114,759Total Assets

$
1,145,407

$
1,143,891Notes payable & current portion of LT debt

$
81,410

$
78,590Long-term debt


98,394


98,394All other liabilities


278,700


278,700Total liabilities


458,504


455,684Capital in excess of par value


420,749


438,843Retained earnings


438,782


421,992All other shareholders' equity


(172,628
)

(172,628
)Total Shareholders' Equity


686,903


688,207Total Liabilities and shareholders' equity

$
1,145,407

$
1,143,891


The
prior year statements of operations have been adjusted as follows:

September 30, 2009

September 30, 2008Reported

As adjusted

Reported

As adjustedIncome from operations

$
25,147

$
25,147

$
12,044

$
12,044Other income (expense)Interest expense


(9,562
)

(13,091
)

(12,345
)

(16,909
)Interest income


1,539


1,539


1,970


1,970Gain from debt extinguishment, net


7,360


4,488





Other, net


1,522


1,522


2,713


2,713Total other income (expense)


859


(5,542
)

(7,662
)

(12,226
)Income (loss) before taxes and discontinued operations


26,006


19,605


4,382


(182
)Provision for income taxes


4,005


1,687


4,294


2,651Income (loss) from continuing operations


22,001


17,918


88


(2,833
)Income (loss) from discontinued operations


790


790


(40,591
)

(40,591
)Net income (loss)

$
22,791

$
18,708

$
(40,503
)
$
(43,424
)Basic earnings (loss) per common share:Income (loss) from continuing operations

$
0.37

$
0.31

$
0.00

$
(0.09
)Income (loss) from discontinued operations


0.01


0.01


(1.24
)

(1.24
)Net income (loss)


0.39


0.32


(1.24
)

(1.33
)Weighted average shares outstanding


58,699


58,699


32,667


32,667Diluted earnings (loss) per common share:Income (loss) from continuing operations

$
0.37

$
0.30

$
0.00

$
(0.09
)Income (loss) from discontinued operations


0.01


0.01


(1.24
)

(1.24
)Net income (loss)


0.39


0.32


(1.24
)

(1.32
)Weighted average shares outstanding


59,002


59,002


32,836


32,836


64

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 3ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS (Continued)

On
December 21, 2009, Griffon issued $100,000 aggregate principal amount of the 2017 Notes. Griffon used 8.75% as the nonconvertible debt-borrowing rate to discount
the 2017 Notes and
will amortize the debt discount through January 2017. On the date of issuance, the debt component of the 2017 Notes was $75,437 and the debt discount was $24,563. At September 30, 2010, the
2017 Notes had an outstanding balance of $100,000, an unamortized discount balance of $22,525, a net carrying value of $77,475 and a capital in excess of par component balance, net of tax, of $15,720.

For
the 2017 Notes, the effective interest rate and interest expense was as follows:

Year Ended
September 30,
2010Effective interest rate


9.1
%Interest expense related to the coupon

$
3,100Amortization of the discount


2,037Amortization of deferred issuance costs


323Total interest expense on the 2017 Notes

$
5,460


NOTE 4INVENTORIES

The following table details the components of inventory:

At September 30,
2010

At September 30,
2009Raw materials and supplies

$
64,933

$
38,943Work in process


69,107


66,741Finished goods


134,761


33,486Total

$
268,801

$
139,170


NOTE 5PROPERTY, PLANT AND EQUIPMENT

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

At September 30,
2010

At September 30,
2009Land, building and building improvements

$
126,785

$
110,617Machinery and equipment


498,017


423,742Leasehold improvements


33,455


23,390658,257


557,749Accumulated depreciation and amortization


(343,331
)

(321,730
)Total

$
314,926

$
236,019


65

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 6GOODWILL AND OTHER INTANGIBLES

The following table provides changes in carrying value of goodwill by segment through the year ended September 30, 2010:

At September 30,
2008

Other
adjustments
including
currency
translations

At September 30,
2009

Goodwill from
2010
acquisitions

Other
adjustments
including
currency
translations

At September 30,
2010Telephonics

$
18,545

$


$
18,545

$


$


$
18,545Home & Building Products











261,064





261,064Clopay Plastic Products


75,237


3,875


79,112





(1,500
)

77,612Total

$
93,782

$
3,875

$
97,657

$
261,064

$
(1,500
)
$
357,221


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

At September 30,
2010



At September 30,
2009Gross Carrying
Amount

Accumulated
Amortization

Average
Life
(Years)

Gross Carrying
Amount

Accumulated
AmortizationCustomer relationships

$
155,798

$
6,477


25

$
30,650

$
5,628Unpatented technology


8,154


1,144


12


2,990


349Total amortizable intangible assets


163,952


7,621


24


33,640


5,977Trademark


76,680








590


Unpatented technology











5,958


Total intangible assets

$
240,632

$
7,621




$
40,188

$
5,977


An
unpatented intangible assets with a gross carrying value of $5,958 at October 1, 2009 was reclassified from indefinite lived to amortizable, as information became available
that allowed a useful life to be determined; the intangible asset is being amortized over 10 years, its estimated useful life, with effect from October 1, 2009.

Amortization
expense for intangible assets subject to amortization was $1,987, $1,427 and $1,574 for the years ended September 30, 2010, 2009 and 2008, respectively. Amortization
expense for each of the next five years, based on current intangible balances and classifications, is estimated as follows: 2011$6,454; 2012$6,419; 2013$6,412;
2014$6,405 and 2015$6,405.

NOTE 7DISCONTINUED OPERATIONS

As a result of the downturn in the residential housing market and the impact on the Installation Services segment, Griffon's management originally initiated a plan during 2008 to exit
certain markets
within the Installation Services segment through the sale or disposition of business units. As part of the decision to exit certain markets, Griffon closed three units of the Installation Services
segment in 2008.

66

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 7DISCONTINUED OPERATIONS (Continued)

Subsequently,
Griffon's Board of Directors approved a plan to exit all other operating activities of the Installation Services segment in 2008, with the exception of two units which were
merged into CBP. As part of this plan, Griffon closed one additional unit during the third quarter of 2008, sold nine units to one buyer in the third quarter of 2008 and sold its two remaining units
in Phoenix and Las Vegas in the fourth quarter of 2008. The plan met the criteria for discontinued operations classification in accordance with GAAP. Operating results of substantially all of the
Installation Services segment have been reported as discontinued operations in the consolidated statements of operations for all periods presented and the Installation Services segment is excluded
from segment reporting.

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

At September 30,
2010

At September 30,
2009Current

Long-term

Current

Long-termAssets of discontinued operations:Prepaid and other current assets

$
1,079

$


$
1,576

$
Other long-term assets





5,803





5,877Total assets of discontinued operations

$
1,079

$
5,803

$
1,576

$
5,877Liabilities of discontinued operations:Accounts payable

$
8

$


$
13

$
Accrued liabilities


4,281





4,919


Other long-term liabilities





8,446





8,784Total liabilities of discontinued operations

$
4,289

$
8,446

$
4,932

$
8,784


Installation
Services' revenue was $109,400 for 2008. There was no reported revenue in 2010 and 2009. Disposal costs related to the Installation Services segment of $43,100 were included
in discontinued operations in 2008.

NOTE 8ACCRUED LIABILITIES

The following table details the components of accrued liabilities:

At September 30,
2010

At September 30,
2009Compensation

$
54,136

$
31,088Income and other taxes


16,347


5,738Insurance


10,717


5,024Warranties and rebates


8,184


7,040Interest


6,099


872Deferred income taxes


4,719


Professional fees


4,139


1,463Rent, utilities and freight


3,210


430Marketing and advertising


1,551


1,589Other


15,598


7,876Total

$
124,700

$
61,120


67

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 9RESTRUCTURING AND OTHER RELATED CHARGES

As part of its cost structure review, in June 2009, Griffon announced plans to consolidate facilities in CBP. These actions are scheduled to be completed in early calendar 2011,
consistent with the plan. CBP estimates it will incur pre-tax exit and restructuring costs approximating $11,000, substantially all of which will be cash charges; charges include $2,000
for one-time termination benefits and other personnel costs, $1,000 for excess facilities and related costs, and $8,000 for other exit costs, primarily in connection with production
realignment. CBP expects approximately $11,000 in capital expenditures in order to effectuate the restructuring plan. CBP spent $4,180 and $7,300 in 2010 for the restructuring plan and related capital
expenditures, respectively, and since inception through September 30, 2010, has spent $5,420 and $9,300 of restructuring and related capital expenditures to-date for the plan,
respectively.

In
the latter part of 2007, as a result of the downturn in the residential housing market and the impact on CBP, a plan, which was substantially completed in 2008, was initiated to
restructure operations. This plan included charges for workforce reductions, closure or consolidation of excess facilities and other costs for the closure and relocation of its Tempe, AZ manufacturing
facility to Troy, OH.

A
summary of the restructuring and other related charges included in the line item "Restructuring and other related charges" in the Consolidated Statements of Operations recognized for
2008, 2009 and 2010 were as follows:

Workforce
Reduction

Facilities &
Exit Costs

Other related
Costs

TotalAmounts incurred in:Year ended September 30, 2008

$
647

$
(11
)
$
1,974

$
2,610Year ended September 30, 2009

$
207

$
672

$
361

$
1,240Year ended September 30, 2010

$
602

$
2,549

$
1,029

$
4,180


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

Workforce
Reduction

Facilities &
Exit Costs

Other related
Costs

TotalAccrued liability at September 30, 2008

$


$
231

$


$
231Charges


207


672


361


1,240Payments





(903
)

(361
)

(1,264
)Accrued liability at September 30, 2009


207








207Charges


602


2,549


1,029


4,180Payments


(213
)

(2,549
)

(1,029
)

(3,791
)Accrued liability at September 30, 2010

$
596

$


$


$
596


NOTE 10WARRANTY LIABILITY

Telephonics offers warranties against product defects for periods ranging from six months to three years, with certain products having a limited lifetime warranty, depending on the
specific product and terms of the customer purchase agreement. Typical warranties require Telephonics to repair or replace the defective products during the warranty period at no cost to the customer.
At the time revenue is recognized, Home & Building Products records a liability for warranty costs, estimated based on

68

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 10WARRANTY LIABILITY (Continued)

historical
experience and periodically assesses its warranty obligations and adjusts the liability as necessary. ATT offers an express limited warranty for a period of ninety days on all products
unless otherwise stated on the product or packaging from the date of original purchase.

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

Years Ended September 30,2010

2009Balance, beginning of fiscal year

$
5,707

$
5,328Warranties issued and charges in estimated pre-existing warranties


4,194


5,968Actual warranty costs incurred


(4,005
)

(5,589
)Balance, end of fiscal period

$
5,896

$
5,707


NOTE 11NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT

The present value of the net minimum payments on capitalized leases as of September 30, 2010 is as follows:

At September 30,
2010Total minimum lease payments

$
16,459Less amount representing interest


(3,790
)Present value of net minimum lease payments


12,669Current Portion


(1,038
)Capitalized lease obligation, less current portion

$
11,631


Minimum
payments under current capital leases for the next five years are as follows: $1,663 in 2011, $1,553 in 2012, $1,514 in 2013, $1,493 in 2014 and $1,471 in 2015.

