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EMPLOYEE BENEFIT PLANS
 12 Months Ended
Sep. 30, 2019
Retirement Benefits [Abstract]  
EMPLOYEE BENEFIT PLANS 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 $11,788 in 2019, $11,053 in 2018 and $10,079 in 2017.

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 $1,852 and $1,699 as of September 30, 2019 and 2018. The accumulated other comprehensive income (loss) for these plans was $(146) and ($60) as of September 30, 2019 and 2018, respectively, and the 2019 and 2018 benefit expense was $50 and $45, respectively. It is the Company’s practice to fund these benefits as incurred.
 
Griffon also has qualified and non-qualified defined benefit plans covering certain employees with benefits based on years of service and employee compensation. Over time, these amounts will be recognized as part of net periodic pension costs in the Consolidated Statements of Operations and Comprehensive Income (Loss).
 
Griffon is responsible for overseeing the management of the investments of the qualified defined benefit plan and uses the services of an investment manager to manage these assets based on agreed upon risk profiles. 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 values of a majority of the plan assets were determined by the plans’ trustee using quoted market prices for identical instruments (level 1 inputs) as of September 30, 2019 and 2018. The fair value of various other investments was determined by the plan’s trustee using direct observable market corroborated inputs, including quoted market prices for similar assets (level 2 inputs). A small amount of plan assets are invested in private equity which consist primarily of investments in private companies which are valued using the net asset values provided by the underlying private investment companies as a practical expedient (level 3 inputs).

Effective January 1, 2012, the Clopay Pension Plan merged with the Ames True Temper Inc. Pension Plan. The merged qualified defined benefit plan was named the Clopay Ames Pension Plan (the “Clopay AMES Plan”). The Clopay portion of the Clopay AMES Plan has been frozen to new entrants since December 2000. Certain employees who were part of the plan prior to December 2000 continued to accrue a service benefit through December 2010, at which time all plan participants stopped accruing service benefits. The AMES portion of the Clopay AMES Plan has been frozen to all new entrants since November 2009 and stopped accruing benefits in December 2009.

The AMES supplemental executive retirement plan was frozen to new entrants and participants in the plan stopped accruing benefits in 2008.

In March 2017, the FASB issued Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changed certain presentation and disclosure requirements for employers that sponsor defined benefit and post-retirement pension plans. The new standard requires the service cost component of the net benefit cost to be in the same line item as other compensation in operating income and the other components of net benefit plan cost, including interest costs, amortization of prior service costs and recognized actuarial costs to be presented outside of operating income on a retrospective basis. The standard was effective for fiscal years beginning after December 15, 2017. The Company adopted the requirements of the standard in the first quarter of 2019 on a retrospective basis reclassifying the other components of the net periodic benefit plan costs from Selling, general and administrative expenses to a non-service expense within Other income (expense). The defined benefit and post-retirement pension plans did not have a service cost component. The Company utilized a practical expedient included in the accounting guidance which allowed the Company to use amounts previously disclosed in its pension and other post-retirement benefits note for the prior period as the estimation basis for applying the required retrospective presentation requirements.

The Company’s non-service cost components of net periodic benefit plan cost was a benefit of $3,148, $3,649 and $1,993 during 2019, 2018, and 2017 respectively. The impact of this adoption resulted in a reclassification to the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for 2018 and 2017, in which previously reported Cost of goods and services and Selling, general and administrative expenses were increased by $3,649 and $1,993, respectively with a corresponding offset to Other income (expense). The remaining provisions of the standard did not have a material impact on our financial position, results of operations or liquidity.

Griffon uses judgment to establish the assumptions used in determining the future liability of the plan, as well as the investment returns on the plan assets. The expected return on assets assumption used for pension expense was developed through analysis of historical market returns, current market conditions and past experience of plan investments. The long-term rate of return assumption
represents the expected average rate of earnings on the funds invested, or to be invested, to provide for the benefits included in the benefit obligations. The assumption is based on several factors including historical market index returns, the anticipated long-term asset allocation of plan assets and the historical return. 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. A 10% change in the discount rate or return on assets would not have a material effect on the financial statements of Griffon.

