NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT

12 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

NOTE 10 — NOTES PAYABLE, CAPITALIZED LEASES AND LONG-TERM DEBT

The present value of the net minimum payments on capitalized leases as of September 30, 2013 was follows:

	At September 30, 2013
Total minimum lease payments	$	11,972
Less amount representing interest payments		(2,128	)
Present value of net minimum lease payments		9,844
Current portion		(1,106	)
Capitalized lease obligation, less current portion	$	8,738

Minimum payments under capital leases for the next five years are as follows: $1,579 in 2014, $1,550 in 2015, $1,511 in 2016, $1,437 in 2017, $1,425 in 2018 and $4,470 thereafter.

Included in the consolidated balance sheet at September 30, 2013 under Property, plant and equipment are costs and accumulated depreciation subject to capitalized leases of $15,304 and $5,460, respectively, and included in Other assets are deferred interest charges of $207. Included in the consolidated balance sheet at September 30, 2012 under property, plant and equipment are costs and accumulated depreciation subject to capitalized leases of $15,342 and $4,414, respectively, and included in other assets are deferred interest charges of $232. The capitalized leases carry interest rates from 5% to 10% and mature from 2014 through 2022. Amortization expense was $1,605, $1,598, and $1,663 in 2013, 2012 and 2011, respectively.

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 was used for improvements. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon.

Debt at September 30, 2013 and 2012 consisted of the following:

		At September 30, 2013
		Outstanding Balance			Original Issuer Discount			Balance Sheet			Capitalized Fees & Expenses		Coupon Interest Rate
Senior notes due 2018	(a)	$	550,000		$	—		$	550,000		$	7,328		7.100	%
Revolver due 2018	(a)		—			—			—			2,425		n/a
Convert. debt due 2017	(b)		100,000			(13,246	)		86,754			1,478		4.000	%
Real estate mortgages	(c)		13,212			—			13,212			185		n/a
ESOP Loans	(d)		21,098			—			21,098			24		n/a
Capital lease - real estate	(e)		9,529			—			9,529			207		5.000	%
Term loan due 2013	(f)		2,704			—			2,704			23		n/a
Revolver due 2013	(f)		—			—			—			—		n/a
Foreign lines of credit	(g)		4,606			—			4,606			—		n/a
Foreign term loan	(g)		411			—			411			4		n/a
Other long term debt	(h)		941			—			941			—		n/a
Totals			702,501			(13,246	)		689,255		$	11,674
less: Current portion			(10,768	)		—			(10,768	)
Long-term debt		$	691,733		$	(13,246	)	$	678,487

		At September 30, 2012
		Outstanding Balance			Original Issuer Discount			Balance Sheet			Capitalized Fees & Expenses		Coupon Interest Rate
Senior notes due 2018	(a)	$	550,000		$	—		$	550,000		$	8,862		7.125	%
Revolver due 2016	(a)		—			—			—			2,175		n/a
Convert. debt due 2017	(b)		100,000			(16,607	)		83,393			1,921		4.000	%
Real estate mortgages	(c)		14,063			—			14,063			271		n/a
ESOP Loans	(d)		22,723			—			22,723			32		n/a
Capital lease - real estate	(e)		10,455			—			10,455			232		5.000	%
Term loan due 2013	(f)		12,873			—			12,873			107		n/a
Revolver due 2013	(f)		—			—			—			—		n/a
Foreign lines of credit	(g)		2,064			—			2,064			—		n/a
Foreign term loan	(g)		2,693			—			2,693			19		n/a
Other long term debt	(h)		1,346			—			1,346			—
Totals			716,217			(16,607	)		699,610		$	13,619
less: Current portion			(17,703	)		—			(17,703	)
Long-term debt		$	698,514		$	(16,607	)	$	681,907

Interest expense consists of the following for the years ended September 30, 2013, 2012 and 2011.

		Year Ended September 30, 2013
		Effective Interest Rate			Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense
Senior notes due 2018	(a)		7.4	%	$	39,188		$	—	$	1,626	$	40,814
Revolver due 2018	(a)		n/a			785			—		582		1,367
Convert. debt due 2017	(b)		9.1	%		4,000			3,361		443		7,804
Real estate mortgages	(c)		4.9	%		538			—		86		624
ESOP Loans	(d)		2.9	%		628			—		8		636
Capital lease - real estate	(e)		5.3	%		504			—		25		529
Term loan due 2013	(f)		3.9	%		271			—		87		358
Revolver due 2013	(f)		0.5	%		68			—		—		68
Foreign lines of credit	(g)		12.9	%		520			—		—		520
Foreign term loan	(g)		9.8	%		216			—		14		230
Other long term debt	(h)					553			—		—		553
Capitalized interest						(983	)		—		—		(983	)
Totals					$	46,288		$	3,361	$	2,871	$	52,520