Included
in the consolidated balance sheet at September 30, 2010 under property, plant and equipment are cost and accumulated depreciation subject to capitalized leases of $10,046
and $647, respectively, and included in other assets are restricted cash and deferred interest charges of $4,629 and $283, respectively. At September 30, 2009, the amounts subject to
capitalized leases were $10,450 and $1,268, respectively, and included in other assets were restricted cash and deferred interest charges of $4,629 and $308, respectively. The capitalized leases carry
interest rates from 5.00% to 10.10% and mature from 2011 through 2022.

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

69

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 11NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Continued)

Debt
at September 30 2010 and 2009 consisted of the following:

At September 30,2010

2009Term loan (A)

$
375,000

$
Debt discount on term loan


(7,500
)

4% convertible subordinated debt due 2017 (D)


100,000


Debt discount on 4% convertible subordinated debt


(22,525
)

Note payable to banksrevolving credit (C)


30,000


38,000Asset based lending (B)


25,000


35,925Debt discount on asset based lending


(625
)

Capital leasereal estate


12,182


12,978Real estate mortgages


7,287


7,746ESOP loan (F)


5,000


5,6254% convertible subordinated debt due 2023 (E)


532


79,380Debt discount on 4% convertible subordinated debt





(2,820
)Capital leaseequipment


485


150Total debt


524,836


176,984less: Current portion


(20,901
)

(78,590
)Long-term debt

$
503,935

$
98,394


Minimum
payments under debt agreements for the next five years are as follows: $20,901 in 2011, $27,762 in 2012, $50,581 in 2013, $20,097 in 2014 and $45,147 in 2015.

(A)  On
September 30, 2010, Griffon purchased all of the outstanding stock of ATT Holdings, the parent of ATT, on a cash and debt-free basis, for $542,000
in cash, subject to certain adjustments. In connection with the ATT acquisition, Clopay Ames entered into the $375,000 secured Term Loan and the $125,000 New ABL. The acquisition, including all
related transaction costs, was funded by proceeds of the Term Loan, $25,000 drawn under the New ABL, and $168,000 of Griffon cash. ATT's previous outstanding debt was defeased in connection with the
acquisition.

The
Borrower has the option to select interest rates in respect of the loans under the Term Loan agreement based upon either the Base Rate or the Adjusted Eurodollar Rate (each as
defined in the Term Loan agreement). Interest on outstanding loans accrues at a rate of 6.00% per annum above the Adjusted Eurodollar Rate, subject to a Eurodollar floor of 1.75%, or 5.00% per annum
above the Base Rate.

Borrowings
under the Term Loan agreement are guaranteed by Clopay Ames True Temper LLC ("Clopay LLC"), the parent of Clopay Ames, and certain material domestic subsidiaries
of the Borrower (collectively, the "Term Loan Guarantors"). All obligations under the Term Loan agreement are secured by a first-priority security interest in substantially all of the Borrower's
assets and substantially all of the assets of the Term Loan Guarantors other than inventory, accounts receivable and cash of the Borrower and the Term Loan Guarantors, which collateralizes borrowings
under an ABL Credit Agreement (as defined below) on a first-priority basis and borrowings under the Term Loan agreement on a second-priority basis.

70

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 11NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Continued)

The Term Loan agreement contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset
dispositions, certain
restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions, limitations on
subsidiary distributions, modifications of constituent documents and debt agreements, capital expenditures, equity issuances and sale/leasebacks.

Under
the Term Loan agreement, the Borrower is required to maintain a certain minimum interest coverage ratio, defined as the ratio of EBIDTA to interest expense, which increases over
time. The Borrower is also required to keep its leverage ratio below a certain level, defined as the ratio of total debt to EBIDTA, which level decreases over time.

Fees
and expenses for the term loan of $9,800 were capitalized in Other assets and an original issuer discount ("OID") of $7,500 was recorded as a reduction of Long-term
debt, both will amortize into interest expense over the 6 year life of the loan.

At
September 30, 2010, Griffon was in compliance with the terms and covenants of the Term Loan agreement and expects to remain in compliance for the reasonably foreseeable future.
Further, the covenants within the Term Loan agreement do not materially affect Griffon's ability to undertake additional debt or equity financing for Griffon, the parent company, as the Term Loan
agreement is at the subsidiary level and not guaranteed by Griffon. The debt balance under the Term Loan agreement approximates fair value, as the interest rate is indexed to current market rates.

(B)  In
addition to the Term Loan agreement, on September 30, 2010, the Borrower entered into the New ABL with JPMorgan Chase Bank, N.A. as administrative agent. The
New ABL replaces the credit agreement, dated as of June 24, 2008, by CBP and Plastics. A $1,111 charge to write-off previously capitalized financing costs related to the replaced
credit agreement was recorded in September, 2010.

The
New ABL provides for a revolving credit facility in an aggregate principal amount equal to $125,000 (subject to customary borrowing base limitations) which includes a swingline
facility with a sublimit of $12,500 and a letter of credit facility with a sublimit of $25,000. Borrowings under the New ABL mature on September 30, 2015. Loans under the New ABL may be repaid
and reborrowed from time to time.

The
Borrower has the option to select interest rates in respect of the loans under the New ABL based upon either the Alternative Base Rate or the Adjusted LIBO Rate (each as defined in
the New ABL). Depending upon availability under the New ABL, interest on borrowings accrues at rates ranging from 1.25% to 1.75% per annum above the Alternative Base Rate or 2.25% to 2.75% per annum
above the Adjusted LIBO Rate.

Borrowings
under the New ABL are guaranteed by Clopay LLC and certain material domestic subsidiaries of the Borrower and are secured by a first-priority security interest on
inventory, accounts
receivable and cash of the Borrower, and a second-priority security interest on substantially all of the other assets of such entities.

The
New ABL contains customary affirmative and negative covenants, including without limitation, restrictions on the following: indebtedness, liens, investments, asset dispositions,
certain restricted payments, payment in respect of certain indebtedness, fundamental changes and certain acquisitions, changes in the nature of the business conducted, affiliate transactions,
limitations on subsidiary

71

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 11NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Continued)

distributions,
modifications of constituent documents and debt agreements, equity issuances and sale/leasebacks.

The
New ABL contains customary events of default, including without limitation, failure to make certain payments when due, materially incorrect representations and warranties, breach of
covenants, events of bankruptcy, default on other indebtedness, changes in control with respect to Griffon and certain of its subsidiaries, and the failure of any of the loan documents to remain in
full force and effect.

Fees
and expenses for the New ABL of $3,400 were capitalized in Other assets and an original issuer discount ("OID") of $625 was recorded as a reduction of Long-term debt,
both will amortize into interest expense over the 5 year life of the facility.

In
June 2008, CBP and Plastics entered into a credit agreement for their domestic operations with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto,
pursuant to which the lenders agreed to provide a five-year, senior secured revolving credit facility of $100,000 (the "CCA"). At September 30, 2010 the outstanding balance was paid
in connection with the acquisition of ATT described above. At September 30, 2009, $35,925 was outstanding under the CCA.

(C)  In
March 2008, Telephonics entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto, pursuant to which the
lenders agreed to provide a five-year, revolving credit facility of $100,000 (the "TCA"). Borrowings under the TCA bear interest (1.8% at September 30, 2010) at rates based upon
LIBOR or the prime rate and are collateralized by the stock and assets of Telephonics. At September 30, 2010 and September 30, 2009, $30,000 and $38,000, respectively, were outstanding
under the TCA and approximately $64,562 was available for borrowing at September 30, 2010. Griffon has been in compliance with all financial covenants under the TCA since its inception. The
balance of the debt approximates its fair value.

The
TCA and the New ABL include various sublimits for standby letters of credit. At September 30, 2010, there was approximately $18,901 of aggregate standby letters of credit
outstanding under these credit facilities and $31,099 are available to be drawn. Additionally, these agreements limit dividends and advances that these subsidiaries may pay to the parent.

(D)  On
December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the "2017 Notes"). The initial conversion rate of the 2017
Notes was 67.0799 shares of Griffon's common stock per $1,000 principal amount of notes, corresponding to an initial conversion price of approximately $14.91 per share. This represents a 23%
conversion premium over the $12.12 per share closing price on December 15, 2009. The outstanding balance of these notes on September 30, 2010 was $100,000 and the fair value was
approximately $106,000, based on quoted market price (level 1 inputs).

(E)  At
September 30, 2010, Griffon had $532 remaining of 4% convertible subordinated notes due 2023 (the "2023 Notes"). At September 30, 2009, $79,400 was
outstanding. Holders of the 2023 Notes may require Griffon to repurchase all or a portion of their 2023 Notes on July 18, 2010, 2013 and 2018, if Griffon's common stock price is below the
conversion price of the 2023 Notes, as well as upon a change in control. In July 2010, substantially all of the 2023 Notes were put to Griffon at par and settled.

In
January 2010, Griffon purchased $10,100 face value of the 2023 Notes for $10,200. Griffon recorded a pre-tax gain from debt extinguishment of $32, offset by $20 for a
proportionate reduction in

72

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 11NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT (Continued)

the
related deferred financing costs for a net pre-tax gain of $12. Capital in excess of par was reduced by $300 related to the equity portion of the extinguished 2023 Notes and the debt
discount was reduced by $200.

In
December 2009, Griffon purchased $19,200 face value of the 2023 Notes for $19,400. Including a proportionate reduction in the related deferred financing costs, Griffon recorded an
immaterial net pre-tax loss on the extinguishment in the first quarter of 2010. Capital in excess of par value was reduced by $700 related to the equity portion of the extinguished 2023
Notes and the debt discount was reduced by $500.

During
2009, Griffon purchased $50,620 face value of the Notes from certain note holders for $42,741. Griffon recorded a pre-tax gain from debt extinguishment of
approximately $7,879, offset by a $519 proportionate reduction in the related deferred financing costs for a net gain of $7,360.

Griffon's
ESOP entered into a new loan agreement in September 2010 to borrow an additional $20,000 over a one-year period. After the first year, Griffon has the option to
convert all or a portion of the outstanding loan to a five-year term. If converted, principal is payable in quarterly installments at the rate of $250 per quarter beginning September 2011,
with the remainder due at the final maturity date. The loan will bear interest at a rate equal to either a) LIBOR plus 2.5% or b) the Bank's prime rate. The proceeds of the loan are to
be used to purchase common stock of Griffon in the open market. The loan is secured by a pledge of the shares purchased with the loan
proceeds and payments are guaranteed by Griffon. At September 30, 2010, there were no borrowings under this line.

(F)  Griffon's
ESOP has a loan agreement, guaranteed by Griffon, which requires payments of principal and interest through the expiration date of September 2012 at which time
the $3,900 balance of the loan, and any outstanding interest, will be payable. The primary purpose of this loan and its predecessor loans, which were refinanced by this loan in October 2008, was to
purchase 547,605 shares of Griffon's common stock in October 2008. The loan bears interest (1.5% at September 30, 2010) at rates based upon the prime rate or LIBOR. The balance of the loan was
$5,000 at September 30, 2010, and the outstanding balance approximates fair value, as the interest rates are indexed to current market rates.

Real
estate mortgages bear interest at rates from 6.3% to 6.6% with maturities extending through 2016 and are collateralized by real property whose carrying value at September 30,
2010 aggregated approximately $10,500. These mortgages approximate fair value.

