EMPLOYEE BENEFIT PLANS

12 Months Ended

Sep. 30, 2012

Compensation and Employee Benefit Plans [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 $7,300 in 2012, $7,500 in 2011 and $5,200 in 2010.

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 $2,262 and $2,177 as of September 30, 2012 and 2011. The accumulated other comprehensive loss for these plans was $79 and $78 as of September 30, for 2012 and 2011, respectively and the 2012 and 2011 benefit expense was $76 and $175, 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.

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 for identical instruments (level 1 inputs) as of September 30, 2012. 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 fair value of investments with significant unobservable inputs was supported by audited financial statements (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 True Temper Plan (the “CATT Plan”).

The Clopay portion of the CATT 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 ATT portion of the CATT Plan has been frozen to all new entrants since November 2009 and stopped accruing benefits 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. 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.

Net periodic benefit costs (benefits) were as follows:

	Defined Benefits for the Years Ended September 30,									Supplemental Benefits for the Years Ended September 30,
	2012			2011			2010			2012		2011		2010
Net periodic costs (benefits)
Service cost	$	238		$	377		$	529		$	36	$	34	$	29
Interest cost		9,191			9,552			1,645			1,692		1,759		1,984
Expected return on plan assets		(11,896	)		(11,501	)		(1,371	)		—		—		—
Amortization of:
Prior service costs		6			8			9			171		328		328
Actuarial loss		1,735			1,144			1,064			1,137		1,141		986
Total net periodic costs (benefits)	$	(726	)	$	(420	)	$	1,876		$	3,036	$	3,262	$	3,327

The tax benefits in 2012, 2011 and 2010 for the amortization of pension costs in other comprehensive income (loss) were $1,067, $917 and $835, 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 2013 are $3,360 and $20, 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,
	2012			2011			2010			2012			2011			2010
Discount rate		4.44	%		4.89	%		5.60	%		4.30	%		4.26	%		5.00	%
Average wage increase		0.11	%		0.72	%		3.50	%		4.89	%		4.89	%		5.00	%
Expected return on assets		7.71	%		7.72	%		7.00	%		—			—			—

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,
	2012			2011			2012			2011
Change in benefit obligation
Benefit obligation at beginning of fiscal year	$	212,660		$	200,208		$	41,285		$	43,220
Benefits earned during the year		238			378			36			34
Interest cost		9,191			9,552			1,692			1,759
Plan participant contributions		16			25			—			—
Benefits paid		(10,359	)		(10,607	)		(3,936	)		(3,915	)
Effect of foreign currency		(413	)		13			—			—
Actuarial loss		21,616			13,091			2,396			187
Benefit obligation at end of fiscal year		232,949			212,660			41,473			41,285
Change in Plan Assets
Fair value of plan assets at beginning of fiscal year		137,678			133,733			—			—
Actual return on plan assets		25,190			636			—			—
Plan participant contributions		16			25			—			—
Company contributions		8,638			13,889			3,936			3,915
Effect of foreign currency		(330	)		2			—			—
Benefits paid		(10,359	)		(10,607	)		(3,936	)		(3,915	)
Fair value of plan assets at end of fiscal year		160,833			137,678			—			—
Projected benefit obligation in excess of plan assets	$	(72,116	)	$	(74,982	)	$	(41,473	)	$	(41,285	)
Amounts recognized in the statement of financial position consist of:
Accrued liabilities	$	—		$	—		$	(3,897	)	$	(3,918	)
Other liabilities (long-term)		(72,116	)		(74,982	)		(37,576	)		(37,367	)
Total Liabilites		(72,116	)		(74,982	)		(41,473	)		(41,285	)
Net actuarial losses		44,656			38,057			20,750			19,491
Prior service cost		10			16			113			284
Deferred taxes		(15,633	)		(13,326	)		(7,302	)		(6,921	)
Total Accumulated other comprehensive loss, net of tax		29,033			24,747			13,561			12,854
Net amount recognized at September 30,	$	(43,083	)	$	(50,235	)	$	(27,912	)	$	(28,431	)
Accumulated benefit obligations	$	232,574		$	212,430		$	41,473		$	40,878
Information for plans with accumulated benefit obligations in excess of plan assets:
ABO	$	232,574		$	212,430		$	41,473		$	40,878
PBO		232,949			212,660			41,473			41,285
Fair value of plan assets		160,833			137,678			—			—

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

	Defined Benefits at September 30,						Supplemental Benefits at September 30,
	2012			2011			2012			2011
Weighted average discount rate		3.67	%		4.44	%		3.40	%		4.30	%
Weighted average wage increase		0.11	%		0.11	%		4.87	%		4.89	%

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

	At September 30,
	2012			2011			Target
Equity securities		66.0	%		55.0	%		63.0	%
Fixed income		29.0	%		41.0	%		37.0	%
Other		5.0	%		4.0	%		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
2013	$	10,455	$	3,951
2014		10,789		3,951
2015		10,965		3,832
2016		11,208		3,778
2017		11,410		3,720
2018 through 2022		61,319		14,680

Griffon expects to contribute $2,628 to the Defined Benefit plans in 2013, in addition to the $3,951 in payments related to the Supplemental Benefits that will primarily be funded from the general assets of Griffon.

The CATT Plan is covered by the Pension Protection Act of 2006. The Adjusted Funding Target Attainment Percent (“AFTAP”) for the plan as of January 1, 2012 was 94.5%. Since the plan was in excess of the 80% funding threshold there were no plan restrictions. The expected level of 2013 catch up contributions is $2,802.

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.

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 estimated value of the various holdings of the fund portfolio. One of the commingled mutual funds 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; these asset values are estimated by underlying managers of the assets in which the fund invests. These investments are classified within Level 3 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, 2012

	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	$	29	$	—	$	—	$	29
Short-term investment funds		—		5,231		—		5,231
Government agency securities		—		2,899		—		2,899
Debt instruments		—		30,616		—		30,616
Equity securities		62,713		—		—		62,713
Commingled funds		—		50,105		6,224		56,329
Limited partnerships and hedge
fund investments		—		—		3,016		3,016
Total	$	62,742	$	88,851	$	9,240	$	160,833

The activity for the level 3 assets was as follows:

Beginning Balance at September 30, 2011	$	—
Actual Return on Plan Assets		175
Purchases		9,065
Ending Balance at September 30, 2012	$	9,240

For 2012, the actual return on plan assets were $159 for the commingled fund and $16 for private equity.

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

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, 2012), 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 $1,796 in 2012, $841 in 2011 and $1,011 in 2010. 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, 2012 and 2011 based on the closing stock price of Griffon’s stock was $21,993 and $19,761, respectively. The ESOP shares were as follows:

	At September 30,
	2012		2011
Allocated shares		2,335,040		2,233,950
Unallocated shares		2,135,287		2,339,813
		4,470,327		4,573,763