INCOME TAXES

12 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 12 – INCOME TAXES

Income taxes have been based on the following components of Income before taxes and discontinued operations:

	For the Years Ended September 30,
	2013			2012			2011
Domestic	$	16,083		$	27,910		$	(17,869	)
Non-U.S.		(1,750	)		(5,969	)		3,520
	$	14,333		$	21,941		$	(14,349	)

Provision (benefit) for income taxes on income from continuing operations was comprised of the following:

	For the Years Ended September 30,
	2013			2012			2011
Current	$	2,468		$	7,557		$	(4,169	)
Deferred		5,075			(2,627	)		(2,749	)
Total	$	7,543		$	4,930		$	(6,918	)
U.S. Federal	$	5,807		$	3,400		$	(8,988	)
State and local		2,915			(1,301	)		91
Non-U.S.		(1,179	)		2,831			1,979
Total provision	$	7,543		$	4,930		$	(6,918	)

Griffon’s Income tax provision (benefit) included benefits of ($3,209) in 2013, ($3,356) in 2012 and ($733) in 2011 reflecting the reversal of previously recorded tax liabilities primarily due to the resolution of various tax audits and due to the closing of certain statutes for prior years’ tax returns.

Differences between the effective income tax rate applied to Income from continuing operations and U.S. Federal income statutory rate were as follows:

	For the Years Ended September 30,
	2013			2012			2011
U.S. Federal income tax provision (benefit) rate		35.0	%		35.0	%		(35.0	)%
State and local taxes, net of Federal benefit		2.8			3.6			(1.9	)
Non-U.S. taxes		5.3			7.0			5.3
Change in tax contingency reserves		(10.9	)		(6.7	)		2.2
Executive compensation limits		10.0			7.1			13.1
Repatriation of foreign earnings		(8.3	)		(12.3	)		—
Valuation allowance on foreign tax credits		10.1			(2.4	)		(27.2	)
Non-deductible meals and entertainment		1.6			1.2			2.0
Research credits		(7.4	)		(0.7	)		(5.4	)
Deferred tax impact of state rate change		15.0			(11.0	)		—
Other		(0.6	)		1.6			(1.3	)
Effective tax provision (benefit) rate		52.6	%		22.5	%		(48.2	)%

The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows:

	At September 30,
	2013			2012
Deferred tax assets:
Bad debt reserves	$	2,202		$	2,071
Inventory reserves		9,295			12,589
Deferred compensation (equity compensation and defined benefit plans)		32,645			42,773
Compensation benefits		3,059			2,706
Insurance reserve		3,360			3,924
Restructuring reserve		699			489
Warranty reserve		3,320			3,587
Net operating loss		26,644			25,708
Tax credits		7,311			5,622
Other reserves and accruals		2,924			651
		91,459			100,120
Valuation allowance		(13,421	)		(10,541	)
Total deferred tax assets		78,038			89,579
Deferred tax liabilities:
Deferred income		(13,124	)		(14,051	)
Goodwill and intangibles		(70,216	)		(70,463	)
Property, plant and equipment		(36,469	)		(33,673	)
Interest		(5,154	)		(6,542	)
Other		(5,164	)		(1,323	)
Total deferred tax liabilities		(130,127	)		(126,052	)
Net deferred tax liabilities	$	(52,089	)	$	(36,473	)

The change in the valuation allowance relates to the U.S., foreign tax credits and the valuation allowance for certain state, local and foreign tax attributes.

The components of the net deferred tax liability, by balance sheet account, were as follows:

	At September 30,
	2013			2012
Prepaid and other current assets	$	9,118		$	16,059
Other assets		3,205			2,956
Current liabilities		—			(129	)
Other liabilities		(66,422	)		(55,882	)
Assets of discontinued operations		2,010			523
Net deferred liability assets	$	(52,089	)	$	(36,473	)

At September 30, 2013 and at September 30, 2012, Griffon has not recorded deferred income taxes on the undistributed earnings of its non-U.S. subsidiaries because of management’s ability and intent to indefinitely reinvest such earnings outside the U.S. At September 30, 2013, Griffon’s share of the undistributed earnings of the non-U.S. subsidiaries amounted to approximately $74,923. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

At September 30, 2011 deferred income taxes were recorded on pre-acquisition undistributed earnings of non-U.S. subsidiaries for the ATT group of entities. The deferred income taxes were recorded as these earnings were historically not indefinitely reinvested outside of the U.S. At September 30, 2012 the pre-acquisition unremitted foreign earnings of ATT group were distributed as a dividend to the U.S. Parent Corp. recognizing the previously recorded deferred tax liability.

At September 30, 2013 and 2012, Griffon had loss carryforwards for non-U.S. tax purposes of $83,564 and $75,400, respectively. The non-U.S. loss carryforwards are available for carryforward indefinitely.

Griffon had State and local loss carryforwards at September 30, 2013 and 2012 of $6,057 and $6,303, respectively, which expire in varying amounts through 2033.

Griffon had foreign tax credit carryforwards of $5,151 and $3,361 at September 30, 2013 and 2012, respectively, which are available for use through 2017.

Griffon files U.S. Federal, state and local tax returns, as well as Germany, Canada, Brazil, Australia, Sweden, Mexico, Ireland and other non-U.S. jurisdiction tax returns. Griffon’s U.S. Federal income tax returns are no longer subject to income tax examination for years before 2008, the German income tax returns are no longer subject to income tax examination for years through 2010 and major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2003. Various U.S. state and non-U.S. statutory tax audits are currently underway.

The following is a roll forward of the unrecognized tax benefits:

Balance at September 30, 2011	$	12,910
Additions based on tax positions related to the current year		1,840
Reductions based on tax positions related to prior years		(822	)
Lapse of Statutes		(617	)
Settlements		(1,435	)
Balance at September 30, 2012		11,876
Additions based on tax positions related to the current year		1,343
Reductions based on tax positions related to prior years		111
Lapse of Statutes		(974	)
Settlements		(1,836	)
Balance at September 30, 2013	$	10,520

If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is $7,248. Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At September 30, 2013 and 2012, the combined amount of accrued interest and penalties related to tax positions taken or to be taken on Griffon’s tax returns and recorded as part of the reserves for uncertain tax positions was $1,672 and $2,141, respectively.Griffon cannot reasonably estimate the extent to which existing liabilities for uncertain tax positions may increase or decrease within the next twelve months as a result of the progression of ongoing tax audits or other events. Griffon believes that it has adequately provided for all open tax years by tax jurisdiction.