Derivative Instruments and Hedging Activities

Fair values of derivative instruments as of September 30, 2010 are as follows:

Liabilities DerivativesDescription of Derivative

Qualifies
for Hedge
Designation

Fair Value

Balance
Sheet
Location

Pretax Loss
Recognized
in OCIInterest rate swaps

No

$
741


(a
)
$
0Interest rate swaps

No


3,104


(a
)

0


(a)The
interest rate swap is included in Accrued expenses and other current liabilities.


As
part of the acquisition of ATT, these swaps were terminated in October 2010.

73

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 12EMPLOYEE BENEFIT PLANS

Griffon offers defined contribution plans to most of its U.S. employees. In addition to employee contributions to the plans, Griffon makes contributions based upon various percentages of
compensation and/or employee contributions, which were $5,200 in 2010, $5,800 in 2009 and $9,800 in 2008.

The
Company also provides healthcare and life insurance benefits for certain groups of retirees through several plans. For certain employees, the benefits are at fixed amounts per
retiree and are partially contributory by the retiree. The post-retirement benefit obligation was $2,005 as of September 30, 2010 arising primarily from the acquisition of ATT. It
is the Company's practice to fund these benefits as incurred.

Griffon
also has qualified and a non-qualified defined benefit plans covering certain employees with benefits based on years of service and employee compensation. Griffon
adopted the FASB amendments on September 30, 2007, which required Griffon to recognize the funded status of its defined benefit plans in the Consolidated Balance Sheets with a corresponding
adjustment to Accumulated other comprehensive income, net of tax. Over time, these amounts will be recognized as part of net periodic pension costs in the Consolidated Statements of Operations.

Griffon
is responsible for overseeing the management of the investments of the qualified defined benefit plan and uses the service of an investment manager to manage these assets based
on agreed
upon risk profiles set by Griffon management. The primary objective of the qualified defined benefit plan is to secure participant retirement benefits. As such, the key objective in this plan's
financial management is to promote stability and, to the extent appropriate, growth in the funded status. Financial objectives are established in conjunction with a review of current and projected
plan financial requirements. The fair value of a majority of the plan assets were determined by the plans' trustee using quoted market prices identical instruments (level 1 inputs) as of
September 30, 2010. The fair value of various other investments were determined by the plan's trustee using direct observable market corroborated inputs, including quoted market prices for
similar assets (level 2 inputs).

One
of the qualified defined benefit plans has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continue to accrue a
service benefit through December 2010, at which time all plan participants will stop accruing service benefits. A 10% change in the discount rate, average wage increase or return on assets would not
have a material effect on the financial statements of Griffon.

The
benefits for the ATT defined benefit and supplemental executive retirement plans have been frozen since 2008.

Griffon
uses judgment to estimate the assumptions used in determining the future liability of the plan, as well as the investment returns on the assets invested for the plan. The
expected return on assets assumption used for pension expense was developed through analysis of historical market returns, current market conditions and the past experience of plan asset investments.
The discount rate assumption is determined by developing a yield curve based on high quality bonds with maturities matching the plans' expected benefit payment stream. The plans' expected cash flows
are then discounted by the resulting year-by-year spot rates.

74

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 12EMPLOYEE BENEFIT PLANS (Continued)

Net
periodic costs were as follows:

Defined Benefits for the Years
Ended September 30,

Supplemental Benefits for the Years
Ended September 30,2010

2009

2008

2010

2009

2008Net periodic benefit costsService cost

$
529

$
425

$
520

$
29

$
22

$
137Interest cost


1,645


1,638


1,571


1,984


2,586


2,432Expected return on plan assets


(1,371
)

(1,723
)

(2,081
)







Amortization of:Prior service costs


9


9


9


328


328


328Actuarial loss


1,064


325


135


986


596


821Transition obligation





(1
)

(1
)







Total net periodic benefit costs

$
1,876

$
673

$
153

$
3,327

$
3,532

$
3,718


The
tax benefits in 2010, 2009 and 2008 for the amortization of pension costs in other comprehensive income were $835, $440 and $452, respectively.

The
estimated net actuarial loss and prior service cost that will be amortized from Accumulated other comprehensive income into net periodic pension cost during 2011 are $8,476 and $336,
respectively.

The
weighted-average assumptions used in determining the net periodic benefit costs were as follows:

Defined Benefits for the Years
Ended September 30,

Supplemental Benefits for the Years
Ended September 30,2010

2009

2008

2010

2009

2008Discount rate


5.60
%

7.50
%

6.30
%

5.00
%

7.50
%

6.30
%Average wage increase


3.50
%

3.50
%

3.50
%

5.00
%

5.00
%

5.00
%Expected return on assets


7.00
%

8.50
%

8.50
%










75

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 12EMPLOYEE BENEFIT PLANS (Continued)

Plan
assets and benefit obligation of the defined benefit plans were as follows:

Defined Benefits at
September 30,

Supplemental Benefits at
September 30,2010

2009

2010

2009Change in benefit obligationBenefit obligation at beginning of fiscal year

$
29,803

$
22,263

$
41,632

$
36,429Assumed in business combination


166,689





876


Benefits earned during the year


529


425


29


22Interest cost


1,644


1,638


1,984


2,586Benefits paid


(1,372
)

(1,251
)

(3,898
)

(3,899
)Actuarial loss


2,915


6,728


2,597


6,494Benefit obligation at end of fiscal year


200,208


29,803


43,220


41,632Change in Plan AssetsFair value of plan assets at beginning of fiscal year


19,877


20,442





Assumed in business combination


109,490








Actual return on plan assets


2,176


(365
)




Company contributions


3,562


1,051


3,898


3,899Benefits paid


(1,372
)

(1,251
)

(3,898
)

(3,899
)Fair value of plan assets at end of fiscal year


133,733


19,877





Projected benefit obligation in excess of plan assets

$
(66,475
)
$
(9,926
)
$
(43,220
)
$
(41,632
)Amounts recognized in the statement of financial position consist of:Accrued liabilities

$


$
(876
)
$
(3,932
)
$
(3,898
)Other liabilities (long-term)


(66,475
)

(9,050
)

(39,288
)

(37,734
)Total Liabilites


(66,475
)

(9,926
)

(43,220
)

(41,632
)Net actuarial losses


15,236


14,189


20,445


18,833Prior service cost


24


33


611


939Deferred taxes


(5,341
)

(4,978
)

(7,370
)

(6,920
)Total Accumulated other comprehensive loss, net of tax


9,919


9,244


13,686


12,852Net amount recognized at September 30,

$
(56,556
)
$
(682
)
$
(29,534
)
$
(28,780
)Accumulated benefit obligations

$
199,604

$
29,674

$
42,827

$
41,317Information for plans with accumulated benefit obligations in excess of plan assets:ABO

$
199,604

$
29,674

$
42,827

$
41,317PBO


200,208


29,803


43,220


41,632Fair value of plan assets


133,733


19,877








76

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 12EMPLOYEE BENEFIT PLANS (Continued)

The
weighted-average assumptions used in determining the benefit obligations were as follows:

Defined Benefits at September 30,

Supplemental Benefits at September 30,2010

2009

2010

2009Weighted average discount rate


4.89
%

5.60
%

4.26
%

5.00
%Weighted average wage increase


0.73
%

3.50
%

4.90
%

5.00
%


The
actual and weighted-average assets allocation for qualified benefit plans were as follows:

At September 30,2010

2009

TargetEquity securities


64.0
%

0.0
%

63.0
%Fixed income


35.0
%

91.7
%

37.0
%Other


1.0
%

8.3
%

0.0
%Total


100.0
%

100.0
%

100.0
%


Estimated
future benefit payments to retirees, which reflect expected future service, are as follows:

For the fiscal years ending September 30,

Defined
Benefits

Supplemental
Benefits2011

$
10,138

$
3,9322012


10,386


3,9322013


10,662


3,9552014


10,888


3,9552015


11,140


3,8732016 through 2020


59,823


16,512


Griffon
expects to contribute $7,332 to the Defined Benefit plans in 2011, in addition to the $3,932 in payments related to the Supplemental Benefits that will be funded from the general
assets of Griffon.

The
following is a description of the valuation methodologies used for plan assets measured at fair value:

Short-term investment fundsThe fair value is determined using the Net Asset Value ("NAV") provided by the administrator of the fund. The
NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in a market that is not
active and is primarily classified as Level 2.

Government and agency securitiesWhen quoted market prices are available in an active market, the investments are classified as Level 1. When
quoted market prices are not available in an active market, the investments are classified as Level 2.

Equity SecuritiesThe fair values reflect the closing price reported on a major market where the individual securities are traded. These investments
are classified within Level 1 of the valuation hierarchy.

77

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 12EMPLOYEE BENEFIT PLANS (Continued)

Debt securitiesThe fair values are based on a compilation of primarily observable market information or a broker quote in a non-active
market. These investments are primarily classified within Level 2 of the valuation hierarchy.

Commingled fundsThe fair values are determined using NAV provided by the administrator of the fund. The NAV is based on the value of the underlying
assets owned by the trust/entity, minus its liabilities, and then divided by the number of shares outstanding. These investments are generally classified within Level 2 of the valuation
hierarchy.

The
following table presents the fair values of Griffon's pension and post-retirement plan assets by asset category as of September 30, 2010:

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

TotalShort-term investment funds

$


$
190

$


$
190Government agency securities


2,030


2,780





4,810Debt instruments





15,255





15,255Equity securities


60,807


4,023





64,830Commingled funds





48,648





48,648Total

$
62,837

$
70,896

$


$
133,733


Griffon
has an ESOP that covers substantially all domestic employees. Shares of the ESOP which have been allocated to employee accounts are charged to expense based on the fair value of
the shares transferred and are treated as outstanding in earnings per share. Compensation expense under the ESOP was $1,011 in 2010, $796 in 2009 and $338 in 2008. The cost of the shares held by the
ESOP and not yet allocated to employees is reported as a reduction of Shareholders' Equity. In connection with the rights offering in September 2008, the ESOP purchased 74,100 shares underlying rights
associated with the unallocated shares of the ESOP. The ESOP shares were as follows:

At September 30,2010

2009Allocated shares


2,213,122


2,126,058Unallocated shares


626,725


780,6972,839,847


2,906,755


78

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 13INCOME TAXES

Income taxes have been based on the following components of Income before taxes and discontinued operations:

For the Years Ended September 30,2010

2009

2008Domestic

$
7,360

$
10,260

$
(18,583
)Non-U.S.


6,452


9,345


18,401$
13,812

$
19,605

$
(182
)


Provision
(benefit) for income taxes on income from continuing operations was comprised of the following:

For the Years Ended September 30,2010

2009

2008Current

$
7,974

$
4,831

$
4,082Deferred


(3,666
)

(3,144
)

(1,431
)Total

$
4,308

$
1,687

$
2,651U.S. Federal

$
5,426

$
984

$
5,527State and local


(1,795
)

1,543


1,105Non-U.S.


677


(840
)

(3,981
)Total provision

$
4,308

$
1,687

$
2,651


Griffon's
income tax provision (benefit) included benefits of ($2,740) in 2010, ($1,387) in 2009 and ($11,422) in 2008 reflecting the reversal of previously recorded tax liabilities
primarily due to the resolution of various tax audits and due to the closing of certain statutes for prior years' tax returns.

Included
in Prepaids and other current assets are tax receivable amounts of $690 and $6,074 at September 30, 2010 and 2009, respectively.

