EMPLOYEE BENEFIT PLANS

12 Months Ended

Sep. 30, 2011

Pension and Other Postretirement Benefits Disclosure [Text Block]

NOTE 11 – 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 $7,500 in 2011, $5,200 in 2010 and $5,800 in 2009.

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 $2,177 and $2,005 as of September 30, 2011 and 2010. The accumulated other comprehensive loss for these plans was $78 and zero as of September 30, for 2011 and 2010, respectively and the 2011 and 2010 benefit expense was $175 and $87, respectively. 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. 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, 2011. 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).

The U.S. components of the defined benefit plans, which excludes the supplemental and post retirement healthcare and insurance benefit plans, are frozen and have stopped accruing benefits.

The Clopay 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 continued to accrue a service benefit through December 2010, at which time all plan participants stopped 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 ATT qualified defined benefit plan has been frozen to all new entrants since November 2009 and stopped accruing benefit in December 2009.

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

Net periodic costs were as follows:

	Defined Benefits for the Years Ended September 30,									Supplemental Benefits for the Years Ended September 30,
	2011			2010			2009			2011		2010		2009
Net periodic (benefit) costs
Service cost	$	377		$	529		$	425		$	34	$	29	$	22
Interest cost		9,552			1,645			1,638			1,759		1,984		2,586
Expected return on plan assets		(11,501	)		(1,371	)		(1,723	)		—		—		—
Amortization of:
Prior service costs		8			9			9			1,141		328		328
Actuarial loss		1,144			1,064			325			328		986		596
Transition obligation		—			—			(1	)		—		—		—
Total net periodic (benefit) costs	$	(420	)	$	1,876		$	673		$	3,262	$	3,327	$	3,532

The tax benefits in 2011, 2010 and 2009 for the amortization of pension costs in other comprehensive income were $798, $835 and $440, 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 $2,551 and $177, 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,
	2011			2010			2009			2011			2010			2009
Discount rate		4.89	%		5.60	%		7.50	%		4.26	%		5.00	%		7.50	%
Average wage increase		0.72	%		3.50	%		3.50	%		4.89	%		5.00	%		5.00	%
Expected return on assets		7.72	%		7.00	%		8.50	%		—			—			—

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

	Defined Benefits at September 30,						Supplemental Benefits at September 30,
	2011			2010			2011			2010
Change in benefit obligation
Benefit obligation at beginning of fiscal year	$	200,208		$	29,803		$	43,220		$	41,632
Assumed in business combination		—			166,689			—			876
Benefits earned during the year		378			529			34			29
Interest cost		9,552			1,644			1,758			1,984
Plan participant contributions		25			—			—			—
Benefits paid		(10,607	)		(1,372	)		(3,915	)		(3,898	)
Effect of foreign currency		13			—			—			—
Actuarial loss		13,091			2,915			188			2,597
Benefit obligation at end of fiscal year		212,660			200,208			41,285			43,220
Change in Plan Assets
Fair value of plan assets at beginning of fiscal year		133,733			19,877			—			—
Assumed in business combination		—			109,490			—			—
Actual return on plan assets		636			2,176			—			—
Plan participant contributions		25			—			—			—
Company contributions		13,889			3,562			3,915			3,898
Effect of foreign currency		2			—			—			—
Benefits paid		(10,607	)		(1,372	)		(3,915	)		(3,898	)
Fair value of plan assets at end of fiscal year		137,678			133,733			—			—
Projected benefit obligation in excess of plan assets	$	(74,982	)	$	(66,475	)	$	(41,285	)	$	(43,220	)
Amounts recognized in the statement of financial position consist of:
Accrued liabilities	$	—		$	—		$	(3,918	)	$	(3,932	)
Other liabilities (long-term)		(74,982	)		(66,475	)		(37,367	)		(39,288	)
Total Liabilites		(74,982	)		(66,475	)		(41,285	)		(43,220	)
Net actuarial losses		38,057			15,236			19,491			20,445
Prior service cost		16			24			284			611
Deferred taxes		(13,326	)		(5,341	)		(6,921	)		(7,370	)
Total Accumulated other comprehensive loss, net of tax		24,747			9,919			12,854			13,686
Net amount recognized at September 30,	$	(50,235	)	$	(56,556	)	$	(28,431	)	$	(29,534	)
Accumulated benefit obligations	$	212,430		$	199,604		$	40,878		$	42,827
Information for plans with accumulated benefit obligations in excess of plan assets:
ABO	$	212,430		$	199,604		$	40,878		$	42,827
PBO		212,660			200,208			41,285			43,220
Fair value of plan assets		137,678			133,733			—			—

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

	Defined Benefits at September 30,						Supplemental Benefits at September 30,
	2011			2010			2011			2010
Weighted average discount rate		4.44	%		4.89	%		4.30	%		4.26	%
Weighted average wage increase		0.11	%		0.73	%		4.89	%		4.90	%

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

	At September 30,
	2011			2010			Target
Equity securities		55.0	%		64.0	%		63.0	%
Fixed income		41.0	%		35.0	%		37.0	%
Other		4.0	%		1.0	%		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	Defined Benefits		Supplemental Benefits
2012	$	10,361	$	3,918
2013		10,667		3,941
2014		10,891		3,940
2015		11,131		3,871
2016		11,397		3,740
2017 through 2021		61,080		15,814

Griffon expects to contribute $8,601 to the Defined Benefit plans in 2012, in addition to the $3,918 in payments related to the Supplemental Benefits that will primarily be funded from the general assets of Griffon.

The majority of Griffon’s qualified pension plans are covered by the Pension Protection Act of 2006. The weighted average Adjusted Funding Target Attainment Percent (“AFTAP”) for these plans as of January 1, 2011 was 80%, with all of the plans at or in excess of the 80% threshold; as such there were no plan restrictions. The expected level of 2012 catch up contributions is $6,052.

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 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.

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 and can be liquidated on demand.

The following table presents the fair values of Griffon’s pension and post-retirement plan assets by asset category:

At September 30, 2011

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Short-term investment funds	$	—	$	667	$	—	$	667
Government agency securities		382		2,741		—		3,123
Debt instruments		—		14,876		—		14,876
Equity securities		68,313		3,841		—		72,154
Commingled funds		—		46,858		—		46,858
Total	$	68,695	$	68,983	$	—	$	137,678

At September 30, 2010

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Short-term investment funds	$	—	$	190	$	—	$	190
Government agency securities		2,030		2,780		—		4,810
Debt instruments		—		15,255		—		15,255
Equity securities		60,807		4,023		—		64,830
Commingled funds		—		48,648		—		48,648
Total	$	62,837	$	70,896	$	—	$	133,733

Griffon has an ESOP that covers substantially all domestic employees. All employees of Griffon, who are not members of a collective bargaining unit, automatically become eligible to participate in the plan on the October 1^st following completion of one year of service. Griffon’s securities are allocated to participants’ individual accounts based on the proportion of each participant’s aggregate compensation (not to exceed $245 for the plan year ended September 30, 2011), bears 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 earnings per share. Compensation expense under the ESOP was $841 in 2011, $1,011 in 2010 and $796 in 2009. 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, 2011 and 2010 based on the closing stock price of Griffon’s stock was $19,761 and $7,640, respectively.

The ESOP shares were as follows:

	At September 30,
	2011		2010
Allocated shares		2,158,009		2,213,122
Unallocated shares		2,415,754		626,725
		4,573,763		2,839,847