Net periodic costs (benefits) were as follows:
 
Defined Benefits for the Years Ended 
September 30,
 
Supplemental Benefits for the Years 
Ended September 30,
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Net periodic (benefits) costs:
 

 
 

 
 

 
 

 
 

 
 

Interest cost
$
5,778

 
$
5,084

 
$
4,892

 
$
503

 
$
544

 
$
715

Expected return on plan assets
(10,331
)
 
(10,736
)
 
(10,943
)
 
—

 
—

 
—

Amortization of:
 

 
 

 
 

 
 

 
 

 
 

Prior service costs
—

 
—

 
1

 
14

 
14

 
15

Actuarial loss
630

 
755

 
1,980

 
258

 
628

 
1,347

Total net periodic (benefits) costs
$
(3,923
)
 
$
(4,897
)
 
$
(4,070
)
 
$
775

 
$
1,186

 
$
2,077


 
The tax benefits in 2019, 2018 and 2017 for the amortization of pension costs in Other comprehensive income (loss) were $221, $342 and $1,170, respectively.
 
The estimated net actuarial loss and prior service cost that will be amortized from AOCI into Net periodic pension cost during 2020 is $4,167 and $14, respectively.
 
The weighted-average assumptions used in determining the net periodic (benefits) costs were as follows:
 
Defined Benefits for the Years Ended 
September 30,
 
Supplemental Benefits for the Years 
Ended September 30,
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Discount rate
2.92
%
 
4.10
%
 
3.64
%
 
2.64
%
 
3.99
%
 
3.18
%
Expected return on assets
7.00
%
 
7.00
%
 
7.25
%
 
—
%
 
—
%
 
—
%


Plan assets and benefit obligation of the defined and supplemental benefit plans were as follows:
 
Defined Benefits at
September 30,
 
Supplemental Benefits at
September 30,
 
2019
 
2018
 
2019
 
2018
Change in benefit obligation:
 

 
 

 
 

 
 

Benefit obligation at beginning of fiscal year
$
161,328

 
$
174,337

 
$
15,718

 
$
32,627

Interest cost
5,778

 
5,084

 
503

 
544

Benefits paid
(10,790
)
 
(10,531
)
 
(1,942
)
 
(3,001
)
Actuarial (gain) loss
21,481

 
(7,562
)
 
1,901

 
(14,452
)
Benefit obligation at end of fiscal year
177,797

 
161,328

 
16,180

 
15,718

Change in plan assets:
 

 
 

 
 

 
 

Fair value of plan assets at beginning of fiscal year
150,680

 
150,822

 
—

 
—

Actual return on plan assets
2,606

 
7,940

 
—

 
—

Company contributions
3,114

 
2,449

 
1,942

 
3,001

Benefits paid
(10,790
)
 
(10,531
)
 
(1,942
)
 
(3,001
)
Fair value of plan assets at end of fiscal year
145,610

 
150,680

 
—

 
—

Projected benefit obligation in excess of plan assets
$
(32,187
)
 
$
(10,648
)
 
$
(16,180
)
 
$
(15,718
)
Amounts recognized in the statement of financial position consist of:
 

 
 

 
 

 
 

Accrued liabilities
$
—

 
$
—

 
$
(1,906
)
 
$
(1,906
)
Other liabilities (long-term)
(32,187
)
 
(10,648
)
 
(14,279
)
 
(13,812
)
Total Liabilities
(32,187
)
 
(10,648
)
 
(16,185
)
 
(15,718
)
Net actuarial losses
47,663

 
19,088

 
6,609

 
4,965

Prior service cost
—

 
—

 
14

 
28

Deferred taxes
(17,098
)
 
(6,103
)
 
(2,374
)
 
(1,597
)
Total Accumulated other comprehensive loss, net of tax
30,565

 
12,985

 
4,249

 
3,396

Net amount recognized at September 30,
$
(1,622
)
 
$
2,337

 
$
(11,936
)
 
$
(12,322
)
Accumulated benefit obligations
$
177,797

 
$
161,328

 
$
16,180

 
$
15,718

Information for plans with accumulated benefit obligations in excess of plan assets:
 

 
 

 
 

 
 

ABO
$
177,797

 
$
161,328

 
$
16,180

 
$
15,718

PBO
177,797

 
161,328

 
16,180

 
15,718

Fair value of plan assets
145,610

 
150,680

 
—

 
—


 
The weighted-average assumptions used in determining the benefit obligations were as follows:
 
Defined Benefits at 
September 30,
 
Supplemental Benefits at 
September 30,
 
2019
 
2018
 
2019
 
2018
Weighted average discount rate
2.92
%
 
4.10
%
 
2.64
%
 
3.99
%

 
The actual and weighted-average asset allocation for qualified benefit plans were as follows:
 
At September 30,
 
 
 