79

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 13INCOME TAXES (Continued)

Differences
between the effective income tax rate applied to income from continuing operations and U.S. Federal income statutory rate were as follows:

For the Years Ended September 30,2010

2009

2008U.S. Federal income tax rate


35.0
%

35.0
%

35.0
%State and local taxes, net of Federal benefit


2.6


4.8


191.6Non-U.S. taxes


(11.3
)

(21.0
)

(513.4
)Acquisition costs


9.5





Reduction of tax contingency reserves


(5.5
)

(1.0
)

5,020.3Non-deductible goodwill








(2,483.3
)Non-U.S. dividends





4.3


(1,028.0
)Valuation allowance





(14.9
)

(2,307.1
)Meals and entertainment


1.4


1.0


(141.3
)Non-U.S. purchase price adjustment








(233.0
)Other


(0.5
)

0.4


2.6Effective tax rate from continuing operations


31.2
%

8.6
%

(1,456.6
)%


The
tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows:

At September 30,2010

2009Deferred tax assets:Bad debt reserves

$
1,834

$
1,323Inventory reserves


4,716


5,469Deferred compensation


48,826


23,361Compensation benefits


2,237


281Insurance reserve


3,894


3,263Restructuring reserve


619


578Warranty reserve


3,185


2,665Net operating loss and foreign tax credit


30,914


12,154Other reserves and accruals


5,580


1,197101,805


50,291Valuation allowance


(15,069
)

(4,726
)Total deferred tax assets


86,736


45,565Deferred tax liabilities:Deferred income


(16,619
)

(3,350
)Goodwill and intangibles


(77,099
)

(6,770
)Depreciation and amortization


(29,120
)

(14,841
)Interest


(8,687
)

(11,906
)Unremitted earnings


(10,118
)

Other


(2,825
)

(1,424
)Total deferred tax liabilities


(144,468
)

(38,291
)Net deferred tax assets

$
(57,732
)
$
7,274


80

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 13INCOME TAXES (Continued)

The
increase to the valuation allowance relates to foreign tax credits, capital losses and state net operating losses acquired in connection with the ATT acquisition.

The
components of the net deferred tax asset (liability), by balance sheet account, were as follows:

At September 30,2010

2009Prepaid and other current assets

$
10,897

$
10,024Other assets


1


7,115Current liabilities


(4,719
)

Other liabilities


(65,155
)

(11,475
)Assets of discontinued operations


1,244


1,610Net deferred tax assets

$
(57,732
)
$
7,274


Other
than for ATT, Griffon has not recorded deferred income taxes on the undistributed earnings of its non-U.S. subsidiaries because of management's ability and intent to
indefinitely reinvest such earnings outside the U.S. At September 30, 2010, Griffon's share of the undistributed earnings of the non-U.S. subsidiaries amounted to approximately
$62,408.

Deferred
income taxes on the undistributed earnings of non-U.S. subsidiaries has been recorded in the opening balance sheet for the ATT group of entities as these earnings
were historically not indefinitely reinvested outside of the U.S.

At
September 30, 2010 and 2009, Griffon had net operating loss carryforwards for federal tax purposes of $11,028 resulting from the acquisition of ATT and had loss carryforwards
for non-U.S. tax purposes of $36,438 and $17,141, respectively. The U.S. loss carryforwards expire in 2027 and 2028, the non-U.S. loss carryforwards of $36,438 are
available for carryforward indefinitely.

Griffon
had State and local loss carryforwards at September 30, 2010 and 2009 of $5,400 and $2,900, respectively, which expire in varying amounts through 2030.

Griffon
had foreign tax credit carryforwards of $11,188 and $6,326 at September 30, 2010 and 2009, respectively, which are available for use through 2020.

Griffon
had foreign capital loss carryforwards of $13,702 at September 30, 2010. The capital loss carryforwards do not expire.

Griffon
files U.S. Federal, state and local tax returns, as well as Germany, Canada, Brazil, Ireland and Sweden non-U.S. jurisdiction tax returns. Griffon's U.S.
federal income tax returns are no longer subject to income tax examination for years before 2006, Griffon's German income tax returns are no longer subject to income tax examination for years through
2007 and Griffon's major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2000. Various U.S. state and non-U.S.
statutory tax audits are currently underway. Griffon does not believe that its unrecognized tax benefits will materially change within the next twelve months.

81

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 13INCOME TAXES (Continued)

The
following is a roll forward of the unrecognized tax benefits activity:

Balance at October 1, 2008

$
11,634Additions based on tax positions related to the current year


1,395Reductions based on tax positions related to prior years


(358
)Lapse of statutes


(895
)Settlements


(3,638
)Balance at September 30, 2009


8,138Additions based on tax positions related to the current year


1,975Assumed in business combination


4,391Reductions based on tax positions related to prior years lapse of statutes


(2,740
)Balance at September 30, 2010

$
11,764


If
recognized, the amount of potential tax benefits that would impact Griffon's effective tax rate is $8,489. Griffon recognizes potential accrued interest and penalties related to
unrecognized tax benefits in income tax expense. At September 30, 2010 and 2009, the combined amount of accrued interest and penalties related to tax positions taken or to be taken on Griffon's
tax returns and recorded as part of the reserves for uncertain tax positions was $2,134 and $1,407, respectively.

NOTE 14STOCKHOLDERS' EQUITY AND EQUITY COMPENSATION

In August 2008, Griffon's Board of Directors authorized a 20 million share common stock rights offering to its shareholders in order to raise equity capital for general corporate
purposes and to fund future growth. The rights had an exercise price of $8.50 per share. In conjunction with the rights offering, GS Direct, L.L.C. ("GS Direct"), an affiliate of Goldman Sachs, agreed
to back stop the rights offering by purchasing, on the same terms, any and all shares not subscribed through the exercise of rights. GS Direct also agreed to purchase additional shares of common stock
at the rights offering price if it did not acquire a minimum of 10 million shares of common stock as a result of its back stop commitment. Griffon received a total of $248,600 in gross proceeds
from the rights offering and issued 29.2 million shares as follows: In September 2008, Griffon received $241,300 of gross proceeds, and issued 28.4 million shares, from the first closing
of its rights offering and the closing of the related investments by GS Direct and by Griffon's Chief Executive Officer; in October 2008, an additional $5,300 of rights offering proceeds were
received, and 620,486 shares were issued, in connection with the second closing of the rights offering; and in April 2009, $2,000 of rights offering proceeds were received, and 233,298 shares were
issued, in connection with the rights offering.

Griffon
expenses the fair value of equity compensation grants over the related vesting period. Compensation cost related to stock-based awards with graded vesting are amortized using the
straight-line attribution method. Options for an aggregate of 1,375,000 shares of Common Stock were previously authorized for grant under Griffon's 2001 Stock Option Plan at
September 30, 2010. As of September 30, 2010, options for 101,567 shares remain available for future grants under this plan. The plan provides for the granting of options at an exercise
price of not less than 100% of the fair market value at the date of grant. Options generally expire ten years after date of grant and become exercisable in equal installments over two to four years.

82

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 14STOCKHOLDERS' EQUITY AND EQUITY COMPENSATION (Continued)

During
2006, shareholders approved the Griffon Corporation 2006 Equity Incentive Plan ("Incentive Plan") under which awards of performance shares, performance units, stock options, stock
appreciation rights, restricted shares and deferred shares may be granted. Options under the Incentive Plan
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 shareholders approved an amendment to
the Incentive Plan in 2009. The maximum number of shares of common stock available for award under the Incentive Plan is 7,750,000. The number of shares available under the Incentive Plan is reduced
by a factor of two-to-one for awards other than stock options. If the remaining shares available under the Incentive Plan at September 30, 2010 were awarded through
stock options, 2,418,000 shares would be available for grants or if the remaining shares were awarded as restricted stock, 1,209,000 shares would be available for grants.

A
summary of stock option activity for the years ended September 30, 2010, 2009 and 2008 is as follows:

OptionsShares

Weighted
Average
Exercise
Price

Aggregated
Intrinsic
Value

Weighted
Average
Contractual
Term (Years)Outstanding at October 1, 2007


2,208,773

$
13.49Granted


25,000


14.19Exercised


Forfeited/expired


(832,882
)

11.08Outstanding at September 30, 2008


1,400,891


13.87

$
670


4.5Exercisable at September 30, 2008


1,329,066


13.40


670


4.3Outstanding at October 1, 2008


1,400,891


13.87Granted


350,000


20.00Exercised


(33,000
)

6.12


109Forfeited/expired


(27,552
)

20.55Outstanding at September 30, 2009


1,690,339


15.18


980


4.6Exercisable at September 30, 2009


1,420,381


14.21


980


3.9Outstanding at October 1, 2009


1,690,339


15.18Granted


Exercised


(54,075
)

6.33


337Forfeited/expired


(92,043
)

16.46Outstanding at September 30, 2010


1,544,221


15.42


1,667


3.9Exercisable at September 30, 2010 through:September 30, 2011


333,125September 30, 2012


212,500September 30, 2013


172,726September 30, 2014


133,000September 30, 2015


217,120September 30, 2016


99,500September 30, 2017


20,625September 30, 2018


September 30, 2019


233,334Total Exercisable


1,421,930

$
15.04

$
1,667


3.5


83

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 14STOCKHOLDERS' EQUITY AND EQUITY COMPENSATION (Continued)

Options Outstanding

Options ExercisableRange of
Exercises Prices

Shares

Weighted
Average
Exercise
Price

Aggregated
Intrinsic
Value

Weighted
Average
Contractual
Term (Years)

Shares

Weighted
Average
Exercise
Price

Aggregated
Intrinsic
Value

Weighted
Average
Contractual
Term (Years)$6.33 to $6.33


3,125


6.33

$
18


0.1


3,125


6.33

$
18


0.1$7.75 to $11.14


505,000


8.92


1,649


0.8


505,000


8.92


1,649


0.8$12.39 to $17.23


417,513


14.88





3.6


411,888


14.88





3.6$19.49 to $26.06


618,583


21.13





6.5


501,917


21.39





6.1Totals


1,544,221




$
1,667





1,421,930




$
1,667


Unrecognized compensation expense related to non-vested options was $76 at September 30, 2010 and will be recognized over a
weighted average vesting period of 0.5 years. The fair value of options vested during the years ended September 30, 2010, 2009 and 2008 were $585, $631 and $775, respectively.

A
summary of restricted stock activity for the years ended September 30, 2010, 2009 and 2008 is as follows:

Restricted StockShares

Weighted
Average
Grant
Price

Aggregated
Intrinsic
Value*

Weighted
Average
Contractual
Term (Years)Outstanding at October 1, 2007


257,255

$
23.51

$
97


3.4Granted


300,000


8.98


2,694Fully Vested


(98,255
)

22.38


3,252Forfeited








Outstanding at September 30, 2008


459,000


14.25


11


2.8Granted


1,202,500


8.38


10,077Fully Vested


(53,000
)

24.20


511Forfeited


(6,000
)

9.30


56Outstanding at September 30, 2009


1,602,500


9.53


2,414


3.1Granted


703,845


11.35


7,989Fully Vested


(43,000
)

24.20


590Forfeited


(52,500
)

14.79


776Outstanding at September 30, 2010


2,210,845


9.70

$
6,255


2.5


*Aggregated
intrinsic value at the date the shares were outstanding, granted, vested or forfeited, as applicable.