		Year Ended September 30, 2012
		Effective Interest Rate			Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense
Senior notes due 2018	(a)		7.4	%	$	39,188		$	—	$	1,623	$	40,811
Revolver due 2016	(a)		n/a			881			—		622		1,503
Convert. debt due 2017	(b)		9.2	%		4,000			3,086		443		7,529
Real estate mortgages	(c)		4.0	%		575			—		86		661
ESOP Loans	(d)		3.0	%		707			—		6		713
Capital lease - real estate	(e)		5.3	%		551			—		25		576
Term loan due 2013	(f)		5.0	%		831			—		87		918
Foreign lines of credit	(g)		14.3	%		228			—		—		228
Foreign term loan	(g)		10.5	%		238			—		11		249
Other long term debt	(h)					680			—		34		714
Capitalized interest						(1,895	)		—		—		(1,895	)
Totals					$	45,984		$	3,086	$	2,937	$	52,007

		Year Ended September 30, 2011
		Effective Interest Rate			Cash Interest			Amort. Debt Discount		Amort. Deferred Cost & Other Fees		Total Interest Expense
Senior notes due 2018	(a)		7.4	%	$	21,118		$	—	$	881	$	21,999
Revolver due 2016	(a)		n/a			—			—		332		332
Convert. debt due 2017	(b)		9.0	%		3,944			2,832		443		7,219
Real estate mortgages	(c)		5.6	%		761			—		86		847
ESOP Loans	(d)		2.7	%		345			—		67		412
Capital lease - real estate	(e)		5.3	%		602			—		26		628
Term loan due 2013	(f)		n/a			338			—		71		409
Revolver due 2013	(f)		1.2	%		160			—		79		239
Foreign lines of credit	(g)		3.0	%		91			—		—		91
Foreign term loan	(g)		n/a			—			—		—		—
Term loan due 2016	(i)		9.5	%		13,405			572		838		14,815
Asset based loan	(i)		6.2	%		1,076			58		341		1,475
Other long term debt	(h)					214			—		107		321
Capitalized interest						(941	)		—		—		(941	)
Totals					$	41,113		$	3,462	$	3,271	$	47,846

Minimum payments under debt agreements for the next five years are as follows: $10,768 in 2014, $6,488 in 2015, $17,863 in 2016, $112,048 in 2017, $551,207 in 2018 and $4,127 thereafter.

(a) On March 17, 2011, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $550,000 of 7.125% Senior Notes due in 2018 (“Senior Notes”); interest is payable semi-annually. On August 9, 2011, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 via an exchange offer.

Proceeds from the Senior Notes were used to pay down outstanding borrowings under a senior secured term loan facility and two senior secured revolving credit facilities of certain of the Company’s subsidiaries. The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions.

On March 28, 2013, Griffon amended and increased the amount available under its Revolving Credit Facility (“Credit Agreement”) from $200,000 to $225,000 and extended its maturity from March 18, 2016 to March 28, 2018 (except that if the Company’s 7-1/8 Senior Notes due 2018 are still outstanding on October 1, 2017, the Facility will mature on October 1, 2017). The facility includes a letter of credit sub-facility with a limit of $60,000, a multi-currency sub-facility of $50,000 and a swingline sub-facility with a limit of $30,000. Borrowings under the Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the occurrence of a default or event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. The current margins are 1.00% for base rate loans and 2.00% for LIBOR loans. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio as well as customary affirmative and negative covenants and events of default. The Credit Agreement also includes certain restrictions, such as limitations on the incurrence of indebtedness and liens and the making of restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all assets of the Company and the guarantors and a pledge of not greater than two-thirds of the equity interest in each of Griffon’s material, first-tier foreign subsidiaries.

At September 30, 2013, there were $25,457 of standby letters of credit outstanding under the Credit Agreement; $199,543 was available, subject to certain covenants, for borrowing at that date.

(b) On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The current conversion rate of the 2017 Notes is 67.8495 shares of Griffon’s common stock per $1,000 principal amount of notes, corresponding to a conversion price of $14.74 per share. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion; (ii) the 42nd trading day prior to maturity of the notes; and (iii) such time as the cumulative adjustment equals or exceeds 1%. As of September 30, 2013, aggregate dividends since the last conversion price adjustment of $0.075 per share would have resulted in an adjustment to the conversion ratio of approximately 0.66%. At both September 30, 2013 and 2012, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720.

