LEASES

3 Months Ended

Dec. 31, 2021

Leases [Abstract]

LEASES

LEASES

The Company recognizes right-of-use ("ROU") assets and lease liabilities on the balance sheet, with the exception of leases with a term of twelve months or less. The Company determines if an arrangement is a lease at inception. The ROU assets and short and long-term liabilities associated with our Operating leases are shown as separate line items on our Condensed Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, net, other accrued liabilities, and other non-current liabilities. The Company's finance leases are immaterial. ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments primarily include rent and insurance costs (lease components). The Company's leases also include non-lease components such as real estate taxes and common-area maintenance costs. The Company elected the practical expedient to account for lease and non-lease components as a single component. In certain of the Company's leases, the non-lease components are variable and in accordance with the standard are therefore excluded from lease payments to determine the ROU asset. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of

lease payments. We use the implicit rate when readily determinable. Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability. For leases with a lease term of 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Condensed Consolidated Balance Sheets.Variable lease cost for both operating and finance leases, if any, is recognized as incurred. Components of operating lease costs are as follows:

	For the Three Months Ended December 31,
	2021		2020
Fixed	$	9,747	$	9,491
Variable (a), (b)	1,852		1,894
Short-term (b)	1,349		1,070
Total	$	12,948	$	12,455

(a) Primarily relates to common-area maintenance and property taxes.

(b) Not recorded on the balance sheet.

Supplemental cash flow information were as follows:

	For the Three Months Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,844	$	10,609
Financing cash flows from finance leases	753		803
Total	$	11,597	$	11,412

Supplemental Condensed Consolidated Balance Sheet information related to leases were as follows:

	December 31, 2021		September 30, 2021
Operating Leases:
Right of use assets:
Operating right-of-use assets	$	141,406	$	144,598
Lease Liabilities:
Current portion of operating lease liabilities	$	28,932	$	29,881
Long-term operating lease liabilities	117,189		119,315
Total operating lease liabilities	$	146,121	$	149,196
Finance Leases:
Property, plant and equipment, net(1)	$	15,719	$	16,466
Lease Liabilities:
Notes payable and current portion of long-term debt	$	2,359	$	2,347
Long-term debt, net	13,569		14,120
Total financing lease liabilities	$	15,928	$	16,467

(1) Finance lease assets are recorded net of accumulated depreciation of $3,961 and $6,136 as of December 31, 2021 and September 30, 2021, respectively.

Griffon has one finance lease outstanding for real estate located in Ocala, Florida. The lease matures in 2025, and bears interest at a fixed rate of approximately 5.6%. During the period ended December 31, 2021, the financing lease on the Troy, Ohio location expired. The lease bore interest at a rate of approximately 5.0%, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease. Griffon exercised the one dollar buy out option in November 2021. The Ocala, Florida lease contains two five-year renewal options. At December 31, 2021, $14,083 was outstanding, net of issuance costs.

The aggregate future maturities of lease payments for operating leases and finance leases as of December 31, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases
2022(a)	$	26,927	$	2,362
2023	29,265		2,876
2024	22,123		2,312
2025	19,790		2,124
2026	13,554		2,106
2027	10,766		2,074
Thereafter	54,382		5,703
Total lease payments	176,807		19,557
Less: Imputed Interest	(30,686)		(3,629)
Present value of lease liabilities	$	146,121	$	15,928

(a) Excluding the three months ended December 31, 2021.

Average lease terms and discount rates at December 31, 2021 were as follows:

Weighted-average remaining lease term (years)
Operating leases	8.0
Finance Leases	7.9
Weighted-average discount rate
Operating Leases	4.45	%
Finance Leases	5.49	%

LEASES

LEASES

The Company recognizes right-of-use ("ROU") assets and lease liabilities on the balance sheet, with the exception of leases with a term of twelve months or less. The Company determines if an arrangement is a lease at inception. The ROU assets and short and long-term liabilities associated with our Operating leases are shown as separate line items on our Condensed Consolidated Balance Sheets. Finance leases are included in property, plant, and equipment, net, other accrued liabilities, and other non-current liabilities. The Company's finance leases are immaterial. ROU assets, along with any other related long-lived assets, are periodically evaluated for impairment.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments primarily include rent and insurance costs (lease components). The Company's leases also include non-lease components such as real estate taxes and common-area maintenance costs. The Company elected the practical expedient to account for lease and non-lease components as a single component. In certain of the Company's leases, the non-lease components are variable and in accordance with the standard are therefore excluded from lease payments to determine the ROU asset. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of

lease payments. We use the implicit rate when readily determinable. Our determination of the lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

For operating leases, fixed lease payments are recognized as operating lease cost on a straight-line basis over the lease term. For finance leases and impaired operating leases, the ROU asset is depreciated on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability. For leases with a lease term of 12 months or less (a "Short-term" lease), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the Condensed Consolidated Balance Sheets.Variable lease cost for both operating and finance leases, if any, is recognized as incurred. Components of operating lease costs are as follows:

	For the Three Months Ended December 31,
	2021		2020
Fixed	$	9,747	$	9,491
Variable (a), (b)	1,852		1,894
Short-term (b)	1,349		1,070
Total	$	12,948	$	12,455

(a) Primarily relates to common-area maintenance and property taxes.

(b) Not recorded on the balance sheet.

Supplemental cash flow information were as follows:

	For the Three Months Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,844	$	10,609
Financing cash flows from finance leases	753		803
Total	$	11,597	$	11,412

Supplemental Condensed Consolidated Balance Sheet information related to leases were as follows:

	December 31, 2021		September 30, 2021
Operating Leases:
Right of use assets:
Operating right-of-use assets	$	141,406	$	144,598
Lease Liabilities:
Current portion of operating lease liabilities	$	28,932	$	29,881
Long-term operating lease liabilities	117,189		119,315
Total operating lease liabilities	$	146,121	$	149,196
Finance Leases:
Property, plant and equipment, net(1)	$	15,719	$	16,466
Lease Liabilities:
Notes payable and current portion of long-term debt	$	2,359	$	2,347
Long-term debt, net	13,569		14,120
Total financing lease liabilities	$	15,928	$	16,467

(1) Finance lease assets are recorded net of accumulated depreciation of $3,961 and $6,136 as of December 31, 2021 and September 30, 2021, respectively.

Griffon has one finance lease outstanding for real estate located in Ocala, Florida. The lease matures in 2025, and bears interest at a fixed rate of approximately 5.6%. During the period ended December 31, 2021, the financing lease on the Troy, Ohio location expired. The lease bore interest at a rate of approximately 5.0%, was secured by a mortgage on the real estate, which was guaranteed by Griffon, and had a one dollar buyout at the end of the lease. Griffon exercised the one dollar buy out option in November 2021. The Ocala, Florida lease contains two five-year renewal options. At December 31, 2021, $14,083 was outstanding, net of issuance costs.

The aggregate future maturities of lease payments for operating leases and finance leases as of December 31, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases
2022(a)	$	26,927	$	2,362
2023	29,265		2,876
2024	22,123		2,312
2025	19,790		2,124
2026	13,554		2,106
2027	10,766		2,074
Thereafter	54,382		5,703
Total lease payments	176,807		19,557
Less: Imputed Interest	(30,686)		(3,629)
Present value of lease liabilities	$	146,121	$	15,928

(a) Excluding the three months ended December 31, 2021.

Average lease terms and discount rates at December 31, 2021 were as follows:

Weighted-average remaining lease term (years)
Operating leases	8.0
Finance Leases	7.9
Weighted-average discount rate
Operating Leases	4.45	%
Finance Leases	5.49	%