Unrecognized
compensation expense related to non-vested shares of restricted stock was $14,800 at September 30, 2010 and will be recognized over a
weighted average vesting period of 2.9 years.

In
connection with the September 2008 rights offering, Griffon was obligated under certain anti-dilution provisions within its stock option plans to reduce the exercise price
of the then-outstanding options and recorded stock-based compensation expense of approximately $354. Also in September 2008, in connection with an investment in conjunction with the rights
offering, Griffon's Chief Executive Officer purchased 578,151 shares of Common Stock at $8.50 per share, representing a

84

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 14STOCKHOLDERS' EQUITY AND EQUITY COMPENSATION (Continued)

discount
to the fair value of such shares at closing. Griffon recorded stock-based compensation expense related to this transaction of approximately $104.

Griffon
has an Outside Director Stock Award Plan (the "Outside Director Plan"), which was approved by the shareholders in 1994, under which 330,000 shares may be issued to
non-employee directors. Annually, each eligible director is awarded shares of Griffon's Common Stock having a value of $10, which vests over a three-year period. For shares
issued under the Outside Director Plan, the fair market value of the shares at the date of issuance is recognized as compensation expense over the vesting period. In 2010, 2009 and 2008, 9,792, 12,732
and 12,155 shares, respectively, were issued under the Outside Director Plan.

In
connection with the ATT acquisition, Griffon entered into certain retention arrangements with the ATT senior management team. Under these arrangements, on September 30, 2010,
Griffon issued 239,145 shares of common stock to the ATT senior management team, and for each share of common stock purchased, the ATT senior management team received one share of restricted
stock that vests in full after four years, subject to the attainment of a specified performance measure.

At
September 30, 2010, a total of approximately 6,443,558 shares of Griffon's authorized Common Stock were reserved for issuance in connection with stock compensation plans.

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

Using
historical data as of the grant dates, the fair value of the 2009 option grant was estimated as of the grant dates using the Black-Scholes option pricing model with the following
weighted average assumptions:

2009
Grant

2008
GrantRisk-free interest rate


3.04
%

4.09
%Dividend yield


0.00
%

0.00
%Expected life (years)


7.0


7.0Volatility


38.98
%

40.00
%Option exercise price

$
20.00

$
14.19Fair value of options granted

$
2.06

$
6.89


For
the years ended September 30, 2010, 2009 and 2008, stock based compensation expense totaled $5,778, $4,415 and $3,327, respectively.

NOTE 15ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of Accumulated other comprehensive income were:

At September 30,2010

2009

2008Foreign currency translation adjustment

$
41,187

$
50,266

$
38,431Minimum pension liability


(23,605
)

(22,096
)

(12,962
)Accumulative other comprehensive income

$
17,582

$
28,170

$
25,469


85

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 16COMMITMENTS AND CONTINGENT LIABILITIES

Operating leases

Griffon rents real property and equipment under operating leases expiring at various dates. Most of the real property leases have
escalation clauses related to increases in real property taxes. Rent expense for all operating leases totaled approximately $25,100, $24,700 and $32,400 in 2010, 2009 and 2008, respectively. Griffon
has engaged in sale-leaseback transactions for various manufacturing equipment used at selected U.S. locations. Net proceeds received from these transactions, classified as operating
leases, for the years ended September 30, 2010, 2009 and 2008 were zero, zero, and $4,791, respectively. Aggregate future minimum lease payments for operating leases at September 30,
2010 are $27,000 in 2011, $20,000 in 2012, $15,000 in 2013, $11,000 in 2014, $9,000 in 2015 and $29,000 thereafter.

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. Thereafter, in a process that is still ongoing, ISC has submitted additional revised drafts
of the Feasibility Study in response to comments received from the DEC.

Improper Advertisement Claim involving Union Tools Products.During December 2004, a customer of ATT was named in litigation that
involved UnionTools
products. The complaint asserted causes of action against the defendant for improper advertisement to the end consumer. The allegation suggests that advertisements led the consumer to believe that the
hand tools sold were manufactured within boundaries of the United States. The allegation asserts cause of action against the customer for common law fraud. In the event that an adverse judgment is
rendered against the customer, there is a possibility that the customer would seek legal recourse against ATT for an unspecified amount in

86

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 16COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

contributory
damages. Presently, ATT cannot estimate the amount of loss, if any, if the customer were to seek legal recourse against ATT.

Department of Environmental Conservation of New York State, regarding Frankfort, NY site.During fiscal 2009, an underground fuel tank
with
surrounding soil contamination was discovered at the Frankfort, N.Y. site which is the result of historical facility operations prior to ATT's ownership. ATT is actively working with the New York
Department of Environmental Conservation and the New York State Department of Health to define remediation requirements. Due to changes in administrative proceedings to date, the date by which the
Company believes remediation will be completed has changed to December 2011 from December 2010. The Company believes that future remediation costs will be less than $1,000, and that it has adequately
accrued for this liability.

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 Contract Investigative Service ("DCIS"), and the Department of
Justice which has responsibility for asserting claims on behalf of the U.S. government. In addition to ongoing audits, pursuant to an administrative subpoena Griffon is currently providing information
to the U.S. Department of Defense Office of the Inspector General. No claim has been asserted against Griffon, and Griffon is unaware of any material financial exposure in connection with the
Inspector General's inquiry.

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

Contingent acquisition purchase price liabilities

In connection with certain acquisitions, Griffon has recorded contingent consideration of zero and $2,861 at September 30, 2010
and 2009, respectively, included in other liabilities.

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.

87

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 17EARNINGS PER SHARE

The rights offering discussed in the Stockholders' Equity and Equity Compensation footnote contained a bonus element to existing shareholders that required Griffon to adjust the shares
used in the computation of basic and fully-diluted weighted-average shares outstanding for all periods presented prior to the offering. Basic and diluted EPS from continuing operations for the years
ended September 30, 2010, 2009 and 2008 were determined using the following information:

For the Years Ended September 30,(Shares in thousands)

2010

2009*

2008*Weighted average shares outstandingbasic


58,974


58,699


32,667Incremental shares from 4% convertible notes








Incremental shares from stock based compensation


1,019


303


169Weighted average shares outstandingdiluted


59,993


59,002


32,836Anti-dilutive options excluded from diluted EPS computation


1,036


1,305


980


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

NOTE 18RELATED PARTIES

Simultaneously with the closing of the September 2008 rights offering and related investment by GS Direct, two employees of GS Direct joined Griffon's Board of Directors. In connection
with the rights offering, GS Direct was paid a commitment fee, and received expense reimbursements from Griffon, of $2,432 during 2008. An affiliate of GS Direct acted as placement agent for the sale
of the 2017 notes in December 2009; provided financial advice to Griffon in connection with the ATT acquisition; acted as co-lead arranger, co-bookrunner and
co-syndication agent in connection with the Term Loan; and acted as dealer manager for the tender of two prior issuances of ATT bonds. Fees and expenses paid in 2010 were approximately
$14,149.

88

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 19QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly results of operations for the years ended September 30, 2010 and 2009 were as follows:

Continuing Operations

Net Income (loss)Quarter ended

Revenue

Gross Profit

Income (loss)

Per Share
Basic

Per Share
Diluted

Income (loss)

Per Share
Basic

Per Share
Diluted2010December 31, 2009

$
305,157

$
70,281

$
4,180

$
0.07

$
0.07

$
4,291

$
0.07

$
0.07March 31, 2010


313,977


69,070


2,034


0.03


0.03


2,033


0.03


0.03June 30, 2010


327,026


74,355


4,989


0.08


0.08


4,968


0.08


0.08September 30, 2010


347,836


74,598


(1,699
)

(0.03
)

(0.03
)

(1,700
)

(0.03
)

(0.03
)$
1,293,996

$
288,304

$
9,504

$
0.16

$
0.16

$
9,592

$
0.16

$
0.162009December 31, 2008

$
302,334

$
58,957

$
2,066

$
0.04

$
0.04

$
2,069

$
0.04

$
0.04March 31, 2009


276,087


53,975


(2,076
)

(0.04
)

(0.04
)

(1,427
)

(0.02
)

(0.02
)June 30, 2009


287,385


66,286


6,089


0.10


0.10


6,100


0.10


0.10September 30, 2009


328,244


77,905


11,839


0.20


0.20


11,966


0.20


0.20$
1,194,050

$
257,123

$
17,918

$
0.31

$
0.30

$
18,708

$
0.32

$
0.32


Notes to Quarterly Financial Information (unaudited): Earnings (loss) per share are computed independently for each quarter and year presented; as such the sum of the quarters
may not be equal to the full year amounts.Income (loss) from continuing operations and Net income (loss), and the related per share earnings, for the three months
and year ended September 30, 2008, included a $12,913 CBP goodwill write-off.Income (loss) from continuing operations and Net income (loss), and the related per share earnings, included restructuring
and other related charges related to CBP of $38, $1,202, $1,011, 1,220, $1,489 and $460 for the three-month periods ended June 30, 2009 and September 30, 2009 and each quarter in 2010,
respectively and $4,180 and $1,240 for the years ended September 30, 2010 and 2009, respectively.


NOTE 20BUSINESS SEGMENTS

Griffon's reportable business segments are as follows:



Griffon
evaluates performance and allocates resources based on operating results before interest income or expense, income taxes and certain nonrecurring items of income or expense.

89

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 20BUSINESS SEGMENTS (Continued)

Information
on Griffon's business segments is as follows:

For the Years Ended September 30,REVENUE

2010

2009

2008Telephonics

$
434,516

$
387,881

$
366,288Home & Building Products


389,366


393,414


435,321Clopay Plastic Products


470,114


412,755


467,696Total consolidated net sales

$
1,293,996

$
1,194,050

$
1,269,305




INCOME (LOSS) BEFORE TAXES AND DISCONTINUED OPERATIONSSegment operating profit (loss):Telephonics

$
38,586

$
34,883

$
32,862Home & Building Products


4,986


(11,326
)

(17,444
)Clopay Plastic Products


20,469


24,072


20,620Total segment operating profit


64,041


47,629


36,038Unallocated amounts


(37,199
)

(20,960
)

(21,281
)Gain (loss) from debt extinguishment, net


(1,117
)

4,488


Net interest expense


(11,913
)

(11,552
)

(14,939
)Income (loss) before taxes and discontinued operations

$
13,812

$
19,605

$
(182
)


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

DEPRECIATION and AMORTIZATIONSegment:Telephonics

$
7,534

$
6,657

$
6,753Home & Building Products


10,185


13,223


12,071Clopay Plastic Products


22,384


21,930


22,638Total segment


40,103


41,810


41,462Corporate


339


536


1,461Total consolidated depreciation and amortization

$
40,442

$
42,346

$
42,923




CAPITAL EXPENDITURESSegment:Telephonics

$
12,410

$
7,564

$
5,862Home & Building Products


10,527


7,560


8,227Clopay Plastic Products


16,819


16,801


38,718Total segment


39,756


31,925


52,807Corporate


721


772


309Total consolidated capital expenditures

$
40,477

$
32,697

$
53,116


90

---



GRIFFON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

NOTE 20BUSINESS SEGMENTS (Continued)



ASSETS

At
September 30,
2010

At
September 30,
2009

At
September 30,
2008Segment assets:Telephonics

$
268,373

$
271,809

$
251,016Home & Building Products


919,146


169,251


197,740Clopay Plastic Products


397,470


364,626


356,635Total segment assets


1,584,989


805,686


805,391Corporate (principally cash and equivalents)


157,645


330,752


344,254Total continuing assets


1,742,634


1,136,438


1,149,645Assets from discontinued operations


6,882


7,453


17,841Consolidated total

$
1,749,516

$
1,143,891

$
1,167,486


Segment
information by geographic region was as follows:

For the Years Ended September 30,REVENUE BY GEOGRAPHIC AREA

2010

2009

2008United States

$
882,444

$
827,009

$
853,692Germany


89,775


97,879


110,900Canada


68,934


69,198


64,378Brazil


55,570


41,566


44,019Turkey


27,601


10,161


13,415All other countries


169,672


148,237


182,901Consolidated revenue

$
1,293,996

$
1,194,050

$
1,269,305




PROPERTY, PLANT & EQUIPMENT BY GEOGRAPHIC AREA

At
September 30,
2010

At
September 30,
2009

At
September 30,
2008United States

$
216,825

$
150,132

$
151,733Germany


61,860


64,503


67,800All other countries


36,241


21,384


19,470Consolidated property, plant and equipment

$
314,926

$
236,019

$
239,003


Plastics
sales to P&G were approximately $233,000 in 2010, $224,000 in 2009 and $262,000 in 2008. Telephonics' sales to the United States Government and its agencies, either as a prime
contractor or subcontractor, aggregated approximately $316,000 in 2010, $276,000 in 2009 and $257,000 in 2008.