2019
 
2018
 
Target
Cash and equivalents
1.9
%
 
18.0
%
 
—
%
Equity securities
49.9
%
 
68.5
%
 
63.0
%
Fixed income
29.4
%
 
9.5
%
 
37.0
%
Other
18.8
%
 
4.0
%
 
—
%
Total
100.0
%
 
100.0
%
 
100.0
%


Estimated future benefit payments to retirees, which reflect expected future service, are as follows:
For the years ending September 30,
Defined
Benefits
 
Supplemental Benefits
2020
$
11,017

 
$
1,900

2021
11,094

 
1,807

2022
11,026

 
1,709

2023
10,990

 
1,608

2024
10,933

 
1,490

2025 through 2029
53,249

 
5,741



During 2020, Griffon expects to contribute $1,900 in payments related to Supplemental Benefits that will be funded from the general assets of Griffon. Griffon expects to contribute $6,758 to the Defined Benefit plan in 2020.

The Clopay AMES Plan is covered by the Pension Protection Act of 2006. The Adjusted Funding Target Attainment Percent for the plan as of January 1, 2019 was 91.3%. Since the plan was in excess of the 80% funding threshold there were no plan restrictions. The expected level of 2020 catch up contributions is $2,440.

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. These investments can be liquidated on demand.

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 1.

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

Debt securities – The fair values are based on a compilation of primarily observable market information or a broker quote in a non-active market where the individual mutual fund securities are invested in debt securities. These investments are primarily classified within Level 1 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 or 3, as appropriate, of the valuation hierarchy and can be liquidated on demand.

Interest in limited partnerships and hedge funds - One limited partnership investment is a private equity fund and the fair value is determined by the fund managers based on the net asset values provided by the underlying private investment companies as a practical expedient. These investments are 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:
At September 30, 2019
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Cash and equivalents
$
2,791

 
$
—

 
$
—

 
$
2,791

Government agency securities
27,408

 
10,008

 
—

 
37,416

Debt instruments
182

 
2,996

 
—

 
3,178

Equity securities
72,517

 
—

 
—

 
72,517

Commingled funds
—

 
—

 
8,776

 
8,776

Limited partnerships and hedge fund investments
—

 
18,569

 
—

 
18,569

Other Securities
1,348

 
724

 
—

 
2,072

Total
$
104,246

 
$
32,297

 
$
8,776

 
$
145,319


The following table represents level 3 significant unobservable inputs for the year ended September 30, 2019:
 
 
 
Significant
Unobservable
Inputs
(Level 3)
 
 
As of October 1, 2018
$
—

Purchases, issuances and settlements
7,695

Gains and losses
1,081

As of September 30, 2019
$
8,776


At September 30, 2018
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Cash and equivalents
$
27,209

 
$
—

 
$
—

 
$
27,209

Debt instruments
14,269

 
—

 
—

 
14,269

Equity securities
41,042

 
—

 
—

 
41,042

Commingled funds
—

 
62,088

 
—

 
62,088

Limited partnerships and hedge fund investments
—

 
6,026

 
—

 
6,026

Total
$
82,520

 
$
68,114

 
$
—

 
$
150,634



Griffon has an ESOP that covers substantially all domestic employees. All U.S. employees of Griffon, who are not members of a collective bargaining unit, automatically become eligible to participate in the plan on the October 1st following completion of one qualifying year of service (as defined in the plan). Securities are allocated to participants’ individual accounts based on the proportion of each participant’s aggregate compensation (not to exceed $280 for the plan year ended September 30, 2019), to the total of all participants’ compensation. 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 determining earnings per share. Dividends paid on shares held by the ESOP are used to offset debt service on ESOP Loans. Dividends paid on shares held in participant accounts are utilized to allocate shares from the aggregate number of shares to be released, equal in value to those dividends, based on the
closing price of Griffon common stock on the dividend payment date. Compensation expense under the ESOP was $2,630 in 2019, $9,532 in 2018, including an impact of $2,588 from the April 2018 special dividend, and $5,643 in 2017. The cost of the shares held by the ESOP and not yet allocated to employees is reported as a reduction of Shareholders’ Equity. The fair value of the unallocated ESOP shares as of September 30, 2019 and 2018 based on the closing stock price of Griffon’s stock was $47,378 and $40,010, respectively. The ESOP shares were as follows:
 
At September 30,
 
2019
 
2018
Allocated shares
3,209,069

 
3,157,530

Unallocated shares
2,259,308

 
2,477,385

Total
5,468,377

 
5,634,915