(c) On December 20, 2010, Griffon entered into two second lien real estate mortgages to secure new loans totaling $11,834. The loans mature in February 2016, are collateralized by the related properties and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 3% with the option to swap to a fixed rate. On October 21, 2013, Griffon refinanced these real estate mortgages with total principal of $17,175, maturing in October 2018 and bearing interest at LIBOR plus 2.75%.

Griffon has other real estate mortgages, collateralized by real property, which bear interest at 6.3% and mature in 2016.

(d) Griffon’s Employee Stock Ownership Plan (“ESOP”) entered into a loan agreement in August 2010 to borrow $20,000 over a one-year period. The proceeds were used to purchase 1,874,737 shares of Griffon common stock in the open market for $19,973. The loan bears interest at a) LIBOR plus 2.5% or b) the lender’s prime rate, at Griffon’s option. In November 2011, Griffon exercised an option to convert the outstanding loan to a five-year term loan; principal is payable in quarterly installments of $250, beginning December 2011, with a balloon payment of $15,223 due at maturity (November 2016). The loan is secured by shares purchased with the proceeds of the loan, and repayment is guaranteed by Griffon. At September 30, 2013, $17,973 was outstanding.

In addition, the ESOP is party to a loan agreement which requires quarterly principal payments of $156 and interest through the extended expiration date of December 2013, at which time the $3,125 balance of the loan, and any outstanding interest, will be payable. Griffon has the intent and ability to refinance the December 2013 balance and has classified the balance in Long-Term Debt. The primary purpose of this loan was to purchase 547,605 shares of Griffon’s common stock in October 2008. The loan is secured by shares purchased with the proceeds of the loan and repayment is guaranteed by Griffon. The loan bears interest at rates based upon the prime rate or LIBOR. At September 30, 2013, $3,125 was outstanding and classified as long-term debt as the Company has the intent and ability to refinance in 2014.

(e) In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon.

(f) In November 2010, Clopay Europe GMBH (“Clopay Europe”) entered into a €10,000 revolving credit facility and a €20,000 term loan. The facility accrues interest at EURIBOR plus 2.45% per annum and the term loan accrues interest at EURIBOR plus 2.20% per annum. The revolving facility matures in November 2013, but is renewable upon mutual agreement with the bank. In July 2011, the full €20,000 was drawn on the term loan, with a portion of the proceeds used to repay borrowings under the revolving credit facility. The term loan is payable in ten equal quarterly installments which began in September 2011, with maturity in December 2013. Under the term loan, Clopay Europe is required to maintain a certain minimum equity to assets ratio and keep leverage below a certain level, defined as the ratio of total debt to EBITDA.

(g) In February 2012, Clopay do Brazil, a subsidiary of Plastics, borrowed $4,000 at a rate of 104.5% of Brazilian CDI (9.10% at September 30, 2013). The loan was used to refinance existing loans, is collateralized by accounts receivable and a 50% guaranty by Plastics and is to be repaid in four equal, semi-annual installments of principal plus accrued interest beginning in August 2012. Clopay do Brazil also maintains lines of credit of approximately $4,950. Interest on borrowings accrue at a rate of Brazilian CDI plus 6.0% (15.23% at September 30, 2013). At September 30, 2013 there was approximately $4,600 borrowed under the lines.

In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 revolving credit facility. The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.48% LIBOR USD and 2.46% Bankers Acceptance Rate CDN as of September 30, 2013). The revolving facility matures in November 2015. Garant is required to maintain a certain minimum equity. At September 30, 2013, there were 0 borrowings under the revolving credit facility with CAD $15,000 available for borrowing

(h) At September 30, 2012, Griffon had $532 of 4% convertible subordinated notes due 2023 (“2023 Notes”) outstanding. On April 15, 2013, the 2023 Notes were redeemed at par plus accrued interest. Other long term debt also includes capital leases.

(i) 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 (“Term Loan”) and a $125,000 asset based lending agreement (“ABL”).

On November 30, 2010, Clopay Ames, as required under the Term Loan agreement, entered into an interest rate swap on a notional amount of $200,000 of the Term Loan. The agreement fixed the LIBOR component of the Term Loan interest rate at 2.085% for the notional amount of the swap.

On March 17, 2011, the Term Loan and swap were terminated, and on March 18, 2011, the ABL was terminated, in connection with the issuance of the Senior Notes and Credit Agreement.

At September 30, 2013, Griffon and its subsidiaries were in compliance with the terms and covenants of its credit and loan agreements.

In 2011, in connection with the termination of a previously existing term loan, asset-backed credit facility and cash flow facility, Griffon recorded a $26,164 loss on extinguishment of debt consisting of $21,617 of deferred financing charges and original issuer discounts, a call premium of $3,703 on the term loan, and $844 of swap and other breakage costs.