NOTE 21OTHER INCOME (EXPENSE)

Other income (expense) included $249, $(392) and $(5) for the years ended September 30, 2010, 2009 and 2008, respectively, of 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.

*****

91

---





SCHEDULE I        GRIFFON CORPORATION        CONDENSED FINANCIAL INFORMATION OF REGISTRANT        BALANCE SHEETS        (in thousands)

At September 30,
2010

At September 30,
2009CURRENT ASSETSCash and equivalents

$
74,600

$
223,511Prepaid and other current assets


5,963


2,050Total Current Assets


80,563


225,561PROPERTY, PLANT AND EQUIPMENT, net


1,267


837INVESTMENT IN SUBSIDIARIES


772,374


590,993OTHER ASSETS


40,586


36,089Total Assets

$
894,790

$
853,480CURRENT LIABILITIESCurrent portion of long-term debt, net of debt discount

$
625

$
77,185Accounts payable and accrued liabilities


24,247


15,191Total Current Liabilities


24,872


92,376CONVERTIBLE SUBORDINATED NOTES, net of debt discount


78,007


OTHER


81,196


72,897Total Liabilities


184,075


165,273COMMITMENTS AND CONTINGENCIESSHAREHOLDERS' EQUITY


710,715


688,207Total Liabilities and Shareholders' Equity

$
894,790

$
853,480


92

---





SCHEDULE I (Continued)        GRIFFON CORPORATION        CONDENSED FINANCIAL INFORMATION OF REGISTRANT        STATEMENTS OF OPERATIONS    
(in thousands)

Years Ended September 30,2010

2009

2008Costs and Expenses:General and administrative expenses

$
(26,491
)
$
(20,643
)
$
(21,155
)Gain (loss) from debt extinguishment, net


(6
)

4,488


Interest expense and other, net


(7,608
)

(5,928
)

(9,558
)Loss before credit for federal income taxes and equity in net income of subsidiaries


(34,105
)

(22,083
)

(30,713
)Credit for federal income taxes resulting from tax sharing arrangement with subsidiaries


(14,853
)

(8,974
)

(7,606
)Loss before equity in net income of subsidiaries


(19,252
)

(13,109
)

(23,107
)Equity in income of subsidiaries


28,756


31,027


20,274Income from continuing operations


9,504


17,918


(2,833
)Equity in income (loss) of discontinued operations


88


790


(40,591
)Net income (loss)

$
9,592

$
18,708

$
(43,424
)


93

---





SCHEDULE I (Continued)        GRIFFON CORPORATION        CONDENSED FINANCIAL INFORMATION OF REGISTRANT        STATEMENTS OF CASH FLOWS    
(in thousands)

Years Ended September 30,2010

2009

2008CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)

$
9,592

$
18,708

$
(43,424
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Stock-based compensation


5,778


4,145


3,327Amortization/write-off of deferred financing costs and debt discount


4,439


4,586


5,059(Gain) loss from debt extinguishment, net


6


(4,488
)

Deferred income taxes


(2,500
)

(10,174
)

2,840Equity in income of subsidiaries


(28,756
)

(31,027
)

(20,274
)Equity in (income) loss of discontinued operations


(88
)

(790
)

40,591Change in assets and liabilities:(Increase) decrease in prepaid and other assets


(4,309
)

199


(120
)Increase in accounts payable, accrued liabilities and income taxes payable


4,609


17,640


4,060Other changes, net


1,066


4,757


(4,036
)Net cash provided by (used in) operating activities


(10,163
)

3,556


(11,977
)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of property, plant and equipment


(720
)

(372
)

(46
)Acquired business, net of cash acquired


(167,950
)




Advances from subsidiaries








42,000Distribution from subsidiaries


10,000


10,000


60,000Net cash provided by (used in) investing activities


(158,670
)

9,628


101,954CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of shares from rights offering


2,823


7,257


241,344Purchase of shares for treasury








(579
)Proceeds from issuance of long-term debt


100,000


4,370


630Payments of long-term debt


(79,473
)

(43,885
)

(76,417
)Financing costs


(4,278
)

(541
)

(7,111
)Purchase of ESOP shares





(4,370
)

Exercise of stock options


343





Tax benefit from vesting of restricted stock


325


217


3Capital contribution





(676
)

(4,067
)Other, net


182


401


139Net cash provided by (used in) financing activities


19,922


(37,227
)

153,942NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS


(148,911
)

(24,043
)

243,919CASH AND EQUIVALENTS AT BEGINNING OF YEAR


223,511


247,554


3,635CASH AND EQUIVALENTS AT END OF YEAR

$
74,600

$
223,511

$
247,554


94

---





SCHEDULE II        GRIFFON CORPORATION        VALUATION AND QUALIFYING ACCOUNTS        FOR THE YEARS ENDED SEPTEMBER 30, 2010, 2009 AND 2008        (in thousands)

Description

Balance at
Beginning
of Year

Acquired By
Purchase

Recorded to
Cost and
Expense

Accounts
Written Off,
net

Other

Balance at
End of YearFOR THE YEAR ENDED SEPTEMBER 30, 2010Allowance for Doubtful AccountsBad debts

$
3,138

$
521

$
2,431

$
(996
)
$
(3
)
$
5,091Sales returns and allowances


1,319





430


(258
)

(1
)

1,490$
4,457

$
521

$
2,861

$
(1,254
)
$
(4
)
$
6,581Inventory valuation

$
11,178

$
1,187

$
4,904

$
(4,017
)
$
(111
)
$
13,141Deferred tax valuation allowance

$
4,726

$
9,971

$
372

$


$


$
15,069OR THE YEAR ENDED SEPTEMBER 30, 2009Allowance for Doubtful AccountsBad debts

$
3,675

$


$
628

$
(1,210
)
$
45

$
3,138Sales returns and allowances


1,934





(247
)

(385
)

17


1,319$
5,609

$


$
381

$
(1,595
)
$
62

$
4,457Inventory valuation

$
10,315

$


$
5,549

$
(4,725
)
$
39

$
11,178Deferred tax valuation allowance

$
8,040

$


$
(3,314
)
$


$


$
4,726FOR THE YEAR ENDED SEPTEMBER 30, 2008Allowance for Doubtful AccountsBad debts

$
3,834

$


$
1,257

$
(1,407
)
$
(9
)
$
3,675Sales returns and allowances


2,503





(157
)

(415
)

3


1,934$
6,337

$


$
1,100

$
(1,822
)
$
(6
)
$
5,609Inventory valuation

$
10,231

$


$
4,862

$
(4,834
)
$
56

$
10,315Deferred tax valuation allowance

$
3,841

$


$
4,199

$


$


$
8,040


Note:    This Schedule II is for continuing operations only.

95

---





Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.    Controls and Procedures

Evaluation and Disclosure Controls and Procedures

Griffon's management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of the design and operation of Griffon's disclosure controls and procedures, as defined by Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, Griffon's disclosure controls and procedures were effective to ensure that information
required to be disclosed by Griffon in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified by the SEC's rules
and forms and such
information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Management's Report on Internal Control over Financial Reporting

Griffon's management is responsible for establishing and maintaining adequate internal control over financial reporting. Griffon's
internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of Griffon's financial statements for external reporting in accordance with accounting principles generally accepted in the United States of
America. Management evaluates the effectiveness of Griffon's internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal ControlIntegrated Framework. Management, under the supervision and with the participation of Griffon's Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of Griffon's internal control over financial reporting as of September 30, 2010 and concluded that it is effective.

In
making its assessment of internal control over financial reporting as of September 30, 2010, management has excluded ATT which became a wholly-owned subsidiary of Griffon in a
purchase business combination on September 30, 2010. Accordingly, ATT's financial results are not included in Griffon's consolidated statements of operations and cash flows for the year ended
September 30, 2010, and their total assets constitute 43% of Griffon's consolidated total assets as of September 30, 2010.

Griffon's
independent registered public accounting firm, Grant Thornton LLP, has audited the effectiveness of Griffon's internal control over financial reporting as of
September 30, 2010, and has expressed an unqualified opinion in their report which appears in this Annual Report on Form 10-K.

Changes in Internal Controls

There were no changes in Griffon's internal control over financial reporting identified in connection with the evaluation referred to
above that occurred during the fourth quarter of the year ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, the registrant's internal
control over financial reporting.

Inherent Limitations on the Effectiveness Controls

Griffon's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external

96

---



purposes
in accordance with generally accepted accounting principles. Griffon's internal control over financial reporting includes those policies and procedures that:



Management,
including Griffon's Chief Executive Officer and Chief Financial Officer, does not expect that Griffon's internal controls will prevent or detect all errors and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in
future periods is subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

97

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Shareholders Griffon Corporation

We have audited Griffon Corporation (a Delaware corporation) and subsidiaries' (the "Company") internal control over financial reporting as of
September 30, 2010, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit. Our audit of, and opinion on, the Company's internal control over financial reporting does not include internal control over
financial reporting of Ames True Temper, Inc. ("ATT"), which became a wholly-owned subsidiary of the Company on September 30, 2010, whose financial results are not included in the
Company's consolidated statements of operations and cash flows for the year ended September 30, 2010 and whose total assets constitute 43% of the Company's consolidated total assets as of
September 30, 2010. As indicated in Management's Report, ATT was acquired on September 30, 2010 and therefore, management's assertion on the effectiveness of the Company's internal
control over financial reporting excluded internal control over financial reporting of ATT.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2010, based on criteria established in Internal ControlIntegrated
Frameworkissued by COSO.

98

---



We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Griffon Corporation and
subsidiaries as of September 30, 2010 and 2009, and the related consolidated statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for each of the three
years in the period ended September 30, 2010 and our report dated November 17, 2010 expressed an unqualified opinion thereon.

/s/ GRANT
THORNTON LLP

New
York, New York
November 17, 2010

99

---





Item 9B.    Other Information

None

PART III

The information required byPart III: Item 10,Directors, and Executive
Officers and Corporate Governance; Item 11,Executive Compensation; Item 13,Certain
Relationships and Related Transactions and Director Independence; and Item 14,Principal Accountant Fees and Servicesis
included in and incorporated by reference to Griffon's definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in January, 2011, to be filed with the
Securities and Exchange Commission within 120 days following the end of Griffon's year ended September 30, 2010. Information relating to the executive officers of the Registrant appears
under Item 1 of this report.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information regarding security ownership of certain beneficial owners and management that is required to be included pursuant to
this Item 12 is included in and incorporated by reference to Griffon's definitive proxy statement in connection with its Annual Meeting of Stockholders scheduled to be held in January, 2011.

The
following sets forth information relating to Griffon's equity compensation plans as of September 30, 2010:

Plan Category

(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

(b)
Weighted-average
exercise price
of outstanding
options, warrants
and rights

(c)
Number of securities
remaining available
for future
issuance under
equity compensation
plans (Excluding
securities reflected
in column (a))Equity compensation plans approved by security holders(1)


1,290,870

$
15.13


2,688,492Equity compensation plans not approved by security holders(2)


253,351


16.85





---

100

---



PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

(1)

Financial StatementsCovered by Report of Independent Registered Public Accounting Firm(A)

Consolidated Balance Sheets at September 30, 2010 and 2009(B)

Consolidated Statements of Operations for the Fiscal Years Ended September 30, 2010, 2009 and 2008(C)

Consolidated Statements of Cash Flows for the Fiscal Years Ended September 30, 2010, 2009 and 2008(D)

Consolidated Statements of Shareholders' Equity and Comprehensive Income for the Fiscal Years Ended September 30, 2010, 2009 and 2008(E)

Notes to the Consolidated Financial Statements(2)

Financial Statement SchedulesCovered by Report of Independent Registered Public Accounting FirmSchedule ICondensed Financial Information of RegistrantSchedule IIValuation and Qualifying AccountsAll other schedules are not required and have been omitted.(3)

Exhibitssee (b) below




Exhibit No.2.1

Stock Purchase Agreement, dated July 19, 2010, among CHATT Holdings LLC, CHATT Holdings Inc., Clopay Acquisition Corp. and, solely for the purposes of Section 7.09, Griffon Corporation
(Exhibit 2.1 to Current Report on Form 8-K filed July 23, 2010 (Commission File No. 1-06620))3.1

Restated Certificate of Incorporation (Exhibit 3.1 of Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-06620)) and Exhibit 3.1 of Quarterly Report on
Form 10-Q for the quarter ended March 31, 20083.2

Amended By-laws (Exhibit 3 of Current Report on Form 8-K filed May 14, 2008 (Commission File No. 1-06620))4.1

Specimen Certificate for Shares of Common Stock of Registrant (Exhibit 4.3 of Registration Statement on Form S-3 filed September 26, 2003 (Commission File No. 333-109171)4.2

Indenture, dated as of June 22, 2004, between the Registrant and American Stock Transfer and Trust Company, including the form of note. (Exhibit 4.3 to Annual Report on Form 10-K for the year ended
September 30, 2004 (Commission File No. 1-06620))4.3

Irrevocable Election Letter related to Indenture dated as of June 22, 2004 between the Registrant and American Stock Transfer and Trust Company (Exhibit 4.4 to Annual Report on Form 10-K for the year
ended September 30, 2004 (Commission File No. 1-06620))4.4

Indenture, dated December 21, 2009, between Griffon Corporation and American Stock Transfer & Trust Company, LLC (Exhibit 4.1 to Current Report on Form 8-K filed December 21, 2009
(Commission File No. 1-06620))


101

---



Exhibit No.10.1

Employment Agreement dated as of July 1, 2001 between the Registrant and Harvey R. Blau (Exhibit 10.1 of Current Report on Form 8-K filed May 18, 2001 (Commission File No. 1-06620))10.2

Employment Agreement dated as of July 1, 2001 between the Registrant and Robert Balemian (Exhibit 10.2 of Current Report on Form 8-K file May 18, 2001 (Commission File No. 1-06620))10.3

Form of Trust Agreement between the Registrant and Wachovia Bank, National Association, as Trustee, dated October 2, 2006, relating to Griffon's Employee Stock Ownership Plan (Exhibit 10.3 to Annual Report
on Form 10-K for the year ended September 30, 2006 (Commission File No. 1-06620))10.4

1992 Non-Qualified Stock Option Plan (Exhibit 10.10 of Annual Report on Form 10-K for the year ended September 30, 1993 (Commission File No. 1-06620))10.5

Non-Qualified Stock Option Plan (Exhibit 10.12 of Annual Report on Form 10-K for the year ended September 30, 1998 (Commission File No. 1-06620))10.6

Form of Indemnification Agreement between the Registrant and its officers and directors (Exhibit 28 to Current Report on Form 8-K dated May 3, 1990 (Commission File No. 1-06620))10.7

Outside Director Stock Award Plan (Exhibit 4 of Form S-8 Registration Statement No. 33-52319)10.8

1997 Stock Option Plan (Exhibit 4.2 of Form S-8 Registration Statement No. 333-21503)10.9

2001 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-67760)10.10

Senior Management Incentive Compensation Plan (Exhibit 4.2 of Form S-8 Registration Statement No. 333-62319)10.11

1998 Employee and Director Stock Option Plan, as amended (Exhibit 4.1 of Form S-8 Registration Statement No. 333-102742)10.12

1998 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-62319)10.13

Amendment to Employment Agreement between the Registrant and Harvey R. Blau dated August 8, 2003 (Exhibit 10.1 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (Commission File
No. 1-06620))10.14

Non-Qualified Stock Option Agreement (Exhibit 4.1 of Form S-8 Registration Statement No. 333-131737)10.15

Griffon Corporation 2006 Equity Incentive Plan, as amended (Exhibit 10.1 of Quarterly Report on Form 10-Q for the period ended December 31, 2008 (Commission File No. 1-06620))10.16

Amendment No. 2 to Employment Agreement, dated July 18, 2006 between the Registrant and Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed July 21, 2006 (Commission File
No. 1-06620))10.17

Severance agreement, dated July 18, 2006 between the Registrant and Patrick Alesia (Exhibit 10.2 to Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))10.18

Supplemental Executive Retirement Plan as amended through July 18, 2006 (Exhibit 10.3 to Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))10.19

Griffon Corporation 2006 Performance Bonus Plan (Exhibit 10.2 to Current Report on Form 8-K filed February 17, 2006 (Commission File No. 1-06620))


102

---



Exhibit No.10.20

Form of Restricted Stock Award Agreement under the Griffon Corporation 2006 Equity Incentive Plan (Exhibit 10.3 to Current Report on Form 8-K/A filed July 31, 2006 (Commission File No. 1-06620))10.21

Amendment No. 3 to Employment Agreement, dated August 3, 2007, between the Registrant and Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed August 6, 2007 (Commission File
No. 1-06620))10.22

Amendment No. 1 to the Severance Agreement, dated August 3, 2007, between the Registrant and Patrick L. Alesia (Exhibit 10.2 to Current Report on Form 8-K filed August 6, 2007 (Commission File
No. 1-06620))10.23

Amendment No. 1 to the Amended and Restated Supplemental Executive Retirement Plan dated August 3, 2007 (Exhibit 10.3 to the Current Report on Form 8-K filed August 6, 2007 (Commission File
No. 1-06620))10.24

Investment Agreement, dated August 7, 2008, between Griffon Corporation and GS Direct, L.L.C. (Exhibit 10.1 to the Current Report on Form 8-K filed August 13, 2008 (Commission File No. 1-06620))10.25

Credit Agreement, dated as of March 31, 2008, among Telephonics Corporation, Gritel Holding Co., Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (Exhibit 10.1
to the Current Report on Form 8-K filed April 4, 2008 (Commission File No. 1-06620))10.26

Guarantee and Collateral Agreement, dated as of March 31, 2008, made by Gritel Holding Co., Inc. and Telephonics Corporation in favor of JPMorgan Chase Bank, N.A. (Exhibit 10.2 to the Current
Report on Form 8-K filed April 4, 2008 (Commission File No. 1-06620))10.27

Employment Agreement, dated March 16, 2008, between the Registrant and Ronald J. Kramer. (Exhibit 10.1 to the Current Report on Form 8-K filed March 20, 2008 (Commission File No. 1-06620))10.28

Employment Agreement dated August 6, 2009, between the Registrant and Douglas J. Wetmore (Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (Commission File
No. 1-06620))10.29

Purchase Agreement, dated December 16, 2009, between Griffon Corporation and Goldman, Sachs & Co., as representative for the purchasers named therein (Exhibit 10.1 to Current Report on
Form 8-K filed December 21, 2009 (Commission File No. 1-06620)).10.30

Offer Letter Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan (Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File
No. 1-06620))10.31

Severance Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan (Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File No. 1-06620))10.32

Credit and Guarantee Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper Holding Corp., Clopay Ames True Temper LLC, certain subsidiaries of Clopay Ames True Temper Holding Corp.
party thereto, the Lenders party thereto, Goldman Sachs Lending Partners LLC, as Administrative Agent, Collateral Agent, Lead Arranger, Lead Bookrunner and Syndication Agent and Deutsche Bank Securities Inc., as Lead Arranger, Lead
Bookrunner and Syndication Agent (Exhibit 10.1 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620))


103

---



Exhibit No.10.33

Amended and Restated Credit Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper Holding Corp., Clopay Ames True Temper LLC, certain subsidiaries of Clopay Ames True Temper Holding
Corp. party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent and Deutsche Bank Securities Inc., as Joint
Lead Arranger, Joint Bookrunner and Co-Syndication Agent (Exhibit 10.2 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620))10.34

Amended and Restated Pledge and Security Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper LLC, Clopay Ames True Temper Holding Corp., certain subsidiaries of Clopay Ames True
Temper Holding Corp. party thereto and JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Secured Parties referred to therein (Exhibit 10.3 to Current Report on Form 8-K filed October 1, 2010 (Commission File
No. 1-06620))10.35

Pledge and Security Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper LLC, Clopay Ames True Temper Holding Corp., certain subsidiaries of Clopay Ames True Temper Holding Corp.
party thereto, and Goldman Sachs Lending Partners LLC, in its capacity as Collateral Agent for the Secured Parties referred to therein (Exhibit 10.4 to Current Report on Form 8-K filed October 1, 2010 (Commission File
No. 1-06620))10.36

Intercreditor Agreement, dated as of September 30, 2010, among JPMorgan Chase Bank, N.A., as Administrative Agent for the ABL Secured Parties referred to therein, Goldman Sachs Lending Partners LLC, as
Administrative Agent and Collateral Agent for the Term Loan Secured (Exhibit 10.5 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620))14

Code of Ethics for Senior Financial Officers (Exhibit 14 to Annual Report on Form 10-K for the year ended September 30, 2003 (Commission File No. 1-06620))21

The following lists Griffon's significant subsidiaries all of which are wholly-owned by Griffon. The names of certain subsidiaries which do not, when considered in the aggregate, constitute a significant subsidiary,
have been omitted.




Name of Subsidiary

State of
IncorporationClopay Corporation

DelawareTelephonics Corporation

DelawareAmes True Temper, Inc.

Delaware




23*

Consent of Grant Thornton LLP31.1*

Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act31.2*

Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act32*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 USC Section 1350.


---

104

---



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Griffon has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on the 17th day of November 2010.

GRIFFON CORPORATIONBy:

/s/ RONALD J. KRAMER Ronald J. Kramer, Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on November 17, 2010 by the following persons on behalf of the Registrant in
the capacities indicated:

/s/ HARVEY R. BLAU Harvey R. Blau

Chairman of the Board/s/ RONALD J. KRAMER Ronald J. Kramer

Chief Executive Officer (Principal Executive Officer)/s/ DOUGLAS J. WETMORE Douglas J. Wetmore

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)/s/ BRIAN G. HARRIS Brian G. Harris

Chief Accounting Officer (Principal Accounting Officer)/s/ HENRY A. ALPERT Henry A. Alpert

Director/s/ BERTRAND M. BELL Bertrand M. Bell

Director/s/ GERALD J. CARDINALE Gerald J. Cardinale

Director/s/ BLAINE V. FOGG Blaine V. Fogg

Director/s/ BRADLEY J. GROSS Bradley J. Gross

Director


105

---



/s/ ROBERT G. HARRISON Robert G. Harrison

Director/s/ DONALD J. KUTYNA Donald J. Kutyna

Director/s/ JAMES A. MITAROTONDA James A. Mitarotonda

Director/s/ MARTIN S. SUSSMAN Martin S. Sussman

Director/s/ WILLIAM H. WALDORF William H. Waldorf

Director/s/ JOSEPH J. WHALEN Joseph J. Whalen

Director


106

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EXHIBIT INDEX

Exhibit No.2.1

Stock Purchase Agreement, dated July 19, 2010, among CHATT Holdings LLC, CHATT Holdings Inc., Clopay Acquisition Corp. and, solely for the purposes of Section 7.09, Griffon Corporation
(Exhibit 2.1 to Current Report on Form 8-K filed July 23, 2010 (Commission File No. 1-06620)).3.1

Restated Certificate of Incorporation (Exhibit 3.1 of Annual Report on Form 10-K for the year ended September 30, 1995 (Commission File No. 1-06620)) and Exhibit 3.1 of Quarterly Report on
Form 10-Q for the quarter ended March 31, 20083.2

Amended By-laws (Exhibit 3 of Current Report on Form 8-K filed May 14, 2008 (Commission File No. 1-06620))4.1

Specimen Certificate for Shares of Common Stock of Registrant (Exhibit 4.3 of Registration Statement on Form S-3 filed September 26, 2003 (Commission File No. 333-109171)4.2

Indenture, dated as of June 22, 2004, between the Registrant and American Stock Transfer and Trust Company, including the form of note. (Exhibit 4.3 to Annual Report on Form 10-K for the year ended
September 30, 2004 (Commission File No. 1-06620))4.3

Irrevocable Election Letter related to Indenture dated as of June 22, 2004 between the Registrant and American Stock Transfer and Trust Company (Exhibit 4.4 to Annual Report on Form 10-K for the year
ended September 30, 2004 (Commission File No. 1-06620))4.4

Indenture, dated December 21, 2009, between Griffon Corporation and American Stock Transfer & Trust Company, LLC (Exhibit 4.1 to Current Report on Form 8-K filed December 21, 2009
(Commission File No. 1-06620)).10.1

Employment Agreement dated as of July 1, 2001 between the Registrant and Harvey R. Blau (Exhibit 10.1 of Current Report on Form 8-K filed May 18, 2001 (Commission File No. 1-06620))10.2

Employment Agreement dated as of July 1, 2001 between the Registrant and Robert Balemian (Exhibit 10.2 of Current Report on Form 8-K file May 18, 2001 (Commission File No. 1-06620))10.3

Form of Trust Agreement between the Registrant and Wachovia Bank, National Association, as Trustee, dated October 2, 2006, relating to Griffon's Employee Stock Ownership Plan (Exhibit 10.3 to Annual Report
on Form 10-K for the year ended September 30, 2006 (Commission File No. 1-06620))10.4

1992 Non-Qualified Stock Option Plan (Exhibit 10.10 of Annual Report on Form 10-K for the year ended September 30, 1993 (Commission File No. 1-06620))10.5

Non-Qualified Stock Option Plan (Exhibit 10.12 of Annual Report on Form 10-K for the year ended September 30, 1998 (Commission File No. 1-06620))10.6

Form of Indemnification Agreement between the Registrant and its officers and directors (Exhibit 28 to Current Report on Form 8-K dated May 3, 1990 (Commission File No. 1-06620))10.7

Outside Director Stock Award Plan (Exhibit 4 of Form S-8 Registration Statement No. 33-52319)10.8

1997 Stock Option Plan (Exhibit 4.2 of Form S-8 Registration Statement No. 333-21503)10.9

2001 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-67760)10.10

Senior Management Incentive Compensation Plan (Exhibit 4.2 of Form S-8 Registration Statement No. 333-62319)10.11

1998 Employee and Director Stock Option Plan, as amended (Exhibit 4.1 of Form S-8 Registration Statement No. 333-102742)


---



Exhibit No.10.12

1998 Stock Option Plan (Exhibit 4.1 of Form S-8 Registration Statement No. 333-62319)10.13

Amendment to Employment Agreement between the Registrant and Harvey R. Blau dated August 8, 2003 (Exhibit 10.1 of Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (Commission
File No. 1-06620))10.14

Non-Qualified Stock Option Agreement (Exhibit 4.1 of Form S-8 Registration Statement No. 333-131737)10.15

Griffon Corporation 2006 Equity Incentive Plan, as amended (Exhibit 10.1 of Quarterly Report on Form 10-Q for the period ended December 31, 2008 (Commission File No. 1-06620))10.16

Amendment No. 2 to Employment Agreement, dated July 18, 2006 between the Registrant and Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed July 21, 2006 (Commission File
No. 1-06620))10.17

Severance agreement, dated July 18, 2006 between the Registrant and Patrick Alesia (Exhibit 10.2 to Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))10.18

Supplemental Executive Retirement Plan as amended through July 18, 2006 (Exhibit 10.3 to Current Report on Form 8-K filed July 21, 2006 (Commission File No. 1-06620))10.19

Griffon Corporation 2006 Performance Bonus Plan (Exhibit 10.2 to Current Report on Form 8-K filed February 17, 2006 (Commission File No. 1-06620))10.20

Form of Restricted Stock Award Agreement under the Griffon Corporation 2006 Equity Incentive Plan (Exhibit 10.3 to Current Report on Form 8-K/A filed July 31, 2006 (Commission File No. 1-06620))10.21

Amendment No. 3 to Employment Agreement, dated August 3, 2007, between the Registrant and Harvey R. Blau (Exhibit 10.1 to Current Report on Form 8-K filed August 6, 2007 (Commission File
No. 1-06620))10.22

Amendment No. 1 to the Severance Agreement, dated August 3, 2007, between the Registrant and Patrick L. Alesia (Exhibit 10.2 to Current Report on Form 8-K filed August 6, 2007 (Commission
File No. 1-06620))10.23

Amendment No. 1 to the Amended and Restated Supplemental Executive Retirement Plan dated August 3, 2007 (Exhibit 10.3 to the Current Report on Form 8-K filed August 6, 2007 (Commission File
No. 1-06620))10.24

Investment Agreement, dated August 7, 2008, between Griffon Corporation and GS Direct, L.L.C. (Exhibit 10.1 to the Current Report on Form 8-K filed August 13, 2008 (Commission File
No. 1-06620))10.25

Credit Agreement, dated as of March 31, 2008, among Telephonics Corporation, Gritel Holding Co., Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent
(Exhibit 10.1 to the Current Report on Form 8-K filed April 4, 2008 (Commission File No. 1-06620))10.26

Guarantee and Collateral Agreement, dated as of March 31, 2008, made by Gritel Holding Co., Inc. and Telephonics Corporation in favor of JPMorgan Chase Bank, N.A. (Exhibit 10.2 to the Current
Report on Form 8-K filed April 4, 2008 (Commission File No. 1-06620)).10.27

Employment Agreement, dated March 16, 2008, between the Registrant and Ronald J. Kramer. (Exhibit 10.1 to the Current Report on Form 8-K filed March 20, 2008 (Commission File No. 1-06620))10.28

Employment Agreement dated August 6, 2009, between the Registrant and Douglas J. Wetmore (Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (Commission File
No. 1-06620))


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Exhibit No.10.29

Purchase Agreement, dated December 16, 2009, between Griffon Corporation and Goldman, Sachs & Co., as representative for the purchasers named therein (Exhibit 10.1 to Current Report on
Form 8-K filed December 21, 2009 (Commission File No. 1-06620)).10.30

Offer Letter Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan (Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File
No. 1-06620)).10.31

Severance Agreement, dated April 27, 2010 between the Company and Seth L. Kaplan (Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File
No. 1-06620)).10.32

Credit and Guarantee Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper Holding Corp., Clopay Ames True Temper LLC, certain subsidiaries of Clopay Ames True Temper Holding Corp.
party thereto, the Lenders party thereto, Goldman Sachs Lending Partners LLC, as Administrative Agent, Collateral Agent, Lead Arranger, Lead Bookrunner and Syndication Agent and Deutsche Bank Securities Inc., as Lead Arranger, Lead
Bookrunner and Syndication Agent (Exhibit 10.1 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620)).10.33

Amended and Restated Credit Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper Holding Corp., Clopay Ames True Temper LLC, certain subsidiaries of Clopay Ames True Temper Holding
Corp. party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent and Deutsche Bank Securities Inc.,
as Joint Lead Arranger, Joint Bookrunner and Co-Syndication Agent (Exhibit 10.2 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620)).10.34

Amended and Restated Pledge and Security Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper LLC, Clopay Ames True Temper Holding Corp., certain subsidiaries of Clopay Ames True
Temper Holding Corp. party thereto and JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Secured Parties referred to therein (Exhibit 10.3 to Current Report on Form 8-K filed October 1, 2010 (Commission
File No. 1-06620)).10.35

Pledge and Security Agreement, dated as of September 30, 2010, by and among Clopay Ames True Temper LLC, Clopay Ames True Temper Holding Corp., certain subsidiaries of Clopay Ames True Temper Holding Corp.
party thereto, and Goldman Sachs Lending Partners LLC, in its capacity as Collateral Agent for the Secured Parties referred to therein (Exhibit 10.4 to Current Report on Form 8-K filed October 1, 2010 (Commission File
No. 1-06620)).10.36

Intercreditor Agreement, dated as of September 30, 2010, among JPMorgan Chase Bank, N.A., as Administrative Agent for the ABL Secured Parties referred to therein, Goldman Sachs Lending Partners LLC, as
Administrative Agent and Collateral Agent for the Term Loan Secured (Exhibit 10.5 to Current Report on Form 8-K filed October 1, 2010 (Commission File No. 1-06620)).14

Code of Ethics for Senior Financial Officers (Exhibit 14 to Annual Report on Form 10-K for the year ended September 30, 2003 (Commission File No. 1-06620))21

The following lists Griffon's significant subsidiaries all of which are wholly-owned by Griffon. The names of certain subsidiaries which do not, when considered in the aggregate, constitute a significant subsidiary,
have been omitted.




Name of Subsidiary

State of
IncorporationClopay Corporation

DelawareTelephonics Corporation

DelawareAmes True Temper, Inc.

Delaware


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23*

Consent of Grant Thornton LLP31.1*

Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act31.2*

Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act32*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 USC Section 1350.


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